Natural Gas Services Group Announces Diluted Earnings Per Share of $.91 for the Year Ended December 31, 2009
Natural Gas Services Group Inc. Financial Results:
Revenue: Our total revenue decreased from $85.3 million to $67.8 million, or 20.6%, for the twelve months ended December 31, 2009, compared to the same period ended December 31, 2008. This was primarily the result of a 47.7% decrease in sales revenue, from our Tulsa facility, a 9.1% decrease in service and maintenance revenue offset by a 5.3% increase in rental revenue.
Margins: Our overall gross margin percentage increased to 52.6% for the twelve months ended December 31, 2009, from 47.3% for the same period ended December 31, 2008. This increase is the result of three factors: (1) rentals, which have a higher margin than our other sources of revenue, increased (rental revenue increased to 66.6% from 50.2% of our total revenue for the year ended December 31, 2009 compared to the same period ended December 31, 2008); (2) our rental margin increased to 63.2% from 62.2% for the year ended December 31, 2009 compared to the same period ended December 31, 2008 and (3) this margin increase is also the result of greater efficiencies in our field service operations.
Net income: Ournet income for the three months ended December 31, 2009, decreased 56.7% to $1.7 million, as compared to net income of $3.9 million for the same period in 2008. Net income for the twelve months of 2009 decreased 29.4% to $11.0 million, when compared to net income of $15.6 million for the same period in 2008. This decrease was mainly the result of a decrease in compressor unit sales from our Tulsa facilities resulting from the slow down of the economy and its effect on the Oil and Gas industry.
Earnings per share: Ourearnings per diluted share was $0.14 for the three months ending December 31, 2009 as compared to $0.33 for the same 2008 period, a 57.6% decrease. Comparing the twelve months of 2008 versus 2009, our earnings per diluted share fell from $1.28 to $.91, or 28.9%.
EBITDA: EBITDAdecreased (see discussion of EBITDA at the end of this release) 36.7% to $5.9 million for the fourth quarter ended December 31, 2009, versus $9.3 million for the same period in 2008. EBITDA decreased 15.4% to $29.5 million for the year ended December 31, 2009 versus $34.9 million for the same period ended December 31, 2008. Please see discussion of Non-GAAP Measures in this release.
Rental fleet: As of December 31, 2009, we had 1,776 natural gas compressors in our rental fleet totaling approximately 223,694 horsepower, as compared to 1,730 natural gas compressors totaling approximately 217,085 horsepower at December 31, 2008. As of December 31, 2009, we had 1,159 natural gas compressors rented compared to 1,469 at December 31, 2008. The average monthly rental rate per unit decreased to approximately $2,700 for December 2009 compared to approximately $2,900 for December 2008. This decrease is primarily the result of higher horsepower units returned by our customers during the year and price concessions.
Cash flow: At December 31, 2009, we had cash and cash equivalents of approximately $23.0 million, working capital of $40.3 million and total debt of $13.8 million, of which approximately $3.4 million was classified as current. We had positive net cash flow from operating activities of approximately $32.2 million during 2009.
Selected data: The table below shows our revenues, percentage of total revenues, gross margin, exclusive of depreciation, and gross margin percentage of each of our segments for the years ended December 31, 2009 and 2008. Gross margin is the difference between revenue and cost of sales, exclusive of depreciation.
Revenue
-------------------------------------
Year Ended December 31,
-------------------------------------
2008 2009
---------------- -----------------
(dollars in thousands)
(unaudited)
Sales $41,380 48.5% $21,657 31.9%
Rental 42,864 50.2% 45,146 66.6%
Service and maintenance 1,092 1.3% 993 1.5%
----- ---
Total $85,336 $67,796
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Gross Margin, Exclusive of
Depreciation(1)
-------------------------------------
Year Ended December 31,
-------------------------------------
2008 2009
---------------- -----------------
(dollars in thousands)
(unaudited)
Sales $13,328 32.2% $6,777 31.3%
Rental 26,671 62.2% 28,546 63.2%
Service and maintenance 343 31.4% 316 31.8%
--- ---
Total $40,342 47.3% $35,639 52.6%
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(1) For a reconciliation of gross margin to its most directly comparable
financial measure calculated and presented in accordance with GAAP,
please read Non-GAAP Financial Measures" in this report.
