What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-15 compared with 2022-02-16 · 165 added, 167 removed, 297 unchanged (53% of the section changed)

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Our assets consist of gathering pipelines, compressor stations and interests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Appalachian Basin in West Virginia and Ohio.

Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways, which portions of these systems are also utilized to transport flowback and produced water.

These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments to transport the water throughout the pipelines.

Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways.

These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments.

Portions of these water handling systems are also utilized to transport flowback and produced water.

These services are provided by us directly or through third-parties with which we contract.

Our assets also include other flowback and produced water treatment facilities that we use to provide water treatment services to Antero Resources and third-parties.

COVID-19 Pandemic

Since the start of the COVID-19 pandemic, governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, among other actions, which caused a significant decrease in activity in the global economy and the demand for oil, and to a lesser extent, natural gas and NGLs.

As vaccines have become widely available, social distancing guidelines, travel restrictions and stay-at-home orders have eased, activity in the global economy has increased and demand for oil, natural gas and NGLs, and related commodity pricing, has improved.

However, new variants of the virus could cause further commodity market volatility and resulting financial market instability, and these are variables beyond our control that may adversely impact our generation of funds from operating cash flows, distributions from unconsolidated affiliates and our ability to access the capital markets.

As a midstream energy company, we are recognized as an essential business under various federal, state and local regulations related to the COVID-19 pandemic.

As such, we have continued to operate throughout the pandemic as permitted under these regulations while taking steps to protect the health and safety of our workers.

We have implemented protocols to reduce the risk of an outbreak within our field operations and corporate offices, and these protocols have not reduced Antero Resources’ production and our throughput in a significant manner.

A substantial portion of our non-field level employees currently operate in remote work from home arrangements, and we have been able to maintain a consistent level of effectiveness through these arrangements, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting.

We continue to monitor the COVID-19 environment in order to (i) protect the health and safety of our employees and contract workers and (ii) determine when a return to in-office working arrangements will be appropriate .

Neither our nor Antero Resources’ supply chain has experienced any significant interruptions due to the COVID-19 pandemic.

Prior to the COVID-19 pandemic, Antero Resources had developed a diverse set of buyers and destinations, as well as in-field and off-site storage capacity for its condensate volumes, and as a result of the pandemic, Antero Resources has expanded its customer base and its condensate storage capacity within the Appalachian Basin.

However, if Antero Resources or our other customers were to experience any production curtailments or shut-ins it would reduce throughput for our gathering and processing systems.

In addition, if our customers were to delay or discontinue drilling or completion activities, it would reduce the volumes of water that we handle and therefore revenues for our water distribution and handling business.

As the global economy continues to recover from the effects of the COVID-19 pandemic, economic indicators have continued to strengthen.

However, the economy has begun to experience elevated inflation levels as a result of global supply and demand imbalances resulting from the COVID-19 pandemic.

For example, the United States Bureau of Labor and Statistics (“BLS”) CPI for all urban consumers increased 7% from December 31, 2020 to December 31, 2021 as compared to the average historical 10-year rate of 2%.

Additionally, employment activity has also begun to strengthen as demonstrated by the United States BLS unemployment rate declining from a high of 15% in April 2020 to 4% in December 2021.

Inflationary pressures and labor shortages could result in increases to our operating and capital costs that are not fixed, renegotiation of contracts and/or supply agreements and higher labor costs, among others.

Asset Acquisitions

On October 25, 2022, we acquired certain Marcellus gas gathering and compression assets from Crestwood for $205 million in cash, before closing adjustments, which was funded by borrowings under our Credit Facility.

These assets include 72 miles of dry gas gathering pipelines and nine compressor stations with approximately 700 MMcf/d of compression capacity.

Current throughput of the assets is approximately 200 MMcf/d, resulting in significant available capacity for growth.

Additionally, on December 21, 2022, we acquired certain Utica compression assets from EnLink for $10 million in cash, before closing adjustments, which was funded by borrowings under our Credit Facility.

These assets include four compressor stations with approximately 380 MMcf/d of compression capacity.

The acquired compression assets are interconnected with the Company’s existing low pressure and high pressure gathering systems and service Antero Resources’ production.

Current throughput of the assets is approximately 100 MMcf/d.

See Note 6—Property and Equipment to the consolidated financial statements for more information on our asset acquisitions.

Market Conditions and Business Trends

Commodity Markets

Prices for natural gas, NGLs and oil increased significantly during the year ended December 31, 2022 as compared to the year ended December 31, 2021.

While substantially all of our revenues are based on fixed-fee contracts that are not directly impacted by changes in commodity prices, commodity price changes do impact the revenues and cash flows of Antero Resources, and Antero Resources’ drilling and development plan does have a direct impact on our gathering, compression and water handling services, revenues and cash flows.

In the current economic environment, we expect that commodity prices for some or all of the commodities produced by Antero Resources could remain volatile.

However, to the extent Antero Resources maintains a maintenance capital program as it has done in recent years, we do not expect to experience substantial variability in our throughput volumes resulting from volatile commodity prices.

Growth Incentive Fee Program with Antero Resources

Our 2019 gathering and compression agreement with Antero Resources includes a growth incentive fee program whereby we agreed to provide quarterly fee rebates to Antero Resources through December 31, 2023, contingent upon Antero Resources achieving volumetric growth targets on low pressure gathering.

Antero Resources’ throughput on the acquired assets is not considered in the low pressure gathering volume targets.

If actual low pressure volumes are below the lowest threshold for the respective period, Antero Resources will not earn a reduction in low pressure gathering fees.

The growth incentive fee rebate program expires December 31, 2023, and the following table summarizes the remaining low pressure gathering growth incentive targets through 2023:

Low Pressure Gathering

Quarterly Fee

Volume Growth Incentive

Targets (MMcf/d)

(in millions)

Calendar Year 2023

>2,900 and <3,150

>3,150 and <3,400

Antero Resources earned $48 million in fee rebates during the year ended December 31, 2022 by achieving all four quarterly volumetric targets for the year.

