UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 8, 1997
(Date of Report)
July 2, 1997
(Date of earliest event reported)
ANALYTICAL SURVEYS, INC.
(Exact name of registrant as specified in its charter)
COLORADO
(State of incorporation)
0-13111
(Commission File Number)
084-846389
(IRS Employer Identification No.)
1935 Jamboree Drive
Colorado Springs, Colorado 80920
(Address of principal executive offices)
(719)-593-0093
(Registrant's telephone number)
Item 7. Financial Statements and Exhibits
Analytical Surveys, Inc. (the "Company") acquired the outstanding
stock of MSE Corporation, Inc., 941 Meridian Street,
Indianapolis, Indiana on July 2, 1997. The Company filed a
Current Report on form 8-K dated July 2, 1997 to report the
transaction. This amendment number 1 to Current Report on Form 8-
K dated July 2, 1997 presents the audited financial statements of
MSE Corporation for the two years ended December 31, 1996 and
unaudited pro forma financial information.
Item 7. Financial Statements and Exhibits (continued)
(a) AUDITED FINANCIAL STATEMENTS
MSE Corporation
Financial Statements
December 31, 1996 and 1995
<PAGE>
MSE Corporation
Table of Contents
Page
- --------------------------------------------------------------------------------
Independent Auditor's Report 1
Financial Statements
Statement of income and retained earnings 2
Balance sheet 3
Statement of cash flows 4
Notes to financial statements 5
(2)
<PAGE>
Independent Auditor's Report
Board of Directors
MSE Corporation
Indianapolis, Indiana
We have audited the accompanying balance sheet of MSE Corporation as of
December 31, 1996 and 1995, and the related statements of income and retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these 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 audit 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 financial statements referred to above present fairly
in all material respects, the financial position of MSE Corporation at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
February 14, 1997
<PAGE>
MSE Corporation
<TABLE>
<CAPTION>
Statement of Income and Retained Earnings
Year Ended December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue .................................... $ 22,527,047 $ 18,257,081
------------ ------------
Operating Expenses
Salaries, wages and fringe benefits ..... 12,144,938 9,857,916
Deferred compensation ................... 425,342 331,312
Facilities expense ...................... 1,543,526 1,367,849
Depreciation and amortization ........... 1,179,251 734,751
Sub-contract expenses ................... 2,255,851 1,066,666
Supplies ................................ 605,537 632,735
Bad debt expense ........................ 98,214 74,092
Other administrative expenses ........... 2,402,119 2,096,559
--------- ---------
20,654,778 16,161,880
---------- ----------
Operating Income ........................... 1,872,269 2,095,201
--------- ---------
Other Income (Expense)
Interest expense ........................ (251,573) (263,646)
Interest income ......................... 17,667 8,732
Gain (loss) on sale of assets ........... (778) 18,354
---- ------
(234,684) (236,560)
-------- --------
Net Income ................................. 1,637,585 1,858,641
Retained Earnings, Beginning of Year ....... 7,337,075 5,835,387
--------- ---------
8,974,660 7,694,028
Dividends declared and paid ............. (277,370) (356,953)
-------- --------
Retained Earnings, End of Year ............. $ 8,697,290 $ 7,337,075
============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
MSE Corporation
Balance Sheet
December 31 1996 1995
- --------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current Assets
Cash ......................................... $ 103,151 $ 51,591
Trade accounts receivable ................
Billed-net of allowance for doubtful .......
accounts of $195,000 and $201,000 ........ 4,600,768 4,335,301
Unbilled ................................... 5,230,568 2,821,597
--------- ---------
9,831,336 7,156,898
Accounts and notes receivable -
related parties ............................ 622,297 844,570
Notes receivable ............................. 16,176 19,398
Other current assets ......................... 56,331 80,243
------ ------
Total current assets ................... 10,629,291 8,152,700
---------- ---------
Property and Equipment ........................... 1,675,507 1,499,867
--------- ---------
Other Assets
Accounts receivable--long-term portion--
net of allowance for doubtful accounts of
$57,000 .................................... 122,562 --
Notes receivable-long-term portion ............ 17,750 11,532
Accounts and notes receivable-related .........
party-long-term portion ..................... 1,379,399 1,087,095
Product development costs-net of ..............
