UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to .
--------------- ------------------
Commission File Number 0-14488
Seitel, Inc.
(Exact name of registrant as specified in charter)
Delaware 76-0025431
- ------------------------------- ---------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
50 Briar Hollow Lane
West Building, 7th Floor
Houston, Texas 77027
- -------------------------------- -------
(Address of principal executive (Zip Code)
offices)
(713) 627-1990
---------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
---------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
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 November 13, 1995 there were 9,340,157 shares of the Company's
common stock, par value $.01 per share, outstanding.
Page 1 of 14
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . 3
Consolidated Statements of Operations
for the Three Months Ended September 30,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations
for the Nine Months Ended September 30,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders'
Equity for the Nine Months Ended
September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Interim
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 12
Page 2 of 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and equivalents $ 1,793 $ 1,541
Receivables
Trade 46,416 37,098
Notes and other 1,299 329
Net data bank 104,721 95,801
Net oil and gas properties 37,194 21,389
Net geophysical and other property and equipment 10,054 11,067
Prepaid expenses, deferred charges and other assets 2,896 1,546
----------- -----------
TOTAL ASSETS $ 204,373 $ 168,771
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 34,829 $ 32,649
Income taxes payable 202 933
Bank debt
Lines of Credit 26,624 5,085
Term Loan 2,628 3,231
Notes Payable 297 -
Obligations under capital leases 4,041 5,088
Subordinated debentures 2,024 3,523
Deferred contractor payable 6,395 9,698
Contingent payables 2,512 3,152
Deferred income taxes 5,996 3,502
Deferred revenue 400 581
----------- -----------
TOTAL LIABILITIES 85,948 67,442
----------- -----------
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; authorized
5,000,000 shares; none issued - -
Common stock, par value $.01 per share; authorized
20,000,000 shares; issued and outstanding 9,336,905 and
8,825,619 at September 30, 1995 and December 31, 1994,
respectively 93 88
Additional paid-in capital 84,117 75,611
Retained earnings 35,754 27,257
Treasury stock, 414 shares at cost at September 30, 1995 and
December 31, 1994 (4) (4)
Notes receivable from officers and employees (1,463) (1,551)
Cumulative translation adjustment (72) (72)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 118,425 101,329
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 204,373 $ 168,771
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
Page 3 of 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUE $ 20,757 $ 18,789
EXPENSES:
Depreciation, depletion and amortization 5,926 6,142
Cost of sales 6,441 5,098
Selling, general and administrative expenses 4,311 3,521
Net interest expense 616 840
----------- ------------
17,294 15,601
----------- ------------
Income before provision for income taxes and
extraordinary item 3,463 3,188
Provision for income taxes 1,281 1,116
----------- ------------
Income before extraordinary item 2,182 2,072
Extraordinary charge on early extinguishment
of debt, net income tax benefit of $163 - (304)
----------- ------------
NET INCOME $ 2,182 $ 1,768
=========== ============
Earnings per share:
Primary:
Income before extraordinary item $ .22 $ .25
Extraordinary item - (.04)
=========== ============
Net income $ .22 $ .21
=========== ============
Assuming full dilution:
Income before extraordinary item $ .22 $ .23
Extraordinary item - (.03)
=========== ============
Net income $ .22 $ .20
=========== ============
Weighted average number of common and common equivalent shares:
Primary 9,940 8,387
=========== ============
Assuming full dilution 10,235 9,602
=========== ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
Page 4 of 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUE $ 66,450 $ 47,540
EXPENSES:
Depreciation, depletion and amortization 20,404 18,963
Cost of sales 17,121 7,351
Selling, general and administrative expenses 13,101 9,681
Net interest expense 2,337 2,434
------------ ------------
52,963 38,429
------------ ------------
Income before provision for income taxes and
extraordinary item 13,487 9,111
Provision for income taxes 4,990 3,189
------------ ------------
Income before extraordinary item 8,497 5,922
Extraordinary charge on early extinguishment
of debt, net of income tax benefit of $163 - (304)
------------ ------------
NET INCOME $ 8,497 $ 5,618
============ ============
Earnings per share:
Primary
Income before extraordinary item $ .86 $ .80
Extraordinary item - (.04)
============ ============
Net income $ .86 $ .76
============ ============
Assuming full dilution
Income before extraordinary item $ .85 $ .72
Extraordinary item - (.03)
============ ============
Net income $ .85 $ .69
============ ============
Weighted average number of common and common equivalent shares:
Primary 9,853 7,421
============ ============
Assuming full dilution 10,105 8,794
============ ============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
