sv3asr
As filed with the Securities and Exchange Commission on
January 29, 2007
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Forms F-3*
and S-3*
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Compagnie Générale de Géophysique-Veritas
(Exact Name of Registrant as Specified in its Charter)
General Geophysics Company
(Translation of Registrants Name into English)
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Republic of France |
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Tour Maine-Montparnasse |
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Not Applicable |
(State or Other Jurisdiction of
Incorporation or Organization) |
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33 avenue de Maine
BP 191
75755 Paris CEDEX 15
France
(33) 1 64 47 45 00 |
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(I.R.S. Employer
Identification No.) |
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants Principal Executive
Offices)
CT Corporation System
111 Eighth Avenue
New York, New York 10011
(212) 894-8400
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
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Beatrice Place-Faget
Corporate General Counsel
Tour Maine-Montparnasse
33, avenue du Maine
75755 Paris Cedex 15
+33 1 64 47 45 00 |
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Thomas N. ONeill III
Linklaters 25, rue de Marignan
75008 Paris
France
+33 1 56 43 56 43 |
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William P. Rogers, Jr.
Cravath, Swaine & Moore LLP
City Point
One Ropemaker Street
London EC2Y 9HR
United Kingdom
+44 207 453 1000 |
Approximate date of commencement of proposed sale to the
public: From time to time after this registration statement
becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following
box. o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, please check the
following
box. þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earliest effective registration statement for the same
offering. o
If this Form is a registration statement pursuant to General
Instruction I.C. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box. þ
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.C. filed to
register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
CALCULATION OF REGISTRATION FEE
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Amount to be |
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Registered/Proposed |
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Maximum |
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Amount of |
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Title of Each Class of |
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Aggregate |
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Registration |
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Securities to be Registered |
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Offering Price |
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Fee |
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Senior Notes
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$ 600,000,000(1) |
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$ (3) |
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Guarantees of Senior Notes
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(2) |
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None |
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(1) |
Estimated solely for the purpose of calculating the registration
fee. |
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(2) |
No separate consideration will be received for the Guarantees. |
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(3) |
The Registrants have elected to rely on Rule 456(b) and
Rule 457(r) of the Securities Act of 1933, as amended, to defer
payment of the registration fee. |
Table of Additional Registrants
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Name and Address, Including Zip |
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Code and Telephone Number, |
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Including Area Code, of |
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State or Other |
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I.R.S. Employer | |
Principal Executive Offices |
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Jurisdiction of Incorporation |
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Identification No. | |
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CGG Americas Inc.
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Texas |
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74 - 1596771 |
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16430 Park Ten Place
Houston, Texas 77084
(1) 281 646 2400 |
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CGG Canada Services Ltd.
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Alberta, Canada |
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450, 808-4th Avenue SW
Calgary, Alberta TP3 E8
Canada
(1) 403 266 1011 |
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CGG Marine Resources Norge A/ S
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Norway |
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OH Bangs Vei 70
N-1363 Høvik
Norway
(47) 67 11 34 72 |
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Sercel, Inc.
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Oklahoma |
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73 - 1396603 |
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17200 Park Row
Houston, Texas 77084
(1) 281 492 6688 |
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Sercel Canada Ltd.
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New Brunswick, Canada |
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1108 55th Avenue, NE
Calgary, Alberta TZE 6Y
Canada
(1) 403 275 3544 |
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Sercel Australia Pty Ltd.
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New South Wales, Australia |
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274 Victoria Road |
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Rydalmere, New South Wales 2116 |
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Australia
(61) 2 8832 5500 |
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CGGVeritas Services Inc.
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Delaware |
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20 - 8026762 |
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10300 Town Park Drive
Houston, Texas 77072
(1) 832 351 8300 |
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Veritas DGC Land Inc.
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Delaware |
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76 - 0542437 |
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10300 Town Park Drive
Houston, Texas 77072
(1) 832 351 8300 |
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Veritas Geophysical Corporation
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Delaware |
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74 - 1813790 |
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10300 Town Park Drive
Houston, Texas 77072
(1) 832 351 8300 |
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Veritas Investments Inc.
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Delaware |
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76 - 0569069 |
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c/o Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801 |
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Viking Maritime Inc.
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Delaware |
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76 - 0677405 |
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c/o Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801 |
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Name and Address, Including Zip |
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Code and Telephone Number, |
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Including Area Code, of |
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State or Other |
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I.R.S. Employer | |
Principal Executive Offices |
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Jurisdiction of Incorporation |
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Identification No. | |
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Veritas Geophysical (Mexico) LLC
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Delaware |
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76 - 0670383 |
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c/ o Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801 |
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Veritas DGC Asia Pacific Ltd.
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Delaware |
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74 - 2007144 |
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10300 Town Park Drive
Houston, Texas 77072
(1) 832 351 8300 |
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Alitheia Resources Inc.
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Delaware |
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56 - 2475147 |
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10300 Town Park Drive
Houston, Texas 77072
(1) 832 351 8300 |
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* |
This registration statement comprises a filing on
Form F-3 with
respect to the securities of Compagnie Générale de
Géophysique-Veritas, CGG Canada Services Ltd., CGG Marine
Resources Norge A/ S, Sercel Canada Ltd. and Sercel Australia
Pty Ltd. and a filing on
Form S-3 with
respect to the securities of CGG Americas Inc., Sercel, Inc.,
CGGVeritas Services Inc., Veritas DGC Land Inc., Veritas
Geophysical Corporation, Veritas Investments Inc., Viking
Maritime Inc., Veritas Geophysical (Mexico) LLC, Veritas
DGC Asia Pacific Ltd. and Alitheia Resources Inc. |
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The information in this preliminary
prospectus is not complete and may be changed. This preliminary
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED
JANUARY 29, 2007.
$600,000,000
Compagnie Générale de Géophysique-Veritas
$300,000,000 71/2% Senior
Notes due 2015
$300,000,000 % Senior Notes
due 2017
Guaranteed on a senior basis by certain subsidiaries
We are
offering an additional $300,000,000 principal amount of our
71/2% Senior
Notes due 2015 (the additional notes) and
$300,000,000 principal amount of
our % Senior Notes due 2017 (the
new notes, and together with the additional notes,
the notes).
The Additional Notes
The
additional notes will mature on May 15, 2015. We will pay
interest on the additional notes each May 15 and November 15. We
will make the first payment on May 15, 2007 for interest
accrued and unpaid from November 15, 2006. The additional
notes constitute a further issuance of our
71/2% Senior
Notes due 2015 first issued in a principal amount of
$165,000,000 on April 28, 2005 and issued in an additional
principal amount of $165,000,000 on February 3, 2006
(together, the existing notes). The sales of the
existing notes were not registered under the Securities Act of
1933 but were the subject of subsequent exchange offers for
identical notes registered with the Securities and Exchange
Commission. The additional notes and the existing notes will be
treated as the same series of notes under the indenture dated
April 28, 2005 pursuant to which the existing notes were
issued.
We may
redeem all or a part of the additional notes at any time on or
after May 15, 2010 at the redemption prices described in
this prospectus. We may redeem up to 35% of the aggregate
principal amount of the existing notes and the additional notes
prior to May 15, 2008 using the proceeds of certain equity
offerings. At any time prior to May 15, 2010, we may redeem
all or part of the additional notes at a redemption price equal
to 100% of the principal amount of the additional notes plus the
applicable premium described in this prospectus. We may also
redeem all, but not less than all, of the additional notes at a
redemption price equal to 100% of the principal amount of the
additional notes in the event of certain changes in tax laws. If
we undergo a change of control, each holder may require us to
repurchase all or a portion of the additional notes at 101% of
the principal amount thereof, plus accrued and unpaid interest.
The New Notes
The new
notes will mature on May 15, 2017. We will pay interest on
the new notes each May 15 and November 15. We will make the
first payment on May 15, 2007 for interest accrued and
unpaid from the issue date of the new notes. The new notes will
be issued pursuant to a new indenture. We may redeem all or a
part of the new notes at any time on or after May 15, 2012
at the redemption prices described in this prospectus. We may
redeem up to 35% of the new notes prior to May 15, 2010
using the proceeds of certain equity offerings. At any time
prior to May 15, 2012, we may redeem all or part of the new
notes at a redemption price equal to 100% of the principal
amount of the new notes plus the applicable premium described in
this prospectus. We may also redeem all, but not less than all,
of the new notes at a redemption price equal to 100% of the
principal amount of the new notes in the event of certain
changes in tax laws. If we undergo a change of control, each
holder may require us to repurchase all or a portion of the new
notes at 101% of the principal amount thereof, plus accrued and
unpaid interest.
The notes
will be our senior unsecured obligations and will be initially
guaranteed on a senior unsecured basis by certain of our
subsidiaries. The notes will rank equally in right of payment
with all our other existing and future senior unsecured
indebtedness and senior in right of payment to all our existing
and future subordinated indebtedness. The notes and the
subsidiary guarantees will be effectively subordinated to all
our secured obligations and all secured obligations of our
subsidiaries that guarantee the notes to the extent of the value
of the collateral. The notes will also be effectively junior to
all obligations of our subsidiaries that do not guarantee the
notes.
Application
has been made to admit the notes to listing on the Official List
of the Luxembourg Stock Exchange and to trading on the Euro MTF
market (Euro MTF).
Investing in the notes involves risks. See Risk
Factors beginning on page 22.
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Underwriting | |
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Price to | |
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discounts | |
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Proceeds to | |
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public(1) | |
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and commissions | |
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issuer | |
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Additional notes
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New notes
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(1) |
In the case of the additional notes, plus accrued and unpaid
interest from and including November 15, 2006 to but
excluding the delivery date and in the case of the new notes,
plus accrued and unpaid interest from and including the issue
date of the new notes to but excluding the delivery date. |
Delivery
of the notes in book-entry form will be made on or
about ,
2007.
Neither
the Securities and Exchange Commission, any state securities
commission nor any
non-U.S. securities
authority has approved or disapproved of these securities or
determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Sole Bookrunner and Lead Manager
Credit Suisse
Joint Lead Managers
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BNP PARIBAS
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Natexis Bleichroeder Inc. |
Co-Managers
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Calyon Securities
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SOCIETE GENERALE |
The date of this prospectus
is ,
2007.
TABLE OF CONTENTS
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1 |
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22 |
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36 |
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37 |
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38 |
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40 |
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42 |
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74 |
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109 |
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114 |
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125 |
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129 |
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189 |
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233 |
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239 |
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248 |
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249 |
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F-1 |
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You should rely only on the information contained in this
document or to which we have referred you. We have not
authorized anyone to provide you with information that is
different. This document may only be used where it is legal to
sell these securities and may only be used for the purposes for
which it has been published. The information in this document
may only be accurate on the date of this document.
In connection with this offering, Credit Suisse Securities
(Europe) Limited may over-allot or effect transactions for a
limited period of time with a view to supporting the market
price of the notes at a level higher than that which might
otherwise prevail. However, Credit Suisse Securities (Europe)
Limited is not obliged to do this. Such stabilizing, if
commenced, may be discontinued at any time, and must be brought
to an end after a limited period.
NOTICE TO INVESTORS
CGGVeritas, having made all reasonable inquiries, confirms to
the best of its knowledge, information and belief that the
information contained in this prospectus with respect to
CGGVeritas and its consolidated subsidiaries and affiliates
taken as a whole and the notes offered hereby is true and
accurate in all material respects and is not misleading, that
the opinions and intentions expressed in this document are
honestly held and that there are no other facts the omission of
which would make this prospectus as a whole misleading in any
material respect. Subject to the following paragraph, CGGVeritas
accepts responsibility for the information contained in this
prospectus.
The information contained under the section Exchange
Rates includes extracts from information and data publicly
released by official and other sources. While we accept
responsibility for accurately summarizing the information
concerning exchange rate information, we accept no further
responsibility in respect of such information. The information
set out in relation to sections of this prospectus describing
clearing and settlement arrangements, including the sections
entitled Description of the Additional Notes
Book Entry, Delivery and Form and Description of the
New Notes Book Entry, Delivery and Form, is
subject to any change or reinterpretation of the rules,
regulations and procedures of Cede & Co., Euroclear
Bank S.A./ N.V. (Euroclear)
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or Clearstream Banking, sociètè anonyme
(Clearstream) currently in effect. While we accept
responsibility for accurately summarizing the information
concerning Cede & Co., Euroclear and Clearstream, we
accept no further responsibility in respect of such information.
In addition, this prospectus contains summaries believed to be
accurate with respect to certain documents, but reference is
made to the actual documents for complete information. All such
summaries are qualified in their entirety by such reference.
Copies of documents referred to herein will be made available to
prospective investors upon request to us.
We are providing this prospectus only to prospective purchasers
of the notes. You should read this prospectus before making a
decision whether to purchase any notes.
This prospectus does not constitute an offer to sell or an
invitation to subscribe for or purchase any of the notes in any
jurisdiction in which such offer or invitation is not authorized
or to any person to whom it is unlawful to make such an offer or
invitation. No action has been, or will be, taken to permit a
public offering in any jurisdiction where action would be
required for that purpose, other than the United States.
Accordingly, the notes may not be offered or sold, directly or
indirectly, and this prospectus may not be distributed, in any
jurisdiction except in accordance with the legal requirements
applicable to such jurisdiction. You must comply with all laws
that apply to you in any place in which you buy, offer or sell
any notes or possess this prospectus. You must also obtain any
consents or approvals that you need in order to purchase, offer
or sell any notes or possess or distribute this prospectus. We
and the underwriters are not responsible for your compliance
with any of the foregoing legal requirements.
We are not, the underwriters are not, and none of our respective
representatives are making an offer to sell the notes in any
jurisdiction except where an offer or sale is permitted. You
should understand that you will be required to bear the
financial risks of your investment for an indefinite period of
time. This prospectus is based on information provided by us and
by other sources that we believe are reliable. We cannot assure
you that this information is accurate or complete. The
underwriters named in this prospectus make no representation or
warranty, express or implied, as to the accuracy or completeness
of such information, and nothing contained or incorporated by
reference in this prospectus is, or shall be relied upon as, a
promise or representation by the underwriters with respect to
the notes as to the past or the future.
The information contained in this prospectus speaks as of the
date hereof. Neither the delivery of this prospectus at any time
after the date of publication nor any subsequent commitment to
purchase the notes shall, under any circumstances, create an
implication that there has been no change in the information set
forth in this prospectus or in our business since the date of
this prospectus.
We are not, the underwriters are not, and none of our respective
representatives are making any representation to you regarding
the legality of an investment in the notes by you under any
legal, investment or similar laws or regulations. You should not
consider any information in this prospectus to be legal,
business, tax or other advice. You should consult your own
attorney, business advisor and tax advisor for legal, financial,
business and tax and related aspects of an investment in the
notes. You are responsible for making your own examination of us
and our business and your own assessment of the merits and risks
of investing in the notes.
The notes will be issued in the form of one or more global
notes, which will be deposited with, or on behalf of, a common
depositary for the accounts of Cede & Co., Euroclear
and Clearstream. Beneficial interests in the global notes will
be shown on, and transfers of beneficial interests in the global
notes will be effected only through, records maintained by
Cede & Co., Euroclear and/or Clearstream and their
participants, as applicable. See Description of the
Additional Notes Book Entry, Delivery and Form
and Description of the New Notes Book Entry,
Delivery and Form.
This prospectus sets out the procedures of Cede & Co.,
Euroclear and Clearstream in order to facilitate the original
issue and subsequent transfers of interests in the notes among
participants of Euroclear and Clearstream. However, neither
Cede & Co., Euroclear nor Clearstream is under any
obligation to perform or continue to perform such procedures and
such procedures may be modified or discontinued by either of
them at any time. We will not, nor will any of our agents, have
responsibility for the performance of the respective obligations
of Cede & Co., Euroclear, Clearstream or their
respective participants under the rules and procedures governing
their operations, nor will we or our agents have any
responsibility or liability for any aspect of the records
relating to, or payments made on account of, book-entry
interests held through the facilities of any clearing system or
for
ii
maintaining, supervising or reviewing any records relating to
these book-entry interests. Investors wishing to use these
clearing systems are advised to confirm the continued
applicability of their rules, regulations and procedures.
We reserve the right to withdraw this offering of the notes at
any time. We and the underwriters also reserve the right to
reject any offer to purchase the notes in whole or in part for
any reason or no reason and to allot to any prospective
purchaser less than the full amount of the notes sought by it.
The underwriters and certain of their respective related
entities may acquire, for their own accounts, a portion of the
notes.
This prospectus has not received the visa of the French
Autorité des Marchés Financiers
(AMF) and accordingly may not be used in
connection with any offer or sale of the notes to the public in
France.
This prospectus has been prepared on the basis that all offers
of notes will be made pursuant to an exemption under the
Prospectus Directive, as implemented in member states of the
European Economic Area (EEA), from the requirement
to produce a prospectus for offers of notes. Accordingly any
person making or intending to make any offer within the EEA of
notes which are the subject of the placement contemplated in
this prospectus should only do so in circumstances in which no
obligation arises for us or any of the underwriters to produce a
prospectus for such offer. Neither we nor the underwriters have
authorized, nor do they authorize, the making of any offer of
notes through any financial intermediary, other than offers made
by the underwriters which constitute the final placement of
notes contemplated in this prospectus.
Each person in a Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State) who receives any
communication in respect of, or who acquires any notes under,
the offering contemplated in this prospectus will be deemed to
have represented, warranted and agreed to with each underwriter
and us that:
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(a) |
it is a qualified investor within the meaning of the law in that
Relevant Member State implementing Article 2(1)(e) of the
Prospectus Directive; and |
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(b) |
in the case of any notes acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the notes acquired by it in the
offer have not been acquired on behalf of, nor have they been
acquired with a view to their offer or resale to, persons in any
Relevant Member State other than qualified investors, as that
term is defined in the Prospectus Directive, or in circumstances
in which the prior consent of the underwriters has been given to
the offer or resale; or (ii) where notes have been acquired by
it on behalf of persons in any Relevant Member State other than
qualified investors, the offer of those notes to it is not
treated under the Prospectus Directive as having been made to
such persons. For the purposes of this representation, the
expression an offer of notes to the public in
relation to any notes in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and any notes to be
offered so as to enable an investor to decide to purchase or
subscribe for the notes, as the same may be varied in that
Relevant Member State by any measure implementing the Prospectus
Directive in that Relevant Member State and the expression
Prospectus Directive means Directive 2003/71/ EC and
includes any relevant implementing measure in each Relevant
Member State. |
We expect that delivery of the notes will be made against
payment therefor on or about the fifth business day following
the date of pricing of the notes (this settlement cycle being
referred to as T+5). Under
Rule 15c6-1 of the
U.S. Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the
parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade notes on the date of
this prospectus or the next succeeding two business days will be
required, by virtue of the fact that the notes initially will
settle in T+5, to specify an alternate settlement cycle at the
time of any such trade to prevent a failed settlement.
