Colorado | 75-2811855 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Yes x | No o |
Yes x | No o |
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o |
(Do not check if smaller reporting company) |
Yes o | No x |
Class | May 4, 2018 | |
Common Stock, $0.01 par value | 13,085,607 |
Part I - FINANCIAL INFORMATION | ||
Item 1. Consolidated Financial Statements | ||
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Part II - OTHER INFORMATION | ||
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NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) | |||||||
March 31, | December 31, | ||||||
2018 | 2017 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 65,138 | $ | 69,208 | |||
Trade accounts receivable, net of allowance for doubtful accounts of $495 and $569, respectively | 7,719 | 8,534 | |||||
Inventory | 25,749 | 26,224 | |||||
Prepaid income taxes | 3,443 | 3,443 | |||||
Prepaid expenses and other | 329 | 817 | |||||
Total current assets | 102,378 | 108,226 | |||||
Long-term inventory, net of allowance for obsolescence of $21 and $15, respectively | 3,315 | 2,829 | |||||
Rental equipment, net of accumulated depreciation of $150,859 and $145,851, respectively | 168,790 | 167,099 | |||||
Property and equipment, net of accumulated depreciation of $11,528 and $11,274, respectively | 9,277 | 7,652 | |||||
Goodwill | 10,039 | 10,039 | |||||
Intangibles, net of accumulated amortization of $1,664 and $1,632, respectively | 1,495 | 1,526 | |||||
Other assets | 1,066 | 939 | |||||
Total assets | $ | 296,360 | $ | 298,310 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 1,322 | $ | 4,162 | |||
Accrued liabilities | 3,407 | 3,106 | |||||
Deferred income | 294 | 185 | |||||
Total current liabilities | 5,023 | 7,453 | |||||
Line of credit, non-current portion | 417 | 417 | |||||
Deferred income tax liability | 32,211 | 32,163 | |||||
Other long-term liabilities | 1,075 | 958 | |||||
Total liabilities | 38,726 | 40,991 | |||||
Commitments and contingencies (Note 8) | |||||||
Stockholders’ Equity: | |||||||
Preferred stock, 5,000 shares authorized, no shares issued or outstanding | — | — | |||||
Common stock, 30,000 shares authorized, par value $0.01; 12,949 and 12,880 shares issued and outstanding, respectively | 129 | 129 | |||||
Additional paid-in capital | 105,415 | 105,325 | |||||
Retained earnings | 152,090 | 151,865 | |||||
Total stockholders' equity | 257,634 | 257,319 | |||||
Total liabilities and stockholders' equity | $ | 296,360 | $ | 298,310 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands, except earnings per share) (unaudited) | |||||||
Three months ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Revenue: | |||||||
Rental income | $ | 11,471 | $ | 11,922 | |||
Sales | 2,998 | 6,637 | |||||
Service and maintenance income | 249 | 343 | |||||
Total revenue | 14,718 | 18,902 | |||||
Operating costs and expenses: | |||||||
Cost of rentals, exclusive of depreciation stated separately below | 4,704 | 4,668 | |||||
Cost of sales, exclusive of depreciation stated separately below | 2,191 | 5,423 | |||||
Cost of service and maintenance | 65 | 94 | |||||
Selling, general and administrative expense | 2,021 | 3,046 | |||||
Depreciation and amortization | 5,387 | 5,328 | |||||
Total operating costs and expenses | 14,368 | 18,559 | |||||
Operating income | 350 | 343 | |||||
Other income (expense): | |||||||
Interest expense | (3 | ) | (2 | ) | |||
Other (expense) income , net | (73 | ) | 3 | ||||
Total other (expense) income, net | (76 | ) | 1 | ||||
Income before provision for income taxes | 274 | 344 | |||||
Provision for income taxes | 49 | 92 | |||||
Net income | $ | 225 | $ | 252 | |||
Earnings per share: | |||||||
Basic | $ | 0.02 | $ | 0.02 | |||
Diluted | $ | 0.02 | $ | 0.02 | |||
Weighted average shares outstanding: | |||||||
Basic | 12,920 | 12,804 | |||||
Diluted | 13,169 | 13,056 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||
Three months ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 225 | $ | 252 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 5,387 | 5,328 | |||||
Deferred income taxes | 48 | (1,266 | ) | ||||
Stock-based compensation | 428 | 1,532 | |||||
Bad debt allowance | (50 | ) | 60 | ||||
Gain on sale of assets | — | (27 | ) | ||||
Loss (gain) on company owned life insurance | 67 | (12 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivables | 865 | 2,637 | |||||
Inventory | 15 | 1,661 | |||||
Prepaid expenses and prepaid income taxes | 488 | 1,930 | |||||
Accounts payable and accrued liabilities | (2,539 | ) | 68 | ||||
Deferred income | 109 | (1,741 | ) | ||||
Other | 85 | 43 | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 5,128 | 10,465 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchase of rental equipment and property and equipment | (8,712 | ) | (144 | ) | |||
Purchase of company owned life insurance | (139 | ) | (93 | ) | |||
Proceeds from sale of property and equipment | — | 27 | |||||
NET CASH USED IN INVESTING ACTIVITIES | (8,851 | ) | (210 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Payments from other long-term liabilities, net | (9 | ) | (4 | ) | |||
Proceeds from exercise of stock options | 157 | 517 | |||||
Taxes paid related to net share settlement of equity awards | (495 | ) | (492 | ) | |||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (347 | ) | 21 | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (4,070 | ) | 10,276 | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 69,208 | 64,094 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 65,138 | $ | 74,370 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Interest paid | $ | 3 | $ | 2 | |||
Income taxes paid | $ | — | $ | — | |||
NON-CASH TRANSACTIONS | |||||||
Transfer of rental equipment components to inventory | $ | 40 | $ | 48 |
Three months ended March 31, | ||||||||||
(in thousands) | ||||||||||
2018 | 2017 | |||||||||
Compressors - sales | $ | 1,829 | $ | 5,640 | ||||||
Flares - sales | 522 | 269 | ||||||||
Other (Parts/Rebuilds) - sales | 647 | 727 | ||||||||
Service and maintenance 1 | 4,837 | 5,116 | ||||||||
Total revenue from contracts with customers | 7,835 | 11,752 | ||||||||
Add: non-ASC 606 rental revenue | 6,883 | 7,150 | ||||||||
Total revenue | $ | 14,718 | $ | 18,902 |
March 31, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Accounts Receivable | |||||||
Accounts receivable - contracts with customers | $ | 5,080 | $ | 5,454 | |||
Accounts receivable - non-ASC 606 | 3,134 | 3,649 | |||||
Total Accounts Receivable | $ | 8,214 | $ | 9,103 | |||
Less:Allowance for doubtful accounts | $ | (495 | ) | $ | (569 | ) | |
Total Accounts Receivable, net | $ | 7,719 | $ | 8,534 | |||
Deferred income | $ | 294 | $ | 185 |
(in thousands) | 2019(1) | 2020 | 2021 | 2022 | 2023 | Total | ||||||||||||
Service and Maintenance | $ | 610 | $ | 595 | $ | 542 | $ | 542 | $ | 9 | $ | 2,298 |
Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Outstanding, December 31, 2017 | 327,270 | $ | 20.21 | 4.28 | $ | 2,255 | ||||||
Exercised | (8,500 | ) | 18.51 | 86 | ||||||||
Outstanding, March 31, 2018 | 318,770 | $ | 20.25 | 4.07 | $ | 1,638 | ||||||
Exercisable, March 31, 2018 | 296,738 | $ | 19.67 | 3.72 | $ | 1,638 |
Range of Exercise Prices | Options Outstanding | Options Exercisable | |||||||||||||
Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||
$0.01-15.70 | 65,852 | 1.31 | $ | 9.82 | 65,852 | $ | 9.82 | ||||||||
$15.71-17.81 | 67,750 | 1.62 | 17.53 | 67,750 | 17.53 | ||||||||||
$17.82-20.48 | 54,250 | 3.22 | 19.39 | 54,250 | 19.39 | ||||||||||
$20.49-33.36 | 130,918 | 7.09 | 27.27 | 108,886 | 27.09 | ||||||||||
318,770 | 4.07 | $ | 20.25 | 296,738 | $ | 19.67 |
Unvested stock options: | Shares | Weighted Average Grant Date Fair Value Per Share | ||||
Unvested at December 31, 2017 | 48,581 | $ | 11.41 | |||
Vested | (26,549 | ) | 10.97 | |||
Unvested at March 31, 2018 | 22,032 | $ | 11.93 |
March 31, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Raw materials - current | $ | 21,482 | $ | 22,813 | |||
Raw materials - long term | 3,315 | 2,829 | |||||
Finished Goods | 1,022 | 1,022 | |||||
Work in process | 3,245 | 2,389 | |||||
$ | 29,064 | $ | 29,053 |
Three months ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
Net income | $ | 225 | $ | 252 | |||
Denominator for basic net income per common share: | |||||||
Weighted average common shares outstanding | 12,920 | 12,804 | |||||
Denominator for diluted net income per share: | |||||||
Weighted average common shares outstanding | 12,920 | 12,804 | |||||
Dilutive effect of stock options and restricted stock | 249 | 252 | |||||
Diluted weighted average shares | 13,169 | 13,056 | |||||
Earnings per common share: | |||||||
Basic | $ | 0.02 | $ | 0.02 | |||
Diluted | $ | 0.02 | $ | 0.02 |
• | The nature of the products and services; |
• | The nature of the production processes; |
• | The type or class of customer for their products and services; |
• | The methods used to distribute their products or provide their services; and |
• | The nature of the regulatory environment, if applicable. |
For the three months ended March 31, 2018 (in thousands): | |||||||||||||||||||
Rental | Sales | Service & Maintenance | Corporate | Total | |||||||||||||||
Revenue | $ | 11,471 | $ | 2,998 | $ | 249 | $ | — | $ | 14,718 | |||||||||
Operating costs and corporate expenses | 4,704 | 2,191 | 65 | 7,408 | 14,368 | ||||||||||||||
Total other expense, net | — | — | — | (76 | ) | (76 | ) | ||||||||||||
Income before provision for income taxes | $ | 6,767 | $ | 807 | $ | 184 | $ | (7,484 | ) | $ | 274 |
For the three months ended March 31, 2017 (in thousands): | |||||||||||||||||||
Rental | Sales | Service & Maintenance | Corporate | Total | |||||||||||||||
Revenue | $ | 11,922 | $ | 6,637 | $ | 343 | $ | — | $ | 18,902 | |||||||||
Operating costs and corporate expenses | 4,668 | 5,423 | 94 | 8,374 | 18,559 | ||||||||||||||
Total other income, net | — | — | — | 1 | 1 | ||||||||||||||
Income before provision for income taxes | $ | 7,254 | $ | 1,214 | $ | 249 | $ | (8,373 | ) | $ | 344 |
Revenue Three months ended March 31, | |||||||||||
(in thousands) | |||||||||||
2018 | 2017 | ||||||||||
Rental | $ | 11,471 | 78 | % | $ | 11,922 | 63 | % | |||
Sales | 2,998 | 20 | % | 6,637 | 35 | % | |||||
Service and Maintenance | 249 | 2 | % | 343 | 2 | % | |||||
Total | $ | 14,718 | $ | 18,902 |
March 31, | December 31, | ||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 65,138 | $ | 69,208 | |||
Trade accounts receivable, net | 7,719 | 8,534 | |||||
Inventory | 25,749 | 26,224 | |||||
Prepaid income taxes | 3,443 | 3,443 | |||||
Prepaid expenses and other | 329 | 817 | |||||
Total current assets | 102,378 | 108,226 | |||||
Current Liabilities: | |||||||
Accounts payable | 1,322 | 4,162 | |||||
Accrued liabilities | 3,407 | 3,106 | |||||
Deferred income | 294 | 185 | |||||
Total current liabilities | 5,023 | 7,453 | |||||
Total working capital | $ | 97,355 | $ | 100,773 |
Obligations Due in Period (in thousands) | ||||||||||||||||||||||||
Cash Contractual Obligations | 2018 (1) | 2019 | 2020 | 2021 | Thereafter | Total | ||||||||||||||||||
Line of credit (secured) | $ | — | $ | — | $ | 417 | $ | — | $ | — | $ | 417 | ||||||||||||
Interest on line of credit(2) | 13 | 17 | 17 | — | — | 47 | ||||||||||||||||||
Purchase obligations(3) | 157 | 300 | 300 | 300 | 266 | 1,323 | ||||||||||||||||||
Other long-term liabilities | — | — | — | — | 83 | 83 | ||||||||||||||||||
Facilities and office leases | 379 | 122 | 9 | 1 | — | 511 | ||||||||||||||||||
Total | $ | 549 | $ | 439 | $ | 743 | $ | 301 | $ | 349 | $ | 2,381 |
Exhibit No. | Description |
Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 of the 10-QSB filed and dated November 10, 2004) | |
Bylaws as amended (Incorporated by reference to Exhibit 3.1 of the Registrant's current report on form 8-K filed with the Securities and Exchange Commission on June 21, 2016. | |
Lease Agreement, dated January 9, 2018, between WNB Tower, LTD and Natural Gas Services Group, Inc. (Incorporated by reference to Exhibit 10.15 of the Registrant’s Form 10-K for the fiscal year ended December 31, 2017 and filed with the Securities and Exchange Commission on March 9, 2018.) | |
2009 Restricted Stock/Unit Plan, as amended (Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K dated June 3, 2014 and filed with the Securities and Exchange Commission on June 6, 2014.) | |
Stock Option Plan, as amended and restated (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 21, 2016.) | |
Credit Agreement between Natural Gas Services Group, Inc. and JPMorgan Chase Bank, N.A., dated December 10, 2010 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 24, 2014.) | |
Fifth Amendment of Credit Agreement between Natural Gas Services Group, Inc. and JPMorgan Chase Bank, N.A., dated August 31, 2017 (Incorporated by reference to Exhibit 10.2 of the Registrant's Current report on Form 8-K filed with the Securities and Exchange Commission on September 7, 2017.) | |
Security Agreement between Natural Gas Services Group, Inc. and JPMorgan Chase Bank, N.A., dated December 10, 2010 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 16, 2011.) | |
Fourth Security Agreement between Natural Gas Services Group, Inc. and JPMorgan Chase Bank, N.A., dated August 31, 2017 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 7, 2017.) | |
Promissory Note in the aggregate amount of $30,000,000 issued to JPMorgan Chase Bank, N.A., dated August 31, 2017, in connection with the revolving credit line under the Credit Agreement with JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 7, 2017.) | |
Amended and restated Employment Agreement dated April 27, 2015 between Natural Gas Services Group, Inc. and Stephen C. Taylor (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2015.) | |
