UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 21, 2019
GEOSPACE TECHNOLOGIES CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Texas | 001-13601 | 76-0447780 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
7007 Pinemont, Houston, Texas |
77040 | |||
(Address of Principal Executive Offices) | (Zip Code) |
Registrants Telephone Number, Including Area Code: (713) 986-4444
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Common Stock | GEOS | The NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On November 21, 2019, the Company issued a press release regarding operating results for its fourth quarter and fiscal year 2019. The press release is attached as Exhibit 99.1. The foregoing description of the press release is qualified by reference to such exhibit.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 21, 2019, Thomas T. McEntire notified Geospace Technologies Corporation (the Company) of his intention to retire and resign from his position as Vice President and Chief Financial Officer of the Company, to be effective December 31, 2019. In connection with his retirement, Mr. McEntire and the Company have entered into a consulting agreement (the Consulting Agreement).
Under the terms of the Consulting Agreement Mr. McEntire will provide consulting services to the Company following his December 31, 2019 retirement date from January 1, 2020 until December 31, 2020 and renewing automatically for subsequent one year terms thereafter (the Term), unless either party provides written notice of its intent to terminate the Consulting Agreement at least 30 days prior to the expiration of the then current Term. Pursuant to the Consulting Agreement, Mr. McEntire will receive $250.00 per hour during which he is engaged in providing services to the Company. Additionally, certain restricted stock and restricted stock unit awards that were previously granted to Mr. McEntire shall continue to vest during the Term. The foregoing summary of the key terms of the Consulting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the complete text of the Consulting Agreement, a copy of which is attached as Exhibit 10.1 hereto.
On November 21, 2019, the Companys Board of Directors appointed Robert L. Curda, age 46, as Vice President and Chief Financial Officer of the Company effective January 1, 2020. Mr Curda has served as the Companys Operational Controller since 2005. The Compensation Committee and the Board of Directors have determined to increase the base salary of Mr. Curda from $141,000 to $225,000, effective December 1, 2019, in connection with his new appointment.
There are no arrangements or understandings between Mr. Curda and any other persons pursuant to which Mr. Curda was named Vice President and Chief Financial Officer of the Company. There are no family relationships, as defined in Item 401 of Regulation S-K, between Mr. Curda and any director or executive officer of the Company, and there are no transactions between Mr. Curda and the Company that would be reportable under Item 404(a) of Regulation S-K.
Item 9.01. Financial Statements and Exhibits
Exhibit 10.1* |
Consulting Agreement dated November 21, 2019 between Geospace Technologies Corporation, and Thomas T. McEntire. | |
Exhibit 99.1** |
Press Release dated November 21, 2019. |
* | Filed herewith. |
** | Furnished herewith. |
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.
GEOSPACE TECHNOLOGIES CORPORATION | ||
Date: November 22, 2019 | ||
By: /s/ Thomas T. McEntire | ||
| ||
Thomas T. McEntire | ||
Vice President, Chief Financial Officer & Secretary |
Exhibit 10.1
CONSULTING AGREEMENT
This Consulting Agreement (this Agreement) is executed as of November 21, 2019, between Geospace Technologies Corporation (the Company) and Thomas T. McEntire (Consultant). The Company and Consultant are sometimes referred to herein individually as a party and collectively as the parties.
WHEREAS, Consultant plans to end his full-time employment with the Company as of December 31, 2019;
WHEREAS, the Company desires to retain Consultant as an independent contractor to be beginning as of January 1, 2020 (the Effective Date) to provide certain services in accordance with the terms and conditions contained in this Agreement; and
WHEREAS, Consultant wishes to render such services in accordance with the terms and conditions contained in this Agreement.
NOW, THEREFORE, for valuable consideration given and received, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound, do hereby agree as follows:
I. | INDEPENDENT CONTRACTOR STATUS |
Section 1.1 Independent Contractor Status and Purpose. The Company hereby retains Consultant to provide the services set forth in Exhibit A hereto during the Term (defined below). Consultant shall perform such services for the Company as an independent contractor and not as an agent, employee, joint venturer, partner, or other position. Consultant shall not have the authority to bind the Company in any way.
Section 1.2 No Provision of Facilities and Equipment. Consultant shall provide at his own expense his office or place of business, any necessary equipment (including, without limitation, computers, printers, and fax machines), office supplies, and other miscellaneous materials; provided that the Company may, in its sole discretion, permit Consultant to use the Companys computer equipment, computer systems, and an assigned office at the Companys premises.
