UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 1, 2004
NATURAL GAS SERVICES GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Colorado 1-31398 75-2811855
(State or other jurisdiction (Commission File (IRS Employer
of Incorporation or organization) Number) Identification No.)
2911 South County Road 1260 Midland, Texas 79706
(Address of Principal Executive Offices) (Zip Code)
432-563-3974
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2004, Natural Gas Services Group, Inc. issued a news
release announcing the registrant's results of operations for its third fiscal
quarter and nine months ended September 30, 2004. The news release issued on
November 1, 2004 is furnished as Exhibit No. 99 to this Current Report on Form
8-K. Natural Gas Services Group's Annual Report to Shareholders and its reports
on Forms 10-KSB, 10-QSB and 8-K and other publicly available information should
be consulted for other important information about the registrant.
The information in this Current Report on Form 8-K, including Exhibit
No. 99 hereto, shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to liability
of that section. The information in this Current Report shall not be
incorporated by reference into any filing or other document pursuant to the
Securities Act of 1933, as amended, except as shall be expressly set forth by
specific reference in such filing or document.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
The Exhibit listed below is furnished as an Exhibit to this Current
Report on Form 8-K.
Exhibit No. Description of Exhibit
----------- ----------------------
99 News release issued November 1, 2004
(furnished pursuant to Item 2.02)
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATURAL GAS SERVICES GROUP, INC.
By: /s/ Wallace C. Sparkman
------------------------------
Wallace C. Sparkman, President
Dated: November 1, 2004
3
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99 News release issued November 1, 2004 (furnished pursuant to
Item 2.02)
4
Exhibit 99
FOR IMMEDIATE RELEASE NEWS
November 1, 2004 Amex - NGS, NGS.WS
NATURAL GAS SERVICES GROUP ANNOUNCES THIRD QUARTER AND
NINE MONTHS FINANCIAL RESULTS
5% Increase In Revenue For The Three Months to $3.9 Million
21% Increase In Revenue For The Nine Months to $11.2 Million
MIDLAND, Texas, November 1, 2004 - Natural Gas Services Group, Inc. (AMEX:NGS),
a leading provider of equipment and services to the natural gas and oil
industry, announces its financial results for the third quarter and nine months
ended September 30, 2004.
Revenue for the third quarter ended September 30, 2004, increased 5% to
$3,870,113 as compared to $3,699,556 for the same period in 2003. Revenue for
the nine months ended September 30, 2004, increased 21% to $11,221,529 as
compared to $9,264,116 for the same period in 2003. The increase in revenue
during the third quarter and nine months reflects an increase in revenue from
the rental of natural gas compressor units and a slight increase in service and
maintenance revenue.
Gross margin percentage increased from 52% for the nine months ended September
30, 2003, to 56% for the same period ended September 30, 2004. This improvement
resulted mainly from the relative increase in leasing revenue as a percentage of
the total revenue. Our rental fleet carries a gross margin averaging 70%, and an
increase in rentals improves our total gross margin.
Net income for the three months ended September 30, 2004, increased 17% to
$451,074 or $.07 per share (diluted), as compared to net income of $384,407 or
$.07 per share (diluted) for the same period in 2003. Net income for the nine
months ended September 30, 2004, increased 231% to $2,710,568 or $.43 per share
(diluted), as compared to net income of $817,442 or $.14 per share (diluted) for
same period in 2003. This increase included life insurance proceeds on Mr. Wayne
L. Vinson, our former President and C.E.O. who passed away on March 15, 2004.
Excluding these proceeds we had a 60% increase for the nine months.
NGS's rental fleet grew by 34% during the nine months ended September 30, 2004.
The Company ended the period with 533 compressor packages in its rental fleet,
up from 399 units at December 31, 2003 and 354 units at September 30, 2003.
EBITDA (see discussion of EBITDA at the end of this release) increased 22% to
$1,586,814 for the three months ended September 30, 2004, versus $1,300,933 for
the same period in 2003. EBITDA increased 84% to $5,815,434 for nine months
ended September 30, 2004, versus $3,164,915 for the same period in 2003.