The Executive Nonqualified Excess Plan Adoption Agreement, referred to as the Nonqualified Deferred Compensation Plan (Incorporated by reference to Exhibit 10.11 of the Registrant's Quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 6, 2016.) |
Annual Incentive Bonus Plan (Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission December 18, 2012.) | |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Certification of Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith. |
/s/ Stephen C. Taylor | /s/ G. Larry Lawrence | ||
Stephen C. Taylor | G. Larry Lawrence | ||
President and Chief Executive Officer | Vice President and Chief Financial Officer | ||
(Principal Executive Officer) | (Principal Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Natural Gas Services Group, Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | May 10, 2018 | Natural Gas Services Group, Inc. | ||
By: | /s/ Stephen C. Taylor | |||
Stephen C. Taylor, | ||||
President, CEO and Chairman of the Board of Directors | ||||
(Principal Executive Officer) |
Dated: | May 10, 2018 | Natural Gas Services Group, Inc. | ||
By: | /s/ G. Larry Lawrence | |||
G. Larry Lawrence | ||||
Vice President, Chief Financial Officer | ||||
(Principal Accounting Officer) |
Dated: | May 10, 2018 | Natural Gas Services Group, Inc. | ||
By: | /s/ Stephen C. Taylor | |||
Stephen C. Taylor, | ||||
President, CEO and Chairman of the Board of Directors | ||||
(Principal Executive Officer) |
Dated: | May 10, 2018 | Natural Gas Services Group, Inc. | ||
By: | /s/ G. Larry Lawrence | |||
G. Larry Lawrence, | ||||
Vice President and Chief Financial Officer | ||||
(Principle Accounting Officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 04, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NATURAL GAS SERVICES GROUP INC | |
Entity Central Index Key | 0001084991 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 13,085,607 |
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Current Assets: | ||
Allowance for doubtful accounts | $ 495 | $ 569 |
Allowance for inventory obsolescence | 21 | 15 |
Noncurrent Assets: | ||
Accumulated depreciation, rental equipment | 150,859 | 145,851 |
Accumulated depreciation, property and equipment | 11,528 | 11,274 |
Accumulated amortization, intangibles | $ 1,664 | $ 1,632 |
Stockholders’ Equity: | ||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 12,949,000 | 12,880,000 |
Common stock, shares outstanding | 12,949,000 | 12,880,000 |
Basis of Presentation and Summary of Significant Accounting Policies |
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Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies These notes apply to the unaudited condensed consolidated financial statements of Natural Gas Services Group, Inc. a Colorado corporation (the "Company", “NGSG”, "Natural Gas Services Group", "we" or "our"). The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at March 31, 2018 and the results of our operations for the three months ended March 31, 2018 and 2017 not misleading. As permitted by the rules and regulations of the Securities and Exchange Commission (SEC), the accompanying condensed consolidated financial statements do not include all disclosures normally required by generally accepted accounting principles in the United States of America (GAAP). These financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 on file with the SEC. In our opinion, the condensed consolidated financial statements are a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2018. Revenue Recognition Policy The Company adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company applied ASC 606 using the cumulative effect method. We had no significant changes in our recognition of revenue at adoption and our review of all open revenue from contracts with customers on January 1, 2018 indicated we had no adjustment to be made. If an adjustment had been needed, we would have recognized the cumulative effect of initially applying ASC 606 with an adjustment to the opening balance of equity at January 1, 2018. Therefore, our consolidated financial statements for 2017 reported under ASC 605 are comparable to the consolidated financial statements for 2018 reported under ASC 606, since an adjustment was not needed, except for the respective additional disclosures as detailed below. Revenue is measured based on a consideration specified in a customer’s contract, excluding any sale incentives and taxes collected on behalf of third parties (i.e. sales and property taxes). We recognize revenue once a performance obligation has been satisfied and control over a product or service has transferred to the customer. Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our condensed consolidated income statement. Nature of goods and Services The following is a description of principal activities from which the Company generates its revenue: Rental Revenue. The Company generates revenue from renting compressors and flare systems to our customers. These contracts may also include a fee for servicing the compressor or flare during the rental contract. Our rental contracts range from six to twenty-four months, with revenue being recognized over time, in equal payments over the term of the contract. After the terms of the contract have expired, a customer may renew their contract or continue renting on a monthly basis thereafter. In accordance with generally accepted accounting principles, the revenue earned from servicing rental equipment is recognized in accordance with ASC 606, while the revenue earned from the rental of the equipment is recognized in accordance with ASC 840 - Leases. Sales Revenue. The Company generates revenue by the sale of custom/fabricated compressors, flare systems and parts, as well as, exchange/rebuilding customer owned compressors and sale of used rental equipment. Custom/fabricated compressors and flare systems - The Company designs and fabricates compressors and flares based on the customer’s specifications outlined in their contract. Though the equipment being built is customized by the customer, control under these contracts does not pass to the customer until the compressor or flare package is complete and shipped, or in accordance with a bill and hold arrangements the customer accepts title and assumes the risk and rewards of ownership. We request some of our customer’s to make progressive payments as the product is being built; these payments are recorded as a contract liability on the Deferred Income line on the condensed consolidated balance sheet until control has been transferred. These contracts also may include an assurance warranty clause to guarantee the product is free from defects in material and workmanship for a set duration of time; this is a standard industry practice and is not considered a performance obligation. From time to time, upon the customer’s written request, we recognize revenue when manufacturing is complete and the equipment is ready for shipment. At the customer’s request, we will bill the customer upon completing all performance obligations, but before shipment. The customer will formally request we ship the equipment per their direction from our manufacturing facility at a later specified date and that we segregate the equipment from our finished goods, such that they are not available to fill other orders. Per the customer’s agreement, title of the equipment, all risk of ownership including, the risk of loss, is passed to the customer once the equipment is complete and ready for shipment. We have operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both the customer and us. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the customer, and there are no exceptions to the customer’s commitment to accept and pay for the manufactured equipment. Revenues recognized at the completion of manufacturing for the three months ended March 31, 2018 was approximately $1.7 million. Parts - Revenue is recognized after the customer obtains control of the parts. Control is passed either by the customer taking physical possession or the parts being shipped. The amount of revenue recognized is not adjusted for expected returns, as our historical part returns have been de minimis. Exchange or rebuilding customer owned compressors - Based on the contract, the Company will either exchange a new/rebuilt compressor for the customer’s malfunctioning compressor or rebuild the customer’s compressor. Revenue is recognized after control of the replacement compressor has transferred to the customer by physical delivery, delivery and installment or shipment of the compressor. Used compressors or flares - From time to time, a customer may request to purchase a used compressor or flare out of our rental fleet. Revenue from the sale of rental equipment is recognized when the control has passed to the customer, when the customer has taken physical possession or the equipment has been shipped. Service and Maintenance Revenue. The Company provides routine or call-out services on customer owned equipment. Revenue is recognized after services in the contract are rendered. Payment terms for sales revenue and service and maintenance revenue discussed above are generally 30 to 60 days although terms for specific customers can vary. Also, the transaction prices are not subject to variable consideration constraints. Disaggregation of Revenue The following table shows the Company's revenue disaggregated by product or service type for the three moths ended March 31, 2018 and 2017:
1Service and maintenance includes revenue from servicing our own rental equipment contracted to customers and third party equipment. Contract Balances As of March 31, 2018 and December 31, 2017, we had the following receivables and deferred income from contracts with customers:
The Company did not recognize any revenue for the period ended March 31, 2018 that were included in deferred income at the beginning of the period. For the period ended December 31, 2017, the Company recognized revenue of $1.9 million from amounts related to sales that were included in deferred income at the beginning of the period. The increases (decreases) of Accounts Receivable and deferred income were primarily due to normal timing differences between our performance and the customers’ payments. Transaction Price Allocated to the Remaining Performance Obligations The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
(1) For the nine months starting April 2019. All consideration from contracts with customers is included in the amounts presented above. The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The Company applies the transition practical expedient in ASC 606-10-65-1(f)(3) and does not disclose the amount of the transaction price allocated to the remaining performance obligations and an explanation of when the Company expects to recognize that amount as revenue for 2017. Contract Costs The Company applies the practical expedient in ASC 340-40-25-4 and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general and administrative expense on our consolidated income statement. Fair Value of Financial Instruments Our financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, deferred compensation plan (cash portion) and our line of credit. Pursuant to ASC 820 (Accounting Standards Codification), the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their fair values because of their nature and relatively short maturity dates or durations. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In order to record any financial statement benefit, we are required to determine, based on technical merits of the position, whether it is more likely than not (a likelihood of more than 50 percent) that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. If that step is satisfied, then we must measure the tax position to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of the benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We have no uncertain tax positions as of March 31, 2018. Our policy regarding income tax interest and penalties is to expense those items as other expense. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”), which makes broad and complex changes to the U.S. tax code. Certain income tax effects of the 2017 Tax Act are reflected in the Company’s financial results in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), which provides SEC staff guidance regarding the application of Accounting Standards Codification Topic 740 Income Taxes (“ASC 740”). As we do not have all of the necessary information to analyze all income tax effects of the 2017 Tax Act, we will continue to evaluate tax reform and adjust the provisional amounts as additional information is obtained. We expect to complete our detailed analysis no later than the fourth quarter of 2018. Recently Issued Accounting Pronouncements On February 25, 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for capital and operating leases with lease terms of more than 12 months. Additionally, this ASU will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The new standard will be effective during our first quarter ending March 31, 2019. The process of reviewing our leases and evaluating the impact of the new standard on our condensed consolidated financial statements and disclosures is ongoing, but we expect our review to be completed in the latter half of 2018. Reclassification of Prior Period Balances Certain reclassifications have been made to prior period amounts to conform to the current-year presentation. These reclassifications had no effect on the reported results of operations. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Stock Options: A summary of option activity under our 1998 Stock Option Plan as of December 31, 2017, and changes during the three months ended March 31, 2018 is presented below.
