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TGC Industries (TGE)
Q1 2013 Earnings Call
April 29, 2013 9:30 am ET
Karen Roan - Senior Vice President of Market Intelligence
Wayne A. Whitener - Chief Executive Officer, President and Director
James K. Brata - Chief Financial Officer, Principal Accounting Officer, Vice President, Secretary and Treasurer
Veny Aleksandrov - FIG Partners, LLC, Research Division
Keith Maher - Singular Research
Rhys Hoyle Williams - Columbia Partners, L.L.C. Investment Management
Previous Statements by TGE
» TGC Industries Management Discusses Q4 2012 Results - Earnings Call Transcript
» TGC Industries, Inc. Q3 2009 Earnings Call Transcript
» TGC Industries, Inc. Q2 2009 Earnings Call Transcript
I'd now like to turn the conference over to Karen Roan. Please go ahead, ma'am.
Thank you, George. Good morning and welcome to the TGC Industries First Quarter 2013 Conference Call. We appreciate your joining us today. Your hosts are Wayne Whitener, President and Chief Executive Officer; and Jim Brata, Chief Financial Officer.
Before I turn over the call to management, I have few items to cover. If you would like to listen to a replay of today's call, it is available via webcast by going to the Investor Relations section of the company's website at tgcseismic.com or via a recorded instant replay until May 14. Information on how to access the replay was provided in this morning's earnings release. Information reported on this call speaks only as of today, Monday, April 29, 2013, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay.
Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding the company's future performance are forward-looking statements. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the company is unable to predict or control, that may cause the company's actual future results or performance to materially differ from any future results or performance expressed or implied by those statements.
These risks and uncertainties include the risk factors disclosed by the company from time to time in its filings with the SEC, including in its annual report on Form 10-K for the year ended December 31, 2012. Furthermore, as we start this call, please also refer to the statement regarding forward-looking statements incorporated in our press release issued this morning, and please note that the contents of our conference call this morning are covered by these statements.
Now let me turn over the call to Wayne Whitener.
Wayne A. Whitener
Thank you, Karen, and good morning, everyone. Thank you for joining us today for our first quarter 2013 earnings call. I will make some initial comments, and Jim Brata will provide you with the financial details. Then, I will conclude with some remarks about our marketing and business going forward.
The first quarter results were essentially in line with our forecast. As previously disclosed, we had expected first quarter 2013 results to be below last year's record first quarter due to a reserve expense of approximately $1.3 million associated with site cleanup costs related to the ending of the Canadian winter season that we took in the first quarter of 2013 that was not taken in the first quarter of 2012. We had additional depreciation expense of approximately $1 million. We also experienced land permit delays, mainly in the Northeast, and difficult winter weather conditions in parts of the U.S. during the first 2 months of this year.
In the first quarter, we operated 9 crews in the U.S. and 6 crews in Canada. Activity in Canada was solid in the first quarter. Since the beginning of April, we have shut down 4 crews in Canada due to the Canadian spring breakup. We are experiencing a softening in the U.S. seismic market as our clients are reevaluating reservoir plays and seismic funds are being diverted to drilling programs. As a result we have idled 2 U.S. crews but are keeping the key personnel to maintain the flexibility to get these crews back in the field as quickly as client demands warrant. We believe this softening is temporary but may last into the third quarter. However, we believe demand for our services will improve during the latter part of the year. Our backlog at the end of the first quarter was approximately $40 million consisting primarily of U.S. work.
I will now turn the call over to Jim Brata, who will give you a detailed review of our financial results, and then I will come back with some final remarks.
James K. Brata
Thank you, Wayne, and good morning. Revenues for the first quarter of 2013 were $63 million compared to $67 million in the record first quarter of 2012. We operated 9 crews in the U.S. during the quarter compared to 8 crews in last year's first quarter. In Canada, we operated 6 crews in this year's first quarter compared to 7 crews operating in Canada during the first quarter of 2012.
Cost of services in the first quarter of 2013 was $43 million compared to $39 million in the same quarter a year ago. The increase is primarily due to a reserve expense of approximately $1.3 million associated with site cleanup costs related to the ending of the Canadian winter season that we took in the first quarter of 2013 that was not taken in the first quarter of 2012; certain land permitting delays, mainly in the Northeast; and the adverse winter weather conditions in parts of the U.S. during the first 2 months of this year. Cost of services as a percentage of revenues in the first quarters of 2013 and 2012 was 68.4% and 57.5%, respectively.