UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

for the Quarterly Period Ended June 30, 2015 OR

for the transition period from ____ to ____

Commission file number 001-13601

 

GEOSPACE TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

7007 Pinemont Drive

Houston, Texas  77040-6601

(Address of Principal Executive Offices) (Zip Code)

(713) 986-4444

(Registrant’s telephone number, including area code)

 

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      

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes     X       No       

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes           No   X

There were 13,147,916 shares of the Registrant’s Common Stock outstanding as of the close of business on July 31, 2015.

 

 

 

 

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Table of Contents

 

 

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PART I - FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

1.   Significant Accounting Policies

Basis of Presentation

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2014 was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at June 30, 2015 and the consolidated statements of operations and statements of comprehensive income (loss) for the three and nine months ended June 30, 2015 and 2014, and the consolidated statements of cash flows for the nine months ended June 30, 2015 and 2014 were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. The results of operations for the three and nine months ended June 30, 2015 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to the rules of the Securities and Exchange Commission. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2014.

Reclassifications

Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation. During the nine months ended June 30, 2015, the Company reclassified $4.2 million in deposits made for equipment purchases in the prior fiscal year from prepaid and other current assets to property, plant and equipment on its consolidated balance sheet. Such reclassification had no effect on net income (loss), stockholders’ equity or cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to bad debt reserves, inventory obsolescence reserves, percentage-of-completion revenue recognition, self-insurance reserves, product warranty reserves, long-lived assets, intangible assets and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents.

Short-term Investments

The Company classifies its short-term investments consisting of corporate bonds, government bonds and other such similar investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized holding gains and losses reported each period as a component of accumulated other comprehensive income (loss) in stockholders’ equity. See note 2 for additional information.

Inventories

The Company records a write-down of its inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of cost or market value. Cost is determined on the first-in, first-out method, except that certain of the Company’s foreign subsidiaries use an average cost method to value their inventories.

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

Impairment Review of Goodwill and Long-lived Assets

At June 30, 2015, the Company had $1.8 million of goodwill reflected in its consolidated balance sheet. In accordance with FASB ASC 350, “Intangibles – Goodwill and Other,” we perform goodwill impairment testing at least annually, unless indicators of impairment exist in interim periods. In recent months, business conditions in the oil and gas industry have significantly deteriorated and the market value of the Company’s stock has declined. In light of the foregoing, we concluded that it was appropriate for us to perform an interim goodwill impairment test as of June 30, 2015. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. Based on the results of our step one test as of June 30, 2015, management concluded that goodwill was not impaired; however, if conditions worsen or do not recover there could be impairments in the future. In connection with our goodwill impairment test, management also reviewed the recoverability of the carrying value of the Company’s rental equipment and property, plant and equipment based on future undiscounted cash flows and determined that no such impairment of these assets was necessary at June 30, 2015.  

Revenue Recognition – Products and Services

The Company primarily derives revenue from the sale of its manufactured products, including revenues derived from the sale of its manufactured rental equipment. In addition, the Company generates revenue from the short-term rental under operating leases of its manufactured products. Except for revenues recognized using the percentage-of-completion method discussed below, the Company recognizes revenue from product sales, including the sale of used rental equipment, when (i) title passes to the customer, (ii) the customer assumes the risks and rewards of ownership, (iii) the product sales price has been determined, (iv) collectability of the sales price is reasonably assured, and (v) product delivery occurs as directed by the customer. Except for certain of the Company’s reservoir characterization products, the Company’s products are generally sold without any customer acceptance provisions and the Company’s standard terms of sale do not allow customers to return products for credit. The Company recognizes rental revenues as earned over the rental period. Rentals of the Company’s equipment generally range from daily rentals to rental periods of up to six months or longer. Revenues from engineering services are recognized as services are rendered over the duration of a project, or as billed on a per hour basis. Field service revenues are recognized when services are rendered and are generally priced on a per day rate.

Revenue Recognition – Percentage of Completion

The Company utilizes the percentage-of-completion method (the “POC Method”) to recognize revenues and costs on contracts having the following characteristics:

The POC Method requires the Company’s senior management to make estimates, at least quarterly, of the (i) total expected costs of the contract, (ii) manufacturing progress against the contract and (iii) the estimated cost to complete the contract. These estimates impact the amount of revenue and gross profit the Company recognizes for each reporting period. Significant estimates that may affect the future cost to complete a contract include the cost and availability of raw materials and component parts, engineering services, manufacturing equipment, labor, manufacturing capacity, factory productivity, contract penalties and disputes, product warranties and other contingent factors. Change orders are included in the total estimated contract revenue when it is probable that the change order will result in additional value that can be reliably estimated and realized. The Company defers recognition of the entire amount of revenue or portion thereof associated with unapproved change orders if there is substantial uncertainty as to amounts involved or ultimate realization. The cumulative impact of periodic revisions to the future cost to complete a contract will be reflected in the period in which these changes become known, including, to the extent required, the recognition of losses at the time such losses are known and estimable. Due to the various estimates inherent in the POC Method, actual final results at the conclusion of a contract could differ from management’s previous estimates.

