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TGC Industries, Inc. (TGE)
Q2 2008 Earnings Call
July 28, 2008 9:30 am ET
Wayne A. Whitener - President, Chief Executive Officer and Director
Kenneth W. Uselton - Chief Financial Officer, Treasurer, Secretary
James Kevin Brata - Vice President and Chief Financial Officer Designate
Jack Lascar - Investor Relations - Partner of Dennard Rupp Gray & Easterly LLC
Karen David-Greene - Oppenheimer & Co.
Terese Fabian - Sidoti
Neal Dingmann - Dahlman Rose & Co.
[Vinny Alexandra - Pritchard Capital Partners]
[Dan McCullom - River Capital]
[Sherman Pryor - North Point]
Previous Statements by TGE
» TGC Industries, Inc. Q3 2009 Earnings Call Transcript
» TGC Industries, Inc. Q2 2009 Earnings Call Transcript
» TGC Industries, Inc. Q3 2008 Earnings Call Transcript
Your host will be Wayne Whitener, President and Chief Executive Officer, along with Chief Financial Officer Ken Uselton and James Brata, Vice President and Chief Financial Officer Designate.
Before I turn the call over to management I have a few items to cover. If you would like to be added to the company’s email distribution list, please call DRG&E’s office at 713-529-6600 and relay that information to us or you can send me an email with that information a firstname.lastname@example.org. 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 11. That information was provided in this morning’s earnings release.
Information reported on this call speaks only as of today, July 28, 2008 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 including without limitation the company’s expected future financial position, results of operation, cash flows, funds from operations, financing plan, gross margins, business strategy, budget, projection of costs and expenses, capital expenditures, competitor position, product offerings, access to capital and growth opportunities 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 10K for the year ended December 31, 2007. 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.
I will turn the call now over to Wayne Whitener.
Wayne A. Whitener
I would like to welcome Jim Brata, our new Vice President who is expected to become our new Chief Financial Officer after Ken Uselton retires at the end of September. As far as the agenda is concerned, I will provide you with some highlights and Ken Uselton will provide you with some of the financial details. Then I will come back with some final comments.
First I’d like to discuss a few highlights of the quarter. As I had mentioned during the first quarter conference call, we have been bidding and winning some larger projects. On two of these larger projects our clients experienced delays in their permitting process so we idled two of our crews for most of the second quarter which reduced our revenues, increased our costs, and negatively affected second quarter earnings. However these two crews have been back at work since the middle of July. The good news is that during the last three months bidding activity has been very strong. We have been very successful and have been awarded several large contracts in the Midcontinent Gulf Coast region and currently have a new record backlog of approximately $78 million. This is up 70% from the backlog of $46 million we had in late April and with our current backlog we expect to have all our crews fully utilized for the second half of the year and well into the first quarter of next year.
Driven by continued strong customer demand and our record backlog, we have ordered another 4,000 channels in early July that we expect delivery on this week. With the additional 4,000 channels we’ll have a channel capacity of approximately 47,000 channels. So we are well positioned for the larger projects we are bidding and winning. The additional 4,000 channels will increase our crew productivity and better enable us to meet the growing needs of our clients.
As far as our financial highlights, we ended the quarter with a strong balance sheet with cash exceeding long-term debt. We continue to generate cash and year-to-date we generated cash flow from operations of about $13.2 million.
Now I’ll turn the call over to Ken Uselton, our Chief Financial Officer, who will give you some details on the financial results. Then I will return with some final remarks.
Kenneth W. Uselton
Revenues for the 2008 second quarter decreased 14% to $18.6 million from $21.7 million in the second quarter a year ago. As Wayne said, two crews were idle for most of the second quarter which negatively impacted revenues. Cost of services in the second quarter were $12.6 million compared to $14.8 million in the second quarter a year ago, a decrease of 15%. Cost of services as a percentage of revenue was 67% in the 08 second quarter versus 68% in the 07 second quarter. Our gross margins for the second quarter of 08 were 33% compared to 32% a year ago.