The following table summarizes information about our stock options outstanding at March 31, 2018:
The summary of the status of our unvested stock options as of December 31, 2017 and changes during the three months ended March 31, 2018 is presented below.
As of March 31, 2018, there was $223,511 of unrecognized compensation cost related to unvested options. Such cost is expected to be recognized over a weighted-average period of two years. Total compensation expense for stock options was $66,625 and $124,331 for the three months ended March 31, 2018 and 2017, respectively. Restricted Shares/Units: In accordance with the Company's employment agreement with Stephen Taylor, the Company's Chief Executive Officer, the Compensation Committee reviewed his performance in determining the issuance of restricted common stock. Based on this review which included consideration of the Company's 2017 performance, Mr. Taylor, was awarded 84,700 restricted shares/units on March 15, 2018, which vest over three years, in equal installments, beginning March 15, 2019. On March 15, 2018, the Compensation Committee awarded 20,000 restricted shares/units to each of G. Larry Lawrence, our CFO, and James Hazlett, our Vice President of Technical Services. The restricted shares to Messrs. Lawrence and Hazlett vest over three years, in equal installments, beginning March 15, 2019. We also awarded and issued 16,288 shares of restricted common stock to the independent members of our Board of Directors as partial payment for 2018 services as directors. The restricted stock issued to our directors vests over one year, in quarterly installments, beginning March 31, 2019. Total compensation expense related to restricted awards was $361,630 and $1,408,265 for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, there was a total of $4,408,825 of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next three years. |
Inventory |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | Inventory Our inventory, net of allowance for obsolescence of $20,785 and $15,000 at March 31, 2018 and December 31, 2017, respectively, consisted of the following amounts:
Our long-term inventory consists of raw materials that remain viable but that the Company does not expect to sell within the year. During the three months ended March 31, 2018 and 2017, there were no write-offs of obsolete inventory against the allowance for obsolescence. |
Deferred Compensation Plans |
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Mar. 31, 2018 | |
Postemployment Benefits [Abstract] | |
Deferred Compensation Plans | Deferred Compensation Plans The Company has a non-qualified deferred compensation plan for executive officers, directors and certain eligible employees. The assets of the deferred compensation plan are held in a rabbi trust and are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company. The plan allows for deferral of up to 90% of a participant’s base salary, bonus, commissions, director fees and restricted stock unit awards. A Company owned life insurance policy held in a rabbi trust is utilized as a source of funding for the plan. The cash surrender value of the life insurance policy is $966,000 and $312,000 as of March 31, 2018 and 2017, respectively. For the three months ending March 31, 2018, we reported in other (expense) income in the consolidated income statement a loss related to the policy of approximately $67,000 and for the same period in 2017, a gain of approximately $12,000. For deferrals of base salary, bonus, commissions and director fees, settlement payments are made to participants in cash, either in a lump sum or in periodic installments. The obligation to pay the deferred compensation and the deferred director fees is adjusted to reflect the positive or negative performance of investment measurement options selected by each participant and was $992,000 and $261,000 as of March 31, 2018 and 2017, respectively. The deferred obligation is included in other long-term liabilities in the condensed consolidated balance sheet. For deferrals of restricted stock units, the plan does not allow for diversification, therefore, distributions are paid in shares of common stock and the obligation is carried at grant value. As of March 31, 2018, 104,590 unvested restricted stock units have been deferred and 32,037 units have been released; carrying a value of $816,373 to the deferred compensation plan. |
Credit Facility |
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Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Credit Facility | Credit Facility We have a senior secured revolving credit agreement the ("Amended Credit Agreement") with JP Morgan Chase Bank, N.A (the "Lender") with an aggregate commitment of $30 million, subject to collateral availability. We also have a right to request from the Lender, on an uncommitted basis, an increase of up to $20 million on the aggregate commitment (which could potentially increase the commitment amount to $50 million). On August 31, 2017, we amended and renewed the Amended Credit Agreement, which was set to expire on December 31, 2017. The Credit Agreement Amendment extended the maturity date to December 31, 2020. No other material revisions were made to the credit facility. Borrowing Base. At any time before the maturity of the Amended Credit Agreement, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above. Generally, the borrowing base equals the sum of (a) 80% of our eligible accounts receivable plus (b) 50% of the book value of our eligible general inventory (not to exceed 50% of the commitment amount at the time) plus (c) 75% of the book value of our eligible equipment inventory. The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral. We had $29.5 million borrowing base availability at March 31, 2018 under the terms of our Amended Credit Agreement. Interest and Fees. Under the terms of the Amended Credit Agreement, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) LIBOR multiplied by the Statutory Reserve Rate (as defined in the Amended Credit Agreement), with respect to this rate, for Eurocurrency funding, plus the Applicable Margin (“LIBOR-based”), or (b) CB Floating Rate, which is the Lender's Prime Rate less