-----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, NULtv2+eUheoqKhGbOsIJ3FQjiHKZTSuqChYuJJeYsAmNASTk00PBkpUAoF4tlc6 vQJ9j01iEE8F1fSrAUTqmQ== 0000912057-01-527801.txt : 20010814 0000912057-01-527801.hdr.sgml : 20010814 ACCESSION NUMBER: 0000912057-01-527801 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOKINETICS INC CENTRAL INDEX KEY: 0000314606 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 941690082 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09268 FILM NUMBER: 1705280 BUSINESS ADDRESS: STREET 1: 8401 WESTHEIMER STREET 2: SUITE 150 CITY: HOUSTON STATE: TX ZIP: 77063 BUSINESS PHONE: 7138507600 MAIL ADDRESS: STREET 1: 8401 WESTHEIMER STREET 2: SUITE 150 CITY: HOUSTON STATE: TX ZIP: 77063 10QSB 1 a2056255z10qsb.txt 10QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2001 ----------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ______________ Commission File Number 0 -9268 -------------- GEOKINETICS INC. ----------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 94-1690082 ---------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 8401 WESTHEIMER, SUITE 150 HOUSTON, TEXAS 77063 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Small Business Issuer's telephone number, including area code (713) 850-7600 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 ------- ------ On June 30, 2001, there were 18,992,156 shares of Registrant's common stock ($.01 par value) outstanding. GEOKINETICS INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements.................................. 3 Condensed Statements of Financial Position June 30, 2001 and December 31, 2000................. 3 Condensed Statements of Operations Three Months and Six Months Ended June 30, 2001 and 2000.............................. 5 Condensed Statements of Cash Flows Six Months Ended June 30, 2001 and 2000............................. 6 Notes to Interim Financial Statements................. 7 Item 2. Management's Discussion and Analysis or Plan of Operation....................... 10 PART II. OTHER INFORMATION Item 5. Other Information.................................... 13 Item 6. Exhibits and Reports on Form 8-K..................... 13 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statements of Financial Position
ASSETS June 30 December 31 2001 2000 Unaudited Audited ----------- ----------- Current Assets: Cash $ 2,338,377 $ 1,241,282 Receivables 4,319,537 3,329,282 Prepaid expenses 300,462 526,598 ----------- ----------- Total Current Assets 6,958,376 5,097,162 Property and Equipment: Equipment, net of depreciation 5,636,230 7,218,216 Buildings, net of depreciation 229,817 233,056 Land 23,450 23,450 ----------- ----------- Total Property and Equipment 5,889,497 7,474,722 Other Assets: Note receivable 250,000 250,000 Deferred charges 131,985 73,022 Restricted investments 131,700 131,700 Other assets 67,353 47,879 Goodwill, net of amortization 20,737,015 22,161,250 ----------- ----------- Total Other Assets 21,318,053 22,663,851 ----------- ----------- Total Assets $34,165,926 $35,235,735 =========== ===========
3 LIABILITIES AND STOCKHOLDERS' EQUITY
June 30 December 31 2001 2000 Unaudited Audited -------------- -------------- Current Liabilities: Current maturities of long term debt $ 558,968 $ 566,678 Current portion of capital lease 106,336 228,444 Accounts payable 1,864,358 2,362,060 Accrued liabilities 1,758,590 2,261,201 Deferred revenue 3,668,696 119,333 Notes payable 90,294 252,090 Advances for lease bank 133,750 175,000 Other current liabilities 9,838 9,838 ------------ ------------ Total Current Liabilities 8,190,830 5,974,644 Short term obligations expected to be refinanced 2,441,115 2,286,759 Long term debt, (net of current maturities), net of OID 62,211,685 58,080,462 Other Liabilities: Accrued long term lease liability 3,172,715 1,713,640 ------------ ------------ Total Liabilities 76,016,345 68,055,505 Stockholders' Equity: Common stock, $.01 par value, 100,000,000 shares authorized, 18,992,156 shares outstanding 193,672 193,672 Additional paid in capital 33,019,248 33,019,248 Retained deficit (74,920,839) (65,890,190) ------------ ------------ (41,707,919) (32,677,270) Less common stock in treasury at cost - 375,000 shares (142,500) (142,500) ------------ ------------ Total Stockholders' Equity (41,850,419) (32,819,770) ------------ ------------ Total Liabilities and Stockholders' Equity $ 34,165,926 $ 35,235,735 ============ ============
4 GEOKINETICS INC. Condensed Statements of Operations
