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Item 5. Market for Registrant’s Common Equity

2021-03-31 compared with 2020-03-31 · 6 added, 108 removed, 41 unchanged (74% of the section changed)

31 unchanged sentences

(2) The Restricted Stock/Unit Plan expired on June 20, 2019.

The outstanding shares/units as of December 31, 2019, will vest over the next two years.

The outstanding shares/units as of December 31, 2020, will vest in 2021 assuming the participant remains employed up to the vesting date, subject to acceleration under certain circumstances.

Stock Repurchase Program

1 unchanged sentence

The timing and extent of any repurchase is subject to the discretion of management and is dependent upon market pricing and conditions, business, legal, accounting and other considerations.

The repurchase program does not obligate the Company to purchase any shares and will expire on September 30, 2020, subject to earlier termination of the program by the Board of Directors.

The repurchase program does not obligate the Company to purchase any shares and was set to expire on September 30, 2020, subject to earlier termination of the program by the Board of Directors.

On October 23, 2020, the Board of Directors authorized the extension of the repurchase program through September 30, 2021.

The repurchase program may be modified, suspended or terminated at any time without notice, in the Company’s discretion, based upon a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, the need for capital in the Company’s operations and other factors deemed appropriate.

The Company intends to finance the repurchases with existing liquidity and free cash flow.

As of December 31, 2019, the Company repurchased 37,936 of its outstanding shares of common stock with a value of $490,000, at an average price of $12.91.

No repurchases were made during the fourth quarter of 2019.

To date, the Company repurchased 37,936 of its outstanding shares of common stock with a value of $490,000, at an average price of $12.91.

No repurchases were made during 2020.

As of December 31, 2020, the Company had approximately $9.5 million remaining under the repurchase authorization.

2 unchanged sentences

SELECTED FINANCIAL DATA

In the table below, we provide you with selected historical financial data.

We have derived this information from our audited financial statements for each of the years in the five-year period ended December 31, 2019.

In the table we also present non-GAAP financial measures, Adjusted EBITDA and Adjusted Gross Margin, which we use in our business.

These measures are not calculated or presented in accordance with GAAP.

We explain these measures below and reconcile them to the most directly comparable financial measure calculated and presented in accordance with GAAP in "Non-GAAP Financial Measures." This information is only a summary and it is important that you read this information along with our audited financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 below, which discusses factors affecting the comparability of the information presented.

The selected financial information provided is not necessarily indicative of our future results of operations or financial performance.

Year Ended December 31,

2019 2018 2017 2016 2015

(in thousands, except per share amounts)

STATEMENTS OF OPERATIONS AND OTHER INFORMATION:

Revenues $ 78,444 $ 65,478 $ 67,693 $ 71,654 $ 95,919

Costs of revenues, exclusive of depreciation and amortization shown separately below

44,310 34,809 34,552 31,306 42,450

Selling, general and administrative expenses 10,710 9,096 10,081 9,011 10,989

Depreciation and amortization 23,268 22,080 21,316 21,796 22,758

Impairment of goodwill 10,039 — — — —

Inventory allowance 3,758 — 273 566 205

Retirement of rental equipment 1,512 — — 545 4,370

Operating (loss) income (15,153) (507) 1,471 8,430 15,147

Total other income, net 596 113 36 35 117

(Loss) Income before income taxes (14,557) (394) 1,507 8,465 15,264

Income tax benefit (expense) 693 (72) 18,287 (1,996) (5,117)

Net (loss) income $ (13,864) $ (466) $ 19,794 $ 6,469 $ 10,147

(Loss) earnings per share:

Basic $ (1.06) $ (0.04) $ 1.54 $ 0.51 $ 0.81

Diluted $ (1.06) $ (0.04) $ 1.51 $ 0.50 $ 0.79

Weighted average shares outstanding:

Basic 13,114 12,965 12,831 12,702 12,567

Diluted 13,114 12,965 13,110 12,935 12,793

Adjusted EBITDA (1)

$ 24,035 $ 21,755 $ 23,110 $ 31,380 $ 42,612

Adjusted gross margin (2)

$ 34,134 $ 30,669 $ 33,141 $ 40,348 $ 53,469

Cash flows from:

Operating Activities $ 29,412 $ 23,689 $ 17,499 $ 31,785 $ 41,566

Investing Activities (70,175) (40,285) (12,838) (3,414) (12,270)

Financing Activities (273) 16 453 191 55

Net change in cash and cash equivalents $ (41,036) $ (16,580) $ 5,114 $ 28,562 $ 29,351

2019 2018 2017 (3)

BALANCE SHEET INFORMATION:

(in thousands)

Current assets $ 42,415 $ 94,921 $ 108,143 $ 95,359 $ 68,074

Total assets 286,577 304,200 298,260 293,524 285,553

Long-term debt (including current portion) 417 417 417 417 417

Stockholders’ equity 247,693 259,232 257,262 232,954 223,981

(1) Adjusted EBITDA is defined, reconciled to net income and discussed immediately below under “Non-GAAP Financial Measures.”