II. | TERM; TERMINATION |
Section 2.1 Term. This Agreement shall commence on the Effective Date and shall continue for one year, renewing automatically for subsequent one year terms thereafter (the Term), unless either party provides written notice to the other of its intent to terminate this Agreement not less than 30 days before the end of the then current Term.
Section 2.2 Termination. Notwithstanding the foregoing, the Company shall have the right to immediately terminate this Agreement for cause or discontinue any payments hereunder if Consultant breaches any provision of this Agreement, including Exhibit A and Exhibit B and any amendments thereto.
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III. | PAYMENT FOR SERVICES |
Section 3.1 Payment. The Company shall pay Consultant for services rendered as described herein in accordance with Exhibit A to this Agreement.
Section 3.2 No Required Expense Reimbursement. The Company is not required to compensate Consultant for any expenses unless jointly agreed by the parties in writing. If the Company does agree to reimburse Consultant for a specific expense, then this expense must be reasonable and subject to the same expense reimbursement policies to which employees of the Company are subject.
Section 3.3 No Benefits. Except as otherwise provided in Section 4.1 with respect to previously granted and unvested awards under the Plan, Consultant shall not be entitled to participate in any insurance or other benefit programs which may be applicable to employees of the Company. The Company is not providing to Consultant any health insurance, workers compensation insurance, unemployment insurance, retirement plans, or any other benefits.
Section 3.4 No Vacation; Sick Leave. The Company shall not pay Consultant for any vacations, sick leave, or other leave.
IV. | TREATMENT OF OUTSTANDING EQUITY AWARDS. |
Section 4.1 Continued Vesting of Outstanding Equity Awards. For purposes of the restricted stock and restricted stock unit awards set forth in Exhibit B hereto (the Equity Awards) that were previously granted to Consultant under the Geospace Technologies Corporation 2014 Long Term Incentive Plan (the Plan), the Company agrees to treat Consultants service under this Agreement as a continuation of his employment relationship with the Company and, as a result, the Company has agreed that Consultant will not incur a Termination of Employment (as that term is defined in the Plan) under the Plan and the Equity Awards during the period he provides services under this Agreement and that his service under this Agreement will be treated as service with the Company for purposes of vesting of Consultants rights under the Equity Awards.
V. | CONSULTANT OBLIGATIONS |
Section 5.1 Taxes. For any payments received by Consultant under this Agreement, Consultant acknowledges that he is responsible for all applicable city, state, federal, and other taxes as required pursuant to any law or governmental regulation or ruling. Consultant acknowledges that the Company is not withholding any taxes from the payments made to Consultant under this Agreement. The Company shall report all compensation paid to Consultant hereunder on an IRS Form 1099-Misc. For the avoidance of doubt, Consultant and the Company acknowledge and agree that all payments under the Equity Awards will be treated as compensation paid to an employee and the Company will withhold all applicable taxes as contemplated in the Equity Awards.
VI. | UNAUTHORIZED DISCLOSURE |
Section 6.1 Unauthorized Disclosure. Consultant agrees and understands that during the duration of this Agreement and Consultants history with the Company, Consultant has been and will be exposed to and has and will receive information relating to the confidential affairs of the Company and its affiliates, including, without limitation, technical information, intellectual property, business and marketing plans, strategies, customer information, software, other information concerning the products, promotions, development, financing, expansion plans, business policies and practices of the Company and its affiliates and other forms of information considered by the Company and its affiliates to be
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confidential or in the nature of trade secrets (including, without limitation, ideas, research and development, know-how, formulas, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals) (collectively, the Confidential Information). Consultant agrees that at all times during the duration of this Agreement, Consultant shall not disclose such Confidential Information, either directly or indirectly, to any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof (each, a Person) other than in connection with his provision of consulting services to the Company without the prior written consent of the Company and shall not use or attempt to use any such information in any manner other than in connection with his provision of consulting services to the Company, unless required by law to disclose such information, in which case Consultant shall provide the Company with written notice of such requirement as far in advance of such anticipated disclosure as possible. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of this Agreement, to the extent requested by the Company, Consultant shall promptly supply to the Company all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data and any other tangible product or document which has been produced by, received by or otherwise submitted to Consultant during the duration of this Agreement, and any copies thereof in his (or capable of being reduced to his) possession; provided, however, that Consultant may retain his full rolodex or similar address and telephone directories.
VIII. | MISCELLANEOUS |
Section 8.1 Applicable Law, Jurisdiction and Mandatory Forum. This Agreement is entered into under, shall be construed and enforced in accordance with, and the rights and obligations of the parties shall be governed for all purposes by, the laws of the State of Texas, without giving effect to the conflicts of law principles thereof, and venue shall be fixed solely and exclusively in Harris County, Texas.
