Rental Equipment, Property and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Rental Equipment, Property and Equipment

Rental Equipment

Our rental equipment and associated accumulated depreciation as of December 31, 2019 and 2018, respectively, consisted of the following (in thousands):


	2019		2018
Compressor units	$	370,961	$	329,697
Work-in-progress	9,129		11,868
Rental equipment	380,090		341,565
Accumulated depreciation	(162,348)		(165,459)
Rental equipment, net of accumulated depreciation	$	217,742	$	176,106

Our rental equipment has an estimated useful life between 15 and 25 years. Depreciation expense for rental equipment was $21.4 million, $20.9 million and $20.0 million for the year ended December 31, 2019, 2018 and 2017, respectively.

In January 2019, the Company reviewed the estimated useful lives of its rental equipment. This review indicated that the actual lives of its larger horsepower rental equipment were longer than the estimated useful lives used for depreciation purposes in the Company’s financial statements. These units incorporate newer technology and heavier, more robust castings and forging, which allows for complete overhauls at longer cycles when compared to its older, lower horsepower units. Accordingly, as of January 1, 2019, the Company changed its estimates of the useful lives of for these higher horsepower units from 15 years to 20 years (for its 400-600 horsepower units) or 25 years (for its 1,380 horsepower units). This analysis is consistent with our peers, which are depreciating their compressor units over 20 to 30 years. The effect of this change in estimate was to reduce 2019 depreciation expense by approximately $1.47 million, decrease 2019 net loss by $1.13 million, and decrease 2019 basic and diluted loss per share by $0.09.

Retirement of Rental Equipment

Given its concerns about the current industry backdrop, Company management determined during the third quarter of 2019 which units were not of the type, configuration, make or model that our customers are demanding or that were not cost efficient to refurbish, maintain and/or operate. As a result of this review, we determined 327 units should be retired from our rental fleet. Accordingly, we recorded a $1.5 million loss on retirement of rental equipment during the year ended December 31, 2019.

During our review of our rental compressor units in 2018, we determined 13 units should be retired from our rental fleet. We recorded no loss on this retirement, as these units were fully depreciated. We did not record any retirements from our rental fleet in 2017.

Property and Equipment

Property and equipment consists of the following at December 31, 2019 and 2018 (in thousands):


	Useful Lives (Years)	2019		2018
Land	—	$	1,290	$	1,290
Building	39	18,632		6,116
Building and leasehold improvements	39	1,168		808
Office equipment and furniture	5	2,001		1,492
Software	5	573		573
Machinery and equipment	7	3,492		3,324
Vehicles	3	7,560		6,292
Construction in Progress	—	—		8,319
Total		34,716		28,214
Less accumulated depreciation		(12,847)		(11,570)
Total		$	21,869	$	16,644

Depreciation expense for property and equipment was $1.7 million, $1.1 million and $1.2 million for the year ended December 31, 2019, 2018 and 2017, respectively.

Depreciation Expense by Product Line

The following table depicts annual depreciation expense associated with each product line as well as our corporate activities at December 31, 2019, 2018 and 2017 (in thousands):


	2019		2018		2017
Rentals	$	22,596	$	21,611	$	20,873
Sales	275		271		267
Service & Maintenance	37		22		22
Corporate	235		50		29
Total	$	23,143	$	21,954	$	21,191