Three Months Ended June 30 Six Months Ended June 30 (Unaudited) (Unaudited) ----------------------------- ------------------------------ 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Revenues: Seismic revenue $ 2,795,462 $ 1,408,334 $ 6,452,275 $ 1,776,579 Data processing revenue 1,561,234 1,266,682 3,125,709 3,221,863 ------------ ------------ ------------ ------------ Total Revenues 4,356,696 2,675,016 9,577,984 4,998,442 Expenses: General and administrative 426,628 505,732 876,639 1,060,577 Seismic operating expense 3,431,796 2,149,707 7,284,379 3,364,778 Data processing expense 1,233,627 1,288,094 2,510,473 2,766,708 Amortization expense 1,002,430 1,002,269 2,004,861 2,004,537 Depreciation expense 777,486 1,000,209 1,554,972 2,000,418 ------------ ------------ ------------ ------------ Total Expenses 6,871,967 5,946,011 14,231,324 11,197,018 ------------ ------------ ------------ ------------ Loss from Operations (2,515,271) (3,270,995) (4,653,340) (6,198,576) Other Income (Expense): Interest income 33,918 25,655 62,383 54,537 Other income 279 83,820 279 88,485 Interest expense (2,290,735) (1,950,512) (4,439,970) (3,814,174) ------------ ------------ ------------ ------------ Total Other (Expense) (2,256,538) (1,841,037) (4,377,308) (3,671,152) Loss before provision for income tax (4,771,809) (5,112,032) (9,030,648) (9,869,728) Provision for income tax -- -- -- -- ------------ ------------ ------------ ------------ Net Loss $ (4,771,809) $ (5,112,032) $ (9,030,648) $ (9,869,728) ============ ============ ============ ============ Earnings (Loss) per common share-Basic $ (0.25) $ (0.27) $ (0.48) $ (0.52) ============ ============ ============ ============ Weighted average common shares and equivalents outstanding 18,992,156 18,992,156 18,992,156 19,101,359 ============ ============ ============ ============
5 GEOKINETICS INC. Condensed Statements of Cash Flows
Six Months Ended June 30 (Unaudited) ----------------------------- 2001 2000 ----------- ----------- OPERATING ACTIVITIES Net Loss $(9,030,648) $(9,869,728) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization 3,559,833 4,004,955 Deferred gain, net of write-down -- (116,544) Changes in operating assets and liabilities Accounts receivable and work in progress (990,253) 380,305 Prepaid expenses and other assets 147,700 (254,137) Accounts payable (497,702) 275,619 Accrued liabilities and deferred revenue 3,046,748 5,360,428 Short term obligations expected to be refinanced 4,074,514 -- Long term lease liability 1,459,075 -- ----------- ----------- Net cash provided (used) in operating activities 1,769,267 (219,102) INVESTING ACTIVITIES Receipt of deposits and other -- 52,742 Purchases of capital assets (70,522) (12,268) ----------- ----------- Net cash provided (used) in investing activities (70,522) 40,474 FINANCING ACTIVITIES Proceeds from short term debt 9,940 -- Principal paid on capital lease -- (175,391) Principal paid on lease bank advances (41,251) -- Payments on software financing (122,108) -- Principal paid on long term debt (276,495) (480,048) Principal paid on short term debt (171,736) (160,498) ----------- ----------- Net cash (used) in financing activities (601,650) (815,937) Net increase (decrease) in cash 1,097,095 (994,565) Cash deficit of subsidiary sold -- 10,859 Cash at beginning of period 1,241,282 2,677,996 ----------- ----------- Cash at end of period $ 2,338,377 $ 1,694,290 =========== ===========
6 NOTES TO INTERIM FINANCIAL STATEMENTS 1. METHOD AND BASIS OF PRESENTATION The unaudited interim financial statements contained herein have been prepared in accordance with the instructions to Form 10-QSB and include all adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position and results of operations for the interim period reported. All such adjustments are of a normal recurring nature. The financial statements are condensed and should be read in conjunction with the financial statements and related notes included in the Registrant's Form 10-KSB filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2000. A summary of accounting policies and other significant information is included therein. At June 30, 2001, the Company had cash balances of $2,338,377. The Company believes this cash, anticipated cash flow from its seismic acquisition and seismic data processing operations, and the completion of the transactions of April 9, 2001, will provide sufficient liquidity to continue operations through 2001. The Company's financial results will continue to be negatively impacted until a full recovery in the seismic service industry occurs. The Company is presently unable to predict when such a recovery will occur. These financial statements are prepared assuming that the Company will continue as a going concern. They do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that would be necessary in the event the Company cannot continue in existence. 