-----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, C6iJqKMB/TGg7SH+ZRsFcA5W/kq2Fu5xXSuBGlKNeQmatufn/tkqPLWq1MBUaBqt tHOIssRGkKZL401i83GLCw== 0000912057-01-539869.txt : 20020410 0000912057-01-539869.hdr.sgml : 20020410 ACCESSION NUMBER: 0000912057-01-539869 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1791305 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 a2063042z10qsb.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 September 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 Number) incorporation or organization) One Riverway, Suite 2100 Houston, Texas 77056 ---------------------------------------- ---------- (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 September 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 September 30, 2001 and December 31, 2000 ................ 3 Condensed Statements of Operations Three Months and Nine Months Ended September 30, 2001 and 2000 ............................. 5 Condensed Statements of Cash Flows Nine Months Ended September 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
September 30 December 31 2001 2000 Unaudited Audited ------------ ----------- Current Assets: Cash $ 2,076,635 $ 1,241,282 Receivables 3,655,424 3,329,282 Prepaid expenses 92,613 526,598 ----------- ----------- Total Current Assets 5,824,672 5,097,162 Property and Equipment: Equipment, net of depreciation 5,361,236 7,218,216 Buildings, net of depreciation 228,197 233,056 Land 23,450 23,450 ----------- ----------- Total Property and Equipment 5,612,883 7,474,722 Other Assets: Note receivable 250,000 250,000 Deferred charges 48,885 73,022 Restricted investments 231,700 131,700 Other assets 62,349 47,879 Goodwill, net of amortization 20,024,898 22,161,250 ----------- ----------- Total Other Assets 20,617,832 22,663,851 ----------- ----------- Total Assets $32,055,387 $35,235,735 =========== ===========
3
LIABILITIES AND STOCKHOLDERS' EQUITY September 30 December 31 2001 2000 Unaudited Audited ------------ ----------- Current Liabilities: Current maturities of long term debt $ 551,179 $ 566,678 Current portion of capital lease 257,393 228,444 Accounts payable 2,167,641 2,362,060 Accrued liabilities 1,937,527 2,261,201 Deferred revenue 2,734,349 119,333 Notes payable 56,906 252,090 Advances for lease bank 120,000 175,000 Other current liabilities 9,838 9,838 ------------ ------------ Total Current Liabilities 7,834,833 5,974,644 Short term obligations expected to be refinanced 4,557,039 2,286,759 Long Term Liabilities: Long term debt, net of current maturities, net of OID 62,316,545 58,080,462 Capital lease, net of current maturities 202,573 - ------------ ------------ Total Long Term Liabilities 62,519,118 58,080,462 Other Liabilities: Accrued long term lease liability 4,172,694 1,713,640 ------------ ------------ Total Liabilities 79,083,684 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 (80,098,717) (65,890,190) ------------ ------------ (46,885,797) (32,677,270) Less common stock in treasury at cost - 375,000 shares (142,500) (142,500) ------------ ------------ Total Stockholders' Equity (47,028,297) (32,819,770) ------------ ------------ Total Liabilities and Stockholders' Equity $ 32,055,387 $ 35,235,735 ============ ============
4 GEOKINETICS INC. Condensed Statements of Operations
Three Months Ended Nine Months Ended September 30 September 30 (Unaudited) (Unaudited) -------------------------- --------------------------- 2001 2000 2001 2000 ----------- ------------ ------------ ------------ Revenues: Seismic revenue $ 5,008,872 $ 3,525,102 $ 11,461,147 $ 5,301,681 Data processing revenue 1,543,246 1,236,696 4,668,955 4,458,559 ----------- ------------ ------------ ------------ Total Revenues 6,552,118 4,761,798 16,130,102 9,760,240 Expenses: General and administrative 408,821 439,709 1,285,460 1,500,287 Seismic operating expense 5,927,748 4,142,124 13,212,127 7,506,902 Data processing expense 1,274,597 1,223,129 3,785,070 3,989,837 Amortization expense 1,002,430 1,002,268 3,007,291 3,006,805 Depreciation expense 790,743 1,000,209 2,345,714 3,000,627 ----------- ------------ ------------ ------------ Total Expenses 9,404,339 7,807,439 23,635,662 19,004,458 ----------- ------------ ------------ ------------ Loss from Operations (2,852,221) (3,045,641) (7,505,560) (9,244,218) Other Income (Expense): Interest income 29,998 19,530 92,381 74,066 Other income - 500 279 88,985 Interest expense (2,355,655) (1,971,902) (6,795,625) (5,786,075) ----------- ------------ ------------ ------------ Total Other (Expense) (2,325,657) (1,951,872) (6,702,965) (5,623,024) Loss before provision for income tax (5,177,878) (4,997,513) (14,208,525) (14,867,242) Provision for income tax - - - - ----------- ------------ ------------ ------------ Net Loss (5,177,878) (4,997,513) (14,208,525) (14,867,242) =========== ============ ============ ============ Earnings (Loss) per common share-Basic $ (0.27) $ (0.26) $ (0.75) $ (0.78) =========== ============ ============ ============ Weighted average common shares and equivalents outstanding 18,992,156 18,992,156 18,992,156 19,064,692 =========== ============ ============ ============
5 GEOKINETICS INC. Condensed Statements of Cash Flows
