12 unchanged sentences
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: Table Archrock, Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
24 unchanged sentences
February 22, 2023
+Added: Table Archrock, Contents
OTHER INFORMATION
+Added: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
+Added: Not applicable.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
−Removed: The information required in Part III Item 10 of this 2021 Form 10-K is incorporated by reference to the sections entitled “Election of Directors,” “Governance” and “Stock Ownership” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year.
+Added: The information required by Item 10 is incorporated by reference to the sections entitled “Election of Directors,” “Governance” and “Stock Ownership” in our Proxy Statement.
EXECUTIVE COMPENSATION
−Removed: The information required in Part III Item 11 of this 2021 Form 10-K is incorporated by reference to the sections entitled “Governance” and “Compensation Discussion and Analysis” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year.
+Added: The information required by Item 11 is incorporated by reference to the sections entitled “Governance” and “Compensation Discussion and Analysis” in our Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
−Removed: Portions of the information required in Part III Item 12 of this 2021 Form 10-K are incorporated by reference to the section entitled “Stock Ownership” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year.
+Added: Portions of the information required in Item 12 are incorporated by reference to the section entitled “Stock Ownership” in our Proxy Statement.
Securities Authorized for Issuance under Equity Compensation Plans
−Removed: The following table sets forth information as of December 31, 2021, with respect to the Archrock compensation plans under which our common stock is authorized for issuance, aggregated as follows:
+Added: The following table sets forth information as of December 31, 2022, with respect to our compensation plans under which our common stock is authorized for issuance, aggregated as follows:
Number of Securities
12 unchanged sentences
Equity compensation plans not approved by security holders (4)
−Removed: (1) Comprised of the 2013 Plan, 2020 Plan and ESPP.
+Added: (1) Comprised of the 2013 Plan, the 2020 Plan and the ESPP.
No additional grants may be made under the 2013 Plan.
1 unchanged sentence
(3) Performance–based restricted stock units do not have an exercise price.
−Removed: (4) Includes 7,246,625 shares of common stock under the 2020 Plan and 521,719 shares of common stock under the ESPP.
−Removed: In addition, as of December 31, 2021, 1,698,150 restricted shares were outstanding, which are not included in column (c).
(4) Comprised of our DSDP.
−Removed: See Note 24 (“Stock-Based Compensation”) to our Financial Statements for further details of our DSDP.
+Added: See Note 18 to our Financial Statements for further details of our DSDP.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
−Removed: The information required in Part III Item 13 of this 2021 Form 10-K is incorporated by reference to the section entitled “Governance” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year.
+Added: The information required by Item 13 is incorporated by reference to the section entitled “Governance” in our Proxy Statement.
+Added: Table Archrock, Contents
PRINCIPAL ACCOUNTANT FEES AND SERVICES
−Removed: The information required in Part III Item 14 of this 2021 Form 10-K is incorporated by reference to the section entitled “Ratification of the Appointment of the Independent Registered Public Accounting Firm” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year.
+Added: The information required by Item 14 is incorporated by reference to the section entitled “Ratification of the Appointment of the Independent Registered Public Accounting Firm” in our Proxy Statement.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
−Removed: (a) Documents filed as a part of this 2021 Form 10-K
+Added: List of Documents filed as a part of this 2022 Form 10–K
Financial Statements
−Removed: The following financial statements are filed as a part of this 2021 Form 10-K.
Report of Independent Registered Public Accounting Firm (PCAOB ID 34 )
−Removed: Bookmark not defined.
Consolidated Balance Sheets
10 unchanged sentences
Agreement and Plan of Merger, dated as of January 1, 2018, by and among Archrock, Inc., Archrock GP LLC, Archrock General Partner, L.P.
−Removed: and Archrock Partners, L.P., incorporated by reference to Exhibit 2.1 of Archrock’s Current Report on Form 8-K filed on January 2, 2018
+Added: and Archrock Partners, L.P., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8–K filed on January 2, 2018
Amendment No.
1 to Agreement and Plan of Merger, dated as of January 11, 2018, by and among Archrock, Inc., Archrock GP LLC, Archrock General Partner, L.P., Archrock Partners, L.P.
−Removed: and Amethyst Merger Sub LLC, incorporated by reference to Exhibit 2.2 of Archrock’s Current Report on Form 8-K filed on January 16, 2018
+Added: and Amethyst Merger Sub LLC, incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8–K filed on January 16, 2018
Asset Purchase Agreement, dated as of June 23, 2019, by and among Archrock Services, L.P., Archrock, Inc.
2 unchanged sentences
and Harvest Four Corners, LLC, incorporated by reference to Exhibit 2.2 of the Registrant’s Current Report on Form 8–K filed on June 24, 2019
+Added: Table Archrock, Contents
Composite Restated Certificate of Incorporation of Archrock, Inc., incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10–K for the year ended December 31, 2015
6 unchanged sentences
Description of Common Stock
−Removed: Credit Agreement, dated as of July 10, 2015, by and among Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.), Archrock Services, L.P., the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 16, 2015
−Removed: First Amendment to Credit Agreement, dated as of October 5, 2015, by and among Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.), Archrock Services, L.P., the lenders signatory thereto and Wells Fargo Bank, National Association, as administrative agent, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on October 6, 2015
−Removed: Amended and Restated Senior Secured Credit Agreement, dated as of November 3, 2010, by and among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A.
−Removed: and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, Barclays Bank plc and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners L.P.’s Current Report on Form 8-K filed on November 9, 2010
−Removed: First Amendment to Amended and Restated Senior Secured Credit Agreement, dated March 7, 2012, among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender, and the other lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners, L.P.’s Current Report on Form 8-K filed on March 13, 2012
−Removed: Third Amendment to Amended and Restated Senior Secured Credit Agreement, dated March 27, 2013, among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners, L.P.’s Current Report on Form 8-K filed on March 28, 2013
−Removed: Fourth Amendment to Amended and Restated Senior Secured Credit Agreement, dated February 4, 2015, among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners, L.P.’s Current Report on Form 8-K filed on February 5, 2015
−Removed: Fifth Amendment to Amended and Restated Senior Secured Credit Agreement and First Amendment to Amended and Restated Collateral Agreement, dated May 2, 2016, among Archrock Partners Operating LLC, as Borrower, Archrock Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to Archrock Partners, L.P.’s Current Report on Form 8-K filed on May 6, 2016
−Removed: Amended and Restated Guaranty Agreement, dated as of November 3, 2010, made by Exterran Partners, L.P.
−Removed: and EXLP Leasing LLC in favor of Wells Fargo Bank, National Association, as Administrative Agent, incorporated by reference to Exhibit 10.2 to Archrock Partner’s L.P.’s Current Report on Form 8-K filed on November 9, 2010
−Removed: Amended and Restated Collateral Agreement, dated as of November 3, 2010, made by EXLP Operating LLC, Exterran Partners, L.P.
−Removed: and EXLP Leasing LLC in favor of Wells Fargo Bank, National Association, as Administrative Agent, incorporated by reference to Exhibit 10.3 to Archrock Partner’s L.P.’s Current Report on Form 8-K filed on November 9, 2010
−Removed: Second Amendment, Consent and Waiver to Credit Agreement, dated as of May 10, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 11, 2016
−Removed: Third Amendment, Consent and Waiver to Credit Agreement, dated as of July 21, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 26, 2016
−Removed: Fourth Amendment, Consent and Waiver to Credit Agreement, dated as of September 21, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 22, 2016
−Removed: Fifth Amendment, Consent and Waiver to Credit Agreement, dated as of December 9, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto.
−Removed: incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 12, 2016
Fourth Amended and Restated Omnibus Agreement, dated November 3, 2015, by and among Archrock, Inc.
2 unchanged sentences
(formerly named Exterran General Partner, L.P.), Archrock Partners, L.
−Removed: (formerly named Exterran Partners, L.P.) and Archrock Partners Operating LLC, incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text) and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment)
+Added: (formerly named Exterran Partners, L.P.) and Archrock Partners Operating LLC, incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10–K filed on February 29, 2016 (portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text) and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment)
First Amendment to Fourth Amended and Restated Omnibus Agreement, dated November 19, 2016, by and among Archrock, Inc., Archrock Services, L.P., Archrock GP LLC, Archrock General Partner, L.P., Archrock Partners, L.P., and Archrock Partners Operating LLC incorporated by reference to the Registrant’s Current Report on Form 8–K filed on November 23, 2016 (portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text) and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment)
Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) 2013 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 19, 2013
−Removed: First Amendment to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) 2013 Stock Incentive Plan, incorporated by reference to Exhibit 10.13 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
−Removed: Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 26, 2009
−Removed: Amendment No.
−Removed: 1 to Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 26, 2009
−Removed: Amendment No.
−Removed: 2 to Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
−Removed: Amendment No.
−Removed: 3 to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 29, 2010
−Removed: Amendment No.
−Removed: 4 to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed March 29, 2011
−Removed: Amendment No.
−Removed: 5 to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Exhibit 10.14 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
−Removed: Exterran Holdings, Inc.
−Removed: 2011 (now Archrock, Inc.) Employment Inducement Long-Term Equity Plan, incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8, filed November 4, 2011
−Removed: Exterran Holdings, Inc.
(now Archrock, Inc.) Directors’ Stock and Deferral Plan, incorporated by reference to Exhibit 10.16 of the Registrant’s Current Report on Form 8–K filed on August 23, 2007
3 unchanged sentences
(now Archrock, Inc.) Directors’ Stock and Deferral Plan, incorporated by reference to Exhibit 10.16 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
−Removed: Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on August 23, 2007
−Removed: Amendment No.
−Removed: 1 to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Annex D to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 29, 2011
−Removed: Amendment No.
−Removed: 2 to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Annex C to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed on March 29, 2011
−Removed: Amendment No.
−Removed: 3 to the Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.15 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
Archrock Deferred Compensation Plan, incorporated by reference to Exhibit 10.17 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
Exterran (now Archrock, Inc.) Employees’ Supplemental Savings Plan, incorporated by reference to Exhibit 10.30 of the Registrant’s Annual Report on Form 10–K for the year ended December 31, 2007
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice for Time-Vested Incentive Stock Option, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice for Time-Vested Stock Option for Officers, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice for Time-Vested Stock Option for Officers, incorporated by reference to Exhibit 10.63 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.64 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010
−Removed: Form of Indemnification Agreement, incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on August 23, 2007
−Removed: Form of Amendment to Indemnification Agreement, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Incentive Stock Option for Officers, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Restricted Stock, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Cash-Settled Restricted Stock Units, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Stock-Settled Restricted Stock Units, incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Performance Units, incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Common Stock Award for Non-Employee Directors, incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014
−Removed: Form of Exterran Holdings, Inc.
−Removed: (now Archrock, Inc.) Award Notice and Agreement for Performance Units incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 25, 2015
Summary of Donna A.
1 unchanged sentence
Summary of Jason Ingersoll Compensation Arrangement, incorporated by reference to Exhibit 10.51 to the Registrant’s Annual Report on Form 10–K for the year ended December 31, 2015
−Removed: Form of Compensation Letter applicable to Messrs.
−Removed: Childers, Miller, Rice and Wayne, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 4, 2016.
+Added: Table Archrock, Contents
+Added: Form of Compensation Letter applicable to Mr.
+Added: Childers, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8–K filed on August 4, 2016.
Form of Indemnification Agreement, incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
Form of Employment Letter applicable to Messrs.
−Removed: Childers, Miller, Rice, Wayne and Ingersoll, incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
+Added: Childers and Ingersoll, incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
Form of Severance Benefit Agreement applicable to Messrs.
−Removed: Childers, Miller, Rice, Wayne and Ingersoll, incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
+Added: Childers and Ingersoll, incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
Form of Change of Control Agreement applicable to Messrs.
−Removed: Childers, Miller, Rice, Wayne and Ingersoll, incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
−Removed: Form of Award Notice and Agreement for Restricted Stock pursuant to the 2013 Stock Incentive Plan, incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
−Removed: Form of Award Notice and Agreement for Common Stock Award for Non-Employee Directors pursuant to the 2013 Stock Incentive Plan, incorporated by reference to Exhibit 10.12 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Time-Vested Restricted Stock, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Time-Vested Stock-Settled Restricted Stock Units, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Common Stock Award for Non-Employee Directors, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016
+Added: Childers and Ingersoll, incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
Employee Matters Agreement, dated as of November 3, 2015, by and between Exterran Holdings, Inc.
5 unchanged sentences
Supply Agreement, dated as of November 3, 2015, by and among Archrock Services, L.P., EXLP Operating LLC and Exterran Energy Solutions, L.P., incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8–K filed on November 5, 2015
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 23, 2017
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock for Non-Employee Directors, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 23, 2017
Archrock, Inc.
−Removed: 2017 Employee Stock Purchase Plan, incorporated by reference to Annex A to Archrock’s Definitive Proxy Statement filed March 16, 2017
−Removed: Sixth Amendment and Consent to Credit Agreement and Second Amendment to Guaranty and Collateral Agreement, dated as of March 30, 2017, by and among Archrock Services, L.P., Archrock, Inc., the Guarantors party thereto, the Lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the Lenders incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
−Removed: Consulting Agreement between Archrock, Inc.
−Removed: and Donald C.
−Removed: Wayne dated May 11, 2017 incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017
+Added: 2017 Employee Stock Purchase Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed March 16, 2017
Form of Amendment to Severance Benefit Agreement incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10–Q for the quarter ended June 30, 2017
−Removed: Form of Second Amendment to Severance Benefit Agreement
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units (Cash-Settled), incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units (Stock-Settled), incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock Units, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018
−Removed: Form of Letter Agreement Amending the Award Notice and Agreement for 2017 Performance Units, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018
Form of Second Amendment to Severance Benefit Agreement, incorporated by reference to Exhibit 10.73 to the Registrant’s Annual Report on Form 10–K for the year ended December 31, 2017
−Removed: Form of Letter Agreement, dated as of March 19, 2018, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 21, 2018
+Added: Credit Agreement, dated as of March 30, 2017, among Archrock Partners Operating LLC, as Borrower, the other Loan Parties party thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders, as an Issuing Bank and as Swingline Lender, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8–K filed on April 5, 2017.
+Added: Pledge and Security Agreement, dated as of March 30, 2017, among Archrock Partners Operating LLC and the other Grantors party thereto in favor or JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.2 to Archrock Partners, L.P.’s Current Report on Form 8–K filed on April 5, 2017.
Amendment No.
1 unchanged sentence
Omnibus Joinder Agreement, dated as of April 26, 2018, by and among Archrock, Inc., Archrock Services, L.P., AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, and Archrock MLP LP LLC and acknowledged and accepted by JPMorgan Chase Bank, N.A., as the Administrative Agent, incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8–K filed on April 26, 2018
+Added: Table Archrock, Contents
Amendment and Supplement to Pledge and Security Agreement dated as of April 26, 2018, by and among Archrock Partners Operating LLC, Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock Partners Leasing LLC, Archrock, Inc., Archrock Services, L.P., AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, Archrock MLP LP LLC and JPMorgan Chase Bank, N.A., as the Administrative Agent, incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8–K filed on April 26, 2018
4 unchanged sentences
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock, incorporated by reference to Exhibit 10.85 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018
−Removed: Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock for Non-Employee Directors, incorporated by reference to Exhibit 10.86 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018
+Added: Award Notice and Agreement for Restricted Stock, incorporated by reference to Exhibit 10.85 to the Registrant’s Annual Report on Form 10–K filed on February 20, 2019
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units (Cash-Settled), incorporated by reference to Exhibit 10.87 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018
+Added: Award Notice and Agreement for Performance Units (Cash–Settled), incorporated by reference to Exhibit 10.87 to the Registrant’s Annual Report on Form 10–K filed on February 20, 2019
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units (Stock-Settled), incorporated by reference to Exhibit 10.88 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018
+Added: Award Notice and Agreement for Performance Units (Stock–Settled), incorporated by reference to Exhibit 10.88 to the Registrant’s Annual Report on Form 10–K filed on February 20, 2019
Purchase Agreement, dated as of March 7, 2019, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and J.P.