Page 5 of 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Notes
Receivables
Common Stock Additional Treasury Stock from Cumulative
------------------ Paid-in Retained ----------------- Officers Translation
Shares Amount Capital Earnings Shares Amount & Employees Adjustment
--------- -------- ---------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 5,438,250 $ 55 $ 22,555 $ 8,741 - $ - $ - $ -
Proceeds from issuance of common stock 28,902 - 181 - - - - -
Sale of common stock through private offering 400,000 4 2,146 - - - (2,150) -
Cash dividends - - - (275) - - - -
Stock dividends 109,320 1 790 (791) - - - -
Foreign currency translation adjustment - - - - - - - (164)
Net income - - - 4,550 - - - -
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1992 5,976,472 60 25,672 12,225 - - (2,150) (164)
Proceeds from issuance of common stock 10,916 - 37 - - - - -
Payments received on notes receivable from
officers and employees - - - - (414) (4) 111 -
Foreign currency translation adjustment - - - - - - - 79
Net income - - - 5,717 - - - -
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1993 5,987,388 60 25,709 17,942 (414) (4) (2,039) (85)
Sale of Common stock through public offering 1,061,200 11 31,906 - - - - -
Proceeds from issuance of common stock 770,364 7 7,280 - - - - -
Tax reduction from exercise of stock options - - 1,879 - - - - -
Conversions and exchanges of subordinated
debentures 1,006,667 10 8,837 - - - - -
Payments received on notes receivable from
officers and employees - - - - - - 488 -
Foreign currency translation adjustment - - - - - - - 13
Net income - - - 9,315 - - - -
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1994 8,825,619 88 75,611 27,257 (414) (4) (1,551) (72)
Proceeds from issuance of common stock 349,760 3 5,453 - - - - -
Tax reduction from exercise of stock options - - 1,670 - - - - -
Conversions and exchanges of subordinated
debentures 161,526 2 1,383 - - - - -
Payments received on notes receivable from
officers and employees - - - - - - 88 -
Net income - - - 8,497 - - - -
--------- -------- ---------- ---------- -------- -------- ---------- ----------
BALANCE SEPTEMBER 30, 1995 (Unaudited) 9,336,905 $ 93 $ 84,117 $ 35,754 (414)$ (4) $ (1,463) $ (72)
========= ======== ========== ========== ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 6 of 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 55,547 $ 38,602
Cash paid to suppliers and employees (26,981) (13,069)
Interest paid (978) (2,214)
Interest received 81 167
Income taxes paid (2,452) (220)
------------ ------------
Net cash provided by operating activities 25,217 23,266
------------ ------------
Cash flows from investing activities:
Cash invested in seismic data (32,653) (30,861)
Cash invested in oil and gas properties (15,606) (12,736)
Cash paid to acquire property and equipment (935) (478)
Advances made to oil and gas joint venture partner (1,142) -
------------ ------------
Net cash used in investing activities (50,336) (44,075)
------------ ------------
Cash flows from financing activities:
Borrowings under lines of credit agreements 66,524 44,208
Principal payments under lines of credit (44,985) (55,271)
Principal payments on term loan (603) (505)
Principal payments on notes payable (33) -
Principal payments on capital lease obligations (1,057) (327)
Proceeds from issuance of common stock 5,499 41,235
Costs of debt and equity transactions (62) (2,080)
Payments on receivables from officers and employees 88 474
------------ ------------
Net cash provided by financing activities 25,371 27,734
------------ ------------
Effect of exchange rate changes - 3
------------ ------------
Net increase in cash and equivalents 252 6,928
Cash and cash equivalents at beginning of period 1,541 1,759
============ ============
Cash and cash equivalents at end of period $ 1,793 $ 8,687
============ ============
Reconciliation of net income to net cash provided by operating activities:
Net income $ 8,497 $ 5,618
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 20,834 19,573
Non-cash sales (1,404) (2,775)
Increase in receivables (9,146) (10,560)
Increase in other assets (1,683) (764)
Increase in other liabilities 8,119 12,174
------------ ------------
Total adjustments 16,720 17,648
============ ============
Net cash provided by operating activities $ 25,217 $ 23,266
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 7 of 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)
September 30, 1995
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Regulation S-X. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain reclassifications
have been made to the amounts in the prior year's financial statements to
conform to the current year's presentation. Operating results for the nine
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. For further
information, refer to the financial statements and notes thereto for the year
ended December 31, 1994.
NOTE B-EARNINGS PER SHARE
Earnings per share is based on the weighted average number of
outstanding shares of common stock during the respective periods, including
common equivalent shares applicable to assumed exercise of stock options and
warrants when such common stock equivalents are dilutive, and the Company's
other potentially dilutive securities.
