UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 1996
Commission File Number 0-13111
ANALYTICAL SURVEYS, INC.
(Name of small business issuer as specified in its charter)
Colorado
(State of incorporation)
84-0846389
(IRS Employer Identification No.)
1935 Jamboree Drive
Colorado Springs, Colorado 80920
(Address of principal executive offices)
(719) 593-0093
(Telephone number)
Securities registered pursuant to Section 12(g) of
the Act:
No Par Value Common Stock
(Title of each class)
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 twelve months and (2) has been subject to such filing requirements
for the past ninety (90) days: Yes __X__ No_____
Check if there is no disclosure of delinquent filers in response to Items 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB: Yes __X__ No_____
Issuer's revenue for its most recent fiscal year was $22,668,878.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to average bid and asked prices of such stock, as of December 4,
1996 was $43,980,000. The number of shares of common stock outstanding as of
December 4, 1996 was 4,888,651.
Item 13(a) on page 25 describes the exhibits filed with the Securities and
Exchange Commission and those exhibits incorporated by reference to previously
filed documents. Certain sections of the definitive Proxy Statement to be filed
for the 1997 Annual Meeting of Shareholders are incorporated by reference into
Part III.
Transitional Small Business Disclosure Format: Yes ____ No___X__
<PAGE>
Table of Contents
PART I
Item 1. Description of Business 3
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote
of Security Holders 5
PART II
Item 5. Market for Common Equity and
Related Stockholder Matters 5
Item 6. Management's Discussion and Analysis
or Plan of Operation 6
Item 7. Financial Statements 10
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 25
Part III
Item 9. Directors, Executive Officers, Promoters and
Control Persons, Compliance with Section 1G(a)
of the Exchange Act 25
Item 10. Executive Compensation 25
Item 11. Security Ownership of Certain Beneficial Owners
and Management 25
Item 12. Certain Relationships and Related Transactions 25
Item 13. Exhibits and Reports on Form 8-K 25
Signatures 28
<PAGE>
PART I
Item 1. Description of Business
General
Analytical Surveys, Inc., ("ASI" or the "Company") is a Colorado corporation
formed in 1981. ASI's primary business is the production of precision
computerized maps and information files used in Geographic Information Systems
(GIS). Federal, state and local government agencies, utilities and commercial
companies use Geographic Information Systems to manage information about
features such as utilities, natural resources, streets, land use and property
taxation. The Company completed two acquisitions during 1996 to expand into the
utilities facilities data conversion market and to increase capacity and the
range of conversion services offered.
A Geographic Information System consists of four components: computer hardware,
applications software, computerized maps and computerized information (database)
files. ASI produces the last two components of the GIS; ASI does not manufacture
or sell the computer hardware or applications software required by GIS end
users. ASI produces maps for use on GIS computers from aerial photography using
analytical stereoplotters, computer equipment and internally developed
proprietary software. The Company also converts existing printed maps and other
information into computerized maps and computer information files. The Company's
digital imaging department prepares digital orthophotographs by scanning aerial
photographs into the computer using a high resolution scanner. The distortions
inherent in all aerial photography are then removed using internally developed
proprietary software and the resulting digital image is accurate to mapping
standards. The final product can be delivered either as a computer data file or
as a printed image.
ASI employs subcontractors for tasks outside its expertise such as aerial
photography and ground survey. The Company also may use subcontractors for work
similar to that performed by ASI in order to expand capacity, to meet deadlines,
to manage work load and to encourage businesses owned by women and minorities.
The Company engages in research and development activities to develop new
production process software and to improve existing process software. Research
and development expenditures were $283,872 in fiscal year 1996 and $347,321 in
fiscal year 1995. Certain activities, principally ongoing software refinement,
previously performed by the research and development group were transferred to
operations staff in 1996.
The industry has grown over the last several years as technical and price
improvements in GIS hardware and software have expanded the GIS market by making
these systems more attractive to potential customers.
Marketing and Sales
Virtually all of ASI's revenues are earned under fixed price contracts which
cover a specific scope of work and the Company is dependent upon its ability to
secure new contracts from new as well as existing customers. From time to time,
the revenues earned on specific contracts may exceed ten percent of total
revenues earned in a year. Those contracts which contributed more than ten
percent of revenue in 1996 and 1995 are summarized in the following table.
Customer 1996 1995
Southern New England Telephone 10% *
Montgomery County, AL * 12%
* Less than ten percent
Based on the backlog remaining on these existing contracts at September 30,
1996, none of the existing projects for these customers is expected to
contribute more than ten percent of revenue in future years.
Backlog represents the value of revenue not yet earned on contracts awarded to
the Company; it increases when new contracts are awarded and decreases as
revenue is earned. The Company's backlog was approximately $40,000,000 at
September 30, 1996 up from $12,620,000 at the end of 1995. The backlog includes
several large projects which will extend over one to four years. These larger
projects are usually fixed price agreements which increase the Company's risk
due to inflation; however, the Company receives the benefit of the improved
availability of production work.
The Company employs 7 sales representatives to market and sell its products and
services throughout the United States and internationally. The Company maintains
memberships in professional and trade associations and participates in industry
conferences by presenting exhibits and technical papers. Contracts are awarded
by customers through direct negotiation, competitive technical evaluation,
competitive bid or a combination thereof.
ASI has directed its marketing efforts towards clientele who require
high-quality digital mapping. Historically, ASI's customers have included
cities, counties, engineering companies, utility companies and federal
government agencies. Approximately half of revenues have been historically
derived from state and local government contracts. These contracts may contain
termination provisions for the convenience of the customer, lack of appropriated
funds or default by the Company. Contracts with the United States Government,
which represent less than 10% of ASI's revenues, also may be subject to
renegotiation or termination.
Advances in GIS technologies and the decline in the costs of computers have
attracted more industrial and municipal customers into the GIS marketplace. In
addition, a significant portion of ASI's revenues are generated from utility
clients, both commercial and municipal. The Company expects that an increasing
share of its new customers will be industrial and municipal GIS users.
ASI is required to furnish performance bonds to customers on some of its
contracts. The percentage of the Company's work requiring bonds varies between
10% and 30% depending on the mix of work in progress. Performance bonds are
issued by a limited number of insurance companies; the continued availability of
bonds depends on the Company's ability to meet the underwriting standards of
potential issuers and surety market conditions.
Competition
The Company's management believes approximately eight companies are of
comparable size and capabilities as ASI. The Company's recent two acquisitions
also brought exposure to competitors with whom the Company did not previously
compete. Further, the Company's management believes there is a second tier of
primarily regional competitors who may seek to expand their efforts to the
national and international levels.
Recently developed commercial satellite companies are becoming new entrants to
the larger GIS market. These include Space Imaging Inc. and EarthWatch Inc. At
present the announced but not yet available products of these companies do not
appear to provide the same degree of resolution as is typically required by
ASI's customers. The Company's management believes these new entrants may lead
to new market opportunities as markets develop increasing awareness of the value
of geographic information. On the other hand, there can be no assurance that new
entrants and new products will not adversely affect the Company's future
operations.
ASI seeks to compete on the basis of the quality of its products and the
efficiency with which it can provide digital mapping services to customers. The
Company uses its internally-developed proprietary software as well as
commercially available software to automate much of the production process. The
Company believes its systematic approach enables it to achieve more consistent
quality than it could using more manually-intensive methods. The Company will
evaluate the suitability of its internally developed proprietary software to the
production processes employed at the two recently acquired businesses. If and
when such use of this proprietary software is implemented, the desired favorable
results, if any, will become apparent only gradually as existing projects would
likely be completed using existing techniques and new techniques applied to
newly started projects.
