Natural Gas Services Group Announces Record Revenue and Net Income for 2006
Natural Gas Services Group, Inc.
(in thousands of
dollars, except per
share amounts and
percentages) Fourth Fourth Twelve Twelve
Quarter Quarter Change Months Months Change
2005 2006 2005 2006
(unaudited) (unaudited)
Total Revenue $ 13,779 $ 16,562 20% $ 49,311 $ 62,729 27%
Operating income $2,614 $3,476 33% $8,859 $12,131 37%
Net income $1,386 $2,319 67% $4,446 $7,588 71%
EPS (Basic) $0.15 $0.19 27% $0.59 $0.67 14%
EPS (Diluted) $0.15 $0.19 27% $0.52 $0.66 27%
EBITDA $3,960 $5,736 45% $13,282 $19,541 47%
Weighted average
shares outstanding:
Basic 9,012 12,016 7,564 11,405
Diluted 9,240 12,078 8,481 11,472
Revenue: Total revenue increased from $13.8 million to $16.6 million, or 20%, for the three months ended December 31, 2006, compared to the same period ended December 31, 2005. These gains were the result of a 35% increase in rental revenue and an 18% increase in sales revenue that outweighed the corresponding $423 thousand decline in service and maintenance revenue, coinciding with our strategy to de-emphasize this business segment. Total revenue increased from $49.3 million to $62.7 million, or 27% for the twelve months ended December 31, 2006 compared to the same period ended December 31, 2005. These results were due to a 42% increase in rental revenue and a 26% increase in sales revenue. Service and maintenance revenue declined from $2.4 million to $1 million in the comparable twelve month period.
Operating income: Operating income increased from $2.6 million to $3.5 million, or 33%, for the three months ended December 31, 2006, compared to the same period ended December 31, 2005, and increased from $8.9 million to $12.1 million, or 37%, for the twelve months ended December 31, 2006 compared to the same period ended December 31, 2005. The higher operating income was driven by strong sales and rental gross margins and higher total revenues for the current quarter. Fourth quarter gross margins for sales revenues were 26%, while rental revenues experienced a year-to-date high gross margin of 63%. Indirect operating costs, consisting of selling expense, general and administrative expense and depreciation and amortization expense, for the three-month comparable year-over-year periods increased 34% from $2.5 million to $3.3 million. Approximately $700 thousand of this increase was depreciation attributable to the continued expansion of our rental fleet.
Net Income: Net income for the three months ended December 31, 2006, increased from $1.4 million to $2.3 million, or 67%, compared to the three months ended December 31, 2005. Net income for the twelve months ended December 31, 2006, increased from $4.4 million to $7.6 million, or 71%, compared to the same period ended December 31, 2005. These significant gains in both comparative periods were the cumulative result of higher revenues, robust gross margins and positive net interest income. Net income for the three months ended December 31, 2006 grew to 14% of total revenue.
EBITDA: EBITDA (see discussion of EBITDA at the end of this release) increased 45% from $4.0 million for the three months ended December 31, 2005 to $5.7 million for the three months ended December 31, 2006. EBITDA increased 47% from $13.3 million for the twelve months ended December 31, 2005 to $19.5 million for the twelve months ended December 31, 2006. EBITDA as a percentage of total revenue increased from 27% for the full year of 2005 to 31% for the comparable 2006 period and posted a record high of 35% of revenue for the three months ended December 31, 2006.
Earnings per Share: Earnings per diluted share increased 27% to $0.19 during the three months ended December 31, 2006 as compared to $0.15 during the three months ended December 31, 2005. Comparing the first twelve months of 2005 versus 2006, earnings per diluted share grew 27% from $0.52 to $0.66. The growth in earnings per diluted share was achieved in spite of a 35% increase in the number of diluted shares for the comparative twelve month period.
Steve Taylor, President and CEO of Natural Gas Services Group, Inc. said, "We are very pleased to have again achieved record annual revenue and earnings in 2006. The significant growth of revenue and gross margins in both our compressor sales and rental businesses reinforces and validates our operating strategies. The attractiveness of our industry and our particular focus on unconventional, wellhead compression markets will continue to drive our growth into the future. As always, full credit goes to all of our employees for their exceptional efforts and dedication."
The Company has scheduled a conference call Thursday, March 1, 2007 at 9:30 a.m., Central Standard Time, to discuss 2006 Fourth Quarter and Twelve Months Financial Results.
What: Natural Gas Services Group, Inc. 2006 Fourth Quarter and Twelve
Months Financial Results Conference Call
When: Thursday, March 1, 2007 at 9:30 a.m. CST
How: Live via phone by dialing 800-624-7038. Code: Natural Gas
Services. Participants to the Conference call should call in at
least 5 minutes prior to the start time.
Steve Taylor, President and CEO of Natural Gas Services Group, Inc., will lead the call and discuss the Company's fourth quarter and twelve months 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., 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: Jim Drewitz, Investor Relations
972-355-6070
jdrewitz@comcast.net
Or visit the Company's website at
http://www.ngsgi.com
"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 EBITDA to net income is as follows:
Three months ended Twelve months ended
(in thousands of December 31, December 31,
dollars) 2005 2006 2005 2006
(unaudited) (unaudited)
EBITDA $3,960 $5,736 $13,282 $19,541
Adjustments to
reconcile EBITDA
to net income:
Amortization and
depreciation (1,198) (1,885) (4,224) (6,020)
Interest expense (558) (339) (1,997) (1,646)
Provision for
income taxes (818) (1,193) (2,615) (4,287)
Net income $1,386 $2,319 $4,446 $7,588
This release contains forward-looking statements subject to various risks and uncertainties that could cause the Company's future plans, objectives and performance to differ materially from those in the forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "plan," "subject to," "anticipate," "estimate," "continue," "present value," "future," "reserves," "appears," "prospective," or other variations thereof or comparable terminology. Factors that could cause or contribute to such differences could include, but are not limited to, those relating to conditions in the natural gas industry, including the demand for natural gas and fluctuations in the price of natural gas; weaknesses in the Company's internal controls; competition among the various providers of compression services and products; changes in safety, health and environmental regulations; changes in economic or political conditions in the markets in which we operate; failure of our customers to continue to rent equipment after expiration of the primary rental term; the inherent risks associated with our operations, such as equipment defects, malfunctions and natural disasters; our inability to comply with covenants in our debt agreements and the decreased financial flexibility associated with our substantial debt; future capital requirements and availability of financing; general economic conditions; events similar to September 11, 2001; and fluctuations in interest rates. While we believe our forward-looking statements are based upon reasonable assumptions, these are factors that are difficult to predict and that are influenced by economic and other conditions beyond our control. Important factors that could cause actual results to differ materially from the expectations reflected in the forward- looking statements include, but are not limited to, the factors described above and the other factors described under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.
NATURAL GAS SERVICES GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share data)
December 31,
2005 2006
ASSETS
Current Assets:
Cash and cash equivalents $3,271 $4,391
Short-term investments --- 25,052
Trade accounts receivable, net of
doubtful accounts of $75 and $110,
respectively 6,192 8,463
Inventory, net of allowance for
obsolescence of $361 and $347,
respectively 14,723 16,943
Prepaid expenses and other 456 321
Total current assets 24,642 55,170
Rental equipment, net of accumulated
depreciation of $7,598 and $11,320,
respectively 41,201 59,866
Property and equipment, net of
accumulated depreciation of $2,458 and
$3,679, respectively 6,424 6,714
Goodwill, net of accumulated
amortization of $325 10,039 10,039
Intangibles, net of accumulated
amortization of $492 and $819,
respectively 3,978 3,650
Other assets 85 113
Total assets $86,369 $135,552
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt
and subordinated notes $5,680 $4,442
Line of credit 300 ---
