<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: December 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From _______________ to ______________
Commission File Number: 0-15034
GEODYNAMICS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-2502865
- --------------------------------- ----------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
21171 Western Avenue, Suite 110, Torrance, California 90501
-----------------------------------------------------------
(Address of principal executive office)
(310) 782-7277
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(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Outstanding as of December 31, 1995
------------ -----------------------------------
Common Stock 2,704,170
This document is comprised of 11 pages.
-1-
<PAGE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
FORM 10-Q
December 1, 1995
INDEX
Page
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheets as of December 1, 1995
(unaudited) and June 2, 1995 3
Condensed Consolidated Statements of Income (unaudited)
for the three and six months ended December 1, 1995 and
December 2, 1994 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended December 1, 1995 and December 2,
1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
Signatures 11
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<PAGE>
Part I. Financial Information
<TABLE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 1, June 2,
1995 1995
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 2,866,000 $ 2,310,000
Short-term investments 3,970,000 5,862,000
Contract receivables:
Billed 12,419,000 12,614,000
Unbilled 2,700,000 1,910,000
Prepaid expenses and others 1,934,000 1,354,000
----------- -----------
Total current assets 23,889,000 24,050,000
----------- -----------
Equipment and Leasehold Improvements, at cost
Equipment and leasehold improvements 28,421,000 28,098,000
Less accumulated depreciation and amortization (17,300,000) (16,615,000)
----------- -----------
Net equipment and leasehold improvements 11,121,000 11,483,000
----------- -----------
Other Assets
Noncurrent unbilled contract receivables 920,000 920,000
Investments 1,295,000 1,277,000
Goodwill, net of amortization of $113,000 at
December 1, 1995 and $75,000 at June 2, 1995 1,387,000 1,425,000
Intangible assets, net of amortization of
$1,070,000 at December 1, 1995 and $916,000
at June 2, 1995 926,000 1,080,000
Other assets 299,000 405,000
----------- -----------
Total other assets 4,827,000 5,107,000
----------- -----------
$39,837,000 $40,640,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,441,000 $ 2,907,000
Accrued expenses 3,581,000 3,229,000
Line of credit 647,000 747,000
Other current liabilities 650,000 1,429,000
----------- -----------
Total current liabilities 6,319,000 8,312,000
----------- -----------
Long-term liabilities
Long-term debt, net of current portion 138,000 163,000
Other liabilities 1,696,000 1,709,000
----------- -----------
Total long-term liabilities 1,834,000 1,872,000
----------- -----------
Shareholders' Equity
Common stock, without par value
Authorized - 10,000,000 shares
Outstanding - 2,699,000 at December 1, 1995
and 2,605,000 shares at June 2, 1995 12,552,000 11,910,000
Retained earnings 19,143,000 18,542,000
Foreign currency translation (11,000) 4,000
----------- -----------
Total shareholders' equity 31,684,000 30,456,000
----------- -----------
$39,837,000 $40,640,000
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<PAGE>
<TABLE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- --------------------------
December 1, December 2, December 1, December 2,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $16,055,000 $14,619,000 $32,053,000 $27,763,000
Costs and Expenses 15,405,000 13,763,000 30,583,000 26,095,000
----------- ----------- ----------- -----------
Income from
Operations 650,000 856,000 1,470,000 1,668,000
----------- ----------- ----------- -----------
Other Income/(Expense)
Interest income 92,000 103,000 159,000 172,000
Interest expense (27,000) (22,000) (50,000) (44,000)
----------- ----------- ----------- -----------
Net other 65,000 81,000 109,000 128,000
----------- ----------- ----------- -----------
Income before
Provision for
Income Taxes 715,000 937,000 1,579,000 1,796,000
Provision for Income
Taxes 275,000 360,000 608,000 691,000
----------- ----------- ----------- -----------
Net Income $ 440,000 $ 577,000 $ 971,000 $ 1,105,000
=========== =========== =========== ===========
Earnings per Common
Share $ 0.15 $ 0.22 $ 0.33 $ 0.43
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding
(Note 3) 2,947,000 2,632,000 2,905,000 2,571,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<PAGE>
<TABLE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Six Months Ended
------------------------
December 1, December 2,
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 971,000 $1,105,000
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 1,523,000 1,368,000
Loss on retirement of capital assets -- 1,000
Nonqualified stock options, charged to
operations 32,000 35,000
Deferred income taxes 14,000 --
(Increase) decrease in:
Contract receivables (1,222,000) 783,000
Refundable income taxes (160,000) --
Prepaid expenses and other (420,000) 60,000
Other noncurrent assets 63,000 5,000
Increase (decrease) in:
Accounts payable (1,466,000) 211,000
Accrued expenses 352,000 (236,000)
Other current liabilities (152,000) 24,000
Other liabilities (27,000) (283,000)
