Equity

12 Months Ended

Dec. 31, 2019

15. Equity

Elite Acquisition

On August 1, 2019, we completed the Elite Acquisition. A portion of the acquisition’s purchase price was funded through the issuance of 21.7 million shares of common stock with an acquisition date fair value of $225.9 million, which was recorded to common stock and additional paid-in capital in our consolidated statements of equity. See Note 4 (“Business Transactions”) for further details of this acquisition.

Merger Transaction

In April 2018, we completed the Merger and issued 57.6 million shares of our common stock to acquire the 41.2 million common units of the Partnership not owned by us prior to the Merger at a fixed exchange ratio of 1.40 shares of our common stock for each Partnership common unit for total implied consideration of $625.3 million. Additionally, the incentive distribution rights in the Partnership, all of which we owned prior to the Merger, were canceled and ceased to exist. As a result of the Merger, the Partnership’s common units are no longer publicly traded.

As we controlled the Partnership prior to the Merger and continue to control the Partnership after the Merger, we accounted for the change in our ownership interest in the Partnership as an equity transaction in the second quarter of 2018. No gain or loss was recognized in our consolidated statements of operations as a result of the Merger.

Prior to the Merger, public unitholders held a 57% ownership interest in the Partnership and we owned the remaining 43% equity interest. The equity interests in the Partnership that were owned by the public prior to the Merger are reflected in noncontrolling interest in our consolidated statements of equity. The earnings of the Partnership that were attributed to its common units held by the public prior to the Merger are reflected in net income (loss) attributable to the noncontrolling interest in our consolidated statements of operations.

The tax effects of the Merger were reported as adjustments to other assets, noncurrent assets associated with discontinued operations, deferred tax liabilities, additional paid-in capital and other comprehensive income. The change in ownership and tax step up from the consideration given in the Merger caused us to record a $156.0 million deferred tax asset, which resulted in an overall $52.2 million net deferred tax asset. We evaluated the realizability of our resulting net deferred tax asset position by assessing the available positive and negative evidence and concluded, based on the weight of the evidence, that a $50.8 million valuation allowance was required. The $105.2 million net tax impact of the change in deferred tax assets and the valuation allowance was recorded as an offsetting increase to additional paid-in capital.

We incurred $0.5 million, $10.2 million and $0.3 million of transaction costs directly attributable to the Merger during the years ended December 31, 2019, 2018 and 2017 respectively, including financial advisory, legal service and other professional fees, which were recorded to transaction-related costs on our consolidated statements of operations.

Other Transactions Related to the Partnership

In August 2017, the Partnership sold, pursuant to a public underwritten offering, 4.6 million common units, including 0.6 million common units pursuant to an over-allotment option. The Partnership received net proceeds of $60.3 million after deducting underwriting discounts, commissions and offering expenses, which it used to repay borrowings outstanding under the Credit Facility. In connection with this sale and as permitted under its partnership agreement, the Partnership sold 93,163 general partner units to its General Partner for a contribution of $1.3 million to maintain the General Partner’s approximate 2% general partner interest in the Partnership. As a result of this transaction, adjustments were made to noncontrolling interest, accumulated other comprehensive income (loss), deferred tax liabilities and additional paid-in capital to reflect our new ownership percentage in the Partnership.

The following table presents the effects of changes in our ownership interest in the Partnership on the equity attributable to Archrock stockholders during the years ended December 31, 2018 and 2017 (in thousands):



	Year Ended December 31,
	2018		2017
Net income attributable to Archrock stockholders	$	21,063	$	18,953
Increase in Archrock stockholders’ additional paid-in capital for change in ownership of Partnership common units	56,845		17,638
Increase from net income attributable to Archrock stockholders and transfers from noncontrolling interest	$	77,908	$	36,591

Cash Dividends

The following table summarizes our dividends declared and paid in each of the quarterly periods of 2019, 2018 and 2017:



	Declared Dividends per Common Share		Dividends Paid (in thousands)
2017
Q1	$	0.120	$	8,458
Q2	0.120		8,534
Q3	0.120		8,536
Q4	0.120		8,536

2018
Q1	$	0.120	$	8,532
Q2	0.120		15,486
Q3	0.132		17,114
Q4	0.132		17,156

2019
Q1	$	0.132	$	17,231
Q2	0.132		17,206
Q3	0.145		22,062
Q4	0.145		22,031

On January 23, 2020, our Board of Directors declared a quarterly dividend of $0.145 per share of common stock, or approximately $22.2 million, that was paid on February 14, 2020 to stockholders of record at the close of business on February 7, 2020.