Antero Resources earned $12 million in fee rebates during the year ended December 31, 2021 by achieving the quarterly volumetric target during the fourth quarter of 2021.

Economic Indicators

The economy is experiencing elevated inflation levels as a result of global supply and demand imbalances, where global demand continues to outpace current supplies.

For example, the CPI for all urban consumers increased 8% from year ended December 31, 2021 to year ended December 31, 2022 as compared to the Federal Reserve’s stated goal of 2%.

See “—Capital Resources and Liquidity—Capital Investment” for more information.

In order to manage the inflation risk currently present in the United States’ economy, the Federal Reserve has utilized monetary policy in the form of interest rate increases in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis.

The global economy also continues to be impacted by the effects of the COVID-19 pandemic and global events, among other factors.

These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others.

However, neither our nor Antero Resources’ supply chain has experienced any significant interruptions due to the COVID-19 pandemic or global supply and demand imbalances.

Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed.

Additionally, these economic variables could lead to a renegotiation of contracts and/or supply agreements, among others.

These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

Recent Developments and Highlights

Credit Facility

On October 26, 2021, we entered into an amended and restated senior secured revolving credit facility with lender commitments of $1.25 billion, which matures on October 26, 2026;

provided that if on November 17, 2025 any of the 7.875% senior unsecured notes due May 15, 2026 (the “2026 Notes”) are outstanding, the New Credit Facility will mature on such date.

We reduced our commitments from $2.13 billion under the Prior Credit Facility to $1.25 billion to better align with our expected future liquidity needs.

See Note 10—Long-Term Debt to the consolidated financial statements and “—Capital Resources and Liquidity—Debt Agreements—Credit Facility” for more information.

Issuance of Senior Notes

On June 8, 2021, we issued $750 million in aggregate principal amount of 5.375% senior notes due June 15, 2029 (the “2029 Notes”) at par.

The 2029 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.

The 2029 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners LP’s (“Antero Midstream Partners”) wholly owned subsidiaries (other than Antero Midstream Finance Corporation) and certain of its future restricted subsidiaries.

See Note 10—Long-Term Debt to the consolidated financial statements for more information.

Redemption of Senior Notes

On June 8, 2021, we redeemed all of our outstanding 5.375% Senior Notes Due September 15, 2024 (the “2024 Notes”) at a redemption price of 102.688% of the principal amount therefore, plus accrued and unpaid interest.

See Note 10—Long-Term Debt to the consolidated financial statements for more information.

Return of Capital Program

On August 12, 2019, our Board authorized a share repurchase program to opportunistically repurchase up to $300 million of shares of our outstanding common stock.

On February 10, 2021, our Board extended this program through June 30, 2023.

During the year ended December 31, 2021, we did not repurchase any shares under this program.

We currently have approximately $150 million of share repurchase capacity remaining under this program.

On January 12, 2022, the Board declared a cash dividend on the shares of our common stock of $0.225 per share for the quarter ended December 31, 2021.

The dividend was paid on February 9, 2022 to stockholders of record as of January 26, 2022.

The Board also declared a cash dividend of $138 thousand on the Series A Preferred Stock that was paid on February 14, 2022 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note 14—Equity and Earnings Per Common Share to our consolidated financial statements.

COVID-19 Pandemic

We continue to operate throughout the COVID-19 pandemic, in some cases subject to federal, state and local regulations, and we have taken and continue to take steps to protect the health and safety of our workers.

We have implemented protocols to reduce the risk of an outbreak within our field operations and offices, and these protocols have not impacted Antero Resources’ production, our throughput or our business activities.

During 2022, we transitioned from a hybrid working arrangement for non-field level employees , which involved a combination of in-office and remote work-from-home arrangements, to an in-office working arrangement for all non-field level employees.

We have been able to maintain a consistent level of effectiveness through these arrangements, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting.

We continue to monitor the COVID-19 environment in order to protect the health and safety of our employees.

Sources of Our Revenues

Our gathering and compression revenues are driven by the volumes of natural gas we gather and compress, and our water handling revenues are driven by quantities of fresh water delivered to our customers to support their well completion operations and produced water treated.

Pursuant to our long-term contracts with Antero Resources, we have secured long-term dedications covering a significant portion of Antero Resources’ current and future acreage for gathering and compression services.

We have also entered into a long-term water services agreement covering Antero Resources’ 502,000 net acres in West Virginia and Ohio, with a right of first offer on all future areas of operation.

Under the agreement, we receive a fixed fee for all fresh water deliveries by pipeline directly to the well site, subject to annual CPI-based adjustments.

In addition, we also provide other fluid handling services.

Our fresh water delivery systems and other fluid handling services support well completion and production operations for Antero

The following items are the primary components of our revenues:

● Gathering and Processing.

Our low pressure gathering, compression and high pressure gathering services support production operations for Antero Resources.

Our gathering and processing revenues are driven by the volumes of

natural gas we gather and compress.

We receive a low pressure gathering fee per Mcf, a compression fee per Mcf and a high-pressure gathering fee per Mcf, as applicable, substantially all of which are subject to annual CPI-based adjustments.

Additionally, our gathering and compression agreements provide for certain minimum volume commitments for gathering and compression services that run to 2032.

Pursuant to our long-term contracts with Antero Resources, we have secured long-term dedications covering substantially all of Antero Resources’ current and future acreage for gathering and compression services.

Our gathering and compression operations are substantially dependent upon natural gas production from Antero Resources’ upstream activity in its areas of operation.

In addition, there is a natural decline in production from existing wells that are connected to our gathering systems.

Although we expect that Antero Resources will continue to devote substantial resources to the development of oil and gas reserves, we have no control over this activity and Antero Resources has the ability to reduce or curtail such development at its discretion.

See Note 5—Revenue to the consolidated financial statements for more information on our gathering and compression agreements.

● Water Handling.

Our fresh water delivery systems and other fluid handling services support well completion and production operations for Antero Resources.