Wallace Sparkman, President and CEO of Natural Gas Services Group, Inc. said,
"We are pleased with our quarter-over-quarter growth. Our Year-To-Date
financials are strong and getting stronger. "Here are some key indicators
comparing the quarter ending September 2004 to same period last year:
The Company added 45 new gas compressors in the quarter ended 9-30-04
Leasing income is up 46% from $1.9 million to $2.7 million.
Gross margin percentage increased 21% to $2.2 million.
Operating income up 12% to $942,692.
Net income up 17% to $451,074.
EBITDA up 22% to $1.6 million.
Diluted Earnings Per Share at $.07.
As the third quarter and nine months financial results show, we have been able
to grow our company through organic growth, as evidenced by the fact our core
leasing business remains quite profitable. We have been able to do this by
delivering a high-value product to the small to mid-sized compressor market that
meets their critical needs. As we continue to focus on the execution of our
marketing and sales strategies, we are pleased with the increasing acceptance of
our products and the acceleration of new account penetration. We have a strong
balance sheet, a healthy backlog and now that NGS has acquired Screw Compression
System, Inc. we are on track for an even a more successful fourth quarter and
fiscal year 2004. We remain extremely optimistic about our prospects for
continued and long term growth."
Conference Call:
As a reminder, the Company has scheduled a conference call Monday, November 1 at
3:00 PM Central Standard Time.
What: Natural Gas Services 2004 Third Quarter & Nine Months Financial Results
Conference Call
When: Monday, November 1, 2004 - 3:00 PM Central Standard Time
How: Live via phone by dialing 800-936-4602. Code: Natural Gas Services.
Participants to the conference call should call in at least 5 minutes prior to
the start time.
Wallace Sparkman, President & CEO, Natural Gas Services Group, Inc. will be
leading the call and discussing third quarter and nine months financial results,
the status of existing and new natural gas compressor leases, the acquisition of
Screw Compression Systems, Inc. and a look at the balance of fiscal 2004.
About Natural Gas Services Group, Inc. (NGS)
NGS manufactures, fabricates, sells, leases and services natural gas compressors
that enhance the production of oil and gas wells. The Company also manufactures
and sells flare systems and flare ignition systems for plant and production
facilities.
For More Information, Contact: Wallace Sparkman, President & CEO
800-580-1828
Jim Drewitz, Investor Relations
jdrewitz@comcast.net
972-355-6070
Or
visit the Company's website at 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 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 Sept. 30, Nine months ended Sept. 30,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
EBITDA $ 1,586,814 $ 1,300,933 $ 5,815,434 $ 3,164,915
Adjustments to reconcile
EBITDA to net income:
Amortization and depreciation (641,817) (455,563) (1,750,851) (1,235,118)
Interest expense (205,532) (170,971) (580,083) (500,760)
Provision for income tax (288,391) (289,992) (773,932) (611,595)
------------ ------------ ------------ ------------
Net income $ 451,074 $ 384,407 $ 2,710,568 $ 817,442
============ ============ ============ ============
........................................
3
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-KSB filed with the Securities
and Exchange Commission.
4
Natural Gas Services Group, Inc.
Consolidated Balance Sheet
(unaudited)
September 30, 2004
ASSETS
Current Assets:
Cash and cash equivalents $ 4,408,170
Accounts receivable - trade 1,187,402
Inventory 3,179,066
Prepaid expenses 178,693
-----------
Total current assets 8,953,332
Lease equipment, net 25,818,667
Other property, plant and equipment, net 3,140,203
Goodwill, net 2,589,655
Patents, net 93,328
Other assets 95,500
-----------
Total assets $40,690,686
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt and capital lease $ 3,145,056
Line of Credit 521,461
Accounts payable and accrued liabilities 1,647,514
Unearned Income 118,283
-----------
Total current liabilities 5,432,315
Long term debt and capital lease, less current portion 9,079,435
Subordinated notes, net 1,433,060
Deferred income tax payable 2,612,013
-----------
Total liabilities 18,556,823
SHAREHOLDERS' EQUITY
Common stock 60,683
Paid in capital 16,249,850
Retained earnings 5,823,331
-----------
Total shareholders' equity 22,133,864
-----------
Total liabilities and shareholders' equity $40,690,686
===========
5
Natural Gas Services Group, Inc.