In general, management believes this industry is competitive and certain
competitors may have more capital availability than does ASI.
Employees
At September 30, 1996 ASI had approximately 377 employees, virtually all of whom
are full-time.
ASI offers its employees a typical benefits package including health, life,
disability, and dental insurance; a 401-K tax deferred retirement savings plan;
vacations and holidays. The Company does not provide any other pension plan to
its employees. ASI does not have a collective-bargaining agreement with any of
its employees and generally considers relations with its employees to be good.
Item 2. Description of Property
The Company leases its office and production facilities.
Location Square Footage Lease Termination
Colorado Springs, CO 32,000 2004
Cary, North Carolina 23,400 1998-2000
Waukesha, Wisconsin 25,300 1999
These facilities are in generally good condition and adequate for the
foreseeable needs of the Company.
ASI also operates sales offices in Sterling, Virginia (near Washington,D.C.)
and Chattanooga, Tennessee.
Item 3. Legal Proceedings
The Company is not the subject of any significant outstanding legal proceedings
or significant known claims.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the shareholders during the fourth
quarter of the year ended September 30, 1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded in the NASDAQ National Market System
over-the-counter market under the symbol ANLT. The trading volume in ASI's
Common stock has ranged from 255,000 shares per month to 3,780,000 shares per
month in the year ended September 30, 1996. This range of trading volume may
contribute to stock price volatility and limited trading liquidity.
The Company's Board of Directors authorized a three for two stock split of
Company's no par value common stock for all common shareholders of record on
June 27, 1996. All share, option and per share amounts included in this Annual
Report on Form 10-KSB have been adjusted for the effects of the stock split.
The following table sets forth the range of high and low prices per share for
each quarterly period for the fiscal years ended September 30, 1995 and 1996 as
reported by the National Association of Securities Dealers Automated Quotations
System (NASDAQ). On April 1, 1995 trading in the Company's Common Stock moved
from NASDAQ's Small Cap Market to NASDAQ's National Market System. Price ranges
reported in the following table represent the range of bid quotations prior to
April 1, 1995 and the trading range after that date. These prices reflect
inter-dealer quotations without adjustments for retail markup, markdown or
commission and do not necessarily represent actual transactions.
Fiscal Year Ended September 30, 1995 High Low
First Quarter $ 3.50 $ 2.25
Second Quarter 4.17 3.00
Third Quarter 4.92 3.25
Fourth Quarter 5.83 4.33
Fiscal Year Ended September 30, 1996
First Quarter $ 6.83 $ 4.59
Second Quarter 10.33 6.00
Third Quarter 16.00 8.08
Fourth Quarter 17.50 8.75
American Securities Transfer, Inc., the transfer agent for the shares of ASI's
Common Stock, has reported that there were approximately 400 shareholders of
record as of September 30, 1996. This does not include an estimated 2,500
investors holding stock in "street name."
On December 4, 1996, the closing bid and asked prices of the Company's Common
Stock as reported by NASDAQ were $10.00 and $10.25 respectively.
Holders of the Company's Common Stock are entitled to receive dividends as and
when they may be declared by its Board of Directors. No such dividends have ever
been paid with respect to the Company's Common Stock and none is anticipated to
be paid in the foreseeable future. Under its present bank loan agreement, the
Company must obtain the bank's prior written consent should the Company wish to
pay a dividend. The bank has agreed to not unreasonably withhold such consent;
however, there is no assurance that the Company would receive the bank's consent
to pay a dividend.
Item 6. Management's Discussion and Analysis or Plan of Operation
This discussion contains forward looking statements, primarily those statements
which are not statements of historical facts. There are important factors that
could cause results to differ materially from those anticipated in the forward
looking statements including factors which are beyond the control of the
Company. These factors include the competitive environment such as entry of new
competitors, improved technical capabilities by existing competitors and
capacity utilization achieved by all competitors. Market conditions that may
also affect future results include competitive environment in the utilities
market, local tax collections by municipalities and federal government spending
levels.
The following table sets forth selected financial data for the Company and
should be read in conjunction with the financial statements and related notes
included elsewhere in this document and with the balance of this Management's
Discussion and Analysis :
<TABLE>
<CAPTION>
Year ended September 30,
(000's except per share amounts)
<S> <C> <C>
1996 1995
---- ----
Statement of Operations Data
Sales $22,669 13,538
Costs and expenses 19,264 11,519
Other expenses, net 339 119
Income tax expense 1,153 716
------- ------
Net earnings 1,913 1,184
======= ======
Earnings per share $ .38 .27
======= ======
Balance Sheet Data September 30,
(000's)
1996 1995
---- ----
Current assets $16,452 8,554
Current liabilities 6,466 2,816
------- ------
Working capital 9,986 5,738
======= ======
Total assets $21,988 10,048
Long-term debt
less current portion 4,528 408
Stockholders' equity 10,926 6,654
</TABLE>
Results of Operations
The following table summarizes the changes in selected operating indicators. The
percentages on the left show the relationship of various income and expense
items to net revenues. The percentages on the right measure year to year
changes.
<TABLE>
<CAPTION>
Percentage of Net Revenues* Percentage Change
Year Ended September 30 from Prior Year
<S> <C> <C> <C> <C> <C>
1996 1996 1996 1995
--- ---- ---- ----
100 100 Sales 67 21
Costs and expenses:
Salaries, wages and
46 39 related benefits 100 17
17 24 Subcontractor costs 20 23
16 16 General and administrative 64 22
6 6 Depreciation and amortization 51 3
--- ---
85 85 Total costs and expenses 67 19
--- ---
15 15 Earnings from operations 69 36
(2) (1) Other income (expense) 185 (35)
--- ---
13 14 Earnings before income taxes 61 47
5 5 Income tax expense 61 46
--- ---
8 9 Net earnings 62 47
=== === === ===
*Totals may not be exact due to rounding.
</TABLE>
1996 Compared to 1995
Results of Operations
The Company implemented a strategy to enter the utilities facility data
conversion market by the acquisition of Intelligraphics International
(Intelligraphics) on December 22, 1995. This acquisition lead to a more rapid
entry into this market at a lower cost than would a strategy of developing both
the technology and market presence through internal technology development and
marketing efforts. This utilities market is competitive and margins are
generally lower than those earned by the Company in its traditional markets. The
lower margins are usually mitigated by the larger contract size and term and the
expected greater volume of conversion work to be done in this market.
A second acquisition, Westinghouse Landmark GIS, also contributed to the growth
strategy and provided the capability to perform deeds research tax mapping as
opposed to the use of outside subcontractors to perform this work. This
acquisition also provided additional capacity in the Company's traditional
photogrammetry and cadastral markets as well as an enhanced regional presence in
the east and southeast regions of the country.
The acquisitions, combined with the Company's original Colorado-based business,
caused net income from continuing operations (net earnings) to increase 62% over
the previous year on a sales increase of 67%. Total costs and expenses remain at
85% of sales with a shift between salaries, wages and benefits increasing to 46%
from 39% of sales while subcontractor costs decreased to 17% of sales from 24%
last year. The combination of salaries plus subcontractor costs remained at 63%
of sales. This shift towards a greater salaries component reflects the higher
labor input required at the two acquired production facilities and lower use of
outside subcontractors in those locations. The acquisitions will also allow the
Company to complete a greater proportion of its production work using internal
resources as opposed to outside subcontractors.
Interest expense increased 195% over the previous year due to the increased debt
undertaken to complete the two acquisitions.
Earnings per share increased 41% over the previous year. This increase reflects
the 62% increase in net earnings (all from operations) and the 14% increase in
the average number of shares outstanding in 1996 over 1995. Approximately 40% of
the increase in average shares outstanding is the result of the 345,000 shares
issued in connection with the Intelligraphics acquisition and the balance is due
to the issuance of shares for stock option exercises.