9 unchanged sentences
Purchase Agreement, dated as of December 16, 2019, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and RBC Capital Markets, LLC, as representative of the initial purchasers named therein, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8–K filed on December 17, 2019
−Removed: Separation Agreement, dated effective as of January 31, 2020 between Archrock, Inc.
−Removed: Clawges, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on February 11, 2020
Form of Compensation Letter applicable to Messrs.
1 unchanged sentence
Hildebrandt, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8–K filed on April 30, 2020
+Added: Table Archrock, Contents
Purchase Agreement, dated as of December 14, 2020, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and RBC Capital Markets, LLC, as representative of the initial purchasers named therein, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8–K filed on December 15, 2020
1 unchanged sentence
3 to Credit Agreement, dated as of February 22, 2021, by and among Archrock Inc., Archrock Partners Operating LLC, Archrock Services, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8–K filed on February 23, 2021
−Removed: Form of Letter Agreement
+Added: Archrock, Inc.
+Added: 2020 Stock Incentive Plan
+Added: Form of Letter Agreement , incorporated by reference to Exhibit 10.99 of the Registrant’s Annual Report on Form 10–K filed on February 23, 2022
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock
+Added: Award Notice and Agreement for Restricted Stock , incorporated by reference to Exhibit 10.100 of the Registrant’s Annual Report on Form 10–K filed on February 23, 2022
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock for Non-Employee Directors
+Added: Award Notice and Agreement for Restricted Stock for Non–Employee Directors , incorporated by reference to Exhibit 10.101 of the Registrant’s Annual Report on Form 10–K filed on February 23, 2022
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Restricted Stock Units for Non-Employee Directors
+Added: Award Notice and Agreement for Restricted Stock Units for Non–Employee Directors , incorporated by reference to Exhibit 10.102 of the Registrant’s Annual Report on Form 10–K filed on February 23, 2022
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units (Cash-Settled)
+Added: Award Notice and Agreement for Performance Units (Cash–Settled) , incorporated by reference to Exhibit 10.103 of the Registrant’s Annual Report on Form 10–K filed on February 23, 2022
Form of Archrock, Inc.
−Removed: Award Notice and Agreement for Performance Units (Stock-Settled)
+Added: Award Notice and Agreement for Performance Units (Stock–Settled) , incorporated by reference to Exhibit 10.104 of the Registrant’s Annual Report on Form 10–K filed on February 23, 2022
Form of Compensation Letter (incorporated by reference and filed as Exhibit 10.1 to Form 8–K filed on April 30, 2020), incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8–K filed on June 21, 2021
12 unchanged sentences
Furnished, not filed .
+Added: Table Archrock, Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
4 unchanged sentences
February 22, 2023
+Added: Table Archrock, Contents
POWER OF ATTORNEY
47 unchanged sentences
As such, the timing of the identification of compressor units for removal could have a significant impact on the amount of any impairment charge.
−Removed: During the year ended December 31, 2021, the Company retired 230 units from the active fleet resulting in an
−Removed: asset impairment charge of $21.2 million.
+Added: During the year ended December 31, 2022, the Company retired 145 units from the active fleet resulting in an asset impairment charge of $21.4 million.
The determination of impairment requires management to make significant estimates and assumptions related to the timing of the identification of compressor units for removal.
22 unchanged sentences
Cash and cash equivalents
−Removed: Accounts receivable, trade, net of allowance of $ 2,152 and $ 3,370 , respectively
+Added: Accounts receivable, net
Other current assets
1 unchanged sentence
Property, plant and equipment, net
−Removed: Operating lease ROU assets
+Added: Operating lease ROU asset
Intangible assets, net
1 unchanged sentence
Deferred tax assets
−Removed: Noncurrent assets associated with discontinued operations
−Removed: Liabilities and Equity
+Added: Assets of discontinued operations
+Added: Liabilities and Stockholders' Equity
Current liabilities:
−Removed: Accounts payable, trade
+Added: Accounts payable
Accrued liabilities
5 unchanged sentences
Other liabilities
−Removed: Noncurrent liabilities associated with discontinued operations
+Added: Liabilities of discontinued operations
Total liabilities
Commitments and contingencies (Note 15)
+Added: Stockholders' equity:
Preferred stock:
−Removed: $ 0.01 par value per share, 50,000,000 shares authorized, zero issued
+Added: $ 0.01 par value, 50,000,000 shares authorized, zero issued
Common stock:
−Removed: $ 0.01 par value per share, 250,000,000 shares authorized, 161,482,852 and 160,014,960 shares issued, respectively
+Added: $ 0.01 par value 250,000,000 shares authorized, 163,439,013 and 161,482,852 shares issued, respectively
Additional paid-in capital
−Removed: Accumulated other comprehensive loss
Accumulated deficit
1 unchanged sentence
( 2,463,114 )
+Added: Accumulated other comprehensive loss
Treasury stock:
7,810,548 and 7,417,401 common shares, at cost, respectively
−Removed: Total liabilities and equity
+Added: Total stockholders' equity
+Added: Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
14 unchanged sentences
Goodwill impairment
−Removed: Restatement and other charges
Restructuring charges
1 unchanged sentence
Debt extinguishment loss
−Removed: Transaction-related costs
Gain on sale of assets, net
−Removed: Other income, net
+Added: Other expense (income), net
Income (loss) before income taxes
Provision for (benefit from) income taxes
−Removed: Income (loss) from continuing operations
−Removed: Loss from discontinued operations, net of tax
Net income (loss)
−Removed: Basic and diluted net income (loss) per common share
+Added: Basic and diluted income (loss) per common share
Weighted average common shares outstanding:
1 unchanged sentence
Archrock, Inc.
−Removed: Consolidated Statements of Comprehensive Income
+Added: Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
9 unchanged sentences
Consolidated Statements of Equity
−Removed: (in thousands, except share data)
−Removed: Archrock Stockholders
+Added: (in thousands, except share amounts)
Comprehensive
+Added: Treasury Stock
Income (Loss)
6 unchanged sentences
Stock-based compensation, net of forfeitures
−Removed: Shares issued for Elite Acquisition
−Removed: Comprehensive income
−Removed: Interest rate swap loss, net of reclassifications to earnings
+Added: Contribution from Exterran Corporation
+Added: Impact of ASU 2016-13 adoption
+Added: Comprehensive loss:
+Added: Other comprehensive loss
Balance at December 31, 2020
5 unchanged sentences
Stock-based compensation, net of forfeitures
−Removed: Contribution from Exterran Corporation
−Removed: Impact of ASU 2016-13 adoption
−Removed: Comprehensive loss
−Removed: Interest rate swap loss, net of reclassifications to earnings
+Added: Net proceeds from issuance of common stock
+Added: Comprehensive income
+Added: Other comprehensive income
Balance at December 31, 2021
7 unchanged sentences
Comprehensive income
−Removed: Interest rate swap gain, net of reclassifications to earnings
−Removed: Amortization of dedesignated interest rate swap
+Added: Other comprehensive income
Balance at December 31, 2022
9 unchanged sentences
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
−Removed: Loss from discontinued operations, net of tax
Depreciation and amortization
1 unchanged sentence
Goodwill impairment
+Added: Unrealized change in fair value of investment in unconsolidated affiliate
Inventory write-downs
−Removed: Amortization of operating lease ROU assets
−Removed: Amortization of deferred financing costs
+Added: Amortization of operating lease ROU asset
+Added: Amortization of debt issuance costs
Amortization of debt discount
Amortization of debt premium
+Added: Amortization of capitalized implementation costs
Amortization of dedesignated interest rate swap
3 unchanged sentences
Non-cash restructuring charges
−Removed: Provision for credit losses
+Added: Provision for (benefit from) credit losses
(Gain) loss on sale of assets, net
3 unchanged sentences
Deferred revenue recognized in earnings
−Removed: Change in assets and liabilities, net of acquisition:
−Removed: Accounts receivable, trade
−Removed: Contract costs, net
+Added: Changes in operating assets and liabilities:
+Added: Accounts receivable, net
+Added: Contract costs
Accounts payable and other liabilities
Deferred revenue
−Removed: Net cash provided by continuing operations
−Removed: Net cash used in discontinued operations
Net cash provided by operating activities
2 unchanged sentences
Proceeds from sale of business
−Removed: Proceeds from sale of property, plant and equipment and other assets
+Added: Proceeds from sale of property, equipment and other assets
Proceeds from insurance and other settlements
−Removed: Cash paid in Elite Acquisition
−Removed: Net cash provided by (used in) investing activities
+Added: Investments in unconsolidated entities
+Added: Net cash (used in) provided by investing activities
Cash flows from financing activities:
2 unchanged sentences
( 1,204,375 )
−Removed: ( 2,071,750 )
−Removed: Payments for debt issuance costs
−Removed: Proceeds from (payments for) settlement of interest rate swaps that include financing elements
+Added: Payments of debt issuance costs
+Added: Payments for settlement of interest rate swaps that include financing elements
Dividends paid to stockholders
3 unchanged sentences
Contribution from Exterran Corporation
−Removed: Net cash provided by (used in) financing activities
+Added: Net cash used in financing activities
+Added: Archrock, Inc.
+Added: Consolidated Statements of Cash Flows
+Added: (in thousands)
Net increase (decrease) in cash and cash equivalents
6 unchanged sentences
Accrued capital expenditures
−Removed: Non-cash consideration received in July 2020 Disposition
−Removed: Issuance of Archrock common stock pursuant to Elite Acquisition, net of tax
+Added: Non-cash consideration received in sales of a business
The accompanying notes are an integral part of these consolidated financial statements .
2 unchanged sentences
DESCRIPTION OF BUSINESS
−Removed: We are an energy infrastructure company with a pure-play focus on midstream natural gas compression.
+Added: We are an energy infrastructure company with a primary focus on midstream natural gas compression.
We are the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the U.S.
4 unchanged sentences
In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment.
−Removed: Basis of Presentation and Significant Accounting Policies
+Added: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
−Removed: Our Financial Statements include Archrock and its subsidiaries, all of which are wholly owned.
+Added: Our consolidated financial statements include the accounts of Archrock and its wholly–owned subsidiaries.
All intercompany accounts and transactions have been eliminated in consolidation.
+Added: In the Notes to Consolidated Financial Statements, all dollar and share amounts in tabulations are in thousands of dollars and shares, respectively, unless otherwise noted.
Our Financial Statements are prepared in accordance with GAAP and the rules and regulations of the SEC.
−Removed: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities.
+Added: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures of contingent assets and liabilities.
Because of the inherent uncertainties in this process, actual future results could differ from those expected as of the reporting date.
−Removed: Management believes that the estimates and assumptions used are reasonable.
−Removed: Significant Accounting Policies
+Added: Management believes that the estimates and assumptions sued are reasonable.
Cash and Cash Equivalents
We consider all highly–liquid investments purchased with an original maturity of three months or less to be cash equivalents.
+Added: Accounts Receivable and Allowance for Credit Losses
+Added: The contractual life of our trade receivables is primarily 30 days based on the payment terms specified in the contract.
+Added: Contract operations services are generally billed monthly at the beginning of the month in which service is being provided.
+Added: Aftermarket services billings typically occur when parts are delivered or service is completed.
+Added: Due to the short–term nature of our trade accounts receivable, we consider the amortized cost to be the same as the carrying value amount of the receivable, excluding the allowance for credit losses.
+Added: We recognize an allowance for credit losses when a receivable is recorded, even when the risk of loss is remote.
+Added: We utilize an aging schedule to determine our allowance for credit losses, and measure expected credit losses on a collective (pool) basis when similar risk characteristics exist.
+Added: We rely primarily on ratings assigned by external rating agencies and credit monitoring services to assess credit risk and aggregate customers first by low, medium or high risk asset pools, and then by delinquency status.
+Added: We also consider the internal risk associated with geographic location and the services we provide to the customer when determining asset pools.
+Added: If a customer does not share similar risk characteristics with other customers, we evaluate the customer’s outstanding trade receivables for expected credit losses on an individual basis.
+Added: Each reporting period, we reassess our customers’ risk profiles and determine the appropriate asset pool classification, or perform individual assessments of expected credit losses, based on the customers’ risk characteristics at the reporting date.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Loss rates are separately determined for each asset pool based on the length of time a trade receivable has been outstanding.
+Added: We analyze two years of internal historical loss data, including the effects of prepayments, write–offs and subsequent recoveries, to determine our historical loss experience.
+Added: Our historical loss information is a relevant data point for estimating credit losses, as the data closely aligns with trade receivables due from our customers.
+Added: Ratings assigned by external rating agencies and credit monitoring services consider past performance and forecasts of future economic conditions in assessing credit risk.
+Added: Inventory consists of parts used for maintenance of natural gas compression equipment.
+Added: Inventory is stated at the lower of cost and net realizable value using the average cost method.
+Added: Property, Plant and Equipment
+Added: Property, plant and equipment are recorded at cost and depreciated using the straight–line method over their estimated useful lives as follows:
+Added: Compression equipment, facilities and other fleet assets
+Added: 3 to 30 years
+Added: 20 to 35 years
+Added: Transportation and shop equipment
+Added: 3 to 10 years
+Added: Computer hardware and software
+Added: 3 to 10 years
+Added: Major improvements that extend the useful life of an asset are capitalized and depreciated over the estimated useful life of the major improvement, up to seven years .
+Added: Repairs and maintenance are expensed as incurred.
+Added: We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.
+Added: We recognize ROU assets and liabilities based on the present value of lease payments over the lease term.
+Added: 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.
+Added: The lease term includes options to extend when we are reasonably certain to exercise the option.
+Added: Short–term leases, those with an initial term of 12 months or less, are not recorded on the balance sheet.
+Added: 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.
+Added: Operating lease expense for lease payments is recognized on a straight–line basis over the term of the lease.
+Added: Our facility leases, of which we are the lessee, contain lease and nonlease components, which we have elected to account for as a single lease component, as the nonlease components are not significant to the total consideration of the contract and separating the nonlease component would have no effect on lease classification.
+Added: For contract operations service agreements in which we are a lessor, as the services nonlease component is predominant over the compression package lease component, we do not account for these agreements as operating leases.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Impairment of Long–Lived Assets
+Added: We review long–lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable.
+Added: An impairment loss exists when estimated undiscounted cash flows expected from the use of the asset and its eventual disposition are less than its carrying amount.
+Added: Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its fair value.
+Added: Internal–Use Software
+Added: Certain of our contracts have been deemed to be hosting arrangements that are service contracts, including those related to the cloud migration of our ERP system and cloud services for our new mobile workforce, telematics and inventory management tools.
+Added: Certain costs incurred for the implementation of a hosting arrangement that is a service contract are capitalized and amortized on a straight–line basis over the term of the respective contract.
+Added: Amortization begins for each component of the hosting arrangement when the component becomes ready for its intended use.
+Added: Capitalized implementation costs are presented in other assets, the same line item in our consolidated balance sheets that a prepayment of the fees for the associated hosting arrangement would be presented.
+Added: Amortization expense of the capitalized implementation costs is presented in SG&A, the same line item in our consolidated statements of operations as the expense for fees for the associated hosting arrangement.
