Geophysical Systems reports first profit since 1981.

Geophysical Systems reports first profit since 1981

Company claims success in lawsuit against Raytheon

For the first time since filing for protection under Chapter 11 of the U.S. Bankruptcy Code in 1983, Pasadena-based Geophysical Systems Corp. has reported a yearly profit.

The company, which reported an annual net loss of $25 million for the year ended Dec. 31, 1982, has been steadily improving its financial picture since then, company chairman and Chief Executive Officer Samuel J. Allen said.

Unaudited results showed a total net income of $1.59 million for the year ended Dec. 31, 1988, but that figure was reduced to $500,000 because of a one-time charge for obsolete inventory, he noted.

Allen attributed the company's financial improvement to several factors, including renewed sale of equipment parts, which have not sold for several years, new pacts for its contract services and an overall tightening of its operations.

"We have done everthing we can to make our operations more efficient," he said.

The company also apparently has been successful in its court action against Massachusetts-based Raytheon Corp., and the firm's Tulsa, Okla.-based subsidiary Seismograph Service Corp. The suit concerned a computer system the Pasadena firm bought and later claimed was faulty, Allen noted. Geophysical Systems sued the two firms in U.S. District Court in 1985 and late last year a jury ruled in favor of the Pasadena firm, he said.

Carol Rorschach, Seismograph Service spokeswoman, said both sides will be back in court in November to determine how much money is due Geophysical Systems because of the jury's finding. Judge A. Wallace Tashima threw out the jury's original award of $48.3 million because he called it "grossly excessive, contrary to the great weight of the evidence and probably infected by prejudice," she said.

Geophysical Systems manufactures a proprietary system for collecting earthquake data. It is called the Geocor IV, and Geophysical Systems sells it to petroleum and geophysical services companies. Geophysical also does contract work using the system to detect underground oil and gas resources.

Revenues for 1988 were $6.98 million, including $1.1 million from a one-time joint venture transaction with an international oil exploration company based in Houston, Allen said. All the financial data was based on unaudited figures because the company has not been audited since its Chapter 11 petition.

Allen said his company also just has been awarded three new contracts with a total value of between $1.5 million and $2 million. Work on those contracts is expected to begin shortly.

One of the contracts is for a unique seismic survey of the Owens Valley in central California under a contract with California Energy Co. Inc.

Geophysical Systems crews will use two of its 1,024-channel seismic systems to survey the area to determine its potential geothermal properties, Allen explained.

California Energy now is producing about 130 megawatts of electricity from geothermal wells in the Owens Valley area and plans to increase its output by drilling more wells, he said. The Geophysical Systems survey will allow the company to more closely determine where the wells should be drilled.

The firm is combining the use of two of its detection systems because of the complexities of gathering data from the subsurface geology in the area, Allen said. This survey is believed to be the first time that a seismic system has simultaneously recorded data from 2,048 points on the ground, he added.

The company also recently signed a contract for a second phase of a survey it is conducting for the U.S. Department of Energy near Mount St. Helens in Washington state. That survey is to determine whether sedimentary beds containing oil and gas are located under surface volcanic rock in the area.

A third contract will involve an oil and gas exploration survey in Australia's Northern Territory, he added. That work will be done by a Geophysical Systems wholly owned subsidiary, he noted.

Allen said the 1988 figures compare with those for the year ended Dec. 31, 1987, which showed a net loss of $204,000 on revenues of $3.8 million.

The multimillion-dollar award against Raytheon and its subsidiary came after a six-week trial before Judge Tashima, Allen noted. The jury upheld Geophysical Systems' contention that the computer system leased to it by Seismograph Service did not perform as promised and forced the Pasadena firm into Chapter 11, he noted.

However, the judge granted a motion filed by Seismograph Service to overturn the $48.3 million award and set a new trial on that issue for November, Allen said.

Rorschach said the judge's decision was partially based on a premise that the jury may have been unduly influenced by testimony on another allegation contained in the suit. That allegation, which involved a charge of unfair competition, was dropped during the trial, she added.