0001389050false00013890502020-05-042020-05-04

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):  May 4, 2020

Commission File Number 001-33666

ARCHROCK, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

74-3204509

(State or other jurisdiction of incorporation)

(I.R.S. Employer Identification No.)

9807 Katy Freeway, Suite 100, Houston, TX 77024

(Address of principal executive offices, zip code)

(281) 836-8000

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol

    

Name of exchange on which registered

Common stock, $0.01 par value per share

AROC

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Item 2.02    Results of Operations and Financial Condition

On May 4, 2020, Archrock, Inc. issued a press release announcing its results for the quarter ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will not be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), unless specifically identified therein as being incorporated therein by reference.

Item 9.01    Financial Statements and Exhibits

(d)   Exhibits

99.1

Press release dated May 4, 2020, announcing Archrock, Inc.’s results of operations for the quarter ended March 31, 2020

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ARCHROCK, INC.

By:

/s/ Douglas S. Aron

Douglas S. Aron

Senior Vice President and Chief Financial Officer

May 5, 2020

3

Archrock Reports First Quarter 2020 Results

HOUSTON, May 4, 2020 - Archrock, Inc. (NYSE: AROC) (“Archrock”) today reported results for the first quarter of 2020.

First Quarter 2020 Financial Results

Revenue for the first quarter of 2020 was $249.7 million compared to $236.2 million in the first quarter of 2019.
Net loss for the first quarter of 2020 was $61.2 million compared to net income of $19.5 million in the first quarter of 2019.
Adjusted EBITDA (a non-GAAP measure defined below) for the first quarter of 2020 was $112.9 million compared to $91.2 million in the first quarter of 2019.
Previously declared quarterly dividend of $0.145 per common share for the first quarter of 2020 was 10% higher compared to the first quarter of 2019. Dividend coverage was 2.8x for the first quarter of 2020.
Archrock’s leverage ratio was 4.05x, pro forma for the redemption of $350.0 million aggregate principal amount of senior notes due 2022, compared to 4.41x as of March 31, 2019.

Archrock’s first quarter 2020 net loss of $61.2 million included a non-cash impairment of our remaining $99.8 million of goodwill associated with the Elite Compression acquisition during 2019. This impairment resulted from the recent deterioration in commodity prices and global economic conditions. Partially offsetting this, we booked a tax benefit on the entire non-recurring goodwill impairment charge of $22.7 million during the first quarter of 2020.

Archrock also incurred a non-cash long-lived asset impairment of $6.2 million, as well as restructuring costs related to severance benefits totaling $1.7 million.

Adjusted EBITDA for the first quarter of 2020 of $112.9 million included $4.1 million in gains related to the sale of compression and other assets.

Management Commentary and Outlook

“First quarter performance reflected outstanding execution by our team,” said Brad Childers, Archrock’s President and Chief Executive Officer. “We grew adjusted EBITDA 24% compared to the first quarter of 2019, maintained attractive gross margins, continued to optimize our fleet with non-core asset sales and reduced our leverage. With our solid operating capability and high-quality compression business, I am confident in our ability to maximize results as we enter this downturn.”

“In response to the COVID-19 pandemic and concurrent global economic slowdown that arose late in the first quarter, Archrock has taken swift and decisive action to protect our strong financial position and set our strategy to successfully navigate the uncertain market ahead. First and foremost, we remain focused on continuing to provide exceptional customer service and critical natural gas production infrastructure while protecting the health and safety of our employees, customers and communities. In anticipation of lower customer activity levels, we are further reducing planned 2020 capital expenditures and are aggressively cutting operating and corporate expenses. In total, these efforts are anticipated to generate annualized cash savings of between $75 to $85 million.”

“For the remainder of the year, we will continue to differentiate the performance that our production-oriented business and diverse footprint can deliver. We have substantial available liquidity and no near-term debt maturities, maintain manageable leverage and will work to protect our financial flexibility.  Significantly reduced investment in new equipment will further enable our strong free cash flow profile, supporting debt repayment as well as return of capital to shareholders. Archrock is uniquely positioned to navigate this part of the cycle and preserve long-term value for an eventual market recovery,” concluded Childers.  

