-----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, LwChh2eOJQCwjUCu5yH+ZEJ0fL3i0QsA0g0nUJvOJIQmrsYZ06v7W/vNCsHYfC4/ P02t7oi45iNd6ZnR2ZHhzg== 0000950137-00-000843.txt : 20000308 0000950137-00-000843.hdr.sgml : 20000308 ACCESSION NUMBER: 0000950137-00-000843 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANALYTICAL SURVEYS INC CENTRAL INDEX KEY: 0000753048 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 840846389 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13111 FILM NUMBER: 562219 BUSINESS ADDRESS: STREET 1: 941 MERIDIAN STREET STREET 2: SUITE 100 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176341000 MAIL ADDRESS: STREET 1: 941 MERIDIAN STREET STREET 2: SUITE 100 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) - ----- of the Securities Exchange Act of 1934 For the quarterly period ended DECEMBER 31, 1999 or Transition Report Pursuant to Section 13 or 15(d) - ----- of the Securities Exchange Act of 1934 Commission File Number 0-13111 ANALYTICAL SURVEYS, INC. (Exact name of small business issuer as specified in its charter) COLORADO 84-0846389 (State of incorporation) (IRS Employer Identification No.) 941 NORTH MERIDIAN STREET INDIANAPOLIS, INDIANA 46204 (Address of principal executive offices) (Zip Code) (317) 634-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past (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 ninety (90) days. Yes X No ---- ---- The number of shares of common stock outstanding as of February 17, 2000 was 6,955,690. 2 PART I ITEM 1. FINANCIAL STATEMENTS ANALYTICAL SURVEYS, INC. CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
September 30, December 31, 1999 1999 ------- ------ ASSETS Current assets: Cash $ 6,659 4,018 Accounts receivable net of allowance for doubtful accounts of $138 and $119 15,074 15,863 Revenue in excess of billings 30,898 24,229 Deferred income taxes 402 405 Income tax receivable 4,085 7,111 Prepaid expenses and other 1,066 1,316 -------- -------- Total current assets 58,184 52,942 -------- -------- Equipment and leasehold improvements, at cost: Equipment 13,916 14,305 Furniture and fixtures 1,581 1,585 Leasehold improvements 1,076 1,078 -------- -------- 16,573 16,968 Less accumulated depreciation and amortization (8,740) (9,571) -------- -------- 7,833 7,397 -------- -------- Investment securities 535 2,062 Deferred income taxes 590 -- Goodwill net of accumulated amortization of $3,174 and $3,597 22,100 21,680 -------- -------- Total assets $ 89,242 84,081 ======== ========
2 3 ANALYTICAL SURVEYS, INC. CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
SEPTEMBER 30, DECEMBER 31, 1999 1999 ------------ ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 7,265 7,450 Billings in excess of revenue 2,008 2,080 Accounts payable and other accrued liabilities 5,063 3,629 Accrued payroll and related benefits 3,819 2,807 ------- ------- Total current liabilities 18,155 15,966 Long-term debt, less current portion 20,339 18,640 Deferred income taxes -- 402 Deferred compensation payable 85 84 ------- ------- Total liabilities 38,579 35,092 ------- ------- Stockholders' equity Preferred stock; no par value. Authorized 2,500 shares; none issued or outstanding -- -- Common stock; no par value. Authorized 100,000 shares; 6,948 and 6,956 shares issued and outstanding at September 30, and December 31, respectively 32,080 32,105 Accumulated other comprehensive income - unrealized gain on equity investments -- 947 Retained earnings 18,583 15,937 ------- ------- Total stockholders' equity 50,663 48,989 ------- ------- Total liabilities and stockholders' equity $89,242 84,081 ======= =======
See accompanying notes to consolidated financial statements. 3 4 ANALYTICAL SURVEYS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands except per share amounts) (Unaudited) Three Months Ended December 31, 1998 1999 ---- ---- Sales $ 26,851 16,843 -------- -------- Costs and expenses Salaries, wages and related benefits 14,288 12,540 Subcontractor costs 3,708 2,962 Other general and administrative 4,365 3,715 Depreciation and amortization 1,349 1,252 -------- -------- 23,710 20,469 -------- -------- Earnings (loss) from operations 3,141 (3,626) -------- -------- Other income (expense): Interest expense, net (691) (501) Other 58 (25) -------- -------- (633) (526) -------- -------- Earnings (loss) before income taxes 2,508 (4,152) Income tax expense (benefit) 1,089 (1,475) -------- -------- Net earnings (loss) 1,419 (2,677) Other comprehensive income, net of income taxes -- 947 -------- -------- Comprehensive income (loss) $ 1,419 (1,730) ======== ======== Earnings (loss) per common share: Basic $ 0.21 (0.39) Diluted $ 0.20 (0.39) Weighted average outstanding common shares: Basic 6,739 6,949 Diluted 7,128 7,085 See accompanying notes to consolidated financial statements. 