Section 8.2 Successors/Assignment. Consultant acknowledges and agrees that this Agreement shall be binding upon Consultant and inure to the benefit of the Company. This Agreement is personal to Consultant, who shall not be entitled to assign, transfer, or charge any of its rights or obligations under this Agreement, or sub-contract or otherwise delegate any of its rights or obligations to any third party without the written consent of the Company.
Section 8.3 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by e-mail transmission (with evidence of transmission from the sender) or by registered or certified mail (postage prepaid, return receipt requested). Actual notice is sufficient to be notice hereunder. Such communications must be sent to the respective parties at the following addresses:
If to the Company to: |
Geospace Technologies Corporation | |
7007 Pinemont Drive | ||
Houston, Texas 77040 | ||
Attn: CEO | ||
E-mail: rwheeler@geospace.com | ||
If to Consultant to: |
The address set forth under Consultants name | |
on the signature page hereto |
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Any party hereto may change its address for the purpose of receiving notices, demands, and other communications as herein provided by a written notice given in the manner aforesaid to the other party hereto.
Section 8.4 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall (i) be deemed a waiver or similar or dissimilar provisions or conditions at the same or at any prior or subsequent time, or (ii) preclude insistence upon strict compliance in the future.
Section 8.5 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then, the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
Section 8.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement.
Section 8.7 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
Section 8.8 Affiliate. As used in this Agreement, affiliate shall mean any Person which directly or indirectly through one or more intermediaries owns or controls, is owned or controlled by, or is under common ownership or control with, the Company.
Section 8.9 Termination. Except as otherwise provided in this Agreement, termination of this Agreement pursuant to the provisions of Article II hereof shall not affect any right or obligation of either party hereto which is accrued or vested prior to or upon such termination or the rights and obligations set forth in Articles VI and VII hereof.
Section 8.10 Interpretations. For purposes of this Agreement, (a) the words include, includes and including shall be deemed to be followed by the words without limitation; (b) the word or is not exclusive; (c) the word days means calendar days; (d) the words herein, hereof, hereby, hereto and hereunder refer to this Agreement as a whole; (e) the word any means any and all; (f) references to any gender shall include each other gender as the context requires; (g) references to the Company are also to its permitted successors and assigns; and (f) all italics are used for emphasis only. Unless the context otherwise requires, any reference herein: (x) to Exhibit A means Exhibit A to this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. Exhibit A referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if it were set forth verbatim herein.
Section 8.11 Entire Agreement. This Agreement and the documents contemplated herein constitutes the entire agreement of the parties with respect to the subject of this Agreement.
Section 8.12 Modifications. No modifications of this Agreement shall be effective unless in writing signed by both parties hereto.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.
CONSULTANT | ||
/s/ Thomas T. McEntire | ||
Thomas T. McEntire | ||
Address for Notice: | ||
15111 Claycreste Ct. | ||
Cypress, TX 77429 | ||
E-mail: ####### | ||
GEOSPACE TECHNOLOGIES CORPORATION | ||
By: | /s/ Walter R. Wheeler | |
Name: | Walter R. Wheeler | |
Title: | President & Chief Executive Officer |
[Signature Page to Consulting Agreement]
EXHIBIT A
SCOPE OF SERVICES AND COMPENSATION
1. Scope of Services. Consultants services shall include, but are not limited to, staying abreast of the Companys affairs, reviewing the Companys filings with the U.S. Securities and Exchange Commission (SEC), reviewing monthly reports, and making himself available to meet with the Company if necessary. Consultant shall provide such other consulting services to the Company on an as requested basis.
2. Compensation. In consideration of Consultant providing the services to the Company as outlined herein, the Company agrees to pay Consultant a fee equal to $250.00 per hour during which Consultant is engaged in providing the services. Consultant shall prepare and submit invoices each month showing in reasonable detail any services performed and time spent on such services under this Agreement. Payment of such invoices shall be due thirty days after receipt by the Company.
[Exhibit A to Consulting Agreement]
EXHIBIT B
LIST OF UNVESTED EQUITY AWARDS
1. | Employee Restricted Stock Unit Award Agreement effective as of November 27, 2018 (time vested) |
2. | Employee Restricted Stock Unit Award Agreement effective as of November 27, 2018 (performance vested) |
3. | Award of Restricted Stock effective as of November 16, 2017 |
4. | Award of Restricted Stock effective as of November 16, 2016 |
[Exhibit B to Consulting Agreement]
Exhibit 99.1
NEWS RELEASE
7007 Pinemont Drive
Houston, TX 77040 USA
Contact: Rick Wheeler
President and CEO
TEL: 713.986.4444
FAX: 713.986.4445
FOR IMMEDIATE RELEASE
GEOSPACE TECHNOLOGIES REPORTS FOURTH QUARTER AND
FISCAL YEAR 2019 RESULTS
Houston, Texas November 21, 2019 Geospace Technologies (NASDAQ: GEOS) today announced that revenue for the year ended September 30, 2019 increased by 26% to $95.8 million compared to revenue of $75.7 million for the comparable year ago period. Net loss for the year ended September 30, 2019 narrowed to $146,000, or $(0.01) per diluted share compared to a net loss of $19.2 million, or ($1.45) per diluted share for the comparable year-ago period.