Cost Reduction Actions

In response to the challenging market conditions, Archrock announced the following actions:

Further reduced our planned 2020 capital expenditures to $140 to $170 million, 60% lower than 2019 at the midpoint.
Completed a business unit restructuring to further streamline our organization and improve our profitability. This included headcount rationalization at the executive and senior leadership level.
Aligned our corporate cost structure with the current market environment through discretionary spending cuts and temporary compensation adjustments. This includes a 25% reduction in the Board of Directors’ retainer fees; a 25% reduction in the Chief Executive Officer’s salary; a 10% reduction in the Executive Leadership Team’s salaries; and a 5% to 10% reduction in non-executive employee salaries, with no expected change for employees below a targeted threshold.

Identified other 2020 operating expense savings throughout the organization and supply chain.

Contract Operations

For the first quarter of 2020, contract operations segment revenue totaled $207.0 million, reflecting an increase of 13% compared to $182.5 million in the first quarter of 2019. Gross margin was $128.3 million, up $20.6 million or 19% from the first quarter of 2019, reflecting a gross margin percentage of 62% compared to 59% in the prior year quarter. Total operating horsepower at the end of the first quarter of 2020 was 3.9 million, up from 3.6 million at the end of the prior year quarter, reflecting a 9% increase. Utilization at the end of the first quarter of 2020 was 89% compared to 88% at the end of the first quarter of 2019.

Aftermarket Services

For the first quarter of 2020, aftermarket services segment revenue totaled $42.7 million compared to $53.7 million in the first quarter of 2019 due to a decrease in service activities and parts sales as customers continued the deferral of maintenance activities that began in the second quarter of 2019. Gross margin of $7.7 million was down from $9.8 million in the first quarter of 2019. Gross margin percentage of 18% was consistent with the prior year as we continued to optimize our cost structure and prioritize high-margin business within our aftermarket services operations.

Balance Sheet

On April 1, 2020, we repaid $350.0 million aggregate principal amount of our 6% senior notes due 2022.

Pro forma for the senior notes redemption, long-term debt was $1.81 billion at March 31, 2020 compared to $1.84 billion as of December 31, 2019 and our leverage ratio was 4.05x, down from 4.23x as of the fourth quarter of 2019. Our pro forma available liquidity totaled $409.3 million.

Quarterly Dividend

Our Board of Directors recently declared a quarterly dividend of $0.145 per share of common stock, or $0.58 per share on an annualized basis, unchanged sequentially and up 10% as compared to the first quarter of 2019. Dividend coverage in the first quarter of 2020 was 2.8x. The dividend will be paid on May 18, 2020 to stockholders of record at the close of business on May 11, 2020.


2020 Annual Guidance

Archrock is providing updated 2020 annual guidance as listed below. All figures are in thousands, except percentages and ratios:

Full Year 2020 Guidance

Low

High

Net income (loss) (1) 

$

(32,000)

$

8,000

Adjusted EBITDA (2)

380,000

420,000

Cash available for dividend (3) (4)

209,000

239,000

Segment

Contract operations revenue

$

750,000

$

785,000

Contract operations gross margin percentage

61.5

%

63.0

%

Aftermarket services revenue

$

145,000

$

180,000

Aftermarket services gross margin percentage

15.5

%

17.0

%

Selling, general and administrative

$

113,000

$

118,000

Capital expenditures

Growth capital expenditures

$

70,000

$

90,000

Maintenance capital expenditures

47,000

53,000

Other capital expenditures

23,000

27,000

(1)2020 annual guidance for net income (loss) does not include the impact of long-lived asset impairment because due to its nature it cannot be accurately forecasted. Long-lived asset impairment does not impact Adjusted EBITDA or cash available for dividend, however it is a reconciling item between these measures and net income (loss). Long-lived asset impairment for the years ended 2019 and 2018 was $44.7 million and $28.1 million, respectively.
(2)Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons.
(3)Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.
(4)A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were $10.4 million and $(13.2) million for the years ended 2019 and 2018, respectively.


