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 SEPTEMBER 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 October 30, 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 September 30, 2000.
Statements of Operations for the three and nine month periods ended
September 30, 2000 and 1999.
Statements of Cash Flows for the nine month periods ended
September 30, 2000 and 1999.
Notes to Financial Statements.
TGC INDUSTRIES, INC
BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C>
SEPTEMBER 30,
2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,009,398
Accounts receivable 653,914
Cost and estimated earnings in excess
of billings on uncompleted contracts 211,929
Prepaid expenses and other 185,933
_________
Total current assets 2,061,174
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 11,180,284
Automobiles and trucks 750,008
Furniture and fixtures 323,323
Other 18,144
__________
12,271,759
Less accumulated depreciation
and amortization (7,930,731)
__________
4,341,028
DEFERRED INCOME TAXES 202,000
OTHER ASSETS 395
_________
Total assets $6,604,597
=========
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC
BALANCE SHEET -- CONTINUED
(UNAUDITED)
<TABLE>
<S> <C>
SEPTEMBER 30,
2000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $473,157
Accrued liabilities 282,414
Billings in excess of costs and estimated
earnings on uncompleted contracts 535,332
Current maturities of long-term obligations 295,860
_________
Total current liabilities 1,586,763
LONG-TERM OBLIGATIONS, less current
maturities 166,510
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; 1,087,950 shares issued
and outstanding 1,087,950
Common stock, $.30 par value; 25,000,000
shares authorized; 2,354,818 shares issued 706,445
Additional paid-in capital 5,704,729
Accumulated deficit (4,692,376)
Treasury stock, at cost (31,944 shares) (215,314)
_________
4,851,324
_________
Total liabilities and stockholders' equity $6,604,597
=========
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
(Unaudited) (Unaudited)
2000 1999 2000 1999
_________ _________ _________ _________
Revenue $2,589,305 $983,187 $4,387,672 $4,517,546
Cost of services 2,291,310 1,150,631 4,757,649 4,550,459
Selling, general, adm. 243,080 228,152 727,971 669,868
_________ _________ _________ _________
2,534,390 1,378,783 5,485,620 5,220,327
INCOME (LOSS) FROM OPERATIONS 54,915 (395,596) (1,097,948) (702,781)
Interest expense 12,756 44,623 134,652 148,396
_________ _________ _________ _________
NET INCOME (LOSS) 42,159 (440,219) (1,232,600) (851,177)
Less dividend requirement on
preferred stock 181,349 112,705 408,581 338,345
_________ _________ _________ _________
INCOME (LOSS) ALLOCABLE TO
COMMON STOCKHOLDERS $(139,190) $(552,924) $(1,641,181) $(1,189,522)
Earnings (loss) per common share
Basic $ (.06) $ (.25) $ (.72) $ (.54)
Diluted $ (.06) $ (.25) $ (.72) $ (.54)
Weighted average number of
common shares:
Basic 2,321,358 2,224,934 2,286,820 2,222,074
Diluted 2,321,358 2,224,934 2,286,820 2,222,074
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC
Statements of Cash Flows (Unaudited)
<TABLE>
<S> <C> <C> <C>
Nine Months Ended
September 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $(1,232,600) $(851,177)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,235,559 1,451,779
Loss (gain) on disposal of property and equipment (3,901) (9,894)
Changes in operating assets and liabilities
Trade accounts receivable (653,914) 635,081
Billings in excess of cost and estimated earnings
on uncompleted contracts 323,403 (387,474)
Prepaid expenses (95,836) (9,239)
Other assets 100 569
Accounts payable 422,224 (307,109)
Accrued liabilities 266,748 94,665
________ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES 261,783 617,201
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (513,336) (9,221)
Proceeds from sale of property and equipment 3,901 46,300
_______ ______
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (509,435) 37,079
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid - (178,044)
Proceeds from issuance of debt 77,580 200,000
Principal payments of debt obligations (719,204) (1,257,814)
________ _________
NET CASH USED IN FINANCING ACTIVITIES (641,624) (1,235,858)
NET DECREASE IN CASH AND CASH EQUIVALENTS (889,276) (581,578)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,898,674 702,999
_________ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,009,398 $121,421
========= =======
Supplemental cash flow information
Interest paid $54,374 $147,004
Income taxes paid $ - $78,774
</TABLE>
See notes to Financial Statements
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 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. The effect of preferred stock dividends on the amount
of income (loss) available to common stockholders was $.08 and $.05 for the
three months ended September 30, 2000 and 1999, respectively, and $.18 and
$.15 for the nine months ended September 30, 2000 and 1999, respectively.