For the fourth quarter ended September 30, 2019, the company reported revenue of $28.9 million, an increase of approximately 40%, compared to revenue of $20.6 million for the comparable year-ago period. For the year ended September 30, 2019, the company reported net income of $8.7 million, or $0.63 per diluted share compared to a net loss of $0.2 million, or ($0.02) per diluted share for the prior year.
The company noted that both the 2019 fiscal year and the fourth quarter periods benefited from (i) a $7.0 million gain on the sale of non-essential real estate and (ii) a $2.1 million net reduction to the fair value of contingent consideration related to the acquisitions of Quantum and OptoSeis®. Excluding these favorable adjustments, the fiscal year 2019 net loss was $9.3 million, or $(0.70) per diluted share, and the 2019 fourth quarter net loss was $0.5 million, or $(0.04) per diluted share. The company also noted the 2018 fiscal year fourth quarter benefited from the reversal of a $2.3 million bad debt previously recorded in the 2018 third quarter.
Walter R. (Rick) Wheeler, President and CEO of Geospace Technologies said, Increasing demand for our companys rental equipment fueled fourth quarter and year-end results. Fiscal fourth quarter revenue surged by approximately 40% to $28.9 million , and together with gross profit of $10.4 million, reflect the highest quarterly figures in more than five years. Total revenue for the year ended September 30, 2019 increased by 26% to $95.8 million, while gross profit nearly tripled to $31.4 million. We attribute the higher revenue and improved results to additional gross profit realized from our growing rental equipment business. On a pro forma basis to exclude the favorable adjustments noted above, our 2019 fiscal year and fourth quarter losses declined by 52% and 80%, respectively, compared to the similar prior year periods.
Oil and Gas Markets Segment
Revenue from the oil and gas markets segment totaled $20.8 million for the three months ended September 30, 2019. For the full fiscal year, revenue from this segment was $65.0 million. This reflects respective increases of 57% and 45% over the equivalent three- and twelve-month periods a year ago. In both periods, higher revenue was the direct result of increased rentals of the companys OBX marine nodal recording systems. At September 30, 2019, the company had approximately 31,000 OBX stations in its rental fleet, most of which are actively utilized on performing rental contracts with multiple seismic contractors. Ongoing discussions with new and existing customers regarding future rental contracts and extensions to current rental contracts for OBX stations are carefully considered by management when evaluating needs to further expand the companys OBX rental fleet to satisfy anticipated growth in demand.
Revenue from the companys traditional seismic products in the fourth fiscal quarter ended September 30, 2019 totaled $0.6 million, a decrease of 82% from last years fourth quarter and a historic low for this product segment. For the full fiscal year, revenue from these products totaled $9.5 million, a decrease of 26% compared to last year. Reductions in both periods are primarily attributed to lower demand for the companys seismic sensors but were partially offset for the year-long period by increased marine product revenue.
The companys wireless seismic products produced revenue of $20.0 million and $52.8 million respectively for the fourth quarter and full fiscal year ended September 30, 2019. These amounts reflect respective increases of 106% and 94% over the comparative periods last year. The large increases for both periods are the result of substantial growth in rental revenue from the companys OBX ocean bottom marine nodal systems. For the full year, the increase from last year was partially offset by a reduction in revenue from the sale and rental of the companys land based GSX wireless products. The company sold 5,000 channels of its new advanced GCL land recording system in the fourth quarter of fiscal year 2019, and, after the end of the fiscal year, announced the receipt of an order from SAExploration, Inc. for a 30,000 channel GCL system, which the company expects to deliver in its second fiscal quarter ending March 31, 2020.