Purchasers of the notes who wish to make such trades should
consult their own adviser.
iii
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities
Exchange Act of 1934 (the Exchange Act) applicable
to foreign private issuers. In accordance with the Exchange Act,
we electronically file reports, including annual reports on
Form 20-F and interim reports on
Form 6-K, and
other information with the Securities and Exchange Commission.
You may obtain these reports and other information by sending a
written request to CGGVeritas, Tour Maine-Montparnasse, 33
avenue de Maine, BP 191, 75755 Paris CEDEX 15, France,
Attention: Investor Relations Officer, Telephone: (33) 1 64
47 45 00.
You can inspect and copy these reports, and other information,
without charge, at the Public Reference Room of the Commission
located at 100 F. Street, N.E., Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference
Room by calling the Commission at
1-800-SEC-0330. The
Commission also maintains an Internet site at http://www.sec.gov
that contains reports, proxy and information statements, and
other information regarding issuers that file electronically
with the Commission.
In addition, you can inspect material filed by CGG, Veritas and
CGGVeritas at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005, on which
American Depositary Shares representing shares of our common
stock are listed. As a foreign private issuer, we are not
subject to the proxy rules under Section 14 or the
short-swing insider profit disclosure rules under
Section 16 of the Exchange Act.
All information referred to above will, for so long as the notes
are listed on the Luxembourg Stock Exchange, also be available,
without charge, at the specified office of the Paying Agent in
Luxembourg during usual business hours on any weekday
(Saturdays, Sundays and public holidays excepted) from the date
of this prospectus.
On January 12, 2007, following the completion of the merger
with CGG, Veritas was delisted from the New York Stock
Exchange and filed a Form 15 to terminate its registration
and reporting obligations under the Exchange Act.
PRESENTATION OF INFORMATION
In this prospectus, references to United States or
U.S. are to the United States of America, references
to U.S. dollars or $ are to United
States dollars, references to France are to the
Republic of France, references to Norway are to the
Kingdom of Norway, references to NOK are to
Norwegian kroner and references to euro or
are
to the single currency introduced at the start of the third
stage of European Economic and Monetary Union pursuant to the
Treaty establishing the European Union.
Unless otherwise indicated, statements in this prospectus
relating to market share, ranking and data are derived from
management estimates based, in part, on independent industry
publications, reports by market research firms or other
published independent sources. Any discrepancies in any table
between totals and the sums of the amounts listed in such table
are due to rounding.
As used in this prospectus CGG refers to Compagnie
Générale de Géophysique and its subsidiaries,
except as otherwise indicated, Veritas refers to
Veritas DGC Inc. and its subsidiaries before the merger between
CGG and Veritas and to CGGVeritas Services Inc. following such
merger, except as otherwise indicated, and
CGGVeritas, we, us and
our refer to Compagnie Générale de
Géophysique-Veritas and its subsidiaries, except as
otherwise indicated.
iv
INCORPORATION BY REFERENCE
The Commission allows us to incorporate by reference
the information we file with the Commission in other documents,
which means:
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incorporated documents are considered part of this prospectus; |
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we can disclose important information to you by referring you to
those documents; and |
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information that we file with the Commission after the date of
this prospectus and incorporate by reference herein
automatically updates and supersedes this prospectus and
information previously incorporated by reference herein. |
We incorporate by reference the following document that we have
previously filed with the Commission:
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SEC Filing |
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Filing Date | |
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CGGs Form 20-F for the fiscal year ended
December 31, 2005
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May 9, 2006 |
|
In addition, we incorporate by reference each of the following
documents that we will file with the Commission (other than, in
each case, documents or information deemed to have been
furnished and not filed in accordance with the rules of the
Commission) between the date of this prospectus and termination
of the offering of the notes:
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all annual reports on
Form 20-F we file
with the Commission; and |
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any future reports furnished on
Form 6-K that
indicate that they are incorporated by reference in this
prospectus. |
You may obtain a copy of any of the documents referred to above
(excluding exhibits) at no cost by contacting us at the
following address:
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Compagnie Générale de Géophysique-Veritas |
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Tour Maine-Montparnasse |
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33 avenue de Maine |
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BP 191 |
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75755 Paris CEDEX 15 |
|
Attention: Investor Relations Officer |
|
Tel: (33) 1 64 47 45 00 |
In addition, for so long as the notes are listed on the
Luxembourg Stock Exchange, you may obtain a copy of any of the
documents referred to above (excluding exhibits) at no cost
during usual business hours on any weekday (except Saturdays,
Sundays and public holidays) at the specified offices of the
Paying Agent in Luxembourg.
Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of
this prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein, modifies or
supersedes such statement. The modifying or superseding
statement need not state that it has modified or superseded a
prior statement or include any other information set forth in
the document that it modifies or supersedes. The making of a
modifying or superseding statement shall not be deemed an
admission for any purposes that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue
statement of a material fact or an omission to state a material
fact that is required to be stated or that is necessary to make
a statement not misleading in light of the circumstances in
which it was made. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
v
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements
within the meaning of the federal securities laws, which involve
risks and uncertainties, including, without limitation, certain
statements made in the sections entitled Our
Business, Business of CGG, Business of
Veritas and Managements Discussion and
Analysis of Financial Condition and Results of Operations.
You can identify forward-looking statements because they contain
words such as believes, expects,
may, should, seeks,
approximately, intends,
plans, estimates, or
anticipates or similar expressions that relate to
our strategy, plans or intentions. These forward-looking
statements are subject to risks and uncertainties that may
change at any time, and, therefore, our actual results may
differ materially from those that we expected. We have based
these forward-looking statements on our current views and
assumptions about future events. While we believe that our
assumptions are reasonable, we caution that it is very difficult
to predict the impact of known factors, and, of course, it is
impossible for us to anticipate all factors that could affect
our actual results. All forward-looking statements are based
upon information available to us on the date of this prospectus.
Important factors that could cause actual results to differ
materially from our expectations (cautionary
statements) are disclosed under Risk Factors
and elsewhere in this prospectus, including, without limitation,
in conjunction with the forward-looking statements included in
this prospectus. All forward-looking information in this
prospectus and subsequent written and oral forward-looking
statements attributable to us, or persons acting on our behalf,
are expressly qualified in their entirety by the cautionary
statements. Some of the factors that we believe could affect our
actual results include:
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our ability to develop an integrated strategy for CGGVeritas; |
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difficulties and delays in achieving synergies and cost savings; |
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our substantial indebtedness; |
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changes in international economic and political conditions and,
in particular, in oil and gas prices; |
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exposure to the credit risk of customers; |
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our ability to finance our operations on acceptable terms; |
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the timely development and acceptance of our new products and
services; |
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the complexity of products sold; |
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changes in demand for seismic products and services; |
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the effects of competition; |
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the social, political and economic risks of our global
operations; |
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the costs and risks associated with pension and post-retirement
benefit obligations; |
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changes to existing regulations or technical standards; |
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existing or future litigation; |
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difficulties and costs in protecting intellectual property
rights and exposure to infringement claims by others; |
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the costs of compliance with environmental, health and safety
laws; |
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the timing and extent of changes in currency exchange rates and
interest rates; |
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the accuracy of our assessment of risks related to acquisitions,
projects and contracts and whether these risks materialize; |
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our ability to integrate successfully the businesses or assets
we acquire, including Veritas; |
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our ability to monitor existing and targeted partnerships; |
vi
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our ability to sell our seismic data library; |
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our ability to access the debt and equity markets during the
periods covered by the forward-looking statements, which will
depend on general market conditions and on our credit ratings
for our debt obligations; and |
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our success at managing the risks of the foregoing. |
We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise. We caution you that the
foregoing list of important factors may not contain all of the
material factors that are important to you. In addition, in
light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not
occur. When considering forward-looking statements, you should
keep in mind the risk factors and other cautionary statements
included in this prospectus, including those described in the
Risk Factors section of this prospectus.
vii
PROSPECTUS SUMMARY
This prospectus summary highlights selected information from
this prospectus to help you understand our business and the
terms of the notes. You should carefully read all of this
prospectus, including the consolidated financial statements and
related notes, to understand fully our business and the terms of
the notes, as well as some of the other considerations that may
be important to you in making your investment decision. You
should pay special attention to the Risk Factors
section of this prospectus to determine whether an investment in
the notes is appropriate for you.
Compagnie Générale de Géophysique-Veritas
We are a leading international provider of geophysical services
and manufacturer of geophysical equipment. We provide
geophysical services principally to oil and gas companies that
use seismic imaging to help explore for, develop and manage oil
and gas reserves by:
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identifying new areas where subsurface conditions are favorable
for the accumulation of oil and gas; |
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determining the size and structure of previously identified oil
and gas fields; and |
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optimizing development and production of oil and gas reserves
(reservoir management). |
We manufacture and sell our geophysical equipment primarily to
other geophysical service companies.
Following the merger with Veritas, we intend to continue
CGGs segmentation between geophysical services and
products, and to organize our services business both into
geographical operating segments for the western and eastern
hemispheres, and into the following three business lines:
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the land business line for land and shallow water seismic
acquisition and non-exclusive (multi-client) library
sales; |
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the offshore business line for marine seismic acquisition,
multi-client library
sales and related services; and |
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the processing & reservoir business line for seismic
data processing, data management and reservoir studies. |
Our products segment, which conducts business primarily through
our subsidiary Sercel Holding S.A. and its subsidiaries
(Sercel), manufactures and sells seismic data
acquisition equipment, both for land and offshore use.
On a pro forma basis after giving effect to the merger and the
financing transactions (as defined below), we would have had
total revenue of
1,489.1 million
and
1,470.1 million
and operating income of
125.7 million
and
289.6 million
for the year ended December 31, 2005 and the nine months
ended September 30, 2006, respectively under IFRS. See
Unaudited Pro Forma Condensed Combined Financial
Information.
Our address is Tour Maine-Montparnasse, 33, avenue de Maine, BP
191, 75755 Paris Cedex 15, France, and our telephone number
is +33 (0) 1 64 47 45 00.
On January 12, 2007, CGG acquired Veritas (the
merger) pursuant to an agreement and plan of merger
dated September 4, 2006 (the merger agreement).
In the merger, CGG issued an aggregate of 46.1 million ADSs
and paid an aggregate of $1.5 billion in cash to holders of
Veritas stock. Upon completion of the merger, CGG was renamed
Compagnie Générale de Géophysique-Veritas
(abbreviated as CGGVeritas).
1
We believe a number of strategic factors support the merger,
including the following:
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the combination of CGG and Veritas took place in a strong
business environment, as decreasing reserves of oil and gas
companies have been coupled with growing energy consumption
sustained by long-term demand, particularly in China and India; |
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the combination of CGG and Veritas creates a strong, global,
pure-play seismic company, offering a broad range of seismic
services, and, through Sercel, geophysical equipment to the
industry across all markets; |
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the combination of CGG and Veritas brings together two companies
with strong technological foundations in the geophysical
services and equipment market, as both CGG and Veritas have a
long tradition of providing seismic services both onshore and
offshore; |
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the addition of Veritas fleet of seven vessels creates a
combined seismic services business operating the worlds
leading seismic fleet of 20 vessels, including 14 high
capacity 3D vessels; |
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multi-client services benefits from two complementary, recent
vintage, well-positioned seismic data libraries; |
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CGGs and Veritas respective offerings for land
acquisition services represent strong geographical and
technological complementarities for high-end positioning and
further development of local partnerships; |
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CGGs and Veritas respective positions in data
processing and imaging as well as the skills and reputation of
their experts and geoscientists, allow us to create the industry
reference in this segment, with particular strengths in advanced
technologies such as depth imaging, 4D processing and reservoir
characterization as well as a close link with clients through
dedicated centers; |
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the merger will not affect Sercels open technology
approach. Sercel will pursue its strategy of maintaining leading
edge technology, offering new generations of differentiating
products and focusing on key markets; and |
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with a combined workforce of approximately 7,000 staff operating
worldwide, including Sercel, CGGVeritas will, through continued
innovation, be an industry leader in seismic technology,
services and equipment with a broad base of customers, including
independent, international and national oil companies. |
For a more complete discussion of the merger, see The
Veritas Merger.
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Bridge Loan and Senior Credit Facilities |
In order to finance a portion of the cash merger consideration,
on January 12, 2007, CGG drew $700 million under a
senior secured bridge loan facility (the bridge loan
facility) guaranteed by certain of our subsidiaries. We
intend to use the net proceeds from this offering plus cash on
hand to repay in full the bridge loan facility.
Also on January 12, 2007, Volnay Acquisition Co. I (which
was subsequently merged with Veritas and Volnay Acquisition
Co. II, with the surviving entity renamed CGGVeritas
Services Inc.) and CGG entered into a senior credit agreement
(the senior facilities), pursuant to which
CGGVeritas Services Inc. borrowed $1 billion under a senior
secured term loan (the term loan facility)
principally for the purpose of financing the remaining portion
of the cash component of the consideration for the merger and
obtained a $115 million senior secured revolving facility
(the U.S. revolving facility). Aggregate
commitments under the U.S. revolving facility are expected
to be increased to $140 million. The senior facilities are
guaranteed by us and certain of our subsidiaries.
We are also planning to enter into a senior secured revolving
credit facility (the French revolving facility),
guaranteed by certain of our subsidiaries, of up to
$200 million for working capital purposes.
For a description of the credit facilities above, see
Description of Certain Indebtedness.
2
The borrowings under the term loan facility and the bridge loan
facility and the issuance of the notes offered hereby and the
use of proceeds therefrom are collectively referred to in this
prospectus as the financing transactions.
Our Business
Services accounted for 64% and Products accounted for 36% of
CGGs consolidated operating revenue for the year ended
December 31, 2005. Service operations accounted for 98% and
Veritas Hampson-Russell (VHR), Veritas proprietary
software business, accounted for 2% of Veritas
consolidated revenues for the year ended July 31, 2006.
Veritas provides geophysical services and geophysical software
products but does not manufacture geophysical equipment.
The tables below present CGGs operating revenue (in euros)
by business line for the nine months ended September 30,
2006 and the years ended December 31, 2005 and 2004 under
IFRS and Veritas revenues (in U.S. dollars) by
business line for the three months ended October 31, 2006
and the fiscal years ended July 31, 2006, 2005 and 2004
under U.S. GAAP.
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2006 | |
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| |
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2005 | |
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Nine months | |
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Year ended December 31, | |
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ended | |
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September | |
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30, | |
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2004 | |
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| |
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| |
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) | |
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(in millions, except percentages | |
CGG Operating Revenue by Business
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Land
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96.9 |
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|
10 |
% |
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|
119.8 |
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|
|
14 |
% |
|
|
77.3 |
|
|
|
11 |
% |
Offshore
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|
404.1 |
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|
42 |
% |
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|
319.5 |
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|
37 |
% |
|
|
205.7 |
|
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|
30 |
% |
Processing and Reservoir
|
|
|
102.3 |
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|
|
11 |
% |
|
|
113.0 |
|
|
|
13 |
% |
|
|
105.0 |
|
|
|
15 |
% |
|
Total Services
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|
603.3 |
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|
|
63 |
% |
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|
552.3 |
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|
64 |
% |
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|
388.0 |
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|
56 |
% |
|
Products
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|
352.3 |
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|
37 |
% |
|
|
317.6 |
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|
36 |
% |
|
|
299.4 |
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|
44 |
% |
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|
|
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Total
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955.6 |
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|
100 |
% |
|
|
869.9 |
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|
|
100 |
% |
|
|
687.4 |
|
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|
100 |
% |
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2006 | |
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| |
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2006 | |
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| |
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2005 | |
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| |
|
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|
Year ended July 31, | |
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| |
|
|
|
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|
|
2004 | |
|
|
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|
|
|
| |
|
|
Three | |
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|
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months | |
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ended | |
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|
October | |
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31, | |
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| |
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) millions, except percentages | |
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(in $ | |
Veritas Revenues by Business
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|
|
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|
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|
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|
Land
|
|
|
85.4 |
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|
37 |
% |
|
|
286.9 |
|
|
|
35 |
% |
|
|
195.5 |
|
|
|
31 |
% |
|
|
200.7 |
|
|
|
36 |
% |
Offshore
|
|
|
105.7 |
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|
46 |
% |
|
|
405.1 |
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|
|
49 |
% |
|
|
331.4 |
|
|
|
52 |
% |
|
|
272.7 |
|
|
|
48 |
% |
Processing and Reservoir
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|
|
34.6 |
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|
|
15 |
% |
|
|
110.6 |
|
|
|
14 |
% |
|
|
90.9 |
|
|
|
14 |
% |
|
|
75.7 |
|
|
|
13 |
% |
|
Total Services
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|
|
225.7 |
|
|
|
98 |
% |
|
|
802.6 |
|
|
|
98 |
% |
|
|
617.8 |
|
|
|
97 |
% |
|
|
549.1 |
|
|
|
97 |
% |
|
VHR
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5.1 |
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2 |
% |
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|
19.6 |
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2 |
% |
|
|
16.2 |
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|
|
3 |
% |
|
|
15.4 |
|
|
|
3 |
% |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
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|
|
230.8 |
|
|
|
100 |
% |
|
|
822.2 |
|
|
|
100 |
% |
|
|
634.0 |
|
|
|
100 |
% |
|
|
564.5 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tables below present CGGs operating revenue (in euros)
by region for the nine months ended September 30, 2006 and
the years ended December 31, 2005 and 2004 under IFRS and
Veritas revenues (in
3
U.S. dollars) by region for the three months ended
October 31, 2006 and fiscal years ended July 31, 2006,
2005 and 2004 under U.S. GAAP.
