美國

證券交易委員會

華盛頓特區20549

表格10-Q

(標記一個)

☒ 根據1934年證券交易所法案第13或15(d)條的季報告

截至2024年6月30日季度結束 2024年9月30日

或

☐

在從【空白】過渡到【空白】的過渡期間

委託文件號碼。001-33666

Archrock, Inc.

（依憑章程所載的完整登記名稱）


特拉華	74-3204509
(公司成立所在地或其他行政區劃) 的註冊地或組織地點) or organization)	（聯邦稅號）

9807 Katy Freeway, Suite 100, 休斯頓, 德克薩斯 77024

(公司總部地址，郵政編碼)

(281) 836-8000

(註冊人電話號碼，包括區號)

根據法案第12(b)條註冊的證券：


每種類別的名稱	交易符號	註冊的交易所名稱
每股普通股票，面值$0.01	AROC	紐約證券交易所

請檢查標記，確認註冊商是否(1)在過去的12個月內(或更短的期限，註冊商在該期限內需要提交此類報告)提交了證券交易法1934年第13條或15(d)條要求提交的所有報告；並且(2)過去90天一直受到此類報告的要求。是 ☒ 不 ☐

請勾選表示，登記者是否已在過去12個月（或登記者需要提交此類檔案的較短期間）內根據S-t條例第405條（本章節第232.405條）的規定，以電子方式提交所有所需提交的互動式資料檔案。 Yes ☒ 沒有 ☐

請載明檢查標記，公司是否為大型加速披露人、加速披露人、非加速披露人、小型報告公司或新興成長公司。請於「交易所法案」第1202條中查閱「大型加速披露人」、「加速披露人」、「小型報告公司」和「新興成長公司」的定義。


大型加速歸檔人	☒	加速歸檔人	☐
非加速歸檔人	☐	小型報告公司	☐
		新興成長型企業	☐

如果一家新興成長型公司，請用勾選標記表示該申報人已選擇不使用根據證交所法案13(a)條款提供的任何新的或修訂過的財務會計準則的延長過渡期。 ☐

請在核准印章處打勾，表明公司是否為外殼公司（根據《交易所法》第120億2條所定義）。是 ☐ No ☒

截至2024年11月5日，登記人普通股的流通股數為： 175,172,118 股。



	頁面
詞彙表	3
前瞻性聲明	4

第一部分財務資料
項目一。財務報表（未經審核）	5
簡明綜合資產負債表	5
簡明綜合營運報表	6
簡明綜合股權報表	7
簡明綜合現金流量報表	9
未經審核簡明綜合財務報表附註	10
項目二。管理層對財務狀況及營運結果進行討論及分析	28
第三項目。關於市場風險的定量和定性披露	37
第四項。控制和程序	38

第二部分。其他資訊
項目一。法律程序	39
項目 1A。風險因素	40
項目二。非登記股份證券銷售及所得款項的使用	41
第三項高級證券違約	41
第四項。礦山安全披露	41
第五項。其他資訊	41
第六項。展品	42

簽名	43

Table of Contents

詞彙表

本報告文本中出現的以下術語和縮寫所指的含意如下。



2013計劃	2013年股票激勵計劃
2020年計劃	2020年股票激勵計劃
2023 Form 10-K	Annual Report on Form 10-k for the year ended December 31, 2023
2027債券	$50000萬 of 6.875% senior notes due April 2027, issued in March 2019
2027 Notes Tender Offer	$20000萬 partial redemption of the 2027 Notes, completed in August 2024
2028年債券	$80000萬的6.25%償還期限為2028年4月的優先票據中，其中$50000萬於2019年12月發行，$30000萬於2020年12月發行
2032年註釋	$70000萬的6.625%償還期限為2032年9月的優先票據，於2024年8月發行
修正及重新簽訂的信用協議	日期為2023年5月16日的修訂和重述信用協議，修訂和重述日期為2017年3月30日的信用協議，管理信用額度
archrock，我們，我們，我們	archrock, Inc.，獨立地及與其全資子公司一起
archrock ELT	archrock ELt LLC，archrock的間接全資子公司
ASU	會計準則更新
信貸設施	11億美元以資產為基礎的循環信貸，到期日為2028年5月，根據修訂的和重訂的信貸協議進行管理，經修訂
ECOTEC	Ecotec International Holdings, LLC
ESPP	員工股票購買計劃
證券交易所法案	1934年修訂後的證券交易法
金融會計準則委員會	金融會計準則委員會
修訂後的第一修訂和修訂後的信貸協議	2024年8月28日生效之第一修改協議，修改了修訂後的信貸協議
基本報表	本季度報告第10-Q表格中第I項「財務報表」的簡明綜合基本報表
GAAP	美國通用會計原則
GHG	溫室氣體（例如二氧化碳、甲烷和水蒸氣）
Hilcorp	Hilcorp Energy Company
Ionada	Ionada PLC
2024年7月股本發售	公開包銷發行，由archrock出售約1270萬股普通股，於2024年7月完成
LIBOR	倫敦銀行同業拆息利率
場外交易	場外交易，就售後服務零件和元件而言
證券交易委員會	美國證券交易委員會
銷售與行政支出	銷售、總務和行政費用
股份回購計劃	由我們的董事會於2023年4月27日批准的股份回購計劃，允許我們在十二個月內回購高達5000萬美元的優先普通股，在其到期前於2024年4月25日延長24個月，並將授權的股份回購金額補充至5000萬美元。
TOPS	Total Operations and Production Services, LLC，是由阿波羅全球管理某些聯屬公司管理的投資組合公司。
TOPS收購	根據2024年8月30日完成的交易（“收購日期”），由archrock、archrock ELt、TOPS Pledge1、LLC、TOPS Pledge2、LLC及有限目的下的TOPS Holdings、LLC於2024年7月22日訂立的某特定購買及出售協議，archrock收購了TOPS發行並未支付的全部股權
SOFR	隔夜拆款利率
美國。	美利堅合眾國
WACC	資本的加權平均成本

Table of Contents

前瞻性陳述

本季度財務報告的表格10-Q（以下簡稱“10-Q表格”）包含旨在符合1995年《私人證券訴訟改革法》建立的安全港條款的“前瞻性陳述”。這份10-Q表格中除了歷史事實陳述之外的所有陳述都屬於證券交易所法案涵義下的前瞻性陳述，包括但不限於我們的業務增長策略和預計成本；未來財務狀況；可供運營及支付股息的現金流量充裕程度；預期的資本支出金額；預期的成本節省；未來營業收入、調整後毛利率和其他與我們業務相關的財務或運營指標；我們設備未來價值；及我們管理層對未來運營的計劃和目標。您可以通過“相信”、“預期”、“打算”、“預測”、“預期”、“估計”、“將持續”等字眼或其負面形式來識別這些陳述中的許多陳述。

此類前瞻性陳述可能面臨各種風險和不確定性，可能導致與本10-Q表格日期預期不符的實際結果。雖然我們認為這些前瞻性陳述所反映的期望是基於合理假設的，但無法保證這些期望將被證實正確。已知可能導致我們的實際結果與這些前瞻性陳述反映的期望不符的重要因素包括我們2023年10-K表格中描述的風險因素以及我們不時在美國證券交易委員會的申報案件中披露的風險因素，這些資料可通過我們的網站或美國證券交易委員會的網站獲得。 www.archrock.com 和美國證券交易委員會的網站獲取 www.sec.gov這些風險因素包括但不限於無法實現TOPS收購所預期的好處和整合TOPS的困難；收購風險，包括TOPS收購，可能降低我們向普通股東分配資金的能力；與流行病和其他公共衛生危機相關的風險；通脹增加；持續國際衝突和緊張局勢；與我們業務相關的風險；競爭壓力；無法以經濟上可接受的條件進行收購；未來支付分紅的不確定性；與大量債務及我們的債務協議相關的風險；無法取得資本和信貸市場的資金，或以負擔得起的條件借款以獲得額外資本；無法資助購買額外壓縮設備；容易受到利率上升的影響；與LIBOR淘汰相關的不確定性；我們客戶財務狀況惡化的風險；與我們最重要客戶流失相關的風險；對我們合約運營服務協議續約的不確定性；有失去管理或運營人員風險；依賴特定供應商和容易受到產品短缺和價格上漲的影響；信息技術和網絡安全概念風險；稅務風險；法律和監管風險，包括與氣候和環境、社會和治理相關的風險。

所有包含在本10-Q表格中的前瞻性陳述基於我們在此10-Q表格日期可取得的資訊。除法律要求外，我們不會公開更新或修訂任何前瞻性陳述，無論是因為新資訊、未來事件或其他原因。我們或代表我們行動的任何人作出的所有后續書面或口頭前瞻性陳述均受到本10-Q表格中遍布的警語的完全限制。

Table of Contents

第一部分. 財務資料

項目1 基本報表

Archrock, Inc。

縮短的合併財務報表

(以千為單位，除每股面值和股數外)

(未經審計)


	2024年9月30日		2023年12月31日
資產
流動資產:
現金及現金等價物	$	3,749	$	1,338
應收帳款，扣除抵減後 $638 和 $587，分別		149,019		124,069
存貨		84,366		81,761
其他流動資產		7,547		5,989
全部流動資產		244,681		213,157
不動產、廠房及設備淨值		3,261,026		2,301,982
營業租賃使用權資產		15,222		14,097
商譽		116,937		—
無形資產，扣除累計攤銷		78,197		30,182
Contract costs, net		35,938		37,739
递延税款贷项		2,138		3,192
其他資產		54,241		47,733
已停業營運之非流動資產		7,868		7,868
資產總額	$	3,816,248	$	2,655,950

負債及股東權益
流動負債：
應付帳款，交易	$	70,120	$	61,026
應計負債		119,303		85,381
递延收入		5,238		5,736
流動負債合計		194,661		152,143
長期負債		2,236,131		1,584,869
运营租赁负债		12,536		12,271
递延所得税负债		41,394		4,921
其他負債		32,922		22,857
停止運作的業務的非流動負債		7,868		7,868
總負債		2,525,512		1,784,929