Summary Metrics

Three Months Ended

March 31, 

December 31, 

March 31, 

(in thousands, except percentages, per share amounts and ratios)

    

2020

    

2019

    

2019

Net income (loss)

$

(61,187)

 

$

46,044

 

$

19,456

Adjusted EBITDA

$

112,915

 

$

112,512

 

$

91,196

Contract operations revenue

$

206,974

 

$

204,437

 

$

182,507

Contract operations gross margin

$

128,323

 

$

128,374

 

$

107,772

Contract operations gross margin percentage

 

62

%  

63

%  

59

%

Aftermarket services revenue

$

42,723

 

$

41,550

 

$

53,652

Aftermarket services gross margin

$

7,732

 

$

6,314

 

$

9,750

Aftermarket services gross margin percentage

 

18

%  

15

%  

18

%

Selling, general, and administrative

$

30,626

 

$

30,594

 

$

28,989

Cash available for dividend

$

62,114

 

$

64,213

 

$

48,412

Cash available for dividend coverage

 

2.8

x

2.9

x

2.8

x

Total available horsepower (at period end)

 

4,386

 

4,395

 

4,035

Total operating horsepower (at period end)

 

3,883

 

3,926

 

3,561

Horsepower utilization spot (at period end)

 

89

%  

89

%  

88

%

Conference Call Details

Archrock will host a conference call on Tuesday, May 5, 2020, to discuss first quarter 2020 financial results. The call will begin at 11:00 a.m. Eastern Time.

To listen to the call via a live webcast, please visit Archrock’s website at www.archrock.com. The call will also be available by dialing 1-877-407-0784 in the United States and Canada or 1-201-689-8560 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference Archrock.

A replay of the conference call will be available on Archrock’s website for approximately seven days. Also, a replay may be accessed by dialing 1-844-512-2921 in the United States and Canada, or 1-412-317-6671 for international calls. The access code is 13701039.

*****

Adjusted EBITDA, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived asset impairment, goodwill impairment, restatement and other charges, restructuring charges, transaction-related costs, non-cash stock-based compensation expense, indemnification income (expense), net and other items. A reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, and a reconciliation of our updated full year 2020 Adjusted EBITDA guidance to net income (loss) appear below.

Gross margin, a non-GAAP measure, is defined as total revenue less cost of sales (excluding depreciation and amortization). Gross margin percentage is defined as gross margin divided by revenue. A reconciliation of gross margin to net income (loss), the most directly comparable GAAP measure, appears below.

Cash available for dividend, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived asset impairment, goodwill impairment, restatement and other charges, restructuring charges, transaction-related costs, non-cash stock-based compensation expense and indemnification income (expense), net less maintenance capital expenditures, other capital expenditures, cash taxes and cash interest expense. Reconciliations of cash available for dividend to net income (loss) and cash flows from operating activities, the most directly comparable GAAP measures, appear below.

About Archrock

Archrock is an energy infrastructure company with a pure-play focus on midstream natural gas compression.  Archrock is the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Archrock is headquartered in Houston, Texas, with approximately 1,700 employees. For more information, please visit www.archrock.com.


Forward-Looking Statements

All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of Archrock, Inc. Forward-looking information includes, but is not limited to statements regarding: the effects of the COVID-19 pandemic on our business, operations, customers and financial conditions; guidance or estimates related to Archrock’s results of operations or of financial condition; fundamentals of Archrock’s industry, including the attractiveness of returns and valuation, stability of cash flows, demand dynamics and overall outlook, and Archrock’s ability to realize the benefits thereof; Archrock’s expectations regarding future economic and market conditions and trends; Archrock’s operational and financial strategies, including planned growth, coverage and leverage reduction strategies, Archrock’s ability to successfully effect those strategies and the expected results therefrom; Archrock’s financial and operational outlook; demand and growth opportunities for Archrock’s services; structural and process improvement initiatives, the expected timing thereof, Archrock’s ability to successfully effect those initiatives and the expected results therefrom; the operational and financial synergies provided by Archrock’s size; and statements regarding Archrock’s dividend policy.

