Form 10-Q/A
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 March 31, 1997
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, Suite 210, 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 X . No .
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 April 30, 1997
Common Stock, $.01 par value 10,147,600
<PAGE>
GeoScience Corporation Form 10-Q/A
INDEX
-----
Page No.
--------
Part I. Financial Information:
Consolidated Balance Sheet March 31, 1997
and December 31, 1996 1
Consolidated Statement of Income and Accumulated
Earnings for the Quarter Ended March 31,
1997 and 1996 2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4-5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
Signatures 9
<PAGE>
Page 1 Form 10-Q/A
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GeoScience Corporation
Consolidated Balance Sheet
(stated in thousands,
except share amounts)
March 31, 1997 December 31, 1996
---------------- -----------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $1,164 $1,306
Receivables 37,917 30,793
Inventories 47,802 45,845
Other 3,074 2,632
-------- --------
Total current assets 89,957 80,576
Property, plant and equipment 25,714 25,093
Long-term receivables 6,563 9,899
Other assets 7,712 8,258
-------- --------
Total assets $129,946 $123,826
======== ========
Liabilities
Current liabilities:
Notes payable and current
maturities of long-term debt $21,166 $16,197
Accounts payable 9,412 8,336
Unearned revenue 3,954 3,232
Taxes on income 1,207 2,813
Payable to Tech-Sym Corporation 6,234 5,126
Other accrued liabilities 7,044 8,009
-------- --------
Total current liablilites 49,017 43,713
Long-term debt 7,795 4,620
Other liabilities and deferred credits 352 689
-------- --------
Total liabilities 57,164 49,022
Shareholders' Investment
Common stock - authorized 35,000,000
shares, $.01 par value; issued
10,497,600 shares 105 105
Additional capital 44,877 44,877
Accumulated earnings 32,379 32,597
Common stock held in treasury
at cost (350,000 and 240,000 shares) (4,491) (3,046)
Cumulative translation adjustments (88) 271
-------- --------
Total shareholders' investment 72,782 74,804
-------- --------
Total liabilities and
shareholders' investment $129,946 $123,826
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Page 2 Form 10-Q/A
GeoScience Corporation
Consolidated Statement of Income and
Accumulated Earnings
(stated in thousands,
except per share amounts)
For the Quarter
Ended March 31,
---------------------
1997 1996
(unaudited)
Revenue:
Equipment sales $23,902 $20,269
Software sales 1,971 2,459
Maintenance and other 3,280 2,022
--------- ---------
29,153 24,750
Cost of revenue
Cost of equipment sales 16,132 12,421
Cost of software sales 123 335
Cost of maintenance and other 1,513 675
--------- ---------
17,768 13,431
--------- ---------
Gross profit 11,385 11,319
--------- ---------
Expenses:
Selling, general and administrative
expenses 8,108 6,713
Research and development expense 3,246 3,491
Interest expense 495 601
Interest and other (income), net (148) (36)
--------- ---------
11,701 10,769
--------- ---------
Income (loss) from operations
before income taxes (316) 550
Provision (benefit) for income taxes (98) 176
--------- ---------
Net income (loss) (218) 374
Accumulated earnings:
Beginning of period 32,597 28,930
--------- ---------
End of period $32,379 $29,304
========= =========
Earnings (loss) per common share:
Net income (loss) ($0.02) $0.04
===== =====
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Page 3 Form 10-Q/A
GeoScience Corporation
Consolidated Statement of Cash Flows
(stated in thousands)
For the Three Months
Ended March 31,
--------------------
1997 1996
(unaudited)
Cash flows from operating activities:
Net income (loss) ($218) $374
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization 1,793 1,635
Change in operating assets and liabilities:
Receivables (2,666) (2,721)
Inventories (1,957) (2,435)
Other current assets (442) 1,459
Long-term receivables (1,122) 251
Other assets (22) (1,398)
Accounts payable 1,076 (3,586)
Unearned revenue 722 (217)
Taxes on income (1,606) 95
Other liabilities (1,302) 662
Payable to Tech-Sym 218 1,497
----- -----
Net cash used for operating activities (5,526) (4,384)
----- -----
Cash flows from investing activities:
Capital expenditures (1,846) (2,504)
----- -----
Net cash used for investing activities (1,846) (2,504)
----- -----
Cash flows from financing activities:
Net borrowings from Tech-Sym Corporation 890 4,404
Net borrowings under line of credit agreements 423 1,329
Proceeds from long-term debt 15
Payments on long-term debt (142) (132)
Purchase of treasury stock (1,445)
Proceeds from sale of notes receivable 7,848
Other (359)
----- -----
Net cash provided by financing activities 7,230 5,601
----- -----
Net decrease in cash and cash equivalents (142) (1,287)
Cash and cash equivalents at beginning of period 1,306 1,668
------ ------
Cash and cash equivalents at end of period $1,164 $381
====== ======
Cash flow from operating activities include:
Interest paid $428 $414
Income taxes paid 1,621
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Page 4 Form 10-Q/A
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
months ended March 31, 1997 and 1996 and should be read in conjunction with
the financial statements and the notes thereto for the year ended December
31, 1996, included in the Company's annual report. 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.