Revenue from the companys reservoir seismic products in the fourth quarter and full fiscal year ended September 30, 2019, totaled $252,000 and $2.7 million respectively. The respective decreases of 13% and 44% compared to the fourth quarter and full year periods a year ago are the result of lower sales and rentals of the companys borehole tools and reduced demand for support services. The company does not expect meaningful revenue from these products unless and until it is engaged in a contract for the delivery of a permanent reservoir monitoring (PRM) system. The companys PRM product offerings were extended through its acquisition of OptoSeis fiber optic sensing technology in November of 2018. Management believes its augmented PRM product line in conjunction with its prevalent leadership in PRM system design significantly enhances its opportunities for future contract awards. Although no such contracts are currently up for award, the company is in discussions with multiple oil and gas companies interested in utilizing its PRM technology. As a result of these expanded discussions, the company recorded a charge of $0.8 million in its 2019 fourth quarter to increase the fair value of the earn-out liability it expects to pay to the previous owner of the OptoSeis fiber optic sensing technology. While management believes a tender for a system is likely in the foreseeable future, it does not expect to earn any revenue, if awarded such a contract, until late in fiscal year 2020 or beyond.
Adjacent Markets Segment
Revenue from the companys adjacent markets segment totaled $8.0 million in the fourth quarter ended September 30, 2019, an increase of 17% over the same period last year. The increase was primarily due to higher sales of the companys industrial sensors and water meter cables, aided by slight increases in revenue from graphic imaging products and contract manufacturing services. For the full fiscal year, total revenue from the adjacent markets segment was $30.2 million, an increase of less than 1% compared to last year. The essentially flat year-over-year performance comprises revenue reductions from water meter cables balanced by offsetting increases from industrial sensors, with relatively unchanged revenue from other adjacent market products. Management believes the companys adjacent markets segment provides a strategic element of revenue stability amidst the commercial volatility experienced by its oil and gas market segment products. Management further believes this segment continues to exhibit overall opportunities for revenue growth despite fluctuations that may occur from one period to another.
Emerging Markets Segment
Revenue from the companys emerging markets segment totaled $14,000 in the fourth quarter and $159,000 for the full fiscal year ended September 30, 2019. Compared to the prior year, these figures reflect a decrease of 95% and 44% for the two respective time periods. The decrease in revenue is attributed to the completion of legacy contracts last year compared with no significant border and perimeter security contracts during fiscal year 2019. This market segment is comprised solely of products and services offered by Quantum, which focuses on specialty products incorporating seismic acoustic technology to monitor, protect, and secure physical borders and perimeters in both domestic and international markets. Management does not expect significant revenue contributions from Quantum in the near-term but does believe its unique technology is capable of creating meaningful future revenue opportunities from border and perimeter security system contracts. Since Quantum has not received any meaningful border and perimeter security contracts since its acquisition in July 2018, in the fourth quarter of fiscal 2019, the company reduced the fair value of its earn-out liability by $2.9 million, resulting in an offsetting $2.9 million credit/reduction to its operating expenses.
Balance Sheet and Liquidity
As of September 30, 2019, Geospace had $18.9 million in cash, cash equivalents, and short-term investments. The company also maintained a borrowing availability of $27.0 million at September 30, 2019 under its bank credit agreement with no borrowings outstanding. The company further noted that, after the end of the fiscal year, its bank credit agreement was extended two years to expire in April 2022. Thus, as of September 30, 2019, the companys total liquidity was $45.9 million. The company additionally owns unencumbered property and real estate in both domestic and international locations.
For the year ended September 30, 2019, the companys capital expenditures totaled $36.0 million. A majority of these capital investments were targeted at the companys ocean bottom OBX nodal systems. The company expects to incur capital expenditures of $11 million in fiscal year 2020, with approximately $6 million directed toward additional investments in its OBX nodal systems pending future demand.
The company noted that its trade accounts receivable at September 30, 2019 include $8.5 million from an international seismic marine customer that, as of September 30, 2019, rented a significant amount of the companys marine nodal equipment. The company has experienced cash collection difficulties with this customer throughout fiscal year 2019 due to the customers inability to generate enough cash flow to pay its obligations to the company in a timely manner. In November 2019, the company accepted a plan from the customer to bring its unpaid invoices to a satisfactory status. This plan contemplates completion during the companys second fiscal quarter ending March 31, 2020. The company has significant concerns about the ultimate collection of its accounts receivable from this customer. However, the company has not, and does not currently intend to, provide any significant bad debt reserves toward this customers outstanding accounts unless and until it becomes probable in the companys judgement that the customer is unable to pay its debts to the company.
