Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 28, 2020 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Commission File Number | 001-33666 | |
Entity Registrant Name | Archrock, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 74-3204509 | |
Entity Street Address | 9807 Katy Freeway | |
Entity Suite Number | Suite 100 | |
Entity City | Houston | |
Entity State | TX | |
Entity Postal Zip Code | 77024 | |
City Area Code | 281 | |
Local Phone Number | 836-8000 | |
Title of each class | Common stock, $0.01 par value per share | |
Trading Symbol | AROC | |
Name of exchange on which registered | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 152,925,708 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001389050 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 3,221 | $ 3,685 |
Accounts receivable, trade, net of allowance of $2,523 and $2,210, respectively | 138,623 | 144,865 |
Inventory | 72,931 | 74,467 |
Other current assets | 8,969 | 9,186 |
Total current assets | 223,744 | 232,203 |
Property, plant and equipment, net | 2,561,923 | 2,559,398 |
Operating lease ROU assets | 19,156 | 17,901 |
Goodwill, net | 100,598 | |
Intangible assets, net | 73,261 | 77,471 |
Contract costs, net | 41,314 | 42,927 |
Deferred tax assets | 55,175 | 36,642 |
Other assets | 29,661 | 29,934 |
Noncurrent assets associated with discontinued operations | 12,605 | 12,901 |
Total assets | 3,016,839 | 3,109,975 |
Current liabilities: | ||
Accounts payable, trade | 62,289 | 60,215 |
Accrued liabilities | 86,015 | 67,845 |
Deferred revenue | 8,841 | 10,683 |
Total current liabilities | 157,145 | 138,743 |
Long-term debt | 1,811,455 | 1,842,549 |
Operating lease liabilities | 17,184 | 16,094 |
Deferred tax liabilities | 857 | 1,289 |
Other liabilities | 22,207 | 16,829 |
Noncurrent liabilities associated with discontinued operations | 8,519 | 8,508 |
Total liabilities | 2,017,367 | 2,024,012 |
Commitments and contingencies (Note 21) | ||
Equity: | ||
Common stock: $0.01 par value per share, 250,000,000 shares authorized, 159,756,498 and 158,636,918 shares issued, respectively | 1,598 | 1,587 |
Additional paid-in capital | 3,415,784 | 3,412,509 |
Accumulated other comprehensive income (loss) | (7,173) | (1,387) |
Accumulated deficit | (2,328,069) | (2,244,877) |
Treasury stock: 6,830,407 and 6,702,602 common shares, at cost, respectively | (82,668) | (81,869) |
Total equity | 999,472 | 1,085,963 |
Total liabilities and equity | $ 3,016,839 | $ 3,109,975 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 2,523 | $ 2,210 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
Common stock, shares issued (in shares) | 159,756,498 | 158,636,918 |
Treasury stock, common shares (in shares) | 6,830,407 | 6,702,602 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue: | ||
Revenues | $ 249,697 | $ 236,159 |
Total cost of sales (excluding depreciation and amortization) | 113,642 | 118,637 |
Selling, general and administrative | 30,626 | 28,989 |
Depreciation and amortization | 49,822 | 44,106 |
Long-lived asset impairment | 6,195 | 3,092 |
Goodwill impairment | 99,830 | |
Restatement and other charges | 421 | |
Restructuring costs | 1,728 | |
Interest expense | 29,665 | 23,617 |
Transaction-related costs | 180 | |
(Gain) loss on sale of assets, net | (4,116) | 16 |
Other income, net | (555) | (221) |
Income (loss) before income taxes | (77,140) | 17,322 |
Benefit from income taxes | (15,953) | (2,407) |
Income (loss) from continuing operations | (61,187) | 19,729 |
Loss from discontinued operations, net of tax | (273) | |
Net income (loss) | $ (61,187) | $ 19,456 |
Basic and diluted net income (loss) per common share (in dollars per share) | $ (0.41) | $ 0.15 |
Weighted average common shares outstanding: | ||
Basic (in shares) | 150,550 | 128,209 |
Diluted (in shares) | 150,550 | 128,255 |
Contract Operations | Contract operations | ||
Revenue: | ||
Revenues | $ 206,974 | $ 182,507 |
Total cost of sales (excluding depreciation and amortization) | 78,651 | 74,735 |
Aftermarket Services | Aftermarket services | ||
Revenue: | ||
Revenues | 42,723 | 53,652 |
Total cost of sales (excluding depreciation and amortization) | $ 34,991 | $ 43,902 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ (61,187) | $ 19,456 |
Other comprehensive loss, net of tax: | ||
Interest rate swap loss, net of reclassifications to earnings | (5,786) | (3,225) |
Total other comprehensive loss | (5,786) | (3,225) |
Comprehensive income (loss) | $ (66,973) | $ 16,231 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Accumulated Deficit | Total |
Beginning balance at Dec. 31, 2018 | $ 1,358 | $ 3,177,982 | $ 5,773 | $ (79,862) | $ (2,263,677) | $ 841,574 |
Beginning, shares at Dec. 31, 2018 | 135,787,509 | (6,381,605) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Treasury stock purchased | $ (857) | (857) | ||||
Treasury stock purchased, shares | (87,036) | |||||
Cash dividends | (17,231) | (17,231) | ||||
Shares issued in employee stock purchase plan | 218 | 218 | ||||
Shares issued in employee stock purchase plan, shares | 29,728 | |||||
Stock-based compensation, net of forfeitures | $ 11 | 2,346 | 2,357 | |||
Stock-based compensation, net of forfeitures, shares | 1,059,115 | (15,434) | ||||
Comprehensive income | ||||||
Net income | 19,456 | 19,456 | ||||
Interest rate swap loss, net of reclassifications to earnings | (3,225) | (3,225) | ||||
Ending balance at Mar. 31, 2019 | $ 1,369 | 3,180,546 | 2,548 | $ (80,719) | (2,261,452) | 842,292 |
Ending, shares at Mar. 31, 2019 | 136,876,352 | (6,484,075) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Impact of ASU 2016-13 adoption | 166 | 166 | ||||
Beginning balance at Dec. 31, 2019 | $ 1,587 | 3,412,509 | (1,387) | $ (81,869) | (2,244,877) | 1,085,963 |
Beginning, shares at Dec. 31, 2019 | 158,636,918 | (6,702,602) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Treasury stock purchased | $ (799) | (799) | ||||
Treasury stock purchased, shares | (90,594) | |||||
Cash dividends | (22,171) | (22,171) | ||||
Shares issued in employee stock purchase plan | $ 1 | 201 | 202 | |||
Shares issued in employee stock purchase plan, shares | 56,417 | |||||
Stock-based compensation, net of forfeitures | $ 10 | 3,074 | 3,084 | |||
Stock-based compensation, net of forfeitures, shares | 1,063,163 | (37,211) | ||||
Comprehensive income | ||||||
Net income | (61,187) | (61,187) | ||||
Interest rate swap loss, net of reclassifications to earnings | (5,786) | (5,786) | ||||
Ending balance at Mar. 31, 2020 | $ 1,598 | $ 3,415,784 | $ (7,173) | $ (82,668) | $ (2,328,069) | $ 999,472 |
Ending, shares at Mar. 31, 2020 | 159,756,498 | (6,830,407) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parentheticals) - $ / shares | 3 Months Ended | ||||
Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Statement of Stockholders' Equity [Abstract] | |||||
Dividends declared and paid per common share (in dollars per share) | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.132 | $ 0.132 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||||
Net income (loss) | $ (61,187) | $ 19,456 | ||
Adjustments to reconcile net income to cash provided by operating activities: | ||||
Loss from discontinued operations, net of tax | 273 | |||
Depreciation and amortization | 49,822 | 44,106 | ||
Long-lived asset impairment | 6,195 | 3,092 | ||
Goodwill impairment | 99,830 | |||
Inventory write-downs | 282 | 222 | ||
Amortization of operating lease ROU assets | 781 | 712 | ||
Amortization of deferred financing costs | 1,533 | 1,509 | ||
Amortization of debt discount | 187 | 366 | ||
Interest rate swaps | 196 | (410) | ||
Stock-based compensation expense | 3,006 | 2,357 | ||
Non-cash restructuring charges | 61 | |||
Provision for credit losses | 752 | 428 | ||
(Gain) loss on sale of assets, net | (944) | 16 | ||
Gain on March 2020 Disposition | (3,172) | |||
Deferred income tax benefit | (15,966) | (2,883) | ||
Amortization of contract costs | 6,805 | 5,117 | ||
Deferred revenue recognized in earnings | (7,735) | (12,749) | ||
Changes in assets and liabilities: | ||||
Accounts receivable, trade | 4,803 | (3,154) | ||
Inventory | 1,068 | 3,724 | ||
Other assets | (439) | 15,165 | ||
Contract costs, net | (5,537) | (6,574) | ||
Accounts payable and other liabilities | 12,936 | 1,131 | ||
Deferred revenue | 5,783 | 9,467 | ||
Other | 69 | 29 | ||
Net cash provided by operating activities | 99,129 | 81,400 | ||
Cash flows from investing activities: | ||||
Capital expenditures | (71,946) | (132,697) | ||
Proceeds from March 2020 Disposition | 24,179 | |||
Proceeds from sale of property, plant and equipment and other assets | 2,543 | 11,155 | ||
Proceeds from insurance and other settlements | 1,083 | 238 | ||
Net cash used in investing activities | (44,141) | (121,304) | ||
Cash flows from financing activities: | ||||
Borrowings of long-term debt | 227,500 | 690,000 | ||
Repayments of long-term debt | (259,500) | (629,000) | ||
Payments for debt issuance costs | (596) | (7,521) | ||
Proceeds from (payments for) settlement of interest rate swaps that include financing elements | (88) | 393 | ||
Dividends paid to stockholders | (22,171) | $ (22,031) | $ (17,206) | (17,231) |
Proceeds from stock issued under employee stock purchase plan | 202 | 218 | ||
Purchases of treasury stock | (799) | (857) | ||
Net cash provided by (used in ) financing activities | (55,452) | 36,002 | ||
Net decrease in cash and cash equivalents | (464) | (3,902) | ||
Cash and cash equivalents, beginning of period | 3,685 | $ 1,708 | 5,610 | |
Cash and cash equivalents, end of period | $ 3,221 | $ 3,685 | $ 1,708 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Organization and Basis of Presentation | 1. Description of Business and Basis of Presentation We are an energy infrastructure company with a pure-play focus on midstream natural gas compression. We are the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. We operate in two business segments: contract operations and aftermarket services. Our predominant segment, contract operations, primarily includes designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment. The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with GAAP and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our 2019 Form 10-K, which contains a more comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. Certain prior year amounts have been reclassified to conform to the current year presentation. |
Recent Accounting Developments
Recent Accounting Developments | 3 Months Ended |
Mar. 31, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Developments | 2. Recent Accounting Developments Accounting Standards Updates Implemented Credit Losses In June 2016, the FASB issued ASU 2016-13, which changes the impairment model for financial assets measured at amortized cost and certain other instruments, and requires entities to use a new current expected credit loss model that results in recognition of expected losses over the contractual life of an asset. We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective Our financial assets measured at amortized cost consist of cash equivalents and trade receivables from revenue transactions within the scope of ASC 606 Revenue. We believe our temporary cash investments have a zero loss expectation because we maintain minimal balances in our cash investment accounts and have no history of loss. Trade accounts receivable are due from companies of varying size engaged principally in oil and natural gas activities throughout the U.S. We review the financial condition of customers prior to extending credit and generally do not obtain collateral for trade receivables. Payment terms are on a short-term basis and in accordance with industry practice. We consider this credit risk to be limited due to these companies’ financial resources, the nature of the products and services we provide and the terms of our customer agreements. Due to the short-term nature of our trade receivables, we consider the amortized cost to be the same as the carrying amount of the receivable, excluding the allowance for credit losses. We recognize an allowance for credit losses when a receivable is recorded, even when the risk of loss is remote. We utilize an aging schedule to determine our allowance for credit losses, and measure expected credit losses on a collective (pool) basis when similar risk characteristics exist. We rely primarily on ratings assigned by external rating agencies and credit monitoring services to assess credit risk and aggregate customers first by low, medium or high risk asset pools, and then by delinquency status. We also consider the internal risk associated with geographic location and the services we provide to the customer when determining asset pools. If a customer does not share similar risk characteristics with other customers, we evaluate the customer’s outstanding trade receivables for expected credit losses on an individual basis. Trade receivables evaluated individually are not included in our collective assessment. Each reporting period, we reassess our customers’ risk profiles and determine the appropriate asset pool classification, or perform individual assessments of expected credit losses, based on the customers’ risk characteristics at the reporting date. The contractual life of our trade receivables is primarily 30 days based on the payment terms specified in the contract. Contract operations services are generally billed monthly at the beginning of the month in which service is being provided. Aftermarket services billings typically occur when parts are delivered or service is completed. Loss rates are separately determined for each asset