Dawson Geophysical Co (DWSN) 2013 Q4 法說會逐字稿

Good morning, 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 a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Monday, February 24, 2014. And I would now like to turn the conference over to Karen Roan of Dennard Lascar Associates. Please go ahead.

Thank you, Katia. Good morning and welcome to the TGC Industries fourth-quarter and yearend 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 a few items to cover.

If you would like to listen to a replay of today's call it will be available via webcast by going to the Investor Relations section of the Company's website at TGCseismic.com or by a recorded instant replay until March 10. 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 24, 2014, and therefore you are advised that time sensitive information may no longer be accurate as of the time any replay listening.

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, 2013. Therefore 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 I will turn over the call to Wayne Whitener.

Thank you, Karen, and good morning, everyone. Thank you for joining us today for our fourth-quarter 2013 earnings call. I will make some additional 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.

The past year has been a challenging one as we faced decreasing demand for our seismic services since early last year. As the year went by it became clear that our customers were allocating capital away from seismic data acquisition into developing and production activities. As a result we have had to idle crews to align our resources with current demand, but have kept our key personnel in place to maintain our ability to get crews back in the field as quickly as possible as demand requires.

This soft demand continued into the fourth quarter. In addition to challenging market conditions we also experienced severe weather conditions in many of our key markets in the US and in Canada. During the fourth quarter, which (inaudible) the beginning of the Canadian winter season, our backlog had remained relatively steady and we were able to sequentially increase our US crews from three crews at the beginning of the third quarter to five crews in the fourth quarter.

We ended the fourth quarter with five crews in the US; this compares to nine crews operating in the US in the fourth quarter of last year. In Canada we operated three crews during the fourth quarter compared to four crews in 2012 when we began the quarter with four crews and ended with five crews.

Our Canadian operations were impacted by softer activity as well as delays and interruptions due to harsh weather conditions and government land permitting. As a result our Canadian crews were intermittently during the quarter causing additional mobilization and stand down costs. As a result our revenues went down approximately 67% during the fourth quarter which negatively affected our margins.

The good news is that the activity in Canada has started to pick up and we expect a good remaining winter season there. Since the end of the fourth quarter we have placed three additional crews back in the field in Canada. Overall we are currently operating ten crews in North America, six in Canada and four in the US.

Our backlog currently stands at $63 million consistently both US and Canadian work. I will now turn the call over to Jim Brata who will review the financial results and then I will return with some comments.

Thank you, Wayne, and good morning. Revenues for the fourth quarter of 2013 $18.7 million compared to $57 million in the fourth quarter 2012. As a reminder, the fourth quarter 2012 was a record fourth quarter in terms of revenues and earnings.

We operated five crews in the US in this year's fourth quarter compared to nine crews in the US in last year's fourth quarter. In Canada we operated three crews compared to the beginning the quarter with four crews and ending with five crews in the fourth quarter of 2012.

Cost of services in the fourth quarter of 2013 was $17.7 million compared to $40.8 million in the same quarter a year ago. Cost of services as a percentage of revenues of the fourth quarter of 2013 was 94.3% compared to 71.5% in the fourth quarter of 2012.

Gross profit was $1.1 million in the fourth quarter of 2013 compared to $16.3 million in the fourth quarter a year ago. Gross profit margin was 5.7% compared to 28.5% in the fourth quarter a year ago. The year-over-year gross margin decrease was due to lower revenues along with the expense of having crews in the field delayed or interrupted by severe weather and land permitting delays in Canada.

Our selling, general and administrative expenses were $2.4 million in the fourth quarter of 2013 compared to $2.3 in the fourth quarter of 2012. Depreciation and amortization expense was $5.5 million compared to $6.9 million in the 2012 fourth quarter.

As a percentage of revenues depreciation and amortization expense was 29.5% in this year's fourth quarter compared to 12.1% in the fourth quarter of 2012. The interest expense was $188,000 in the fourth quarter of 2013 compared to $349,000 a year ago. We reported net loss of $4.7 million or $0.21 per share compared to net income of $4.2 million or $0.19 per diluted share in last year's fourth quarter.

We recorded an income tax benefit of $2.3 million in the fourth quarter and an effective tax benefit rate of 33%. This compares to an income tax expense of $2.6 million and an effective tax expense rate of 38% a year ago.

EBITDA was a negative $1.3 million and the 2013 fourth quarter compared to $14 million in the fourth quarter a year ago. An EBITDA reconciliation table was provided in our earnings release issued this morning. Now I will briefly highlight our full year results.

For 2013 revenues were approximately $135 million compared to $196 million for 2012 which was a record year for revenues and earnings. Cost of services was $108 million compared to $135 million last year. As a percentage of revenues cost of services was 80% compared to 69% in 2012.

Gross profit for 2013 was $27 million compared to $61 million in 2012. Gross margin in 2013 was 20% compared to 31% in 2012. Selling, general and administrative expense was $9.6 million in 2013 compared to $8.8 million a year ago. As a percentage of revenues 2013 SG&A expense was 7.1% compared to 4.5% in 2012.

Depreciation and amortization expense in 2013 was approximately $25 million compared to $26 million in 2012. As a percentage of revenues depreciation and amortization expense was 18% in 2013 compared to 13% in 2012. We recorded net loss of $6.3 million or $0.29 per share in 2013 compared to net income of $15.7 million or $0.72 per diluted share in 2012.

