MIDLAND, Texas August 7, 2012 - Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of gas compression equipment and services to the natural gas industry, announces its financial results for the three and six months ended June 30, 2012.
Revenue: Total revenue increased to $24.5 million from $13.8 million, or 78%, for the three months ended June 30, 2012, compared to the same period ended June 30, 2011. This increase includes the second half of a non-recurring sale of units from our fleet to a large customer. Rental revenues increased 18% in the same year-over-year period. Sequentially, total revenues decreased $1.9 million primarily due to lower sales of custom-fabricated compressor units caused by some customer design changes and delays
Gross Margins: Overall gross margin was $11.0 million for the three months ended June 30, 2012 which was 36% higher than the $8.1 million recorded for the same period ended June 30, 2011. Due to a mix shift from higher margin rentals to relatively lower margin compressor sales, gross margins moved to 45% of revenue from 59% in those same respective quarters. Sequentially, gross margins decreased slightly from $11.2 million for the quarter ended March 31, 2012.
Operating Income: Operating income for the three months ended June 30, 2012 was $4.8 million, up 50% from the comparative prior year's level of $3.2 million. This increase was primarily driven by higher year-over-year revenues, particularly the non-recurring sales revenues. Sequentially, operating income decreased from $5.6 million to $4.8 million due to lower compressor sales revenues and higher SG&A expenses.
Net Income: Net income for the three months ended June 30, 2012 increased 50% to $3.0 million, when compared to net income of $2.0 million for the same period in 2011. As already mentioned, the mix shift towards compressor sales resulted in net income margins for the three months ended June 30, 2012 decreasing to 12% from 15% for the three months ended June 30, 2011. Net income decreased in sequential quarters from $3.5 million to $3.0 million.
Earnings per share: Comparing the second quarter of 2012 versus 2011, earnings per diluted share improved 50% to 24 cents from 16 cents. Diluted earnings decreased from 29 cents to 24 cents between sequential quarters.
EBITDA: EBITDA increased 30% to $8.7 million or 35% of revenue for the three months ended June 30, 2012 versus $6.7 million or 49% of revenue for the same three months ended June 30, 2011. Please see discussion of Non-GAAP measures in this release.
Cash flow: At June 30, 2012, cash and cash equivalents were approximately $30.5 million; working capital was $49.6 million with a total bank debt level of $1.0 million, all of which was classified as non-current. Positive net cash flow from operating activities was approximately $20 million during the first six months of 2012 compared to $16.0 million for the same period in 2011.
Commenting on 2012 results, Stephen C. Taylor, President and CEO, said:
"In spite of shifting markets, NGS continues to grow our sales and rental businesses and our operating results confirm our strategy and direction. Our sales revenues maintained a healthy level of activity and our backlog is at a constant level. Our rental fleet is growing with every new unit built being fully utilized and rented at premium rates. Expansion of our rental operations into new liquids-oriented areas is proceeding and we are setting new equipment on a regular basis. We are optimistic that our growth will continue. "
Selected data: The table below shows revenues and gross margin, exclusive of depreciation, of each business segment for the three months ended June 30, 2012 and 2011. Gross margin is the difference between revenue and cost of sales, exclusive of depreciation.
| Revenue | Gross Margin, Exclusive of Depreciation(1) | ||||||||||||||||||||||||||
| Three months ended June 30, | Three months ended June 30, | ||||||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||
| Sales | $ | 10,649 | 43 | % | $ | 1,901 | 14 | % | $ | 3,086 | 28 | % | $ | 1,263 | 16 | % | |||||||||||
| Rental | 13,671 | 56 | % | 11,601 | 84 | % | 7,797 | 71 | % | 6,692 | 82 | % | |||||||||||||||
| Service & Maintenance | 188 | 1 | % | 256 | 2 | % | 90 | 1 | % | 163 | 2 | % | |||||||||||||||
| Total | $ | 24,508 | $ | 13,758 | $ | 10,973 | $ | 8,118 | |||||||||||||||||||
(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" below.