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Nine months | |
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ended | |
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|
September 30, | |
|
Year ended December 31, | |
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| |
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
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| |
|
| |
|
| |
|
|
(in millions, except percentages) | |
CGG Operating Revenue by Region
|
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Americas
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|
|
314.0 |
|
|
|
33 |
% |
|
|
291.7 |
|
|
|
34 |
% |
|
|
207.7 |
|
|
|
30 |
% |
Asia Pacific/Middle East
|
|
|
313.2 |
|
|
|
33 |
% |
|
|
297.3 |
|
|
|
34 |
% |
|
|
274.5 |
|
|
|
40 |
% |
Europe
|
|
|
229.4 |
|
|
|
24 |
% |
|
|
190.3 |
|
|
|
22 |
% |
|
|
138.2 |
|
|
|
20 |
% |
Africa
|
|
|
99.0 |
|
|
|
10 |
% |
|
|
90.6 |
|
|
|
10 |
% |
|
|
67.0 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
955.6 |
|
|
|
100 |
% |
|
|
869.9 |
|
|
|
100 |
% |
|
|
687.4 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
months | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended | |
|
|
|
|
October 31, | |
|
Year ended July 31, | |
|
|
| |
|
| |
|
|
2006 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in $ millions, except percentages) | |
Veritas Revenues by Region |
Americas
|
|
|
143.4 |
|
|
|
62 |
% |
|
|
552.4 |
|
|
|
67 |
% |
|
|
397.8 |
|
|
|
63 |
% |
|
|
390.6 |
|
|
|
70 |
% |
Asia Pacific/Middle East
|
|
|
41.9 |
|
|
|
18 |
% |
|
|
138.2 |
|
|
|
17 |
% |
|
|
124.9 |
|
|
|
20 |
% |
|
|
81.3 |
|
|
|
14 |
% |
Europe
|
|
|
44.8 |
|
|
|
20 |
% |
|
|
93.6 |
|
|
|
11 |
% |
|
|
71.9 |
|
|
|
11 |
% |
|
|
79.2 |
|
|
|
14 |
% |
Africa
|
|
|
0.7 |
|
|
|
|
|
|
|
38.0 |
|
|
|
5 |
% |
|
|
39.4 |
|
|
|
6 |
% |
|
|
13.3 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
230.8 |
|
|
|
100 |
% |
|
|
822.2 |
|
|
|
100 |
% |
|
|
634.0 |
|
|
|
100 |
% |
|
|
564.5 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We believe we are a leading land seismic contractor,
particularly in difficult terrain. Land seismic acquisition
includes all seismic surveying techniques where the recording
sensor is either in direct contact with, or in close proximity
to, the ground. Our land business line offers integrated
services, including the acquisition and processing of seismic
data on land, in transition zones and on the ocean floor (seabed
surveys). As at September 30, 2006, CGG had 12 land
crews performing specialized 3D and 2D seismic surveys, all of
which were recording data. During its fiscal year 2006, Veritas
had an average of 12 land crews in operation. As at
December 31, 2005, CGGs land survey equipment had a
combined recording capacity of approximately
59,000 channels. As at July 31, 2006, Veritas
land survey equipment had a combined recording capacity of
approximately 52,000 channels. We have developed
partnerships with local seismic acquisition companies in several
countries, including Saudi Arabia, Indonesia and Libya. We bring
to these partnerships our international expertise, technical
know-how, equipment and experienced key personnel as needed,
while local partners provide their logistical resources,
equipment and knowledge of the environment and local market. We
are also continuing to invest in Veritas non-exclusive
land seismic data libraries.
Land activities accounted for 14% of CGGs consolidated
operating revenue and 35% of Veritas consolidated
revenues, for the years ended December 31, 2005 and
July 31, 2006, respectively.
We provide a full range of 3D marine seismic services,
principally in the Gulf of Mexico, the North Sea and off the
coasts of West Africa and Brazil, as well as in the Asia-Pacific
region. The capacity to both acquire and process marine seismic
data is an important element of our overall strategy to maintain
and develop our leading position in marine seismic data
acquisition and processing. We currently operate a combined
fleet of 20 vessels, including 14 high capacity 3D vessels.
Capacity in the combined fleet is balanced between large (more
than
4
10 streamers), medium (six to eight streamers) and smaller
sizes, with all vessels equipped with Sercels solid or
fluid streamers. Time charters allow us to change vessels in
order to keep pace with market developments and provide us with
the security of continued access to vessels without the
significant investment required for ownership.
We undertake both exclusive and multi-client marine surveys.
When we acquire marine seismic data on an exclusive basis, the
customer contracts to pay for and directs the scope and extent
of the survey and retains ownership of the data obtained. In
regions where there is extensive petroleum exploration, such as
Brazil, the Gulf of Mexico, West Africa, the Mediterranean Sea
and the North Sea, we also undertake multi-client surveys, in
which we fund the survey ourselves and retain ownership of the
seismic data. This enables us to provide multiple companies
access to the data by way of license. As a result, we have the
potential to obtain multiple and higher revenues, while our
customers who license the data have the opportunity to pay lower
prices. Multi-client surveys accounted for 42% of CGGs
offshore operating revenue in 2005 and 40% in the nine months
ended September 30, 2006. In the fiscal year ended
July 31, 2006, and the three months ended October 31,
2006, 60% and 61%, respectively of Veritas marine revenues
came from multi-client work.
Offshore activities accounted for 37% of CGGs consolidated
operating revenue and 49% of Veritas consolidated revenues
for the years ended December 31, 2005 and July 31,
2006, respectively.
We provide seismic data processing and reservoir services
through our network of 30 data processing centers and reservoir
teams located around the world. Our seismic data processing
operations transform seismic data acquired in the field into 2D
cross-sections, or 3D images of the earths subsurface or
4D time-lapse seismic data using Geocluster and Hampson-Russell
software, our proprietary seismic software, or third party
applications. These images are then interpreted by geophysicists
and geologists for use by oil and gas companies in evaluating
prospective areas, selecting drilling sites and managing
producing reservoirs. We process seismic data acquired by our
land and marine acquisition crews as well as seismic data
acquired by non-affiliated third parties. Marine seismic data
has been a significant source of the growth in demand for our
data processing services and represents over two-thirds of the
operating revenues generated in our processing centers. In
addition, we reprocess previously processed data using new
techniques to improve the quality of seismic images. We also
license our proprietary software to companies wishing to do
their own geophysical interpretation.
We complement our network of international centers with regional
multi-client centers and dedicated centers that bring processing
facilities within our clients premises. Fifteen of our
data processing centers are dedicated centers that
are located in clients offices. We believe that these
dedicated centers are responsive to the trend among oil and gas
companies to outsource processing work. They also allow us to
provide clients with a high level of service. These centers
enable our geoscientists to work directly with clients and
tailor our services to meet individual clients needs.
We also operate four visualization centers that allow teams of
our customers geoscientists and engineers to view and
interpret large volumes of 3D data.
Processing and reservoir activities accounted for 13% of
CGGs consolidated operating revenue and 14% of
Veritas consolidated revenues for the years ended
December 31, 2005 and July 31, 2006, respectively.
Products
We conduct our equipment development and production operations
through Sercel. We believe Sercel is the market leader in the
development and production of seismic acquisition systems and
specialized equipment in the land and offshore seismic markets.
Sercels principal product line is seismic recording
equipment, particularly the 408UL 24-bit recording systems.
Sercel is operated as an independent division and makes most of
its sales to third-party purchasers. Veritas provides
geophysical software but does not produce geophysical equipment.
Sercel currently operates eight seismic equipment manufacturing
facilities, located in Nantes, Saint Gaudens and Toulon in
France, Houston, Sydney, Singapore, Alfreton in England and
Calgary. In China, Sercel operates its activities through
Sercel-JunFeng Geophysical Equipment Co Ltd, based in Hebei
(China), in which Sercel
5
acquired a 51% interest in 2004 and through Xian-Sercel a
manufacturing joint venture with XPEIC (Xian Petroleum Equipment
Industrial Corporation), in which Sercel holds a 40% interest.
In addition, two sites in Massy and Brest (France) are dedicated
to borehole tools and submarine acoustic instrumentation,
respectively.
Purchases by CGG of geophysical equipment from Sercel have
historically been included in intragroup sales. Prior to the
merger, Veritas was a customer of Sercel and following the
merger, purchases by Veritas of geophysical equipment from
Sercel are also included in intragroup sales.
Products accounted for 36% of CGGs consolidated operating
revenue for the year ended December 31, 2005.
Our Strategy
We intend to continue to strengthen our competitive position in
the global geophysical services and products markets by
capitalizing on growth opportunities resulting from both the
application of new technologies in every sector of the oil and
gas business from exploration to production and
reservoir management and from our diversified
geographic presence. See Our Business Our
Strategy.
To achieve this objective, we have adopted the following
strategies:
Develop Technological Synergies for Products
and Capitalize on New Generation Equipment.
We believe Sercel is the leading producer of land, marine and
subsea geophysical equipment, particularly in difficult terrain.
We plan to continue developing synergies among the technologies
available within Sercel and to capitalize fully on our position
as a market leader. Through internal expenditures on research
and development, we seek to improve existing products and
maintain an active new product development program in all
segments of the geophysical equipment market (land, marine and
ocean-bottom).
Develop and Utilize Innovative
Technology.
The industry is increasingly demanding clearer seismic imaging
and better visibility, particularly underneath salt layers. We
expect recent technologies such as multi-azimuth,
multi-component (3C/4C) surveys and time-lapse (4D) surveys to
become increasingly important for new production-related
applications, particularly in the marine sector, and expect
specialized recording equipment for difficult terrain to become
more important in land seismic data acquisition, particularly in
transition zones and shallow water. We believe that the combined
technology and know-how of CGG and Veritas will strengthen
research and development capabilities to best serve our client
base.
Emphasize Client Service.
There is an industry trend towards higher quality outsourcing in
the selection of
third-party service
providers. We plan to continue our client service strategy
through: individually tailoring our data acquisition operations;
expanding regional multi-client and dedicated
on-site processing
centers; recruiting and training customer-oriented service
staff; organizing client training seminars focused on our
products and services; developing easy access to our
multi-client data library through the application of
e-business
technologies; developing corporate contracts with our main
clients; and gaining access to new data acquisition markets,
such as subsea and newly opening territories.
Provide Integrated Services.
We are committed to providing clients with a full array of
seismic data services, from acquisition and processing to data
interpretation and management. We believe that integration of
compatible technology and equipment increases the accuracy of
data acquisition and processing, enhances the quality of our
client service and thereby improves productivity in oil and gas
exploration and production.
6
Exploit Strong Data Libraries.
We intend to take advantage of the complementary, recent
vintage, well positioned seismic data libraries of CGG and
Veritas. For example, in the Gulf of Mexico, Veritas data
library is positioned in the Western and Central Gulf while
CGGs data library is in the Central and Eastern Gulf. Data
merging from the CGG and Veritas libraries will provide
potential for cross imaging enhancement and value creation by
applying the latest processing software development to achieve
an optimal image. Onshore, Veritas land library offers
additional potential in North America. Our combined library is a
strength in a market where a global library portfolio is
increasingly attractive to clients.
Develop Reservoir Applications.
Seismic data is mainly used by oil and gas companies for
exploration purposes. However, we are progressively extending
our core business towards compiling and analyzing seismic data
of existing reservoirs. Through high-resolution images and our
expertise in 4D seismic and permanent monitoring, we aim to
assist hydrocarbon producers in better characterizing and
predicting the static properties and dynamic behavior of their
reservoirs.
Industry Conditions
Overall demand for geophysical services and equipment is
dependent on spending by oil and gas companies for exploration,
production development and field management activities. This
spending depends in part on present and expected future oil and
gas prices.
We believe that the outlook for the geophysical services sector
and the demand for geophysical products is fundamentally
positive for a number of reasons:
|
|
|
|
|
Economic growth, particularly in more active regions such as
Asia (notably China and India) and Brazil, is generating
increased energy demand and leading to higher energy prices and
increased exploration efforts; |
|
|
|
The need to replace depleting reserves and maximize the recovery
of oil in existing reservoirs should encourage capital
expenditures by companies engaged in exploration and production,
which we expect will benefit the seismic industry; |
|
|
|
The scope of application of geophysical services has
considerably increased over the last several years as a result
of significant research and development efforts. Geophysical
services can now potentially be applied to the entire sequence
of exploration, development and production as opposed to
exploration only. This is particularly true with technologies
such as 4D (time lapse seismic data); and |
|
|
|
The depth and duration of the contraction in the geophysical
sector between 1999 and 2004 may have increased awareness among
geophysical service providers of the risks related to market
overcapacity. |
We believe that the merger puts us in a strong position to
benefit from these industry conditions. See The Veritas
Merger Merger Rationale.
7
SUMMARY FINANCING STRUCTURE
The following diagram summarizes our financing structure and
debt obligations after giving effect to the merger and the
financing transactions. We have listed below only our
subsidiaries that guarantee the senior facilities and the notes
(with the exception of Sercel Canada Ltd., which does not
guarantee the senior facilities). We expect that each of these
subsidiaries (other than Sercel Canada Ltd.) will also guarantee
the French revolving facility. Our other subsidiaries, which
will not initially guarantee the notes, have no obligation to
pay amounts due on the notes. As a result, the notes are
effectively subordinated to existing and future third party
indebtedness and other liabilities of those non-guarantor
subsidiaries. See Risk Factors Risks Related
to the Notes Your right to receive payments on the
notes is effectively junior to most of our existing indebtedness
and possibly all of our future borrowings. For a summary
of the debt obligations identified in this diagram, please see
Description of the Additional Notes,
Description of the New Notes and Description
of Certain Indebtedness.
8
Notes:
|
|
(1) |
We are planning to enter into the French revolving facility of
$200 million. To secure the obligations under the French
revolving facility, we and our subsidiaries acting as guarantors
under the senior facilities intend to grant the same guarantees
and security interests as were granted to secure the obligations
under the senior facilities. |
|
(2) |
The senior facilities include the U.S. revolving facility of
$115 million, which is expected to be increased to
$140 million. There are no drawings under the U.S.
revolving facility as of the date of this prospectus. The senior
facilities are guaranteed by us and the initial guarantors of
the notes shown in the diagram above, other than Sercel Canada
Ltd. As security for CGGVeritas Services Inc.s obligations
under the senior facilities, we have pledged first-priority
security in the shares of CGGVeritas Services Inc. and certain
of our other first-tier subsidiaries, as well as material
first-tier subsidiaries of Veritas. In addition, certain
guarantors have provided (or will provide) first-priority
security interests in certain of their respective tangible and
intangible assets, including (without limitation) certain
vessels, real property, mineral rights, deposit accounts and
intellectual property. |
|
(3) |
CGG issued, on April 28, 2005 and February 3, 2006, an
aggregate of $330 million of its
71/2%
Senior Notes due 2015. The additional notes are being issued as
part of the same series as such notes and pursuant to the same
indenture governing such notes. |
9
SUMMARY OF THE OFFERING
|
|
|
The Issuer |
|
Compagnie Générale de Géophysique-Veritas |
Securities Offered
|
|
|
Additional notes |
|
$300,000,000 aggregate principal amount of
71/2% Senior
Notes due 2015 (the additional notes) issued under
an indenture dated as of April 28, 2005. Notes in an
aggregate principal amount of $330,000,000 have been previously
issued under that indenture and are outstanding (the
existing notes). The additional notes and the
existing notes will be treated as the same series of notes under
the indenture. |
|
New notes |
|
$300,000,000 aggregate principal amount
of % Senior Notes due 2017 (the new
notes, and together with the additional notes,
the notes). The new notes will be issued under
a new indenture. |
|
Maturity |
|
|
|
Additional notes |
|
May 15, 2015. |
|
New notes |
|
May 15, 2017. |
|
Interest |
|
|
|
Additional notes |
|
71/2% per
annum, payable semi-annually in arrears on May 15 and November
15. Interest on the additional notes will accrue from and
including November 15, 2006 and will be paid commencing on
May 15, 2007. |
|
New notes |
|
% per
annum, payable semi-annually in arrears on May 15 and November
15. Interest on the new notes will accrue from and including the
issue date and will be paid commencing on May 15, 2007. |
|
Guarantees |
|
Initially, the notes will be guaranteed on a senior unsecured
basis by CGGVeritas Services Inc., Veritas DGC Land Inc.,
Veritas Geophysical Corporation, Veritas Investments Inc.,
Viking Maritime Inc., Veritas Geophysical (Mexico) LLC, Veritas
DGC Asia Pacific Ltd. and Alitheia Resources Inc. (the
Veritas Guarantors), Sercel Inc., Sercel Canada
Ltd. and Sercel Australia Pty Ltd. (the Sercel
Guarantors) and CGG Americas, Inc., CGG Canada Services
Ltd. and CGG Marine Resources Norge A/ S (the CGG
Guarantors, and together with the Veritas Guarantors and
the Sercel Guarantors, the Initial Guarantors). Our
other subsidiaries, including Exploration Resources, will not
initially guarantee the notes and, in certain circumstances, we
may elect to have the Sercel Guarantors released from their
guarantees of the notes. |
|
|
|
The Veritas Guarantors (excluding their subsidiaries that have
not guaranteed the notes) generated, before consolidation
entries, $384.1 million of revenues, $65.5 million of
operating income and $49.5 million of net income in the
year ended July 31, 2006 and held $807.9 million of
total assets before consolidation entries as at July 31,
2006. They generated, before consolidation entries,
$112.5 million of revenues, $15.2 million of operating
income and $20.4 million of net income in the three-month
period ended |
10
|
|
|
|
|
October 31, 2006 and held $781.3 million of total
assets before consolidation entries as at October 31, 2006. |
|
|
|
The CGG Guarantors (excluding their subsidiaries that have not
guaranteed the notes) generated, before consolidation entries,
161.0 million
of revenues,
49.8 million
of operating income and
30.7 million
of net income in the year ended December 31, 2005 and held
394.4 million
of total assets before consolidation entries as at
December 31, 2005. They generated, before consolidation
entries,
194.2 million
of revenues,
92.8 million
of operating income and
54.7 million
of net income in the nine-month period ended September 30,
2006 and held
402.1 million
of total assets before consolidation entries as at
September 30, 2006. |
|
|
|
The Sercel Guarantors (excluding their subsidiaries that have
not guaranteed the notes) generated, before consolidation
entries,
146.5 million
of revenues,
10.9 million
of operating income and
6.3 million
of net income in the year ended December 31, 2005 and held
205.9 million
of total assets before consolidation entries as at
December 31, 2005. They generated, before consolidation
entries,
229.3 million
of revenues,
33.6 million
of operating income and
22.3 million
of net income in the nine-month period ended September 30,
2006 and held
208.7 million
of total assets before consolidation entries as at
September 30, 2006. |
|
Ranking |
|
The notes will be our senior unsecured obligations, ranking
equally in right of payment with all our other existing and
future senior unsecured indebtedness and senior in right of
payment to all our existing and future subordinated
indebtedness. The notes and the subsidiary guarantees will be
effectively subordinated to all our secured obligations and all
secured obligations of the subsidiaries that guarantee the
notes, including any indebtedness under our senior facilities or
under the French revolving facility, to the extent of the value
of the collateral. In addition, the notes will be effectively
subordinated to all current and future indebtedness and other
obligations, including trade payables, of our subsidiaries that
do not guarantee the notes. As at September 30, 2006, on a
pro forma basis for the merger and the financing transactions,
there would have been
947 million
of outstanding indebtedness, including accrued interest,
effectively senior to the notes, of which
926 million
would have been secured. As at October 31, 2006,
Veritas
non-guarantor
subsidiaries had no outstanding indebtedness. The Indentures
permit us and our subsidiaries to incur additional indebtedness
(including additional secured indebtedness), subject to certain
conditions. See Description of Certain Indebtedness. |
|
Optional Redemption |
|
|
|
Additional notes |
|
We may redeem all or a part of the additional notes at any time
on or after May 15, 2010 at the redemption prices described
in this prospectus. We may redeem up to 35% of the aggregate
principal amount of the existing notes and the additional notes
prior to May 15, 2008 using the proceeds of certain equity
offerings. At any time prior to May 15, 2010, we may redeem
all or part of the additional notes at a redemption price equal
to 100% of the principal |
11
|
|
|
|
|
amount of the additional notes plus the applicable premium
described in this prospectus. |
|
New notes |
|
We may redeem all or a part of the new notes at any time on or
after May 15, 2012 at the redemption prices described in
this prospectus. We may redeem up to 35% of the aggregate
principal amount of the new notes prior to May 15, 2010
using the proceeds of certain equity offerings. At any time
prior to May 15, 2012, we may redeem all or part of the new
notes at a redemption price equal to 100% of the principal
amount of the new notes plus the applicable premium described in
this prospectus. |
|
Change of Control |
|
If we undergo a change of control, each holder may require us to
repurchase all or a portion of the notes held by such holder at
101% of the principal amount thereof, plus accrued and unpaid
interest. |
|
Redemption for Changes in
Tax Law |
|
We will be required to pay additional amounts to the holders of
the notes to compensate them for any amounts deducted from
payments to them in respect of the notes on account of certain
taxes and other governmental charges. If we become obliged to
pay such additional amounts as a result of a change in law, the
notes will be subject to redemption, in whole but not in part,
at our option at a price equal to 100% of the principal amount
of the notes. |
|
Certain Covenants and Events of Default |
|
Each of the indentures governing the notes contains certain
covenants and events of default that, among other things, limit
our ability and that of certain of our subsidiaries to: |
|
|
|
incur
or guarantee additional indebtedness or issue preferred shares; |
|
|
|
pay
dividends or make other distributions; |
|
|
|
purchase
equity interests or redeem subordinated indebtedness early; |
|
|
|
create
or incur certain liens; |
|
|
|
create
or incur restrictions on the ability to pay dividends or make
other payments to us; |
|
|
|
enter
into transactions with affiliates; |
|
|
|
issue
or sell capital stock of our subsidiaries; |
|
|
|
engage
in sale-and-leaseback transactions; and |
|
|
|
sell
assets or merge or consolidate with another company. |
|
|
|
All of these limitations are subject to a number of important
qualifications and exceptions. In addition, the starting dates
for the calculation of the availability under the various
baskets relating to restricted payments,
indebtedness, liens and other covenants are the same as those
under the indenture governing the existing notes, namely either
January 1, 2005 or April 28, 2005 (depending on the
particular basket). |
12
|
|
|
|
|
If at any time the notes receive ratings of BBB- or higher from
Standard & Poors and Baa3 or higher from
Moodys, and no default or event of default has occurred
and is continuing, certain restrictions, covenants and events of
default will cease to be applicable to the notes for so long as
the notes maintain such ratings. |
|
Taxation |
|
Because the notes constitute obligations and are deemed
to be issued outside the Republic of France for the purposes of
Article 131 quater of the French tax code (Code
général des impôts), payments of principal or
interest on, and other revenues with respect to the notes will
be entitled to the exemption from the withholding tax on
interest set out under Article 125 A III of the French
tax code. Accordingly, such payments do not give the right to
any tax credit from any French source. |
|
Use of Proceeds |
|
We intend to use the net proceeds of the offering, plus cash on
hand, to repay in full all amounts outstanding under the bridge
loan facility used to finance the merger. See Use of
Proceeds and Description of Certain
Indebtedness Bridge Loan Facility. |
|
Listing |
|
Application has been made to admit the notes to listing on the
Official List of the Luxembourg Stock Exchange and to trading on
the Euro MTF. |
|
Governing Law |
|
New York. |
|
Trustee and Principal Paying Agent |
|
The Bank of New York Trust Company, National Association. |
|
Luxembourg Listing and Paying Agent |
|
Dexia Banque Internationale à Luxembourg, société
anonyme. |
For further information regarding the notes, see
Description of the Additional Notes and
Description of the New Notes.