承諾事項和或附帶條件（注8）

股權：
優先股: $0.01 每股面值， 50,000,000 已授權股份，零已發行		—		—
普通股： $0.01 每股面值， 250,000,000 已授權股份， 185,333,786 和 164,984,401 發行股份分別為		1,854		1,650
資本公積額額外增資		3,877,203		3,470,576
累積虧損		(2,467,142)		(2,499,931)
庫藏股： 10,158,142 和 9,020,454 普通股，分別以成本計量		(121,179)		(101,274)
總股本		1,290,736		871,021
負債加股東權益總額	$	3,816,248	$	2,655,950

附註是這些未經審計的簡明綜合財務報表的一個組成部分。

Table of Contents

Archrock, Inc。

損益綜合表簡明合併報表

（以千為單位，除每股金額外）

(未經審計)


	截至三個月的結束				截至九個月的結束
	九月三十日，				九月三十日，
	2024		2023		2024		2023
營業收入:
合同運營	$	245,420	$	207,552	$	693,939	$	596,417
售後服務		46,741		45,815		137,236		134,327
營業總收入		292,161		253,367		831,175		730,744
銷貨成本，不包括折舊和攤銷
合約運營		79,810		75,273		236,831		230,788
售後服務		34,395		36,688		104,553		105,939
銷售總成本，不包括折舊和攤銷		114,205		111,961		341,384		336,727
銷售、總務和行政費用		34,059		28,558		96,887		83,632
折舊和攤銷		48,377		42,155		135,065		123,546
長期資產及其他資產減值		2,509		2,922		9,478		8,383
重组费用		—		592		—		1,554
債務撲滅損失		3,181		—		3,181		—
利息支出		30,179		28,339		85,372		83,550
交易相關費用		9,220		—		11,002		—
資產出售收益，淨額		(2,218)		(3,237)		(5,175)		(8,018)
其他收益（費用），淨額		(304)		(235)		(37)		1,831
税前收入		52,953		42,312		154,018		99,539
所得税费用		15,437		11,454		41,545		27,543
凈利潤	$	37,516	$	30,858	$	112,473	$	71,996

每普通股基本及稀釋每股收益	$	0.22	$	0.20	$	0.70	$	0.46

加權平均在外流通股數：
基本		165,847		154,163		158,205		154,210
稀釋		166,173		154,401		158,518		154,398

附註是這些未經審計的簡明綜合財務報表的一個組成部分。

Table of Contents

Archrock, Inc。

簡明合併權益表

(以千為單位，除股份和每股金額外)

(未經審計)



				額外
	普通股			實收		累積		庫藏股
		金額	股份	資本		虧損			金額	股份	總計
2023年6月30日結餘	$	1,649	164,940,249	$	3,463,668	$	(2,515,351)	$	(94,433)	(8,440,673)	$	855,533
收回的股份		—	—		—		—		(4,422)	(354,012)		(4,422)
股份被扣押與股權獎勵的淨結算相關		—	—		—		—		(9)	(717)		(9)
現金分紅（$0.155 每普通股份）		—	—		—		(24,250)		—	—		(24,250)
根據ESPP發行的股份		—	19,494		192		—		—	—		192
股份基礎薪酬，扣除沒收部分後的淨額		—	—		3,191		—		—	(44,250)		3,191
凈利潤		—	—		—		30,858		—	—		30,858
2023年9月30日的結餘	$	1,649	164,959,743	$	3,467,051	$	(2,508,743)	$	(98,864)	(8,839,652)	$	861,093

截至2024年6月30日的結存	$	1,658	165,793,798	$	3,478,597	$	(2,476,793)	$	(108,966)	(9,493,262)	$	894,496
收回的股份		—	—		—		—		(12,107)	(649,854)		(12,107)
股份與權益獎勵淨利潤相關的扣留		—	—		—		—		(106)	(5,291)		(106)
現金分紅派息（$0.165 每普通股份）		—	—		—		(27,865)		—	—		(27,865)
根據ESPP發行的股份		—	14,485		263		—		—	—		263
基於股票的報酬，扣除被沒收的部分		—	1,853		3,738		—		—	(9,735)		3,738
普通股發行的淨收益		127	12,650,000		255,620		—		—	—		255,747
發行股份以進行TOPS收購		69	6,873,650		138,985		—		—	—		139,054
凈利潤		—	—		—		37,516		—	—		37,516
2024年9月30日的餘額	$	1,854	185,333,786	$	3,877,203	$	(2,467,142)	$	(121,179)	(10,158,142)	$	1,290,736

附註是這些未經審計的簡明綜合財務報表的一個組成部分。

阿奇羅克股份有限公司

簡明綜合股權報表

（以千計，股份及每股金額除外）

(未經審核)



				額外
	普通股			已付款		累積		庫務股票
		金額	股票	資本		赤字			金額	股票	總計
二零二二年十二月三十一日結餘	$	1,634	163,439,013	$	3,456,777	$	(2,509,133)	$	(88,585)	(7,810,548)	$	860,693
股份回購		—	—		—		—		(6,495)	(576,262)		(6,495)
與股權獎項淨額結算有關的預扣股份		—	—		—		—		(3,784)	(384,684)		(3,784)
現金股息 ($0.455 每股普通股）		—	—		—		(71,606)		—	—		(71,606)
根據 ESPP 發行的股份		1	61,494		573		—		—	—		574
基於股票賠償（扣除沒收		14	1,459,236		9,701		—		—	(68,158)		9,715
淨收入		—	—		—		71,996		—	—		71,996
二零二三年九月三十日止餘額	$	1,649	164,959,743	$	3,467,051	$	(2,508,743)	$	(98,864)	(8,839,652)	$	861,093

二零二三年十二月三十一日結餘	$	1,650	164,984,401	$	3,470,576	$	(2,499,931)	$	(101,274)	(9,020,454)	$	871,021
股份回購		—	—		—		—		(13,337)	(732,826)		(13,337)
與股權獎項淨額結算有關的預扣股份		—	—		—		—		(6,568)	(391,868)		(6,568)
現金股息 ($0.495 每股普通股）		—	—		—		(79,684)		—	—		(79,684)
根據 ESPP 發行的股份		—	49,602		815		—		—	—		815
基於股票賠償（扣除沒收		8	776,133		11,207		—		—	(12,994)		11,215
發行普通股所得款項淨額		127	12,650,000		255,620		—		—	—		255,747
為收購 TOPS 而發行的股份		69	6,873,650		138,985		—		—	—		139,054
淨收入		—	—		—		112,473		—	—		112,473
二零二四年九月三十日止餘額	$	1,854	185,333,786	$	3,877,203	$	(2,467,142)	$	(121,179)	(10,158,142)	$	1,290,736

附帶附註是這些未經審核的簡明合併財務報表中不可或缺的一部分。

Table of Contents

Archrock, Inc。

簡明合併現金流量量表

（以千為單位）

(未經審計)


	截至九個月的結束
	September 30,
	2024		2023
經營活動現金流量：
凈利潤	$	112,473	$	71,996
調整淨利潤以達經營活動所提供之淨現金流量：
折舊和攤銷		135,065		123,546
長期資產及其他資產減值		9,478		8,383
非現金重組費用		—		211
投資於非合併聯屬公司之公允價值變動未實現收益		—		1,996
存貨減損		568		381
營運租賃權益資產攤銷		2,789		2,488
未來融資成本攤銷		3,575		4,599
債券溢價攤銷		(1,504)		(1,504)
Amortization of capitalized implementation costs		2,259		1,841
債務撲滅損失		3,181		—
股份報酬支出		11,215		9,715
信用損失準備（受益）		95		(234)
資產出售收益，淨額		(5,175)		(8,018)
延遲所得稅支出		40,483		26,411
合同成本攤銷		17,771		15,636
推遲認列於收入的營業收入		(9,707)		(11,043)
營運資產和負債的變化：
應收帳款淨額		(4,883)		(7,315)
存貨		3,449		(1,672)
其他資產		(3,303)		(1,635)
合約成本		(15,970)		(18,854)
應付帳款及其他負債		(7,126)		10,745
預收收入		10,598		10,733
其他		(78)		62
經營活動產生的淨現金流量		305,253		238,468

投資活動之現金流量:
資本支出		(261,044)		(261,977)
出售財產、設備及其他資產所得款項		24,204		54,663
保險及其他賠償款項收入		45		1,157
支付TOPS收購款後，扣除取得現金		(866,568)		—
投資未納入合併財務報表的實體		(1,307)		(2,000)
投資活動中使用的淨現金		(1,104,670)		(208,157)

來自籌資活動的現金流量:
長期借款		1,133,425		577,725
償還長期債務		(974,275)		(522,075)
2032年調整票據發行所得		700,000		—
2027年債券的部分償還		(201,987)		—
償還債務發行成本		(12,308)		(5,734)
分紅派息給股東		(79,684)		(71,606)
購回普通股		(13,337)		(6,495)
現金及現金等價物與受限現金—期初		(6,568)		(3,784)
普通股發行的淨收益		255,747		—
員工股票認購計劃下發行股票所得		815		574
籌資活動提供的淨現金		801,828		(31,395)
現金及現金等價物的淨增加（減少）		2,411		(1,084)
期初現金及現金等價物		1,338		1,566
現金及現金等價物期末餘額	$	3,749	$	482

披露非現金投資交易補充資料：
根據TOPS收購協議發行archrock普通股	$	139,054	$	—

附註是這些未經審計簡明綜合基本報表的重要組成部分.

