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
MARCH 31, 1998.
[ ] 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 April 21, 1998
Common Stock ($.10 Par Value) 6,475,485
PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial
information:
Balance Sheet as of March 31, 1998.
Statements of Operations for the three-month periods
ended March 31, 1998 and 1997.
Statements of Cash Flows for the three-month periods
ended March 31, 1998 and 1997.
Notes to Financial Statements.
TGC INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
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MARCH 31, 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 443,425
Accounts receivable 887,425
Prepaid expenses and other 167,848
Deferred income taxes 170,000
Total current assets 1,668,698
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 9,950,734
Automobiles and trucks 705,881
Furniture and fixtures 317,167
10,973,782
Less accumulated depreciation ( 3,631,404)
7,342,378
OTHER ASSETS 35,057
Total assets 9,046,133
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
BALANCE SHEET - CONTINUED
(UNAUDITED)
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MARCH 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 1,073,861
Accrued liabilities 161,879
Billings in excess of costs and
estimated earnings on uncompleted
contracts 1,191,268
Current maturities of long-term
obligations 1,354,306
Total current liabilities 3,781,314
LONG-TERM OBLIGATIONS, less current
maturities 1,316,490
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value;4,000,000
shares authorized; 1,129,350 issued and
outstanding 1,129,350
Common stock, $.10 par value; 25,000,000
shares authorized; 6,571,317 shares
issued 657,132
Additional paid-in capital 5,379,946
Accumulated deficit (3,002,785)
Treasury stock, at cost (95,832 shares) ( 215,314)
3,948,329
Total liabilities and stockholders'
equity $ 9,046,133
See notes to Financial Statements
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TGC INDUSTRIES, INC.
Statements of Operations
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Three Months Ended
March 31
(Unaudited)
1998 1997
Revenue $ 4,319,329 $ 2,740,353
Cost of services 3,776,207 2,527,915
Selling, general, adm. 258,292 209,308
4,034,499 2,737,223
INCOME FROM OPERATIONS 284,830 3,130
Interest expense 69,307 42,982
NET INCOME (LOSS) 215,523 ( 39,852)
Less dividend requirement on
preferred stock 112,935 114,885
INCOME (LOSS) ALLOCABLE TO
COMMON STOCKHOLDERS $ 102,588 $( 154,737)
Earnings (loss) per common share
Basic $ .02 $ (.02)
Diluted $ .01 $ (.02)
Weighted average number of
common shares
Basic 6,475,485 6,309,549
Diluted 14,520,248 6,309,549
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
Statements of Cash Flows
(Unaudited)
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Three Months Ended
March 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 215,523 $( 39,852)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 414,196 269,996
Gain on disposal of property and equipment - (208,985)
Changes in operating assets and liabilities
Accounts receivable 1,614,457 524,997
Billings in excess of cost and estimated
earnings on uncompleted contracts (1,034,443) (260,107)
Prepaid expenses ( 33,219) (216,540)
Accounts payable ( 336,807) 374,090
Accrued liabilities ( 51,788) (274,718)
NET CASH PROVIDED BY OPERATING ACTIVITIES 787,919 168,881
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ( 148,979) (594,187)
Proceeds from sale of property and
equipment - 210,332
(Increase) decrease in other assets 175 ( 33,840)
NET CASH USED IN INVESTING ACTIVITIES ( 148,804) (417,695)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of debt obligations ( 319,038) (117,754)
Other 2,813 -
NET CASH USED IN FINANCING ACTIVITIES ( 316,225) (117,754)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 322,890 (366,568)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 120,535 655,280
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 443,425 $ 288,712
Supplemental cash flow information
Cash paid during the period
Cash paid for interest $ 69,307 $ 42,982
Cash paid for income taxes $ 10,230 $ -
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
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, 1997 filed on Form
10-KSB.
NOTE C -- EARNINGS (LOSS) PER SHARE
During December 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share."
Under SFAS 128, basic earnings (loss) per common share is based
upon the weighted average number of shares of common stock
outstanding. Diluted earnings (loss) per share is based upon the
weighted average number of common shares outstanding and, when
dilutive, common shares outstanding and, when dilutive, common
shares issuable for stock options, warrants, and convertible
securities. Earnings (loss) per share data for 1997 has been
restated to conform to the provisions of SFAS 128.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TGC Industries, Inc. ("TGC") reported revenues increased to
$4,319,329 for the three months ended March 31, 1998, from
$2,740,353 for the same period of the prior year. Net income,
before dividend requirements on preferred stock increased to
$215,523, compared with a loss, before dividend requirements on
preferred stock, of $39,852 for the same period of the prior year.