Risk Factors
Investment in the notes offered hereby involves certain risks.
You should carefully consider the information under Risk
Factors and all other information included in this
prospectus before investing in the notes.
13
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING
INFORMATION OF CGG
In accordance with regulations adopted by the European Union in
July 2002, all companies incorporated under the laws of one of
the member states of the European Union and whose securities are
publicly traded within the European Union were required to
prepare their consolidated financial statements for the fiscal
year starting on or after January 1, 2005, on the basis of
accounting standards issued by the International Accounting
Standards Board. Therefore, in accordance with these
requirements, CGG converted from using French generally accepted
accounting principles to IFRS, as adopted by the European Union.
As a first-time adopter of IFRS at January 1, 2005, CGG has
followed the specific requirements described in IFRS 1,
First Time Adoption of IFRS. The options selected for the
purpose of the transition to IFRS are described in the notes to
CGGs audited consolidated financial statements included
elsewhere in this prospectus. Effects of the transition on the
balance sheet at January 1, 2004, the statement of income
for the year ended December 31, 2004 and the balance sheet
at December 31, 2004 are presented and discussed in
Note 30 to CGGs audited consolidated financial
statements included elsewhere in this prospectus.
The tables below set forth CGGs summary historical
consolidated financial and operating information:
|
|
|
|
|
as at and for the nine months ended September 30, 2006 and
2005 in accordance with both IFRS and U.S. GAAP; |
|
|
|
as at and for the years ended December 31, 2005 and 2004 in
accordance with IFRS; and |
|
|
|
as at and for the years ended December 31, 2005, 2004 and
2003 in accordance with U.S. GAAP. |
The following summary historical consolidated financial
information as at and for the years ended December 31, 2005
and 2004 is derived from CGGs consolidated audited
financial statements included elsewhere in this prospectus.
CGGs consolidated financial statements for the years ended
December 31, 2005 and 2004 have been audited by Barbier
Frinault & Autres Ernst & Young and
Mazars & Guérard. The following summary historical
consolidated financial information for the nine-month periods
ended September 30, 2006 and 2005 is unaudited and is
derived from CGGs unaudited financial statements included
elsewhere in this prospectus. The unaudited financial statements
include all adjustments, consisting of normal recurring
accruals, which CGG considers necessary for a fair presentation
of its financial position and results of operations for these
periods. The results of operations for the nine-month periods
presented below are not necessarily indicative of the results
for the full fiscal year.
The tables should be read in conjunction with, and are qualified
in their entirety by reference to, CGGs consolidated
financial statements and Managements Discussion and
Analysis of Financial Condition and Results of
Operations CGG Results of Operations included
elsewhere in this prospectus.
IFRS differs from U.S. GAAP in certain significant
respects. For a discussion of significant differences between
U.S. GAAP and IFRS as they relate to CGGs
consolidated financial statements and a reconciliation to
U.S. GAAP of CGGs net income and shareholders
equity for 2005 and 2004, see Note 31 to CGGs audited
consolidated financial statements included elsewhere in this
prospectus and Note 3 to CGGs unaudited consolidated
financial statements included elsewhere in this prospectus.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
As at and for the nine | |
|
|
|
|
months ended | |
|
As at and for the | |
|
|
September 30, | |
|
year ended | |
|
|
| |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except for | |
|
|
per share and ratio data) | |
Amounts in accordance with IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
955.6 |
|
|
|
607.5 |
|
|
|
869.9 |
|
|
|
687.4 |
|
Other revenues from ordinary activities
|
|
|
1.4 |
|
|
|
1.2 |
|
|
|
1.9 |
|
|
|
0.4 |
|
Cost of operations
|
|
|
(636.7 |
) |
|
|
(473.2 |
) |
|
|
(670.0 |
) |
|
|
(554.0 |
) |
Gross profit
|
|
|
320.3 |
|
|
|
135.5 |
|
|
|
201.8 |
|
|
|
133.8 |
|
Research and development expenses, net
|
|
|
(27.8 |
) |
|
|
(23.6 |
) |
|
|
(31.1 |
) |
|
|
(28.8 |
) |
Selling, general and administrative expenses
|
|
|
(86.9 |
) |
|
|
(64.2 |
) |
|
|
(91.2 |
) |
|
|
(78.6 |
) |
Other revenues (expenses)
|
|
|
12.0 |
|
|
|
2.7 |
|
|
|
(4.4 |
) |
|
|
19.3 |
|
Operating income
|
|
|
217.6 |
|
|
|
45.0 |
|
|
|
75.1 |
|
|
|
45.7 |
|
Cost of financial debt, net
|
|
|
(19.2 |
) |
|
|
(26.7 |
) |
|
|
(42.3 |
) |
|
|
(27.8 |
) |
Derivative and other expenses on convertible bonds
|
|
|
(23.0 |
) |
|
|
(38.0 |
) |
|
|
(11.5 |
) |
|
|
(23.5 |
) |
Other financial income (loss)
|
|
|
(8.4 |
) |
|
|
1.3 |
|
|
|
(14.5 |
) |
|
|
0.8 |
|
Income taxes
|
|
|
(54.9 |
) |
|
|
(18.5 |
) |
|
|
(26.6 |
) |
|
|
(10.9 |
) |
Equity in income of affiliates
|
|
|
8.9 |
|
|
|
9.6 |
|
|
|
13.0 |
|
|
|
10.3 |
|
Net income (loss)
|
|
|
121.0 |
|
|
|
(27.3 |
) |
|
|
(6.8 |
) |
|
|
(5.4 |
) |
Attributable to minority interests
|
|
|
1.2 |
|
|
|
0.6 |
|
|
|
(1.0 |
) |
|
|
(1.0 |
) |
Attributable to shareholders
|
|
|
119.8 |
|
|
|
(27.9 |
) |
|
|
(7.8 |
) |
|
|
(6.4 |
) |
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1)
|
|
|
6.92 |
|
|
|
(2.37 |
) |
|
|
(0.64 |
) |
|
|
(0.55 |
) |
|
Diluted(2)
|
|
|
6.78 |
|
|
|
(2.37 |
) |
|
|
(0.64 |
) |
|
|
(0.55 |
) |
Other Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed
charges(3)
|
|
|
10.9 |
x |
|
|
1.7 |
x |
|
|
1.4 |
x |
|
|
1.8 |
x |
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
168.7 |
|
|
|
|
|
|
|
112.4 |
|
|
|
130.6 |
|
Working
capital(4)
|
|
|
254.0 |
|
|
|
|
|
|
|
154.1 |
|
|
|
116.4 |
|
Property, plant & equipment, net
|
|
|
485.0 |
|
|
|
|
|
|
|
480.1 |
|
|
|
204.1 |
|
Multi-client surveys
|
|
|
69.8 |
|
|
|
|
|
|
|
93.6 |
|
|
|
124.5 |
|
Total assets
|
|
|
1,751.7 |
|
|
|
|
|
|
|
1,565.1 |
|
|
|
971.2 |
|
Financial
debt(5)
|
|
|
430.8 |
|
|
|
|
|
|
|
400.3 |
|
|
|
249.6 |
|
Stockholders equity
|
|
|
850.5 |
|
|
|
|
|
|
|
698.5 |
|
|
|
393.2 |
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the nine | |
|
|
|
|
months ended | |
|
As at and for the | |
|
|
September 30, | |
|
year ended | |
|
|
| |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except for | |
|
|
per share and ratio data) | |
Other Historical Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBDA(6)
|
|
|
359.9 |
|
|
|
148.9 |
|
|
|
229.5 |
|
|
|
172.5 |
|
Capital expenditures (property, plant &
equipment)(7)
|
|
|
117.2 |
|
|
|
75.4 |
|
|
|
125.1 |
|
|
|
49.8 |
|
Capital expenditures for multi-client surveys
|
|
|
38.9 |
|
|
|
19.2 |
|
|
|
32.0 |
|
|
|
51.1 |
|
Net
debt(8)
|
|
|
273.0 |
|
|
|
500.5 |
|
|
|
297.2 |
|
|
|
121.8 |
|
Net
debt(8)/
ORBDA(6)
|
|
|
|
|
|
|
|
|
|
|
1.3 |
x |
|
|
0.7 |
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the | |
|
|
|
|
|
|
|
|
nine months | |
|
|
|
|
ended September 30, | |
|
As at and for the year ended | |
|
|
| |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except for per share, ratio and operational data) | |
Amounts in accordance with U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
967.7 |
|
|
|
601.6 |
|
|
|
860.8 |
|
|
|
709.5 |
|
|
|
645.6 |
|
Operating income
|
|
|
215.0 |
|
|
|
38.2 |
|
|
|
61.9 |
|
|
|
55.0 |
|
|
|
42.7 |
|
Net income (loss)
|
|
|
94.0 |
|
|
|
(15.3 |
) |
|
|
8.3 |
|
|
|
(20.2 |
) |
|
|
3.1 |
|
Per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common stock
holder(1)
|
|
|
5.43 |
|
|
|
(1.30 |
) |
|
|
0.69 |
|
|
|
(1.73 |
) |
|
|
0.27 |
|
|
Diluted common stock
holder(9)
|
|
|
5.32 |
|
|
|
(1.30 |
) |
|
|
0.67 |
|
|
|
(1.73 |
) |
|
|
0.26 |
|
Other Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed
charges(3)
|
|
|
8.8 |
x |
|
|
2.0 |
x |
|
|
1.6 |
x |
|
|
1.4 |
x |
|
|
0.5 |
x |
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,751.2 |
|
|
|
|
|
|
|
1,573.8 |
|
|
|
975.8 |
|
|
|
924.2 |
|
Financial
debt(5)
|
|
|
436.7 |
|
|
|
|
|
|
|
416.7 |
|
|
|
266.5 |
|
|
|
232.4 |
|
Stockholders equity
|
|
|
811.7 |
|
|
|
|
|
|
|
689.5 |
|
|
|
372.2 |
|
|
|
413.4 |
|
Operational Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land teams in operations
|
|
|
8 |
|
|
|
12 |
|
|
|
11 |
|
|
|
8 |
|
|
|
12 |
|
Operational
streamers(10)
|
|
|
44 |
|
|
|
52 |
|
|
|
46 |
|
|
|
39 |
|
|
|
42 |
|
Data processing centers
|
|
|
31 |
|
|
|
30 |
|
|
|
27 |
|
|
|
26 |
|
|
|
26 |
|
Notes:
|
|
(1) |
Basic per share amounts under IFRS and U.S. GAAP have been
calculated on the basis of 17,318,957 issued and
outstanding shares in the nine month period ended
September 30, 2006, 11,765,118 issued and outstanding
shares in the nine month period ended September 30, 2005,
12,095,925 issued and outstanding shares in 2005 and 11,681,406
issued and outstanding shares in 2004. Basic per share amounts
under U.S. GAAP have been calculated on the basis of
11,680,718 issued and outstanding shares in 2003. |
|
(2) |
Diluted per share amount under IFRS has been calculated on the
basis of 17,675,616 issued and outstanding shares in the
nine month period ended September 30, 2006,
13,451,097 issued and outstanding shares in the nine month
period ended September 30, 2005, 12,095,925 issued and
outstanding shares in 2005 and 11,681,406 issued and outstanding
shares in 2004. For the nine-month period ended
September 30, 2005, the effect of convertible bonds was
anti-dilutive. |
|
(3) |
For purposes of calculating the ratio of earnings to fixed
charges, earnings in IFRS consist of income (loss) from
consolidated companies before income taxes, excluding derivative
and other expenses on convertible bonds included in CGGs
income statement for the relevant |
16
|
|
|
period included elsewhere in this
prospectus. Earnings under U.S. GAAP consist of income from
consolidated companies before income taxes and minority
interests, excluding equity in income of affiliates included in
CGGs income statement for the relevant period included
elsewhere in this prospectus. Fixed charges under each of IFRS
and U.S. GAAP consist of net cost of financial debt
(including amortization fees). For the year ended
December 31, 2003, our earnings were insufficient to cover
fixed charges by
13.5 million
under U.S. GAAP.
|
|
(4) |
Working capital consists of trade
accounts and notes receivable, inventories and
work-in-progress, tax
assets, other current assets and assets held for sale less trade
accounts and notes payable, accrued payroll costs, income tax
payable, advance billings to customers, current provisions and
other current liabilities. |
|
(5) |
Financial debt means
total financial debt, including current maturities, capital
leases and accrued interest but excluding bank overdrafts.
Financial debt excludes fees relating to the raising of debt
under IFRS, but includes such fees under U.S. GAAP.
|
|
(6) |
A discussion of ORBDA
(Operating Result Before Depreciation and Amortization,
previously denominated Adjusted EBITDA), including
(i) a reconciliation to net cash provided by operating
activities and (ii) the reasons why our management believes
that a presentation of ORBDA provides useful information to
investors regarding our financial condition and results of
operations, is found in Managements Discussion and
Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources ORBDA.
|
|
(7) |
Capital expenditures
is defined as purchases of property, plant and equipment plus
equipment acquired under capital lease.
|
|
|
|
The following table presents a reconciliation of capital
expenditures to purchases of property, plant and equipment and
equipment acquired under capital lease for the periods indicated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months | |
|
For the year | |
|
|
ended September 30, | |
|
ended | |
|
|
| |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions) | |
Purchase of property, plant and equipment
|
|
|
117.0 |
|
|
|
61.8 |
|
|
|
107.7 |
|
|
|
41.1 |
|
Equipment acquired under capital lease
|
|
|
0.2 |
|
|
|
13.6 |
|
|
|
17.4 |
|
|
|
8.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
117.2 |
|
|
|
75.4 |
|
|
|
125.1 |
|
|
|
49.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
Net debt means bank overdrafts, financial debt
including current portion (including capital lease debt) net of
cash and cash equivalents. A discussion of net debt, including
(i) a reconciliation of net debt to financing items of the
CGG balance sheet and (ii) the reasons why our management
believes that a presentation of net debt provides useful
information to investors regarding our financial condition and
results of operations, is found in Managements
Discussion and Analysis of Financial Condition and Results of
Operations Net Debt. |
|
(9) |
Diluted per share amounts under U.S. GAAP have been
calculated on the basis of 17,675,616 issued and
outstanding shares in the nine month period ended
September 30, 2006, 13,451,097 issued and outstanding
shares in the nine month period ended September 30, 2005,
12,378,209 issued and outstanding shares in 2005, 11,681,406
issued and outstanding shares in 2004, and 11,760,630 issued and
outstanding shares in 2003. |
|
|
(10) |
Data includes Exploration Resources ASAs streamers (from
and including December 31, 2005) and excludes streamers of
vessels in transit or dry-dock. |
17
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
VERITAS
The table below sets forth summary historical consolidated
financial information for Veritas as at and for the three months
ended October 31, 2006 and 2005, and as at and for the
years ended July 31, 2006, 2005 and 2004 in each case in
accordance with U.S. GAAP.