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 June 30, | Six months ended June 30, | |||||||||||||||
| (dollars in thousands) | (dollars in thousands) | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net income | $ | 3,000 | $ | 2,008 | $ | 6,508 | $ | 4,505 | ||||||||
| Interest expense | 3 | 28 | 5 | 37 | ||||||||||||
| Provision for income taxes | 1,887 | 1,231 | 4,037 | 2,762 | ||||||||||||
| Depreciation and amortization | 3,797 | 3,434 | 7,584 | 6,725 | ||||||||||||
| EBITDA | $ | 8,687 | $ | 6,701 | $ | 18,134 | $ | 14,029 | ||||||||
| Other operating expenses | 2,347 | 1,462 | 4,157 | 2,848 | ||||||||||||
| Other income | (61 | ) | (45 | ) | (99 | ) | (753 | ) | ||||||||
| Gross margin | $ | 10,973 | $ | 8,118 | $ | 22,192 | $ | 16,124 | ||||||||
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 management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key operating components. Depreciation expense is a necessary element of costs and the ability to generate revenue and selling, general and administrative expense is a necessary cost to support 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 the company's performance. As an indicator of operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP. 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 most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Conference Call Details:
Teleconference: Tuesday, August 7, 2012 at 10:00 a.m. Central (11:00 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 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 C. Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing the financial results for the three months ended June 30, 2012.
About Natural Gas Services Group, Inc. (NGS):
NGS is a leading provider of medium horsepower, wellhead compression equipment to the natural gas industry with a primary focus on the non-conventional gas and oil industry, i.e., coal bed methane, gas and oil 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 and Midland, Texas and service facilities located in major gas producing basins in the U.S.
| For More Information, Contact: | Leann Conner, Investor Relations |
| (432) 262-2700 leann.conner@ngsgi.com | |
| www.ngsgi.com |
| NATURAL GAS SERVICES GROUP, INC. CONDENSED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) | |||||||
| June 30, | December 31, | ||||||
| 2012 | 2011 | ||||||
| ASSETS | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 30,472 | $ | 16,390 | |||
| Trade accounts receivable, net of allowance for doubtful accounts of $462 and $296, respectively | 4,609 | 5,679 | |||||
| Inventory, net of allowance for obsolescence of $771 and $486, respectively | 26,729 | 26,965 | |||||
| Prepaid income taxes | 109 | 109 | |||||
| Prepaid expenses and other | 519 | 360 | |||||
| Total current assets | 62,438 | 49,503 | |||||
| Rental equipment, net of accumulated depreciation of $62,967 and $56,623, respectively | 141,664 | 142,473 | |||||
| Property and equipment, net of accumulated depreciation of $8,463 and $7,786 respectively | 7,445 | 7,839 | |||||
| Goodwill, net of accumulated amortization of $325, both periods | 10,039 | 10,039 | |||||
| Intangibles, net of accumulated amortization of $1,967 and $1,936, respectively | 2,219 | 2,282 | |||||
| Other assets | 28 | 28 | |||||
| Total assets | $ | 223,833 | $ | 212,164 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts payable | $ | 2,094 | $ | 3,730 | |||
| Accrued liabilities | 5,638 | 3,644 | |||||
| Current income tax liability | 119 | 75 | |||||
| Deferred income | 4,953 | 4,863 | |||||
| Total current liabilities | 12,804 | 12,312 | |||||
| Line of credit, non-current portion | 1,017 | 1,017 | |||||
| Deferred income tax liability | 40,673 | 36,769 | |||||
| Other long-term liabilities | 513 | 524 | |||||
| Total liabilities | 55,007 | 50,622 | |||||
| Commitments and contingencies | |||||||
| Stockholders' Equity: | |||||||
| Preferred stock, 5,000 shares authorized, no shares issued or outstanding | - | - | |||||
| Common stock, 30,000 shares authorized, par value $0.01; 12,218 and 12,179 shares issued and outstanding, respectively | 122 | 122 | |||||