The accompanying consolidated financial statements for the quarter ended
March 31, 1997, have been restated to reflect the higher cost of revenue
for certain engineering and manufacturing costs which were erroneously
capitalized. The restated consolidated statement of income and accumulated
earnings for the quarter ended March 31, 1997, is summarized as follows (in
thousands, except per share amounts):
Quarter ended March 31, 1997
As previously As
reported restated
----------------------------
Income (loss) from operations
before income taxes $ 274 $ (316)
Net income (loss) 189 (218)
Earnings (loss) per common share $.02 ($.02)
Retained earnings at
March 31, 1997 $32,786 $32,379
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 $47,802,000 at March 31, 1996, include
raw materials of $13,686,000 and work-in-process and finished goods of
$34,116,000.
3. Shares of common stock of the Company have been reserved at March 31,
1997 for issuance as follows:
1,500,000 shares for issuance upon exercise of options granted or to
be granted 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.
<PAGE>
Page 5 Form 10-Q/A
GeoScience Corporation
Notes to Consolidated Financial Statements
Provision for federal income taxes for the three month periods ended March
31, 1997 and 1996 was equivalent to an effective rate of 31% and 32%,
respectively, 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 (10,225,000 and 7,900,000 for the
three months ended March 31, 1997 and 1996, respectively).
6. During the first quarter of 1997, the Company sold notes receivable in
the amount of $7,848,000 to a bank. In accordance with Statement of
Financial Accounting Standards No. 125 (FAS 125), TRANSFERS AND SERVICING
OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES the consolidated
financial statements were restated to reflect both the asset and the
liability associated with this transaction.
7. In 1997, Statement of Financial Accounting Standards No. 128 (FAS 128),
EARNINGS PER SHARE was issued. FAS 128 is effective for earnings per share
calculations for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Adoption of FAS 128 is
not expected to have a material effect on the Company's financial position
or operational results.
8. Effective August 14, 1996 the Board of Directors authorized the Company
to repurchase up to 250,000 shares of its common stock. Effective October
17, 1996 and April 28, 1997, the Board authorized increases in the stock
repurchase plan of 150,000 and 200,000 shares, respectively, with a revised
maximum amount of 600,000 shares. As of May 13, 1997, the Company purchased
435,000 shares of its common stock since the inception of the plan.
<PAGE>
Page 6 Form 10-Q/A
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 Corporation and borrowings under the Company's
revolving credit facilities. Cash used for operations was $5,526,000 for the
three months ended March 31, 1997, compared to $4,384,000 for the same period in
the prior year. The primary use of cash was to acquire additional inventory to
support the anticipated business growth. 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.
At March 31, 1997, the Company had unused committed lines of credit which
aggregated $6,403,000.
After working capital, the chief use of the Company's funds has normally been
capital expenditures. Capital expenditures for property, plant and equipment
were $1,846,000 and $2,504,000 for the three months ended March 31, 1997 and
1996, 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 statement of income.