The following summary historical consolidated financial
information as at and for the years ended July 31, 2006,
2005 and 2004 is derived from Veritas consolidated annual
financial statements under U.S. GAAP included elsewhere in
this prospectus. Veritas consolidated financial statements
as at and for the years ended July 31, 2006, 2005 and 2004
have been audited by PricewaterhouseCoopers LLP. The following
summary historical consolidated financial information for the
three-month periods
ended October 31, 2006 and 2005 is derived from
Veritas unaudited financial statements included elsewhere
in this prospectus. The unaudited financial statements include
all adjustments, consisting of normal recurring accruals, which
Veritas considers necessary for a fair presentation of its
financial position and results of operations for these periods.
The results of operations for the
three-month periods
presented below are not necessarily indicative of the results
for the full fiscal year.
The table below should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated
financial statements of Veritas and Managements
Discussion and Analysis of Financial Condition and Results of
Operations Veritas Results of Operations
included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the three | |
|
|
|
|
months ended October 31, | |
|
As at and for the year | |
|
|
| |
|
ended July 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2006(1) | |
|
2005(2) | |
|
2004(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in $ millions, except per share amount) | |
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
230.8 |
|
|
|
168.7 |
|
|
|
822.2 |
|
|
|
634.0 |
|
|
|
564.5 |
|
Cost of services
|
|
|
165.8 |
|
|
|
136.7 |
|
|
|
623.2 |
|
|
|
519.0 |
|
|
|
495.7 |
|
Research and development
|
|
|
5.4 |
|
|
|
4.9 |
|
|
|
22.9 |
|
|
|
18.9 |
|
|
|
15.5 |
|
General and administrative
|
|
|
11.4 |
|
|
|
8.9 |
|
|
|
43.2 |
|
|
|
31.9 |
|
|
|
25.5 |
|
Operating income (loss)
|
|
|
37.9 |
|
|
|
18.3 |
|
|
|
132.9 |
|
|
|
64.2 |
|
|
|
27.8 |
|
Interest expense
|
|
|
2.2 |
|
|
|
1.5 |
|
|
|
7.3 |
|
|
|
4.0 |
|
|
|
18.9 |
|
Interest income
|
|
|
(5.0 |
) |
|
|
(1.9 |
) |
|
|
(12.0 |
) |
|
|
(5.3 |
) |
|
|
(1.6 |
) |
Gain on involuntary conversion of assets
|
|
|
|
|
|
|
(2.0 |
) |
|
|
(2.0 |
) |
|
|
(9.9 |
) |
|
|
|
|
Other (income) expense, net
|
|
|
0.03 |
|
|
|
(.13 |
) |
|
|
.12 |
|
|
|
(.88 |
) |
|
|
1.6 |
|
Provision (benefit) for income tax expense
|
|
|
13.2 |
|
|
|
9.0 |
|
|
|
57.2 |
|
|
|
(6.8 |
) |
|
|
3.7 |
|
Net income (loss)
|
|
|
27.5 |
|
|
|
11.8 |
|
|
|
82.2 |
|
|
|
83.0 |
|
|
|
5.2 |
|
Net income (loss) per common share basic
|
|
|
0.77 |
|
|
|
0.34 |
|
|
|
2.33 |
|
|
|
2.45 |
|
|
|
0.16 |
|
Net income (loss) per common share diluted
|
|
|
0.68 |
|
|
|
0.32 |
|
|
|
2.08 |
|
|
|
2.37 |
|
|
|
0.15 |
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
353.8 |
|
|
|
228.0 |
|
|
|
402.0 |
|
|
|
249.4 |
|
|
|
116.3 |
|
Property and equipment, net
|
|
|
141.9 |
|
|
|
128.8 |
|
|
|
110.6 |
|
|
|
127.9 |
|
|
|
121.7 |
|
Multi-client data library
|
|
|
324.1 |
|
|
|
333.3 |
|
|
|
296.6 |
|
|
|
316.8 |
|
|
|
313.2 |
|
Total assets
|
|
|
1,175.6 |
|
|
|
954.5 |
|
|
|
1,158.0 |
|
|
|
966.6 |
|
|
|
776.2 |
|
Long-term debt (including current maturities)
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
155.0 |
|
Stockholders equity
|
|
|
749.8 |
|
|
|
607.8 |
|
|
|
710.5 |
|
|
|
582.5 |
|
|
|
489.7 |
|
|
Other Historical Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBDA(4)
|
|
|
123.5 |
|
|
|
81.6 |
|
|
|
383.7 |
|
|
|
265.9 |
|
|
|
278.3 |
|
18
Notes:
|
|
(1) |
Includes a gain on involuntary conversion of assets of
$2.0 million. |
|
(2) |
Includes a gain on involuntary conversion of assets of
$9.9 million and a release of deferred tax valuation
allowances of $36.9 million. |
|
(3) |
Includes charges of $22.1 million related to a change in
multi-client accounting policies and $7.4 million related
to debt refinancing. The change in multi-client accounting
policies may affect the comparability between periods and is
more fully described in Note 1 of the Veritas consolidated
financial statements included elsewhere in this prospectus. |
|
(4) |
A discussion of ORBDA (Operating Result Before
Depreciation and Amortization), including (i) a
reconciliation to net cash provided by operating activities and
(ii) the reasons why our management believes that a
presentation of ORBDA provides useful information to investors
regarding our financial condition and results of operations, is
found in Managements Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources ORBDA. |
19
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following summary unaudited pro forma condensed combined
financial information is presented in millions of euros and
gives pro forma effect to the merger and the financing
transactions under IFRS and U.S. GAAP as if they occurred
on January 1, 2005, in the case of the pro forma statements
of income, and September 30, 2006, in the case of the pro
forma balance sheet. The pro forma condensed combined statements
of income give pro forma effect to the acquisition of
Exploration Resources and the related financings as if they
occurred on January 1, 2005. The merger and the acquisition
of Exploration Resources reflected in the unaudited pro forma
financial statements using the purchase method of accounting
under U.S. GAAP.
The unaudited pro forma adjustments reflect the following
assumptions:
|
|
|
|
|
under U.S. GAAP, the price of CGG ADSs was $32.44, the
average price of CGG ADSs for the period beginning two days
before and ending two days after September 5, 2006 (the
date that the merger was announced); |
|
|
|
under IFRS, the price of CGG ADSs was $40.50, the closing
price on the closing date of the merger; |
|
|
|
each outstanding share of Veritas common stock was converted in
the merger into the right to receive either (i) 2.25 CGG
ADSs (with respect to 50.664% of Veritas total common
stock) or (ii) $75.00 in cash (with respect to 49.336% of
Veritas total common stock); |
|
|
|
the cash consideration paid by CGG in connection with the merger
was financed by a $1.0 billion term loan facility, the
issuance of $600 million in notes offered hereby and cash
on hand; and |
|
|
|
each employee option to purchase shares of Veritas common stock
pursuant to any stock option plan, program or arrangement of
Veritas outstanding at the time of the merger, whether or not
vested, has been cancelled and converted into the right to
receive, for each share of Veritas common stock subject to such
option, an amount in cash equal to the excess, if any, of $75.00
over the exercise price per share under such option (less any
applicable withholding taxes). |
The unaudited pro forma condensed combined financial
information is presented for illustrative purposes only and is
not indicative of the results of operations or the financial
condition of CGGVeritas that would have been achieved had the
merger, the acquisition of Exploration Resources, and the
related financing transactions been completed as of the dates
indicated, nor is the unaudited pro forma condensed combined
financial information indicative of our future results of
operations or financial position. The unaudited pro forma
condensed combined financial information does not reflect any
cost savings or other synergies that may result from the merger
nor does it reflect any special items such as restructuring and
integration costs that may be incurred as a result of the merger.
CGGVeritas reports, and CGG reported, its financial results in
euros and in conformity with IFRS, with a reconciliation to
U.S. GAAP. Veritas reported its financial results in
U.S. dollars and in conformity with U.S. GAAP. IFRS
differs from U.S. GAAP in certain significant respects. For
a discussion of significant differences between U.S. GAAP
and IFRS as they relate to CGGs consolidated financial
statements and a reconciliation to U.S. GAAP of CGGs
net income and shareholders equity for 2005 and 2004, see
Note 31 to CGGs audited consolidated financial
statements included elsewhere in this prospectus and Note 3
to CGGs unaudited consolidated financial statements
included elsewhere in this prospectus. For an explanation of the
differences between IFRS and U.S. GAAP as they apply to
CGGs and Veritas historical accounting treatments,
see Note 2 to the unaudited pro forma condensed combined
financial statements.
The unaudited pro forma condensed combined financial information
has been derived from and should be read in conjunction with the
unaudited pro forma condensed combined financial information and
the related notes included elsewhere in this prospectus, and the
respective consolidated financial statements of CGG for the year
ended December 31, 2005 and as at and for the nine-month
period ended September 30, 2006 and the consolidated
financial statements of Veritas for the year ended July 31,
2006 and as at and for the three months ended October 31,
2006, all included elsewhere in this prospectus.
The unaudited pro forma condensed combined financial information
is based on preliminary estimates and assumptions, which we
believe to be reasonable. In the unaudited pro forma
condensed combined financial information, the cash to be paid
and CGG ADSs to be issued as merger consideration for
Veritas shares of
20
common stock have been allocated to the Veritas assets and
liabilities based upon preliminary estimates by the management
of CGG of their respective fair values at the date of the
merger. Any difference between the consideration paid and the
fair value of the Veritas assets and liabilities has been
recorded as goodwill. Definitive allocations will be performed
after the effective time of the merger. Accordingly, the pro
forma adjustments relating to the purchase price allocation are
preliminary, have been made solely for the purpose of preparing
the unaudited pro forma condensed combined financial information
and are subject to revision based on the final determination of
fair value after the effective time of the merger. Any such
revisions may be material.
|
|
|
|
|
|
|
|
|
|
|
As at and | |
|
|
|
|
for the | |
|
|
|
|
nine | |
|
|
|
|
months | |
|
For the | |
|
|
ended | |
|
year ended | |
|
|
September 30, | |
|
December | |
|
|
2006 | |
|
31, 2005 | |
|
|
| |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
|
| |
|
| |
|
|
(in millions, except for per | |
|
|
share and ratio data) | |
IFRS
|
|
|
|
|
|
|
|
|
Statement of Income Data in accordance with IFRS:
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
1,470.1 |
|
|
|
1,489.1 |
|
Gross profit
|
|
|
430.9 |
|
|
|
292.2 |
|
Operating income (loss)
|
|
|
289.6 |
|
|
|
125.7 |
|
Net income attributable to shareholders
|
|
|
123.9 |
|
|
|
(17.3 |
) |
Earnings per share basic
|
|
|
4.60 |
|
|
|
(0.80 |
) |
Earnings per share diluted
|
|
|
4.54 |
|
|
|
(0.79 |
) |
Ratio of earnings to fixed charges
|
|
|
2.1x |
|
|
|
|
|
|
Balance Sheet Data in accordance with IFRS (at end of
period):
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,863.4 |
|
|
|
|
|
Shareholders equity attributable to
shareholders
|
|
|
2,405.5 |
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
|
300.5 |
|
|
|
|
|
Current portion of long-term debt
|
|
|
60.6 |
|
|
|
|
|
Bonds and notes issued and long-term debt
|
|
|
1,630.5 |
|
|
|
|
|
|
U.S. GAAP
|
|
|
|
|
|
|
|
|
Statement of Income Data in accordance with U.S.
GAAP:
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
1,479.3 |
|
|
|
1,474.4 |
|
Gross profit
|
|
|
439.2 |
|
|
|
288.3 |
|
Operating income (loss)
|
|
|
278.5 |
|
|
|
105.8 |
|
Net income attributable to shareholders
|
|
|
92.6 |
|
|
|
0.4 |
|
Earnings per share basic
|
|
|
3.44 |
|
|
|
0.02 |
|
Earnings per share diluted
|
|
|
3.39 |
|
|
|
0.02 |
|
Ratio of earnings to fixed charges
|
|
|
1.2x |
|
|
|
|
|
|
Balance Sheet Data in accordance with U.S. GAAP (at
end of period):
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,524.4 |
|
|
|
|
|
Shareholders equity attributable to
shareholders
|
|
|
2,018.8 |
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
|
300.4 |
|
|
|
|
|
Current portion of long-term debt
|
|
|
63.4 |
|
|
|
|
|
Bonds and notes issued and long-term debt
|
|
|
1,656.5 |
|
|
|
|
|
21
RISK FACTORS
An investment in the notes involves risks. Before
investing in the notes, you should carefully consider the
following risk factors and all information contained in this
prospectus. Additional risks and uncertainties of which we are
not aware or that we believe are immaterial may also adversely
affect our business, financial condition, liquidity, results of
operations or prospects. If any of these events occur, our
business, financial condition, liquidity, results of operations
or prospects could be materially and adversely affected. If that
happens, we may not be able to pay interest or principal on the
notes when due and you could lose all or part of your
investment.
Risks Related to Our Business
|
|
|
We are subject to certain risks related to acquisitions,
including the merger, and these risks may materially adversely
affect our revenues, expenses, operating results and financial
condition. |
The merger involves the integration of CGG and Veritas, two
companies that have previously operated independently and as
competitors. CGG and Veritas entered into the merger with the
expectation that, among other things, the merger would enable us
to achieve expected cost synergies from having one rather than
two public companies as well as the redeployment of support
resources towards operations and premises rationalization.
Achieving the benefits of the merger will depend in part upon
meeting the challenges inherent in the successful combination
and integration of global business enterprises of the size and
scope of CGG and Veritas and the possible resulting diversion of
management attention for an extended period of time. There can
be no assurance that we will meet these challenges and that such
diversion will not negatively affect our operations. In
addition, delays encountered in the transition process could
have a material adverse effect on our revenues, expenses,
operating results and financial condition. There can be no
assurance that we will actually achieve anticipated synergies or
other benefits from the merger.
In addition, in the past we have grown by acquisition, and we
may acquire companies or assets in the future. Such
acquisitions, whether completed or in the future, present
various financial and management-related risks, including
integration of the acquired businesses in a cost-effective
manner; implementation of a combined intended business strategy;
diversion of our managements attention; outstanding or
unforeseen legal, regulatory, contractual, labor or other issues
arising from the acquisitions; additional capital expenditure
requirements; retention of customers; integration of different
company and management cultures; operation in new geographic
markets; the need for more extensive management coordination;
and retention, hiring and training of key personnel. Should any
of these risks associated with acquisitions materialize, it
could have a material adverse effect on our business, financial
condition and results of operations.
|
|
|
We are subject to risks related to our international
operations that could harm our business and results of
operations. |
With operations worldwide, and with a majority of our revenues
likely to be derived outside of the United States and Western
Europe, including in emerging markets, our business and results
of operations will be subject to various risks inherent in
international operations. These risks include:
|
|
|
|
|
instability of foreign economies and governments; |
|
|
|
risks of war, terrorism, civil disturbance, seizure,
renegotiation or nullification of existing contracts; and |
|
|
|
foreign exchange restrictions, sanctions and other laws and
policies affecting taxation, trade and investment. |
We are exposed to these risks in all of our foreign operations
to some degree, and our exposure could be material to our
financial condition and results of operations in emerging
markets where the political and legal environment is less stable.
While we carry insurance against political risks associated with
such operations in amounts we consider appropriate in accordance
with industry practices, we cannot assure you that we will not
be subject to material
22
adverse developments with respect to our international
operations or that our coverage will be adequate to cover us for
any losses arising from such risks.
Revenue generating activities in certain foreign countries may
require prior United States government approval in the form of
an export license and may otherwise be subject to tariffs and
import/export restrictions. These laws can change over time and
may result in limitations on our ability to compete globally. In
addition,
non-U.S. persons
employed by our separately incorporated
non-U.S. entities
will conduct business in some foreign jurisdictions that have
been subject to U.S. trade embargoes and sanctions by the
U.S. Office of Foreign Assets Control. CGG and Veritas have
typically generated revenue in these countries through the
performance of data processing, reservoir consulting services
and the sale of software licenses and software maintenance. We
have current and ongoing relations with customers in these
countries. CGG and Veritas did, and we do, have procedures in
place to conduct these operations in compliance with applicable
U.S. laws. However, failure to comply with U.S. laws
on foreign operations could result in material fines and
penalties and damage to our reputation. In addition, our
activities in these countries could reduce demand for our
securities among certain investors.
