(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol | Name of exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Page | |
2018 Form 10-K | Archrock, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018 |
2021 Notes | $350.0 million of 6% senior notes due April 2021, issued in March 2013 |
2022 Notes | $350.0 million of 6% senior notes due October 2022, issued in April 2014 |
2027 Notes | $500.0 million of 6.875% senior notes due April 2027, issued in March 2019 |
Amendment No. 1 | Amendment No. 1 to Credit Agreement, dated February 23, 2018, which amended that certain Credit Agreement, dated as of March 30, 2017, which governs the Credit Facility |
Archrock, our, we, us | Archrock, Inc., individually and together with its wholly-owned subsidiaries |
Archrock Credit Facility | Archrock’s $350 million revolving credit facility terminated in April 2018 in connection with the Merger and Amendment No.1 |
ASC 606 Revenue | Accounting Standards Codification Topic 606 Revenue from Contracts with Customers |
ASC 840 Leases | Accounting Standards Codification Topic 840 Leases |
ASC 842 Leases | Accounting Standards Codification Topic 842 Leases |
ASU 2016-13 | Accounting Standards Update No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
ASU 2017-12 | Accounting Standards Update No. 2017-12 Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities |
ASU 2018-02 | Accounting Standards Update No. 2018-02 Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income |
ASU 2018-13 | Accounting Standards Update No. 2018-13 Fair Value Measurement (Topic 820)—Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement |
Credit Facility | $1.25 billion asset-based revolving credit facility due March 2022, as amended by Amendment No. 1 |
EBITDA | Earnings before interest, taxes, depreciation and amortization |
Elite Acquisition | Transaction expected to close in the third quarter of 2019 pursuant to the Asset Purchase Agreement entered into on June 23, 2019 |
Elite Compression | Elite Compression Services, LLC |
Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
Financial Statements | Condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q |
GAAP | U.S. generally accepted accounting principles |
Harvest | Harvest Four Corners, LLC |
Harvest Sale | Transaction expected to close in the third quarter of 2019 pursuant to the Asset Purchase Agreement entered into on June 23, 2019 |
Hilcorp | Hilcorp Energy Company |
JDH Capital | JDH Capital Holdings, L.P. |
Merger | Transaction completed on April 26, 2018 in which Archrock acquired all of the Partnership’s outstanding common units not already owned by Archrock pursuant to the Agreement and Plan of Merger, dated as of January 1, 2018, among Archrock and the Partnership, which was amended by Amendment No. 1 to Agreement and Plan of Merger on January 11, 2018 |
OTC | Over-the-counter, as related to aftermarket services parts and components |
Partnership | Archrock Partners, L.P., together with its subsidiaries |
ROU | Right-of-use, as related to the new lease model under ASC 842 Leases |
SEC | U.S. Securities and Exchange Commission |
Securities Act | Securities Act of 1933, as amended |
SG&A | Selling, general and administrative |
Spin-off | Spin-off of our international contract operations, international aftermarket services and global fabrication businesses into a standalone public company operating as Exterran Corporation which was completed in November 2015 |
U.S. | United States of America |
• | the risk that cost savings, tax benefits and any other synergies from the Merger may not be fully realized or may take longer to realize than expected; |
• | conditions in the oil and natural gas industry, including the level of production of, demand for or price of oil or natural gas; |
• | our reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies; |
• | changes in economic or political conditions, including terrorism and legislative changes; |
• | the inherent risks associated with our operations, such as equipment defects, impairments, malfunctions and natural disasters; |
• | the risk that counterparties will not perform their obligations under our financial instruments; |
• | the financial condition of our customers; |
• | our ability to timely and cost-effectively obtain components necessary to conduct our business; |
• | employment and workforce factors, including our ability to hire, train and retain key employees; |
• | our ability to implement certain business and financial objectives, such as: |
– | winning profitable new business; |
– | growing our asset base and enhancing asset utilization; |
– | integrating acquired businesses; |
– | generating sufficient cash; and |
– | accessing the capital markets at an acceptable cost; |
• | liability related to the use of our services; |
• | changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures; |
• | the effectiveness of our control environment, including the identification of control deficiencies; and |
• | our level of indebtedness and ability to fund our business. |
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable, trade, net of allowance of $1,554 and $1,452, respectively | |||||||
Inventory | |||||||
Tax refund receivable | |||||||
Other current assets | |||||||
Current assets associated with discontinued operations | |||||||
Total current assets | |||||||
Property, plant and equipment, net | |||||||
Operating lease ROU assets | — | ||||||
Intangible assets, net | |||||||
Contract costs, net | |||||||
Other assets | |||||||
Noncurrent assets associated with discontinued operations | |||||||
Total assets | $ | $ | |||||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable, trade | $ | $ | |||||
Accrued liabilities | |||||||
Deferred revenue | |||||||
Current liabilities associated with discontinued operations | |||||||
Total current liabilities | |||||||
Long-term debt | |||||||
Operating lease liabilities | — | ||||||
Deferred income taxes | |||||||
Other liabilities | |||||||
Noncurrent liabilities associated with discontinued operations | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 18) | |||||||
Equity: | |||||||
Preferred stock: $0.01 par value per share, 50,000,000 shares authorized, zero issued | |||||||
Common stock: $0.01 par value per share, 250,000,000 shares authorized, 136,899,297 and 135,787,509 shares issued, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive income (loss) | ( | ) | |||||
Accumulated deficit | ( | ) | ( | ) | |||
Treasury stock: 6,577,558 and 6,381,605 common shares, at cost, respectively | ( | ) | ( | ) | |||
Total equity | |||||||
Total liabilities and equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue: | |||||||||||||||
Contract operations | $ | $ | $ | $ | |||||||||||
Aftermarket services | |||||||||||||||
Total revenue | |||||||||||||||
Cost of sales (excluding depreciation and amortization): | |||||||||||||||
Contract operations | |||||||||||||||
Aftermarket services | |||||||||||||||
Total cost of sales (excluding depreciation and amortization) | |||||||||||||||
Selling, general and administrative | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Long-lived asset impairment | |||||||||||||||
Restatement and other charges | ( | ) | ( | ) | |||||||||||
Interest expense | |||||||||||||||
Debt extinguishment loss | |||||||||||||||
Transaction-related costs | |||||||||||||||
Other income, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income before income taxes | |||||||||||||||
Provision for (benefit from) income taxes | ( | ) | ( | ) | ( | ) | |||||||||
Income from continuing operations | |||||||||||||||
Loss from discontinued operations, net of tax | ( | ) | |||||||||||||
Net income | |||||||||||||||
Less: Net income attributable to the noncontrolling interest | ( | ) | ( | ) | |||||||||||
Net income (loss) attributable to Archrock stockholders | $ | $ | $ | $ | ( | ) | |||||||||
Basic and diluted net income (loss) per common share attributable to Archrock common stockholders | $ | $ | $ | $ | ( | ) | |||||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Interest rate swap gain (loss), net of reclassifications to earnings | ( | ) | ( | ) | |||||||||||
Amortization of terminated interest rate swaps | |||||||||||||||
Merger-related adjustments | |||||||||||||||
Total other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Comprehensive income | |||||||||||||||
Less: Comprehensive income attributable to the noncontrolling interest | ( | ) | ( | ) | |||||||||||
Comprehensive income attributable to Archrock stockholders | $ | $ | $ | $ |
Archrock Stockholders | |||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Accumulated Deficit | Noncontrolling Interest | ||||||||||||||||||||||||||||
Amount | Shares | Amount | Shares | Total | |||||||||||||||||||||||||||||
Balance at April 1, 2018 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Cash dividends ($0.120 per common share) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Shares issued in employee stock purchase plan | |||||||||||||||||||||||||||||||||
Stock-based compensation, net of forfeitures | |||||||||||||||||||||||||||||||||
Stock options exercised | |||||||||||||||||||||||||||||||||
Merger-related adjustments | |||||||||||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||
Interest rate swap gain, net of reclassifications to earnings | |||||||||||||||||||||||||||||||||
