<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
-----------------
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 0-23718
NUMAR CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2750939
(State of Incorporation) (I.R.S. Employer
Identification Number)
508 LAPP ROAD
MALVERN, PENNSYLVANIA 19355
(Address and ZIP code of principal executive offices)
(610) 251-0116
(Registrant's telephone number including area code)
NOT APPLICABLE
(Former name, address or fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 11 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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the Registrant's common stock, $0.01 par
value, as of April 25, 1997 was 8,400,653.
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INDEX
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<CAPTION>
Page
ITEM 1. FINANCIAL STATEMENTS ----
<S> <C>
Consolidated Balance Sheets
As of March 31, 1997 and December 31, 1996 1
Consolidated Statements of Operations
For the Three Months Ended March 31,
1997 and 1996 2
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
1997 and 1996 3
Notes to Consolidated Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 7
Signatures 8
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NUMAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 5,211 $ 5,626
Accounts receivable, less allowance for doubtful
accounts of $206,000 and $90,000, respectively........ 5,402 4,486
Inventory............................................... 143 219
Prepaid expenses and other current assets............... 346 396
------- ---------
Total current assets.............................. 11,102 10,728
Well logging devices under construction and supplies....... 3,248 3,655
Property and equipment, net................................ 17,538 16,744
Other assets, net.......................................... 727 703
-------- ---------
Total assets.......................................... $32,615 $31,829
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of loans payable........................ $ 70 $ 76
Accounts payable........................................ 812 961
Accrued expenses........................................ 2,122 1,998
Deferred revenue........................................ 2,810 3,166
Foreign taxes payable................................... 382 391
------ ---------
Total current liabilities............................. 6,196 6,592
Deferred revenue........................................... 6,202 5,977
Loans payable.............................................. 113 129
Stockholders' equity:
Common shares; par value $.01 per share; authorized,
50,000,000 shares; issued and outstanding 8,400,653
and 8,389,653, respectively......................... 84 84
Additional paid-in capital.............................. 56,508 56,458
Accumulated deficit..................................... (36,488) (37,411)
-------- ---------
Total stockholders' equity........................... 20,104 19,130
-------- ---------
Total liabilities and stockholders' equity........... $32,615 $31,829
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
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NUMAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
for the three months ended
March 31,
--------------------------
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Revenue............................................. $ 6,548 $2,973
Cost of sales and services.......................... 3,606 2,141
Depreciation of field assets........................ 1,058 912
---------- ------
Gross profit (loss)............................ 1,884 (80)
General and administrative expenses................. 359 378
Research and development expenses................... 587 470
---------- ------
Income (loss) from operations.................. 938 (928)
Other income (expense):
Interest income.................................. 72 74
Interest expense................................. (6) (7)
---------- ------
Income (loss) before income tax................ 1,004 (861)
Income tax expense (benefit)........................ 81 (16)
---------- ----------
Net income (loss).............................. $ 923 $ (845)
========== ======
Net income (loss) per share.................... $ .11 $(.10)
========== ==========
Weighted average common shares outstanding.......... 8,733,534 8,273,460
</TABLE>
See accompanying notes to consolidated financial statements.
2
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NUMAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
for the three months ended
March 31,
----------------------------
1997 1996
---------- -----------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income (loss).................................... $ 923 $ (845)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization.................. 1,180 1,016
Provision for doubtful accounts................ 116 5
Changes in assets and liabilities which
provided (used) cash:
Receivables - trade............................ (1,032) 810
Inventory...................................... 76 ---
Prepaid expenses and other current assets...... 50 48
Other assets................................... (35) (68)
Accounts payable............................... (149) (221)
Accrued expenses............................... 124 (83)
Deferred revenue............................... (131) (28)
Foreign taxes payable.......................... (9) (88)
-------- --------
Net cash provided by operating activities........ 1,113 546
-------- --------
Cash flows from investing activities:
Capital expenditures................................ (1,556) (2,554)
Proceeds from disposition of property and equipment. --- 153
-------- --------
Net cash used in investing activities........... (1,556) (2,401)
-------- --------
Cash flows from financing activities:
Repayment of bank debt and term loans.............. (22) (21)
Payment of employee subscriptions receivable....... -- 26
Proceeds from issuance of common shares............ 50 --
-------- --------
Net cash provided by financing activities...... 28 5
-------- --------
Cash and cash equivalents:
Net decrease in cash............................... (415) (1,850)
Balance, beginning of period....................... 5,626 6,323
-------- --------
Balance, end of period........................... $ 5,211 $ 4,473
======== ========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest........................................ $ 4,115 $ 5,692
======== ========
Income taxes.................................... $ 70,000 $ --
======== ========
Accounts payable on well logging devices under
construction and supplies.................... $286,519 $346,294
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
NUMAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements reflect all
adjustments which are, in the opinion of management, necessary to fairly present
such information. All such adjustments were normal and recurring in nature.
