U.S. SECURITIES AND EXCHANGE
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, 1999.
[ ] 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 offices) (Zip Code)
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 30, 1999
Common Stock ($.30 Par Value) 2,224,933
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of March 31, 1999.
Statements of Earnings for the three month periods ended March 31,
1999 and 1998.
Statements of Cash Flows for the three month periods ended March 31,
1999 and 1998
Notes to Financial Statements.
TGC INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C> <C>
MARCH 31,
1999
_______________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 419,168
Accounts receivable 1,009,909
Prepaid expenses and other 87,334
Deferred income taxes 202,000
___________
Total current assets 1,718,411
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 10,839,241
Automobiles and trucks 698,646
Furniture and fixtures 317,167
Other 18,144
___________
11,873,198
Less accumulated depreciation
and amortization (5,380,632)
___________
6,492,566
OTHER ASSETS 963
___________
Total Assets $ 8,211,940
===========
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
BALANCE SHEET--CONTINUED
(UNAUDITED)
<TABLE>
<S> <C> <C>
MARCH 31,
1999
_____________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 379,791
Accrued liabilities 215,800
Billings in excess of costs and estimated
earnings on uncompleted contracts 192,036
Current maturities of long-term obligations 1,161,133
____________
Total current liabilities 1,948,760
LONG-TERM OBLIGATIONS, less current
maturities 812,521
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 4,000,000
shares authorized; 1,129,350 issued
and outstanding 1,129,350
Common stock, $.30 par value, 25,000,000
shares authorized; 2,251,766 shares issued 675,530
Additional paid-in capital 4,972,821
Accumulated deficit (1,111,728)
Treasury stock, at cost (31,944 shares) (215,314)
___________
5,450,659
___________
Total liabilities and stockholders' equity $ 8,211,940
============
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
STATEMENTS OF EARNINGS
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<S> <C> <C>
Three Months Ended
March 31,
________________________
(Unaudited)
1999 1998
_____ _____
Revenue $2,610,147 $4,319,329
Cost of services 2,068,681 3,776,207
Selling, general, adm. 210,411 258,292
__________ ___________
2,279,092 4,034,499
INCOME FROM OPERATIONS 331,055 284,830
Interest expense 56,078 69,307
___________ ___________
NET INCOME 274,977 215,523
Less dividend requirement on
preferred stock 112,935 112,935
__________ ___________
INCOME ALLOCABLE TO
COMMON STOCKHOLDERS $ 162,042 $ 102,588
Earnings per common share
Basic $ .07 $ .05
Diluted .06 .04
Weighted average number of
common shares
Basic 2,217,166 2,158,495
Diluted 4,726,833 4,840,082
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
Statements of Cash Flows (Unaudited)
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<S> <C> <C> <C>
Three Months Ended
March 31,
________________________
1999 1998
______ ______
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 274,977 $ 215,523
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 492,404 414,196
Changes in operating assets and liabilities
Accounts receivable 103,275 1,614,457
Billings in excess of cost and estimated
earnings on uncompleted contracts (195,438) (1,034,443)
Prepaid expenses 103,338 (33,219)
Accounts payable (196,515) (336,807)
Accrued liabilities 19,510 (51,788)
___________ ___________
NET CASH PROVIDED BY OPERATING ACTIVITIES 601,551 787,919
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (9,221) (148,979)
Decrease (increase) in other assets - 175
___________ __________
NET CASH USED IN INVESTING ACTIVITIES (9,221) (148,804)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (178,044) -
Proceeds from issuance of debt - -
Proceeds from exercise of stock
options and warrants - -
Principal payments of debt obligations (698,117) (319,038)
Other - 2,813
__________ __________
NET CASH USED IN FINANCING ACTIVITIES (876,161) (316,225)
__________ __________
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (283,831) 322,890
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 702,999 120,535
__________ __________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 419,168 $443,425
========== ==========
Supplemental cash flow information
Interest paid $ 56,078 $ 69,307
Income taxes paid $ 41,250 $ 10,230
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
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, 1998 filed on Form 10-KSB.
NOTE C--EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of shares of
common stock outstanding. Diluted earnings per share is based upon the weighted
average number of common shares outstanding and, when dilutive, common shares
issuable for stock options, warrants and convertible securities. On November
5, 1998, the Board of Directors declared a one-for-three reverse stock split on
the Company's common stock. All references to number of shares, except shares
authorized, and to per share information in the financial statements have been
adjusted to reflect the reverse stock split on a retroactive basis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
TGC Industries, Inc. ("TGC") reported revenues of $2,610,147 for the three
months ended March 31, 1999, compared with revenues of $4,319,329 for the same
period of 1998. Net income, before dividend requirements on preferred stock was
$274,977, compared with net income before dividend requirements on preferred
stock, of $215,523 for the same period of 1998. Income per common share, on a
diluted basis, was $.06 for the first quarter of 1999, as compared with income
of $.04 per common share for the same period of 1998.