4 5 ANALYTICAL SURVEYS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended December 31, December 31, 1998 1999 ------ ------ Cash flows from operating activities: Net earnings (loss) $ 2,273 (2,677) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 1,349 1,252 Deferred income tax expense (benefit) (158) 409 Tax benefit relating to exercise of stock options 132 17 Changes in operating assets and liabilities, net of effect of business combinations: Accounts receivable, net (4,094) (789) Revenue in excess of billings (1,215) 6,699 Income taxes 1,285 (3,026) Prepaid expenses and other (56) (250) Billings in excess of revenue 1,160 72 Accounts payable and other accrued liabilities (1,698) (1,434) Accrued payroll and related benefits (2,418) (1,012) ------- ------- Net cash used by operating activities (3,440) (739) ------- ------- Cash flows from investing activities: Purchase of equipment and leasehold improvements (1,169) (396) ------- ------- Cash flows from financing activities: Net borrowings (payments) under lines of credit with banks 3,400 -- Proceeds from issuance of long-term debt 1,339 307 Loan fees on long-term debt (162) -- Principal payments on long-term debt (302) (1,821) Proceeds from exercise of stock options 249 8 ------- ------- Net cash provided by financing activities 4,524 (1,506) ------- ------- Net increase in cash (85) (2,641) Cash at beginning of period 2,243 6,659 ------- ------- Cash at end of period $ 2,158 4,018 ======= ======= Supplemental disclosures of cash flow information: Cash paid for interest $ 677 362 ======= ======= Cash paid for income taxes $ 195 1,192 ======= ======= Common stock issued for net assets acquired in business combinations $ 514 -- ======= =======
See accompanying notes to financial statements. 5 6 Notes to Consolidated Financial Statements (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with the accounting policies described in the Company's annual report for the year ended September 30, 1999. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1999. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of Analytical Surveys, Inc., and subsidiaries at December 31, 1999 and the results of their operations and cash flows for the three months ended December 31, 1998 and 1999. Investment securities consist of corporate equity securities that are classified as available-for-sale. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders' equity until realized. 2. LITIGATION The Company has been named as a defendant in several putative securities class actions alleging a misstatement or omission of material facts concerning the Company's operations and financial results. Plaintiffs seek to represent themselves and a class of all public investors who purchased or otherwise acquired common stock of the Company and who suffered damages, and seek an award of compensatory damages and attorneys' fees and costs. Because this litigation is at an early stage, it is impossible to evaluate the impact that the above actions, or any future, related actions, may have on the Company. However, it is reasonably possible that an unfavorable outcome in the present litigation, or in any related future actions, could have a material adverse impact on the Company's financial condition or results of operations in one or more future reporting periods. The Company intends to defend itself vigorously in this litigation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS. THE DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS FORM 10-Q. THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK AND UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS FORM 10-Q THAT ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. WHEN USED IN THIS FORM 10-Q, OR IN THE DOCUMENTS INCORPORATED BY REFERENCE INTO THIS FORM 10-Q, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "INTEND" AND "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THE STATEMENTS REGARDING THE COMPANY'S STRATEGY, FUTURE SALES, FUTURE EXPENSES AND FUTURE LIQUIDITY AND CAPITAL RESOURCES. ALL FORWARD-LOOKING STATEMENTS IN THIS FORM 10-Q ARE BASED UPON 6 7 INFORMATION AVAILABLE TO THE COMPANY ON THE DATE OF THIS FORM 10-Q, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THIS FORM 10-Q. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW, IN ITEM 1. BUSINESS--"RISK FACTORS" AND ELSEWHERE IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K. OVERVIEW ASI, a leading provider of data conversion and digital mapping services to users of customized geographic information systems, was founded in 1981. From 1981 to 1995, the Company experienced steady growth in revenues with periodic fluctuations in financial results. In 1995, the Company embarked on a growth strategy, which sought to consolidate the fragmented GIS services industry. The Company's acquisitions during the period are summarized in the following table: Date Company Location Employees ---- ------- -------- --------- 12/95 Intelligraphics Wisconsin 200 7/96 Westinghouse Landmark North Carolina 105 7/97 MSE Corporation Indiana 325 6/98 Cartotech Texas 270 The Company recognizes revenue using the percentage of completion method of accounting on a cost-to-cost basis. For each contract, an estimate of total production costs is determined; these estimates are reevaluated regularly. Production costs consist of internal costs, primarily salaries and wages, and external costs, primarily subcontractor costs. Internal and external production costs may vary considerably among projects and during the course of completion of each project. At each accounting period and for each of the Company's contracts, the percentage of completion is based on production costs incurred to date as a percentage of total estimated production costs. This percentage is then multiplied by the contract's total value to calculate the sales revenue to be recognized. The percentage of completion is effected by any factors which influence either the estimate of future productivity or the production cost per hour used to determine future costs. The Company recognizes losses on contracts in the period such loss is determined. From the beginning of fiscal 1995 through the end of the first three months of fiscal 2000, the Company has recognized aggregate losses on contracts of approximately $1.6 million. Over the same period, the Company recognized sales of approximately $250 million. Sales and marketing expenses associated with obtaining contracts are expensed as