---------- ----------
Net cash provided by (used in) operating
activities (492,000) 3,073,000
---------- ----------
Cash Flows from Investing Activities:
Purchases of short-term investments (3,608,000) (2,071,000)
Sales of short-term investments 5,500,000 2,445,000
Purchase of LCT, net of acquired cash of $1,319,000 -- (1,419,000)
Employee loans, net 25,000 43,000
Purchases of property and equipment (969,000) (836,000)
---------- ----------
Net cash provided by (used in) investing
activities 948,000 (1,838,000)
---------- ----------
Cash Flows from Financing Activities:
Line of credit repayments (150,000) --
Line of credit borrowings 50,000 185,000
Proceeds from exercise of common stock options and
tax benefits related to stock options 546,000 102,000
Repurchases of common stock (14,000) (103,000)
Cash dividends paid (370,000) (359,000)
Foreign currency translation (15,000) (3,000)
Long-term subordinated debt (25,000) (389,000)
Payments on notes receivable from sale of stock -- 3,000
Proceeds from employee stock purchase plan 78,000 108,000
---------- ----------
Net cash provided by (used in) financing
activities 100,000 (456,000)
---------- ----------
Net increase in cash 556,000 779,000
Cash at beginning of period 2,310,000 1,237,000
---------- ----------
Cash at end of period $2,866,000 $2,016,000
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period - income taxes $ 857,000 $ 379,000
Cash paid during the period - interest $ 50,000 $ 44,000
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
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<PAGE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Accounting Policies
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have either been condensed or omitted pursuant
to those rules and regulations. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of operations and
cash flows for the periods presented are not necessarily indicative of the
results that may be expected for the full fiscal year. For further
information, refer to the financial statements and notes thereto for the year
ended June 2, 1995 included in the Company's 1995 Annual Report on Form 10-K.
The Condensed Consolidated Balance Sheets at June 2, 1995 have been taken
from the audited financial statements at that date and condensed.
Note 2 - Investments
The Company's short-term investments are stated at market, which equals
cost, and consist of money market funds.
Note 3 - Earnings Per Common Share
The following schedule summarizes the information used to compute earnings
per common share. Fully diluted earnings per share did not vary
significantly from primary earnings per share.
<TABLE>
<CAPTION>
Three Months Ended: Six Months Ended:
------------------------ ------------------------
December 1, December 2, December 1, December 2,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $440,000 $577,000 $971,000 $1,105,000
=========== =========== =========== ===========
Weighted average common
shares outstanding 2,668,000 2,571,000 2,646,000 2,519,000
Dilutive effect of stock
options 279,000 61,000 259,000 52,000
----------- ----------- ----------- -----------
Weighted average shares
used to compute earnings
per common share 2,947,000 2,632,000 2,905,000 2,571,000
=========== =========== =========== ===========
</TABLE>
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<PAGE>
Note 4 - Material Transaction
On October 18, 1995, the Company announced that a definitive agreement had
been reached with Logicon, Inc. ("Logicon") concerning the acquisition of the
Company's DoD-related business and would result in the divestiture of the
Company's remaining assets, its interest in its LaFehr & Chan Technologies,
Inc. ("LCT") subsidiary, either through a spin-off to the Company's
shareholders, through sale of the stock or assets or a combination thereof.
The transaction would result in the payment to Company shareholders of an
estimated $11.08 to $11.25 per share, depending upon the amount of certain
transaction expenses, on a fully diluted basis in cash, plus a pro rata
distribution of shares in LCT, or an estimated range of $12.08 to $12.25 if a
sale of LCT occurs. LCT would, in conjunction with the issuance of the LCT
stock in a spin-off, apply for inclusion for trading on the NASDAQ SmallCap
Market, or distribute the sales proceeds of a divestiture of the Company's
interest in LCT.
The transaction is subject to Geodynamics' shareholder approval and is
conditional on the successful divestiture of LCT. Prior to the effective
date of the proxy statement, the Company intends to continue in its efforts
to dispose of its interest in LCT, and, if successful, will distribute the
proceeds to Company shareholders in lieu of LCT shares.
A proxy statement has been submitted to the Securities and Exchange
Commission for comment. The shareholder's meeting to vote on the proposed
transaction is expected to occur in early March 1996 and the closing before
the end of March 1996.
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<PAGE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $16.1 million and $32.1 million in the three and six months
ended December 1, 1995, respectively, an increase of 9.8% and 15.5%,
respectively, over the $14.6 million and $27.8 million in the corresponding
fiscal 1995 periods. These increases were attributable to higher marine and
airborne survey activity for the LCT subsidiary, and a DoD contract with a
higher volume of equipment purchases in the first half of fiscal 1996.
