XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.6.0.2

Discontinued Operations | 6 Months Ended
--- | ---
Jun. 30, 2016
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | 3. Discontinued Operations Spin-off of Exterran Corporation On November 3, 2015 (the “Distribution Date”), we completed the spin-off (the “Spin-off”) of our international contract operations, international aftermarket services and global fabrication businesses into a standalone public company operating as Exterran Corporation. To effect the Spin-off, we distributed on the Distribution Date, on a pro rata basis, all of the shares of Exterran Corporation common stock to our stockholders as of October 27, 2015 (the “Record Date”). Archrock stockholders received one share of Exterran Corporation common stock for every two shares of our common stock held at the close of business on the Record Date. Upon the completion of the Spin-off, we were renamed “Archrock, Inc.” and, on November 4, 2015, the ticker symbol for our common stock on the New York Stock Exchange was changed to “AROC.” Following the completion of the Spin-off, we and Exterran Corporation are independent, publicly traded companies with separate public ownership, boards of directors and management, and we continue to own and operate the U.S. contract operations and U.S. aftermarket services businesses that we previously owned. Additionally, we continue to hold our interests in the Partnership, which include the sole general partner interest and certain limited partner interests, as well as all of the incentive distribution rights in the Partnership. Effective on the Distribution Date, the Partnership was renamed “Archrock Partners, L.P.,” and, on November 4, 2015, the ticker symbol for its common units on the Nasdaq Global Select Market was changed to “APLP.” Exterran Corporation’s business following the Spin-off has been reported as discontinued operations, net of tax, in our condensed consolidated statement of operations for all periods presented and was previously included in the international contract operations segment, fabrication segment and aftermarket services segment. Following the Spin-off, we no longer operate in the international contract operations or fabrication segments and our operations in the aftermarket services segment are now limited to domestic operations. 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 on the Distribution Date:
• | The separation and distribution agreement contains the key provisions relating to the separation of our business from Exterran Corporation’s business. The separation and distribution agreement identifies the assets and rights that were transferred, liabilities that were assumed or retained and contracts and related matters that were assigned to us or Exterran Corporation in the Spin-off and describes how these transfers, assumptions and assignments occurred. Pursuant to the separation and distribution agreement, on the Distribution Date, a subsidiary of Exterran Corporation transferred net proceeds of $532.6 million from borrowings under the Exterran Corporation credit facility to us to allow for the repayment of a portion of our indebtedness. On the Distribution Date, we terminated our former credit facility and repaid all borrowings and accrued and unpaid interest outstanding on the repayment date totaling $326.5 million. Our new capital structure includes a $350.0 million revolving credit facility that became available on the Distribution Date. On December 4, 2015, we redeemed for cash the $350.0 million aggregate principal amount of our 7.25% senior notes due December 2018 at a redemption price equal to 101.813% of the principal amount thereof plus accrued but unpaid interest to the redemption date for $369.2 million. In addition, the separation and distribution agreement contains certain noncompetition provisions addressing restrictions for three years after the Spin-off on Exterran Corporation’s ability to provide contract operations and aftermarket services in the United States and on our ability to provide contract operations and aftermarket services outside of the United States and to provide products for sale worldwide that compete with Exterran Corporation’s current product sales business, subject to certain exceptions. The separation and distribution agreement also governs the treatment of aspects relating to indemnification, insurance, confidentiality and cooperation. Additionally, the separation and distribution agreement specifies our right to receive payments from a subsidiary of Exterran Corporation based on a notional amount corresponding to payments received by Exterran Corporation’s subsidiaries from PDVSA Gas, S.A. (“PDVSA Gas”) in respect of the sale of Exterran Corporation’s subsidiaries’ and joint ventures’ previously nationalized assets promptly after such amounts are collected by Exterran Corporation’s subsidiaries. As of June 30, 2016, we have received payments, including annual charges, of approximately $522.7 million ($50.0 million of which was used to repay insurance proceeds previously collected under the policy we maintained for the risk of expropriation), $29.7 million of which was received during the six months ended June 30, 2016. Pursuant to the separation and distribution agreement, Exterran Corporation or its subsidiary was due to receive the remaining principal amount as of June 30, 2016 of approximately $54.0 million in installments. As these remaining proceeds are received, Exterran Corporation intends to contribute to us an amount equal to such proceeds pursuant to the terms of the separation and distribution agreement. The separation and distribution agreement also specifies our right to receive a $25.0 million cash payment from a subsidiary of Exterran Corporation promptly following the occurrence of a qualified capital raise as defined in the Exterran Corporation credit agreement.