Amortization of terminated interest rate swaps | |||||||||||||||||||||||||||||||||
Merger-related adjustments | |||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||
Balance at April 1, 2019 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||
Cash dividends ($0.132 per common share) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Shares issued in employee stock purchase plan | |||||||||||||||||||||||||||||||||
Stock-based compensation, net of forfeitures | ( | ) | |||||||||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||
Interest rate swap loss, net of reclassifications to earnings | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | $ | $ |
Archrock Stockholders | |||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Accumulated Deficit | Noncontrolling Interest | ||||||||||||||||||||||||||||
Amount | Shares | Amount | Shares | Total | |||||||||||||||||||||||||||||
Balance at January 1, 2018 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Treasury stock purchased | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Cash dividends ($0.240 per common share) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Shares issued in employee stock purchase plan | |||||||||||||||||||||||||||||||||
Stock-based compensation, net of forfeitures | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Stock options exercised | |||||||||||||||||||||||||||||||||
Cash distribution to noncontrolling unitholders of the Partnership | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Impact of adoption of ASC 606 Revenue | |||||||||||||||||||||||||||||||||
Impact of adoption of ASU 2017-12 | |||||||||||||||||||||||||||||||||
Impact of adoption of ASU 2018-02 | ( | ) | — | ||||||||||||||||||||||||||||||
Merger-related adjustments | |||||||||||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||
Net income (loss) | ( | ) | |||||||||||||||||||||||||||||||
Interest rate swap gain, net of reclassifications to earnings | |||||||||||||||||||||||||||||||||
Amortization of terminated interest rate swaps | |||||||||||||||||||||||||||||||||
Merger-related adjustments | |||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||
Treasury stock purchased | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Cash dividends ($0.264 per common share) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Shares issued in employee stock purchase plan | |||||||||||||||||||||||||||||||||
Stock-based compensation, net of forfeitures | ( | ) | |||||||||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||
Interest rate swap loss, net of reclassifications to earnings | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | $ | $ |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Loss from discontinued operations, net of tax | |||||||
Depreciation and amortization | |||||||
Long-lived asset impairment | |||||||
Inventory write-downs | |||||||
Amortization of operating lease ROU assets | |||||||
Amortization of deferred financing costs | |||||||
Amortization of debt discount | |||||||
Amortization of terminated interest rate swaps | |||||||
Debt extinguishment loss | |||||||
Interest rate swaps | ( | ) | |||||
Stock-based compensation expense | |||||||
Provision for doubtful accounts | |||||||
Gain on sale of assets | ( | ) | ( | ) | |||
Deferred income tax benefit | ( | ) | ( | ) | |||
Amortization of contract costs | |||||||
Deferred revenue recognized in earnings | ( | ) | ( | ) | |||
Changes in assets and liabilities: | |||||||
Accounts receivable, trade | ( | ) | ( | ) | |||
Inventory | ( | ) | |||||
Other assets | |||||||
Contract costs | ( | ) | ( | ) | |||
Accounts payable and other liabilities | |||||||
Deferred revenue | |||||||
Other | ( | ) | |||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Capital expenditures | ( | ) | ( | ) | |||
Proceeds from sale of property, plant and equipment | |||||||
Proceeds from insurance and other settlements | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from borrowings of long-term debt | |||||||
Repayments of long-term debt | ( | ) | ( | ) | |||
Payments for debt issuance costs | ( | ) | ( | ) | |||
Proceeds from (payments for) settlement of interest rate swaps that include financing elements | ( | ) | |||||
Dividends paid to Archrock stockholders | ( | ) | ( | ) | |||
Distributions paid to noncontrolling partners in the Partnership | ( | ) | |||||
Proceeds from stock options exercised | |||||||
Proceeds from stock issued under employee stock purchase plan | |||||||
Purchases of treasury stock | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Net decrease in cash and cash equivalents | ( | ) | ( | ) | |||
Cash and cash equivalents, beginning of period | |||||||
Cash and cash equivalents, end of period | $ | $ | |||||
Supplemental disclosure of non-cash transactions: | |||||||
Issuance of Archrock common stock pursuant to Merger, net of tax | $ | $ |
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||
Other income, net | $ | $ | ( | ) | |||
Provision for income taxes | |||||||
Loss from discontinued operations, net of tax | $ | $ | ( | ) |
June 30, 2019 | December 31, 2018 | ||||||
Other current assets | $ | $ | |||||
Other assets | |||||||
Total assets associated with discontinued operations | $ | $ | |||||
Accrued liabilities | $ | $ | |||||
Deferred income taxes | |||||||
Total liabilities associated with discontinued operations | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Parts and supplies | $ | $ | |||||
Work in progress | |||||||
Inventory | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Compression equipment, facilities and other fleet assets | $ | $ | |||||
Land and buildings | |||||||
Transportation and shop equipment | |||||||
Computer hardware and software | |||||||
Other | |||||||
Property, plant and equipment | |||||||
Accumulated depreciation | ( | ) | ( | ) | |||
Property, plant and equipment, net | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Credit Facility | $ | $ | |||||
2027 Notes | |||||||
Less: Deferred financing costs, net of amortization | ( | ) | |||||
2022 Notes | |||||||
Less: Debt discount, net of amortization | ( | ) | ( | ) | |||
Less: Deferred financing costs, net of amortization | ( | ) | ( | ) | |||
2021 Notes | |||||||
Less: Debt discount, net of amortization | ( | ) | |||||
Less: Deferred financing costs, net of amortization | ( | ) | |||||
Long-term debt | $ | $ |
EBITDA to Interest Expense | 2.5 to 1.0 |
Senior Secured Debt to EBITDA | 3.5 to 1.0 |
Total Debt to EBITDA | |
Through fiscal year 2019 | 5.75 to 1.0 |
Through second quarter of 2020 | 5.50 to 1.0 |
Thereafter (1) | 5.25 to 1.0 |
(1) | Subject to a temporary increase to |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Contract operations (1): | |||||||||||||||
0 - 1,000 horsepower per unit | $ | $ | $ | $ | |||||||||||
1,001 - 1,500 horsepower per unit | |||||||||||||||
Over 1,500 horsepower per unit | |||||||||||||||
Other (2) | |||||||||||||||
Total contract operations (3) | |||||||||||||||
Aftermarket services (1): | |||||||||||||||
Services | |||||||||||||||
OTC parts and components sales | |||||||||||||||
Total aftermarket services (4) | |||||||||||||||
Total revenue | $ | $ | $ | $ |
(1) | We operate in |
(2) | Primarily related to fees associated with Archrock-owned non-compressor equipment. |
(3) | Included $ |
(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. |
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Total | |||||||||||||||||||||
Remaining performance obligations | $ | $ | $ | $ | $ | $ | $ |
Classification | June 30, 2019 | ||||
ROU assets | Operating lease ROU assets | $ | |||
Lease liabilities | |||||
Current | Accrued liabilities | $ | |||
Noncurrent | Operating lease liabilities | ||||
Total lease liabilities | $ |
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||
Operating lease cost | $ | $ | |||||
Short-term lease cost | |||||||
Variable lease cost | |||||||
Total lease cost | $ | $ |
Six Months Ended June 30, 2019 | |||
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities | $ | ||
Operating lease ROU assets obtained in exchange for new lease liabilities |
June 30, 2019 | ||
Weighted average remaining lease term (in years) | ||
Weighted average discount rate | % |
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total lease payments | |||
Less: Interest | ( | ) | |
Total lease liabilities under ASC 842 Leases | $ |
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total lease liabilities under ASC 840 Leases | $ |
Expiration Date | Notional Value | ||
May 2020 | $ | ||
March 2022 | |||
$ |
June 30, 2019 | December 31, 2018 | ||||||
Other current assets | $ | $ | |||||
Other assets | |||||||
Total derivative assets | $ | $ | |||||
Other liabilities | $ | ( | ) | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Pre-tax gain (loss) recognized in other comprehensive income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense | ( | ) | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Total amount of interest expense in which the effects of cash flow hedges are recorded | $ | $ | $ | $ | |||||||||||
Amount of gain reclassified from accumulated other comprehensive income (loss) into interest expense |
June 30, 2019 | December 31, 2018 | ||||||
Interest rate swaps asset | $ | $ | |||||
Interest rate swaps liability | ( | ) |
June 30, 2019 | December 31, 2018 | ||||||
Carrying amount of fixed rate debt (1) | $ | $ | |||||
Fair value of fixed rate debt |
