UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
__X__Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
June 30, 1997
or
_____Transition Report Pursuant to Section 13 or
15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-13111
ANALYTICAL SURVEYS, INC.
(Exact name of small business issuer as specified in
its charter)
Colorado 84-0846389
(State of incorporation)(IRS Employer Identification
No.)
1935 Jamboree Drive
Colorado Springs, Colorado 80920
(Address of principal executive offices) (Zip Code)
(719) 593-0093
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past (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 ninety
(90) days.
Yes __X__ No_____
The number of shares of common stock outstanding as of
August 11, 1997 was 6,055,424.
Transitional Small Business Disclosure Format:
Yes _____ No__X__
<PAGE>
Part I Item 1.
<TABLE>
<CAPTION>
ANALYTICAL SURVEYS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
June 30, September 30,
1997 1996
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 2,402 $ 1,022
Accounts receivable, net of $60
allowance for doubtful accounts 5,632 5,781
Revenues in excess of billings 10,214 9,329
Prepaid expenses and other 417 215
Prepaid income taxes 129 --
Deferred tax assets 137 105
------- -------
Total current assets 18,931 16,452
------- -------
PROPERTY AND EQUIPMENT, at cost
Equipment 7,929 7,544
Furniture and fixtures 1,079 957
Leasehold improvements 191 162
------- -------
9,199 8,663
Less Accumulated depreciation and
amortization (6,850) (6,049)
------- -------
2,349 2,614
Goodwill, net of accumulated amortization 2,729 2,881
Long term deferred tax assets 15 --
Other assets 40 41
------- -------
TOTAL ASSETS $ 24,064 $ 21,988
======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANALYTICAL SURVEYS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
June 30, September 30,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Line-of-credit with bank (Note 2) $ -- $ 500
Current portion of long-term debt 1,327 1,247
Billings in excess of revenue 667 1,091
Accounts payable and accrued liabilities 2,733 2,268
Income taxes payable -- 20
Accrued payroll and benefits 1,372 1,340
------- -------
Total current liabilities 6,099 6,466
Deferred income taxes payable -- 4
Long-term debt, less current portion 3,713 4,528
Deferred compensation payable 70 64
------- -------
Total liabilities 9,882 11,062
------- -------
STOCKHOLDERS' EQUITY
Preferred stock-authorized 2,500,000
shares of no par value; none issued
and outstanding -- --
Common stock-authorized 100,000,000 shares
of no par value; issued 5,128 shares at
June 30, 1997 and 4,922 shares
at September 30, 1996 7,019 5,820
Treasury stock of 35 shares, at cost (125) (125)
Retained earnings 7,288 5,231
------- -------
Total stockholders' equity 14,182 10,926
------- -------
TOTAL LIABILITIES AND EQUITY $ 24,064 $ 21,988
======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANALYTICAL SURVEYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
(Unaudited)
Nine months Three Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
SALES OF SERVICES $ 24,643 $15,296 $ 8,484 $ 5,963
------- ------- ------- -------
COSTS AND EXPENSES
Salaries, wages
and benefits 11,524 7,077 3,983 2,747
Subcontractor costs 4,419 2,652 1,391 971
General and administrative 4,029 2,503 1,382 961
Depreciation and
amortization 973 802 320 291
------- ------- ------- -------
20,945 13,034 7,076 4,970
------- ------- ------- -------
EARNINGS FROM OPERATIONS 3,698 2,262 1,408 993
------- ------- ------- -------
OTHER INCOME (EXPENSE)
Interest (382) (217) (123) (91)
Miscellaneous Income 8 15 7 12
------- ------- ------- -------
(374) (202) (116) (79)
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 3,324 2,060 1,292 914
INCOME TAX EXPENSE 1,267 782 490 346
------- ------- ------- -------
NET EARNINGS $ 2,057 $ 1,278 $ 802 $ 568
======= ======= ======= =======
EARNINGS PER SHARE $ 0.39 $ 0.26 $ 0.15 $ 0.11
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANALYTICAL SURVEYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine months Nine months
Ended Ended
June 30, June 30,
1997 1996
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES $ 2,680 $ 23
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 157 12
Purchase of property and equipment (709) (484)
Net assets acquired
in business combinations -- (3,548)
------- -------
Net cash used in investing activities (552) (4,020)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under
notes payable (500) 150
Proceeds from issuance of
long-term debt 214 3,708
Principal payments of long-term debt (948) (514)
Proceeds from issuance of common stock 486 477
------- -------
Net cash provided (used)
by financing activities (748) 3,821
------- -------
Net increase (decrease) in cash 1,380 (176)
Cash at beginning of period 1,022 665
------- -------
Cash at end of period $ 2,402 $ 489
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 386 $ 215
======= =======
Income taxes paid $ 738 $ 376
======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANALYTICAL SURVEYS, INC.
