usac-20200331
0001522727--12-312020Q1falseP3YP6M911100015227272020-01-012020-03-31xbrli:shares00015227272020-04-30iso4217:USD00015227272020-03-3100015227272019-12-310001522727usac:CommonUnitsMember2020-03-310001522727usac:CommonUnitsMember2019-12-3100015227272019-01-012019-03-310001522727usac:CommonUnitsMember2020-01-012020-03-310001522727usac:CommonUnitsMember2019-01-012019-03-310001522727us-gaap:CapitalUnitClassBMember2020-01-012020-03-310001522727us-gaap:CapitalUnitClassBMember2019-01-012019-03-31iso4217:USDxbrli:shares0001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-12-310001522727us-gaap:WarrantMember2019-12-310001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2020-01-012020-03-310001522727us-gaap:WarrantMember2020-01-012020-03-310001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2020-03-310001522727us-gaap:WarrantMember2020-03-310001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2018-12-310001522727us-gaap:LimitedPartnerMemberus-gaap:CapitalUnitClassBMember2018-12-310001522727us-gaap:WarrantMember2018-12-3100015227272018-12-310001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-01-012019-03-310001522727us-gaap:LimitedPartnerMemberus-gaap:CapitalUnitClassBMember2019-01-012019-03-310001522727us-gaap:WarrantMember2019-01-012019-03-310001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-03-310001522727us-gaap:LimitedPartnerMemberus-gaap:CapitalUnitClassBMember2019-03-310001522727us-gaap:WarrantMember2019-03-3100015227272019-03-310001522727usac:PreferredUnitsMember2020-01-012020-03-310001522727usac:PreferredUnitsMember2019-01-012019-03-310001522727srt:MinimumMemberusac:CompressionEquipmentOverhaulsMember2020-01-012020-03-310001522727usac:CompressionEquipmentOverhaulsMembersrt:MaximumMember2020-01-012020-03-310001522727srt:MinimumMember2020-01-012020-03-310001522727srt:MaximumMember2020-01-012020-03-310001522727usac:SeniorNotesDueOnApril12026Member2020-03-310001522727usac:SeniorNotesDueOnApril12026Member2019-12-310001522727usac:SeniorNotesDueOnSeptember12027Member2020-03-310001522727usac:SeniorNotesDueOnSeptember12027Member2019-12-310001522727us-gaap:GasGatheringAndProcessingEquipmentMember2020-03-310001522727us-gaap:GasGatheringAndProcessingEquipmentMember2019-12-310001522727us-gaap:ComputerEquipmentMember2020-03-310001522727us-gaap:ComputerEquipmentMember2019-12-310001522727us-gaap:VehiclesMember2020-03-310001522727us-gaap:VehiclesMember2019-12-310001522727us-gaap:BuildingMember2020-03-310001522727us-gaap:BuildingMember2019-12-310001522727us-gaap:LeaseholdImprovementsMember2020-03-310001522727us-gaap:LeaseholdImprovementsMember2019-12-310001522727us-gaap:FurnitureAndFixturesMember2020-03-310001522727us-gaap:FurnitureAndFixturesMember2019-12-310001522727us-gaap:LandMember2020-03-310001522727us-gaap:LandMember2019-12-310001522727usac:NewlyAcquiredCompressionEquipmentMember2020-01-012020-03-310001522727usac:UsedCompressionEquipmentMembersrt:MinimumMember2020-01-012020-03-310001522727usac:UsedCompressionEquipmentMembersrt:MaximumMember2020-01-012020-03-310001522727us-gaap:FurnitureAndFixturesMembersrt:MinimumMember2020-01-012020-03-310001522727us-gaap:FurnitureAndFixturesMembersrt:MaximumMember2020-01-012020-03-310001522727usac:VehiclesAndComputerEquipmentMembersrt:MinimumMember2020-01-012020-03-310001522727usac:VehiclesAndComputerEquipmentMembersrt:MaximumMember2020-01-012020-03-310001522727us-gaap:BuildingMember2020-01-012020-03-310001522727us-gaap:LeaseholdImprovementsMember2020-01-012020-03-310001522727us-gaap:AccountsPayableAndAccruedLiabilitiesMember2020-01-012020-03-310001522727us-gaap:AccountsPayableAndAccruedLiabilitiesMember2019-01-012019-12-31usac:itemutr:hp0001522727us-gaap:GasGatheringAndProcessingEquipmentMember2019-01-012019-03-310001522727us-gaap:CustomerRelationshipsMember2019-12-310001522727us-gaap:TradeNamesMember2019-12-310001522727us-gaap:CustomerRelationshipsMember2020-01-012020-03-310001522727us-gaap:TradeNamesMember2020-01-012020-03-310001522727us-gaap:CustomerRelationshipsMember2020-03-310001522727us-gaap:TradeNamesMember2020-03-310001522727us-gaap:CostOfSalesMember2020-01-012020-03-310001522727us-gaap:CostOfSalesMember2019-01-012019-03-310001522727us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-03-310001522727us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-03-310001522727usac:DepreciationAndAmortizationMember2020-01-012020-03-310001522727usac:DepreciationAndAmortizationMember2019-01-012019-03-31xbrli:pure0001522727us-gaap:FinanceLeasesPortfolioSegmentMember2020-03-310001522727us-gaap:FinanceLeasesPortfolioSegmentMember2019-12-310001522727us-gaap:FinanceLeasesPortfolioSegmentMember2020-01-012020-03-310001522727us-gaap:FinanceLeasesPortfolioSegmentMember2019-01-012019-03-310001522727us-gaap:RevolvingCreditFacilityMember2020-03-310001522727us-gaap:RevolvingCreditFacilityMember2019-12-310001522727us-gaap:SeniorNotesMember2020-03-310001522727us-gaap:SeniorNotesMember2019-12-310001522727us-gaap:RevolvingCreditFacilityMember2020-01-012020-03-310001522727usac:UsaCompressionPartnersLpMember2020-01