OREANDA-NEWS. Archrock Partners, L.P. (NASDAQ:APLP) today reported net income of $5.3 million, or $0.08 per diluted common unit, for the second quarter of 2017, compared to a net loss of $4.3 million, or $0.07 per diluted common unit, for the first quarter of 2017 and net income of $3.3 million, or $0.05 per diluted common unit, for the second quarter of 2016.

EBITDA, as adjusted (as defined below), was $66.9 million for the second quarter of 2017, compared to $61.1 million for the first quarter of 2017 and $71.2 million for the second quarter of 2016.

Revenue was $138.3 million for the second quarter of 2017, compared to $137.3 million for the first quarter of 2017 and $140.1 million for the second quarter of 2016. Gross margin was $84.3 million, or 61% of revenue, in the second quarter of 2017, compared to $81.0 million, or 59% of revenue, in the first quarter of 2017 and $90.7 million, or 65% of revenue, in the second quarter of 2016.

Selling, general and administrative expenses (“SG&A”) were $18.3 million for the second quarter of 2017, compared to $20.3 million for the first quarter of 2017 and $19.7 million in the second quarter of 2016.

Cash flows from operating activities were $38.0 million for the second quarter of 2017, compared to $60.7 million for the first quarter of 2017 and $42.9 million for the second quarter of 2016.

Distributable cash flow (as defined below) was $39.1 million for the second quarter of 2017, compared to $34.4 million for the first quarter of 2017 and $46.7 million for the second quarter of 2016. Distributable cash flow coverage was 2.04x for the second quarter of 2017, compared to 1.80x for the first quarter of 2017 and 2.67x for the second quarter of 2016.

“Archrock Partners performed extremely well in the second quarter,” said Brad Childers, Chairman, President and Chief Executive Officer of Archrock Partners’ managing general partner. “During the quarter, we grew operating horsepower by 34,000 horsepower, improved gross margin percentage by 200 basis points, and increased EBITDA, as adjusted, $6 million sequentially. We continued to drive new orders at impressive levels, and in spite of the recent commodity price pull-back, demand for our services has remained at elevated levels providing visibility of new starts through 2017 and into 2018.”

“As we have communicated over the past nine months, 2017 is a transition year with the prior cyclical downturn giving way to the expansion we expected in the second half of 2017,” continued Childers. “We are confident that expansion is underway and we expect to see solid year-over-year growth in year-end 2017 operating horsepower.”

“With the industry’s largest fleet of high demand large horsepower units, Archrock Partners is well positioned to benefit from surging activity levels as well as the long-term expected increase in demand for natural gas. We will continue to invest in additional large horsepower units to expand our already considerable fleet and meet our customers’ growing need for our services,” concluded Childers.   

Net income, excluding the items listed in the following sentence, for the second quarter of 2017 was $8.4 million, or $0.12 per diluted common unit. The excluded item consisted of a non-cash long-lived asset impairment of $3.1 million. Net income, excluding the items listed in the following sentence, for the first quarter of 2017 was $2.2 million, or $0.03 per diluted common unit. The excluded items consisted of a non-cash long-lived asset impairment of $6.2 million and debt extinguishment costs of $0.3 million. Net income, excluding the items listed in the following sentence, for the second quarter of 2016 was $12.8 million, or $0.21 per diluted common unit. The excluded items consisted of a non-cash long-lived asset impairment of $8.3 million as well as restructuring charges of $1.2 million.

Conference Call Details                   

Archrock, Inc. and Archrock Partners, L.P. will host a joint conference call on Tuesday, August 1, 2017, to discuss their second quarter 2017 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 1-888-771-4371 in the United States and Canada or +1-847-585-4405 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference Archrock conference call number 4525 3386.

A replay of the conference call will be available on Archrock’s website for approximately seven days. Also, a replay may be accessed for approximately seven days by dialing 1-888-843-7419 in the United States and Canada, or +1-630-652-3042 for international calls. The access code is 4525 3386#.

EBITDA, as adjusted, a non-GAAP measure, is defined as net income (loss) excluding income taxes, interest expense, depreciation and amortization expense, long-lived asset impairment, restructuring charges, expensed acquisition costs, debt extinguishment costs, non-cash SG&A costs and other items. A reconciliation of EBITDA, as adjusted, to net income (loss), the most directly comparable GAAP measure, appears below.

