Dawson Geophysical Co (DWSN) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the TGC Industries fourth-quarter earnings conference call.

During today's presentation, all parties will be in listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions). This conference is being recorded today Monday, the 28th of February, 2011. I would now like to turn the conference over to Jack Lascar of DRG&L.

Thank you, Luke. Good morning and welcome to the TGC Industries fourth-quarter and year-end 2010 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 the call over to management, I have a few items to cover. If you'd like to be added to the Company's e-mail distribution list, please call us at 713-529-6600 and relay that information to us.

If you'd 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 March 14th.

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, February 28th, 2011 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, 2009.

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 are covered by these statements. I will turn the call now over to Wayne Whitener.

Thank you, Jack, and good morning, everyone. I would like to welcome you to our fourth-quarter and year-end conference call.

As far as the agenda is concerned, I will make some brief comments on the quarter and Jim Brata will provide you with the financial details. Then I will come back with some final remarks.

Let me begin by saying that we are pleased with our return to profitability in the fourth quarter and that we are seeing clear signs of an improving environment for the seismic land acquisition business. As far as the highlights of the quarter and the year is concerned, let me remind you that all four quarters of 2010 include the operating results of Eagle Canada, which we acquired in mid-October 2009.

As we disclosed in a press release in early January, we operated six crews in the US during most of the fourth quarter and added a seventh crew late in the quarter. We are currently operating seven crews in the US working in the Mid-Continent Gulf Coast regions as well as several of the shale plays.

We ended the third quarter operating two crews in Canada and began and ended the fourth quarter with four crews there. The Canadian season is now in full swing and we are currently operating six crews there.

The Canadian seismic market is shaping up better than originally anticipated. As you know, operations in Canada have some seasonality to them which result in a stronger fourth and first calendar quarters.

There's no question that the US seismic market is in the early stages of a recovery, rebounding from the sharp downturn that occurred in the second half of 2009. We continue to believe this market is gradually recovering as bidding remains relatively active and we continue to see slight improvements in pricing in the US.

Our current backlog is $62 million. The decline in our backlog from year-end of 2010 is driven by the high productivity of our Canadian crews which should have a positive impact on our first-quarter results.

However, our Canadian backlog is not being replaced at peak levels due to the seasonality. Based on our current backlog and our pipeline of business, we expect to continue operating at least six crews in Canada and seven crews in the lower 48 for the first quarter of 2011. I will now turn over the call to Jim Brata who will give a detailed review of our financial results, then I will come back with some final remarks.

Good morning. Revenues for the fourth quarter of 2010 rose 108% to $32.7 million compared to $15.7 million in the fourth quarter of 2009, reflecting a sustained improvement in demand in the US and the seasonally strong winter in Canada. In last year's fourth quarter, we experienced reduced demand for seismic services and a competitive pricing environment in the US, and thus operated four crews in the lower 48 and three crews in Canada for the two months we owned Eagle Canada.

Cost of services in the fourth quarter of 2010 increased 86% to $25.1 million from $13.4 million in the fourth quarter a year ago driven by the increase in activity. Due to the solid year-over-year increase in revenues, cost of services as a percentage of revenues in the fourth quarter declined to 76.7% from 85.4% in the '09 fourth quarter.

As a result, gross profit more than tripled to $7.6 million from $2.3 million in the fourth quarter a year ago. Gross profit margin increased to 23.3% compared to 14.6% in the fourth quarter of last year and also showed sequential improvement from 17.1% in the third quarter of 2010.

Selling, general and administrative expenses declined to $1.9 million in the fourth quarter of 2010 from $2.4 million in the fourth quarter of 2009 primarily due to the inclusion of acquisition costs from Eagle Canada in the 2009 fourth quarter. As a percentage of revenues, SG&A expenses declined to 5.8% compared to 15.2% a year ago.

Depreciation and amortization was essentially flat at $3.8 million compared to the fourth quarter of 2009. As a percentage of revenues, depreciation and amortization fell to 11.7% compared to 23.7% in the fourth quarter of 2009.

Interest expense in the fourth quarter was approximately 27% lower than a year ago at $173,000 as we continued to pay down our debt during the quarter. the quarter. We reported net income of $0.7 million or $0.04 per diluted share compared to a net loss of $2.7 million or $0.14 per share in the fourth quarter a year ago.

We recorded a tax expense of slightly more than $1.0 million in the fourth quarter of 2010, an effective tax rate of 59%, which reflects the impact of state taxes net of federal benefit and permanent tax differences including stock-based compensation. All per share amounts have been adjusted to reflect a 5% stock dividend payable on May 14, 2010 to shareholders of record on April 30, 2010.

