-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WKeFFIARqsQIE0d4+OGnk3dPWY8B67fqAQi3yLt8EHDScplSK2UOqFcrRQ67J+aS 8aBaSpqPILP0vUtCRTtM4w== /in/edgar/work/20000809/0000930661-00-001893/0000930661-00-001893.txt : 20000921 0000930661-00-001893.hdr.sgml : 20000921 ACCESSION NUMBER: 0000930661-00-001893 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OYO GEOSPACE CORP CENTRAL INDEX KEY: 0001001115 STANDARD INDUSTRIAL CLASSIFICATION: [3829 ] IRS NUMBER: 760447780 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-36727 FILM NUMBER: 689409 BUSINESS ADDRESS: STREET 1: 7334 N GESSNER RD CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7139399700 MAIL ADDRESS: STREET 1: 9777 W GULF BANK ROAD SUITE 5 CITY: HOUSTON STATE: TX ZIP: 77040 10-Q 1 0001.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2000 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 2000 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 001-13601 OYO GEOSPACE CORPORATION (Exact Name of Registrant as Specified in Its Charter) Delaware 76-0447780 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 12750 South Kirkwood, Suite 200 Stafford, Texas 77477 (Address of Principal Executive Offices) (281) 494-8282 (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 --- --- There were 5,507,638 shares of the Registrant's Common Stock outstanding as of the close of business on August 8, 2000. ================================================================================ Table of Contents PART I. FINANCIAL INFORMATION Page - ------------------------------- Number ------ Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 13 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors OYO Geospace Corporation and Subsidiaries We have reviewed the accompanying consolidated balance sheet of OYO Geospace Corporation and Subsidiaries as of June 30, 2000, and the related consolidated statements of operations for the three months and nine months ended June 30, 2000 and 1999, and the consolidated statements of cash flows for the nine months ended June 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the aforementioned financial statements for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of September 30, 1999, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year then ended (not presented herein) and, in our report dated November 5, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of September 30, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP Houston, Texas August 8, 2000 3 OYO GEOSPACE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
ASSETS June 30, 2000 September 30, 1999 ------------- ------------------ (unaudited) Current assets: Cash and cash equivalents.................................... $ 3,830 $ 5,280 Trade accounts and current portion of notes receivable, net.. 8,277 7,770 Inventories.................................................. 21,311 21,941 Deferred income tax.......................................... 1,968 1,864 Prepaid expenses and other................................... 1,240 1,394 ------- ------- Total current assets...................................... 36,626 38,249 Rental equipment, net.......................................... 1,918 1,654 Property, plant and equipment, net............................. 18,316 17,060 Goodwill and other intangible assets, net...................... 5,319 5,598 Deferred income tax............................................ 723 729 Other assets................................................... 162 129 ------- ------- Total assets.............................................. $63,064 $63,419 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term debt....... $ 194 $ 169 Accounts payable............................................. 3,454 2,792 Accrued expenses and other................................... 2,649 2,630 Income tax payable........................................... 191 319 ------- ------- Total current liabilities................................. 6,488 5,910 Long-term debt................................................. 4,035 4,182 Deferred income tax............................................ 1,587 1,929 ------- ------- Total liabilities......................................... 12,110 12,021 ------- ------- Stockholders' equity: Preferred stock.............................................. - - Common stock................................................. 55 55 Additional paid-in capital................................... 30,004 29,914 Retained earnings............................................ 22,272 23,066 Accumulated other comprehensive loss......................... (584) (456) Unearned compensation-restricted stock awards................ (793) (1,181) ------- ------- Total stockholders' equity................................ 50,954 51,398 ------- ------- Total liabilities and stockholders' equity................ $63,064 $63,419 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 4 OYO GEOSPACE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited)
