Natural Gas Services Group Announces Diluted EPS of $0.13/Share for the 2nd Quarter of 2010
MIDLAND, Texas, Aug 05, 2010 /PRNewswire via COMTEX/ --
Natural Gas Services Group, Inc. (NYSE: NGS), a leading provider of equipment and services to the natural gas industry, announces its financial results for the second quarter and six months ended June 30, 2010.
Natural Gas Services Group Inc. Financial Results:
Revenue: Ourtotal revenue decreased from $16.8 million to $11.9 million, or 29%, for the three months ended June 30, 2010, compared to the same period ended June 30, 2009. This was mainly the result of decreased compressor sales and compressor rental revenue due to the economic slowdown and depressed natural gas industry. Sales revenue decreased 61%, rental revenue decreased 17% while service and maintenance revenue increased 16%. Total revenues for the comparable six months decreased 36%, to $23.5 million from $36.8 million which was mainly the result of a 72% decrease in our sales revenue, a decrease in rental revenue of 20% and service and maintenance revenue decrease of 13%. Compared to the first quarter of 2010, total revenue increased from $11.5 million to $11.9 million, or 3%. This was mainly the result of increased revenues from compressor rentals, flares, rebuilds and parts sales.
Operating income: Operating income declined 48% to $2.4 million for the three months ended June 30, 2010 compared to $4.6 million in the same period for 2009, while the six months ended June 30, 2010 compared to the same period in 2009 showed a decline from $10.7 million to $4.6 million, or 57%. Operating income increased 7% to $2.4 million for the current quarter as compared to $2.2 million in the first quarter and rose to 20% of revenue, up from 19% in the first quarter. The decline in revenues over the past year impacted these margins, as did the fact that the semi-variable SG&A and depreciation expenses are costs that tend to hold steady.
Net income: Ournet income decreased 48% to $1.5 million for the three months ended June 30, 2010 as compared to net income of $2.9 million for the same period in 2009. Net income for the first six months of 2010 decreased 57% to $2.9 million, when compared to net income of $6.7 million for the same period in 2009. This was mainly the result of decreased third party unit sales. Net income increased 13% to $1.5 million in the current quarter when compared to $1.3 million in the first quarter of this year.
Earnings per share: Ourearnings per diluted share was $0.13 for the three months ending June 30, 2010 as compared to $0.24 for the same 2009 period, a 46% decrease. Comparing the six months of 2009 versus 2010, our earnings per diluted share fell from $0.55 to $0.24, or 56%. In looking at the sequential quarters, diluted earnings per share were up to 13 cents in the current quarter from 11 cents achieved in the first quarter of the year.
EBITDA: Our EBITDAdecreased(see discussion of EBITDA at the end of this release) 29% to $5.4 million for the second quarter ended June 30, 2010, versus $7.5 million for the same period in 2009. EBITDA decreased 37% to $10.4 million for the six months ended June 30, 2010 versus $16.5 million for the same period ended June 30, 2009. When compared to the prior quarter of 2010, EBITDA increased 6% in the current quarter to $5.4 million compared to $5.1 million in the prior quarter.
Cash flow: At June 30, 2010, we had cash and cash equivalents of $23.8 million, working capital of $43.0 million, and total debt of $5.0 million, of which $3.9 million was classified as current. We had positive net cash flow from operating activities of $15 million during first six months of 2010.
Selected data: The table below shows our revenues, net income, and gross margin exclusive of depreciation, and gross margin for the quarters and six month periods ended June 30, 2010 and 2009. Gross margin is the difference between revenue and cost of sales, exclusive of depreciation.
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
In thousands of dollars, except per share
data)
------------------------------------------
2009 2010 2009 2010
---- ---- ----
Sales $4,599 $1,779 $11,528 $3,241
Rental 11,969 9,902 24,757 19,777
Service and
maintenance 189 220 497 433
--- --- --- ---
Total Revenue 16,757 11,901 36,782 23,451
Gross margin (1) 9,220 6,820 19,812 13,421
Net Income $2,872 $1,544 $6,669 $2,908
Earnings per share
(diluted) $0.24 $0.13 $0.55 $0.24
(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.
Rental fleet: As of June 30, 2010, we had 1,806 natural gas compressors in our rental fleet totaling 230,212 horsepower, as compared to 1,771 natural gas compressors totaling 223,041 horsepower at June 30, 2009. As of June 30, 2009, we had 1,345 natural gas compressors rented compared to 1,227 at June 30, 2010, resulting in a current quarter-end utilization of 68%.
Stephen Taylor, President and CEO of Natural Gas Services Group, commented, "We are generally happy with these results because of the quarter-to-quarter improvement in all major financial measures, especially our margins and earnings, but we continue to compete in a difficult market. Our customers remain very conservative from an activity perspective and while I am reluctant to say we have turned a corner, we do anticipate higher levels of activity into 2011, progress, however, will be hard won."
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 performance 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.
Gross margin is defined 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.
The reconciliation of net income to EBITDA and gross margin is as follows:
(in thousands
of dollars) Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2009 2010 2009 2010
---- ---- ----
Net income $2,872 $1,544 $6,669 $2,908
Interest
expense 154 53 314 127
Provision for
income taxes 1,546 862 3,599 1,630
Depreciation
and
amortization 2,935 2,905 5,893 5,779
----- ----- ----- -----
EBITDA $7,507 $5,364 $16,475 $10,444
Other operating
expenses 1,654 1,522 3,231 3,020
Other expense
(income) 59 (66) 106 (43)
--- --- --- ---
Gross margin $9,220 $6,820 $19,812 $13,421
====== ====== ======= =======
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, August 5, 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 relations section.