We and certain of our subsidiaries and affiliated entities also
conduct business in countries which experience government
corruption. We are committed to doing business in accordance
with all applicable laws and our codes of ethics, but there is a
risk that we, our subsidiaries or affiliated entities or our
respective officers, directors, employees and agents may take
action in violation of applicable laws, including the Foreign
Corrupt Practices Act of 1977. Any such violations could result
in substantial civil and/or criminal penalties and might
materially adversely affect our business and results of
operations or financial condition.
|
|
|
We invest significant amounts of money in acquiring and
processing seismic data for multi-client surveys and for our
data library without knowing precisely how much of the data we
will be able to sell or when and at what price we will be able
to sell the data. |
We invest significant amounts of money in acquiring and
processing seismic data that we will own. By making such
investments, we are exposed to risks that:
|
|
|
|
|
We may not fully recover the costs of acquiring and processing
the data through future sales. The amounts of these data sales
are uncertain and depend on a variety of factors, many of which
are beyond our control. In addition, the timing of these sales
is unpredictable and sales can vary greatly from period to
period. Technological or regulatory changes or other
developments could also materially adversely affect the value of
the data. |
|
|
|
The value of our multi-client data could be significantly
adversely affected if any material adverse change occurs in the
general prospects for oil and gas exploration, development and
production activities in the areas where we acquire multi-client
data. |
|
|
|
Any reduction in the market value of such data will require us
to write down our recorded value, which could have a significant
material adverse effect on our results of operations. |
For example, in its fiscal years 2003 and 2002, Veritas incurred
$4.9 million and $55.3 million, respectively, in
impairment charges related to surveys with relatively low levels
of sales in its multi-client library. These surveys were found
to be impaired for various reasons, including slow acreage
turnover in the case of U.S. land surveys, a border dispute
in the case of a Shetland-Faroes survey and excessive
acquisition cost in the case of a Gulf of Mexico survey. In
addition, a decision by the Norwegian government on
March 31, 2006 not to award exploration-production licenses
in the area where one of CGGs surveys is located (Moere)
changed CGGs previous estimate of future sales, and caused
this
4.6 million
survey to be fully depreciated at March 31, 2006.
Additionally, each of our individual surveys has a minimum book
life based on its location, so particular surveys may be subject
to significant amortization even though sales of licenses
associated with that survey are weak or non-existent, thus
reducing our profits.
23
|
|
|
Our results of operations may be significantly affected by
currency fluctuations. |
We derive a substantial amount of our revenues from
international sales, subjecting us to risks relating to
fluctuations in currency exchange rates. Our revenues and
expenses are denominated in currencies including the euro, the
U.S. dollar and, to a significantly lesser extent, other
non-euro Western European currencies, principally the British
pound and the Norwegian kroner. Historically, a significant
portion of CGGs revenues that were invoiced in euros
related to contracts that were effectively priced in
U.S. dollars, as the U.S. dollar often serves as the
reference currency when bidding for contracts to provide
geophysical services. CGGs U.S. dollar-linked
revenues have increased considerably over the last few years due
to increased sales outside of Europe.
Fluctuations in the exchange rate of the euro against such other
currencies, particularly the U.S. dollar, can have a
significant effect upon our results of operations, which are
reported in euros. The merger will increase both our
dollar-denominated revenues and expenses, as Veritas
revenues and expenses have historically been denominated largely
in U.S. dollars. In addition, since we participate in
competitive bids for data acquisition contracts that are
denominated in U.S. dollars, a depreciation of the
U.S. dollar against the euro harms our competitive position
against companies whose costs and expenses are denominated to a
greater extent in U.S. dollars. For financial reporting
purposes, such depreciation will negatively affect our reported
results of operations since U.S. dollar-denominated
earnings that are converted to euros are stated at a decreased
value. While CGG has in the past attempted to reduce the risks
associated with such exchange rate fluctuations through its
hedging policy, we cannot assure you that we will be effective
or that fluctuations in the values of the currencies in which we
operate will not materially adversely affect our future results
of operations.
|
|
|
Our working capital needs are difficult to forecast and
may vary significantly, which could result in additional
financing requirements that we may not be able to meet on
satisfactory terms, or at all. |
It will be difficult for us to predict with certainty our
working capital needs. This difficulty is due primarily to
working capital requirements related to the marine seismic
acquisition business and related to the development and
introduction of new lines of geophysical equipment products. For
example, under specific circumstances, we may extend the length
of payment terms we grant to customers or increase our
inventories substantially. We may therefore be subject to
significant and rapid increases in our working capital needs
that we may have difficulty financing on satisfactory terms, or
at all, due to limitations in our debt agreements.
|
|
|
Technological changes and new products and services are
frequently introduced in the market, and our technology could be
rendered obsolete by these introductions, or we may not be able
to develop and produce new and enhanced products on a
cost-effective and timely basis. |
Technology changes rapidly in the seismic industry, and new and
enhanced products are frequently introduced in the market for
our products and services, particularly in our equipment
manufacturing and data processing and geosciences sectors. Our
profitability and ability to generate cash depends to a
significant extent upon our ability to develop and produce new
and enhanced products and services on a cost-effective and
timely basis in accordance with industry demands. While we
commit substantial resources to research and development, we may
encounter resource constraints or technical or other
difficulties that could delay the introduction of new and
enhanced products and services in the future. In addition, the
continuing development of new products risks making our older
products obsolete. New and enhanced products and services, if
introduced, may not gain market acceptance and may be materially
adversely affected by technological changes or product or
service introductions by one of our competitors.
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We rely on significant customers, so the loss of a single
customer or a few customers could have a material adverse effect
on our operating revenues and business. |
A relatively small number of our clients account for a
significant percentage of our revenues. These clients include
clients that were significant to each of CGG and Veritas prior
to the merger. The loss of a significant amount of the business
of any of these clients (either as a result of external factors
such as the economic environment or a breakdown of a client
relationship) could cause shortfalls against financial targets
and may have
24
a material adverse effect on our operating revenues and
business. Certain of the master agreements governing the
relationship of Veritas with some of these clients are
terminable at will by such clients.
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The nature of our business subjects us to significant
ongoing operating risks for which we may not have adequate
insurance or for which we may not be able to procure adequate
insurance on economical terms, if at all. |
Our seismic data acquisition activities, particularly in
deepwater marine areas, are often conducted under harsh weather
and other hazardous operating conditions. These operations are
subject to risks of loss to property and injury to personnel
from fires, accidental explosions, ice floes and high seas.
These types of events could result in loss from business
interruption, delay, equipment destruction or other liability.
We carry insurance against the destruction of or damage to our
seismic equipment and against business interruption for our data
processing activities in amounts we consider appropriate in
accordance with industry practice. However, our insurance
coverage may not be adequate in all circumstances or against all
hazards, and we may not be able to maintain adequate insurance
coverage in the future at commercially reasonable rates or on
acceptable terms.
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A reduction in our seismic fleet could materially
adversely affect our operating revenues and business. |
We rely on our fleet of seismic vessels to perform offshore
surveys. We own certain of our vessels and we charter others
from their owners for contractually agreed periods. Although our
fleet has grown and improved through recent upgrades and the
acquisitions of Exploration Resources and Veritas, if the number
or quality of our vessels available for surveys were to
diminish, our capacity to conduct surveys would be reduced. A
reduction in the number of available vessels could result from
damage or destruction to them or other property loss, injury to
personnel, or because we cannot enter into or renew charters on
economically reasonable terms or at all. Of our 20 vessels,
two have charters ending before December 31, 2008. Any such
reduction in the size or quality of our fleet may have a
material adverse effect on our operating revenues and business.
Moreover, it is difficult to bring new vessels into service
because of substantial backlog and capacity constraints at
shipyards globally. The adverse consequences experienced by a
reduction in the size of our fleet would be exacerbated by a
corresponding inability to replace such a lost vessel in a
commercially timely manner.
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Compliance with internal controls procedures and
evaluations and attestation requirements will require
significant efforts and resources and may result in the
identification of significant deficiencies or material
weaknesses. |
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
we will be required, for 2006, as a foreign private issuer, to
perform an evaluation of our internal controls over financial
reporting and have our independent auditors publicly disclose
their conclusions regarding such evaluation. CGG established
procedures in 2006 in order to comply with Section 404 in
the timeframe permitted under the regulations of the SEC. We
expect that ensuring compliance with these requirements will be
a substantial and time-consuming process. If we fail to complete
these procedures and the required evaluation in a timely manner,
or if our independent auditors cannot attest to its evaluation
in a timely manner, we could be subject to regulatory review and
penalties that may result in a loss of public confidence in our
internal controls and our access to the U.S. public capital
markets could be hindered. In addition, we may uncover
significant deficiencies or material weaknesses in our internal
controls. Measures taken by us to remedy these issues may
require significant efforts, dedicated time and expenses, as
well as the commitment of significant managerial resources. Each
of these circumstances may have a material adverse effect on our
business, ability to raise financing for its business, financial
condition and results of operations.
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We depend on proprietary technology and are exposed to
risks associated with the misappropriation or infringement of
that technology. |
Our results of operations depend in part upon our proprietary
technology. We rely on a combination of patents, trademarks and
trade secret laws to establish and protect our proprietary
technology. We currently hold or have applied for 160 patents in
various countries for products and processes. These patents last
between four and twenty years, depending on the date of filing
and the protection accorded by each country. In addition, we
enter into confidentiality and license agreements with our
employees, customers and potential customers and
25
limit access to and distribution of our technology. However,
actions that we take to protect our proprietary rights may not
be adequate to deter the misappropriation or independent
third-party development of our technology. Although none of
CGGVeritas, CGG or Veritas has been involved in any material
litigation regarding its intellectual property rights or the
possible infringement of intellectual property rights of others,
such litigation may be brought in the future. In addition, the
laws of certain foreign countries do not protect proprietary
rights to the same extent as either the laws of France or the
laws of the United States, which may limit our ability to pursue
third parties that misappropriate our proprietary technology.
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A failure to attract and retain qualified employees may
materially adversely affect our future business and
operations. |
Our future results of operations will depend in part upon our
ability to retain our existing highly skilled and qualified
employees and to attract new employees. A number of our
employees are highly skilled scientists and highly trained
technicians, and failure by us to continue to attract and retain
such individuals could materially adversely affect our ability
to compete in the geophysical services industry.
We compete with other seismic products and services companies
and, to a lesser extent, companies in the oil industry for
skilled geophysical and seismic personnel, particularly in
times, such as the present, when demand for seismic services is
relatively high. A limited number of such skilled personnel is
available, and demand from other companies may limit our ability
to fill our human resources needs. If we are unable to hire,
train and retain a sufficient number of qualified employees,
this could impair our ability to manage and maintain our
business and to develop and protect our know-how. Our success
will also depend to a significant extent upon the abilities and
efforts of members of our senior management, the loss of whom
could materially adversely affect our business and results of
operations.
In addition, key employees may depart because of issues relating
to the uncertainty and difficulty of integration or a desire not
to remain with CGGVeritas following the merger. Although
following the merger we have not observed significant departures
of key scientific and technical personnel, several members of
Veritas senior management have agreed to provide
consulting services for a limited period of time but will no
longer be employed by us. Accordingly, no assurance can be given
that we will be able to attract or retain key employees to the
same extent that CGG and Veritas have been able to attract or
retain their own employees in the past. Any failure to do so
could have a material adverse effect on our business and results
of operations.
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The financial statements and other financial information
of Veritas presented in this prospectus and used to prepare the
unaudited pro forma condensed combined financial information
presented in this prospectus and the pro forma financial
information itself may not be indicative of the results of
Veritas as part of our group. |
This prospectus contains unaudited pro forma condensed combined
financial information, which gives effect to the merger and the
financing transactions. The unaudited pro forma condensed
combined financial information is based on preliminary estimates
and assumptions which we believe to be reasonable and is being
furnished solely for illustrative purposes and is not
necessarily indicative of what our combined results of
operations and financial condition would have been had the
merger and financing transactions occurred on January 1,
2005 or on September 30, 2006, respectively. The historical
results of operations and other financial information of Veritas
presented in this prospectus were reported in U.S. dollars in
accordance with U.S. GAAP (not IFRS) and are not
necessarily indicative of the contribution of Veritas
operations to CGGVeritas. See Unaudited Pro Forma
Condensed Combined Financial Information, Business
of Veritas and The Veritas Merger Merger
Rationale. IFRS differs in material respects from
U.S. GAAP including with respect to such matters as the
accounting treatment of development costs and revenue
recognition and consolidation policies. We are currently
assessing the impact of Veritas results of operations on
our future consolidated IFRS financial statements. As a result,
you should not place undue reliance on our unaudited condensed
consolidated pro forma financial information presented in this
prospectus.
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CGG and Veritas have had losses in the past and we cannot
assure that we will be profitable in the future. |
CGG recorded net losses in 2004 and 2005 (attributable to
shareholders) of
6.4 million
and
7.8 million,
respectively, although excluding the accounting impact under
IFRS of its 7.75% subordinated convertible bonds due 2012
denominated in U.S. dollars, its net income would have been
positive. Veritas recorded a net loss of $59.1 million in
its fiscal year 2003. We cannot assure you that we will be
profitable in the future.
Risks Related to the Industry
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We depend on capital expenditures by the oil and gas
industry, and reductions in such expenditures may have a
material adverse effect on our business. |
Demand for the products and services of CGG and Veritas has
historically been dependent upon the level of capital
expenditures by oil and gas companies for exploration,
production and development activities. These expenditures are
significantly influenced by oil and gas prices and by
expectations regarding future oil and gas prices. Oil and gas
prices may fluctuate based on relatively minor changes in the
supply of and demand for oil and gas, expectations regarding
future supply of and demand for oil and gas and certain other
factors beyond our control. Lower or volatile oil and gas prices
tend to limit the demand for seismic services and products.
Factors affecting the prices of oil and gas include:
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demand for oil, natural gas and natural gas liquids; |
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worldwide political, military and economic conditions, including
political developments in the Middle East, economic growth
levels and the ability of OPEC to set and maintain production
levels and prices for oil; |
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levels of oil and gas production; |
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the price and availability of alternative fuels; |
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policies of governments regarding the exploration for and
production and development of oil and gas reserves in their
territories; and |
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global weather conditions. |
Although oil and gas prices are currently high compared with
historical values, which generally increases demand for seismic
products and services, the markets for oil and gas historically
have been volatile and are likely to continue to be so in the
future.
We believe that global geopolitical uncertainty or uncertainty
in the Middle Eastern producing regions (where we are
particularly active) could lead oil companies to suddenly delay
or cancel current geophysical projects. Any events that affect
worldwide oil and gas supply, demand or prices or that generate
uncertainty in the market could reduce exploration and
development activities and materially adversely affect our
operations. We cannot assure you as to future oil and gas prices
or the resulting level of industry spending for exploration,
production and development activities.
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We are subject to intense competition, which could limit
our ability to maintain or increase our market share or to
maintain our prices at profitable levels. |
Most of our contracts are obtained through a competitive bidding
process, which is standard for the seismic services industry in
which we operate. Competitive factors in recent years have
included price, crew availability, technological expertise and
reputation for quality, safety and dependability. While no
single company competes with us in all of our segments, we are
subject to intense competition in each of our segments. We
compete with large, international companies as well as smaller,
local companies. In addition, we compete with major service
providers and government-sponsored enterprises and affiliates.
Some of our competitors operate more data acquisition crews than
we do and have greater financial and other resources. These and
other competitors may be better positioned to withstand and
adjust more quickly to volatile market conditions, such as
fluctuations in oil and gas prices and production levels, as
well as changes in government regulations. In addition, if
geophysical
27
service competitors increase their capacity in the future (or do
not reduce capacity if demand decreases), the excess supply in
the seismic services market could apply downward pressure on
prices. The negative effects of the competitive environment in
which we operate could have a material adverse effect on our
results of operations.
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We have high levels of fixed costs that are incurred
regardless of our level of business activity. |
We have high fixed costs. As a result, downtime or low
productivity due to, among other things, reduced demand, weather
interruptions, equipment failures or other causes could result
in significant operating losses. Low utilization rates may
hamper our ability to recover the cost of necessary capital
investments.
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Our land and marine seismic acquisition revenues vary
significantly during the year. |
Our land and marine seismic acquisition revenues are partially
seasonal in nature. The offshore data acquisition business is,
by its nature, exposed to unproductive interim periods due to
necessary repairs or transit time from one operational zone to
another during which revenue is usually not recognized. Other
factors that cause variations from quarter to quarter include
the effects of weather conditions in a given operating area, the
internal budgeting process of some important clients relative to
their exploration expenses, the timing of the receipt and
commencement of contracts for data acquisition, the timing of
offshore lease sales and the effect of such timing on the demand
for geophysical activities and the timing of sales of licenses
to geophysical data in our multi-client data library, which may
be significant and which are not typically made in a linear or
consistent pattern. Combined with our high fixed costs, these
revenue fluctuations could produce unexpected material adverse
effects on our results of operations in any fiscal period.
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Our business is subject to governmental regulation, which
may adversely affect our future operations. |
Our operations are subject to a variety of federal, provincial,
state, foreign and local laws and regulations, including
environmental, health and safety laws. We need to invest
financial and managerial resources to comply with these laws and
related permit requirements. Our failure to do so could result
in fines or penalties, enforcement actions, claims for personal
injury or property damages, or obligations to investigate and/or
remediate contamination. Failure to timely obtain the required
permits may also result in crew downtime and operating losses.
Moreover, if applicable laws and regulations, including
environmental, health and safety requirements, or the
interpretation or enforcement thereof, become more stringent in
the future, we could incur capital or operating costs beyond
those currently anticipated. The adoption of laws and
regulations that directly or indirectly curtail exploration by
oil and gas companies could also materially adversely affect our
operations by reducing the demand for our geophysical products
and services.
Risks Related to our Indebtedness
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Our substantial debt could adversely affect our financial
health and prevent us from fulfilling our obligations. |
We have a significant amount of debt. As at September 30,
2006, on a pro forma basis to reflect the merger and the
financing transactions, our total financial debt, total assets
and shareholders equity would have been
1,702 million,
4,863 million
and
2,406 million,
respectively. We cannot assure you that we will be able to
generate sufficient cash to service our debt or sufficient
earnings to cover fixed charges in future years.
Our substantial debt could have important consequences. In
particular, it could:
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make it more difficult to satisfy our obligations with respect
to the notes; |
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increase our vulnerability to general adverse economic and
industry conditions; |
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working
capital, capital expenditures and other general corporate
purposes; |
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limit our flexibility in planning for, or reacting to, changes
in our businesses and the industries in which we operate; |
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place us at a competitive disadvantage compared to our
competitors that have less debt; and |
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limit, along with the financial and other restrictive covenants
of our indebtedness, among other things, our ability to borrow
additional funds. |
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Our debt agreements contain restrictive covenants that may
limit our ability to respond to changes in market conditions or
pursue business opportunities. |
The indentures governing the notes and Veritas convertible
notes and the agreements governing our credit facilities
(including the senior facilities and the French revolving
facility) contain restrictive covenants that limit our ability
and the ability of certain of our subsidiaries to, among other
things:
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incur or guarantee additional indebtedness or issue preferred
shares; |
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pay dividends or make other distributions; |
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purchase equity interests; |
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create or incur certain liens; |
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create or incur restrictions on the ability to pay dividends or
make other payments to us; |
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enter into transactions with affiliates; |
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issue or sell capital stock of subsidiaries; |
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engage in sale-and-leaseback transactions; and |
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sell assets or merge or consolidate with another company. |
Complying with the restrictions contained in some of these
covenants requires us to meet certain ratios and tests, notably
with respect to consolidated interest coverage, total assets,
net debt, equity and net income. The requirement that we comply
with these provisions may materially adversely affect our
ability to react to changes in market conditions, take advantage
of business opportunities we believe to be desirable, obtain
future financing, fund needed capital expenditures, finance our
equipment purchases, increase research and development
expenditures, or withstand a continuing or future downturn in
our business.