Although the Company believes the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. It is
suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in Form 10-K filed with the
Securities and Exchange Commission on March 26, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings per Share". The Company
does not expect the adoption of this statement to have a significant impact on
the Company's financial statements.
(2) WELL LOGGING DEVICES UNDER CONSTRUCTION AND SUPPLIES
Well logging devices under construction and supplies as of March 31, 1997
and December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
--------- ------------
<S> <C> <C>
Supplies and components............................................ $ 2,693 $ 3,073
Work-in-process.................................................... 555 582
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$ 3,248 $ 3,655
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(3) PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 1997 and December 31, 1996 are as
follows (in thousands):
March 31 December 31
1997 1996
-------- -----------
MRIL tools and related equipment.................................... $ 26,486 $ 24,677
Research equipment.................................................. 705 705
Computer equipment.................................................. 1,488 1,364
Other equipment and fixtures........................................ 2,431 2,402
-------- --------
31,110 29,148
Less accumulated depreciation....................................... (13,572) (12,404)
-------- --------
$ 17,538 $ 16,744
======== ========
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4
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Depreciation expense (in thousands) for the three months ended March 31,
1997 and March 31, 1996 was $1,168 and $1,008, respectively.
(4) OTHER ASSETS
Other assets as of March 31, 1997 and December 31, 1996 are as follows
(in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
-------- -----------
<S> <C> <C>
Patent costs and trademarks.... $ 735 702
Equipment Deposits............. 100 48
Other.......................... 26 76
----- ----
861 826
Less accumulated amortization.. (134) (123)
----- ----
$ 727 $ 703
===== =====
</TABLE>
(5) DEFERRED REVENUE
NUMAR has entered into revenue-sharing agreements with two wireline service
companies, whereby NUMAR supplies these companies with certain MRIL equipment.
NUMAR retains ownership of all equipment provided under these agreements. In
consideration for entering into these contracts, NUMAR receives non-refundable
advances, based on equipment ordered by the wireline companies and records these
advances as deferred revenue. In addition, NUMAR sells certain equipment to
these wireline companies and receives funds in advance of deliveries. These
funds so received are recorded as advances or deferred revenue.
<TABLE>
<CAPTION>
<S> <C>
Balance of deferred revenue
at December 31, 1996....................... $ 9,143
Less amount recognized......................... (1,219)
Plus funds received for additional equipment... 1,088
-------
Balance of deferred revenue at March 31, 1997.. $ 9,012
=======
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Management's discussion and analysis is the Company's analysis of its
financial performance and of significant trends which may impact its future
performance. It should be read in conjunction with the consolidated financial
statements of the Company and the related notes thereto.
RESULTS OF OPERATION
REVENUE. Revenue for the first quarter of fiscal 1997 was $6.5 million, an
increase of 120% compared to revenue of $3.0 million in the first quarter of
1996. Total revenue from wireline logging for the first quarter of 1997 was
$4.9 million, compared to $2.7 million for the same period in 1996, an increase
of 83%. Within this increase of revenue from wireline logging, domestic revenue
increased by 106%, and wireline logging revenue from industry partners increased
by 109%. Wireline logging revenue from international operations was flat
compared to the same period in 1996. Other revenue for the first quarter of
1997 was $1.6 million. This compares to other revenue of $291,000 for the first
quarter of 1996. Included in other revenue was sales to industry partners,
primarily for resale into the Peoples Republic of China, of $1.3 million.