Table of Contents

Archrock, Inc。

附註至簡明綜合財務報表

1.業務描述及基礎介紹；

我們是一家能源基礎設施公司，主要專注中遊天然氣壓縮。我們是美國能源行業客戶中，按總壓縮馬力計的天然氣壓縮服務的領先提供商，也是美國擁有壓縮設備的客戶主要售後服務供應商。我們業務範圍涉及兩個業務板塊包括：合同業務和售後服務。我們主要的合同業務板塊主要包括設計、採購、擁有、安裝、運營、維護、修復和維護我們擁有的天然氣壓縮設備，為客戶提供天然氣壓縮服務。在我們的售後服務業務中，我們賣出部件和元件，並為擁有壓縮設備的客戶提供運營、維護、大修和重新配置等服務。

附表中的未經審核的精簡合併基本財務報表已按照10-Q表格的說明進行了準備，並不包括GAAP要求的所有信息和披露。因此，應該將這些信息與我們2023年的10-K表格中包含的合併財務報表和附註一同閱讀。此處提供的信息反映了管理層認為屬於一般性重現性質並被認為對中期報告結果的公平陳述所必要的所有調整。所有公司間結餘和交易已在合併中予以消除。截至2024年9月30日的九個月營運結果未必能反映預期將於2024年12月31日年結實現的結果。

2. 近期的會計發展

尚未實施的會計準則更新

所得稅揭示

2023年12月，FASB發布了ASU 2023-09《所得稅（主題740）：改善所得稅披露》，該標準將要求進行顯著的額外披露，主要著重於所得稅支付和稅率協調表的披露。ASU 2023-09將於2024年12月15日後開始的財政年度以及2025年12月15日後開始的財政年度內的中期期間生效，應以前瞻性方式應用，並具有回顧性選擇。允許提前採納。我們正在評估採用ASU 2023-09對我們合併財務報表和相關披露將產生的影響。

板塊報告

2023年11月，財務會計準則委員會發布了ASU 2023-07，即《節段報告（第280號主題）：改善可報告節段披露》，該準則將要求對每個可報告節段的重大費用進行披露，以及其他一些披露以幫助投資者了解首席營運決策者如何評估節段費用和營運結果。ASU 2023-07還將允許披露多種節段盈利能力的指標，如果這些指標用於資源分配和評估績效的話。ASU 2023-07將對2023年12月15日後開始的財政年度及2024年12月15日後開始的財政年度內的中期時段起生效，並應採取溯及力原則進行申報，除非不切實際。可提前採納。我們正在評估採納ASU 2023-07對我們節段披露所產生的影響。我們預計採納ASU 2023-07對我們的合併財務報表不會造成重大影響。

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

業務合併 - 合資企業的成立

2023年8月，FASB發佈了ASU 2023-05，以減少實踐中的多樣性，併爲合資企業的投資者提供決策有用的信息，要求合資企業在成立時應用一種新的會計基礎。通過應用一種新的會計基礎，合資企業將在成立日期以公允價值確認和初始計量其資產和負債，公允價值計量的例外情況與業務合併指南一致。ASU 2023-05對所有成立日期在2025年1月1日或之後的合資企業的成立具有前瞻性生效。此外，2025年1月1日之前成立的合資企業可以選擇追溯適用該修訂，前提是它有足夠的信息來做到這一點。允許在未發佈或未提供發佈的任何中期或年度期間提前採用，無論是前瞻性還是追溯性。我們預計ASU 2023-05的採用將不會對我們的合併基本報表產生影響。

3. 業務交易

TOPS 收購

在2024年8月30日，我們完成了TOPS收購，我們收購了TOPS所有已發行和流通的股權，包括大約的艦隊 580,000 馬力，包括大約 530,000 運營馬力，綜合對價包括$869.1 萬美元和 6,873,650 普通股的股份，收購日期公允價值爲$139.1 百萬。購買價格的現金部分由2024年7月的股權發行和2032年債券發行的收益以及信貸設施下的借款提供資金。所支付的購買價格根據買賣協議的條款，須進行慣常的交割後調整。

The TOPS Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill. The preliminary allocation of the purchase price, which is subject to certain adjustments, was based upon preliminary valuations. Our estimates and assumptions are subject to change upon the completion of management’s review of the final valuations. We are in the process of finalizing valuations related to property, plant and equipment, identifiable intangible assets and goodwill. Post-closing adjustments to the purchase price could impact future depreciation and amortization as well as income tax expense. The final valuation of net assets acquired is expected to be completed as soon as practicable, but no later than one year from the acquisition date.

The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


(以千爲單位)
現金	$	2,498
應收賬款		9,694
存貨		6,944
其他流動資產		495
物業、廠房及設備		872,053
經營租賃使用權資產		1,424
商譽		116,937
無形資產		52,775
其他資產		4,032
交易應付賬款		(48,609)
應計負債		(4,666)
經營租賃負債		(1,424)
其他負債		(4,032)
購買價格	$	1,008,121

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

以下按資產類別詳細說明公允價值測量的估值方法和重要輸入。關於物業、廠房及設備以及無形資產的公允價值測量基於市場上不可觀察的重要輸入，因此代表了第3級測量。

固定資產

物業、廠房及設備的初步金額主要由電動馬達驅動壓縮設備組成，這些設備將根據預計的平均剩餘使用壽命，以直線法折舊。開空用於評估物業、廠房和設備的初步公允價值，採用了成本法和市場法。在成本法下，我們通過評估類似資產的近期購買或已發佈的數據，估算了資產的更換成本，然後根據實際情況調整了更換成本，以考慮物理磨損和功能及經濟的過時情況。然後，我們考慮了市場法，通過將我們估算的每馬力美元與市場可比數據和市場參與者假設進行比較，並根據需要進行了調整。

其他固定資產採用間接成本法進行估值，即使用已發佈的指數應用特定於資產的趨勢信息，計算反映歷史成本的資產的估計更換成本。其他資產根據已發佈的正常使用壽命估算和以前與類似資產的經驗進行折舊。

無形資產

無形資產包括客戶關係和商標，估計使用壽命爲 12年和五年根據資產預計直接或間接貢獻於我們未來現金流的期限，初步確定無形資產及其相關的使用壽命。

與客戶關係相關的可識別無形資產的公允價值是通過多期超額收益法確定的，這是一種折現現金流法的具體應用，即收入法，我們估計並折現無形資產未來現金流，通過調整整體業務營業收入考慮流失、過時、銷售成本、營業費用、稅收以及歸屬於其他取得資產的必要回報。得出預期未來現金流時所作出的重要估計包括我們預期的客戶流失率和歸屬於這些資產的收益。爲了折現估計的未來現金流，我們使用的折現率高於我們的加權平均資本成本（WACC），以反映相對於獲得的有形資產，客戶關係的流動性較差。

一般認爲，商標的公允市場價值最好通過收入法下的免版稅法來衡量，我們通過估算第三方在許可協議中談判的合理特許權使用費率來計算特許權使用費節省，該費率以商標相關總營業收入的百分比表示。與商標相關的營業收入乘以選定的特許權使用費率，並在商標的估計使用壽命內折算得出特許權使用費節省。特許權使用費節省已稅後處理並使用與商標的風險特徵相符的折現率折現爲現值，考慮到我們的加權平均資本成本（WACC）及TOPS其它取得資產的收益。

商譽

與TOPS收購相關的初步商譽金額歸因於我們在目前運營的二疊紀盆地擴展服務，並被分配到我們的合同運營部門。所記錄的商譽被認爲具有無限期的使用壽命，並將每年進行減值評估，或者在存在潛在減值指標時更頻繁地進行評估。預計爲TOPS收購所記錄的所有商譽在美國聯邦所得稅中可以扣除。

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

稅務或有資產及 indemnification 資產

與TOPS收購相關，我們記錄了一項基於非收入稅的或有事項，總額爲$4.3 百萬，以及相應的 indemnification 資產，總額爲$4.3 百萬，基於收購日期時存在的事實。這項稅務或有事項源於TOPS的收購前活動。作爲收購的一部分，賣方同意對某些稅務或有事項進行 indemnify，最高額度爲$21.6 百萬，截至收購日期。根據事實和情況，賣方的 indemnification 義務可能會在一段時間內減少。五年自收購日期起，但也可能延長至及時提交給賣方的索賠解決之時。

自收購日期起，歸屬於TOPS收購的運營結果已包含在我們的簡明合併基本報表中，作爲我們的合同業務部門的一部分。自收購日期至2024年9月30日的營業收入歸屬於收購的資產爲$15.6 百萬。由於我們沒有針對這些資產和負債準備完整的獨立業績，因此無法提供自收購日期起歸屬於收購資產和負債的收益。

與交易相關的費用

與TOPS收購有關，我們記錄了$9.2 百萬和$11.0 在截至2024年9月30日的三個月和九個月的合併基本報表中，交易相關費用爲百萬。

下表列出了按費用類型產生的交易相關費用：


	截至三個月		九個月結束
(以千爲單位)	2024年9月30日		2024年9月30日
其他營業費用 3,571 2,452 2,806 45.6% 27.3%⁽¹⁾	$	8,762	$	10,544
與補償相關的費用 ⁽²⁾		363		363
其他費用		95		95
總交易相關費用	$	9,220	$	11,002

(1)	專業費用包括法律、顧問、諮詢和其他費用。

(2)	補償相關費用包括與員工保留和與收購相關的其他補償安排相關的金額。付款在不同時間到期，包括在內的兩年 TOPS收購週年紀念。

以下表格列出了Cornerstone重組，Cornerstone收購和RP Finance合併對Rafael，Cornerstone和RP Finance的假設合併後運營結果，假設這些事件在2022年8月1日同時發生，並於2024年4月30日和2023年4月30日進行。

截至2024年和2023年9月30日的三個月和九個月的未經審計的預計財務信息是通過調整我們的歷史基本報表來反映在TOPS收購中獲得的資產和負債。TOPS收購在這份未經審計的預計財務信息中被視爲自2023年1月1日起發生，並反映以下內容：

●

與TOPS收購相關的員工保留和其他補償相關安排的影響；

●

我們會計政策的應用，並調整TOPS的結果，以反映自2023年1月1日起假設對不動產、廠房及設備和無形資產的公允價值調整所需的額外折舊和攤銷費用；

●

由於2032年票據、2027年票據招標要約以及對修改和重新制定的信貸協議的第一次修訂而產生的利息支出；

●

the exclusion of $8.8500萬股，並且總成本（包括佣金和消費稅）分別爲$$10.5 million of nonrecurring financial advisory, legal, audit and other professional fees incurred related to the acquisition and recorded to transaction-related costs in our condensed consolidated statements of operations during the three and nine months ended September 30, 2024, respectively. The nine months ended September 30, 2023 pro forma earnings were adjusted to reflect these charges; and

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

●

根據預估的混合法定稅率對調整的所得稅影響 23%.