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If we are unable to comply with the restrictions and
covenants in the indentures and debt agreements governing the
notes and other debt, there could be a default under the terms
of these indentures and agreements, which could result in an
acceleration of repayment. |
If we are unable to comply with the restrictions and covenants
in the indentures governing the notes or in current or future
debt agreements, including agreements governing the senior
facilities and the French revolving facility, there could be a
default under the terms of these indentures and agreements. Our
ability to comply with these restrictions and covenants,
including meeting financial ratios and tests, may be affected by
events beyond our control. See Description of the
Additional Notes, Description of the New Notes
and Description of Certain Indebtedness. As a
result, we cannot assure you that we will be able to comply with
these restrictions and covenants or meet these tests. In the
event of a default under these agreements, lenders could
terminate their commitments to lend or accelerate the loans and
declare all amounts borrowed due and payable. Borrowings under
other debt instruments that contain cross-acceleration or
cross-default provisions may also be accelerated and become due
and payable. If any of these events occur, our assets might not
be sufficient to repay in full all of our outstanding
indebtedness, including the notes offered hereby, and we may be
unable to find alternative financing. Even if we could obtain
alternative financing, it might not be on terms that are
favorable or acceptable to us.
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We and our subsidiaries may incur substantially more
debt. |
We and our subsidiaries may incur substantial additional debt
(including secured debt) in the future. Some or all of this debt
could rank senior to the notes. The terms of the indentures
governing the notes and our existing senior indebtedness will
limit, but not prohibit, us and our subsidiaries from doing so.
As of the date of this prospectus, we have no outstanding
drawings under our $115 million U.S. revolving
facility. In addition, we have drawn $700 million under our
bridge loan facility, which we intend to refinance entirely with
the proceeds of this offering and cash on hand, and
$1 billion under our term loan facility to finance the cash
component of the consideration for the merger. If new debt is
added to the current debt levels of us and our subsidiaries, the
related risks for us could intensify.
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To service our indebtedness, we will require a significant
amount of cash, and our ability to generate cash will depend on
many factors beyond our control. |
Our ability to make payments on and to refinance our
indebtedness, and to fund planned capital expenditures will
partly depend on our ability to generate cash in the future.
This ability is, to a certain extent, subject to general
economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. See
Risks Related to Our Business and
Risks Related to the Industry.
We cannot assure you that we will generate sufficient cash flow
from operations, that we will realize operating improvements on
schedule or that future borrowings will be available to us in an
amount sufficient to enable us to service and repay our
indebtedness or to fund our other liquidity needs. If we are
unable to satisfy our debt obligations, we may have to undertake
alternative financing plans, such as refinancing or
restructuring our indebtedness, selling assets, reducing or
delaying capital investments or seeking to raise additional
capital. We cannot assure you that any refinancing or debt
restructuring would be possible, that any assets could be sold
or that, if sold, the timing of the sales and the amount of
proceeds realized from those sales, or that additional financing
could be obtained on acceptable terms.
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Our results of operations could be materially adversely
affected by changes in interest rates. |
Our sources of liquidity include credit facilities and debt
securities which are or may be subject to variable interest
rates. In particular, the term loan facility is subject to
interest based on U.S. dollar LIBOR. As a result, our
interest expenses could increase significantly if short-term
interest rates increase. Each 50 basis point increase in
the LIBOR will increase our pro forma interest expense by
approximately $5 million per year.
Risks Related to the Notes
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Your right to receive payments on the notes is effectively
junior to most of our existing indebtedness and possibly all of
our future borrowings. |
The notes effectively rank behind all of our secured
indebtedness, to the extent of the assets which secure such
indebtedness, including borrowings under the term loan facility
and any future borrowings under our U.S. revolving facility and
French revolving facility. In the event of any foreclosure,
dissolution, winding-up, liquidation, reorganization,
administration or other bankruptcy or insolvency proceeding of
an entity that has secured obligations, holders of secured
indebtedness will have prior claims to our assets or the
relevant guarantors assets that constitute their
collateral.
Only certain of our subsidiaries will initially guarantee the
notes. Our other subsidiaries have no obligation to pay amounts
due on the notes and will not initially guarantee the notes. As
a result, the notes are effectively subordinated to existing and
future third party indebtedness and other liabilities, including
trade payables, of those non-guarantor subsidiaries. The CGG
Guarantors and the Sercel Guarantors (excluding their
subsidiaries that have not guaranteed the notes) generated,
before consolidation entries,
307.5 million
of revenue,
60.7 million
of operating income and
37.0 million
of net income in the year ended December 31, 2005 and held
600.3 million
of total assets (before consolidation entries) as at
December 31, 2005. The CGG Guarantors and the Sercel
Guarantors generated, before consolidation entries,
423.5 million
of revenue,
126.4 million
of operating income and
77.0 million
of net income in the nine months ended September 30, 2006
and held
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610.8 million
of total assets (before consolidation entries) as at
September 30, 2006. The Veritas Guarantors (excluding their
subsidiaries that have not guaranteed the notes) generated,
before consolidation entries, $384.1 million of revenue,
$65.5 million of operating income and $49.5 million of
net income in the year ended July 31, 2006 and held
$807.9 million of total assets (before consolidation
entries) as at July 31, 2006. The Veritas Guarantors
generated, before consolidation entries, $112.5 million of
revenue, $15.2 million of operating income and
$20.4 million of net income in the three months ended
October 31, 2006 and held $781.3 million of total
assets (before consolidation entries) as at October 31,
2006.
In the event of a bankruptcy, liquidation or reorganization or
similar proceeding relating to us, our subsidiaries or our
respective properties, holders of the notes will participate
with our trade creditors and all other holders of our senior
unsecured indebtedness in the assets remaining. In any of these
cases, we may not have sufficient funds to pay all of our
creditors, and holders of the notes may receive less, ratably,
than the holders of secured debt.
As at September 30, 2006, on a pro forma basis for the merger
and the financing transactions, there would have been
947 million of
outstanding indebtedness, including accrued interest,
effectively senior to the notes, of which
926 million
would have been secured.
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We will rely in part on our subsidiaries for funds
necessary to meet our financial obligations, including the
notes. |
We conduct a significant proportion of our activities through
our subsidiaries. We will depend in part on those subsidiaries
for dividends and other payments to generate the funds necessary
to meet our financial obligations, including the payment of
principal and interest on the notes. We cannot assure you that
the earnings from, or other available assets of, these operating
subsidiaries, together with our own operations, will be
sufficient to enable us to pay principal or interest on the
notes when due.
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Although the occurrence of specific change of control
events affecting us will permit you to require us to repurchase
your notes, we may not be able to repurchase your notes. |
Upon the occurrence of specific change of control events
affecting us, you will have the right to require us to
repurchase your notes at 101% of their principal amount, plus
accrued and unpaid interest. Our ability to repurchase your
notes upon such a change of control event would be limited by
our access to funds at the time of the repurchase and the terms
of our debt agreements, which agreements could restrict or
prohibit such a repurchase. Upon a change of control event, we
may be required immediately to repay the outstanding principal,
any accrued interest on and any other amounts owed by us under
our senior facilities and our French revolving facility. The
source of funds for these repayments would be our available cash
or cash generated from other sources. However, we cannot assure
you that we will have sufficient funds available upon a change
of control to make these repayments and any required repurchases
of tendered notes.
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Certain affiliates or associated entities of underwriters
participating in this offering will receive the net proceeds of
this offering, which may present a conflict of interest. |
We will use the proceeds from this offering to repay the loans
outstanding under the bridge loan facility. Affiliates of Credit
Suisse Securities (Europe) Limited, BNP Paribas Securities
Corp., Calyon Securities (USA), Inc., Natexis Bleichroeder Inc.
and SG Americas Securities, LLC, the underwriters in this
offering, are lenders under the bridge loan facility, owning, as
of January 12, 2007, 45.6%, 7.2%, 2.5%, 7.2% and 6.3%,
respectively, of the loans outstanding under the bridge loan
facility. The proceeds from this offering, plus cash on hand,
will be used to repay in full the loans outstanding under the
bridge loan facility. See the information under the heading
titled Underwriting for a more detailed description
of these relationships.
The circumstances described above may present a conflict of
interest because certain of the underwriters participating in
this offering may have an interest in the successful completion
of this offering in addition to the underwriting discounts and
commissions they expect to receive. This offering is therefore
being made using a qualified independent underwriter
in compliance with Rule 2710(h) of the Conduct Rules of the
National Association of Securities Dealers, Inc., which is
intended to address potential conflicts of interest involving
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underwriters. BNP Paribas Securities Corp. is assuming the
responsibilities of acting as the qualified independent
underwriter with respect to this offering. See the information
under the heading Underwriting for a more detailed
description of the independent underwriting procedures that are
being used in connection with this offering.
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Insolvency laws in France may not be as favorable to you
as U.S. or other insolvency laws. |
We are incorporated under the laws of France. Consequently, we
and our French subsidiaries will be subject to French laws and
proceedings affecting creditors, including article 1244-1 of the
French Civil Code (Code civil), the conciliation
procedure (conciliation), the safeguard procedure
(procédure de sauvegarde) and insolvency
proceedings, which may be either judicial reorganization or
liquidation proceedings (redressement or liquidation
judiciaire).
Pursuant to article 1244-1 of the French Civil Code, French
courts may, in any civil proceeding involving the debtor,
whether initiated by the debtor or a creditor, taking into
account the debtors financial position and the
creditors financial needs, defer or otherwise reschedule
over a maximum period of two years the payment dates of payment
obligations. In addition, if a debtor specifically initiates
proceedings therefor, French courts may decide that any amounts
the payment date of which is thus deferred or rescheduled, will
bear interest at a rate which is lower than the contractual rate
(but not lower than the legal rate) and that payments made shall
first be allocated to repayment of principal. If a court order
under article 1244-1 is made, it will suspend any pending
enforcement measures, and any contractual interest or penalty
for late payment will not accrue or be due during the period
ordered by the court.
A company may initiate, in its sole discretion a conciliation
procedure (conciliation) with respect to itself whereby
it tries to reach a judicial amicable settlement of its debts,
provided it (i) has not become unable to pay its debts as
they come due out of its available assets (cessation de
paiements) for more than 45 days and
(ii) experiences legal, economic or financial difficulties.
At the request of the company, the court will enter an order
appointing a conciliator (conciliateur) to help the
company reach an agreement with its creditors for reducing or
rescheduling its indebtedness. Certain conditions must be
satisfied for the agreement to be approved by the court, and in
particular, it must permit the survival of the company as a
going concern. The court may impose, pursuant to article 1244-1
of the French Civil Code, debt deferrals on creditors which,
during the course of the conciliation procedure, take any action
against the company for the payment of their claims.
A company may initiate, in its sole discretion, a safeguard
procedure (procédure de sauvegarde) with respect to
itself, provided it (i) has not become unable to pay its
debts as they come due out of its available assets and
(ii) experiences difficulties, which it is not able to
overcome, which may cause the company to become unable to pay
its debts. From the time of the court order initiating the
safeguard procedure until the end of an observation period,
which may last for up to 18 months in exceptional cases,
the company is prohibited from paying any prior debts and its
creditors are barred from pursuing any legal proceedings against
it to (i) obtain the payment of such debts,
(ii) terminate an agreement with the company or
(iii) seize or attach any of its assets. The purpose of the
observation period is to determine whether a safeguard plan can
be adopted. This plan (which can provide for debt deferrals or
write-offs) may be negotiated with two separate creditors
committees, one comprising the main suppliers of the company and
the other comprising its credit institutions. Each committee
votes on the plan with a majority in number of the creditors
representing at least two thirds of the claims of the committee
members. If the committees reject the plan, and for creditors
who are not members of the committees, the court may impose debt
deferrals of up to ten years, with minimum installments of 5% of
the total amount of the companys liabilities. The current
applicable legislation does not provide for the inclusion of
noteholders in the membership of any committee, thus they must
be consulted separately.
A companys directors are required to petition for
insolvency proceedings within 45 days of becoming unable to
pay its debts as they come due. A companys creditors, the
relevant commercial court or the public prosecutor may also file
a petition for insolvency proceedings if the company becomes
unable to pay its debts as they come due. The date on which the
debtor became unable to pay its debts as they came due (i.e.,
the date of suspension of payments (date de cessation des
paiements)), is deemed to be the date of the court order
commencing insolvency proceedings (jugement
douverture). However, in this order or in a subsequent
order, a
32
court may set the date of suspension of payments at an earlier
date of up to 18 months prior to the court order commencing
proceedings (but in any event at no earlier date than the date
on which the court approved any prior conciliation agreement).
If the proceedings are judicial reorganization proceedings, an
administrator appointed by the court investigates the affairs of
the debtor during an initial observation period (période
dobservation) and makes proposals for the
debtors reorganization, sale or liquidation. The court can
order the liquidation of the debtor at any time during the
observation period. There is no observation period if the court
directly opens judicial liquidation proceedings against the
debtor. The outcome of the proceedings is decided by the court
without a vote of the creditors. During the observation period,
a reorganization plan may be negotiated and adopted by two
creditors committees under the same principles as those
applicable to the safeguard procedure described above. A court
may also impose debt deferrals of up to ten years, with minimum
installments of 5% of the total amount of the companys
liabilities.
The importance of the date of suspension of payments is that it
marks the beginning of the suspect period (période
suspecte). Certain transactions made during the suspect
period may be void or voidable. Void transactions include
transactions or payments entered into during the suspect period
that constitute voluntary preferences for the benefit of certain
creditors to the detriment of other creditors. These include
transfers of assets for no or nominal consideration (à
titre gratuit), contracts under which the reciprocal
obligations of the debtor significantly exceed those of the
other party, payments on debts not due at the time of payment,
payments of matured debts otherwise than through recognized
means of payment (e.g., checks, promissory notes, cash),
security granted for debts previously incurred, provisional
measures unless the writ of attachment or seizure predates the
date of suspension of payments. Voidable transactions include
transfers of assets for no or nominal consideration (à
titre gratuit) within six months prior to the commencement
of the suspect period and include transactions entered into, or
payments made when due, after the date of suspension of payments
if the party dealing with the debtor knew or should have known
that it had suspended payment of its debts.
As a general rule, creditors domiciled in France whose debts
arose prior to the commencement of bankruptcy proceedings,
including safeguard procedures or judicial reorganizations, must
file a claim with the creditors representative within two
months of the publication of the court order in the
Bulletin Officiel des Annonces Civiles et
Commerciales. This period is extended to four months for
creditors domiciled outside France. Creditors who have not
submitted their claims during this period are barred from
receiving distributions made in connection with the bankruptcy
proceedings. Employees are not subject to such limitations.
Contractual provisions to the effect that termination of
agreements with, or the acceleration of the payment obligations
of, a company which result from:
|
|
|
|
|
the opening of judicial reorganization or safeguard proceedings
against such company, or |
|
|
|
the existence of the state of suspension of payments (i.e., the
inability to pay due debts out of available assets) against such
company |
shall not be enforceable.
An administrator may continue or not continue executory
contracts. If the administrator elects to continue a contract,
the administrator must ensure that the debtor fully performs its
post-petition contractual obligations.
If the court adopts a judicial reorganization or safeguard plan,
it can prohibit for a period of time the sale of an asset that
it deems to be essential to the continued business of the debtor.
In general, French insolvency legislation favors the
continuation of a business and protection of employment over the
payment of creditors. It assigns priority to the payment of
certain creditors, including the employees, judicial expenses
and post-petition creditors.
|
|
|
Courts, under certain circumstances, may void the
guarantees of the notes provided by certain of our
subsidiaries. |
Our creditors or the creditors of one or more guarantors of the
notes or a liquidator, administrator or other controller
appointed to a guarantor could challenge the guarantees as
fraudulent transfers, conveyances, preferences, insolvent
transactions or uncommercial transactions or on other grounds
(including because of the
33
absence of a corporate benefit to the guarantor or due to
financial assistance principles) under applicable
U.S. federal or state law, applicable Canadian federal or
provincial law, applicable Australian law, applicable Norwegian
law or the applicable law governing the country of incorporation
of any future guarantors. While the relevant laws vary from one
jurisdiction to another, the entering into the guarantees by
certain of our subsidiaries could be found to be a fraudulent
transfer, conveyance, preference, insolvent transaction or
uncommercial transaction or otherwise void or unenforceable if a
court were to determine that, for example, one or more of the
following apply to the provision of the guarantee:
|
|
|
|
|
a guarantor delivered its guarantee with the intent to defeat,
hinder, delay, defraud or otherwise interfere with its existing
or future creditors; |
|
|
|
the guarantor did not receive fair consideration or benefit for
the delivery of the guarantee and the guarantor was insolvent at
the time it delivered the guarantee; |
|
|
|
the guarantor delivered its guarantee in contravention of laws
relating to the provision of financial assistance; |
|
|
|
the guarantor was insolvent at the time of execution of the
guarantee or was rendered insolvent by reason of its execution
of the guarantee or the observance of its obligations under the
guarantee; |
|
|
|
a reasonable person in the guarantors circumstances would
not have entered into the transaction having regard to the
benefits (if any) to the guarantor, the detriment to the
guarantor and the respective benefits to other parties; |
|
|
|
the guarantor was engaged, or was about to engage, in a business
or transaction for which its remaining assets constituted
unreasonably small capital to carry on its business; |
|
|
|
the guarantor intended to incur, or believed it would incur,
debts beyond its ability to pay the debts as they matured; |
|
|
|
the guarantor was a defendant in an action for money damage, or
had a judgment for money damages docketed against it (if, in
either case, after final judgment, the judgment is
unsatisfied); or |
|
|
|
the availability of certain equitable remedies that are in the
discretion of the courts. |
To the extent a court voids a guarantee as a fraudulent
transfer, preference, insolvent transaction or uncommercial
transaction or conveyance or holds it unenforceable for any
other reason, holders of notes would cease to have any direct
claim against the guarantor that delivered the guarantee. If a
court were to take this action, the guarantors assets
would, in certain jurisdictions, be applied first to satisfy the
guarantors liabilities, including trade payables and
preferred stock claims, if any, before any portion of its assets
could be distributed to us to be applied to the payment of the
notes. We cannot assure you that a guarantors remaining
assets would be sufficient to satisfy the claims of the holders
of notes relating to any voided portions of the guarantees. In
other jurisdictions (such as Australia), if a guarantee is so
voided or held unenforceable, you will cease to have any claim
against the guarantor.
|
|
|
Judgments of U.S. courts may not be enforceable
against CGGVeritas. |
Judgments of U.S. courts, including those predicated on the
civil liability provisions of the federal securities laws of the
United States, may not be enforceable in French courts. As a
result, shareholders who obtain a judgment against CGGVeritas in
the United States may not be able to require it to pay the
amount of the judgment.
|
|
|
A trading market for the new notes may not develop and a
trading market for the notes may not continue to exist. |
There has not been an established trading market for the new
notes. Although the underwriters have informed us that they
currently intend to make a market in the new notes offered
hereby, they have no obligation to do so and may discontinue
making a market at any time without notice.