These services are provided by us directly or through third-parties with which we contract.

For other fluid handling services provided by third-parties, Antero Resources reimburses our third-party out-of-pocket costs plus 3%.

Our water handling revenues are driven by quantities of fresh water delivered to our customers to support their well completion operations and produced water transported, blended and/or disposed.

We receive a fixed fee for all fresh water deliveries by pipeline directly to the well site, subject to annual CPI-based adjustments.

Our other fluid handling services include wastewater handling, blending and high-rate transfer services.

For other fluid handling services provided by us, we charge Antero Resources a cost of service fee .

For other fluid handling services provided by third-parties, we charge Antero Resources a fee based on our third-party out-of-pocket costs plus 3%.

We have a long-term water services agreement covering Antero Resources’ 553,000 gross acres in West Virginia and Ohio, with a right of first offer on all future areas of operation.

The initial term of the water services agreement runs to 2035.

All of Antero Resources’ existing acreage is dedicated to us for gathering and compression services except for existing third-party commitments.

Approximately 127,000 gross leasehold acres characterized by dry gas and liquids-rich production have been previously dedicated to third-party gatherers.

Our gathering and compression operations are substantially dependent upon natural gas and oil production from Antero Resources’ upstream activity in its areas of operation.

In addition, there is a natural decline in production from existing wells that are connected to our gathering systems.

Our water handling operations are substantially dependent upon the number of wells drilled and completed by Antero Resources, as well as Antero Resources’ production.

As of December 31, 2021, Antero Resources had disclosed estimated net proved reserves 17.7 Tcfe, of which 58% was natural gas, 41% were NGLs and 1% was oil.

As of December 31, 2021, Antero Resources’ drilling inventory consisted of 2,083 identified potential horizontal well locations, approximately 1,371 of which were located on acreage dedicated to us, providing us with significant opportunity for growth as Antero Resources’ drilling program continues.

As of December 31, 2022, Antero Resources had disclosed estimated net proved reserves of 17.8 Tcfe, of which 58% was natural gas, 41% were NGLs and 1% was oil.

As of December 31, 2022, Antero Resources’ drilling inventory consisted of 1,819 gross identified potential horizontal well locations, substantially all of which were on acreage dedicated to us, providing us with significant opportunity for future capital investments as Antero Resources’ drilling program continues.

See Note 5—Revenue to the consolidated financial statements for more information on our water services agreement.

Principal Components of Our Cost Structure

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We seek to maximize the profitability of our operations in part by minimizing, to the extent appropriate, expenses directly tied to operating and maintaining our assets.

We schedule and conduct maintenance over time to avoid significant variability in our direct operating expense and minimize the impact on our cash flow.

We schedule and conduct preventative maintenance over time to avoid significant variability in our direct operating expense and minimize the impact on our cash flow.

Gathering and compression operating costs consist primarily of labor, water disposal, pigging, fuel, monitoring, repair and maintenance, utilities and contract services.

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● General and Administrative.

Our general and administrative expenses include direct charges and costs charged by Antero Resources.

Our general and administrative expenses include direct charges incurred by us and costs charged by Antero Resources.

These costs relate to:

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We have typically financed a portion of our cash requirements with borrowings under our revolving credit facility and with senior unsecured notes.

Our interest expense also includes amortization of deferred financing costs incurred in connection with our revolving credit facility and senior notes, amortization of senior notes premiums and finance leases.

Our interest expense also includes amortization of deferred financing costs incurred in connection with our revolving credit facility and senior notes and amortization of senior notes premiums.

See Note 8 — Long-Term Debt to our consolidated financial statements and “ —Capital Resources and Liquidity—Debt Agreements” for additional information on our debt agreements.

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We are subject to state and federal income taxes but are currently not in a cash tax paying position with respect to state and federal income taxes.

The difference between our financial statement income tax expense and our federal income tax liability is primarily due to the differences in the tax and financial statement treatment of our investment in Antero Midstream Partners.

The difference between our financial statement income tax expense and our current U.S.

federal income tax liability is primarily due to the differences in the tax and financial statement treatment of our investment in Antero Midstream Partners.

We have recorded deferred income tax expense to the extent our deferred tax liabilities exceed our deferred tax assets.

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As of December 31, 2022, we had approximately $415 million of U.S.

federal net operating loss carryforwards (“NOLs”), and approximately $412 million of state NOLs.

The Company currently considers all of its deferred tax assets realizable.

federal NOL carryforwards, and approximately $478 million of state NOL carryforwards.

The Company currently considers all of its deferred tax assets, except for those related to charitable contributions, realizable.

The amount of deferred tax assets considered realizable, however, could change as we generate taxable income or as estimates of future taxable income are reduced.

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These metrics help us identify factors and trends that impact our operating results, profitability and financial condition.

The key metrics we use to evaluate our business are provided below.

The following are the key metrics we use to evaluate our business:

● Adjusted EBITDA.

We use Adjusted EBITDA as a performance measure to assess the ability of our assets to generate cash sufficient to pay interest costs, support indebtedness and return capital to stockholders.

We use Adjusted EBITDA as a corporate-level performance measure to assess the ability of our assets to generate cash sufficient to pay interest costs, support indebtedness and return capital to stockholders.

Adjusted EBITDA is a non-GAAP financial measure.

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(i) gathering and processing and (ii) water handling.

The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process gross production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from the Joint Venture and Stonewall Gas Gathering LLC.

The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways, (ii) the wastewater treatment facility and related landfill (collectively, the “Clearwater Facility”) that was idled in September 2019 and (iii) other fluid handling services.

The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from our investments in the Joint Venture and Stonewall.

The Joint Venture and Stonewall provide processing, fractionation and high-pressure gas gathering services in the Appalachian Basin.