the Applicable Margin; provided, however, that no more than three LIBOR-based borrowings under the agreement may be outstanding at any one time. For purposes of the LIBOR-based interest rate, the Applicable Margin is 1.50%. For purposes of the CB Floating Rate, the Applicable Margin is 1.50%. For the three month period ended March 31, 2018, our weighted average interest rate was 3.16%. Accrued interest is payable monthly on outstanding principal amounts, provided that accrued interest on LIBOR-based loans is payable at the end of each interest period, but in no event less frequently than quarterly. In addition, fees and expenses are payable in connection with our requests for letters of credit (generally equal to the Applicable Margin for LIBOR-related borrowings multiplied by the face amount of the requested letter of credit) and administrative and legal costs. Maturity. The maturity date of the Amended Credit Agreement is December 31, 2020, at which time all amounts borrowed under the agreement will be due and outstanding letters of credit must be cash collateralized. The agreement may be terminated early upon our request or the occurrence of an event of default. Security. The obligations under the Amended Credit Agreement are secured by a first priority lien on all of our inventory and accounts and leases receivables, along with a first priority lien on a variable number of our leased compressor equipment the book value of which must be maintained at a minimum of 2.00 to 1.00 commitment coverage ratio (such ratio being equal to (i) the amount of the borrowing base as of such date to (ii) the amount of the commitment as of such date.) Covenants. The Amended Credit Agreement contains customary representations and warranties, as well as covenants which, among other things, limit our ability to incur additional indebtedness and liens; enter into transactions with affiliates; make acquisitions in excess of certain amounts; pay dividends; redeem or repurchase capital stock or senior notes; make investments or loans; make negative pledges; consolidate, merge or effect asset sales; or change the nature of our business. In addition, we also have certain financial covenants that require us to maintain on a consolidated basis a leverage ratio less than or equal to 2.50 to 1.00 as of the last day of each fiscal quarter. Events of Default and Acceleration. The Amended Credit Agreement contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults; defaults in performance of covenants or other agreements contained in the loan documents; inaccuracies in representations and warranties; certain defaults, termination events or similar events; certain defaults with respect to any other Company indebtedness in excess of $50,000; certain bankruptcy or insolvency events; the rendering of certain judgments in excess of $150,000; certain ERISA events; certain change in control events and the defectiveness of any liens under the secured revolving credit facility. Obligations under the Amended Credit Agreement may be accelerated upon the occurrence of an event of default. As of March 31, 2018, we were in compliance with all covenants in our Amended Credit Agreement. A default under our Credit Agreement could trigger the acceleration of our bank debt so that it is immediately due and payable. Such default would likely limit our ability to access other credit. At March 31, 2018 and December 31, 2017 our outstanding balance on the line of credit was $417,000. |
Earnings per Share |
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Earnings per Share | Earnings per Share The following table reconciles the numerators and denominators of the basic and diluted earnings per share computation(in thousands, except per share data):
In the three months ended March 31, 2018 and 2017, options to purchase 83,917 shares of common stock with exercise prices ranging from $28.15 to $33.36 were not included in the computation of dilutive income per share, due to their antidilutive effect. |
Segment Information |
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Segment Information | Segment Information ASC 280-10-50, “Operating Segments", defines the characteristics of an operating segment as: a) being engaged in business activity from which it may earn revenue and incur expenses, b) being reviewed by the Company's chief operating decision maker (CODM) for decisions about resources to be allocated and assess its performance and c) having discrete financial information. Although we look at our products to analyze the nature of our revenue, other financial information, such as certain costs and expenses, net income and EBITDA are not captured or analyzed by these categories. Our CODM does not make resource allocation decisions or access the performance of the business based on these categories, but rather in the aggregate. Based on this, management believes that it operates in one business segment. In their analysis of product lines as potential operating segments, management also considered ASC 280-10-50-11, “Aggregation Criteria”, which allows for the aggregation of operating segments if the segments have similar economic characteristics and if the segments are similar in each of the following areas:
We are engaged in the business of designing and manufacturing compressors and flares. Our compressors and flares are sold and rented to our customers. In addition, we provide service and maintenance on compressors in our fleet and to third parties. These business activities are similar in all geographic areas. Our manufacturing process is essentially the same for the entire Company and is performed in-house at our facilities in Midland, Texas and Tulsa, Oklahoma. Our customers primarily consist of entities in the business of producing natural gas and crude oil. The maintenance and service of our products is consistent across the entire Company and is performed via an internal fleet of vehicles. The regulatory environment is similar in every jurisdiction in that the most impacting regulations and practices are the result of federal energy policy. In addition, the economic characteristics of each customer arrangement are similar in that we maintain policies at the corporate level.