Revenue Recognition
14 unchanged sentences
The performance obligation is satisfied and revenue is recognized at the agreed–upon transaction price at the point in time when service is complete and the customer has accepted the work performed and can obtain the remaining benefits of the service that the unit will provide.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
Aftermarket Services
20 unchanged sentences
We recognize a contract liability when we have an obligation to transfer goods or services to a customer for which we have already received consideration.
−Removed: Concentrations of Credit Risk
−Removed: Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents and trade accounts receivable.
−Removed: Our temporary cash investments have a zero-loss expectation because we maintain minimal balances in our cash investment accounts and have no history of loss.
−Removed: Trade accounts receivable are due from companies of varying size engaged principally in oil and natural gas activities throughout the U.S.
−Removed: We review the financial condition of customers prior to extending credit and generally do not obtain collateral for trade receivables.
−Removed: Payment terms are on a short-term basis and in accordance with industry practice.
−Removed: We consider this credit risk to be limited due to these companies’ financial resources, the nature of the products and services we provide and the terms of our customer agreements.
−Removed: Due to the short-term nature of our trade receivables, we consider the amortized cost to be the same as the carrying amount of the receivable, excluding the allowance for credit losses.
−Removed: We recognize an allowance for credit losses when a receivable is recorded, even when the risk of loss is remote.
−Removed: We utilize an aging schedule to determine our allowance for credit losses, and measure expected credit losses on a collective (pool) basis when similar risk characteristics exist.
−Removed: We rely primarily on ratings assigned by external rating agencies and credit monitoring services to assess credit risk and aggregate customers first by low, medium or high risk asset pools, and then by delinquency status.
−Removed: We also consider the internal risk associated with geographic location and the services we provide to the customer when determining asset pools.
−Removed: If a customer does not share similar risk characteristics with other customers, we evaluate the customer’s outstanding trade receivables for expected credit losses on an individual basis.
−Removed: Trade receivables evaluated individually are not included in our collective assessment.
−Removed: Each reporting period, we reassess our customers’ risk profiles and determine the appropriate asset pool classification, or perform individual assessments of expected credit losses, based on the customers’ risk characteristics at the reporting date.
−Removed: The contractual life of our trade receivables is primarily 30 days based on the payment terms specified in the contract.
−Removed: Contract operations services are generally billed monthly at the beginning of the month in which service is being provided.
−Removed: Aftermarket services billings typically occur when parts are delivered or service is completed.
−Removed: Loss rates are separately determined for each asset pool based on the length of time a trade receivable has been outstanding.
−Removed: We analyze two years of internal historical loss data, including the effects of prepayments, write-offs and subsequent recoveries, to determine our historical loss experience.
−Removed: Our historical loss information is a relevant data point for estimating credit losses, as the data closely aligns with trade receivables due from our customers.
−Removed: Ratings assigned by external rating agencies and credit monitoring services consider past performance and forecasts of future economic conditions in assessing credit risk.
−Removed: We routinely update our historical loss data to reflect our customers’ current risk profile, to ensure the historical data and loss rates are relevant to the pool of assets for which we are estimating expected credit losses.
−Removed: At both December 31, 2021 and 2020, Chevron U.S.A.
−Removed: and Williams Partners accounted for 14 %and 10 % of our trade accounts receivable balance, respectively.
−Removed: The following table summarizes the activity in our allowance for credit losses:
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Balance at beginning of period
−Removed: Impact of adoption of ASU 2016-13 on January 1, 2020
−Removed: Provision for credit losses
−Removed: Write-offs charged against allowance
−Removed: Balance at end of period
−Removed: Inventory consists of parts used for maintenance of natural gas compression equipment.
−Removed: Inventory is stated at the lower of cost and net realizable value using the average cost method.
−Removed: Property, Plant and Equipment
−Removed: Property, plant and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives as follows:
−Removed: Compression equipment, facilities and other fleet assets
−Removed: 3 to 30 years
−Removed: 20 to 35 years
−Removed: Transportation and shop equipment
−Removed: 3 to 10 years
−Removed: Computer hardware and software
−Removed: 3 to 10 years
−Removed: Major improvements that extend the useful life of an asset are capitalized and depreciated over the estimated useful life of the major improvement, up to seven years .
−Removed: Repairs and maintenance are expensed as incurred.
−Removed: Long-Lived Assets
−Removed: We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable.
−Removed: An impairment loss exists when estimated undiscounted cash flows expected from the use of the asset and its eventual disposition are less than its carrying amount.
−Removed: Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its fair value.
−Removed: Identifiable intangibles are amortized over the estimated useful life of the asset.
−Removed: We determine if an arrangement is a lease at inception and 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.
−Removed: 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.
−Removed: The lease term includes options to extend when we are reasonably certain to exercise the option.
−Removed: Short-term leases, those with an initial term of 12 months or less, are not recorded on the balance sheet.
−Removed: 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.
−Removed: Operating lease expense for lease payments is recognized on a straight-line basis over the term of the lease.
−Removed: Our facility leases, of which we are the lessee, contain lease and nonlease components, which we have elected to account for as a single lease component, as the nonlease components are not significant to the total consideration of the contract and separating the nonlease component would have no effect on lease classification.
−Removed: As it relates to our contract operations service agreements in which we are a lessor, the services nonlease component is predominant over the compression package lease component and therefore recognition of these agreements follows the Accounting Standards Codification Topic 606 Revenue from Contracts with Customers guidance.
−Removed: The goodwill acquired in connection with the Elite Acquisition represented the excess of consideration transferred over the fair value of the assets and liabilities acquired.
−Removed: We review the carrying amount of our goodwill in the fourth quarter of every year, or whenever indicators of potential impairment exist, to determine if the carrying amount of a reporting unit exceeds its fair value, including the applicable goodwill.
−Removed: We perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is impaired.
−Removed: If the fair value is more likely than not impaired, we perform a quantitative impairment test to identify impairment and measure the amount of impairment loss to be recognized, if any.
−Removed: Our qualitative assessment includes consideration of various events and circumstances and their potential impact to a reporting unit’s fair value, including macroeconomic and industry conditions such as a deterioration in our operating environment and limitations on access to capital and other developments in the equity and credit markets, cost factors that could have a negative effect on earnings and cash flows, relevant entity-specific and reporting unit-specific events and overall financial performance such as declining earnings or cash flows or a sustained decrease in share price.
−Removed: The quantitative impairment test (i) allocates goodwill and our other assets and liabilities to our reporting units, contract operations and aftermarket services, (ii) calculates the fair value of the reporting units and (iii) determines the impairment loss, if any, as the amount by which the carrying amount of the reporting unit exceeds its fair value (limited to the total amount of goodwill allocated to that reporting unit).
−Removed: All of the goodwill recognized in the Elite Acquisition was allocated to our contract operations reporting unit.
−Removed: The fair value of the contract operations reporting unit is calculated using the expected present value of future cash flows method.
−Removed: Significant estimates are made to determine future cash flows including future revenues, costs and capital requirements and the appropriate risk-adjusted discount rate by which to discount the estimated future cash flows.
−Removed: In the first quarter of 2020, the global response to the COVID-19 pandemic significantly impacted our market capitalization and estimates of future revenues and cash flows, which triggered the need to perform a quantitative test of the fair value of our contract operations reporting unit as of March 31, 2020.
−Removed: The quantitative test determined that the carrying amount of our contract operations reporting unit exceeded its fair value and we recorded a full impairment loss on goodwill as a result.
−Removed: Internal-Use Software
−Removed: Certain of our contracts have been deemed to be hosting arrangements that are service contracts, including those related to the cloud migration of our ERP system and cloud services for our new mobile workforce, telematics and inventory management tools.
−Removed: Certain costs incurred for the implementation of a hosting arrangement that is a service contract are capitalized and amortized on a straight-line basis over the term of the respective contract.
−Removed: Amortization begins for each component of the hosting arrangement when the component becomes ready for its intended use.
−Removed: Capitalized implementation costs are presented in other assets, the same line item in our consolidated balance sheets that a prepayment of the fees for the associated hosting arrangement would be presented.
−Removed: Amortization expense of the capitalized implementation costs is presented in SG&A, the same line item in our consolidated statements of operations as the expense for fees for the associated hosting arrangement.
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements.
4 unchanged sentences
If a valuation allowance was previously recorded and we subsequently determined we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax assets’ valuation allowance, which would reduce the provision for income taxes.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
We record uncertain tax positions in accordance with the accounting standard on income taxes under a two–step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more–likely–than–not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
−Removed: Hedging and Use of Derivative Instruments
−Removed: We use derivative instruments to manage our exposure to fluctuations in the variable interest rate of our Credit Facility and thereby minimize the risks and costs associated with financial activities.
−Removed: We do not use derivative instruments for trading or other speculative purposes.
−Removed: We record interest rate swaps on the balance sheet as either derivative assets or derivative liabilities measured at their fair value.
−Removed: The fair value of our derivatives is based on the income approach (discounted cash flow) using market observable inputs, including LIBOR forward curves.
−Removed: Changes in the fair value of the derivatives designated as cash flow hedges are recognized as a component of other comprehensive income (loss) until the hedged transaction affects earnings.
−Removed: 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.
−Removed: Cash flows from derivatives designated as hedges are classified in our 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 which case, the cash settlements for these derivatives are classified as cash flows from financing activities.
−Removed: To qualify for hedge accounting treatment, we must formally document, designate and assess the effectiveness of the transactions.
−Removed: 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.
−Removed: If the necessary correlation ceases to exist or if the anticipated transaction is no longer probable, we would discontinue hedge accounting and apply mark-to-market accounting.
−Removed: Amounts paid or received from interest rate swap agreements are recorded in interest expense and matched with the cash flows and interest expense of the debt being hedged, resulting in an adjustment to the effective interest rate.
−Removed: Recent Accounting Developments
−Removed: Accounting Standards Updates Implemented
−Removed: Reference Rate Reform
−Removed: In June 2021, we prospectively adopted ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform.
−Removed: ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022.
−Removed: Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020.
−Removed: On June 10, 2021, we amended one of our interest rate swap agreements and determined that the modifications meet the criteria for the optional expedients and exceptions, which allow us to forego dedesignation of the hedging relationship and to subsequently assess effectiveness on a qualitative basis.
−Removed: The adoption of ASU 2020-04 did not have a material impact on our consolidated financial statements.
−Removed: In the first quarter, we evaluated Amendment No.
−Removed: 3 to our Credit Facility and determined that ASU 2020-04 was not applicable.
−Removed: We will continue to assess any modifications to our interest rate swap and Credit Facility agreements during the effective period of this update and will apply the amendments as applicable.
−Removed: Business Transactions
−Removed: July 2021 Dispositions
−Removed: In July 2021, we completed sales of certain contract operations customer service agreements and approximately 575 compressors, comprising approximately 100,000 horsepower, used to provide compression services under those agreements, as well as other assets used to support the operations.
+Added: Concentrations of Credit Risk
+Added: Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents and trade accounts receivable.
+Added: Our temporary cash investments have a zero–loss expectation because we maintain minimal balances in our cash investment accounts and have no history of loss.
+Added: Trade accounts receivable are due from companies of varying size engaged principally in oil and natural gas activities throughout the U.S;
+Added: therefore, our customers may be similarly affected by changes in economic and other conditions within the industry.
+Added: We perform periodic evaluations of our customers’ financial condition, including monitoring our customers’ payment history and current credit worthiness to manage this risk.
+Added: We generally do not obtain collateral for trade receivables, but we may require payment in advance.
+Added: Payment terms are on a short–term basis and in accordance with industry practice.
+Added: We consider this credit risk to be limited due to these companies’ financial resources, the nature of the products and services we provide and the terms of our customer agreements.
+Added: During the years ended December 31, 2022, 2021 and 2020, no customers accounted for more than 10% of our consolidated revenues.
+Added: Accounting Standard Update Implemented
+Added: In December 2022, the FASB issued ASU No.
+Added: 2022–06, Deferral of the Sunset Date of Reference Rate Reform (Topic 848) .
+Added: Topic 848 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.
+Added: ASU 2022–06 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.
+Added: The ASU is effective as of December 21, 2022 through December 31, 2024.
+Added: We adopted ASU 2022–06 during 2022, and the adoption did not and is currently not expected to have a material impact on our consolidated financial statements.
+Added: We continue to evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis.
+Added: No other new accounting pronouncements issued or effective during 2022 have had or are expected to have a material impact on our consolidated financial statements.
+Added: During 2022, we completed sales of certain contract operations customer service agreements and approximately 770 compressors, comprising approximately 172,000 horsepower, used to provide compression services under those agreements, as well as other assets used to support the operations.
We allocated customer–related and contract–based intangible assets based on a ratio of the horsepower sold relative to the total horsepower of the asset group.
−Removed: We received cash consideration of $ 60.3 million for the sales and recorded gains on the sales of $ 13.0 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2021.
−Removed: February 2021 Disposition
−Removed: In February 2021, we completed the sale of certain contract operations customer service agreements and approximately 300 compressors, comprising approximately 40,000 horsepower, used to provide compression services under those agreements as well as other assets used to support the operations.
+Added: We recognized an aggregate gain of $ 28.1 million.
+Added: During 2021, we completed sales of certain contract operations customer service agreements and approximately 875 compressors, comprising approximately 140,000 horsepower, used to provide compression services under those agreements, as well as other assets used to support the operations.
We allocated customer–related and contract–based intangible assets based on a ratio of the horsepower sold relative to the total horsepower of the asset group.
−Removed: We recorded a gain on the sale of $ 6.0 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2021.
−Removed: July 2020 Disposition
+Added: We recognized an aggregate gain on the sales of $ 19.0 million.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
In July 2020, we completed the sale of the turbocharger business included within our aftermarket services segment .
In connection with the sale, we entered into a supply agreement to purchase a minimum amount of turbocharger goods and services over a two–year term.
−Removed: In addition to cash of $ 9.5 million received upon closing, an additional $ 3.0 million was received on the first anniversary of the closing date in July 2021, and $ 3.5 million was received through the purchase of turbocharger goods and services under the supply agreement, including $ 2.8 million that was received during the year ended December 31, 2021.
−Removed: We recognized a gain on the sale of $ 9.3 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2020.
−Removed: March 2020 Disposition
+Added: In addition to cash of $ 9.5 million received upon closing, an additional $ 3.0 million was received on the first anniversary of the closing date in July 2021, and $ 3.5 million was received through the purchase of turbocharger goods and services under the supply agreement, including $ 2.8 million that was received in 2021.
+Added: We recognized a gain on the sale of $ 9.3 million in 2020.
In March 2020, we completed the sale of certain contract operations customer service agreements and approximately 200 compressors, comprising approximately 35,000 horsepower, used to provide compression services under those agreements as well as other assets used to support the operations.
We allocated customer–related and contract–based intangible assets and goodwill based on a ratio of the horsepower sold relative to the total horsepower of the asset group.
−Removed: We recognized a gain on the sale of $ 3.2 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2020.
−Removed: Elite Acquisition
−Removed: In August 2019, we completed the Elite Acquisition whereby we acquired from Elite Compression substantially all of its assets, including a fleet of predominantly large compressors comprising approximately 430,000 horsepower, vehicles, real property and inventory, and certain liabilities for aggregate consideration consisting of $ 214.0 million in cash and 21.7 million shares of common stock with an acquisition date fair value of $ 225.9 million.
−Removed: The cash portion of the acquisition was funded with borrowings under the Credit Facility.
−Removed: The Elite Acquisition was accounted for using the acquisition method, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date.
−Removed: The excess of the consideration transferred over those fair values was recorded as goodwill.
−Removed: Our valuation methodology and significant inputs for fair value measurements are detailed by asset class below.