Earnings per share was determined by dividing net income, as adjusted
below, by applicable shares outstanding (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income as reported $ 2,182 $ 1,768 $ 8,497 $ 5,618
Interest eliminated on
assumed conversion of 9%
convertible subordinated
debentures 24 137 72 441
-------- -------- -------- ---------
Total income used for fully
diluted earnings per share $ 2,206 $ 1,905 $ 8,569 $ 6,059
======== ======== ======== =========
Weighted average number of
common and common
equivalent shares 9,940 8,387 9,853 7,421
======== ======== ======== =========
Weighted average number of
common shares-assuming
full dilution 10,235 9,602 10,105 8,794
======== ======== ======== =========
</TABLE>
NOTE C-DATA BANK
Costs incurred in the creation of proprietary seismic data are
capitalized. Seismic data costs are amortized for each seismic data program in
the proportion that the program's revenue for a period relates to management's
estimate of the program's ultimate revenue. Since inception, management has
established guidelines regarding its annual charge for amortization. Under these
guidelines, 90% of the cost incurred in the creation of proprietary seismic data
is amortized within five years of inception, and the final 10% is amortized on a
straight-line basis over fifteen years. Costs of existing seismic data libraries
purchased by the Company are fully amortized within ten years from date of
Page 8 of 14
<PAGE>
purchase. On a periodic basis, the carrying value of each seismic data program
is compared to its estimated future revenue and, if appropriate, is reduced to
its estimated net realizable value.
NOTE D-OIL AND GAS PROPERTIES
The Company accounts for its oil and gas exploration and production
activities using the full-cost method of accounting. Under this method, all
costs associated with acquisition, exploration and development of oil and gas
reserves are capitalized, including directly related overhead costs and interest
costs related to its unevaluated properties and certain properties under
development which are not currently being amortized. For the nine months ended
September 30, 1995 and 1994, general and administrative costs of $628,000 and
$524,000, respectively, have been capitalized to oil and gas properties. For the
nine months ended September 30, 1995, interest costs of $543,000 have been
capitalized to oil and gas properties.
NOTE E-SUPPLEMENTAL CASH FLOW INFORMATION
Significant non-cash investing and financing activities are as follows:
1. During the first nine months of 1995 and 1994, the Company issued
161,526 and 197,403 shares, respectively, of its common stock
upon the conversion and exchange of $1,499,000 and $1,832,000,
respectively, of its 9% convertible subordinated debentures. In
connection with these conversions and exchanges, unamortized bond
issue costs totaling $95,000 and $128,000 during the first nine
months of 1995 and 1994, respectively, have been charged to
additional paid-in-capital.
2. During the first nine months of 1995 and 1994, the Company
licensed seismic data valued at $1,404,000 and $2,775,000,
respectively, in exchange for the purchase of seismic data for
its library.
3. During the first nine months of 1995 and 1994, capital lease
obligations totaling $10,000 and $5,517,000, respectively, were
incurred when the Company entered into leases for property and
equipment.
4. During the first nine months of 1995, the Company acquired
$330,000 of property and equipment by incurring a directly
related note payable.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total revenue increased 10% and 40% during the third quarter and first
nine months of 1995, respectively, as compared to the third quarter and first
nine months of 1994. Revenue primarily consists of revenue generated from three
niche-energy businesses - seismic, exploration and production, and gas
marketing. Seismic revenue was $16,001,000 for the third quarter of 1995
compared to $17,996,000 for the third quarter of 1994. This decrease in seismic
revenue is primarily due to the Company's 3D seismic recording crew performing
more work for the Company's oil and gas subsidiary during the third quarter of
1995 (for which no revenues are recognized) rather than for outside third
parties. Seismic revenue for the nine months ended September 30, 1995, was
$52,991,000 compared to $46,040,000 for the nine months ended September 30,
1994. This increase is attributable to increases in sales from both
two-dimensional (2D) and three-dimensional (3D) seismic data. Oil and gas
revenue increased from $381,000 during the third quarter of 1994 to $1,871,000
during the third quarter of 1995 and increased from $871,000 during the first
nine months of 1994 to $3,631,000 during the first nine months of 1995. The
increases in oil and gas revenue are due to more wells being on line in the 1995
periods as compared to the 1994 periods. At September 30, 1995, a total of 61
wells were producing as compared to a total of 12 wells at September 30, 1994.
Page 9 of 14
<PAGE>
Gas marketing revenue increased from $323,000 for the third quarter of 1994 to
$2,884,000 for the third quarter of 1995 and increased from $513,000 for the
nine months ended September 30, 1994 to $9,826,000 for the nine months ended
September 30, 1995. These increases are due to the increased volume of business
in this area.