Three Months Ended Nine Months Ended ----------------------------- ----------------------------- June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 ------------- ------------- ------------- ------------- Sales.......................................... $ 12,935 $ 9,564 $ 40,693 $ 32,773 Cost of sales.................................. 10,850 5,773 29,838 19,317 ---------- ---------- ---------- ---------- Gross profit................................... 2,085 3,791 10,855 13,456 Operating expenses: Selling, general and administrative.......... 2,741 2,252 7,496 7,770 Research and development..................... 1,627 1,401 4,568 4,627 ---------- ---------- ---------- ---------- Total operating expenses.................. 4,368 3,653 12,064 12,397 ---------- ---------- ---------- ---------- Income (loss) from operations.................. (2,283) 138 (1,209) 1,059 Other income (expense): Interest expense............................. (96) (97) (250) (258) Interest income.............................. 48 35 228 134 Other, net................................... (92) (41) (36) (75) ---------- ---------- ---------- ---------- Total other income (expense), net......... (140) (103) (58) (199) ---------- ---------- ---------- ---------- Income (loss) before income taxes.............. (2,423) 35 (1,267) 860 Income tax expense (benefit)................... (801) (168) (473) 120 ---------- ---------- ---------- ---------- Net income (loss).............................. $ (1,622) $ 203 $ (794) $ 740 ========== ========== ========== ========== Basic earnings (loss) per share................ $ (0.30) $ 0.04 $ (0.15) $ 0.14 ========== ========== ========== ========== Diluted earnings (loss) per share.............. $ (0.30) $ 0.04 $ (0.15) $ 0.14 ========== ========== ========== ========== Weighted average shares outstanding - Basic 5,440,791 5,402,642 5,427,793 5,377,929 Weighted average shares outstanding - Diluted 5,440,791 5,468,062 5,427,793 5,441,141
The accompanying notes are an integral part of the consolidated financial statements. 5 OYO GEOSPACE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine Months Nine Months Ended Ended June 30, 2000 June 30, 1999 ------------- ------------- Cash flows from operating expenses: Net income (loss).......................................... $ (794) $ 740 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Deferred income tax...................................... (443) 37 Depreciation and amortization............................ 2,668 2,778 Amortization of restricted stock awards.................. 381 387 Bad debt expense......................................... 271 642 Effects of changes in operating assets and liabilities: Trade accounts and notes receivable...................... (778) 3,373 Inventories.............................................. 630 (856) Prepaid expenses and other assets........................ 154 (311) Accounts payable......................................... 660 (5,081) Accrued expenses and other............................... 519 (3,084) Income tax payable....................................... (128) (122) ------- ------- Net cash provided by (used in) operating activities.... 3,140 (1,497) ------- ------- Cash flows from investing activities: Capital expenditures....................................... (4,394) (3,049) Purchase of business, net of cash acquired................. - (1,259) Proceeds from sale of equipment............................ 54 753 ------- ------- Net cash used in investing activities.................. (4,340) (3,555) ------- ------- Cash flows from financing activities: Increase in notes payable.................................. - 9,500 Principal payments on notes payable........................ (122) (7,577) ------- ------- Net cash provided by (used in) financing activities.... (122) 1,923 ------- ------- Effect of exchange rate changes on cash..................... (128) 27 ------- ------- Decrease in cash and cash equivalents....................... (1,450) (3,102) Cash and cash equivalents, beginning of period.............. 5,280 3,970 ------- ------- Cash and cash equivalents, end of period.................... $ 3,830 $ 868 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 6 OYO GEOSPACE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The consolidated balance sheet of OYO Geospace Corporation and its subsidiaries (the "Company") at September 30, 1999, has been derived from the Company's audited consolidated financial statements at that date. The consolidated balance sheet at June 30, 2000, and the consolidated statements of operations for the three months and nine months ended June 30, 2000 and 1999, and the consolidated statements of cash flows for the nine months ended June 30, 2000 and 1999, have been prepared by the Company, without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows have been made. The results of operations for the three months and nine months ended June 30, 2000, are not necessarily indicative of the operating results for a full year or of future operations. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended September 30, 1999. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information as of June 30, 2000 and for the three months and nine months then ended, because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act. 2. Earnings Per Common Share The following table summarizes the calculation of net earnings and weighted average common shares and common equivalent shares outstanding for purposes of the computation of earnings per share:
Three Months Ended Nine Months Ended ----------------------------- ----------------------------- June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 ------------- ------------- ------------- ------------- Net earnings (loss) available to common stockholders (in thousands) $ (1,622) $ 203 $ (794) $ 740 ========== ========== ========== ========== Weighted average common shares outstanding 5,440,791 5,402,642 5,427,793 5,377,929 Weighted average common share equivalents outstanding - 65,420 - 63,212 ---------- ---------- ---------- ---------- Weighted average common shares and common share equivalents outstanding 5,440,791 5,468,062 5,427,793 5,441,141 ========== ========== ========== ========== Basic earnings (loss) per common share $ (0.30) $ 0.04 $ (0.15) $ 0.14 ========== ========== ========== ========== Diluted earnings (loss) per common share $ (0.30) $ 0.04 $ (0.15) $ 0.14 ========== ========== ========== ==========