以下未經審計的資料僅供參考，不一定反映我們在交易達成之初期可能發生的經營業績，也不一定預示未來的結果。


	截至三個月				九個月結束
	九月三十日，				九月30日，
(以千爲單位)	2024		2023		2024		2023
營業收入	$	321,775	$	282,657	$	940,244	$	806,243
歸屬於archrock股東的淨利潤		49,494		29,318		133,164		50,791

4. 庫存

截至2024年9月30日和2023年12月31日，存貨包括以下內容：


	九月30日		12月31日，
（以千爲單位）	2024		2023
零部件和耗材	$	70,824	$	70,759
進行中的工作		13,542		11,002
存貨	$	84,366	$	81,761

5. 物業、廠房和設備淨值

截至2024年9月30日和2023年12月31日，淨固定資產如下所示：


	九月30日，		十二月31日，
（以千爲單位）	2024		2023
壓縮設備、設施和其他艦隊資產	$	4,301,892	$	3,326,919
土地和建築物		31,936		30,169
運輸和商店設備		117,296		100,474
電腦硬件和軟件		77,912		77,532
其他		6,106		5,678
物業、廠房及設備		4,535,142		3,540,772
累計折舊		(1,274,116)		(1,238,790)
物業、廠房和設備，淨值	$	3,261,026	$	2,301,982

6. 對未納入的聯營企業的投資

對我們被視爲對公司有重大影響力但沒有控制權的投資，採用權益法覈算，除非選擇了公允價值選擇權。對於我們選擇公允價值選擇的投資，選項是不可撤銷的，並且在初次確認時逐項投資應用。

2022年4月，我們同意以現金收購25％的股權，該公司專注於甲烷排放檢測、監測和管理。我們選擇了公允價值選項來覈算這筆投資，在截至2023年9月30日的九個月內，我們確認了與我們投資公允價值變動相關的未實現損失爲$2.0百萬（請參閱附註15（"公允價值計量"））。這項投資的公允價值變動會計入我們的資產負債表中的其他費用運輸淨利潤中。 2024年8月，ECOTEC向某些投資者，包括archrock，發出了按份額募集資本的要求，導致對ECOTEC的額外投資爲1.3 百萬美元。截至2024年9月30日，我們對ECOTEC的所有權利益爲25％，包含在我們的資產負債表的其他資產中。

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

對於不適用權益法計量且沒有明確可確定的公允價值的所有權益投資，我們選擇了公允價值計量替代方案，按照成本減去減值（如有）記錄這些投資，包括對同一發行人的相同或類似投資的有序交易中觀察價格變動進行調整。使用公允價值計量替代方案計量的權益證券投資在每個報告期內進行減值或有序交易中的觀察價格變動複覈。

在2023年11月，我們同意擔任Ionada的A輪首選融資的主要投資方，Ionada是一家致力於減少溫室氣體排放並打造可持續未來的全球碳捕集技術公司。Ionada已開發出一種後燃燒碳捕集解決方案，旨在減少能源、海洋和電動燃料等行業中各類中小型工業排放源的二氧化碳排放。我們選擇了公允價值計量替代方案來計量這項投資（參見附註15(「公允價值計量」)）。對賬面價值的調整將在我們的簡明合併經營報告的其他費用中確認。截至2024年9月30日，我們對Ionada的投資賬面價值爲$4.3 百萬，其中包括我們初始投資的$3.8百萬；以及我們在Ionada的全面稀釋所有權益10，包括在我們的簡明綜合資產負債表中的其他資產。在特定條件下，我們的所有權份額將增加到24，在接下來的兩年.

7. 長期債務

長期負債包括以下內容，截至2024年9月30日和2023年12月31日：


(以千爲單位)	2024年9月30日		2023年12月31日
信貸設施	$	446,175	$	287,025

6.6252032年9月到期的高級票據:
未償還的本金		700,000		—
未攤銷的債務發行成本		(9,629)		—
		690,371		—
6.25到期日爲2028年4月的高級票據：
未償還本金		800,000		800,000
未攤銷債券溢價		7,020		8,524
未攤銷的債務發行成本		(5,816)		(7,081)
		801,204		801,443
6.875到期日爲2027年4月的高級票據：
剩餘本金		300,000		500,000
未攤銷的債務發行成本		(1,619)		(3,599)
		298,381		496,401

長期債務	$	2,236,131	$	1,584,869

2032票據

2024年8月26日，我們完成了一項私人發行的$700.0 總額爲 6.625% 到期於2032年9月的優先票據，並在扣除發行費用後獲得了淨收益$690.3 百萬美元，扣除發行成本。$9.7 發行成本的數百萬美元記錄爲長期債務中的遞延融資成本，並在我們的簡明合併資產負債表中按照票據期限分期攤銷爲利息費用。一部分淨收益用於資助TOPS收購的現金對價的部分，2027年票據召回要約和償還我們信貸額度下的未償借款。

2032年票據未進行註冊，且不會在美國證券法或任何其他司法管轄區的證券法下進行註冊，除非根據證券法和適用州證券法的註冊豁免，不得在美國出售。我們僅根據證券法下的規則144A向合格機構買家發行2032年票據，並根據證券法下的條例S向美國境外的特定非美國人發行。

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

2032年票據得到我們以及我們所有現有子公司的充分和無條件擔保，由我們以及所有現有子公司聯合和連帶擔保，除了發行2032年票據的archrock合作伙伴金融公司。2032年票據和擔保與我們和擔保人現有和未來的所有優先未償債務同等支付。

我們可以自行選擇，在2027年9月1日或之後的任何時間，按指定的贖回價格贖回全部或部分2032年票據，加上任何應計及未付利息。此外，在2027年9月1日之前，我們可以按指定的贖回價格和補償溢價贖回不超過 40%的2032年票據，加上任何應計及未付利息，按指定的贖回價格和補償溢價。

2027年債券要約收購

關於2032年債券的發行，我們完成了同時進行的現金要約收購，金額爲$202.0 百萬美元，約佔已投標2027年債券的 101%，以及$0.2 百萬美元的代理和法律費用。在收購日，已投標2027年債券的淨賬面價值爲$198.8 百萬美元，我們在簡明合併利潤表中記錄了$3.2 百萬美元的債務攤銷損失。

《修正和再度修訂信貸協議的第一修正案》

2024年8月28日，我們修訂了修訂後的信貸協議，其中包括：

●

提高信貸額度從 $750.0 百萬股增加到 $1.1 十億；

●

將用於發行擺動線貸款的信貸額度比例從 $75.0 百萬增加至 $110.0百萬美元；

●

將現金支配觸發閾值金額從 $75.0 百萬增加到 $110.0 百萬;

●

將某些金融機構添加爲信用額度工具的貸款人;

●

加入成爲Archrock Services, L.P.新成立的全資子公司的擔保人和出借人，並

●

修改我們所受制約的某些其他契約條款。

在截至2024年9月30日的三個月和九個月裏，我們發生了$2.6 百萬交易成本，涉及修訂後的信貸協議的首次修正案，已被列入我們簡明合併資產負債表中的其他資產，並正在按剩餘信貸額度期限攤銷。

修訂後的信貸協議

2023年5月16日，我們修訂並重新制定了信貸設施，其中包括:

●

將信貸設施的到期日從2024年11月8日延長至2028年5月16日（如果在該日期還有2027年票據和2028年票據的任何部分尚未償還，則到2026年12月2日或2027年12月3日）;

●

將參考利率從LIBOR更改爲SOFR，使得信貸設施下的借款根據我們的選擇，利息爲基準利率或SOFR利率加上適用的差額;

●

增加用於發放搖盪線貸款的信貸額度部分從 $50.0 百萬美元增加至 $75.0百萬美元。

Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

During the second quarter of 2023, we incurred $6.0 million in transaction costs related to the Amended and Restated Credit Agreement, which were included in other assets in our condensed consolidated balance sheets and are being amortized over the remaining term of the Credit Facility. In addition, during the second quarter of 2023, we wrote off $1.0 million of unamortized deferred financing costs as a result of the Amended and Restated Credit Agreement, which was recorded to interest expense in our condensed consolidated statements of operations during the nine months ended September 30, 2023.

As of September 30, 2024, there were $4.1 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.1在信貸設施未償餘額上，加權平均年利率爲 7.2 7.7分別爲2024年9月30日和2023年12月31日。在截至2024年9月30日和2019年9月30日的三個月內，我們分別支付了0.6 百萬和$0.4 百萬美元的承諾費用，以支付信貸設施每日未使用金額。1.5 百萬美元和百萬美元1.3 分別在截至2024年9月30日和2023年9月30日的九個月內。

截至2024年9月30日，我們符合信貸設施下的所有契約。此外，截至2024年9月30日，我們的信貸設施上所有未提取的額度可用於借款。

8. 承諾和或有事項

保險事宜

我們的業務可能存在危險，涉及到不可控制的天然氣或井液流動、火災或爆炸等意外情況。按照行業慣例，我們審查安全設備和程序，併購買了部分業務風險的保險，但並非所有風險。我們的保險範圍包括財產損失、綜合責任和商業汽車責任以及我們認爲合適的其他保險。我們認爲我們的保險覆蓋範圍符合行業慣例，並且對我們的業務足夠，但是；若保險未覆蓋的損失和責任將增加我們的成本。

此外，鑑於我們在工傷賠償和員工醫療索賠方面基本上是自我承擔的，因爲我們在這些風險方面承擔了相對較高的事故免賠額，根據已知事實、歷史趨勢和行業平均水平，我們進行損失預估並根據實際情況提取準備金。我們的離岸資產的財產損害也是自保的。

稅務事項

我們受到許多州和地方稅收的規定，這些稅收並非基於收入。由於這些稅項可能會接受稅務機關的審計，因此可能會導致額外的稅款。當我們判斷可能已經承擔了責任並且可以合理估計到達時，我們會爲這樣的額外稅款進行計提。截至2024年9月30日和2023年12月31日，我們分別爲非收入稅收審計結果的後果準備了$8.9 百萬美元和$3.9 百萬美元，用於非收入稅收審計結果。我們預計這些審計的最終解決方案不會導致與計提金額存在重大差異。除非我們認爲主張索賠的可能性很大，可能會確定索賠是合理的，我們可以合理估計索賠或索賠的區間，否則我們不會爲未主張的稅務審計索賠進行計提。我們認爲非收入稅收審計可能導致潛在未主張索賠對我們的合併財務狀況產生重大影響的可能性很小，但未來審計結果的解決方案可能對我們的合併經營業績或現金流量產生重大影響。

截至2024年9月30日和2023年12月31日，$0.6 上述稅務風險中有數百萬美元涉及已從審計審閱階段發展到有爭議聽證階段。截至2024年9月30日，有$4.3 上述稅務風險中有數百萬美元具有可抵銷的賠償資產。無截至2023年12月31日被投保。

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Litigation and Claims

In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends.