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Commitments and Contingencies |
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Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, we are a party to various legal proceedings in the ordinary course of our business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from these actions will not have a material adverse effect on our financial position, results of operations or cash flow. We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation. The Company also has a contractual obligation related to the construction of a new corporate office of approximately $10.5 million, financed by cash on hand. Construction of a new office began in late 2017 and is expected to be completed in early 2019. |
Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||
Basis of Accounting | These notes apply to the unaudited condensed consolidated financial statements of Natural Gas Services Group, Inc. a Colorado corporation (the "Company", “NGSG”, "Natural Gas Services Group", "we" or "our"). The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at March 31, 2018 and the results of our operations for the three months ended March 31, 2018 and 2017 not misleading. As permitted by the rules and regulations of the Securities and Exchange Commission (SEC), the accompanying condensed consolidated financial statements do not include all disclosures normally required by generally accepted accounting principles in the United States of America (GAAP). These financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 on file with the SEC. In our opinion, the condensed consolidated financial statements are a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2018. |
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Revenue Recognition | Revenue Recognition Policy The Company adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company applied ASC 606 using the cumulative effect method. We had no significant changes in our recognition of revenue at adoption and our review of all open revenue from contracts with customers on January 1, 2018 indicated we had no adjustment to be made. If an adjustment had been needed, we would have recognized the cumulative effect of initially applying ASC 606 with an adjustment to the opening balance of equity at January 1, 2018. Therefore, our consolidated financial statements for 2017 reported under ASC 605 are comparable to the consolidated financial statements for 2018 reported under ASC 606, since an adjustment was not needed, except for the respective additional disclosures as detailed below. Revenue is measured based on a consideration specified in a customer’s contract, excluding any sale incentives and taxes collected on behalf of third parties (i.e. sales and property taxes). We recognize revenue once a performance obligation has been satisfied and control over a product or service has transferred to the customer. Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our condensed consolidated income statement. Nature of goods and Services The following is a description of principal activities from which the Company generates its revenue: Rental Revenue. The Company generates revenue from renting compressors and flare systems to our customers. These contracts may also include a fee for servicing the compressor or flare during the rental contract. Our rental contracts range from six to twenty-four months, with revenue being recognized over time, in equal payments over the term of the contract. After the terms of the contract have expired, a customer may renew their contract or continue renting on a monthly basis thereafter. In accordance with generally accepted accounting principles, the revenue earned from servicing rental equipment is recognized in accordance with ASC 606, while the revenue earned from the rental of the equipment is recognized in accordance with ASC 840 - Leases. Sales Revenue. The Company generates revenue by the sale of custom/fabricated compressors, flare systems and parts, as well as, exchange/rebuilding customer owned compressors and sale of used rental equipment. Custom/fabricated compressors and flare systems - The Company designs and fabricates compressors and flares based on the customer’s specifications outlined in their contract. Though the equipment being built is customized by the customer, control under these contracts does not pass to the customer until the compressor or flare package is complete and shipped, or in accordance with a bill and hold arrangements the customer accepts title and assumes the risk and rewards of ownership. We request some of our customer’s to make progressive payments as the product is being built; these payments are recorded as a contract liability on the Deferred Income line on the condensed consolidated balance sheet until control has been transferred. These contracts also may include an assurance warranty clause to guarantee the product is free from defects in material and workmanship for a set duration of time; this is a standard industry practice and is not considered a performance obligation. From time to time, upon the customer’s written request, we recognize revenue when manufacturing is complete and the equipment is ready for shipment. At the customer’s request, we will bill the customer upon completing all performance obligations, but before shipment. The customer will formally request we ship the equipment per their direction from our manufacturing facility at a later specified date and that we segregate the equipment from our finished goods, such that they are not available to fill other orders. Per the customer’s agreement, title of the equipment, all risk of ownership including, the risk of loss, is passed to the customer once the equipment is complete and ready for shipment. We have operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both the customer and us. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the customer, and there are no exceptions to the customer’s commitment to accept and pay for the manufactured equipment. Revenues recognized at the completion of manufacturing for the three months ended March 31, 2018 was approximately $1.7 million. Parts - Revenue is recognized after the customer obtains control of the parts. Control is passed either by the customer taking physical possession or the parts being shipped. The amount of revenue recognized is not adjusted for expected returns, as our historical part returns have been de minimis. Exchange or rebuilding customer owned compressors - Based on the contract, the Company will either exchange a new/rebuilt compressor for the customer’s malfunctioning compressor or rebuild the customer’s compressor. Revenue is recognized after control of the replacement compressor has transferred to the customer by physical delivery, delivery and installment or shipment of the compressor. Used compressors or flares - From time to time, a customer may request to purchase a used compressor or flare out of our rental fleet. Revenue from the sale of rental equipment is recognized when the control has passed to the customer, when the customer has taken physical possession or the equipment has been shipped. Service and Maintenance Revenue. The Company provides routine or call-out services on customer owned equipment. Revenue is recognized after services in the contract are rendered. Payment terms for sales revenue and service and maintenance revenue discussed above are generally 30 to 60 days although terms for specific customers can vary. Also, the transaction prices are not subject to variable consideration constraints. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, deferred compensation plan (cash portion) and our line of credit. Pursuant to ASC 820 (Accounting Standards Codification), the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their fair values because of their nature and relatively short maturity dates or durations. |
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Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements On February 25, 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for capital and operating leases with lease terms of more than 12 months. Additionally, this ASU will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The new standard will be effective during our first quarter ending March 31, 2019. The process of reviewing our leases and evaluating the impact of the new standard on our condensed consolidated financial statements and disclosures is ongoing, but we expect our review to be completed in the latter half of 2018. |
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Segment Information | ASC 280-10-50, “Operating Segments", defines the characteristics of an operating segment as: a) being engaged in business activity from which it may earn revenue and incur expenses, b) being reviewed by the Company's chief operating decision maker (CODM) for decisions about resources to be allocated and assess its performance and c) having discrete financial information. Although we look at our products to analyze the nature of our revenue, other financial information, such as certain costs and expenses, net income and EBITDA are not captured or analyzed by these categories. Our CODM does not make resource allocation decisions or access the performance of the business based on these categories, but rather in the aggregate. Based on this, management believes that it operates in one business segment. In their analysis of product lines as potential operating segments, management also considered ASC 280-10-50-11, “Aggregation Criteria”, which allows for the aggregation of operating segments if the segments have similar economic characteristics and if the segments are similar in each of the following areas:
We are engaged in the business of designing and manufacturing compressors and flares. Our compressors and flares are sold and rented to our customers. In addition, we provide service and maintenance on compressors in our fleet and to third parties. These business activities are similar in all geographic areas. Our manufacturing process is essentially the same for the entire Company and is performed in-house at our facilities in Midland, Texas and Tulsa, Oklahoma. Our customers primarily consist of entities in the business of producing natural gas and crude oil. The maintenance and service of our products is consistent across the entire Company and is performed via an internal fleet of vehicles. The regulatory environment is similar in every jurisdiction in that the most impacting regulations and practices are the result of federal energy policy. In addition, the economic characteristics of each customer arrangement are similar in that we maintain policies at the corporate level. |
Basis of Presentation and Summary of Significant Accounting Policies - (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table shows the Company's revenue disaggregated by product or service type for the three moths ended March 31, 2018 and 2017:
1Service and maintenance includes revenue from servicing our own rental equipment contracted to customers and third party equipment. |
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Schedule of Contract with Customer, Asset and Liability |
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
(1) For the nine months starting April 2019. |
Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Option Activity | A summary of option activity under our 1998 Stock Option Plan as of December 31, 2017, and changes during the three months ended March 31, 2018 is presented below.
