TGC Industries (TGE)
Q2 2013 Earnings Call
July 29, 2013 9:30 am ET
Jack Lascar - President and Managing Partner
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
Joel D. Luton - Westlake Securities LLC, Research Division
Keith Maher - Singular Research
Previous Statements by TGE
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I would now like to turn the conference over to Mr. Jack Lascar. Please go ahead, sir.
Thank you, Damien. Good morning and welcome to the TGC Industries Second Quarter 2013 Conference Call. We appreciate you 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 www.tgcseismic.com or via a recorded instant replay until August 12. 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, July 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 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 those statements.
With that, I will turn the call over to Wayne Whitener.
Wayne A. Whitener
Thank you, Jack, and good morning, to everyone. Thank you for joining us today for our second quarter 2013 earnings call. I will make some initial comments and Jim Brata will provide you with some financial details, then I will conclude with some remarks about our markets and business going forward.
As you may know, in our past press release and call, we mentioned the softening in demand we were seeing in the U.S. seismic market, which began late in the first quarter and continued into the second quarter. After operating 15 crews in North America during the first quarter, 9 the U.S. and 6 in Canada, we began to idle crews in the U.S. at the beginning of the second quarter. In an effort to keep our crude count in line with demand for services, we idle crews fairly rapidly as demand softened but we kept key personnel in place to maintain our ability to get crews back in the field as quickly as possible as demands warrants.
Since the beginning third quarter, conditions have improved and we are currently operating 3 crews in the U.S. and intend to fill 2 additional crews in early August, which will bring our crude count to 5 crews in the U.S. We expect to operate a minimum of 5 crews in the U.S. for the remainder of the year and believe business conditions will improve over the balance of 2013 and into 2014. The significant drop in our U.S. crude count during the second quarter resulted in a substantial amount of cost associated with idling of these crews, which negatively impacted our results. In addition, we experienced a significant increase in shot-hole work during the quarter, which produce higher revenues but has a lower margin.
Canada continues to be a solid market for us. Of course, our Canadian crews were shut down by mid-April with the spring breakup, but we added additional crews for summer work in June and have 3 Canadian crews currently working and operating. Based on preliminary feedback from our clients, we expect a strong winter season in Canada. We ended the first quarter with a backlog of $32 million, consisting of both U.S. and Canadian work. Additionally, we have a number of large contracts that are in the final stages of negotiation.
I'll now turn the call over to Jim Brata, who will give you some detailed review of our financials, then I will come back with some final remarks.
James K. Brata
Thank you, Wayne, and good morning.
Revenues for the second quarter of 2013 were $31 million compared to $30 million in the second quarter of 2012. Cost of services in the second quarter of 2013 was $28 million compared to $25 million in the same quarter a year ago. The increase is primarily due to a significant increase in shot-hole work during the quarter, which carries a lower margin, as well as cost associated with the idling of many of our U.S. crews during the second quarter.