A summary of the period to period changes in the principal items included in the
consolidated statement of income is shown below:
Comparison of
Three Months
Ended March 31,
1997 and 1996
-----------------
Increase(Decrease)
(stated in thousands)
Sales $ 4,403
Costs and expenses 5,269
-------
Income from operations
before income taxes (866)
Provision for income taxes (274)
-------
Net Income $ (592)
=======
<PAGE>
Page 7 Form 10-Q/A
GeoScience Corporation
Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
Comparison of Three Months Ended March 31, 1997 and 1996:
Revenue for the quarter ended March 31, 1997 increased 18% to $29,153,000 from
$24,750,000 for the year earlier period. Costs and expenses increased 22% to
$29,469,000 from $24,200,000, which resulted in a 157% decrease in income before
income taxes to a loss of $316,000 from an income of $550,000 in the same
quarter in the prior year. The 18% increase in revenue was the result of (i)
increased sales of equipment ($3,633,000 or 18%) due primarily to increased
shipments of marine seismic cables, and (ii) increased maintenance and other
revenue ($1,258,000 or 62%) resulting from contract awards to provide technical
data services to potential bidders on upcoming oil exploration leases. These
increases more than offset the $488,000 or 20% reduction in software revenue
that resulted from certain customers delaying the placement of their orders.
Cost of revenue increased $4,337,000 or 32% to $17,768,000 from $13,431,000 for
the quarter ended March 31, 1997. The increase was due to (i) the general
increase in equipment sales, (ii) a significant shift in the product mix of the
revenue for the current quarter as compared to the year ago period, (iii)
increased engineering and manufacturing costs associated primarily with the
design changes implemented on the 24-bit seismic data acquisition module and
(iv) increased manufacturing costs at the domestic seismic cable manufacturing
facility. The product mix for the quarter included larger equipment shipments of
marine seismic cables, which traditionally carry lower profit margins than the
electronics portion of the data acquisition systems equipment, and lower
shipments of software products, which generally have a very low cost of revenue
in comparison to both equipment products and maintenance and other services.
Design changes to the 24-bit module are intended to enhance the product and
increase its reliability.
Selling, general and administrative expenses increased $1,395,000 or 21% to
$8,108,000 from $6,713,000 for the quarter. This increase was primarily due to
(i) higher commissions during the period primarily due to a large international
sale, (ii) increased royalties due to the general increase in equipment sales
during the period, and (iii) increased accruals for potential bad debt
write-off. Research and development expense for the quarter decreased $245,000
or 7% to $3,246,000 from $3,491,000 from the year ago period. This decrease
reflected the cost cutting measures initiated during the second half of 1996
within the software business area, as well as a reduction in field testing
expenses related to the Polyseis products in the equipment business area.
<PAGE>
Page 8 Form 10-Q/A
GeoScience Corporation
Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
Interest expense decreased $106,000 or 18% to $495,000 from $601,000 as compared
to the prior year period as a result of the reduction of interest bearing debt
due to the proceeds from the Company's initial public offering that was
completed in the second quarter of 1996. Other income, net, increased $112,000
from the like period in 1996 due to interest earnings on interest bearing
receivables during the period.
The Company's software subsidiary, CogniSeis Development, Inc., posted a first
quarter loss of $1,087,000. The Company is soliciting offers to acquire the
subsidiary and intends to sell it if the price and terms of an offer reflect the
intrinsic value and profit making potential of the subsidiary and its product
lines.
<PAGE>
Page 9 Form 10-Q/A
GeoScience Corporation
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: November 13, 1997 /s/ RICHARD F. MILES
Richard F. Miles, President
(principal executive officer)
Date: November 13, 1997 /s/ RAY F. THOMPSON
Ray F. Thompson, Vice-
President and Treasurer
(principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM GEOSCIENCE FORM 10-Q/A 1ST QUARTER 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,164
<SECURITIES> 0
<RECEIVABLES> 37,917
<ALLOWANCES> 0
<INVENTORY> 47,802
<CURRENT-ASSETS> 89,957
<PP&E> 25,714
<DEPRECIATION> 0
<TOTAL-ASSETS> 129,946
<CURRENT-LIABILITIES> 49,017
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 129,946
<SALES> 29,153
<TOTAL-REVENUES> 0
<CGS> 17,768
<TOTAL-COSTS> 29,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> (316)
<INCOME-TAX> (98)
<INCOME-CONTINUING> (218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (218)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
