11-K 1 d11k.txt FORM 11-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NO. 1-3071 THE HANOVER COMPANIES RETIREMENT SAVINGS PLAN (FULL TITLE OF THE PLAN) HANOVER COMPRESSOR COMPANY 12001 NORTH HOUSTON ROSSLYN, HOUSTON, TEXAS 77086 (NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE) Required Information Item 4. Financial Statements and Supplemental Schedules for the Plan The Hanover Companies Retirement Savings Plan (the "Plan") is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). In lieu of the requirements of Items 1-3 of this Form, the Plan is filing financial statements and supplemental schedule prepared in accordance with the financial reporting requirements of ERISA. The Plan's financial statements and supplemental schedule has been examined by PricewaterhouseCoopers LLP, Independent Accountants and their report is included herein beginning on page F-1. Exhibit Designation Description Method of Filing ----------- ----------- ---------------- Exhibit 23 Consent of PricewaterhouseCoopers LLP Filed with this Report. 2 Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan administrator for the Hanover Companies Retirement Savings Plan has duly caused this Annual Report to be signed by the undersigned thereunto duly authorized. Hanover Companies Retirement Savings Plan By: /s/ Michael J. McGhan --------------------------------- Michael J. McGhan, President/Chief Executive Officer Date: June 27, 2002 3 The Hanover Companies Retirement Savings Plan Financial Statements and Supplemental Schedule December 31, 2001 and 2000 F-1 Page Report of Independent Accountants F-3 Financial Statements: Statement of Net Assets Available for Benefits at December 31, 2001 and 2000 F-4 Statement of Changes in Net Assets Available for Benefits for the Year ended December 31, 2001 F-5 Notes to Financial Statements F-6 Supplemental Schedule:* Schedule of Assets (Held at End of Year) F-14 * Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. F-2 Report of Independent Accountants To the Participants and Plan Administrator of The Hanover Companies Retirement Savings Plan In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of The Hanover Companies Retirement Savings Plan (the Plan) at December 31, 2001 and 2000, and the changes in net assets available for benefits for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /S/ PricewaterhouseCoopers LLP Houston, Texas June 21, 2002 F-3 The Hanover Companies Retirement Savings Plan Statement of Net Assets Available for Benefits December 31, 2001 and 2000
2001 2000 Investments: Cash (Note 9) $ 19,819,122 $ 8,379 Hanover Compressor Company common stock, at fair value 7,726,973 7,818,791 Mutual funds, at fair value 9,213,451 Common/collective trusts, at fair value 2,924,160 Participant loans, at cost 1,838,622 978,895 ------------ ----------- Total investments 29,384,717 20,943,676 ------------ ----------- Employer contributions receivable 227,344 225,615 Employee contributions receivable 193,802 ------------ ----------- Total receivables 227,344 419,417 Excess contributions payable (46,081) ------------ ----------- Net assets available for benefits $ 29,612,061 $21,317,012 ============ ===========
The accompanying notes are an integral part of these financial statements. F-4 The Hanover Companies Retirement Savings Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2001 Additions to net assets attributed to: Investment income (loss): Net depreciation in fair value of mutual funds $ (1,249,309) Net depreciation in fair value of common/collective trusts (71,907) Net depreciation in fair value of Hanover Compressor Company common stock (3,902,302) Dividend income 583,018 Interest income 139,753 ------------ Total investment income (loss) (4,500,747) ------------ Contributions: Employer contributions 1,177,493 Employee contributions 5,314,594 Employee rollover contributions 3,308,763 Plan mergers (Note 5) 3,632,196 ------------ Total contributions 13,433,046 ------------ Total additions to net assets 8,932,299 Deductions from net assets attributed to: Benefits paid 626,333 Administrative expenses 10,917 ------------ Total deductions from net assets 637,250 ------------ Net increase in net assets available for benefits 8,295,049 Net assets available for benefits: Beginning of year 21,317,012 ------------ End of year $ 29,612,061 ============ The accompanying notes are an integral part of these financial statements. F-5 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 1. Description of Plan The Hanover Companies Retirement Savings Plan (the Plan) was adopted effective January 1, 1994 by Hanover Compressor Company (the Company) and replaced the Company's former plan, the Hanover Energy Employee's Savings Plan. The following description of the Plan provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan covering all domestic employees of the Company. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Participation A domestic employee of the Company is generally eligible to become a participant in the Plan upon attainment of eighteen years of age and six months of service with the Company. Contributions Participants may contribute up to 20% of their pre-tax compensation, as defined in the Plan document. Participants may also elect to make rollover contributions to the Plan from other qualified retirement plans. The Company may make discretionary contributions to the Plan in the form of matching contributions of 35% of each participant's contributions for the Plan year, up to an annual maximum of $1,000 per individual. Participants who were employed on the last day of the Plan year or who died, became disabled while an employee of the Company or terminated employment after obtaining normal retirement age, as defined in the Plan document, during the Plan year are eligible for an allocation of discretionary Company contributions. The Company made discretionary contributions of $1,177,493 during the Plan year ended December 31, 2001. Participant contributions may not exceed the maximum statutory limit, which was $10,500 for the Plan year ended December 31, 