Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 NUMBER 0-28422
GEOSCIENCE CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA 76 - 0497775
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10500 WESTOFFICE DRIVE, HOUSTON, TEXAS 77042
(Address of principal executive offices) Zip Code
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713/780-1881
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ ]. No [X].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON OUTSTANDING AT JULY 31, 1996
Common Stock, $.01 par value 10,497,600
<PAGE>
Form 10-Q
GeoScience Corporation
INDEX
PAGE NO.
Part I. Financial Information:
Consolidated Balance Sheet June 30, 1996
and December 31, 1995 1
Consolidated Statement of Income and Accumulated
Earnings for Three Months Ended June 30,
1996 and 1995 2
Consolidated Statement of Income and Accumulated
Earnings for Six Months ended June 30,
1996 and 1995 3
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of financial
Condition and Results of Operations 6-8
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
<PAGE>
Page 1 Form 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GeoScience Corporation
Consolidated Balance Sheet
June 30, December 31,
1996 1995
--------- --------
(stated in thousands)
Assets
Current assets:
Cash and cash equivalents ................... $ 405 $ 1,668
Receivables ................................. 31,273 28,291
Inventories ................................. 39,223 32,916
Other ....................................... 1,077 2,508
--------- --------
Total current assets .................. 71,978 65,383
Property, plant and equipment ................. 23,491 22,550
Long term receivables ......................... 2,530 2,990
Other assets .................................. 10,755 7,967
--------- --------
Total assets .......................... $ 108,754 $ 98,890
========= ========
Liabilities
Current liabilities:
Notes payable and current
maturities of long-term debt ............... $ 5,254 $ 11,681
Accounts payable ............................ 10,009 11,370
Unearned revenue ............................ 2,434 5,897
Taxes on income ............................. 1,572 482
Payable to Tech-Sym Corporation ............. 2,650 23,554
Other accrued liabilities ................... 6,395 6,238
--------- --------
Total current liablilites ............. 28,314 59,222
Long-term debt ................................ 4,948 5,386
Other liabilities and deferred credits ........ 1,299 1,014
--------- --------
Total liabilities ..................... 34,561 65,622
Shareholders' Investment
Common stock - authorized 35,000,000
shares, $.01 par value; issued
10,497,600 and 7,900,000 shares .............. 105 1
Additional capital ............................ 44,830 4,553
Accumulated earnings .......................... 29,532 28,930
Cumulative translation adjustments ............ (274) (216)
--------- --------
Total shareholders' investment ........ 74,193 33,268
--------- --------
Total liabilities and
shareholders' investment ............. $ 108,754 $ 98,890
========= ========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 2 Form 10-Q
GeoScience Corporation
Consolidated Statement of Income and
Accumulated Earnings
For the Three Months
Ended June 30,
-----------------------
1996 1995
-------- --------
(stated in thousands except
for per share amounts)
Revenue:
Equipment sales ................................ $ 21,064 $ 15,924
Software sales ................................. 2,210 1,967
Maintenance and other .......................... 2,126 1,859
-------- --------
25,400 19,750
Cost of revenue:
Cost of equipment sales ........................ 13,003 9,298
Cost of software sales ......................... 344 171
Cost of maintenance and other .................. 672 799
-------- --------
14,019 10,268
-------- --------
Gross profit .............................. 11,381 9,482
-------- --------
Expenses:
Selling, general and administrative
expenses ..................................... 7,561 5,103
Research and development expense ............... 3,545 2,934
Interest expense ............................... 574 247
Interest and other income, net ................. (635) (703)
-------- --------
11,045 7,581
-------- --------
Income from continuing
operations before income taxes ........... 336 1,901
Provision for income taxes ....................... 108 599
-------- --------
Income from continuing operations ......... 228 1,302
Discontinued operations:
Loss from operations of discontinued
Syntron Pressure Controls division
less applicable income tax benefits ........... (212)
Loss on disposal of Syntron Pressure
Controls division less applicable
income tax benefits .......................... (144)
-------- --------
Net income ................................ 228 946
Accumulated earnings:
Beginning of period .......................... 29,304 25,011
-------- --------
End of period ................................ $ 29,532 $ 25,957
======== ========
Earnings per common share:
Income from continuing operations ............ $ .03 $ .16
Loss from discontinued operations ............ (.04)
-------- --------
Net income ................................ $ .03 $ .12
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3 Form 10-Q
GeoScience Corporation
Consolidated Statement of Income and
Accumulated Earnings
For the Six Months
Ended June 30,
-----------------------
1996 1995
-------- --------
(stated in thousands except
for per share amounts)
Revenue:
Equipment sales ................................ $ 41,333 $ 27,639
Software sales ................................. 4,669 4,061
Maintenance and other .......................... 4,148 3,556
-------- --------
50,150 35,256
Cost of revenue:
Cost of equipment sales ........................ 25,424 16,037
Cost of software sales ......................... 679 489
Cost of maintenance and other .................. 1,347 1,612
-------- --------
27,450 18,138
-------- --------
Gross profit .............................. 22,700 17,118
-------- --------
Expenses:
Selling, general and administrative
expenses ..................................... 14,274 9,967
Research and development expense ............... 7,036 5,966
Interest expense ............................... 1,175 487
Interest and other income, net ................. (671) (784)
-------- --------
21,814 15,636
-------- --------
Income from continuing
operations before income taxes ........... 886 1,482
Provision for income taxes ....................... 284 489
-------- --------
Income from continuing operations ......... 602 993
Discontinued operations:
Loss from operations of discontinued
Syntron Pressure Controls division
less applicable income tax benefits ........... (422)
Loss on disposal of Syntron Pressure
Controls division less applicable
income tax benefits .......................... (144)
-------- --------
Net income ................................ 602 427
Accumulated earnings:
Beginning of period .......................... 28,930 25,530
-------- --------
End of period ................................ $ 29,532 $ 25,957
======== ========
Earnings per common share:
Income from continuing operations ............ $ .07 $ .12
Loss from discontinued operations ............ (.07)
-------- --------
Net income ................................ $ .07 $ .05
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4 Form 10-Q
GeoScience Corporation
Consolidated Statement of Cash Flows
For the Six Months
Ended June 30,
-------------------
1996 1995
-------- -------
(stated in thousands)
Cash flows from operating activities:
Net income ............................................ $ 602 $ 427
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization ...................... 3,294 2,795
Change in operating assets and liabilities:
Receivables ........................................ (2,982) (1,965)
Inventories ........................................ (6,307) (7,035)
Accounts payable and taxes on income ............... (271) 2,598
Unearned revenue and
other accrued liabilities ......................... (3,306) 4,113
Long-term receivables and other assets ............. (3,342) 286
Other .............................................. 1,658 642
-------- -------
Net cash provided by (used for)
operating activities ................................ (10,654) 1,861
-------- -------
Cash flows from investing activities:
Capital expenditures .................................. (3,221) (4,202)
-------- -------
Net cash provided by (used for)
investing activities ............................... (3,221) (4,202)
-------- -------
Cash flows from financing activities:
Net borrowings (payments) under
line of credit agreements ............................ (6,415) (1,801)
Proceeds from long-term debt .......................... (450) (164)
Payable to Tech-Sym ................................... (20,904) 3,850
Proceeds from issuance of common stock ................ 40,381
-------- -------
Net cash provided by financing activities ............. 12,612 1,885
-------- -------
Net increase (decrease) in
cash and cash equivalents ............................. (1,263) (456)
Cash and cash equivalents at beginning of period ...... 1,668 1,884
-------- -------
Cash and cash equivalents at end of period ............ $ 405 $ 1,428
======== =======
Cash flow from operating activities include:
Interest paid ......................................... $ 574 $ 250
Income taxes paid ..................................... -- --
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5 Form 10-Q
GeoScience Corporation
Notes to Consolidated Financial Statements
1. The unaudited consolidated financial statements include the accounts of
GeoScience Corporation and its subsidiaries ("the Company") for the three
month and six month periods ended June 30, 1996 and 1995 and should be
read in conjunction with the financial statements and the notes thereto
for the year ended December 31, 1995, included in the Company's
Registration Statement on Form S-1, as filed with the Securities and
Exchange Commission on May 17, 1996, as amended (Registration No.
333-2986). In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of these
unaudited statements have been included. Such financial results, however,
should not be construed as necessarily indicative of future earnings.
2. Inventories are valued at the lower of cost or market. Cost is determined
on the first-in, first-out method. Inventories (principally electronic
parts) which aggregated $39,223,000 at June 30, 1996, include raw
materials of $13,511,000 and work-in-process and finished goods of
$25,712,000.
3. Shares of common stock of the Company have been reserved at June 30, 1996
for issuance as follows:
1,500,000 shares for issuance upon exercise of options granted or
to be grated under the 1996 Equity Incentive Plan of the Company.
4. The Company provides deferred income taxes for temporary differences
arising when revenues or expenses are recognized in different periods for
financial and tax reporting purposes.
Provision for federal income taxes for the three and six month periods
ended June 30, 1996 and 1995 was equivalent to an effective rate of 32%
of earnings before income taxes. The difference between the effective
rate and the U.S. statutory rate is due principally to tax benefits of
foreign sales and research and development credits.
5. Earnings per common share are based on the weighted average number of
shares outstanding during each period (9,185,000 and 7,900,000 for the
three months ended June 30, 1996 and 1995, respectively, and 8,542,000
and 7,900,000 for the six month period ended June 30, 1996 and 1995,
respectively).
Page 6 Form 10-Q
GeoScience Corporation
Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES:
The Company has financed its operations from internally generated cash,
intercompany loans from Tech-Sym and borrowings under the Company's revolving
credit facilities. Cash used for operating activities for the six month period
ended June 30, 1996 was expended primarily for increased inventories necessary
to support the higher revenue. Effective May 17, 1996, the Company completed its
initial public offering of common stock of 2,597,600 shares. The net proceeds to
the Company were $40.5 million of which $13.0 million was used to pay
indebtedness of revolving credit facilities and the balance used to pay amounts
due Tech-Sym Corporation.
At June 30, 1996, the Company had unused committed lines of credit which
aggregated $9,734,000.
After working capital, the chief use of the Company's funds has normally been
capital expenditures. Capital expenditures for property, plant and equipment
were $3,221,000 and $4,202,000 for the six months ended June 30, 1996 and 1995,
respectively.
RESULTS OF OPERATIONS:
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods included
in the accompanying consolidated statements of income.
A summary of the period to period changes in the principal items included in the
consolidated statements of income is shown below:
Comparison of Comparison of
Three Months Six Months
Ended June 30, Ended June 30,
1996 and 1995 1996 and 1995
------- --------
Increase(Decrease)
(stated in thousands)
Sales ....................................... $ 5,650 $ 14,894
Costs and expenses .......................... 7,215 15,490
------- --------
Income from
continuing operations
before income taxes ....................... (1,565) (596)
Provision for income taxes .................. 491 205
------- --------
Income from
continuing operations ..................... (1,074) (391)
Discontinued operations ..................... 356 566
------- --------
Net Income .................................. $ (718) $ 175
======= ========
Page 7 Form 10-Q
GeoScience Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Continued
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND 1995:
Revenue for the quarter ended June 30, 1996 increased 29% while costs and
expenses increased 40% which resulted in a decrease in income in continuing
operations before income taxes of 82% over the like quarter of the previous
year. This 29% increase in revenue was the result of (i) increased sales of
equipment ($5,140,000 or 32%) due primarily to shipments of the new 24-bit
module, (ii) increase in software sales ($243,000 or 12%), and (iii) increase in
maintenance and other revenue ($267,000 or 14%), the latter two due primarily to
the acquisition of Photon Systems Ltd. effective September 1995.
Cost of revenue increased 37% while selling, general and administrative expense
increased 48% for the quarter ended June 30, 1996 as compared to the second
quarter of 1995. The increase in cost of revenue was primarily due to (i) costs
associated with increased sales and (ii) increased manufacturing cost of the new
24- bit module over the standard 16-bit module. Selling, general and
administrative expense increased due primarily to the addition of selling,
general and administrative expenses of Photon Systems Ltd., which was acquired
effective September 1995, as well as royalties on increased equipment sales.
Research and development expense increased 21% for the quarter ended June 30,
1996 as compared to the like quarter of 1995, but decreased from 15% as a
percent of sales for 1995 to 14% for 1996. Interest expense increased 132% for
the quarter primarily due to borrowing required to support the increase in
sales. Interest and other income was essentially the same for both quarters. The
provision for income tax rate was essentially the same for both periods.
Syntron's Pressure Control division was sold effective June 15, 1995.
Page 8 Form 10-Q
GeoScience Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Continued
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1995:
Revenue for the six month period ended June 30, 1996 increased 42% while costs
and expenses increased 46% which resulted in a decrease in income from
continuing operations before income taxes of 40%. The 42% increase in revenue
was the result of (i) increased equipment sales ($13,694,000 or 50%), (ii)
increased software sales ($608,000 or 15%) and (iii) increased revenue in
maintenance and other ($592,000 or 17%), all due to the same reasons as
discussed in the quarterly comparisons.
Cost of revenue increased 51% while selling, general and administrative expense
increased 42% for the quarter ended June 30, 1996 as compared to the same
quarter of 1995. The reason for the increase in cost of revenue was essentially
the same as the reasons for the quarterly comparison. The increase in selling,
general and administrative expense of 43% compares favorably to the 42% increase
in revenue. Research and development expense increased 18% for the six month
period, but decreased from 17% as a percentage of sales for 1995 to 14% for
1996. Interest expense increased 141% for the six month period due to additional
borrowing required to support the increase in sales. Interest and other income
was essentially the same for both periods. See note 4 of the Notes to the
Consolidated Financial Statements contained on page 5 of the report for income
tax information.
Page 9 Form 10-Q
GeoScience Corporation
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits to this report except for Exhibit 27 -
Financial Data Schedule which is deemed not to be filed for
purposes of liability under the federal securities laws.
No financial statements were filed as a part of this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GEOSCIENCE CORPORATION
Registrant
Date: August 12, 1996 /s/ RICHARD F. MILES
Richard F. Miles, President
Date: August 12, 1996 /s/ RAY F. THOMPSON
Ray F. Thompson, Vice President
and Chief Financial Officer
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<CASH> 405
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<RECEIVABLES> 31,273
<ALLOWANCES> 0
<INVENTORY> 39,223
<CURRENT-ASSETS> 71,978
<PP&E> 23,491
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0
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