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Summary of Stock Options Outstanding | The following table summarizes information about our stock options outstanding at March 31, 2018:
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Status of Unvested Stock Options | The summary of the status of our unvested stock options as of December 31, 2017 and changes during the three months ended March 31, 2018 is presented below.
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Inventory (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Our inventory, net of allowance for obsolescence of $20,785 and $15,000 at March 31, 2018 and December 31, 2017, respectively, consisted of the following amounts:
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Earnings per Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted | The following table reconciles the numerators and denominators of the basic and diluted earnings per share computation(in thousands, except per share data):
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information |
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Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Revenue from External Customer [Line Items] | ||
Revenue | $ 14,718 | $ 18,902 |
Bill and Hold Arrangement | ||
Revenue from External Customer [Line Items] | ||
Revenue | $ 1,700 |
Basis of Presentation and Summary of Significant Accounting Policies Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | $ 7,835 | $ 11,752 |
Rental revenue | 6,883 | 7,150 |
Revenue | 14,718 | 18,902 |
Compressors | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 1,829 | 5,640 |
Flares | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 522 | 269 |
Service & Maintenance | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 4,837 | 5,116 |
Revenue | 249 | 343 |
Other (Parts/Rebuilds) | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | $ 4,837 | $ 5,116 |
Basis of Presentation and Summary of Significant Accounting Policies Contract Balances (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
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Mar. 31, 2018 |
Dec. 31, 2017 |
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Contract Assets | ||
Increases due to cash received, excluding amounts recognized as revenue during the period | $ 0 | |
Transferred to receivables from contract assets recognized at the beginning of the period | 0 | |
Contract Liabilities | ||
Revenue Recognized that was included in the contract liability balance at the beginning of the year | ||
Increases due to cash received, excluding amounts recognized as revenue during the period |
Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended |
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Mar. 31, 2018 |
Dec. 31, 2017 |
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Number of Stock Options | ||
Outstanding, beginning of period (in shares) | 327,270 | |
Exercised (in shares) | (8,500) | |
Outstanding, end of period (in shares) | 318,770 | 327,270 |
Exercisable (in shares) | 296,738 | |
Weighted Average Exercise Price | ||
Outstanding, beginning of period (in USD per share) | $ 20.21 | |
Exercised (in USD per share) | 18.51 | |
Outstanding, end of period (in USD per share) | 20.25 | $ 20.21 |
Exercisable (in USD per share) | $ 19.67 | |
Weighted Average Remaining Contractual Life (years) | ||
Outstanding | 4 years 25 days | 4 years 2 months 42 days |
Exercisable | 3 years 7 months 50 days | |
Aggregate Intrinsic Value | ||
Outstanding, beginning of period | $ 2,255 | |
Exercised | 86 | |
Outstanding, end of period | 1,638 | $ 2,255 |
Exercisable | $ 1,638 |
Stock-Based Compensation - Summary of Unvested Stock Options (Details) - USD ($) |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Shares | ||
Unvested, beginning of period (in shares) | 48,581 | |
Vested (in shares) | (26,549) | |
Unvested, end of period (in shares) | 22,032 | |
Weighted Average Grant Date Fair Value Per Share | ||
Unvested, weighted average grant date fair value, beginning of period (in USD per share) | $ 11.41 | |
Vested, weighted average grant date fair value (in USD per share) | 10.97 | |
Unvested, weighted average grant date fair value, end of period (in USD per share) | $ 11.93 | |
Stock Options | ||
Weighted Average Grant Date Fair Value Per Share | ||
Unrecognized compensation cost related to unvested options | $ 223,511 | |
Unrecognized compensation cost related to awards, weighted average period for recognition | 2 years | |
Share-based compensation expense | $ 66,625 | $ 124,331 |
Inventory (Details) - USD ($) |
3 Months Ended | ||
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Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
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Inventory Disclosure [Abstract] | |||
Allowance for inventory obsolescence | $ 21,000 | $ 15,000 | |
Raw materials - current | 21,482,000 | 22,813,000 | |
Raw materials - long term | 3,315,000 | 2,829,000 | |
Finished Goods | 1,022,000 | 1,022,000 | |
Work in process | 3,245,000 | 2,389,000 | |
Inventory, net | 29,064,000 | $ 29,053,000 | |
Write-offs of obsolete inventory against allowance | $ 0 | $ 0 |
Deferred Compensation Plans (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
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Postemployment Benefits [Abstract] | ||
Participant's maximum compensation deferral percentage | 90.00% | |
Company owned life insurance | $ 966,000 | $ 312,000 |
Loss (gain) on company owned life insurance | 67,000 | (12,000) |
Deferred compensation obligation | $ 992,000 | $ 261,000 |
Deferred restricted stock shares | 104,590 | |
Deferred compensation arrangement with individual, shares issued (in shares) | 32,037 | |
Deferred compensation arrangement, fair value of shares issued | $ 816,373 |
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