2. LONG TERM DEBT At June 30, 2001, the Company's long term debt was $62,770,653, including $558,968 classified as current maturities. Long term debt is presented net of unamortized Original Issue Discount, totaling $2,218,738. Long term debt consists primarily of (i) 13.5% Senior Secured Notes, due 2005, in the amount of $54,886,187, (ii) 13.5% Senior Secured Notes, due 2003, in the amount of $7,110,393 and (iii) a note to a financial institution, bearing interest at prime plus 1.5%, in the amount of $2,943,433. Interest due as of March 15, 2001 on the Company's Senior Secured 2002 Notes and 2005 Notes in the amount of $3,920,158 was satisfied by issuing additional senior secured notes. This transaction occurred on April 9, 2001 in conjunction with a restructuring of the Company's Senior Secured Notes. At June 30, 2001, accrued interest on the Company's Senior Secured Notes totaled $2,441,115 and is classified as "Short term obligations expected to be refinanced" on the Company's balance sheet. 7 3. SEGMENT INFORMATION The following table sets forth the Company's significant information from reportable segments:
For the Quarter Ended June 30, 2001 -------------------------------------------- Seismic Data Acquisition Processing Totals ------------- ------------- ------------ Revenues from external customers $ 2,795,462 $ 1,561,234 $ 4,356,696 Segment Profit (Loss) (2,471,226) (2,211,394) (4,682,620) Segment Assets 8,865,785 35,657,410 44,523,195 For the Quarter Ended June 30, 2000 -------------------------------------------- Seismic Data Acquisition Processing Totals ------------- ------------- ------------ Revenues from external customers $ 1,408,334 $ 1,266,681 $ 2,675,015 Segment Profit (Loss) (2,619,496) (2,312,556) (4,932,052) Segment Assets 11,455,071 34,105,875 45,560,946 For the Six Months Ended June 30, 2001 -------------------------------------------- Seismic Data Acquisition Processing Totals ------------- ------------- ------------ Revenues from external customers $ 6,452,275 $ 3,125,709 $ 9,577,984 Segment Profit (Loss) (4,440,935) (4,393,026) (8,833,961) Segment Assets 8,865,785 35,657,410 44,523,195 For the Six Months Ended June 30, 2000 -------------------------------------------- Seismic Data Acquisition Processing Totals ------------- ------------- ------------ Revenues from external customers $ 1,776,579 $ 3,221,863 $ 4,998,442 Segment Profit (Loss) (5,349,345) (4,124,266) (9,473,611) Segment Assets 11,455,071 34,105,875 45,560,946
8 The following table reconciles reportable segment losses to consolidated losses:
FOR THE QUARTER ENDED JUNE 30 ----------------------------- 2001 2000 ----------- ----------- PROFIT OR LOSS Total profit or loss for reportable segments $(4,682,620) $(4,932,052) Unallocated amounts: Corporate expenses net of interest earnings (83,418) (172,642) Corporate interest expense (5,390) (6,750) Depreciation (381) (588) ----------- ----------- Total Consolidated Loss $(4,771,809) $(5,112,032) =========== ===========
FOR THE SIX MONTHS ENDED JUNE 30 --------------------------------- 2001 2000 ----------- ----------- PROFIT OR LOSS Total profit or loss for reportable segments $(8,833,961) $(9,473,611) Unallocated amounts: Corporate expenses net of interest earnings (183,585) (381,272) Corporate interest expense (12,340) (13,669) Depreciation (762) (1,176) ----------- ----------- Total Consolidated Loss $(9,030,648) $(9,869,728) =========== ===========
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL At June 30, 2001, the Company's financial position reflects (i) the seismic acquisition services being conducted by Quantum Geophysical, Inc., and (ii) the seismic data processing, software and consultation services being provided by Geophysical Development Corporation. Demand for certain of the Company's services, primarily its seismic acquisition services, continued to improve when compared to the same periods of a year ago. However, demand for the service provided by the Company's seismic data processing segment remained weak. The Company continues to experience significant competition in its marketplace which in turn negatively impacts the prices the Company can charge for its services. The Company's financial results will continue to lag until a more favorable pricing environment presents itself. The Company is presently unable to predict when such an event will occur. During the quarter ended June 30, 2001, the Company operated two seismic acquisition crews on a non-continuous basis. The Company's current backlog is sufficient to keep two seismic acquisition crews operating on a continuous basis at least through the end of calendar 2001. During the quarter, the Company's data processing segment continued to have a significant portion of its computing capability unutilized. RESULTS