Non GAAP Measures: "EBITDA" reflects net income or loss before interest, taxes, depreciation and amortization. EBITDA is a measure used by analysts and investors as an indicator of operating cash flow since it excludes the impact of movements in working capital items, non-cash charges and financing costs. Therefore, EBITDA gives the investor information as to the cash generated from the
operations of a business. However, EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America ("GAAP"), and should not
be considered a substitute for other financial measures of performance. EBITDA as calculated by NGS may not be comparable to EBITDA as calculated and reported by other companies. The most comparable GAAP measure to EBITDA is net income. The reconciliation of net income to EBITDA and gross margin is as follows:
Three months ended Twelve months ended
(in thousands of December 31, December 31,
dollars) 2008 2009 2008 2009
---- ---- ---- ----
Net income $3,932 $1,703 $15,593 $11,015
Interest expense 224 144 742 606
Provision for
income taxes 2,365 1,184 8,627 6,212
Depreciation and
amortization 2,828 2,891 9,925 11,686
EBITDA $9,349 $5,922 $34,887 $29,519
Other operating
expenses 1,468 1,377 5,842 6,190
Other expense
(income) 8 (167) (387) (70)
Gross margin $10,825 $7,132 $40,342 $35,639
We define gross margin as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations. Depreciation expense is a necessary element of our costs and our ability to generate revenue and selling, general and administrative expense is a necessary cost to support our operations and required corporate activities. Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.
Cautionary Note Regarding Forward-Looking Statements:
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause NGS's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS's products and services; and new governmental safety, health and environmental regulations which could require NGS to make significant capital expenditures. The forward-looking statements included in this press release are only made as of the date of this press release, and NGS undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Conference Call Details:
Teleconference: Thursday, March 4, 2010 at 9:30 a.m. Central (10:30 a.m. Eastern). Live via phone by dialing 800-624-7038, pass code "Natural Gas Services". All attendees and participants to the conference call should arrange to call in at least 5 minutes prior to the start time.
Live Webcast: The webcast will be available in listen only mode via our website www.ngsgi.com, investor relation section.
Webcast Reply: For those unable to attend or participate, a replay of the conference call will be available within 24 hours on the NGS website at www.ngsgi.com.
Stephen Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing fourth quarter and twelve month 2009 financial results.
About Natural Gas Services Group, Inc. (NGS):
NGS is a leading provider of small to medium horsepower, wellhead compression equipment to the natural gas industry with a primary focus on the non-conventional gas industry, i.e., coal bed methane, gas shale and tight gas. The Company manufactures, fabricates, rents and maintains natural gas compressors that enhance the production of natural gas wells. The Company also designs and sells custom fabricated natural gas compressors to particular customer specifications and sells flare systems for gas plant and production facilities. NGS is headquartered in Midland, Texas with manufacturing facilities located in Tulsa, Oklahoma, Lewiston, Michigan and Midland, Texas and service facilities located in major gas producing basins in the U.S.
For More Information, Kimberly Huckaba, Investor
Contact: Relations
(432) 262-2700
Kim.Huckaba@ngsgi.com
www.ngsgi.com
NATURAL GAS SERVICES GROUP, INC.
