U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDING
SEPTEMBER 30, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO _________.
Commission File Number 0-14908
TGC INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Texas 74-2095844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1304 Summit, Suite 2
Plano, Texas 75074
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number, including area code: (972) 881-1099
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ____
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at October 31, 1997
Common Stock ($.10 Par Value) 6,455,485
PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of September 30, 1997.
Statements of Operations for the three and nine month
periods ended September 30, 1997 and 1996.
Statements of Cash Flows for the nine month periods
ended September 30, 1997 and 1996.
Notes to Financial Statements.
TGC INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C> <C>
SEPTEMBER 30,
1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 254,650
Accounts receivable 2,011,173
Costs and estimated earnings in excess
of billings on uncompleted contracts 46,161
Prepaid expenses 328,957
----------
Total current assets 2,640,941
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 9,516,960
Automobiles and trucks 679,537
Furniture and fixtures 317,167
---------
10,513,664
Less accumulated depreciation (3,077,837)
---------
7,435,827
OTHER ASSETS 65,232
---------
Total assets $ 10,142,000
==========
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
BALANCE SHEET - CONTINUED
(UNAUDITED)
<TABLE>
<S> <C> <C>
SEPTEMBER 30,
1997
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 1,258,036
Accrued liabilities 317,076
Billings in excess of costs and
estimated earnings on uncompleted
contracts 1,801,941
Current maturities of long-term
obligations 1,425,281
---------
Total current liabilities 4,802,334
LONG-TERM OBLIGATIONS, less current
maturities 1,953,601
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value;
4,000,000 shares authorized;
1,148,850 issued and outstanding 1,148,850
Common stock, $.10 par value;
25,000,000 shares authorized;
6,400,820 shares issued 640,082
Additional paid-in capital 5,599,428
Accumulated deficit (3,803,106)
Treasury stock, at cost
(85,082 shares) (199,189)
-----------
3,386,065
Total liabilities and stockholders'
equity $ 10,142,000
==========
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
(Unaudited) (Unaudited)
1997 1996 1997 1996
Revenue $4,163,699 $2,640,350 $11,220,350 $7,100,277
Other income 2,634 - 427,006 -
4,166,333 2,640,350 11,647,356 7,100,277
Cost of services 3,598,677 2,205,956 10,125,181 5,980,366
Selling, general, adm. 217,059 204,164 674,741 603,741
3,815,736 2,410,120 10,799,922 6,584,107
INCOME FROM OPERATIONS 350,597 230,230 847,434 516,170
Interest expense 40,245 2,391 126,192 35,534
INCOME FROM CONTINUING
OPERATIONS 310,352 227,839 721,242 480,636
Discontinued operations
Income (loss) from
operations - 2,409 - (1,402,706)
NET INCOME (LOSS) 310,352 230,248 721,242 (922,070)
Less dividend requirement
on preferred stock 114,885 100,975 344,655 100,975
--------- --------- --------- ----------
INCOME (LOSS) ALLOCABLE
TO COMMON STOCKHOLDERS $ 195,467 $ 129,273 $ 376,587 $ (1,023,045)
Earnings (loss) per common
and common equivalent share:
Primary earnings (loss) per share:
Continuing operations $.03 $.02 $.05 $ .06
Discontinued operations - - - (.21)
--- --- --- -----
$.03 $.02 $.05 $(.15)
Fully diluted earnings per share:
Continuing operations $.02 $.02 $.05 $ .06
Weighted average number of common
and common equivalent shares:
Primary 7,037,103 6,870,252 7,016,632 6,859,146
Fully diluted 14,724,062 13,696,505 14,752,054 9,135,919
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
Statements of Cash Flows (Unaudited)
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<S> <C> <C> <C>
Nine Months Ended
September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 721,242 $ (922,070)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Loss from discontinued operations - 1,402,706
Depreciation and amortization 929,798 574,003
Gain on disposal of property and equipment (208,985) (11,585)
Changes in operating assets and liabilities
Accounts receivable (1,123,767) 242,014
Billings in excess of cost and estimated earnings
on uncompleted contracts 1,251,375 846,633
Prepaid expenses (252,414) (237,791)
Accounts payable (225,792) (117,496)
Accrued liabilities 122,217 (49,493)
--------- ----------
NET CASH PROVIDED BY CONTINUING OPERATIONS 1,213,674 1,726,921
NET CASH USED IN DISCONTINUED OPERATIONS - (456,687)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,213,674 1,270,234
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,087,286) (2,405,690)
Proceeds from sale of property and equipment 210,332 14,500
Increase in other assets (33,840) (31,019)
INVESTING ACTIVITIES OF DISCONTINUED
OPERATIONS - (92,442)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (910,794) (2,514,651)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (459,840) -
Proceeds from issuance of debt 337,401 125,813
Proceeds from issuance of stock, net of expenses - 5,020,705
Other (18,736) -
Principal payments of debt obligations (562,335) (115,563)
Capital contribution to Chase Packaging Corporation - (2,716,403)
FINANCING ACTIVITIES OF DISCONTINUED
OPERATIONS - (366,348)
-------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (703,510) 1,948,204
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (400,630) 703,787
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 655,280 114,868
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 254,650 $ 818,655
======== ========
Supplemental cash flow information
Cash paid during the year
Interest $ 126,192 $ 27,513
Income taxes $ - $ -
</TABLE>
TGC INDUSTRIES, INC.
Statements of Cash Flows (Unaudited) Continued
Noncash investing and financing activities
(1) On January 7, 1997, options for 4,668 shares and 47,500 shares of Common
Stock at an exercise price of $1.00 and $.40 respectively per share were
exercised. The Company received 14,025 shares of its Common Stock at a
market value of $1.6875 per share as payment for the exercise of the options.
