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, 2002.
[ ] 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, 2002
Common Stock ($.30 Par Value) 5,509,764
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of March 31, 2002.
Statements of Operations for the three-month periods ended
March 31, 2002 and 2001.
Statements of Cash Flows for the three-month periods ended
March 31, 2002 and 2001.
Notes to Financial Statements.
TGC INDUSTRIES, INC
BALANCE SHEET
(UNAUDITED)
MARCH 31,
2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 789,625
Accounts receivable 932,433
Cost and estimated earnings in excess
of billings on uncompleted contracts 145,764
Prepaid expenses and other 41,061
_________
Total current assets 1,908,883
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 11,528,276
Automobiles and trucks 833,743
Furniture and fixtures 323,323
Other 18,144
__________
12,703,486
Less accumulated depreciation
and amortization (10,064,350)
___________
2,639,136
OTHER ASSETS 4,824
___________
Total assets $ 4,552,843
===========
See notes to Financial Statements
TGC INDUSTRIES, INC
BALANCE SHEET -- CONTINUED
(UNAUDITED)
MARCH 31,
2002
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $591,855
Accrued liabilities 158,747
Billings in excess of costs and estimated
earnings on uncompleted contracts 472,412
Current maturities of notes payable 15,475
Current portion of capital lease obligations 42,247
_________
Total current liabilities 1,280,736
NOTES PAYABLE, less current maturities 101,021
CAPITAL LEASE OBLIGATIONS, less current portion 62,591
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 4,000,000
shares authorized:
8-1/2% Senior convertible preferred stock;
2,560,445 shares issued and outstanding 2,560,445
8% Series C convertible exchangeable
preferred stock; 1,150,350 shares issued,
58,100 shares outstanding 58,100
Common stock, $.30 par value; 25,000,000
shares authorized; 5,541,708 shares issued 1,662,512
Additional paid-in capital 5,481,724
Accumulated deficit (6,438,972)
Treasury stock, at cost (31,944 shares) (215,314)
__________
3,108,495
Total liabilities and stockholders' equity $4,552,843
==========
See notes to Financial Statements
TGC INDUSTRIES, INC
STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
__________________
(Unaudited)
2002 2001
___________________
Revenue $2,917,860 $ 882,152
Cost of services 2,601,881 1,181,059
Selling, general, adm. 230,521 236,598
_________ _________
2,832,402 1,417,657
_________ _________
INCOME (LOSS) FROM OPERATIONS 85,458 (535,505)
Interest expense 3,746 5,865
________ _________
NET INCOME (LOSS) 81,712 (541,370)
Less dividend requirements on
preferred stock 68,381 165,578
________ _________
INCOME (LOSS) ALLOCABLE TO
COMMON STOCKHOLDERS $13,331 $(706,948)
Income (loss) per common share:
Basic and diluted $ .00 $ (.30)
Weighted average number of
common shares:
Basic and diluted 4,769,939 2,340,374
See notes to Financial Statements
TGC INDUSTRIES, INC
Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $81,712 $(541,370)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 392,955 396,581
Changes in operating assets and liabilities
Trade accounts receivable 323,521 71,263
Cost and estimated earnings in excess of
billings on uncompleted contracts (125,630) (4,554)
Prepaid expenses 31,758 50,423
Accounts payable (475,651) (67,124)
Accrued liabilities (18,239) 52,784
Billings in excess of cost and estimated
earnings on uncompleted contracts (290,589) 363,741
_______ _______
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (80,163) 321,744
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (37,957) (31,730)
_______ _______
NET CASH USED IN INVESTING ACTIVITIES (37,957) (31,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants - 3,766
Principal payments on notes payable (3,805) (84,405)
Principal payments on capital lease obligations (132,411) -
________ _______
NET CASH USED IN FINANCING ACTIVITIES (136,216) (80,639)
________ _______
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (254,336) 209,375
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,043,961 259,131
_________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $789,625 $468,506
========= ========
Supplemental cash flow information
Interest paid $ 3,746 $ 5,865
Income taxes paid $ - $ -
Noncash investing and financing activities
Capital lease obligations incurred $ 22,712 $ -
Common Stock issued on conversion of
Preferred Stock $977,550 $ -
See notes to Financial Statements
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2002
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, 2001
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 $.01 and $(.07) for the three months ended March 31, 2002 and 2001,
respectively.
Outstanding warrants that were not included in the diluted calculation
because their effect would be anti-dilutive totaled 850,000 for the three-
month periods ended March 31, 2002, and 2001. Outstanding options that were
not included in the diluted calculation because their effect would be anti-
dilutive totaled 232,100 and 311,285 for the three-month periods ended March
31, 2002 and 2001, 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 March 31, 2002, cumulative dividends of approximately $69,720 were
in arrears on the Company's Series C Preferred Stock.
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2002
(Continued)
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. Dividends paid during 2000, on the Senior Preferred Stock, were paid
in additional shares of Senior Preferred Stock, in accordance with the terms
of the agreement. In addition, the holders elected to receive payment of
the June and December 2001 dividends in additional shares of Senior
Preferred Stock. At March 31, 2002, 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") returned to profitability in the first quarter
of 2002 reporting net income, before dividend requirements on preferred
stock, of $81,712 on revenue of $2,917,860, compared with a net loss, before
dividend requirements on preferred stock, of $(541,370) on revenue of
$882,152 for 2001. Income per common share, on a basic and diluted basis,
was $.00 for the three month period ended March 31, 2002, compared with a
loss per common share of $(.30) for 2001. The number of common shares used
in the income (loss) per share computation for the first quarter of 2002 and
2001 do not include any common shares issuable for stock options, warrants
or convertible securities because the effect of their inclusion would be
anti-dilutive.