While Archrock believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. The factors that could cause results to differ materially from those indicated by such forward-looking statements include, but are not limited to: changes in customer, employee or supplier relationships; local, regional and national economic and financial market conditions and the impact they may have on Archrock and its customers; changes in tax laws; conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for oil or natural gas or a sustained decrease in the price of oil or natural gas; changes in economic conditions in key operating markets; impacts of world events, including the COVID-19 pandemic; the financial condition of Archrock’s customers; the failure of any customer to perform its contractual obligations; changes in safety, health, environmental and other regulations; and the effectiveness of Archrock’s control environment, including the identification of control deficiencies.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Archrock’s Annual Report on Form 10-K for the year ended December 31, 2019, Archrock’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and those set forth from time to time in Archrock’s filings with the Securities and Exchange Commission, which are available at www.archrock.com. Except as required by law, Archrock expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.

SOURCE: Archrock, Inc.

For information, contact:

Megan Repine

VP of Investor Relations

281-836-8360

investor.relations@archrock.com


ARCHROCK, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Three Months Ended

March 31, 

December 31, 

March 31, 

    

2020

    

2019

    

2019

Revenue:

Contract operations

$

206,974

$

204,437

$

182,507

Aftermarket services

 

42,723

 

41,550

 

53,652

Total revenue

 

249,697

 

245,987

 

236,159

Cost of sales (excluding depreciation and amortization):

 

  

 

  

 

  

Contract operations

 

78,651

 

76,063

 

74,735

Aftermarket services

 

34,991

 

35,236

 

43,902

Total cost of sales (excluding depreciation and amortization)

 

113,642

 

111,299

 

118,637

Selling, general and administrative

 

30,626

 

30,594

 

28,989

Depreciation and amortization

 

49,822

 

50,087

 

44,106

Long-lived asset impairment

 

6,195

 

25,842

 

3,092

Goodwill impairment

99,830

Restatement and other charges

 

 

 

421

Restructuring charges

1,728

Interest expense

 

29,665

 

27,709

 

23,617

Transaction-related costs

 

 

441

 

180

(Gain) loss on sale of assets, net

(4,116)

(6,372)

16

Other income, net

 

(555)

 

(280)

 

(221)

Income (loss) before income taxes

 

(77,140)

 

6,667

 

17,322

Benefit from income taxes

 

(15,953)

 

(39,377)

 

(2,407)

Income (loss) from continuing operations

(61,187)

46,044

19,729

Loss from discontinued operations, net of tax

(273)

Net income (loss)

$

(61,187)

$

46,044

$

19,456

Basic and diluted net income (loss) per common share (1)

$

(0.41)

$

0.30

$

0.15

Weighted average common shares outstanding:

 

  

 

  

 

  

Basic

 

150,550

 

150,426

 

128,209

Diluted

 

150,550

 

150,465

 

128,255


(1)Basic and diluted net income (loss) per common share is computed using the two-class method to determine the net income (loss) per share for each class of common stock and participating security (restricted stock and stock-settled restricted stock units that have non-forfeitable rights to receive dividends or dividend equivalents) according to dividends declared and participation rights in undistributed earnings. Accordingly, we have excluded net income attributable to participating securities from our calculation of basic and diluted net income (loss) per common share.


ARCHROCK, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

(in thousands, except percentages, per share amounts and ratios)

Three Months Ended

March 31, 

December 31, 

March 31, 

    

2020

    

2019

    

2019

Revenue:

Contract operations

$

206,974

$

204,437

$

182,507

Aftermarket services

 

42,723

 

41,550

 

53,652

Total revenue

$

249,697

$

245,987

$

236,159

Gross margin (1):

 

  

 

  

 

  

Contract operations

$

128,323

$

128,374

$

107,772

Aftermarket services

 

7,732

 

6,314

 

9,750

Total gross margin

$

136,055

$

134,688

$

117,522

Gross margin percentage:

 

  

 

  

 

  

Contract operations

 

62

%  

 

63

%  

 

59

%

Aftermarket services

 

18

%  

 

15

%  

 

18

%

Total gross margin percentage

 

54

%  

 

55

%  

 

50

%

Selling, general and administrative

$

30,626

$

30,594

$

28,989

% of revenue

 

12

%  

 

12

%  

 

12

%

Adjusted EBITDA (1)

$

112,915

$

112,512

$

91,196

% of revenue

 

45

%  

 

46

%  

 

39

%

Capital expenditures

$

71,946

$

81,731

$

132,697

Less: Proceeds from sale of property, plant and equipment and other assets

 

(26,722)

 

(25,287)

 

(11,155)