(1) | Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 6 (“Long-Term Debt”). |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Idle compressor units retired from the active fleet | |||||||||||||||
Horsepower of idle compressor units retired from the active fleet | |||||||||||||||
Impairment recorded on idle compressor units retired from the active fleet | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) from continuing operations attributable to Archrock stockholders | $ | $ | $ | $ | ( | ) | |||||||||
Loss from discontinued operations, net of tax | ( | ) | |||||||||||||
Net income (loss) attributable to Archrock stockholders | ( | ) | |||||||||||||
Less: Net income attributable to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income (loss) attributable to Archrock common stockholders | $ | $ | $ | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Weighted average common shares outstanding including participating securities | |||||||||||
Less: Weighted average participating securities outstanding | ( | ) | ( | ) | ( | ) | ( | ) | |||
Weighted average common shares outstanding used in basic net income (loss) per common share | |||||||||||
Net dilutive potential common shares issuable: | |||||||||||
On exercise of options and vesting of performance-based restricted stock units | * | ||||||||||
On settlement of employee stock purchase plan shares | * | ||||||||||
Weighted average common shares outstanding used in diluted net income (loss) per common share |
* | Excluded from diluted net income (loss) per common share as their inclusion would have been anti-dilutive. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Net dilutive potential common shares issuable: | |||||||||||
On exercise of options where exercise price is greater than average market value for the period | |||||||||||
On exercise of options and vesting of performance-based restricted stock units | |||||||||||
On settlement of employee stock purchase plan shares | |||||||||||
Net dilutive potential common shares issuable |
Six Months Ended June 30, 2018 | |||
Net loss attributable to Archrock stockholders | $ | ( | ) |
Decrease in Archrock stockholders’ additional paid-in capital for purchase of Partnership common units | |||
Change from net loss attributable to Archrock stockholders and transfers from noncontrolling interest | $ |
Dividends per Common Share | Total Dividends (in thousands) | ||||||
2018 | |||||||
Q1 | $ | $ | |||||
Q2 | |||||||
Q3 | |||||||
Q4 | |||||||
2019 | |||||||
Q1 | $ | $ | |||||
Q2 |
Shares (in thousands) | Weighted Average Grant Date Fair Value Per Share | |||||
Non-vested awards, January 1, 2019 | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Canceled | ( | ) | ||||
Non-vested awards, June 30, 2019 (1)(2) |
(1) | Non-vested awards as of June 30, 2019 are comprised of |
(2) | During the three months ended June 30, 2019, the settlement terms of |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Equity awards | $ | $ | $ | $ | |||||||||||
Liability awards | |||||||||||||||
Total stock-based compensation | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Beginning accumulated other comprehensive income | $ | $ | $ | $ | |||||||||||
Gain (loss) recognized in other comprehensive income (loss), net of tax provision of $0, $472, $0 and $888, respectively (1) | ( | ) | ( | ) | |||||||||||
(Gain) loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax benefit of $0, $(8), $0 and $(53), respectively (1)(2) | ( | ) | ( | ) | |||||||||||
Merger-related adjustments (3) | |||||||||||||||
Other comprehensive income (loss) attributable to Archrock stockholders | ( | ) | ( | ) | |||||||||||
Ending accumulated other comprehensive income (loss) | $ | ( | ) | $ | $ | ( | ) | $ |
(1) | Included adjustments of $ |
(2) | Included stranded tax effects resulting from the Tax Cuts and Jobs Act, which was implemented in December 2017, of $ |
(3) | Pursuant to the Merger, we reclassified a gain of $ |
Contract Operations | Aftermarket Services | Total | |||||||||
Three months ended June 30, 2019 | |||||||||||
Revenue | $ | $ | $ | ||||||||
Gross margin | |||||||||||
Three months ended June 30, 2018 | |||||||||||
Revenue | $ | $ | $ | ||||||||
Gross margin | |||||||||||
Six months ended June 30, 2019 | |||||||||||
Revenue | $ | $ | $ | ||||||||
Gross margin | |||||||||||
Six months ended June 30, 2018 | |||||||||||
Revenue | $ | $ | $ | ||||||||
Gross margin |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Total gross margin | $ | $ | $ | $ | |||||||||||
Less: | |||||||||||||||
Selling, general and administrative | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Long-lived asset impairment | |||||||||||||||
Restatement and other charges | ( | ) | ( | ) | |||||||||||
Interest expense | |||||||||||||||
Debt extinguishment loss | |||||||||||||||
Transaction-related costs | |||||||||||||||
Other income, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income before income taxes | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Total available horsepower (at period end)(1) | 4,096 | 3,881 | 4,096 | 3,881 | |||||||
Total operating horsepower (at period end)(2) | 3,611 | 3,354 | 3,611 | 3,354 | |||||||
Average operating horsepower | 3,587 | 3,342 | 3,567 | 3,316 | |||||||
Horsepower utilization: | |||||||||||
Spot (at period end) | 88 | % | 86 | % | 88 | % | 86 | % | |||
Average | 88 | % | 86 | % | 88 | % | 86 | % |
(1) | Defined as idle and operating horsepower. New compressor units completed by a third party manufacturer that have been delivered to us are included in the fleet. |
(2) | Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 11,423 | $ | 4,149 | $ | 30,879 | $ | 6,218 | |||||||
Selling, general and administrative | 28,618 | 26,649 | 57,607 | 54,157 | |||||||||||
Depreciation and amortization | 45,482 | 43,331 | 89,588 | 87,786 | |||||||||||
Long-lived asset impairment | 8,632 | 6,953 | 11,724 | 11,663 | |||||||||||
Restatement and other charges | 24 | (1,076 | ) | 445 | (591 | ) | |||||||||
Interest expense | 25,954 | 23,337 | 49,571 | 45,884 | |||||||||||
Debt extinguishment loss | 3,653 | 2,450 | 3,653 | 2,450 | |||||||||||
Transaction-related costs | 2,687 | 5,686 | 2,867 | 9,811 | |||||||||||
Other income, net | (2,010 | ) | (1,644 | ) | (2,215 | ) | (2,789 | ) | |||||||
Provision for (benefit from) income taxes | 1,191 | (1,567 | ) | (1,216 | ) | (1,213 | ) | ||||||||
Loss from discontinued operations, net of tax | — | — | 273 | — | |||||||||||
Gross margin | $ | 125,654 | $ | 108,268 | $ | 243,176 | $ | 213,376 |
Three Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Revenue | $ | 186,258 | $ | 165,450 | 13 | % | ||||
Cost of sales (excluding depreciation and amortization expense) | 70,521 | 67,809 | 4 | % | ||||||
Gross margin | $ | 115,737 | $ | 97,641 | 19 | % | ||||
Gross margin percentage (1) | 62 | % | 59 | % | 3 | % |
Three Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Revenue | $ | 52,132 | $ | 61,420 | (15) | % | ||||
Cost of sales (excluding depreciation and amortization expense) | 42,215 | 50,793 | (17) | % | ||||||
Gross margin | $ | 9,917 | $ | 10,627 | (7) | % | ||||
Gross margin percentage | 19 | % | 17 | % | 2 | % |
Three Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Selling, general and administrative | $ | 28,618 | $ | 26,649 | 7 | % | ||||
Depreciation and amortization | 45,482 | 43,331 | 5 | % | ||||||
Long-lived asset impairment | 8,632 | 6,953 | 24 | % | ||||||
Restatement and other charges | 24 | (1,076 | ) | (102 | )% | |||||
Interest expense | 25,954 | 23,337 | 11 | % | ||||||
Debt extinguishment loss | 3,653 | 2,450 | 49 | % | ||||||
Transaction-related costs | 2,687 | 5,686 | (53 | )% | ||||||
Other income, net | (2,010 | ) | (1,644 | ) | 22 | % |
Three Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Idle compressor units retired from the active fleet | 160 | 120 | |||||
Horsepower of idle compressor units retired from the active fleet | 41,000 | 27,000 | |||||
Impairment recorded on idle compressor units retired from the active fleet | $ | 8,632 | $ | 6,953 |
Three Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Provision for (benefit from) income taxes | $ | 1,191 | $ | (1,567 | ) | (176 | )% | |||
Effective tax rate | 9 | % | (61 | )% | 70 | % |
Three Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Net income attributable to the noncontrolling interest | $ | — | $ | (2,212 | ) | (100 | )% |
Six Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Revenue | $ | 368,765 | $ | 326,647 | 13 | % | ||||
Cost of sales (excluding depreciation and amortization) | 145,256 | 132,404 | 10 | % | ||||||
Gross margin | $ | 223,509 | $ | 194,243 | 15 | % | ||||
Gross margin percentage | 61 | % | 59 | % | 2 | % |
Six Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Revenue | $ | 105,784 | $ | 112,263 | (6 | )% | ||||
Cost of sales (excluding depreciation and amortization) | 86,117 | 93,130 | (8 | )% | ||||||
Gross margin | $ | 19,667 | $ | 19,133 | 3 | % | ||||
Gross margin percentage | 19 | % | 17 | % | 2 | % |
Six Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Selling, general and administrative | $ | 57,607 | $ | 54,157 | 6 | % | ||||
Depreciation and amortization | 89,588 | 87,786 | 2 | % | ||||||
Long-lived asset impairment | 11,724 | 11,663 | 1 | % | ||||||
Restatement and other charges | 445 | (591 | ) | (175 | )% | |||||
Interest expense | 49,571 | 45,884 | 8 | % | ||||||
