-----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, A8r8ir3q9mb7cJBgu3yXQacy+Y2HYrhkVrLdpx6P4DM+Nck/lyVcJOREAdMISOiF YL3FGERQxdrLYVJguxWrXA== 0001003382-96-000005.txt : 19960629 0001003382-96-000005.hdr.sgml : 19960629 ACCESSION NUMBER: 0001003382-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3-D GEOPHYSICAL INC CENTRAL INDEX KEY: 0001003382 STANDARD INDUSTRIAL CLASSIFICATION: 1382 IRS NUMBER: 133841601 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27564 FILM NUMBER: 96567117 BUSINESS ADDRESS: STREET 1: 7076 S. ALTON WAY STREET 2: BUILDING H CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 303-290-0214 MAIL ADDRESS: STREET 1: 7076 SOUTH ALTON WAY STREET 2: BUILDING H CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1996 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 No. 0-27564 3-D GEOPHYSICAL, INC. (Exact name of Registrant as specified in its charter) Delaware 13-3841601 (State of incorporation) (I.R.S. Employer Identification No.) 7076 South Alton Way, Building H, Englewood, Colorado 80112 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (303 )290-0214 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 [ ] As of May 12, 1996, there were 7,600,000 shares of Registrant's Common Stock par value, $.01 outstanding. 3-D GEOPHYSICAL,INC. FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 INDEX PART I. Financial Information Page Item 1 Financial Statements Condensed Consolidated Balance Sheets December 31, 1995 and March 31, 1996.............................4 Condensed Consolidated Statements of Operations Three Months Ended March 31, 1995 and March 31, 1996 ............5 Condensed Consolidated Statements of Cash Flows-Three Months Ended March 31, 1995 and March 31, 1996..........................6 Notes to Condensed Consolidated Financial Statements...........7-12 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..........................13-16 PART II. Other Information Item 1 Legal Proceedings............................................17 Item 2 Changes in Securities........................................17 Item 3 Defaults Upon Senior Securities..............................17 Item 4 Submission of Matters to a Vote of Security Holders........................................17 Item 5 Other Information............................................17 Item 6 Exhibits and Reports on Form 8-K.............................17 SIGNATURES...............................................................18 PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, March 31, 1995 1996 ____ ____ ASSETS Current assets: Cash and cash equivalents $ 609 $ 8,793 Accounts receivable, net of the allowance for doubtful accounts of $0 and $49 as of December 31,1995 and March 31, 1996 -Billed 1,786 7,781 -Unbilled - 2,085 -Other 158 382 Prepaid expenses 182 820 Other 57 55 ______ _______ Total current assets $2,792 $19,916 Restricted cash - 1,000 Property and equipment, net of accumulated depreciation of $1,744 and $3,178 as of December 31, 1995 and March 31, 1996 1,746 15,834 Goodwill, net of accumulated amortization of $0 and $66 as of December 31, 1995 and March 31, 1996 - 6,569 Other assets 9 129 ______ _______ Total assets $4,547 $43,448 ====== ======= The accompanying notes are an integral part of these condensed consolidated financial statements. Page 3 of 18 3-D GEOPHYSICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (in thousands except per share amounts) December 31, March 31, 1995 1996 ____ ____ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt and capital leases $ 182 $ 3,015 Accounts payable 1,004 7,376 Accrued liabilities 1,003 1,344 ______ ______ Total current liabilities 2,189 11,735 Long-term debt and capital leases - 3,729 Payable to related party - 1,000 Deferred income taxes 530 538 Stockholders' equity: Common stock-predecessor 321 - Common stock, $.01 par value, 25,000,000 shares authorized, 7,600,000 shares issued and outstanding - 76 Preferred stock, $.01 par value, 1,000,000 shares authorized and none issued and outstanding - - Additional paid in capital - 29,110 Retained earnings 4,363 292 Cumulative foreign currency translation adjustments (2,856) (3,032) ______ ______ Total stockholders' equity 1,828 26,446 Total liabilities and stockholders' equity $4,547 $43,448 ====== ======= The accompanying notes are an integral part of these condensed consolidated financial statements. Page 4 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) For the Three Months Ended March 31, 1995 1996 ____ ____ Net sales $2,257 $7,052 Expenses: Cost of data acquisition 1,649 5,018 Depreciation and amortization 226 633 General and administrative expenses 240 859 _____ _____ Total operating expenses 2,115 6,510 Operating income 142 542 Other income (expense) Miscellaneous 64 132 