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 JUNE 30, 2000.
[ ] 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 July 28, 2000
Common Stock ($.30 Par Value) 2,322,874
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of June 30, 2000.
Statements of Operations for the three and six month periods
ended June 30, 2000 and 1999.
Statements of Cash Flows for the six month periods ended June
30, 2000 and 1999.
Notes to Financial Statements.
TGC INDUSTRIES, INC
BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C>
JUNE 30,
2000
___________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,087,926
Accounts receivable 696,177
Cost and estimated earnings in excess
of billings on uncompleted contracts 5,725
Prepaid expenses and other 248,919
__________
Total current assets 2,038,747
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 11,128,166
Automobiles and trucks 748,249
Furniture and fixtures 320,210
Other 18,144
__________
12,214,769
Less accumulated depreciation
and amortization (7,511,649)
___________
4,703,120
DEFERRED INCOME TAXES 202,000
OTHER ASSETS 495
__________
Total assets $6,944,362
==========
See notes to Financial Statements
</TABLE>
TGC INDUSTRIES, INC.
BALANCE SHEET -- CONTINUED
(UNAUDITED)
<TABLE>
<S> <C>
JUNE 30,
2000
____________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 328,391
Accrued liabilities 263,523
Billings in excess of costs and estimated
earnings on uncompleted contracts 818,932
Current maturities of long-term obligations 510,039
_________
Total current liabilities 1,920,885
LONG-TERM OBLIGATIONS, less current
maturities 214,312
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 4,000,000
shares authorized:
8-1/2% Senior convertible preferred stock;
2,259,890 shares issued and outstanding 2,259,890
8% Series C convertible exchangeable
preferred stock; 1,093,350 shares issued
and outstanding 1,093,350
Common stock, $.30 par value; 25,000,000
shares authorized; 2,341,318 shares issued 702,395
Additional paid-in capital 5,703,379
Accumulated deficit (4,734,535)
Treasury stock, at cost (31,944 shares) (215,314)
___________
4,809,165
Total liabilities and stockholders' equity $6,944,362
==========
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
2000 1999 2000 1999
______ ______ ______ ______
Revenue $1,439,829 $ 924,212 $1,798,367 $3,534,359
Cost of services 1,733,277 1,331,147 2,466,339 3,399,828
Selling, general, adm. 249,409 231,305 484,891 441,716
_________ _________ _________ _________
1,982,686 1,562,452 2,951,230 3,841,544
INCOME (LOSS) FROM
OPERATIONS (542,857) (638,240) (1,152,863) (307,185)
Interest expense 45,697 47,695 121,896 103,773
________ ________ _________ ________
NET INCOME (LOSS) (588,554) (685,935) (1,274,759) (410,958)
Less dividend requirement
on preferred stock 116,207 112,705 227,232 225,640
_________ _________ ___________ _________
INCOME (LOSS) ALLOCABLE
TO COMMON STOCKHOLDERS $(704,761) $(798,640) $(1,501,991) $(636,598)
Earnings (loss) per
common share
Basic $ (.31) $ (.36) $ (.66) $ (.29)
Diluted $ (.31) $ (.36) $ (.66) $ (.29)
Weighted average number of
common shares:
Basic 2,276,146 2,224,035 2,269,362 2,220,620
Diluted 2,276,146 2,224,035 2,269,362 2,220,620
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC.