−Removed: The fair value measurements for property, plant and equipment and intangible assets were based on significant inputs that are not observable in the market and therefore represent Level 3 measurements.
−Removed: The goodwill resulting from the acquisition was attributable to the expansion of our services in various regions in which we currently operate and was allocated to our contract operations segment.
−Removed: The goodwill had an indefinite life that was to be reviewed annually for impairment or more frequently if indicators of potential impairment existed.
−Removed: All of the goodwill recorded for this acquisition is expected to be deductible for U.S.
−Removed: federal income tax purposes.
−Removed: See Note 9 (“Goodwill”) for details on the 2020 impairment of our goodwill.
−Removed: Property, Plant and Equipment
−Removed: The property, plant and equipment is primarily comprised of compression equipment that will be depreciated on a straight-line basis over an estimated average remaining useful life of 15 years.
−Removed: The fair value of the property, plant and equipment was determined using the cost approach, whereby we estimated the replacement cost of the assets by evaluating recent purchases of similar assets or published data, and then adjusted replacement cost for physical deterioration and functional and economic obsolescence, as applicable.
−Removed: Intangible Assets
−Removed: The intangible assets consist of customer relationships that have an estimated useful life of 15 years.
−Removed: The amount of intangible assets and their associated useful life were determined based on the period over which the assets are expected to contribute directly or indirectly to our future cash flows.
−Removed: The fair value of the identifiable intangible assets was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired.
−Removed: Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets.
−Removed: To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our weighted average cost of capital to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired.
−Removed: Unaudited Pro Forma Financial Information
−Removed: Unaudited pro forma financial information for the year ended December 31, 2019 was derived by adjusting our historical financial statements in order to give effect to the assets and liabilities acquired in the Elite Acquisition.
−Removed: The Elite Acquisition is presented in this unaudited pro forma financial information as though the acquisition occurred as of January 1, 2018, and reflects the following:
−Removed: • the acquisition of substantially all of Elite Compression’s assets, including a compression fleet of approximately 430,000 horsepower, vehicles, real property and inventory, and certain liabilities;
−Removed: • borrowings of $ 214.0 million under the Credit Facility for cash consideration exchanged in the acquisition;
−Removed: • the exclusion of $ 7.8 million of financial advisory, legal and other professional fees incurred related to the acquisition and recorded to transaction-related costs in our consolidated statements of operations during the year ended December 31, 2019.
−Removed: The unaudited pro forma financial information below is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results.
−Removed: (in thousands)
−Removed: December 31, 2019
−Removed: Net income attributable to Archrock stockholders
−Removed: The results of operations attributable to the assets and liabilities acquired in the Elite Acquisition have been included in our consolidated financial statements as part of our contract operations segment since the date of acquisition.
−Removed: Revenue attributable to the assets acquired from the date of acquisition, August 1, 2019, through December 31, 2019 was $ 33.2 million.
−Removed: We are unable to provide earnings attributable to the assets and liabilities acquired since the date of acquisition as we do not prepare full stand-alone earnings reports for those assets and liabilities.
−Removed: In August 2019, we completed an asset sale in which Harvest acquired from us approximately 80,000 active and idle compression horsepower, vehicles and parts inventory for cash consideration of $ 30.0 million.
−Removed: We recorded a $ 6.6 million gain on this sale to gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2019.
−Removed: The assets were previously reported under our contract operations segment.
−Removed: Discontinued Operations
−Removed: We completed the Spin-off in 2015.
−Removed: 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, including a tax matters agreement, which governs the respective rights, responsibilities and obligations of Exterran Corporation and us with respect to certain tax matters.
−Removed: As of both December 31, 2021 and 2020, we had $ 7.9 million 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 consolidated balance sheets.
−Removed: We had an offsetting indemnification asset of $ 7.9 million related to these unrecognized tax benefits recorded to noncurrent assets associated with discontinued operations as of both December 31, 2021 and 2020.
−Removed: The following table presents the balance sheets for our discontinued operations:
−Removed: (in thousands)
−Removed: Deferred tax assets
−Removed: Total assets associated with discontinued operations
−Removed: Deferred tax liabilities
−Removed: Total liabilities associated with discontinued operations
−Removed: The following table presents the statements of operations for our discontinued operations:
+Added: We recognized a gain on the sale of $ 3.2 million in 2020.
+Added: ACCOUNTS RECEIVABLE, NET
+Added: Accounts receivable, net is comprised of the following:
+Added: Customer related:
+Added: Related parties (1)
+Added: Accounts receivable
+Added: Allowance for credit losses
+Added: Accounts receivable, net
+Added: (1) See Note 27 for additional information.
+Added: (2) Other receivables primarily consist of amounts due from the sale of used equipment.
+Added: The changes in our allowance for credit losses are as follows:
Year Ended December 31,
−Removed: (in thousands)
−Removed: Other (income) expense, net
−Removed: Provision for (benefit from) income taxes
−Removed: Loss from discontinued operations, net of tax
−Removed: (in thousands)
+Added: Balance at January 1
+Added: Impact of adoption of new accounting standard
+Added: Provision for credit losses
+Added: Write-offs charged against allowance
+Added: Balance at December 31
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Inventory is comprised of the following:
Parts and supplies
2 unchanged sentences
PROPERTY, PLANT AND EQUIPMENT, NET
−Removed: (in thousands)
+Added: Property, plant and equipment, net is comprised of the following:
Compression equipment, facilities and other fleet assets
10 unchanged sentences
We have operating leases and subleases for office space, temporary housing, storage and shops.
−Removed: Our leases have remaining lease terms of less than one year to approximately nine years and most include options to extend the lease term, at our discretion, for an additional six months to ten years .
+Added: Our leases have remaining lease terms of less than one year to approximately ten years and most include options to extend the lease term, at our discretion, for an additional six months to ten 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.
−Removed: Financial and other supplemental information related to our operating leases follows.
−Removed: (in thousands)
+Added: Financial and other supplemental information related to our operating leases is as follows:
Classification
4 unchanged sentences
Total lease liabilities
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
Year Ended December 31,
−Removed: (in thousands)
Operating lease cost
3 unchanged sentences
Year Ended December 31,
−Removed: (in thousands)
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities
Operating lease ROU assets obtained in exchange for lease liabilities, net (1)
−Removed: (1) Includes decreases to our ROU assets of $ 0.3 million and $ 0.1 million related to lease amendments and terminations during the years ended December 31, 2021 and 2020, respectively.
+Added: (3) Includes decreases to our ROU assets of $ 0.2 million and $ 0.6 million related to lease amendments and terminations during 2022 and 2021, respectively.
Weighted average remaining lease term (in years)
Weighted average discount rate
−Removed: Remaining maturities of our lease liabilities as of December 31, 2021 were as follows:
−Removed: (in thousands)
+Added: Remaining maturities of our lease liabilities as of December 31, 2022 are as follows:
Total lease payments
Total lease liabilities
−Removed: We recognized goodwill in connection with the Elite Acquisition, which represented the excess of consideration transferred over the fair value of the assets and liabilities acquired.
−Removed: All of the goodwill was allocated to our contract operations reporting unit.
−Removed: Beginning in the first quarter of 2020, the COVID-19 pandemic caused a significant deterioration in global macroeconomic conditions, which commenced substantial spending cuts by our customers and a decline in production.
−Removed: This global response to the pandemic significantly impacted our market capitalization and estimates of future revenues and cash flows, which triggered the need to perform a quantitative test of the fair value of our contract operations reporting unit as of March 31, 2020.
−Removed: The quantitative test determined that the carrying amount of our contract operations reporting unit exceeded its fair value and we recorded a goodwill impairment loss of $ 99.8 million during the first quarter of 2020.
−Removed: Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions, which have a significant impact on the fair value determined.
−Removed: We determined the fair value of our reporting unit using an equal weighting of both the expected present value of future cash flows and a market approach.
−Removed: The present value of future cash flows was estimated using our most recent forecast and the weighted average cost of capital.
−Removed: The market approach used a market multiple on the earnings before interest expense, provision for income taxes and depreciation and amortization expense of comparable peer companies.
−Removed: Significant estimates for our reporting unit included in our impairment analysis were our cash flow forecasts, our estimate of the market’s weighted average cost of capital and market multiples.
INTANGIBLE ASSETS, NET
−Removed: Intangible assets include customer relationships and contracts associated with various business and asset acquisitions.
−Removed: These acquired intangible assets were recorded at fair value determined as of the acquisition date and are being amortized over the period we expect to benefit from the assets.
−Removed: Intangible assets, net consisted of the following:
−Removed: December 31, 2021
−Removed: December 31, 2020
−Removed: (in thousands)
−Removed: Customer-related ( 15 ― 25 year life)
−Removed: Contract-based ( 5 ― 7 year life)
−Removed: Intangible assets
−Removed: Amortization expense of these intangible assets totaled $ 11.3 million, $ 15.6 million and $ 15.3 million during the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: Estimated future intangible assets amortization expense as of December 31, 2021 was as follows:
−Removed: (in thousands)
+Added: Intangible assets include customer relationships associated with various business and asset acquisitions.
+Added: These acquired intangible assets were recorded at fair value determined as of the date of acquisition and are being amortized over the period we expect to benefit from the assets.
+Added: Intangible assets, net is comprised of the following:
+Added: Gross carrying amount
+Added: Accumulated amortization
+Added: Intangible assets, net
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Intangible assets are amortized on a straight–line basis with estimated useful lives ranging from 15 to 25 years .
+Added: Amortization expense was $ 8.9 million, $ 11.3 million and $ 15.6 million during the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: Estimated amortization expense for each of the subsequent five fiscal years is expected to be as follows:
CONTRACT COSTS
We capitalize incremental costs to obtain a contract with a customer if we expect to recover those costs.
−Removed: Capitalized costs include commissions paid to our sales force to obtain contract operations contracts.
−Removed: We expense commissions paid for sales of service contracts and OTC parts and components within our aftermarket services segment, as the amortization period is less than one year.
−Removed: We had contract costs of $ 2.6 million and $ 3.2 million associated with sales commissions recorded in our consolidated balance sheets at December 31, 2021 and 2020, respectively.
−Removed: We capitalize costs incurred to fulfill a contract if those costs relate directly to a contract, enhance resources that we will use in satisfying performance obligations and if we expect to recover those costs.
−Removed: Capitalized costs incurred to fulfill our customer contracts include freight charges to transport compression assets before transferring services to the customer and mobilization activities associated with our contract operations services.
−Removed: Aftermarket services fulfillment costs are recognized based on the percentage-of-completion method applicable to the customer contract and do not typically result in the recognition of contract costs.
−Removed: We had contract costs of $ 22.8 million and $ 26.0 million associated with freight and mobilization recorded in our consolidated balance sheets at December 31, 2021 and 2020, respectively.
−Removed: Contract operations obtainment and fulfillment costs are amortized based on the transfer of service to which the assets relate, which is estimated to be 38 months based on average contract term, including anticipated renewals.
−Removed: We assess periodically whether the 38 -month estimate fairly represents the average contract term and adjust as appropriate.
−Removed: Contract costs associated with commissions are amortized to SG&A.
−Removed: Contract costs associated with freight and mobilization are amortized to cost of sales (excluding depreciation and amortization).
−Removed: During the years ended December 31, 2021, 2020 and 2019, we amortized $ 2.2 million, $ 3.0 million and $ 2.6 million, respectively, related to sales commissions and $ 17.8 million, $ 23.6 million and $ 20.7 million, respectively, related to freight and mobilization.
+Added: Capitalized contract costs included commissions paid to our sales force to obtain contract operations contracts.
+Added: As of December 31, 2022 and 2021, we had contract costs of $ 3.0 million and $ 2.6 million associated with sales commissions recorded in our consolidated balance sheets.
+Added: We also capitalize costs incurred to fulfill a contract if those costs relate directly to a contract, enhance resources that we will use in satisfying performance obligations and we expect to recover those costs.
+Added: Contract costs incurred to fulfill our customer contracts include freight charges to transport compression assets before transferring services to the customer and mobilization activities associated with our contract operations services.
+Added: As of December 31, 2022 and 2021, we had contract costs of $ 31.7 million and $ 22.8 million associated with freight and mobilization recorded in our consolidated balance sheets.
+Added: Aftermarket services fulfillment costs are recognized based on the percentage–of–completion method applicable to the customer contract and do not typically result in the recognition of a contract asset.
+Added: These obtainment and fulfillment costs associated with our contract operations segment are amortized based on the transfer of service to which the assets relate, which is estimated to be 36 months based on average contract term, including anticipated renewals.
+Added: We periodically assess whether the 36 –month estimate fairly represents the average contract term and adjust as appropriate.
+Added: Costs associated with sales commissions in our aftermarket services segment are expensed when paid, as the amortization period is less than one year .
+Added: Aftermarket services fulfillment costs are recognized based on the percentage–of–completion method applicable to the customer contract and do not typically result in the recognition of a contract asset.
+Added: Costs associated with sales commissions in our contract operations segment are amortized to SG&A.
+Added: During the years ended December 31, 2022, 2021 and 2020, we amortized $ 1.9 million, $ 2.2 million and $ 3.0 million, respectively, related to sales commissions.
+Added: Contract costs associated with freight and mobilization are amortized to costs of sales (excluding depreciation and amortization).
+Added: During the years ended December 31, 2022, 2021 and 2020, we amortized $ 17.3 million, $ 17.8 million and $ 23.6 million, respectively, related to freight and mobilization.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
HOSTING ARRANGEMENTS
−Removed: In the fourth quarter of 2018, we began a process and technology transformation project that has, among other things, replaced our existing ERP, supply chain and inventory management systems and expanded the remote monitoring capabilities of our compression fleet.
−Removed: Included in this project are hosting arrangements that are service contracts related to the cloud migration of our ERP system and cloud services for our new mobile workforce, telematics and inventory management tools.
−Removed: As of December 31, 2021 and 2020, we had $ 12.7 million and $ 7.7 million, respectively, of capitalized implementation costs related to our hosting arrangements that are service contracts included in other assets in our consolidated balance sheets.
−Removed: Accumulated amortization was $ 0.7 million and $ 0.3 million at December 31, 2021 and 2020, respectively.
−Removed: We recorded $ 0.3 million of amortization expense to SG&A in our consolidated statements of operations during each of the years ended December 31, 2021 and 2020.
+Added: We have hosting arrangements that are service contracts for cloud applications including our ERP, mobile workforce, telematics and inventory management tools.
+Added: Capitalized implementation costs and accumulated amortization related to our hosting arrangements that are service contracts are as follows:
+Added: Hosting arrangements
+Added: Accumulated amortization
+Added: Hosting arrangements, net
+Added: These costs are included in other assets in our consolidated balance sheets.
+Added: Amortization expense, which is recorded in SG&A in our consolidated statements of operations, was $ 2.0 million, $ 0.3 million and $ 0.3 million during the years ended December 31, 2022, 2021 and 2020, respectively.
During the year ended December 31, 2020, we impaired $ 1.7 million of capitalized implementation costs related to the hosting arrangements of the mobile workforce component of our project due to the termination of the agreement, which was included in long–lived and other asset impairment in our consolidated statements of operations.
+Added: INVESTMENT IN UNCONSOLIDATED AFFILIATE
+Added: Investments in which we are deemed to exert significant influence, but not control, are accounted for using the equity method of accounting, except in cases where the fair value option is elected.
+Added: For such investments where we have elected the fair value option, the election is irrevocable and is applied on an investment–by–investment basis at initial recognition.
+Added: In April 2022, we agreed to acquire for cash a 25 % equity interest in ECOTEC, a company specializing in methane emissions detection, monitoring and management.
+Added: We have elected the fair value option to account for this investment, and during the year ended December 31, 2022, we recognized an unrealized loss of $ 1.9 million related to the change in fair value of our investment (see Note 25).