2001. Participants may change their contribution percentage on a quarterly basis. All Company matching contributions are made in the form of Hanover Compressor Company common stock. With regards to the Company matching contributions, participants may not withdraw or reallocate such amounts to other Plan investment options until the participant terminates participation in the Plan. F-6 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 Participant Accounts Each participant's account is credited with the participant's contributions, Company contributions and an allocation of Plan earnings and forfeitures of terminated participants' nonvested accounts. All Plan assets are allocated to individual participant account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account balance. Vesting Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Participants become vested in the Company's contributions, including reallocated forfeiture accounts, and actual earnings thereon at the rate of 20% per year after two years of employment with the Company subject to limitations by the Plan document. Forfeitures Forfeited nonvested Company contributions are allocated to current Plan participants on an annual basis based on the ratio of each individual participant's total compensation to the total compensation of all eligible Plan participants for the Plan year as defined by the Plan document. For the year ended December 31, 2001, forfeited nonvested amounts totaling $33,947 were allocated to Plan participants. As of December 31, 2001, there were $49,732 of forfeited nonvested accounts which had not yet been allocated to Plan participants. Investment Options During the year ended December 31, 2001, participants were able to direct their contributions among 23 different investment options consisting of Hanover Compressor Company common stock, common/collective trusts and mutual funds. As further discussed in Note 9, effective December 31, 2001 all of the Plan's investments, with the exception of Hanover Compressor Company common stock, were converted to cash. Payment of Benefits A participant may elect to withdraw any part of his or her vested account upon retirement, termination of employment, death or disability or attainment of age 59 1/2. Benefits may be paid by either a lump-sum amount equal to the value of his or her account or periodic installments. A lump-sum payment is automatically distributed to terminated participants with vested balances equal to or less than $5,000. Withdrawals of vested balances due to immediate and heavy financial need are also permitted subject to the terms of the Plan document. F-7 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 Participant Loans Participants may borrow from their accounts a minimum of $500 up to a maximum of the lesser of $50,000 or 50% of the value of the participant's vested account balance in the Plan. Loans are secured by the vested balance in the participant's account and bear interest at a rate determined by the Plan administrator in accordance with the terms of the Plan document. As of December 31, 2001 and 2000, the interest rate on outstanding loans ranged from 5.0% to 11.5% and 7.5% to 11.5%, respectively. Loan repayments are made through payroll deductions and interest paid on loans is credited to the applicable participant's account. Participant loans are generally repaid over a period not to exceed five years. Administration The Plan is sponsored by the Company and certain officers and employees of the Company serve as the Plan Administrator. The Plan Administrator has the power and duty to take all actions and make all decisions necessary to properly carry out the provisions of the Plan subject to the terms of the Plan document. These powers and duties include, among other things, the interpretation of Plan provisions and the engagement of a trustee, record keeper, investment manager, legal counsel, independent accountants and other such specialists as are deemed necessary for operation of the Plan. Merrill Lynch served as the trustee, record keeper and investment manager of the Plan. As discussed in Note 9, effective January 1, 2002, Merrill Lynch's duties were transferred to INVESCO Retirement, Inc. Expenses of the Plan Expenses of the Plan are generally paid for by the Company. Administrative expenses reflected on the accompanying statement of changes in net assets available for benefits for the year ended December 31, 2001 represent the sum of charges to individual participant accounts for specific transactions initiated by the applicable participants in accordance with the Plan document. 2. Summary of Significant Accounting Policies The financial statements of the Plan are prepared on an accrual basis in accordance with accounting principles generally accepted in the United States of America and in accordance with the provisions of the American Institute of Certified Public Accountants Statement of Position 99-3, "Accounting for and Reporting of Certain Defined Contribution Plan Investments and Other Disclosure Matters." The following is a summary of the Plan's significant accounting policies: F-8 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 Use of Estimates The preparation of the Plan's financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan administrator to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and changes in net assets available for benefits during the reporting period and, when applicable, disclosures of contingent assets and liabilities at the date of the preparation of the financial statements. Actual results could differ from those estimates. Payment of Benefits Benefits are recorded when paid. Valuation of Investments The Plan's investments in mutual funds and Hanover Compressor Company common stock are stated at fair market value based on period ending quoted market prices. Common/collective trusts are stated at fair market value of the applicable trusts' underlying net assets as determined by the quoted market prices for securities which market quotations are available or with respect to securities for which no quotations are available, fair values as determined in good faith by Merrill Lynch. Cash and participant loans are valued at cost, which approximates fair market value. Investment Income Recognition The net appreciation (depreciation) in fair value of investments includes the realized gain or loss on investments bought and sold during the year as well as the unrealized change in fair value of such investments during the year. Purchases and sales of securities are reflected on a trade-date basis. Dividend income is recorded on the ex-dividend date and interest income is recorded as earned. Certain of the Plan's investments pay investment advisory fees and/or 12b-1 fees and administrative expenses. These fees are reflected in the valuation of these investments. 