pool based on the length of time a trade receivable has been outstanding. We analyze two years of internal historical loss data, including the effects of prepayments, write-offs and subsequent recoveries, to determine our historical loss experience. Our historical loss information is a relevant data point for estimating credit losses, as the data closely aligns with trade receivables due from our customers. Ratings assigned by external rating agencies and credit monitoring services consider past performance and forecasts of future economic conditions in assessing credit risk. We routinely update our historical loss data to reflect our customers’ current risk profile, to ensure the historical data and loss rates are relevant to the pool of assets for which we are estimating expected credit losses. Judgement is used to determine the expected credit loss for customers that do not share similar risk characteristics with other customers, based on customer specific items such as legal proceedings, past experience with the customer and/or ongoing customer negotiations. The following table summarizes the changes in the allowance for credit losses balance during the three months ended March 31, 2020 (in thousands): Balance at December 31, 2019 $ 2,210 Impact of adoption of ASU 2016-13 on January 1, 2020 (216) Provision for credit losses 752 Write-offs charged against allowance (223) Balance at March 31, 2020 $ 2,523 Fair Value Measurements On January 1, 2020, we adopted ASU 2018-13, which amends the required fair value measurements disclosures related to valuation techniques and inputs used, uncertainty in measurement and changes in measurements applied. These amendments resulted in new, prospective disclosures of the range and weighted average of the significant unobservable inputs used to develop our Level 3 fair value measurements related to our idle and previously-culled compressors. The adoption of ASU 2018-13 had no impact on our condensed consolidated financial statements. Income Taxes On January 1, 2020, we adopted ASU 2019-12, which simplifies the accounting for income taxes by, among other things, removing certain exceptions related to the incremental approach for intraperiod tax allocation, the year-to-date loss methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities on outside basis differences. ASU 2019-12 also clarifies other aspects of the accounting for income taxes in order to improve consistency of application. The adoption of ASU 2019-12 had no impact on our condensed consolidated financial statements. Accounting Standards Updates Not Yet Implemented Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. We are currently assessing the impact that ASU 2020-04 may have on our interest rate swap agreements, Credit Facility and other transactions that may be affected by reference rate reform |
Business Transactions
Business Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Business Transactions | 3. Business Transactions March 2020 Disposition On March 1, 2020, we completed the sale of certain contract operations customer service agreements and approximately 200 compressors, comprising approximately 35,000 horsepower, used to provide compression services under those agreements as well as other assets used to support the operations. We allocated customer and contract-related intangible assets and goodwill based on a ratio of the horsepower sold relative to the total horsepower of the asset group. We recognized a gain on the sale of $3.2 million in gain (loss) on sale of assets, net in our condensed consolidated statements of operations during the three months ended March 31, 2020. Elite Acquisition On August 1, 2019, we completed the Elite Acquisition whereby we acquired from Elite Compression substantially all of its assets, including a fleet of predominantly large compressors comprising approximately 430,000 horsepower, vehicles, real property and inventory, and certain liabilities for aggregate consideration consisting of $214.0 million in cash and 21.7 million shares of common stock with an acquisition date fair value of $225.9 million. The cash portion of the acquisition was funded with borrowings on the Credit Facility. The Elite Acquisition was accounted for using the acquisition method, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill. The following table summarizes the purchase price allocation based on the estimated fair values of the acquired assets and liabilities as of the acquisition date (in thousands): Accounts receivable $ 9,007 Inventory 7,987 Other current assets 608 Property, plant and equipment 286,158 Operating lease ROU assets 682 Goodwill 100,598 Intangible assets 40,237 Accounts payable, trade (2,079) Accrued liabilities (2,973) Operating lease liabilities (326) Purchase price $ 439,899 Our valuation methodology and significant inputs for fair value measurements are detailed by asset class below. The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and therefore represent Level 3 measurements. Goodwill The goodwill resulting from the acquisition is attributable to the expansion of our services in various regions in which we currently operate and was allocated to our contract operations segment. All of the goodwill recorded for this acquisition is expected to be deductible for U.S. federal income tax purposes. Property, Plant and Equipment The property, plant and equipment is primarily comprised of compression equipment that will be depreciated on a straight-line basis over an estimated average remaining useful life of 15 years . The fair value of the property, plant and equipment was determined using the cost approach, whereby we estimated the replacement cost of the assets by evaluating recent purchases of similar assets or published data, and then adjusted replacement cost for physical deterioration and functional and economic obsolescence, as applicable. Intangible Assets The intangible assets consist of customer relationships that have an estimated useful life of 15 years . The amount of intangible assets and their associated useful life were determined based on the period over which the assets are expected to contribute directly or indirectly to our future cash flows. The fair value of the identifiable intangible assets was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired. Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets. To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our weighted average cost of capital to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired. Unaudited Pro Forma Financial Information Unaudited pro forma financial information for the three months ended March 31, 2019 was derived by adjusting our historical financial statements in order to give effect to the assets and liabilities acquired in the Elite Acquisition. The Elite Acquisition is presented in this unaudited pro forma financial information as though the acquisition occurred as of January 1, 2019, and reflects the following: ● the acquisition of substantially all of Elite Compression’s assets, including a compression fleet of approximately 430,000 horsepower, vehicles, real property and inventory, and certain liabilities; and ● borrowings of $214.0 million under the Credit Facility for cash consideration exchanged in the acquisition. The unaudited pro forma financial information below is presented (in thousands) for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results. Three Months Ended March 31, 2019 Revenue $ 254,564 Net income 20,967 The results of operations attributable to the assets and liabilities acquired in the Elite Acquisition have been included in our condensed consolidated financial statements as part of our contract operations segment since the date of acquisition. |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | 4. Discontinued Operations In 2015 we completed the Spin-off. In order to effect the Spin-off and govern our relationship with Exterran Corporation after the Spin-off, we entered into several agreements with Exterran Corporation which include, but are not limited to, the tax matters agreement. The tax matters agreement governs the respective rights, responsibilities and obligations of Exterran Corporation and us with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes. Subject to the provisions of this agreement, we and Exterran Corporation agreed to indemnify the primary obligor of any return for tax periods beginning before and ending before or after the Spin-off (including any ongoing or future amendments and audits for these returns) for the portion of the tax liability (including interest and penalties) that relates to their respective operations reported in the filing. As of March 31, 2020 and December 31, 2019, we had $8.5 million, respectively, of unrecognized tax benefits (including interest and penalties) related to Exterran Corporation operations prior to the Spin-off recorded to noncurrent liabilities associated with discontinued operations in our condensed consolidated balance sheets. We had an offsetting indemnification asset of $8.5 million related to these unrecognized tax benefits recorded to noncurrent assets associated with discontinued operations as of March 31, 2020 and December 31, 2019, respectively. The following table presents the balance sheet for our discontinued operations (in thousands): March 31, 2020 December 31, 2019 Other assets $ 8,519 $ 8,508 Deferred tax assets 4,086 4,393 Total assets associated with discontinued operations $ 12,605 $ 12,901 Deferred tax liabilities $ 8,519 $ 8,508 Total liabilities associated with discontinued operations $ 8,519 $ 8,508 The following table presents the statements of operations for our discontinued operations (in thousands): Three Months Ended March 31, 2020 2019 Other income, net $ (10) $ (1,432) Provision for income taxes 10 1,705 Loss from discontinued operations, net of tax $ — $ (273) |
Inventory
Inventory | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventory | 5. Inventory Inventory consisted of the following (in thousands): March 31, 2020 December 31, 2019 Parts and supplies $ 63,889 $ 66,121 Work in progress 9,042 8,346 Inventory $ 72,931 $ 74,467 |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, Net | 6. Property, Plant and Equipment, Net Property, plant and equipment, net consisted of the following (in thousands): March 31, 2020 December 31, 2019 Compression equipment, facilities and other fleet assets $ 3,659,907 $ 3,653,930 Land and buildings 51,031 50,743 Transportation and shop equipment 114,465 116,057 Computer hardware and software 93,734 93,695 Other 17,587 15,308 Property, plant and equipment 3,936,724 3,929,733 Accumulated depreciation (1,374,801) (1,370,335) Property, plant and equipment, net $ 2,561,923 $ 2,559,398 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | 7. Leases Operating Leases We determine if an arrangement is a lease at inception. Following ASC 842, we determine lease classification and recognize ROU assets and liabilities on the lease commencement date based on the present value of lease payments over the lease term. As the discount rate implicit in the lease is rarely readily determinable, we estimate our incremental borrowing rate using information available at commencement date in determining the present value of the lease payments. The lease term includes options to extend when we are reasonably certain to exercise the option. Short-term leases, those with an initial term of 12 months or less, are not recorded on the balance sheet. Variable costs such as our proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Operating lease expense for lease payments is recognized on a straight-line basis over the term of the lease. The facility leases discussed below, of which we are the lessee, contain lease and nonlease components for which we have elected to account for as a single lease component, as the nonlease components are not significant to the total consideration of the contract and separating the nonlease component would have no effect on lease classification. As it relates to our contract operations services agreements in which we are the lessor, the services nonlease component is predominant over the compression package lease component and therefore recognition of these agreements will continue to follow the ASC 606 Revenue guidance. We have operating leases and subleases for office space, temporary housing, storage and shops. Our leases have remaining lease terms of less than one year to 11 years and most include options to extend the lease term, at our discretion, for an additional three Balance sheet information related to our operating leases was as follows (in thousands): Classification March 31, 2020 December 31, 2019 ROU assets Operating lease ROU assets $ 19,156 $ 17,901 Lease liabilities Current Accrued liabilities $ 3,211 $ 3,037 Noncurrent Operating lease liabilities 17,184 16,094 Total lease liabilities $ 20,395 $ 19,131 The components of lease cost were as follows (in thousands): Three Months Ended March 31, 2020 2019 Operating lease cost $ 1,031 $ 974 Short-term lease cost 129 173 Variable lease cost 349 382 Total lease cost $ 1,509 $ 1,529 Cash flow and non-cash information related to our operating leases were as follows (in thousands): Three Months Ended March 31, 2020 2019 Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities $ 1,351 $ 1,311 Operating lease ROU assets obtained in exchange for new lease liabilities 2,037 617 Other supplemental information related to our operating leases was as follows: March 31, 2020 December 31, 2019 Weighted average remaining lease term (in years) 8.3 8.2 Weighted average discount rate 5.1 % 5.3 % Remaining maturities of lease liabilities governed under ASC 842 Leases as of March 31, 2020 were as follows (in thousands): 2020 $ 2,808 2021 3,955 2022 2,855 2023 2,550 2024 2,159 2025 1,930 Thereafter 8,942 Total lease payments 25,199 Less: Interest (4,804) Total lease liabilities under ASC 842 Leases $ 20,395 |