(2) Adjusted Gross Margin is defined, reconciled to operating income and discussed immediately below under "Non-GAAP Financial Measures."

(3) As disclosed in Notes 2, 17 and 18 to our consolidated financial statements, we revised certain prior period financial information to reflect additional, immaterial operating costs and expenses.

The impact of these revisions on our balance sheet for the year ended December 31, 2017, which is not included within our consolidated financial statements, was a decrease to current assets of $83,000, a decrease to total assets of $50,000, and a decrease to stockholders' equity of $57,000.

Non-GAAP Financial Measures

Our definition and use of Adjusted EBITDA

“Adjusted EBITDA” is a non-GAAP financial measure that we define as earnings (net (loss) income) before interest, taxes, depreciation and amortization, as well as impairment of goodwill, an increase in inventory allowance and inventory write-offs, and retirement of rental equipment.

This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP.

Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

• it is widely used by investors in the energy industry to measure a company’s operating performance without regard to items excluded from the calculation of Adjusted EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;

• it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating structure;

• it is used by our management for various purposes, including as a measure of operating performance, in presentations to our Board of Directors, as a basis for strategic planning and forecasting, and as a component for setting incentive compensation.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under generally accepted accounting principles.

Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures, future requirements for capital expenditures, or contractual commitments;

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted EBITDA does not reflect the cash requirements necessary to service interest or principal payments on our debts;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any capital expenditures for such replacements.

There are other material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of certain recurring items that materially affect our net income or loss, and the lack of comparability of

results of operations of different companies.

Please read the table below under “Reconciliation” to see how Adjusted EBITDA reconciles to our net income, the most directly comparable GAAP financial measure.

Reconciliation

The following table reconciles our net (loss) income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:

Year Ended December 31,

2019 2018 2017 2016 2015

(in thousands)

Net (loss) income $ (13,864) $ (466) $ 19,794 $ 6,469 $ 10,147

Interest expense 15 69 14 8 15

Income tax (benefit) expense (693) 72 (18,287) 1,996 5,117

Depreciation and amortization 23,268 22,080 21,316 21,796 22,758

Impairment of goodwill 10,039 — — — —

Inventory allowance 3,758 — 273 566 205

Retirement of rental equipment 1,512 — — 545 4,370

Adjusted EBITDA $ 24,035 $ 21,755 $ 23,110 $ 31,380 $ 42,612

Our definition and use of Adjusted Gross Margin

We define “Adjusted Gross Margin” as total revenue less costs of revenues (excluding depreciation and amortization expense).

Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and costs (excluding depreciation and amortization expense), which are key components of our operations.

Adjusted gross margin differs from gross margin, in that gross margin includes depreciation expense.

We believe adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations.

Depreciation expense does not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs from current operating activity.

Rather, depreciation expense reflects the systematic allocation of historical property and equipment values over the estimated useful lives.

Adjusted gross margin has certain material limitations associated with its use as compared to gross margin.

These limitations are primarily due to the exclusion of depreciation expense, which is material to our results of operations.

Because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue.

In order to compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.

As an indicator of our operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin as determined in accordance with GAAP.

Our adjusted gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate adjusted gross margin in the same manner.

Reconciliation

The following table calculates gross margin, the most directly comparable GAAP financial measure, and reconciles it to adjusted gross margin:

Year Ended December 31,

2019 2018 2017 2016 2015

(in thousands)

Total revenue $ 78,444 $ 65,478 $ 67,693 $ 71,654 $ 95,919

Costs of revenue, exclusive of depreciation and amortization (44,310) (34,809) (34,552) (31,306) (42,450)

Depreciation allocable to costs of revenue (22,908) (21,904) (21,162) (21,641) (22,605)

Gross margin 11,226 8,765 11,979 18,707 30,864

Depreciation allocable to costs of revenue 22,908 21,904 21,162 21,641 22,605

Adjusted gross margin $ 34,134 $ 30,669 $ 33,141 $ 40,348 $ 53,469

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity