What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-12 compared with 2021-08-16 · 70 added, 59 removed, 419 unchanged (24% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

June 30, December 31,

(in thousands, except par value)

September 30, December 31,

Current Assets:

45 unchanged sentences

(in thousands, except earnings per share)

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

17 unchanged sentences

Interest expense ( 25 ) ( 2 ) ( 40 ) ( 13 )

Other income (expense), net 50 378 151 193

Other income, net 119 214 270 407

Total other income (expense), net 94 212 230 394

Loss before provision for income taxes ( 1,469 ) ( 729 ) ( 3,994 ) ( 968 )

Income tax (expense) benefit 339 ( 57 ) 213 4,486

Income tax benefit 212 167 425 4,653

Net (loss) income $ ( 1,257 ) $ ( 562 ) $ ( 3,569 ) $ 3,685

23 unchanged sentences

BALANCES, June 30, 2020 — — 13,286 133 111,489 141,725 38 ( 490 ) 252,857

Compensation expense on common stock options — — — — 1 — — — 1

Issuance of restricted stock — — 4 — — — — — —

Compensation expense on restricted common stock — — — — 562 — — — 562

Net loss — — — — — ( 562 ) — — ( 562 )

BALANCES, September 30, 2020 — $ — 13,290 $ 133 $ 112,052 $ 141,163 38 $ ( 490 ) $ 252,858

NATURAL GAS SERVICES GROUP, INC.

15 unchanged sentences

BALANCES, June 30, 2021 — — 13,394 134 113,175 136,974 213 ( 2,382 ) 247,901

Compensation expense on restricted common stock — — — — 421 — — — 421

Purchase of treasury shares — — — — — — 258 ( 2,540 ) ( 2,540 )

Net loss — — — — — ( 1,257 ) — — ( 1,257 )

BALANCES, September 30, 2021 — $ — 13,394 $ 134 $ 113,596 $ 135,717 471 $ ( 4,922 ) $ 244,525

See accompanying notes to these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six months ended

Nine months ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

16 unchanged sentences

Deferred tax liability increase due to tax law change — 10,103

Other 373 226

NET CASH PROVIDED BY OPERATING ACTIVITIES 19,958 27,932

35 unchanged sentences

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, 2021 and the results of our operations for the three and six months ended June 30, 2021 and 2020 not misleading.

These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at September 30, 2021 and the results of our operations for the three and nine months ended September 30, 2021 and 2020 not misleading.

As permitted by the rules and regulations of the Securities and Exchange Commission (SEC), the accompanying condensed consolidated financial statements do not include all disclosures normally required by generally accepted accounting principles in the United States of America (GAAP).

1 unchanged sentence

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, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021.

Revenue Recognition Policy

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606").

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.

31 unchanged sentences

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 three months ended June 30, 2021.

Revenue recognized related to bill and hold arrangements for the six months ended June 30, 2020 was approximately $ 852,000 .

There was no revenue recognized for bill and hold arrangements for the nine months ended September 30, 2021.

Revenue recognized related to bill and hold arrangements for the nine months ended September 30, 2020 was approximately $ 852,000 .

Parts - Revenue is recognized after the customer obtains control of the parts.

11 unchanged sentences

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, 2021 and 2020:

Three months ended June 30, Six months ended June 30,

The following table shows the Company's revenue disaggregated by product or service type for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

8 unchanged sentences

Contract Balances

As of June 30, 2021 and December 31, 2020, we had the following receivables and deferred income from contracts with customers:

June 30, 2021 December 31, 2020

As of September 30, 2021 and December 31, 2020, we had the following receivables and deferred income from contracts with customers:

September 30, 2021 December 31, 2020

(in thousands)

6 unchanged sentences

Deferred income $ 693 $ 1,103

The Company recognized sales and rental revenues of $ 1.1 million and $ 2,000 , respectively, for the six months ended June 30, 2021 that was included in deferred income at the beginning of 2021.

The Company recognized sales and rental revenues of $ 1.1 million and $ 2,000 , respectively, for the nine months ended September 30, 2021 that was included in deferred income at the beginning of 2021.

For the year ended December 31, 2020, the Company recognized sales and rental revenues of $ 533,000 and $ 73,000 , respectively, that was included in deferred income at the beginning of 2020.

The increases (decreases) of accounts receivable and deferred income were primarily due to normal timing differences between our performance and the customers’ payments.

The decreases of accounts receivable and deferred income were primarily due to normal timing differences between our performance and the customers’ payments.

Remaining Performance Obligations

As of June 30, 2021, the Company did no t have revenue related to unsatisfied performance obligations.

As of September 30, 2021, the Company did no t have revenue related to unsatisfied performance obligations.

Contract Costs

9 unchanged sentences

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, 2021.

We have no liabilities for uncertain tax positions as of September 30, 2021.

Our policy regarding income tax interest and penalties is to expense those items as interest expense and other expense, respectively.

9 unchanged sentences

We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements and note disclosures.

Our inventory, net of allowance for obsolescence of $ 37,000 at June 30, 2021 and $ 221,000 at December 31, 2020, consisted of the following amounts:

June 30, 2021 December 31, 2020

Our inventory, net of allowance for obsolescence of $ 37,000 at September 30, 2021 and $ 221,000 at December 31, 2020, consisted of the following amounts:

September 30, 2021 December 31, 2020

(in thousands)

6 unchanged sentences

Inventory Allowance

Due to the slow moving nature or obsolescence of a portion of its long-term inventory and inventory related to the periodic retirement of rental equipment, the Company routinely reviews its inventory allowance balance for costs that may not be recoverable in the future.

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:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in thousands)

7 unchanged sentences

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, 2021.

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 September 30, 2021.

Rental Equipment

Our rental equipment and associated accumulated depreciation as of June 30, 2021 and December 31, 2020, respectively, consisted of the following:

June 30, 2021 December 31, 2020

Our rental equipment and associated accumulated depreciation as of September 30, 2021 and December 31, 2020, respectively, consisted of the following:

September 30, 2021 December 31, 2020

(in thousands)

4 unchanged sentences

Rental equipment, net of accumulated depreciation $ 208,396 $ 207,585

We evaluated our rental equipment for potential impairment as of June 30, 2021, and determined that no such impairment existed as of that date.

We evaluated our rental equipment for potential impairment as of September 30, 2021, and determined that no such impairment existed as of that date.

Credit Facility

11 unchanged sentences

At any time before the maturity of the New 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) 90 % of eligible accounts receivable owed to the Company by investment grade debtors, plus (b) 85 % of the eligible accounts receivable owing by non-investment grade debtors, plus (c) 50 % of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $ 2.0 million, plus (d) 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 (e) 80 % of the value at cost (excluding any costs for capitalized interest or other non-cash capitalized costs) of the eligible new compressor fleet, minus (f) any required availability reserves determined by the Lender in its sole discretion.

valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $ 2.0 million, plus (d) 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 (e) 80 % of the value at cost (excluding any costs for capitalized interest or other non-cash capitalized costs) of the eligible new compressor fleet, minus (f) any required availability reserves determined by the Lender in its sole discretion.

The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral.

As of June 30, 2021, our allowable borrowing base was $ 20.0 million.

As of September 30, 2021, our allowable borrowing base was $ 20.0 million.

Interest and Fees.

5 unchanged sentences

Depending on the leverage ratio, the Applicable Margin can be 0.25 % to 0.75 % for Base Rate Loans (as defined in the New Credit Agreement) and 1.25 % to 1.75 % for Eurodollar Rate Loans and for requested letters of credit.

Accrued interest is payable monthly on outstanding principal amounts, provided that accrued interest on Eurodollar Rate Loans is payable at the end of each interest period, but in no event less frequently than quarterly.

In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the New Credit Agreement is in effect at an annual rate equal to 0.25 % of the unused commitment amount.

Accrued interest is payable monthly on outstanding principal amounts and unused commitment fee, provided that accrued interest on Eurodollar Rate Loans is payable at the end of each interest period, but in no event less frequently than quarterly.

The New 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;

19 unchanged sentences

Obligations outstanding under the Credit Agreement may be accelerated upon the occurrence of an event of default.

As of June 30, 2021, we were in compliance with all financial covenants in our New Credit Agreement.

A default under our New Credit Agreement could trigger the acceleration of our debt such that it is immediately due and payable.

Such default would likely limit our ability to access other credit.

At June 30, 2021, we had no amounts outstanding under the New Credit Agreement.

As of September 30, 2021, we were in compliance with all financial covenants in our New Credit Agreement.

At September 30, 2021, we had no amounts outstanding under the New Credit Agreement.

Stock-Based and Other Long-Term Incentive Compensation

Stock Options

A summary of all option activity as of December 31, 2020, and changes during the six months ended June 30, 2021 is presented below.

A summary of all option activity as of December 31, 2020, and changes during the nine months ended September 30, 2021 is presented below.

Stock Options

6 unchanged sentences

( 16,000 ) 17.81 — —

Outstanding, June 30, 2021 145,334 $ 25.21 3.37 $ —

Exercisable, June 30, 2021 145,334 $ 25.21 3.37 $ —

The following table summarizes information about our stock options outstanding at June 30, 2021:

Outstanding, September 30, 2021 145,334 $ 25.21 3.11 $ —

Exercisable, September 30, 2021 145,334 $ 25.21 3.11 $ —

The following table summarizes information about our stock options outstanding at September 30, 2021:

Range of Exercise Prices

12 unchanged sentences

145,334 3.11 $ 25.21 145,334 $ 25.21

As of June 30, 2021 and December 31, 2020, there were no unvested stock options.