Consolidated Income Statements
(unaudited)
Three months ended September 30, Nine months ended September 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
Revenue:
Sales $ 702,679 $ 1,372,248 $ 2,444,899 $ 2,877,358
Service and maintenance income 436,584 452,714 1,370,306 1,346,597
Leasing income 2,730,851 1,874,594 7,405,325 5,040,161
-------------- -------------- -------------- --------------
3,870,113 3,699,556 11,220,529 9,264,116
Cost of revenue:
Cost of sales 451,334 1,008,771 1,699,003 2,155,568
Cost of service and maintenance 338,312 290,008 1,030,167 961,237
Cost of leasing 843,725 545,309 2,174,185 1,313,093
-------------- -------------- -------------- --------------
1,633,371 1,844,088 4,903,355 4,429,898
-------------- -------------- -------------- --------------
Gross Margin 2,236,742 1,855,468 6,317,174 4,834,218
Operating Cost:
Selling expense 226,935 159,870 629,545 484,421
General and administrative expense 425,299 395,918 1,368,524 1,186,922
Depreciation and amortization 641,817 455,563 1,750,851 1,235,118
-------------- -------------- -------------- --------------
1,294,050 1,011,351 3,748,919 2,906,461
-------------- -------------- -------------- --------------
Operating income 942,692 844,117 2,568,255 1,927,757
Interest expense (205,532) (170,971) (580,083) (500,760)
Other income 2,306 1,253 1,496,329 2,040
-------------- -------------- -------------- --------------
Income before income taxes 739,466 674,399 3,484,501 1,429,037
Provision for income tax 288,391 289,992 773,932 611,595
-------------- -------------- -------------- --------------
Net income 451,074 384,407 2,710,568 817,442
Preferred dividends 0 30,530 53,277 92,550
-------------- -------------- -------------- --------------
Net income available to common shareholders $ 451,074 $ 353,877 $ 2,657,291 $ 724,892
============== ============== ============== ==============
Earnings per share:
Basic $ 0.08 $ 0.07 $ 0.49 $ 0.15
Diluted $ 0.07 $ 0.07 $ 0.43 $ 0.14
Weighted average Shares:
Basic 5,626,280 4,995,713 5,428,146 4,910,062
Diluted 6,492,354 5,389,673 6,216,995 5,208,096
6
Natural Gas Services Group, Inc.
Consolidated Statements of Cash Flows
(unaudited)
Nine Months Nine Months
Ended Ended
September 30, 2004 September 30, 2003
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,710,568 $ 817,442
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,750,851 1,235,120
Deferred taxes 769,507 602,202
Amortization of debt issuance costs 48,717 48,717
Gain on disposal of assets 6,911 10,547
Changes in operating assets and liabilities:
Trade and other receivables (370,807) (938,817)
Inventory (624,827) (1,000,735)
Prepaid expenses and other (71,663) 42,958
Accounts payable and accrued liabilities 575,362 708,971
Deferred income (88,932) 174,710
Other (16,745) (60,436)
------------------ ------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,688,942 1,640,679
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (786,941) (713,245)
Purchase of rental equipment (8,150,073) (5,187,208)
Acquisition of remaining interest in joint venture, net of cash acquired -- 242,753
Proceeds from sale of property and equipment 50,123 112,500
Decrease in lease receivable -- 210,512
Distribution from equity method investment -- 49,090
------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (8,886,891) (5,285,598)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank loans 5,031,435 2,649,811
Net proceeds from line of credit 521,461 --
Repayments of long term debt (1,821,111)
(1,583,951)
Repayments of line of credit (300,000) --
Proceeds from sale of common stock, exercised warrants and stock options 5,051,409 216,247
Dividends paid on preferred stock (53,277) (92,550)
------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,429,917 1,189,557
------------------ ------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,231,968 (2,455,362)
CASH AT BEGINNING OF PERIOD 176,202 2,713,638
------------------ ------------------
CASH AT END OF PERIOD $ 4,408,170 $ 258,276
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 580,083 $ 500,760
7