Accounts payable and accrued liabilities 4,917 4,914
Current income tax liability 207 1,056
Deferred income 103 225
Total current liabilities 11,207 10,637
Long term debt, less current portion 20,225 12,950
Subordinated notes, less current portion 2,000 1,000
Deferred income tax payable 7,247 9,764
Stockholders' equity:
Common stock, 30,000 shares authorized,
par value $0.01; 9,022 and 12,046
shares issued and outstanding, respectively 90 120
Additional paid-in capital 34,667 82,560
Retained earnings 10,933 18,521
Total stockholders' equity 45,690 101,201
Total liabilities and stockholders'
equity $86,369 $135,552
NATURAL GAS SERVICES GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
For the Years Ended December 31,
2004 2005 2006
Revenue:
Sales, net $3,593 $30,278 $38,214
Service and maintenance
income 1,874 2,424 979
Rental income 10,491 16,609 23,536
Total revenue 15,958 49,311 62,729
Operating costs and expenses:
Cost of sales, exclusive of
depreciation stated
separately below 2,556 23,331 29,629
Cost of service, exclusive of
depreciation stated
separately below 1,357 1,479 735
Cost of rental, exclusive of
depreciation stated
separately below 3,038 6,528 8,944
Selling expenses 875 1,034 1,273
General and administrative 1,777 3,856 3,997
Depreciation and amortization 2,444 4,224 6,020
Total operating costs
and expenses 12,047 40,452 50,598
Operating income 3,911 8,859 12,131
Other income (expense):
Interest expense (838) (1,997) (1,646)
Other income (expense) 1,441 199 1,390
Total other income (expense) 603 (1,798) (256)
Income before provision for
income taxes 4,514 7,061 11,875
Provision for income taxes:
Current 20 207 1,743
Deferred 1,120 2,408 2,544
Total income tax expense 1,140 2,615 4,287
Net income 3,374 4,446 7,588
Preferred dividends 53 --- ---
Income available to common
stockholders $3,321 $4,446 $7,588
Earnings per common share:
Basic $0.59 $0.59 $0.67
Diluted $0.52 $0.52 $0.66
Weighted average common
shares outstanding:
Basic 5,591 7,564 11,405
Diluted 6,383 8,481 11,472
NATURAL GAS SERVICES GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
For the Years Ended December 31,
2004 2005 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $3,374 $4,446 $7,588
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 2,444 4,224 6,020
Deferred taxes 1,120 2,408 2,544
Employee stock option
expense --- 135 376
Loss (gain) on disposal
of assets 71 (28) 13
Gross profit from sale of
rental equipment --- --- (1,263)
Changes in current assets:
Trade accounts and other
receivables (1,182) (1,352) (2,271)
Inventory (1,915) (5,699) (2,220)
Prepaid expenses and other (34) (362) 135
Changes in current liabilities:
Accounts payable and accrued
liabilities 1,264 337 (3)
Current income tax liability 20 187 849
Deferred income (185) (855) 122
Other assets (279) 348 (46)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 4,698 3,789 11,844
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (11,596) (17,708) (27,684)
Purchase of short-term
investments --- --- (38,252)
Redemption of short-term
investments --- --- 13,200
Assets acquired, net of cash --- (7,584) ---
Proceeds from sale of property
and equipment 50 264 4,305
Changes in restricted cash (2,000) 2,000 ---
NET CASH USED IN INVESTING
ACTIVITIES (13,546) (23,028) (48,431)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds from line
of credit 550 300 1,375
Proceeds from long-term debt 6,592 21,517 68
Repayments of long-term debt (2,589) (13,077) (9,581)
Repayment of line of credit (300) --- (1,675)
Dividends paid on preferred
stock (53) --- ---
Proceeds from exercise of
stock options and warrants 5,157 13,085 357
Proceeds from sale of stock,
net of transaction costs --- --- 47,163
NET CASH PROVIDED BY FINANCING
ACTIVITIES 9,357 21,825 37,707
NET CHANGE IN CASH 509 2,586 1,120
CASH AT BEGINNING OF PERIOD 176 685 3,271
CASH AT END OF PERIOD $685 $3,271 $4,391
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid $775 $1,877 $1,692
Income taxes paid $31 $24 $894
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Assets acquired for issuance of
subordinated debt --- 3,000 ---
Assets acquired for issuance
of common stock --- 5,120 ---
SOURCE Natural Gas Services Group, Inc.
Jim Drewitz, Investor Relations, +1-972-355-6070, or jdrewitz@comcast.net , for Natural Gas Services Group, Inc.
http://www.ngsgi.com
