Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Summary of Significant Accounting Policies | |
Cash and Cash Equivalents | (a)Cash and Cash Equivalents |
|
Cash and cash equivalents consist of all cash balances. The Partnership considers investments in highly liquid financial instruments purchased with an original maturity of 90 days or less to be cash equivalents. |
|
|
Trade Accounts Receivable | (b)Trade Accounts Receivable |
|
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts of $374,198 and $246,410 as of December 31, 2014 and 2013, respectively, is the Partnership’s best estimate of the amount of probable credit losses in the Partnership’s existing accounts receivable. The Partnership determines the allowance based upon historical write-off experience and specific identification of certain customers. The Partnership does not have any off-balance-sheet credit exposure related to its customers. |
|
|
Inventories | (c)Inventories |
|
Inventories are valued at the lower of cost or market using the specific identification method. Inventory consists of serialized parts used in the repair of compression units. Purchases of these assets are considered operating activities in the consolidated statement of cash flows. The reserve for slow moving and obsolete inventory was $0.4 million as of December 31, 2014 and 2013. |
|
|
Property and Equipment | (d)Property and Equipment |
|
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: |
|
|
| | | | | | | | | | | | | |
Compression equipment | | 25 years | | | | | | | | | | | |
Furniture and fixtures | | 7 years | | | | | | | | | | | |
Vehicles and computer equipment | | 3 - 7 years | | | | | | | | | | | |
Leasehold improvements | | 5 years | | | | | | | | | | | |
|
Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $67.6 million, $49.7 million and $38.9 million, respectively. |
|
|
Impairments of Long-Lived Assets | (e)Impairments of Long-Lived Assets |
|
During the year ended December 31, 2014, the Partnership evaluated the future deployment of its idle fleet and determined that certain compression equipment was no longer going to be utilized in the operating fleet. This compression equipment was written down to its respective fair value, measured using quoted market prices or, in the absence of quoted market prices, based on an estimate of discounted cash flows, or the expected net sale proceeds compared to other fleet units the Partnership recently sold or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment the Partnership plans to use. The Partnership recorded $2.3 million and $0.2 million in impairment of compression equipment for the years ended December 31, 2014 and 2013, respectively. The Partnership did not record impairment of long-lived assets in 2012. |
|
|
Revenue Recognition | (f)Revenue Recognition |
|
Revenue from contract operations is recorded when earned over the period of the contract, which generally ranges from one month to five years. Parts and service revenue is recorded as parts are delivered or services are performed for the customer. |
|
|
Income Taxes | (g)Income Taxes |
|
The Partnership elected to be treated under SubChapter K of the Internal Revenue Code. Under SubChapter K, a partnership return is filed annually reflecting each partner’s allocable share of the partnership’s income or loss. Therefore, no provision has been made for federal income tax. Partnership net income (loss) is allocated to the partners in proportion to their respective interest in the Partnership. |
|
As a partnership, all income, gains, losses, expenses, deductions and tax credits generated by the Partnership generally flow through to its unitholders. However, Texas imposes an entity-level income tax on partnerships. |
|
The State of Texas’ margin tax became effective for tax reports originally due on or after January 1, 2008. This margin tax requires partnerships and other forms of legal entities to pay a tax of approximately 1.0% on its "margin,” as defined in the law, based on annual results. The margin tax base to which the tax rate is applied is the lesser of (1) 70% of total revenues for federal income tax purposes, (2) total revenue less cost of goods sold, or (3) total revenue less compensation for federal income tax purposes. For the years ended December 31, 2014, 2013 and 2012, the Partnership recorded expense related to the Texas margin tax of $102,738, $279,972 and $196,040, respectively. |
|
|
Fair Value Measurements | (h)Fair Value Measurements |
|
Accounting standards on fair value measurements 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: |
|
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. |
|
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
|
Level 3 inputs are unobservable inputs for the asset or liability. |
