SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-27564
3-D GEOPHYSICAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3841601
(State of incorporation) (I.R.S. Employer Identification No.)
7076 South Alton Way, Building H, Englewood, Colorado 80112
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (303 )290-0214
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 12, 1996, there were 7,600,000 shares of Registrant's Common
Stock par value, $.01 outstanding.
<PAGE>
3-D GEOPHYSICAL,INC.
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996
INDEX
PART I. Financial Information
Page
Item 1 Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1995 and March 31, 1996.............................4
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1995 and March 31, 1996 ............5
Condensed Consolidated Statements of Cash Flows-Three Months
Ended March 31, 1995 and March 31, 1996..........................6
Notes to Condensed Consolidated Financial Statements...........7-12
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................13-16
PART II. Other Information
Item 1 Legal Proceedings............................................17
Item 2 Changes in Securities........................................17
Item 3 Defaults Upon Senior Securities..............................17
Item 4 Submission of Matters to a Vote
of Security Holders........................................17
Item 5 Other Information............................................17
Item 6 Exhibits and Reports on Form 8-K.............................17
SIGNATURES...............................................................18
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
December 31, March 31,
1995 1996
____ ____
ASSETS
Current assets:
Cash and cash equivalents $ 609 $ 8,793
Accounts receivable, net of the allowance
for doubtful accounts of $0 and $49 as of
December 31,1995 and March 31, 1996
-Billed 1,786 7,781
-Unbilled - 2,085
-Other 158 382
Prepaid expenses 182 820
Other 57 55
______ _______
Total current assets $2,792 $19,916
Restricted cash - 1,000
Property and equipment, net of accumulated
depreciation of $1,744 and $3,178 as of
December 31, 1995 and March 31, 1996 1,746 15,834
Goodwill, net of accumulated amortization of
$0 and $66 as of December 31, 1995
and March 31, 1996 - 6,569
Other assets 9 129
______ _______
Total assets $4,547 $43,448
====== =======
The accompanying notes are an integral part of
these condensed consolidated financial statements.
Page 3 of 18
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3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands except per share amounts)
December 31, March 31,
1995 1996
____ ____
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and capital leases $ 182 $ 3,015
Accounts payable 1,004 7,376
Accrued liabilities 1,003 1,344
______ ______
Total current liabilities 2,189 11,735
Long-term debt and capital leases - 3,729
Payable to related party - 1,000
Deferred income taxes 530 538
Stockholders' equity:
Common stock-predecessor 321 -
Common stock, $.01 par value, 25,000,000 shares
authorized, 7,600,000 shares issued and
outstanding - 76
Preferred stock, $.01 par value, 1,000,000 shares
authorized and none issued and outstanding - -
Additional paid in capital - 29,110
Retained earnings 4,363 292
Cumulative foreign currency translation adjustments (2,856) (3,032)
______ ______
Total stockholders' equity 1,828 26,446
Total liabilities and stockholders' equity $4,547 $43,448
====== =======
The accompanying notes are an integral part of
these condensed consolidated financial statements.
Page 4 of 18
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3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
For the Three Months
Ended March 31,
1995 1996
____ ____
Net sales $2,257 $7,052
Expenses:
Cost of data acquisition 1,649 5,018
Depreciation and amortization 226 633
General and administrative expenses 240 859
_____ _____
Total operating expenses 2,115 6,510
Operating income 142 542
Other income (expense)
Miscellaneous 64 132
Interest expense (114) (142)
Foreign currency transaction gains 4 68
____ ____
Other income (expense) (46) 58
Income before provision for income
taxes and extraordinary item 96 600
Provision for income taxes 10 138
____ ____
Income before extraordinary item 86 462
Extraordinary item net of tax expense of $36 - 57
____ ____
Net income $ 86 $519
==== ====
Income before extraordinary item per share $.09
Extraordinary item, net of tax expense, per share .01
____
Net earnings per share $.10
====
Weighted average common shares outstanding 5,163,385
The accompanying notes are an integral part of
these condensed consolidated financial statements.
Page 5 of 18
<PAGE>
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months
Ended March 31
1995 1996
____ ____
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided (used ) by operating activities $ 448 $(1,862)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (26) (233)
Cash consideration paid to acquire seismic data
acquisition companies - (10,328)
Cash received from the sale of property
and equipment - 21
______ _______
Net cash used by investing activities (26) (10,540)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid in connection with the initial
public offering - (3,268)
Proceeds from initial public offering, net of
underwriting discounts - 32,085
Cash paid to retire indebtedness of
Founding Companies - (4,599)
Principal payments on notes payable
and capital leases (245) (1,134)
Net borrowings under factor agreements (207) -
Cash dividend paid to owners of predecessor
company - (2,510)
____ ______
Net cash provided (used) by financing activities (452) 20,574
Net increase (decrease) in cash (30) 8,172
Cash at beginning of period 242 609
Effect of change in exchange rate on cash balance (65) 12
______ _______
Cash at end of period $ 147 $ 8,793
====== =======
The accompanying notes are an integral part of these
these condensed consolidated financial statements.
Page 6 of 18
<PAGE>
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
On February 9, 1996, 3-D Geophysical, Inc. ("Company")
consummated an initial public offering (the "Offering") and simultaneously
acquired in separate transactions, in exchange for cash, notes and shares of
common stock, Geoevaluaciones, S.A. de C.V., ("GEO"), Processos Interactivos
Avanzados, S.A. de C.V.("PIASA"), certain assets and liabilities of the land
seismic business of Northern Geophysical of America, Inc.("Northern"),
Paragon Geophysical, Inc. ("Paragon") and Kemp Geophysical Corporation
("Kemp") (Collectively referred to as the "Founding Companies").
For accounting purposes the acquisitions of GEO and PIASA have been
treated as a recapitalization of GEO and PIASA with GEO (combined with PIASA)
as the acquiror of the Company. Accordingly, the financial statements include
the historical operating performance of GEO and PIASA (the "Mexican
Operations"). For accounting purposes,GEO is considered the predecessor
company.
The acquisitions of the other Founding Companies have been treated as
business combinations accounted for by the purchase method of accounting as
prescribed by Accounting Principles Board Opinion No. 16 and Staff
Accounting Bulletin No. 48. Northern and Kemp are being valued at the fair
market value of consideration given. In connection with the acquisitions of
Northern and Kemp, the excess of consideration given over the fair market
value of net assets acquired will be amortized on a straight-line basis over
15 years. The acquisition of Paragon's common stock in exchange for shares of
the Company's common stock is accounted for at Paragon's historical cost.
The accompanying condensed consolidated financial statements include the
accounts of Northern, Kemp and Paragon from February 9, 1996, the effective
dates of the acquisitions. As a result, the Company's statement of
operations for the three months ended March 31, 1996 is not comparable to the
statement of operations for the three months ended March 31, 1995,and the
Company's balance sheet as of March 31, 1996 is not comparable to its balance
sheet as of December 31, 1995.
The consideration paid to the former owners of Northern, Kemp and Paragon
and the allocation of such consideration to the acquired assets is as follows:
Cash paid for the stock and assets
of the acquired companies $10,328,000
Stock issued to the former owners of Kemp at offering
price of $7.50 per share 294,000
Assumption of the liabilities in excess of assets of Paragon (916,000)
Liabilities assumed:
Bank overdraft 162,000
Accounts payable 5,532,000
Accrued and other current liabilities 1,979,000
Debt assumed:
Current 8,317,000
Non-current 3,187,000
__________
Amounts allocated to the acquired assets $28,883,000
===========
Page 7 of 18
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3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION, (continued)
Allocation of the purchase price to the acquired assets
Accounts receivable:
Trade $ 7,011,000
Other 249,000
Other current assets 204,000
Property and equipment 13,818,000
Goodwill 6,635,000
Other assets 966,000
___________
$28,883,000
===========
In the opinion of the Company, the accompanying consolidated
financial statements include all adjustments which are of a normal recurring
nature necessary to present fairly the Company's financial position at
March 31, 1996, and the results of its operations and cash flows for the three
month periods ended March 31, 1995 and 1996. All significant intercompany
accounts have been eliminated. Although the Company believes that the
disclosures are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. These consolidated
financial statements should be read in conjunction with the Company's
financial statements and footnotes thereto included in the Company's
Registration Statement on Form S-1 and the Company's Annual Report on
Form 10-K which were filed pursuant to Rule 15d-2 of the Securities and
Exchange Act of 1934, as amended. The results of operations for the three
month period ended March 31, 1996, are not necessarily indicative of the
results to be expected for the full year.
Page 8 of 18
<PAGE>
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION, (continued)
PRO FORMA INFORMATION
The accompanying summarized pro forma information for the Company for the
three month periods ended March 31, 1995 and 1996, represents the operations
of the Company as if the acquisitions of the Founding Companies and the
initial public offering had occurred on January 1, 1995.
For the Three For the Three
Months Ended Months Ended
March 31, 1995 March 31, 1996
______________ ______________
Net sales $6,956 $10,754
====== =======
Extraordinary item, net of tax expense $ - $ 57
====== =======
Net income (loss) $ (504) $ 272
====== =======
Income before extraordinary item, per share $ (.07) $ .03
Extraordinary item, net of tax expense,
per share - .01
______ _____
Earnings (loss) per share $(.07) $ .04
====== =====
Pro forma weighted average common
shares outstanding 7,600,000 7,600,000
The summarized pro forma information is not necessarily indicative of
actual results that would have been achieved if the transaction had occurred
on the date indicated or which may be realized in the future. Neither
expected benefits and cost reductions anticipated by the Company, nor future
corporate costs of the Company, have been reflected in the above summarized
pro forma information.
Page 9 of 18
<PAGE>
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INITIAL PUBLIC OFFERING OF COMMON STOCK
On February 9, 1996, the Company completed the offering of 4,000,000
shares of common stock at $7.50 per share. Subsequently, on February 21,
1996, the underwriters exercised an option to purchase an additional 600,000
shares at $7.50 per share. The proceeds, net of the underwriters'
commissions and estimated offering costs were $28,817,000. Of these net
proceeds, approximately $10,328,000 was used to pay the cash portion of the
purchase price for certain Founding Companies, $2,510,000 was paid to fund the
dividend to the former shareholders of GEO, and approximately $4,599,000 was
used to retire certain indebtedness of the Founding Companies. The Company
recognized $57,000 of extraordinary gain, net of tax, from the retirement
of a certain portion of this debt.
3. CONCENTRATIONS OF CREDIT RISK
During the three months ended March 31, 1995, which included only the
operations of GEO, one customer accounted for 100% of seismic and
geophysical revenues, and during the three months ended March 31, 1996, two
customers accounted for 28% and 23% of seismic and geophysical revenues.
As of December 31, 1995, which consisted only of the accounts of GEO,
one customer accounted for 99% of accounts receivable and as of March 31, 1996,
two customers accounted for 19% and 24% of accounts receivable.
4. RECENT ACCOUNTING PRONOUNCEMENTS
During the fourth quarter of 1995, Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation" (SFAS 123) was
issued. The Company will continue to account for future grants of common
stock options using the intrinsic value method under Accounting Principles
Board Opinion No. 25,"Accounting for Stock Issued to Employees" and will
adopt the disclosure requirements of SFAS 123.
Page 10 of 187
<PAGE>
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. EARNINGS PER SHARE
The number of shares used in the earnings per share calculation is
determined as follows:
Weighted Average
Description Shares Outstanding
___________ __________________
Shares issued to 3-D stockholders giving effect to
the 2,717.66 for 1 stock split 1,400,682
Shares deemed to have been issued to fund cash
portion of GEO dividend 468,000
Shares issued to acquire Founding Companies 1,019,274
Shares sold in initial offering 2,018,286
Shares sold upon exercise of the over-allotment option 257,143
_________
Weighted average common shares outstanding 5,163,385
=========
6. INCOME TAXES
The effective income tax rates for the three months ended March 31, 1995
and 1996 are 10% and 23%, respectively. The differences between the statutory
federal income tax rate on income before provision for income taxes and
extraordinary item, and the Company's effective income tax rate result
primarily from the tax benefits associated with inflation adjustments with
respect to the operations of GEO and PIASA. The increase in the effective
rate results from a reduction in the tax benefits associated with the
inflation adjustments realized by GEO for the quarter ended March 31, 1996.
7. COMMITMENTS AND CONTINGENCIES
Pursuant to the terms of the Kemp stock purchase agreement, the Company
has agreed to a contingent cash payment in consideration of the acquisition
of all of the outstanding shares of capital stock of Kemp. The maximum
payment is $725,000, the exact amount of which is dependent upon Kemp's
earnings before interest and taxes for the fiscal years ending
December 31, 1996, 1997 and 1998.
Page 11 of 18
<PAGE>
3-D GEOPHYSICAL, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. COMMITMENTS AND CONTINGENCIES,(Continued)
GEO has a dispute, and may be threatened with litigation, in connection
with certain agreements entered into by it with Capilano International Inc.,
a Canadian company ("Capilano"). The dispute concerns a certain Letter of
Intent and a certain Technical Assistance Agreement, dated June 1, 1991
and June 3,1992, respectively (the "Capilano Agreements"). GEO maintains that
it is not obligated to compensate Capilano for certain services GEO believes
were either inadequately provided or not provided at all by Capilano and the
parties disagree upon how certain profits and losses should be allocated
under the Capilano Agreements. On May 13, 1996, a Capilano representative
contacted the Chairman of the Board of the Company expressing Capilano's
interest in resolving the dispute. The Company is not currently able to
estimate the effect, if any, on GEO's results of operations and financial
position which may result from the resolution of this matter. Accordingly,
the Company's financial statements do not reflect any adjustment related to
this matter.
8. COMMON STOCK - PREDECESSOR
Common stock for the Company at December 31, 1995, consists solely of
GEO common stock of 1,200,000 shares of N$1 par value variable capital stock.
In 1993, GEO capitalized $229,582 of earnings by issuing 229,582 shares of
common stock.
GEO and PIASA are required under Mexican law to establish a legal
reserve equal to 5% of each company's earnings until such time as the reserve
equals 20% of the minimum capital of GEO and PIASA.
9. SUBSEQUENT EVENTS
On May 2, 1996, the Company and one of its vendors entered into a letter
of intent to purchase new seismic recording equipment for $8.5 million. As
part of the letter of intent, the vendor will povide certain credit support to
a financial institution with which the Company is currently under negotiations
to finance a portion of this equipment and refinance $4.5 million of existing
debt.
On April 26, 1996, the Company granted 339,502 stock options to
members of the Board of Directors, management and employees.
Page 12 of 18
<PAGE>
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For accounting purposes, GEO is considered the predecessor company
and the financial performance of Northern, Kemp, and Paragon (the "Purchased
Companies") are included as of the acquisition date, February 9,1996. As a
result, the Company's statement of operations for the three months ended
March 31, 1996, includes the financial activities of the Purchased Companies
after February 8, 1996, and is not comparable to the statement of operations
for the three months ended March 31, 1995. The following discussion has been
divided into two sections. The first section relates to the Company and
includes the historical operating performance of GEO and PIASA (the
Mexican Operations). The second section discusses the Company's financial
condition, liquidity, and capital resources as of March 31, 1996.
RESULTS OF OPERATIONS
Three Months Ended March 31,1996 Compared to Three Months Ended March 31,1995.
Net Sales. Net sales for the Company increased 212.5% to $7.1 million
in the three months ended March 31, 1996, from $2.3 million in the three
months ended March 31, 1995. The increase is primarily attributable to the
inclusion of $4.9 million of net sales of the Purchased Companies partially
offset by a 6.5% decrease to $2.1 million in the three months ended March
31, 1996, from $2.3 million in the three months ended March 31, 1995 for the
Mexican Operations. The decline in net sales in the Mexican Operations is
attributable primarily to the devaluation of the Mexican Peso ("Peso).
Cost of Data Acquisition. Cost of data acquisition for the Company
increased 204.3% to $5.0 million in the three months ended March 31, 1996,
from $1.6 million in the three months ended March 31, 1995. The increase
is primarily attributable to the inclusion of $3.5 million of cost of data
acquisition of the Purchased Companies offset by a 7.6% decrease to
$1.5 million in the three months ended March 31, 1996, from $1.6 million in
the three months ended March 31, 1995, for the Mexican Operations. The decline
in data acquisition cost in the Mexican Operations is attributable primarily
to the devaluation of the Peso.
Depreciation and Amortization. Depreciation and amortization for the
Company increased 180.1% to $633,000 in the three months ended March 31, 1996,
from $226,000 in the three months ended March 31, 1995. The increase is
primarily attributable to the inclusion of $500,000 of depreciation and
amortization of the Purchased Companies including $66,000 of goodwill
amortization attributable to the acquisitions of the Purchased Companies.
This increase was partially offset by a 41.2% decrease to $133,000 in the
three months ended March 31, 1996, from $226,000 in the three months ended
March 31, 1995, for the Mexican Operations. This decrease is primarily the
result of the devaluation of the Peso.
Page 13 of 18
<PAGE>
General and Administrative Expenses. General and administrative expenses
for the Company increased 257.9% to $859,000 in the three months ended March
31, 1996, from $240,000 in the three months ended March 31, 1995. The
increase is primarily attributable to the inclusion of $581,000 of general and
administrative expenses of the Purchased Companies and a 15.8% increase to
$278,000 in the three months ended March 31, 1996, from $240,000 in the
three months ended March 31, 1995, for the Mexican Operations.
Operating Income. Operating income for the Company increased 281.7% to
$542,000 in the three months ended March 31, 1996, from $142,000 in the three
months ended March 31, 1995. The increase is primarily attributable to the
inclusion of $365,000 of operating income of the Purchased Companies in
addition to a 24.6% increase to $177,000 in the three months ended
March 31, 1996, from $142,000 in the three months ended March 31, 1995 for
the Mexican Operations. The increase in operating income of the Mexican
Operations is primarily attributable to a decrease in depreciation due to
the devaluation of the Peso.
Miscellaneous Income (Expense). The Company recognized miscellaneous
income of $132,000 in the three months ended March 31, 1996, compared to
miscellaneous income of $64,000 in the three months ended March 31, 1995.
The increase is primarily the result of interest income in Mexico due to the
high interest rates and interest income from the offering proceeds of the
Company's initial public offering.
Interest Expense. The Company's interest expense increased 24.6% to
$142,000 in the three months ended March 31, 1996, from $114,000 in the three
months ended March 31, 1995. The increase is attributable to the debt
of the Purchased Companies, partially offset by a reduction of debt in
the Mexican Operations.
Foreign Currency Gains. The Company recognized a foreign currency gain
of $68,000 in the three months ended March 31, 1996, compared to a foreign
currency gain of $4,000 in the three months ended March 31, 1995.
The gains are attributed to the reduction of U.S. dollar liabilities of the
Mexican Operations and the fluctuation of the Peso/U.S. dollar exchange rate.
Income Tax Expense. The Company recognized income tax expense from
operations of $138,000 in the three months ended March 31, 1996, compared to
income tax expense of $10,000 in the three months ended March 31, 1995. The
increase is primarily attributable to earnings of the Purchased Companies
taxed at a 38% rate, partially offset by inflation adjustments to the
38% tax rate in Mexico which produced a $4,000 tax benefit.
Extraordinary Item Net of Income Tax Expense. The Company recognized a
$57,000 extraordinary item in the three months ended March 31, 1996, net of
tax expense of $36,000. The extraordinary item is due to a gain
recognized on the early extinguishment of debt. No extraordinary items were
recognized in the three months ended March 31, 1995.
Page 14 of 18
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
From December 31, 1995 to March 31, 1996, total assets of the Company
increased from $4.5 million to $43.4 million, total liabilities increased
from $2.7 million to $17.0 million, and total stockholders' equity increased
from $1.8 million to $26.4 million. These increases resulted from the
Company's initial public offering and acquisition of the Founding Companies.
On February 9, 1996, the Company completed its initial public offering
of 4,000,000 shares of common stock at $7.50 per share. Subsequently, on
February 21, 1996, the underwriters exercised their over-allotment option to
purchase an additional 600,000 shares at $7.50 per share. The net proceeds
to the Company (after deducting (i) underwriting discounts and commissions
and (ii) offering expenses) were approximately $28.8 million. Of this
amount, approximately $2.5 million was used to pay cash dividends to GEO
and PIASA's stockholders, approximately $10.3 million was used to purchase
the land seismic assets of Northern and 100% of Kemp's equity, and
approximately $4.6 million was used to repay indebtedness of the Founding
Companies. The net proceeds to the Company from the issuance, after
deducting underwriting discounts, offering expenses and the cash required to
purchase and repay debt of the Founding Companies, have been and will be used
for working capital and capital expenditures, and may be used for strategic
acquisitions.
At March 31, 1996, the Company had $8.8 million of cash. The Company
utilized $1.9 million net cash from operating activities in the three months
ended March 31, 1996 as compared to providing $448,000 in the same
period of the prior year. The reduction in net cash provided by operating
activities was primarily attributable to a net increase in working capital.
Net cash used in investing activities increased to $10.5 million in the
three months ended March 31, 1996, from $26,000 in the same period of the
prior year. This amount was primarily due to the cash utilized to purchase
Northern and Kemp.
Net cash provided by financing activities increased to $20.6 million for
the three months ended March 31,1996 from a net cash used of $452,000 in the
prior year due to the completion of the Company's initial public offering.
The Company used $233,000 for capital expenditures in the three months
ended March 31, 1996, from $26,000 in the same period of the prior year. In
addition, simultaneously with the acquisition of the Founding Companies,
Northern and Paragon exercised options to purchase equipment which was
previously being rented. These capital expenditures reduced the Company's
reliance on rental equipment and improved the Company's position to meet
the demand for technologically advanced 3-D data acquisition recording
systems. On May 2, 1996, the Company entered into a letter of
intent to purchase approximately $8.5 million of equipment from Input/Output,
Inc. by May 31, 1996. This purchase will increase the recording channel
Page 15 of 18
<PAGE>
capacity by over 50%. Pursuant to the letter of intent, Input/Output,Inc.
intends to provide certain credit support to a financial institution
with which the Company is currently negotiating. The proposed credit
facility would be for three years and include the purchase price for the above
equipment and would refinance conditional sales agreements totalling
approximately $4.5 million incurred by the Founding Companies prior to the
Company's initial public offering. The new equipment will be utilized to
meet the requirements of a contract with a subsidiary of British
Petroleum in Alaska, currently under negotiation, increase the capacity of
one of its Mexican crews for a new 3-D contract, and increase the channel
capacity of the Company's two crews in the Rocky Mountain Region.
At May 1, 1996, the Company's estimated backlog of commitments for
services totaled $35.2 million. The Company expects to complete
substantially all of of these commitments during 1996; however, commitments
are subject to cancellation at the option of the Company's customers.
The Company believes that its planned capital expenditures and
operating requirements through the end of 1996 will be funded from a portion
of its initial public offering, cash from operations, and proceeds from the
borrowing from a financial institution, currently under negotiations referred
to above. There can be no assurance that the Company will be able to obtain
financing at all, or on terms favorable to the Company. If the Company is
not able to obtain additional financing, it will be unable to complete its
capital expenditure program and may be materially and adversely affected
as a result.
Page 16 of 18
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None
Page 17 of 18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
3-D Geophysical, Inc.
Dated: May 15, 1996 /s/ Richard Davis
By: _________________________________
Richard Davis
President and Chief Executive Officer
(principal executive officer)
Dated: May 15, 1996 /s/ John D. White, Jr.
By:_________________________________
John D. White, Jr.
Treasurer and Chief Financial
Officer (principal financial
and accounting officer)
Page 18 of 18
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