Depreciation, depletion and amortization consists primarily of data
bank amortization. Refer to Note C for a description of the Company's
amortization policy. Data bank amortization decreased from $5,846,000 during the
third quarter of 1994 to $5,149,000 during the third quarter of 1995 and
increased from $18,027,000 to $18,529,000 for the first nine months of 1994 and
1995, respectively. As a percentage of revenue from licensing seismic data, data
bank amortization was 44% and 48% for the third quarter of 1995 and 1994,
respectively, and 44% and 48% for the first nine months of 1995 and 1994,
respectively. These changes are primarily due to the mix of sales of 2D and 3D
data amortized at varying percentages based on each data program's current and
expected future revenue stream.
Cost of sales consists of expenses associated with the acquisition of
seismic data for non-affiliated parties, seismic resale support services, oil
and gas production, and gas marketing activities. The increase in cost of sales
from $5,098,000 to $6,441,000 for the third quarter of 1994 and 1995,
respectively, and from $7,351,000 to $17,121,000 for the first nine months of
1994 and 1995, respectively, is due to the Company's increasing volume of
business in these areas. Revenues from these areas increased from $6,231,000, to
$8,835,000 during the third quarter of 1994 and 1995, respectively, and
increased from $9,033,000 to $23,621,000 during the first nine months of 1994
and 1995, respectively.
The Company's selling, general and administrative expenses increased
during the 1995 periods as compared to the 1994 periods primarily as a result of
the addition of new employees, marketing expenses and incentive compensation
directly related to the increased volume of business, as well as expenses
related to the Company's expansions in the 3D seismic data, gas marketing, and
oil and gas exploration and production areas. As a percentage of total revenue,
these expenses were 21% and 20% for the third quarter of 1995 and for the first
nine months of 1995, respectively, and were 19% and 20% for the third quarter of
1994, and for the first nine months of 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company filed a registration statement on Form S-3 (the "Shelf
Registration Statement") in June 1994 to offer from time to time in one or more
series (i) unsecured debt securities, which may be senior or subordinated, (ii)
preferred stock, par value $0.01 per share, and (iii) common stock, par value
$.01 per share, or any combination of the foregoing, at an aggregate initial
offering price not to exceed $75,000,000. The Shelf Registration Statement was
declared effective by the Securities and Exchange Commission on June 30, 1994.
In August, 1994, the Company completed a public offering of 1,061,200 shares of
its common stock priced at $32 per share pursuant to the Shelf Registration
Statement. The net proceeds from the offering (after underwriting commission and
offering expenses) totaled $31,917,000. After this sale of common stock at an
initial aggregate offering price of $33,958,400, the Company may offer
additional securities in the future for up to an aggregate initial offering
price of $41,041,600 pursuant to the Shelf Registration Statement.
On May 4, 1995, the Company increased its revolving line of credit to
$25,000,000, added a LIBOR interest rate option and extended the maturity. The
increased revolving line of credit bears interest at the prevailing prime rate
or LIBOR plus 2% (the "LIBOR rate"), is collateralized by both accounts
receivable and the seismic data library and is available for general corporate
purposes. The Company may borrow up to $10,000,000 on the revolving line of
credit based on seismic data library collateral and up to $25,000,000 based on
accounts receivable collateral, the total of which cannot exceed $25,000,000.
The banking facility was effective as of December 31, 1994, and matures June 1,
1997. The balance outstanding on the revolving line of credit amounted to
$21,500,000 at November 13, 1995, of which $13,500,000 is borrowed at the LIBOR
rate of 7.8125%, $3,500,000 is borrowed at the LIBOR rate of $7.84375%, and
$4,500,000 is borrowed at the LIBOR rate of 7.875%. The banking facility imposes
certain financial covenants upon the Company which include covenants relating to
leverage, net worth and working capital, as well as certain restrictions on
dividends, liens, additional debt or lease obligations and the acquisition or
disposition of major assets. Such covenants are not anticipated to restrict the
Company's ability to borrow funds under the facility.
Page 10 of 14
<PAGE>
On June 14, 1995, DDD Energy, Inc. ("DDD Energy"), a wholly-owned
subsidiary of the Company, received a loan facility from the Company's banks.
Under the terms of this facility, DDD Energy has a reducing revolving line of
credit, the amount of which is determined by the banks' semi-annual review of
DDD Energy's oil and gas reserves securing the facility. The master note amount
pursuant to the facility is $75,000,000, but amounts outstanding under the
facility are limited to the oil and gas reserve borrowing base, and are subject
to interest, at the Company's option, at either the prevailing prime rate or
LIBOR plus 2% (the "LIBOR rate"). The borrowing base, determined as of September
1, 1995, amounted to $8,400,000, reducing by $160,000 per month beginning
October 1, 1995. The balance outstanding on the reducing revolving line of
credit amounted to $8,080,000 at November 13, 1995, and is borrowed at the LIBOR
rate of 7.875%. Funds available under the facility will be used to repay
advances from the Company and for reserve acquisitions and development drilling.