Costs and expenses were $15.4 million and $30.6 million in the three and six
months ended December 1, 1995, respectively, reflecting a decline in
consolidated profit margins from 6.0% through six months of 1995 to 4.6%
through the same period in fiscal 1996. This decline in profit margins is
primarily attributable to expenses related to the planned divestiture of LCT
and the proposed merger into Logicon, Inc. (see Note 4 in Notes to Condensed
Consolidated Financial Statements and "Material Transaction" below).
Earnings per share were $0.15 and $0.33 for the three and six months ended
December 1, 1995, declining from $0.22 and $0.43 in the comparable periods
ended December 2, 1994. The declines are attributable to lower profit
margins (see above) and a higher weighted average number of shares
outstanding in fiscal 1996, plus an increase in the dilutive effect of stock
options due to higher market prices per share in the current quarter (see Note
3 in Notes to Condensed Consolidated Financial Statements).
CAPITAL RESOURCES AND LIQUIDITY
Cash and short-term investments decreased to $6.8 million at December 1, 1995
from $8.2 million at June 2, 1995. The decrease is due in large part to a
decrease in accounts payable from $2.9 million at June 2, 1995 to $1.4
million at the end of the current quarter. In addition, outstanding contract
receivables increased to $15.1 million from $14.5 million at June 2, 1995.
Accounts receivable aging at December 1, 1995 was 91 days, decreasing
slightly from 93 days at June 2, 1995. The balance sheet remains strong,
with working capital up approximately $1.8 million to a total of $17.6
million and a current ratio of 3.8 to 1 at December 1, 1995, compared with
2.9 to 1 at June 2, 1995. The Company maintains an $8.0 million line of
credit with a bank; at December 1, 1995, borrowings were $647,000 under this
line, down from $747,000 at June 2, 1995. Borrowings under the line of
credit, which are guaranteed by the parent company, were to provide working
capital for the Company's LaFehr & Chan Technologies, Inc. ("LCT") subsidiary.
-8-
<PAGE>
MATERIAL TRANSACTION
As discussed in the Notes to the Consolidated Financial Statements, the
Company reached a definitive agreement with Logicon, Inc. ("Logicon") in
which the Company's DoD business would be acquired by Logicon. The
agreement, announced on October 18, 1995, is subject to approval by
Geodynamics shareholders, and is expected to be voted on in early March of
1996. If approved, the agreement calls for the payment of an estimated
$11.08 - $11.25 per share, depending upon the amount of certain transaction
expenses, to holders of Geodynamics stock, plus a pro rata distribution of
shares in the Company's wholly-owned subsidiary LCT, if a spin-off as a
separate, publically-traded company in conjunction with the merger occurs, or
an estimated range of $12.08 to $12.25 per share in the event of a sale of
LCT, in which there would be a distribution of the sale proceeds. The spin
off would occur if the Company is unable to otherwise dispose of LCT, which
will not be included as part of the business acquired by Logicon. The Company
intends to continue to attempt to dispose of its interest in LCT until the
effective date of the proxy statement, and, if successful, will distribute
the proceeds to Geodynamics shareholders in lieu of LCT shares.
-9-
<PAGE>
GEODYNAMICS CORPORATION AND SUBSIDIARIES
Part II. Other Information
Items 1 through 5 have been omitted because the related information is
either inapplicable or has been previously reported.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
Date Item Reported
---------------- -----------------------------------
October 18, 1995 Item 5 - Logicon Merger Agreement
October 18, 1995 Item 5 - LCT Agreement
October 18, 1995 Item 5 - LCT Agreement w/Attachment <PAGE>
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<PAGE>
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 thereto duly authorized.
GEODYNAMICS CORPORATION
DATE: January 15, 1996 By: /s/ David P. Nelson
-----------------------------------------
David P. Nelson, Vice-President, Chief
Financial Officer, and duly authorized
to sign on behalf of registrant
DATE: January 15, 1996 By: /s/ Robert G. Cook
-----------------------------------------
Robert G. Cook, Corporate Controller and
Chief Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> DEC-1-1995
<CASH> 2,866,000
<SECURITIES> 3,970,000
<RECEIVABLES> 15,119,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,889,000
<PP&E> 28,421,000
<DEPRECIATION> (17,300,000)
<TOTAL-ASSETS> 39,837,000
<CURRENT-LIABILITIES> 6,319,000
<BONDS> 0
<COMMON> 12,552,000
0
0
<OTHER-SE> 19,132,000
<TOTAL-LIABILITY-AND-EQUITY> 39,837,000
<SALES> 32,053,000
<TOTAL-REVENUES> 32,053,000
<CGS> 30,583,000
<TOTAL-COSTS> 30,583,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,000
<INCOME-PRETAX> 1,579,000
<INCOME-TAX> 608,000
<INCOME-CONTINUING> 971,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 971,000
<EPS-PRIMARY> $0.33
<EPS-DILUTED> $0.33
</TABLE>