Wheeler concluded, Notably, certain product lines within our oil and gas market segment continue to experience persistent commercial challenges, and this is highly evident for our traditional exploration and reservoir seismic product categories. In contrast, revenue from our wireless seismic products continues to strengthen, driven by an expanding list of rental contracts and global projects utilizing our ocean bottom OBX nodal systems. And while demand for our wireless GSX land products has also diminished in recent years, due to reduced onshore seismic exploration, recent orders of our GCL land wireless systems give us confidence that our advanced new technology offers the best-chosen value to our customers in this difficult market. We are also encouraged by our ongoing discussions with oil and gas companies regarding the deployment of PRM systems. Many of these plans call for timelines of two to three years and could be postponed even further depending on future capital spending budgets. However, the long-term value of PRM systems is well established, and we are glad that such dialogs are reestablished and moving forward. Meanwhile we continue pursuing our diversification strategy by expanding product lines within our adjacent markets segment and readying our border and perimeter security solutions developed through the integration of Quantum.
Retirement of Chief Financial Officer
Thomas T. McEntire, the companys Vice President and Chief Financial Officer since 1997, has announced his intention to retire on December 31, 2019. Robert L. Curda, the companys Operational Controller since 2005, will become Vice President and Chief Financial Officer and assume Mr. McEntires duties effective January 1, 2020. The company has negotiated a consulting agreement with Mr. McEntire to provide assistance to the company. Toms 22 years of service since 1997 has been invaluable to the success of the company. We wish him all the best., said Wheeler.
Conference Call Information
Geospace Technologies will host a conference call to review its fiscal year 2019 full year financial results on November 22, 2019 at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can access the call at (877) 876-9174 (US) or (785) 424-1669 (International). Please reference the conference ID: GEOSQ419 prior to the start of the conference call. A replay will be available for approximately 60 days and may be accessed through the Investor tab of our website at www.geospace.com.
About Geospace Technologies
Geospace principally designs and manufactures seismic instruments and equipment. We market our seismic products to the oil and gas industry to locate, characterize and monitor hydrocarbon-producing reservoirs. We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications. We design and manufacture other products of a non-seismic nature, including water meter products, imaging equipment and offshore cables.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as may, will, should, intend, expect, plan, budget, forecast, anticipate, believe, estimate, predict, potential, continue, evaluating or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the results and success of our transactions with Quantum and the OptoSeis® technology, the adoption and sale of our products in various geographic regions, potential tenders for PRM systems, future demand for OBX systems, the completion of new orders for our channels of our GCL system, the fulfillment of customer payment plans, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our best judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption Risk Factors and elsewhere in our most recent Annual Report on Form 10-K which is on file with the Securities and Exchange Commission, as well as other cautionary language in such Annual Report, any subsequent Quarterly Report on the Form 10-Q, or in our other periodic reports, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of the Quantum or OptoSeis® technology transactions to yield positive operating results, decreases in commodity price levels, which could reduce demand for our products, the failure of our products to achieve market acceptance, despite substantial investment by us, our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, bad debt write-offs associated with customer accounts, lack of further orders for our OBX systems, failure of our Quantum products to be adopted by the border and security perimeter market, and infringement or failure to protect intellectual property. The occurrence of the events described in these risk factors and elsewhere in our most recent Annual Report on Form 10-K or in our other periodic reports could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.
Geospace Technologies Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(unaudited)
Three Months Ended | Year Ended | |||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||
Revenue: |
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Products |
$ | 11,390 | $ | 12,852 | $ | 45,847 | $ | 53,306 | ||||||||
Rental equipment |
17,549 | 7,735 | 49,962 | 22,442 | ||||||||||||
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Total revenue |
28,938 | 20,587 | 95,809 | 75,748 | ||||||||||||
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Cost of revenue: |
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Products |
13,092 | 11,796 | 46,059 | 51,913 | ||||||||||||
Rental equipment |
5,450 | 3,527 | 18,322 | 12,863 | ||||||||||||
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Total cost of revenue |
18,541 | 15,323 | 64,381 | 64,776 | ||||||||||||