+Added: Changes in the fair value of this investment are recognized in other (income) expense, net in our consolidated statements of operations.
+Added: As of December 31, 2022, our ownership interest in ECOTEC is 22.7 %, which is included in other assets in our consolidated balance sheets.
+Added: The remaining 2.3 % interest was acquired in January 2023.
ACCRUED LIABILITIES
−Removed: (in thousands)
+Added: Accrued liabilities are comprised of the following:
Accrued salaries and other benefits
1 unchanged sentence
Accrued interest
−Removed: Derivative liability - current
+Added: Derivative liability
Other accrued liabilities
Accrued liabilities
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: CONTRACT LIABILITIES
+Added: As of December 31, 2022 and 2021, our contract liabilities were $ 8.0 million and $ 4.4 million, respectively.
+Added: These liabilities are included in deferred revenue and other liabilities in our consolidated balance sheets.
+Added: We deferred revenue of $ 24.6 million and $ 10.2 million, respectively, and recognized $ 21.0 million and $ 10.4 million, respectively, as revenue during the years ended December 31, 2022 and 2021, respectively.
+Added: The revenue recognized and deferred during the periods primarily related to freight billings and milestone billings on aftermarket services.
LONG–TERM DEBT
−Removed: (in thousands)
+Added: Long–term debt is comprised of the following:
Credit facility
−Removed: Debt premium, net of amortization
−Removed: Deferred financing costs, net of amortization
−Removed: Deferred financing costs, net of amortization
+Added: 6.25 % senior notes due April 2028:
+Added: Principal outstanding
+Added: Unamortized debt premium
+Added: Unamortized debt issuance costs
+Added: 6.875 % senior notes due April 2027:
+Added: Principal outstanding
+Added: Unamortized debt issuance costs
Long-term debt
Credit Facility
−Removed: As of December 31, 2021, there were $ 8.9 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.4 %.
−Removed: The weighted average annual interest rate on the outstanding balance under the Credit Facility, excluding the effect of interest rate swaps, was 2.6 % and 2.7 % at December 31, 2021 and 2020, respectively.
−Removed: As a result of the facility’s ratio requirements (see below), $ 502.5 million of the $ 506.6 million of undrawn capacity was available for additional borrowings as of December 31, 2021.
−Removed: We were in compliance with all other covenants under our Credit Facility agreement.
−Removed: Amendments to the Credit Facility
−Removed: Amendment No.
−Removed: In February 2021, we amended our Credit Facility to, among other things, reduce the aggregate revolving commitment from $ 1.25 billion to $ 750.0 million and adjust the maximum Senior Secured Debt to EBITDA and Total Debt to EBITDA ratios, as defined in the Credit Facility agreement, to those listed in the table below.
−Removed: We incurred $ 1.8 million in transaction costs related to Amendment No.
−Removed: 3, which were included in other assets in our consolidated balance sheets and are being amortized over the remaining term of the Credit Facility.
−Removed: In addition, we wrote off $ 4.9 million of unamortized deferred financing costs as a result of the amendment, which was recorded to interest expense in our consolidated statements of operations during the year ended December 31, 2021.
−Removed: Amendment No.
−Removed: In November 2019, we amended the Credit Facility to, among other things, extend the maturity date of the Credit Facility from March 30, 2022 to November 8, 2024 and change the applicable margin for borrowings to those discussed in “Other Facility Terms” below.
−Removed: We incurred $ 6.4 million in transaction costs related to Amendment No.
−Removed: 2, which were included in other assets in our consolidated balance sheets and are being amortized over the remaining term of the Credit Facility.
−Removed: Other Facility Terms
+Added: As of December 31, 2022, our Credit Facility has an aggregate borrowing commitment of $ 750.0 million and will expire in November 2024 unless renewed or amended prior to that date.
Subject to certain conditions, including approval by the lenders, we are able to increase the aggregate commitments under the Credit Facility by up to an additional $ 250.0 million.
−Removed: Portions of the Credit Facility up to $ 50.0 million are available for the issuance of swing line loans and $ 50.0 million is available for the issuance of letters of credit.
−Removed: The Credit Facility bears interest at a base rate or LIBOR, at our option, plus an applicable margin.
−Removed: Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from 2.00 % to 2.75 % and (ii) in the case of base rate loans, from 1.00 % to 1.75 %.
+Added: We may use up to $ 50.0 million for swing line loans and an additional $ 50.0 million for letters of credit.
+Added: As of December 31, 2022, there were $ 5.7 million letters of credit outstanding under the Credit Facility.
+Added: The Credit Facility borrowing base consists of eligible accounts receivable, inventory and compressors, the largest of which is compressors.
+Added: Borrowings under the Credit Facility are secured by substantially all of our personal property assets and certain of our subsidiaries.
+Added: Borrowings under the Credit Facility bear interest at, based on our election, either a base rate or LIBOR, plus an applicable margin.
The base rate is the highest of (i) the prime rate announced by JPMorgan Chase Bank, (ii) the Federal Funds Effective Rate plus 0.50 % and (iii) one-month LIBOR plus 1.00 %.
+Added: Depending on our leverage ratio, the applicable margin varies (i) in the case of base rate loans, from 1.00 % to 1.75 % and (ii) in the case of LIBOR loans, from 2.00 % to 2.75 %.
+Added: The weighted average annual interest rate on the outstanding balance under our Credit Facility, excluding the effect of interest rate swaps, was 6.9 % and 2.6 % at December 31, 2022 and 2021, respectively.
Additionally, we are required to pay commitment fees based on the daily unused amount of the Credit Facility at a rate of 0.375 %.
−Removed: We incurred $ 2.0 million, $ 2.0 million and $ 1.9 million in commitment fees during the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: The Credit Facility borrowing base consists of eligible accounts receivable, inventory and compressors, the largest of which is compressors.
−Removed: Borrowings under the Credit Facility are secured by substantially all of our personal property assets and our Significant Domestic Subsidiaries (as defined in the Credit Facility agreement), including all of the membership interests of our Domestic Subsidiaries (as defined in the Credit Facility agreement).
−Removed: The Credit Facility agreement contains various covenants including, but not limited to, restrictions on the use of proceeds from borrowings and limitations on our ability to incur additional indebtedness, engage in transactions with affiliates, merge or consolidate, sell assets, make certain investments and acquisitions, make loans, grant liens, repurchase equity and pay distributions.
−Removed: The Credit Facility agreement also contains various covenants requiring mandatory prepayments from the net cash proceeds of certain asset transfers.
+Added: We incurred $ 1.9 million, $ 2.0 million and $ 2.0 million in commitment fees during 2022, 2021 and 2020, respectively.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: As a result of the facility’s ratio requirements, $ 487.6 million of the $ 493.0 million of undrawn capacity was available for additional borrowings as of December 31, 2022.
As of December 31, 2022, the following consolidated financial ratios, as defined in our Credit Facility agreement, were required:
2 unchanged sentences
Total Debt to EBITDA
−Removed: Through fiscal year 2022
January 1, 2023 through September 30, 2023
1 unchanged sentence
(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.
+Added: In addition to the financial covenants discussed above, the Credit Facility agreement contains various covenants including, but not limited to, restrictions on the use of proceeds from borrowings and limitations on our ability to incur additional indebtedness, engage in transactions with affiliates, merge or consolidate, sell assets, make certain investments and acquisitions, make loans, grant liens, repurchase equity and pay distributions.
+Added: The Credit Facility agreement also contains various covenants requiring mandatory prepayments from the net cash proceeds of certain asset transfers.
+Added: As of December 31, 2022, we were in compliance with all covenants under our Credit Facility agreement.
2027 Notes and 2028 Notes
−Removed: In December 2020, we completed a private offering of $ 300.0 million aggregate principal amount of 6.25 % senior notes due April 2028, which were issued pursuant to the indenture under which we completed a private offering of $ 500.0 million aggregate principal amount of 6.25 % senior notes in December 2019.
+Added: Our 2027 Notes were issued under an indenture dated March 21, 2019 and mature on April 1, 2027.
+Added: The notes were issued in a private offering at 100 % of their face value and have an effective interest rate of 7.9 % .
+Added: We received net proceeds of $ 491.2 million after deducting issuance costs of $ 8.8 million.
+Added: Our 2028 Notes were issued under an indenture dated December 20, 2019 and mature on April 1, 2028.
+Added: The 2028 Notes were issued in two private offerings of $ 500.0 million and $ 300.0 million in December 2019 and December 2020, respectively.
The notes of the two offerings have identical terms and are treated as a single class of securities.
2 unchanged sentences
We received net proceeds of $ 491.8 million after deducting issuance costs of $ 8.2 million from our December 2019 offering and net proceeds of $ 309.9 million after deducting issuance costs of $ 4.7 million from our December 2020 offering.
−Removed: In March 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 of $ 8.8 million.
−Removed: The $ 500.0 million of notes were issued at 100 % of their face value and have an effective interest rate of 7.9 %.
The net proceeds from the 2027 Notes and 2028 Notes were used to repay borrowings outstanding under our Credit Facility.
4 unchanged sentences
The 2027 Notes and 2028 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.
−Removed: In April 2020, the 2022 Notes were redeemed at 100 % of their $ 350.0 million aggregate principal amount plus accrued and unpaid interest of $ 10.5 million with borrowings under the Credit Facility.
−Removed: A debt extinguishment loss of $ 4.0 million related to the redemption was recognized during the year ended December 31, 2020.
−Removed: In April 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 under the Credit Facility.
−Removed: We recorded a debt extinguishment loss of $ 3.7 million related to the redemption during the year ended December 31, 2019.
−Removed: Long-Term Debt Maturity
−Removed: Contractual maturities of long-term debt over the next five years, excluding interest to be accrued, as of December 31, 2021, were as follows:
−Removed: (in thousands)
−Removed: Long-term debt maturities through 2026
−Removed: Accumulated Other Comprehensive Income (Loss)
−Removed: Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with owners.
−Removed: Our accumulated other comprehensive income (loss) consists of changes in the fair value of our interest rate swap derivative instruments, net of tax.
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Beginning accumulated other comprehensive income (loss)
−Removed: Other comprehensive income (loss), net of tax:
−Removed: Loss recognized in other comprehensive income (loss), net of tax benefit of $ 257 , $ 1,776 and $ 1,425 , respectively
−Removed: (Gain) loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax provision (benefit) of $( 1,324 ), $( 814 ) and $ 478 , respectively
−Removed: Total other comprehensive income (loss)
−Removed: Ending accumulated other comprehensive loss
−Removed: See Note 22 (“Derivatives”) for further details on our interest rate swap derivative instruments.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Maturities of Long–Term Debt
+Added: As of December 31, 2022, the maturities of our long–term debt, excluding interest to be accrued, are as follows:
+Added: COMMITMENTS AND CONTINGENCIES
+Added: Insurance Matters
+Added: Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions.
+Added: 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.
+Added: Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate.
+Added: 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.
+Added: 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.
+Added: Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.
+Added: We are also self–insured for property damage to our offshore assets.
+Added: In August 2021, Hurricane Ida made landfall in Louisiana, causing operational disruptions, damage to compressors and a temporary shutdown of facilities in Louisiana that negatively impacted our financial performance in the quarter.
+Added: As of December 31, 2021, we had an insurance recovery of $ 2.8 million related to the facility and compressor damages, which we received in cash during the three months ended March 31, 2022.
+Added: In September 2022, we received an additional $ 0.4 million related to business interruption insurance recovery proceeds.
+Added: We are subject to a number of state and local taxes that are not income–based.
+Added: 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.
+Added: 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.
+Added: As of December 31, 2022 and 2021, we accrued $ 3.9 million and $ 5.8 million, respectively, for the outcomes of non–income–based tax audits.
+Added: We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued.
+Added: 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.
+Added: 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.
+Added: During the years ended December 31, 2022 and 2021, certain of our sales and use tax audits advanced from the audit review phase to the contested hearing phase.
+Added: As of both December 31, 2022 and 2021, we accrued $ 0.6 million for these audits.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: In 2020, we settled a certain sales and use tax audit for which we recorded a $ 12.4 million net benefit in our consolidated statements of operations.
+Added: This net benefit was primarily reflected as decreases of $ 4.4 million and $ 7.9 million to cost of sales (excluding depreciation and amortization) and SG&A, respectively.
+Added: We received a cash refund of $ 17.3 million in the fourth quarter of 2020 related to this settlement and have a $ 2.0 million accrued liability recorded as of December 31, 2022, which is included in our accrual for non–income–based tax audits discussed above.
+Added: Litigation and Claims
+Added: In the ordinary course of business, we are involved in various pending or threatened legal actions.
+Added: While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends.
+Added: 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.
+Added: STOCKHOLDERS’ EQUITY
At–the–Market Continuous Equity Offering Program
3 unchanged sentences
Any sales agent may also terminate the ATM Agreement but only with respect to itself.
−Removed: During the year ended December 31, 2021, we sold 357,148 shares of common stock for net proceeds of $ 3.4 million pursuant to the ATM Agreement.
−Removed: Elite Acquisition
−Removed: In August 2019, we completed the Elite Acquisition.
−Removed: A portion of the acquisition’s purchase price was funded through the issuance of 21.7 million shares of common stock with an acquisition date fair value of $ 225.9 million, which was recorded to common stock and additional paid-in capital in our consolidated statements of equity.
−Removed: See Note 4 (“Business Transactions”) for further details of this acquisition.
+Added: During the years ended December 31, 2022 and 2021, we sold 447,020 and 357,148 shares of common stock, respectively, for net proceeds of $ 4.2 million and $ 3.4 million, respectively, pursuant to the ATM Agreement.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
Cash Dividends
The following table summarizes our dividends declared and paid in each of the quarterly periods of 2022, 2021 and 2020:
−Removed: Declared Dividends
+Added: Dividends per
Dividends Paid
−Removed: per Common Share
−Removed: (in thousands)
On January 26, 2023, our Board of Directors declared a quarterly dividend of $ 0.15 per share of common stock, or approximately $ 23.6 million, which was paid on February 14, 2023 to stockholders of record at the close of business on February 7, 2023.
+Added: Accumulated Other Comprehensive Loss
+Added: Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with owners.
+Added: Our accumulated other comprehensive loss consists of changes in the fair value of our interest rate swap derivative instruments, net of tax.
+Added: See Note 24 for further details on our interest rate swap derivative instruments.
+Added: The following table presents the changes in accumulated other comprehensive loss, net of tax:
+Added: Year Ended December 31,
+Added: Beginning accumulated other comprehensive loss
+Added: Other comprehensive income (loss), net of tax:
+Added: Loss recognized in other comprehensive income
+Added: Loss reclassified from accumulated other comprehensive loss to interest expense
+Added: Total other comprehensive income (loss)
+Added: Ending accumulated other comprehensive loss
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
REVENUE FROM CONTRACTS WITH CUSTOMERS
−Removed: The following table presents our revenue from contracts with customers by segment (see Note 22 (“Segments”)) and disaggregated by revenue source:
+Added: The following table presents our revenue from contracts with customers by segment (see Note 28) and disaggregated by revenue source:
Year Ended December 31,
−Removed: (in thousands)
Contract operations:
10 unchanged sentences
All other contract operations revenue is recognized over time.
−Removed: (3) Includes a reversal of $ 0.9 million of revenue during the year ended December 31, 2019 related to changes in estimates of performance obligations partially satisfied in prior periods.
(3) Services revenue within aftermarket services is recognized over time.
2 unchanged sentences
As of December 31, 2022, we had $ 310.5 million of remaining performance obligations related to our contract operations segment, which will be recognized through 2027 as follows:
−Removed: (in thousands)
Remaining performance obligations
We do 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.