Outstanding warrants that were not included in the diluted calculation because
their effect would be anti-dilutive totaled 1,136,575 for the three and nine
month periods ended September 30, 2000 and 1999. Outstanding options that
were not included in the diluted calculation because their effect would be
anti-dilutive totaled 176,497 and 139,397 for the three and nine month periods
ended September 30, 2000 and 1999 respectively.
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
September 30, 2000, cumulative dividends of approximately $653,000 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 year.
However, dividends declared and payable through December 1, 2000, on the
Senior Preferred Stock shall be by payment in kind securities by issuance of
additional shares of Senior Preferred Stock with a liquidation value equal to
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2000
(continued)
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 be by
cash or by payment in kind dividend at the election of the holders by written
notice to the Company. At September 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 revenue of $2,589,305 and net income,
before dividend requirements on preferred stock, of $42,159 for the three
month period ended September 30, 2000, compared with revenue of $983,187 and a
net loss, before dividend requirements on preferred stock, of $(440,219) for
1999. Loss per common share, on a diluted basis, was $(.06) for the three
month period ended September 30, 2000, compared with a loss per common share
of $(.25) for 1999.
For the nine month period ended September 30, 2000, TGC had revenues of
$4,387,672 and a net loss, before dividend requirements on preferred stock, of
$(1,232,600). This compares with revenue of $4,517,546 and a net loss, before
dividend requirements on preferred stock, of $(851,177) for 1999. Loss per
common share, on a diluted basis, was $(.72) for the first nine months of
2000, compared with a loss per common share of $(.54) for 1999.
The Company was awarded sufficient contracts to return to profitability,
before dividend requirements on preferred stock, during the third quarter of
2000 showing a significant improvement over the first two quarters 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 services industry has yet to experience an increase
in demand for its services. However, there has been a recent increase in
seismic bidding activity and management is aggressively pursuing contract
opportunities.
Management believes that the outlook for the geophysical services industry is
promising. Geophysical services should be in greater demand due to the recent
increase in levels of seismic bidding activity and the prospect of oil and
natural gas prices remaining at or near their current levels. Though there
can be no assurance, such conditions should enable the Company to secure
contracts and improve its performance.
Non-cash charges for depreciation and amortization were $1,235,559 in the
first nine months of 2000 compared with $1,451,779 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.
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2000
(continued)
FINANCIAL CONDITION
Cash of $261,783 was provided from operations for the first nine months of
2000 compared with cash provided from operations of $617,201 for the same
period of 1999. Cash used in investing activities for the first nine months
of 2000 was for the addition of equipment in the amount of $513,336. During
the first nine months of 2000, principal payments of debt obligations were
$719,204 and proceeds from the issuance of debt was $77,580, resulting in net
cash used in financing activities of $641,624.
Working capital decreased $617,980 to $474,411 from the December 31, 1999
balance of $1,092,391. The Company's current ratio was 1.3 at September 30,
2000, compared with 2.3 at December 31, 1999. Stockholders' equity increased
$1,357,712 from the December 31, 1999 balance of $3,493,612 to $4,851,324 at
September 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.
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 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: November 13, 2000 /s/ Wayne A. Whitener
Wayne A. Whitener
President & Chief
Executive Officer
(Principal Executive Officer)
Date: November 13, 2000 /s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial
and Accounting Officer)
192489.1