-012020-03-310001522727usac:SeriesPerpetualPreferredUnitsMember2019-12-310001522727usac:SeriesPerpetualPreferredUnitsMember2020-03-310001522727usac:SeriesPerpetualPreferredUnitsMember2020-01-012020-03-3100015227272019-02-082019-02-0800015227272019-05-102019-05-1000015227272019-08-092019-08-0900015227272019-11-082019-11-0800015227272019-01-012019-12-3100015227272020-02-072020-02-070001522727us-gaap:SubsequentEventMember2020-04-162020-04-160001522727us-gaap:LimitedPartnerMemberusac:EnergyTransferOperatingLpMemberusac:CommonUnitsMember2020-03-310001522727us-gaap:GeneralPartnerMemberusac:EnergyTransferOperatingLpMemberusac:CommonUnitsMember2020-03-310001522727us-gaap:LimitedPartnerMemberus-gaap:CapitalUnitClassBMember2019-07-302019-07-300001522727us-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-07-300001522727us-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-02-082019-02-080001522727usac:PhantomUnitholdersMemberus-gaap:CashDistributionMember2019-02-082019-02-080001522727us-gaap:CashDistributionMember2019-02-082019-02-080001522727us-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-05-102019-05-100001522727usac:PhantomUnitholdersMemberus-gaap:CashDistributionMember2019-05-102019-05-100001522727us-gaap:CashDistributionMember2019-05-102019-05-100001522727us-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-08-092019-08-090001522727usac:PhantomUnitholdersMemberus-gaap:CashDistributionMember2019-08-092019-08-090001522727us-gaap:CashDistributionMember2019-08-092019-08-090001522727us-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-11-082019-11-080001522727usac:PhantomUnitholdersMemberus-gaap:CashDistributionMember2019-11-082019-11-080001522727us-gaap:CashDistributionMember2019-11-082019-11-080001522727us-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2019-01-012019-12-310001522727usac:PhantomUnitholdersMemberus-gaap:CashDistributionMember2019-01-012019-12-310001522727us-gaap:CashDistributionMember2019-01-012019-12-310001522727us-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2020-02-072020-02-070001522727usac:PhantomUnitholdersMemberus-gaap:CashDistributionMember2020-02-072020-02-070001522727us-gaap:CashDistributionMember2020-02-072020-02-070001522727us-gaap:SubsequentEventMemberus-gaap:CashDistributionMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2020-04-162020-04-160001522727usac:DistributionReinvestmentPlanMemberus-gaap:LimitedPartnerMemberusac:CommonUnitsMember2020-01-012020-03-310001522727usac:DistributionReinvestmentPlanMember2020-03-31usac:tranche0001522727usac:EigGlobalEnergyPartnersMember2019-01-012019-12-310001522727usac:EigGlobalEnergyPartnersMember2020-01-012020-03-310001522727usac:IssueTrancheOneMember2019-12-310001522727usac:IssueTrancheOneMember2020-03-310001522727usac:IssueTrancheTwoMember2020-03-310001522727usac:IssueTrancheTwoMember2019-12-310001522727us-gaap:PhantomShareUnitsPSUsMember2020-01-012020-03-310001522727us-gaap:PhantomShareUnitsPSUsMember2019-01-012019-03-310001522727usac:ContractOperationsRevenueMember2020-01-012020-03-310001522727usac:ContractOperationsRevenueMember2019-01-012019-03-310001522727usac:RetailPartsAndServicesMember2020-01-012020-03-310001522727usac:RetailPartsAndServicesMember2019-01-012019-03-310001522727usac:TransferredDuringPrimaryTermMember2020-01-012020-03-310001522727usac:TransferredDuringPrimaryTermMember2019-01-012019-03-310001522727usac:TransferredMonthToMonthMember2020-01-012020-03-310001522727usac:TransferredMonthToMonthMember2019-01-012019-03-310001522727us-gaap:TransferredOverTimeMember2020-01-012020-03-310001522727us-gaap:TransferredOverTimeMember2019-01-012019-03-310001522727us-gaap:TransferredAtPointInTimeMember2020-01-012020-03-310001522727us-gaap:TransferredAtPointInTimeMember2019-01-012019-03-3100015227272020-04-012020-03-3100015227272021-01-012020-03-3100015227272022-01-012020-03-3100015227272023-01-012020-03-3100015227272024-01-012020-03-310001522727us-gaap:LimitedPartnerMemberusac:EnergyTransferOperatingLpMember2020-01-012020-03-310001522727us-gaap:GeneralPartnerMemberusac:EnergyTransferOperatingLpMember2020-01-012020-03-310001522727usac:EntitiesAffiliatedWithEnergyTransferOperatingLpMember2020-01-012020-03-310001522727usac:EntitiesAffiliatedWithEnergyTransferOperatingLpMember2019-01-012019-03-310001522727usac:EntitiesAffiliatedWithEnergyTransferOperatingLpMember2020-03-310001522727usac:EntitiesAffiliatedWithEnergyTransferOperatingLpMember2019-12-310001522727usac:EnergyTransferOperatingLpMember2019-12-310001522727usac:EnergyTransferOperatingLpMember2020-03-310001522727usac:CommitmentsToPurchaseCompressionUnitsMember2020-03-310001522727usac:PredecessorParentCompanyOwnerMember2020-02-012020-02-29
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​For the quarterly period ended March 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​For the transition period from              to               .
Commission File No. 001-35779
USA Compression Partners, LP
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
75-2771546
(I.R.S. Employer
Identification No.)