The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways, and (ii) other fluid handling services, which include high rate transfer, wastewater transportation, disposal and blending.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2022

The operating results of our reportable segments were as follows for the years ended December 31, 2020 and 2021:

The operating results of our reportable segments were as follows:

Year Ended December 31, 2021

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Revenue–Antero Resources

Gathering—low pressure rebate

Revenue–third-party

Gathering—low pressure fee rebate

Amortization of customer relationships

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Impairment of property and equipment

Impairment of goodwill

Accretion of asset retirement obligations

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Total operating expenses

Operating loss

Operating income

Other income (expense):

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Equity in earnings of unconsolidated affiliates

Loss on early extinguishment of debt

Total other income (expense)

Income (loss) before income taxes

Income tax benefit

Net income (loss) and comprehensive income (loss)

Income before income taxes

Income tax expense

Net income and comprehensive income

Adjusted EBITDA (2)

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Revenue–third-party

Gathering—low pressure rebate

Gathering—low pressure fee rebate

Amortization of customer relationships

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Accretion of asset retirement obligations

Loss on asset sale

Loss on settlement of asset retirement obligations

Gain on asset sale

Total operating expenses

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Equity in earnings of unconsolidated affiliates

Loss on early extinguishment of debt

Total other income (expense)

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For a discussion of this measure, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, see “— Non-GAAP Financial Measures ”.

The following table sets forth the operating data for Antero Midstream:

The operating data for Antero Midstream is as follows:

Operating Data:

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Fractionation—Joint Venture (MBbl/d)

* Not meaningful or applicable.

(1) The year ended December 31, 2021 average realized fee does not include $2.4 million of low pressure gathering fee revenues which volumes relate to prior periods.

Total revenues decreased by $3 million, from $901 million, including amortization of customer relationships of $71 million, for the year ended December 31, 2020, to $898 million, including amortization of customer relationships of $71 million, for the year ended December 31, 2021.

Gathering and processing revenues increased by 6%, from $675 million for the year ended December 31, 2020 to $713 million for the year ended December 31, 2021.

Water handling revenues decreased by 18%, from $226 million for the year ended December 31, 2020 to $185 million for the year ended December 31, 2021.

Total revenues increased by $22 million, from $898 million for the year ended December 31, 2021, to $920 million for the year ended December 31, 2022.

Amortization of customer relationships was $71 million during the years ended December 31, 2021 and 2022.

Gathering and processing revenues decreased by 1%, from $713 million for the year ended December 31, 2021 to $706 million for the year ended December 31, 2022.

Water handling revenues increased by 15%, from $185 million for the year ended December 31, 2021 to $214 million for the year ended December 31, 2022.

These fluctuations primarily resulted from the following:

Gathering and Processing

● Low pressure gathering revenue increased $37 million period over period primarily due to $36 million in lower rebates to Antero Resources during the year ended December 31, 2021, partially offset by decreased throughput volumes of 9 Bcf, or 18 MMcf/d.

Low pressure gathering volumes decreased between periods primarily due to downtime at certain processing and fractionation facilities during the third quarter of 2021, partially offset by 69 additional wells connected to our system since December 31, 2020 .

● Compression revenue increased $4 million period over period due to increased throughput volumes of 15 Bcf, or 47 MMcf/d, primarily due to additional wells connected to our system since December 31, 2020 , and one new compressor that came online during the summer of 2020, partially offset by downtime at certain processing and fractionation facilities during the third quarter of 2021.

● High pressure gathering revenue decreased $ 3 million period over period due to decreased throughput volumes of 21 Bcf, or 50 MMcf /d.

The high pressure gathering volumes decreased period over period primarily as a result of downtime at certain processing and fractionation facilities during the third quarter of 2021, partially offset by 69 new wells connected to our system since December 31, 2020.

● Low pressure gathering revenue decreased $22 million period over period primarily due to $36 million in higher fee rebates to Antero Resources during the year ended December 31, 2022, partially offset by a 3% increase in the low pressure gathering rate as a result of the annual CPI-based adjustment and by increased throughput volumes of 28 Bcf, or 76 MMcf/d.

Low pressure gathering volumes increased between periods primarily due to 327 additional wells being connected to our system since December 31, 2021 , of which 253 wells are from our asset acquisitions that closed during the fourth quarter of 2022.

● Compression revenue increased $11 million period over period due to a 3% increase in the compression rate as a result of the annual CPI-based adjustment, as well as increased throughput volumes of 28 Bcf, or 76 MMcf/d and our asset acquisitions during the fourth quarter of 2022.

Compression volumes increased primarily due to additional wells connected to our system since December 31, 2021 and 12 compressor stations that were acquired during the fourth quarter of 2022.

● High pressure gathering revenue increased $4 million period over period due to a 3% increase to the high pressure gathering rate as a result of the annual CPI-based adjustment partially offset by decreased throughput volumes of 10 Bcf, or 26 MMcf /d.

The high pressure gathering volumes decreased period over period primarily as a result of higher production from Antero Resources that was subject to a third-party high pressure gathering acreage dedication, partially offset by 74 new wells connected to our high pressure system since December 31, 2021.

The assets we acquired during the year ended

December 31, 2022 were connected to our high pressure system prior to such acquisitions, and therefore, the 253 wells connected to such assets were already gathered by our existing high-pressure gathering system.

Water Handling

● Fresh water delivery revenue decreased $21 million period over period due to decreased fresh water delivery volumes of 6 MMBbl , or 14 MBbl/d, as a result of 16 fewer wells completed during the year ended December 31, 2021.

● Other fluid handling services revenue decreased $19 million period over period primarily due to a $25 million decrease in services that are billed at cost plus 3% as a result of increased use of our water blending services and cost reductions, partially offset by a $6 million increase in water blending services.

● Fresh water delivery revenue increased $16 million period over period primarily due to increased fresh water delivery volumes of 3 MMBbl , or 8 MBbl/d and a 3% increase to the fresh water delivery rate as a result of the annual CPI-based adjustment.

● Other fluid handling services revenue increased $13 million period over period primarily due to increased costs, partially due to inflationary pressures that impact our cost plus 3% and cost of service rates, and increased other fluid handling volumes of 2 MMBbl, or 6 MBbl/d.

