Gross Margin, EBITDA and Rental Revenue Increase for the Comparative Six Month Periods
MIDLAND, Texas, Aug. 6 /PRNewswire-FirstCall/ -- 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, 2009.
Natural Gas Services Group, Inc. Financial Results:
Revenue: Our total revenue decreased from $19.5 million to $16.8 million, or 14.0%, for the three months ended June 30, 2009, compared to the same period ended June 30, 2008. This decrease was primarily the result of a 49.8% decrease in sales revenue, a segment of the business hit proportionally hard in the current environment. However, rental revenue increased 18.6%, and service and maintenance revenue decreased 15.6%. Total revenues for the comparable six months decreased 4.2%, to $36.8 million from $38.4 million which was mainly the result of 38.6% decrease in our sales revenue. This was offset by an increase in rental revenue of 29.6% and service and maintenance revenue decrease of 4.6%.
Operating income: There was a decrease in operating income to $4.6 million from $5.1 million, or 10.0%, for the three months ended June 30, 2009, compared to the same period ended June 30, 2008. We posted an increase to $10.7 million from $10.6 million, or 0.9%, for the six months ended June 30, 2009 compared to the same period ended June 30, 2008. Operating income primarily grew from the increase in rental revenue which generates higher margins. Additionally, operating income was positively affected by greater efficiencies in our field service operations on our rental units resulting in improved margins.
Net income: Our net income for the three months ended June 30, 2009, decreased 13.8% to $2.9 million, as compared to net income of $3.3 million for the same period in 2008. Net income for the first six months of 2009 decreased 2.6% to $6.7 million, when compared to net income of $6.9 million for the same period in 2008. This was mainly the result of decreased third party unit sales.
Earnings per share: Our earnings per diluted share was $0.24 for the three months ending June 30, 2009 as compared to $0.27 for the same 2008 period, a 11.1% decrease. Comparing the six months of 2008 versus 2009, our earnings per diluted share fell from $0.56 to $0.55, or 1.8%.
EBITDA: Our EBITDA decreased (see discussion of EBITDA at the end of this release) 1.9% to $7.5 million for the second quarter ended June 30, 2009, versus $7.7 million for the same period in 2008. EBITDA increased 6.6% to $16.5 million for the quarter ended June 30, 2009 versus $15.5 million for the same period ended June 30, 2008.
Cash flow: At June 30, 2009, we had cash and cash equivalents of $11.7 million, working capital of $39.1 million, and total debt of $14.9 million, of which $3.4 million was classified as current. We had positive net cash flow from operating activities of $16.9 million during first six months of 2009.
Selected data: The table below shows our revenues, gross margin, exclusive of depreciation, and gross margin for the quarters and six month periods ended June 30, 2009 and 2008. Gross margin is the difference between revenue and cost of sales, exclusive of depreciation.
Three months ended Six months ended
June 30, June 30,
-------- --------
2008 2009 2008 2009
---- ---- ---- ----
Sales $9,159 $4,599 $18,785 $11,528
Rental 10,095 11,969 19,105 24,757
Service and maintenance 224 189 521 497
--- --- --- ---
Total Revenue 19,478 16,757 38,411 36,782
Gross margin (1) 8,994 9,220 17,922 19,812
Net Income $3,333 $2,872 $6,850 $6,669
Earnings per share
(diluted) $0.27 $0.24 $0.56 $0.55
(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, 2009, we had 1,771 natural gas compressors in our rental fleet totaling 223,041 horsepower, as compared to 1,546 natural gas compressors totaling 188,462 horsepower at June 30, 2008. As of June 30, 2009, we had 1,345 natural gas compressors rented compared to 1,388 at June 30, 2008.
