TGC Industries Inc Reports Operating Results (10-K)
Tgc Industries Inc. has a market cap of $125.7 million; its shares were traded at around $6.55 with and P/S ratio of 1.2. Tgc Industries Inc. had an annual average earning growth of 23% over the past 5 years.
Highlight of Business Operations: We believe that it is essential to take advantage of advances in seismic technology and to commit capital to purchase and update our equipment cost-effectively. Purchasing and updating seismic equipment and technology involves a commitment to capital spending. As a result, during the year ended December 31, 2010 capital expenditures of approximately $15,226,000 were used to acquire, maintain, and replace seismic equipment and vehicles. Major purchases included a new 3,000 channel GSR System. The Company also purchased approximately 5,000 additional GSR channels and 8,500 additional ARAM channels. Because of the market downturn in 2009, we reduced capital expenditures for fiscal year 2009 to approximately $1,960,000, primarily for equipment and vehicle maintenance and replacement. For fiscal year 2008, capital expenditures were approximately $21,686,000.
We do not carry insurance against certain risks that we could experience such as business interruption resulting from equipment maintenance or weather delays. We obtain insurance against certain property and personal casualty risks and other risks when such insurance is available and when our management considers it advisable to do so. Currently, our insurance coverage consists of employers liability with limits of $1,000,000 per accident and $2,000,000 in the aggregate, commercial general liability of $1,000,000 per accident and $2,000,000 in the aggregate, pollution liability of $1,000,000 per accident and $2,000,000 in the aggregate, and automobile liability with a $1,000,000 combined single limit, and a $10,000,000 umbrella policy. Our general service agreements require us to have specific amounts of insurance. There can be no assurance, however, that any insurance obtained by us will be adequate to cover any losses or liabilities, or that this insurance will continue to be available or available on terms which are acceptable to us. Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance, could have a material adverse effect on us.
We reported a net loss of approximately $1,223,000 for the year ended December 31, 2010, compared to net income of approximately $1,880,000 and $6,898,000 reported for the years ended December 31, 2009 and 2008, respectively. We also reported net income for the years ended December 31, 2007 and 2006. Our ability to be profitable in the future will depend on many factors beyond our control, but primarily on the level of demand for land-based seismic data acquisition services by oil and natural gas exploration and development companies. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
Certain assets that are critical to our operations, including three of our ARAM ARIES recording systems, 13 vibration vehicles, and a 5,000 channel Geospace GSR recording system, acquired in 2010, are pledged as collateral to our equipment lenders and commercial banks and could be subject to foreclosure in the event that we default on our indebtedness having 36 to 57 month terms. We currently have debt obligations covering the purchase of this equipment that require monthly payments between approximately $80,000 and $103,000. These debt obligations mature at various dates ranging from July of 2011 to December of 2013. Any decline in our operations could inhibit our ability to make these substantial monthly payments. In view of the short terms of these notes, a failure to make the monthly payments on these notes could cause our lenders to foreclose quickly on the assets securing these notes. The foreclosure on certain of our core assets securing these notes could severely limit our ability to continue operations.
Our stock price is subject to significant volatility. Overall market conditions, including a decline in oil and natural gas prices and other risks and uncertainties described in this Risk Factors section and elsewhere in this Form 10-K, could cause the market price of our common stock to fall. The high and low sales prices of our common stock for the year ended December 31, 2010, were $ 4.64 and $ 2.82, respectively.
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