−Removed: Contract Assets and Liabilities
−Removed: Contract Assets
−Removed: As of December 31, 2021 and 2020, our receivables from contracts with customers, net of allowance for credit losses, were $ 84.7 million and $ 95.6 million, respectively.
−Removed: Contract Liabilities
−Removed: Freight billings to customers for the transport of compression assets, customer-specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability.
−Removed: Our contract liabilities were $ 4.4 million and $ 4.6 million as of December 31, 2021 and 2020, respectively, and were included in deferred revenue and other liabilities in our consolidated balance sheets.
−Removed: During the year ended December 31, 2021, we deferred revenue of $ 10.2 million and recognized $ 10.4 million as revenue.
−Removed: The revenue recognized and deferred during the period primarily related to freight billings and milestone billings on aftermarket services.
+Added: STOCK–BASED COMPENSATION
+Added: The 2020 Plan and the 2013 Plan both provide for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock–based awards and dividend equivalent rights to our employees, directors and consultants.
+Added: No additional grants may be made under the 2013 Plan following the adoption of the 2020 Plan.
+Added: Previous grants made under the 2013 Plan continue to be governed by that plan and the applicable award agreements.
+Added: As of December 31, 2022, the maximum number of shares of common stock available for issuance under the 2020 Plan is 8,500,000 , and 5.9 million shares remain available for grant.
+Added: Each stock–settled award granted under the 2020 Plan reduces the number of shares available for issuance by one share.
+Added: Cash–settled awards are not counted against the aggregate share limit.
+Added: Shares subject to awards granted under the 2020 Plan that are subsequently canceled, terminated, settled in cash or forfeited, excluding shares withheld to satisfy tax withholding obligations or to pay the exercise price of an option, are available for future grant under the 2020 Plan.
+Added: Our policy is to issue new shares when restricted stock units and performance–based restricted stock units are vested.
+Added: We account for forfeitures as they occur.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Both the 2020 Plan and the 2013 Plan allow us to withhold shares upon vesting of restricted stock at the then–current market price to cover taxes required to be withheld on the vesting date.
+Added: During the years ended December 31, 2022, 2021 and 2020, we withheld 283,024 shares valued at $ 2.4 million, 283,972 shares valued at $ 2.5 million and 236,752 shares valued at $ 1.8 million, respectively, to cover tax withholding.
+Added: Restricted Stock Awards and Performance–Based Restricted Stock Units
+Added: Grants of restricted stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in three equal installments following the date of grant.
+Added: Compensation expense is recognized over the vesting period equal to the fair value of our common stock at the grant date.
+Added: Our restricted stock includes rights to receive dividends or dividend equivalents.
+Added: Grants of performance–based restricted stock units are three –year equity settled awards linked to the performance of our common stock.
+Added: The awards also include dividend equivalent rights that accumulate during the vesting period.
+Added: The vesting of the performance–based restricted stock units is dependent of the satisfaction of a combination of certain service–related conditions and our total shareholder return ranked against that of a predetermined peer group over a three –year performance period.
+Added: The awards vest in their entirety on the date specified in the award agreement following the conclusion of the performance period.
+Added: The final number of shares of common stock issuable upon vesting can range from 0 % to 200 % of the initial grant depending on the level of achievement as determined by the Compensation Committee of our Board of Directors.
+Added: The fair value of the performance–based restricted stock units, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model.
+Added: Expected volatilities for us and each peer company utilized in the model are estimated using a historical period consistent with the awards’ remaining performance period as of the grant date.
+Added: The risk–free interest rate is based on the yield on U.S.
+Added: Treasury Separate Trading of Registered Interest and Principal Securities for a term consistent with the remaining performance period.
+Added: The dividend yield used is 0.0 % to approximate accumulation of earnings.
+Added: The assumptions that were used to estimate the fair value of our performance–based stock units are as follows:
+Added: Year Ended December 31,
+Added: Remaining performance period as of grant date (in years)
+Added: Risk-free interest rate used
+Added: Grant-date fair value
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Activity related to our restricted stock and performance–based restricted stock units is as follows:
+Added: Non-vested restricted stock and performance-based restricted stock units, December 31, 2021
+Added: Non-vested restricted stock and performance-based restricted stock units, December 31, 2022
+Added: The grant date fair value of the restricted stock and performance–based restricted stock units granted during the years ended December 31, 2022, 2021 and 2020 was $ 14.3 million, $ 12.1 million and $ 11.9 million, respectively.
+Added: The fair value of the restricted stock and performance–based restricted stock units vested during the years ended December 31, 2022, 2021 and 2020 was $ 9.3 million, $ 8.5 million and $ 6.6 million, respectively.
+Added: As of December 31, 2022, we expect $ 12.7 million of unrecognized compensation cost related to our non–vested restricted stock and performance–based restricted stock units to be recognized over the weighted–average period of 1.8 years.
+Added: Cash Settled Performance Units
+Added: Grants of cash–settled performance units vest at the end of the three year vesting period and are payable in an amount of cash equivalent to the value of our common stock at the vesting date for each unit vested.
+Added: These awards are subject to one of more performance conditions and are accounted for as liability awards with expense based on the fair value measured at the end of each reporting period.
+Added: These awards also include dividend equivalent rights that accumulated during the vesting period.
+Added: At the end of each reporting period, the Compensation Committee of our Board of Directors approves the determination of achievement for each performance measure, which can range from 0 % to 200 % .
+Added: Activity related to our cash–settled performance units is as follows:
+Added: Non-vested cash-settled performance units, December 31, 2021
+Added: Non-vested cash-settled performance units, December 31, 2022
+Added: The grant date fair value of the cash settled performance units granted during the years ended December 31, 2022, 2021 and 2020 was $ 2.5 million, $ 2.3 million and $ 1.8 million, respectively.
+Added: Cash paid upon vesting of these cash settled performance units during the years ended December 31, 2022, 2021 and 2020 was $ 1.2 million, $ 0.6 million and $ 0.5 million, respectively.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: As of December 31, 2022, we expect $ 3.0 million of unrecognized compensation cost related to our non–vested liability awards to be recognized over the weighted–average period of 1.9 years.
+Added: Employee Stock Purchase Plan
+Added: Our ESPP provides employees with an opportunity to participate in our long–term performance and success through the purchase of shares of common stock at a price that may be less than fair market value.
+Added: Each quarter, eligible employees may elect to withhold a portion of their salary up to the lesser of $ 25,000 per year or 10 % of their eligible pay at a price equal to 85 % to 100 % of the fair market value of the stock as defined by the plan.
+Added: The purchase discount under the ESPP is 5 % of the fair market value of our common stock on the first or last trading day of the quarter, whichever is lesser.
+Added: Our ESPP is compensatory and, as a result, we record an expense in our consolidated statements of operations related to the ESPP.
+Added: The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, unless it is extended.
+Added: The maximum number of shares of common stock available for purchase under the ESPP is 1.0 million.
+Added: As of December 31, 2022, 429,250 shares remained available for purchase under the ESPP.
+Added: Directors’ Stock and Deferral Plan
+Added: Our DSDP provides non–employee members of the Board of Directors with an opportunity to elect to receive our common stock as payment for a portion or all of their retainer.
+Added: The number of shares paid each quarter is determined by dividing the dollar amount of fees elected to be paid in common stock by the closing sales price per share of the common stock on the last day of the quarter.
+Added: In addition, directors who elect to receive a portion or all of their fees in the form of common stock may also elect to defer, until a later date, the receipt of a portion or all of their fees to be received in common stock.
+Added: In this case, we issue restricted stock units and the rights to receive dividends or dividend equivalents is accrued and paid when the shares are issued.
+Added: There are 100,000 shares reserved under the DSDP and, as of December 31, 2022, 37,771 shares remained available to be issued under the plan.
+Added: Stock–Based Compensation Expense
+Added: Stock–based compensation expense is as follows:
+Added: Year Ended December 31,
+Added: Equity award expense
+Added: Liability award expense (1)
+Added: Total stock-based compensation expense
+Added: (1) In 2021, we reversed a prior period expense of $ 2.1 million as the result of revised estimates of performance achievement of our 2020 and 2019 cash–settled performance–based restricted stock units.
+Added: RETIREMENT BENEFIT PLAN
+Added: Our 401(k) retirement plan provides for optional employee contributions up to the applicable IRS annual limit and discretionary employer matching contributions.
+Added: We make discretionary matching contributions to each participant’s account at a rate of 100 % of each participant’s contributions up to 5 % of eligible compensation.
+Added: We recorded matching contributions of $ 4.9 million, $ 4.4 million and $ 5.6 million during the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
LONG–LIVED AND OTHER ASSET IMPAIRMENT
−Removed: We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable.
−Removed: In the first quarter of 2020, we determined that the impairment of our contract operations reporting unit’s goodwill was an indicator of potential impairment of the carrying amount of our long-lived assets, including our compressor fleet and associated customer and contract-based intangible assets.
−Removed: Accordingly, we performed a quantitative impairment test of our long-lived assets, by which we determined that they were not also impaired.
−Removed: No similar impairment has been indicated subsequent to the first quarter of 2020.
Compression Fleet
7 unchanged sentences
Year Ended December 31,
−Removed: (dollars in thousands)
Idle compressors retired from the active fleet
1 unchanged sentence
Impairment recorded on idle compressors retired from the active fleet
+Added: In the first quarter of 2020, the global response to the COVID–19 pandemic significantly impacted our market capitalization and estimates of future revenues and cash flows, which triggered the need to perform a quantitative test of the fair value of our contract operations reporting unit as of March 31, 2020.
+Added: The quantitative test determined that the carrying amount of our contract operations reporting unit exceeded its fair value and we recorded a goodwill impairment loss of $ 99.8 million during the first quarter of 2020.
Other Impairment
During the year ended December 31, 2020, $ 1.7 million of capitalized implementation and unamortized prepaid costs related to the mobile workforce component of our process and technology transformation project was impaired.
−Removed: See Note 12 (“Hosting Arrangements”) for further details.
+Added: See Note 10 for further details.
RESTRUCTURING CHARGES
−Removed: During the first quarter of 2020, we completed restructuring activities to further streamline our organization and more fully align our teams to improve our customer service and profitability.
+Added: In response to the decreased activity level of our customers that resulted from the COVID–19 pandemic, we recorded pandemic restructuring charges for severance costs of $ 1.7 million and $ 5.3 million during the years ended December 31, 2021 and 2020, respectively.
+Added: We do not expect to incur additional material costs under this restructuring plan.
+Added: During the year ended December 31, 2021, management approved and initiated a plan to exit a facility no longer deemed economical for our business, and we incurred $ 0.9 million of costs to complete the exit of the facility.
+Added: We do not expect to incur additional material costs under this restructuring plan.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: During the year ended December 31, 2020, we completed restructuring activities to further streamline our organization and more fully align our teams to improve our customer service and profitability.
We incurred severance costs of $ 1.7 million related to these activities during the first quarter of 2020.
No additional costs will be incurred for this organizational restructuring.
−Removed: In response to the decreased activity level of our customers that resulted from the COVID-19 pandemic beginning in the second quarter of 2020, we incurred severance costs of $ 7.0 million to right-size our business.
−Removed: No additional costs will be incurred under this restructuring plan.
−Removed: During the third quarter of 2020, a plan to dispose of certain non-core properties was approved by management.
−Removed: We have incurred $ 1.5 million of costs as a result of these property disposals.
−Removed: No additional costs will be incurred under this restructuring plan.
−Removed: During the third quarter of 2021, management approved and initiated a plan to exit a facility no longer deemed economical for our business, and in the fourth quarter, we incurred $ 0.9 million of costs to complete the exit of this facility.
−Removed: We do not expect to incur additional material costs under this restructuring plan.
−Removed: The severance and property disposal costs incurred under the above restructuring plans were recorded to restructuring charges in our consolidated statements of operations.
−Removed: The following table presents the changes to our accrued liability balance related to restructuring charges during the year ended December 31, 2021:
−Removed: (in thousands)
−Removed: Restructuring
−Removed: Restructuring
−Removed: Restructuring
−Removed: Restructuring
−Removed: Balance at December 31, 2020
−Removed: Charges incurred
−Removed: Balance at December 31, 2021
+Added: Management also approved a plan to dispose of certain non–core properties, and we incurred $ 1.5 million of costs as a result of these property disposals.
+Added: No additional charges will be incurred under this restructuring plan.
The following table presents restructuring charges incurred by segment:
−Removed: (in thousands)
−Removed: Year ended December 31, 2021
Pandemic restructuring
−Removed: 2020 Property restructuring - other exit costs
−Removed: 2021 Property restructuring - other exit costs
+Added: 2021 property restructuring
+Added: 2020 property restructuring
Other restructuring
Total restructuring charges
−Removed: Year ended December 31, 2020
Organizational restructuring
2 unchanged sentences
Impairment loss
−Removed: Total 2020 Property restructuring
Total restructuring charges
−Removed: (1) Represents expense incurred within our corporate function and not directly attributable to our segments.
The following table presents restructuring charges incurred by cost type:
−Removed: Years Ended December 31,
−Removed: (in thousands)
+Added: Year Ended December 31,
Severance costs
8 unchanged sentences
Total restructuring charges
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
Current and Deferred Tax Provision
1 unchanged sentence
Year Ended December 31,
−Removed: (in thousands)
Current tax provision (benefit):
3 unchanged sentences
Provision for (benefit from) income taxes
−Removed: The provision for (benefit from) income taxes for the years ended December 31, 2021, 2020 and 2019 resulted in effective tax rates on continuing operations of 28 %, 20 % and ( 67 )%, respectively.
−Removed: The following table reconciles these effective tax rates to the U.S.
−Removed: statutory rate of 21 %, the rate in effect during the years ended December 31, 2021, 2020 and 2019:
+Added: The provision for (benefit from) income taxes for the years ended December 31, 2022, 2021 and 2020 resulted in effective tax rates of 27 %, 28 % and 20 % , respectively.
+Added: The reconciliation of these effective tax rates to the U.S.
+Added: statutory rate of 21 % is as follows:
Year Ended December 31,
−Removed: (in thousands)
Income taxes at U.S.
5 unchanged sentences
Provision for (benefit from) income taxes
−Removed: (1) Includes the expiration of statute of limitations and in 2019, also reflects a decrease in our uncertain tax benefit, net of federal benefit, due to settlements of tax audits.
+Added: (1) Includes the expiration of statute of limitations.
See “Unrecognized Tax Benefits” below for further details.
(2) See “Tax Attributes and Valuation Allowances” below for further details.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
Deferred income tax balances are the direct effect of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the taxes are actually paid or recovered.
−Removed: The tax effects of temporary differences that gave rise to deferred tax assets and deferred tax liabilities were as follows:
−Removed: (in thousands)
+Added: The tax effects of our temporary differences that gave rise to deferred tax assets and deferred tax liabilities were as follows:
Deferred tax assets:
Net operating loss carryforwards
+Added: Interest expense limitation carryforward
Accrued liabilities
7 unchanged sentences
(1) See “Tax Attributes and Valuation Allowances” below for further details.
−Removed: (2) The 2021 and 2020 net deferred tax assets are reflected in our consolidated balance sheets as deferred tax assets of $ 47.9 million and $ 56.9 million, respectively, and deferred tax liabilities of $ 1.1 million and $ 0.7 million, respectively.
+Added: (2) The 2022 net deferred tax assets are reflected in our consolidated balance sheets as deferred tax assets of $ 33.4 million and $ 47.9 million, respectively, and deferred tax liabilities of $ 0.9 million and $ 1.1 million, respectively.
Both the 2022 and 2021 balances are based on a U.S.