Direct operating expenses.

Total direct operating expenses decreased by 5% , from $ 165 million for the year ended December 31, 2020 to $157 million for the year ended December 31, 2021.

Gathering and processing direct operating expenses increased 17% from $ 56 million for the year ended December 31, 2020 to $66 million for the year ended December 31, 2021 primarily due to higher maintenance expense and ad valorem taxes between periods, as well as increased expense from one new compressor station that came online in the summer of 2020.

Water handling direct operating expenses decreased by 16% , from $ 109 million for the year ended December 31, 2020 to $91 million for the year ended December 31, 2021.

The decrease was primarily due to lower costs associated with third-party other fluid handling services of $25 million, partially offset by higher blending costs as a result of increased blending volumes between periods.

Total direct operating expenses increased by 15% , from $ 157 million for the year ended December 31, 2021 to $180 million for the year ended December 31, 2022.

Gathering and processing direct operating expenses increased 15% from $ 66 million for the year ended December 31, 2021 to $76 million for the year ended December 31, 2022 primarily due to (i) higher throughput volumes between periods, (ii) 12 acquired compressors that came online during the fourth quarter of 2022 and (iii) higher chemical, fuel, labor and heavy maintenance expense.

Water handling direct operating expenses increased by 15% , from $ 91 million for the year ended December 31, 2021 to $104 million for the year ended December 31, 2022 primarily due to increased water blending locations, trucking rates, labor costs and Utica fresh water deliveries between periods.

General and administrative (excluding equity-based compensation) expenses.

General and administrative expenses (excluding equity-based compensation expense) increased 28% , from $ 39 million for the year ended December 31, 2020 to $50 million for the year ended December 31, 2021 primarily due to (i) legal costs associated with the Clearwater Facility, (ii) higher salary and wage expense, which includes our annual incentive program that was temporarily and significantly reduced during 2020 and (iii) higher costs allocated to us from Antero Resources during 2021, partially offset by cost reduction efforts between periods.

General and administrative expenses (excluding equity-based compensation expense) decreased 16% , from $ 50 million for the year ended December 31, 2021 to $42 million for the year ended December 31, 2022 primarily due to (i) lower legal costs associated with the Veolia legal matter between periods and (ii) lower costs allocated to us from Antero Resources.

Equity-based compensation expenses.

Equity-based compensation expenses remained relatively consistent at $13 million and $14 million for the years ended December 31, 2020 and 2021, respectively.

Equity-based compensation expenses increased by 45% from $14 million to $20 million for the years ended December 31, 2021 and 2022, respectively, primarily due to an increase in the annual equity awards granted during the year ended December 31, 2022 compared to prior years.

Facility idling expenses.

Facility idling expenses decreased 74%, from $15 million for the year ended December 31, 2020 to $4 million for the year ended December 31, 2021 primarily due to reduced Clearwater Facility decommissioning costs between periods.

Facility idling expenses remained consistent at $4 million for each of the years ended December 31, 2021 and 2022.

Depreciation expense.

Total depreciation expense remained consistent at $109 million for each of the years ended December 31, 2020 and 2021.

Total depreciation expense increased by 21% from $109 million for the year ended December 31, 2021 to $132 million for the year ended December 31, 2022.

This increase is primarily due to (i) $16 million for a phased early retirement of an underutilized compressor station, (ii) $6 million related to gathering and processing system assets placed in service during 2022 and (iii) $1 million for our asset acquisitions during the fourth quarter of 2022.

The phased early retirement of an underutilized compressor station began in the second quarter of 2022 and will be completed by the first half of 2023, and allows us to relocate and reuse the compressor units and equipment to (i) expand an existing compressor station and/or (ii) contribute to a new compressor station.

There are certain costs associated with the underutilized compressor station that cannot be relocated or reused, and such costs will be fully depreciated during the first half of 2023.

Impairment of property and equipment expense.

Impairment of property and equipment expense of $98 million for the year ended December 31, 2020 was primarily for the impairment of fresh water delivery assets in the Utica Shale region.

Impairment of property and equipment expense of $5 million for the year ended December 31, 2021 was primarily due to canceled project write-downs as well as a lower of cost or market adjustment for pipe inventory.

Impairment of goodwill expense.

Impairment of goodwill expense of $575 million for the year ended December 31, 2020 reflects an impairment of the goodwill that was associated with our gathering system due to declines in commodity prices and the industry environment.

All of our goodwill was fully impaired during the year ended December 31, 2020.

Loss on asset sale.

Loss on asset sale remained relatively consistent at $3 million and $4 million for the years ended December 31, 2020 and 2021, respectively, and primarily relate to sales of excess pipe inventory.

Impairment of property and equipment expense of $5 million for the year ended December 31, 2021 was primarily a lower of cost or net realizable value adjustment for pipe inventory.

Impairment of property and equipment expense of $4 million for the year ended December 31, 2022 was primarily due to (i) a write-down of the Clearwater Facility related to the retirement obligation for the facility and (ii) cancelled projects.

Loss (gain) on asset sale.

Loss on asset sale of $4 million for the year ended December 31, 2021 primarily relates to the sale of excess pipe inventory.

Gain on asset sale of $2 million for the year ended December 31, 2022 primarily relates to (i) the sale of four compressor engines, (ii) reimbursement of certain cancelled projects and (iii) sale of miscellaneous equipment and excess pipe inventory.

Interest expense.

Interest expense increased by 19%, from $147 million for the year ended December 31, 2020 to $175 million for the year ended December 31, 2021 primarily due to the issuance of (i) $550 million of 2026 Notes on November 10, 2020 and (ii) $750 million of 2029 Notes on June 8, 2021, partially offset by lower borrowings under the Credit Facility during the year ended December 31, 2021 and the redemption of all $650 million of the 2024 Notes on June 8, 2021.