3. Comprehensive Income Comprehensive income includes all changes in stockholders' equity, except those resulting from investments by and distributions to owners. The following table summarizes the components of comprehensive income (in thousands): 7 OYO GEOSPACE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Three Months Ended Nine Months Ended ----------------------------- ----------------------------- June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 ------------- ------------- ------------- ------------- Net income (loss) $(1,622) $203 $(794) $740 Foreign currency translation adjustments (129) 43 (128) (13) ------- ---- ----- ---- Total comprehensive income (loss) $(1,751) $246 $(922) $727 ======= ==== ===== ====
4. Inventories Inventories consisted of the following (in thousands): June 30, 2000 September 30, 1999 ------------- ------------------ Finished goods $ 2,870 $ 3,070 Work in process 2,880 2,639 Raw materials 15,561 16,232 ------- ------- $21,311 $21,941 ======= ======= 5. Segment and Geographic Information The Company manages its business and makes decisions with respect to the deployment of resources on a single consolidated product-line basis. The Company has one reportable segment comprised of operations in the United States, Canada and the United Kingdom. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following analysis of the financial condition and results of operations of OYO Geospace Corporation should be read in conjunction with the Consolidated Financial Statements and Notes related thereto included elsewhere in this Form 10-Q. Industry Overview We design and manufacture instruments and equipment used in the acquisition and processing of seismic data and the commercial graphics industry. We have been in the seismic instrument and equipment business since 1980, marketing our products primarily to the oil and gas industry worldwide. Geoscientists use seismic data to map potential or existing oil and gas bearing formations and the geologic structures that surround them. Seismic data is used primarily in connection with the exploration, development and production of oil and gas. Seismic data acquisition is conducted on land in several stages. First, an energy source imparts seismic waves into the earth, reflections of which are received and measured by geophones and hydrophones. Electrical signals generated by the geophones and hydrophones are then transmitted through leader wire, geophone and hydrophone string connectors and telemetric cable to data collection units, which store information for processing and analysis. Seismic thermal imaging products are output devices used in the field or office to create a graphic representation of the seismic data after it has been acquired. Marine seismic data acquisition is conducted primarily by large ocean-going vessels that tow long seismic cables known as "streamers". Usually, the energy source in marine seismic data acquisition is an airgun, and the reflected seismic waves are received and measured by hydrophones, which are attached to the streamers. The streamers then transmit the electrical impulses back to the vessel via telemetric cable included within the streamers, and the seismic data is then processed in much the same manner as it is on land. The seismic data acquisition industry suffered a substantial downturn in fiscal 1999, which adversely impacted our operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Demand for Our Products is Volatile; Industry Conditions Currently are Uncertain; Pricing Pressures May Continue". Results of Operations The following table sets forth for the three and nine months ended June 30, 2000 and 1999, the percentage of certain statement of operations items to total sales:
Three Months Ended June 30, Nine Months Ended June 30, ----------------------------- ---------------------------- 2000 1999 2000 1999 -------- ------- ------- ------- Sales 100.0% 100.0% 100.0% 100.0% Cost of sales 83.9% 60.4% 73.3% 58.9% Gross profit 16.1% 39.6% 26.7% 41.1% Selling, general and administrative 21.1% 23.5% 18.5% 23.8% Research and development 12.6% 14.7% 11.2% 14.1% Income (loss) from operations (17.6)% 1.4% (3.0)% 3.2% Other income (expense), net (1.1)% (1.0)% (0.2)% (0.6)% Income (loss) before provision for income taxes (18.7)% 0.4% (3.2)% 2.6% Income tax expense (benefit) (6.2)% (1.7)% (1.2)% 0.3% Net income (loss) (12.5)% 2.1% (2.0)% 2.3%
9 Fiscal Year 2000 Compared to Fiscal Year 1999. Sales for the three months and nine months ended June 30, 2000 increased $3.4 million, or 35.2%, and $7.9 million, or 24.2%, respectively, from the corresponding periods of the prior fiscal year. Our sales increased primarily because of an increase in demand for our land-based seismic products for the Canadian and Middle Eastern marketplaces. This sales increase was partially offset by a decline in sales of our marine-based seismic products as a result of the oversupply of deepwater seismic vessels. Cost of sales for the three months and nine months ended June 30, 2000 increased $5.1 million, or 87.9%, and $10.5 million, or 54.5%, respectively, from the corresponding periods of the prior fiscal year. Cost of sales increased as a percentage of total sales to 83.9% and 73.3% in the three months and nine months ended June 30, 2000, respectively, from 60.4% and 58.9% in the corresponding periods of the prior fiscal year. Several factors have contributed to the decline in our gross profit margin since the prior year periods. First, the sales mix of our products contains significantly more sales of land-based seismic products which continue to experience competitive pricing pressures despite a recent increase in demand. As a result of these pricing pressures, in recent months we made a highly competitive bid on a large equipment order. As expected, the revenues from the resulting order absorbed fixed overhead costs which otherwise would have been unabsorbed, however, our direct labor costs exceeded those anticipated for filling the order. We expect competitive pressures to continue throughout the remainder of this fiscal year. Second, the sales mix