Webcast Replay: For those unable to attend the live teleconference, a Webcast replay of the call will be available within 2 hours at the NGS website at www.ngsgi.com under the Investor Relations section and will remain accessible for 30 days.
Stephen Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing the financial results for the three and six months ended June 30, 2010.
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., coalbed methane, gas shales 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, Contact: Kimberly Huckaba, Investor Relations
(432) 262-2700
Kim.Huckaba@ngsgi.com
www.ngsgi.com
NATURAL GAS SERVICES GROUP, INC.
BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
December
31, June 30,
--------- --------
2009 2010
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $23,017 $23,833
Trade accounts receivable, net of allowance
for doubtful accounts of $363 and 7,314 3,214
$146, respectively
Inventory, net of allowance for obsolescence
of $345 and $353, respectively 24,037 23,316
Prepaid income taxes 1,556 2,674
Prepaid expenses and other 279 347
--- ---
Total current assets 56,203 53,384
Rental equipment, net of accumulated
depreciation of $34,008 and $38,930,
respectively 110,263 110,881
Property and equipment, net of accumulated
depreciation of $7,210 and $7,234,
respectively 7,626 7,162
Goodwill, net of accumulated amortization of
$325, both periods 10,039 10,039
Intangibles, net of accumulated amortization
of $1,497 and $1,627, respectively 2,721 2,591
Other assets 19 26
--- ---
Total assets $186,871 $184,083
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $3,378 $3,378
Line of credit 7,000 500
Accounts payable 2,239 1,692
Accrued liabilities 1,485 2,176
Current income tax liability 1,708 2,475
Deferred income 90 172
--- ---
Total current liabilities 15,900 10,393
Long -term debt, less current portion 2,817 1,127
Deferred income tax payable 25,498 26,361
Other long term liabilities 558 551
--- ---
Total liabilities 44,773 38,432
------ ------
Stockholders' equity:
Preferred stock, 5,000 shares authorized, no
shares issued or outstanding - -
Common stock, 30,000 shares authorized, par
value $0.01;12,101 and 12,105 shares issued
and outstanding, respectively 121 121
Additional paid-in capital 84,570 85,214
Retained earnings 57,407 60,316
------ ------
Total stockholders' equity 142,098 145,651
------- -------
Total liabilities and stockholders' equity $186,871 $184,083
======== ========
NATURAL GAS SERVICES GROUP, INC.
INCOME STATEMENTS
(in thousands, except earnings per share)
(unaudited)
Three months
ended Six months ended
June 30, ----------------
June 30,
--------
2009 2010 2009 2010
---- ---- ---- ----
Revenue:
Sales, net $4,599 $1,779 $11,528 $3,241
Rental income 11,969 9,902 24,757 19,777
Service and
maintenance
income 189 220 497 433
--- --- --- ---
Total revenue 16,757 11,901 36,782 23,451
------ ------ ------ ------
Operating costs
and expenses:
Cost of sales,
exclusive of
depreciation
stated
separately
below 3,253 1,137 7,782 2,128
Cost of
rentals,
exclusive of
depreciation
stated
separately
below 4,152 3,792 8,841 7,596
Cost of service
and
maintenance,
exclusive of
depreciation
stated
separately
below 132 152 347 306
Selling,
general, and
administrative
expense 1,654 1,522 3,231 3,020
Depreciation
and
amortization 2,935 2,905 5,893 5,779
----- ----- ----- -----
Total operating
costs and
expenses 12,126 9,508 26,094 18,829
------ ----- ------ ------
Operating
income 4,631 2,394 10,688 4,622
Other income
(expense):
Interest
expense (154) (53) (314) (127)
Other income
(expense) (59) 66 (106) 43
--- --- ---- ---
Total other
income
(expense) (213) 13 (420) (84)
---- --- ---- ---
Income before
provision for
income taxes 4,418 2,406 10,268 4,538
Provision for
income taxes 1,546 862 3,599 1,630
Net income $2,872 $1,544 $6,669 $2,908
====== ====== ====== ======
Earnings per
share:
Basic and
Diluted $0.24 $0.13 $0.55 $0.24
Weighted
average shares
outstanding:
Basic 12,095 12,104 12,094 12,103
Diluted 12,099 12,205 12,102 12,203
NATURAL GAS SERVICES GROUP, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months Ended
----------------
June 30,
--------
2009 2010
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,669 $2,908
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 5,893 5,779
Deferred taxes 3,599 863
Employee stock options expense 299 592
Gain on disposal of assets (44) (36)
Changes in current assets and
liabilities:
Trade accounts receivables, net 5,522 4,100
Inventory, net 4,800 946
Prepaid income taxes and prepaid
expenses (701) (1,186)
Accounts payable and accrued
liabilities (9,283) 144
Current income tax liability (100) 767
Deferred income 243 82
Other - (7)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 16,897 14,954
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (7,235) (6,030)
Redemption of short-term investments 2,300 -
Proceeds from sale of property and
equipment 135 36
--- ---
NET CASH USED IN INVESTING ACTIVITIES (4,800) (5,994)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from other long-term
liabilities, net 121 (7)
Repayments of long-term debt (1,689) (1,690)
Repayments of line of credit - (6,500)
Proceeds from exercise of stock
options 9 53
--- ---
NET CASH USED IN FINANCING ACTIVITIES (1,559) (8,144)
------ ------
NET CHANGE IN CASH 10,538 816
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,149 23,017
----- ------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $11,687 $23,833
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $322 $157
Income taxes paid $658 $1,118
NON-CASH TRANSACTIONS:
Transfer of rental equipment to
inventory $1,286 $225
SOURCE Natural Gas Services Group, Inc.