9. Stockholders’ Equity

July 2024 Equity Offering

On July 24, 2024, Archrock sold, pursuant to a public underwriting offering, 12,650,000 shares, including 1,650,000 shares pursuant to an over-allotment option. Archrock received net proceeds of $255.7 million, after deducting underwriting discounts, commissions and offering expenses. Proceeds from this equity offering were used to fund a portion of the TOPS Acquisition.

TOPS Acquisition

On August 30, 2024, we completed the TOPS Acquisition and issued 6,873,650 shares of common stock to the sellers as part of the acquisition purchase price. The acquisition date fair value was $139.1 million and is reflected in common stock and additional paid-in capital in our condensed consolidated statements of equity. See Note 3 (“Business Transactions”) for further details.

Share Repurchases

Share Repurchase Program

On April 27, 2023, our Board of Directors authorized a share repurchase program that allowed us to repurchase up to $50.0 million of outstanding common stock. Under the Share Repurchase Program, shares of our common stock may be repurchased periodically, including in the open market, privately negotiated transactions, or otherwise in accordance with applicable federal securities laws, at any time. On April 25, 2024, our Board of Directors approved an extension of the Share Repurchase Program upon expiry of the current authorization on April 27, 2024, for an additional 24-month period. Through September 30, 2024, we had repurchased 1,483,200 common shares at an average price of $14.97 per share for an aggregate of $22.2 million. In connection with the extension, the Board of Directors replenished the amount of shares authorized for repurchase under the Share Repurchase Program, resulting in available capacity of $50.0 million. The actual timing, manner, number, and value of shares repurchased under the program will be determined by us at our discretion.

Shares Withheld to Cover

The 2020 Plan and 2013 Plan allow us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

The following table summarizes shares repurchased:


	Three Months Ended						Nine Months Ended
	September 30, 2024						September 30, 2024
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		649,854	$	18.63	$	12,107		732,826	$	18.20	$	13,337
Shares withheld related to net settlement of equity awards		5,291		20.05		106		391,868		16.76		6,568
Total		655,145	$	18.64	$	12,213		1,124,694	$	17.70	$	19,905

	Three Months Ended						Nine Months Ended
	September 30, 2023						September 30, 2023
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		354,012	$	12.49	$	4,422		576,262	$	11.27	$	6,495
Shares withheld related to net settlement of equity awards		717		12.75		9		384,684		9.84		3,784
Total		354,729	$	12.49	$	4,431		960,946	$	10.70	$	10,279

Cash Dividends

The following table summarizes our dividends declared and paid in each of the quarterly periods of 2024 and 2023:


	Dividends per
(dollars in thousands, except per share amounts)	Common Share		Dividends Paid
2024
Q3	$	0.165	$	27,865
Q2		0.165		25,819
Q1		0.165		26,000

2023
Q4	$	0.155	$	24,190
Q3		0.155		24,250
Q2		0.150		23,504
Q1		0.150		23,852

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

10. Revenue from Contracts with Customers

The following table presents our revenue from contracts with customers by segment and disaggregated by revenue source:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Contract operations:
0 ― 1,000 horsepower per unit	$	60,589	$	43,142	$	151,250	$	126,272
1,001 ― 1,500 horsepower per unit		96,160		90,016		286,517		259,830
Over 1,500 horsepower per unit		88,529		74,140		255,684		209,526
Other ⁽¹⁾		142		254		488		789
Total contract operations revenue ⁽²⁾		245,420		207,552		693,939		596,417

Aftermarket services:
Services		27,396		24,860		78,509		70,676
OTC parts and components sales		19,029		20,955		58,411		63,651
Other		316		—		316		—
Total aftermarket services revenue ⁽³⁾		46,741		45,815		137,236		134,327

Total revenue	$	292,161	$	253,367	$	831,175	$	730,744

(1) Primarily relates to fees associated with owned non-compression equipment.

(2) Includes $1.5 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively, and $3.8 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time.

(3) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue and other revenue is recognized at a point in time.

See Note 17 (“Segment Information”) for further details.

Performance Obligations

As of September 30, 2024, we had $828.3 million of remaining performance obligations related to our contract operations segment, which will be recognized through 2029 as follows:


(in thousands)	2024		2025		2026		2027		2028		2029		Total
Remaining performance obligations	$	175,887	$	387,950	$	208,119	$	41,617	$	12,350	$	2,403	$	828,326

We do not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year.

Contract Assets and Liabilities

Contract Assets

As September 30, 2024 and December 31, 2023, our receivables from contracts with customers, net of allowance for credit losses, were $141.1 million and $119.7 million, respectively.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Allowance for Credit Losses

Our allowance for credit losses balance changed as follows during the nine months ended September 30, 2024:


(in thousands)
Balance at beginning of period	$	587
Provision for credit losses		95
Write-offs charged against allowance		(44)
Balance at end of period	$	638

Contract Liabilities

Freight billings to customers for the transport of compression assets, customer-specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. As of September 30, 2024 and December 31, 2023, our contract liabilities were $7.9 million and $7.0 million, respectively.

During the nine months ended September 30, 2024, we deferred revenue of $10.6 million and recognized $9.7 million as revenue. The revenue recognized during the period primarily related to freight billings and milestone billings on aftermarket services.

11. Long-Lived and Other Asset Impairment

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

Compression Fleet

We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment, and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use.

In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value.

The following table presents the results of our compression fleet impairment review as recorded in our contract operations segment:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2024		2023		2024		2023
Idle compressors retired from the active fleet		15		30		80		75
Horsepower of idle compressors retired from the active fleet		12,000		16,000		58,000		39,000
Impairment recorded on idle compressors retired from the active fleet	$	2,509	$	2,922	$	9,478	$	8,383

See Note 15 (“Fair Value Measurements”) for further details.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

12. Restructuring Charges

During the first quarter of 2023, a plan to further streamline our organization and more fully align our teams to improve our customer service and profitability was approved by management. We did not incur restructuring charges during the nine months ended September 30, 2024, and we do not expect to incur additional restructuring charges related to these restructuring activities.

The following table presents restructuring charges incurred by segment:


	Contract		Aftermarket
(in thousands)	Operations		Services		Other⁽¹⁾		Total
Three months ended September 30, 2023
Organizational restructuring	$	—	$	387	$	205	$	592
Total restructuring charges	$	—	$	387	$	205	$	592

Nine months ended September 30, 2023
Organizational restructuring	$	101	$	387	$	1,066	$	1,554
Total restructuring charges	$	101	$	387	$	1,066	$	1,554

(1)	Represents expense incurred within our corporate function and not directly attributable to our segments.

The following table presents restructuring charges incurred by cost type:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2023		2023
Organizational Restructuring
Severance costs	$	592	$	1,296
Consulting costs		—		258
Total restructuring costs	$	592	$	1,554

13. Income Taxes

Valuation Allowance

The amount of our deferred tax assets considered realizable could be adjusted if projections of future taxable income are reduced or objective negative evidence in the form of a three-year cumulative loss is present or both. Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely net operating loss, interest expense limitation and tax credit carryforwards. This may result in the need to record a valuation allowance against all or a portion of our deferred tax assets.

Effective Tax Rate

The year-to-date effective tax rate for the nine months ended September 30, 2024 differed significantly from our statutory rate primarily due to state taxes, unrecognized tax benefits and the limitation on executive compensation offset by the benefit from equity-settled long-term incentive compensation.

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Notes to Condensed Consolidated Financial Statements (continued)

Unrecognized Tax Benefits

As of September 30, 2024, we believe it is reasonably possible that $3.5 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to September 30, 2025 due to the settlement of audits or the expiration of statutes of limitations or both. However, due to the uncertain and complex application of the tax regulations, it is possible that the ultimate resolution of these matters may result in liabilities that could materially differ from this estimate.

14. Earnings Per Common Share

Basic earnings per common share is computed using the two-class method, which is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic earnings per common share is determined by dividing net income, after deducting amounts allocated to participating securities, by the weighted-average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock-settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, only distributed earnings (dividends) are allocated to participating securities, as participating securities do not have a contractual obligation to participate in our undistributed losses.

Diluted earnings per common share is computed using the weighted-average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding performance-based restricted stock units and stock to be issued pursuant to our ESPP unless their effect would have been anti-dilutive.

The following table shows the calculation of net income attributable to common stockholders, which is used in the calculation of basic and diluted earnings per common share, potential shares of common stock that were included in computing diluted earnings per common share and the potential shares of common stock issuable that were excluded from computing diluted earnings per common share as their inclusion would have been anti-dilutive:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	37,516	$	30,858	$	112,473	$	71,996
Less: Allocation of earnings to participating securities		(430)		(434)		(1,607)		(1,418)
Net income attributable to common stockholders	$	37,086	$	30,424	$	110,866	$	70,578

Less: Allocation of earnings to cash or share settled restricted stock units		(129)		—		(352)		—
Diluted net income attributable to common stockholders	$	36,957	$	30,424	$	110,514	$	70,578

Weighted-average common shares outstanding used in basic earnings per common share		165,847		154,163		158,205		154,210
Effect of dilutive securities:
Performance-based restricted stock units		325		235		306		181
ESPP shares		1		3		7		7
Weighted-average common shares outstanding used in diluted earnings per common share		166,173		154,401		158,518		154,398

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

15. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment in ECOTEC

As of September 30, 2024, we owned a 25% equity interest in ECOTEC (see Note 6 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value option to account for this investment. As of September 30, 2024, the fair value of our investment in ECOTEC was $16.2 million and is classified as Level 3.

The fair value determination of this investment primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples. Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement.