amortization of $705,482 and $201,531 ....... 1,068,541 1,315,569
Other ......................................... 16,123 12,684
------ ------
2,604,375 2,426,880
----------- -----------
$14,909,173 $12,079,447
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Stockholder's Equity
<S> <C> <C>
Current Liabilities
Notes payable, bank .............................. $ 2,363,000 $ 1,764,000
Current maturities of long-term debt ............. 332,967 702,249
Accounts payable-trade ........................... 1,112,167 708,545
Employee payroll withholdings .................... 80,925 83,610
Deferred income .................................. -- 13,455
Accrued expenses
Payroll ...................................... 455,387 310,871
Interest ..................................... 21,185 30,791
Taxes-other than income taxes ................ 88,563 76,158
------ ------
Total current liabilities ........................ 4,454,194 3,689,679
--------- ---------
Long-Term Debt-net of current maturities ......... 554,654 275,000
------- -------
Other Long-Term Liability-
deferred compensation ............................ 1,202,035 776,693
--------- -------
Stockholder's Equity
Common stock, without par value
Authorized-1,000,000 shares
Issued-100,000 shares ............................ 1,000 1,000
Retained earnings ................................ 8,697,290 7,337,075
--------- ---------
8,698,290 7,338,075
$14,909,173 $12,079,447
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
MSE Corporation
<TABLE>
<CAPTION>
Statement of Cash Flows
Year Ended December 31 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income ............................................. $ 1,637,585 $ 1,858,641
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization ........................ 1,179,251 734,751
Provision for doubtful accounts and notes receivable . 98,214 74,092
Gain (loss) on sale of assets ........................ 778 (18,354)
Deferred compensation ................................ 425,342 331,312
Changes in
Trade accounts receivable .......................... (2,895,214) (1,967,798)
Accounts and notes receivable-related parties ...... 72,273 (719,366)
Other current assets ............................... 23,912 115,394
Accounts payable-trade ............................. 403,622 246,715
Employee payroll withholdings ...................... (2,685) (66,293)
Accrued expenses and deferred income ............... 133,860 53,873
------- ------
Net cash provided by operating activities ........ 1,076,938 642,967
--------- -------
Investing Activities
Purchases of property and equipment .................... (518,410) (331,075)
Proceeds from sale of property and equipment ........... 23,719 4,600
Payments received on notes receivable .................. 61,301 51,775
Additions to notes receivable .......................... (206,601)
Increase in product development costs .................. (256,923) (785,838)
Increase in other assets ............................... (3,439) (1,932)
------ ------
Net cash used by investing activities ............ (900,353) (1,062,470)
-------- ----------
Financing Activities
Net increase in notes payable, bank .................... 599,000 1,434,000
Principal payments on long-term debt ................... (746,655) (650,505)
Proceeds from long-term debt ........................... 300,000
Dividends paid ......................................... (277,370) (356,953)
-------- --------
Net cash provided (used) by financing activities . (125,025) 426,542
-------- -------
Increase in Cash .......................................... 51,560 7,039
Cash, Beginning of Year ................................... 51,591 44,552
------ ------
Cash, End of Year ......................................... $ 103,151 $ 51,591
=========== ===========
Supplemental Disclosure
Interest paid .......................................... $ 244,358 $ 240,638
Capital lease obligations incurred for use of equipment 357,027 344,304
</TABLE>
See notes to financial statements
<PAGE>
MSE Corporation
Notes to Financial Statements
Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
MSE Corporation, the "Company", is headquartered in Indianapolis, Indiana,
and primarily performs digital mapping services, consulting, engineering,
surveying, and landscape architecture throughout the United States.
The preparation of 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Contract Revenue and Cost Recognition
Profits from contracts are generally recognized by applying percentages of
completion for each year to the total estimated profits for the respective
contracts. The percentages of completion are determined by relating the extent
of service performed to date to the current estimated total of the respective
contracts. When the estimate on a contract indicates a loss, the Company's
policy is to record the entire loss. The cumulative effect of revisions in
estimates of total costs or revenue during the course of the work is reflected
in the accounting period in which the facts that caused the revision first
become known. An amount equal to the costs attributable to unapproved contract
addons is included in the total estimated revenue when realization is probable.
Because of the inherent uncertainties in estimating costs and revenues, it is at
least reasonably possible that the estimates used could change in the near term.
Unbilled trade accounts receivable are fees earned but unbilled at year end.
Bad Debts
The Company uses the reserve method of accounting for bad debts on receivables.
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization
are computed on both the straight-line and accelerated methods over the
estimated useful lives of the assets.