Goodwill
Goodwill | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill | |
Goodwill | 8. Goodwill Our goodwill was recognized in connection with the Elite Acquisition and represents the excess of consideration transferred over the fair value of the assets and liabilities acquired. All of the goodwill was allocated to our contract operations reporting unit. We review the carrying amount of our goodwill in the fourth quarter of every year, or whenever indicators of potential impairment exist, to determine if the carrying amount of our contract operations reporting unit exceeds its fair value, including the goodwill. During the first quarter, the COVID-19 pandemic caused a significant deterioration in global macroeconomic conditions, including a collapse in the demand for oil coupled with an oversupply of oil, which commenced substantial spending cuts by our customers and a decline in production. This global response to the pandemic significantly impacted our market capitalization and estimates of future revenues and cash flows as of March 31, 2020, which triggered the need to perform a quantitative test of the fair value of our contract operations reporting unit as of March 31, 2020. The quantitative test determined that the carrying amount of our contract operations reporting unit exceeded its fair value and we recorded a full impairment loss on goodwill as a result. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions, which have a significant impact on the fair value determined. We determine the fair value of our reporting unit using an equal weighting of both the expected present value of future cash flows and a market approach. The present value of future cash flows is estimated using our most recent forecast and the weighted average cost of capital. The market approach uses a market multiple on the earnings before interest expense, provision for income taxes and depreciation and amortization expense of comparable peer companies. Significant estimates for our reporting unit included in our impairment analysis are our cash flow forecasts, our estimate of the market’s weighted average cost of capital and market multiples. The following table presents the change in the carrying amount of goodwill during the quarter ended March 31, 2020 (in thousands): Balance at December 31, 2019 $ 100,598 Dispositions (768) Impairment loss (99,830) Balance at March 31, 2020 $ — |
Hosting Arrangements
Hosting Arrangements | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Hosting Arrangements | 9. Hosting Arrangements In the fourth quarter of 2018 we began a process and technology transformation project that will, among other things, upgrade or replace our existing ERP, supply chain and inventory management systems and expand the remote monitoring capabilities of our compression fleet. Included in this project are hosting arrangements that are service contracts related to the cloud migration of our ERP system and cloud services for our new mobile workforce, telematics and inventory management tools. Certain costs incurred for the implementation of our hosting arrangements that are service contracts are capitalized and amortized on a straight-line basis over the term of the respective contract. Amortization begins in the period in which an individual component becomes ready for its intended use. As of March 31, 2020 and December 31, 2019, we capitalized $6.5 million and $5.5 million, respectively, of implementation costs related to our hosting arrangements that are service contracts to other assets in our condensed consolidated balance sheets. Accumulated amortization was $0.1 million at March 31, 2020. We recorded $0.1 million of amortization expense to SG&A in our condensed consolidated statements of operations |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | 10. Long-Term Debt Long-term debt consisted of the following (in thousands): March 31, 2020 December 31, 2019 Credit Facility $ 481,000 $ 513,000 2028 Notes 500,000 500,000 Less: Deferred financing costs, net of amortization (7,851) (8,090) 492,149 491,910 2027 Notes 500,000 500,000 Less: Deferred financing costs, net of amortization (7,723) (7,999) 492,277 492,001 2022 Notes 350,000 350,000 Less: Debt discount, net of amortization (1,860) (2,046) Less: Deferred financing costs, net of amortization (2,111) (2,316) 346,029 345,638 Long-term debt $ 1,811,455 $ 1,842,549 Credit Facility As of March 31, 2020, there were $13.7 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.5%. The weighted average annual interest rate on the outstanding balance under the Credit Facility, excluding the effect of interest rate swaps, was 3.4% and 4.3% at March 31, 2020 and December 31, 2019, respectively. We incurred $0.7 million and $0.5 million in commitment fees on the daily unused amount of the Credit Facility during the three months ended March 31, 2020 and 2019, respectively. We must maintain certain consolidated financial ratios as defined in our Credit Facility agreement. As a result of these ratio requirements, $651.4 million of the $755.3 million of undrawn capacity was available for additional borrowings as of March 31, 2020. As of March 31, 2020, we were in compliance with all covenants under the Credit Facility agreement. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | 11. Accumulated Other Comprehensive Income (Loss) Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with owners. Our accumulated other comprehensive income (loss) consists of changes in the fair value of our interest rate swap derivative instruments, net of tax, which are designated as cash flow hedges. The following table presents the changes in accumulated other comprehensive income (loss) of our derivative cash flow hedges, net of tax, during the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended March 31, 2020 2019 Beginning accumulated other comprehensive income (loss) $ (1,387) $ 5,773 Loss recognized in other comprehensive loss, net of tax benefit of $1,590 and $0, respectively (1) (5,983) (2,299) (Gain) loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax benefit of $51 and $0, respectively (1) 197 (926) Other comprehensive loss (5,786) (3,225) Ending accumulated other comprehensive income (loss) $ (7,173) $ 2,548 (1) Includes adjustment of $0.7 million related to an increase in the valuation allowance recorded to offset the tax effect of other comprehensive loss recorded during the three months ended March 31, 2019. See Note 18 (“Derivatives”) for further details on our interest rate swap derivative instruments. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Equity | 12. Equity Cash Dividends The following table summarizes our dividends declared and paid in each of the quarterly periods of 2020 and 2019: Declared Dividends Dividends Paid per Common Share (in thousands) 2020 Q1 $ 0.145 $ 22,171 2019 Q1 $ 0.132 $ 17,231 Q2 0.132 17,206 Q3 0.145 22,062 Q4 0.145 22,031 On April 24, 2020, our Board of Directors declared a quarterly dividend of $0.145 per share of common stock to be paid on May 18, 2020 to stockholders of record at the close of business on May 11, 2020. |
Revenue from Contract with Cust
Revenue from Contract with Customers | 3 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | 13. Revenue from Contracts with Customers The following table presents our revenue from contracts with customers disaggregated by revenue source (in thousands): Three Months Ended March 31, 2020 2019 Contract operations (1) : 0 - 1,000 horsepower per unit $ 66,740 $ 63,739 1,001 - 1,500 horsepower per unit 84,852 74,340 Over 1,500 horsepower per unit 54,591 43,425 Other (2) 791 1,003 Total contract operations (3) 206,974 182,507 Aftermarket services (1) : Services 25,450 33,521 OTC parts and components sales 17,273 20,131 Total aftermarket services (4) 42,723 53,652 Total revenue $ 249,697 $ 236,159 (1) We operate in two segments: contract operations and aftermarket services. See Note 23 (“Segments”) for further details regarding our segments. (2) Primarily relates to fees associated with owned non-compression equipment. (3) Includes $1.6 million and $2.1 million for the three months ended March 31, 2020 and 2019, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time. (4) All service revenue within aftermarket services is recognized over time. All OTC parts and components sales revenue is recognized at a point in time. Performance Obligations As of March 31, 2020, we had $470.5 million of remaining performance obligations related to our contract operations segment. We have elected to apply the practical expedient to not consider the effects of the time value of money, as the expected time between the transfer of services and payment for such services is less than one year. The remaining performance obligations will be recognized through 2025 as follows (in thousands): 2020 2021 2022 2023 2024 2025 Total Remaining performance obligations $ 244,368 $ 157,208 $ 60,034 $ 7,422 $ 1,355 $ 119 $ 470,506 As of March 31, 2020, we elected to apply the practical expedient to not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year. Contract Assets and Liabilities As of March 31, 2020 and December 31, 2019, our receivables from contracts with customers, net of allowance for credit losses, were $133.5 million and $139.4 million, respectively. Freight billings to customers for the transport of compression assets, customer-specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. As of March 31, 2020 and December 31, 2019, our contract liabilities were $9.4 million and $11.4 million, respectively, which were included in deferred revenue and other liabilities in our condensed consolidated balance sheets. The decrease in the contract liability balance during the three months ended March 31, 2020 was primarily due to revenue deferral of $5.8 million, partially offset by $7.7 million recognized as revenue during the period, each primarily related to freight billings and aftermarket services. |
Long-Lived Asset Impairment
Long-Lived Asset Impairment | 3 Months Ended |
Mar. 31, 2020 | |
Asset Impairment Charges [Abstract] | |
Long-Lived Asset Impairment | 14. Long-Lived Asset Impairment We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable. We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use. In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value. The following table presents the results of our impairment review as recorded to our contract operations segment (dollars in thousands): Three Months Ended March 31, 2020 2019 Idle compressors retired from the active fleet 85 20 Horsepower of idle compressors retired from the active fleet 23,000 15,000 Impairment recorded on idle compressors retired from the active fleet $ 6,195 $ 3,092 During the three months ended March 31, 2020, we determined that the impairment of our contract operations reporting unit’s goodwill was an indicator of potential impairment of the carrying amount of our long-lived assets, including our compressor fleet and associated customer and contract-based intangible assets. Accordingly, we performed a quantitative impairment test of our long-lived assets, by which we determined that they were not impaired as of March 31, 2020. |
Restructuring Charges
Restructuring Charges | 3 Months Ended |
Mar. 31, 2020 | |
Restructuring Charges | |
Restructuring Charges | 15. Restructuring Charges During the first quarter of 2020, we completed a series of restructuring activities to further streamline our organization and more fully align our teams to improve our customer service and profitability. We incurred severance costs of $1.7 million in connection with these restructuring activities during the three months ended March 31, 2020, which are reflected as restructuring charges in our condensed consolidated statements of operations. The following table presents, by segment, the restructuring charges incurred during the three months ended March 31, 2020 (in thousands): Contract Aftermarket Operations Services Other (1) Total Three months ended March 31, 2020 $ 478 $ 625 $ 625 $ 1,728 (1) Represents expense incurred within our corporate function and not directly attributable to our segments. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 16. Income Taxes CARES Act On March 27, 2020, President Trump signed into law the CARES Act, which includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, NOL carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act provisions did not have a material impact on our condensed consolidated financial statements. Future regulatory guidance under the CARES Act or additional legislation enacted by Congress in connection with the COVID-19 pandemic could impact our tax provision in future periods. Valuation Allowance The amount of our deferred tax assets considered realizable could be adjusted if projections of future taxable income are reduced or objective negative evidence in the form of a three-year cumulative loss is present or both. Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely NOL carryforwards and tax credit carryforwards. This may result in the need to record a valuation allowance against all or a portion of our deferred tax assets. Effective Tax Rate The year-to-date effective tax rate for the three months ended March 31, 2020 differed from our statutory rate primarily due to an increase in unrecognized tax benefits. Our quarterly income tax provision is determined based on our estimated full year effective tax rate, adjusted for tax attributable to infrequent or unusual items, which are recognized on a discrete period basis in the income tax provision in the period in which they occur. Our year-to-date income tax provision included a $22.7 million tax benefit recorded discretely on the nonrecurring goodwill impairment loss of $99.8 million. See Note 8 (“Goodwill”) for further details on the goodwill impairment. Unrecognized Tax Benefits As of March 31, 2020, we believe it is reasonably possible that $2.6 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to March 31, 2021 due to the settlement of audits or the expiration of statutes of limitations or both. However, due to the uncertain and complex application of the tax regulations, it is possible that the ultimate resolution of these matters may result in liabilities that could materially differ from this estimate. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | 17. Earnings per Share Basic net income (loss) per common share is computed using the two-class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic net income (loss) per common share is determined by dividing net income (loss), after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock-settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses. Diluted net income (loss) per common share is computed using the weighted average number of shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options, performance-based restricted stock units and stock to be issued pursuant to our employee stock purchase plan unless their effect would be anti-dilutive. The following table shows net income (loss) used in the calculation of basic and diluted net income (loss) per common share (in thousands): Three Months Ended March 31, 2020 2019 Income (loss) from continuing operations $ (61,187) $ 19,729 Loss from discontinued operations, net of tax — (273) Net income (loss) (61,187) 19,456 Less: Net income attributable to participating securities (322) (356) Net income (loss) attributable to common stockholders $ (61,509) $ 19,100 The following table shows the potential shares of common stock that were included in computing diluted net income (loss) per common share (in thousands): Three Months Ended March 31, 2020 2019 Weighted average common shares outstanding including participating securities 152,601 130,238 Less: Weighted average participating securities outstanding (2,051) (2,029) Weighted average common shares outstanding used in basic net income (loss) per common share 150,550 128,209 Net dilutive potential common shares issuable: On exercise of options and vesting of performance-based restricted stock units — 40 On settlement of employee stock purchase plan shares — 6 Weighted average common shares outstanding used in diluted net income (loss) per common share 150,550 128,255 The following table shows the potential shares of common stock issuable that were excluded from computing diluted net income (loss) per common share as their inclusion would have been anti-dilutive (in thousands): Three Months Ended March 31, 2020 2019 On exercise of options where exercise price is greater than average market value for the period 126 154 On exercise of options and vesting of performance-based restricted stock units 57 — On settlement of employee stock purchase plan shares 29 — Net dilutive potential common shares issuable 212 154 |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | 18. Derivatives We are exposed to market risks associated with changes in the variable interest rate of the Credit Facility. We use derivative instruments to manage our exposure to fluctuations in this variable interest rate and thereby minimize the risks and costs associated with financial activities. We do not use derivative instruments for trading or other speculative purposes. The following interest rate swaps, entered into to offset changes in expected cash flows due to fluctuations in the associated variable interest rates, were outstanding at March 31, 2020 (in millions): Expiration Date Notional Value May 2020 $ 100 March 2022 300 $ 400 The counterparties to our derivative agreements are major financial institutions. We monitor the credit quality of these financial institutions and do not expect nonperformance by any counterparty, although such nonperformance could have a material adverse effect on us. We have no collateral posted for the derivative instruments. We have designated these interest rate swaps as cash flow hedging instruments. Changes in the fair value of the interest rate swaps are recognized as a component of other comprehensive income (loss) until the hedged transaction affects earnings. At that time, amounts are reclassified into earnings to interest expense, the same statement of operations line item to which the earnings effect of the hedged item is recorded. Cash flows from derivatives designated as hedges are classified in our condensed consolidated statements of cash flows under the same category as the cash flows from the underlying assets, liabilities or anticipated transactions unless the derivative contract contains a significant financing element; in this case, the cash settlements for these derivatives are classified as cash flows from financing activities. We expect the hedging relationship to be highly effective as the interest rate swap terms substantially coincide with the hedged item and are expected to offset changes in expected cash flows due to fluctuations in the variable rate. We perform quarterly qualitative prospective and retrospective hedge effectiveness assessments unless facts and circumstances related to the hedging relationships change such that we can no longer assert qualitatively that the cash flow hedge relationships were and continue to be highly effective. We estimate that $4.3 million of the deferred pre-tax loss attributable to interest rate swaps included in accumulated other comprehensive loss at March 31, 2020 will be reclassified into earnings as interest expense at then-current values during the next 12 months as the underlying hedged transactions occur. As of March 31, 2020, the weighted average effective fixed interest rate on our interest rate swaps was 1.8%. The following table presents the effect of our derivative instruments designated as cash flow hedging instruments on our condensed consolidated balance sheets (in thousands): March 31, 2020 December 31, 2019 Other current assets $ — $ 12 Total derivative assets $ — $ 12 Accrued liabilities $ (4,317) $ (593) Other liabilities (4,764) (1,175) Total derivative liabilities $ (9,081) $ (1,768) The following tables present the effect of our derivative instruments designated as cash flow hedging instruments on our condensed consolidated statements of operations (in thousands): Three Months Ended March 31, 2020 2019 Pre-tax loss recognized in other comprehensive loss $ (7,573) $ (2,299) Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense (248) 926 Total amount of interest expense in which the effects of cash flow hedges are recorded 29,665 23,617 See Note 11 (“Accumulated Other Comprehensive Income (Loss)”) and Note 19 (“Fair Value Measurements”) for further details on our derivative instruments. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 19. Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis On a quarterly basis, our interest rate swap derivative instruments are valued based on the income approach (discounted cash flow) using market observable inputs, including LIBOR forward curves. These fair value measurements are classified as Level 2. The following table presents our derivative asset and liability measured at fair value on a recurring basis, with pricing levels as of the date of valuation (in thousands): March 31, 2020 December 31, 2019 Derivative asset $ — $ 12 Derivative liability (9,081) (1,768) Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Goodwill In the first quarter of 2020, we determined that the significant deterioration in global macroeconomic conditions caused by the COVID-19 pandemic was an indicator of potential impairment of our goodwill, and we performed a quantitative impairment test as of March 31, 2020 that resulted in a $99.8 million impairment of our goodwill. Significant estimates used in our impairment analysis included cash flow forecasts, our estimate of the market’s weighted average cost of capital and market multiples, which are Level 3 inputs. See Note 8 (“Goodwill”) for further details of the valuation methodology used in connection with the goodwill impairment. Compressors During the three months ended March 31, 2020, we recorded nonrecurring fair value measurements related to our idle and previously-culled compressors. Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years. These fair value measurements are classified as Level 3. The fair value of our impaired compressors at March 31, 2020 and December 31, 2019 was as follows: March 31, 2020 December 31, 2019 Impaired compressors $ 253 $ 5,859 The unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compressors being measured. Additional quantitative information related to our significant unobservable inputs follows: Range Weighted Average Estimated net sale proceeds (1) $0 - $372 per horsepower $21 per horsepower (1) Weighted average is calculated based on an estimated discount for market liquidity of 78% . See Note 14 (“Long-Lived Asset Impairment”) for further details. Other Financial Instruments The carrying amounts of our cash, receivables and payables approximate fair value due to the short-term nature of those instruments. The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to its variable interest rate. The fair value of these outstanding borrowings is a Level 3 measurement. The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs. The following table presents the carrying amount and fair value of our fixed rate debt (in thousands): March 31, 2020 December 31, 2019 Carrying amount of fixed rate debt (1) $ 1,330,455 $ 1,329,549 Fair value of fixed rate debt 1,067,000 1,400,000 (1) Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 10 (“Long-Term Debt”). |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 20. Stock-Based Compensation Stock-based compensation expense consisted of the following during the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended March 31, 2020 2019 Equity awards $ 3,006 $ 2,357 Liability awards (548) 966 Total stock-based compensation expense $ 2,458 $ 3,323 The following table presents restricted stock, restricted stock unit, performance-based restricted stock unit and cash-settled performance unit activity during the three months ended March 31, 2020 (shares in thousands): Weighted Average Grant Date Fair Value Shares Per Share Non-vested awards, December 31, 2019 2,022 $ 10.25 Granted 1,412 9.47 Vested (314) 9.44 Canceled (52) 10.23 Non-vested awards, March 31, 2020 (1) 3,068 9.97 (1) Non-vested awards as of March 31, 2020 are comprised of 529,000 cash-settled restricted stock units and cash-settled performance units and 2,539,000 restricted stock and stock-settled performance units. As of March 31, 2020, we expect $21.5 million of unrecognized compensation cost related to unvested restricted stock, stock-settled restricted stock units, performance units, cash-settled restricted stock units and cash-settled performance units to be recognized over the weighted average period of 2.2 years. 2020 Plan The 2020 Plan was adopted in April 2020 and provides for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock-based awards and dividend equivalent rights to employees, directors and consultants of Archrock. Under the 2020 Plan, the maximum number of shares of common stock available for issuance is 8,500,000. Each stock-settled award granted under the 2020 Plan reduces the number of shares available for issuance by one share. No additional grants may be made under the 2013 Plan following the adoption of the 2020 Plan. Previous grants made under the 2013 Plan continue to be governed by that plan and the applicable award agreements. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 21. Commitments and Contingencies Performance Bonds In the normal course of business we have issued performance bonds to various state authorities that ensure payment of certain obligations. We have also issued a bond to protect our 401(k) retirement plan against losses caused by acts of fraud or dishonesty. The bonds have expiration dates in 2020 through the fourth quarter of 2022 and maximum potential future payments of $2.2 million. As of March 31, 2020, we were in compliance with all obligations to which the performance bonds pertain. Tax Matters We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of March 31, 2020 and December 31, 2019, we accrued $2.4 million and $2.5 million, respectively, for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our consolidated financial position, but it is possible that the resolution of future audits could be material to our consolidated results of operations or cash flows. Subject to the provisions of the tax matters agreement between Exterran Corporation and us, both parties agreed to indemnify the primary obligor of any return for tax periods beginning before and ending before or after the Spin-off (including any ongoing or future amendments and audits for these returns) for the portion of the tax liability (including interest and penalties) that relates to their respective operations reported in the filing. The tax contingencies mentioned above relate to tax matters for which we are responsible in managing the audit. As of March 31, 2020 and December 31, 2019, we recorded an indemnification liability (including penalties and interest), in addition to the tax contingency above, of $2.6 million and $2.8 million, respectively, for our share of non-income-based tax contingencies related to audits being managed by Exterran Corporation. Insurance Matters Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs. Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. We are also self-insured for property damage to our offshore assets. Litigation and Claims In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 22. Related Party Transactions In connection with the closing of the Elite Acquisition, we issued 21.7 million shares of our common stock to JDH Capital, an affiliate of our customer Hilcorp. As long as JDH Capital, together with affiliates of Hilcorp, owns at least 7.5% of our outstanding common stock, it will have the right to designate one director to our Board of Directors. On August 1, 2019, Jeffery D. Hildebrand, founder and executive chairman of Hilcorp, was elected to our Board of Directors. Mr. Hildebrand receives no compensation for his role as a director. As of March 31, 2020, JDH Capital owned 14.2% of our outstanding common stock. Revenue from Hilcorp and affiliates was $10.7 million and $5.5 million during the three months ended March 31, 2020 and 2019, respectively. Accounts receivable, net due from Hilcorp and affiliates were $4.1 million and $5.1 million as of March 31, 2020 and December 31, 2019, respectively. |