Cash flows from operating activities increased 30% in 1996 over 1995. Net
earnings plus depreciation and amortization increased 57% from $1,969,000 in
1995 to $3,097,000 in 1996. Cash flows from operations were also improved by the
103% increase in tax benefit relating to exercise of employee stock options. It
is unlikely that tax benefits from the exercise of employee stock options will
recur at the levels experienced in 1995 and 1996. Cash flows from operations
were reduced by increased investment in the net current assets of the company,
principally accounts receivable and revenues in excess of billings. These
contract-related balances fluctuate due to the aggregate effect of the progress
on specific projects and billing and payment terms of the contracts.
Cash flows used in investing activities are comprised of the cost of the
acquisitions discussed above plus routine capital equipment additions.
Cash flows provided by financing activities are comprised of the borrowing of
cash under long-term debt for the two acquisitions and the routine use of the
line of credit, scheduled debt reductions and the proceeds of stock option
exercises.
The Company's backlog of signed contracts increased to approximately $40,000,000
up 217% from $12,620,000 in 1995. The Company's expansion strategy has enabled
it to sign significant contracts with utilities customers as well as municipal
customers and commercial companies. Some of these projects are large
multiple-year contracts which offer the Company the benefit of increased work
but also subject the Company to increased risk due to possible inflation and/or
changing customer expectations. The Company continues to seek and perform both
larger and smaller projects for future work.
Liquidity and Capital Resources
Short-term liquidity requirements are met primarily through operating receipts
supplemented by a bank line of credit with a $1,850,000 limit. At September 30,
1996, the Company's balance on the line of credit was $500,000. The cost of
capital equipment is usually financed through term debt and/or capitalized
leases with terms of from three to five years. The Company has up to $436,000
available under its line of credit for equipment acquisitions through the end of
February 1997. The Company has not committed to any material capital purchases.
Management expects to meet long-term liquidity requirements through cash flows
generated by operations supplemented from time to time by short-term borrowings
on a bank line of credit. Routine capital expenditures will usually be financed
with term debt and/or capital leases.
Management believes the line of credit combined with cash flows from operations
are adequate to finance ongoing operations. Management also believes the Company
will be able to finance any required capital expenditures from a combination of
operating cash flows and new term debt or lease arrangements. The Company is
dependent, however, upon its ability to successfully deliver acceptable products
in order to maintain adequate operating cash flows.
Other Risk Factors
The Company faces, as do all businesses, a wide range of increasingly complex
legal, regulatory and compliance requirements. The Company is not aware of any
substantial risk of loss from product liability litigation nor from
noncompliance with environmental, labor or other laws and regulations.
The Company has been awarded several projects with contract values in the range
of $3,000,000 to $10,000,000, usually on a fixed-price basis. While these
projects provide improved availability of work, the projects may extend over two
to four years. The extended production period may increase the Company's
exposure to the risk of inflation, changes in customer expectations and customer
funding capabilities.
The Company has not paid any dividends since its inception, and there is no
intention to pay dividends in the foreseeable future. Under its present bank
loan agreement, the Company must obtain the bank's prior written consent should
the Company wish to pay a dividend. The bank has agreed to not unreasonably
withhold such consent; however, there is no assurance that the Company would
receive the bank's consent to pay a dividend.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of (SFAS 121) was issued in March
1995 by the Financial Accounting Standards Board. It requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS 121 is
required to be adopted for fiscal years beginning after December 15, 1995.
Adoption of this statement by the Company as of October 1, 1996 did not have a
significant effect on the consolidated financial statements.
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), was issued by the Financial Accounting Standards Board
in October 1995. SFAS 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans as well as transactions in
which an entity issues its equity instruments to acquire goods or services from
non-employees. This statement defines a fair value based method of accounting
for employee stock option or similar equity instruments and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB opinion No. 25, Accounting for Stock Issued to
Employees. Entities electing to remain with the accounting in Opinion 25 must
make proforma disclosures of net income and, if presented, earnings per share,
as if the fair value based method of accounting defined by SFAS 123 had been
applied. SFAS 123 is applicable to fiscal years beginning after December 15,
1995. The Company does not currently expect to adopt the accounting prescribed
by SFAS 123; however, the Company will include the disclosures required by SFAS
123 in future annual financial statements.
Item 7. Financial Statements
Page
Independent Auditors' Report 11
Balance Sheets 12
Statements of Operations 14
Statements of Stockholders' Equity 15
Statements of Cash Flows 16
Notes to Financial Statements 17
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Analytical Surveys, Inc.:
We have audited the accompanying consolidated balance sheets of Analytical
Surveys, Inc. and subsidiary as of September 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Analytical Surveys,
Inc. and subsidiary as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
November 1, 1996
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 1996 and 1995
(In Thousands)
<TABLE>
<S> <C> <C>
Assets 1996 1995
- ------ ---- ----
Current assets:
Cash $ 1,022 665
Accounts receivable, net of allowance for doubtful
accounts of $60 and $20 in 1996 and
1995, respectively (notes 3, 4 and 10) 5,781 2,925
Revenue in excess of billings (notes 3 and 4) 9,329 4,705
Deferred income taxes (note 6) 105 50
Prepaid expenses and other 215 209
------ ------
Total current assets 16,452 8,554
------ ------
Equipment and leasehold improvements, at cost (note 4):
Equipment 7,544 5,657
Furniture and fixtures 957 735
Leasehold improvements 162 134
------ ------
8,663 6,526
Less accumulated depreciation and amortization (6,049) (5,046)
------ ------
2,614 1,480
------ ------
Goodwill, net of accumulated amortization of $141 and $12 in 1996
and 1995, respectively (note 2) 2,881 14
Other assets 41 --
------ ------
$ 21,988 10,048
====== ======
</TABLE>
Continued)
<PAGE>
Consolidated Balance Sheets, Continued
(In Thousands)
<TABLE>
<S> <C> <C>
Liabilities and Stockholders' Equity 1996 1995
- ------------------------------------ ---- ----
Current liabilities:
Line-of-credit with bank (note 4) $ 500 --
Current portion of long-term debt (note 4) 1,247 417
Billings in excess of revenue (note 3) 1,091 177
Accounts payable and other accrued liabilities 2,268 1,560
Accrued payroll and benefits 1,340 662
Income taxes payable 20 --
------ ------
Total current liabilities 6,466 2,816
------ ------
Long-term debt, less current portion (note 4) 4,528 408
Deferred income taxes payable (note 6) 4 113
Deferred compensation payable 64 57
------ ------
Total liabilities 11,062 3,394
------ ------
Stockholders' equity (note 7):
Preferred stock - 2,500 no par value shares
authorized; none issued and outstanding -- --
Common stock - 100,000 no par value shares
authorized; 4,922 and 4,282 shares
issued in 1996 and 1995, respectively 5,820 3,461
Treasury stock - 35 shares, at cost (125) (125)
Retained earnings 5,231 3,318
------ ------
10,926 6,654
------ ------
Commitments and contingencies (notes 5 and 7) $ 21,988 10,048
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Operations
Years Ended September 30, 1996 and 1995
(In Thousands, Except Per Share Amounts)
<TABLE>
<S> <C> <C>
1996 1995
---- ----
$ 22,669 13,538
------ ------
Costs and expenses:
Salaries, wages and related benefits 10,501 5,247
Subcontractor costs 3,898 3,244