Although revenue and margin levels were sufficient to return TGC to
profitability during the first quarter of 2002, there continues to be excess
capacity in the land-based geophysical services industry and pricing remains
very competitive. As a result, management continues to monitor expenses
and, where possible, implement cost containment programs to remain highly
competitive through this continued period of reduced industry activity. In
the opinion of management, despite the need for more U.S. energy self-
sufficiency and the industry having favorable longer-term prospects, there
are not as yet clear indications of when the geophysical industry will show
significant signs of improvement. During 2001 there were a number of
consolidations and mergers in the geophysical industry. Management is
hopeful that with fewer seismic crews available in the marketplace that TGC
will be able to secure contracts with improved margins thereby continuing to
improve its performance in 2002.
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2002
(Continued)
In January 2002, TGC entered into a two year Joint Venture Agreement (the
"Agreement") with a gravity data processing center (the "Processing
Center"). The Agreement provides that TGC will furnish the Processing
Center approximately 100,000 stations of digitized gravity data. The
Process Center has processed the data using the latest technological gravity
data processing software and techniques producing a data set (the "Data
Set"). During the term of the Agreement TGC and the Processing Center will
endeavor to market and license the Data Set. In consideration for producing
the Data Set TGC will pay the Processing Center a 20% commission. Revenue
from the licensing of gravity data represents a small portion of TGC's total
revenue. However, the Data Bank has been fully amortized and therefore only
minimal expenses are incurred with each license agreement. As a result,
revenue from the licensing of gravity data is very profitable. Management
believes the joint venture will enhance TGC's future gravity revenue thereby
improving its performance.
In February 2002, TGC entered into an agreement with a corporation to
dispose of TGC's shot-hole drilling equipment, and to use the proceeds to
acquire five buggy-mounted Vibroseis units and purchase certain equipment
needed to make the Vibroseis equipment compatible with TGC's recording
equipment. A one-year $30,000 note with interest at 5% payable monthly
financed this additional equipment. The Vibroseis equipment opens up
increasing bidding opportunities. Management believes that TGC should
secure a portion of the existing Vibroseis market business and thereby be
likely to improve its performance.
Non-cash charges for depreciation and amortization were $392,955 in the
first three months of 2002 compared with $396,581 for the same period of
2001.
At December 31, 2001, TGC had net operating loss carryforwards of
approximately $8,100,000 available to offset future taxable income, which
expire at various dates through 2021.
FINANCIAL CONDITION
Cash of $80,163 was used in operations for the first three months of 2002
compared with cash provided by operations of $321,744 for the same period of
2001. This decrease in cash from operations in the first three months of
2002 was primarily the result of a decrease in billings in excess of cost
and estimated earnings on uncompleted contracts, an increase in cost and
estimated earnings in excess of billings on uncompleted contracts and a
decrease in accounts payable resulting from a decline in the level of
activity during the first three months of 2002 as compared with the last
three months of 2001. Net cash of $37,957 was used in investing activities
during the first three months of 2002 for capital expenditures to replace
certain vehicles and equipment. Principal payments of notes of $3,805 and
principal payments of capital lease obligations of $132,411 resulted in net
cash of $136,216 being used in financing activities during the first three
TGC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2002
(Continued)
months of 2002. TGC anticipates that available funds, together with
anticipated cash flows generated from future operations will be sufficient
to meet TGC's minimum lease and note payment obligations.
Working capital increased $415,791 to $628,147 at March 31, 2002 from the
December 31, 2001, working capital of $212,356. The Company's current ratio
was 1.5 at March 31, 2002, compared with 1.1 at December 31, 2001.
Stockholders' equity increased $81,712 to $3,108,495 at March 31, 2002 from
the December 31, 2001 balance of $3,026,783. This increase was
attributable to the net income, before dividend requirements on preferred
stock, of $81,712.
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 2002, so long as one of the Company's two crews
is employed, of which there is no assurance.
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, but are not limited
to the dependence upon energy industry spending for seismic services, the
unpredictable nature of forecasting weather, the potential for contract
delay or cancellation, the potential for fluctuations in oil and gas prices,
and the availability of capital resources. 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 5. OTHER INFORMATION
As previously reported, the Company has been notified by NASDAQ of the
potential delisting of the Company's Common Stock from the NASDAQ SmallCap
Market for: (1) having failed to maintain a minimum market value of
publicly held shares of $1,000,000, and (2) having failed to equal or exceed
the minimum bid price requirement of $1.00 per share, in each case for
thirty (30) consecutive trading days. The Company, as a condition to
continued listing of its securities on the NASDAQ SmallCap Market, must
satisfy these requirements for a minimum of ten (10) consecutive trading
days by May 15, 2002 and August 13, 2002, respectively. Management of the
Company believes that the Company will not satisfy these requirements in a
timely manner and, therefore, anticipates that the NASDAQ staff will provide
written notification that the Company's Common Stock will be delisted from
the SmallCap Market. In such event, the Company plans to take the necessary
action for its Common Stock to be traded over-the-counter on the National
Association of Securities Dealers, Inc. Over-The-Counter Bulletin Board
System.
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: May 8, 2002 /s/ Wayne A. Whitener
Wayne A. Whitener
President & Chief
Executive Officer
(Principal Executive Officer)
Date: May 8, 2002 /s/ Kenneth W. Uselton
Kenneth W. Uselton
Treasurer (Principal Financial
and Accounting Officer)
4891.00001/269127.1