Segments
Segments | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Segments | 23. Segments We manage our business segments primarily based on the type of product or service provided. We have two segments which we operate within the U.S.: contract operations and aftermarket services. The contract operations segment primarily provides natural gas compression services to meet specific customer requirements. The aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets. We evaluate the performance of our segments based on gross margin for each segment. Revenue includes only sales to external customers. The following table presents revenue and gross margin by segment during the three months ended March 31, 2020 and 2019 (in thousands): Contract Aftermarket Operations Services Total Three months ended March 31, 2020 Revenue $ 206,974 $ 42,723 $ 249,697 Gross margin 128,323 7,732 136,055 Three months ended March 31, 2019 Revenue $ 182,507 $ 53,652 $ 236,159 Gross margin 107,772 9,750 117,522 The following table reconciles total gross margin to income (loss) before income taxes (in thousands): Three Months Ended March 31, 2020 2019 Total gross margin $ 136,055 $ 117,522 Less: Selling, general and administrative 30,626 28,989 Depreciation and amortization 49,822 44,106 Long-lived asset impairment 6,195 3,092 Goodwill impairment 99,830 — Restatement and other charges — 421 Restructuring charges 1,728 — Interest expense 29,665 23,617 Transaction-related costs — 180 (Gain) loss on sale of assets, net (4,116) 16 Other income, net (555) (221) Income (loss) before income taxes $ (77,140) $ 17,322 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | 24. Subsequent Events 2022 Notes Redemption On April 1, 2020, the 2022 Notes were redeemed at 100% of their $350.0 million aggregate principal amount plus accrued and unpaid interest of $10.5 million with borrowings from the Credit Facility. A debt extinguishment loss of approximately $4.0 million related to the redemption will be recognized in the second quarter of 2020. |
Recent Accounting Developments
Recent Accounting Developments (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Credit Losses | Credit Losses In June 2016, the FASB issued ASU 2016-13, which changes the impairment model for financial assets measured at amortized cost and certain other instruments, and requires entities to use a new current expected credit loss model that results in recognition of expected losses over the contractual life of an asset. We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective Our financial assets measured at amortized cost consist of cash equivalents and trade receivables from revenue transactions within the scope of ASC 606 Revenue. We believe our temporary cash investments have a zero loss expectation because we maintain minimal balances in our cash investment accounts and have no history of loss. Trade accounts receivable are due from companies of varying size engaged principally in oil and natural gas activities throughout the U.S. We review the financial condition of customers prior to extending credit and generally do not obtain collateral for trade receivables. Payment terms are on a short-term basis and in accordance with industry practice. We consider this credit risk to be limited due to these companies’ financial resources, the nature of the products and services we provide and the terms of our customer agreements. Due to the short-term nature of our trade receivables, we consider the amortized cost to be the same as the carrying amount of the receivable, excluding the allowance for credit losses. We recognize an allowance for credit losses when a receivable is recorded, even when the risk of loss is remote. We utilize an aging schedule to determine our allowance for credit losses, and measure expected credit losses on a collective (pool) basis when similar risk characteristics exist. We rely primarily on ratings assigned by external rating agencies and credit monitoring services to assess credit risk and aggregate customers first by low, medium or high risk asset pools, and then by delinquency status. We also consider the internal risk associated with geographic location and the services we provide to the customer when determining asset pools. If a customer does not share similar risk characteristics with other customers, we evaluate the customer’s outstanding trade receivables for expected credit losses on an individual basis. Trade receivables evaluated individually are not included in our collective assessment. Each reporting period, we reassess our customers’ risk profiles and determine the appropriate asset pool classification, or perform individual assessments of expected credit losses, based on the customers’ risk characteristics at the reporting date. The contractual life of our trade receivables is primarily 30 days based on the payment terms specified in the contract. Contract operations services are generally billed monthly at the beginning of the month in which service is being provided. Aftermarket services billings typically occur when parts are delivered or service is completed. Loss rates are separately determined for each asset pool based on the length of time a trade receivable has been outstanding. We analyze two years of internal historical loss data, including the effects of prepayments, write-offs and subsequent recoveries, to determine our historical loss experience. Our historical loss information is a relevant data point for estimating credit losses, as the data closely aligns with trade receivables due from our customers. Ratings assigned by external rating agencies and credit monitoring services consider past performance and forecasts of future economic conditions in assessing credit risk. We routinely update our historical loss data to reflect our customers’ current risk profile, to ensure the historical data and loss rates are relevant to the pool of assets for which we are estimating expected credit losses. Judgement is used to determine the expected credit loss for customers that do not share similar risk characteristics with other customers, based on customer specific items such as legal proceedings, past experience with the customer and/or ongoing customer negotiations. The following table summarizes the changes in the allowance for credit losses balance during the three months ended March 31, 2020 (in thousands): Balance at December 31, 2019 $ 2,210 Impact of adoption of ASU 2016-13 on January 1, 2020 (216) Provision for credit losses 752 Write-offs charged against allowance (223) Balance at March 31, 2020 $ 2,523 |
Fair Value Measurements | Fair Value Measurements On January 1, 2020, we adopted ASU 2018-13, which amends the required fair value measurements disclosures related to valuation techniques and inputs used, uncertainty in measurement and changes in measurements applied. These amendments resulted in new, prospective disclosures of the range and weighted average of the significant unobservable inputs used to develop our Level 3 fair value measurements related to our idle and previously-culled compressors. The adoption of ASU 2018-13 had no impact on our condensed consolidated financial statements. |
Income Taxes | Income Taxes On January 1, 2020, we adopted ASU 2019-12, which simplifies the accounting for income taxes by, among other things, removing certain exceptions related to the incremental approach for intraperiod tax allocation, the year-to-date loss methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities on outside basis differences. ASU 2019-12 also clarifies other aspects of the accounting for income taxes in order to improve consistency of application. The adoption of ASU 2019-12 had no impact on our condensed consolidated financial statements. |
Accounting Standards Updates Not Yet Implemented | Accounting Standards Updates Not Yet Implemented Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. We are currently assessing the impact that ASU 2020-04 may have on our interest rate swap agreements, Credit Facility and other transactions that may be affected by reference rate reform |
Recent Accounting Development_2
Recent Accounting Developments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Summary of changes in the allowance for credit losses balance | The following table summarizes the changes in the allowance for credit losses balance during the three months ended March 31, 2020 (in thousands): Balance at December 31, 2019 $ 2,210 Impact of adoption of ASU 2016-13 on January 1, 2020 (216) Provision for credit losses 752 Write-offs charged against allowance (223) Balance at March 31, 2020 $ 2,523 |
Business Transactions (Tables)
Business Transactions (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Asset Acquisitions | The following table summarizes the purchase price allocation based on the estimated fair values of the acquired assets and liabilities as of the acquisition date (in thousands): Accounts receivable $ 9,007 Inventory 7,987 Other current assets 608 Property, plant and equipment 286,158 Operating lease ROU assets 682 Goodwill 100,598 Intangible assets 40,237 Accounts payable, trade (2,079) Accrued liabilities (2,973) Operating lease liabilities (326) Purchase price $ 439,899 |
Pro Forma Information | The unaudited pro forma financial information below is presented (in thousands) for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results. Three Months Ended March 31, 2019 Revenue $ 254,564 Net income 20,967 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Summary of operating results and balance sheet data for discontinued operations | The following table presents the balance sheet for our discontinued operations (in thousands): March 31, 2020 December 31, 2019 Other assets $ 8,519 $ 8,508 Deferred tax assets 4,086 4,393 Total assets associated with discontinued operations $ 12,605 $ 12,901 Deferred tax liabilities $ 8,519 $ 8,508 Total liabilities associated with discontinued operations $ 8,519 $ 8,508 The following table presents the statements of operations for our discontinued operations (in thousands): Three Months Ended March 31, 2020 2019 Other income, net $ (10) $ (1,432) Provision for income taxes 10 1,705 Loss from discontinued operations, net of tax $ — $ (273) |
Inventory (Tables)
Inventory (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory, net of reserves | Inventory consisted of the following (in thousands): March 31, 2020 December 31, 2019 Parts and supplies $ 63,889 $ 66,121 Work in progress 9,042 8,346 Inventory $ 72,931 $ 74,467 |
Property, Plant and Equipment_2
Property, Plant and Equipment, Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment, net | Property, plant and equipment, net consisted of the following (in thousands): March 31, 2020 December 31, 2019 Compression equipment, facilities and other fleet assets $ 3,659,907 $ 3,653,930 Land and buildings 51,031 50,743 Transportation and shop equipment 114,465 116,057 Computer hardware and software 93,734 93,695 Other 17,587 15,308 Property, plant and equipment 3,936,724 3,929,733 Accumulated depreciation (1,374,801) (1,370,335) Property, plant and equipment, net $ 2,561,923 $ 2,559,398 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases Balance Sheet Location | Balance sheet information related to our operating leases was as follows (in thousands): Classification March 31, 2020 December 31, 2019 ROU assets Operating lease ROU assets $ 19,156 $ 17,901 Lease liabilities Current Accrued liabilities $ 3,211 $ 3,037 Noncurrent Operating lease liabilities 17,184 16,094 Total lease liabilities $ 20,395 $ 19,131 |
Components of Lease Costs | The components of lease cost were as follows (in thousands): Three Months Ended March 31, 2020 2019 Operating lease cost $ 1,031 $ 974 Short-term lease cost 129 173 Variable lease cost 349 382 Total lease cost $ 1,509 $ 1,529 Cash flow and non-cash information related to our operating leases were as follows (in thousands): Three Months Ended March 31, 2020 2019 Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities $ 1,351 $ 1,311 Operating lease ROU assets obtained in exchange for new lease liabilities 2,037 617 Other supplemental information related to our operating leases was as follows: March 31, 2020 December 31, 2019 Weighted average remaining lease term (in years) 8.3 8.2 Weighted average discount rate 5.1 % 5.3 % |