• | The tax matters agreement governs the respective rights, responsibilities and obligations of Exterran Corporation and us with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes. Subject to the provisions of this agreement Exterran Corporation and us agreed to indemnify the primary obligor of any return for tax periods beginning before and ending before or after the Spin-off (including any ongoing or future amendments and audits for these returns) for the portion of the tax liability (including interest and penalties) that relates to their respective operations reported in the filing. As of June 30, 2016, we classified $5.7 million of unrecognized tax benefits (including interest and penalties) as long-term liability associated with discontinued operations since it relates to operations of Exterran Corporation prior to the Spin-off. We have also recorded an offsetting $5.7 million indemnification asset related to this reserve as long-term assets associated with discontinued operations.
• | The employee matters agreement governs the allocation of liabilities and responsibilities between us and Exterran Corporation relating to employee compensation and benefit plans and programs, including the treatment of retirement, health and welfare plans and equity and other incentive plans and awards. The agreement contains provisions regarding stock-based compensation. See Note 12 (“Stock-Based Compensation”) for additional information relating to the Archrock Stock Incentive Plan.
• | The transition services agreement sets forth the terms on which Exterran Corporation will provide to us, and we will provide to Exterran Corporation, on a temporary basis, certain services or functions that the companies historically have shared. Transition services provided to us by Exterran Corporation and to Exterran Corporation by us include accounting, administrative, payroll, human resources, environmental health and safety, real estate, fleet, financial audit support, legal, tax, treasury and other support and corporate services, and each service is provided at a predetermined rate set forth in the transition services agreement. Each service provided under the agreement has its own duration, which is generally less than one year and not more than two years, extension terms and monthly cost, and the transition services agreement will terminate upon cessation of all services provided thereunder. For the six months ended June 30, 2016, we recorded other income of $0.4 million and selling, general and administrative expense of $0.8 million associated with the services under the transition services agreement.
• | The supply agreement sets forth the terms under which Exterran Corporation will provide manufactured equipment, including the design, engineering, manufacturing and sale of natural gas compression equipment, on an exclusive basis to us and the Partnership. This supply agreement has an initial term of two years, subject to certain cancellation conditions, and is extendible for additional one-year terms by mutual agreement of the parties. Pursuant to the supply agreement, we and the Partnership each will be required to purchase our respective requirements of newly-manufactured compression equipment from Exterran Corporation, subject to certain exceptions. For the six months ended June 30, 2016, we purchased $31.6 million of newly-manufactured compression equipment from Exterran Corporation.
• | The storage agreements set forth the terms under which Exterran Corporation will provide each of us and the Partnership with storage space for equipment purchased under the supply agreement, as well as the terms under which we will provide storage space to Exterran Corporation for certain of its equipment.
• | The services agreements set forth the terms under which Exterran Corporation will provide us (or our customers on our behalf) with engineering, preservation and installation and commissioning services and we will provide Exterran Corporation (or its customers on its behalf) with make-ready, parts sales, preservation and installation and commissioning services. These services agreements will continue in effect until terminated by either party on 30 days’ written notice.
Generally, the separation and distribution agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Exterran Corporation’s business with Exterran Corporation. Pursuant to the separation and distribution agreement, we and Exterran Corporation generally release the other party from all claims arising prior to the Spin-off that relate to the other party’s business. Other discontinued operations activity In December 2013, we abandoned our contract water treatment business as part of our continued emphasis on simplification and focus on our core businesses. The abandonment of this business meets the criteria established for recognition as discontinued operations under GAAP. Therefore, our contract water treatment business has been reported as discontinued operations, net of tax, in our condensed consolidated statement of operations. This business was previously included in our contract operations segment. The following tables summarize the operating results of discontinued operations (in thousands):
| Three months ended June 30, 2016 |  | Three months ended June 30, 2015
| Exterran Corporation (1) |  | Exterran Corporation (1) |  | Contract Water Treatment Business |  | Total