General and administrative 3,681 2,244
Depreciation and amortization 1,184 784
------ ------
19,264 11,519
------ ------
Earnings from operations 3,405 2,019
Other income (expense):
Interest expense, net (351) (119)
Gain on sale of assets 12 --
------ ------
(339) (119)
------ ------
Earnings before income taxes 3,066 1,900
Income tax expense (note 6) 1,153 716
------ ------
Net earnings $ 1,913 1,184
====== ======
Earnings per common and common equivalent share $ .38 .27
====== ======
Weighted average outstanding common and
common equivalent shares 5,033 4,408
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
Years Ended September 30, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
Common stock Treasury stock Retained
Shares Amount Shares Amount earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balances at October 1, 1994 3,835 2,462 -- -- 2,134 4,596
Exercise of stock options 447 562 -- -- -- 562
Tax benefit relating to
exercise of stock options -- 437 -- -- -- 437
Acquisition of treasury stock -- -- (35) (125) -- (125)
Net earnings -- -- -- -- 1,184 1,184
------ ------ ------ ------ ------ ------
Balances at September 30, 1995 4,282 3,461 (35) (125) 3,318 6,654
Common stock issued in connection
with business combination (note 2) 345 891 -- -- -- 891
Exercise of stock options 295 583 -- -- -- 583
Tax benefit relating to
exercise of stock options -- 885 -- -- -- 885
Net earnings -- -- -- -- 1,913 1,913
------ ------ ------ ------ ------ ------
Balances at September 30, 1996 4,922 5,820 (35) $ (125) 5,231 10,926
====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
Years Ended September 30, 1996 and 1995
(In Thousands)
<TABLE>
<S> <C> <C>
1996 1995
---- ----
Cash flows from operating activities:
Net earnings $ 1,913 1,184
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,184 785
Gain on sale of assets (12) --
Deferred income tax benefit (163) (108)
Tax benefit relating to exercise of employee stock options 885 437
Changes in operating assets and liabilities, net of effect
of business combinations:
Accounts receivable, net (481) (1,226)
Revenue in excess of billings (2,820) (717)
Prepaid expenses and other 18 (67)
Other assets (36) --
Billings in excess of revenue 163 (243)
Accounts payable and other accrued liabilities (36) 800
Accrued payroll and benefits 130 83
Income taxes payable 20 (342)
Deferred compensation payable 7 8
------ ------
Net cash provided by operating activities 772 594
------ ------
Cash flows used by investing activities:
Purchase of equipment and leasehold improvements (919) (704)
Proceeds from sale of equipment 12 --
Net assets acquired in business combinations (5,541) --
------ ------
Net cash used by investing activities (6,448) (704)
------ ------
Cash flows provided by financing activities:
Net borrowings under line-of-credit with bank 500 --
Proceeds from issuance of long-term debt 5,765 521
Principal payments on long-term debt (815) (734)
Proceeds from exercise of stock options 583 561
Purchase of treasury stock -- (125)
------ ------
Net cash provided by financing activities 6,033 223
------ ------
Net increase in cash 357 113
Cash at beginning of year 665 552
------ ------
Cash at end of year $ 1,022 665
====== ======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 344 112
====== ======
Cash paid for income taxes $ 376 765
====== ======
Common stock issued in connection with business combination $ 891 --
====== ======
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Business and Basis of Financial Statement Presentation
Analytical Surveys, Inc. (ASI or the Company) is a Colorado
corporation formed in 1981. ASI's primary business is the
production of precision computerized maps and information
files used in Geographic Information Systems (GIS). Federal,
state and local government agencies and commercial companies
use Geographic Information Systems to manage information
relating to utilities, natural resources, streets, land use
and property taxation.
The consolidated financial statements include the accounts of
the Company and ASI Landmark Inc., its wholly owned
subsidiary, which was formed in July 1996 (see note 2). All
significant intercompany balances and transactions have been
eliminated in consolidation.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(b) Revenue Recognition
The Company recognizes revenue using the percentage of
completion method based on the cost-to-cost method, whereby
the percentage complete is based on costs incurred in relation
to total estimated costs. Costs associated with obtaining
contracts are expensed as incurred. The Company does not
combine contracts for purposes of recognizing revenue and,
generally, does not segment contracts.
Revenue in excess of billings represents work completed but
not billed. The Company bills customers based upon the terms
included in the contract, which is generally upon delivery.
When billed, such amounts are recorded as accounts receivable.
Billings in excess of revenue represent billings in advance of
work performed.
The Company recognizes losses on contracts in the period such
loss is determined. The Company does not believe warranty
obligations on completed contracts are material.
(c) Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost.
Depreciation and amortization are provided using the
straight-line method over the following estimated useful
lives:
Equipment 3 to 10 years
Furniture and fixtures 5 to 10 years
Leasehold improvements 5 years
Maintenance, repairs, and renewals which neither add to the
value of the asset or extend its useful life are charged to
expense as incurred.
(1) Summary of Significant Accounting Policies (continued)
(d) Goodwill
Goodwill represents the excess of the purchase price over net
assets acquired (see note 2). Goodwill is being amortized over
a 15-year period using the straight-line method.
(e) Income Taxes
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109). SFAS 109 requires the
use of the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
(f) Research and Development Costs
The Company expenses research and development costs as they
are incurred. Research and development costs, which are
included in general and administrative expenses in the
statement of operations, totaled $283,872 and $347,321 in 1996
and 1995, respectively.
(g) Earnings Per Share
The computation of earnings per common share is based on the
weighted average number of common shares outstanding plus the
effect of common stock equivalents.
(h) Reclassifications
Certain prior year amounts have been reclassified to conform
to the 1996 presentation.
(2) Business Combinations
In December 1995, the Company acquired substantially all of the
assets and assumed certain liabilities of Intelligraphics, Inc.
for $3,548,019 cash and issued 345,000 shares of restricted common
stock valued at $891,250, for total consideration of $4,439,269.
Intelligraphics provides data conversion services, primarily to
the utilities market.
In July 1996, the Company, through its wholly owned subsidiary ASI
Landmark, Inc., acquired substantially all of the assets and
assumed certain liabilities of Westinghouse Landmark GIS, Inc. for
cash of $1,992,598. Landmark provides photogrammetic mapping and
data conversion service to the municipal and county markets.
<PAGE>
(2) Business Combinations (continued)
Both acquisitions were accounted for using the purchase method of
accounting. The aggregate purchase price of the 1996 acquisitions
was allocated based on fair values as follows (amounts in
thousands):
Current assets $ 4,286
Property and equipment 1,245
Other assets, including goodwill 3,022
Current liabilities (2,121)
------
$ 6,432
======
The following unaudited proforma information presents the results
of operations of the Company as if the acquisitions of
Intelligraphics, Inc. and Westinghouse Landmark GIS, Inc. had
occurred on October 1, 1994 (in thousands, except per share
amounts):
Years ended September 30,
1996 1995
Sales $ 27,729 $ 26,869
====== ======
Net earnings $ 1,009 $ 900
====== ======
Earnings per share $.20 $ .19
== ===
The proforma information is based on historical information and does
not necessarily reflect the actual results that would have occurred nor
is it necessarily indicative of future results of operations of the
combined enterprises.
(3) Accounts Receivable, Revenue in Excess of Billings, and Billings in
Excess of Revenue
At September 30, 1996, the estimated period to complete contracts in
process ranges from one to thirty-nine months, and the Company expects
to collect substantially all related accounts receivable and revenue in
excess of billings within one year.