Quarterly Report on Form 10-QSB
June 30, 1997
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
The accompanying interim financial statements have been prepared
by management in accordance with the accounting policies
described in the Company's annual report for the year ended
September 30, 1996. The consolidated financial statements include
the accounts of the Company and ASI Landmark, Inc., its wholly
owned subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation. The financial
statements have not been audited by independent auditors.
The financial statements reflect all adjustments which are, in
the opinion of management, necessary to present fairly the
financial position of Analytical Surveys, Inc. at June 30, 1997
and its results of operations for the nine and three months ended
June 30, 1997 and 1996, and its cash flows for the nine months
ended June 30, 1997 and 1996. All such adjustments are of a
normal recurring nature.
The Statement of Cash Flows for the nine months ended June 30,
1996 includes certain reclassifications to conform the
presentation to that used in the 1996 annual report and the
current period.
The computation of earnings per common share is based on the
weighted average number of shares outstanding plus common stock
equivalents as follows (in thousands):
Nine months ended June 30, 1997 5,260
Nine months ended June 30, 1996 4,963
Three months ended June 30, 1997 5,409
Three months ended June 30, 1996 5,220
2. Notes Payable to Bank
In February 1997, the Company renewed its line of credit loan
agreement with its existing bank for one year at the same maximum
loan amount of $1,850,000. The interest rate was reduced to 0.25
percent above the bank's published prime lending rate and is
variable with changes in that prime rate.
See note 4 regarding events subsequent to June 30, 1997 affecting
notes payable to bank.
<PAGE>
ANALYTICAL SURVEYS, INC.
Quarterly Report on Form 10-QSB
June 30, 1997
3. Stock Options
The following table summarizes stock option transactions under
the Company's four non-qualified stock option plans (in thousands
except per share amounts):
<TABLE>
Shares under Option Price
option per share
<S> <C> <C>
Outstanding at September 30, 1996 989 $ 0.67 to 14.33
Exercised (205) 1.03 to 11.08
Canceled (11) 1.58 to 11.08
Issued 292 11.00 to 12.50
-----
Outstanding June 30, 1997 1,065 0.67 to 14.33
=====
Options Exercisable
at June 30, 1997: 527
=====
Available for Grant
at June 30, 1997: 10
=====
</TABLE>
4. Business combination subsequent to June 30, 1997
On July 2, 1997, the Company acquired MSE Corporation, an
Indianapolis, Indiana based corporation providing data conversion
services to the GIS industry and civil engineering and land
surveying services for approximately $12,500,000 in cash
(including transaction costs) and 925,000 shares of restricted
common stock valued at $7,313,000 for total consideration of
$18,813,000. The Company borrowed $12,500,000 from a bank under a
note which is payable over a 5 year period and bears interest at
a floating rate of 2% over the one month London Interbank Offered
Rate ("LIBOR"). The Company has entered into an interest rate
swap agreement with the bank that fixes the rate at 8.07% for the
first year of the loan. This transaction occurred subsequent to
the date of these financial statements, therefore these financial
statements do not reflect any of the acquired assets,
liabilities or results of operations of MSE.