contains fewer sales of marine-based products due to the factors referred to above. Sales of our marine products have historically had the highest gross profit margins. Finally, a number of other factors contributed to the decline in our gross profit margin including currency fluctuations resulting in increased cost of foreign-purchased materials, increased warranty expenses associated with our thermal imaging products and increased inventory obsolescence costs associated with the introduction of a new reservoir characterization acquisition system. Selling, general and administrative expenses for the three months ended June 30, 2000 increased $0.5 million, or 21.7%, from the corresponding period of the prior fiscal year and for the nine months ended June 30, 2000 decreased $0.3 million, or 3.5%, from the corresponding period of the prior fiscal year. These increases and decreases are primarily the result of periodic fluctuations in our bad debt expenses. Selling, general and administrative expenses decreased as a percentage of total sales to 21.1% and 18.5% in the three months and nine months ended June 30, 2000, respectively, from 23.5% and 23.8% in the corresponding periods of the prior fiscal year, primarily reflecting higher sales volume. Research and development expenses for the three months ended June 30, 2000 increased $0.2 million, or 16.1%, and for the nine months ended June 30, 2000 decreased $0.1 million, or 1.3%, from the corresponding periods of the prior fiscal year. Research and development expenses decreased as a percentage of total sales to 12.6% and 11.2% in the three months and nine months ended June 30, 2000, respectively, from 14.7% and 14.1% in the corresponding periods of the prior fiscal year, reflecting higher sales volume. Our effective tax rate for the three months ended June 30, 2000 was a benefit of 33.1% compared to a benefit of 480.0% for the three months ended June 30, 1999. The effective tax rate for the nine months ended June 30, 2000 was a benefit of 37.3% compared to a tax provision of 14.0% for the corresponding period of the prior fiscal year. The tax rates for the prior year periods ended June 30, 1999 include the impact of $0.2 million nonrecurring tax benefit relating to the utilization of tax credits and other attributes from prior years. Excluding the tax benefit, the effective tax rates for each of the periods ended June 30, 1999 would have been 35.0%. Liquidity and Capital Resources At June 30, 2000, we had $3.8 million in cash and cash equivalents. For the nine months ended June 30, 2000, we generated $3.1 million of cash from operating activities, principally resulting from our net loss adjusted for noncash expenses and changes in working capital. For the nine months ended June 30, 2000, we used approximately $4.3 million of cash in investing activities, principally consisting of capital expenditures. We estimate that total capital expenditures in fiscal 2000 will be approximately $6.0 million. 10 For the nine months ended June 30, 2000, we used $0.1 million of cash in financing activities resulting from principal payments on long-term mortgage notes payable. We have a working capital line of credit, under which we are able to borrow up to $10.0 million secured by our accounts receivable and inventory. The credit facility expires in October 2001. Our credit facility prohibits us from paying cash dividends on our common stock, limits our capital expenditures, limits our additional indebtedness to $7.5 million, requires us to maintain certain financial ratios and contains other customary covenants. There were no borrowings under our line of credit at June 30, 2000. The recent operating loss we experienced in the third quarter resulted in a reduction in our borrowing availability. Among the financial ratios required by our credit facility is the Ratio of Funded Debt to EBITDA. In order for us to maintain compliance with this ratio, our borrowing availability under the credit facility at June 30, 2000 is limited to $1.5 million. We are currently in discussions with our lender to extend our borrowing availability under the credit facility. We believe that the combination of existing cash reserves, cash flows from operations and borrowing availability under our credit facility should provide us with sufficient capital resources and liquidity to fund our planned operations through fiscal 2000. We also believe we will be successful in either extending our borrowing availability with our current lender or securing adequate financing elsewhere to fund our future operating needs. However, there can be no assurance that we will be able to obtain such additional borrowings or that such sources of capital will be sufficient to support our capital requirements in the long-term, and we may be required to issue additional debt or equity securities in the future to meet our capital requirements. Forward Looking Statements This Form 10-Q includes "forward-looking" statements which are subject to the "safe harbor" provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included herein, including statements about potential future products and markets, our future financial position, business strategy and other plans and objectives for future operations, are forward- looking statements. Although we believe the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct, and actual results may differ materially from such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations are disclosed below and in our Annual Report on Form 10-K for the year ended September 30, 1999 under the headings "Forward-Looking Statements" and "Risk Factors". Further, all written and verbal forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors. Demand for Our Products is Volatile; Industry Conditions Currently are Uncertain; Pricing Pressures May Continue In fiscal 1999 rapid declines