Debt extinguishment loss | 3,653 | 2,450 | 49 | % | ||||||
Transaction-related costs | 2,867 | 9,811 | (71 | )% | ||||||
Other income, net | (2,215 | ) | (2,789 | ) | (21 | )% |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Idle compressor units retired from the active fleet | 180 | 165 | |||||
Horsepower of idle compressor units retired from the active fleet | 56,000 | 50,000 | |||||
Impairment recorded on idle compressor units retired from the active fleet | $ | 11,724 | $ | 11,663 |
Six Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Benefit from income taxes | $ | (1,216 | ) | $ | (1,213 | ) | — | % | ||
Effective tax rate | (4 | )% | (24 | )% | 20 | % |
Six Months Ended June 30, | Increase | |||||||||
2019 | 2018 | (Decrease) | ||||||||
Net income attributable to the noncontrolling interest | $ | — | $ | (8,097 | ) | (100 | )% |
• | growth capital expenditures, which are made to expand or to replace partially or fully depreciated assets or to expand the operating capacity or revenue-generating capabilities of existing or new assets, whether through construction, acquisition or modification; and |
• | maintenance capital expenditures, which are made to maintain the existing operating capacity of our assets and related cash flows, further extending the useful lives of the assets. |
EBITDA to Interest Expense | 2.5 to 1.0 |
Senior Secured Debt to EBITDA | 3.5 to 1.0 |
Total Debt to EBITDA | |
Through fiscal year 2019 | 5.75 to 1.0 |
Through second quarter of 2020 | 5.50 to 1.0 |
Thereafter (1) | 5.25 to 1.0 |
(1) | Subject to a temporary increase to 5.50 to 1.0 for any quarter during which an acquisition satisfying certain thresholds is completed and for the two quarters immediately following such quarter. |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 148,663 | $ | 105,215 | |||
Investing activities | (212,342 | ) | (112,727 | ) | |||
Financing activities | 60,084 | 508 | |||||
Net decrease in cash and cash equivalents | $ | (3,595 | ) | $ | (7,004 | ) |
Exhibit No. | Description | |
2.1 | ||
2.2 | ||
2.3 | ||
2.4 | ||
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
4.1 | ||
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.1* | Interactive data files pursuant to Rule 405 of Regulation S-T |
* | Filed herewith. |
** | Furnished, not filed. |
ARCHROCK, INC. | |||
By: | /s/ DOUGLAS S. ARON | ||
Douglas S. Aron | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Financial Officer) | |||
By: | /s/ DONNA A. HENDERSON | ||
Donna A. Henderson | |||
Vice President and Chief Accounting Officer | |||
(Principal Accounting Officer) | |||
July 30, 2019 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Archrock, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ D. BRADLEY CHILDERS | ||
Name: | D. Bradley Childers | ||
Title: | President and Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Archrock, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ DOUGLAS S. ARON | ||
Name: | Douglas S. Aron | ||
Title: | Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ D. BRADLEY CHILDERS | ||
Name: | D. Bradley Childers | |
Title: | President and Chief Executive Officer | |
Date: July 30, 2019 |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ DOUGLAS S. ARON | ||
Name: | Douglas S. Aron | |
Title: | Senior Vice President and Chief Financial Officer | |
Date: July 30, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 1,554 | $ 1,452 |
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) | 136,899,297 | 135,787,509 |
Treasury stock, common shares (in shares) | 6,577,558 | 6,381,605 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 11,423 | $ 4,149 | $ 30,879 | $ 6,218 |
Other comprehensive income (loss), net of tax: | ||||
Interest rate swap gain (loss), net of reclassifications to earnings | (5,320) | 1,720 | (8,545) | 6,282 |
Amortization of terminated interest rate swaps | 0 | 85 | 0 | 230 |
Merger-related adjustments | 0 | 5,670 | 0 | 5,670 |
Total other comprehensive income (loss) | (5,320) | 7,475 | (8,545) | 12,182 |
Comprehensive income | 6,103 | 11,624 | 22,334 | 18,400 |
Less: Comprehensive income attributable to the noncontrolling interest | 0 | (3,506) | 0 | (12,360) |
Comprehensive income attributable to Archrock stockholders | $ 6,103 | $ 8,118 | $ 22,334 | $ 6,040 |
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||||||||
Dividends declared and paid per common share (in dollars per share) | $ 0.132 | $ 0.132 | $ 0.132 | $ 0.132 | $ 0.120 | $ 0.120 | $ 0.264 | $ 0.240 |
Organization and Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Organization and Basis of Presentation | 1. Organization and Basis of Presentation We are an energy infrastructure company with a pure-play focus on midstream natural gas compression. We believe 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 only 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 2018 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 Business Developments Elite Acquisition On June 23, 2019, we entered into an asset purchase agreement with Elite Compression pursuant to which we will acquire from Elite Compression substantially all of its assets, including a fleet of predominantly-large compressor units comprising approximately 430,000 horsepower, a fleet of vehicles, real personal property and parts inventory, and certain liabilities for aggregate consideration of $205.0 million cash and 21,656,683 newly-issued shares of Archrock common stock. We intend to fund the cash portion of the purchase price with borrowings on the Credit Facility. The Elite Acquisition is expected to close in the third quarter of 2019 subject to certain closing conditions and the consummation of the Harvest Sale (see below). Harvest Sale On June 23, 2019, we entered into an asset purchase agreement with Harvest pursuant to which Harvest will acquire from us approximately 80,000 active and idle compression horsepower, vehicles and parts inventory for consideration of $30 million to be paid in cash. The Harvest Sale is expected to close in the third quarter of 2019, subject to customary closing conditions. During the three and six months ended June 30, 2019, we incurred transaction costs of $2.5 million related to the Elite Acquisition and Harvest Sale, which is reflected in transaction-related costs in our condensed consolidated statements of operations.
|
Recent Accounting Developments |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Developments | 2. Recent Accounting Developments Accounting Standards Updates Implemented Leases ASC 842 Leases establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new guidance, lessor accounting is largely unchanged. We adopted ASC 842 Leases on January 1, 2019 using the modified retrospective transition method and elected the practical expedient package to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification of any expired or existing leases and (iii) initial direct costs for any existing leases. We did not elect the practical expedient to use hindsight in determining the lease term. Adoption of ASC 842 Leases resulted in recognition of an operating lease ROU asset of $18.6 million and an operating lease liability of $20.0 million in our condensed consolidated balance sheet at January 1, 2019. The difference of $1.4 million related to accrued rent and prepaid lease payments recorded to our consolidated balance sheet as of December 31, 2018. We did not recognize any finance lease ROU assets or liabilities upon adoption of ASC 842 Leases. There was no impact to our condensed consolidated statements of operations, equity or cash flows upon adoption. Comparative information has not been recast and continues to be reported under the accounting standards in effect for those periods. ASC 842 Leases also provides a practical expedient, elected by class of underlying asset, to not separate lease and nonlease components and instead account for those components as a single component if certain conditions are met. ASC 842 Leases also provides clarification for lessors on whether ASC 842 Leases or ASC 606 Revenue is applicable to the combined component based on determination of the predominant component. We have concluded that for our contract operations services agreements, in which we are a lessor, the services nonlease component is predominant over the compression unit lease component and therefore ongoing recognition of these agreements will continue to follow the ASC 606 Revenue guidance. We have also elected, as a lessee, to not separate lease and nonlease components as it relates to our facility leases. In addition, we have made an accounting policy election, as permitted by ASC 842 Leases, to not apply the recognition requirements of ASC 842 Leases to leases with an initial term of 12 months or less. Accounting Standards Updates Not Yet Implemented In August 2018, the FASB issued 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 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU 2018-13 on our consolidated financial statements and footnote disclosures. In June 2016, the FASB issued ASU 2016-13 which changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in earlier recognition of allowance for losses. For public entities that meet the definition of an SEC filer, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. Entities will apply ASU 2016-13 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements and footnote disclosures.