Distributable cash flow, a non-GAAP measure, is defined as net income (loss) (a) plus depreciation and amortization expense, long-lived asset impairment, restructuring charges, expensed acquisition costs, non-cash SG&A costs, debt extinguishment costs, and interest expense (b) less cash interest expense (excluding amortization of deferred financing fees, amortization of debt discount and non-cash transactions related to interest rate swaps) and maintenance capital expenditures, and (c) excluding gains or losses on asset sales and other items. Distributable cash flow coverage is defined as distributable cash flow divided by total distributions declared. A reconciliation of distributable cash flow to cash flows from operating activities, the most directly comparable GAAP measure, appears below.

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

Net income (loss), excluding items, a non-GAAP measure, is defined as net income (loss) plus long-lived asset impairment, restructuring charges, expensed acquisition costs and debt extinguishment costs. A reconciliation of net income (loss), excluding items, to net income (loss), the most directly comparable GAAP measure, appears below.

About Archrock Partners

Archrock Partners, L.P., a master limited partnership, is the leading provider of natural gas contract compression services to customers throughout the United States. Archrock, Inc. (NYSE:AROC) owns an equity interest in Archrock Partners, including all of the general partner interest. For more information, visit www.archrock.com.

 

 
ARCHROCK PARTNERS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)
 
  Three Months Ended
  June 30,   March 31,   June 30,
  2017   2017   2016
Revenue $ 138,255     $ 137,295     $ 140,052  
           
Costs and expenses:          
Cost of sales (excluding depreciation and amortization expense) — affiliates 53,995     56,277     49,310  
Depreciation and amortization 36,275     36,885     38,627  
Long-lived asset impairment 3,081     6,210     8,283  
Restructuring charges —     —     1,208  
Selling, general and administrative — affiliates 18,303     20,311     19,741  
Interest expense 21,299     20,223     19,313  
Debt extinguishment costs —     291     —  
Other (income) loss, net (933 )   112     72  
Total costs and expenses 132,020     140,309     136,554  
Income (loss) before income taxes 6,235     (3,014 )   3,498  
Provision for income taxes 960     1,302     187  
Net income (loss) $ 5,275     $ (4,316 )   $ 3,311  
           
General partner interest in net income (loss) $ 105     $ (86 )   $ 66  
           
Common unitholder interest in net income (loss) $ 5,170     $ (4,230 )   $ 3,245  
           
Weighted average common units outstanding used in income (loss) per common unit (1):          
Basic 65,399     65,418     59,837  
           
Diluted 65,399     65,418     59,837  
           
Income (loss) per common unit (1):          
Basic $ 0.08     $ (0.07 )   $ 0.05  
           
Diluted $ 0.08     $ (0.07 )   $ 0.05  
           
(1) Basic and diluted income (loss) per common unit is computed using the two-class method. Under the two-class method, basic and diluted income (loss) per common unit is determined by dividing income (loss) allocated to the common units after deducting the amounts allocated to our general partner (including distributions to our general partner on its incentive distribution rights) and participating securities (unvested phantom units with nonforfeitable tandem distribution equivalent rights to receive cash distributions), by the weighted average number of outstanding common units excluding the weighted average number of outstanding participating securities during the period.
 
ARCHROCK PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per unit amounts, percentages and ratios)
 
  Three Months Ended
  June 30,   March 31,   June 30,
  2017   2017   2016
Revenue $ 138,255     $ 137,295     $ 140,052  
           
Gross margin (1) $ 84,260     $ 81,018     $ 90,742  
Gross margin percentage 61 %   59 %   65 %
           
EBITDA, as adjusted (1) $ 66,927     $ 61,115     $ 71,210  
  % of revenue 48 %   45 %   51 %
           
Capital expenditures $ 57,522     $ 14,090     $ 10,777  
Less: Proceeds from sale of property, plant and equipment (875 )   (4,187 )   (10,751 )
Net capital expenditures $ 56,647     $ 9,903     $ 26  
           
Cash flows from operating activities $ 38,043     $ 60,715     $ 42,885  
Distributable cash flow (2) $ 39,081     $ 34,432     $ 46,721  
           
Distributions declared for the period per common unit $ 0.2850     $ 0.2850     $ 0.2850  
Distributions declared to all unitholders for the period $ 19,121     $ 19,101     $ 17,513  
Distributable cash flow coverage (3) 2.04 x   1.80 x   2.67 x
           
  June 30,   March 31,   June 30,
  2017   2017   2016
Debt (4) $ 1,377,152     $ 1,347,357     $ 1,410,042  
Total partners' capital 486,703     500,429     489,737  
           
(1) Management believes EBITDA, as adjusted, 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.
(2) Management uses distributable cash flow, a non-GAAP measure, as a supplemental performance and liquidity measure. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions.
(3) Defined as distributable cash flow for the period divided by distributions declared to all unitholders for the period.
(4) Carrying values are shown net of unamortized debt discounts and unamortized deferred financing costs.
 