The following summarizes contracts in process at September 30 (in
thousands):
1996 1995
---- ----
Costs incurred on uncompleted contracts $ 39,007 14,702
Estimated earnings 19,464 10,292
------ ------
58,471 24,994
Less billings to date (50,233) (20,466)
------ ------
$ 8,238 4,528
====== ======
Included in the accompanying balance sheets as follows:
Revenue in excess of billings $ 9,329 4,705
Billings in excess of revenue (1,091) (177)
------ ------
$ 8,238 4,528
====== ======
Notes to Consolidated Financial Statements, Continued
(4) Debt
The Company has a $1,850,000 revolving line of credit with a bank
bearing interest at .5% over the base rate (8.75% at September 30,
1996). The line of credit is collateralized by the assignment of
accounts receivable and officers life insurance proceeds and expires
February 28, 1997. Borrowings of $500,000 were outstanding under the
line-of-credit as of September 30, 1996.
Long-term debt consists of the following at September 30 (in
thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1996 1995
---- ----
Notepayable to a bank in monthly installments ranging from $63,453 to
$88,834 at .5% over the base rate (8.75% at September 30, 1996),
final maturity in November 2001, secured by accounts
receivable, work-in-process and officer life insurance proceeds $ 4,962 --
Notes payable to a bank under a $1,250,000 equipment draw-down term
loan, bearing interest at effective rates ranging from 8.13% to
11.83% at September 30, 1996, monthly payments of $42,256, final
maturity in August 1999, secured by certain equipment (a) 810 743
Term notes payable in monthly installments of $1,507, including
interest ranging from 7.95% to 9.40%, final maturity in November
1996, secured by certain equipment 3 82
------ ------
5,775 825
Less current portion (1,247) (417)
------ ------
$ 4,528 408
====== ======
</TABLE>
Maturities of long-term debt as of September 30, 1996, are as follows
(in thousands):
Years ending September 30:
1997 $ 1,246
1998 1,292
1999 1,199
2000 1,066
2001 903
Thereafter 69
-----
$ 5,775
======
(a) The equipment draw-down term loan agreement contains restrictive
covenants which require, among other things, the maintenance of
certain financial ratios and include certain limitations on capital
expenditures and dividend payments.
(5) Leases
The Company leases its facilities under operating leases. Amounts due
under noncancelable operating leases with terms of one year or more at
September 30, 1996 are as follows (in thousands):
<PAGE>
(5) Leases (continued)
Years ending September 30:
1997 $ 990
1998 774
1999 586
2000 412
2001 351
Thereafter 1,131
-----
Total minimum lease payments $ 4,244
=====
Rent expense totaled $535,203 and $302,303 for the years ended
September 30, 1996 and 1995, respectively.
(6) Income Taxes
Income tax expense (benefit) for the years ended September 30 is as
follows (in thousands):
1996 1995
---- ----
Current:
Federal $ 1,148 713
State and local 168 111
----- ---
1,316 824
----- ---
Deferred:
Federal (141) (94)
State and local (22) (14)
----- ---
(163) (108)
----- ---
$ 1,153 716
===== ===
The exercise of non-qualified stock options results in state and federal
income tax benefit to the Company related to the difference between the
market price at the date of exercise and the option price. Common stock
was increased by $884,459 and $437,242 in 1996 and 1995, respectively,
related to the tax benefit of the exercise of stock options.
Actual income tax expense differs from the amount computed using the
federal statutory rate of 34% for the years ended September 30 as
follows (in thousands):
1996 1995
---- ----
Computed "expected" income tax expense $ 1,042 646
State income taxes, net of federal tax effect 101 63
Other 10 7
----- ---
Actual income tax expense $ 1,153 716
===== ===
<PAGE>
(6) Income Taxes (continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at September 30, are
presented below (in thousands):
<TABLE>
<S> <C> <C>
1996 1995
---- ----
Current deferred tax assets and liabilities:
Accounts receivable, primarily due to allowance
for doubtful accounts $ 22 7
Accrued liabilities, primarily due to accrued
compensated absences for financial statement
purposes 99 62
Deferred compensation related to stock options
issued under the 1988 ASI Stock Option Plan 5 8
Prepaid expenses, primarily due to marketing
commissions expensed for income tax purposes (21) (27)
---- ----
Total net current deferred tax asset $ 105 50
==== ====
Non-current deferred tax assets and liabilities:
Deferred compensation accrued for financial
statement purposes only $ 24 21
Equipment and leasehold improvements, primarily
due to differences in depreciation (28) (134)
---- ----
Total net non-current deferred tax liability $ (4) (113)
==== ====
</TABLE>
(7) Stockholders' Equity and Stock Options
The Board of Directors may issue preferred stock with rates of
dividends, voting rights, redemption prices, liquidation prices,
liquidation premiums, conversion rights, and other requirements without
a vote of the shareholders.
In 1989, the Company entered into a stock redemption agreement with its
founder, who is also its chairman, chief technical officer, and a major
shareholder of the Company (the Shareholder). Under the terms of the
agreement, the Company may be required upon the occurrence of certain
events to purchase all or a portion of the common stock owned by the
Shareholder. In these instances, the purchase price will be determined
based upon the mean between the quoted bid and asked price of the
Company's common stock. The future events that may require purchase, and
the related terms, are summarized as follows:
Minimum shares required Payment
Event (a) to be purchased terms
--------- ------------------------ -------
Death The number of shares based upon proceeds Cash from
from $1,000,000 life insurance policy insurance
maintained and owned by the Company (b) policy
Disability The number of shares based upon proceeds Cash from
from $1,000,000 disability insurance policy insurance
maintained and owned by the Company (b) policy
Involuntary Maximum of all shares owned by shareholder Cash
termination,
except for cause
(a) In the event of voluntary termination or involuntary termination
for cause, the Company is not required to purchase shares. In the
event of voluntary termination, the Company will have the option
to purchase up to all shares owned by the Shareholder through the
issuance of promissory notes.
(b) The Company would be required to purchase the minimum shares
based upon a request from the Shareholder or his estate. In
addition, the Company may be offered the option to purchase all
additional shares of the Shareholder, which may be purchased by
issuing promissory notes with a three year term.
At September 30, 1996, the Shareholder owned 526,050 shares of the
Company's common stock, which represented approximately 11% of the
outstanding common stock.
The Company currently has five nonqualified stock option plans. The
Board of Directors may grant options to purchase up to 2,026,500 shares
of the Company's common stock to officers, directors, and key employees.
The exercise price of the options is established by the Board of
Directors on the date of grant. Employees may vest in their options
either 100% on date of grant or 25% on date of grant and 25% each year
thereafter as determined by the Board of Directors. The options are
exercisable in whole or in part for a period of up to ten years from
date of grant.
The Board of Directors authorized a three for two stock split of the
Company's no par value common stock for all common shareholders of
record on June 27, 1996. All share, option and per share amounts
included in the accompanying consolidated financial statements have been
adjusted for the effects of the stock split.
The following summarizes stock option activity under the plans (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Shares Option price
under option per share
<S> <C> <C> <C>
Outstanding at October 1, 1994 1,117 .67 to 2.09
Granted 426 3.50 to 4.92
Exercised (447) .67 to 2.09
Canceled (29) 1.59 to 4.00
-----
Outstanding at September 30, 1995 1,067 .67 to 4.92
Granted 238 5.25 to 14.33
Exercised (295) 1.12 to 4.00
Canceled (21) 1.58 to 11.08
-----
Outstanding at September 30, 1996 989 .67 to 14.33
=====
At September 30, 1996:
Options exercisable 502 .67 to 5.333
=====
Options available for grant 45
=====
</TABLE>
(8) Employee Benefit Plan
The Company sponsors a qualified tax deferred savings plan in accordance
with the provisions of section 401(k) of the Internal Revenue Code.
Employees may defer up to 15% of their compensation, subject to certain
limitations. The Company matches 50% of the employee contributions up to
4% of their compensation. The Company contributed $65,756 and $60,494 to
the Plan in 1996 and 1995, respectively.