111 Congress Avenue, Suite 2400
Austin, Texas
(Address of principal executive offices)
78701
(Zip Code)
(512) 473-2662
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common units representing limited partner interestsUSACNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ⌧  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ⌧  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.​
Large accelerated filer
       Accelerated filer ☐
       Non-accelerated filer ☐
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐​
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No ☒
As of April 30, 2020, there were 96,721,320 common units outstanding.


Table of Contents
TABLE OF CONTENTS
Page



i

Table of Contents
GLOSSARY
The abbreviations, acronyms and industry terminology used in this Quarterly Report are defined as follows:
COVID-19novel coronavirus 2019
Credit AgreementSixth Amended and Restated Credit Agreement by and among USA Compression Partners, LP, as borrower, USAC OpCo 2, LLC, USAC Leasing 2, LLC, USA Compression Partners, LLC, USAC Leasing, LLC, CDM Resource Management LLC, CDM Environmental & Technical Services LLC and USA Compression Finance Corp., the lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as agent and a letter of credit issuer, JPMorgan Chase Bank, N.A., Barclays Bank PLC, Regions Capital Markets, a division of Regions Bank, RBC Capital Markets and Wells Fargo Bank, N.A., as joint lead arrangers and joint book runners, Barclays Bank PLC, Regions Bank, RBC Capital Markets and Wells Fargo Bank, N.A., as syndication agents, and MUFG Union Bank, N.A., SunTrust Bank and The Bank of Nova Scotia, as senior managing agents.
DERsdistribution equivalent rights
DRIPdistribution reinvestment plan
EBITDAearnings before interest, taxes, depreciation and amortization
ETOEnergy Transfer Operating, L.P.
Exchange ActSecurities Exchange Act of 1934, as amended
GAAPgenerally accepted accounting principles of the United States of America
LIBORLondon Interbank Offered Rate
Preferred UnitsSeries A Preferred Units representing limited partner interests in USA Compression Partners, LP
SECUnited States Securities and Exchange Commission
Senior Notes 2026$725.0 million aggregate principal amount of senior notes due on April 1, 2026
Senior Notes 2027$750.0 million aggregate principal amount of senior notes due on September 1, 2027
U.S.United States of America
USA Compression Predecessorcollectively, CDM Resource Management LLC and CDM Environmental & Technical Services LLC

ii

Table of Contents
PART I.  FINANCIAL INFORMATION
ITEM 1. Financial Statements
USA COMPRESSION PARTNERS, LP
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
March 31,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents$2  $10  
Accounts receivable:
Trade, net of allowances for credit losses of $3,476 and $2,479, respectively
78,485  80,276  
Other5,503  11,057  
Related party receivables45,234  45,461  
Inventories91,724  91,923  
Prepaid expenses and other assets2,752  2,196  
Total current assets223,700  230,923  
Property and equipment, net2,485,055  2,482,943  
Lease right-of-use assets24,886  18,317  
Identifiable intangible assets, net355,826  363,171  
Goodwill  619,411  
Other assets13,620  15,642  
Total assets$3,103,087  $3,730,407  
Liabilities, Preferred Units and Partners’ Capital
Current liabilities:
Accounts payable$25,809  $21,703  
Accrued liabilities87,919  119,383  
Deferred revenue48,594  48,289  
Total current liabilities162,322  189,375  
Long-term debt, net1,909,578  1,852,360  
Operating lease liabilities23,306  17,343  
Other liabilities13,956  13,422  
Total liabilities2,109,162  2,072,500  
Commitments and contingencies
Preferred Units477,309  477,309  
Partners’ capital:
Common units, 96,721 and 96,632 units issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
502,637  1,166,619  
Warrants13,979  13,979  
Total partners’ capital516,616  1,180,598  
Total liabilities, preferred units and partners’ capital$3,103,087  $3,730,407  
See accompanying notes to unaudited condensed consolidated financial statements.
1

Table of Contents
USA COMPRESSION PARTNERS, LP
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per unit amounts)​
Three Months Ended
March 31,
20202019
Revenues:
Contract operations$172,794  $163,976  
Parts and service3,048  2,684  
Related party3,157  4,086  
Total revenues178,999  170,746  
Costs and expenses:
Cost of operations, exclusive of depreciation and amortization59,165  57,025  
Selling, general and administrative12,385  15,995  
Depreciation and amortization58,762  58,924  
Loss (gain) on disposition of assets(1,014) 40  
Impairment of compression equipment  3,234  
Impairment of goodwill619,411    
Total costs and expenses748,709  135,218  
Operating income (loss)(569,710) 35,528  
Other income (expense):
Interest expense, net(32,478) (28,857) 
Other23  20  
Total other expense(32,455) (28,837) 
Net income (loss) before income tax expense(602,165) 6,691  
Income tax expense296  104  
Net income (loss)(602,461) 6,587  
Less: distributions on Preferred Units(12,187) (12,187) 
Net loss attributable to common and Class B unitholders’ interests$(614,648) $(5,600) 
Net loss attributable to:
Common units$(614,648) $(2,088) 
Class B Units$  $(3,512) 
Weighted average common units outstanding – basic and diluted96,707  90,060  
Weighted average Class B Units outstanding – basic and diluted  6,398  
Basic and diluted net loss per common unit$(6.36) $(0.02) 
Basic and diluted net loss per Class B Unit$  $(0.55) 
Distributions declared per common unit for respective periods$0.525  $0.525  
See accompanying notes to unaudited condensed consolidated financial statements.
2