|
Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | 3. 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 June 30, 2019 and December 31, 2018, we had $8.5 million and $7.1 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 and $7.1 million related to these unrecognized tax benefits recorded to noncurrent assets associated with discontinued operations as of June 30, 2019 and December 31, 2018, respectively. The following table summarizes the statements of operations data for discontinued operations (in thousands):
The following table summarizes the balance sheet data for discontinued operations (in thousands):
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Inventory |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | 4. Inventory Inventory consisted of the following (in thousands):
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Property, Plant and Equipment, Net |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Net | 5. Property, Plant and Equipment, Net Property, plant and equipment, net, consisted of the following (in thousands):
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Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | 6. Long-Term Debt Long-term debt consisted of the following (in thousands):
Archrock Credit Facility In April 2018, in connection with the Merger and Amendment No. 1, the Archrock Credit Facility was terminated. As a result of the termination, we recorded a debt extinguishment loss of $2.5 million during the three and six months ended June 30, 2018. We incurred $0.2 million in commitment fees in 2018 prior to the facility’s termination and were in compliance with all covenants through its closing. Credit Facility As of June 30, 2019, there were $15.2 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.7%. The weighted average annual interest rate on the outstanding balance under the Credit Facility, excluding the effect of interest rate swaps, was 5.3% and 5.4% at June 30, 2019 and December 31, 2018, respectively. We incurred $0.6 million in commitment fees on the daily unused amount of the Credit Facility during each of the three months ended June 30, 2019 and 2018 and $1.1 million during each of the six months ended June 30, 2019 and 2018. We must maintain the following consolidated financial ratios, as defined in the Credit Facility agreement:
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As of June 30, 2019, the ratio requirements above did not constrain our undrawn capacity and as such, all of the $442.3 million of undrawn capacity was available for additional borrowings. As of June 30, 2019, we were in compliance with all covenants under the Credit Facility agreement. 2027 Notes On March 21, 2019, we completed a private offering of $500.0 million aggregate principal amount of 6.875% senior notes due April 2027 and received net proceeds of $491.2 million after deducting issuance costs. The $8.8 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. The net proceeds were used to repay borrowings outstanding under the Credit Facility as of March 31, 2019. The 2027 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2027 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act. The 2027 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us and all of our existing subsidiaries, other than Archrock Partners, L.P. and APLP Finance Corp., which are co-issuers of the 2027 Notes, and certain of our future subsidiaries. The 2027 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness. The 2027 Notes may be redeemed at any time, in whole or in part, at specified redemption prices and make-whole premiums, plus any accrued and unpaid interest. Redemption of 2021 Notes On April 5, 2019, the 2021 Notes were redeemed at 100% of their $350.0 million aggregate principal amount plus accrued and unpaid interest of $0.2 million with borrowings from the Credit Facility. We recorded a debt extinguishment loss of $3.7 million related to the redemption during the three and six months ended June 30, 2019.
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Revenue from Contract with Customers |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contracts with Customers | 7. Revenue from Contracts with Customers Disaggregation of Revenue The following table presents our revenue from contracts with customers disaggregated by revenue source (in thousands):
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Performance Obligations As of June 30, 2019, we had $312.9 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 2024 as follows (in thousands):
As of June 30, 2019 we have 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 Balances As of June 30, 2019 and December 31, 2018, our receivables from contracts with customers, net of allowance for doubtful accounts, were $139.3 million and $142.1 million, respectively. As of June 30, 2019 and December 31, 2018, our contract liabilities were $11.6 million and $17.1 million, respectively, which are included in deferred revenue and other liabilities in our condensed consolidated balance sheets. Freight billings to customers for the transport of compressor assets and milestone billings on aftermarket services often result in a contract liability. We recognized $25.2 million of our December 31, 2018 contract liability balance as revenue during the six months ended June 30, 2019, primarily related to freight billings and aftermarket services.
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 8. Leases We determine if an arrangement is a lease at inception. 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. As of June 30, 2019, all of our leases were operating. The facility leases discussed below, of which we are the lessee, contain lease and nonlease components for which we have elected the practical expedient to account for as a single lease component, as the nonlease components are not significant to the total consideration in 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 unit lease component and therefore ongoing 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 one to 11 years and most include options to extend the lease term, at our discretion, for an additional three to five years. We are not, however, reasonably certain that we will exercise any of the options to extend and as such, they have not been included in the remaining lease terms. Balance sheet information related to our operating leases was as follows (in thousands):
The components of lease cost were as follows (in thousands):
Cash flow and noncash information related to our operating leases were as follows (in thousands):
Other supplemental information related to our operating leases was as follows:
Remaining maturities of lease liabilities governed under ASC 842 Leases as of June 30, 2019 were as follows (in thousands):
Maturities of lease liabilities governed under ASC 840 Leases as of December 31, 2018 were as follows (in thousands):
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Derivatives |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | 9. 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. At June 30, 2019, 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 (in millions):
The counterparties to the derivative agreements are major financial institutions. We monitor the credit quality of these financial institutions and do not expect non-performance by any counterparty, although such non-performance 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 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 $0.3 million of the deferred pre-tax gain attributable to interest rate swaps included in accumulated other comprehensive income at June 30, 2019 will be reclassified into earnings as interest income at then-current values during the next 12 months as the underlying hedged transactions occur. As of June 30, 2019, the weighted average effective fixed interest rate on the interest rate swaps was 1.8%. The following table presents the effect of the derivative instruments designated as cash flow hedging instruments in our condensed consolidated balance sheets (in thousands):
The following tables present the effect of the derivative instruments designated as cash flow hedging instruments on our condensed consolidated statements of operations (in thousands):
See Note 10 (“Fair Value Measurements”) and Note 17 (“Accumulated Other Comprehensive Income (Loss)”) for further details on our derivative instruments.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 10. Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis On a quarterly basis, our interest rate swaps are valued based on the income approach (discounted cash flow) using market observable inputs, including London Interbank Offered Rate forward curves. These fair value measurements are classified as Level 2. The following table presents our interest rate swaps asset and liability measured at fair value on a recurring basis, with pricing levels as of the date of valuation (in thousands):
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis During the six months ended June 30, 2019, we recorded non-recurring fair value measurements related to our idle and previously-culled compressor units. Our estimate of the compressor units’ 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 compressor units was $1.6 million and $2.3 million at June 30, 2019 and December 31, 2018, respectively. See Note 11 (“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 the Credit Facility approximates fair value due to its variable interest rate. The fair value of these outstanding borrowings was estimated using a discounted cash flow analysis based on interest rates offered on loans with similar terms to borrowers of similar credit quality, which are Level 3 inputs. The fair value of our fixed rate debt was estimated based on quoted prices in inactive markets and is considered a Level 2 measurement. The following table summarizes the carrying amount and fair value of our fixed rate debt (in thousands):
—————— (1) Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 6 (“Long-Term Debt”).
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Long-Lived Asset Impairment |
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Asset Impairment Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Lived Asset Impairment | 11. 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 compressor units 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 compressor units 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 in our contract operations segment (dollars in thousands):
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Hosting Arrangements |
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Jun. 30, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Hosting Arrangements | 12. Hosting Arrangements In the fourth quarter of 2018 we began a process and technology transformation project that will, among other things, upgrade our existing ERP system, improve our supply chain and inventory management and expand the remote monitoring capabilities of our compression fleet. Included in this project is the implementation of hosting arrangements that are service contracts related to the cloud migration of our ERP system and hosted cloud services for our new mobile workforce telematics tool. |
Income Taxes |
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Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 13. Income Taxes The year-to-date effective tax rate for the six months ended June 30, 2019 differed significantly from our statutory rate primarily due to the reduction of a valuation allowance, which was recorded to offset the tax effect of the increase in book income in the six months ended June 30, 2019, as well as the release of an unrecognized tax benefit due to the settlement of a tax audit. Unrecognized Tax Benefits As of June 30, 2019, we believe it is reasonably possible that $1.9 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to June 30, 2020 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 which could materially differ from this estimate.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 14. Earnings per Share Net Income (Loss) Attributable to Archrock Common Stockholders per Common Share Basic net income (loss) attributable to Archrock common stockholders 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) attributable to Archrock common stockholders per common share is determined by dividing net income (loss) attributable to Archrock common stockholders 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) attributable to Archrock common stockholders 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 summarizes net income (loss) attributable to Archrock common stockholders used in the calculation of basic and diluted net income (loss) per common share (in thousands):
The following table shows the potential shares of common stock that were included in computing diluted net income (loss) attributable to Archrock common stockholders per common share (in thousands):
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The following table shows the potential shares of common stock issuable that were excluded from computing diluted net income (loss) attributable to Archrock common stockholders per common share as their inclusion would have been anti-dilutive (in thousands):
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Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | 15. Equity Merger Transaction In April 2018, we completed the Merger and acquired all of the common units of the Partnership not owned by us prior to the Merger. As a result of the Merger, the Partnership’s common units are no longer publicly traded. The 2021 Notes and 2022 Notes were not impacted by the Merger. As we controlled the Partnership prior to the Merger and continue to control the Partnership after the Merger, we accounted for the change in our ownership interest in the Partnership as an equity transaction in the second quarter of 2018 and no gain or loss was recognized in our condensed consolidated statements of operations as a result of the Merger. The tax effects of the Merger were reported as adjustments to other assets, noncurrent assets associated with discontinued operations, deferred income taxes, additional paid-in capital and other comprehensive income. The following table presents the effects of changes in our ownership interest in the Partnership on the equity attributable to Archrock stockholders:
Prior to the Merger, public unitholders held a 57% ownership interest in the Partnership and we owned the remaining 43% equity interest. The earnings of the Partnership that were attributed to its common units held by the public prior to the Merger are reflected in net income attributable to the noncontrolling interest in our condensed consolidated statements of operations. Cash Dividends The following table summarizes our dividends declared and paid in each of the quarterly periods of 2019 and 2018:
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | 16. Stock-Based Compensation We have granted restricted stock, restricted stock units and performance-based restricted stock units to employees and non-employee directors under the Archrock, Inc. 2013 Stock Incentive Plan. The following table presents restricted stock, restricted stock unit, performance-based restricted stock unit and cash-settled performance unit activity during the six months ended June 30, 2019:
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As of June 30, 2019, we expect $18.5 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. Total stock-based compensation expense consisted of the following (in thousands):
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Accumulated Other Comprehensive Income (Loss) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | 17. 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 consists of changes in the fair value of our interest rate swap derivative instruments, net of tax, which are designated as cash flow hedges, amortization of terminated interest rate swaps and adjustments related to changes in our ownership of the Partnership. The following table presents the changes in accumulated other comprehensive income (loss) of our derivative cash flow hedges, net of tax and excluding noncontrolling interest, during the three and six months ended June 30, 2019 and 2018 (in thousands):
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See Note 9 (“Derivatives”) for further details on our interest rate swap derivative instruments.
