(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
No o |
No o |
Large accelerated filer o | Accelerated filer o | Smaller reporting company | Emerging growth company | |||||||||||
Yes | No x |
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 par value) (unaudited) | |||||||||||
June 30, | December 31, | ||||||||||
2023 | 2022 | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Trade accounts receivable, net of allowance for doubtful accounts of $ | |||||||||||
Inventory | |||||||||||
Federal income tax receivable (Note 4) | |||||||||||
Prepaid income taxes | |||||||||||
Prepaid expenses and other | |||||||||||
Total current assets | |||||||||||
Long-term inventory, net of allowance for obsolescence of $ | |||||||||||
Rental equipment, net of accumulated depreciation of $ | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
Right of use assets - operating leases, net of accumulated amortization $ | |||||||||||
Intangibles, net of accumulated amortization of $ | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued liabilities | |||||||||||
Current operating leases | |||||||||||
Deferred income | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Deferred income tax liability | |||||||||||
Long-term operating leases | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 9) | |||||||||||
Stockholders’ Equity: | |||||||||||
Preferred stock, | |||||||||||
Common stock, | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Treasury shares, at cost, | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited) | |||||||||||||||||||||||
Three months ended | Six months ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
Rental income | $ | $ | $ | $ | |||||||||||||||||||
Sales | |||||||||||||||||||||||
Service and maintenance income | |||||||||||||||||||||||
Total revenue | |||||||||||||||||||||||
Operating costs and expenses: | |||||||||||||||||||||||
Cost of rentals, exclusive of depreciation stated separately below | |||||||||||||||||||||||
Cost of sales, exclusive of depreciation stated separately below | |||||||||||||||||||||||
Cost of service and maintenance, exclusive of depreciation stated separately below | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment expense | |||||||||||||||||||||||
Total operating costs and expenses | |||||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense), net | ( | ( | |||||||||||||||||||||
Total other income (expense), net | ( | ( | |||||||||||||||||||||
Income before provision for income taxes | |||||||||||||||||||||||
Income tax (expense) | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
Earnings (loss) per share: | |||||||||||||||||||||||
Basic | $ | $ | ( | $ | $ | ||||||||||||||||||
Diluted | $ | $ | ( | $ | $ | ||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||
BALANCES, January 1, 2022 | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on common stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on restricted common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Taxes paid related to net shares settlement of equity awards | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCES, March 31, 2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on common stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on restricted common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Taxes paid related to net shares settlement of equity awards | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
BALANCES, June 30, 2022 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||
BALANCES, January 1, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on common stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on restricted common stock | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Taxes paid related to net shares settlement of equity awards | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCES, March 31, 2023 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on common stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Compensation expense on restricted common stock | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Taxes paid related to net shares settlement of equity awards | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net Income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCES, June 30, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||||||
Six months ended | |||||||||||
June 30, | |||||||||||
2023 | 2022 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Amortization of debt issuance costs | |||||||||||
Deferred income tax expense | |||||||||||
Stock-based compensation | |||||||||||
Bad debt allowance | |||||||||||
Impairment expense | |||||||||||
Gain on sale of assets | ( | ( | |||||||||
Loss (gain) on company owned life insurance | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Trade accounts receivables | ( | ( | |||||||||
Inventory | ( | ||||||||||
Prepaid expenses and prepaid income taxes | ( | ( | |||||||||
Accounts payable and accrued liabilities | |||||||||||
Deferred income | ( | ( | |||||||||
Other | ( | ||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Purchase of rental equipment, property and other equipment | ( | ( | |||||||||
Purchase of company owned life insurance | ( | ( | |||||||||
Proceeds from sale of property and equipment | |||||||||||
NET CASH USED IN INVESTING ACTIVITIES | ( | ( | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Proceeds from loan | |||||||||||
Payments of other long-term liabilities, net | ( | ( | |||||||||
Payments of debt issuance costs | ( | ||||||||||
Purchase of treasury shares | ( | ||||||||||
Taxes paid related to net share settlement of equity awards | ( | ( | |||||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ||||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | |||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | |||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
Interest paid | $ | $ | |||||||||
NON-CASH TRANSACTIONS | |||||||||||
Right of use asset acquired through an operating lease | $ | $ | |||||||||