Table of Contents
USA COMPRESSION PARTNERS, LP
Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital
(in thousands, except per unit amounts)
For the Three Months Ended March 31, 2020
Common unitsWarrantsTotal
Partners’ capital ending balance, December 31, 2019$1,166,619  $13,979  $1,180,598  
Vesting of phantom units1,065    1,065  
Distributions and DERs, $0.525 per unit
(50,755)   (50,755) 
Issuance of common units under the DRIP301    301  
Unit-based compensation for equity classified awards55    55  
Net loss attributable to common unitholders’ interests(614,648)   (614,648) 
Partners’ capital ending balance, March 31, 2020$502,637  $13,979  $516,616  
For the Three Months Ended March 31, 2019
Common unitsClass B UnitsWarrantsTotal
Partners’ capital ending balance, December 31, 2018$1,289,731  $75,146  $13,979  $1,378,856  
Vesting of phantom units2,357      2,357  
Distributions and DERs, $0.525 per unit
(47,259)     (47,259) 
Issuance of common units under the DRIP252      252  
Unit-based compensation for equity classified awards36      36  
Net loss attributable to common and Class B unitholders’ interests(2,088) (3,512)   (5,600) 
Partners’ capital ending balance, March 31, 2019$1,243,029  $71,634  $13,979  $1,328,642  
See accompanying notes to unaudited condensed consolidated financial statements.
3

Table of Contents
USA COMPRESSION PARTNERS, LP
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)​
Three Months Ended
March 31,
20202019
Cash flows from operating activities:
Net income (loss)$(602,461) $6,587  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization58,762  58,924  
Provision for expected credit losses1,500    
Amortization of debt issuance costs1,986  1,680  
Unit-based compensation expense (income)(1,829) 3,134  
Deferred income tax expense123  14  
Loss (gain) on disposition of assets(1,014) 40  
Impairment of compression equipment  3,234  
Impairment of goodwill619,411    
Changes in assets and liabilities:
Accounts receivable and related party receivables, net7,120  (1,381) 
Inventories(8,046) (6,659) 
Prepaid expenses and other current assets(556) (1,250) 
Other assets754  449  
Accounts payable5,036  (4,013) 
Accrued liabilities and deferred revenue(30,709) (12,990) 
Net cash provided by operating activities50,077  47,769  
Cash flows from investing activities:
Capital expenditures, net(45,275) (36,339) 
Proceeds from disposition of property and equipment1,881  321  
Proceeds from insurance recovery1,324  1,365  
Net cash used in investing activities(42,070) (34,653) 
Cash flows from financing activities:
Proceeds from revolving credit facility250,008  221,792  
Proceeds from issuance of senior notes  750,000  
Payments on revolving credit facility(193,408) (909,914) 
Cash paid related to net settlement of unit-based awards(644) (1,433) 
Cash distributions on common units(51,381) (47,739) 
Cash distributions on Preferred Units(12,187) (12,187) 
Deferred financing costs(153) (13,220) 
Other(250) (287) 
Net cash used in financing activities(8,015) (12,988) 
Increase (decrease) in cash and cash equivalents(8) 128  
Cash and cash equivalents, beginning of period10  99  
Cash and cash equivalents, end of period$2  $227  
Supplemental cash flow information:
Cash paid for interest, net of capitalized amounts$56,046  $38,737  
Supplemental non-cash transactions:
Non-cash distributions to certain common unitholders (DRIP)$301  $252  
Transfers from (to) inventories to (from) property and equipment$7,576  $(1,951) 
Changes in capital expenditures included in accounts payable and accrued liabilities$2,201  $(782) 
Financing costs included in accounts payable and accrued liabilities$268  $139  
See accompanying notes to unaudited condensed consolidated financial statements.
4

Table of Contents
USA COMPRESSION PARTNERS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Description of Business
Unless otherwise indicated, the terms “our,” “we,” “us,” “the Partnership” and similar language refer to USA Compression Partners, LP, collectively with its consolidated operating subsidiaries.
We are a Delaware limited partnership. Through our operating subsidiaries, we provide compression services under fixed-term contracts with customers in the natural gas and crude oil industries, using natural gas compression packages that we design, engineer, own, operate and maintain. We also own and operate a fleet of equipment used to provide natural gas treating services, such as carbon dioxide and hydrogen sulfide removal, cooling, and dehydration. We primarily provide compression services in a number of shale plays throughout the U.S., including the Utica, Marcellus, Permian Basin, Delaware Basin, Eagle Ford, Mississippi Lime, Granite Wash, Woodford, Barnett, Haynesville, Niobrara and Fayetteville shales.
USA Compression GP, LLC, a Delaware limited liability company, serves as our general partner and is referred to herein as the “General Partner.” The General Partner is wholly-owned by ETO.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Partnership and its operating subsidiaries, all of which are wholly-owned by us.
(2) Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC.
In the opinion of our management, such financial information reflects all normal recurring adjustments necessary for a fair presentation of these interim unaudited condensed consolidated financial statements in accordance with GAAP. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements contained in our annual report on Form 10-K for the year ended December 31, 2019 filed on February 18, 2020 (our “2019 Annual Report”).
Use of Estimates
Our unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that existed at the date of the unaudited condensed consolidated financial statements. Although these estimates were based on management’s available knowledge of current and expected future events, actual results could differ from these estimates.
Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of all cash balances. We consider investments in highly liquid financial instruments purchased with an original maturity of 90 days or less to be cash equivalents.
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest.
Allowance for Credit Losses
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments. On January 1, 2020, we adopted Topic 326, which is effective for interim and annual reporting periods beginning on or after December 15, 2019. Topic 326 requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets.
5