The facility matures on June 1, 1997 and is guaranteed by the Company.
On July 15, 1993, a wholly-owned subsidiary of the Company obtained a
$4,300,000, five year term loan bearing interest at the rate of 7.61% for the
purchase of a 3D seismic recording system. The debt is secured by such
equipment. Monthly principal and interest payments began on August 1, 1993. The
balance outstanding on the term loan at November 13, 1995, was $2,489,000.
From January 1, 1995 through November 13, 1995, the Company received
$5,515,000 from the exercise of common stock purchase warrants and options and
the Company's 401(k) stock purchases. In connection with the warrant and option
exercises, the Company will also receive approximately $1,670,000 in tax
savings.
In October 1994, the Company called for redemption of its 12-1/2%
subordinated debentures, thereby eliminating future interest and sinking fund
payments. The Company's 9% convertible debentures, amounting to $2,009,000 at
November 9, 1995, require semi-annual interest payments (March 31 and September
30) and, beginning March 31, 1997, annual sinking fund payments equal to 10% of
the principal amount of the debentures then outstanding.
During 1994 and 1995, the Company entered into capital leases which
relate to the purchase of a second 3D seismic recording system and seismic data
processing center. These lease agreements are for terms of three to five years.
Monthly principal and interest payments total approximately $125,000. The
balance outstanding under these capital lease obligations was $3,919,000 at
November 13, 1995.
The Company has entered into payment arrangements with one of its
contractors for seismic acquisition services which require the Company to make
payments only when sales on the related seismic project are collected
(contingent payables), or allow the Company to make payments as sales of related
seismic projects are collected until July 1, 1996, at which time any outstanding
balance would be due (deferred contractor payable). In connection with these
arrangements, the Company had $1,266,000 in receivables at September 30, 1995,
which will be paid to the contractor upon collection. Accordingly, the same
amount, $1,266,000, was included in the Company's regular accounts payable. The
Company has a verbal payment arrangement with the contractor on certain other
seismic acquisition projects pursuant to which payments to the contractor are
made only when sales of the related seismic projects are collected. At September
30, 1995, accounts receivable included $1,100,000 dedicated to payment pursuant
to this verbal arrangement, while regular accounts payable included the full
balance due the contractor of $8,076,000. Amounts owed to this contractor bear
interest at the prime rate or the prime rate plus 1%, except for contingent
payables which bear no interest. Management anticipates that sales from these
projects will pay in full the amounts owed to the contractor.
During the first nine months of 1995, cash from operations, bank
borrowings and proceeds from the exercise of common stock purchase warrants and
options funded the third party seismic data creation costs borne by the Company
and oil and gas exploration and development costs, as well as taxes, interest
expenses, cost of sales and general and administrative expenses. The Company
believes its revenues from operating sources and proceeds from the exercise of
warrants and options, combined with its available lines of credit, should be
sufficient to fund all of its internal operations and related capital
Page 11 of 14
<PAGE>
expenditures for 1995. To the extent these sources are not sufficient to cover
the Company's expenses, it would be necessary for the Company to arrange for
additional debt or equity financing. There can be no assurance that the Company
would be able to accomplish any such debt or equity financing on terms
satisfactory to it.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
- --------------------------
There have been no material developments in the legal proceedings reported in
Item 1. of the Company's 10-Q for the quarter ended June 30, 1995.
Items 2., 3., and 5. Not applicable.
- -------------------
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
The Company's Annual Meeting of Stockholders was held on July 18, 1995.
Matters voted upon at the Annual Meeting, and the results of those votes are as
follows:
1. The election of eight directors to serve until the 1995 Annual Meeting.
Name No. of Votes For No. of Votes Withheld
-------------------- -------------------- ---------------------
Paul A. Frame 8,271,622 58,158
Horace A. Calvert 8,270,624 59,156
Herbert M. Pearlman 8,223,022 106,758
David S. Lawi 8,224,023 105,757
James C. Rives, Jr. 8,271,624 58,156
William Lerner 8,224,024 105,756
Walter M. Craig, Jr. 8,224,124 105,656
John E. Stieglitz 8,224,124 105,656
2. Approval of the Seitel, Inc. 1995 Shareholder Value Incentive Bonus Plan.
No. of Votes For No. of Votes Against No. of Votes Abstained
-------------------- ------------------------ ----------------------
5,758,710 70,662 36,598
3. Approval of certain amendments to the Seitel, Inc. 1993 Incentive Stock
Option Plan.
No. of Votes For No. of Votes Against No. of Votes Abstained
-------------------- ------------------------ ----------------------
6,561,667 1,702,025 66,088
4. Approval of the appointment of the public accounting firm of Arthur
Andersen LLP to act as the Company's independent Certified Public
Accountants for the year of 1995.
