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, 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 April 28, 2000
Common Stock ($.30 Par Value) 2,267,124
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of March 31, 2000.
Statements of Operations for the three month
periods ended March 31, 2000 and 1999.
Statements of Cash Flows for the three month
periods ended March 31, 2000 and 1999.
Notes to Financial Statements.
TGC INDUSTRIES, INC
BALANCE SHEET
(UNAUDITED)
MARCH 31, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,219,230
Accounts receivable 1,245,715
Prepaid expenses and other 67,308
___________________
Total current assets 2,532,253
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 10,839,241
Automobiles and trucks 632,570
Furniture and fixtures 317,167
Other 18,144
___________________
11,807,122
Less accumulated depreciation
and amortization (7,103,444)
___________________
4,703,678
DEFERRED INCOME TAXES 202,000
OTHER ASSETS 495
___________________
Total assets $ 7,438,426
===================
See notes to Financial Statements
TGC INDUSTRIES, INC
BALANCE SHEET -- CONTINUED
(UNAUDITED)
MARCH 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 163,673
Accrued liabilities 136,460
Billings in excess of costs and estimated
earnings on uncompleted contracts 941,443
Current maturities of long-term
obligations 599,220
________________
Total current liabilities 1,840,796
LONG-TERM OBLIGATIONS, less current
maturities 2,790,224
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 4,000,000
shares authorized; 1,110,250 issued
and outstanding 1,110,250
Common stock, $.30 par value; 25,000,000
shares authorized; 2,299,068 shares
issued 689,720
Additional paid-in capital 5,368,731
Accumulated deficit (4,145,981)
Treasury stock, at cost (31,944 (215,314)
shares) ___________________
2,807,406
___________________
Total liabilities and stock- $ 7,438,426
holders' equity ===================
See notes to Financial Statements
TGC INDUSTRIES, INC
STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
(Unaudited)
2000 1999
Revenue $ 358,538 $2,610,147
Cost of services 733,062 2,068,681
Selling, general, adm. 235,482 210,411
_________ _________
968,544 2,279,092
INCOME (LOSS) FROM OPERATIONS (610,006) 331,055
Interest expense 76,199 56,078
_________ _________
NET INCOME (LOSS) (686,205) 274,977
Less dividend requirement on
preferred stock 111,025 112,935
_________ _________
INCOME (LOSS) ALLOCABLE TO
COMMON STOCKHOLDERS $(797,230) $ 162,042
Earnings (loss) per common share
Basic $ (.35) $ .07
Diluted $ (.35) $ .06
Weighted average number of
common shares:
Basic 2,262,577 2,217,166
Diluted 2,262,577 4,726,833
See notes to Financial Statements
TGC INDUSTRIES, INC
Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ (686,205) $274,977
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 408,272 492,404
Loss (gain) on disposal of property
and equipment (3,901) -
Changes in operating assets and liabilities
Trade accounts receivable (1,245,715) 103,275
Billings in excess of cost and
estimated earnings
on uncompleted contracts 941,443 (195,438)
Prepaid expenses 22,789 103,338
Accounts payable 112,740 (196,515)
Accrued liabilities 30,481 19,510
____________ __________
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (420,096) 601,551
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (48,699) (9,221)
Proceeds from sale of property
and equipment 3,901 -
____________ __________
NET CASH (USED IN)
INVESTING ACTIVITIES (44,798) (9,221)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid - (178,044)
Principal payments of
debt obligations (214,550) (698,117)
NET CASH USED IN FINANCING
ACTIVITIES (214,550) (876,161)
____________ __________
NET (DECREASE) IN CASH (679,444) (283,831)
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,898,674 702,999
____________ __________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,219,230 $ 419,168
============ ==========
Supplemental cash flow information
Interest paid $ 23,075 $ 56,078
Income taxes paid $ - $ 41,250
See notes to Financial Statements
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 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 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 issuable for stock options, warrants and
convertible securities.
NOTE D DIVIDENDS
Holders of the Company's Series C 8% Convertible Exchangeable 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 March 31, 2000, cumulative
dividends of approximately $444,000 were in arrears.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
TGC Industries, Inc. ("TGC") reported revenues of $358,538 and a net loss,
before dividend requirements on preferred stock, of $(686,205) for the three
months ended March 31, 2000, compared with revenue of $2,610,147 and income,
before dividend requirements on preferred stock, of $274,977 for 1999. Loss
per common share, on a diluted basis, was $(.35) for the first quarter of
2000, compared with income of $.06 per common share for 1999. TGC was
awarded approximately $3.5 million in new contracts during the first quarter
of 2000. However, the majority of these contracts were awarded to TGC late in
the first quarter. As a result, TGC was unable to generate sufficient
revenues to be profitable during the first quarter of 2000.
The Company has substantially reduced its break-even levels to increase its
competitiveness. In addition, there has been a recent increase in seismic
bidding activity and management is aggressively pursing contract
opportunities. As of April 28, 2000, TGC has been successful in adding an
additional $3.8 million in new business for a total backlog of $7.3 million
and the outlook seems to be progressively improving as our customers regain
their confidence in the oil and gas marketplace.
Management believes that the geophysical services market conditions should
improve in 2000 and seismic services should be in greater demand due to the
recent increase in levels of seismic bidding activity and the prospect of oil
and 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 $408,272 in the first
quarter of 2000 compared with $492,404 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 $(420,096) was (used in) operations for the first three months of 2000
compared with cash provided from operations of $601,551 for the same period of
1999. The funds used in operations during the first three months of 2000 were
primarily attributable to the net loss before non-cash depreciation and
amortization charges and an increase in accounts receivable of $1,245,715.
Cash used in investing activities for the first three months of 2000 was for
the replacement of equipment in the amount of $48,699. Cash used in financing
activities for the first three months of 2000 was for principal payments of
debt obligations in the amount of $214,550.
Working capital decreased $400,934 to $691,457 from the December 31, 1999
balance of $1,092,391. The Company's current ratio was 1.4 to 1.0 at March
31, 2000, compared with 2.3 to 1.0 at December 31, 1999. Stockholders equity
decreased $686,206 from the December 31, 1999 balance of $3,493,612 to
$2,807,406 at March 31, 2000. This decrease was attributable to the net loss
for the three months ended March 31, 2000, of $(686,205).
The holders of the Company's outstanding Series C 8% Convertible Exchangeable
Preferred Stock ("Preferred Stock"), voted at the Annual Meeting held May 11,
2000,to consent to a new series of Senior Convertible Preferred Stock("Senior
Preferred Stock") by the affirmative vote of the holders of over two-thirds
(2/3) of the issued and outstanding shares of Preferred Stock entitled to vote
thereon, voting as a class. As a result of this action, WEDGE Energy
Services, L.L.C., ("WEDGE"), will then convert its 8.5% Convertible Debenture
into Senior Preferred Stock. This conversion will increase the equity
section of the balance sheet by approximately $2,580,869 as additional
preferred stock and decrease long-term debt by $2,500,000 and accrued
liabilities by approximately $80,869.
At May 1, 2000, one of the Company's two crews was employed. 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 -- A report under Item 5 of Form 8-K was filed on
March 2, 2000, to announce the date of the Company's annual meeting of
shareholders and also to announce that the Company had received a favorable
ruling from Nasdaq that the Company's securities evidenced compliance with all
continued listing criteria and that the Company's securities will continue to
be listed on the Nasdaq SmallCap Market.
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 11, 2000 /s/ Wayne A. Whitener
Wayne A. Whitener
President & Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 2000 /s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial
and Accounting Officer)