Table of Contents
To adopt Topic 326, we evaluated our allowance for credit losses related to our two financial assets: (i) trade accounts receivable and (ii) net investment in lease related to our sales-type lease discussed further in Note 7. We determined a cumulative catch-up adjustment to the opening balance sheet presented January 1, 2020 was not required.
Our determination of the allowance for credit losses requires us to make estimates and judgments regarding our customers’ ability to pay amounts due and is the same process for both of our financial assets as they have similar risk characteristics. We continuously evaluate the financial strength of our customers based on collection experience, the overall business climate in which our customers operate and specific identification of customer credit losses and make adjustments to the allowance as necessary. Our evaluation of our customers’ financial strength is based on the aging of their respective receivables balance, customer correspondence, financial information and third-party credit ratings. Our evaluation of the business climate in which our customers operate is based on a review of various publicly available materials regarding our customers’ industries, including the solvency of various companies in the industry.
Inventories
Inventories consist of serialized and non-serialized parts used primarily in the repair of compression units. All inventories are stated at the lower of cost or net realizable value. Serialized parts inventories are determined using the specific identification method, while non-serialized parts inventories are determined using the weighted average cost method. Purchases of inventories are considered operating activities on the unaudited condensed consolidated statements of cash flows.
Property and Equipment
Property and equipment are carried at cost except for (i) certain acquired assets which are recorded at fair value on their respective acquisition dates and (ii) impaired assets which are recorded at fair value on the last impairment evaluation date for which an adjustment was required. Overhauls and major improvements that increase the value or extend the life of compression equipment are capitalized and depreciated over three to five years. Ordinary maintenance and repairs are charged to cost of operations, exclusive of depreciation and amortization.
When property and equipment is retired or sold, its carrying value and the related accumulated depreciation are removed from our accounts and any associated gains or losses are recorded on our statements of operations in the period of sale or disposition.
Capitalized interest is calculated by multiplying the Partnership’s monthly effective interest rate on outstanding debt by the amount of qualifying costs, which include upfront payments to acquire certain compression units. Capitalized interest was $0.1 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively.
Impairment of Long-Lived Assets
Long-lived assets with recorded values that are not expected to be recovered through future cash flows are written-down to estimated fair value. We test long-lived assets for impairment when events or circumstances indicate that the assets’ carrying value may not be recoverable or will no longer be utilized in the operating fleet. The most common circumstance requiring compression units to be evaluated for impairment is when idle units do not meet the desired performance characteristics of our active revenue generating horsepower.
The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value of the long-lived asset exceeds the sum of the undiscounted cash flows associated with the asset, an impairment loss equal to the amount of the carrying value exceeding the fair value of the asset is recognized. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, based on an estimate of discounted cash flows, the expected net sale proceeds compared to the other similarly configured fleet units we recently sold 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.
Refer to Note 5 for more detailed information about impairment charges during the three months ended March 31, 2020 and 2019.
Identifiable Intangible Assets
Identifiable intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to our future cash flows. The estimated useful lives of our intangible assets range from 15 to 25 years.
6

Table of Contents
Goodwill
Goodwill represents consideration paid in excess of the fair value of the identifiable net assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment annually based on the carrying values as of October 1, or more frequently if impairment indicators arise that suggest the carrying value of goodwill may not be recovered.
Refer to Note 5 for more detailed information about goodwill impairment charges during the three months ended March 31, 2020.
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of our services or goods. Revenue is measured at the amount of consideration we expect to receive in exchange for providing services or transferring goods. Incidental items, if any, that are immaterial in the context of the contract are recognized as expenses.
Income Taxes
We are organized as a partnership for U.S. federal and state income tax purposes. As a result, our partners are responsible for U.S. federal and state income taxes based upon their distributive share of our items of income, gain, loss or deduction. Texas imposes an entity-level income tax on partnerships that is based on Texas sourced taxable margin (the “Texas Margin Tax”). We have included in the consolidated financial statements a provision for the Texas Margin Tax.
Pass Through Taxes
Sales taxes incurred on behalf of, and passed through to, customers are accounted for on a net basis.
Fair Value Measurements
Accounting standards on fair value measurements establish a framework for measuring fair value and stipulate disclosures about fair value measurements. The standards apply to recurring and non-recurring financial and non-financial assets and liabilities that require or permit fair value measurements. Among the required disclosures is the fair value hierarchy of inputs we use to value an asset or a liability. The three levels of the fair value hierarchy are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
As of March 31, 2020, our financial instruments consisted primarily of cash and cash equivalents, trade accounts receivable, trade accounts payable and long-term debt. The book values of cash and cash equivalents, trade accounts receivable and trade accounts payable are representative of fair value due to their short-term maturities. The carrying amount of our revolving credit facility approximates fair value due to the floating interest rates associated with the debt.
The fair value of our Senior Notes 2026 and Senior Notes 2027 were estimated using quoted prices in inactive markets and are considered Level 2 measurements.
The following table summarizes the aggregate principal amount and fair value of our Senior Notes 2026 and Senior Notes 2027 (in thousands):
March 31,
2020
December 31,
2019
Senior Notes 2026, aggregate principal$725,000  $725,000  
Fair value of Senior Notes 2026467,625  764,875  
Senior Notes 2027, aggregate principal$750,000  $750,000  
Fair value of Senior Notes 2027472,500  785,625  
7

Table of Contents
Operating Segment
We operate in a single business segment, the compression services business.
(3) Trade Accounts Receivable
The allowance for credit losses, which was $3.5 million and $2.5 million at March 31, 2020 and December 31, 2019, respectively, is our best estimate of the amount of probable credit losses included in our existing accounts receivable.
The following summarizes activity within our trade accounts receivable allowance for credit losses balance (in thousands):
Three Months Ended March 31,
2020
Balance at December 31, 2019$2,479  
Current-period provision for expected credit losses1,500  
Writeoffs charged against the allowance(503) 
Balance at March 31, 2020$3,476  

The recent decline in crude oil prices, driven by decreased demand for and oversupply of crude oil as a result of the COVID-19 pandemic, is the primary factor contributing to the increase to the allowance for credit losses for the three months ended March 31, 2020. We cannot predict the duration of these conditions or the severity of their impact on our customers and the collectability of their accounts receivable.
(4)  Inventories​
Components of inventories are as follows (in thousands):
March 31,
2020
December 31,
2019
Serialized parts$44,260  $43,890  
Non-serialized parts47,464  48,033  
Total inventories$91,724  $91,923  

(5)  Property and Equipment, Identifiable Intangible Assets and Goodwill
Property and Equipment
Property and equipment consisted of the following (in thousands):
March 31,
2020
December 31,
2019
Compression and treating equipment$3,434,055  $3,384,985  
Computer equipment54,794  54,940  
Automobiles and vehicles35,061  33,544  
Buildings8,639  8,639  
Leasehold improvements8,547  7,395  
Furniture and fixtures1,190  1,543  
Land77  77  
Total property and equipment, gross3,542,363  3,491,123  
Less: accumulated depreciation and amortization(1,057,308) (1,008,180) 
Total property and equipment, net$2,485,055  $2,482,943  
8

Table of Contents
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows:
Compression equipment, acquired new25 years
Compression equipment, acquired used
5 - 25 years
Furniture and fixtures
3 - 10 years
Vehicles and computer equipment
1 - 10 years
Buildings
5 years
Leasehold improvements5 years
Depreciation expense on property and equipment and loss (gain) on disposition of assets were as follows (in thousands):
Three Months Ended
March 31,
20202019
Depreciation expense$51,417  $51,579  
Loss (gain) on disposition of assets(1,014) 40  
As of March 31, 2020 and December 31, 2019, there was $13.6 million and $11.4 million, respectively, of property and equipment purchases in accounts payable and accrued liabilities.
During the first quarter of 2020 certain potential impairment indicators were identified, specifically (i) the decline in the market price of our common units, (ii) the decline in global commodity prices, and (iii) the COVID-19 pandemic; however, we determined our property and equipment was not impaired as of March 31, 2020.
On a quarterly basis, we evaluate the future deployment of our idle fleet under then-current market conditions. For the three months ended March 31, 2019, we determined to retire or re-utilize key components of 14 compressor units, or approximately 4,700 horsepower, that were previously used to provide services in our business. As a result, we recorded an impairment of compression equipment of $3.2 million for the three months ended March 31, 2019.
The primary causes for these impairments were: (i) units were not considered marketable in the foreseeable future, (ii) units were subject to excessive maintenance costs or (iii) units were unlikely to be accepted by customers due to certain performance characteristics of the unit, such as the inability to meet then-current quoting criteria without excessive retrofitting costs. These compression units were written down to their respective estimated salvage values, if any.
Identifiable Intangible Assets
Identifiable intangible assets, net consisted of the following (in thousands):
Customer
Relationships
Trade NamesTotal
Net balance at December 31, 2019$329,057  $34,114  $363,171  
Amortization expense(6,526) (819) (7,345) 
Net balance at March 31, 2020$322,531  $33,295  $355,826  
​Accumulated amortization of intangible assets was $194.8 million and $187.5 million as of March 31, 2020 and December 31, 2019, respectively. The expected amortization of the intangible assets for each of the five succeeding years is $29.4 million.
During the first quarter of 2020 certain potential impairment indicators were identified, specifically (i) the decline in the market price of our common units, (ii) the decline in global commodity prices, and (iii) the COVID-19 pandemic; however, we determined our identifiable intangible assets were not impaired as of March 31, 2020.
Goodwill
During the first quarter of 2020 certain potential impairment indicators were identified, specifically (i) the decline in the market price of our common units, (ii) the decline in global commodity prices, and (iii) the COVID-19 pandemic; which together indicated the fair value of the reporting unit was less than its carrying amount as of March 31, 2020.
9

Table of Contents
We performed a quantitative goodwill impairment test as of March 31, 2020 and determined fair value using a weighted combination of the income approach and the market approach. Determining fair value of a reporting unit requires judgment and use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating margins, EBITDA margins, weighted average costs of capital and future market conditions, among others. We believe the estimates and assumptions used were reasonable and based on available market information, but variations in any of the assumptions could have resulted in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the income approach, we determined fair value based on estimated future cash flows, including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflects the overall level of inherent risk of the Partnership. Cash flow projections were derived from four-year operating forecasts plus an estimate of later period cash flows, all of which were developed by management. Subsequent period cash flows were developed using growth rates that management believed were reasonably likely to occur. Under the market approach, we determined fair value by applying valuation multiples of comparable publicly-traded companies to the projected EBITDA of the Partnership and then averaging that estimate with similar historical calculations using a three-year average. In addition, we estimated a reasonable control premium representing the incremental value that would accrue to us if we were to be acquired.
Based on the quantitative goodwill impairment test described above, our carrying amount exceeded fair value and as a result, we recognized a goodwill impairment of $619.4 million for the three months ended March 31, 2020.
(6)  Other Current Liabilities
Components of other current liabilities included the following (in thousands):
March 31,
2020
December 31,
2019
Accrued sales tax contingencies (1)$44,923  $48,883  
Accrued interest expense5,780  31,210  
Accrued payroll and benefits6,828  10,687  
Accrued capital expenditures13,558  11,357  
______________________
(1)Refer to Note 13 for further information on the accrued sales tax contingencies.
(7)  Lease Accounting
Lessee Accounting
We maintain both finance leases and operating leases, primarily related to office space, warehouse facilities and certain corporate equipment. Our leases have remaining lease terms of up to ten years, some of which include options that permit renewals for additional periods.
We determine if an arrangement is a lease at inception. Operating leases are included in lease right-of-use assets, accrued liabilities and operating lease liabilities in our unaudited condensed consolidated balance sheets. Finance leases are included in property and equipment, accrued liabilities and other liabilities in our unaudited condensed consolidated balance sheets.
Right-of-use (“ROU”) lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. ROU lease assets also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable costs such as our proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred.
For short-term leases (leases that have terms of twelve months or less upon commencement), lease payments are recognized on a straight line basis and no ROU assets are recorded. For certain equipment leases, such as office equipment, we account for the lease and non-lease components as a single lease component.
10