3. Concentrations of Credit and Market Risk Certain investments, including the common stock of the Company, potentially subject the Plan to concentrations of credit and market risk. The Plan does not obtain or require collateral for these investments. Changes in the domestic and international economic environment and other factors outside the control of the Plan have a direct impact on the market value and/or credit risk of the Plan's investments. It is reasonably possible that changes in the economic environment will occur in the near term F-9 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 and that such changes will have a material effect on the market value of the Plan's investments and/or credit risk relating to such investments. 4. Investments Plan investments as of December 31, 2001 and 2000 that represent five percent or more of the Plan's net assets available for benefits are as follows: December 31, ------------------ 2001 2000 ---- ---- Cash (Note 9) $19,819,122 Common stock: Hanover Compressor Company 7,726,973 $7,818,791 Commom/collective trusts: Merrill Lynch Retirement Preservation Trust 2,380,810 Mutual funds: Merrill Lynch Balanced Capital Fund 1,396,221 Merrill Lynch Global Allocations Fund 1,835,861 Merrill Lynch Growth Fund 1,359,429 Merrill Lynch Focus Value Fund 1,311,699 The Plan's only investment option which is nonparticipant directed is its investment in Hanover Compressor Company common stock as it relates to Company contributions. As follows is a summary of the change in the Plan's investment in Hanover Compressor Company common stock for the year ended December 31, 2001: Net depreciation in fair value of common stock $(3,902,302) Interest income on participant loans 23,644 Employer contributions 1,175,764 Employee contributions 1,158,380 Employee rollover contributions 563,991 Loan repayments 119,831 Transfers (to) from other investment options, net 891,064 Benefits paid (122,190) ----------- Net decrease (91,818) Total investment Beginning of year 7,818,791 ----------- End of year $ 7,726,973 =========== 5. Plan Mergers Effective October 1, 2001, the Company merged the assets of four similar defined contribution retirement plans into the Plan. F-10 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 Such plans were sponsored by certain of the Company's operating subsidiaries prior to the Company's acquisition of these entities. The participants in these plans became eligible to participate in the Plan in conjunction with the Company's acquisition of the applicable entity. Such acquisitions were completed by the Company at various times from 1999 to 2001. 6. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contribution at any time and to terminate the Plan subject to the provisions of ERISA. If the Plan were to be terminated in the future, all participants would immediately become fully vested in their entire account balance at the time of the Plan's termination. 7. Tax Status The Internal Revenue Service has determined and informed the Company by a letter dated December 6, 1995 that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (IRC). As a result, it is believed that the Plan is exempt from taxation under the applicable sections of the IRC. The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. 8. Party-In-Interest Transactions Certain of the Plan's investments are managed by Merrill Lynch, the trustee and record keeper of the Plan. Transactions involving these investments occur at quoted market values. Consequently, such transactions are permitted under the provisions of the Plan and are exempt from prohibition of party-in-interest transactions under ERISA. Additionally, the Plan provides for investment in shares of the Company's common stock. As the Company is the Plan Sponsor, these transactions qualify as party-in-interest transactions under ERISA. 9. Change of Record Keeper, Investment Manager and Trustee Effective January 1, 2002, the Plan administrator changed the Plan's investment manager, record keeper and trustee from Merrill Lynch to INVESCO Retirement, Inc. (INVESCO). As a result of the change, certain of the Plan's available investment options were no longer available to participants. In preparation for the F-11 The Hanover Companies Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 transfer, Merrill Lynch converted all investments, with the exception of Hanover Compressor Company common stock, to cash on December 31, 2001. The Plan's assets were transferred to INVESCO on January 2, 2002. All investment options converted to cash prior to the transfer were mapped to investments with similar investment objectives upon receipt of the funds by INVESCO. F-12 Supplemental Schedule F-13 The Hanover Companies Retirement Savings Plan Schedule of Assets (Held at End of Year) December 31,2001
(c) (d) (e) (a) (b) Description Historical Current Identity of issuer of asset cost value ------------------ ----------- ------------ ------------ Cash Cash $ 19,819,122 $ 19,819,122 * Hanover Compressor Company Common stock 7,702,171 7,726,973 * Participant loans Interest rates ranging from 5.0% to 11.5% with varying maturity dates 1,838,622 1,838,622 ------------ ------------ Assets held for investment $ 29,359,915 $ 29,384,717 ============ ============
* Denotes party in interest as defined by ERISA. F-14