Interest expense (114) (142) Foreign currency transaction gains 4 68 ____ ____ Other income (expense) (46) 58 Income before provision for income taxes and extraordinary item 96 600 Provision for income taxes 10 138 ____ ____ Income before extraordinary item 86 462 Extraordinary item net of tax expense of $36 - 57 ____ ____ Net income $ 86 $519 ==== ==== Income before extraordinary item per share $.09 Extraordinary item, net of tax expense, per share .01 ____ Net earnings per share $.10 ==== Weighted average common shares outstanding 5,163,385 The accompanying notes are an integral part of these condensed consolidated financial statements. Page 5 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Three Months Ended March 31 1995 1996 ____ ____ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided (used ) by operating activities $ 448 $(1,862) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (26) (233) Cash consideration paid to acquire seismic data acquisition companies - (10,328) Cash received from the sale of property and equipment - 21 ______ _______ Net cash used by investing activities (26) (10,540) CASH FLOWS FROM FINANCING ACTIVITIES: Cash paid in connection with the initial public offering - (3,268) Proceeds from initial public offering, net of underwriting discounts - 32,085 Cash paid to retire indebtedness of Founding Companies - (4,599) Principal payments on notes payable and capital leases (245) (1,134) Net borrowings under factor agreements (207) - Cash dividend paid to owners of predecessor company - (2,510) ____ ______ Net cash provided (used) by financing activities (452) 20,574 Net increase (decrease) in cash (30) 8,172 Cash at beginning of period 242 609 Effect of change in exchange rate on cash balance (65) 12 ______ _______ Cash at end of period $ 147 $ 8,793 ====== ======= The accompanying notes are an integral part of these these condensed consolidated financial statements. Page 6 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION On February 9, 1996, 3-D Geophysical, Inc. ("Company") consummated an initial public offering (the "Offering") and simultaneously acquired in separate transactions, in exchange for cash, notes and shares of common stock, Geoevaluaciones, S.A. de C.V., ("GEO"), Processos Interactivos Avanzados, S.A. de C.V.("PIASA"), certain assets and liabilities of the land seismic business of Northern Geophysical of America, Inc.("Northern"), Paragon Geophysical, Inc. ("Paragon") and Kemp Geophysical Corporation ("Kemp") (Collectively referred to as the "Founding Companies"). For accounting purposes the acquisitions of GEO and PIASA have been treated as a recapitalization of GEO and PIASA with GEO (combined with PIASA) as the acquiror of the Company. Accordingly, the financial statements include the historical operating performance of GEO and PIASA (the "Mexican Operations"). For accounting purposes,GEO is considered the predecessor company. The acquisitions of the other Founding Companies have been treated as business combinations accounted for by the purchase method of accounting as prescribed by Accounting Principles Board Opinion No. 16 and Staff Accounting Bulletin No. 48. Northern and Kemp are being valued at the fair market value of consideration given. In connection with the acquisitions of Northern and Kemp, the excess of consideration given over the fair market value of net assets acquired will be amortized on a straight-line basis over 15 years. The acquisition of Paragon's common stock in exchange for shares of the Company's common stock is accounted for at Paragon's historical cost. The accompanying condensed consolidated financial statements include the accounts of Northern, Kemp and Paragon from February 9, 1996, the effective dates of the acquisitions. As a result, the Company's statement of operations for the three months ended March 31, 1996 is not comparable to the statement of operations for the three months ended March 31, 1995,and the Company's balance sheet as of March 31, 1996 is not comparable to its balance sheet as of December 31, 1995. The consideration paid to the former owners of Northern, Kemp and Paragon and the allocation of such consideration to the acquired assets is as follows: Cash paid for the stock and assets of the acquired companies $10,328,000 Stock issued to the former owners of Kemp at offering price of $7.50 per share 294,000 Assumption of the liabilities in excess of assets of Paragon (916,000) Liabilities assumed: Bank overdraft 162,000 Accounts payable 5,532,000 Accrued and other current liabilities 1,979,000 Debt assumed: Current 8,317,000 Non-current 3,187,000 __________ Amounts allocated to the acquired assets $28,883,000 =========== Page 7 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION, (continued) Allocation of the purchase price to the acquired assets Accounts receivable: Trade $ 7,011,000 Other 249,000 Other current assets 204,000 Property and equipment 13,818,000 Goodwill 6,635,000 Other assets 966,000 ___________ $28,883,000 =========== In the opinion of the Company, the accompanying consolidated financial statements include all adjustments which are of a normal recurring nature necessary to present fairly the Company's financial position at March 31, 1996, and the results of its operations and cash flows for the three month periods ended March 31, 1995 and 1996. All significant intercompany accounts have been eliminated. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with the Company's financial statements and footnotes thereto included in the Company's Registration Statement on Form S-1 and the Company's Annual Report on Form 10-K which were filed pursuant to Rule 15d-2 of the Securities and Exchange Act of 1934, as amended. The results of operations for the three month period ended March 31, 1996, are not necessarily indicative of the results to be expected for the full year. Page 8 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION, (continued) PRO FORMA INFORMATION The accompanying summarized pro forma information for the Company for the three month periods ended March 31, 1995 and 1996, represents the operations of the Company as if the acquisitions of the Founding Companies and the initial public offering had occurred on January 1, 1995. For the Three For the Three Months Ended Months Ended March 31, 1995 March 31, 1996 ______________ ______________ Net sales $6,956 $10,754 ====== ======= Extraordinary item, net of tax expense $ - $ 57 ====== ======= Net income (loss) $ (504) $ 272 ====== ======= Income before extraordinary item, per share $ (.07) $ .03 Extraordinary item, net of tax expense, per share - .01 ______ _____ Earnings (loss) per share $(.07) $ .04 ====== ===== Pro forma weighted average common shares outstanding 7,600,000 7,600,000 The summarized pro forma information is not necessarily indicative of actual results that would have been achieved if the transaction had occurred on the date indicated or which may be realized in the future. Neither expected benefits and cost reductions anticipated by the Company, nor future corporate costs of the Company, have been reflected in the above summarized pro forma information. Page 9 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 2. INITIAL PUBLIC OFFERING OF COMMON STOCK On February 9, 1996, the Company completed the offering of 4,000,000 shares of common stock at $7.50 per share. Subsequently, on February 21, 1996, the underwriters exercised an option to purchase an additional 600,000 shares at $7.50 per share. The proceeds, net of the underwriters' commissions and estimated offering costs were $28,817,000. Of these net proceeds, approximately $10,328,000 was used to pay the cash portion of the purchase price for certain Founding Companies, $2,510,000 was paid to fund the dividend to the former shareholders of GEO, and approximately $4,599,000 was used to retire certain indebtedness of the Founding Companies. The Company recognized $57,000 of extraordinary gain, net of tax, from the retirement of a certain portion of this debt. 3. CONCENTRATIONS OF CREDIT RISK During the three months ended March 31, 1995, which included only the operations of GEO, one customer accounted for 100% of seismic and geophysical revenues, and during the three months ended March 31, 1996, two customers accounted for 28% and 23% of seismic and geophysical revenues. As of December 31, 1995, which consisted only of the accounts of GEO, one customer accounted for 99% of accounts receivable and as of March 31, 1996, two customers accounted for 19% and 24% of accounts receivable. 4. RECENT ACCOUNTING PRONOUNCEMENTS During the fourth quarter of 1995, Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" (SFAS 123) was issued. The Company will continue to account for future grants of common stock options using the intrinsic value method under Accounting Principles Board Opinion No. 25,"Accounting for Stock Issued to Employees" and will adopt the disclosure requirements of SFAS 123. Page 10 of 187 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. EARNINGS PER SHARE The number of shares used in the earnings per share calculation is determined as follows: Weighted Average Description Shares Outstanding ___________ __________________ Shares issued to 3-D stockholders giving effect to the 2,717.66 for 1 stock split 1,400,682 Shares deemed to have been issued to fund cash portion of GEO dividend 468,000 Shares issued to acquire Founding Companies 1,019,274 Shares sold in initial offering 2,018,286 Shares sold upon exercise of the over-allotment option 257,143 _________ Weighted average common shares outstanding 5,163,385 ========= 6. INCOME TAXES The effective income tax rates for the three months ended March 31, 1995 and 1996 are 10% and 23%, respectively. The differences between the statutory federal income tax rate on income before provision for income taxes and extraordinary item, and the Company's effective income tax rate result primarily from the tax benefits associated with inflation adjustments with respect to the operations of GEO and PIASA. The increase in the effective rate results from a reduction in the tax benefits associated with the inflation adjustments realized by GEO for the quarter ended March 31, 1996. 