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TGC Industries Inc Reports Operating Results (10-Q)

May 10, 2010 | About:
10qk

10qk

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TGC Industries Inc (TGE) filed Quarterly Report for the period ended 2010-03-31.

Tgc Industries Inc has a market cap of $71.42 million; its shares were traded at around $3.72 with and P/S ratio of 0.79. TGE is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Income from operations. Income from operations was $1,155,059 for the three months ended March 31, 2010, compared to $8,792,785 for the same period of 2009, a decrease of 86.9%. The decrease was attributable to several factors, including the fact that income from operations for the three months ended March 31, 2009 was among the highest in company history. Other factors contributing to the decrease in income from operations during the first quarter of 2010 include lower overall demand, a competitive pricing environment for seismic services, uncertainty regarding the future energy policy in the United States, and our operation of six seismic crews in the U.S. during the three months ended March 31, 2010 compared to nine crews for the same period of 2009. EBITDA decreased $7,569,449 to $5,022,773 for the three months ended March 31, 2010, from $12,592,222 for the same period of 2009, a decrease of 60.1%. This decrease was a result of factors discussed above. For a definition of EBITDA, a reconciliation of EBITDA to net income, and discussion of EBITDA, please refer to the section entitled EBITDA found below.

Working capital increased $1,262,456 to $18,558,090 as of March 31, 2010, from the December 31, 2009 working capital of $17,295,634. This increase was primarily due to a $10,171,084 increase in trade accounts receivable attributable to Eagle Canada, which are subject to customary Canadian industry payment practices. This increase was partially offset by a decrease in cash of $2,275,583, a decrease in prepaid federal income taxes of $943,600, a $3,411,186 increase in trade accounts payable, a $941,828 increase in billings in excess of costs and estimated earnings on uncompleted contracts, and an increase in federal and state income taxes payable of $471,348.

Net cash used in investing activities was $702,771 for the three months ended March 31, 2010, and $462,078 for the three months ended March 31, 2009. This increase was due to an increase in capital expenditures of $103,249 and a decrease in proceeds from the sale of property and equipment of $137,444.

During the three months ended March 31, 2010, the Company acquired $1,529,551 of additional equipment and vehicles, primarily to replace similar equipment and vehicles. Cash of $703,452 and $826,099 of capital lease obligations from a vehicle leasing company was used to finance these acquisitions. Although we do not budget for our capital expenditures, we will purchase additional equipment during 2010 as the demand for our services increase.

In December of 2007, we completed a $4,120,254 loan transaction with a commercial lender for the purpose of providing funds for the purchase of our seventh new ARAM ARIES recording system. This loan is repayable over a period of 48 months at a fixed per annum interest rate of 6.38%. This loan is collateralized by the new recording system equipment and the recording vehicles and two semi-trailers that transport the newly purchased equipment between jobs. In January of 2008, the Company entered into a $2,463,101 loan agreement with a bank to provide financing for the purchase of new vibration vehicles. The loan is repayable over a period of 57 months at a fixed per annum interest rate of 6.35% and is collateralized by the vibration vehicles. In February of 2008, the Company exercised its purchase option for seismic recording equipment it had been renting. In March of 2008, the Company entered into a $2,975,844 loan agreement with a commercial lender to provide financing for the purchase of this rented equipment and to replace an existing loan the Company had with the lender. This loan is repayable over a period of 48 months at a fixed per annum interest rate of 5.75% and is collateralized by the equipment. In July of 2008, the Company entered into a $3,200,000 loan agreement with a bank to provide financing for the purchase of seismic recording equipment. This loan is repayable over 36 months at a fixed per annum interest rate of 6.00% and is collateralized by the equipment. In August of 2008, the Company entered into a $2,003,700 loan agreement with a bank to provide financing for the purchase of new vibration vehicles. This loan is repayable over 36 months at a fixed per annum interest rate of 6.00% and is collateralized by the vibration vehicles. In September of 2008, the Company entered into a $2,690,402 loan agreement with a commercial lender to provide financing for our eighth new ARAM ARIES recording system. This loan is repayable over a period of 48 months at a fixed per annum interest rate of 6.00% and is collateralized by the recording system. Also in September of 2008, the Company entered into a $1,092,053 loan agreement with the same commercial lender to provide financing for recording equipment that goes with the eighth ARAM ARIES recording system. This loan is co-terminus with the loan for the recording system, carries a fixed per annum interest rate of 6.00%, and is collateralized by the recording equipment. In January of 2008, Eagle Canada entered into a $4,660,070 loan agreement with a bank to provide financing for the purchase of a new ARAM ARIES recording system. This loan is repayable over a period of 36 months at a fixed per annum interest rate of 6.14% and is collateralized by the recording system.

In April of 2005, we entered into a revolving credit agreement with a commercial bank. Effective September 16, 2006, we renewed our revolving credit agreement and increased the borrowing limit from $3,500,000 to $5,000,000. The borrowing limit under that revolving line of credit agreement remains at $5,000,000 and was renewed on September 16, 2007, September 16, 2008, and again on September 16, 2009. The revolving line of credit agreement does not expire until September 16, 2010. Our obligations under this agreement are secured by a security interest in our accounts receivable. Interest on the outstanding amount under the revolving credit agreement is payable monthly at the greater of the prime rate of interest or five percent. The credit loan agreement provides for non-financial and financial covenants including a minimum debt service coverage ratio in excess of 2.0 to 1.0 and a ratio of debt to worth not in excess of 1.25 to 1.0. As of March 31, 2010, we had no borrowings outstanding under the revolving credit agreement.

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