Transfer of rental equipment to inventory | $ | $ |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Compressors - sales | $ | $ | $ | $ | |||||||||||||||||||
Flares - sales | |||||||||||||||||||||||
Other (parts/rebuilds) - sales | |||||||||||||||||||||||
Service and maintenance | |||||||||||||||||||||||
Total revenue from contracts with customers | |||||||||||||||||||||||
Add: ASC 842 rental revenue | |||||||||||||||||||||||
Total revenue | $ | $ | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
(in thousands) | |||||||||||
Accounts Receivable | |||||||||||
Accounts receivable - contracts with customers | $ | $ | |||||||||
Accounts receivable - ASC 842 | |||||||||||
Total Accounts Receivable | |||||||||||
Less: Allowance for doubtful accounts | ( | ( | |||||||||
Total Accounts Receivable, net | $ | $ | |||||||||
Deferred income | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
(in thousands) | |||||||||||
Raw materials - current | $ | $ | |||||||||
Work-in-process | |||||||||||
Inventory - current | |||||||||||
Raw materials - long term (net of allowance of $ | |||||||||||
Inventory - total | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
(in thousands) | |||||||||||
Beginning balance | $ | $ | |||||||||
Accruals | |||||||||||
Write-offs | ( | ( | |||||||||
Ending balance | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
(in thousands) | |||||||||||
Compressor units | $ | $ | |||||||||
Work-in-process | |||||||||||
Rental equipment | |||||||||||
Accumulated depreciation | ( | ( | |||||||||
Rental equipment, net of accumulated depreciation | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||
(in thousands) | |||||||||||
Total long-term debt | $ | $ |
Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
Outstanding, December 31, 2022 | $ | $ | |||||||||||||||||||||
Cancelled / Forfeited | ( | — | |||||||||||||||||||||
Expired | ( | — | — | ||||||||||||||||||||
Outstanding, June 30, 2023 | |||||||||||||||||||||||
Exercisable, June 30, 2023 | $ | $ |
Range of Exercise Prices | Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||||||||||||||
$ | $ | $ | |||||||||||||||||||||||||||
$ | |||||||||||||||||||||||||||||
$ | |||||||||||||||||||||||||||||
$ | |||||||||||||||||||||||||||||
$ | $ |
Unvested Stock Options: | Shares | Weighted Average Grant Date Fair Value Per Share | |||||||||
Unvested at December 31, 2022 | $ | ||||||||||
Vested, outstanding shares | ( | ||||||||||
Cancelled/Forfeited | ( | ||||||||||
Unvested at June 30, 2023 | $ |
Number of Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
Outstanding, December 31, 2022 | $ | $ | |||||||||||||||||||||
Granted | |||||||||||||||||||||||
Vested | ( | ||||||||||||||||||||||
Canceled/Forfeited | ( | ||||||||||||||||||||||
Outstanding, June 30, 2023 | $ | $ |
Three months ended | Six months ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||
Numerator: | |||||||||||||||||||||||
Net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
Denominator for earnings per basic common share: | |||||||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||
Denominator for earnings per diluted common share: | |||||||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||
Dilutive effect of stock options and restricted stock/units | |||||||||||||||||||||||
Diluted weighted average shares | |||||||||||||||||||||||
Earnings (loss) per common share: | |||||||||||||||||||||||
Basic | $ | $ | ( | $ | $ | ||||||||||||||||||
Diluted | $ | $ | ( | $ | $ |
Three months ended June 30, | |||||||||||||||||
2023 | 2022 | ||||||||||||||||
(in thousands) | |||||||||||||||||
Rental | $ | 24,105 | 89.4 | % | $ | 18,144 | 91.0 | % | |||||||||
Sales | 1,595 | 5.9 | % | 1,292 | 6.5 | % | |||||||||||
Service and Maintenance | 1,257 | 4.7 | % | 490 | 2.5 | % | |||||||||||
Total | $ | 26,957 | $ | 19,926 |
Six months ended June 30, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Rental | $ | 46,828 | 87.4 | % | $ | 35,274 | 87.6 | % | |||||||||||||||
Sales | 4,587 | 8.6 | % | 4,184 | 10.4 | % | |||||||||||||||||
Service and Maintenance | 2,162 | 4.0 | % | 804 | 2.0 | % | |||||||||||||||||
Total | $ | 53,577 | $ | 40,262 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Net income (loss) | $ | 504 | $ | (70) | $ | 874 | $ | 267 | |||||||||||||||
Interest expense | 185 | 24 | 185 | 49 | |||||||||||||||||||
Income tax expense | 249 | 372 | 396 | 361 | |||||||||||||||||||
Depreciation and amortization | 6,418 | 6,042 | 12,583 | 12,103 | |||||||||||||||||||
Non-cash stock compensation expense | 1,130 | 331 | 1,617 | 754 | |||||||||||||||||||
Severance expenses | 612 | — | 1,224 | — | |||||||||||||||||||
Impairment expense | 779 | — | 779 | — | |||||||||||||||||||
Adjusted EBITDA | $ | 9,877 | $ | 6,699 | $ | 17,658 | $ | 13,534 | |||||||||||||||
June 30, | December 31, | ||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 4,286 | $ | 3,372 | |||||||
Trade accounts receivable, net | 20,872 | 14,668 | |||||||||
Inventory | 27,960 | 23,414 | |||||||||
Federal income tax receivable | 11,538 | 11,538 | |||||||||
Prepaid income taxes | 10 | 10 | |||||||||
Prepaid expenses and other | 1,446 | 1,145 | |||||||||
Total current assets | 66,112 | 54,147 | |||||||||
Current Liabilities: | |||||||||||
Accounts payable | 28,603 | 6,481 | |||||||||
Accrued liabilities | 18,492 | 23,726 | |||||||||
Current operating leases | 133 | 155 | |||||||||
Deferred income | — | 37 | |||||||||
Total current liabilities | 47,228 | 30,399 | |||||||||
Total working capital | $ | 18,884 | $ | 23,748 |
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 February 10, 2021. | |||||
Description of Securities (Incorporated by reference to the Registrant's Registration Statement on From 8-A, filed with the SEC on October 27, 2008.) | |||||
Form of Senior Indenture (Incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on From S-3 (No. 333-261091) and filed on November 16, 2021.) | |||||