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

The Company analyzes a variety of indicators to determine manufacturing progress, including actual costs incurred to date compared to total estimated costs and actual quantities produced to date compared to total contract quantities.

Cost of sales includes direct contract costs, such as materials and labor, and indirect costs that are attributable to a contract’s production activity. The timing of when the Company invoices its customer is dependent upon the completion of certain production milestones as defined in the contract. Cumulative contract costs and estimated earnings to date in excess of cumulative billings are reported as a current asset on the consolidated balance sheet as “costs and estimated earnings in excess of billings.” Cumulative billings in excess of cumulative costs and estimated earnings are reported as a current liability on the consolidated balance sheet as “billings in excess of costs and estimated earnings.” Any uncollected billed revenue, including contract retentions, is included in “trade accounts receivable, net.”

The Company has no contracts accounted for under the POC Method at June 30, 2015 and September 30, 2014.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, department supplies, direct project costs and other related costs.

Product Warranties

Most of the Company’s products do not require installation assistance or sophisticated instructions. The Company offers a standard product warranty obligating it to repair or replace equipment with manufacturing defects. The Company maintains a reserve for future warranty costs based on historical experience or, in the absence of historical product experience, management’s estimates. Reserves for future warranty costs are included within accrued expenses and other current liabilities on the consolidated balance sheets. Changes in the warranty reserve are reflected in the following table (in thousands):

 

 

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going Concern”, which provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and to provide related footnote disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customer (Topic 606).” The amendment applies a new five-step revenue recognition model to be used in recognizing revenues associated with customer contracts. The amendment requires disclosure sufficient to enable readers of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill the contract. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

 

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

2.   Short-term Investments

 

 

 

Accumulated other comprehensive loss on the consolidated balance sheets at June 30, 2015 and September 30, 2014 included unrealized losses (net of tax) of $13,000 and $26,000, respectively.

 

 

3.   Derivative Financial Instruments

At June 30, 2015 and September 30, 2014, the Company’s Canadian subsidiary had $27.7 million and $29.8 million, respectively, of Canadian dollar denominated intercompany accounts payable owed to one of the Company’s U.S. subsidiaries.  In order to mitigate its exposure to movements in foreign currency rates between the U.S. dollar and Canadian dollar, the Company routinely enters into foreign currency forward contracts to hedge a portion of its exposure to changes in the value of the Canadian dollar.   Approximately $3.1 million of these Canadian dollar denominated intercompany accounts payable are considered by management to be of a short-term nature whereby the appreciation or devaluation of the Canadian dollar against the U.S. dollar will result in a gain or loss, respectively, to our consolidated statement of operations.  The Company considers the remaining $24.6 million to be of a long-term nature and whereby settlement is not planned or anticipated in the foreseeable future; therefore, any resulting foreign income exchange gains and losses are reported in the consolidated balance sheets as a component of other comprehensive income in accordance with ASC 830 “Foreign Currency Matters”.  In June 2015, the Company entered into a $3.0 million 90-day hedge contract with a United States bank to hedge its short-term Canadian dollar foreign exchange rate exposure.  This contract reduces the impact on cash flows from movements in the Canadian dollar/U.S. dollar currency exchange rate, but has not been designated as a hedge for accounting purposes.  

At June 30, 2015, the Company had an accrued unrealized foreign exchange gain of $28,000 under this contract.

The following table summarizes the gross fair value of all derivative instruments, which are not designated as hedging instruments and their location in the consolidated balance sheets (in thousands):

 

 

The following table summarizes the impact of the Company’s derivatives on the consolidated statements of operations for the three and nine month periods ended June 30, 2015 and 2014 (in thousands):

 

 

Amounts in the above table include realized and unrealized derivative gains and losses.

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

 

 

4.   Fair Value of Financial Instruments

At June 30, 2015, the Company’s financial instruments included cash and cash equivalents, short-term investments, foreign currency forward contract, trade and notes receivables and accounts payable.  Due to the short-term maturities of cash and cash equivalents, trade and other receivables and accounts payable, the carrying amounts approximate fair value on the respective balance sheet dates.

The Company measures its short-term investments and derivative instruments at fair value on a recurring basis.  The fair value measurement of the Company’s short-term investments and derivative instruments was determined using the following inputs (in thousands):

 

 

 

The Company applies fair value techniques on a non-recurring basis in evaluating potential impairment losses related to goodwill and long-lived assets.

 

 

5.   Accounts and Notes Receivable

Current trade accounts are reflected in the following table (in thousands):

 

 

The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses.  The Company determines the allowance based upon historical experience and a review of its balances.  Accounts receivable balances are charged off against the allowance whenever it is probable that the receivable will not be recoverable.  The Company does not have any off-balance-sheet credit exposure related to its customers.

