FOR IMMEDIATE RELEASE	NEWS
May 10, 2010	NYSE: NGS

	Revenue						Gross Margin, Exclusive of Depreciation(1)
	Three Months Ended March 31,						Three Months Ended March 31,
	2009			2010			2009			2010
	(dollars in thousands) (unaudited)
Sales	$6,929	35%		$1,461	13%		$2,400	35%		$470	32%
Rental	12,788	64%		9,876	86%		8,099	63%		6,073	62%
Service & Maintenance	308	1%		212	2%		93	30%		58	27%
Total	$20,025			$11,549			$10,592	53%		$6,601	57%

 

 

Gross margin is defined as total revenue less cost of sales (excluding depreciation and amortization expense).  Gross margin is included as a supplemental disclosure because it is a primary measure used by management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key operating components.  Depreciation expense is a necessary element of costs and the ability to generate revenue and selling, general and administrative expense is a necessary cost to support operations and required corporate activities.  Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding the company’s performance.  As an indicator of operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP.  Gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.

 

(in thousands of dollars)						Three months ended March 31,
						2009		2010
Net income						$ 3,797		$1,364
Interest expense						160		74
Provision for income taxes						2,053		767
Depreciation and amortization						2,958		2,874
EBITDA						$ 8,968		$ 5,079
Other operating expenses						1,577		1,499
Other expense (income)						47		23
Gross margin						$ 10,592		$ 6,601

 

 

For More Information, Contact:	Kimberly Huckaba, Investor Relations
	(432) 262-2700 Kim.Huckaba@ngsgi.com
	www.ngsgi.com

NATURAL GAS SERVICES GROUP, INC. BALANCE SHEETS (in thousands, except per share amounts) (unaudited)
		December 31,			March 31,
		2009				2010
ASSETS
Current Assets:
Cash and cash equivalents		$	23,017			$	21,618
Trade accounts receivable, net of allowance for doubtful accounts of $363 and $212,   respectively			7,314				3,780
Inventory, net of allowance for obsolescence of $345 and $311, respectively			24,037				23,508
Prepaid income taxes			1,556				1,756
Prepaid expenses and other			279				294
Total current assets			56,203				50,956
Rental equipment, net of accumulated depreciation of $34,008 and $36,428, respectively			110,263				109,935
Property and equipment, net of accumulated depreciation of $7,210 and $7,578, respectively			7,626				7,302
Goodwill, net of accumulated amortization of $325, both periods			10,039				10,039
Intangibles, net of accumulated amortization of $1,497 and $1,562, respectively			2,721				2,656
Other assets			19				19
Total assets		$	186,871			$	180,907
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt		$	3,378			$	3,378
Line of credit			7,000				500
Accounts payable			2,239				1,113
Accrued liabilities			1,485				1,496
Current income tax liability			1,708				2,265
Deferred income			90				113
Total current liabilities			15,900				8,865
Long -term debt, less current portion			2,817				1,972
Deferred income tax payable			25,498				25,775
Other long term liabilities			558				557
Total liabilities			44,773				37,169
Stockholders’ equity:
Preferred stock, 5,000 shares authorized, no shares issued or outstanding			—				—
Common stock, 30,000 shares authorized, par value $0.01;12,101 and 12,103 shares issued and outstanding, respectively			121				121
Additional paid-in capital			84,570				84,846
Retained earnings			57,407				58,771
Total stockholders' equity			142,098				143,738
Total liabilities and stockholders' equity		$	186,871			$	180,907

NATURAL GAS SERVICES GROUP, INC. INCOME STATEMENTS (in thousands, except earnings per share) (unaudited)
									Three months ended March 31,
									2009				2010
Revenue:
Sales, net									$	6,929			$	1,461
Rental income										12,788				9,876
Service and maintenance income										308				212
Total revenue										20,025				11,549
Operating costs and expenses:
Cost of sales, exclusive of depreciation stated separately below										4,529				991
Cost of rentals, exclusive of depreciation stated separately below										4,689				3,803
Cost of service and maintenance, exclusive of depreciation stated separately below										215				154
Selling, general, and administrative expense										1,577				1,499
Depreciation and amortization										2,958				2,874
Total operating costs and expenses										13,968				9,321
Operating income										6,057				2,228
Other income (expense):
Interest expense										(160	)			(74	)
Other income (expense)										(47	)			(23	)
Total other income (expense)										(207	)			(97	)
Income before provision for income taxes										5,850				2,131
Provision for income taxes										(2,053	)			(767	)
Net income									$	3,797			$	1,364
Earnings per share:
Basic									$	0.31			$	0.11
Diluted									$	0.31			$	0.11
Weighted average shares outstanding:
Basic										12,094				12,102
Diluted										12,099				12,185

NATURAL GAS SERVICES GROUP, INC. STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
	Three Months Ended March 31,
	2009					2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,797				$	1,364
Adjustments to reconcile net income to net cash provided by operating   activities:
Depreciation and amortization		2,958					2,874
Deferred taxes		2,053					210
Employee stock options expense		121					306
Gain on disposal of assets		4					—
Changes in current assets and liabilities:
Trade accounts receivables, net		1,000					3,534
Inventory, net		2,540					754
Prepaid income taxes and prepaid expenses		(107		)			(214	)
Accounts payable and accrued liabilities		(6,651		)			(1,115	)
Current income tax liability		—					557
Deferred income		104					23
NET CASH PROVIDED BY OPERATING ACTIVITIES		5,819					8,293
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(5,824		)			(2,383	)
Redemption of short-term investments		2,300					—
Proceeds from sale of property and equipment		19					—
NET CASH USED IN INVESTING ACTIVITIES		(3,505		)			(2,383	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from other long-term liabilities, net		123					(1	)
Repayments of long-term debt		(845		)			(845	)
Repayments of line of credit		—					(6,500	)
Proceeds from exercise of stock options		—					37
NET CASH USED IN FINANCING ACTIVITIES		(722		)			(7,309	)
NET CHANGE IN CASH		1,592					(1,399	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,149					23,017
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,741				$	21,618
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	164				$	100
Income taxes paid	$	—				$	200
NON-CASH TRANSACTIONS:
Transfer of rental equipment to inventory	$	1,286				$	225