EBITDA for the fourth quarter increased to $5.7 million, an EBITDA margin of 17.5% compared to a loss of 88,000 in the fourth quarter of 2009. An EBITDA reconciliation table is provided in our earnings release. Now I will briefly summarize our 2010 results.

2010 revenues increased 20% to $108.3 million from $90.4 million in 2009. Cost of services as a percentage of revenues increased to 79.3% from 72.3% in 2009 due to lower margins in the US resulting from depressed demand and a more competitive pricing environment especially in the first half of 2010. Gross profit in 2010 was $22.4 million compared to $25.1 million a year ago. Gross margin was 20.7% compared to 27.7% in 2009.

SG&A expenses in 2010 rose to $6.9 million from $5.5 million in 2009, a 25% increase mainly due to the inclusion of Canadian operations during all of 2010. SG&A expenses as a percentage of revenues for 2010 increased only slightly to 6.4% in 2010 from 6.1% in 2009.

2010 depreciation and amortization expense was $15.3 million compared to $14.6 million in 2009, a 5% increase. Depreciation and amortization expense as a percentage of revenues for 2010 and 2009 was 14.2% and 16.2%, respectively.

Income from operations was $0.1 million for 2010 compared to $4.9 million in 2009. We reported a net loss of $1.2 million or a $0.06 loss per share for 2010 compared to net income of $1.9 million or $0.10 per diluted share in 2009. EBITDA for 2010 was $15.5 million, an EBITDA margin of 14.3% compared to $19.5 million, an EBITDA margin of 21.6% in 2009.

Now I will highlight some balance sheet items. As of the end of the year, we had long-term debt of $6.0 million, cash and cash equivalents of $13.1 million. Our cash position has been reduced by approximately $12 million since the beginning of the year as we have made principal payments of approximately $9.6 million on our notes payable and capital lease obligations. Our current ratio is approximately 1.6 to 1 and working capital was approximately $14.3 million and we generated approximately $5.2 million in cash from operations.

And with that, I'll turn the call back to Wayne.

Thank you, Jim. Before we go to questions, I would like to briefly summarize where we are today and see what we see ahead.

As we continue to emerge from the difficult North American seismic market, we've taken steps to respond to the improving demands of our customer base. To that end during 2010, we purchased a total of 8000 channels of GSR wireless recording equipment. This equipment can operate either independently or integrated with our ARAM equipment and the operational flexibility of this system expands our capabilities since it can function in many different types of environments.

We have also purchased an additional 4500 channels of ARAM ARIES seismic equipment during the fourth quarter. Overall there have been several encouraging signs that cause us to cautiously be optimistic about the outlook for the seismic market, namely we are seeing major global companies continuing work in the US shale plays as a positive sign for gas related activities.

We continue to keep involved in several of the shale plays. Also we are seeing many of the new opportunities leaning more towards the oil plays.

We are experiencing steady and improving bidding activity. Our order book is strong and pricing in the US continues to gradually improve. Therefore we expect to continue to benefit from better capacity utilization and improved pricing throughout 2011. This concludes my formal remarks and I will now take any questions.

(Operator Instructions) Veny Aleksandrov, Pritchard Capital Partners.

Congratulations on the quarter. My first question is in the US, you made the comment you expect to operate at least seven crews.

Do you see a potential need for the redeployment of the eighth crew later in the year or you just add equipment and people to the seven crews that you have and make them bigger, if you need to?

Well, what we've done of course as we discussed, we purchased additional GSR channels and we purchased additional ARAM channels to help boost the channel count on the crews that we presently have operating which is the six crews in Canada and seven crews here in the US. We continue to monitor the needs of our clients and if we feel necessary to add an additional crew here in the US or take some equipment availability out of Canada, we are sure in a position to do so.

Okay, thank you. And then back to the GSR, how many crews are using right now the GSR wireless equipment and do you already see improved efficiency and improved results out of these crews?

Right now we are operating one GSR crew in Canada, and that crew is on a term contract and the client is very satisfied with the crew and the equipment. We are operating one GSR crew here in the US and we have been very satisfied with the operation and the productivity of that crew as well.

Thank you. And my last question, where are the seven crews working right now in the states?

Well, we are working Mid-Continent, Texas, Gulf Coast, West Texas. We just finished some work in the Niobrara area up there, and we just finished some work in the Marcellus, and we expect to be going back to both of those areas here in the next 30 to 60 days.

Thank you so much.

(Operator Instructions) There are no further questions in the queue. Management, please proceed.

I would like to thank everybody for listening to our fourth-quarter year-end conference call and we are very optimistic about 2010 and we hope that everybody continues to follow us and our stock. Thank you.

Ladies and gentlemen, this concludes the TGC Industries fourth-quarter earnings conference call. You may now disconnect. Thank you for using ACT Teleconferencing.