Product Development Costs
Certain internal software development costs incurred after technological
feasibility has been demonstrated and which meet recoverability tests, are
capitalized. In addition, certain other product development costs which include
both digital imagery data production costs and purchased materials and software
are also capitalized. These costs are amortized over the estimated economic life
of the product, generally 3 years on a straight-line basis or the ratio of
current revenue to the total of current and anticipated future revenue,
whichever method results in the greater amount of expense. Amortization expense
totaled $503,951 and $142,922 for 1996 and 1995.
Revenue on the sale of developed products is recognized upon delivery of
the product. Revenue from updates and support service subscriptions is
recognized over the period earned.
<PAGE>
MSE Corporation
Notes to Financial Statements
Self Insurance
The Company has elected to act as a self-insurer for certain costs related
to employee health and accident benefit programs. Costs resulting from
non-insured losses are charged to income when incurred. The Company has
purchased insurance which limits its exposure for individual claims and which
limits its aggregate exposure to $300,000.
<TABLE>
<CAPTION>
Property and Equipment
Property and equipment consist of the following:
December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Computer-aided design and mapping equipment .... $ 3,758,517 $ 4,220,015
Survey equipment ............................... 216,386 263,348
Vehicles ....................................... 113,779 74,899
Office furniture and equipment ................. 775,669 752,757
Leasehold improvements ......................... 440,970 210,753
---------- -----------
Total cost ............................ 5,125,321 5,521,772
Accumulated depreciation and amortization ...... (3,449,814) (4,021,905)
---------- ----------
$ 1,675,507 $ 1,499,867
=========== ===========
</TABLE>
Note Payable-Bank
The Company has a $3,000,000 revolving credit agreement which expires May
1, 1997. The line is secured by substantially all of the Company's assets. In
addition, $750,000 of the line of credit is secured by a personal guarantee of
the Company's sole stockholder. Interest is charged on the line at the bank's
prime rate which was 8.25% on December 31, 1996 and is payable monthly. As of
December 31, 1996 and 1995, there was $2,363,000 and $1,764,000 in borrowings
outstanding against this line.
<TABLE>
<CAPTION>
Long-Term Debt
Long-term debt consists of the following:
December 31 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Installment note payable--bank; payable in monthly installments of $44,800 principle
with interest at 8.25%, due on February 1, 1997, collateralized by substantially all
of the Company's assets ............................................................ $ 88,666 $ 625,000
Installment note payable--bank; payable in monthly installments of $6,131 principle
with interest at 8.25% due on June 1, 2001, collateralized by substantially all of
the Company's assets ............................................................... 275,763
Obligations under capital leases ...................................................... 523,192 352,249
------- -------
887,621 977,249
Current maturities ................................................................. (332,967) (702,249)
-------- --------
$ 554,654 $ 275,000
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MSE Corporation
Notes to Financial Statements
The aggregate maturities of long-term debt are as follows:
Years Ending December 31
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
1997 $332,967
1998 199,464
1999 151,430
2000 155,163
2001 48,597
---- ------
$887,621
========
</TABLE>
Leases
The Company leases office space and equipment under several lease
agreements expiring through 2000. The Company's headquarters facilities are
leased from MSE Realty, LLC, an affiliated company, under an operating lease
which expires December 31, 2000. Building and equipment lease rental expense was
$1,922,791 and $1,629,223 during the years ended December 31, 1996 and 1995,
respectively. The Company has guaranteed the repayment of the mortgage loan that
MSE Realty, LLC has on the facilities it leases to the Company. As of December
31, 1996 and 1995, the mortgage was $2,774,428 and $3,249,744.
The Company is obligated under various capital leases for computer-aided
design and mapping equipment. At December 31, 1996 and 1995, the gross amounts
of equipment and related accumulated amortization recorded under capital leases
were as follows:
<TABLE>
<CAPTION>
December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Computer-aided design and mapping equipment ...... $ 848,199 $ 491,173
Accumulated amortization ......................... (257,733) (114,874)
-------- --------
$ 590,466 $ 376,299
========= =========
</TABLE>
Amortization of assets held under capital leases is included with
depreciation expense.