Nine Months Ended September 30 (Unaudited) ---------------------------- 2001 2000 ------------ ------------ OPERATING ACTIVITIES Net Loss $(14,208,525) $(14,867,242) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization 5,353,005 6,007,432 Deferred gain, net of write-down - (116,544) Changes in operating assets and liabilities Accounts receivable and work in progress (326,141) (1,044,264) Prepaid expenses and other assets 343,652 (158,298) Accounts payable (194,419) 1,641,072 Accrued liabilities and deferred revenue 2,291,341 7,596,284 Short term obligations expected to be refinanced 6,190,438 - Long term lease liability 2,459,054 - ------------ ------------ Net cash provided (used) in operating activities 1,908,405 (941,560) INVESTING ACTIVITIES Receipt of deposits and other - 52,742 Purchases of capital assets (635,039) (146,584) ------------ ------------ Net cash (used) in investing activities (635,039) (93,842) FINANCING ACTIVITIES Proceeds from short term debt 77,905 - Proceeds from long term debt - 120,345 Proceeds from long term capital lease 417,003 - Principal paid on lease bank advances (55,001) - Payments on software financing (185,481) - Principal paid on long term debt (419,350) (866,441) Principal paid on short term debt (273,089) (244,585) ------------ ------------ Net cash (used) in financing activities (438,013) (990,681) Net increase (decrease) in cash 835,353 (2,026,083) Cash deficit of subsidiary sold - 10,859 Cash at beginning of period 1,241,282 2,677,996 ------------ ------------ Cash at end of period $ 2,076,635 $ 662,772 ============ ============
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 September 30, 2001, the Company had cash balances of $2,076,635. The Company believes this cash and anticipated cash flow from its seismic acquisition and seismic data processing operations will provide sufficient liquidity to continue operations through the foreseeable future. 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 September 30, 2001, the Company's long term debt was $62,867,724, including $551,179 classified as current maturities. Long term debt is presented net of unamortized Original Issue Discount, totaling $1,978,813. 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 $2,821,321. At September 30, 2001, accrued interest on the Company's Senior Secured Notes totaled $4,557,039 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 September 30, 2001 --------------------------------------------- Seismic Data Acquisition Processing Totals ----------- ----------- ------------ Revenues from external customers $ 5,008,872 $ 1,543,246 $ 6,552,118 Segment Profit (Loss) (2,802,412) (2,300,505) (5,102,917) Segment Assets 8,449,355 35,950,634 44,399,989 For the Quarter Ended September 30, 2000 --------------------------------------------- Seismic Data Acquisition Processing Totals ----------- ----------- ------------ Revenues from external customers $ 3,525,102 $ 1,236,696 $ 4,761,798 Segment Profit (Loss) (2,586,067) (2,292,382) (4,878,449) Segment Assets 11,906,797 34,331,564 46,238,361 For the Nine Months Ended September 30, 2001 ---------------------------------------------- Seismic Data Acquisition Processing Totals ----------- ----------- ------------ Revenues from external customers $11,461,147 $ 4,668,955 $ 16,130,102 Segment Profit (Loss) (7,243,359) (6,693,550) (13,936,909) Segment Assets 8,449,355 35,950,634 44,399,989 For the Nine Months Ended September 30, 2000 ---------------------------------------------- Seismic Data Acquisition Processing Totals ----------- ----------- ------------ Revenues from external customers $ 5,301,681 $ 4,458,559 $ 9,760,240 Segment Profit (Loss) (7,935,412) (6,416,648) (14,352,060) Segment Assets 11,906,797 34,331,564 46,238,361
8 The following table reconciles reportable segment losses to consolidated losses:
For the Quarter Ended September 30 -------------------------------------- 2001 2000 ------------ ------------ PROFIT OR LOSS Total profit or loss for reportable segments $ (5,102,917) $ (4,878,449) Unallocated amounts: Corporate expenses net of interest earnings (70,265) (111,891) Corporate interest expense (4,003) (6,585) Depreciation (693) (588) ------------ ------------ Total Consolidated Loss $ (5,177,878) $ (4,997,513) ============ ============ For the Nine Months Ended September 30 -------------------------------------- 2001 2000 ------------ ------------ PROFIT OR LOSS Total profit or loss for reportable segments $(13,936,909) $(14,352,060) Unallocated amounts: Corporate expenses net of interest earnings (253,848) (493,164) Corporate interest expense (16,313) (20,254) Depreciation (1,455) (1,764) ------------ ------------ Total Consolidated Loss $(14,208,525) $(14,867,242) ============ ============