Additional quantitative information related to the significant unobservable inputs are as follows:

Significant

Three Months Ended

Unobservable

September 30, 2024

September 30, 2023

Inputs

Range

Median

Range

Median

Valuation technique:

Discounted cash flow

WACC

0.4% - 20.0%

13.5%

0.0% - 17.4%

10.0%

Guideline public company

Revenue multiple

1.5x - 7.2x

3.8x

1.6x - 10.0x

4.0x

The reconciliation of changes in the fair value of our investment in ECOTEC is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)		2024		2023		2024		2023
Balance at beginning of period	$	14,905	$	12,807	$	14,905	$	12,803
Purchases of equity interests		1,250		—		1,250		2,000
Unrealized loss ⁽¹⁾		—		—		—		(1,996)
Balance at end of period	$	16,155	$	12,807	$	16,155	$	12,807

(1)	Included in other expense, net in our unaudited condensed consolidated statement of operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Investment in Ionada

As of September 30, 2024, we had a fully diluted ownership equity interest in Ionada of 10% (see Note 6 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value measurement alternative to account for this investment. As of September 30, 2024, the carrying value of our investment in Ionada was $4.3 million, which includes our initial investment of $3.8 million and cumulative transaction costs of $0.5 million. There had been no upward adjustments, impairments or downward adjustments to the carrying value of the investment as of September 30, 2024. Subject to certain contractual conditions additional investments may be made on the same terms and conditions as the initial investment, $1.2 million in November 2024, $1.3 million in November 2025 and $4.8 million prior to July 2026, for a fully diluted ownership interest of 12%, 15% and 24%, respectively.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Compressors

During the nine months ended September 30, 2024, we recorded nonrecurring fair value measurements related to our idle compressors. Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared with other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted-average disposal period of four years. These fair value measurements are classified as Level 3. The fair value of our compressors impaired as of September 30, 2024 and December 31, 2023 was as follows:


(in thousands)	September 30, 2024		December 31, 2023
Impaired compressors	$	853	$	1,423

The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compressors being measured. Additional quantitative information related to our significant unobservable inputs follows:


	Range	Weighted Average ⁽¹⁾
Estimated net sale proceeds:
As of September 30, 2024	$0 - $211 per horsepower	$49 per horsepower
As of December 31, 2023	$0 - $294 per horsepower	$50 per horsepower

(1)	Calculated based on an estimated discount for market liquidity of 25% and 33% as of September 30, 2024 and December 31, 2023, respectively.

See Note 11 (“Long-Lived and Other Asset Impairments”) for further details.

Other Financial Instruments

The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.

The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to the variable interest rate. The measurement of the fair value of these outstanding borrowings is a Level 3 measurement.

The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:


(in thousands)	September 30, 2024		December 31, 2023
Carrying amount of fixed rate debt ⁽¹⁾	$	1,789,956	$	1,297,844
Fair value of fixed rate debt		1,823,000		1,289,000

(1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7 (“Long-Term Debt”).

16. Related Party Transactions

ECOTEC

During both the three and nine months ended September 30, 2024, we made purchases of $0.3 million from our unconsolidated affiliate ECOTEC for use in our operations.

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Notes to Condensed Consolidated Financial Statements (continued)

Hilcorp

From August 2019 to present, our Board of Directors has included a member affiliated with our customer Hilcorp or its subsidiaries or affiliates. Revenue from Hilcorp was $10.2 million and $8.9 million during the three months ended September 30, 2024 and 2023, respectively, and $30.6 million and $26.7 million during the nine months ended September 30, 2024 and 2023, respectively. Accounts receivable, net due from Hilcorp was $3.6 million and $3.8 million as of September 30, 2024 and December 31, 2023, respectively.

17. Segment Information

We manage our business segments primarily based on the type of product or service provided. We have two segments that we operate within the U.S.: contract operations and aftermarket services. Our contract operations segment primarily provides natural gas compression services to meet specific customer requirements. Our aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.

We evaluate the performance of our segments based on adjusted gross margin, defined as revenue less cost of sales, exclusive of depreciation and amortization, for each segment. Segment revenue includes only sales to external customers.

Summarized financial information for our reporting segments is shown below:


	Contract		Aftermarket
(in thousands)	Operations		Services		Total
Three months ended September 30, 2024
Revenue	$	245,420	$	46,741	$	292,161
Adjusted gross margin		165,610		12,346		177,956

Three months ended September 30, 2023
Revenue	$	207,552	$	45,815	$	253,367
Adjusted gross margin		132,279		9,127		141,406

Nine months ended September 30, 2024
Revenue	$	693,939	$	137,236	$	831,175
Adjusted gross margin		457,108		32,683		489,791

Nine months ended September 30, 2023
Revenue	$	596,417	$	134,327	$	730,744
Adjusted gross margin		365,629		28,388		394,017

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Notes to Condensed Consolidated Financial Statements (continued)

The following table reconciles total adjusted gross margin to income before income taxes:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Total adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017
Less:
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Income before income taxes	$	52,953	$	42,312	$	154,018	$	99,539

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q and in conjunction with our 2023 Form 10-K.

OVERVIEW

We are an energy infrastructure company with a pure-play focus on midstream natural gas compression. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. We operate in two business segments: contract operations and aftermarket services. Our contract operations services primarily include designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment.

Recent Business Developments

TOPS Acquisition

On August 30, 2024, we completed the TOPS Acquisition whereby we acquired all of the issued and outstanding equity interests in TOPS, including a fleet of approximately 580,000 horsepower for aggregate consideration consisting of $869.1 million in cash and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. The cash portion of the purchase price was funded with proceeds from the July 2024 Equity Offering, the 2032 Notes offering and borrowings under the Credit Facility. See Note 3 (“Business Transactions”) for further details.

2032 Notes

On August 26, 2024, we completed a private offering of $700.0 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.3 million after deducting issuance costs. The $9.7 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. A portion of the net proceeds was used to fund a portion of the cash consideration for the TOPS Acquisition, the 2027 Notes Tender Offer and to repay borrowings outstanding under our Credit Facility. See Note 7 (“Long-Term Debt”) for further details.

2027 Notes Tender Offer

In connection with the TOPS Acquisition and offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million, which reflects approximately 101% of the aggregate principal amount of the tendered 2027 Notes and $0.2 million of agent and legal fees. On the date of tender, the net carrying value of the tendered 2027 Notes was $198.8 million and we recorded a debt extinguishment loss of $3.2 million in our condensed consolidated statements of operations. See Note 7 (“Long-Term Debt”) for further details.

July 2024 Equity Offering

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Operating Highlights


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(horsepower in thousands)	2024		2023		2024		2023
Total available horsepower (at period end)⁽¹⁾	4,418		3,773		4,418		3,773
Total operating horsepower (at period end)⁽²⁾	4,179		3,608		4,179		3,608
Average operating horsepower⁽³⁾	3,757		3,593		3,668		3,539
Horsepower utilization:
Spot (at period end)	95	%	96	%	95	%	96	%
Average	95	%	95	%	95	%	94	%

(1)	Defined as idle and operating horsepower. Includes new compressors completed by third-party manufacturers that have been delivered to us.

(2)	Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue.

(3)	Includes operating horsepower as of September 30, 2024 for compressors acquired in the TOPS Acquisition.

Non-GAAP Financial Measures

Management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measure of adjusted gross margin.

We define adjusted gross margin as total revenue less cost of sales, exclusive of depreciation and amortization. Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales, exclusive of depreciation and amortization, which are key components of our operations. We believe adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. In addition, depreciation and amortization may not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs of current operating activity. As an indicator of our operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin, net income (loss) or any other measure presented in accordance with GAAP. Our adjusted gross margin may not be comparable to a similarly titled measure of other entities because other entities may not calculate adjusted gross margin in the same manner.

Adjusted gross margin has certain material limitations associated with its use as compared to net income. These limitations are primarily due to the exclusion of SG&A, depreciation and amortization, long-lived and other asset impairments, restructuring charges, debt extinguishment loss, interest expense, transaction-related costs, gain on sale of assets, net, other expense (income), net and provision for income taxes. Because we intend to finance a portion of our operations through borrowings, interest expense is a necessary element of our costs and our ability to generate revenue. Additionally, because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue and SG&A is necessary to support our operations and required corporate activities. To compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.

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The following table reconciles net income to adjusted gross margin:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	37,516	$	30,858	$	112,473	$	71,996
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Provision for income taxes		15,437		11,454		41,545		27,543
Adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017

The following table reconciles adjusted gross margin to gross margin, its most directly comparable GAAP measure:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Total revenues	$	292,161	$	253,367	$	831,175	$	730,744
Cost of sales, exclusive of depreciation and amortization		(114,205)		(111,961)		(341,384)		(336,727)
Depreciation and amortization		(48,377)		(42,155)		(135,065)		(123,546)
Gross margin		129,579		99,251		354,726		270,471
Depreciation and amortization		48,377		42,155		135,065		123,546
Adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017

RESULTS OF OPERATIONS

Summary of Results

Revenue was $292.2 million and $253.4 million during the three months ended September 30, 2024 and 2023, respectively, and $831.2 million and $730.7 million during the nine months ended September 30, 2024 and 2023, respectively. The increase in revenue was primarily due to increased revenue from our contract operations business during the three and nine months ended September 30, 2024. See “Contract Operations” and “Aftermarket Services” below for further details.

Net income was $37.5 million and $30.9 million during the three months ended September 30, 2024 and 2023, respectively. The increase was primarily driven by higher adjusted gross margin from both our contract operations business and aftermarket services business. These changes were partially offset by increases in transaction-related costs, depreciation and amortization, SG&A, provision for income taxes, debt extinguishment loss and interest expense, and a decrease in gain on sale of assets, net.

Net income was $112.5 million and $72.0 million during the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily driven by higher adjusted gross margin from both our contract operations business and aftermarket services business. These changes were partially offset by increases in provision for income taxes, SG&A, depreciation and amortization, transaction-related costs, debt extinguishment loss, interest expense, long-lived and other asset impairment, and decreases in the gain on sale of assets, net and the unrealized change in the fair value of our investment in an unconsolidated affiliate.

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Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Contract Operations


	Three Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	245,420		$	207,552		18	%
Cost of sales, exclusive of depreciation and amortization		79,810			75,273		6	%
Adjusted gross margin	$	165,610		$	132,279		25	%
Adjusted gross margin percentage ⁽¹⁾		67	%		64	%	4	%

(1)	Defined as adjusted gross margin divided by revenue.

Revenue in our contract operations business increased primarily due to $20.7 million in higher rates, an increase of $15.6 million due to the compression units acquired in the TOPS Acquisition and increase in average operating horsepower for contract compression.

The increase in cost of sales, exclusive of depreciation and amortization, was primarily due to a $3.9 million increase in total employee compensation expense and a $1.4 million increase in parts expense. This increase was partially offset by a decrease of $1.9 million in lube oil expenses as a result of lower prices.

Aftermarket Services


	Three Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	46,741		$	45,815		2	%
Cost of sales, exclusive of depreciation and amortization		34,395			36,688		(6)	%
Adjusted gross margin	$	12,346		$	9,127		35	%
Adjusted gross margin percentage ⁽¹⁾		26	%		20	%	6	%

(1) Defined as adjusted gross margin divided by revenue.