ARCHROCK PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per unit amounts)
 
  Three Months Ended
  June 30,   March 31,   June 30,
  2017   2017   2016
Reconciliation of GAAP to Non-GAAP Financial Information:          
           
Net income (loss) $ 5,275     $ (4,316 )   $ 3,311  
Depreciation and amortization 36,275     36,885     38,627  
Long-lived asset impairment 3,081     6,210     8,283  
Restructuring charges —     —     1,208  
Selling, general and administrative — affiliates 18,303     20,311     19,741  
Interest expense 21,299     20,223     19,313  
Debt extinguishment costs —     291     —  
Other (income) loss, net (933 )   112     72  
Provision for income taxes 960     1,302     187  
Gross margin (1) 84,260     81,018     90,742  
Non-cash selling, general and administrative — affiliates 37     520     281  
Less: Selling, general and administrative — affiliates (18,303 )   (20,311 )   (19,741 )
Less: Other income (loss), net 933     (112 )   (72 )
EBITDA, as adjusted (1) 66,927     61,115     71,210  
Less: Provision for income taxes (960 )   (1,302 )   (187 )
Less: (Gain) loss on sale of property, plant and equipment (in Other (income) loss, net) (907 )   148     103  
Less: Cash interest expense (19,659 )   (18,254 )   (18,527 )
Less: Maintenance capital expenditures (6,320 )   (7,275 )   (5,878 )
Distributable cash flow (2) $ 39,081     $ 34,432     $ 46,721  
           
Cash flows from operating activities $ 38,043     $ 60,715     $ 42,885  
Provision for doubtful accounts (663 )   (278 )   (547 )
Restructuring charges —     —     1,208  
Deferred income tax provision (930 )   (1,302 )   (187 )
Payments for settlement of interest rate swaps that include financing elements (460 )   (581 )   (778 )
Maintenance capital expenditures (6,320 )   (7,275 )   (5,878 )
Change in assets and liabilities 9,411     (16,847 )   10,018  
Distributable cash flow (2) $ 39,081     $ 34,432     $ 46,721  
           
Net income (loss) $ 5,275     $ (4,316 )   $ 3,311  
Items:          
Long-lived asset impairment 3,081     6,210     8,283  
Restructuring charges —     —     1,208  
Debt extinguishment costs —     291     —  
Net income, excluding items $ 8,356     $ 2,185     $ 12,802  
           
Diluted income (loss) per common unit $ 0.08     $ (0.07 )   $ 0.05  
Adjustment for items per common unit 0.04     0.10     0.16  
Diluted income per common unit, excluding items (1) $ 0.12     $ 0.03     $ 0.21  
           
(1) Management believes EBITDA, as adjusted, diluted income per common unit, excluding items, 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.
(2) Management uses distributable cash flow, a non-GAAP measure, as a supplemental performance and liquidity measure. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions.
 
ARCHROCK PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except percentages)
 
  Three Months Ended
  June 30,   March 31,   June 30,
  2017   2017   2016
           
Total available horsepower (at period end) (1) (2) 3,281     3,267     3,315  
           
Total operating horsepower (at period end) (1) (3) 2,860     2,826     2,778  
           
Average operating horsepower 2,843     2,861     2,815  
           
Horsepower Utilization:          
Spot (at period end) 87 %   87 %   84 %
Average 87 %   88 %   85 %
           
Total available contract operations horsepower of Archrock, Inc.
and Archrock Partners (at period end) (2)		 3,827     3,795     4,023  
           
Total operating contract operations horsepower of Archrock, Inc.
and Archrock Partners (at period end) (3)		 3,118     3,079     3,187  
           
(1) Includes compressor units comprising approximately 23,000, 4,000 and 4,000 horsepower leased from Archrock as of June 30, 2017, March 31, 2017 and June 30, 2016, respectively. Excludes compressor units comprising approximately 6,000 and 600 horsepower leased to Archrock as of June 30, 2017 and 2016, respectively. No units were leased to Archrock as of March 31, 2017.
(2) Defined as idle and operating horsepower. New 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.