Interest expense increased by 8%, from $175 million for the year ended December 31, 2021 to $190 million for the year ended December 31, 2022 primarily due to (i) the issuance of $750 million of 5.375% senior notes due June 15, 2029 (the “2029 Notes”) on June 8, 2021, (ii) increased interest rates on our Credit Facility due to higher benchmark rates during the year ended December 31, 2022, and (iii) increased borrowings on our Credit Facility due to our asset acquisitions, partially offset by the redemption of all $650 million of the 2024 Notes on June 8, 2021.

Equity in earnings of unconsolidated affiliates.

Equity in earnings in unconsolidated affiliates increased by 5%, from $86 million for the year ended December 31, 2020 to $90 million for the year ended December 31, 2021 primarily due to an increase in the level of volume throughput at the Joint Venture between periods, including one new Joint Venture processing plant with nameplate capacity of 200 MMcf/d being placed in service during July 2021, partially offset by the effects of the processing plant and fractionation facility downtime during the third quarter of 2021.

Equity in earnings in unconsolidated affiliates increased by 4%, from $90 million for the year ended December 31, 2021 to $94 million for the year ended December 31, 2022 primarily due to higher Joint Venture earnings as a result of annual CPI-based adjustments for processing and fractionation fees, partially offset by lower processed volumes at the Joint Venture between periods.

Loss on early extinguishment of debt.

Loss on early extinguishment of debt for the year ended December 31, 2021 of $22 million primarily relates to the redemption of all $650 million of the 2024 Notes at a premium to par of $17 million as well as the write-off of $6 million of unamortized deferred financing costs, partially offset by $2 million of unamortized premium.

Income tax benefit (expense).

Income tax benefit for the year ended December 31, 2020 was $56 million or an effective tax rate of 31.2% primarily due to the loss before taxes for the period coupled with an $11 million rate benefit related to the carryback of net operating losses to prior tax years .

Income tax expense for the year ended December 31, 2021 was $117 million primarily due to income before taxes for the period which reflects an effective tax rate of 26.1% primarily due to the effects of state income taxes.

Net income (loss).

Net loss was $123 million for the year ended December 31, 2020 primarily due to a $575 million impairment of goodwill for our gathering system and an $89 million impairment of our freshwater delivery assets.

Net income was $332 million for the year ended December 31, 2021, primarily due to higher gathering and processing revenues and lower (i) impairment of property and equipment, (ii) direct operating expense and (iii) facility idling expense between periods, offset by lower water handling revenues and higher (i) interest expense, (ii) loss on early extinguishment of debt and (iii) general and administrative expense between periods.

There was no loss on early extinguishment of debt for the year ended December 31, 2022.

Income tax expense.

Income tax expense remained consistent for the years ended December 31, 2021 and 2022 at $117 million, which reflects effective tax rates of 26.1% and 26.5%, respectively.

Net income decreased by 2% from $332 million for the year ended December 31, 2021 to $326 million for the year ended December 31, 2022.

The decrease between periods was primarily related to higher direct operating costs, depreciation expense and interest expense and lower gathering and processing revenues, partially offset by higher water handling revenues, higher equity in earnings from unconsolidated affiliates and lower general and administrative costs.

Adjusted EBITDA.

Adjusted EBITDA increased by 1%, from $876 million for the year ended December 31, 2021 to $884 million for the year ended December 31, 2022.

The increase was primarily due to increased gathering and compression revenues and decreased direct operating expense and facility idling costs between periods, partially offset by lower water handling revenues and higher general and administrative expense between periods.

The increase between periods was primarily due to higher water handling revenues and lower general and administrative costs, excluding equity-based compensation, partially offset by higher direct operating costs and lower gathering and processing revenues.

For a discussion of the non-GAAP financial measure Adjusted EBITDA, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, read “—Non-GAAP Financial Measures” below.

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Sources and Uses of Cash

Capital resources and liquidity are provided by operating cash flows, borrowings under our New Credit Facility and capital market transactions.

Capital resources and liquidity are provided by operating cash flows, available borrowings under our Credit Facility and capital market transactions.

See Note 8 —Long-Term Debt to our consolidated financial statements.

We expect that the combination of these capital resources will be adequate to meet our working capital requirements, capital expenditures program, expected quarterly cash dividends and share repurchases under our share repurchases program for at least the next 12 months.

During the year ended December 31, 2022, we paid dividends of $0.90 per share, or a total of $433 million, to holders of our common stock, as applicable, and we paid $550 thousand of dividends on our Series A Preferred Stock.

On January 12, 2022, the Board declared a cash dividend on the shares of our common stock of $0.225 per share for the quarter ended December 31, 2021 to be paid on February 9, 2022 to stockholders of record as of January 26, 2022.

On January 11, 2023, the Board declared a cash dividend on the shares of our common stock of $0.2250 per share for the quarter ended December 31, 2022 paid on February 8, 2023 to stockholders of record as of January 25, 2023.

The Board also declared an aggregate cash dividend of $138 thousand on our Series A Preferred Stock that was paid on February 14, 2023.

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As of December 31, 2022, we did not have any off-balance sheet arrangements.

The following table and discussion presents a summary of our net cash provided by operating activities, investing activities and financing activities for the periods indicated:

The following table and discussion presents a summary of our net cash provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

Year Ended December 31,

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Net cash provided by operating activities was $710 million and $700 million for the years ended December 31, 2021 and 2022, respectively.

The decrease in net cash provided by operating activities for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily the result of lower water handling revenues, higher interest expense and general and administrative expense and increased cash used for working capital, excluding income tax receivable, between periods, partially offset by (i) higher gathering and processing revenues, (ii) lower direct operating expense and facility idling costs and (iii) decreased income tax refunds between periods .

The decrease in net cash provided by operating activities between periods was primarily the due to (i) $16 million in income tax refunds received during the year ended December 31, 2021 from certain net operating loss carryback provisions included in the Coronavirus Aid, Relief, and Economic Security Act that was enacted in March 2020, (ii) higher direct operating costs, (iii) lower gathering and processing revenues, (iv) higher asset retirement obligation settlement costs and (v) higher interest expense payments, partially offset by higher water handling revenues and lower general and administrative costs, excluding equity-based compensation.