incurred. Backlog increases when new contracts are signed and decreases as revenue is recognized. As of December 31, 1999, backlog was $79.8 million as compared with $91.3 million as of September 30, 1999. The Company engages in research and development activities. The majority of these activities occur as the Company develops software or designs a product for a particular contract, so that the costs of such efforts are included as an integral part of the Company's services. Such custom-designed software can often be applied to projects for other customers. These amounts expended by the Company are not included in research and development expenses, although the Company retains ownership of such proprietary software or products. The Company, through its Advanced Technology Division, also engages in research and development activities independently of the Company's work on particular customer projects. For the three months ended December 31, 1998 and 1999, the Company expended $67,072 and $95,567, respectively on such independent research and development activities in the Advanced Technology Division. On December 30, 1999, the Company announced it had revised its previously announced fiscal 1999 results. On January 27, 2000, the Company announced that it was conducting a detailed review of its cost-of-completion assumptions related to its contracts under the supervision of the Audit Committee of the Board of Directors that might lead to a restatement of its financial results for fiscal 1999. As a result of this comprehensive review, the Company discovered certain accounting errors that required a downward adjustment of the revenues recognized in 7 8 each of the four quarters of fiscal 1999. The errors related principally to the exclusion of certain contract-related costs in the estimated costs to complete on certain projects; the untimely recognition of additional anticipated costs to complete; and the inaccurate assessment of future production efficiencies and inefficiencies affecting estimated costs to complete. When the Company's analysis indicated that the estimated costs to complete a specific project were based on inaccurate information or assumptions, an estimate was made of the impact on previously recognized revenues as well as timing of the error, and the appropriate fiscal 1999 quarter's operating results were restated accordingly. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected consolidated statements of operations data expressed as a percentage of sales: Three Months Ended December 31 ------------------- 1998 1999 ---- ---- PERCENTAGE OF SALES: Sales............................................ 100.0% 100.0% Costs and expenses Salaries, wages and related benefits......... 53.2 74.5 Subcontractor costs.......................... 13.8 17.6 Other general and administrative.............. 16.3 22.1 Depreciation and amortization................. 5.0 7.4 ----- ----- Earnings (loss) from operations.................. 11.7 (21.5) Other expense, net............................... (2.4) (3.1) ----- ----- Earnings (loss) before income taxes.............. 9.3 (24.7) Income tax expense (benefit)..................... 4.1 (8.8) ----- ----- Net earnings (loss).............................. 5.2% (15.9)% ===== ===== THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998 SALES. The Company's sales consist of revenue recognized for services performed. Sales decreased $10.0 million to $16.8 million for the first three months of fiscal 2000 from $26.9 million for the first three months of fiscal 1999 as a result of a reduction of new contract signings during fiscal 1999. Management believes these market conditions were caused by consolidation in the utility industry, year 2000 computer concerns and increased competition from companies with offshore operations. SALARIES, WAGES AND RELATED BENEFITS. Salaries, wages and related benefits includes employee compensation for production, marketing, selling, administrative and executive employees. Salaries, wages and related benefits decreased 12.2% to $12.5 million for the first three months of fiscal 2000 from $14.3 million for the first three months of fiscal 1999, as a result of reductions in its workforce. The reductions in the workforce were a result the Company's decision to subcontract a higher percentage of its production work to offshore subcontractors. As a percentage of sales, salaries, wages and related benefits increased to 74.5% for the first three months of fiscal 2000 from 53.2% for the first three months of fiscal 1999, as reductions in the workforce were insufficient to offset the reduced sales volume. SUBCONTRACTOR COSTS. Subcontractor costs includes production costs incurred through the use of third parties for production tasks, such as data conversion services to meet contract requirements, aerial photography and ground and airborne survey services. Subcontractor costs decreased 20.1% to $3.0 million for the first three months of fiscal 2000 from $3.7 million for the first three months of fiscal 1999, and increased as a percentage of sales to 8 9 17.6% for the first three months of fiscal 2000 from 13.8% for the first three months of fiscal 1999. While overall subcontractor costs declined because of lower sales volume, the percentage of subcontractor costs to total costs was higher as a result of the Company's transition to subcontracting a greater percentage of its production offshore. OTHER GENERAL AND ADMINISTRATIVE COSTS. Other general and administrative costs includes rent, maintenance, travel, supplies, utilities, insurance and professional services. Such costs decreased 14.9% to $3.7 million for