This improved earnings performance in the first quarter of 1999 compared with
the first quarter of 1998 was principally attributable to expense reduction and
cost containment programs implemented to remain competitive during this period
of reduced industry activity and a contract termination fee received from one
of the Company's clients.
TGC's cost of services, as a percentage of revenue, were 79.3% for the first
quarter of 1999, compared to 87.4% for the same period of 1998. Selling, general
and administrative expense decreased by $47,881 in the first quarter of 1999
when compared with the same period of 1998. This decrease was attributable to
expense reductions implemented to remain competitive during this period of
reduced industry activity. Interest expense decreased by $13,229 in the first
quarter of 1999 when compared with the same period of 1998. This decrease was
primarily a result of the reducing loan balances for the purchase of geophysical
equipment.
Non-cash charges for depreciation and amortization were $492,404 in the first
quarter of 1999 compared with $414,196 for the same period of 1998.
At December 31, 1998, TGC had net operating loss carryforwards of approximately
$3,600,000 available to offset future taxable income, which expire at various
dates through 2013.
The second quarter will be a difficult period for the Company and will compare
unfavorably with the second quarter of 1998. Management is aggressively pursing
contract opportunities and believes, but there can be no assurance, that the
second half of 1999 should show some improvement. However, it is anticipated
that the Company's revenue for 1999 will be significantly less than reported for
1998.
Management believes that the geophysical market conditions should materially
improve beginning in calendar year 2000 and seismic services should be in
greater demand enhancing the Company's performance.
FINANCIAL CONDITION
Cash of $601,551 was provided from operations for the first three months of 1999
compared with cash provided from operations of $787,919 for the same period of
1998. The funds generated in the first three months of 1999 were primarily
attributable to net earnings before non-cash depreciation and amortization
charges. Cash used in investing activities for the first three months of 1999
was for the replacement of equipment in the amount of $9,221. Cash used in
financing activities for the first three months of 1999 was for principal
payments of debt obligations in the amount of $698,117, and dividend payments
on preferred stock of $178,044.
Working capital deficit decreased $640,372 to $230,349 from the December 31,
1998 balance of $870,721. The Company's current ratio was .88 to 1.0 at March
31, 1999, compared with .72 to 1.0 at December 31 1998. Stockholders' equity
increased $322,803 from the December 31, 1998 balance of $5,127,856 to
$5,450,659 at March 31, 1999. This increase was primarily attributable to net
income for the three months ended March 31, 1999, of $274,977.
During the fourth quarter of 1998, the Company renewed its revolving bank line
of credit with a major bank in an amount of up to $1,000,000. 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 began preparation for the year 2000 issues during 1996. In late
1996, TGC upgraded and replaced its accounting software. In addition, TGC
installed a small personal computer network. The cost of these additions, which
are year 2000 compliant, was approximately $15,000. TGC uses an outside source
for its payroll services and has been assured by this vendor that its software
is year 2000 compliant. TGC will need to make a few additional hardware
upgrades in order for the total system to be year 2000 compliant. These
upgrades will be completed by September 30, 1999, at which time the Company will
be fully year 2000 compliant. The cost of these upgrades will be approximately
$2,000.
At May 1, 1999, neither of the Company's two crews were employed. However, the
Company anticipates that available funds, together with anticipated cash flows
generated from future operations (of which there is no assurance) and amounts
available under its revolving line of credit will be sufficient to meet the
Company's cash needs during 1999.
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 forward-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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -- None.
b. Reports -- None.
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: April 30, 1999 /s/ Wayne A. Whitener
Wayne A. Whitener
President & Chief
Executive Officer
(Principal Executive Officer)
Date: April 30, 1999 /s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial
and Accounting Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 419,168
<SECURITIES> 0
<RECEIVABLES> 1,009,909
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,718,411
<PP&E> 11,873,198
<DEPRECIATION> 5,380,632
<TOTAL-ASSETS> 8,211,940
<CURRENT-LIABILITIES> 1,948,760
<BONDS> 812,521
0
1,129,350
<COMMON> 675,530
<OTHER-SE> 3,645,779
<TOTAL-LIABILITY-AND-EQUITY> 8,211,940
<SALES> 0
<TOTAL-REVENUES> 2,610,147
<CGS> 0
<TOTAL-COSTS> 2,068,681
<OTHER-EXPENSES> 210,411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,078
<INCOME-PRETAX> 162,042
<INCOME-TAX> 0
<INCOME-CONTINUING> 162,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,042
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
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