<PAGE>
MSE Corporation
<TABLE>
<CAPTION>
Notes to Financial Statements
Future minimum lease commitments under noncancelable leases and the building lease are as follows:
Capital Operating Leases
------------------------------------
Years Ending December 31 Lease Building Equipment Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 $228,600 $1,320,000 $527,991 $2,076,591
1998 164,482 1,320,000 385,292 1,869,774
1999 102,036 1,320,000 128,784 1,550,820
2000 92,596 132,000 393 1,412,989
2001 12,993 12,993
-------------------
600,707
Amount representing interest (77,515)
===================
Present value of net minimum lease payments $523,192
===================
</TABLE>
Income Tax Status
Effective January 1, 1987, the Company elected to be classified as an S
Corporation under the Internal Revenue Code. Such corporations are not subject
to federal and state income taxes and, accordingly, no provision for federal or
state taxes on income is required for the years ended December 31, 1996 and
1995. Under the election, the stockholder must include the Company's taxable
income in his personal income tax return, whether or not distributed as
dividends. The election continues unless the Company becomes disqualified or
until the election is revoked.
The Company files its income tax returns and reports its taxable income on
the cash basis. As of December 31, 1996, temporary differences relating to
differences between financial statement and taxable income aggregate
approximately $7,802,600 for which deferred income taxes would have to be
provided in the financial statements if the election were revoked.
The Company elected to be an S Corporation prior to December 31, 1986 and
is therefore not subject to the built-in gains tax on the sale of any of its
assets.
Contingencies
The Company is involved in various lawsuits and is subject to certain
claims which arise in the normal course of business. In management's opinion,
any uninsured liability resulting from such litigation would not have a
materially adverse effect on its operations or financial position.
<PAGE>
MSE Corporation
Notes to Financial Statements
Retirement and Employee Benefit Plans
The Company has a wage-deferral plan qualified under Section 401(k) of the
Internal Revenue Code that covers all eligible employees. The Company will make
a matching contribution of 25% of an employee's first 4% of compensation which
is contributed into the plan. Company contributions to this plan were $64,286
and $52,439 for 1996 and 1995, respectively.
Effective January 1, 1988, the Company adopted a non-qualified deferred
compensation plan for certain of its key management personnel. Under this plan,
the Board of Directors has established certain criteria for the employees to be
eligible to participate in the equity growth of the Company without becoming
stockholders. Annual expense will be charged to operations each year as the
amount deferred is vested by the participant. The deferred compensation expense
was $425,342 and $331,312 for 1996 and 1995.
Related Parties
The Company provides professional services to several associated companies.
An associated company is any company in which MSE Corporation and/or its sole
stockholder exercises common control or influence.
<PAGE>
MSE Corporation
<TABLE>
<CAPTION>
Notes to Financial Statements
The following is a summary of the related party balances:
Phillips Preserve Other
SCM Real SCM Sycamore MSE Design at MSE Sole Assoc.
Estate Kensington Springs Realty,LLC Group,LLC Fall Creek Stockholder Co. Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996
Accounts and notes
receivable-related party
(current) Accounts and notes $160,000 -- $ 54,425 -- $43,150 $124,613 $186,625 $53,484 $ 622,297
receivable-related party 393,617 $605,996 -- $323,802 -- -- 49,579 6,405 1,379,399
(long-term) -------- -------- -------- -------- ------- -------- ------ ----- ---------
$553,617 $605,996 $ 54,425 $323,802 $43,150 $124,613 $236,204 $59,889 $2,001,696
======== ======== ======== ======== ======= ======== ======== ======= ==========
Year Ended December 31, 1996
Service revenue ... $ 19,732 $108,292 $646,341 -- -- $188,159 -- $43,838 $1,006,362
Interest income ........... 433 -- -- $ 482 -- $ 12,401 -- 13,316
Accounting fees ........... -- -- -- 5,688 -- -- -- -- 5,688
-------- -------- ------- ------- -- -------- ------ ------ ----------
20,165 108,292 646,341 $ 6,170 0 $188,159 12,401 43,838 $1,025,366
======== ======== ======== ======= == ======== ====== ====== ==========
December 31, 1995
Accounts and notes
receivable-related party
(current) $320,161 $122,170 $162,005 $194,957 -- -- $ 43,847 $ 1,430 $ 844,570
Accounts and notes
receivable-related party 351,311 639,581 -- -- -- -- 96,203 -- 1,087,095
(long-term) ------- ------- -------- -------- ------- -------- ------- ------- ---------
$671,472 $761,751 $162,005 $194,957 $ 0 $ 0 $140,050 $ 1,430 $1,931,665
======== ======== ======== ======== ======= ======== ======== ======= ==========
Year Ended December 31, 1995
Service revenue ..... $261,497 $122,171 $224,018 -- -- -- -- $ 1,430 $ 609,116
Interest income ..... 467 -- -- -- -- -- $ 9,639 -- 10,106
Accounting fees ..... -- -- -- $ 3,060 -- -- -- -- 3,060
------- -------- -------- -------- ------- -------- -------- ------- -------
$261,964 $122,171 $224,018 $ 3,060 $ 0 $ 0 $ 9,639 $ 1,430 $ 622,282
======= ======== ======== ======== ======= ======== ======== ======= =======
</TABLE>
<PAGE>
MSE Corporation
Notes to Financial Statements
Major Customers
For 1996, there were sales to one major customer that amounted to
approximately 14% of total revenue. For 1995, there were sales to one major
customer that amounted to approximately 13% of total revenue. A major customer
is defined as a customer that accounts for more than 10% of a company's net
sales. Trade receivables billed and unbilled receivables from major customers at
December 31, 1996, were $1,010,455 and $1,456,433.