Operating Lease Maturity Schedule | Remaining maturities of lease liabilities governed under ASC 842 Leases as of March 31, 2020 were as follows (in thousands): 2020 $ 2,808 2021 3,955 2022 2,855 2023 2,550 2024 2,159 2025 1,930 Thereafter 8,942 Total lease payments 25,199 Less: Interest (4,804) Total lease liabilities under ASC 842 Leases $ 20,395 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill | |
Schedule of change in the carrying value of goodwill | The following table presents the change in the carrying amount of goodwill during the quarter ended March 31, 2020 (in thousands): Balance at December 31, 2019 $ 100,598 Dispositions (768) Impairment loss (99,830) Balance at March 31, 2020 $ — |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | Long-term debt consisted of the following (in thousands): March 31, 2020 December 31, 2019 Credit Facility $ 481,000 $ 513,000 2028 Notes 500,000 500,000 Less: Deferred financing costs, net of amortization (7,851) (8,090) 492,149 491,910 2027 Notes 500,000 500,000 Less: Deferred financing costs, net of amortization (7,723) (7,999) 492,277 492,001 2022 Notes 350,000 350,000 Less: Debt discount, net of amortization (1,860) (2,046) Less: Deferred financing costs, net of amortization (2,111) (2,316) 346,029 345,638 Long-term debt $ 1,811,455 $ 1,842,549 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table presents the changes in accumulated other comprehensive income (loss) of our derivative cash flow hedges, net of tax, during the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended March 31, 2020 2019 Beginning accumulated other comprehensive income (loss) $ (1,387) $ 5,773 Loss recognized in other comprehensive loss, net of tax benefit of $1,590 and $0, respectively (1) (5,983) (2,299) (Gain) loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax benefit of $51 and $0, respectively (1) 197 (926) Other comprehensive loss (5,786) (3,225) Ending accumulated other comprehensive income (loss) $ (7,173) $ 2,548 (1) Includes adjustment of $0.7 million related to an increase in the valuation allowance recorded to offset the tax effect of other comprehensive loss recorded during the three months ended March 31, 2019. |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Summary of entity's dividends per common share | Declared Dividends Dividends Paid per Common Share (in thousands) 2020 Q1 $ 0.145 $ 22,171 2019 Q1 $ 0.132 $ 17,231 Q2 0.132 17,206 Q3 0.145 22,062 Q4 0.145 22,031 |
Revenue from Contract with Cu_2
Revenue from Contract with Customers (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | The following table presents our revenue from contracts with customers disaggregated by revenue source (in thousands): Three Months Ended March 31, 2020 2019 Contract operations (1) : 0 - 1,000 horsepower per unit $ 66,740 $ 63,739 1,001 - 1,500 horsepower per unit 84,852 74,340 Over 1,500 horsepower per unit 54,591 43,425 Other (2) 791 1,003 Total contract operations (3) 206,974 182,507 Aftermarket services (1) : Services 25,450 33,521 OTC parts and components sales 17,273 20,131 Total aftermarket services (4) 42,723 53,652 Total revenue $ 249,697 $ 236,159 (1) We operate in two segments: contract operations and aftermarket services. See Note 23 (“Segments”) for further details regarding our segments. (2) Primarily relates to fees associated with owned non-compression equipment. (3) Includes $1.6 million and $2.1 million for the three months ended March 31, 2020 and 2019, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time. (4) All service revenue within aftermarket services is recognized over time. All OTC parts and components sales revenue is recognized at a point in time. |
Remaining Performance Obligation | The remaining performance obligations will be recognized through 2025 as follows (in thousands): 2020 2021 2022 2023 2024 2025 Total Remaining performance obligations $ 244,368 $ 157,208 $ 60,034 $ 7,422 $ 1,355 $ 119 $ 470,506 |
Long-Lived Assets Impairment (T
Long-Lived Assets Impairment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Asset Impairment Charges [Abstract] | |
Schedule of impairment of long-lived assets | The following table presents the results of our impairment review as recorded to our contract operations segment (dollars in thousands): Three Months Ended March 31, 2020 2019 Idle compressors retired from the active fleet 85 20 Horsepower of idle compressors retired from the active fleet 23,000 15,000 Impairment recorded on idle compressors retired from the active fleet $ 6,195 $ 3,092 |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Restructuring Charges | |
Schedule of restructuring charges by segment | The following table presents, by segment, the restructuring charges incurred during the three months ended March 31, 2020 (in thousands): Contract Aftermarket Operations Services Other (1) Total Three months ended March 31, 2020 $ 478 $ 625 $ 625 $ 1,728 (1) Represents expense incurred within our corporate function and not directly attributable to our segments. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Summary of net income (loss) attributable to Archrock common stockholders used in the calculation of basic and diluted income (loss) per common share | The following table shows net income (loss) used in the calculation of basic and diluted net income (loss) per common share (in thousands): Three Months Ended March 31, 2020 2019 Income (loss) from continuing operations $ (61,187) $ 19,729 Loss from discontinued operations, net of tax — (273) Net income (loss) (61,187) 19,456 Less: Net income attributable to participating securities (322) (356) Net income (loss) attributable to common stockholders $ (61,509) $ 19,100 |
Schedule of potential shares of common stock that were included in computing diluted income (loss) attributable to Archrock common stockholders per common share | The following table shows the potential shares of common stock that were included in computing diluted net income (loss) per common share (in thousands): Three Months Ended March 31, 2020 2019 Weighted average common shares outstanding including participating securities 152,601 130,238 Less: Weighted average participating securities outstanding (2,051) (2,029) Weighted average common shares outstanding used in basic net income (loss) per common share 150,550 128,209 Net dilutive potential common shares issuable: On exercise of options and vesting of performance-based restricted stock units — 40 On settlement of employee stock purchase plan shares — 6 Weighted average common shares outstanding used in diluted net income (loss) per common share 150,550 128,255 |
Schedule of potential shares of common stock issuable, excluded from computation of diluted income (loss), attributable to Archrock common stockholders per common share | The following table shows the potential shares of common stock issuable that were excluded from computing diluted net income (loss) per common share as their inclusion would have been anti-dilutive (in thousands): Three Months Ended March 31, 2020 2019 On exercise of options where exercise price is greater than average market value for the period 126 154 On exercise of options and vesting of performance-based restricted stock units 57 — On settlement of employee stock purchase plan shares 29 — Net dilutive potential common shares issuable 212 154 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of interest rate swaps | The following interest rate swaps, entered into to offset changes in expected cash flows due to fluctuations in the associated variable interest rates, were outstanding at March 31, 2020 (in millions): Expiration Date Notional Value May 2020 $ 100 March 2022 300 $ 400 |
Effect of derivative instruments on consolidated financial position | The following table presents the effect of our derivative instruments designated as cash flow hedging instruments on our condensed consolidated balance sheets (in thousands): March 31, 2020 December 31, 2019 Other current assets $ — $ 12 Total derivative assets $ — $ 12 Accrued liabilities $ (4,317) $ (593) Other liabilities (4,764) (1,175) Total derivative liabilities $ (9,081) $ (1,768) |
Effect of derivative instruments on results of operations | The following tables present the effect of our derivative instruments designated as cash flow hedging instruments on our condensed consolidated statements of operations (in thousands): Three Months Ended March 31, 2020 2019 Pre-tax loss recognized in other comprehensive loss $ (7,573) $ (2,299) Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense (248) 926 Total amount of interest expense in which the effects of cash flow hedges are recorded 29,665 23,617 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Summary of assets and liabilities measured at fair value on recurring basis | The following table presents our derivative asset and liability measured at fair value on a recurring basis, with pricing levels as of the date of valuation (in thousands): March 31, 2020 December 31, 2019 Derivative asset $ — $ 12 Derivative liability (9,081) (1,768) |
Schedule of non-recurring fair value assets | The fair value of our impaired compressors at March 31, 2020 and December 31, 2019 was as follows: March 31, 2020 December 31, 2019 Impaired compressors $ 253 $ 5,859 |
Schedule of additional quantitative information related to our significant unobservable inputs | Range Weighted Average Estimated net sale proceeds (1) $0 - $372 per horsepower $21 per horsepower (1) Weighted average is calculated based on an estimated discount for market liquidity of 78% . |
Schedule of carrying value and estimated fair value of debt instruments | The following table presents the carrying amount and fair value of our fixed rate debt (in thousands): March 31, 2020 December 31, 2019 Carrying amount of fixed rate debt (1) $ 1,330,455 $ 1,329,549 Fair value of fixed rate debt 1,067,000 1,400,000 (1) Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 10 (“Long-Term Debt”). |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Allocation of Total Stock-based Compensation | Stock-based compensation expense consisted of the following during the three months ended March 31, 2020 and 2019 (in thousands): Three Months Ended March 31, 2020 2019 Equity awards $ 3,006 $ 2,357 Liability awards (548) 966 Total stock-based compensation expense $ 2,458 $ 3,323 |
Schedule of Restricted Stock, Restricted Stock Unit, Performance Unit, Cash Settled Restricted Stock Unit and Cash Settled Performance Unit Activity | The following table presents restricted stock, restricted stock unit, performance-based restricted stock unit and cash-settled performance unit activity during the three months ended March 31, 2020 (shares in thousands): Weighted Average Grant Date Fair Value Shares Per Share Non-vested awards, December 31, 2019 2,022 $ 10.25 Granted 1,412 9.47 Vested (314) 9.44 Canceled (52) 10.23 Non-vested awards, March 31, 2020 (1) 3,068 9.97 (1) Non-vested awards as of March 31, 2020 are comprised of 529,000 cash-settled restricted stock units and cash-settled performance units and 2,539,000 restricted stock and stock-settled performance units. |
Segments (Tables)
Segments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Revenue and other financial information by reportable segment | The following table presents revenue and gross margin by segment during the three months ended March 31, 2020 and 2019 (in thousands): Contract Aftermarket Operations Services Total Three months ended March 31, 2020 Revenue $ 206,974 $ 42,723 $ 249,697 Gross margin 128,323 7,732 136,055 Three months ended March 31, 2019 Revenue $ 182,507 $ 53,652 $ 236,159 Gross margin 107,772 9,750 117,522 |
Reconciliation of net income (loss) to gross margin | The following table reconciles total gross margin to income (loss) before income taxes (in thousands): Three Months Ended March 31, 2020 2019 Total gross margin $ 136,055 $ 117,522 Less: Selling, general and administrative 30,626 28,989 Depreciation and amortization 49,822 44,106 Long-lived asset impairment 6,195 3,092 Goodwill impairment 99,830 — Restatement and other charges — 421 Restructuring charges 1,728 — Interest expense 29,665 23,617 Transaction-related costs — 180 (Gain) loss on sale of assets, net (4,116) 16 Other income, net (555) (221) Income (loss) before income taxes $ (77,140) $ 17,322 |
Organization (Details)
Organization (Details) | 3 Months Ended |
Mar. 31, 2020segment | |
Accounting Policies [Abstract] | |
Number of reportable segments | 2 |
Recent Accounting Development_3
Recent Accounting Developments (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Jan. 01, 2020 | |
Credit Losses | |||
Payment term of trade receivables | 30 days | ||
Period for analyzing historical loss data to determine loss experience | 2 years | ||
Changes in the allowance for credit losses balance | |||
Balance at beginning of period | $ 2,210 | ||
Provision for credit losses | 752 | $ 428 | |
Write-offs charged against the allowance | (223) | ||
Balance at end of period | 2,523 | ||
Accounts Receivable, Allowance for Credit Loss, Current | 2,210 | ||
ASU 2016-13 | |||
New Accounting Pronouncements or Change in Accounting Principle | |||
Change in Accounting Principle, Accounting Standards Update, Adopted | true | ||
Change in Accounting Principle, Accounting Standards Update, Transition Option Elected | Modified Retrospective | ||
ASU 2016-13 | Reclassification | |||
Changes in the allowance for credit losses balance | |||