<PAGE>
ANALYTICAL SURVEYS, INC.
Quarterly Report on Form 10-QSB
June 30, 1997
Part I Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion contains certain forward looking statements,
primarily those which discuss the future goals of the Company.
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 the 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, but are not limited to, the competitive and
regulatory environments in the utilities market, local tax
collections by municipalities and spending levels by local, state
and federal governments.
1997 Compared to 1996
Results of Operations:
Three Months Ended June 30, 1997
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 utility 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 in July 1996, 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.
Sales for the three months ended June 30, 1997 were 42% greater
than sales for the same period one year ago. The increase is due
to increased production and the acquisition of the ASI Landmark
subsidiary in July 1996. Costs and expenses for the three months
ended June 30, 1997 also increased 42% over the same period of
the previous year, again due increased production and the normal
costs and expenses of ASI Landmark. The detail components of
costs and expenses are in line with normal expectations as
percentages of sales.
Interest expense increased 35% in the three months ended June
30, 1997 over the same period of 1996 due to the greater term
debt balances incurred as part of the ASI Landmark acquisition.
Net income (all from continuing operations) for the three months
ended June 30, 1997 was 42% higher than the same period of the
previous year due to the increased sales described above.
Earnings per share increased 36%, which was less than the
increase in net income due to the effect of shares issued for
stock option exercises and the effect of common stock equivalents
on the average number of shares outstanding.
Nine months Ended June 30, 1997
Net income (all from continuing operations) for the nine months
ended June 30, 1997 increased 61% over the same nine months of
1996. Increased production plus the effects of the two
acquisitions caused sales to increase 61% and earnings from
operations to increase 64%. Salaries expense increased 63% due to
the acquisitions and increased production. Subcontractor costs
increased 67% due the greater use of aerial photography
subcontractors in the second quarter. The 61% increase in general
and administrative expenses was primarily the result of the
acquisitions, increased selling and marketing activity and
increased production. Interest expense was 76% more than the same
period of the previous year due the term debt incurred as part of
the acquisitions. Earnings per share increased 50%, which was
less than the increase in net income due to the effect of shares
<PAGE>
ANALYTICAL SURVEYS, INC.
Quarterly Report on Form 10-QSB
June 30, 1997
issued for stock option exercises and the effect of common stock
equivalents on the average number of shares outstanding.
Cash flows presented on the Consolidated Statements of Cash Flows
for the nine months ended June 30, 1996 have been reclassified
from the original presentation in 1996 to conform to the
presentation in the September 30, 1996 annual report.
Cash flow provided by operations in the nine months ended June
30, 1997 was $2,680,000 compared to $ 23,000 in the same nine
months of the previous year. Cash flow from operations was
improved by increased net earnings and by normal variations in
investment in unbilled revenues and accounts receivable. The
Company maintains an open line of credit to finance the normal
variations in investment in unbilled revenue and accounts
receivable.
Cash flows from investing activities include the proceeds from
the sale of surplus equipment and the expenditures for routine
capital equipment additions.
Cash flow from financing activities consists of the financing of
equipment using capital leases, the scheduled repayment of debt
and capitalized leases and proceeds from the exercise of stock
options by employees.
The Company's backlog of contracted work increased to $45,939,000
at June 30, 1997 up 104% from 1996. The Company's expansion
strategy has enabled it to sign significant contracts with
utilities customers as well as municipal and commercial
companies. Some of these projects are large multiple-year
contracts which offer the Company the benefits 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.