END OF AUDITED FINANCIAL STATEMENTS
Item 7. Financial Statements and Exhibits (continued)
(b) PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ANALYTICAL SURVEYS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of June 30, 1997 (000's)
Analy- MSE Pro Pro
tical Corp Forma Forma
Surveys Adj Combined
Assets
<S> <C> <C> <C> <C>
Cash $ 2,402 1,847 133 (a) 4,382
Accounts receivable 5,632 4,184 9,816
Revenue in excess
of billing 10,214 7,537 17,751
Prepaid expenses 417 342 759
Prepaid income taxes 129 129
Deferred income taxes 137 137
------ ------ ------ ------
Total current assets 18,931 13,910 133 32,974
------ ------ ------ ------
Property and equipment (net) 2,349 1,500 3,849
Goodwill 2,729 54 9,542 (a) 12,325
Deferred income taxes 15 15
Other assets 40 839 63 (a) 942
------ ------ ------ ------
Total assets $ 24,064 16,303 9,738 50,105
====== ====== ====== ======
Liabilities and Stockholders' Equity
Notes payable to bank $ - 3,000 3,000
Current portion of
long term debt 1,327 172 1,564 (a) 3,063
Billings in excess of
costs and revenue 667 83 750
Accounts payable 2,733 1,471 4,204
Accrued Payroll
and benefits 1,372 981 2,353
------ ------ ------ ------
Total current liabilities 6,099 5,707 1,564 13,370
------ ------ ------ ------
Deferred compensation 70 269 339
Long term debt 3,713 252 10,936 (a) 14,901
------ ------ ------ ------
Total liabilities 9,882 6,228 12,500 28,610
------ ------ ------ ------
Common stock 7,019 136 7,177 14,332
Treasury stock (125) (125)
Retained earnings 7,288 9,939 (9,939) 7,288
------ ------ ------ ------
Total equity 14,182 10,075 (2,762) 21,495
------ ------ ----- ------
Total liabilities and
equity $ 24,064 16,303 9,738 50,105
====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANALYTICAL SURVEYS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Pro Forma Year ended September 30, 1996
(000's except per share amounts)
Analy- MSE Pro Pro
tical Corp. Forma Forma
Surveys Adj Combined
<S> <C> <C> <C> <C>
Sales $ 22,669 22,527 45,196
------ ------ ------
Salaries 10,501 12,570 23,071
Subcontractors 3,898 2,256 6,154
General and administration 3,681 4,650 8,331
Depreciation and
amortization 1,184 1,179 636 (b) 2,999
------ ------ ----- ------
Total costs and expenses 19,264 20,655 636 40,555
------ ------ ----- ------
Operating income 3,405 1,872 (636) 4,641
------ ------ ----- ------
Other income (expense)
Interest (expense) (351) (234) (945) (b) (1,530)
Other income (net) 12 (1) 11
------ ----- ----- ------
Total other income (expense) (339) (235) (945) (1,519)
------ ----- ----- ------
Net income before tax 3,066 1,637 (1,581) 3,122
Income taxes 1,153 21 (c) 1,174
------ ------ ----- ------
Net income $ 1,913 1,637 (1,602) 1,948
====== ====== ===== ======
Earnings per share $ 0.38 0.33
====== ======
Average shares outstanding 5,033 925 (d) 5,958
====== ===== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Pro Forma Nine Months ended June 30, 1997
(000's except per share amounts)
Analy- MSE Pro Pro
tical Corp. Forma Forma
Surveys Adj Combined
<S> <C> <C> <C> <C>
Sales $ 24,643 20,689 45,332
------ ------ ------
Salaries 11,524 9,883 21,407
Subcontractors 4,419 3,364 7,783
General and administration 4,029 3,880 7,909
Depreciation and
amortization 973 934 477 (b) 2,384
------ ------ ----- ------
Total costs and expenses 20,945 18,061 477 39,483
------ ------ ----- ------
Operating income 3,698 2,628 (477) 5,849
------ ------ ----- ------
Other income (expense)
Interest (expense) (382) (173) (627) (b) (1,182)
Other (expense) (net) 8 (18) (10)
------ ----- ----- ------
Total other income (expense) (374) (191) (627) (1,192)
------ ----- ----- ------
Net income before tax 3,324 2,437 (1,104) 4,657
Income taxes 1,267 470 (c) 1,737
----- ------ ----- ------
Net income $ 2,057 2,437 (1,574) 2,920
====== ====== ====== ======