7. COMMITMENTS AND CONTINGENCIES Pursuant to the terms of the Kemp stock purchase agreement, the Company has agreed to a contingent cash payment in consideration of the acquisition of all of the outstanding shares of capital stock of Kemp. The maximum payment is $725,000, the exact amount of which is dependent upon Kemp's earnings before interest and taxes for the fiscal years ending December 31, 1996, 1997 and 1998. Page 11 of 18 3-D GEOPHYSICAL, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. COMMITMENTS AND CONTINGENCIES,(Continued) GEO has a dispute, and may be threatened with litigation, in connection with certain agreements entered into by it with Capilano International Inc., a Canadian company ("Capilano"). The dispute concerns a certain Letter of Intent and a certain Technical Assistance Agreement, dated June 1, 1991 and June 3,1992, respectively (the "Capilano Agreements"). GEO maintains that it is not obligated to compensate Capilano for certain services GEO believes were either inadequately provided or not provided at all by Capilano and the parties disagree upon how certain profits and losses should be allocated under the Capilano Agreements. On May 13, 1996, a Capilano representative contacted the Chairman of the Board of the Company expressing Capilano's interest in resolving the dispute. The Company is not currently able to estimate the effect, if any, on GEO's results of operations and financial position which may result from the resolution of this matter. Accordingly, the Company's financial statements do not reflect any adjustment related to this matter. 8. COMMON STOCK - PREDECESSOR Common stock for the Company at December 31, 1995, consists solely of GEO common stock of 1,200,000 shares of N$1 par value variable capital stock. In 1993, GEO capitalized $229,582 of earnings by issuing 229,582 shares of common stock. GEO and PIASA are required under Mexican law to establish a legal reserve equal to 5% of each company's earnings until such time as the reserve equals 20% of the minimum capital of GEO and PIASA. 9. SUBSEQUENT EVENTS On May 2, 1996, the Company and one of its vendors entered into a letter of intent to purchase new seismic recording equipment for $8.5 million. As part of the letter of intent, the vendor will povide certain credit support to a financial institution with which the Company is currently under negotiations to finance a portion of this equipment and refinance $4.5 million of existing debt. On April 26, 1996, the Company granted 339,502 stock options to members of the Board of Directors, management and employees. Page 12 of 18 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For accounting purposes, GEO is considered the predecessor company and the financial performance of Northern, Kemp, and Paragon (the "Purchased Companies") are included as of the acquisition date, February 9,1996. As a result, the Company's statement of operations for the three months ended March 31, 1996, includes the financial activities of the Purchased Companies after February 8, 1996, and is not comparable to the statement of operations for the three months ended March 31, 1995. The following discussion has been divided into two sections. The first section relates to the Company and includes the historical operating performance of GEO and PIASA (the Mexican Operations). The second section discusses the Company's financial condition, liquidity, and capital resources as of March 31, 1996. RESULTS OF OPERATIONS Three Months Ended March 31,1996 Compared to Three Months Ended March 31,1995. Net Sales. Net sales for the Company increased 212.5% to $7.1 million in the three months ended March 31, 1996, from $2.3 million in the three months ended March 31, 1995. The increase is primarily attributable to the inclusion of $4.9 million of net sales of the Purchased Companies partially offset by a 6.5% decrease to $2.1 million in the three months ended March 31, 1996, from $2.3 million in the three months ended March 31, 1995 for the Mexican Operations. The decline in net sales in the Mexican Operations is attributable primarily to the devaluation