Dawson Geophysical Co (DWSN) 2011 Q1 法說會逐字稿

Good day ladies and gentlemen. Thank you for standing by. Welcome to the TGC Industries' first-quarter earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, Monday, May 2, 2011. I would now like to turn the conference over to Mr. Jack Lascar, please go ahead sir.

Good morning and welcome to the TGC Industries' first-quarter 2011 conference call. We appreciate your joining us today.

Your hosts today are Wayne Whitener, President and Chief Executive Officer, and Jim Brata, Chief Financial Officer.

Before I turn over the call to management, I have a 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 May 16. 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, May 2, 2011. 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 risks 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, 2010.

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 this statement. I will turn now the call over to Wayne Whitener.

Thank you Jack. Good morning everyone. Thank you for joining us for the first-quarter 2011 earnings call. As a preliminary matter, while many of you are interested in where we are in the process of approving the merger with Dawson Geophysical, due to the US securities laws, we are unable to comment about the merger and related subject matters at this time. TGC and Dawson will be filing in the near future a joint proxy statement, prospectus on a Form S-4 to register the stock to be issued to TGC shareholders upon the closing of the merger, to request approval of the merger agreement by TGC shareholders, and request approval of issues of the Dawson shares by Dawson shareholders. Therefore, I would appreciate it if your questions are directed only to our operating results.

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 very pleased with our record first-quarter results because it shows the kind of leverage we can create when we operate at high levels of capacity. We operated seven crews in the US during the entire first quarter, and we expect to continue operating at least seven crews for the next couple of quarters in the Mid-Continent, Gulf Coast and several other shale plays.

We operated six crews in Canada during the first quarter. However, the Canadian season is coming to an end due to the spring saw. The Canadian seismic market turned out to be better than originally anticipated this winter. As you know, operations in Canada has seasonality to them which result in a strong fourth and first quarters and minimum work during the spring and summer months.

Our backlog at the end of the first quarter was $49 million, consisting mainly of US business. The decline in backlog from year-end 2010 is driven by the wind-down of the Canadian winter season.

I will now turn the call over to Jim Brata who will give you a detailed view of our financial results. Then I will come back with some final remarks.

Good morning. Revenues for the first quarter of 2011 increased 66% to $50.2 million, compared to $30.3 million in the first quarter of 2010, which reflects the ongoing improvement in the US land seismic market and the seasonally strong winter in Canada. As Wayne has stated, we operated seven crews in the US and six crews in Canada during the first quarter. In last year's first quarter, we operated six crews in the US and five crews in Canada.

Cost of services in the first quarter of 2011 was $34.3 million compared to $23.6 million in the same quarter a year ago, a 45% increase. Due to the strong year-over-year revenue increase, cost of service as a percentage of revenues in the first quarter declined to 68.2% from 77.9% in last year's first quarter. As a result, gross profit rose 138% to $16 million from $6.7 million in the first quarter of 2010. Gross profit margin increased to 31.8% compared to 22.1% in the first quarter of last year, and also showed sequential improvement from 23.3% in the fourth quarter of 2010.

Selling, general and administrative expenses increased 48% to $2.5 million in the first quarter of 2011 from $1.7 million in the 2010 first quarter. As a percentage of revenues, SG&A expenses declined to 5.0% from 5.6% a year ago.

Depreciation and amortization rose 15% to $4.5 million compared to $3.9 million in the 2010 first quarter. As a percentage of revenues, depreciation and amortization fell to 8.9% compared to 12.8% in the first quarter a year ago.

Interest expense in the first quarter was approximately 11% lower than a year ago at $191,000 as we continued to pay down our debt during the quarter. We reported net income of $5.8 million, or $0.30 per diluted share, compared to $551,000, or $0.03 per diluted share, in the first quarter a year ago. We recorded a tax expense of $3.1 million for the first quarter of 2011 and an effective tax rate of 35%. This compares to a tax expense of $389,000, an effective tax rate of 41% in the same quarter a year ago. All per-share amounts have been adjusted to reflect the 5% stock dividend payable on May 14, 2010 to shareholders of record as of April 30, 2010.

EBITDA for the first quarter increased 168% to $13.5 million, an EBITDA margin of 26.8%, compared to $5.0 million, an EBITDA margin of 16.6% in the first quarter of 2010. An EBITDA reconciliation table is provided in our earnings release.

Now I will highlight some balance sheet items. At the end of the quarter, we have long-term debt of $5.2 million, cash and cash equivalents of $15.5 million. Our current ratio is approximately 1.5-to-1, and working capital is approximately $15.5 million, and we generated approximately $9.1 million in cash from operations. With that, I will 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 what looks ahead. The US seismic market continues to show steady improvement, recovering from the sharp downturn that occurred in the second half of 2009, and bidding remains steady. We continue to take concrete steps to address the needs of our customer base. Over the past several quarters, we purchased new state-of-the-art equipment, GSR wireless recording equipment, and ARAM ARIES seismic equipment, which gives us new capabilities.

Overall, there are several encouraging signs that cause us to be cautiously optimistic about the outlook for the seismic market. Namely, we are seeing major global companies continuing to work in the US shale plays, a positive sign for gas-related activities. Our backlog keeps us involved in several of the shale plays. Also, we are seeing many new opportunities in the oil plays. Our order book is strong, and we are expecting steady bid activity. Therefore, we continue to expect favorable demand for our services for the rest of 2011.

This concludes my formal remarks. Now I will take any questions.

(Operator Instructions). Veny Aleksandrov, Pritchard Capital Markets.

Good morning gentlemen. Congratulations. I have a couple of questions, and the first one is on the backlog. So the $62 million that you had last quarter, if you strip Canada out, how does the $49 million compare with what you had last quarter?

It's pretty comparable there. Like I say, a lot of the backlog that we reported at the end of the year was backlog for Canada. So the backlog pretty much remained steady and that $49 million going forward is pretty much same type of level for the US.

In the same line of questions, the strength in the quarter, it was a very strong quarter. How much of it, and I know you cannot give me exact numbers, but how much of it was attributed to Canada, and how much was the US? Did the US (multiple speakers)?

We don't report segmented numbers. But Canada had a very good quarter, and we had a good quarter here in the US. I will say that the Canadian quarter was stronger than what we expected, and the US operations were very good as well.

Lastly, based on your backlog and what you're saying about being fully utilized last quarter, have you already started transferring equipment back to the US? Do you think you need transfer back to (technical difficulty) (multiple speakers)?

We are moving equipment from Canada back to the US. That is correct.

So you have enough work here that you need additional equipment coming from Canada?

Yes.

Okay, thank you so much. Back to you.

(Operator Instructions). I show no further questions at this time. I'd like to turn the call back to management. Please go ahead.

I would like to thank everybody for joining us for the first-quarter conference call of TGC Industries, and we look forward to the next quarter conference call. Thank you.

Ladies and gentlemen, that concludes our call for today. Thank you for your participation. You may now disconnect.