Investing Activities.

Net cash flows used in investing activities was $233 million and $494 million for the years ended December 31, 2021 and 2022, respectively.

The increase in cash flows used in investing activities was primarily due to (i) a $29 million increase in additions to our gathering system, (ii) a $7 million increase in additions to our water handling system and (iii) $1 million increase in proceeds from excess pipe inventory sales , partially offset by a $23 million decrease in investments made in unconsolidated affiliates between periods.

The increase in cash flows used in investing activities between periods was primarily due to (i) gathering systems and facilities asset acquisitions of $217 million during the year ended December 31, 2022, (ii) an increase in capital spending for expansion of our gathering systems of $41 million and (iii) an increase in capital spending for expansion of our water handling systems of $25 million, partially offset by a $17 million return of capital distribution from the Joint Venture for a processing plant held in inventory that was sold by the Joint Venture during 2022 and an increase in asset sale proceeds of $4 million between periods.

Financing Activities.

Net cash used in financing activities was $477 million and $206 million for the years ended December 31, 2021 and 2022, respectively.

The decrease in net cash used in financing activities between periods is primarily related to lower debt repurchases, higher net borrowings on our Credit Facility and lower total dividends paid to our common stockholders and preferred stockholders, partially offset by lower debt issuances.

Net cash used in financing activities for the year ended December 31, 2021 included:

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and (v) $17 million in deferred financing costs payments associated with the issuance of the 2029 Notes and the senior secured revolving credit facility amendment.

Net cash used in financing activities for the year ended December 31, 2020 included:

(i) issuance of the 2026 Notes of $550 million;

(ii) total dividends to our common stockholders and preferred stockholders of $590 million;

(iii) $346 million in net payments on the Credit Facility;

(iv) $125 million (net of $8 million reflected in the cash flows provided by operating activities related to the accretion of fair value) paid to Antero Resources for the fair value of contingent acquisition consideration at the date of acquisition;

(v) $25 million of common stock repurchases;

and (vi) $6 million in deferred financing costs payments associated with the issuance of the 2026 Notes.

Net cash used in financing activities for the year ended December 31, 2022 included net borrowings of $235 million on our Credit Facility and total dividends to our common stockholders and preferred stockholders of $433 million

Year Ended December 31, 2020 Compared to Year Ended December 31, 2021

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Capital Investments

Our capital expenditures for the year ended December 31, 2021 were $262 million, including $217 million for gathering and compression infrastructure, $43 million for water infrastructure and $2 million for the Joint Venture.

The Board approved a 2022 capital budget with a range of $275 million to $300 million, which includes growth capital supporting the increased volumes expected from Antero Resources’ drilling partnership in addition to its maintenance capital program for 2022.

Our capital expenditures for the year ended December 31, 2022 were $265 million, including $209 million for gathering and compression infrastructure and $73 million for water infrastructure, partially offset by a $17 million return of capital distribution from the Joint Venture for a processing plant held in inventory that was sold by the Joint Venture during year ended December 31, 2022 .

Our 2023 capital budget is $195 million to $215 million, which includes growth capital supporting the increased volumes expected from Antero Resources’ drilling partnership in addition to its maintenance capital program for 2023.

Our capital budgets may be adjusted as business conditions warrant.

If natural gas, NGLs and oil prices decline to levels below acceptable levels or costs increase to levels above acceptable levels, Antero Resources could choose to defer a significant portion of its budgeted capital expenditures until later periods.

As a result, we may also defer a significant portion of our budgeted capital expenditures to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate near-term cash flows.

returns and potential to generate consistent cash flows.

We routinely monitor and adjust our capital expenditures in response to changes in Antero Resources’ development plans, changes in prices, availability of financing, acquisition costs, industry conditions, the timing of regulatory approvals, success or lack of success in Antero Resources’ drilling activities, contractual obligations, internally generated cash flows and other factors both within and outside our control.

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Antero Midstream Partners, as borrower (the “Borrower”), an indirect, wholly owned subsidiary of Antero Midstream Corporation, has a senior secured revolving credit facility with a consortium of banks.

On October 26, 2021, we entered into an amended and restated senior secured revolving credit facility, the New Credit Facility.

The New Credit Facility provides for borrowing under either Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as each term is defined in the New Credit Facility).

The New Credit Facility has lender commitments of $1.25 billion and matures on October 26, 2026;

provided that if on November 17, 2025 any of the 2026 Notes are outstanding, the New Credit Facility will mature on such date.

As of December 31, 2021, we had $547 million of borrowings and no letters of credit outstanding under the New Credit Facility.

On October 26, 2021, we entered into an amended and restated senior secured revolving credit facility, the Credit Facility.

The Credit Facility provides for borrowing under either Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as each term is defined in the Credit Facility).

The Credit Facility has lender commitments of $1.25 billion and matures on October 26, 2026;

provided that if on November 17, 2025 any of the 7.875% senior notes due May 15, 2026 (the “2026 Notes”) are outstanding, the Credit Facility will mature on such date.

As of December 31, 2022, we had $782 million of borrowings and no letters of credit outstanding under the Credit Facility.

We have a choice of borrowing at Adjusted Term SOFR or at the base rate.

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The Credit Facility is guaranteed by our subsidiaries and is secured by mortgages on substantially all of Antero Midstream Partners’ and its subsidiaries’ properties.

The New Credit Facility contains restrictive covenants that may limit our ability to, among other things:

The Credit Facility contains restrictive covenants that may limit our ability to, among other things:

● incur additional indebtedness;

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We were in compliance with the applicable covenants and ratios as of December 31, 2022.

See Note 10—Long-Term Debt to the unaudited condensed consolidated financial statements for more information on our Credit Facility.

See Note 8—Long-Term Debt to the consolidated financial statements for more information on our Credit Facility.

The following table summarizes the material terms of our senior unsecured notes as of December 31, 2022:

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Prior to such date, we may, in certain circumstances, redeem the notes at a redemption price that includes an applicable premium as defined in the indentures to such notes.