Notes to Consolidated Financial Statements, Continued
(9) Major Customers
Sales to individual customers amounting to more than 10% of total sales
were as follows:
Year ended September 30:
1996 Customer A 10%
1995 Customer B 12%
(10) Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Financial Accounting
Standards Board's Statement No. 105, Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentration of Credit Risk, consist primarily of
accounts receivable with the Company's various customers.
Historically, the Company's customers have included cities, counties,
engineering companies, utility companies, and federal government
agencies. Substantially more than 50% of revenues have historically been
derived from state and local government contracts. In addition, a
significant portion of the Company's revenues are generated from utility
clients, both commercial and municipal.
The Company's accounts receivable are due from a variety of
organizations throughout the United States. The Company provides for
uncollectible amounts upon recognition of revenue and when specific
credit and collection issues arise. Management's estimates of
uncollectible amounts have been adequate in prior years, and management
believes that all significant credit and collection risks have been
identified and adequately provided for at September 30, 1996.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act
Information required by this item is contained in the registrant's definitive
proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or
before January 20, 1997 and such information is incorporated herein by
reference.
Item 10. Executive Compensation
Information required by this item is contained in the registrant's definitive
proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or
before January 20, 1997 and such information is incorporated herein by
reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is contained in the registrant's definitive
proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or
before January 20, 1997 and such information is incorporated herein by
reference.
Item 12. Certain Relationships and Related Transactions
Information required by this item is contained in the registrant's definitive
proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or
before January 20, 1997 and such information is incorporated herein by
reference.
Item 13. Exhibits and Reports on Form 8-K
(a) Index of Exhibits
(3) The Exhibits set forth in the following Index of Exhibits are
filed as part of this report.
3. Articles of Incorporation and By-Laws
3.1 Articles of incorporation (as amended) are incorporated by
reference to the Exhibit to the Company's Registration
Statement on Form S-18, Registration No. 2-93108-D.
3.2 By-laws are incorporated by reference to the Exhibits to the
Company's Registration Statement on Form S-18, Registration
No. 2-93108-D.
4. Instruments defining the rights of Security Holders including Indentures
Form of Stock Certificate (filed with Registration Statement No. 2-93108-D and
hereby incorporated by reference).
<PAGE>
10. Material Contracts
10.1 Stock Redemption and Repurchase Agreement dated February 14,
1989 between John A. Thorpe, Chairman and Chief Technical
Officer, and the registrant, incorporated herein by reference
to registrant's Annual Report on Form 10-K for Fiscal Year
ended September 30, 1989.
10.2 Employment Agreement between John A. Thorpe, Chairman and
Chief Technical Officer, and the registrant, dated June 27,
1994 incorporated herein by reference to registrant's
Quarterly Report on Form 10-QSB for June 30, 1994.
10.3 Stock Option Agreement dated July 27, 1990 and amended
November 19, 1990 between Sidney V. Corder, Chief Executive
Officer and President, and the registrant incorporated herein
by reference to registrant's Annual Report on Form 10-K for
Fiscal Year ended September 30, 1990.
10.4 Employment agreement dated June 27, 1994 between ASI and
Sidney V. Corder, Chief Executive Officer and President,
incorporated herein by reference to registrant's Quarterly
Report on Form 10-QSB for June 30, 1994.
10.5 Stock Option Plan dated December 17, 1987 and amended on
August 31, 1992 incorporated herein by reference to
registrant's Annual Report on Form 10-K for Fiscal Year ended
September 30, 1992.
10.6 1990 Non-Qualified Stock Option Plan dated September 21, 1990
and amended and restated on December 17, 1990 and further
amended on August 31, 1992 incorporated herein by reference to
registrant's Annual Report on Form 10-K for Fiscal Year ended
September 30, 1992.
10.7 1991 Non-Qualified Stock Option Plan dated December 17, 1990
and amended on August 31, 1992 incorporated herein by
reference to registrant's Annual Report on Form 10-K for
Fiscal Year ended September 30, 1992.
10.8 1993 Non-Qualified Stock Option Plan dated December 11, 1992
incorporated herein by reference to registrant's Proxy
Statement dated January 11, 1993.
10.9 Analytical Surveys, Inc. 401-K Plan dated October 1, 1988 and
amended and restated May 22, 1992 incorporated herein by
reference to registrant's Annual Report on Form l0-K for
Fiscal Year ended September 30, 1992.
10.10 Analytical Surveys, Inc. Incentive Bonus Plan incorporated
herein by reference to registrant's Annual Report on Form 10-K
for Fiscal Year ended September 30, 1992.
10.11 Building lease dated August 1, 1994 incorporated herein by
reference to registrant's Annual Report on Form 10-KSB for the
Fiscal Year ended September 39, 1994.
10.12 Employment agreement dated September 20, 1995 between ASI and
Scott C. Benger, Senior Vice President, Finance and
Secretary/Treasurer incorporated herein by reference to
registrant's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1995.
10.13 Employment agreement dated September 20, 1995 between ASI and
Raymond R. Mann , Senior Vice President, Contracts and
Business Development incorporated herein by reference to
registrant's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1995.
10.14 1995 Non-Qualified Stock Option Plan dated August 22, 1995
incorporated herein by reference to registrant's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 1995.
10.15 Employment agreement dated December 22, 1995 between ASI and
William D. Nantell, Senior Vice President (included in the
exhibits section).
23. Consent of Experts:
Consent of KPMG Peat Marwick LLP (included in the exhibits
section).
Consent of Daniel P. Edwards, P.C. (included in the exhibits
section).
27. Financial Data Schedule
Item 13. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
One report on Form 8-K was filed during the fourth quarter of fiscal year
1996, including items 2 and 7 regarding the acquisition of substantially
all of the net assets of Westinghouse Landmark GIS, Inc.
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized as of the 11th day of December, 1996.
Analytical Surveys, Inc.
By
/s/ John A. Thorpe
John A. Thorpe, Chairman of the Board
In accordance with the Securities Exchange Act of 1934 this report has been
signed below by the following persons on behalf of the registrants and in the
capacities indicated as of the 11th day of December, 1996.
Signature Title
/s/ John A. Thorpe
John A. Thorpe Chairman and
Chief Technical Officer
/s/ Sidney V. Corder
Sidney V. Corder Director, President and
Chief Executive Officer
/s/ Scott C. Benger
Scott C. Benger Sr. Vice President Finance
and Secretary/Treasurer
(principal financial officer and
principal accounting officer)
/s/ Brian J. Yate
Brian J. Yates Controller
____________________
Richard P. MacLeod Director
/s/ James T. Rothe
James T. Rothe Director
____________________
Robert H. Keeley Director
/s/ Willem H. J. Andersen
Willem H. J. Andersen Director
Employment Agreement
THIS EMPLOYMENT AGREEMENT is signed as of the 22nd day of December,
1995, by and between ANALYTICAL SURVEYS, INC., a Colorado corporation
(hereinafter referred to as the "Employer" or "ASI"), and WILLIAM NANTELL
(hereinafter referred to as the "Employer").
WITNESSETH THAT:
WHEREAS, Employee has been employed by Intelligraphics, Inc.
("Intelligraphics"): and that employment has now been terminated by reason of
ASI's acquisition of substantially all of the assets of Intelligraphics; and
WHEREAS, ASI wants to hire the employee, and ASI and Employee desire to
state in writing the terms and conditions of their agreements and
understandings, and to continue the term of Employee's employment hereunder;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
legally to be bound, agree as follows:
1. Term of Employment.
The term shall commence on December 22, 1995, and shall continue
through December 31, 1996, unless sooner terminated in accordance with the
provisions of Paragraph 6 or unless extended by Employer under Paragraph 6.4.