of the Mexican Peso ("Peso). Cost of Data Acquisition. Cost of data acquisition for the Company increased 204.3% to $5.0 million in the three months ended March 31, 1996, from $1.6 million in the three months ended March 31, 1995. The increase is primarily attributable to the inclusion of $3.5 million of cost of data acquisition of the Purchased Companies offset by a 7.6% decrease to $1.5 million in the three months ended March 31, 1996, from $1.6 million in the three months ended March 31, 1995, for the Mexican Operations. The decline in data acquisition cost in the Mexican Operations is attributable primarily to the devaluation of the Peso. Depreciation and Amortization. Depreciation and amortization for the Company increased 180.1% to $633,000 in the three months ended March 31, 1996, from $226,000 in the three months ended March 31, 1995. The increase is primarily attributable to the inclusion of $500,000 of depreciation and amortization of the Purchased Companies including $66,000 of goodwill amortization attributable to the acquisitions of the Purchased Companies. This increase was partially offset by a 41.2% decrease to $133,000 in the three months ended March 31, 1996, from $226,000 in the three months ended March 31, 1995, for the Mexican Operations. This decrease is primarily the result of the devaluation of the Peso. Page 13 of 18 General and Administrative Expenses. General and administrative expenses for the Company increased 257.9% to $859,000 in the three months ended March 31, 1996, from $240,000 in the three months ended March 31, 1995. The increase is primarily attributable to the inclusion of $581,000 of general and administrative expenses of the Purchased Companies and a 15.8% increase to $278,000 in the three months ended March 31, 1996, from $240,000 in the three months ended March 31, 1995, for the Mexican Operations. Operating Income. Operating income for the Company increased 281.7% to $542,000 in the three months ended March 31, 1996, from $142,000 in the three months ended March 31, 1995. The increase is primarily attributable to the inclusion of $365,000 of operating income of the Purchased Companies in addition to a 24.6% increase to $177,000 in the three months ended March 31, 1996, from $142,000 in the three months ended March 31, 1995 for the Mexican Operations. The increase in operating income of the Mexican Operations is primarily attributable to a decrease in depreciation due to the devaluation of the Peso. Miscellaneous Income (Expense). The Company recognized miscellaneous income of $132,000 in the three months ended March 31, 1996, compared to miscellaneous income of $64,000 in the three months ended March 31, 1995. The increase is primarily the result of interest income in Mexico due to the high interest rates and interest income from the offering proceeds of the Company's initial public offering. Interest Expense. The Company's interest expense increased 24.6% to $142,000 in the three months ended March 31, 1996, from $114,000 in the three months ended March 31, 1995. The increase is attributable to the debt of the Purchased Companies, partially offset by a reduction of debt in the Mexican Operations. Foreign Currency Gains. The Company recognized a foreign currency gain of $68,000 in the three months ended March 31, 1996, compared to a foreign currency gain of $4,000 in the three months ended March 31, 1995. The gains are attributed to the reduction of U.S. dollar liabilities of the Mexican Operations and the fluctuation of the Peso/U.S. dollar exchange rate. Income Tax Expense. The Company recognized income tax expense from operations of $138,000 in the three months ended March 31, 1996, compared to income tax expense of $10,000 in the three months ended March 31, 1995. The increase is primarily attributable to earnings of the Purchased Companies taxed at a 38% rate, partially offset by inflation adjustments to the 38% tax rate in Mexico which produced a $4,000 tax benefit. Extraordinary Item Net of Income Tax Expense. The Company recognized a $57,000 extraordinary item in the three months ended March 31, 1996, net of tax expense of $36,000. The extraordinary item is due to a gain recognized on the early extinguishment of debt. No extraordinary items were recognized in the three months ended March 31, 1995. Page 14 of 18 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES From December 31, 1995 to March 31, 1996, total assets of the Company increased from $4.5 million to $43.4 million, total liabilities increased from $2.7 million to $17.0 million, and total stockholders' equity increased from $1.8 million to $26.4 million. These increases resulted from the Company's initial public offering and acquisition of the Founding Companies. On February 9, 1996, the Company