GEOSPACE TECHNOLOGIES CORPORATION 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 and our Annual
Report on Form 10-K for the year ended
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated by reference
herein 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 (the "Exchange Act"). 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 results
and success of our transactions with Quantum and the OptoSeis® technology, the
adoption and sale of our products in various geographic regions, potential
tenders for permanent reservoir monitoring systems, future demand for OBX
systems, the completion of new orders for our channels of our GCL system, the
fulfillment of customer payment plans, or value of the security associated with
such plans, anticipated levels of capital expenditures and the sources of
funding therefor, and our strategy for growth, product development, market
position, financial results and the provision of accounting 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
Business Overview
Demand for our seismic products targeted at customers in our Oil and Gas Markets
segment 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
Available Information
We file annual, quarterly and current reports, proxy statements and other
information with the
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Products and Product Development
Oil and Gas Markets
Our Oil and Gas Markets business segment has historically accounted for the majority of our revenue. 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. This segment's products include wireless seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, cables, marine streamer retrieval and steering devices and various other seismic products. We believe that our Oil and Gas Markets 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 that 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 also 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. Revenue from these products results 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.
Wireless Products
We have developed multiple versions of a land-based wireless (or nodal) seismic
data acquisition system. Rather than utilizing interconnecting cables as
required by most traditional land data acquisition systems, each of our wireless
stations operate as an independent data collection system, allowing for
virtually unlimited channel configurations. As a result, our wireless systems
require 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. Each wireless station is available in a
single-channel or three-channel configuration. Since its introduction in 2008
and through
We have also developed a marine-based wireless seismic data acquisition system
called the OBX. Similar to our land-based wireless systems, the marine OBX
system may be deployed in virtually unlimited channel configurations and does
not require interconnecting cables between each station. Our deepwater versions
of the OBX system can be deployed in depths of up to 3,450 meters. At
Reservoir Products
Seismic surveys repeated over selected time intervals show dynamic changes within a producing oil and gas reservoir, and operators can use these surveys to monitor the effects of oil and gas development and production. This type of 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. Utilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.
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We have developed permanently installed high-definition reservoir monitoring
systems for land and ocean-bottom applications in producing oil and gas
fields. Our electrical reservoir monitoring systems are currently installed on
numerous offshore reservoirs in the
In addition, we produce seismic borehole acquisition systems that 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 hydraulic fracturing operations.
We believe our reservoir characterization products make seismic acquisition a cost-effective and reliable process for reservoir monitoring. Our multi-component seismic product developments also 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.
We have not received any orders for large-scale seabed PRM systems since
Adjacent Markets
Our Adjacent Markets businesses leverage upon existing manufacturing facilities and engineering capabilities utilized by our Oil and Gas Markets businesses. Many of the seismic products in our Oil and Gas Markets segment, with little or no modification, have direct application to other industries.
Industrial Products
Our industrial products include water meter products, contract manufacturing products, offshore cables, and seismic sensors used for vibration monitoring and geotechnical applications such as mine safety applications and earthquake detection.
Imaging Products
Our imaging products include electronic pre-press products that employ direct thermal imaging and digital inkjet printing technologies targeted at the commercial graphics, industrial graphics, textile and flexographic printing industries.
Emerging Markets
Our Emerging Markets business segment consists of our recent acquisition of
Quantum. Quantum's product line includes a proprietary detection system called
SADAR®, which detects, locates and tracks items of interest in real-time. Using
the SADAR technology, Quantum designs and sells products used for border and
perimeter security surveillance, cross-border tunneling detection and other
products targeted at movement monitoring, intrusion detection and situational
awareness. Quantum's customers include various agencies of the
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