Revenue in our aftermarket services business increased primarily due to higher levels of service activities driven by an increase in customer demand, and maintenance service contracts, which was partially offset by a decrease in part sales.

Adjusted gross margin increased in our aftermarket services business as a result of increased revenue and decreased cost of sales, exclusive of depreciation and amortization, due to a difference in the scope, timing and type of services performed, including additional work associated with maintenance service contracts.

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Costs and Expenses


	Three Months Ended
	September 30,
(in thousands)	2024		2023
Selling, general and administrative	$	34,059	$	28,558
Depreciation and amortization		48,377		42,155
Long-lived and other asset impairment		2,509		2,922
Restructuring charges		—		592
Debt extinguishment loss		3,181		—
Interest expense		30,179		28,339
Transaction-related costs		9,220		—
Gain on sale of assets, net		(2,218)		(3,237)
Other income, net		(304)		(235)

Selling, general and administrative. The increase in SG&A primarily included a $3.6 million increase in employee incentive and other compensation expense, a $0.5 million increase in amortization of capitalized implementation costs and a $0.5 million increase in legal and other professional fees.

Depreciation and amortization. The increase in depreciation and amortization was primarily due to fixed assets additions, including $3.7 million depreciation and amortization associated with the compression units and intangible assets acquired in the TOPS Acquisition. These increases were partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives, the impact of compression and other asset sales, and long-lived and other asset impairments.

Long-lived and other asset impairment. We periodically review the future deployment of our idle compressors for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. We also evaluate for impairment our idle units that have been culled from our compression fleet in prior years and are available for sale. During the three months ended September 30, 2024 and 2023, we recognized $2.5 million and $2.9 million, respectively, of impairment charges to write down these compressors to their fair value. See Note 11 (“Long-Lived Asset and Other Impairments”) for further details. The following table presents the results of our compression fleet impairment review, as recorded in our contract operations segment:


	Three Months Ended
	September 30,
(dollars in thousands)	2024		2023
Idle compressors retired from the active fleet		15		30
Horsepower of idle compressors retired from the active fleet		12,000		16,000
Impairment recorded on idle compressors retired from the active fleet	$	2,509	$	2,922

Restructuring charges. Restructuring charges of $0.6 million during the three months ended September 30, 2023 consisted of severance and consulting costs related to our restructuring activities. See Note 12 (“Restructuring Charges”) for further details

Debt extinguishment loss. We incurred $3.2 million of debt extinguishment loss during the three months ended September 30, 2024 as a result of the 2027 Notes Tender Offer.

Transaction-related costs. We incurred $9.2 million of financial advisory, legal and other professional fees and retention and other employee compensation costs during the three months ended September 30, 2024 related to the TOPS Acquisition.

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Gain on sale of assets, net. The decrease in gain on sale of assets, net was primarily due to gains of $2.6 million on compression asset sales during the three months ended September 30, 2024, compared to gains of $3.2 million on compression asset sales during the three months ended September 30, 2023.

Provision for Income Taxes

The increase in provision for income taxes was primarily due to the tax effect of the increase in book income during the three months ended September 30, 2024 compared with the three months ended September 30, 2023.


	Three Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Provision for income taxes	$	15,437		$	11,454		35	%
Effective tax rate		29	%		27	%	2	%

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Contract Operations


	Nine Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	693,939		$	596,417		16	%
Cost of sales, exclusive of depreciation and amortization		236,831			230,788		3	%
Adjusted gross margin	$	457,108		$	365,629		25	%
Adjusted gross margin percentage ⁽¹⁾		66	%		61	%	5	%

(1)	Defined as adjusted gross margin divided by revenue.

Revenue in our contract operations business increased primarily due to $70.0 million in higher rates, an increase of $15.6 million due to the compression units acquired in the TOPS Acquisition and an increase in average operating horsepower for contract compression.

The increase in cost of sales, exclusive of depreciation and amortization, was primarily due to a $9.1 million increase in total employee compensation expense, a $3.2 million increase in parts expense and a $1.6 million increase in local and miscellaneous taxes. This increase was partially offset by a decrease of $6.7 million in startup expenses resulting from average horsepower utilization for the fleet at record levels as well as fewer unit stops and a decrease of $3.0 million in lube oil expenses as a result of lower prices.

Aftermarket Services


	Nine Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	137,236		$	134,327		2	%
Cost of sales, exclusive of depreciation and amortization		104,553			105,939		(1)	%
Adjusted gross margin	$	32,683		$	28,388		15	%
Adjusted gross margin percentage ⁽¹⁾		24	%		21	%	3	%

(1) Defined as adjusted gross margin divided by revenue.

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Adjusted gross margin increased in our aftermarket services business as a result of increased revenue and decreased cost of sales, exclusive of depreciation and amortization, due to differences in the scope, timing and type of services performed, including additional work associated with maintenance service contracts.

Costs and Expenses


	Nine Months Ended
	September 30,
(in thousands)	2024		2023
Selling, general and administrative	$	96,887	$	83,632
Depreciation and amortization		135,065		123,546
Long-lived and other asset impairment		9,478		8,383
Restructuring charges		—		1,554
Debt extinguishment loss		3,181		—
Interest expense		85,372		83,550
Transaction-related costs		11,002		—
Gain on sale of assets, net		(5,175)		(8,018)
Other expense (income), net		(37)		1,831

Selling, general and administrative. The increase in SG&A primarily included a $10.2 million increase in employee incentive and other compensation expense and a $0.9 million increase in network and computer-related costs, partially offset by a decrease of $0.5 million in professional fees.

Depreciation and amortization. The increase in depreciation and amortization was primarily due to fixed assets additions, including $3.7 million depreciation and amortization associated with the compression units and intangible assets acquired in the TOPS Acquisition, and accelerated depreciation associated with certain assets. The increase was partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives, the impact of compression and other asset sales, and long-lived asset impairments.

Long-lived and other asset impairment. We periodically review the future deployment of our idle compressors for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. We also evaluate for impairment our idle units that have been culled from our compression fleet in prior years and are available for sale. During the nine months ended September 30, 2024 and 2023, we recognized $9.5 million and $8.4 million, respectively, of impairment charges to write down these compressors to their fair value. See Note 11 (“Long-Lived Asset and Other Impairments”) for further details. The following table presents the results of our compression fleet impairment review, as recorded in our contract operations segment:


	Nine Months Ended
	September 30,
(dollars in thousands)	2024		2023
Idle compressors retired from the active fleet		80		75
Horsepower of idle compressors retired from the active fleet		58,000		39,000
Impairment recorded on idle compressors retired from the active fleet	$	9,478	$	8,383

Restructuring charges. Restructuring charges of $1.6 million during the nine months ended September 30, 2023 consisted of severance and consulting costs related to our restructuring activities. See Note 12 (“Restructuring Charges”) for further details.

Debt extinguishment loss. We incurred $3.2 million of debt extinguishment loss during the nine months ended September 30, 2024 as a result of the 2027 Notes Tender Offer.

Interest expense. The increase in interest expense was primarily related to a higher average outstanding balance of long-term debt due to the 2032 Notes offering, an increase in the outstanding balance on the Credit Facility and higher interest rates. These increases were partially offset by the 2027 Notes Tender Offer and the write-off of $1.0 million of unamortized deferred financing costs as a result of the Amended and Restated Credit Agreement during the nine months ended September 30, 2023.

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Transaction-related costs. We incurred $11.0 million of financial advisory, legal and other professional fees and retention and other employee compensation costs during the nine months ended September 30, 2024 related to the TOPS Acquisition.

Gain on sale of assets, net. The decrease in gain on sale of assets, net was primarily due to gains of $5.1 million on compression asset sales during the nine months ended September 30, 2024 compared to gains of $7.3 million on compression asset sales during the nine months ended September 30, 2023.

Other expense (income), net. The change from other expense, net to other income, net was primarily due to a $2.0 million unrealized change in the fair value of our investment in an unconsolidated affiliate recognized during the nine months ended September 30, 2023.

Provision for Income Taxes

The increase in provision for income taxes was primarily due to the tax effect of the increase in book income and the limitation on executive compensation offset by the benefit from equity-settled long-term incentive compensation and reduction in valuation allowance during the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023.


	Nine Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Provision for income taxes	$	41,545		$	27,543		51	%
Effective tax rate		27	%		28	%	(1)	%

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our ability to fund operations, finance capital expenditures and pay dividends depends on the levels of our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under our Credit Facility. Our cash flow is affected by numerous factors, including prices and demand for our services, oil and natural gas exploration and production spending, conditions in the financial markets and other factors. We have no near-term maturities and believe that our operating cash flows and borrowings under the Credit Facility will be sufficient to meet our future liquidity needs.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, may be material, will be upon terms and prices as we may determine and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

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Cash Requirements

Our contract operations business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is primarily dependent on the demand for our contract operations services and the availability of the type of compression equipment required for us to provide those contract operations services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:

•

operating expenses, namely employee compensation and benefits, inventory and lube oil purchases;

•

growth capital expenditures;

•

maintenance capital expenditures;

•

interest on our outstanding debt obligations;

•

dividend payments to our stockholders; and

•

shares repurchased under the Share Repurchase Program and to cover taxes required to be withheld on the vesting date of long-term incentive grants to employees.

Capital Expenditures

Growth Capital Expenditures. The majority of our growth capital expenditures are related to the acquisition cost of new compressors when our idle equipment cannot be reconfigured to economically fulfill a project’s requirements and the new compressor is expected to generate economic returns that exceed our cost of capital over the compressor’s expected useful life. In addition to newly-acquired compressors, growth capital expenditures include the upgrading of major components on an existing compression package where the current configuration of the compression package is no longer in demand and the compressor is not likely to return to an operating status without the capital expenditures. These expenditures substantially modify the operating parameters of the compression package such that it can be used in applications for which it previously was not suited.

Maintenance Capital Expenditures. Maintenance capital expenditures are related to major overhauls of significant components of a compression package, such as the engine, electric motor, compressor and cooler, which return the components to a like-new condition, but do not modify the application for which the compression package was designed.

Projected Capital Expenditures. We expect approximately $260 million in growth capital expenditures in 2024, including $190 million for our pre-acquisition business. The $70 million increase is exclusively related to the addition of the TOPS’ backlog and the remaining payments to packagers at delivery. This backlog is substantially committed to customers.