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL At September 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 continued to lag. 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 be negatively affected 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 September 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 first quarter of 2002. Management believes that a recent increase in the level of bidding activity for seismic acquisition jobs and an improvement in the Company's backlog of acquisition jobs may reflect an improvement in market conditions. The Company's existing backlog of data acquisition contracts is expected to result in revenues for the seismic acqusition segment during the fourth quarter of 2001 and the first quarter of 2002 exceeding revenues during the corresponding periods in the prior fiscal years. The Company intends to aggressively compete for additional seismic acquisition projects from both existing and prospective clients. During the current 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 nine months of fiscal 2001 increased 65% to $16,130,102 from $9,760,240 for the same period of fiscal 2000. For the three months ended September 30, 2001, revenues totaled $6,552,118 as compared to $4,761,798 for the same period of fiscal 2000, an increase of 38%. This significant increase in the Company's operating revenues is directly attributable to the Company's seismic acquisition activities. Seismic acquisition revenue totaled $11,461,147 for the first nine months of 2001 as compared to $5,301,681 for the same period of a year ago, an increase of $6,159,466. The Company's seismic data processing operating revenues were slightly higher, an increase of $210,396, when compared to the same nine month period 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 an increase in demand for the industry's services. Operating expenses for the nine month period ended September 30, 2001 were $16,997,197 as compared to $11,496,739 for the same period of fiscal 2000, an increase of 48%. For the three month period ended September 30, operating expenses increased from $5,365,253 in 2000 to $7,202,345 in 2001, an increase of 34%. 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 nine months ended September 30 decreased from $1,500,287 in 2000 to $1,285,460 in 2001, a decrease of 14%. For the three months ended September 30, general and administrative expenses totaled $408,821 as compared to $439,709 for the same period of fiscal 2000, a decrease of $30,888. 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 nine months ended September 30, 2001 totaled $5,353,005 as compared to $6,007,432 for the same period of fiscal 2000, a decrease of 11%. For the three months ended September 30, 2001, depreciation and amortization decreased from $2,002,477 in 2000 to $1,793,173 in 2001, a decrease of 10%. 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 nine months ended September 30, 2001 totaled $6,702,965 as compared to $5,623,024 for the period ended September 30, 2000, an increase of 19%. For the three months ended September 30, interest expense totaled $2,325,657, an increase of 19% from the same period of fiscal 2000. As was done in fiscal 2000 and again in March 2001, the Company elected to satisfy the September 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 $4.2 million in the Company's 13.5% Senior Secured 2002 Notes and 2005 Notes. These increases in note balances were primarily responsible for the increase in interest expense for the nine months and quarter ended September 30, 2001. During the nine months ended September 30, 2001, the Company reduced its loss from operations compared to the nine months ended September 30, 2000 as a result of increased revenues and reductions in controllable expenses. However, the Company's interest expense during the same period increased, primarily as a result of the Company's issuance of additional notes in payment of the interest due on its Senior Secured 2002 Notes and Senior Secured 2005 Notes. The Company had a net loss of $14,208,525, or $(0.75) per share, for the nine months ended September 30, 2001 as compared to a net loss of $14,867,242, or $(0.78) per share for the nine months ended September 30, 2000. For the three months ended September 30, 2001 the Company had a net loss of $5,177,878, or $(0.27) per share, as compared to a net loss of $4,997,513, or $(0.26) per share, for the three months ended September 30, 2000. The Company's results continue to be severely impacted by the continued weakness in the seismic service industry. Under the terms of the agreement in April 2001, pursuant to which the Company restructured its senior notes, the Company has the authority and intends to issue additional notes for the interest due on its Senior Secured 2002 Notes through September 15, 2003, and on its Senior Secured 2005 Notes through September 15, 2005. 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 nine months 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 continued to lag. The Company continued to experience significant competition in its marketplace which in turn negatively impacted the prices it charged 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 $14.2 million in the first nine months of 2001. These results have left the Company with an equity deficit of approximately $47 million at September 30, 2001. At September 30, 2001, the Company had cash balances of $2,076,635. The Company believes this cash and anticipated cash flow from its seismic acquisition and seismic data processing operations will provide sufficient liquidity to continue operations through the foreseeable future. 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 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. 12 PART II OTHER INFORMATION ITEM 5. OTHER INFORMATION None 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: November 14, 2001 /s/ Thomas J. Concannon ------------------------------------------ Thomas J. Concannon Vice President and Chief Financial Officer 13 -----END PRIVACY-ENHANCED MESSAGE-----