COST OF SALES AND SERVICES. Cost of sales and services increased from $2.1
million in the first quarter of 1996 to $3.6 million in the first quarter of
1997. Included in cost of sales and services in the first quarter of 1997 is
$618,000 of cost of sales, primarily the cost of the MRIL units sold to WALS for
delivery into the Peoples Republic of China. Cost of sales in the first quarter
of 1996 was $57,000. Cost of sales and services excluding cost of sales,
therefore, increased from $2.1 million in the first quarter of 1996 to $3.0
million in the first quarter of 1997, an increase of 43%. This compares
favorably to an increase in revenue from wireline logging of 83%. Cost of sales
and services, other than the cost of sales, is primarily for the support of
wireline logging revenue. In that a large portion of the costs are fixed, there
is significant leverage associated with volume increases.
DEPRECIATION OF FIELD ASSETS. Depreciation of field assets in the first
quarter of 1997 was $1.1 million compared with $912,000 during the same period
in 1996, an increase of 16%, which compares favorably to an increase in wireline
logging revenue of 83%. The higher depreciation is attributable to additional
MRIL units in service with NUMAR and its industry partners.
GROSS PROFIT (LOSS). Gross profit for the first quarter of 1997 was $1.9
million compared to a gross loss of $80,000 as a result of the higher rate of
revenue growth compared to the growth of the cost of sales and services and the
cost of depreciation of field assets.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased slightly during the first quarter of 1997 compared to the first
quarter of 1996. For the balance of the year, general and administrative
expenses are expected to increase compared to the prior year but to decrease as
a percentage of revenues.
6
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RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in
the first quarter of 1997 were $587,000, compared to $470,000 for the same
period in 1996, an increase of 25%. Research and development expenses are
expected to exceed 1996 expenses as the MRIL FEWD development project and other
research projects accelerate, but to decrease as a percentage of revenue.
INCOME TAX EXPENSE. Income tax expense for the first quarter of 1997 was
$81,000 compared to an income tax benefit in the first quarter of 1996 of
$16,000. The Company currently has available $19.0 million federal net
operating loss carryforwards and $2.5 million in state net operating loss
carryforwards, which may be used to reduce taxes payable for federal and state
tax purposes. However, as NUMAR earns profits in 1997, in the United States
there will be tax expense of approximately 2% for Alternative Minimum Tax
Liability and Pennsylvania state taxes, net of utilization of net operating loss
carryforwards, as well as foreign taxes.
NET INCOME (LOSS). Net income for the first quarter of 1997 was $923,000
as compared to a net loss of $845,000 for the first quarter of 1996. This was
the result of revenue increasing at a rate substantially higher than related
expenses.
FINANCIAL CONDITION AND LIQUIDITY. As of March 31, 1997, the Company had
cash on hand of $5.2 million and less than $200,000 of loans outstanding. The
Company believes that the cash on hand, contractual payments due from industry
partners during the balance of the year, and a $3.0 million bank line of credit
will be sufficient to fund its operations and anticipated growth through the
balance of 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) There were no reports filed on Form 8-K during the three months ended
March 31, 1997.
7
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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 thereunto duly authorized.
NUMAR Corporation
By: /s/ Edward P. Delson
-----------------------------
Edward P. Delson
Senior Vice President and
Chief Financial Officer
8
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,211,000
<SECURITIES> 0
<RECEIVABLES> 5,608,000
<ALLOWANCES> 206,000
<INVENTORY> 143,000
<CURRENT-ASSETS> 11,102,000
<PP&E> 31,110,000
<DEPRECIATION> 13,572,000
<TOTAL-ASSETS> 32,615,000
<CURRENT-LIABILITIES> 6,196,000
<BONDS> 0
0
0
<COMMON> 84,000
<OTHER-SE> 20,020,000
<TOTAL-LIABILITY-AND-EQUITY> 32,615,000
<SALES> 1,383,624
<TOTAL-REVENUES> 6,548,000
<CGS> 618,126
<TOTAL-COSTS> 4,664,000
<OTHER-EXPENSES> 946,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> 1,004,000
<INCOME-TAX> 81,000
<INCOME-CONTINUING> 923,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 923,000
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