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

Notes receivable, net are reflected in the following table (in thousands):

 

 

During the nine months ended June 30, 2015, notes receivable were reduced $0.8 million in connection with the return of rental equipment from a customer in a non-cash transaction.

 

 

6.   Inventories

Inventories consist of the following (in thousands):

 

 

During the nine months ended June 30, 2015 and 2014, the Company made non-cash inventory transfers of $4.8 million and $7.0 million, respectively, to its rental equipment fleet. Raw materials include semi-finished goods and component parts totaling $45.1 million and $43.6 million at June 30, 2015 and September 30, 2014, respectively.

 

 

7.   Long-Term Debt

The Company had no long-term debt outstanding at June 30, 2015 and September 30, 2014.

On March 2, 2011, the Company entered into a credit agreement with Frost Bank.  On September 27, 2013, the Company amended the credit agreement and increased its borrowing availability to $50.0 million (as amended, the “Credit Agreement”).  The interest rate for borrowings under the Credit Agreement was a LIBOR based rate with a margin spread of 250 to 325 basis points depending upon the maintenance of certain ratios.  

On May 4, 2015, the Company amended the Credit Agreement which reduced its borrowing availability to $30.0 million with amounts available for borrowing determined by a borrowing base.  Under the amendments to the Credit Agreement, the borrowing base is determined based upon certain of the Company’s and its U.S. subsidiaries’ assets which include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii) 25% of certain inventories (excluding work-in-process inventories).  As of June 30, 2015, the Company’s borrowing base was $39.8 million resulting in borrowing availability of $30.0 million less any outstanding letters of credit.  Borrowings under the Credit Agreement as amended are secured by substantially all of the Company’s assets.  In addition, the Company’s domestic subsidiaries have guaranteed the obligations of the Company under the Credit Agreement and such subsidiaries have secured the obligations by the pledge of substantially all of the assets of such subsidiaries.  The Credit Agreement as amended expires on May 4, 2018 and all borrowed funds are due and payable at that time.  The Company is required to make monthly interest payments on borrowed funds.  The Credit Agreement as amended limits the incurrence of additional indebtedness, requires the maintenance of a single financial ratio that compares certain of the Company’s assets to certain of its liabilities, restricts the Company and its subsidiaries’ ability to pay cash dividends and contains other covenants customary in agreements of this type.  The interest rate for borrowings under the Credit Agreement as amended is based on the Wall Street Journal prime rate, which was 3.25% at June 30, 2015.

At June 30, 2015, the Company was in compliance with all covenants under the Credit Agreement.  At June 30, 2015, the Company had standby letters of credit outstanding in the amount of $130,000.  

 

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

8.   Accumulated Other Comprehensive Loss:

Accumulated other comprehensive loss consisted of the following (in thousands):

 

 

 

9.   Stock-Based Compensation:

On November 21, 2013, the Company issued 184,000 shares of restricted stock under the 1997 Key Employee Stock Option Plan, as amended.  The fair value of the Company’s common stock on the date of grant was $98.68 per share, and the total grant-date fair value related to these awards, net of estimated forfeitures, was $17.3 million which will be charged to expense over four years as the restrictions lapse.  During fiscal year 2014, the Company issued a total of 13,000 shares of restricted stock under the 2014 Long Term Incentive Plan, as amended (“the Plan”) at a weighted average grant date fair value of $45.68 per share.  During the first nine months of fiscal year 2015, the Company issued a total of 3,000 shares of restricted stock under the Plan at a weighted average grant date fair value of $19.13 per share.   Recipients of restricted stock awards are entitled to vote such shares and are entitled to dividends if paid.

Compensation expense for restricted stock awards is determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of shares that are anticipated to fully vest.  As of June 30, 2015, we had unrecognized compensation expense of approximately $10.4 million relating entirely to restricted stock awards.  The weighted average period over which this unrecognized expense is expected to be recognized is approximately 2.5 years.

 

 

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

10.   Earnings (Loss) Per Common Share

The Company applies the two-class method in calculating per share data.  The following table summarizes the calculation of net earnings (loss) and weighted average common shares and common equivalent shares outstanding for purposes of the computation of earnings (loss) per share (in thousands, except share and per share data):

 

 

 

11.  Commitments and Contingencies

The Company is involved in various pending or potential legal actions in the ordinary course of our business. Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty of litigation. However, management believes that the most probable, ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

 

12.   Segment Information

The Company reports and evaluates financial information for two segments:  Seismic and Non-Seismic. Seismic product lines include land and marine wireless data acquisition systems, seabed reservoir characterization products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products.  The Non-Seismic product lines include thermal imaging products and industrial products.  