2. Duties of Employee.
2.1 It is understood and agreed that Employee's principal duties on
behalf of Employer are and shall be as President of the Intelligraphics Division
of ASI, or such additional responsibilities as assigned by the President of ASI.
In accepting employment by Employer, Employee shall undertake and assume the
responsibility of performing for and on behalf of Employer whatever duties are
reasonably necessary and required in his position as President of the
Intelligraphics Division of ASI. Employer agrees that it will not relocate
Employee from his current employment in Waukesha, Wisconsin to any other place
of employment, without Employee's prior consent which Employee agrees to
consider in good faith. Employer agrees that it will not change Employee's title
as President of the Intelligraphics Division of ASI.
2.2 Employee covenants and agrees that at all times during the term of
this Agreement, Employee shall devote his full-time efforts to his duties as an
employee of the Employer.
3. Compensation.
3.1 Salary. As compensation for the services to be rendered by Employee
for Employer under this Agreement, Employee shall be paid not less than the
following base annual salary, on the same basis (biweekly) as ASI's payroll,
during the term hereof: $130,000.00, plus annual increases and bonuses, if any,
as directed by the President of ASI.
3.2 Bonus. Employee shall be a participant in the Intelligraphics
Division of ASI Incentive Bonus Plan effective through September 30, 1996 (and,
if the option is exercised under Paragraph 6.4, through September 30, 1997)
("Bonus Plan"). The Bonus Plan is attached hereto as Exhibit A.
3.3 Salary Review. Employee's salary will be reviewed annually for
appropriate increases, if any, in January, commencing January, 1997.
4. Additional Benefits.
In addition to, and not in limitation of, the compensation referred to
in Paragraph 3, Employee shall be paid the following additional benefits during
the term hereof:
4.1 Reimbursement. Reimbursement of all reasonable expenses incurred by
him in connection with performance of his duties upon submission of vouchers.
Reasonable expenses shall include, but not be limited to all reasonable
out-of-pocket expenses for entertainment, automobile expenses, travel, meals,
lodging, professional fees, professional dues and the like incurred by him in
the interest of the Employer, subject to such guidelines and policies as may be
promulgated by Employer for senior executives.
4.2 Vacations. Employee shall be entitled to vacations of not less than
four (4) weeks per year, in accordance with the Employer's regular vacation
policies established for senior executives; provided, that Employee may accrue
any unused vacation time from year to year, and upon termination of employment
will be compensated for any unused vacation time.
4.3 Death of Disability Payments. In the event of the Employee's
disability or death prior to December 31, 1996 (or prior to December 31, 1997,
if the option is exercised under Paragraph 6.4), Employee's salary in effect at
the time of his death or disability shall continue to be paid to the Employee,
or to his designee, for a period of six (6) calendar months from the date of
death or from the date of Employee's termination by reason of disability. For
the purposes of this Employment Agreement, the obligations of the Employer to
make the payments upon the disability of Employee shall not become effective
unless and until all of the following conditions are met, as determined by an
independent physician selected by the President of ASI and agreed to by
Employee: (1) Employee shall become physically or mentally incapable (excluding
infrequent and temporary absences due to ordinary illnesses) of properly
performing the services required of him in accordance with his obligations under
paragraph 2 hereof or similar provisions of any renewal Agreement; (2) such
incapacities shall exist or be reasonably expected to exist for more than ninety
(90) days in the aggregate during the period of twelve (12) consecutive months;
and (3) either Employee or Employer shall have given the other party thirty (30)
days' written notice of his or its intention to terminate the active employment
of Employee because of such disability.
4.4 Life Insurance. Employee shall be provided with a term life
insurance policy in the amount of $150,000 (provided he can meet the medical
conditions for such coverage without being "rated"), payable to such
beneficiaries as he shall designate, with an additional $150,000 of accidental
death coverage.
4.5 Comparable Benefits. Employee shall also be provided with additional
comparable benefits, if any, to those Employee was receiving from
Intelligraphics at the time of his termination of employment with
Intelligraphics.
5. Disclosure of Information.
Employee acknowledges that in and as a result of his employment
hereunder, he will be making use of, acquiring, and/or adding to confidential
information of a special and unique nature and value relating to such matters as
Employer's trade secrets, systems, procedures, manuals, confidential reports,
and lists of clients. As a material inducement to Employer to enter into this
Agreement and to pay to Employee the compensation stated in Paragraph 3, as well
as any additional benefits stated in Paragraph 4, Employee covenants and agrees
that he shall not, other than in the ordinary course of business conducted for
ASI, at any time during or following the term of his employment, directly or
indirectly divulge or disclose for any purpose whatsoever or appropriate to his
own use or to the use of others any confidential information that has been
obtained by, or disclosed to him, as a result of his employment by Employer.
6. Termination.
6.1 Termination by Employer.
(A) If Employer terminates Employee's employment without cause prior to
December 31, 1996, Employer will continue to pay compensation and benefits
to Employee (as if Employee still were employed), and Employee shall be subject
to the non-compete provisions (the "Non-Compete") described in paragraph 7, for
the period beginning on the date of termination and ending seven months there-
after.
(B) If Employer exercises the option described in paragraph 6.4 and
then terminates Employee's employment without cause prior to December 31, 1997,
Employer will continue to pay compensation and benefits to Employee (as if
Employee still were employed), and the Non-Compete shall apply, each for a
period beginning on the date of termination and ending seven months thereafter.
(C) If Employer terminated Employee's employment with cause, at any
time, the Non-Compete will apply for a period beginning on the date of
termination and ending 12 months thereafter.
6.2 Termination by Employee.
(A) If Employee terminates his employment without cause prior to
December 31, 1996, or, if Employer exercises the option in paragraph 6.4 and
Employee terminates his employment without cause prior to December 31, 1997,
then the Non-Compete will apply for a period beginning on the date of
termination and ending 12 months thereafter.
(B) If Employee terminates his employment with cause prior to December
31, 1996, or, if Employer exercises its option in paragraph 6.4 and Employee
terminates employment with cause prior to December 31, 1997, Employer will pay
compensation and benefits to Employee (as if Employee still were employed), and
the Non-Compete will apply, each for a period beginning on the date of
termination and ending seven months thereafter.
6.3 Non-Renewal and Termination by Employee Without Cause. If Employer
does not exercise its option in paragraph 6.4 or if Employer exercises its
option in paragraph 6.4 but Employer and Employee do not enter a new agreement
prior to January 1, 1998, and in either event Employee thereafter terminates
employment without cause, then Employer, at its option (to be exercised within
ten business days after such termination specifying the period during which the
payments and Non-Compete shall apply), may pay Employee 75% of the compensation
and 75% of the cost of benefits that Employee would have received under the
terms of this Agreement in effect as of December 31, 1996 or December 31, 1997,
as the case may be if Employee had remained employed, and the Non-Compete will
apply to Employee for any period in which such payments are made, but such
period may not extend beyond twelve months from the date of termination without
the mutual written agreement of the parties.
6.4 Option to Extend. At Employer's option, and upon payment to
Employee of an additional $10,000, on or before January 1, 1997, Employee agrees
that the term of this Agreement will be extended through December 31, 1997 and
that he will not voluntarily terminate his employment at any time prior to
December 31, 1997. If the option in exercised, and if Employee has not
terminated employment without cause prior January 1, 1998, Employer will pay to
Employee an additional $10,000.
6.5 Except as provided in paragraphs 6.1(c) and 6.2(a), the provisions
set forth above regarding compensation and applicability of the Non-Compete are
the exclusive remedy for damages for a termination of employment (but not for
any other breach), except that Employer shall be entitled to equitable relief
for any breach of the Non-Compete.