Form of Subordinated Indenture (Incorporated by reference to Exhibit 4.4 of the Registrant's Registration Statement on Form S-3 (No. 333-261091) and filed on November 16, 2021.) | |||||
10.1† | 2019 Equity Incentive Plan, as amended (Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 12, 2022.) | ||||
10.2† | 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.) | ||||
10.3† | Retirement Agreement dated May 17, 2022 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 May 19, 2022.) | ||||
10.4† | Severance Agreement and Release Between Natural Gas Services Group, Inc. and John W. Chisholm dated December 21, 2022 (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 December 28, 2022.) | ||||
10.5† | 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.) | ||||
10.6† | Letter Agreement between Natural Gas Services Group, Inc. and James D. Faircloth dated February 8, 2023 (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 February 13, 2023.) | ||||
Amended and Restated Credit Agreement dated February 28, 2023, among Natural Gas Services Group, Inc., the other Loan Parties thereto, Texas Capital Bank, in its capacity as Administrative Agent and the Lenders party thereto (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 March 6, 2023.) | |||||
Amended and Restated Pledge and Security Agreement dated February 28, 2023, among Natural Gas Services Group, Inc., the Grantors thereto, Texas Capital Bank, in its capacity as Administrative Agent, for the Lenders and other Secured Parties (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 March 6, 2023.) | |||||
A Cooperation Agreement, dated April 28, 2023, between Natural Gas Services Group, Inc. and Mill Road Capital III, L.P., a Cayman Islands exempted limited partnership, and Mill Road Capital III GP LLC, a Cayman Islands limited liability company, pursuant to which the Company agreed to appoint Justin C. Jacobs and Donald J. Tringali to the Company’s Board of Directors. In connection with the Agreement, on April 28, 2023, Leslie A. Beyer resigned from the Company’s Board of Directors (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 28, 2023). | |||||
Interim CEO Agreement between Natural Gas Services Group, Inc. and Stephen C. Taylor dated June 30, 2023 (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 July 5, 2023.) | |||||
Certification of Interim 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 Interim 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. | |||||
† Indicates a management contract or compensatory plan or arrangement |
/s/ Stephen C. Taylor | /s/ James D. Faircloth | ||||||||||
Stephen C. Taylor | James D. Faircloth | ||||||||||
Interim President and Chief Executive Officer | Interim Chief Financial Officer | ||||||||||
(Principal Executive Officer) | (Principal Accounting Officer) | ||||||||||
August 14, 2023 | August 14, 2023 |
Dated: | August 14, 2023 | Natural Gas Services Group, Inc. | ||||||||||||
By: | /s/ Stephen C. Taylor | |||||||||||||
Stephen C. Taylor | ||||||||||||||
Interim President and Chief Executive Officer | ||||||||||||||
(Principal Executive Officer) |
Dated: | August 14, 2023 | Natural Gas Services Group, Inc. | ||||||||||||
By: | /s/James D. Faircloth | |||||||||||||
James D. Faircloth | ||||||||||||||
Interim Chief Financial Officer | ||||||||||||||
(Principal Accounting Officer) |
Dated: | August 14, 2023 | Natural Gas Services Group, Inc. | ||||||||||||
By: | /s/ Stephen C. Taylor | |||||||||||||
Stephen C. Taylor | ||||||||||||||
Interim President and Chief Executive Officer | ||||||||||||||
(Principal Executive Officer) |
Dated: | August 14, 2023 | Natural Gas Services Group, Inc. | ||||||||||||
By: | /s/ James D. Faircloth | |||||||||||||
James D. Faircloth | ||||||||||||||
Interim Chief Financial Officer | ||||||||||||||
(Principal Accounting Officer) |
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Thousands, $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
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ASSETS | ||
Allowance for doubtful accounts | $ 466 | $ 338 |
Allowance for obsolescence | 40 | 120 |
Accumulated depreciation, rental equipment | 187,580 | 177,729 |
Accumulated depreciation, property and equipment | 17,533 | 16,981 |
Accumulated amortization, operating lease right of use assets | 815 | 721 |
Accumulated amortization, intangibles | $ 2,322 | $ 2,259 |
Stockholders’ Equity: | ||
Preferred stock, shares authorized (in shares) | 5,000 | 5,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, shares authorized (in shares) | 30,000 | 30,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 13,688 | 13,519 |
Treasury shares (in shares) | 1,310 | 1,310 |
Description of Business |
6 Months Ended |
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Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of BusinessNatural Gas Services Group, Inc. (the "Company", “NGS”, "Natural Gas Services Group", "we" or "our") (a Colorado corporation), is a provider of natural gas compression equipment and services to the energy industry. The Company manufactures, fabricates, rents, sells and maintains natural gas compressors systems for oil and natural gas production and plant facilities. NGS is headquartered in Midland, Texas, with fabrication facilities located in Tulsa, Oklahoma and Midland, Texas, and service facilities located in major oil and natural gas producing basins in the U.S. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its subsidiary, NGSG Properties, LLC and the rabbi trust associated with the Company's deferred compensation plan. All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation. These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at June 30, 2023 and the results of our operations for the three and six months ended June 30, 2023 and 2022 not misleading. As permitted by the rules and regulations of the Securities and Exchange Commission (the "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 consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 on file with the SEC. In our opinion, the condensed consolidated financial statements are a fair presentation of the financial position, results of operations, changes in stockholders' equity and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023. Revenue Recognition Policy The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"), except for rental revenue as discussed below. Under ASC 606, 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). Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services. To recognize revenue, we (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy the performance obligation(s). Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our condensed consolidated statements of operations. 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 systems to our customers. These contracts, which all qualify as operating leases under ASC Topic 842, Leases (ASC 842), may also include a fee for servicing the compressor during the rental contract period. Our rental contracts typically range from to 24 months, with our larger horsepower compressors having contract terms of up to 60 months. Our revenue is recognized over time, generally monthly, in accordance with payment terms under 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 ASC 842, we have applied the practical expedient ASC 842-10-15-42A, which allows the Company to combine lease and non-lease components. Sales Revenue. The Company generates revenue by the sale of custom/fabricated compressors, and parts, as well as, exchange/rebuilding customer owned compressors and sale of used rental equipment. Custom/fabricated compressors - The Company designs and fabricates compressors 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 package is complete and shipped, or in accordance with a bill and hold arrangement, the customer accepts title and assumes the risk and rewards of ownership. We request some of our customers 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 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 that we ship the equipment per their direction from our manufacturing facility at a later specified date and that we segregate this equipment from our finished goods, such that this equipment is not available to fill other orders. Per the customer’s agreement change of control 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 and 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 control is maintained by the customer and there are no exceptions to the customer’s commitment to accept and pay for the manufactured equipment. There was no revenue recognized for bill and hold arrangements for the six months ended June 30, 2023 or 2022. 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 based on the terms of the contract, i.e., by physical delivery, delivery and installment, or shipment of the compressor. Used compressors - From time to time, a customer may request to purchase a used compressor out of our rental fleet. Revenue from the sale of rental equipment is recognized when the control has passed to the customer based on the terms of the contract, i.e., 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 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, 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 and six months ended June 30, 2023 and 2022:
Contract Balances As of June 30, 2023 and December 31, 2022, we had the following receivables and deferred income from contracts with customers:
The Company recognized sales revenues of $37 thousand for the six months ended June 30, 2023 that was included in deferred income at the beginning of 2023. The increase in accounts receivable and decrease in deferred income were primarily due to normal timing differences between our performance and the customers’ payments. Remaining Performance Obligations As of June 30, 2023, the Company had no deferred revenue related to unsatisfied performance obligations. Contract Costs The Company 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 expenses on our condensed consolidated statements of operations. 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 carryforwards. 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. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. To the extent we establish a valuation allowance or increase this allowance in a period, we include an expense in the tax provision in our condensed consolidated statements of operations. We account for uncertain tax positions in accordance with guidance in ASC 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the condensed consolidated financial statements. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for unrecognized tax benefits is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards. We have no liabilities for uncertain tax positions as of June 30, 2023. Our policy regarding income tax interest and penalties is to expense those items as interest expense and other expense, respectively. Capitalized Interest Beginning January 1, 2023, the Company began capitalizing interest from external borrowings on significant expenditures for the fabrication of its natural gas compressor equipment until such projects are ready for their intended use. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets. For the six months ended June 30, 2023, the Company capitalized interest aggregating approximately $2.7 million. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments to ASC Topic 326 require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including trade receivables. For companies that qualify as smaller reporting companies, the amendments in this update are effective for interim and annual periods beginning after January 1, 2023. We adopted ASU 2016-13 on January 1, 2023. The adoption did not result in any material change to our financial statements. There were no other recent accounting pronouncements during the six months ended June 30, 2023 that are expected to have a material impact on our financial statements.