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GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

The following table summarizes the Company’s segment information (in thousands):

 

 

 

13.   Income Taxes

The Company’s effective tax rates for the three months ended June 30, 2015 and 2014 were (33.8)% and 29.7%, respectively.   The Company’s effective tax rates for the nine months ended June 30, 2015 and 2014 were (34.6)% and 31.8%, respectively. The lower effective tax rates for each of the periods ended June 30, 2014 primarily resulted from a manufacturers’/producers’ deduction available to U.S. manufacturers.

 

 

 

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of the major elements of our consolidated financial statements.  You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein, if any, contain “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.  These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating” or similar words.  Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information.  Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the adoption and sale of our products in various geographic regions, anticipated levels of capital expenditures and the sources of funding therefore, and our strategy for growth, product development, market position, financial results and reserves.  These forward-looking statements reflect our best judgment about future events and trends based on the information currently available to us.  However, there will likely be events in the future that we are not able to predict or control.  The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014, as well as other cautionary language in such Annual Report and this Quarterly Report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.  The occurrence of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations.  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.

Business Overview

Geospace Technologies Corporation is a Texas corporation originally incorporated in Delaware on September 27, 1994.  At the Company’s 2014 Annual Meeting of Stockholders, the Company’s stockholders approved the reincorporation of the Company from the State of Delaware to the State of Texas pursuant to a merger of the Company with and into a newly formed Texas corporation wholly owned by the Company. Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries.

We design and manufacture instruments and equipment used in the acquisition and processing of seismic data as well as in the characterization and monitoring of producing oil and gas reservoirs.  Demand for our products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.  For more information, please refer to the risks discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

We have engaged in the seismic instrument and equipment business since 1980 and market our products primarily to the oil and gas industry.  We also design, manufacture and distribute non-seismic equipment including thermal imaging equipment and industrial products.  We report and categorize our customers and products into two different segments: Seismic and Non-Seismic.

Available Information

We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).  Our SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov.  You may also read and copy any document we file at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on their public reference room.  Our SEC filings are also available to the public on our website at http://www.geospace.com.  From time to time, we may post investor presentations on our website under the “Investor Relations” tab.  Please note that information contained on our website, whether currently posted or posted in the future, is not a part of this Quarterly Report on Form 10-Q or the documents incorporated by reference in this Quarterly Report on Form 10-Q.

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Products and Product Development

Seismic Products

Our seismic business segment accounts for the majority of our revenues. Geoscientists use seismic data primarily in connection with the exploration, development and production of oil and gas reserves to map potential and known hydrocarbon bearing formations and the geologic structures that surround them. Our seismic product lines currently consist of land and marine nodal data acquisition systems, permanent land and seabed reservoir monitoring products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products. Our seismic products are compatible with most major competitive seismic data acquisition systems currently in use. We believe that our seismic products are among the most technologically advanced instruments and equipment available for seismic data acquisition.

Traditional Products

An energy source and a data recording system are combined to acquire seismic data. We provide many of the components of seismic data recording systems, including geophones, hydrophones, multi-component sensors, leader wire, geophone strings, connectors, seismic telemetry cables and other seismic related products. On land, our customers use geophones, leader wire, cables and connectors to receive and measure seismic reflections resulting from an energy source into data recording units, which store the seismic information for subsequent processing and analysis. In the marine environment, large ocean-going vessels tow long seismic cables known as “streamers” containing hydrophones which are used to detect pressure changes. Hydrophones transmit electrical impulses back to the vessel’s data recording unit where the seismic data is stored for subsequent processing and analysis. Our marine seismic products help steer streamers while being towed and help recover streamers if they become disconnected from the vessel.

Our seismic sensor, cable and connector products are compatible with most major competitive seismic data acquisition systems currently in use. Sales result primarily from seismic contractors purchasing our products as components of new seismic data acquisition systems or to repair and replace components of seismic data acquisition systems already in use.

Our products used in marine seismic data acquisition include our marine seismic streamer retrieval devices (“SRDs”). Occasionally, streamer cables are severed and become disconnected from the vessel as a result of obstacles, inclement weather, vessel traffic or human error. Our SRDs, which are attached to the streamer cables, contain air bags which are designed to inflate automatically at a given water depth, bringing the severed streamer cables to the surface. These SRDs save the seismic contractors significant time and money compared to the alternative of losing the streamer cable. We also produce seismic streamer steering devices, or “birds,” which are fin-like devices that attach to the streamer cable. These birds help maintain the streamer cable at a certain desired depth as it is being towed through the water.

Our wholly-owned subsidiary in the Russian Federation manufactures international standard geophones, sensors, seismic leader wire, seismic telemetry cables and related seismic products for customers in the Russian Federation and other international seismic marketplaces. We have a branch office in Colombia that primarily rents seismic equipment to our customers in the South American market.

