<PAGE>
 
 
                               ENERGY INDUSTRIES
 
            NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 2. ACQUISITION
 
  In November 1993, the Company purchased the natural gas compression business
of Energy Industries, Inc. and Zapata Energy Industries L.P. (the
"Acquisition"). Total consideration paid was $90.2 million consisting of $74.5
million in cash and 2.7 million shares of the Company's Common Stock.
Additionally, Energy Industries incurred approximately $2.0 million in fees
associated with the Acquisition. Energy Industries accounted for the
acquisition using the purchase method of accounting and recorded $19.3 million
of goodwill in connection therewith.
 
  The following assets and liabilities were acquired in connection with the
Acquisition effective November 1, 1993 (in millions):
 

<TABLE>
      <S>                                                                 <C>
      Cash............................................................... $ 3.5
      Receivables........................................................   9.3
      Inventory..........................................................  16.2
                                                                          -----
                                                                           29.0
      Goodwill and other assets..........................................  19.7
      Property and equipment, net........................................  49.6
                                                                          -----
                                                                          $98.3
                                                                          =====
      Current liabilities................................................ $ 5.8
      Long-term debt.....................................................    .2
                                                                          -----
                                                                          $ 6.0
                                                                          =====
</TABLE>

 
NOTE 3. INVENTORIES
 
  Energy Industries maintains inventories to support package fabrication in the
Corpus Christi, Texas headquarters, as well as repair and maintenance
operations in the branch offices. Inventories as of June 30, 1995 and September
30, 1994, respectively, are comprised of the following components (in
thousands):
 

<TABLE>
<CAPTION>
                                                          JUNE 30, SEPTEMBER 30,
                                                            1995       1994
                                                          -------- -------------
      <S>                                                 <C>      <C>
      Major fabrication components....................... $ 9,480     $ 3,908
      Parts to support fabrication.......................   6,164       7,422
      Parts to support field service.....................   5,808       4,291
      Used parts and equipment...........................   2,680       1,809
      Labor in process...................................      41         199
                                                          -------     -------
                                                          $24,173     $17,629
                                                          =======     =======
</TABLE>

 
                                       31