No. of Votes For No. of Votes Against No. of Votes Abstained
-------------------- ------------------------ ----------------------
8,282,324 22,922 24,534
Page 12 of 14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) 10.1 First Amendment to Restated Credit and Security Agreement
effective as of September 14, 1995 among the Company, Seitel Data
Corp. (Company's wholly-owned subsidiary), Seitel Geophysical,
Inc. (Company's wholly-owned subsidiary), Seitel Offshore Corp.
(Company's wholly-owned subsidiary), Exsol, Inc. (Company's
wholly-owned subsidiary), and Bank One, Texas National
Association and Compass Bank - Houston
(b) Not applicable
Page 13 of 14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEITEL, INC.
Dated: November 13, 1995 /s/ Paul A. Frame
-----------------------
Paul A. Frame
President and Chief Executive Officer
Dated: November 13, 1995 /s/ Debra D. Valice
-----------------------
Debra D. Valice
Chief Financial Officer
Dated: November 13, 1995 /s/ Marcia H. Kendrick
-----------------------
Marcia H. Kendrick
Chief Accounting Officer
Page 14 of 14
<PAGE>
EXHIBIT INDEX
10.1 First Amendment to Restated Credit and Security Agreement effective as
of September 14, 1995 among the Company, Seitel Data Corp. (Company's
wholly-owned subsidiary), Seitel Geophysical, Inc. (Company's
wholly-owned subsidiary), Seitel Offshore Corp. (Company's
wholly-owned subsidiary), and Exsol, Inc. (Company's wholly-owned
subsidiary) and Bank One, Texas National Association and Compass Bank
- Houston
27 Financial Data Schedule for the third quarter of 1995.
FIRST AMENDMENT TO RESTATED CREDIT AND SECURITY AGREEMENT
This First Amendment to Restated Credit and Security Agreement (this
"First Amendment") is made and entered into as of the 14th day of September,
1995, by and among SEITEL, INC., a Delaware corporation ("Seitel"), SEITEL DATA
CORP., a Delaware corporation ("Data"), SEITEL GEOPHYSICAL, INC., a Delaware
corporation ("Geophysical"), SEITEL OFFSHORE CORP., a Delaware corporation
("Offshore"), and EXSOL, INC., a Delaware corporation (collectively with Seitel,
Data, Geophysical, and Offshore, "Borrowers"); BANK ONE, TEXAS, NATIONAL
ASSOCIATION, a national banking association ("Bank One"); and COMPASS
BANK-HOUSTON, a Texas state chartered banking institution (collectively with
Bank One, "Banks").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Restated Credit and Security
Agreement dated as of December 31, 1994 (the "Loan Agreement"), Banks agreed to
make certain loans to Borrowers upon the terms and conditions therein contained;
and
WHEREAS, the parties hereto desire to modify and amend certain terms
and provisions of the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrowers and Banks agree as
follows:
1. Amendments to Loan Agreement. The Loan Agreement is modified
and amended as follows:
1.1 The definition assigned to "Tangible Net Worth" in
Section 1 of the Loan Agreement is deleted in its
entirety and the following is substituted in place
thereof:
"Tangible Net Worth" shall mean (a) Seitel's consolidated Net
Worth, plus (b) the Subordinated Debt, less (c) the sum of (i)
any and all unconsolidated loans and other advances to
Affiliates, (ii) unconsolidated notes, notes receivable,
accounts, accounts receivable, inter-company receivables, and
other amounts owing from Affiliates, (iii) treasury stock,
goodwill, trademarks, trade names, franchise, or license
agreements, patents, and deferred charges, (iv) any and all
other intangible assets, and (v) the tangible net worth of DDD
Energy, Inc.
<PAGE>
1.2 The first sentence of Section 3.19 of the Loan
Agreement is deleted in its entirety and the following
is substituted in place thereof:
Anything herein to the contrary notwithstanding, no more than
five separate Loans shall be outstanding at any one time,
with, for purposes of this Section, all Floating Rate Loans
constituting one Loan, and all LIBO Rate Loans for the same
Interest Period constituting one Loan.
1.3 Section 8.1(k) of the Loan Agreement is deleted in its
entirety and the following is substituted in place
thereof:
Permit at any time on or after June 30, 1995, Seitel's
Consolidated Tangible Net Worth, tested as of the end of each
calendar quarter, to be less than an amount equal to (i) the
sum of $110,000,000.00, plus 50% of positive Net Income earned
in each quarter subsequent to June 30, 1995, plus 100% of all
equity raised by Seitel subsequent to June 30, 1995, minus
-----
(ii) 100% of all principal payments made on the Subordinated
Debt subsequent to June 30, 1995.