The Company's management believes that the domestic market for
its data conversion services is growing at annual rates of 15% to
20% per year. Over the next several years, the Company is seeking
to more than double the market's annual growth rates by
capitalizing on a variety of opportunities including increased
participation in selected international markets. Additionally,
the Company is seeking to develop new products and services which
could expand its sales by offering even more solutions to
customer needs than it does today. A third strategy for growth
includes acquisitions where opportunities can be found that meet
the Company's criteria for quality, technology, personnel and
growth opportunity and that can be acquired in a manner that will
contribute to the long term success of the Company. There is no
assurance that the Company will be successful in any or all of
these strategies and there are business risks inherent in seeking
growth at these rates. Among the risks faced in successfully
implementing these strategies are the continuing possibility of
new competitors in the industry, possible attempts by others to
consolidate the industry by the acquisition and combination of
existing competitors, and the ability of the Company's management
team to manage all of the elements of a rapidly growing business.
There can be substantial variation in the short term rate of
growth even if the Company is successful in achieving its longer
term growth goals.
As discussed in note 4 to the financial statements, the Company
acquired MSE Corporation ("MSE") on July 2, 1997. MSE is also
engaged in the data conversion business (approximately 80% of
their revenues) and civil engineering and land surveying
(approximately 20% of revenues). MSE had sales of $22 million in
the year ended December 31, 1996, has approximately 335 employees
and performs the majority of its GIS services work for utilities
customers. The Company borrowed $12,500,000 from a bank to pay
the cash portion of the purchase consideration and the
transaction costs under a five year term note. The note payable
to the bank bears interest at a floating rate of 2% over the one
month London Interbank Offered Rate ("LIBOR"). The Company has
entered into an interest rate swap agreement with the bank that
fixes the rate at 8.07% for the first year of the loan.
<PAGE>
ANALYTICAL SURVEYS, INC.
Quarterly Report on Form 10-QSB
June 30, 1997
Liquidity and Capital Resources:
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. There
was no balance owed under the line of credit at June 30, 1997 and
the line of credit agreement was renewed for an additional year
with the existing bank. Routine capital expenditures will usually
be financed with term debt and/or capital leases. The cash
portion of the July 2, 1997 acquisition of MSE Corporation was
financed with new term debt of $12,500,000.
The Company has not committed to significant capital expenditures
at June 30, 1997.
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 variety 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 million to $10 million, 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.
Part II Other Information
Item 2. Legal Proceedings
The Company is not a party to any material pending legal
proceeding nor is its property the subject of a pending legal
proceeding. The Company is involved in routine litigation from
time to time, which is incidental to the business and the outcome
of which is not expected to have a material effect on the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three
months ended June 30, 1997, however one report on Form 8-K was
filed subsequent to the end of the period reporting the
acquisition of MSE Corporation.
<PAGE>
ANALYTICAL SURVEYS, INC.
Quarterly Report on Form 10-QSB
June 30, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Analytical Surveys, Inc.
(Registrant)
Date: August 12, 1997 /s/ Sidney V. Corder
Sidney V, Corder, Chairman
and Chief Executive Officer
Date: August 12, 1997 /s/ Scott C. Benger
Scott C. Benger, Secretary/Treasurer
(principal financial officer and
principal accounting officer)
Date: August 12, 1997 /s/ Brian J. Yates
Brian J. Yates, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from SEC Form 10-QSB and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000753048
<NAME> ANALYTICAL SURVEYS INC
<S> <C>
<MULTIPLIER> 1000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 2402
<SECURITIES> 0
<RECEIVABLES> 15906
<ALLOWANCES> 60
<INVENTORY> 0
<CURRENT-ASSETS> 18931
<PP&E> 9199
<DEPRECIATION> 6850
<TOTAL-ASSETS> 24064
<CURRENT-LIABILITIES> 6099
<BONDS> 0
<COMMON> 6894
0
0
<OTHER-SE> 7288
<TOTAL-LIABILITY-AND-EQUITY> 24064
<SALES> 0
<TOTAL-REVENUES> 24643
<CGS> 0
<TOTAL-COSTS> 20945
<OTHER-EXPENSES> (8)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 382
<INCOME-PRETAX> 3324
<INCOME-TAX> 1267
<INCOME-CONTINUING> 2057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2057
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