6.6 "For Cause" Definition. For purposes hereof, the term "for cause,"
in the case of a breach by Employee, shall mean the failure of Employee for any
reason, within thirty (30) days after receipt by Employee of written notice
thereof from Employer, to correct, cease, or otherwise alter any action or
omission to act that constitutes a material and willful breach of this Agreement
likely to result in material damage to ASI, or willful gross misconduct likely
to result in material damage to ASI (including but not limited to any such
willful activities or participation in such willful activities, directly or
indirectly, which are materially adverse to the Employer or violate Employee's
duty of loyalty to the Employer); and, in the case of a breach by Employer,
shall mean a material default by Employer which remains uncured 30 days after
Employer gives Employer notice of such breach or any reduction of duties of
Employee such that Employee ceases to have executive supervisory
responsibilities.
6.7 Effective Date of Termination.
(A) The effective date of termination with respect to termination
"without cause," shall be the date of which Employee actually ceases to perform
his duties hereunder.
(B) The effective date of termination with respect to termination "for
cause," shall be thirty (30) calendar days after the date on which Employee
receives written notice of termination.
6.8 Limitation on Severance Compensation. Notwithstanding any other
provision of this Agreement, the aggregate of the amount of severance
compensation paid to the Employee under this Agreement or otherwise, shall not
include any amount that the Employer is prohibited from deducting for federal
income tax purposes by virtue of Section 280G of the Internal Revenue Code or
any successor provision.
7. Covenant Not to Compete.
During any applicable period specified in paragraph 6, the Employee
shall not directly or indirectly own, control, operate, manage, consult, own
shares in, be employed by, or otherwise participate in any sole proprietorship,
corporation, partnership or other entity whose primary business is the same or
similar to the business of ASI within the territory in which ASI does business.
This covenant of non-competition has been negotiated and agreed to by
and between the Employer and Employee with full knowledge of, and pursuant to
the requirements of Section 8-2-113 (2) of Colorado Revised Statutes, as amended
from time to time, and is deemed by both parties to be fair and reasonable under
the terms of that statute.
8. Other Business Activities.
During the period of his employment under this Agreement, the Employee
shall not be employed by or otherwise engage or be interested in any business
whether or not in competition with ASI, with the following exceptions:
(A) Employee's investment in any business shall not be considered a
violation of this paragraph, provided that such business is not in competition
with ASI and so long as any services rendered to such business by Employee do
not in any way interfere with Employee's duties under this Agreement.
(B) Employee may consult with other businesses not in competition with
ASI, if expressly considered and approved in advance by the President of ASI (in
his or her sole discretion).
9. Indemnification.
So long as Employee is not found by a court of law to be guilty of a
willful and material breach of this Agreement, or to be guilty of gross
misconduct, he shall be indemnified from and against any and all losses,
liability, claims and expenses, damages, or causes of action, proceedings or
investigations, or threats thereof (including reasonable attorney fees and
expenses of counsel satisfactory to and approved by Employee) incurred by
Employee, arising out of, in connection with, or based upon Employee's services
and the performance of his duties pursuant to this Employment Agreement, or any
other matter contemplated by this Employment Agreement, whether or not resulting
in any such liability subject to such limitations as are provided by the
Colorado Business Corporations Act; and Employee shall be reimbursed by Employer
as and when incurred for any reasonable legal and other expenses incurred by
Employee in connection with investigating or defending against any such loss,
claim, damage, liability, action, proceeding, investigation or threat thereof,
or producing evidence, producing documents or taking any other action in respect
thereto (whether or not Employee is a defendant in or target of such action,
proceeding or investigation), subject to such limitations as are provided by the
Colorado Business Corporations Act.
10. [Intentionally Omitted.]
11. Burden of Benefit.
This Agreement shall be binding upon, and shall inure to the benefit
of, Employer and Employee, and their respective heirs, personal and legal
representatives, successors, and assigns and shall be expressly binding upon and
inure to the benefit of any person or entity acquiring ASI by merger,
consolidation, purchase of all or substantially of its assets or 80% or more of
its outstanding common stock; provided, however, that the interests of the
Employee hereunder are not subject to the claims of his creditors, and may not
be voluntarily or involuntarily assigned, alienated or encumbered.
12. Release.
Employee, by signing this Agreement, hereby forever releases ASI
against any claims or liabilities whatsoever arising out of his employment by
Intelligraphics.
13. Governing Law.
It is understood and agreed that the construction and interpretation of
this Agreement shall at all times and in all respects be governed by the laws of
the State of Colorado.
14. Severability.
The provisions of this Agreement, including particularly but not
solely, the provisions of Paragraphs 5 and 7, shall be deemed severable, and the
invalidity or unenforceability of any one or more of the provisions of this
Agreement shall not affect the validity and enforceability of the other
provisions.
15. Notice.
Any notice required to be given shall be sufficient if it is in writing
and sent by certified or registered mail, return receipt requested, first-class
postage prepaid, to his residence in the case of Employee, and to its principal
office in the case of Employer.
16. Entire Agreement.
This Agreement contains the entire Agreement and understanding by and
between Employer and Employee with respect to the employment of Employee, and no
representations, promises, agreements, or understandings, written or oral, not
contained herein shall be of any force or effect. No change or modification of
this Agreement shall be valid or binding unless it is in writing and signed by
the party intended to be bound. No waiver of any provision of this Agreement
shall be valid unless it is in writing and signed by the party against whom the
waiver is sought to be enforced. No valid waiver of any provision of this
Agreement at any time shall be deemed a waiver of any other provision of this
Agreement at such time or at any other time.
17. Counterparts.
The Agreement may be executed in two or more counterparts, any one of
which shall be deemed the original without reference to the others.
18. Dispute Resolution.
All disputes arising out of or related to this Agreement, including any
claims that all or any part of this Agreement is invalid, illegal, voidable, or
void, will be settled by arbitration, pursuant to an Arbitration Agreement
between ASI, Intelligraphics, Inc., certain former employees of Intelligraphics,
Inc., Joanne Huelsman, James Carpenter, the members of the board of directors of
the Company who are voting trustees under the Voting Trust Agreement and Bank
One, Colorado, NA dated December 22, 1995.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement as of the day and year first above written.
EMPLOYEE: EMPLOYER:
ANALYTICAL SURVEYS, INC.,
a Colorado corporation
/s/ William Nantell By: Sidney V. Corder
WILLIAM NANTELL SIDNEY V. CORDER, President
Consent of Independent Auditors
The Board of Directors
Analytical Surveys, Inc.:
We consent to incorporation by reference in the registration statements
(No. 33-24142, No. 33-33948, No. 33-53950, and No. 33-59940) on Form 10-KSB of
Analytical Surveys, Inc. of our report dated November 1, 1996, relating to the
balance sheets of Analytical Surveys, Inc. and subsidiary as of September 30,
1996 and 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended which report
appears in the September 30, 1996 Annual Report on Form 10-KSB of Analytical
Surveys, Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
December 11, 1996
December 12, 1996
Securities and Exchange Commision
Judicial Plaza
450 Fifth Street, NW
Washington, DC 20549
Re: Analytical Surveys, Inc.
CONSENT OF COUNSEL
I hereby consent to the use of my name as legal counsel in the Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended September 30, 1996 filed by Analytical Surveys, Inc.
on Form 10-KSB.
DANIEL P. EDWARDS, P.C.
/s/ Daniel P. Edwards
DANIEL P. EDWARDS, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from SEC Form
10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 1022
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0
0
<COMMON> 5695
<OTHER-SE> 5231
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<SALES> 0
<TOTAL-REVENUES> 22669
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