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Property and Equipment and Identifiable Intangible Assets

9 Months Ended

Sep. 30, 2019

Property and Equipment and Identifiable Intangible Assets

Property and Equipment and Identifiable Intangible Assets

(5)  Property and Equipment and Identifiable Intangible Assets

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Property and Equipment

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Property and equipment consisted of the following (in thousands):

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​	​	​	​	​	​	​
​		September 30, 2019			December 31, 2018
Compression and treating equipment	​	$	3,355,314	​	$	3,239,831
Furniture and fixtures	​		1,325	​		1,129
Automobiles and vehicles	​		31,869	​		32,490
Computer equipment	​		57,133	​		54,806
Buildings	​	​	8,639	​	​	9,314
Land	​	​	77	​	​	77
Leasehold improvements	​		5,579	​		5,377
Total property and equipment, gross	​		3,459,936	​		3,343,024
Less: accumulated depreciation and amortization	​		(962,480)	​		(821,536)
Total property and equipment, net	​	$	2,497,456	​	$	2,521,488

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Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows:

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​	​	​	​
Compression equipment, acquired new	​	25 years	​
Compression equipment, acquired used	​	5 - 25 years	​
Furniture and fixtures	​	3 - 10 years	​
Vehicles and computer equipment	​	1 - 10 years	​
Buildings	​	5 years	​
Leasehold improvements	​	5 years	​

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Depreciation expense on property and equipment was $50.2 million and $151.2 million for the three and nine months ended September 30, 2019, respectively, and $51.5 million and $136.0 million for the three and nine months ended September 30, 2018, respectively.

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As of September 30, 2019 and December 31, 2018, there was $11.7 million and $7.9 million, respectively, of property and equipment purchases in accounts payable and accrued liabilities.

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During the three and nine months ended September 30, 2019, we recognized $2.0 million and $0.4 million of net gains on disposition of assets, respectively.

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During the three and nine months ended September 30, 2018, we recognized $1.3 million and $12.3 million of net losses on disposition of assets, respectively. The net loss for the nine months ended September 30, 2018 was primarily attributable to disposals of various property and equipment by the USA Compression Predecessor.

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On a quarterly basis, we evaluate the future deployment of our idle fleet under then-current market conditions. For the nine months ended September 30, 2019 and for the three and nine months ended September 30, 2018, we determined to retire or re-utilize key components of 14 compressor units and 18 compressor units, respectively, or approximately 4,700 horsepower and 5,800 horsepower, respectively, that were previously used to provide services in our business. As a result, we recorded $3.2 million in impairment of compression equipment for the nine months ended September 30, 2019 and $2.3 million for the three and nine months ended September 30, 2018.

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The primary causes for these impairments were: (i) units were not considered marketable in the foreseeable future, (ii) units were subject to excessive maintenance costs or (iii) units were unlikely to be accepted by customers due to certain performance characteristics of the unit, such as the inability to meet then-current quoting criteria without excessive retrofitting costs. These compression units were written down to their respective estimated salvage values, if any.

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No impairment was recorded for the three months ended September 30, 2019.

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Identifiable Intangible Assets

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Identifiable intangible assets, net consisted of the following (in thousands):

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​	​	​	​	​	​	​	​	​	​
​		Customer			​	​		​	​
​	​	Relationships		​	Trade Names		​	Total
Net balance at December 31, 2018	​	$	355,161	​	$	37,389	​	$	392,550
Amortization expense	​		(19,579)	​		(2,456)	​		(22,035)
Net balance at September 30, 2019	​	$	335,582	​	$	34,933	​	$	370,515

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Accumulated amortization of intangible assets was $180.1 million and $158.1 million as of September 30, 2019 and December 31, 2018, respectively. The expected amortization of the intangible assets for each of the five succeeding years is $29.4 million.

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- Definition

The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures. Also the disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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