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Gross profit |
10,397 | 5,264 | 31,428 | 10,972 | ||||||||||||
Operating expenses: |
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Selling, general and administrative |
6,133 | 5,409 | 23,626 | 19,874 | ||||||||||||
Research and development |
4,180 | 2,707 | 15,495 | 10,832 | ||||||||||||
Change in estimated fair value of contingent consideration |
(2,115 | ) | | (2,115 | ) | | ||||||||||
Bad debt expense (recovery) |
(163 | ) | (2,072 | ) | 436 | 1,009 | ||||||||||
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Total operating expenses |
8,035 | 6,044 | 37,442 | 31,715 | ||||||||||||
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Gain on disposal of property |
7,047 | | 7,047 | | ||||||||||||
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Income (loss) from operations |
9,409 | (780 | ) | 1,033 | (20,743 | ) | ||||||||||
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Other income (expense): |
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Interest expense |
(14 | ) | (51 | ) | (99 | ) | (336 | ) | ||||||||
Interest income |
410 | 284 | 1,308 | 1,083 | ||||||||||||
Foreign exchange gains, net |
56 | 409 | 241 | 324 | ||||||||||||
Other, net |
(29 | ) | (32 | ) | (212 | ) | (120 | ) | ||||||||
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Total other income, net |
423 | 610 | 1,238 | 951 | ||||||||||||
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Income (loss) before income taxes |
9,832 | (170 | ) | 2,271 | (19,792 | ) | ||||||||||
Income tax expense (benefit) |
1,160 | 37 | 2,417 | (580 | ) | |||||||||||
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Net income (loss) |
$ | 8,672 | $ | (207 | ) | $ | (146 | ) | $ | (19,212 | ) | |||||
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Income (loss) per common share: |
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Basic |
$ | 0.64 | $ | (0.02 | ) | $ | (0.01 | ) | $ | (1.45 | ) | |||||
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Diluted |
$ | 0.63 | $ | (0.02 | ) | $ | (0.01 | ) | $ | (1.45 | ) | |||||
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Weighted average common shares outstanding: |
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Basic |
13,408,912 | 13,270,528 | 13,388,626 | 13,250,867 | ||||||||||||
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Diluted |
13,569,951 | 13,270,528 | 13,388,626 | 13,250,867 | ||||||||||||
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Geospace Technologies Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
(unaudited)
AS OF SEPTEMBER 30, | ||||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: |
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Cash and cash equivalents |
$ | 18,925 | $ | 11,934 | ||||
Short-term investments |
| 25,471 | ||||||
Trade accounts receivable, net of allowance of $951 and $1,453 |
24,193 | 14,323 | ||||||
Financing receivables |
3,233 | 4,258 | ||||||
Inventories |
23,855 | 18,812 | ||||||
Prepaid expenses and other current assets |
1,001 | 1,856 | ||||||
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Total current assets |
71,207 | 76,654 | ||||||
Non-current financing receivables, net of allowance of $0 and $1,849 |
184 | 4,740 | ||||||
Non-current inventories |
21,524 | 31,655 | ||||||
Rental equipment, net |
62,062 | 39,545 | ||||||
Property, plant and equipment, net |
31,474 | 33,624 | ||||||
Goodwill |
5,008 | 4,343 | ||||||
Other intangible assets, net |
10,063 | 8,006 | ||||||
Deferred income tax assets, net |
236 | 246 | ||||||
Prepaid income taxes |
64 | 54 | ||||||
Other assets |
179 | 213 | ||||||
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Total assets |
$ | 202,001 | $ | 199,080 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
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Accounts payable trade |
$ | 4,051 | $ | 4,106 | ||||
Accrued expenses and other current liabilities |
6,370 | 6,826 | ||||||
Deferred revenue |
2,724 | 3,752 | ||||||
Income tax payable |
18 | 51 | ||||||
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Total current liabilities |
13,163 | 14,735 | ||||||
Contingent consideration |
9,940 | 7,713 | ||||||
Deferred income tax liabilities |
51 | 45 | ||||||
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Total liabilities |
23,154 | 22,493 | ||||||
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Commitments and contingencies |
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Stockholders equity: |
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Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding |
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Common stock, $.01 par value, 20,000,000 shares authorized, 13,630,666 and 13,600,541 shares issued and outstanding |
136 | 136 | ||||||
Additional paid-in capital |
88,660 | 86,116 | ||||||
Retained earnings |
105,808 | 105,954 | ||||||
Accumulated other comprehensive loss |
(15,757 | ) | (15,619 | ) | ||||
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Total stockholders equity |
178,847 | 176,587 | ||||||
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Total liabilities and stockholders equity |
$ | 202,001 | $ | 199,080 | ||||
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Geospace Technologies Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
YEAR ENDED SEPTEMBER 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: |
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Net loss |
$ | (146 | ) | $ | (19,212 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Deferred income tax expense (benefit) |