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Inventory |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | Inventory Our inventory, net of allowance for obsolescence of $40,000 at June 30, 2023 and $120,000 at December 31, 2022, 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 or use within the year. Inventory Allowance We routinely review our inventory allowance balance to account for slow moving or obsolete inventory costs that may not be recoverable in the future. A summary of our inventory allowance is as follows:
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Federal Income Tax Receivable |
6 Months Ended |
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Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Federal Income Tax Receivable | Federal Income Tax ReceivableOn March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the economic impact caused by the COVID-19 pandemic. The CARES Act allowed NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes. The Company generated significant NOLs during 2018 and 2019, and has filed amended returns to carryback these losses for five years. Accordingly, during 2020, the Company recorded a federal income tax receivable of $15.0 million and an increase to its deferred income tax liability of $10.1 million on its condensed consolidated balance sheet. During the third quarter of 2020, the Company received refunds totaling $3.9 million related to its 2018 NOLs, which reduced its federal income tax receivable to $11.5 million on its condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022. |
Rental Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental Equipment | Rental Equipment Our rental equipment and associated accumulated depreciation as of June 30, 2023 and December 31, 2022, respectively, consisted of the following:
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Long-term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | Long-term Debt Our long-term debt consists of the following:
Amended and Restated Credit Agreement On May 11, 2021, we entered into a five-year senior secured revolving credit agreement ("Credit Agreement") with Texas Capital Bank, National Association (the "Lender") with an initial commitment of $20 million and an accordion feature that would increase the maximum commitment to $30 million, subject to collateral availability. At December 31, 2022, we had $25 million outstanding under the Credit Agreement with a weighted average interest rate of 7.32%. On February 28, 2023, we replaced our Credit Agreement by entering into a five-year senior secured revolving credit agreement (“Amended and Restated Credit Agreement”) with Texas Capital Bank, as administrative agent (the “Lender”), TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with an initial commitment of $175 million as of the closing date. Subject to collateral availability, we also have a right to request from the Lender, on an uncommitted basis, an increase of up to $125 million on the aggregate commitment; provided, however, the aggregate commitment amount is not permitted to exceed $300 million. The maturity date of the Amended and Restated Credit Agreement is February 28, 2028. The obligations under the Amended and Restated Credit Agreement are secured by a first priority lien on most of our assets, including inventory and accounts receivable as well as a variable number of our leased compressor equipment. Borrowing Base. At any time before the maturity of the Amended and Restated 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) 85% of eligible accounts receivable owed to the Company, plus (b) 50% of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of the component not to exceed $2.5 million, plus (c) the lesser of (i) 95% of the net book value of the compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80% of the net liquidation value percentage of the net book value of the eligible compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (d) 80% of the net book value, valued at the lower cost (excluding any costs for capitalized interest or other non-cash capitalized costs) or market of the eligible new compressor fleet, minus (e) any required availability reserves determined by the Lender in its sole discretion. The Lender may adjust the borrowing base components if the material deviations in the collateral are discovered in the future audits of the collateral. At June 30, 2023, our borrowing base was approximately $175 million. Interest and Fees. Under the terms of the Amended and Restated Credit Agreement, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Term SOFR ("Secured Overnight Financing Rate") Loan, the Adjusted Term SOFR rate plus the Applicable Margin. "Base Rate" means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such a day; (b) the sum of the federal funds rate for such day plus 0.50%; and (c) the Adjusted Term SOFR for such day plus 1.00%. The Applicable Margin is determined based upon the leverage ratio as set forth in the most recent compliance certificate received by the Lender for each fiscal quarter from time to time pursuant to the Amended and Restated Credit Agreement. Depending on the leverage ratio, the Applicable Margin can be 2.00% to 2.75% for Base Rate Loans (as defined in Amended and Restated Credit Agreement) and 3.00% to 3.75% for Term SOFR Loans and for requested letters of credit. In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Amended and Restated Credit Agreement is in effect at an annual rate equal to 0.50% of the unused commitment amount. Accrued interest is payable monthly on outstanding principal amounts and unused commitment fee, provided that accrued interest on Term SOFR Loans is payable at the end of each interest period, but in no event less frequently than quarterly. Covenants. The Amended and Restated Credit Agreement contains customary representations and warranties, as well as covenants which, among other things, condition or 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 are subject to certain financial covenants during certain trigger periods in the Amended and Restated Credit Agreement that require us to maintain (i) a leverage ratio, as defined, lesser than or equal to 3.50 to 1.00 as of the last day of each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter. Events of Default and Acceleration. The Amended and Restated 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 Amended and Restated Credit Agreement and the other transaction 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 $1.0 million; certain bankruptcy or insolvency events; the rendering of certain judgments in excess of $1.0 million; certain ERISA events; certain change in control events and the defectiveness of any liens under the secured revolving credit agreement. Obligations outstanding under the Amended and Restated Credit Agreement may be accelerated upon the occurrence of an event of default. As of June 30, 2023, we were in compliance with all financial covenants in our Amended and Restated Credit Agreement. As of June 30, 2023, we had approximately $100 million outstanding under our Amended and Restated Credit Agreement with a weighted average interest rate of 8.48%. At June 30, 2023, we had approximately $75 million available for borrowing under the Amended and Restated Credit Agreement, subject to borrowing base determination.