| Additional paid-in capital | 88,001 | 87,225 | |||||
| Retained earnings | 80,703 | 74,195 | |||||
| Total stockholders' equity | 168,826 | 161,542 | |||||
| Total liabilities and stockholders' equity | $ | 223,833 | $ | 212,164 | |||
| NATURAL GAS SERVICES GROUP, INC. CONDENSED INCOME STATEMENTS (in thousands, except earnings per share) (unaudited) | |||||||||||||||
| Three months ended | Six months ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||
| Revenue: | |||||||||||||||
| Sales, net | $ | 10,649 | $ | 1,901 | $ | 23,080 | $ | 5,778 | |||||||
| Rental income | 13,671 | 11,601 | 27,409 | 22,482 | |||||||||||
| Service and maintenance income | 188 | 256 | 395 | 552 | |||||||||||
| Total revenue | 24,508 | 13,758 | 50,884 | 28,812 | |||||||||||
| Operating costs and expenses: | |||||||||||||||
| Cost of sales, exclusive of depreciation stated separately below | 7,563 | 638 | 17,118 | 3,186 | |||||||||||
| Cost of rentals, exclusive of depreciation stated separately below | 5,874 | 4,909 | 11,383 | 9,271 | |||||||||||
| Cost of service and maintenance, exclusive of depreciation stated separately below | 98 | 93 | 191 | 231 | |||||||||||
| Selling, general, and administrative expense | 2,347 | 1,462 | 4,157 | 2,848 | |||||||||||
| Depreciation and amortization | 3,797 | 3,434 | 7,584 | 6,725 | |||||||||||
| Total operating costs and expenses | 19,679 | 10,536 | 40,433 | 22,261 | |||||||||||
| Operating income | 4,829 | 3,222 | 10,451 | 6,551 | |||||||||||
| Other income (expense): | |||||||||||||||
| Interest expense | (3 | ) | (28 | ) | (5 | ) | (37 | ) | |||||||
| Other income | 61 | 45 | 99 | 753 | |||||||||||
| Total other income | 58 | 17 | 94 | 716 | |||||||||||
| Income before provision for income taxes | 4,887 | 3,239 | 10,545 | 7,267 | |||||||||||
| Provision for income taxes | 1,887 | 1,231 | 4,037 | 2,762 | |||||||||||
| Net income | $ | 3,000 | $ | 2,008 | $ | 6,508 | $ | 4,505 | |||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.25 | $ | 0.16 | $ | 0.53 | $ | 0.37 | |||||||
| Diluted | $ | 0.24 | $ | 0.16 | $ | 0.53 | $ | 0.37 | |||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 12,216 | 12,179 | 12,177 | 12,157 | |||||||||||
| Diluted | 12,316 | 12,288 | 12,274 | 12,265 | |||||||||||
| NATURAL GAS SERVICES GROUP, INC. CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||
| Six months ended | |||||||
| June 30, | |||||||
| 2012 | 2011 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income | $ | 6,508 | $ | 4,505 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 7,584 | 6,725 | |||||
| Deferred taxes | 3,937 | 2,649 | |||||
| Stock options and restricted stock expense | 686 | 450 | |||||
| Gain on disposal of assets | - | (702 | ) | ||||
| Changes in current assets and liabilities: | |||||||
| Trade accounts receivables, net | 1,070 | 499 | |||||
| Inventory, net | 236 | (1,265 | ) | ||||
| Prepaid income taxes and prepaid expenses | (159 | ) | 1,755 | ||||
| Accounts payable and accrued liabilities | 358 | 256 | |||||
| Current income tax liability | 44 | 29 | |||||
| Deferred income | 90 | 1,126 | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 20,354 | 16,027 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Purchase of property and equipment | (6,319 | ) | (19,481 | ) | |||
| Proceeds from sale of property and equipment | - | 980 | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (6,319 | ) | (18,501 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Proceeds from other long-term liabilities, net | (10 | ) | - | ||||
| Proceeds from exercise of stock options | 57 | 198 | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 47 | 198 | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 14,082 | (2,276 | ) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 16,390 | 19,137 | |||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 30,472 | $ | 16,861 | |||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
| Interest paid | $ | 6 | $ | 43 | |||
| Income taxes paid | $ | 1 | $ | - | |||
| NON-CASH TRANSACTIONS | |||||||
| Transfer of rental equipment to inventory | $ | 8,690 | $ | - | |||