Dividends

On October 24, 2024, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock to be paid on November 13, 2024 to stockholders of record at the close of business on November 6, 2024. Any future determinations to pay cash dividends to our stockholders will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations and credit and loan agreements in effect at that time and other factors deemed relevant by our Board of Directors.

Sources of Cash

Credit Facility

During the nine months ended September 30, 2024 and 2023, our Credit Facility had an average debt balance of $268.7 million and $294.5 million, respectively. The weighted-average annual interest rate on the outstanding balance under the Credit Facility was 7.2% and 7.7% at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, there were $4.1 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.1%.

As of September 30, 2024, we were in compliance with all covenants under our Credit Facility. Additionally, all undrawn capacity on our Credit Facility was available for borrowings as of September 30, 2024.

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2032 Notes and 2027 Notes Tender Offer

On August 26, 2024, we completed a private offering of $700.0 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.3 million after deducting issuance costs. In connection with the offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million. See Note 7 (“Long-Term Debt”) for further details.

July 2024 Equity Offering

On July 24, 2024, Archrock sold, pursuant to a public underwriting offering, 12,650,000 shares, including 1,650,000 shares pursuant to an over-allotment option. Archrock received net proceeds of $255.7 million, after deducting underwriting discounts, commissions and offering expenses. See Note 9 (“Stockholders’ Equity”) for further details.

Cash Flows

Our cash flows, as reflected in our unaudited condensed consolidated statements of cash flows, are summarized below:


	Nine Months Ended
	September 30,
(in thousands)	2024		2023
Net cash provided by (used in):
Operating activities	$	305,253	$	238,468
Investing activities		(1,104,670)		(208,157)
Financing activities		801,828		(31,395)
Net increase (decrease) in cash and cash equivalents	$	2,411	$	(1,084)

Operating Activities

The increase in net cash provided by operating activities was primarily due to increased cash inflows of $99.0 million from adjusted gross margin, excluding deferred revenue recognized in earnings and amortization of freight and mobilization charges, changes of $5.1 million in inventory as a result of improvement in the lead time for parts and of $2.4 million in accounts receivable due to increased cash receipts from customers. These increases were partially offset by changes of $17.9 million in accounts payable and accrued liabilities due in part to accrued interest paid in connection with the 2027 Notes Tender Offer.

Investing Activities

The increase in net cash used in investing activities was primarily due to $869.1 million of cash paid in the TOPS Acquisition and a $30.5 million decrease in proceeds from the sale of property, plant and equipment.

Financing Activities

The change from net cash used in financing activities to net cash provided by financing activities was primarily due to $700.0 million of proceeds from the issuance of the 2032 Notes, $255.7 million of proceeds from the July 2024 Equity Offering and a $103.5 million increase in net borrowings of long-term debt, partially offset by $202.0 million for the 2027 Notes Tender Offer.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks associated with changes in the variable interest rate of our Credit Facility. A 1% increase in the effective interest rate on our Credit Facility’s outstanding balance at September 30, 2024 would have resulted in an annual increase in our interest expense of $4.5 million.

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ITEM 4. CONTROLS AND PROCEDURES

This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Form 10-Q as Exhibits 31.1 and 31.2.

Management’s Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in the rules and forms of the SEC. Based on the evaluation, as of September 30, 2024, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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ITEM 1A. RISK FACTORS

Other than the following items, there have been no material changes or updates to the risk factors previously disclosed in our 2023 Form 10-K.

Risks Related to the TOPS Acquisition

We may not be able to achieve the expected benefits of the TOPS Acquisition. We may also encounter significant difficulties in integrating TOPS.

We may not be able to achieve the expected benefits of the TOPS Acquisition and there can be no assurance that the TOPS Acquisition will be beneficial to us. We may not be able to integrate the assets acquired in the TOPS Acquisition without increases in costs or other difficulties. The integration of a business is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating our business practices and operations with the business practices and operations of TOPS. The integration process may disrupt our business and, if implemented ineffectively, would restrict the full realization of the anticipated benefits from the TOPS Acquisition. The failure to meet the challenges involved in integrating TOPS and to realize the anticipated benefits of the TOPS Acquisition could have an adverse effect on our business, results of operations, financial condition and prospects, as well as the market price of our common stock. The challenges of integrating the operations of acquired businesses include, among others:

●

difficulties with the integration of the business of TOPS and workforce following the TOPS Acquisition;

●

conditions in the oil and natural gas industry, including the level of production of, demand for or price of oil or natural gas;

●

our reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies;

●

changes in economic or political conditions, including terrorism and legislative changes;

●

the inherent risks associated with our operations, such as equipment defects, impairments, malfunctions and natural disasters;

●

the risk that counterparties will not perform their obligations under our financial instruments;

●

the financial condition of our customers;

●

our ability to timely and cost-effectively obtain components necessary to conduct our business;

●

employment and workforce factors, including our ability to hire, train and retain key employees;

●

our ability to implement certain business and financial objectives, such as:

●

winning profitable new business;

●

growing our asset base and enhancing asset utilization;

●

integrating acquired businesses;

●

generating sufficient cash; and

●

accessing the capital markets at an acceptable cost;

●

liability related to the use of our services;

●

changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures;

●

the effectiveness of our control environment, including the identification of control deficiencies; and

●

our level of indebtedness and ability to fund our business.

Many of these factors are outside of our control, and any one of them could result in increased costs and liabilities, decreases in the amount of expected revenue and earnings, and diversion of management’s time and energy, which could have a material adverse effect on our business, financial condition and results of operations. Further, additional unanticipated costs may be incurred in the integration of the acquired business.

The market price of our common stock may decline as a result of the TOPS Acquisition if, among other things, the integration of the properties to be acquired in the TOPS Acquisition is unsuccessful or transaction costs related to the TOPS Acquisition are greater than expected. The market price of our common stock may decline if we do not achieve the perceived benefits of the TOPS Acquisition as rapidly or to the extent anticipated by us or by securities market participants or if the effect of TOPS Acquisition on our business, results of operations or financial condition or prospects is not consistent with our expectations or those of securities market participants.

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Any acquisitions we complete, including the TOPS Acquisition, are subject to substantial risks that could reduce our ability to make distributions to our common stockholders.

Even if we do make acquisitions that we believe will increase the amount of cash available for distribution to our common stockholders, these acquisitions, including the TOPS Acquisition, may nevertheless result in a decrease in the amount of cash available for distribution to our common stockholders. Any acquisition, including the TOPS Acquisition, involves potential risks, including, among other things:

●

the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate;

●

our inability to obtain satisfactory title to the assets we acquire; and

●

the occurrence of other significant changes, such as impairment of long-lived assets, asset devaluation or restructuring charges.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES BY ISSUER AND USE OF PROCEEDS

Sales of Unregistered Securities

None.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes our share repurchase activity for the three months ended September 30, 2024:


					Approximate Dollar
					Value of Shares
				Total Number of	That May Yet be
		Average		Shares Purchased	Purchased Under
	Total Number	Price		as Part of Publicly	the Publicly
	of Shares	Paid per		Announced Plans	Announced Plans
(dollars in thousands, except per share amounts)	Purchased ⁽¹⁾	Share⁽²⁾		or Programs	or Programs
July 1, 2024 — July 31, 2024	4,575	$	20.13	—	$	50,000
August 1, 2024 — August 31, 2024	598,930		18.62	598,214		38,859
September 1, 2024 — September 30, 2024	51,640		18.70	51,640		37,893
Total	655,145	$	18.64	649,854

(1)	Represents shares of common stock purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards and shares repurchased under the 2023 Share Repurchase Program during the period. See Note 9 (“Stockholders Equity”) for further details.

(2)	Average price paid per share includes costs associated with the repurchase, as applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended September 30, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS

The exhibits listed below are filed or furnished as part of this report:



2.1#		Purchase and Sale Agreement, dated as of July 22, 2024, by and among Archrock ELT LLC, Archrock, Inc., TOPS Pledge1, LLC and TOPS Pledge2, LLC and, solely with respect to Section 6.25 of the Purchase and Sale Agreement, TOPS Holdings, LLC (incorporated by reference to Exhibit 2.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on July 22, 2024)
3.1		Composite Certificate of Incorporation of Archrock, Inc., as amended as of November 3, 2015, (incorporated by reference to Exhibit 3.3 to Archrock Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015)
3.2		Fourth Amended and Restated Bylaws of Exterran Holdings, Inc., now Archrock, Inc. (incorporated by reference to Exhibit 3.1 of Archrock Inc.’s Current Report on Form 8-K filed on July 27, 2023)
4.1		Indenture, dated as of August 26, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., the guarantors party thereto and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 26, 2024)
4.2		Supplemental Indenture, dated August 26, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and Computershare Trust Company (as successor in interest to Wells Fargo Bank, National Association), as trustee (incorporated by reference to Exhibit 4.2 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 26, 2024)
4.3		Supplemental Indenture, dated August 26, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and Computershare Trust Company (as successor in interest to Wells Fargo Bank, National Association), as trustee (incorporated by reference to Exhibit 4.3 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 26, 2024)
10.1		Purchase Agreement, dated as of August 12, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and Wells Fargo Securities, LLC, as representative of the initial purchasers named therein (incorporated by reference to Exhibit 10.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 13, 2024)
10.2		First Amendment to Amended and Restated Credit Agreement, dated as of August 28, 2024, by and among Archrock, Inc., Archrock Partners Operating LLC, Archrock Services, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as the Administrative Agent (incorporated by reference to Exhibit 10.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 28, 2024)
10.3		Registration Rights and Lock-Up Agreement, dated as of August 30, 2024, by and between Archrock, Inc., TOPS Pledge1, LLC, TOPS Pledge2, LLC and TOPS NewCo, LLC (incorporated by reference to Exhibit 10.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 30, 2024)
31.1*		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1*		Interactive data files (formatted in Inline XBRL) pursuant to Rule 405 of Regulation S-T
104.1*		Cover page interactive data file (formatted in Inline XBRL) pursuant to Rule 406 of Regulation S-T

* Filed herewith

** Furnished, not filed

# Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5)The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request

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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 thereunto duly authorized.


	Archrock, Inc.

	By:	/s/ Douglas S. Aron
		Douglas S. Aron
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

	By:	/s/ Donna A. Henderson
		Donna A. Henderson
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

		November 12, 2024