the first three months of fiscal 2000 from $4.4 million for the first three months of fiscal 1999, as a result of reductions in force. As a percentage of sales, other general and administrative costs increased to 22.1% for the first three months of fiscal 2000 from 13.8% for the first three months of fiscal 1999. While other general and administrative costs declined overall, they increased as a percentage of costs due to significantly lower sales in the three months ended December 31, 2000 compared to the same period in the prior year. DEPRECIATION AND AMORTIZATION. Depreciation and amortization consists primarily of amortization of goodwill incurred in connection with the Company's acquisitions, as well as depreciation of certain of the Company's operating assets. For the first three months of fiscal 2000, depreciation and amortization decreased 7.2% to $1.25 million from $1.35 million for the first three months of fiscal 1999. As a percentage of sales, depreciation and amortization increased to 7.4% for the first three months of fiscal 2000 from 5.0% in the first three months of fiscal 1999. OTHER EXPENSE, NET. Other expense, net is comprised primarily of net interest expense. Net interest expense decreased 27.5% to $501,000 for the first three months of fiscal 2000 from $691,000 for the first three months of fiscal 1999, as a result of reduced borrowing outstanding, offset in part by higher interest rates. INCOME TAXES. Income tax benefit was $1.5 million for the first three months of fiscal 2000 compared to an expense of $1.1 million for the first three months of fiscal 1999. The Company's effective income tax rate for the first three months of fiscal 2000 was 35.5%, a decrease from 43.4% for the first three months of fiscal 1999. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company's principal source of liquidity has consisted of cash flow from operations supplemented by secured lines of credit. As of December 31, 1999, the Company had not drawn on its line of credit. During 1998, the Company replaced its existing lines of credit with a three-year, $21.0 million secured working capital line of credit and the Company refinanced $25.4 million of term debt. Borrowings under these credit facilities bear interest at a rate per annum equal to, at the Company's option, (i) the agent bank's prime rate or (ii) an adjusted London Interbank Offering Rate (LIBOR) plus a margin ranging from 1.25% to 1.75%. The effective borrowing rate was approximately 7% on December 31, 1999. The Company's loan agreement was amended on March 6, 2000 to establish new covenants requiring the Company to maintain a minimum of $25 million in net tangible assets and to achieve a minimum level of profitability for the three remaining quarters of fiscal 2000. The amended agreement also reduced the line of credit to a maximum of $7.5 million based on eligible accounts receivable, increased the interest rate to LIBOR plus 3%, and accelerated the final maturity of the balance of the term loan to February 2001. The Company's cash flow is significantly affected by three contract-related accounts: accounts receivable; revenues in excess of billings; and billings in excess of revenues. Under the percentage of completion method of accounting, an "account receivable" is created when an amount becomes due from a customer, which typically occurs when an event specified in the contract triggers a billing. "Revenues in excess of billings" occur when the Company has performed under a contract even though a billing event has not been triggered. "Billings in excess of revenues" occur when the Company receives an advance or deposit against work yet to be performed. These accounts, which represent a significant business investment, affect the Company's cash flow as projects are signed, performed, billed and collected. Net cash used by the Company's operating activities was $3.4 million and $0.8 million for first three months of fiscal years 1999 and 2000, respectively. The change in operating cash flows is primarily attributable to normal fluctuations in the contract-related accounts described in the previous paragraph. At December 31, 1999, the working capital in contract-related accounts was equivalent to 215 days sales outstanding, up from 202 days at 9 10 September 30, 1999. The Company believes that this level of investment is at the high end of the normal operating range of days sales outstanding. Cash used by investing activities for the first three months of fiscal years 2000 and 1999 was $0.4 million and $1.2 million, respectively. Such investing activities principally consisted of payments for purchases of equipment and leasehold improvements. Cash used by financing activities for the first three months of fiscal year 2000 was $1.5 million as compared to $4.5 million provided by financing activities for the first three months of fiscal 1999. Financing activities consisted primarily of net borrowings and payments under lines of credit for working capital purposes and net borrowings and payments of long-term debt used for business combinations and the purchase of equipment and leasehold improvements. The Company believes that funds available under its lending arrangements and cash flow from operations are adequate to finance its operations for at least the next twelve months. YEAR 2000 ISSUES The "Year 2000" issue is the result of computer programs using two digits, rather than four, to define the applicable year. The failure of such programs to recognize the year 2000 as such could result in systems failures and miscalculations. The Company and the third parties with which it does business rely on numerous computer programs in their daily operations. To the best of its knowledge, the Company believes that neither it nor any of its customers or key suppliers experienced any adverse impact due to Year 2000 problems. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company may from time to time employ risk management techniques such as interest rate swaps and foreign currency hedging transactions. None of these techniques are used for speculative or trading purposes and the amounts involved are not considered material. Short-term interest rate changes can impact the Company's interest expense on its variable interest rate debt. Variable interest rate debt of $20.7 million was outstanding as of December 31, 1999. Assuming December 31, 1999 debt levels, an increase or decrease in interest rates of one percentage point would impact the Company's interest expense by $207,000. PART II ITEM 1. LEGAL PROCEEDINGS. The Company and certain of its present and former officers and employees (the "Individual Defendants") have been named as defendants in several putative securities class actions filed in the United States District Court for the Southern District of Indiana, beginning February 2, 2000. Plaintiffs in each of the actions allege that the defendants violated Section 10(b) of the Exchange Act, and SEC Rule 10b-5 promulgated thereunder, alleging that they misstated or omitted to state material facts concerning the Company's operations and financial results in the Company's financial statements filed with the SEC, and in press releases and other public statements, issued during the period from January 25, 1999, through January 27, 2000 (the "putative class period"). Plaintiffs seek to represent themselves and a class of all public investors who purchased or otherwise acquired common stock of the Company during the putative class period and who suffered damages thereby, and seek an award of compensatory damages and attorneys' fees and costs. It is expected that the various actions will be consolidated before one judge, and that plaintiffs then will file a single, consolidated class action complaint. Because this litigation is at an early stage, it is impossible to evaluate the impact that the above actions, or any future, related actions, may have on the Company. However, it is reasonably possible that an unfavorable outcome in the present litigation, or in any related future actions, could have a material 10 11 adverse impact on the Company's financial condition or results of operations in one or more future reporting periods. The Company and the Individual Defendants intend to defend themselves vigorously in this litigation. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. Exhibits: 10.12 Amendment No. 5 to Credit Agreement dated March 6, 2000 Forms 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Analytical Surveys, Inc. (Registrant) Date: March 6, 2000 /s/ Sol C. Miller ------------------------ Sol C. Miller, Chief Executive Officer Date: March 6, 2000 /s/ Michael A. Renninger ------------------------ Michael A. Renninger, Vice President 11 EX-10.12 2 NO EXHIBIT INDEX 1 EXHIBIT 10.12 AMENDMENT NO. 5 TO CREDIT AGREEMENT This Amendment to Credit Agreement ("Amendment") is dated as of March 6, 2000 by the BANKS listed on the signature pages hereof (the "Banks") and ANALYTICAL SURVEYS, INC. WITNESSETH WHEREAS, Analytical Surveys, Inc. (the "Borrower"), the Banks and Bank One, Colorado, N.A., as Agent (the "Agent"), are parties to a Credit Agreement dated as of June 3, 1998, as amended (the "Credit Agreement") (capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement); and WHEREAS, the Borrower has requested amendments to certain financial covenants and the amendment of certain provisions of the Credit Agreement. NOW THEREFORE, in consideration of the covenants, conditions and agreements hereinafter set forth, the parties hereto agree as follows: 1. Amendments. Upon and after the Amendment Effective Date (as defined below). a) The defined term "Applicable Margin" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Applicable Margin" means 3.00% for LIBOR Rate Loans and 1.00% for Prime Rate Loans. b) The defined term "Commitment Fee Rate" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Commitment Fee Rate" means .50%. c) Subsection (g) of the defined term "Eligible Account Receivable" is amended in its entirety to read as follows: (g) Accounts Receivable owing from a single account debtor if more that Twenty-five percent (25%) of its Accounts Receivable with the Borrower and all Guarantors is more than 90 days past due; d) The defined term "Eligible Unbilled Account Receivable" in Section 1.1 of the Credit Agreement is deleted. 2 e) The first clause of the second sentence of the defined term "Interest Period" in Section 1.1 of the Credit Agreement is amended in its entirety to read as follows: The duration of each Interest Period shall be one (1) month; provided, however, that: f) The defined term "Maturity Date" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Maturity Date" means the first to occur of (i) February 5, 2001 and (ii) the date on which the due date of the Loans have been accelerated and payment demanded by the Banks by reason of an Event of Default pursuant to Article VI. g) The defined term "Maximum Revolving Credit Amount" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Maximum Revolving Credit Amount" means the lesser of (i) $7,500,000.00 or (ii) the Borrowing Base in effect at the time of determination. h) The defined term "Net Income" in Section 1.1 of the Credit Agreement is amended and restated in its entirety as follows: "Net Income (or Deficit)" means, for any computation period, with respect to the Borrower on a consolidated basis, cumulative net income (or a deficit as the case may be) earned during such period as determined in accordance with GAAP. i) The defined term "Revolving Loans Commitment" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Revolving Loans Commitment" means the commitment of the Banks to Advance Revolving Loans to the Borrower from time to time as provided in Section 2.1 in the aggregate amount of $7,500,000.00. j) The defined term "Revolving Loans Scheduled Maturity Date" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Revolving Loans Scheduled Maturity Date" means February 5, 2001. k) Section 1.1 of the Credit Agreement is amended by the insertion in alphabetical order of the defined term "Tangible Net Worth" that shall read in its entirety as follows: -2- 3 "Tangible Net Worth" means as of any date, the total shareholders equity; (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock) of Borrower, less the aggregate book value of all intangible assets of the Borrower, less the aggregate amount of all loans due from the Borrower's Affiliates, officers, directors and shareholders, less the Borrower's unrealized gain in its investment in Infotech Enterprises, Inc., all determined in accordance with GAAP l) The defined term "Term Loan Scheduled Maturity Date" in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: "Term Loan Scheduled Maturity Date" means February 5, 2001. m) Section 2.1(a) of the Credit Agreement is amended in its entirety to read as follows: (a) Revolving Loans Commitment. Pursuant to the Revolving Loans Commitment, from the Effective Date until the Maturity Date, each Bank severally agrees to Advance funds to the Borrower as Revolving Loans, provided, however, that at no time shall the Banks be required to Advance Revolving Loans to the Borrower if, after such Advance the sum of the principal amount of Revolving Loans outstanding is in excess of the Maximum Revolving Credit Amount; and provided, further, that no Bank shall be required to Advance Revolving Loans in an aggregate amount exceeding the Bank's Revolving Loan Commitments described on Schedule 2.1. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow funds Advanced to the Borrower as Revolving Loans. n) The first sentence of Subsection (a) of Section 2.15 of the Credit Agreement is amended in its entirety to read as follows: Not later than 20 days after the end of each month, the Borrower shall deliver to the Agent a Borrowing Base Certificate, in the form of Exhibit B-4, duly executed by an Authorized Signatory, which Borrowing Base Certificate will set forth the information contained therein as of the end of the preceding month end. -3- 4 o) Subsection (b) of Section 2.15 of the Credit Agreement is amended in its entirety to read as follows: For purposes of determining the applicable Borrowing Base, Eligible Accounts Receivable shall be valued at eighty percent (80%) of the amount thereof. p) Section 2.6(b) of the Credit Agreement is amended by deleting all Repayment Dates and Quarterly Principal Installment Amounts after January 1, 2001 and inserting after the entry for January 1, 2001: On February 5, 2001, payment in full of the outstanding principal balance and accrued interest on the Term Loan. q) Section 5.1 of the Credit Agreement is amended by the addition of a new subsection (r), (s), (t) and (u) that shall read in their entirety as follows: (r) Consultant. The Agent may retain a consultant of its choice to review the Borrower's and Guarantors' financial statements, agings, facilities, business plans, forecasts, proposed debt and equity offerings and, among other things, assess the going concern value and viability of the Borrower and the Guarantors. Such review shall be in scope and detail satisfactory to the Agent. The Borrower shall, and shall cause the Guarantors, to cooperate fully with such consultant, and its agents and employees. Upon reasonable notice to the Borrower, the consultant shall have unrestricted access to the books and records during normal business hours of the Borrower and Guarantors, and their facilities and employees. The reports, conclusions and analysis of the consultant shall be delivered only to the Agent for the consideration and use by the Banks. The Borrower shall promptly pay or reimburse the Agent for the actual cost of the consultant's review and report, including all out-of-pocket expenses for travel, food and lodging. (s) Tax Refund. On or before April 30, 2000, the Borrower and Guarantors shall file all income tax returns, schedules and other filings with the Internal Revenue Service, Colorado Department of Revenue and Indiana Department of Revenue to claim the Federal and State tax refunds reflected in the financial projections provided by the Borrower to the Agent on or about March 1, 2000. The Borrower shall provide the Agent with copies of all such filings on or before April 30, 2000. On or before June 30, 2000, the Borrower and Guarantors shall file all income tax returns, schedules and other filings with all other Government Authorities to claim the other tax refunds reflected in the financial projects provided by the Borrower to the Agent on or about March 1, 2000. The Borrower shall provide the Agent with copies of all such filings on or before -4- 5 June 30, 2000. To the extent permitted by law, the Borrower shall, and shall cause the Guarantors, to assign and cause such tax refunds to be paid directly to the Agent for the benefit of the Banks. Tax refunds shall be immediately applied upon receipt, as mandatory