1 unchanged sentence
Tax Attributes and Valuation Allowances
+Added: Changes in our valuation allowance are as follows:
Year Ended December 31,
−Removed: (in thousands)
Balance at beginning of period
2 unchanged sentences
Balance at end of period
−Removed: (1) In 2019, excludes $ 5.6 million related to discontinued operations .
Pursuant to Sections 382 and 383 of the Code, utilization of loss and credit carryforwards are subject to annual limitations due to any ownership changes of 5% stockholders.
4 unchanged sentences
federal income tax may be limited in the future if we have a 50% or more ownership change in our 5% stockholders.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
We record valuation allowances when it is more likely than not that some portion or all of our deferred tax assets will not be realized.
3 unchanged sentences
Changes to the valuation allowance are reflected in the statement of operations.
−Removed: As of December 31, 2019, we achieved a three-year cumulative book income, and together with other positive and negative evidence, we concluded that there was sufficient positive evidence of projected future taxable income to release the $ 50.8 million valuation allowance previously required for our overall net deferred tax asset position.
−Removed: This release was offset by a $ 0.6 million increase in the valuation allowance on our state NOL deferred tax asset.
−Removed: The overall impact of the change in the valuation allowance was recorded as a $ 50.2 million benefit from income taxes in our consolidated statements of operations and a $ 50.2 million increase in deferred tax assets in our consolidated balance sheets, of which $ 44.6 million and $ 5.6 million were recorded to continuing operations and discontinued operations, respectively.
The amount of our deferred tax assets considered realizable could be adjusted if projections of future taxable income are reduced or objective negative evidence in the form of a three–year cumulative loss is present or both.
−Removed: Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely NOL carryforwards and tax credit carryforwards.
+Added: Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely NOL, interest expense limitation and tax credit carryforwards.
This may result in the need to record a valuation allowance against all or a portion of our deferred tax assets.
4 unchanged sentences
In connection with the state NOL deferred tax asset, we recorded a valuation allowance of $ 0.6 million and $ 0.7 million as of December 31, 2022 and 2021, respectively.
−Removed: At December 31, 2021, we had U.S.
−Removed: federal and state tax credit carryforwards of $ 3.0 million and $ 0.1 million, respectively.
−Removed: If not used, the federal and state tax credit carryforwards will begin to expire in 2037 and 2041, respectively.
+Added: At December 31, 2022, we had a U.S.
+Added: federal tax credit carryforward of $ 3.0 million.
+Added: If not used, the federal tax credit carryforward will begin to expire in 2037.
+Added: As of December 31, 2022, we had U.S.
+Added: federal and state interest expense limitation carryforwards of $ 86.4 million and $ 26.5 million, respectively, included in our interest expense limitation deferred tax asset that are available to offset future taxable income.
+Added: These carryforwards have no expiration.
Unrecognized Tax Benefits
−Removed: A reconciliation of the unrecognized tax benefit (including discontinued operations) activity is shown below:
+Added: Changes in our unrecognized tax benefits (including discontinued operations) are as follows:
Year Ended December 31,
−Removed: (in thousands)
Beginning balance
1 unchanged sentence
Additions based on tax positions related to prior years
−Removed: Reductions based on settlement refunds from government authorities
Reductions based on tax positions related to prior years
2 unchanged sentences
We had $ 19.7 million, $ 19.6 million and $ 18.9 million of unrecognized tax benefits at December 31, 2022, 2021 and 2020, respectively, of which $ 1.1 million, $ 2.1 million and $ 2.9 million, respectively, would affect the effective tax rate if recognized and $ 7.9 million, $ 7.9 million and $ 7.9 million, respectively, would be reflected in income from discontinued operations, net of tax if recognized.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
We recorded $ 2.1 million, $ 2.2 million and $ 2.1 million of potential interest expense and penalties related to unrecognized tax benefits associated with uncertain tax positions (including discontinued operations) in our consolidated balance sheets as of the years ended December 31, 2022, 2021 and 2020, respectively.
To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as reductions in income tax expense.
−Removed: We recorded $ 0.1 million of potential interest expense and penalties in our consolidated statements of operations during the year ended December 31, 2021, and releases of $ 0.1 million during each of the years ended December 31, 2020 and 2019.
+Added: We recorded no potential expenses or releases of interest or penalties in our consolidated statements of operations during 2022, $ 0.1 million of potential interest expense and penalties during 2021, and releases of $ 0.1 million during 2020.
Subject to the provisions of our tax matters agreement with Exterran Corporation, 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.
−Removed: As of both December 31, 2021 and 2020, we recorded an indemnification asset (including penalties and interest) of $ 7.9 million, which is related to unrecognized tax benefits in our consolidated balance sheets.
+Added: As of both December 31, 2022 and 2021, we recorded an indemnification asset (including penalties and interest) of $ 7.9 million, which is related to unrecognized tax benefits in our consolidated balance sheets (see Note 26).
We and our subsidiaries file consolidated and separate income tax returns in the U.S.
11 unchanged sentences
We are not currently involved in any state audits.
−Removed: During the year ended December 31, 2019, we settled certain state audits, which resulted in a refund of $ 2.4 million and a reduction in previously-accrued uncertain tax benefits of $ 4.4 million.
As of December 31, 2022, we believe it is reasonably possible that $ 2.7 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to December 31, 2023 due to the settlement of audits or the expiration of statutes of limitations or both.
However, due to the uncertain and complex application of the tax regulations, it is possible that the ultimate resolution of these matters may result in liabilities that could materially differ from this estimate.
−Removed: In March 2020, President Trump signed into law the CARES Act, which includes, among other things, refundable payroll tax credits, deferment of employer-side social security payments, NOL carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.
−Removed: The CARES Act provisions did not have a material impact on our consolidated financial statements.
−Removed: Future regulatory guidance under the CARES Act or additional legislation enacted by Congress in connection with the COVID-19 pandemic could impact our tax provision in future periods.
−Removed: Earnings per Share
+Added: Impact of New Legislation
+Added: On August 16, 2022, President Biden signed into law the Inflation Reduction Act (Public Law Number 117–169).
+Added: The legislation is expected to have an immaterial impact to our effective tax rate.
+Added: NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed using the two–class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings.
3 unchanged sentences
Diluted net income (loss) per common share is computed using the weighted average number of shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options, performance–based restricted stock units and stock to be issued pursuant to our ESPP unless their effect would be anti–dilutive.
−Removed: The following table shows the calculation for net income (loss) attributable to common stockholders, which is used in the calculation of basic and diluted net income (loss) per common share:
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The following table shows the calculations for net income (loss) attributable to common stockholders and potential shares of common stock, which is used in the calculation of basic and diluted net income (loss) per common share:
Year Ended December 31,
−Removed: (in thousands)
−Removed: Income (loss) from continuing operations
−Removed: Loss from discontinued operations, net of tax
Net income (loss)
−Removed: Earnings attributable to participating securities
+Added: Allocation of earnings to participating securities
Net income (loss) attributable to common stockholders
−Removed: The following table shows the potential shares of common stock that were included in computing diluted net income (loss) per common share:
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Weighted average common shares outstanding including participating securities
−Removed: Weighted average participating securities outstanding
−Removed: Weighted average common shares outstanding used in basic net income (loss) per common share
−Removed: Net dilutive potential common shares issuable:
−Removed: On exercise of options and vesting of performance-based restricted stock units
−Removed: On settlement of ESPP shares
−Removed: Weighted average common shares outstanding used in diluted net income (loss) per common share
−Removed: The following table shows the potential shares of common stock issuable that were excluded from computing diluted net income (loss) per common share as their inclusion would have been anti-dilutive:
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: On exercise of options where exercise price is greater than average market value for the period
−Removed: On exercise of options and vesting of performance-based restricted stock units
−Removed: On settlement of ESPP shares
+Added: Weighted average common shares outstanding used in basic income (loss) per common share
+Added: Effect of dilutive securities:
+Added: Performance-based restricted stock units
+Added: Weighted average common shares outstanding used in diluted income (loss) per common share
+Added: Anti-dilutive shares excluded from diluted income (loss) per common share
+Added: Stock options
+Added: Performance-based restricted stock units
Net dilutive potential common shares issuable
−Removed: We use derivative instruments to manage our exposure to fluctuations in the variable interest rate of our Credit Facility.
−Removed: As of December 31, 2021, we had $ 300.0 million notional value of interest rate swaps outstanding, which expire in March 2022.
−Removed: We entered into these swaps to offset changes in expected cash flows due to fluctuations in the associated variable interest rates and designated them as cash flow hedges.
−Removed: The counterparties to these derivative agreements are major financial institutions.
−Removed: We monitor the credit quality of these financial institutions and do not expect nonperformance by any counterparty, although such nonperformance could have an adverse effect on us.
−Removed: We have no collateral posted for our derivative instruments.
−Removed: During the year ended December 31, 2021, we dedesignated $ 125.0 million notional value of our interest rate swaps.
−Removed: The fair value of this interest rate swap immediately prior to dedesignation was a liability of $ 1.6 million.
−Removed: The associated amount in accumulated other comprehensive loss related to this interest rate swap is being amortized into interest expense over the remaining term of the swap through March 2022.
−Removed: Changes in the fair value of the dedesignated interest rate swap subsequent to dedesignation are recorded in interest expense.
−Removed: The remaining $ 175.0 million notional value of our interest rate swaps continue to be designated as cash flow hedging instruments.
−Removed: We expect the hedging relationship to be highly effective as the interest rate swap terms substantially coincide with the hedged item and are expected to offset changes in expected cash flows due to fluctuations in the variable rate.
−Removed: We estimate that $ 1.2 million of the deferred pre-tax loss attributable to interest rate swaps included in accumulated other comprehensive loss at December 31, 2021 will be reclassified into earnings as interest expense at then-current values during the next 12 months as the underlying hedged transactions occur.
−Removed: As of December 31, 2021, the weighted average effective fixed interest rate of our interest rate swaps was 1.8 %.
−Removed: The following table presents the effect of our derivative instruments on our consolidated balance sheets:
−Removed: (in thousands)
+Added: DERIVATIVES AND HEDGING
+Added: Prior to the expiration of our interest rate swaps in March 2022, we used derivative instruments to manage our exposure to fluctuations in the variable interest rate of our Credit Facility.
+Added: We do not use derivative instruments for trading or other speculative purposes.
+Added: We had entered into three interest rate swaps with an aggregate notional amount of $ 300.0 million to offset changes in the expected cash flows due to fluctuations in the associated variable interest rates and designated them as cash flow hedges.
+Added: In 2021, we dedesignated one of the interest rate swaps with a $ 125.0 million notional value.
+Added: At the time of dedesignation, the fair value of this interest rate swap was a liability of $ 1.6 million.
+Added: The associated amount in accumulated other comprehensive loss related to this interest rate swap was amortized into interest expense over the remaining term of the swap through its expiration in March 2022.
+Added: Changes in the fair value of this interest rate swap subsequent to dedesignation and prior to expiration were recorded in interest expense, the same consolidated statement of operations line item to which the earnings effect of the hedged item was recorded.
+Added: The remaining interest rate swaps had a $ 175.0 million notional value and were designated as (highly effective) cash flow hedging instruments until their expiration.
+Added: Changes in the fair value of these interest rate swaps were recognized as a component of other comprehensive income (loss) until the hedged transactions affected earnings.
+Added: At that time, amounts were reclassified into earnings to interest expense, the same consolidated statement of operations line item to which the earnings effect of the hedged items were recorded.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The effect of our derivative instruments on our consolidated balance sheet is as follows:
Interest rate swaps designated as cash flow hedging instruments
Accrued liabilities
−Removed: Other liabilities
−Removed: Total derivatives designated as cash flow hedging instruments
Interest rate swaps not designated as hedging instruments
1 unchanged sentence
Total derivative liabilities
−Removed: The following table presents the effect of our derivative instruments on our consolidated statements of operations:
+Added: The effect of our derivative instruments on our consolidated statements of operations is as follows:
Year Ended December 31,
−Removed: (in thousands)
Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded
Interest rate swaps designated as cash flow hedging instruments:
−Removed: Pre-tax loss recognized in other comprehensive income (loss)
−Removed: Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense
+Added: Pre-tax loss recognized in other comprehensive income
+Added: Pre-tax loss reclassified from accumulated other comprehensive loss into interest expense
Interest rate swaps not designated as hedging instruments:
Gain recognized in interest expense
−Removed: See Note 2 (“Basis of Presentation and Significant Accounting Policies”), Note 15 (“Accumulated Other Comprehensive Income (Loss)”) and Note 23 (“Fair Value Measurements”) for further details on our derivative instruments.
+Added: See Note 16 and Note 25 for further details on our derivative instruments.
FAIR VALUE MEASUREMENTS
The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:
−Removed: • Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.
+Added: ● Level 1 – quoted unadjusted prices for identical markets in active markets to which we have access at the date of measurement.
● Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model–derived valuations in which all significant inputs and significant value drivers are observable in active markets.
−Removed: Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.
−Removed: • Level 3 — Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable.
−Removed: Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.
+Added: Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered markets makers.
+Added: ● Level 3 – model–derived valuation in which one or more significant inputs or significant value drivers are unobservable.
+Added: Unobservable inputs are those that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
−Removed: On a quarterly basis, our interest rate swap derivative instruments are valued based on the income approach (discounted cash flow) using market observable inputs, including LIBOR forward curves.
−Removed: These fair value measurements are classified as Level 2.
−Removed: The following table presents our derivative position measured at fair value on a recurring basis, with pricing levels as of the date of valuation:
−Removed: (in thousands)
−Removed: Derivative liabilities
+Added: Investment in ECOTEC
+Added: As of December 31, 2022, we owned a 22.7 % equity interest in ECOTEC (see Note 11).
+Added: We have elected the fair value option to account for this investment.
+Added: The fair value determination of this investment primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date.
+Added: The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples.
+Added: Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement.
+Added: As of December 31, 2022, the fair value of our investment in ECOTEC is $ 12.8 million.
+Added: This fair value measurement is classified as Level 3 .
+Added: The significant unobservable inputs are as follows:
+Added: Significant Unobservable Inputs
+Added: Valuation technique:
+Added: Discounted cash flow
+Added: Guideline public company
+Added: Revenue multiple
+Added: 1.7 x - 8.0 x
+Added: The reconciliation of changes in the fair value of our investment in ECOTEC is as follows:
+Added: Year Ended December 31,
+Added: Balance at January 1
+Added: Purchases of equity interests
+Added: Unrealized loss (1)
+Added: Balance at December 31
+Added: Included in other expense (income) in our consolidated statements of operations.
+Added: Interest Rate Swaps
+Added: As of December 31, 2021, the fair value of our interest rate swaps was a liability of $ 1.3 million.
+Added: Prior to their expiration in the first quarter of 2022, our interest rate swaps were valued quarterly based on the income approach (discounted cash flows) using market observable inputs, including LIBOR forward curves.
+Added: These fair value measurements were classified as Level 2 .
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
−Removed: In the first quarter of 2020, we determined that the significant deterioration in global macroeconomic conditions caused by the COVID-19 pandemic was an indicator of potential impairment of our goodwill, and we performed a quantitative impairment test as of March 31, 2020 that resulted in a $ 99.8 million impairment of our goodwill.
−Removed: Significant estimates used in our impairment analysis included cash flow forecasts, our estimate of the market’s weighted average cost of capital and market multiples, which are Level 3 inputs.
−Removed: See Note 9 (“Goodwill”) for further details of the valuation methodology used in connection with the goodwill impairment.
−Removed: During the years ended December 31, 2021 and 2020, we recorded nonrecurring fair value measurements related to our idle compressors.
+Added: During the years ended December 31, 2022 and 2021, we recorded nonrecurring fair value measurements related to our idle compressors (see Note 20).
Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use.
1 unchanged sentence
These fair value measurements are classified as Level 3.
−Removed: The fair value of our compressors impaired during the years ended December 31, 2021 and 2020 was as follows:
−Removed: (in thousands)
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The fair value of our compressors impaired is as follows:
Impaired compressors
10 unchanged sentences
(1) Calculated based on an estimated discount for market liquidity of 51 % and 64 % as of December 31, 2022 and 2021, respectively .
−Removed: See Note 18 (“Long-Lived and Other Asset Impairment”) for further details.
+Added: See Note 20 for further details.
Other Financial Instruments
3 unchanged sentences
The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:
−Removed: (in thousands)
Carrying amount of fixed rate debt (1)
1 unchanged sentence
(1) Carrying amounts are shown net of unamortized debt premium and deferred financing costs.
−Removed: See Note 14 (“Long-Term Debt”).
−Removed: Stock-Based Compensation
−Removed: We recognize stock-based compensation expense related to restricted stock awards, restricted stock units, performance-based restricted stock units and shares issued under our ESPP.
−Removed: We account for forfeitures as they occur.
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Equity award expense
−Removed: Liability award (benefit) expense (1)
−Removed: Total stock-based compensation expense
−Removed: (1) In 2021, includes a reversal of prior period expense of $ 2.1 million during the fourth quarter as the result of revised estimates of performance achievement of our 2019 and 2020 cash-settled performance-based restricted stock units.
−Removed: Stock Incentive Plans
−Removed: The 2020 Plan was adopted in April 2020 and provides for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock-based awards and dividend equivalent rights to employees, directors and consultants of Archrock.
−Removed: The 2020 Plan is administered by the compensation committee of our Board of Directors.
−Removed: Under the 2020 Plan, the maximum number of shares of common stock available for issuance is 8,500,000 .
−Removed: Each stock-settled award granted under the 2020 Plan reduces the number of shares available for issuance by one share.
−Removed: Cash-settled awards are not counted against the aggregate share limit.
−Removed: Shares subject to awards granted under the 2020 Plan that are subsequently canceled, terminated, settled in cash or forfeited, excluding shares withheld to satisfy tax withholding obligations or to pay the exercise price of an option, are available for future grant under the 2020 Plan.
−Removed: No additional grants may be made under the 2013 Plan following the adoption of the 2020 Plan.
−Removed: Previous grants made under the 2013 Plan continue to be governed by that plan and the applicable award agreements.
−Removed: The 2020 Plan and 2013 Plan allow us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date.
−Removed: During the years ended December 31, 2021, 2020 and 2019, we withheld 283,972 shares valued at $ 2.5 million, 236,752 shares valued at $ 1.8 million and 212,080 shares valued at $ 2.0 million, respectively, to cover tax withholding.
−Removed: The compensation committee of our Board of Directors generally establishes its schedule for making annual long-term incentive awards, consisting of a combination of restricted shares and performance units vesting over multiple years, several months in advance and does not make such awards based on knowledge of material nonpublic information.
−Removed: Although the compensation committee of our Board of Directors has historically granted awards on a regular, predictable cycle, such awards may be granted at other times during the year, as determined in the sole discretion of the compensation committee.
−Removed: Restricted Stock
−Removed: Our outstanding restricted stock generally consists of stock-settled restricted stock awards and performance-based restricted stock units, and cash-settled performance-based restricted stock units.
−Removed: For grants of restricted stock, we recognize compensation expense over the vesting period equal to the fair value of our common stock at the grant date.
−Removed: Our restricted stock includes rights to receive dividends or dividend equivalents.
−Removed: We periodically remeasure the fair value of our cash-settled units and record a cumulative adjustment of the expense previously recognized.
−Removed: Our obligation related to the cash-settled units is reflected as a liability in our consolidated balance sheets.
−Removed: Restricted stock awards generally vest one-third per year , subject to continued service through the applicable vesting date.
−Removed: Performance-based restricted stock units generally vest in their entirety at the end of a three-year vesting period, also subject to continued service through the applicable vesting date.
−Removed: Some of our performance-based restricted stock units have a market-based condition that determines the number of restricted stock units and dividend equivalents earned.
−Removed: The market condition is based on our total shareholder return ranked against that of a predetermined peer group over a three-year performance period.
−Removed: The awards vest in their entirety on the date specified in the award agreement following the conclusion of the performance period.
−Removed: The fair value of the performance-based restricted stock units, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model.
−Removed: Expected volatilities for us and each peer company utilized in the model are estimated using a historical period consistent with the awards’ remaining performance period as of the grant date.
−Removed: The risk-free interest rate is based on the yield on U.S.
−Removed: Treasury Separate Trading of Registered Interest and Principal Securities for a term consistent with the remaining performance period.
−Removed: The dividend yield used is 0.0 % to approximate accumulation of earnings.
−Removed: The following table presents the inputs used and the grant date fair value calculated in the Monte Carlo simulation model for the performance-based restricted stock units awarded during the years ended December 31, 2021, 2020 and 2019:
−Removed: Year Ended December 31,
−Removed: Remaining performance period as of grant date (in years)
−Removed: Risk-free interest rate used
−Removed: Grant-date fair value
−Removed: The following table presents our restricted stock activity during the year ended December 31, 2021:
−Removed: (in thousands)
−Removed: Non-vested restricted stock, December 31, 2020
−Removed: Non-vested restricted stock, December 31, 2021 (3)
−Removed: (1) The weighted average grant date fair value of shares granted during the years ended December 31, 2021, 2020 and 2019 was $ 11.20 , $ 9.37 and $ 10.01 , respectively.
−Removed: (2) The total fair value of all awards vested during the years ended December 31, 2021, 2020 and 2019 was $ 9.1 million, $ 7.1 million and $ 9.0 million, respectively.
−Removed: (3) Non-vested awards as of December 31, 2021 were comprised of 523 cash-settled units and 2,055 stock-settled awards and units.
−Removed: As of December 31, 2021, we expect $ 12.6 million of unrecognized compensation cost related to our non-vested awards and units to be recognized over the weighted-average period of 1.8 years.
−Removed: Cash paid upon vesting of cash-settled restricted stock units during the years ended December 31, 2021, 2020 and 2019 was $ 0.6 million, $ 0.5 million and $ 1.3 million, respectively.
−Removed: Employee Stock Purchase Plan
−Removed: Adopted in 2017, our ESPP provides employees with an opportunity to participate in our long-term performance and success through the purchase of shares of common stock at a price that may be less than fair market value.
−Removed: Each quarter, eligible employees may elect to withhold a portion of their salary up to the lesser of $ 25,000 per year or 10 % of their eligible pay to purchase shares of our common stock at a price equal to 85 % to 100 % of the fair market value of the stock as defined by the plan.
−Removed: The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, unless it is extended.
−Removed: The maximum number of shares of common stock available for purchase under the ESPP is 1,000,000 .
−Removed: As of December 31, 2021, 521,719 shares remained available for purchase under the ESPP.
−Removed: Our ESPP is compensatory and, as a result, we record an expense in our consolidated statements of operations related to the ESPP.
−Removed: The purchase discount under the ESPP is 5 % of the fair market value of our common stock on the first or last trading day of the quarter, whichever is lower.
−Removed: Directors’ Stock and Deferral Plan
−Removed: Adopted in 2007, our DSDP provides non-employee members of the Board of Directors with an opportunity to elect to receive our common stock as payment for a portion or all of their retainer.
−Removed: The number of shares paid each quarter is determined by dividing the dollar amount of fees elected to be paid in common stock by the closing sales price per share of the common stock on the last day of the quarter.
−Removed: In addition, directors who elect to receive a portion or all of their fees in the form of common stock may also elect to defer, until a later date, the receipt of a portion or all of their fees to be received in common stock.
−Removed: There are 100,000 shares reserved under the DSDP and, as of December 31, 2021, 37,771 shares remained available to be issued under the plan.
−Removed: Retirement Benefit Plan
−Removed: Our 401(k) retirement plan provides for optional employee contributions up to the applicable IRS annual limit and discretionary employer matching contributions.
−Removed: We make discretionary matching contributions to each participant’s account at a rate of 100 % of each participant’s contributions up to 5 % of eligible compensation.
−Removed: We recorded matching contributions of $ 4.4 million, $ 5.6 million and $ 6.8 million during the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: Commitments and Contingencies
−Removed: Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions.
−Removed: 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.
−Removed: Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate.
−Removed: 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.
−Removed: 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.
−Removed: Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.
−Removed: We are also self-insured for property damage to our offshore assets.
−Removed: We are subject to a number of state and local taxes that are not income-based.
−Removed: 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.
−Removed: 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.
−Removed: As of December 31, 2021 and 2020, we accrued $ 5.8 million and $ 5.6 million, respectively, for the outcomes of non-income-based tax audits.
−Removed: We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued.
−Removed: 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.
−Removed: 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.
−Removed: In 2021, one of our sales and use tax audits advanced from the audit review phase to the contested hearing phase.
−Removed: We accrued $ 0.6 million and $ 0.9 million for this audit as of December 31, 2021 and 2020, respectively.
−Removed: In 2020, we settled a certain sales and use tax audit for which we recorded a $ 12.4 million net benefit in our consolidated statements of operations.
−Removed: This net benefit was primarily reflected as decreases of $ 4.4 million and $ 7.9 million to cost of sales (excluding depreciation and amortization) and SG&A, respectively.
−Removed: We received a cash refund of $ 17.3 million in the fourth quarter of 2020 related to this settlement and have a $ 2.0 million accrued liability recorded as of December 31, 2021, which is included in our accrual for non-income-based tax audits discussed above.
−Removed: 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.
−Removed: The tax contingencies mentioned above relate to tax matters for which we are responsible in managing the audit.
−Removed: As of December 31, 2020, we had an indemnification liability (including penalties and interest), in addition to the tax contingency above, of $ 1.6 million for our share of non-income-based tax contingencies related to audits being managed by Exterran Corporation.
−Removed: During the year ended December 31, 2021, these audits were settled and our indemnification liability was reduced to zero .
−Removed: Litigation and Claims
−Removed: In the ordinary course of business, we are involved in various pending or threatened legal actions.
−Removed: While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends.
−Removed: 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.
+Added: DISCONTINUED OPERATIONS
+Added: 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, including a tax matters agreement, which governs the respective rights, responsibilities and obligations of Exterran Corporation and us with respect to certain tax matters.
+Added: As of both December 31, 2022 and 2021, we had $ 7.9 million of unrecognized tax benefits (including interest and penalties) related to Exterran Corporation operations prior to the Spin-off recorded to liabilities of discontinued operations in our consolidated balance sheets.
+Added: We had an offsetting indemnification asset of $ 7.9 million related to these unrecognized tax benefits recorded to assets of discontinued operations as of both December 31, 2022 and 2021.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Assets and liabilities of discontinued operations are as follows:
+Added: Deferred tax assets
+Added: Assets of discontinued operations
+Added: Deferred tax liabilities
+Added: Liabilities of discontinued operations
+Added: The acquisition of Exterran Corporation by Enerflex, Ltd.
+Added: in October 2022 had no impact on the Spin–off related agreements discussed above.
RELATED PARTY TRANSACTIONS
−Removed: In connection with the closing of the Elite Acquisition, we issued 21.7 million shares of our common stock to JDH Capital, an affiliate of our customer Hilcorp.
−Removed: As long as JDH Capital, together with affiliates of Hilcorp, owns at least 7.5 % of our outstanding common stock, it will have the right to designate one director to our Board of Directors.
−Removed: As of December 31, 2021, JDH Capital owned 11.1 % of our outstanding common stock.
−Removed: Hildebrand, founder and executive chairman of Hilcorp, was appointed Director in August 2019 and served until his resignation on July 29, 2020, at which time Jason C.
−Removed: Rebrook, President of Hilcorp, was appointed Director to fill the resulting vacancy.
−Removed: Hildebrand did no t receive compensation in his role as Director and Mr.
−Removed: Rebrook received no compensation in his role as Director in 2020.
−Removed: In December 2020, the Board of Directors voted to approve the payment of Director cash and equity compensation to Mr.
−Removed: Rebrook beginning in 2021.
+Added: Old Ocean Reserves, an affiliate of our customer Hilcorp, has the right to designate one director to serve on our board of directors as long as Old Ocean Reserves or its successors (together with its affiliates) owns at least 7.5 % of our outstanding common stock.
+Added: As of December 31, 2022, Old Ocean Reserves owned 10.8 % of our outstanding common stock.
+Added: Rebrook, Chief Executive Officer and Director of Harvest Midstream Company, a Hilcorp affiliate, has served as Old Ocean Reserves’ representative director since July 2020.
Revenue from Hilcorp and affiliates was $ 36.2 million, $ 38.2 million and $ 40.3 million during the years ended December 31, 2022, 2021 and 2020, respectively.
−Removed: Accounts receivable, net due from Hilcorp and affiliates was $ 3.7 million and $ 3.9 million as of December 31, 2021 and 2020, respectively.
+Added: Accounts receivable, net due from Hilcorp and affiliates was $ 3.0 million and $ 3.7 million as of December 31, 2022 and 2021, respectively (see Note 4).
+Added: SEGMENT INFORMATION
We manage our business segments primarily based on the type of product or service provided.
3 unchanged sentences
The aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.
−Removed: We evaluate the performance of our segments based on gross margin for each segment.
−Removed: Revenue includes only sales to external customers.
−Removed: No single customer accounted for 10% or more of our revenue during the years ended December 31, 2021, 2020 and 2019.
−Removed: (in thousands)
+Added: We evaluate the performance of our segments based on gross margin, defined as revenue less cost of sales (excluding depreciation and amortization) for each segment.
+Added: Segment revenue includes only sales to external customers.
+Added: Archrock, Inc.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Summarized financial information for our segments is shown below:
Capital expenditures
2 unchanged sentences
(1) Corporate–related items.
−Removed: The following table presents assets by segment reconciled to total assets per the consolidated balance sheets:
−Removed: (in thousands)
+Added: The reconciliations of total assets by segment to total assets per the consolidated balance sheets are as follows:
Contract operations assets
2 unchanged sentences
Other assets (1)
−Removed: Assets associated with discontinued operations
+Added: Assets of discontinued operations
(1) Corporate–related items.
−Removed: The following table reconciles total gross margin to income (loss) before income taxes:
+Added: The reconciliations of total gross margin to income (loss) before income taxes are as follows:
Year Ended December 31,
−Removed: (in thousands)
Total gross margin
3 unchanged sentences
Goodwill impairment
−Removed: Restatement and other charges
Restructuring charges
1 unchanged sentence
Debt extinguishment loss
−Removed: Transaction-related costs
Gain on sale of assets, net
−Removed: Other income, net
+Added: Other expense (income), net
Income (loss) before income taxes
−Removed: Impact of Hurricane
−Removed: Hurricane Ida made landfall in Louisiana on August 29, 2021, causing operational disruptions, damage to compressors and a temporary shutdown of facilities in Louisiana that negatively impacted our financial performance in the quarter.
−Removed: In the third quarter of 2021, we recorded $ 2.0 million in depreciation expense associated with the damaged assets, and in the fourth quarter, we recognized an insurance recovery of $ 2.8 million related to the facility and compressor damages in other income, net in our consolidated statements of operations, after a deductible of $ 0.9 million.
−Removed: A corresponding receivable for $ 2.8 million was recorded to our consolidated balance sheet as of December 31, 2021.
−Removed: The remaining portion of our insurance claim pertaining to business interruption is in process.
−Removed: We are currently unable to estimate the expected amount to be recovered, however, any amount recovered will not be subject to an additional deductible.
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.