Earnings per share $ 0.39 0.47
====== ======
Average shares outstanding 5,260 925 (d) 6,185
====== ===== ======
</TABLE>
<PAGE>
ANALYTICAL SURVEYS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On July 2, 1997, Analytical Surveys, Inc. ("the Company")
acquired all of the outstanding stock of MSE Corporation ("MSE").
The transaction was accounted for as a purchase. The unaudited
pro forma statements of operations do not purport to be
indicative of the results of operations had the acquisition been
consummated on October 1, 1995
The Unaudited Pro Forma Balance sheet as of June 30, 1997 gives
effect to the acquisition as if the transaction occurred on June
30, 1997. The Analytical Surveys, Inc. June 30, 1997 unaudited
balance sheet was combined with the unaudited balance sheet of
MSE as of July 2, 1997, the purchase date. Purchase and pro forma
adjustments are described below.
The Unaudited Pro Forma Statement of Operations for the year
ended September 30, 1996 gives effect to the acquisition as if
the transaction occurred on October 1, 1995. The historical
results of operations of MSE for its fiscal year ended December
31, 1996 were combined with the historical results of operations
for the year ended September 30, 1996 of Analytical Surveys, Inc.
The Unaudited Pro Forma Statement of Operations for the nine
months ended June 30, 1996 also gives effect to the acquisition
as if the transaction occurred on October 1, 1995. The unaudited
results of operations of MSE for its fiscal nine months ended
July 2, 1997 (net of approximately $200,000 in expenses related to
the acquisition) were combined with the unaudited results of
operations for the nine months ended June 30, 1997 of Analytical
Surveys, Inc.
Pro forma adjustments:
The following pro forma adjustments to the combined balance sheet
and results of operations are reflected in the pro forma
financial statements and are referenced by the letter indicated
(a) Purchase entry - Balance Sheet
The pro forma adjustment to reflect the purchase of the operating
assets and the assumption of the recorded liabilities. The
increase in cash represents the excess of the proceeds of the
term loan over the cash required to complete the acquisition. The
excess of the value of the consideration paid over the fair
market value of the net assets acquired was recorded as goodwill.
Goodwill will be amortized over a fifteen year period. Both the
current portion of long term debt and the long term debt
increased as the result of the new term debt undertaken to
provide the cash portion of the consideration paid to the seller.
The increase in common stock represents the value of the
restricted common stock issued to the seller. The adjustment to
eliminate the MSE retained earnings accumulated prior to this
acquisition is appropriate for the purchase method of accounting.
(b) Pro Forma adjustments to Statements of Operations
The combined historical results of operations were adjusted to
reflect the amortization of the increased goodwill and the
interest expense incurred on the added term debt.
(c) Income taxes
Income tax expenses were adjusted for the affects of the Pro
Forma adjustments to Statements of Operations as described above
plus the income tax effects of MSE's operations. MSE was not
required to pay income taxes prior to this acquisition as it was
operated as a "subchapter S corporation". MSE's operations will
be included in the Company's consolidated income tax returns.
(d) Average Common Stock Outstanding
The number of shares outstanding were increased to reflect the
shares issued to the seller and earnings per share were
calculated using the increased number of shares outstanding.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Analytical Surveys, Inc.
Date: September 9, 1997 by: /s/ Scott C. Benger
----------------- Secretary/Treasurer