payments on the Term Loan and will be applied to Term Loan principal payment installments in inverse order of maturity. (t) Netherlands and Portugal Operations. On or before July 6, 2000, the Borrower shall comply with the requirements of Section 5.2(n) of the Credit Agreement with respect to the entities now in existence or to be formed through which the Borrower conducts or will conduct business, directly or indirectly, in the Netherlands and Portugal; provided, however, Agent may waive compliance with this provision if Borrower provides information satisfactory to the Agent that satisfaction of such requirements would be illegal or subject the officers or directors of such entities to legal sanction under applicable law, would violate existing agreements applicable to such entities, or would be unduly expense. (u) Infotech Enterprises, Inc. On or before April 6, 2000 the Borrower shall deliver to the Agent all of the capital stock or other instruments establishing its ownership interest in Infotech Enterprises, Inc. and a stock power signed in blank and shall execute and deliver any amendments to the Pledge Agreement or other Collateral Documents that the Agent may in its discretion require to evidence a pledge of such capital stock as security for the Obligations. r) Section 5.1(b)(iv) of the Credit Agreement is amended and restated to read in its entirety as follows: within 20 days after the end of each month (A) a Borrowing Base Certificate signed by an Authorized Signatory, (B) a consolidated unaudited balance sheet and income statement of the Borrower prepared in accordance with GAAP, (C) a Contract Progress Report of the Borrower and all Guarantors identifying all outstanding contracts, and on an individual contract basis disclosing, expenses incurred to date, estimated expenses remaining, payments received to date, payments remaining and projected profit for each contract (presented in a columnar format with totals), (D) a Compliance Certificate signed by an Authorized Signatory, (E) a listing and aging of all Accounts Receivable of the Borrower and the Guarantors, and (F) a listing and aging of all accounts payable of the Borrower and Guarantors (with all of the foregoing in form, substance and level of detail acceptable to the Agent); s) Section 5.2(a) of the Credit Agreement is amended by the deletion of subsections (i) Maximum Total Debt to EBITDA, (ii) Minimum Fixed Charge Coverage -5- 6 Ratio, (iii) and Minimum Net Income and (iv) Maximum Annual Capital Expenditures and the replacement of such subsections with the following financial covenants that shall read in their entirety as follows: (i) Minimum Tangible Net Worth. Fail to maintain as of the end of each month on a consolidated basis for the Borrower and all Subsidiaries Tangible Net Worth in excess of During the Time Period Minimum Tangible Net Worth ---------------------- -------------------------- March 1, 2000 through March 31, 2000 $25,000,000 April 1, 2000 through June 30, 2000 $25,500,000 July 1, 2000 and thereafter $26,000,000 (ii) Maximum Net Deficit/Minimum Net Income. Have (A) a Net Deficit in excess of $775,000 for the Fiscal Quarter ending March 31, 2000, (B) Net Income less than $120,000 for the Fiscal Quarter ending June 30, 2000, (C) Net Income less than $700,000 for the Fiscal Quarter ending September 30, 2000 and for any Fiscal Quarter thereafter. (iii) Maximum Capital Expenditures. From March 1, 2000 through the Maturity Date make Capital Expenditures for the Borrower and all Subsidiaries on a consolidated basis in excess of $2,000,000. t) Section 5.2(d) of the Credit Agreement is amended by the deletion of subsection (v) thereto and the insertion of a new subsection (v) that shall read in its entirety as follows: (v) other Debt in the aggregate principal amount of $2,000,000 from March 1, 2000 through the Maturity Date. u) Section 5.2(g) of the Credit Agreement is amended by the deletion of subsection (iii) thereto and the insertion of a new subsection (iii) that shall read in its entirety as follows: (iii) up to $250,000 in fair market value of other Dispositions from March 1, 2000 to the Maturity Date, or v) Subsections (a) and (c) of Section 6.1 of the Credit Agreement are amended and restated in their entirety as follows: -6- 7 (a) Payments under the Agreement and the Notes. The Borrower shall fail to pay any principal of, or interest on, the Notes when the same become due and payable. (c) Other Loan Instrument Obligations. (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in the Agreement, or (ii) the Borrower shall fail to perform or observe any term, covenant or agreement contained in any Loan Instrument to which it is a party, or (iii) any Guarantor shall fail to perform or observe any term, covenant or agreement contained in any Loan Instrument to which it is a party. w) Schedule 2.1 of the Credit Agreement is amended and restated in the form of the attached Exhibit A and the Commitments of the Banks shall be reduced to the amounts set forth in such Schedule 2.1, as amended. x) The Agent shall from time to time provide to Borrower revisions of Exhibit B-2, Form of Compliance Certificate and Exhibit B-4, Form of Borrowing Base Certificate, that shall accommodate the amendments to such forms that arise out of this Amendment. The Borrower shall utilize the revised forms of Compliance Certificate and Borrowing Base Certificate on and after its receipt thereof. 2. Conditions Precedent. In the judgement of the Agent, each of the following conditions shall have been satisfied: (a) A Reaffirmation of Guaranty, in form and substance satisfactory to the Agent, shall have been executed and delivered to the Agent by all of the Guarantors: (b) The Borrower shall have paid the Agent an Amendment Fee of $34,375.00 for the pro rata benefit of the Banks; (c) The Borrower shall have paid the Agent an Administrative Fee of $5,000.00 for the sole benefit of the Agent; and (d) The Borrower shall have paid the reasonable legal fees and expenses incurred by the Agent in connection with the preparation of this Amendment and related instruments. (e) The Agent shall have received such other documents and instruments that the Agent may request to effect the purposes of this Amendment. 3. Representations and Warranties. In order to induce the Banks to agree to this Amendment, the Borrower makes the following representations and warranties, which shall survive the execution and delivery of this Amendment: (a) No Event of Default has occurred and is continuing and no Event of Default will exist immediately after giving effect to the amendment contained herein; -7- 8 (b) Each of the representations and warranties set forth in Article IV of the Credit Agreement are true and correct as though such representations and warranties were made at and as of the Amendment Effective Date, except to the extent that any such representations or warranties are made as of a specified date or with respect to a specified period of time, in which case such representations and warranties shall be made as of such specified date or with respect to such specified period. Each of the representations and warranties made under the Credit Agreement shall survive to the extent provided therein and not be waived by the execution and delivery of this Amendment; (c) The Borrower is a duly organized, and validly existing corporation and has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Amendment, and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment; (d) No consent of any other Person or filing or action by any Governmental Authorities, is required to authorize the execution, delivery and performance of this Amendment; (e) This Amendment has been duly executed by a duly Authorized Signatory on behalf of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, except as enforcement thereof may be subject to the effect of any applicable (i) bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and (ii) general principals of equity; and (f) The execution and delivery and performance of the agreements in this Amendment will not violate any law, statute or regulation applicable to the Borrower or any order or decree of any Governmental Authorities, or conflict with or result in the breach or any contractual obligation of the Borrower. 4. Effectiveness. The amendments to the Credit Agreement set forth herein shall become effective as of March 6, 2000 after the Agent shall have received this Amendment, executed and delivered by the Borrower and the Banks and all of the conditions precedent set forth in Section 3 above, have been satisfied (the "Amendment Effective Date"). 5. Counterparts. This Amendment may be executed in counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. 6. Expenses. The Borrower agrees to pay all reasonable costs and expenses, including filing and recording fees, incurred by the Agent in connection with the preparation, execution and delivery of this Amendment and any other documents, or instruments which may be delivered in connection herewith, including without limitation, the reasonable fees and expenses of Davis, Graham & Stubbs LLP, counsel for the Agent. -8- 9 7. Governing Law. The rights and duties of the Borrower, the Banks and the Agent under this Amendment shall be governed by the law of the State of Colorado. 8. Release. In consideration of the amendments provided herein, the Borrower releases and discharges the Banks and the Agent, and their respective directors, officers, employees, agents, successors and assigns from all claims and causes of action of any nature whatsoever, which the Borrower, its successors and assigns ever had or have as of the date hereof against the Banks and the Agent that arise, directly or indirectly, out of or are related to the Credit Agreement. The Borrower acknowledges that the Obligations arising under the Credit Agreement are not subject to any such counterclaim, offset, defense or rights of recoupment against the Banks. 9. Ratification. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects confirmed, approved and ratified. Except to the extent amended hereby, all terms and conditions of the Credit Agreement remain the same. All references to the Credit Agreement in any of the Loan Instruments shall mean the Credit Agreement as amended by this Amendment. IN WITNESS WHEREOF the Banks have caused this Amendment to be duly executed as of the date first written above. BANK ONE, COLORADO, N.A., KEYBANK NATIONAL ASSOCIATION as Agent and Bank By By -------------------------------- -------------------------------- Shaun P. McCarthy K. Alexander Curry Vice President Vice President NATIONAL CITY BANK OF INDIANA THE FIFTH THIRD BANK OF CENTRAL INDIANA By By -------------------------------- -------------------------------- Michael J. Stewart Erik Miner Vice President Vice President AGREED AND ACCEPTED: ANALYTICAL SURVEYS, INC. By -------------------------------- Sol C. Miller President and Chief Executive Officer -9- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 4-MOS SEP-30-1999 OCT-1-1999 DEC-31-1999 4,018 0 40,211 119 0 52,942 16,968 9,571 84,081 15,966 0 0 0 32,105 16,884 84,081 0 16,843 0 20,469 25 0 501 (4,152) (1,475) (2,677) 0 0 0 (2,677) (.39) (.39)
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