|
As of December 31, 2014 and 2013, the Partnership’s financial instruments consisted primarily of cash and cash equivalents, trade accounts receivable, trade accounts payable and long-term 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 amount of long-term debt approximates fair value due to the floating interest rates associated with the debt. |
|
Phantom unit awards granted to employees under the USA Compression Partners, LP 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. |
|
|
Pass Through Taxes | (i)Pass Through Taxes |
|
Sales taxes incurred on behalf of, and passed through to, customers are accounted for on a net basis. |
|
|
Use of Estimates | (j)Use of Estimates |
|
The preparation of the consolidated financial statements of the Partnership in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the management of the Partnership to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and the accompanying results. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could differ from these estimates. |
|
|
Intangible Assets | (k)Identifiable Intangible Assets |
|
As of December 31, 2014 and 2013, identifiable intangible assets consisted of the following (in thousands): |
|
|
| | | | | | | | | | | | | |
| | Customer | | | | | | | | | | |
| | Relationships | | Trade Names | | Non-compete | | Total | |
Gross Balance at December 31, 2012 | | $ | 72,000 | | $ | 15,600 | | $ | - | | $ | 87,600 | |
Additions | | | 6,700 | | | — | | | 900 | | | 7,600 | |
Accumulated Amortization | | | -7,312 | | | -1,872 | | | -75 | | | -9,259 | |
Net Balance at December 31, 2013 | | $ | 71,388 | | $ | 13,728 | | $ | 825 | | $ | 85,941 | |
Gross Balance at December 31, 2013 | | | 78,700 | | | 15,600 | | | 900 | | | 95,200 | |
Additions | | | — | | | — | | | — | | | — | |
Accumulated Amortization | | | -10,047 | | | -2,496 | | | -300 | | | -12,843 | |
Net Balance at December 31, 2014 | | $ | 68,653 | | $ | 13,104 | | $ | 600 | | $ | 82,357 | |
|
Identifiable 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. The estimated useful lives range from 4 to 30 years. Aggregate amortization expense for the years ended December 31, 2014, 2013 and 2012 was $3.6 million, $3.2 million and $3.0 million, respectively. The expected amortization of the identifiable intangible assets for each of the five succeeding years is as follows (in thousands): |
|
|
| | | | | | | | | | | | | |
Year ending December 31, | | Total | | | | | | | | | | |
2015 | | $ | 3,584 | | | | | | | | | | |
2016 | | | 3,584 | | | | | | | | | | |
2017 | | | 3,509 | | | | | | | | | | |
2018 | | | 3,359 | | | | | | | | | | |
2019 | | | 3,359 | | | | | | | | | | |
|
The Partnership assesses identifiable 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 identifiable intangible assets in 2014, 2013 or 2012. |
|
|
Goodwill | (l)Goodwill |
|
Goodwill represents consideration paid in excess of the fair value of the identifiable net assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment annually based on the carrying values as of October 1, or more frequently if impairment indicators arise that suggest the carrying value of goodwill may not be recovered. |
|
As of October 1, 2014, a quantitative assessment was performed to determine whether the fair value of the Partnership’s single reporting unit was greater than its carrying value. As of October 1, 2014, the fair value was determined to be in excess of the carrying value. Due to the identification of certain impairment indicators during the fourth quarter of 2014: (1) the decline in the Partnership’s unit price traded on the New York Stock Exchange, (2) the decline in global crude oil prices, and (3) the decline in performance of the Alerian MLP Index, the Partnership prepared a quantitative assessment as of December 31, 2014. Although the calculated fair value was less than the fair value calculated as of October 1, 2014, the calculated fair value was still in excess of the carrying value. |
|
Therefore, the Partnership did not prepare Step 2 of the impairment analyses nor did it record an impairment of goodwill for the year ended December 31, 2014. No impairment of goodwill was recorded in the years ended December 31, 2013 and 2012. |
|
Capitalized Interest | m)Capitalized Interest |
|
For the year ended December 31, 2014, the Partnership capitalized $0.3 million of interest expense in accordance with ASC 835-20 for interest costs incurred during the period related to upfront payments required in acquiring certain compression units. The Partnership capitalized no interest during the years ended December 31, 2013 or 2012. |
|
Operating Segment | (n)Operating Segment |
|
The Partnership operates in a single business segment, the compression services business. |
|