Net capital expenditures

$

45,224

$

56,444

$

121,542

Total available horsepower (at period end) (2)

 

4,386

 

4,395

 

4,035

Total operating horsepower (at period end) (3)

 

3,883

 

3,926

 

3,561

Average operating horsepower

 

3,914

 

3,920

 

3,545

Horsepower utilization:

 

  

 

  

 

  

Spot (at period end)

 

89

%  

 

89

%  

 

88

%

Average

 

89

%  

 

88

%  

 

89

%

Dividend declared for the period per share

$

0.145

$

0.145

$

0.132

Dividend declared for the period to all shareholders

$

22,226

$

22,183

$

17,242

Cash available for dividend coverage (4)

 

2.8

x

 

2.9

x

 

2.8

x


(1)Management believes gross margin and Adjusted EBITDA provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons.
(2)Defined as idle and operating horsepower. New compressor units completed by a third party manufacturer that have been delivered to us are included in the fleet.
(3)Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue.
(4)Defined as cash available for dividend divided by dividends declared for the period.

March 31, 

December 31, 

March 31, 

    

2020

    

2019

    

2019

Balance Sheet

 

  

 

  

 

  

Long-term debt (1)

$

1,811,455

$

1,842,549

$

1,582,217

Total equity

 

999,472

 

1,085,963

 

842,292


(1)Carrying values are shown net of unamortized debt discounts and unamortized deferred financing costs.


ARCHROCK, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

(in thousands)

Three Months Ended

March 31, 

December 31, 

March 31, 

    

2020

    

2019

    

2019

Reconciliation of Net Income (Loss) to Adjusted EBITDA and Gross Margin

Net income (loss)

$

(61,187)

$

46,044

$

19,456

Less: Loss from discontinued operations, net of tax

(273)

Income (loss) from continuing operations

(61,187)

46,044

19,729

Depreciation and amortization

 

49,822

 

50,087

 

44,106

Long-lived asset impairment

 

6,195

 

25,842

 

3,092

Goodwill impairment

99,830

Restatement and other charges

 

 

 

421

Restructuring charges

1,728

Interest expense

 

29,665

 

27,709

 

23,617

Transaction-related costs

 

 

441

 

180

Stock-based compensation expense

 

3,006

 

1,960

 

2,357

Indemnification (income) expense, net (1)

 

(191)

 

(194)

 

101

Benefit from income taxes

 

(15,953)

 

(39,377)

 

(2,407)

Adjusted EBITDA (2)

 

112,915

 

112,512

 

91,196

Selling, general and administrative

 

30,626

 

30,594

 

28,989

Stock-based compensation expense

 

(3,006)

 

(1,960)

 

(2,357)

Indemnification income (expense), net (1)

 

191

 

194

 

(101)

(Gain) loss on sale of assets, net

(4,116)

(6,372)

16

Other income, net

 

(555)

 

(280)

 

(221)

Gross margin (2)

$

136,055

$

134,688

$

117,522


(1)Represents the net income earned or net expense incurred pursuant to indemnification provisions of our separation and distribution and tax matters agreements with Exterran Corporation.
(2)Management believes Adjusted EBITDA and gross margin provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons.


ARCHROCK, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

(in thousands)

Three Months Ended

March 31, 

December 31, 

March 31, 

    

2020

    

2019

    

2019

Reconciliation of Net Income (Loss) to Adjusted EBITDA and Cash Available for Dividend

Net income (loss)

$

(61,187)

$

46,044

$

19,456

Less: Loss from discontinued operations, net of tax

(273)

Income (loss) from continuing operations

(61,187)

46,044

19,729

Depreciation and amortization

 

49,822

 

50,087

 

44,106

Long-lived asset impairment

 

6,195

 

25,842

 

3,092

Goodwill impairment

99,830

Restatement and other charges

 

 

 

421

Restructuring charges

1,728

Interest expense

 

29,665

 

27,709

 

23,617

Transaction-related costs

 

 

441

 

180

Stock-based compensation expense

 

3,006

 

1,960

 

2,357

Indemnification (income) expense, net

 

(191)

 

(194)

 

101

Benefit from income taxes

 

(15,953)

 

(39,377)

 

(2,407)

Adjusted EBITDA (1)

 

112,915

 

112,512

 

91,196

Less: Maintenance capital expenditures

 

(15,157)

 

(12,748)

 

(14,524)

Less: Other capital expenditures

 

(8,002)

 

(10,005)

 

(7,124)

Less: Cash tax refund

 

195

 

288

 

623

Less: Cash interest expense

 

(27,837)

 

(25,834)

 

(21,759)

Cash available for dividend (2)

$

62,114

$

64,213

$

48,412


(1)Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons.
(2)Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.