Revenue | $ | — |  |  | $ | 423,426 |  |  | $ | — |  |  | $ | 423,426 |
Cost of sales (excluding depreciation and amortization expense) | — |  |  | 326,516 |  |  | 187 |  |  | 326,703 |
Selling, general and administrative | — |  |  | 52,517 |  |  | — |  |  | 52,517 |
Depreciation and amortization | — |  |  | 36,883 |  |  | — |  |  | 36,883 |
Long-lived asset impairment | — |  |  | 5,910 |  |  | — |  |  | 5,910 |
Restructuring charges | — |  |  | 18,411 |  |  | — |  |  | 18,411 |
Interest expense | — |  |  | 319 |  |  | — |  |  | 319 |
Equity in income of non-consolidated affiliates | — |  |  | (5,062 | ) |  | — |  |  | (5,062 | )
Other loss, net (2) | 26 |  |  | 3,045 |  |  | — |  |  | 3,045 |
Loss from discontinued operations before income taxes | (26 | ) |  | (15,113 | ) |  | (187 | ) |  | (15,300 | )
Provision for (benefit from) income taxes | — |  |  | 4,090 |  |  | (62 | ) |  | 4,028 |
Loss from discontinued operations, net of tax | $ | (26 | ) |  | $ | (19,203 | ) |  | $ | (125 | ) |  | $ | (19,328 | )
| Six months ended June 30, 2016 |  | Six months ended June 30, 2015
| Exterran Corporation (1) |  | Exterran Corporation (1) |  | Contract Water Treatment Business |  | Total
Revenue | $ | — |  |  | $ | 892,703 |  |  | $ | — |  |  | $ | 892,703 |
Cost of sales (excluding depreciation and amortization expense) | — |  |  | 657,043 |  |  | 259 |  |  | 657,302 |
Selling, general and administrative | — |  |  | 106,635 |  |  | — |  |  | 106,635 |
Depreciation and amortization | — |  |  | 75,775 |  |  | — |  |  | 75,775 |
Long-lived asset impairment | — |  |  | 10,489 |  |  | — |  |  | 10,489 |
Restructuring charges | — |  |  | 23,201 |  |  | — |  |  | 23,201 |
Interest expense | — |  |  | 826 |  |  | — |  |  | 826 |
Equity in income of non-consolidated affiliates | — |  |  | (10,068 | ) |  | — |  |  | (10,068 | )
Other (income) loss, net (2) | 70 |  |  | (8,205 | ) |  | — |  |  | (8,205 | )
Income (loss) from discontinued operations before income taxes | (70 | ) |  | 37,007 |  |  | (259 | ) |  | 36,748 |
Provision for (benefit from) income taxes | (44 | ) |  | 22,392 |  |  | (104 | ) |  | 22,288 |
Income (loss) from discontinued operations, net of tax | $ | (26 | ) |  | $ | 14,615 |  |  | $ | (155 | ) |  | $ | 14,460 |
(1) | Includes the results of operations of Exterran Corporation and costs directly attributable to the Spin-off.
(2) | Includes income from discontinued operations, net of tax, related to previously discontinued Venezuela operations of $0.4 million and $19.1 million for the three and six months ended June 30, 2015.
The following table summarizes the balance sheet data for discontinued operations (in thousands):
| June 30, 2016 |  | December 31, 2015
| Exterran Corporation |  | Contract Water Treatment Business |  | Total |  | Exterran Corporation |  | Contract Water Treatment Business |  | Total
Other current assets | $ | 184 |  |  | $ | — |  |  | $ | 184 |  |  | $ | 420 |  |  | $ | — |  |  | $ | 420 |
Total current assets associated with discontinued operations | 184 |  |  | — |  |  | 184 |  |  | 420 |  |  | — |  |  | 420 |
Intangibles and other assets, net | 5,714 |  |  | — |  |  | 5,714 |  |  | 5,714 |  |  | — |  |  | 5,714 |
Deferred income taxes | 230 |  |  | 14,465 |  |  | 14,695 |  |  | — |  |  | 15,486 |  |  | 15,486 |
Total assets associated with discontinued operations | $ | 6,128 |  |  | $ | 14,465 |  |  | $ | 20,593 |  |  | $ | 6,134 |  |  | $ | 15,486 |  |  | $ | 21,620 |
Deferred income taxes | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 420 |  |  | $ | — |  |  | $ | 420 |
Other current liabilities | 117 |  |  | — |  |  | 117 |  |  | — |  |  | — |  |  | — |
Total current liabilities associated with discontinued operations | 117 |  |  | — |  |  | 117 |  |  | 420 |  |  | — |  |  | 420 |
Deferred income taxes | 5,714 |  |  | — |  |  | 5,714 |  |  | 5,714 |  |  | — |  |  | 5,714 |
Total liabilities associated with discontinued operations | $ | 5,831 |  |  | $ | — |  |  | $ | 5,831 |  |  | $ | 6,134 |  |  | $ | — |  |  | $ | 6,134 |

X
- References No definition available. + Details
Name: | us-gaap_DiscontinuedOperationsAndDisposalGroupsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=65878427&loc=SL51721533-107759 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721665-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5C -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721675-107760 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3A -URI http://asc.fasb.org/extlink&oid=64862545&loc=SL51724579-110230 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721663-107760 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=64862545&loc=d3e2941-110230 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64827811&loc=d3e1361-107760 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5B -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721673-107760 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3A -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721659-107760 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721671-107760 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5D -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721677-107760 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=64827811&loc=d3e1474-107760 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=64827811&loc=SL51721683-107760 + Details
Name: | us-gaap_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration