Geospace Technologies Reports Fiscal Year 2014 Third Quarter Results

HOUSTON--()--Geospace Technologies (NASDAQ:GEOS) today announced net income of $3.8 million, or $0.29 per diluted share, on revenues of $40.7 million for its fiscal quarter ended June 30, 2014. This compares with a net income of $17.0 million, or $1.31 per diluted share, on revenues of $78.1 million for the comparable quarter last year.

For the nine months ended June 30, 2014, the company recorded revenues of $210.6 million and net income of $38.7 million, or $2.95 per diluted share. For the comparable period last year, the company recorded revenues of $232.3 million and net income of $55.9 million, or $4.32 per diluted share.

Walter R. (“Rick”) Wheeler, Geospace Technologies’ President and CEO, said, “In the third quarter of fiscal year 2014, revenues and net income were down by 48% and 78% respectively from last year’s third quarter. This reduction in revenue is attributed to lower demand for our products across all our product segments. In particular, our seismic reservoir products segment exhibited the largest decrease of $31.2 million. This was caused by the completion of the Statoil order in April, wherein only $6.7 million of revenues from the contract appeared in the third quarter. As previously reported, the manufacturing portion of our Statoil contract has come to an end, and we have no permanent reservoir monitoring (PRM) contracts in hand at this time; however, we remain optimistic that our PRM products will contribute significantly to our results of operations in the future. While we have no such contracts at this time, we are aware of a number of operators around the world who are considering PRM systems for their fields. We believe we are the world leader in the design and construction of such systems.”

“Sales of our traditional and wireless products saw respective declines of roughly 8% and 24% compared to the third quarter last year. Lower demand in both of these product segments is a direct reflection of reduced exploration activity experienced by the seismic industry during the first half of calendar year 2014, especially in North America. As seismic acquisition contractors consolidate and stack their crews in response to diminished backlog, their needs for our equipment drop. And while some of our customers forecast improved activity in the second half of 2014, we expect demand for these products to remain soft through the end of the fiscal year, as demands for new equipment often lag such activity improvements. We are nonetheless well positioned for sales and rental opportunities in this reduced market when contractors look to reduce costs and gain the efficiencies that our equipment provides over legacy cabled systems. For the third quarter, we sold almost 8,000 GSX channels comprised mostly of used channels from our rental fleet. We also sold 200 OBX stations to a Russian customer. Customer interest, quote inquiries, and in-field testing and utilization of our cableless OBX ocean bottom system continue to rise. Currently, we have 3,300 OBX stations rented and utilized on a job in Alaska.”

“Despite the impact of industry softness on sales of our seismic products, our rental business continued to gain traction with our customers as third quarter rental revenues were $7.3 million compared to $1.4 million last year. For the nine months ended June 30, 2014, rental revenues were $20.5 million compared to $10.8 million for the corresponding period last year. The majority of these revenues were derived from our GSX and OBX cableless products although we also rent our borehole and traditional products.”

“Seafloor Geophysical Solutions has been unabated in their effort to secure new backing and financing to proceed with their business plan to deploy our deep-water OBX system. We remain encouraged by their efforts, but have no specific knowledge about when or if a successful completion might occur. Irrespective of the outcome, we believe this matter will be concluded by the end of the fiscal year.”

“Because of our optimism about the future of our PRM products, our plans for construction of a new building at our Pinemont facilities continue to progress and unfold. Final aspects of the base structural and architectural designs are being made now and are targeted for completion in a few weeks. Applying a realistic view toward the timing of approval and permitting processes, it is unlikely that any significant construction will take place on the new building in this fiscal year. Current cost estimates for the new building range from $20 to $25 million with most of this investment expected to fall into fiscal year 2015. Construction efforts to refurbish and remodel a smaller peripheral building on the property, which we intend to permanently utilize, are in final stages. To that end, we are on track for moving operations from one of our rented satellite facilities into this building near the end of September 2014.”

Conference Call Information

Geospace Technologies will host a conference call to review its fiscal year 2014 third quarter financial results on August 7, 2014, at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can access the call at (866) 952-1906 (US) or (785) 424-1825 (International). Please reference the conference ID: GEOSQ314 prior to the start of the conference call. A replay will be available for approximately 60 days and may be accessed through the Investor tab of our website at www.geospace.com.

About Geospace Technologies

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The company also designs and manufactures non-seismic products, including industrial products, offshore cables, thermal printing equipment and film.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included herein including statements regarding potential future products and markets, our potential future revenues, future financial position, business strategy, future expectations and estimates and other plans and objectives for future operations, are forward-looking statements. We believe our forward-looking statements are reasonable. However, they are based on certain assumptions about our industry and our business that may in the future prove to be inaccurate. Important factors that could cause actual results to differ materially from our expectations include the level of seismic exploration worldwide, which is influenced primarily by prevailing prices for oil and gas, the extent to which our new products are accepted in the market, the availability of competitive products that may be more technologically advanced or otherwise preferable to our products, tensions in the Middle East and other factors disclosed under the heading “Risk Factors” and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are on file with the Securities and Exchange Commission. Further, all written and verbal forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

   
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
 
Three Months Ended Nine Months Ended
June 30, 2014   June 30, 2013 June 30, 2014   June 30, 2013
 
Revenues:
Products $ 33,437 $ 76,449 $ 190,167 $ 221,519
Rental equipment   7,291     1,399     20,460     10,800  
Total revenues 40,728 78,148 210,627 232,319
 
Cost of sales:
Products 21,902 41,988 110,540 116,141
Rental equipment   3,450     2,285     9,716     6,197  
Total cost of sales   25,352     44,273     120,256     122,338  
 

Gross profit

15,376 33,875 90,371 109,981
 

Operating expenses:

Selling, general and administrative 6,237 5,610 19,493 16,872
Research and development 3,667 3,327 13,139 10,460
Bad debt expense (recovery)   14     (53 )   658     554  
Total operating expenses   9,918     8,884     33,290     27,886  
 
Income from operations   5,458     24,991     57,081     82,095  
 
Other income (expense):
Interest expense (143 ) (62 ) (378 ) (192 )
Interest income 12 236 68 695
Foreign exchange gains (losses) 52 (235 ) 132 (903 )
Other, net   (50 )   11     (88 )   (8 )
Total other income (expense), net   (129 )   (50 )   (266 )   (408 )
 
Income before income taxes 5,329 24,941 56,815 81,687
Income tax expense   1,577     7,950     18,071     25,814  
 
Net income $ 3,752   $ 16,991   $ 38,744   $ 55,873  
 
 
Basic earnings per share $ 0.29   $ 1.32   $ 2.96   $ 4.34  
 
Diluted earnings per share $ 0.29   $ 1.31   $ 2.95   $ 4.32  
 
 

Weighted average shares outstanding - Basic

 

12,951,845

   

12,911,316

   

12,949,807

   

12,873,677

 

Weighted average shares outstanding - Diluted

 

13,999,807

   

12,982,322

   

13,000,103

   

12,943,105

 
 
     
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
June 30, 2014 September 30, 2013
ASSETS (unaudited)
 
Current assets:
Cash and cash equivalents $ 52,608 $ 2,726
Short-term investments 5,949 --
Trade accounts receivable, net 25,345 49,756
Notes receivable, net 3,846 5,290
Inventories, net 146,847 149,548
Costs and estimated earnings in excess of billings -- 12,400
Deferred income tax assets 7,266 7,056
Prepaid expenses and other current assets   6,409   6,327
 
Total current assets 248,270 233,103
 
Rental equipment, net 55,183 36,908
Property, plant and equipment, net 49,587 48,480
Goodwill 1,843 1,843
Non-current deferred income tax assets 351 594
Prepaid income taxes 6,310 6,201
Other assets   111   96
 
Total assets $ 361,655 $ 327,225
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable trade $ 4,697 $ 16,737
Accrued expenses and other current liabilities 16,315 16,638
Deferred revenue 4,066 1,093
Deferred income tax liabilities 22 12
Income taxes payable   3,192   159
 
Total current liabilities 28,292 34,639
 
Long-term debt --- 931
Non-current deferred income tax liabilities   2,088   2,597
 
Total liabilities   30,380   38,167
 
Commitments and contingencies
 
Stockholders’ equity:
Preferred stock -- --
Common stock 131 129
Additional paid-in capital 69,948 65,985
Retained earnings 262,752 224,008
Accumulated other comprehensive loss   (1,556)   (1,064)
 
Total stockholders’ equity   331,275   289,058
 
Total liabilities and stockholders’ equity $ 361,655 $ 327,225

Contacts

Geospace Technologies
Walter R. Wheeler, 713-986-4444
President and CEO
Fax: 713-986-4445

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Contacts

Geospace Technologies
Walter R. Wheeler, 713-986-4444
President and CEO
Fax: 713-986-4445