(2) In March 1997, the Company financed the acquisition of equipment through
a capital lease in the amount of $876,656.
(3) In August 1997, the Company financed the acquisition of equipment
through notes in the amounts of $721,494 and $644,535, respectively.
See notes to Financial Statements
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and therefore do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and changes in financial position in
conformity with generally accepted accounting principles.
NOTE B -- MANAGEMENT PRESENTATION
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of financial position,
results of operations, and changes in financial position have been included.
The results of the interim periods are not necessarily indicative of results
to be expected for the entire year. For further information, refer to the
financial statements and the footnotes thereto included in the Company's
Annual Report for the year ended December 31, 1996 filed on Form 10-KSB.
NOTE C -- EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per common and common equivalent share are computed
by dividing net earnings (loss), after deducting preferred stock dividends,
by the weighted average number of common shares outstanding during each
period plus the incremental shares that would have been outstanding upon the
assumed exercise of dilutive stock options and warrants. Fully diluted
earnings (loss) per share are computed by dividing net earnings (loss) by the
weighted average number of common shares outstanding during each period plus
the incremental shares that would have been outstanding upon the
assumed exercise of dilutive stock options, warrants and conversion of the
preferred shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
TGC Industries, Inc. ("TGC") reported revenues from continuing operations
increased significantly to $4,163,699 for the three months ended September
30, 1997, advancing 58% from $2,640,350 for the same period of the prior
year. Income from continuing operations, before the dividend requirement on
preferred stock, increased to $310,352, a 36% improvement from $227,839 for
the same quarter of 1996. Income per common share, on a fully diluted basis,
from continuing operations was $.02 for the third quarter of 1997, as
compared with income from continuing operations of $.02 per common share for
the same period of 1996.
For the nine month period ended September 30, 1997, revenues from continuing
operations increased to $11,220,350, advancing 58% from $7,100,277 for the
same period in 1996. Income from continuing operations before dividend
requirements on preferred stock increased to $721,242, a 50% improvement from
$480,636 for the same period in 1996. Income per common share, on a fully
diluted basis, from continuing operations, was $.05 for the first nine months
of 1997, as compared to income from continuing operations of $.06 for the
same period in 1996.
In August, 1997, the Company took delivery of 500 additional channels of
recording equipment for each of its two crews which will improve
capabilities and productivity. With this new equipment and significant
backlog, management believes that TGC will be reorting record revenues and
earnings for 1997.
TGC operates two land seismic crews primarily conducting Three-D ("3-D") data
gathering for clients in the oil and gas business. Given the unpredictable
nature of forecasting weather, the potential for contract delay or
cancellation and the potential for fluctuations in oil and gas prices, no
assurance can be given that management's expectations can be achieved.
FINANCIAL CONDITION
Cash of $1,213,674 was provided from continuing operations for the first nine
months of 1997 compared with cash provided from continuing operations of
$1,726,921 for the first nine months of 1996. The funds generated in the
first nine months of 1997 were primarily attributable to net earnings before
non-cash depreciation charges. Cash used in investing activities for the
first nine months of 1997 was primarily for additions to machinery and
equipment for geophysical field operations. Cash used in financing
activities for the first nine months of 1997 was primarily for
preferred stock dividend payments of $459,840 and principal payments of debt
obligations in the amount of $562,335.
Working capital decreased $875,864 to $(2,161,393) from the December 31, 1996
balance of $(1,285,529) primarily as a result of an increase in current
maturities of long-term obligations and billings in excess of costs and
estimated earnings on uncompleted contracts. The Company's current ratio was
.5 to 1 at September 30, 1997, compared with .6 to 1 at December 31, 1996.
The Company is in the process of securing a working capital revolving credit
line in the amount of $1,000,000 from a major bank. Management anticipates
that negotiations should be complete and the revolving credit line will be in
place by the end of November 1997. Management believes that this revolving
credit line will provide the additional working capital required to support
the significant increase that has occurred in the Company's backlog during
this year.
In August 1997, the Company purchased an additional 500 channels of recording
equipment for each of its two crews utilizing equipment financing of
$1,366,029.
Stockholders' equity increased $368,759 from the December 31, 1996 balance of
$3,017,306 to $3,386,065 at September 30, 1997. This increase is primarily
attributable to income allocable to common stockholders, for the nine months
ended September 30, 1997, of $376,587.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -- None.
b. Reports -- No reports on Form 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned officers,
thereunto duly authorized.
TGC INDUSTRIES, INC.
Date: November 12, 1997
/s/ Robert J. Campbell
Robert J. Campbell
Vice Chairman of the Board
(Principal Executive Officer)
Date: November 12, 1997 /s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 254,650
<SECURITIES> 0
<RECEIVABLES> 2,011,173
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,640,941
<PP&E> 10,513,664
<DEPRECIATION> 3,077,837
<TOTAL-ASSETS> 10,142,000
<CURRENT-LIABILITIES> 4,802,334
<BONDS> 1,953,601
<COMMON> 640,082
0
1,148,850
<OTHER-SE> 1,597,133
<TOTAL-LIABILITY-AND-EQUITY> 10,142,000
<SALES> 0
<TOTAL-REVENUES> 11,647,356
<CGS> 0
<TOTAL-COSTS> 10,125,181
<OTHER-EXPENSES> 674,741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,192
<INCOME-PRETAX> 376,587
<INCOME-TAX> 0
<INCOME-CONTINUING> 376,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 376,587
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