1.4 Section 8.1(l) of the Loan Agreement is deleted in its
entirety and the following is substituted in place
thereof:
Permit Seitel or any of its Subsidiaries (other than to DDD
Energy, Inc.) to borrow any money, or otherwise incur any
additional indebtedness of any kind, except for:
(i) trade credit on open account in the
ordinary course of business;
(ii) obligations relating to Seitel's Guaranty
of DDD Energy, Inc.'s obligations under
the DDD Credit Agreement;
(iii) intercompany loans to the extent permitted
in accordance with the terms and
provisions of Section 8.1(o);
(iv) in addition to indebtedness otherwise
permitted in any other subsection hereof,
indebtedness not to exceed $1,000,000.00,
in the aggregate annually;
2
<PAGE>
(v) obligations relating to Seitel's guaranty
of obligations incurred by DDD Energy,
Inc. in the acquisition of up to $350,000
worth of computer work stations and
related equipment to be purchased or
leased by DDD Energy, Inc. within six
months after the Closing Date; and
(vi) a three year $400,000.00 loan incurred by
Seitel for a promotional bus, as disclosed
to Banks in writing.
Without limiting the foregoing, none of Borrowers
(individually or collectively) will obtain any loans in
addition to the Revolving Line and the Geophysical Loan (as
each may be amended or refinanced) from either Bank without
the express written consent of the other Bank. Except pursuant
to the terms of the Seitel Geophysical Guaranty and the Seitel
DDD Guaranty, and except for the limited guaranty entered into
by Seitel in connection with the Opseis Eagle Lease (as such
term is defined in subsection (g) of the definition of
Permitted Liens) and other guaranties entered into by Seitel
in the ordinary course of business in favor of unrelated third
parties to guarantee the contractual obligations (excluding
the obligations to pay or repay borrowed funds or capital
lease obligations) of its Subsidiaries, none of Borrowers
(individually or collectively) shall guarantee any
indebtedness of any other Person;
1.5 Exhibit "B" to the Loan Agreement is deleted in its
entirety and is replaced with the Exhibit "B" attached
to this First Amendment.
1.6 Exhibit "J" to the Loan Agreement is deleted in its
entirety and is replaced with the Exhibit "J" attached
to this First Amendment.
2. Lien Continuation. The liens and security interests granted in the
Prior Security Agreements and in the Loan Agreement are hereby renewed,
extended, ratified, and confirmed by the parties thereto as continuing to secure
the payment of the indebtedness evidenced by the Notes, together with all of the
other Liabilities. Nothing herein shall in any manner diminish, impair, or
extinguish any of the indebtedness evidenced by the Notes or any of the liens
and security interests heretofore or hereafter securing such indebtedness. The
liens granted in the Prior Security Agreements are not waived. Borrowers ratify
and
3
<PAGE>
acknowledge the Prior Security Agreements and the Loan Agreement (as hereby
amended) as valid, subsisting, and enforceable and agrees that the indebtedness
evidenced by the Notes is just, due, owing, and unpaid, as stated in the Loan
Agreement, and is subject to no offsets, deductions, credits, charges, or claims
of whatsoever kind or character, and further agrees that all offsets, credits,
charges, and claims of whatsoever kind or character are fully settled and
satisfied. To the extent of any conflict between the Notes, or any of the other
Prior Security Agreements, and the Loan Agreement, as amended hereby, the Loan
Agreement, as amended hereby, shall control.
3. Defined Terms. Words and terms used herein which are defined in the
Loan Agreement are used herein as defined therein, except as specifically
modified by the terms of this First Amendment. Terms used in this First
Amendment which are not defined in the Loan Agreement are used therein, as
herein defined.