completed its initial public offering of 4,000,000 shares of common stock at $7.50 per share. Subsequently, on February 21, 1996, the underwriters exercised their over-allotment option to purchase an additional 600,000 shares at $7.50 per share. The net proceeds to the Company (after deducting (i) underwriting discounts and commissions and (ii) offering expenses) were approximately $28.8 million. Of this amount, approximately $2.5 million was used to pay cash dividends to GEO and PIASA's stockholders, approximately $10.3 million was used to purchase the land seismic assets of Northern and 100% of Kemp's equity, and approximately $4.6 million was used to repay indebtedness of the Founding Companies. The net proceeds to the Company from the issuance, after deducting underwriting discounts, offering expenses and the cash required to purchase and repay debt of the Founding Companies, have been and will be used for working capital and capital expenditures, and may be used for strategic acquisitions. At March 31, 1996, the Company had $8.8 million of cash. The Company utilized $1.9 million net cash from operating activities in the three months ended March 31, 1996 as compared to providing $448,000 in the same period of the prior year. The reduction in net cash provided by operating activities was primarily attributable to a net increase in working capital. Net cash used in investing activities increased to $10.5 million in the three months ended March 31, 1996, from $26,000 in the same period of the prior year. This amount was primarily due to the cash utilized to purchase Northern and Kemp. Net cash provided by financing activities increased to $20.6 million for the three months ended March 31,1996 from a net cash used of $452,000 in the prior year due to the completion of the Company's initial public offering. The Company used $233,000 for capital expenditures in the three months ended March 31, 1996, from $26,000 in the same period of the prior year. In addition, simultaneously with the acquisition of the Founding Companies, Northern and Paragon exercised options to purchase equipment which was previously being rented. These capital expenditures reduced the Company's reliance on rental equipment and improved the Company's position to meet the demand for technologically advanced 3-D data acquisition recording systems. On May 2, 1996, the Company entered into a letter of intent to purchase approximately $8.5 million of equipment from Input/Output, Inc. by May 31, 1996. This purchase will increase the recording channel Page 15 of 18 capacity by over 50%. Pursuant to the letter of intent, Input/Output,Inc. intends to provide certain credit support to a financial institution with which the Company is currently negotiating. The proposed credit facility would be for three years and include the purchase price for the above equipment and would refinance conditional sales agreements totalling approximately $4.5 million incurred by the Founding Companies prior to the Company's initial public offering. The new equipment will be utilized to meet the requirements of a contract with a subsidiary of British Petroleum in Alaska, currently under negotiation, increase the capacity of one of its Mexican crews for a new 3-D contract, and increase the channel capacity of the Company's two crews in the Rocky Mountain Region. At May 1, 1996, the Company's estimated backlog of commitments for services totaled $35.2 million. The Company expects to complete substantially all of of these commitments during 1996; however, commitments are subject to cancellation at the option of the Company's customers. The Company believes that its planned capital expenditures and operating requirements through the end of 1996 will be funded from a portion of its initial public offering, cash from operations, and proceeds from the borrowing from a financial institution, currently under negotiations referred to above. There can be no assurance that the Company will be able to obtain financing at all, or on terms favorable to the Company. If the Company is not able to obtain additional financing, it will be unable to complete its capital expenditure program and may be materially and adversely affected as a result. Page 16 of 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. None Page 17 of 18 SIGNATURE Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 3-D Geophysical, Inc. Dated: May 15, 1996 /s/ Richard Davis By: _________________________________ Richard Davis President and Chief Executive Officer (principal executive officer) Dated: May 15, 1996 /s/ John D. White, Jr. By:_________________________________ John D. White, Jr. Treasurer and Chief Financial Officer (principal financial and accounting officer) Page 18 of 18 -----END PRIVACY-ENHANCED MESSAGE-----