in oil prices forced most major oil companies to significantly reduce their exploration budgets, which in turn, caused most seismic contractors (our primary customers) to significantly reduce the number of operational crews performing seismic related activities. This crew reduction resulted in large amounts of under utilized or idle seismic equipment in the marketplace. Although oil and gas prices have recovered substantially from their lows of last year, the industry has continued to be cautious in its capital spending on exploration activities. Moreover, the surplus of equipment in the industry and the time required to reassemble qualified crews has slowed recovery of the land-based seismic markets, resulting in a discount-driven pricing environment. Excess capacity with our marine customers has also adversely affected our business. The oversupply of deepwater marine seismic vessels, coupled with the pending merger of Western Geophysical and Geco Prakla, has resulted in reduced or delayed capital spending in the marine sector. Until the number of operational seismic crews increases significantly and until idle seismic equipment is again utilized, we believe our seismic equipment sales may remain at depressed levels. Further, if oil and gas prices return to lower levels, our sales may further decline. 11 The recent industry environment has resulted in, and may continue to result in, competitive pricing pressures on our land-based seismic products. In addition, certain of our competitors are based outside the United States. As the strength of the U.S. dollar increases against certain foreign currencies, our ability to bid competitively against certain foreign competitors is adversely affected. We intend to respond competitively to these market forces in order to maintain, or improve, our market share. These pricing pressures may continue to adversely impact our profitability. In addition, the recent industry environment has resulted in, and may continue to result in, a greater percentage of our sales being attributable to certain consumable land-based seismic products that historically have provided lower gross profit margins. Further, if overall sales decrease, our manufacturing costs per unit increase as fixed costs are allocated over fewer units. The combination of these factors may result in lower gross profit margins in future periods. We Are Subject to Currency Fluctuations for Purchased Materials A Japanese manufacturer unaffiliated with us is currently the only supplier of wide format printheads that we use in our wide format thermal plotters. We pay for the printheads in Japanese yen. Accordingly, we are at risk that, due to currency fluctuations, the cost of the printheads to us could increase. Our practice is not to hedge these foreign currency exposures unless we are bound by a firm commitment. Our Customer Financing Results in Credit Risks to Us We have found it necessary from time to time to extend long term trade credit to our customers through accounts and notes receivable. As a result, we are subject to the credit risks of nonpayment or late payment. Given current industry conditions, some of our customers may experience liquidity difficulties, which increases those credit risks. We cannot assure you that sufficient aggregate amounts of uncollectible receivables and bad debt charges will not have a material adverse effect on our future results of operations. At June 30, 2000, our bad debt allowance was $0.7 million. We systematically adjust this allowance each month to reflect the estimated credit risk associated with our trade accounts and notes receivable. We base this adjustment on the level of past due accounts and notes receivable, customer creditworthiness, past payment history, access to underlying collateral and other factors. Although we believe this allowance is a fair representation of the credit risk with respect to our outstanding receivables, we can not assure you that this allowance will be adequate to cover every potential bad debt exposure. 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed with this Quarterly Report. 15.1 Awareness Letter of Independent Accountants 27.1 Financial Data Schedule (b) The Company did not file any reports on Form 8-K during the quarter for which this report is filed. 13 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. OYO GEOSPACE CORPORATION Date: August 8, 2000 By: /s/ Gary D. Owens ---------------------------- Gary D. Owens, Chairman of the Board President and Chief Executive Officer (duly authorized officer) Date: August 8, 2000 By: /s/ Thomas T. McEntire ----------------------------- Thomas T. McEntire Chief Financial Officer (principal financial officer) 14 EX-15.1 2 0002.txt AWARENESS LETTER OF IND. ACCTS. EXHIBIT 15.1 AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS ------------------------------------------- Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: OYO Geospace Corporation Registration on Form S-8 We are aware that our report dated August 8, 2000, on our review of interim financial information of OYO Geospace Corporation as of June 30, 2000 and for the three months and nine months ended June 30, 2000 and 1999, and included in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2000, is incorporated by reference in the Company's registration statements on Form S- 8 (333-40893 and 333-80003). Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statement prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ PricewaterhouseCoopers LLP Houston, Texas August 8, 2000 EX-27.1 3 0003.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-30-2000 SEP-30-1999 JUN-30-2000 3,830 0 8,952 675 21,311 36,626 32,786 12,552 63,064 6,488 4,035 0 0 55 50,899 63,064 40,693 40,693 29,838 12,064 0 271 250 (1,267) 473 (794) 0 0 0 (794) (0.15) (0.15)
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