OF OPERATIONS Operating revenues for the first six months of fiscal 2001 increased 92% to $9,577,984 from $4,998,442 for the same period of fiscal 2000. For the three months ended June 30, 2001, revenues totaled $4,356,696 as compared to $2,675,016 for the same period of fiscal 2000, an increase of 63%. This significant increase in the Company's operating revenues is directly attributable to the Company's seismic acquisition activities. Seismic acquisition revenue totaled $6,452,275 for the first six months of 2001 as compared to $1,776,579 for the same period of a year ago, an increase of $4,675,696. The Company's seismic data processing operating revenues were slightly lower, a decrease of $96,154, when compared to the same six month period of a year ago. Demand for the Company's seismic acquisition services has improved when compared to that of a year ago. However, the Company continues to experience significant competition in both its operating segments. This competition continues to negatively impact the pricing environment the Company operates in. The Company's operating results will continue to be negatively impacted until the seismic service industry's pricing environment shows significant improvement. Pricing improvement will come only from a continued increase in demand for the industry's services. Operating expenses for the six month period ended June 30, 2001 were $9,794,852 as compared to $6,131,486 for the same period of fiscal 2000, an increase of 60%. For the three month period ended June 30, operating expenses increased from $3,437,801 in 2000 to $4,665,423 in 2001, an increase of 36%. This increase in operating expenses is the direct result of the significant increase in activity in the Company's seismic acquisition segment. 10 General and administrative expenses for the six months ended June 30 decreased from $1,060,577 in 2000 to $876,639 in 2001, a decrease of 17%. For the three months ended June 30, general and administrative expenses totaled $426,628 as compared to $505,732 for the same period of fiscal 2000, a decrease of 16%. The decrease is a direct result of the Company's ongoing efforts to limit expenditures on outside third parties such as expenditures for professional services, as well as continuing to operate at reduced staffing levels. The Company had previously instituted staff reductions to reduce its costs. Depreciation and amortization expense for the six months ended June 30, 2001 totaled $3,559,833 as compared to $4,004,955 for the same period of fiscal 2000, a decrease of 11%. For the three months ended June 30, 2001, depreciation and amortization decreased from $2,002,478 in 2000 to $1,779,916 in 2001, a decrease of 11%. This decrease is primarily a result of the Company's curtailment of significant capital expenditures during the ongoing seismic service industry downturn and the reduction in expense as operating assets attain their originally estimated useful lives. Interest expense (net of interest income) for the six months ended June 30, 2001 totaled $4,377,308 as compared to $3,671,152 for the period ended June 30, 2000, an increase of 19%. For the three months ended June 30, interest expense totaled $2,256,538, an increase of 23% from the same period of fiscal 2000. As was done in fiscal 2000, the Company elected to satisfy the March 15, 2001 interest payment due on its 13.5% Senior Secured 2002 Notes and 2005 Notes by issuing additional notes. This resulted in an increase of approximately $3.9 million in the Company's 13.5% Senior Secured 2002 Notes and 2005 Notes. This increased note balance was primarily responsible for the increase in interest expense for the six months and quarter ended June 30, 2001. The Company had a net loss of $9,030,648, or $(0.48) per share, for the six months ended June 30, 2001 as compared to a net loss of $9,689,728, or $(0.52) per share for the six months ended June 30, 2000. For the three months ended June 30, 2001 the Company had a net loss of $4,771,809, or $(0.25) per share, as compared to a net loss of $5,112,032, or $(0.27) per share, for the three months ended June 30, 2000. The Company's results continue to be severely impacted by the continued weakness in the seismic service industry. LIQUIDITY AND CAPITAL RESOURCES The seismic service industry downturn that negatively impacted the Company's financial results in 1999 and 2000 continued to hinder its financial performance during the first half of fiscal 2001. Demand for the Company's seismic acquisition services showed improvement when compared to prior periods but demand for the Company's data processing services remained weak. The Company continued to experience significant competition in its marketplace which in turn negatively impacted the prices it can charge for its services. The Company's financial performance will not materially improve until a more favorable pricing environment presents itself. The Company is presently unable to predict when such an event will occur. 