4. NO CONTROL BY BANK. BORROWERS AGREE AND ACKNOWLEDGE THAT ALL OF THE
COVENANTS AND AGREEMENTS PROVIDED FOR AND MADE BY BORROWERS IN THIS FIRST
AMENDMENT, THE LOAN AGREEMENT, AND IN THE OTHER LOAN DOCUMENTS ARE THE RESULT OF
EXTENSIVE AND ARMS-LENGTH NEGOTIATIONS AMONG BORROWERS AND BANKS. BANKS' RIGHTS
AND REMEDIES PROVIDED FOR IN THE LOAN AGREEMENT AND IN THE OTHER LOAN DOCUMENTS
ARE INTENDED TO PROVIDE BANKS WITH A RIGHT TO OVERSEE BORROWERS' ACTIVITIES AS
THEY RELATE TO THE LOAN TRANSACTIONS PROVIDED FOR IN THE LOAN AGREEMENT, WHICH
RIGHT IS BASED ON BANKS' VESTED INTEREST IN BORROWERS' ABILITY TO PAY THE NOTES
AND PERFORM THE OTHER LIABILITIES. NONE OF THE COVENANTS OR OTHER PROVISIONS
CONTAINED IN THE LOAN AGREEMENT SHALL, OR SHALL BE DEEMED TO, GIVE BANKS THE
RIGHT OR POWER TO EXERCISE CONTROL OVER, OR OTHERWISE IMPAIR, THE DAY-TO-DAY
AFFAIRS, OPERATIONS, AND MANAGEMENT OF BORROWERS; PROVIDED THAT IF EITHER BANK
BECOMES THE OWNER OF ANY STOCK OF ANY ENTITY, WHICH ENTITY OWNS AN INTEREST IN
ANY BORROWER, WHETHER THROUGH FORECLOSURE OR OTHERWISE, BANK THEREAFTER SHALL BE
ENTITLED TO EXERCISE SUCH LEGAL RIGHTS AS IT MAY HAVE BY BEING A SHAREHOLDER OF
SUCH ENTITY.
5. Representations and Warranties. The representations and warranties
made by Borrowers in Section 4 of the Loan Agreement are true and correct as of
the date of this First Amendment, except that, with respect to the
representation and warranty contained in Section 4.1(aa) of the Loan Agreement,
Geophysical has filed suit against Greenhill Petroleum Corporation
("Greenhill"), a former customer of Geophysical, to collect certain amounts owed
to Geophysical by Greenhill. Geophysical believes this dispute will result in
Greenhill not using Geophysical's services in the future. Geophysical does not
believe the loss of Greenhill as a customer will have a material adverse effect
on Geophysical's business.
4
<PAGE>
6. Miscellaneous.
--------------
6.1 Governing Law. THE TERMS AND CONDITIONS OF THIS FIRST
AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS
WITHIN THE STATE OF TEXAS.
6.2 Counterparts. This First Amendment may be executed in two
or more counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof. Each counterpart
shall be deemed an original, but all such counterparts taken together shall
constitute one and the same instrument.
6.3 Preservation of the Loan Agreement. Except as specifically
modified by the terms of this First Amendment, all of the terms, provisions,
covenants, warranties, and agreements contained in the Loan Agreement, and all
agreements executed in connection therewith, shall remain in full force and
effect and are hereby restated, affirmed, and made again as of the execution
date of this First Amendment.
6.4 Notice of Final Agreement. THE LOAN AGREEMENT, AS
AMENDED BY THIS FIRST AMENDMENT, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this First
Amendment as of the date first above written.
BORROWERS:
SEITEL, INC.
By:/s/ Debra D. Valice
-------------------------------------------
Debra D. Valice, Vice President of Finance,
Chief Financial Officer, Treasurer, and
Secretary
SEITEL DATA CORP.
By:/s/ Debra D. Valice
-------------------------------------------
Debra D. Valice, Secretary and Treasurer
SEITEL GEOPHYSICAL, INC.
By:/s/ Debra D. Valice
-------------------------------------------
Debra D. Valice, Secretary and Treasurer
5
<PAGE>
SEITEL OFFSHORE CORP.
By:/s/ Debra D. Valice
-----------------------------------------
Debra D. Valice, Secretary and Treasurer
EXSOL, INC.
By:/s/ Debra D. Valice
-----------------------------------------
Debra D. Valice, Secretary and Treasurer
BANKS:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:/s/ Melanie M. Ottens
-----------------------------------------
Melanie M. Ottens, Vice-President
COMPASS BANK - HOUSTON
By:/s/ Kathleen J. Bowen
-----------------------------------------
Kathleen J. Bowen, Vice-President
6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,793
<SECURITIES> 0
<RECEIVABLES> 47,865
<ALLOWANCES> 150
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 54,866<F2>
<DEPRECIATION> 7,618
<TOTAL-ASSETS> 204,373
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 35,614
<COMMON> 93
0
0
<OTHER-SE> 118,332
<TOTAL-LIABILITY-AND-EQUITY> 204,373
<SALES> 66,450
<TOTAL-REVENUES> 66,450
<CGS> 17,121
<TOTAL-COSTS> 17,121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,337
<INCOME-PRETAX> 13,487
<INCOME-TAX> 4,990
<INCOME-CONTINUING> 8,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,497
<EPS-PRIMARY> 0.860
<EPS-DILUTED> 0.850
<FN>
<F1>The Company does not present a classified balance sheet; therefore, current
assets and current liabilities is not reflected in the Company's financial
statements.
<F2>PP&E does not include seismic data bank assets with a cost of
$226,736,000 and related accumulated amortization of $122,015,000.
</FN>
</TABLE>