Statements of Cash Flows (Unaudited)
<TABLE>
<S> <C> <C> <C>
Six Months Ended
June 30,
2000 1999
______ ______
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $(1,274,759) $(410,958)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 816,477 975,739
Loss (gain) on disposal of
property and equipment (3,901) (1,159)
Changes in operating assets and liabilities
Trade accounts receivable (696,177) 1,108,184
Billings in excess of cost and
estimated earnings on uncompleted contracts 813,207 (387,474)
Prepaid expenses (158,822) (121,871)
Other assets - 569
Accounts payable 277,458 (520,916)
Accrued liabilities 247,857 156,504
_________ ________
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,340 798,618
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (456,346) (9,221)
Proceeds from sale of property and equipment 3,901 4,500
__________ _________
NET CASH USED IN INVESTING ACTIVITIES (452,445) (4,721)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid - (178,044)
Proceeds from issuance of debt 77,580 -
Principal payments of debt obligations (457,223) (1,016,762)
___________ ___________
NET CASH USED IN FINANCING ACTIVITIES (379,643) (1,194,806)
NET DECREASE IN CASH AND CASH EQUIVALENTS (810,748) (400,909)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,898,674 702,999
__________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,087,926 $302,090
========== ========
Supplemental cash flow information
Interest paid $ 41,618 $103,773
Income taxes paid $ - $ 48,391
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
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, 1999 filed on Form 10-KSB.
NOTE C -- EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share are based upon the weighted average
number of shares of common stock outstanding. Diluted earnings (loss) per
share are based upon the weighted average number of common shares
outstanding and, when dilutive, common shares issuable for stock options,
warrants and convertible securities.
NOTE D DIVIDENDS
Holders of the Company's Series C 8% Convertible Exchangeable Preferred
Stock ("Series C Preferred Stock") will receive, when, as and if declared
by the Board of Directors of the Company, dividends at a rate of 8% per
annum. The dividends are payable semi-annually during January and July of
each year. At June 30, 2000, cumulative dividends of approximately
$656,000 were in arrears on the Company's Series C Preferred Stock.
Holders of the Company's 8-1/2% Senior Convertible Preferred Stock (the
"Senior Preferred Stock") will receive, when, as and if declared by the
Board of Directors of the Company, dividends at a rate of 8-1/2% per annum.
The dividends are payable semi-annually during June and December of each
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)-CONTINUED
June 30, 2000
year. However, dividends declared and payable through December 1, 2000, on
the Senior Preferred Stock shall be by issuance of additional shares of
Senior Preferred Stock with a liquidation value equal to the amount of the
cash dividend payment which would have been paid. For each dividend
payment due and payable after December 1, 2000, payment shall, subject to
certain conditions, be by cash or by issuance of additional shares of
Senior Preferred Stock at the election of the holders by written notice to
the Company. At June 30, 2000, there were no dividends in arrears on the
Company's Senior Preferred Stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
TGC Industries, Inc. ("TGC") reported revenues of $1,798,367 and a net
loss, before dividend requirements on preferred stock, of $(1,274,759) for
the six months ended June 30, 2000, compared with revenue of $3,534,359 and
a net loss, before dividend requirements on preferred stock, of $(410,958)
for the six months ended June 30, 1999. Loss per common share, on a
diluted basis, was $(.66) for the first six months of 2000, compared with a
loss per common share of $(.29) for 1999.
For the three month period ended June 30, 2000, TGC had revenue of
$1,439,829 and a net loss, before dividend requirements on preferred stock,
of $(588,554). This compares with revenue of $924,212 and a net loss,
before dividend requirements on preferred stock, of $(685,935) for 1999.
Loss per common share, on a diluted basis, was $(.31) for the three month
period ended June 30, 2000, compared with a loss per common share of $(.36)
for 1999.
Although the results for the second quarter of 2000 were disappointing,
they showed a slight improvement over the first quarter of 2000. An
increase in oil prices began in December 1999. However, the increase in
natural gas prices just began in May 2000. Due to these price increases
being so recent, the geophysical service industry has yet to experience an
increase in demand for its services.
June 2000 data showed that there had been an increase of just over 50% in
the number of rotary drilling rigs working in the United States. In
addition, of the 600 plus rotary drilling rigs working in the United
States, approximately 71% are drilling for natural gas and the balance of
29% are drilling for oil. Though there can be no assurance, management
believes TGC should see an improvement in its performance later in the year
provided the prices for oil and natural gas remain at or near their current
levels.
Non-cash charges for depreciation and amortization were $816,477 in the
first six months of 2000 compared with $975,739 for the same period of
1999.