11 As a result of the conditions outlined above, the Company incurred a loss of approximately $18.6 million during 2000 and a loss of approximately $9.0 million in the first six months of 2001. These results have left the Company with an equity deficit of approximately $42 million at June 30, 2001. On April 9, 2001, the Company completed a restructuring of its 13.5% Senior Secured 2002 Notes and 2005 Notes and entered into a Subordination and Amendment Agreement with the holders of the notes and GeoLease Partners, L.P., a Delaware limited partnership. The restructuring extends the maturity date on the 2002 Notes to September 15, 2003 and permits the Company, at its option, to pay interest on each interest payment date, in the form of cash interest or PIK interest (the issuing of additional notes) through, but not including, the maturity dates for the Senior Secured 2002 Notes and 2005 Notes. On April 9, 2001, concurrently with the transactions contemplated by the Subordination and Amendment Agreement, GeoLease Partners, L.P. purchased certain equipment leased by the Company, and was assigned the rights as lessor, under the Equipment Lease between the Company and Input/Output, Inc., its principal equipment supplier. Immediately after the assignment of the Equipment Lease to GeoLease Partners, L.P., the Company and GeoLease Partners, L.P. entered into Amendment No. 1 to the Equipment Lease, allowing the Company to defer the monthly installments due on the Equipment Lease until the expiration date of the Equipment Lease (currently October 1, 2002). The Company is obligated to pay interest on any monthly installment not paid when due, and any such accrued interest is due on the expiration date of the Equipment Lease. Amendment No. 1 to the Equipment Lease also includes a provision for the payment by the Company of $1.9 million as deferred rent due on the later of (i) September 15, 2003 and (ii) the date that the 13.5% Senior Secured 2002 Notes are paid in full. At June 30, 2001, the Company had cash balances of $2,338,377. The Company believes this cash, anticipated cash flow from its seismic acquisition and seismic data processing operations, and the completion of the transactions of April 9, 2001, as described above, will provide sufficient liquidity to continue operations through 2001. The Company anticipates that it will defer making monthly lease installments under the Equipment Lease and avoid making cash interest payments on its 13.5% Senior Secured Notes during 2001. The Company's financial results will continue to be negatively impacted until a recovery in the seismic service industry occurs. The Company is presently unable to predict when such a recovery will occur. The Company's ability to expand its business operations is dependent upon the availability of internally generated cash flow and external financing activities. Such financing may consist of bank or commercial debt, equity or debt securities or any combination thereof. There can be no assurance that the Company will be successful in obtaining additional financing when required. Any substantial alteration or increase in the Company's capitalization through the issuance of debt or equity securities or otherwise may significantly decrease the financial flexibility of the Company. Due to uncertainties regarding the changing market for seismic services, technological changes, and other matters associated with the Company's operations, the Company is unable to estimate the amount of any financing that it may need to acquire, upgrade and maintain seismic equipment and continue its diversification as a full-scale geotechnology enterprise. If the Company 12 is unable to obtain such financing when needed, it will be forced to curtail its business objectives, and to finance its business activities with only such internally generated funds as may then be available. PART II OTHER INFORMATION ITEM 5. OTHER INFORMATION See the third and fourth paragraphs under "Liquidity and Capital Resources" in Part I Item 2 regarding a restructuring of certain indebtedness and lease obligations of the Company ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None. (b) Reports on Form 8-K: None SIGNATURE Pursuant to the requirement 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. GEOKINETICS INC. (Registrant) Date: August 10, 2001 _____________________________________ Thomas J. Concannon Vice President and Chief Financial Officer 13 -----END PRIVACY-ENHANCED MESSAGE-----