ARCHROCK, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

(in thousands)

Three Months Ended

March 31, 

December 31, 

March 31, 

    

2020

    

2019

    

2019

Reconciliation of Cash Flows From Operating Activities to Cash Available for Dividend

Net cash provided by operating activities

$

99,129

$

66,522

$

81,400

Inventory write-downs

 

(282)

 

(282)

 

(222)

Provision for credit losses

 

(752)

 

(1,588)

 

(428)

Gain (loss) on sale of assets, net

 

4,116

 

6,372

 

(16)

Current income tax expense (benefit)

 

13

 

(110)

 

476

Cash tax refund

 

195

 

288

 

623

Amortization of operating lease ROU assets

 

(781)

 

(780)

 

(712)

Amortization of contract costs

 

(6,805)

 

(6,496)

 

(5,117)

Deferred revenue recognized in earnings

 

7,735

 

8,730

 

12,749

Restatement and other charges

 

 

 

421

Cash restructuring charges

1,667

Transaction-related costs

 

 

441

 

180

Indemnification (income) expense, net

 

(191)

 

(194)

 

101

Changes in assets and liabilities

 

(18,683)

 

14,006

 

(19,788)

Maintenance capital expenditures

 

(15,157)

 

(12,748)

 

(14,524)

Other capital expenditures

 

(8,002)

 

(10,005)

 

(7,124)

Proceeds from (payments for) settlement of interest rate swaps that include financing elements

 

(88)

 

57

 

393

Cash available for dividend (1)

$

62,114

$

64,213

$

48,412


(1)Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.


ARCHROCK, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

(in thousands)

Annual Guidance Range

2020

    

Low

    

High

Reconciliation of Net Income (Loss) to Adjusted EBITDA and Cash Available for Dividend

Net income (loss) (1)

$

(32,000)

$

8,000

Depreciation and amortization

 

194,000

 

194,000

Interest expense

 

108,000

 

108,000

Stock-based compensation expense

 

11,000

 

11,000

Benefit from income taxes

 

(13,000)

 

(13,000)

Goodwill impairment and other expenses

112,000

112,000

Adjusted EBITDA (2)

 

380,000

 

420,000

Less: Maintenance capital expenditures

 

(47,000)

 

(53,000)

Less: Other capital expenditures

 

(23,000)

 

(27,000)

Less: Cash interest expense

 

(101,000)

 

(101,000)

Cash available for dividend (3) (4)

$

209,000

$

239,000


(1)2020 annual guidance for net income (loss) does not include the impact of long-lived asset impairment because due to its nature it cannot be accurately forecasted. Long-lived asset impairment does not impact Adjusted EBITDA or cash available for dividend, however it is a reconciling item between these measures and net income (loss). Long-lived asset impairment for the years ended 2019 and 2018 was $44.7 million and $28.1 million, respectively.
(2)Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons.
(3)Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.
(4)A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were $10.4 million and $(13.2) million for the years ended 2019 and 2018, respectively.

v3.20.1
Document and Entity Information
May 04, 2020
Document and Entity Information [Abstract]  
Document Type 8-K
Document Period End Date May 04, 2020
Entity File Number 001-33666
Entity Registrant Name ARCHROCK, INC.
Entity Incorporation, State or Country Code DE
Entity Tax Identification Number 74-3204509
Entity Address, Address Line One 9807 Katy Freeway
Entity Address, Adress Line Two Suite 100
Entity Address, City or Town Houston
Entity Address, State or Province TX
Entity Address, Postal Zip Code 77024
City Area Code 281
Local Phone Number 836-8000
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common stock, $0.01 par value per share
Trading Symbol AROC
Security Exchange Name NYSE
Entity Emerging Growth Company false
Entity Central Index Key 0001389050
Amendment Flag false