Balance at beginning of period | (216) | ||
Accounts Receivable, Allowance for Credit Loss, Current | $ (216) | ||
ASU 2018-13 | |||
New Accounting Pronouncements or Change in Accounting Principle | |||
Change in Accounting Principle, Accounting Standards Update, Adopted | true |
Business Transactions - March 2
Business Transactions - March 2020 Disposition (Details) hp in Thousands, $ in Thousands | Mar. 01, 2020USD ($)hpCompressorUnit | Mar. 31, 2020USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Gain on March 2020 Disposition | $ 3,172 | |
Disposed of by Sale | March 2020 Disposition | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Number of compressors | CompressorUnit | 200 | |
Compressor units horsepower (horsepower) | hp | 35 | |
Gain on March 2020 Disposition | $ 3,200 |
Business Transactions - Elite A
Business Transactions - Elite Acquisition (Details) hp in Thousands, $ in Thousands, shares in Millions | Aug. 01, 2019USD ($)hpshares | Dec. 31, 2019USD ($) |
Purchase price allocation | ||
Goodwill | $ 100,598 | |
Elite Acquisition | ||
Business Transactions | ||
Compressor units horsepower (horsepower) | hp | 430 | |
Cash consideration | $ 214,000 | |
Purchase price allocation | ||
Accounts receivable | 9,007 | |
Inventory | 7,987 | |
Other current assets | 608 | |
Property, plant and equipment | 286,158 | |
Operating lease ROU assets | 682 | |
Goodwill | 100,598 | |
Intangible assets | 40,237 | |
Accounts payable, trade | (2,079) | |
Accrued liabilities | (2,973) | |
Operating lease liabilities | (326) | |
Purchase price | $ 439,899 | |
Elite Acquisition | Common Stock | ||
Business Transactions | ||
Shares issued as compensation for asset acquisition (shares) | shares | 21.7 | |
Fair value of equity consideration | $ 225,900 |
Business Transactions - Assets
Business Transactions - Assets Acquired (Details) - Elite Acquisition | Aug. 01, 2019 |
Business Acquisition [Line Items] | |
Property plant and equipment remaining useful life | 15 years |
Estimated average remaining life intangible assets | 15 years |
Business Transactions - Pro for
Business Transactions - Pro forma (Details) hp in Thousands, $ in Thousands | Aug. 01, 2019USD ($)hp | Mar. 31, 2019USD ($) |
Pro forma financial information | ||
Revenue | $ 254,564 | |
Net income | $ 20,967 | |
Elite Acquisition | ||
Business Transactions | ||
Compressor units horsepower (horsepower) | hp | 430 | |
Cash consideration | $ 214,000 |
Discontinued Operations - Descr
Discontinued Operations - Description (Details) - Exterran Corporation - Spinoff - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Discontinued Operations | ||
Deferred tax liabilities | $ 8,519 | $ 8,508 |
Indemnification asset | $ 8,519 | $ 8,508 |
Discontinued Operations - Balan
Discontinued Operations - Balance Sheet Data for Discontinued Operations (Details) - Spinoff - Exterran Corporation - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Summary of balance sheet data for discontinued operations | ||
Other assets | $ 8,519 | $ 8,508 |
Deferred tax assets | 4,086 | 4,393 |
Total assets associated with discontinued operations | 12,605 | 12,901 |
Deferred tax liabilities | 8,519 | 8,508 |
Total liabilities associated with discontinued operations | $ 8,519 | $ 8,508 |
Discontinued Operations - Incom
Discontinued Operations - Income Statement Data for Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | ||
Loss from discontinued operations, net of tax | $ (273) | |
Spinoff | Exterran Corporation | ||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | ||
Other income, net | $ (10) | (1,432) |
Provision for income taxes | $ 10 | 1,705 |
Loss from discontinued operations, net of tax | $ (273) |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Composition of Inventory net of reserves | ||
Parts and supplies | $ 63,889 | $ 66,121 |
Work in progress | 9,042 | 8,346 |
Inventory | $ 72,931 | $ 74,467 |
Property, Plant and Equipment_3
Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 3,936,724 | $ 3,929,733 |
Accumulated depreciation | (1,374,801) | (1,370,335) |
Property, plant and equipment, net | 2,561,923 | 2,559,398 |
Compression equipment, facilities and other fleet assets | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 3,659,907 | 3,653,930 |
Land and buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 51,031 | 50,743 |
Transportation and shop equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 114,465 | 116,057 |
Computer hardware and software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 93,734 | 93,695 |
Other | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 17,587 | $ 15,308 |
Leases - (Narratives) (Details)
Leases - (Narratives) (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Minimum | |
Lessee, Lease, Description | |
Weighted average remaining lease term (in years) | 1 year |
Operating lease renewal term (in years) | 3 years |
Maximum | |
Lessee, Lease, Description | |
Weighted average remaining lease term (in years) | 11 years |
Operating lease renewal term (in years) | 5 years |
Leases - Balance Sheet Informat
Leases - Balance Sheet Information (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
ROU assets | $ 19,156 | $ 17,901 |
Lease liabilities | ||
Current | 3,211 | 3,037 |
Noncurrent | 17,184 | 16,094 |
Total lease liabilities | $ 20,395 | $ 19,131 |
Leases - Components of Lease Co
Leases - Components of Lease Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 1,031 | $ 974 |
Short-term lease cost | 129 | 173 |
Variable lease cost | 349 | 382 |
Total lease cost | $ 1,509 | $ 1,529 |
Leases - Cash Flow and Non-cash
Leases - Cash Flow and Non-cash Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities | $ 1,351 | $ 1,311 |
Operating lease ROU assets obtained in exchange for new lease liabilities | $ 2,037 | $ 617 |
Leases - Other Supplemental Inf
Leases - Other Supplemental Information (Details) | Mar. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Weighted average remaining lease term (in years) | 8 years 3 months 18 days | 8 years 2 months 12 days |
Weighted average discount rate (percent) | 5.10% | 5.30% |
Leases - Maturity Schedule (Det
Leases - Maturity Schedule (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Operating Lease Liabilities, Payments Due | ||
2020 | $ 2,808 | |
2021 | 3,955 | |
2022 | 2,855 | |
2023 | 2,550 | |
2024 | 2,159 | |
2025 | 1,930 | |
Thereafter | 8,942 | |
Total lease payments | 25,199 | |
Less: Interest | (4,804) | |
Total lease liabilities under ASC 842 Leases | $ 20,395 | $ 19,131 |
Goodwill (Details)
Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Change in the carrying value of goodwill | |
Goodwill, net as of beginning of period | $ 100,598 |
Dispositions | (768) |
Impairment loss | $ (99,830) |
Hosting Arrangements (Details)
Hosting Arrangements (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Hosting arrangements, Capitalized costs | $ 6.5 | $ 5.5 |
Hosting arrangements, Accumulated amortization | 0.1 | |
Hosting arrangements, Amortization | $ 0.1 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Instrument | ||
Long-term debt | $ 1,811,455 | $ 1,842,549 |
Credit Facility | ||
Debt Instrument | ||
Long-term debt | 481,000 | 513,000 |
2028 Notes | ||
Debt Instrument | ||
Long term debt gross | 500,000 | 500,000 |
Less: Deferred financing costs, net of amortization | (7,851) | (8,090) |
Long-term debt | 492,149 | 491,910 |
2027 Notes | ||
Debt Instrument | ||
Long term debt gross | 500,000 | 500,000 |
Less: Deferred financing costs, net of amortization | (7,723) | (7,999) |
Long-term debt | 492,277 | 492,001 |
2022 Notes | ||
Debt Instrument | ||
Long term debt gross | 350,000 | 350,000 |
Less: Debt discount, net of amortization | (1,860) | (2,046) |
Less: Deferred financing costs, net of amortization | (2,111) | (2,316) |
Long-term debt | $ 346,029 | $ 345,638 |
Long-Term Debt - Credit Facilit
Long-Term Debt - Credit Facility (Details) - Credit Facility - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Line of Credit Facility | |||
Letter of credit outstanding | $ 13.7 | ||
Debt instrument, variable rate (percentage) | 2.50% | ||
Debt instrument weighted average interest rate (percent) | 3.40% | 4.30% | |
Commitment fee amount | $ 0.7 | $ 0.5 | |
Current borrowing capacity | 651.4 | ||
Undrawn capacity under revolving credit facility | $ 755.3 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Increase (Decrease) in Stockholders' Equity | ||
Beginning balance | $ 1,085,963 | $ 841,574 |
Total other comprehensive loss | (5,786) | (3,225) |
Ending balance | 999,472 | 842,292 |
Accumulated Other Comprehensive Income (Loss) | ||
Increase (Decrease) in Stockholders' Equity | ||
Beginning balance | (1,387) | 5,773 |
Loss recognized in other comprehensive loss, net of tax benefit of $1,590 and $0, respectively | (5,983) | (2,299) |
(Gain) loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax benefit of $51 and $0, respectively | 197 | (926) |
Total other comprehensive loss | (5,786) | (3,225) |
Ending balance | (7,173) | 2,548 |
Loss recognized in other comprehensive income, tax expense (benefit) | (1,590) | 0 |
(Gain) loss reclassified from accumulated other comprehensive loss, tax expense (benefit) | $ (51) | 0 |
Valuation adjustment | $ 700 |
Equity - Cash Dividends (Detail
Equity - Cash Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 24, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 |
Distributions | ||||||
Dividends per Common Share (in dollars per share) | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.132 | $ 0.132 | |
Total Dividends | $ 22,171 | $ 22,031 | $ 22,062 | $ 17,206 | $ 17,231 | |
Subsequent Event | ||||||
Distributions | ||||||
Dividend declared per common stock (in dollars per share) | $ 0.145 |
Revenue from Contract with Cu_3
Revenue from Contract with Customers - Disaggregate Revenue (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)segment | Mar. 31, 2019USD ($) | |
Disaggregation of Revenue | ||
Contract revenue | $ 249,697 | $ 236,159 |
Number of reportable segments | segment | 2 | |
Contract Operations | Transferred at Point in Time | ||
Disaggregation of Revenue | ||
Contract revenue | $ 1,600 | 2,100 |
Contract Operations | Contract operations | ||
Disaggregation of Revenue | ||
Contract revenue | 206,974 | 182,507 |
Contract Operations | 0 - 1,000 horsepower per unit | ||
Disaggregation of Revenue | ||
Contract revenue | 66,740 | 63,739 |
Contract Operations | 1,001 - 1,500 horsepower per unit | ||
Disaggregation of Revenue | ||
Contract revenue | 84,852 | 74,340 |
Contract Operations | Over 1,500 horsepower per unit | ||
Disaggregation of Revenue | ||
Contract revenue | 54,591 | 43,425 |
Contract Operations | Other | ||
Disaggregation of Revenue | ||
Contract revenue | 791 | 1,003 |
Aftermarket Services | Aftermarket services | ||
Disaggregation of Revenue | ||
Contract revenue | 42,723 | 53,652 |
Aftermarket Services | Services | ||
Disaggregation of Revenue | ||
Contract revenue | 25,450 | 33,521 |
Aftermarket Services | OTC parts and components sales | ||
Disaggregation of Revenue | ||
Contract revenue | $ 17,273 | $ 20,131 |
Revenue from Contract with Cu_4
Revenue from Contract with Customers - Remaining Performance Obligation (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 470,506 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 244,368 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied, expected timing | 9 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 157,208 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 60,034 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 7,422 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 1,355 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 119 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue from Contract with Cu_5
Revenue from Contract with Customers - Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Disaggregation of Revenue | |||
Accounts receivable, trade | $ 138,623 | $ 144,865 | |
Contract liability with customer | 9,400 | 11,400 | |
Deferred revenue | 5,783 | $ 9,467 | |
Deferred revenue recognized in earnings | 7,735 | $ 12,749 | |
Contract with Customers | |||
Disaggregation of Revenue | |||
Accounts receivable, trade | $ 133,500 | $ 139,400 |
Long-Lived Asset Impairment (De
Long-Lived Asset Impairment (Details) hp in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)CompressorUnithp | Mar. 31, 2019USD ($)CompressorUnithp | |
Impaired Long-Lived Assets Held and Used | ||
Impairment recorded on idle compressor units retired from the active fleet (in dollars) | $ 6,195 | $ 3,092 |
Idle Compressor Units | ||
Impaired Long-Lived Assets Held and Used | ||
Idle compressor units retired from the active fleet (compressors) | CompressorUnit | 85 | 20 |
Horsepower of idle compressor units retired from the active fleet (horsepower) | hp | 23 | 15 |
Impairment recorded on idle compressor units retired from the active fleet (in dollars) | $ 6,195 | $ 3,092 |
Restructuring Charges - Descrip
Restructuring Charges - Description (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Restructuring Charges | |
Restructuring costs | $ 1,728 |
Restructuring Charges - By segm
Restructuring Charges - By segment (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Expected restructuring charges | |
Three months ended March 31, 2020 | $ 1,728 |
Corporate | |
Expected restructuring charges | |
Three months ended March 31, 2020 | 625 |
Contract Operations | Operating Segments | |
Expected restructuring charges | |
Three months ended March 31, 2020 | 478 |
Aftermarket Services | Operating Segments | |
Expected restructuring charges | |
Three months ended March 31, 2020 | $ 625 |