16 | (18 | ) | |||||
Rental equipment depreciation |
13,713 | 10,178 | ||||||
Property, plant and equipment depreciation |
3,965 | 4,040 | ||||||
Amortization of intangible assets |
1,661 | 194 | ||||||
Impairment of long-lived assets |
| 573 | ||||||
Accretion of discounts (amortization of premiums) on short-term investments |
(9 | ) | 27 | |||||
Stock-based compensation expense |
2,329 | 2,318 | ||||||
Bad debt expense |
436 | 1,009 | ||||||
Inventory obsolescence expense |
4,614 | 4,353 | ||||||
Change in estimated fair value of contingent consideration |
(2,115 | ) | | |||||
Gross profit from sale of used rental equipment |
(652 | ) | (6,809 | ) | ||||
Gain on disposal of property |
(7,047 | ) | | |||||
Gain on disposal of equipment |
(100 | ) | (27 | ) | ||||
Realized loss on short-term investments |
66 | 11 | ||||||
Effects of changes in operating assets and liabilities: |
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Trade accounts and other receivables |
(9,159 | ) | (5,090 | ) | ||||
Income tax receivable |
| 270 | ||||||
Inventories |
(1,865 | ) | (7,824 | ) | ||||
Prepaid expenses and other current assets |
325 | 93 | ||||||
Prepaid income taxes |
18 | 55 | ||||||
Accounts payable trade |
(44 | ) | 1,333 | |||||
Accrued expenses and other |
660 | 1,011 | ||||||
Deferred revenue |
(1,016 | ) | 3,063 | |||||
Income taxes payable |
(21 | ) | 51 | |||||
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Net cash provided by (used in) operating activities |
5,629 | (10,401 | ) | |||||
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Cash flows from investing activities: |
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Purchase of property, plant and equipment |
(1,936 | ) | (1,721 | ) | ||||
Investment in rental equipment |
(34,070 | ) | (6,513 | ) | ||||
Proceeds from the sale of property |
8,265 | | ||||||
Proceeds from the sale of equipment |
142 | 202 | ||||||
Proceeds from the sale of used rental equipment |
4,856 | 9,918 | ||||||
Purchases of short-term investments |
| (17,922 | ) | |||||
Proceeds from the sale of short-term investments |
25,606 | 28,463 | ||||||
Business acquisition, net of acquired cash |
(1,819 | ) | (4,352 | ) | ||||
Payments for damages related to insurance claim |
(650 | ) | (2,353 | ) | ||||
Proceeds from insurance claim |
1,166 | 1,749 | ||||||
Increase in insurance claim receivable |
| 306 | ||||||
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Net cash provided by investing activities |
1,560 | 7,777 | ||||||
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Cash flows from financing activities: |
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Proceeds from exercise of stock options and other |
215 | 63 | ||||||
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Net cash provided by financing activities |
215 | 63 | ||||||
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Effect of exchange rate changes on cash |
(413 | ) | (597 | ) | ||||
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Increase (decrease) in cash and cash equivalents |
6,991 | (3,158 | ) | |||||
Cash and cash equivalents, beginning of fiscal year |
11,934 | 15,092 | ||||||
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Cash and cash equivalents, end of fiscal year |
$ | 18,925 | $ | 11,934 | ||||
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Geospace Technologies Corporation and Subsidiaries
Summary of Segment Revenue and Operating Income (Loss)
(in thousands)
(unaudited)
Three Months Ended | Year Ended | |||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||
Oil and Gas Markets |
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Traditional seismic exploration product revenue |
$ | 600 | $ | 3,296 | $ | 9,504 | $ | 12,855 | ||||||||
Wireless seismic exploration product revenue |
19,992 | 9,694 | 52,770 | 27,254 | ||||||||||||
Reservoir product revenue |
252 | 290 | 2,692 | 4,842 | ||||||||||||
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20,844 | 13,280 | 64,966 | 44,951 | |||||||||||||
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Adjacent Markets |
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Industrial product revenue |
5,278 | 4,291 | 18,324 | 18,352 | ||||||||||||
Imaging product revenue |
2,750 | 2,583 | 11,832 | 11,580 | ||||||||||||
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8,028 | 6,874 | 30,156 | 29,932 | |||||||||||||
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Emerging Markets |
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Border and perimeter security product revenue |
14 | 286 | 159 | 286 | ||||||||||||
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Corporate |
52 | 147 | 528 | 579 | ||||||||||||
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Total revenue |
$ | 28,938 | $ | 20,587 | $ | 95,809 | $ | 75,748 | ||||||||
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Three Months Ended | Year Ended | |||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||
Operating income (loss): |
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Oil and Gas Markets segment |
$ | 2,644 | $ | 1,482 | $ | 3,095 | $ | (14,070 | ) | |||||||
Adjacent Markets segment |
1,884 | 1,504 | 6,234 | 5,345 | ||||||||||||
Emerging Markets segment |
1,454 | (718 | ) | (2,306 | ) | (718 | ) | |||||||||
Corporate |
3,427 | (3,048 | ) | (5,990 | ) | (11,300 | ) | |||||||||
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Total operating income (loss) |
$ | 9,409 | $ | (780 | ) | $ | 1,033 | $ | (20,743 | ) | ||||||
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