Wireless Products

We have developed a land-based wireless (or nodal) seismic data acquisition system called the GSX.  Each GSX station operates independently and therefore can be deployed in virtually unlimited channel configurations.  Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each GSX station operates as an independent data collection system.  As a result, our GSX system requires less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight and ease of operation.  Our GSX system is designed into configurations ranging from one to four channels per station.  Since its introduction in 2008 and through June 30, 2015, we have sold 332,000 GSX channels and we have 129,000 GSX channels in our rental fleet.  We do not expect to expand our GSX rental fleet in the foreseeable future.  

We have also developed a marine-based wireless seismic data acquisition system called the OBX.  Similar to our GSX land-based wireless system, the marine OBX system can be deployed in virtually unlimited channel configurations and does not require interconnecting cables between each station.  Our deep water versions of the OBX system can be deployed in depths of up to 3,450 meters.  Through June 30, 2015, we have sold 450 OBX stations and we have 4,500 OBX stations in our rental fleet.  We expect to make additional investments in our OBX rental fleet in fiscal year 2015 and beyond.

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Reservoir Products

Seismic surveys repeated over selected time intervals show dynamic changes within the reservoir and can be used to monitor the effects of oil and gas production. In this regard, we have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields. We also produce a retrievable version of our ocean-bottom system for use on fields where permanently installed systems are not appropriate or economical. Utilizing these tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

Our high-definition reservoir monitoring products include the HDSeis™ product line and a suite of borehole and reservoir monitoring products and services. Our HDSeis™ system is a high-definition seismic data acquisition system with flexible architecture that allows it to be configured as a borehole seismic system or as a subsurface system for both land and marine reservoir-monitoring projects. The scalable architecture of the HDSeis™ system enables custom designed system configuration for applications ranging from low-channel engineering and environmental-scale surveys requiring a minimum number of recording channels to high-channel surveys required to efficiently conduct permanent reservoir imaging and monitoring. Modular architecture allows virtually unlimited channel expansion. In addition, multi-system synchronization features make the HDSeis™ system well suited for multi-well or multi-site acquisition, simultaneous surface and downhole acquisition and continuous reservoir monitoring projects.

Reservoir monitoring requires special purpose or custom designed systems in which portability becomes less critical and functional reliability assumes greater importance. This reliability factor helps assure successful operations in inaccessible locations over a considerable period of time. Additionally, reservoirs located in deep water or harsh environments require special instrumentation and new techniques to maximize recovery. Reservoir monitoring also requires high-bandwidth, high-resolution seismic data for engineering project planning and reservoir management. We believe our HDSeis™ System and tools, designed for cost-effective deployment and lifetime performance, will make borehole and seabed seismic acquisition a cost-effective and reliable process for the challenges of reservoir monitoring. Our multi-component seismic product developments include an omni-directional geophone for use in reservoir monitoring, a compact marine three-component or four-component gimbaled sensor and special-purpose connectors, connector arrays and cases.

In November 2012, we received an order from Statoil (the “Statoil Order”) for $171.7 million, including amendments, to instrument two reservoirs in the North Sea.  During the fiscal years ended September 30, 2013 and 2014, we recognized revenues of $109.6 million and $62.1 million, respectively, from the Statoil Order using the percentage of completion revenue recognition method.  Also during the fiscal year ended September 30, 2014, we delivered a $5.0 million permanent land reservoir monitoring system for use in Saudi Arabia and a $4.4 million system to enlarge BP’s existing Valhall field system.  We have not delivered nor have we received orders for any permanent reservoir monitoring systems during the first nine months of fiscal year 2015.  

In addition, we produce seismic borehole acquisition systems which employ a fiber optic augmented wireline capable of very high data transmission rates. These systems are used for several reservoir monitoring applications, including an application pioneered by us allowing operators and service companies to monitor and measure the results of fracturing operations.  

Non-Seismic Products

Our non-seismic businesses leverage upon our existing manufacturing facilities and engineering capabilities. We have found that many of our seismic products, with little or no modification, have direct application to industries beyond those involved in oil and gas exploration and development. For example, our customers utilize our seismic borehole tools to monitor subsurface carbon dioxide injections and for mine safety applications.

Our non-seismic products include thermal imaging products targeted at the commercial graphics industry as well as various industrial products which include (i) sensors and tools for vibration monitoring, mine safety application and earthquake detection, (ii) cables for power and communication for the offshore oil and gas and offshore construction industries, and (iii) water meter cables and other specialty cable and connector products.

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Consolidated Results of Operations

We report and evaluate financial information for two segments: Seismic and Non-Seismic.  Summary financial data by business segment follows (in thousands):

 

 

Overview

During fiscal year 2013 and through the first half of fiscal year 2014, we experienced very strong market demand in both North American and international markets for our wireless GSX channels and geophone sensors.  Also during that period, we reported significant revenues from our seismic reservoir products, primarily from the Statoil Order.  Early in calendar year 2014, we began to experience a softening in the demand for our seismic exploration products, particularly in North America, as capital budgets for oil and gas producers were trending away from exploration-focused activities toward production and exploitation activities.  During this period oil production in North America’s unconventional shale reservoirs increased, as did oil production from non-OPEC countries, resulting in an oversupply of crude oil in the world market.  Since July 2014, market prices for a barrel of crude oil declined from over $100 to less than $50 today.  With the decline in oil and natural gas prices, exploration and production companies have had a significant reduction in cash flows resulting in sharp reductions in capital spending budgets for current and future oil and gas exploration and production activities, including seismic activities.  In addition, the Statoil Order was completed in April 2014 and we have not received any new orders for permanent reservoir monitoring systems since that time.  Consequently, revenues from our seismic business segment for the nine months ended June 30, 2015 declined 73.3%, from the corresponding period of the prior fiscal year, to $51.9 million resulting in an operating loss of $23.4 million.  We expect sales of our seismic products, and in particular our traditional and wireless products, to be challenged until crude oil prices stabilize and industry conditions improve.  We expect these challenging industry conditions to negatively impact the demand for our seismic products throughout fiscal year 2015 and beyond.

Three and nine months ended June 30, 2015 compared to three and nine months ended June 30, 2014

Consolidated revenues for the three months ended June 30, 2015 decreased by $21.0 million, or 51.6%, from the corresponding period of the prior fiscal year.  Consolidated revenues for the nine months ended June 30, 2015 decreased by $141.8 million, or 67.3%, from the corresponding period of the prior fiscal year.  These revenue decreases were attributable to substantially lower product demand in our seismic business segment.

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Consolidated gross profit (loss) for the three months ended June 30, 2015 decreased $18.7 million, or 121.5%, from the corresponding period of the prior fiscal year.  Consolidated gross profit for the nine months ended June 30, 2015 decreased $92.3 million, or 102.1%, from the corresponding period of the prior fiscal year.  The decrease in gross profit for the three and nine months ended June 30, 2015 was caused by a number of factors, including (i) significantly lower seismic product revenues, (ii) unabsorbed fixed manufacturing costs due to low factory utilization, (iii) fixed depreciation expenses from our rental equipment during periods of low rental equipment utilization, (iv) a sales mix containing a concentration of significantly lower-margin products caused by a substantial reduction in revenues from our wireless and reservoir products, (v) increased warranty costs due to product defects, and (vi) increased inventory obsolescence expenses due to higher levels of slow-moving inventories.  Should current industry conditions persist, we expect our seismic product profit margins to be under significant stress for the remainder of fiscal year 2015 and into the future due to each of the factors cited above.  In addition, continued negative industry conditions could lead to asset impairments in the future.

Consolidated operating expenses for the three and nine months ended June 30, 2015 decreased $0.8 million or 7.8%, and $4.3 million or 13.0%, respectively, from the corresponding periods of the prior fiscal year.  The decrease for each period ended June 30, 2015 was primarily due to the elimination of incentive compensation expenses and was partially offset by increased bad debt expense.  

Other expense for the three months and nine months ended June 30, 2015 increased $0.4 million and decreased $1.8 million, respectively, from the corresponding periods of the prior fiscal year.  These changes in other expense were primarily due to foreign exchange gains and losses attributable to U.S. dollar deposits held by our Russian subsidiary.  

Our effective tax rates for the three months ended June 30, 2015 and 2014 were (33.8)% and 29.7%, respectively.  Our effective tax rates for the nine months ended June 30, 2015 and 2014 were (34.6)% and 31.8%, respectively.  The lower effective tax rates for each of the periods ended June 30, 2014 primarily resulted from a manufacturers’/producers’ deduction available to U.S. manufacturers.

Seismic Products

Revenues

Our seismic product revenues for the three months ended June 30, 2015 decreased by $21.8 million, or 61.7%, from the corresponding period of the prior fiscal year.  Revenues of our seismic products for the nine months ended June 30, 2015 decreased by $142.4 million, or 73.3%, from the corresponding period of the prior fiscal year.  The components of this decrease include the following:

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Customer orders for our seismic products, especially large orders for our GSX and OBX wireless systems and our subsea permanent reservoir monitoring systems, generally occur irregularly making it difficult for us to predict our sales and production levels each quarter.  Furthermore, product shipping dates are generally determined by our customers and are not at our discretion.  As a result, these factors have caused past revenues of our seismic products to be unpredictable, or “lumpy,” and we expect this trend to continue into the future.

Operating Income (Loss)

Our operating income (loss) associated with revenues from our seismic products for the three months ended June 30, 2015 decreased by $18.4 million, or 225.8% from the corresponding period of the prior fiscal year.  Our operating income (loss) associated with revenues from our seismic products for the nine months ended June 30, 2015 decreased by $89.5 million, or 135.3%, from the corresponding period of the prior fiscal year. The decrease in operating income for the three and nine months ended June 30, 2015 was due to the substantial decline in our product revenues which, in turn, resulted in substantially lower gross profits due to the factors described above.

Non-Seismic Products

Revenues

Revenues from our non-seismic products for the three months ended June 30, 2015 increased by $0.9 million, or 17.1%, from the corresponding period of the prior fiscal year.  Revenues from our non-seismic products for the nine months ended June 30, 2015 increased by $0.6 million, or 4.0%, from the corresponding period of the prior fiscal year.  The increase in revenues for the three and nine months ended June 30, 2015 was primarily due to increased demand for our industrial products.  

Operating Income

Our operating income associated with revenues from our non-seismic products for the three months ended June 30, 2015 increased $0.2 million, or 25.0%, from the corresponding period of the prior fiscal year. Our operating income associated with revenues from our non-seismic products for the nine months ended June 30, 2015 increased $0.5 million, or 28.5%, from the corresponding period of the prior fiscal year.  The increase in operating income for the three and nine months ended June 30, 2015 was primarily the result of increased demand for our industrial products and margin improvements from our offshore cable products.  

Liquidity and Capital Resources

At June 30, 2015, we had approximately $25.6 million in cash and cash equivalents and $19.6 million in short-term investments.  For the nine months ended June 30, 2015, we used $6.8 million of cash from operating activities.  These uses of cash included (i) our net loss of $19.2 million, (ii) a $8.1 million decrease in accrued expenses and other current liabilities primarily due to the payment of fiscal year 2014 incentive compensation and calendar year 2014 property taxes, (iii) a $6.8 million increase in income tax receivable resulting from our pretax loss and our intent to claim a refund of taxes paid in prior years, (iv) a $1.8 million decrease in accounts payable due to declining inventory purchases resulting from reduced product demand, and (v) a $3.4 million decrease in deferred revenue primarily due to the revenue recognition of a $3.0 million non-refundable customer deposit.  These uses of cash were partially offset by (i) net non-cash charges of $18.6 million from deferred income taxes, depreciation, accretion, stock-based compensation, inventory obsolescence and bad debts, (ii) a $7.3 million decrease in trade accounts and notes receivable resulting from collections and a decline in revenues, (iii) a $5.3 million decrease in inventories caused by reduced product demand and a drawdown of our excess inventories, and (iv) a $2.8 million decrease in prepaid and other current assets.

For the nine months ended June 30, 2015, we used cash of $1.1 million from investing activities.  These uses of cash included (i) capital expenditures of $3.8 million to expand our rental equipment fleet and (ii) $2.0 million for additions to our property and equipment.  These uses of cash were partially offset by (i) proceeds of $4.5 million from the sale of used rental equipment and (ii) net proceeds of $0.1 million from the sale of short-term investments.  Regarding future investments into our rental fleet, we expect total fiscal year 2015 cash investments into our rental fleet to be $4.5 million and non-cash transfers from our inventory account of $5.5 million or more.  We estimate total fiscal year 2015 cash investments in property, plant and equipment will be approximately $2.5 million, including $0.5 million related to the expansion of our Houston manufacturing and engineering facilities. If industry conditions were to improve substantially or if we receive significant PRM system orders, we may accelerate our facility expansion plans. We expect these capital expenditures will be financed from our cash on hand, internal cash flow, rental equipment sales proceeds and/or from borrowings under our credit agreement.  

For the nine months ended June 30, 2015, we had no cash flows from financing activities.    

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On March 2, 2011, we entered into a credit agreement with Frost Bank.  On September 27, 2013, we amended the credit agreement and increased the borrowing availability to $50.0 million (as amended, the “Credit Agreement”).  The interest rate for borrowings under the Credit Agreement was a LIBOR based rate with a margin spread of 250 to 325 basis points depending upon the maintenance of certain ratios.  

On May 4, 2015, we again amended the Credit Agreement which reduced our borrowing availability to $30.0 million with amounts available for borrowing determined by a borrowing base.  Under the amendments to the Credit Agreement, the borrowing base is determined based upon certain or our and our U.S. subsidiaries’ assets which include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii) 25% of certain inventories (excluding work-in-process inventories).  As of June 30, 2015, our borrowing base was $39.8 million resulting in borrowing availability of $30.0 million less any outstanding letters of credit.  Borrowings under the Credit Agreement as amended are secured by substantially all our assets.  In addition, each of our domestic subsidiaries have guaranteed our obligations under the Credit Agreement as amended and such subsidiaries have secured the obligations by the pledge of substantially all of the assets of such subsidiaries.  The Credit Agreement as amended expires on May 4, 2018 and all borrowed funds are due and payable at that time.  We are required to make monthly interest payments on any borrowed funds.  The Credit Agreement as amended limits the incurrence of additional indebtedness, requires the maintenance of a single financial ratio that compares certain of our assets to certain of our liabilities,  restricts the Company and its subsidiaries’ ability to pay cash dividends and contains other covenants customary in agreements of this type.  The interest rate for borrowings under the Credit Agreement as amended is based on the Wall Street Journal prime rate, which was 3.25% at June 30, 2015.