EBITDA for the full year of 2013 was $17 million and EBITDA margin of 12.8% compared to $52 million and EBITDA margin of 26.6% in 2012. And finally I will highlight some balance sheet items.

As of the end of 2013, we had long-term debt of $7.4 million, cash and cash equivalents of $16.1 million; our current ratio was just above 2 to 1. Working capital was approximately $17.7 million and finally we generated approximately $23 million in cash from operations for the full year of 2013. And with that I will turn the call back to Wayne for some closing comments.

Thank you, Jim. Before we go to questions I would like to briefly summarize where we stand today. Inquiries have been increasing since the beginning of 2014 and bidding remains steady. In fact, our customers are making faster contract decisions this year as compared to last, which is a good sign this early in the year.

In light of the current market conditions, as we have mentioned in previous calls, we continue to carefully manage our cost structure and build cash in order to maintain a strong balance sheet which we have accomplished over this past year.

As Jim mentioned, we generated cash from operations of $23 million in 2013 and ended the year with approximately $27 million in cash and accounts receivable. Based upon our backlog and current operations the increased level of inquiries and the feedback from our clients, we anticipate that 2014 will provide better operating results than last year. This concludes my formal remarks. I'm willing to take questions.

(Operator Instructions). Veny Aleksandrov, FIG Partners.

My first question is on the outlook. You are saying that bidding activity is improving and contract signing is improving. If we look at the backlog, yes, it is flattish. But I would think that in the backlog there is less Canadian related work and more US work. Is this correct? And are you starting to sign contracts?

Yes. Most of the backlog that you see is US backlog. And like I say, we are seeing contracts signed quicker than what we have seen previously.

Okay. In terms of weather, we have had some very bad weather in Q1 so far. Have you been affected in the US?

We have had some impact on weather. We are doing some work up in the Montana area and we have had some impact on weather up there. But fortunately we have weather in our contracts so we are being supported by our clients on that.

In Canada, the weather has kind of leveled out somewhat up there and we are able to, as I mentioned, put crews back in the field. So we were operating six crews in Canada at this time and weather seems to be not a factor for the at least the immediate first quarter.

And I know it is still too early, but from where we stand do you think it is going to be a long winter or short winter or are we going to go well into March in terms of Canada?

Well, it has been pretty cold up there, so maybe it will take longer for things to thaw out. So we are expecting a medium to a longer winter in Canada.

Okay, so March and if we are lucky we can go into April. But let's see -- my last question is the uses of cash. You said that you have almost $27 million on the balance sheet. Any change of plans? Do you have any plans for the use of cash or --?

Not at this time. We are going to remain on the maintenance CapEx unless opportunities presented itself to make additional capital expenditures to increase the opportunities for the Company.

Okay, and I will (inaudible) but this the last question. It seems like things are slowly turning in the US. Canada is seasonal, so I know that the winter is almost ending. But in the US with the high gas prices it looks like the business is turning. This is your take and basically it is what you tried to communicate to us in the press release?

Yes. Like I say, we are seeing natural gas prices up over $6. I think that is going to spur some -- definitely people looking back at some dry gas areas, which would bode quite well for us and the seismic business.

Thank you so much.

Joel Luton, Westlake Securities.

Exactly what was your CapEx in the fourth quarter?

In the fourth quarter CapEx was $1 million.

Okay. And what is maintenance CapEx again?

Maintenance CapEx is about $2 million to $3 million per year.

Okay.

And we ended the year, for the full year we had $2.5 million in CapEx.

Okay. And how many crews in the first quarter last year did you have in Canada and the US operating?

We had nine crews in the US -- excuse me, we had five crews in the US and three crews in Canada in the first quarter of last year. We had nine crews in the US and six crews in Canada, a total of 15 crews in the first quarter of 2013.

Okay. So that means you had more crews operating a year ago in the first quarter?

That is correct. And right now we are operating 10 crews, six crews in Canada and four crews in the US.

And as the year pans out do you anticipate that you should have -- the comparisons obviously should get easier as the year goes -- pans out, given you had really the second half of the year kind of fall off the cliff for you in 2013. You should have easier comparisons as this year progresses.

Yes, yes, we should -- we had a record year in 2012. So, yes, comparisons should be closer, correct.

Okay. Thanks a lot. That is all I have.

(Operator Instructions). Evan Richert, Sidoti & Company.

Most of my questions have been asked. I was just wondering if you could touch a bit on the permitting issues. Is this anything unusual or just typical seasonal stuff in Canada?

That is a one-off deal, Evan. We have a particular job that we were working on up there that had special conditions. And so, it was -- normally in Canada we don't have any permit problems, so that was a one-off deal.

Okay, great. And just to reiterate the sentiment, you do have confidence that demand has bottomed down 2013 and based on what you are seeing 2014 there should be some kind of rebound?

That is our hope; it appears to be that way. We are seeing contracts signed so we are optimistic going into 2014.

Okay, great, and one last thing. How important is -- last year you paid the cash dividend. Is that something you are still considering for this year or are you going to hold off?

Well, that is -- we will review that with the Board of Directors and make a decision later on in the year here.

Okay, thanks. That is it for me, guys.

(Operator Instructions). Thank you, and I am showing no further questions at this time. I would like to turn the call back over to management for any further remarks. Please go ahead.

We would like to thank everyone for being on the fourth-quarter and yearend call. And we appreciate your interest in the Company. Thank you.

Thank you. Ladies and gentlemen, this does conclude the TGC Industries fourth-quarter earnings conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030, which access code 4662796. Thank you for your participation. You may now disconnect.