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Commitments and Contingencies |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 18. 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 2019 through the third quarter of 2020 and maximum potential future payments of $2.3 million. As of June 30, 2019, 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 each of June 30, 2019 and December 31, 2018, we accrued $4.5 million 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 June 30, 2019 and December 31, 2018, we recorded an indemnification liability (including penalties and interest), in addition to the tax contingency above, of $2.7 million and $2.6 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. Litigation and Claims In the ordinary course of business, we are involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes 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.
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Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | 19. 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 part 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 and six months ended June 30, 2019 and 2018 (in thousands):
The following table reconciles total gross margin to income before income taxes (in thousands):
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Recent Accounting Developments (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Accounting Standards Updates Implemented and Accounting Standards Updates Not Yet Implemented | Accounting Standards Updates Implemented Leases ASC 842 Leases establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new guidance, lessor accounting is largely unchanged. We adopted ASC 842 Leases on January 1, 2019 using the modified retrospective transition method and elected the practical expedient package to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification of any expired or existing leases and (iii) initial direct costs for any existing leases. We did not elect the practical expedient to use hindsight in determining the lease term. Adoption of ASC 842 Leases resulted in recognition of an operating lease ROU asset of $18.6 million and an operating lease liability of $20.0 million in our condensed consolidated balance sheet at January 1, 2019. The difference of $1.4 million related to accrued rent and prepaid lease payments recorded to our consolidated balance sheet as of December 31, 2018. We did not recognize any finance lease ROU assets or liabilities upon adoption of ASC 842 Leases. There was no impact to our condensed consolidated statements of operations, equity or cash flows upon adoption. Comparative information has not been recast and continues to be reported under the accounting standards in effect for those periods. ASC 842 Leases also provides a practical expedient, elected by class of underlying asset, to not separate lease and nonlease components and instead account for those components as a single component if certain conditions are met. ASC 842 Leases also provides clarification for lessors on whether ASC 842 Leases or ASC 606 Revenue is applicable to the combined component based on determination of the predominant component. We have concluded that for our contract operations services agreements, in which we are a lessor, the services nonlease component is predominant over the compression unit lease component and therefore ongoing recognition of these agreements will continue to follow the ASC 606 Revenue guidance. We have also elected, as a lessee, to not separate lease and nonlease components as it relates to our facility leases. In addition, we have made an accounting policy election, as permitted by ASC 842 Leases, to not apply the recognition requirements of ASC 842 Leases to leases with an initial term of 12 months or less. Accounting Standards Updates Not Yet Implemented In August 2018, the FASB issued 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 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU 2018-13 on our consolidated financial statements and footnote disclosures. In June 2016, the FASB issued ASU 2016-13 which changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in earlier recognition of allowance for losses. For public entities that meet the definition of an SEC filer, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. Entities will apply ASU 2016-13 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements and footnote disclosures.
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Discontinued Operations (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of operating results and balance sheet data for discontinued operations | The following table summarizes the statements of operations data for discontinued operations (in thousands):
The following table summarizes the balance sheet data for discontinued operations (in thousands):
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Inventory (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory, net of reserves | Inventory consisted of the following (in thousands):
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Property, Plant and Equipment, Net (Tables) |
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Schedule of property, plant and equipment, net | Property, plant and equipment, net, consisted of the following (in thousands):
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Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | We must maintain the following consolidated financial ratios, as defined in the Credit Facility agreement:
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Long-term debt consisted of the following (in thousands):
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Revenue from Contract with Customers (Tables) |
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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):
——————
(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.
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Remaining Performance Obligation | The remaining performance obligations will be recognized through 2024 as follows (in thousands):
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Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases Balance Sheet Location | Balance sheet information related to our operating leases was as follows (in thousands):
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Components of Lease Costs | The components of lease cost were as follows (in thousands):
Cash flow and noncash information related to our operating leases were as follows (in thousands):
Other supplemental information related to our operating leases was as follows:
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Operating Lease Maturity Schedule | Remaining maturities of lease liabilities governed under ASC 842 Leases as of June 30, 2019 were as follows (in thousands):
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Maturities of Lease Liability Under ASC 840 | Maturities of lease liabilities governed under ASC 840 Leases as of December 31, 2018 were as follows (in thousands):
|
Derivatives (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest rate swaps | At June 30, 2019, 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 (in millions):
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Effect of derivative instruments on consolidated financial position | The following table presents the effect of the derivative instruments designated as cash flow hedging instruments in our condensed consolidated balance sheets (in thousands):
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Effect of derivative instruments on results of operations | The following tables present the effect of the derivative instruments designated as cash flow hedging instruments on our condensed consolidated statements of operations (in thousands):
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Summary of assets and liabilities measured at fair value on recurring basis | The following table presents our interest rate swaps asset and liability measured at fair value on a recurring basis, with pricing levels as of the date of valuation (in thousands):
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Schedule of carrying value and estimated fair value of debt instruments | The following table summarizes the carrying amount and fair value of our fixed rate debt (in thousands):
—————— (1) Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 6 (“Long-Term Debt”).
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Long-Lived Assets Impairment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Impairment Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Details of Impairment of Long-Lived Assets Held and Used by Asset | The following table presents the results of our impairment review as recorded in our contract operations segment (dollars in thousands):
|
Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 summarizes net income (loss) attributable to Archrock common stockholders used in the calculation of basic and diluted net income (loss) per common share (in thousands):
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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) attributable to Archrock common stockholders per common share (in thousands):
—————— * Excluded from diluted net income (loss) per common share as their inclusion would have been anti-dilutive.
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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) attributable to Archrock common stockholders per common share as their inclusion would have been anti-dilutive (in thousands):
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Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effects of changes in ownership interest | The following table presents the effects of changes in our ownership interest in the Partnership on the equity attributable to Archrock stockholders:
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Summary of entity's dividends per common share | The following table summarizes our dividends declared and paid in each of the quarterly periods of 2019 and 2018:
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 six months ended June 30, 2019:
——————
(2) During the three months ended June 30, 2019, the settlement terms of 99,631 performance units, with grant dates in 2018 and 2019, were modified from settlement in stock to cash. The change in award settlement from stock to cash was the only modification to these awards; the vesting, forfeiture and all other terms and conditions were unchanged. The modification resulted in a $0.2 million reclassification from additional paid-in capital to other current liabilities in our condensed consolidated balance sheets and had an immaterial impact on our condensed consolidated statements of operations.
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Schedule of Allocation of Total Stock-based Compensation | Total stock-based compensation expense consisted of the following (in thousands):
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Accumulated Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 and excluding noncontrolling interest, during the three and six months ended June 30, 2019 and 2018 (in thousands):
——————
(3) Pursuant to the Merger, we reclassified a gain of $5.7 million from noncontrolling interest to accumulated other comprehensive income (loss) related to the fair value of our derivative instruments that was previously attributed to public ownership of the Partnership.