At December 31, 1999, TGC had net operating loss carryforwards of
approximately $5,600,000 available to offset future taxable income, which
expire at various dates through 2019.
FINANCIAL CONDITION
Cash of $21,340 was provided from operations for the first six months of
2000 compared with cash provided from operations of $798,618 for the same
period of 1999. Cash used in investing activities for the first six months
of 2000 was for the addition of equipment in the amount of $456,346. Cash
used in financing activities for the first six months of 2000 was for
principal payments of debt obligations in the amount of $457,223.
Working capital decreased $974,529 to $117,862 from the December 31, 1999
balance of $1,092,391. The Company's current ratio was 1.1 at June 30,
2000, compared with 2.3 at December 31, 1999. Stockholders' equity
increased $1,315,553 from the December 31, 1999 balance of $3,493,612 to
$4,809,165 at June 30, 2000. This increase was attributable to the
conversion in May 2000 by WEDGE Energy Services, L.L.C. ("WEDGE Energy") of
its 8-1/2% Convertible Subordinated Debenture, Series B due December 1,
2009, in the principal amount of $2,500,000 (the "Debenture") plus accrued
interest into 2,252,445 shares of Senior Preferred Stock.
The holders of the Company's outstanding Series C Preferred Stock, voted at
the Annual Meeting held May 11, 2000, to consent to a new series of Senior
Convertible Preferred Stock. The affirmative vote of the holders of two-
thirds (2/3) of the issued and outstanding shares of Series C Preferred
Stock approved the new series of Senior Preferred Stock. As a result of
the consent to the new series of Senior Preferred Stock by the Series C
Preferred Stock shareholders and in accordance with the terms of the
Debenture Agreement, WEDGE Energy, on May 17, 2000, converted its Debenture
into Senior Preferred Stock. This conversion increased the equity section
of the balance sheet by $2,590,312 as additional preferred stock and
decreased long-term debt by $2,500,000 and accrued liabilities by
approximately $90,312. In addition, 7,445 shares of Senior Preferred Stock
were issued to WEDGE Energy as payment of the June 1, 2000, dividend. As
stated, in Note D of the Notes to the Financial Statements, Senior
Preferred Stock dividend payments through December 1, 2000 are paid by
issuance of additional shares of Senior Preferred Stock.
At August 1, 2000, one of the Company's two crews was employed with
sufficient backlog to keep it working the remainder of the year. The
Company anticipates that available funds, together with anticipated cash
flows generated from future operations will be sufficient to meet the
Company's cash needs during 2000.
Forward-Looking Statements
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on May 11, 2000. The following
matters were voted upon and approved by the Company's shareholders:
a. Election to the Board of Directors of Messrs. William J.
Barrett, Edward L. Flynn, Herbert M. Gardner, Allen T.
McInnes, Pasquale V. Scaturro, William H. White and Wayne A.
Whitener was approved by the shareholders by a majority vote
by a vote of 2,665,360 shares voted for and 7,199 shares
withholding authority to vote for.
b. Approval of the Company's 1999 Stock Option Plan was
approved by the shareholders by a majority vote by a vote of
1,661,031 shares voted for, 55,416 shares voted against and
13,678 shares abstaining.
c. Ratification of the selection of the Company's auditors, Grant
Thornton LLP, was approved by the shareholders by a majority
vote by a vote of 2,662,484 shares voted for, 55 shares voted
against and 10,020 shares abstaining.
d. Consent, by vote of the holders of the Company's outstanding 8%
Series C Convertible Exchangeable Preferred stock, voting as a
class, to a new series of 8-1/2% Senior Convertible Preferred
Stock was approved by such holders by a 66-2/3% vote by a vote
of 750,800 shares voted for, 23,000 shares voted against and
none abstaining.
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: August 11, 2000 /s/ Wayne A. Whitener
Wayne A. Whitener
President & Chief
Executive Officer
(Principal Executive Officer)
Date: August 11, 2000 /s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial
and Accounting Officer)