Income per common share, on a diluted basis, was $.01 for the first
quarter of 1998, as compared with a loss of $.02 per common share
for the same period of 1997.
TGC's cost of services, as a percentage of revenue, was 87.4% for
the first quarter of 1998 compared with 92.2% for the same period
of 1997. Selling, general, and administrative expense, as a
percentage of revenue, was 6.0% for the first quarter of 1998
compared with 7.6% for the first quarter of 1997. Interest expense
increased by $26,325 in the first quarter of 1998 when compared
with the same period of 1997. This increase was primarily a result
of the financing of additional geophysical equipment in the second
half of 1997. Non-cash charges for depreciation were $414,196 in
the first quarter of 1998 compared with $269,996 for the same
period in 1997.
TGC operates two land seismic crews primarily conducting Three-D
("3-D") data gathering for clients in the oil and gas business.
TGC crews are under contract through September 1998, and the
Company is working on securing contracts for the balance of 1998.
A large portion of the Company's current backlog is in natural gas
exploration, which, due to higher natural gas prices than a year
ago, may soften the adverse impact of lower oil prices.
This report contains forward-looking statements which reflect the
view of Company's management with respect to future events.
Although management believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ
materially from such expectations are disclosed in the Company's
Securities and Exchange Commission filings, and include, without
limitation, the unpredictable nature of forecasting weather, the
potential for contract delay or cancellation, and the potential for
fluctuations in oil and gas prices. The forwarding-looking
statements contained herein reflect the current views of the
Company's management and the Company assumes no obligation to
update the forward-looking statements or to update the reasons
actual results could differ from those contemplated by such
forward-looking statements.
FINANCIAL CONDITION
Cash of $787,919 was provided from operations for the first quarter
of 1998 compared with cash provided from operations of $168,881 for
the same period of 1997. The funds generated in the first three
months of 1998 were primarily attributable to net earnings before
non-cash depreciation charges. Cash used in investing activities
for the first three months of 1998 was primarily for the
replacement of equipment in the amount of $148,979. Cash used in
financing activities for the first three months of 1998 was
primarily for principal payments of debt obligations in the amount
of $319,038.
Working capital deficit decreased $135,271 to $2,112,616 from the
December 31, 1997 balance of $2,247,887. The Company's current
ratio was .44 to 1.0 at March 31, 1998, compared with .57 to 1.0 at
December 31, 1997. Stockholders equity increased $218,336 from the
December 31, 1997 balance of $3,729,993 to $3,948,329 at March 31,
1998. This increase was primarily attributable to net income for
the three months ended March 31, 1998, of $215,523.
During the fourth quarter of 1997, to support future growth of the
Company, a $1,000,000 revolving bank line of credit was secured
from a major bank. The line of credit bears interest at prime plus
1.5%, is collateralized by equipment and accounts receivable and
requires the maintenance of certain financial ratios.
The Company anticipates that available funds, together with
anticipated cash flows generated from future operations and amounts
available under its revolving line of credit will be sufficient to
meet the Company's cash needs during 1998.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -- Exhibit 27 - Financial Data Schedule.
b. Reports -- A report under Item 7 of Form 8-K was filed on
March 31, 1998, to report the Restated Financial Data Schedules on
earnings [loss] per share data to conform to the provisions of SFAS
128 for (a) Fiscal Year Ended December 31, 1996; (b) Quarter Ended
March 31, 1997; (c) Quarter Ended June 30, 1997; and (d) Quarter
Ended September 30, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TGC INDUSTRIES, INC.
Date: May 12, 1998
/s/ Robert J. Campbell
Robert J. Campbell
Vice Chairman of the Board
(Principal Executive Officer)
Date: May 12, 1998
/s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial
and Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 443,425
<SECURITIES> 0
<RECEIVABLES> 887,425
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,668,698
<PP&E> 10,973,782
<DEPRECIATION> 3,631,404
<TOTAL-ASSETS> 9,046,133
<CURRENT-LIABILITIES> 3,781,314
<BONDS> 1,316,490
<COMMON> 657,132
0
1,129,350
<OTHER-SE> 2,161,847
<TOTAL-LIABILITY-AND-EQUITY> 9,046,133
<SALES> 0
<TOTAL-REVENUES> 4,319,329
<CGS> 0
<TOTAL-COSTS> 3,776,207
<OTHER-EXPENSES> 258,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,307
<INCOME-PRETAX> 102,588
<INCOME-TAX> 0
<INCOME-CONTINUING> 102,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,588
<EPS-PRIMARY> .02
<EPS-DILUTED> .01
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