See Note 10—Long-Term Debt to the consolidated financial statements for more information on our senior notes.

See Note 8—Long-Term Debt to the consolidated financial statements for more information.

Non-GAAP Financial Measures

We use Adjusted EBITDA as an important indicator of our performance.

We define Adjusted EBITDA as net income before net interest expense, income tax expense, depreciation, impairment, accretion of asset retirement obligations, equity-based compensation, excluding equity in earnings of unconsolidated affiliates, amortization of customer relationships, loss on early extinguishment of debt and loss on asset sale and including cash distributions from unconsolidated affiliates.

We define Adjusted EBITDA as net income before net interest expense, income tax expense, depreciation, impairments, accretion of asset retirement obligations, equity-based compensation, excluding equity in earnings of unconsolidated affiliates, amortization of customer relationships, loss on early extinguishment of debt, loss on settlement of asset retirement obligations, loss (gain) on asset sale and including distributions from unconsolidated affiliates.

We use Adjusted EBITDA to assess:

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Adjusted EBITDA is a non-GAAP financial measure.

The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss).

The non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income (loss).

Adjusted EBITDA presentations are not made in accordance with GAAP and have important limitations as an analytical tool because they include some, but not all, items that affect net income (loss).

The GAAP measure most directly comparable to Adjusted EBITDA is net income.

The non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income.

Adjusted EBITDA presentations are not made in accordance with GAAP and have important limitations as an analytical tool because they include some, but not all, items that affect net income.

You should not consider Adjusted EBITDA in isolation or as a substitute for analyses of results as reported under GAAP.

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(in thousands)

Reconciliation of Net Income (Loss) to Adjusted EBITDA:

Net income (loss)

Interest expense, net

Income tax expense (benefit)

Income tax expense

Depreciation expense

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Equity-based compensation

Impairment of property and equipment

Accretion of asset retirement obligations

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Loss on early extinguishment of debt

Loss on asset sale

Loss on settlement of asset retirement obligations

Loss (gain) on asset sale

Adjusted EBITDA

Critical Accounting Policies and Estimates

The following discussion relates to the critical accounting policies and estimates for both the Company and our predecessor, AMGP.

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.

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Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

Business Combination

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date, with any remaining difference recorded as goodwill.

For acquisitions, management engages an independent valuation specialist to assist with the determination of fair value of the assets acquired, liabilities assumed and goodwill, based on recognized business valuation methodologies.

If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded.

Subsequent to the acquisition, and not later than

one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the acquisition date.

An adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period of the adjustment.

Acquisition-related costs are expensed as incurred in connection with each business combination.

We accounted for the Transactions under the acquisition method of accounting and estimated the fair value of assets acquired and liabilities assumed at March 12, 2019.

In connection with the Transactions, the Company, among other things, issued shares of common stock valued at the closing market price of the common shares at the effective time of the Transactions, which was a Level 1 measurement.

We used the discounted cash flow approach, which is an income statement technique, to estimate the fair value of the customer relationships and investments in unconsolidated affiliates using a weighted-average cost of capital of 14.1%, which is based on significant inputs not observable in the market, and thus represents a Level 3 measurement within the fair value hierarchy.

We also used this approach in combination with the cost approach to estimate the fair value of property and equipment whereby certain property and equipment was adjusted for recent purchases of similar items, economic and functional obsolescence, location, normal useful lives and capacity (if applicable).

To estimate the fair value of the long-term debt, we used Level 2 market data inputs.

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business.

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We utilized a combination of approaches to estimate the fair value of our assets including the discounted cash flow approach, comparable company method and the cost approach, whereby certain property and equipment was adjusted for recent purchases of similar items, economic and functional obsolescence, location, normal useful lives and capacity (if applicable).

We performed our fourth quarter of 2019 and first quarter of 2020 quantitative analysis using a weighted-average cost of capital of 10.0% and 18.0%, respectively, which is based on significant inputs not observable in the market, and thus represents a Level 3 measurement within the fair value hierarchy.

We performed our first quarter of 2020 quantitative analysis using a weighted-average cost of capital of 18.0%, which was based on significant inputs not observable in the market, and thus represents a Level 3 measurement within the fair value hierarchy.

Property and Equipment

Property and equipment primarily consists of gathering pipelines, compressor stations and the Clearwater Facility.

Property and equipment primarily consists of gathering pipelines, compressor stations and the water handling assets.

We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.

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We utilized a discounted cash flow approach to estimate the fair value of our assets.

We performed our first quarter of 2020 quantitative analysis using a weighted-average cost of capital of 19.0%, which is based on significant inputs not observable in the market, and thus represents a Level 3 measurement within the fair value hierarchy.

We performed our first quarter of 2020 quantitative analysis using a weighted-average cost of capital of 19.0%, which was based on significant inputs not observable in the market, and thus represents a Level 3 measurement within the fair value hierarchy.

Contingent Acquisition Consideration

In connection with our September 2015 acquisition of certain water treatment assets, we agreed to pay Antero Resources (a) $125 million in cash if we delivered 176 million barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019 and (b) an additional $125 million in cash if we delivered 219 million barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020.

In connection with our September 2015 acquisition of certain water handling assets, we agreed to pay Antero Resources (a) $125 million in cash if we delivered 176 million barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019 and (b) an additional $125 million in cash if we delivered 219 million barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020.

This contingent consideration liability was valued based on Level 3 inputs related to the expected average volumes and weighted average cost of capital and was recorded at the time of such acquisition in accordance with accounting guidance for business combinations.

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New Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes .

This ASU removes certain exceptions to the general principles in ASC 740, Income Taxes (“ASC 740”) and also simplifies portions of ASC 740 by clarifying and amending existing guidance.

It is effective for interim and annual reporting periods after December 15, 2020.

We adopted this ASU on January 1, 2021, and it did not have a material impact on our consolidated financial statements.

See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements for information on new accounting pronouncements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis