Kodiak Gas Services, Inc.KGS

Kodiak Gas Services, Inc. Fair Value Disclosure

10-KFiled Feb 26, 20262 min read
13. Fair Value Measurements
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, derivative instruments and long-term debt. The carrying amounts of cash and cash equivalents, accounts
receivable and accounts payable are representative of their respective Level 1 fair values due to the short-term maturity of these instruments.
The Company’s ABL Facility applies floating interest rates to outstanding amounts; therefore, the carrying amount of the ABL Facility approximates its Level 3 fair value. The fair value of the 2029 Senior Notes, 2033 Senior Notes, and 2035 Senior Notes are determined using Level 2 inputs, relying on quoted prices in less active markets.
The Company records derivative instruments at fair value using Level 2 inputs of the fair value hierarchy. The interest rate swap is valued using a discounted cash flow analysis based on available market data on the expected cash flows of each derivative using observable inputs, including interest rate curves and credit spreads. See Note 12. Derivative Instruments for more details.
We consider the inputs for our long-lived asset impairment calculations to be Level 3 inputs in the fair value hierarchy. See Note 10. Long-Lived and Other Asset Impairment for additional information.
On April 1, 2024, we completed the acquisition of CSI Compressco. The measurements of assets acquired and liabilities assumed were based on significant unobservable inputs and are therefore classified as Level 3 measurements. See Note 3. Acquisitions and Divestitures for additional information.
The following table summarizes the fair value of our interest rate swap measured at fair value on a recurring basis and our long‑term debt disclosed at fair value:
Carrying Value (1)
As of December 31, 2025
(in thousands)
Level 1Level 2Level 3Total
Interest rate swap- non-current asset$4,664 $— $4,664 $— $4,664 
2029 Senior Notes750,000 — 780,360 — 780,360 
2033 Senior Notes770,000 — 786,686 — 786,686 
2035 Senior Notes630,000 — 647,854 — 647,854 
ABL Facility464,647 — — 464,647 464,647 
Carrying Value (1)
As of December 31, 2024
Level 1Level 2Level 3Total
Interest rate swap- current asset$3,672 $— $3,672 $— $3,672 
Interest rate swap- non-current asset17,544 — 17,544 — 17,544 
2029 Senior Notes750,000 — 765,483 — 765,483 
ABL Facility1,875,097 — — 1,875,097 1,875,097 
(1)
See Note 11. Debt and Credit Facilities for a reconciliation of the long-term debt’s presentation in the consolidated balance sheets.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Mar 7, 2025
2023Mar 7, 2024

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

Income TaxesRevenueEarnings Per SharePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsNew StandardsPay vs Performance