Income Taxes (Details)
Income Taxes (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Income Tax Disclosure [Abstract] | |
Tax benefit on goodwill impairment | $ 22,700 |
Goodwill impairment | 99,830 |
Potential decrease in unrecognized tax benefit | $ 2,600 |
Earnings Per Share - Net Income
Earnings Per Share - Net Income Attributable to Common Stockholders (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Summary of net income attributable to Archrock common stockholders used in the calculation of basic and diluted income per common share | ||
Income (loss) from continuing operations | $ (61,187) | $ 19,729 |
Loss from discontinued operations, net of tax | (273) | |
Net income (loss) | (61,187) | 19,456 |
Less: Net income attributable to participating securities | (322) | (356) |
Net income attributable to common stockholders | $ (61,509) | $ 19,100 |
Potential shares of common stock included in computing diluted income attributable to Exterran common stockholders per common share | ||
Weighted average common shares outstanding including participating securities (in shares) | 152,601 | 130,238 |
Less: Weighted average participating securities outstanding (in shares) | (2,051) | (2,029) |
Weighted average common shares outstanding - used in basic net income (loss) per common share (in shares) | 150,550 | 128,209 |
Weighted average common shares outstanding - used in diluted net income (loss) per common share (in shares) | 150,550 | 128,255 |
On exercise of options and vesting of performance-based restricted stock units | ||
Potential shares of common stock included in computing diluted income attributable to Exterran common stockholders per common share | ||
Net dilutive potential common shares issuable (in shares) | 40 | |
On settlement of employee stock purchase plan shares | ||
Potential shares of common stock included in computing diluted income attributable to Exterran common stockholders per common share | ||
Net dilutive potential common shares issuable (in shares) | 6 |
Earnings Per Share - Anti-dilut
Earnings Per Share - Anti-dilutive Shares (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Anti-dilutive effect of the calculation of net dilutive potential shares of common stock issuable | ||
Net dilutive potential common shares issuable (shares) | 212 | 154 |
On exercise of options where exercise price is greater than average market value for the period | ||
Anti-dilutive effect of the calculation of net dilutive potential shares of common stock issuable | ||
Net dilutive potential common shares issuable (shares) | 126 | 154 |
On exercise of options and vesting of performance-based restricted stock units | ||
Anti-dilutive effect of the calculation of net dilutive potential shares of common stock issuable | ||
Net dilutive potential common shares issuable (shares) | 57 | |
On settlement of employee stock purchase plan shares | ||
Anti-dilutive effect of the calculation of net dilutive potential shares of common stock issuable | ||
Net dilutive potential common shares issuable (shares) | 29 |
Derivatives - Interest Rate Swa
Derivatives - Interest Rate Swaps (Details) - Derivatives Designated as Hedging Instruments $ in Millions | Mar. 31, 2020USD ($) |
Interest Rate Swaps | |
Notional Disclosures | |
Notional amount of interest rate swaps | $ 400 |
May 2020 | |
Notional Disclosures | |
Notional amount of interest rate swaps | 100 |
March 2022 | |
Notional Disclosures | |
Notional amount of interest rate swaps | $ 300 |
Derivatives - Interest Rate Ris
Derivatives - Interest Rate Risk - Narratives (Details) - Derivatives Designated as Hedging Instruments - Interest Rate Swaps $ in Millions | Mar. 31, 2020USD ($) |
Derivatives | |
Deferred pre-tax losses to be reclassified during next 12 months | $ 4.3 |
Weighted average effective fixed interest rate on interest rate swaps (as a percent) | 1.80% |
Derivatives - Effect of Derivat
Derivatives - Effect of Derivative Instruments on Balance Sheet (Details) - Derivatives Designated as Hedging Instruments - Interest Rate Swaps - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value Asset | ||
Derivative assets | $ 12 | |
Derivative liability | $ (9,081) | (1,768) |
Other current assets | ||
Fair Value Asset | ||
Derivative assets | 12 | |
Accrued liabilities | ||
Fair Value Asset | ||
Derivative liability | (4,317) | (593) |
Other liabilities | ||
Fair Value Asset | ||
Derivative liability | $ (4,764) | $ (1,175) |
Derivatives - Effect of Deriv_2
Derivatives - Effect of Derivative Instruments on Income Statement (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Effect of derivative instruments on results of operations | ||
Total amount of interest expense in which the effects of cash flow hedges are recorded | $ 29,665 | $ 23,617 |
Interest Rate Swaps | ||
Effect of derivative instruments on results of operations | ||
Pre-tax loss recognized in other comprehensive loss | (7,573) | (2,299) |
Pre-tax income (loss) reclassified from accumulated other comprehensive income (loss) into interest expense | (248) | 926 |
Total amount of interest expense in which the effects of cash flow hedges are recorded | $ 29,665 | $ 23,617 |
Fair Value Measurements - Measu
Fair Value Measurements - Measured on Recurring Basis (Details) - Recurring Basis - Level 2 - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair value measurement of assets and liabilities | ||
Derivative asset | $ 12 | |
Derivative liability | $ (9,081) | $ (1,768) |
Fair Value Measurements - Mea_2
Fair Value Measurements - Measured on Nonrecurring Basis (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)$ / hp | Mar. 31, 2019USD ($) | |
Valuation of our interest rate swaps and impaired assets | ||
Goodwill impairment | $ | $ 99,830 | |
Nonrecurring Basis | Level 3 | ||
Valuation of our interest rate swaps and impaired assets | ||
Impaired compressors | $ | $ 253 | $ 5,859 |
Measurement Input, Discount for market liquidity | Weighted average | ||
Valuation of our interest rate swaps and impaired assets | ||
Measurement input | 0.78 | |
Impaired Long-Lived Assets | Measurement Input, Sale proceeds | Level 3 | Minimum | ||
Valuation of our interest rate swaps and impaired assets | ||
Measurement input | 0 | |
Impaired Long-Lived Assets | Measurement Input, Sale proceeds | Level 3 | Maximum | ||
Valuation of our interest rate swaps and impaired assets | ||
Measurement input | 372 | |
Impaired Long-Lived Assets | Measurement Input, Sale proceeds | Level 3 | Weighted average | ||
Valuation of our interest rate swaps and impaired assets | ||
Measurement input | 21 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value of Debt (Details) - Fixed Rate Debt - Level 2 - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Long-term debt, fair value | $ 1,330,455 | $ 1,329,549 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Long-term debt, fair value | $ 1,067,000 | $ 1,400,000 |
Stock-Based Compensation - Allo
Stock-Based Compensation - Allocated Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Total stock-based compensation expense | $ 2,458 | $ 3,323 |
Equity awards | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Total stock-based compensation expense | 3,006 | 2,357 |
Liability awards | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Total stock-based compensation expense | $ (548) | $ 966 |
Stock-Based Compensation - Awar
Stock-Based Compensation - Award Activity (Details) - Restricted Stock, Restricted Stock Units, Performance Units, Cash Settled Restricted Stock Units and Cash Settled Performance Units shares in Thousands | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Shares | |
Non-vested awards at the beginning of the period (in shares) | shares | 2,022 |
Granted (in shares) | shares | 1,412 |
Vested (in shares) | shares | (314) |
Canceled (in shares) | shares | (52) |
Non-vested awards at the end of the period (in shares) | shares | 3,068 |
Weighted Average Grant Date Fair Value Per Share | |
Non-vested awards at the beginning of the period (in dollars per share) | $ / shares | $ 10.25 |
Granted (in dollars per share) | $ / shares | 9.47 |
Vested (in dollars per share) | $ / shares | 9.44 |
Canceled (in dollars per share) | $ / shares | 10.23 |
Non-vested awards at the end of the period (in dollars per share) | $ / shares | $ 9.97 |
Stock-Based Compensation - Unre
Stock-Based Compensation - Unrecognized cost and 2020 Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Apr. 30, 2020 | Dec. 31, 2019 | |
Stock-Based Compensation | |||
Additional paid-in capital | $ 3,415,784 | $ 3,412,509 | |
2020 Plan | Subsequent Event | |||
Unrecognized compensation | |||
Number of shares authorized for issuance | 8,500,000 | ||
Reduction in number of shares available for issuance for each stock-settled award granted | 1 | ||
Cash Settled Restricted Stock Units and Cash Settled Performance Units | |||
Stock-Based Compensation | |||
Non-vested awards at the end of the period (in shares) | 529,000 | ||
Restricted Stock and Stock-settled Performance Units [Member] | |||
Stock-Based Compensation | |||
Non-vested awards at the end of the period (in shares) | 2,539,000 | ||
Restricted Stock, Restricted Stock Units, Performance Units, Cash Settled Restricted Stock Units and Cash Settled Performance Units | |||
Stock-Based Compensation | |||
Non-vested awards at the end of the period (in shares) | 3,068,000 | 2,022,000 | |
Unrecognized compensation | |||
Expected unrecognized compensation cost related to unvested awards (in dollars) | $ 21,500 | ||
Weighted-average period over which the expected unrecognized compensation cost related to unvested stock options will be recognized | 2 years 2 months 12 days |
Commitments and Contingencies -
Commitments and Contingencies - Guarantees Not Recorded on Balance Sheet (Details) $ in Millions | Mar. 31, 2020USD ($) |
Performance Bonds | |
Commitments and contingencies | |
Maximum potential undiscounted payments | $ 2.2 |
Commitments and Contingencies (
Commitments and Contingencies (Narratives) (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Loss contingency | ||
Accrued liability for the outcomes of non-income based tax audits | $ 2.4 | $ 2.5 |
Indemnification liability | $ 2.6 | $ 2.8 |
Related Party Transactions (Det
Related Party Transactions (Details) shares in Millions, $ in Millions | Aug. 01, 2019USD ($)directorshares | Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) |
Affiliated Entity | JDH Capital | Archrock, Inc. | ||||
Related Party Transaction | ||||
Ownership interest (percent) | 14.20% | |||
Affiliated Entity | JDH Capital | ||||
Related Party Transaction | ||||
Number of directors shareholder and affiliates have right to designate | director | 1 | |||
Affiliated Entity | JDH Capital | Elite Acquisition | Common Stock | ||||
Related Party Transaction | ||||
Minimum ownership interest of outstanding shares required to elect a board of director (percent) | 7.50% | |||
Affiliated Entity | Hilcorp | ||||
Related Party Transaction | ||||
Revenue from related party transactions | $ 10.7 | $ 5.5 | ||
Due from related party | $ 4.1 | $ 5.1 | ||
Affiliated Entity | Jeffery D. Hildebrand | ||||
Related Party Transaction | ||||
Compensation paid by entity to individual in role as Director | $ 0 | |||
Elite Acquisition | Common Stock | ||||
Related Party Transaction | ||||
Shares issued as compensation for asset acquisition (shares) | shares | 21.7 | |||
Elite Acquisition | JDH Capital | Common Stock | ||||
Related Party Transaction | ||||
Shares issued as compensation for asset acquisition (shares) | shares | 21.7 |
Segments (Narratives) (Details)
Segments (Narratives) (Details) | 3 Months Ended |
Mar. 31, 2020segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segments - Revenue and Gross Ma
Segments - Revenue and Gross Margin by Reportable Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue and other financial information by reportable segment | ||
Revenues | $ 249,697 | $ 236,159 |
Gross margin | 136,055 | 117,522 |
Contract Operations | ||
Revenue and other financial information by reportable segment | ||
Gross margin | 128,323 | 107,772 |
Contract Operations | Contract operations | ||
Revenue and other financial information by reportable segment | ||
Revenues | 206,974 | 182,507 |
Aftermarket Services | ||
Revenue and other financial information by reportable segment | ||
Gross margin | 7,732 | 9,750 |
Aftermarket Services | Aftermarket services | ||
Revenue and other financial information by reportable segment | ||
Revenues | $ 42,723 | $ 53,652 |
Segments - Reconciliation of Ne
Segments - Reconciliation of Net Income to Gross Margin (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Reconciliation Net Income (Loss) to Gross Margin | ||
Total gross margin | $ 136,055 | $ 117,522 |
Less: | ||
Selling, general and administrative | 30,626 | 28,989 |
Depreciation and amortization | 49,822 | 44,106 |
Long-lived asset impairment | 6,195 | 3,092 |
Goodwill impairment | 99,830 | |
Restatement and other charges | 421 | |
Restructuring costs | 1,728 | |
Interest expense | 29,665 | 23,617 |
Transaction-related costs | 180 | |
(Gain) loss on sale of assets, net | (4,116) | 16 |
Other income, net | (555) | (221) |
Income (loss) before income taxes | $ (77,140) | $ 17,322 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Thousands | Apr. 01, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Subsequent Events | ||||
Repayments of long-term debt | $ 259,500 | $ 629,000 | ||
2022 Notes | Subsequent Event | ||||
Subsequent Events | ||||
Redemption rate (as a percent) | 100.00% | |||
Repayments of long-term debt | $ 350,000 | |||
Interest paid | $ 10,500 | |||
Debt extinguishment loss | $ 4,000 |