Table of Contents
During the first quarter of 2020 certain potential impairment indicators were identified, specifically (i) the decline in the market price of our common units, (ii) the decline in global commodity prices, and (iii) the COVID-19 pandemic; however, we determined our ROU assets were not impaired as of March 31, 2020.
Supplemental balance sheet information related to leases consisted of the following (in thousands):
Assets (liabilities)March 31,
2020
December 31,
2019
Operating leases:
Lease ROU assets$24,886  $18,317  
Accrued liabilities(3,050) (2,451) 
Operating lease liabilities(23,306) (17,343) 
Finance leases:
Property and equipment, gross$7,268  $7,268  
Accumulated depreciation(5,947) (5,845) 
Property and equipment, net1,321  1,423  
Accrued liabilities(662) (774) 
Other liabilities(1,411) (1,550) 
Components of lease expense consisted of the following (in thousands):
Three Months Ended
March 31,
Income Statement Line Item
20202019
Operating lease costs:
Operating lease costCost of operations, exclusive of depreciation and amortization$585  $372  
Operating lease costSelling, general and administrative408  267  
Total operating lease costs993  639  
Finance lease costs:
Amortization of lease assetsDepreciation and amortization102  819  
Short-term lease costs:
Short-term lease costCost of operations, exclusive of depreciation and amortization109  67  
Short-term lease costSelling, general and administrative15  1  
Total short-term lease costs124  68  
Variable lease costs:
Variable lease costCost of operations, exclusive of depreciation and amortization104  17  
Variable lease costSelling, general and administrative310  333  
Total variable lease costs414  350  
Total lease costs$1,633  $1,876  
11

Table of Contents
The weighted average remaining lease terms and weighted average discount rates were as follows:
March 31,
2020
December 31,
2019
Weighted average remaining lease term:
Operating leases8 years8 years
Finance leases4 years4 years
Weighted average discount rate:
Operating leases5.0 %4.9 %
Finance leases2.6 %2.6 %
Supplemental cash flow information related to leases consisted of the following (in thousands):
Three Months Ended
March 31,
20202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$(966) $(662) 
Operating cash flows from finance leases(186) (194) 
Financing cash flows from finance leases(250) (287) 
ROU assets obtained in exchange for lease obligations:
Operating leases$7,297  $  
Maturities of lease liabilities as of March 31, 2020 consisted of the following (in thousands):
Operating LeasesFinance LeasesTotal
2020 (remainder)$3,260  $552  $3,812  
20214,073  567  4,640  
20223,828  398  4,226  
20233,531  369  3,900  
20243,345  284  3,629  
Thereafter14,544    14,544  
Total lease payments32,581  2,170  34,751  
Less: present value discount(6,225) (97) (6,322) 
Present value of lease liabilities$26,356  $2,073  $28,429  
As of March 31, 2020, we have not entered into any additional leases that have not yet commenced.
Lessor Accounting​
We granted a bargain purchase option to a customer with respect to certain compressor packages leased to the customer. The bargain purchase option provides the customer with an option to acquire the equipment at a value significantly less than the fair market value at the end of the lease term in 2021.
We accounted for this option as a sales-type lease resulting in a current installment receivable included in other accounts receivable of $4.1 million and $4.0 million, and a long-term installment receivable included in other assets of $1.9 million and $2.9 million as of March 31, 2020 and December 31, 2019, respectively.
As of March 31, 2020, there is no allowance for credit losses on our net investment in the sales-type lease based on our collections experience with the customer.
12

Table of Contents
Revenue and interest income related to the lease is recognized over the lease term. We recognize maintenance revenue within contract operations revenue and interest income within interest expense, net. Maintenance revenue and interest income were as follows (in thousands):
Three Months Ended
March 31,
20202019
Maintenance revenue$323  $323  
Interest income124  194  
Lease payments expected to be received subsequent to March 31, 2020 are as follows (in thousands):
Lease Payments
2020 (remainder)$4,255  
20213,356  
Total installment receivables7,611  
Less: present value discount(1,658) 
Present value of installment receivables$5,953  
ASC Topic 842 provides lessors with a practical expedient to not separate non-lease components from the associated lease components and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under ASC Topic 606 Revenue from Contracts with Customers (“ASC Topic 606”) and certain conditions are met. Our contract operations services agreements meet these conditions and we consider the predominant component to be the non-lease components, resulting in the ongoing recognition of revenue following ASC Topic 606 guidance.
(8)  Long-term Debt
Our long-term debt, of which there is no current portion, consisted of the following (in thousands):
March 31,
2020
December 31,
2019
Revolving credit facility$459,322  $402,722  
Senior Notes 2026, aggregate principal725,000  725,000  
Senior Notes 2027, aggregate principal750,000  750,000  
Less: deferred financing costs, net of amortization(24,744) (25,362) 
Total senior notes, net1,450,256  1,449,638  
Total long-term debt, net$1,909,578  $1,852,360  
Revolving Credit Facility
As of March 31, 2020, we were in compliance with all of our covenants under the Credit Agreement. The Credit Agreement has an aggregate commitment of $1.6 billion (subject to availability under our borrowing base), with a further potential increase of $400 million, and has a maturity date of April 2, 2023.
As of March 31, 2020, we had outstanding borrowings under the Credit Agreement of $459.3 million, $1.1 billion of borrowing base availability and, subject to compliance with the applicable financial covenants, available borrowing capacity of $185.9 million. Our weighted average interest rate in effect for all borrowings under the Credit Agreement as of March 31, 2020 was 3.67%, with a weighted average interest rate of 4.10% for the three months ended March 31, 2020. There were no letters of credit issued as of March 31, 2020. We pay a commitment fee of 0.375% on the unused portion of the Credit Agreement.
The Credit Agreement permits us to make distributions of available cash to unitholders so long as (i) no default under the facility has occurred, is continuing or would result from the distribution, (ii) immediately prior to and after giving effect to such distribution, we are in compliance with the facility’s financial covenants and (iii) immediately after giving effect to such distribution, we have availability under the Credit Agreement of at least $100 million.
13