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Segments (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue and other financial information by reportable segment | The following table presents revenue and gross margin by segment during the three and six months ended June 30, 2019 and 2018 (in thousands):
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Reconciliation of net income (loss) to gross margin | The following table reconciles total gross margin to income before income taxes (in thousands):
|
Recent Accounting Developments (Narratives) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
New Accounting Pronouncements or Change in Accounting Principle\ | |||
ROU assets | $ 18,022 | ||
Lease liability | $ 19,474 | ||
Prepaid rent | $ 1,400 | ||
ASU 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle\ | |||
ROU assets | $ 18,600 | ||
Lease liability | $ 20,000 |
Discontinued Operations (Narratives) (Details) - Exterran Corporation - Spinoff - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Discontinued Operations | ||
Deferred income taxes | $ 8,467 | $ 7,063 |
Indemnification asset | $ 8,467 | $ 7,063 |
Discontinued Operations - Income Statement Data for Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | ||||
Loss from discontinued operations, net of tax | $ 0 | $ 0 | $ (273) | $ 0 |
Spinoff | Exterran Corporation | ||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | ||||
Other income, net | 0 | (1,432) | ||
Provision for income taxes | 0 | 1,705 | ||
Loss from discontinued operations, net of tax | $ 0 | $ (273) |
Discontinued Operations - Balance Sheet Data for Discontinued Operations (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Summary of balance sheet data for discontinued operations | ||
Accrued liabilities | $ 269 | $ 297 |
Spinoff | Exterran Corporation | ||
Summary of balance sheet data for discontinued operations | ||
Other current assets | 0 | 300 |
Other assets | 8,467 | 7,063 |
Total assets associated with discontinued operations | 8,467 | 7,363 |
Accrued liabilities | 269 | 297 |
Deferred income taxes | 8,467 | 7,063 |
Total liabilities associated with discontinued operations | $ 8,736 | $ 7,360 |
Inventory (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Composition of Inventory net of reserves | ||
Parts and supplies | $ 64,403 | $ 65,645 |
Work in progress | 9,756 | 10,688 |
Inventory | $ 74,159 | $ 76,333 |
Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 3,731,303 | $ 3,578,352 |
Accumulated depreciation | (1,436,933) | (1,407,314) |
Property, plant and equipment, net | 2,294,370 | 2,171,038 |
Compression equipment, facilities and other fleet assets | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 3,472,300 | 3,323,465 |
Land and buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 46,517 | 47,067 |
Transportation and shop equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 105,941 | 103,766 |
Computer hardware and software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 93,434 | 92,174 |
Other | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 13,111 | $ 11,880 |
Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument | ||
Long-term debt | $ 1,628,814 | $ 1,529,501 |
Senior Notes | 2027 Notes | ||
Debt Instrument | ||
Long term debt gross | 500,000 | 0 |
Less: Deferred financing costs, net of amortization | (8,550) | 0 |
Long-term debt | 491,450 | 0 |
Senior Notes | 2022 Notes | ||
Debt Instrument | ||
Long term debt gross | 350,000 | 350,000 |
Less: Deferred financing costs, net of amortization | (2,725) | (3,133) |
Less: Deferred financing costs, net of amortization | (2,411) | (2,766) |
Long-term debt | 344,864 | 344,101 |
Senior Notes | 2021 Notes | ||
Debt Instrument | ||
Long term debt gross | 0 | 350,000 |
Less: Deferred financing costs, net of amortization | 0 | (2,311) |
Less: Deferred financing costs, net of amortization | 0 | (1,789) |
Long-term debt | 0 | 345,900 |
Revolving Credit Facility | Credit Facility | ||
Debt Instrument | ||
Long-term debt | $ 792,500 | $ 839,500 |
Long-Term Debt - Archrock Credit Facility (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Line of Credit Facility | ||||
Debt extinguishment loss | $ 3,653 | $ 2,450 | $ 3,653 | $ 2,450 |
Revolving Credit Facility | Terminated Credit Facility | ||||
Line of Credit Facility | ||||
Debt extinguishment loss | $ 2,500 | $ 0 | $ 2,500 | 0 |
Commitment fee amount | $ 200 |
Long-Term Debt - Credit Facility (Details) - Revolving Credit Facility - Credit Facility - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Line of Credit Facility | |||||
Letter of credit outstanding | $ 15.2 | $ 15.2 | |||
Debt instrument, variable rate (percentage) | 2.70% | ||||
Debt instrument weighted average interest rate (percent) | 5.30% | 5.30% | 5.40% | ||
Commitment fee amount | $ 0.6 | $ 0.6 | $ 1.1 | $ 1.1 | |
Undrawn capacity under revolving credit facility | $ 442.3 | $ 442.3 |
Long-Term Debt - Debt Ratios (Details) - Revolving Credit Facility |
6 Months Ended | 12 Months Ended | 21 Months Ended | |
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
Mar. 30, 2022 |
|
Line of Credit Facility | ||||
EBITDA to Interest Expense | 2.5 | |||
Senior Secured Debt to EBITDA | 3.5 | |||
Forecasted | ||||
Line of Credit Facility | ||||
Total Debt to EBITDA ratio | 5.50 | 5.75 | 5.25 | |
Archrock Partners, L.P | Forecasted | Conditional Event | ||||
Line of Credit Facility | ||||
Total Debt to EBITDA ratio | 5.5 |
Long-Term Debt - Notes (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Mar. 21, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Debt Instrument | |||
Proceeds from borrowings of long-term debt | $ 1,254,000,000 | $ 383,830,000 | |
Senior Notes | 2027 Notes | |||
Debt Instrument | |||
Debt instrument face amount | $ 500,000,000.0 | ||
Interest rate (as a percent) | 6.875% | ||
Proceeds from borrowings of long-term debt | $ 491,200,000 | ||
Debt issuance cost | $ 8,800,000 |
Long-Term Debt - Redemption of 2021 Notes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Apr. 05, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Debt Instrument | |||||
Repayments of long-term debt | $ 1,151,000 | $ 343,636 | |||
Debt extinguishment loss | $ 3,653 | $ 2,450 | 3,653 | $ 2,450 | |
Senior Notes | 2021 Notes | |||||
Debt Instrument | |||||
Redemption rate (as a percent) | 100.00% | ||||
Repayments of long-term debt | $ 350,000 | ||||
Interest paid | $ 200 | ||||
Debt extinguishment loss | $ 3,700 | $ 3,700 |
Revenue from Contract with Customers - Contract Balances (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Disaggregation of Revenue | |||
Accounts receivable, trade | $ 146,831 | $ 147,985 | |
Contract liability with customer | 11,600 | 17,100 | |
Deferred revenue recognized in earnings | 25,227 | $ 11,274 | |
Contract with customers | |||
Disaggregation of Revenue | |||
Accounts receivable, trade | $ 139,300 | $ 142,100 |
Leases - (Narratives) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Weighted average remaining lease term (in years) | 1 year |
Operating lease renewal term (in years) | 3 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Weighted average remaining lease term (in years) | 11 years |
Operating lease renewal term (in years) | 5 years |
Leases - Balance Sheet Information (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
ROU assets | $ 18,022 |
Lease liabilities | |
Current | 2,827 |
Noncurrent | 16,647 |
Total lease liabilities | $ 19,474 |
Leases - Components of Lease Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Operating lease cost | $ 970 | $ 1,944 |
Short-term lease cost | 65 | 238 |
Variable lease cost | 560 | 942 |
Total lease cost | $ 1,595 | $ 3,124 |
Leases - Cash Flow and Non-cash Information (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities | $ 2,802 |
Operating lease ROU assets obtained in exchange for new lease liabilities | $ 862 |
Leases - Other Supplemental Information (Details) |
Jun. 30, 2019 |
---|---|
Leases [Abstract] | |
Weighted average remaining lease term (in years) | 8 years 6 months |
Weighted average discount rate (percent) | 5.30% |
Leases - Maturity Schedule (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating Lease Liabilities, Payments Due | ||
2019 | $ 1,569 | |
2020 | 3,763 | |
2021 | 3,538 | |
2022 | 2,439 | |
2023 | 2,131 | |
2024 | 1,740 | |
Thereafter | 9,310 | |
Total lease payments | 24,490 | |
Less: Interest | (5,016) | |
Total lease liabilities under ASC 842 Leases | $ 19,474 | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity | ||
2019 | $ 4,317 | |
2020 | 3,980 | |
2021 | 3,562 | |
2022 | 2,433 | |
2023 | 2,170 | |
Thereafter | 11,935 | |
Total lease liabilities under ASC 840 Leases | $ 28,397 |
Derivatives - Interest Rate Risk (Details) - Derivatives designated as hedging instruments $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
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 Risk (Narratives) (Details) - Derivatives designated as hedging instruments - Interest rate swaps $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Derivatives | |