We believe that the combination of existing cash reserves, cash flows from operations and borrowings available under the Credit Agreement as amended should provide us sufficient capital resources and liquidity to fund our planned operations through fiscal year 2015 and beyond.  However, there can be no assurance that such sources of capital will be sufficient to support our capital requirements in the long-term, and we may be required to issue additional debt or equity securities in the future to meet our capital requirements.  There can be no assurance we would be able to issue additional equity or debt securities in the future on terms that are acceptable to us or at all.

At June 30, 2015, the Company was in compliance with all covenants under the Credit Agreement as amended.  At June 30, 2015, the Company had standby letters of credit outstanding in the amount of $130,000.   Please see “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014 for more information about the restrictive covenants imposed on us by the Credit Agreement as amended.

Critical Accounting Policies

There has been no material change to our critical accounting policies discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have market risk relative to sensitive instruments entered into for trading purposes and have only very limited risk as to arrangements entered into other than for trading purposes. We do not engage in commodity or commodity derivative instrument purchase or sales transactions. Because of the inherent unpredictability of foreign currency rates and interest rates, as well as other factors, actual results could differ materially from those projected in this Item.

Foreign Currency and Operations Risk

One of our wholly-owned subsidiaries, Geospace Technologies Eurasia, is located in the Russian Federation. In addition, we operate a branch office, Geospace Technologies Sucursal Sudamericana, in Colombia. Our financial results for these entities may be affected by factors such as changes in foreign currency exchange rates, weak economic conditions or changes in the political climate. Our consolidated balance sheet at June 30, 2015 reflected approximately $9.6 million and $0.4 million of net working capital related to our Russian and Colombian operations, respectively. Both of these entities receive a portion of their revenues and pay a majority of their expenses primarily in their local currency. To the extent that transactions of these entities are settled in their local currency, a devaluation of these currencies versus the U.S. dollar could reduce any contribution from these entities to our consolidated results of operations and total comprehensive income as reported in U.S. dollars. We do not hedge the market risk with respect to our operations in these countries; therefore, such risk is a general and unpredictable risk of future disruptions in the valuation of such currencies versus U.S. dollars to the extent such disruptions result in any reduced valuation of these foreign entities’ net working capital or future contributions to our consolidated results of operations. At June 30, 2015, the foreign exchange rate for $1.00 (one U.S. dollar) was equal to 55.5 Russian Rubles and 2,627 Colombian Pesos, respectively. If the value of the U.S. dollar were to increase by ten percent against these foreign currencies, our working capital in the Russian Federation and in Colombia could decline by $1.0 million and $40,000, respectively.

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Foreign Currency Intercompany Accounts and Notes Receivable

From time to time, we provide access to capital to our foreign subsidiaries through U.S. dollar denominated interest bearing promissory notes. Such funds are generally used by our foreign subsidiaries to purchase capital assets and for general working capital needs. In addition, we sell products to our foreign subsidiaries on trade credit terms in both U.S. dollars and in the subsidiary’s local currency. At June 30, 2015, we had outstanding Canadian-dollar denominated intercompany accounts receivable of CAN$27.7 million.  Approximately CAN$3.1 million of these intercompany receivables are considered by management to be of a short-term nature whereby the appreciation or devaluation of the Canadian dollar against the U.S. dollar will result in a gain or loss, respectively, to our consolidated statement of operations. The Company considers approximately CAN$24.6 million of the intercompany receivable to be of a long-term nature whereby settlement is not planned or anticipated in the foreseeable future; therefore, any resulting foreign exchange gains and losses are reported in the consolidated balance sheets as a component of other comprehensive income in accordance with ASC 830 “Foreign Currency Matters”.  In June 2015, we entered into a CAN$3.0 million 90-day hedge agreement with a United States bank to hedge our short-term Canadian dollar foreign exchange rate exposure, resulting in an under-hedged position of approximately $0.1 million Canadian dollars. To the extent our under-hedged position remains, if the U.S. dollar exchange rate were to strengthen by ten percent against the Canadian dollar, we would recognize a foreign exchange loss of $10,000 U.S. dollars in our consolidated financial statements.

Floating Interest Rate Risk

The Credit Agreement as amended contains a floating interest rate which subjects us to the risk of increased interest costs associated with any upward movements in bank market interest rates. Under the Credit Agreement as amended our borrowing interest rate is the Wall Street Journal prime rate, which was 3.25% at June 30, 2015.  As of June 30, 2015 and September 30, 2014, there were no borrowings outstanding under the Credit Agreement.

 

 

Item 4. Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).  Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in the Company’s reports.

In connection with the preparation of this Quarterly Report on Form 10-Q, the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the CEO and CFO, as of June 30, 2015 of the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.  Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2015.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

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PART II - OTHER INFORMATION

Item 6. Exhibits

The following exhibits are filed with this Report on Form 10-Q.

 

 

 

 

 

 

 

 

 

 

 

 

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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.

 

 

 

 

 

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