BALANCE SHEETS
(in thousands)
(unaudited)
December 31,
------------
2008 2009
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $1,149 $23,017
Short-term investments 2,300 -
Trade accounts receivable, net of doubtful
accounts of $177 and $363, respectively 11,321 7,314
Inventory, net of allowance for
obsolescence of $500 and $345,
respectively 31,931 24,037
Prepaid income taxes 244 1,556
Prepaid expenses and other 87 279
--- ---
Total current assets 47,032 56,203
Rental equipment, net of accumulated
depreciation of $24,624 and $34,008,
respectively 111,967 110,263
Property and equipment, net of accumulated
depreciation of $6,065 and $7,210,
respectively 8,973 7,626
Goodwill, net of accumulated amortization
of $325, both periods 10,039 10,039
Intangibles, net of accumulated
amortization of $1,198 and $1,497
respectively 3,020 2,721
Other assets 19 19
--- ---
Total assets $181,050 $186,871
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $3,378 $3,378
Current portion of line of credit - 7,000
Accounts payable 8,410 2,239
Accrued liabilities 3,987 1,485
Current income tax liability 110 1,708
Deferred income 38 90
--- ---
Total current liabilities 15,923 15,900
Long term debt, less current portion 6,194 2,817
Line of credit, less current portion 7,000 -
Deferred income tax payable 21,042 25,498
Other long term liabilities 441 558
--- ---
Total liabilities 50,600 44,773
Stockholders' equity:
Preferred stock, 5,000 shares authorized,
no shares issued or outstanding - -
Common stock, 30,000 shares authorized, par
value $0.01; 12,094 and 12,101 shares
issued and outstanding, respectively 121 121
Additional paid-in capital 83,937 84,570
Retained earnings 46,392 57,407
------ ------
Total stockholders' equity 130,450 142,098
------- -------
Total liabilities and stockholders' equity $181,050 $186,871
======== ========
NATURAL GAS SERVICES GROUP, INC.
STATEMENTS OF INCOME
(in thousands, except earnings per share)
(unaudited)
For the Year Ended
December 31,
-----------
2008 2009
---- ----
Revenue:
Sales, net $41,380 $21,657
Rental income 42,864 45,146
Service and maintenance income 1,092 993
----- ---
Total revenue 85,336 67,796
Operating costs and expenses:
Cost of sales, exclusive of
depreciation stated separately below 28,052 14,880
Cost of rentals, exclusive of
depreciation stated separately below 16,193 16,600
Cost of service and maintenance,
exclusive of depreciation stated
separately below 749 677
Selling, general and administrative
expense 5,842 6,190
Depreciation and amortization 9,925 11,686
----- ------
Total operating costs and expenses 60,761 50,033
------ ------
Operating income 24,575 17,763
Other income (expense):
Interest expense (742) (606)
Other income 387 70
--- ---
Total other income (expense) (355) (536)
---- ----
Income before provision for income taxes 24,220 17,227
Provision for income taxes:
Current 220 1,756
Deferred 8,407 4,456
----- -----
Total income tax expense 8,627 6,212
----- -----
Net income 15,593 11,015
====== ======
Earnings per common share:
Basic $1.29 $.91
Diluted $1.28 $.91
Weighted average common shares
outstanding:
Basic 12,090 12,096
Diluted 12,143 12,118
NATURAL GAS SERVICES GROUP, INC.
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
For the Year Ended
------------------
December 31,
-----------
2008 2009
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,593 $11,015
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 9,925 11,686
Deferred taxes 8,407 4,456
Employee stock options expense 423 682
Loss (gain) on disposal of
assets 7 (51)
Changes in current assets:
Trade accounts receivables, net 1 4,007
Inventory, net (11,162) 9,008
Prepaid expenses and other 3,894 (1,602)
Changes in current liabilities:
Accounts payable and accrued
liabilities 4,335 (8,673)
Current income tax liability (3,415) 1,598
Deferred income (43) 52
Other 285 -
--- ---
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,250 32,178
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment (46,271) (9,542)
Purchase of short-term
investments (2,620) -
Redemption of short-term
investments 18,981 2,300
Proceeds from sale of property
and equipment 47 143
--- ---
NET CASH USED IN INVESTING ACTIVITIES (29,863) (7,099)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 7,500 500
Proceeds from long-term debt - -
Proceeds from other long term
liabilities, net 441 118
Repayments of long-term debt (4,378) (3,378)
Repayment of line of credit (1,100) (500)
Proceeds from exercise of stock
options 54 49
--- ---
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,517 (3,211)
----- ------
NET CHANGE IN CASH 904 21,868
CASH AT BEGINNING OF PERIOD 245 1,149
--- -----
CASH AT END OF PERIOD $1,149 $23,017
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $802 $613
Income taxes paid $294 $1,477
SOURCE Natural Gas Services Group, Inc.