Deferred pre-tax losses to be reclassified during next 12 months | $ 0.3 |
Weighted average effective fixed interest rate on interest rate swaps (as a percent) | 1.80% |
Derivatives - Effect of Derivative Instruments on Balance Sheet (Details) - Derivatives designated as hedging instruments - Interest rate swaps - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value Asset | ||
Derivative assets | $ 336 | $ 7,307 |
Derivative liability | (1,574) | 0 |
Other current assets | ||
Fair Value Asset | ||
Derivative assets | 336 | 3,185 |
Other assets | ||
Fair Value Asset | ||
Derivative assets | $ 0 | $ 4,122 |
Derivatives - Effect of Derivative Instruments on Income Statement (Details) - Interest rate swaps - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Effect of derivative instruments on results of operations | ||||
Pre-tax gain (loss) recognized in other comprehensive income (loss) | $ (4,529) | $ 2,245 | $ (6,828) | $ 6,941 |
Interest expense | ||||
Effect of derivative instruments on results of operations | ||||
Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense | $ 791 | $ (39) | $ 1,717 | $ (513) |
Derivatives - Derivative Gain (Loss) Recognized in Income Statement (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Effect of derivative instruments on results of operations | ||||
Interest expense | $ 25,954 | $ 23,337 | $ 49,571 | $ 45,884 |
Accumulated Other Comprehensive Income (Loss) | Reclassification adjustments | ||||
Effect of derivative instruments on results of operations | ||||
Interest expense | $ (791) | $ (207) | $ (1,717) | $ (153) |
Fair Value Measurements - Assets and Liabilities Measured at Fair Value (Details) - Recurring basis - Level 2 - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair value measurement of assets and liabilities | ||
Interest rate swaps asset | $ 336 | $ 7,307 |
Interest rate swaps liability | $ (1,574) | $ 0 |
Fair Value Measurements (Narratives) (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Nonrecurring basis | Level 3 | ||
Valuation of our interest rate swaps and impaired assets | ||
Impaired long-lived assets | $ 1.6 | $ 2.3 |
Impaired long-lived assets | ||
Valuation of our interest rate swaps and impaired assets | ||
Weighted average disposal period of impaired assets | 4 years |
Fair Value Measurements - Fair Value of Debt (Details) - Fixed rate debt - Level 2 - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Long-term debt, fair value | $ 836,314 | $ 690,001 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Long-term debt, fair value | $ 881,000 | $ 674,000 |
Long-Lived Asset Impairment (Details) hp in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019
USD ($)
compressor_unit
hp
|
Jun. 30, 2018
USD ($)
compressor_unit
hp
|
Jun. 30, 2019
USD ($)
compressor_unit
hp
|
Jun. 30, 2018
USD ($)
compressor_unit
hp
|
|
Impaired Long-Lived Assets Held and Used | ||||
Impairment recorded on idle compressor units retired from the active fleet | $ 8,632 | $ 6,953 | $ 11,724 | $ 11,663 |
Idle compressor units | ||||
Impaired Long-Lived Assets Held and Used | ||||
Idle compressor units retired from the active fleet (compressors) | compressor_unit | 160 | 120 | 180 | 165 |
Horsepower of idle compressor units retired from the active fleet (horsepower) | hp | 41 | 27 | 56 | 50 |
Impairment recorded on idle compressor units retired from the active fleet | $ 8,632 | $ 6,953 | $ 11,724 | $ 11,663 |
Hosting Arrangements - (Narratives) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Capitalized implementation costs | $ 2.0 | $ 0.4 |
Income Taxes (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Income Tax Disclosure [Abstract] | |
Potential decrease in unrecognized tax benefit | $ 1.9 |
Equity (Narratives) (Details) - $ / shares |
Jul. 24, 2019 |
Mar. 31, 2018 |
---|---|---|
Class of Stock | ||
Ownership percentage held by reporting entity (percent) | 57.00% | |
Subsequent Event | ||
Distributions | ||
Dividend declared per common stock (in dollars per share) | $ 0.145 | |
Archrock | Archrock, Inc. | ||
Class of Stock | ||
Ownership interest (percent) | 43.00% |
Equity - Effects of Changes in Ownership Interest (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Equity [Abstract] | ||||
Net loss attributable to Archrock stockholders | $ 11,423 | $ 1,937 | $ 30,879 | $ (1,879) |
Decrease in Archrock stockholders’ additional paid-in capital for purchase of Partnership common units | 52,815 | |||
Change from net loss attributable to Archrock stockholders and transfers from noncontrolling interest | $ 50,936 |
Equity - Cash Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Distributions | ||||||||
Dividends per Common Share (in dollars per share) | $ 0.132 | $ 0.132 | $ 0.132 | $ 0.132 | $ 0.120 | $ 0.120 | $ 0.264 | $ 0.240 |
Total Dividends | $ 17,206 | $ 17,231 | $ 17,156 | $ 17,114 | $ 15,486 | $ 8,532 | $ 34,437 | $ 24,018 |
Stock-Based Compensation - Restricted Stock, Restricted Stock Units, and Performance Units Activity (Details) - Restricted stock, restricted stock units, performance units, cash settled restricted stock units and cash settled performance units shares in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2019
$ / shares
shares
| |
Shares | |
Non-vested awards at the beginning of the period (in shares) | shares | 1,728 |
Granted (in shares) | shares | 1,383 |
Vested (in shares) | shares | (402) |
Canceled (in shares) | shares | (153) |
Non-vested awards at the end of the period (in shares) | shares | 2,556 |
Weighted Average Grant Date Fair Value Per Share | |
Non-vested awards at the beginning of the period (in dollars per share) | $ / shares | $ 9.68 |
Granted (in dollars per share) | $ / shares | 10.01 |
Vested (in dollars per share) | $ / shares | 6.33 |
Canceled (in dollars per share) | $ / shares | 10.33 |
Non-vested awards at the end of the period (in dollars per share) | $ / shares | $ 10.35 |
Stock-Based Compensation - Allocated Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||||
Total stock-based compensation | $ 2,152 | $ 2,635 | $ 5,475 | $ 4,730 |
Equity awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||||
Total stock-based compensation | 1,512 | 1,969 | 3,869 | 3,763 |
Liability awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||||
Total stock-based compensation | $ 640 | $ 666 | $ 1,606 | $ 967 |
Commitments and Contingencies - Guarantees Not Recorded on Balance Sheet (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Performance bonds | |
Commitments and contingencies | |
Maximum potential undiscounted payments | $ 2.3 |
Commitments and Contingencies (Narratives) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Loss contingency | ||
Accrued liability for the outcomes of non-income based tax audits | $ 4.5 | $ 4.5 |
Indemnification liability | $ 2.7 | $ 2.6 |
Segments (Narratives) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segments - Revenue and Gross Margin by Reportable Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenue and other financial information by reportable segment | ||||
Revenues | $ 238,390 | $ 226,870 | $ 474,549 | $ 438,910 |
Total gross margin | 125,654 | 108,268 | 243,176 | 213,376 |
Contract Operations | ||||
Revenue and other financial information by reportable segment | ||||
Total gross margin | 115,737 | 97,641 | 223,509 | 194,243 |
Contract Operations | Contract operations | ||||
Revenue and other financial information by reportable segment | ||||
Revenues | 186,258 | 165,450 | 368,765 | 326,647 |
Aftermarket Services | ||||
Revenue and other financial information by reportable segment | ||||
Total gross margin | 9,917 | 10,627 | 19,667 | 19,133 |
Aftermarket Services | Aftermarket services | ||||
Revenue and other financial information by reportable segment | ||||
Revenues | $ 52,132 | $ 61,420 | $ 105,784 | $ 112,263 |
Segments - Reconciliation of Net Income to Gross Margin (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Reconciliation Net Income (Loss) to Gross Margin | ||||
Total gross margin | $ 125,654 | $ 108,268 | $ 243,176 | $ 213,376 |
Less: | ||||
Selling, general and administrative | 28,618 | 26,649 | 57,607 | 54,157 |
Depreciation and amortization | 45,482 | 43,331 | 89,588 | 87,786 |
Long-lived asset impairment | 8,632 | 6,953 | 11,724 | 11,663 |
Restatement and other charges | 24 | (1,076) | 445 | (591) |
Interest expense | 25,954 | 23,337 | 49,571 | 45,884 |
Debt extinguishment loss | 3,653 | 2,450 | 3,653 | 2,450 |
Transaction-related costs | 2,687 | 5,686 | 2,867 | 9,811 |
Other income, net | (2,010) | (1,644) | (2,215) | (2,789) |
Income before income taxes | $ 12,614 | $ 2,582 | $ 29,936 | $ 5,005 |
Label | Element | Value |
---|---|---|
Accounting Standards Update 2014-09 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 14,666,000 |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 14,666,000 |
Accounting Standards Update 2017-12 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 383,000 |
Accounting Standards Update 2017-12 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 383,000 |
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