As of June 30, 2021, there was no unrecognized compensation cost related to unvested options.

For the six months ended June 30, 2020, total compensation expense for stock options was $ 18,000 .

For the six months ended June 30, 2021 there was no compensation expense for stock options.

As of September 30, 2021 and December 31, 2020, there were no unvested stock options.

As of September 30, 2021, there was no unrecognized compensation cost related to unvested options.

For the nine months ended September 30, 2021 there was no compensation expense for stock options.

For the nine months ended September 30, 2020, total compensation expense for stock options was $ 18,000 .

Restricted Shares/Units

1 unchanged sentence

Based on this review, which included consideration of the Company's 2020 performance, Mr.

Taylor was awarded 109,212 restricted shares/units on March 18, 2021, which vest over three years , in equal annual installments, beginning March 18, 2022.

Taylor was awarded 109,212 restricted shares on March 18, 2021, which vest over three years , in equal annual installments, beginning March 18, 2022.

On March 18, 2021, the Compensation Committee awarded 20,000 restricted shares to our Vice President of Technical Services, James Hazlett.

7 unchanged sentences

These awards of restricted stock vest one year from the date of grant.

Total compensation expense related to these and previously granted restricted stock awards was $ 896,000 and $ 485,000 for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, there was a total of $ 2.2 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 1.9 years.

A summary of all restricted stock/units outstanding as of December 31, 2020 and activity during the six months ended June 30, 2021 is presented below:

Total compensation expense related to these and previously granted restricted stock awards was $ 1.3 million and $ 1.7 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, there was a total of $ 1.8 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 1.7 years.

A summary of all restricted stock/units outstanding as of December 31, 2020 and activity during the nine months ended September 30, 2021 is presented below:

Shares Weighted Average

7 unchanged sentences

( 3,333 ) 12.26 31

Outstanding, June 30, 2021 276,319 $ 9.63 2.27 $ 2,841

Outstanding, September 30, 2021 276,319 $ 9.63 2.03 $ 2,868

Other Long-Term Incentive Compensation

14 unchanged sentences

The vesting of these awards 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).

Total compensation expense related to these other long-term incentive awards was approximately $ 381,000 for the six months ended June 30, 2021.

As of June 30, 2021, there was a total of $ 1.6 million of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 2.1 years.

Total compensation expense related to these other long-term incentive awards was approximately $ 600,000 and $ 252,000 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, there was a total of $ 1.4 million of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 2.0 years.

(Loss) Earnings per Share

The following table reconciles the numerators and denominators of the basic and diluted (loss) earnings per share computation:

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

10 unchanged sentences

Diluted $ ( 0.10 ) $ ( 0.04 ) $ ( 0.27 ) $ 0.27

For the three and six months ended June 30, 2021, 276,319 restricted stock/units and 145,334 stock options were not included in the computation of diluted loss per share due to their antidilutive effect.

For the three months ended June 30, 2020, 168,334 stock options were not included in the computation of diluted earnings per share due to their antidilutive effect.

For the six months ended June 30, 2020, 175,587 stock options were not included in the computation of diluted earnings per share due to their antidilutive effect.

For the three and nine months ended September 30, 2021, 276,319 restricted stock/units and 145,334 stock options were not included in the computation of diluted loss per share due to their antidilutive effect.

For the three months ended September 30, 2020, 262,781 restricted stock/units and 166,334 stock options were not included in the computation of diluted earnings per share due to their antidilutive effect.

For the nine months ended September 30, 2020, 10,774 restricted stock/units and 171,900 stock options were not included in the computation of diluted earnings per share due to their antidilutive effect.

Commitments and Contingencies

9 unchanged sentences

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

For the six months ended June 30, 2021, the Company repurchased 175,007 of its outstanding shares of common stock with a value of $ 1.9 million, at an average price of $ 10.81 .

As of June 30, 2021, the Company has repurchased 212,943 of its outstanding shares of common stock with a value of $ 2.4 million, at an average price of $ 11.19 .

As of June 30, 2021, the Company had approximately $ 7.6 million remaining under the repurchase authorization.

For the nine months ended September 30, 2021, the Company repurchased 432,731 of its outstanding shares of common stock with a value of $ 4.4 million, at an average price of $ 10.24 .

As of September 30, 2021, the expiration date of the plan, the Company had repurchased 470,667 of its outstanding shares of common stock with a value of $ 4.9 million, at an average price of $ 10.46 .

On September 30, 2021, the Board of Directors authorized a new repurchase plan for up to $ 10.0 million of its outstanding shares of common stock in the open market, block trades or privately negotiated transactions.

The terms of the new plan remain unchanged from the terms of the plan that expired on September 30, 2021.

For further information, see Part II Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.

1 unchanged sentence

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-Q

Item 1. Financial Statements