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Stock-Based and Other Long-Term Incentive Compensation |
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based and Other Long-Term Incentive Compensation | Stock-Based and Other Long-Term Incentive Compensation Stock Options A summary of all option activity as of December 31, 2022, and changes during the six months ended June 30, 2023 is presented below:
The following table summarizes information about our stock options outstanding at June 30, 2023:
The summary of the status of our unvested stock options as of December 31, 2022 and changes during the six months ended June 30, 2023 is presented below:
As of June 30, 2023, there was $123,000 of unrecognized compensation cost related to unvested options. For the six months ended June 30, 2023, there was $52,000 of compensation expense for stock options. For the six months ended June 30, 2022, there was $168,000 of compensation expense for stock options. Restricted Shares/Units On April 26, 2022, 4,212 shares of restricted common stock were awarded to each of our three independent Board members. The restricted stock issued to these directors vest in one year from the date of grant. On August 15, 2022, the Compensation Committee awarded 32,040 shares of restricted common stock to two executive officers that vest ratably over three years, beginning on April 25, 2023 of these 32,040 shares, 11,024 shares were forfeited in connection with the executive officer's resignation. In addition, on August 15, 2022, the Compensation Committee awarded 60,839 shares of restricted stock to Stephen C. Taylor, our Interim Chief Executive Officer, that vested in full on June 30, 2023. On April 25, 2023, the Compensation Committee awarded 27,840 shares of restricted stock to our Chief Technical Officer that vest ratably over three years, beginning on April 25, 2024. Pursuant to the Retirement Agreement dated May 17, 2022, between the Company and Mr. Taylor, our Interim Chief Executive Officer, on April 25, 2023, the Compensation Committee awarded 58,790 fully vested shares of common stock to Mr. Taylor. On May 9, 2023, the Compensation Committee awarded each of our four independent Board members 9,470 restricted stock units. These restricted stock units vest one year from the date of grant. On June 30, 2023 Stephen Taylor was granted 10,101 share of common stock that will vest one year from the date of grant. Total compensation expense related to these and previously granted restricted stock awards was $1.1 million and $200,000 for the three months ended June 30, 2023, and 2022, respectively. A summary of all restricted stock/units outstanding as of December 31, 2022 and activity during the six months ended June 30, 2023 is presented below:
Other Long-Term Incentive Compensation On April 26, 2022, subject to vesting we granted a $50,000 cash award to each of our three independent Board members. These awards vested on April 26, 2023 and have been paid. The Company accounts for these other long-term incentive awards as liabilities under accrued liabilities on our condensed consolidated balance sheet. In general the vesting of long term awards is subject to acceleration upon certain events, such as (i) death or disability of the recipient, (ii) certain circumstances in connection with a change of control of the Company, (iii) for executive officers, termination without cause (as defined in the agreement), and (iv) for executive officers, resignation for good reason (as defined in the agreement). Total compensation expense related to these and other long-term incentive awards was approximately $426,000 and $431,000 for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, all compensation expense related to these other long-term incentive awards had been recognized.
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Earnings (loss) per Share |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (loss) per Share | Earnings (loss) per ShareThe following table reconciles the numerators and denominators of the basic and diluted earnings per share computation:
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesFrom time to time, we are a party to various legal proceedings in the ordinary course of our business. We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation. The Company believes it maintains adequate insurance coverage against any potential litigation loss. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsIn accordance with ASC 855 - Subsequent Events - the Company has evaluated all events subsequent to the balance sheet date as of June 30, 2023 through the date this report was issued and believes nothing is required thereunder. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its subsidiary, NGSG Properties, LLC and the rabbi trust associated with the Company's deferred compensation plan. All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation. These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at June 30, 2023 and the results of our operations for the three and six months ended June 30, 2023 and 2022 not misleading. As permitted by the rules and regulations of the Securities and Exchange Commission (the "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 consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 on file with the SEC. In our opinion, the condensed consolidated financial statements are a fair presentation of the financial position, results of operations, changes in stockholders' equity and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.
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Revenue Recognition Policy and Contract Costs | Revenue Recognition Policy The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"), except for rental revenue as discussed below. Under ASC 606, 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). Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services. To recognize revenue, we (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy the performance obligation(s). Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our condensed consolidated statements of operations. 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 systems to our customers. These contracts, which all qualify as operating leases under ASC Topic 842, Leases (ASC 842), may also include a fee for servicing the compressor during the rental contract period. Our rental contracts typically range from to 24 months, with our larger horsepower compressors having contract terms of up to 60 months. Our revenue is recognized over time, generally monthly, in accordance with payment terms under 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 ASC 842, we have applied the practical expedient ASC 842-10-15-42A, which allows the Company to combine lease and non-lease components. Sales Revenue. The Company generates revenue by the sale of custom/fabricated compressors, and parts, as well as, exchange/rebuilding customer owned compressors and sale of used rental equipment. Custom/fabricated compressors - The Company designs and fabricates compressors 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 package is complete and shipped, or in accordance with a bill and hold arrangement, the customer accepts title and assumes the risk and rewards of ownership. We request some of our customers 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 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 that we ship the equipment per their direction from our manufacturing facility at a later specified date and that we segregate this equipment from our finished goods, such that this equipment is not available to fill other orders. Per the customer’s agreement change of control 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 and 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 control is maintained by the customer and there are no exceptions to the customer’s commitment to accept and pay for the manufactured equipment. There was no revenue recognized for bill and hold arrangements for the six months ended June 30, 2023 or 2022. 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 based on the terms of the contract, i.e., by physical delivery, delivery and installment, or shipment of the compressor. Used compressors - From time to time, a customer may request to purchase a used compressor out of our rental fleet. Revenue from the sale of rental equipment is recognized when the control has passed to the customer based on the terms of the contract, i.e., 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 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, transaction prices are not subject to variable consideration constraints. Contract Costs The Company 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 expenses on our condensed consolidated statements of operations.
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Income Taxes | 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 carryforwards. 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. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. To the extent we establish a valuation allowance or increase this allowance in a period, we include an expense in the tax provision in our condensed consolidated statements of operations. We account for uncertain tax positions in accordance with guidance in ASC 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the condensed consolidated financial statements. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for unrecognized tax benefits is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards. We have no liabilities for uncertain tax positions as of June 30, 2023. Our policy regarding income tax interest and penalties is to expense those items as interest expense and other expense, respectively.
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Capitalized Interest | Capitalized Interest |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments to ASC Topic 326 require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including trade receivables. For companies that qualify as smaller reporting companies, the amendments in this update are effective for interim and annual periods beginning after January 1, 2023. We adopted ASU 2016-13 on January 1, 2023. The adoption did not result in any material change to our financial statements. There were no other recent accounting pronouncements during the six months ended June 30, 2023 that are expected to have a material impact on our financial statements.
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Summary of Significant Accounting Policies (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenue | The following table shows the Company's revenue disaggregated by product or service type for the three and six months ended June 30, 2023 and 2022:
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Schedule of Contract with Customer, Asset and Liability | As of June 30, 2023 and December 31, 2022, we had the following receivables and deferred income from contracts with customers:
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Inventory (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Our inventory, net of allowance for obsolescence of $40,000 at June 30, 2023 and $120,000 at December 31, 2022, consisted of the following amounts:
A summary of our inventory allowance is as follows:
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Rental Equipment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Rental Equipment | Our rental equipment and associated accumulated depreciation as of June 30, 2023 and December 31, 2022, respectively, consisted of the following:
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Long-term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt Instruments | Our long-term debt consists of the following:
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Stock-Based and Other Long-Term Incentive Compensation (Tables) |
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Option Activity | A summary of all option activity as of December 31, 2022, and changes during the six months ended June 30, 2023 is presented below:
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Schedule of Stock Options Outstanding | The following table summarizes information about our stock options outstanding at June 30, 2023:
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Schedule of Status of Unvested Stock Options | The summary of the status of our unvested stock options as of December 31, 2022 and changes during the six months ended June 30, 2023 is presented below:
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Schedule of Restricted Stock Activity | A summary of all restricted stock/units outstanding as of December 31, 2022 and activity during the six months ended June 30, 2023 is presented below:
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Earnings (loss) per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
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Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | $ 2,852 | $ 1,782 | $ 6,749 | $ 4,988 |
Add: ASC 842 rental revenue | 24,105 | 18,144 | 46,828 | 35,274 |
Total revenue | 26,957 | 19,926 | 53,577 | 40,262 |
Compressors - sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 38 | 286 | 1,007 | 2,253 |
Flares - sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 86 | 83 | ||
Other (parts/rebuilds) - sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 1,471 | 923 | 3,494 | 1,848 |
Service and maintenance | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | $ 1,257 | $ 490 | $ 2,162 | $ 804 |
Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounts Receivable | ||
Accounts receivable - contracts with customers | $ 5,835,000 | $ 4,353,000 |
Accounts receivable - ASC 842 | 15,503,000 | 10,653,000 |
Total Accounts Receivable | 21,338,000 | 15,006,000 |
Less: Allowance for doubtful accounts | (466,000) | (338,000) |
Total Accounts Receivable, net | 20,872,000 | 14,668,000 |
Deferred income | $ 0 | $ 37,000 |
Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|---|
Inventory Disclosure [Abstract] | |||
Allowance for obsolescence | $ 40 | $ 120 | $ 64 |
Raw materials - current | 26,184 | 21,354 | |
Work-in-process | 1,776 | 2,060 | |
Inventory - current | 27,960 | 23,414 | |
Raw materials - long term (net of allowance of $40 and $120, respectively) | 2,157 | 1,557 | |
Inventory - total | $ 30,117 | $ 24,971 |
Inventory - Schedule of Inventory Allowance (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
Inventory Valuation Reserves [Roll Forward] | ||
Beginning balance | $ 120 | $ 64 |
Accruals | 0 | 83 |
Write-offs | (80) | (27) |
Ending balance | $ 40 | $ 120 |
Federal Income Tax Receivable (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2020 |
Jun. 30, 2023 |
Dec. 31, 2022 |
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Income Tax Disclosure [Abstract] | ||||
Federal income tax receivable | $ 15,000 | $ 11,538 | $ 11,538 | |
Deferred tax liability increase due to tax law change | $ 10,100 | |||
Income tax received refunds | $ 3,900 |
Rental Equipment (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
Property, Plant and Equipment [Line Items] | ||
Rental equipment, gross | $ 514,271 | $ 424,179 |
Accumulated depreciation | (187,580) | (177,729) |
Rental equipment, net of accumulated depreciation | 326,691 | 246,450 |
Impairment of rental equipment | 0 | |
Compressor units | ||
Property, Plant and Equipment [Line Items] | ||
Rental equipment, gross | 457,300 | 387,145 |
Work-in-process | ||
Property, Plant and Equipment [Line Items] | ||
Rental equipment, gross | $ 56,971 | $ 37,034 |
Long-term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Disclosure [Abstract] | ||
Total long-term debt | $ 100,011 | $ 25,000 |
Stock-Based and Other Long-Term Incentive Compensation - Summary of Unvested Stock Options (Details) |
6 Months Ended |
---|---|
Jun. 30, 2023
$ / shares
shares
| |
Shares | |
Unvested, beginning of period (in shares) | shares | 39,000 |
Vested, outstanding shares (in shares) | shares | (2,499) |
Canceled/Forfeited (in shares) | shares | (4,334) |
Unvested, end of period (in shares) | shares | 32,167 |
Weighted Average Grant Date Fair Value Per Share | |
Unvested, weighted average grant date fair value, beginning of period (in dollars per share) | $ / shares | $ 5.44 |
Vested, outstanding shares (in dollars per share) | $ / shares | 6.57 |
Canceled/Forfeited (in dollars per share) | $ / shares | 5.15 |
Unvested, weighted average grant date fair value, end of period (in dollars per share) | $ / shares | $ 5.39 |
Stock-Based and Other Long-Term Incentive Compensation - Stock Option, Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total unrecognized compensation expense | $ 123 | |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 52 | $ 168 |
Stock-Based and Other Long-Term Incentive Compensation - Other Long-Term Incentive Compensation, Narrative (Details) - Other Long-Term Incentive Compensation $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Apr. 26, 2022
USD ($)
independent_director
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | $ 426 | $ 431 | |
Directors | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted | $ 50 | ||
Number of independent directors | independent_director | 3 |
Earnings (loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Numerator: | ||||||
Net income (loss) | $ 504 | $ 370 | $ (70) | $ 337 | $ 874 | $ 267 |
Denominator for earnings per basic common share: | ||||||
Weighted average common shares outstanding (in shares) | 12,292 | 12,305 | 12,253 | 12,421 | ||
Denominator for earnings per diluted common share: | ||||||
Weighted average common shares outstanding (in shares) | 12,292 | 12,305 | 12,253 | 12,421 | ||
Dilutive effect of stock options and restricted stock/units (in shares) | 102 | 0 | 121 | 107 | ||
Diluted weighted average shares (in shares) | 12,394 | 12,305 | 12,374 | 12,528 | ||
Earnings (loss) per common share: | ||||||
Basic (in dollars per share) | $ 0.04 | $ (0.01) | $ 0.07 | $ 0.02 | ||
Diluted (in dollars per share) | $ 0.04 | $ (0.01) | $ 0.07 | $ 0.02 |
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