Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 |
Organization and Summary of Significant Accounting Policies | ' |
Organization and Summary of Significant Accounting Policies | ' |
(1) Organization and Summary of Significant Accounting Policies |
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(a) Organization |
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USA Compression Partners, LP (the “Partnership”) is a publicly traded Delaware limited partnership formed to own and operate the business conducted by its subsidiaries. The common units representing limited partner interests in the Partnership (“common units”) are listed on the New York Stock Exchange (“NYSE”) under the symbol “USAC.” USA Compression GP, LLC, the general partner of the Partnership (the “General Partner”), is owned by USA Compression Holdings, LLC (“USA Compression Holdings”). Unless the context requires otherwise, references to “we,” “us,” “our,” or “the Partnership” are intended to mean the business and operations of the Partnership and its consolidated subsidiaries and references to the “General Partner” refer to the General Partner. References to “Riverstone” refer to Riverstone/Carlyle Global Energy and Power Fund IV, L.P., and affiliated entities, including Riverstone Holdings LLC. |
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The Partnership, through its wholly- owned subsidiaries (the “Operating Subsidiaries”), primarily provides natural gas compression services under term contracts with customers in the oil and gas industry, using natural gas compressor packages that it designs, engineers, owns, operates and maintains. The condensed consolidated financial statements include the accounts of the Partnership and the Operating Subsidiaries and all intercompany balances and transactions have been eliminated in consolidation. |
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Our ownership is as follows: |
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| | September 30, 2014 | | | | |
| | USA | | | | | | | | | | |
| | Compression | | Argonaut and | | | | | | | | |
| | Holdings | | Related Parties | | Public | | Total | | | | |
General partner interest | | 1.7 | % | — | | — | | 1.7 | % | | | |
Limited partner interest: | | | | | | | | | | | | |
Common unitholders | | 10.1 | % | 16.2 | % | 41.2 | % | 67.5 | % | | | |
Subordinated unitholders | | 30.8 | % | — | | — | | 30.8 | % | | | |
Total | | 42.6 | % | 16.2 | % | 41.2 | % | 100.0 | % | | | |
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Partnership net income (loss) is allocated to the partners in proportion to their respective interest in the Partnership. |
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(b) Basis of Presentation |
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The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared on the same basis as the audited consolidated financial statements included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2013 (“2013 Annual Report”). In the opinion of the Partnership’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position as of September 30, 2014 and December 31, 2013, and the results of operations for the three months and nine months ended September 30, 2014 and 2013 and changes in partners’ capital and changes in cash flows for nine months ended September 30, 2014 , respectively, in accordance with accounting principles generally accepted in the United States (“GAAP”). Operating results for the three months and nine months ended September 30, 2014 and 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. All intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these consolidated financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements for the year ended December 31, 2013 contained in our 2013 Annual Report filed on February 20, 2014. As the closing of the Partnership’s initial public offering (“IPO”) occurred on January 18, 2013, the earnings and earnings per unit for the nine months ended September 30, 2013 have been pro-rated to reflect earnings on a pre-IPO and post-IPO basis. |
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(c) Use of Estimates |
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The unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the unaudited condensed consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates. |
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(d) Intangible Assets |
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As of September 30, 2014, identifiable intangible assets, net consisted of the following (in thousands): |
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| | Customer | | | | | | | | | |
| | Relationships | | Trade Names | | Non-compete | | Total |
Outstanding at December 31, 2013 | | $ | 71,388 | | $ | 13,728 | | $ | 825 | | $ | 85,941 |
Amortization | | | -2,051 | | | -468 | | | -169 | | | -2,688 |
Outstanding and exercisable at September 30, 2014 | | $ | 69,337 | | $ | 13,260 | | $ | 656 | | $ | 83,253 |
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Intangible assets are amortized on a straight line basis over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to the Partnership’s future cash flows. As of September 30, 2014, the amortization periods of identifiable customer relationships and identifiable trade names vary between 20 and 30 years and the amortization period of identifiable non-compete is 4 years. |
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The Partnership assesses intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Partnership did not record any impairment of intangible assets for the three and nine months ended September 30, 2014 or for the three and nine months ended September 30, 2013. |
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(e) Property and Equipment |
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Property and equipment are carried at cost. Overhauls and major improvements that increase the value or extend the life of compressor equipment are capitalized and depreciated over 3 to 5 years. Ordinary maintenance and repairs are charged to income. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows: |
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Compression equipment | | 25 years | | | | | | | | | | |
Furniture and fixtures | | 7 years | | | | | | | | | | |
Vehicles and computer equipment | | 3 - 7 years | | | | | | | | | | |
Leasehold improvements | | 5 years | | | | | | | | | | |
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See more information on property and equipment in Note 4 to our unaudited condensed consolidated financial statements. |
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(f) Impairments of Long-Lived Assets |
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Long-lived assets with recorded values that are not expected to be recovered through future cash flows are written-down to estimated fair value. An asset shall be tested for impairment when events or circumstances indicate that its carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss equal to the amount of the carrying value exceeding the fair value of the asset is recognized. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted cash flows. See Note 4 for discussion of the impairment of compression equipment recorded in the three and nine months ended September 30, 2014. |
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(g) Fair Value of Financial Instruments |
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Accounting standards on fair value measurement establish a framework for measuring fair value and stipulate disclosures about fair value measurements. The standards apply to recurring and nonrecurring financial and non-financial assets and liabilities that require or permit fair value measurements. Among the required disclosures is the fair value hierarchy of inputs the Partnership uses to value an asset or a liability. The three levels of the fair value hierarchy are described as follows: |
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Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access at the measurement date. |
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Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
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Level 3 inputs are unobservable inputs for the asset or liability. |
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The Partnership’s financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, trade accounts payable and senior debt. The book values of cash and cash equivalents, trade accounts receivable and trade accounts payable are representative of fair value due to their short -term maturity. The carrying amounts of senior debt approximate fair value due to the variable interest rates charged on the outstanding senior debt. |
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Awards granted to employees under the 2013 Long Term Incentive Plan (the “LTIP”) are accounted for as liabilities and the liability is re-measured on a quarterly basis. The liability is based on the publicly quoted price of the Partnership’s common units, which is considered a Level 1 input. |
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