Table of Contents
The Credit Agreement also contains various financial covenants, including covenants requiring us to maintain:
a minimum EBITDA to interest coverage ratio of 2.5 to 1.0, determined as of the last day of each fiscal quarter; and
a maximum funded debt to EBITDA ratio, determined as of the last day of each fiscal quarter, for the annualized trailing three months of 5.0 to 1.0 subject to a provision for increases to such threshold by 0.5 in connection with certain future acquisitions for the six consecutive month period following the period in which any such acquisition occurs.
The Credit Agreement matures in April 2023 and we expect to maintain it for the term. The Credit Agreement is a “revolving credit facility” that includes a lock box arrangement, whereby remittances from customers are forwarded to a bank account controlled by the administrative agent and are applied to reduce borrowings under the facility.
Senior Notes 2026​
On March 23, 2018, the Partnership and its wholly owned finance subsidiary, USA Compression Finance Corp. (“Finance Corp”), co-issued the Senior Notes 2026. The Senior Notes 2026 accrue interest at the rate of 6.875% per year. Interest on the Senior Notes 2026 is payable semi-annually in arrears on each of April 1 and October 1.
The indenture governing the Senior Notes 2026 (the “2026 Indenture”) contains certain financial ratios that we must comply with in order to make certain restricted payments as described in the 2026 Indenture.
The Senior Notes 2026 are fully and unconditionally guaranteed (the “2026 Guarantees”), jointly and severally, on a senior unsecured basis by all of our existing subsidiaries (other than Finance Corp), and will be fully and unconditionally guaranteed, jointly and severally, by each of our future restricted subsidiaries that either borrows under, or guarantees, the Credit Agreement or guarantees certain of our other indebtedness (collectively, the “Guarantors”). The Senior Notes 2026 and the 2026 Guarantees are general unsecured obligations and rank equally in right of payment with all of the Guarantors’ and our existing and future senior indebtedness and senior to the Guarantors’ and our future subordinated indebtedness, if any. The Senior Notes 2026 and the 2026 Guarantees are effectively subordinated in right of payment to all of the Guarantors’ and our existing and future secured debt, including debt under the Credit Agreement and guarantees thereof, to the extent of the value of the assets securing such debt, and are structurally subordinated to all indebtedness of any of our subsidiaries that do not guarantee the Senior Notes 2026.
Senior Notes 2027
On March 7, 2019, the Partnership and Finance Corp co-issued the Senior Notes 2027. The Senior Notes 2027 accrue interest from March 7, 2019 at the rate of 6.875% per year. Interest on the Senior Notes 2027 is payable semi-annually in arrears on each of March 1 and September 1.
The indenture governing the Senior Notes 2027 (the “2027 Indenture”) contains certain financial ratios that we must comply with in order to make certain restricted payments as described in the 2027 Indenture.
The Senior Notes 2027 are fully and unconditionally guaranteed (the “2027 Guarantees”), jointly and severally, on a senior unsecured basis by the Guarantors. The Senior Notes 2027 and the 2027 Guarantees are general unsecured obligations and rank equally in right of payment with all of the Guarantors’ and our existing and future senior indebtedness and senior to the Guarantors’ and our future subordinated indebtedness, if any. The Senior Notes 2027 and the 2027 Guarantees are effectively subordinated in right of payment to all of the Guarantors’ and our existing and future secured debt, including debt under the Credit Agreement and guarantees thereof, to the extent of the value of the assets securing such debt, and are structurally subordinated to all indebtedness of any of our subsidiaries that do not guarantee the Senior Notes 2027.
We have no assets or operations independent of our subsidiaries, and there are no significant restrictions upon our ability to obtain funds from our subsidiaries by dividend or loan. Each of the Guarantors is 100% owned by us. None of the assets of our subsidiaries represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act.
(9)  Preferred Units
We had 500,000 Preferred Units outstanding as of March 31, 2020 and December 31, 2019, respectively, with a face value of $1,000 per Preferred Unit.
The Preferred Units rank senior to the common units with respect to distributions and rights upon liquidation. The Preferred Unitholders are entitled to receive cumulative quarterly cash distributions equal to $24.375 per Preferred Unit.
14

Table of Contents
We have declared and paid quarterly cash distributions to our Preferred Unitholders of record as follows:
Payment DateDistribution per Preferred Unit
February 8, 2019$24.375  
May 10, 201924.375  
August 9, 201924.375  
November 8, 201924.375  
2019 total distributions$97.500  
February 7, 2020$24.375  
Announced Quarterly Distribution
On April 16, 2020, we declared a cash distribution of $24.375 per unit on the Preferred Units. The distribution will be paid on May 8, 2020 to unitholders of record as of close of business on April 27, 2020.
Changes in the Preferred Units balance are as follows (in thousands):
Preferred Units
Balance at December 31, 2019$477,309  
Net income allocated to Preferred Units12,187  
Cash distributions on Preferred Units(12,187)