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 Six months ended
(in thousands of dollars) June 30, June 30,
-------- --------
2008 2009 2008 2009
---- ---- ---- ----
Net income $3,333 $2,872 $6,850 $6,669
Interest expense 193 154 434 314
Provision for income taxes 1,760 1,546 3,688 3,599
Depreciation and
amortization 2,364 2,935 4,489 5,893
----- ----- ----- -----
EBITDA $7,650 $7,507 $15,461 $16,475
Other operating expenses 1,485 1,654 2,835 3,231
Other expense (income) (141) 59 (374) 106
---- -- ---- ---
Gross margin $8,994 $9,220 $17,922 $19,812
====== ====== ======= =======
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: Friday, August 7, 2009 at 10:00 a.m. Central (11:00 a.m. Eastern). Live via phone by dialing 800-624-7038, passcode "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 second quarter and six months ending June 30, 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., 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
December 31, June 30,
------------ --------
2008 2009
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $1,149 $11,687
Short-term investments 2,300 -
Trade accounts receivable, net of
doubtful accounts of $177 and $293,
respectively 11,321 5,799
Inventory, net of allowance for
obsolescence of $500 and $254,
respectively 31,931 27,445
Prepaid income taxes 244 801
Prepaid expenses and other 87 231
-- ---
Total current assets 47,032 45,963
Rental equipment, net of accumulated
depreciation of $24,624 and $29,310,
respectively 111,967 113,723
Property and equipment, net of
accumulated depreciation of $6,065 and
$6,400, respectively 8,973 8,303
Goodwill, net of accumulated
amortization of $325, both periods 10,039 10,039
Intangibles, net of accumulated
amortization of $1,198 and $1,347,
respectively 3,020 2,871
Other assets 19 19
-- --
Total assets $181,050 $180,918
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $3,378 $3,378
Accounts payable 8,410 1,189
Accrued liabilities 3,987 1,925
Current income tax liability 110 99
Deferred income 38 281
-- ---
Total current liabilities 15,923 6,872
Long term debt, less current portion 6,194 4,505
Line of credit 7,000 7,000
Deferred income tax payable 21,042 24,552
Other long term liabilities 441 562
--- ---
Total liabilities 50,600 43,491
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 12,097
shares issued and outstanding,
respectively 121 121
Additional paid-in capital 83,937 84,245
Retained earnings 46,392 53,061
------ ------
Total stockholders' equity 130,450 137,427
------- -------
Total liabilities and stockholders'
equity $181,050 $180,918
======== ========
NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except earnings per share)
(unaudited)
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
2008 2009 2008 2009
---- ---- ---- ----
Revenue:
Sales, net $9,159 $4,599 $18,785 $11,528
Rental income 10,095 11,969 19,105 24,757
Service and
maintenance income 224 189 521 497
--- --- --- ---
Total revenue 19,478 16,757 38,411 36,782
------ ------ ------ ------
Operating costs and
expenses:
Cost of sales,
exclusive of
depreciation
stated
separately
below 6,238 3,253 12,631 7,782
Cost of rentals,
exclusive of
depreciation
stated separately
below 4,094 4,152 7,498 8,841
Cost of service and
maintenance,
exclusive of
depreciation
stated separately
below 152 132 360 347
Selling, general, and
administrative
expense 1,485 1,654 2,835 3,231
Depreciation and
amortization 2,364 2,935 4,489 5,893
----- ----- ----- -----
Total operating
costs and
expenses 14,333 12,126 27,813 26,094
------ ------ ------ ------
Operating income 5,145 4,631 10,598 10,688
Other income
(expense):
Interest expense (193) (154) (434) (314)
Other income (expense) 141 (59) 374 (106)
--- --- --- ----
Total other income
(expense) (52) (213) (60) (420)
--- ---- --- ----
Income before
provision for
income taxes 5,093 4,418 10,538 10,268
Provision for
income taxes 1,760 1,546 3,688 3,599
Net income $3,333 $2,872 $6,850 $6,669
====== ====== ====== ======
Earnings per
share:
Basic $0.28 $0.24 $0.57 $0.55
Diluted $0.27 $0.24 $0.56 $0.55
Weighted
average shares
outstanding:
Basic 12,088 12,095 12,087 12,094
Diluted 12,152 12,099 12,150 12,102
NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
June 30,
--------
2008 2009
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,850 $6,669
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 4,489 5,893
Deferred taxes 3,688 3,599
Employee stock options expense 181 299
Loss or (Gain) on disposal
of assets (14) (44)
Changes in current assets and
liabilities:
Trade accounts receivables, net 798 5,522
Inventory, net (9,332) 4,800
Prepaid income taxes and
prepaid expenses 558 (701)
Accounts payable and accrued
liabilities 4,682 (9,283)
Current income tax liability (220) (100)
Deferred income 1,670 243
Other 18 -
-- --
NET CASH PROVIDED BY OPERATING
ACTIVITIES 13,368 16,897
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment (21,897) (7,235)
Purchase of short-term
investments (294) -
Redemption of short-term
investments 12,528 2,300
Proceeds from sale of
property and equipment 35 135
-- ---
NET CASH USED IN INVESTING ACTIVITIES (9,628) (4,800)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 500 -
Proceeds from other long-term
liabilities, net 150 121
Repayments of long-term debt (2,689) (1,689)
Repayments of line of credit (1,100) -
Proceeds from exercise of
stock options 44 9
-- --
NET CASH USED IN FINANCING ACTIVITIES (3,095) (1,559)
------ ------
NET CHANGE IN CASH 645 10,538
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 245 1,149
--- -----
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $890 $11,687
==== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $477 $322
Income taxes paid $220 $658
SOURCE Natural Gas Services Group, Inc.