34
The liquidity of any market for either the new notes or the
additional notes will depend upon the number of holders of such
notes, our performance, the market for similar securities, the
interest of securities dealers in making a market in such notes
and other factors, including general declines or disruptions in
the markets for debt securities. Although we have applied to
admit the notes to listing on the Official List of the
Luxembourg Stock Exchange and to trading on the Euro MTF, a
liquid trading market may not develop or continue to exist for
the notes.
In addition, the notes may trade at prices that are lower than
their initial purchase price.
There is a possibility that the additional notes may not
be fungible with the existing notes.
In the event that the additional notes are issued with more than
a de minimis amount of original issue discount
(OID), the additional notes will be issued with a
separate CUSIP number and will likely be treated as a separate
series for U.S. federal income tax purposes. In such a
case, an investment in the additional notes will likely be
considerably less liquid and a trading market may not develop or
exist at all with respect to the additional notes. In addition,
in such a case, the additional notes will be considered to have
been issued with OID and the treatment under
Taxation United States Federal Tax
Considerations Original Issue Discount would
apply. See Taxation United States Federal Tax
Considerations for further information.
35
EXCHANGE RATES
The following table sets forth, for the periods and dates
indicated, certain information concerning the exchange rates for
the euro expressed in U.S. dollars per euro. Information
concerning the U.S. dollar exchange rate is based on the
noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal
Reserve Bank of New York (the Noon Buying Rate).
Such rates are provided solely for convenience and no
representation is made that euro were, could have been, or could
be, converted into U.S. dollars at these rates or at any
other rate. Such rates were not used by us in the preparation of
our audited and unaudited consolidated financial statements
included elsewhere in this prospectus. The Noon Buying Rate on
January 26, 2007 was $1.2909 per euro.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars per euro exchange rate | |
|
|
| |
Year ended December 31, |
|
Period-end | |
|
High | |
|
Low | |
|
Average(1) | |
|
|
| |
|
| |
|
| |
|
| |
2002
|
|
|
1.05 |
|
|
|
1.05 |
|
|
|
0.86 |
|
|
|
0.95 |
|
2003
|
|
|
1.26 |
|
|
|
1.26 |
|
|
|
1.04 |
|
|
|
1.14 |
|
2004
|
|
|
1.35 |
|
|
|
1.36 |
|
|
|
1.18 |
|
|
|
1.24 |
|
2005
|
|
|
1.18 |
|
|
|
1.35 |
|
|
|
1.17 |
|
|
|
1.24 |
|
2006
|
|
|
1.32 |
|
|
|
1.33 |
|
|
|
1.19 |
|
|
|
1.26 |
|
|
Year ended July 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
0.98 |
|
|
|
1.02 |
|
|
|
0.86 |
|
|
|
0.91 |
|
2003
|
|
|
1.12 |
|
|
|
1.19 |
|
|
|
0.96 |
|
|
|
1.06 |
|
2004
|
|
|
1.20 |
|
|
|
1.29 |
|
|
|
1.08 |
|
|
|
1.20 |
|
2005
|
|
|
1.21 |
|
|
|
1.36 |
|
|
|
1.19 |
|
|
|
1.27 |
|
2006
|
|
|
1.28 |
|
|
|
1.30 |
|
|
|
1.17 |
|
|
|
1.22 |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
1.21 |
|
|
|
1.35 |
|
|
|
1.19 |
|
|
|
1.26 |
|
2006
|
|
|
1.27 |
|
|
|
1.30 |
|
|
|
1.19 |
|
|
|
1.25 |
|
|
Three months ended October 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
1.20 |
|
|
|
1.25 |
|
|
|
1.19 |
|
|
|
1.22 |
|
2006
|
|
|
1.28 |
|
|
|
1.29 |
|
|
|
1.25 |
|
|
|
1.27 |
|
|
Month |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2006
|
|
|
|
|
|
|
1.28 |
|
|
|
1.25 |
|
|
|
|
|
August 2006
|
|
|
|
|
|
|
1.29 |
|
|
|
1.27 |
|
|
|
|
|
September 2006
|
|
|
|
|
|
|
1.28 |
|
|
|
1.26 |
|
|
|
|
|
October 2006
|
|
|
|
|
|
|
1.28 |
|
|
|
1.25 |
|
|
|
|
|
November 2006
|
|
|
|
|
|
|
1.33 |
|
|
|
1.27 |
|
|
|
|
|
December 2006
|
|
|
|
|
|
|
1.33 |
|
|
|
1.31 |
|
|
|
|
|
January 2007 (through January 26)
|
|
|
|
|
|
|
1.33 |
|
|
|
1.29 |
|
|
|
|
|
Note:
|
|
(1) |
The annual average rate is the average of the Noon Buying Rates
on the last business day of each month. |
36
USE OF PROCEEDS
We expect the net proceeds to be received by us from the
offering, net of underwriting commissions and discounts and
other expenses, to be approximately $590 million. We intend
to use the net proceeds from this offering plus cash on hand to
repay in full the $700 million outstanding under the bridge
loan facility used to finance a portion of the cash
consideration paid in the merger. The merger was completed on
January 12, 2007. The total purchase price that we paid for
the acquisition of Veritas was $1.5 billion in cash and
46.1 million CGG ADSs. The bridge loan facility matures on
the date that is 18 months from the effective date of the
merger, subject to a six-month extension at our option.
Borrowings under the bridge loan facility bear an interest rate
based on LIBOR plus an interest rate margin which varies
depending on the credit rating of the bridge loan facility. With
respect to the first interest period, the effective interest
rate on the bridge loan facility is LIBOR plus 4.10%. For
further details of the bridge loan facility, the repayment of
the bridge loan facility and the merger see Description of
Certain Indebtedness Bridge
Loan Facility, The Veritas Merger and
Underwriting.
37
CAPITALIZATION
The following table shows our cash and cash equivalents, total
financial debt and total capitalization as at September 30,
2006:
|
|
|
|
|
on an historical CGG basis; and |
|
|
|
as adjusted to reflect the merger and the financing transactions. |
The historical information has been derived from the unaudited
interim consolidated financial statements of CGG included
elsewhere in this prospectus. The information set out below
should be read in conjunction with The Veritas
Merger, Use of Proceeds and Description
of Certain Indebtedness, the unaudited interim
consolidated financial statements and the accompanying notes
included elsewhere in this prospectus and the unaudited pro
forma condensed combined financial information included
elsewhere in this prospectus. The unaudited pro forma
capitalization has been prepared for illustrative purposes only
and, because of its nature, may not give a true picture of our
capitalization. Other than as described below, there has been no
material change in our consolidated capitalization since
September 30, 2006.
The exchange rate used to translate U.S. dollar amounts to
euros (U.S.$1.2660 per
1.00) in the
following table is the rate used by CGG to prepare its financial
statements as at September 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2006 | |
|
|
| |
|
|
|
|
Other Pro | |
|
|
|
|
|
|
Forma | |
|
|
|
|
|
|
Adjustments | |
|
|
|
|
CGG | |
|
Veritas | |
|
|
|
for the | |
|
|
|
|
Actual | |
|
Actual | |
|
|
|
Merger and | |
|
|
|
|
September 30, | |
|
October 31, | |
|
Pro Forma | |
|
the | |
|
|
|
|
2006 | |
|
2006 | |
|
Consistency | |
|
Financing | |
|
As | |
|
|
(IFRS) | |
|
(U.S. GAAP) | |
|
Adjustments(1) | |
|
Transactions | |
|
Adjusted | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions) | |
Cash and cash equivalents
|
|
|
169 |
|
|
|
280 |
|
|
|
0 |
|
|
|
(148 |
)(2) |
|
|
301 |
|
Bank overdrafts
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
Current portion of financial debt
|
|
|
44 |
|
|
|
122 |
|
|
|
(3 |
) |
|
|
(103 |
) |
|
|
61 |
|
|
Capital lease (current portion)
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
Other financial debt (current including accrued interest)
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
Veritas convertible notes
|
|
|
|
|
|
|
121 |
|
|
|
(3 |
) |
|
|
(103 |
)(3) |
|
|
15 |
|
Financial debt
|
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
1,244 |
|
|
|
1,631 |
|
|
Capital lease
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
Other financial debt (including accrued interest)
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
Senior facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
778 |
(4) |
|
|
778 |
|
|
Senior notes due 2015
|
|
|
255 |
|
|
|
|
|
|
|
|
|
|
|
233 |
(5) |
|
|
488 |
|
|
Senior notes due 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233 |
(5) |
|
|
233 |
|
Total financial debt (including bank overdrafts)
|
|
|
442 |
|
|
|
122 |
|
|
|
(3 |
) |
|
|
1,141 |
|
|
|
1,702 |
|
Shareholders equity
|
|
|
851 |
|
|
|
592 |
|
|
|
(5 |
) |
|
|
968 |
(6) |
|
|
2,406 |
|
Minority interests
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 |
|
Total shareholders equity and minority interests
|
|
|
874 |
|
|
|
592 |
|
|
|
(5 |
) |
|
|
968 |
|
|
|
2,429 |
|
Net debt/(Cash)
|
|
|
273 |
|
|
|
(157 |
) |
|
|
(3 |
) |
|
|
(1,288 |
) |
|
|
1,402 |
|
Note:
|
|
(1) |
Adjustments to Veritas consolidated balance sheet as at
October 31, 2006 have been made to ensure consistency of
accounting principles with CGG under IFRS. See Notes 2 and
3 to our unaudited pro forma condensed combined financial
statements included elsewhere in this prospectus. |
38
|
|
(2) |
Net effect of pro forma adjustment on cash as described in
Note 4.2.5 to our unaudited pro forma condensed combined
financial statements included elsewhere in this prospectus. |
|
(3) |
See discussion in Note 4.1.1.1 to our unaudited pro forma
condensed combined financial statements included elsewhere in
this prospectus. |
|
(4) |
Net proceeds of $1.0 billion from the term loan facility. |
|
(5) |
The assumed net proceeds of the offering of the notes hereby. |
|
(6) |
Reflects the net impact of the shares issued as consideration in
connection with the merger. |
39
THE VERITAS MERGER
On September 4, 2006, Veritas DGC Inc., a Delaware
corporation, and CGG, entered into the merger agreement, by and
among Veritas, CGG, Volnay Acquisition Co. I, a Delaware
corporation and wholly owned subsidiary of CGG, and Volnay
Acquisition Co. II, a Delaware corporation and wholly owned
subsidiary of CGG, under which CGG agreed to acquire all of the
issued and outstanding shares of common stock, par value
$0.01 per share, of Veritas. On January 12, 2007,
pursuant to the terms of the merger agreement, as approved by
the Boards of Directors of both Veritas and CGG and the
shareholders of Veritas, Volnay Acquisition Co. I merged with
and into Veritas with Veritas continuing as the surviving
corporation, and immediately thereafter, Veritas merged with and
into Volnay Acquisition Co. II with Volnay Acquisition
Co. II continuing as the surviving corporation as a wholly
owned subsidiary of CGG. Upon effectiveness of the merger,
Volnay Acquisition Co. II changed its name to
CGGVeritas Services Inc.
The stockholders of Veritas received, in the aggregate,
consideration comprised of $1.5 billion in cash and
46.1 million ADSs of CGG, with each ADS representing
one-fifth of an ordinary share, nominal value
2.00 per
share, of CGG. Under the terms of the Merger Agreement,
stockholders of Veritas had the right to elect to receive cash
or ADSs, subject to a proration if either cash or stock was
oversubscribed. The final consideration per share of Veritas
common stock was $85.50 in cash or 2.0097 CGG ADS.
The merger remains subject to
post-completion
clearance by competition authorities in the United Kingdom
and Brazil. There can be no assurance as to the outcome of these
reviews, but we do not expect them to have a material
impact on our operations.
We believe a number of strategic factors support the merger,
including the following:
|
|
|
|
|
the combination of CGG and Veritas took place in a strong
business environment. Decreasing reserves of oil and gas
companies have been coupled with growing energy consumption
sustained by long-term demand, particularly in China and India.
This environment has created a need to accelerate the pace of
exploration in new areas, to revisit existing exploration areas
with new technologies and to optimize reservoir management to
maximize recovery rates. Seismic technology plays a key role in
this process and CGGVeritas, with its combined technology and
worldwide geographic fit, is expected to be well positioned to
compete to lead and meet the industrys needs; |
|
|
|
the combination of CGG and Veritas creates a strong global
pure-play seismic company, offering a broad range of seismic
services, and, through Sercel, geophysical equipment to the
industry across all markets. The business, geographic and client
complementarities of CGG and Veritas are expected to respond to
the growing demand for seismic imaging and reservoir solutions.
CGGVeritas is expected to be well positioned to provide an
improved technological advanced product offering in seismic
services as most oil and gas companies attempt to replace
diminishing reserves in a more complex exploration environment,
to strengthen long-term relationships with a broad range of
clients and to improve financial performance through business
cycles; |
|
|
|
the combination of CGG and Veritas brings together two companies
with strong technological foundations in the geophysical
services and equipment market. Both CGG and Veritas have a long
tradition in providing seismic services both onshore and
offshore. In particular, Veritas strong offshore positions
will effectively complete the repositioning to offshore that CGG
has been implementing during the last few years. Both companies
already use a broad range of Sercel technologies for their data
acquisition activities, thereby providing a homogeneous
equipment base for the combined CGGVeritas. In addition,
Veritas strong focus on North America fits well with
CGGs international presence. Combining the two customer
bases is expected to provide a good balance between national oil
companies (a strong position of CGG), major oil and gas
operators (a strong position of both CGG and Veritas) and
U.S.-based operators,
both majors and independent (a strong position of Veritas). The |
40
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|
|
|
|
combined technology and know-how of the two companies will
strengthen research and development capabilities to best serve
the CGGVeritas client base with a broader range of technologies
that CGGVeritas would be able to deliver more rapidly to the
market; |
|
|
|
the addition of Veritas fleet of seven vessels creates a
combined seismic services business operating the worlds
leading seismic fleet of 20 vessels, including 14 high
capacity 3D vessels. Capacity in the combined fleet is well
balanced between large (more than 10 streamers), medium (six to
eight streamers) and smaller sizes, with all vessels equipped
with Sercels solid or fluid streamers. The combined fleet
will provide highly flexible fleet management potential with a
balanced distribution of fully owned, chartered, new built and
significantly depreciated capacity. Additionally, most of the
vessels in the combined fleet have been recently equipped with
relatively new technology which will provide CGGVeritas with a
fleet that can be managed without significant investments in the
near term; |
|
|
|
offshore multi-client services benefits from two complementary,
recent vintage, well-positioned seismic data libraries. For
example, the Veritas library will bring to CGG complementary
data in the Gulf of Mexico, with Veritas data library being
positioned in the Western and Central Gulf while CGGs data
library is in the Central and Eastern Gulf. Data merging from
the CGG and Veritas libraries will provide potential for cross
imaging enhancement and value creation. All these benefits take
place in a market where a global library portfolio is
increasingly attractive to clients; |
|
|
|
CGGs and Veritas respective offerings for land
acquisition services represent strong geographical and
technological complementarities for high-end positioning and
further development of local partnerships. Veritas strong
presence in the western hemisphere, in particular North America
and particularly in multi-client surveys, complements CGGs
main geographic footprint in the eastern hemisphere and its
strong focus on the Middle East. In addition, CGGs and
Veritas technological complementarities will enhance
CGGVeritas land offering, ranging from exploration seismic
to field seismic monitoring; |
|
|
|
CGGs and Veritas respective positions in data
processing and imaging as well as the skills and reputation of
their experts and geoscientists, allows CGGVeritas to create the
industry reference in this segment, with particular strengths in
advanced technologies such as depth imaging, 4D processing and
reservoir characterization as well as a close link with clients
through dedicated centers; |
|
|
|
the merger will not affect Sercels open technology
approach. Sercel will pursue its strategy of maintaining leading
edge technology, offering new generations of differentiating
products and focusing on key markets; and |
|
|
|
with a combined workforce of 7,000 staff operating
worldwide, including Sercel, CGGVeritas will, through continued
innovation, be an industry leader in seismic technology,
services and equipment with a broad base of customers including
independent, international and national oil companies. |
See Risk Factors Risks Related to Our
Business We are subject to certain risks related to
acquisitions, including the merger, and these risks may
materially adversely affect our revenues, expenses, operating
results and financial condition.
41
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING
INFORMATION OF CGG
In accordance with regulations adopted by the European Union in
July 2002, all companies incorporated under the laws of one of
the member states of the European Union and whose securities are
publicly traded within the European Union were required to
prepare their consolidated financial statements for the fiscal
year starting on or after January 1, 2005, on the basis of
accounting standards issued by the International Accounting
Standards Board. Therefore, in accordance with these
requirements, CGG converted from using French generally accepted
accounting principles to IFRS, as adopted by the European Union.
As a first-time adopter of IFRS at January 1, 2005, CGG has
followed the specific requirements described in IFRS 1,
First Time Adoption of IFRS. The options selected for the
purpose of the transition to IFRS are described in the notes to
CGGs audited consolidated financial statements, included
elsewhere in this prospectus. Effects of the transition on the
balance sheet at January 1, 2004, the statement of income
for the year ended December 31, 2004 and the balance sheet
at December 31, 2004 are presented and discussed in
Note 30 to CGGs 2005 audited consolidated financial
statements included elsewhere in this prospectus.
The tables below set forth CGGs selected historical
consolidated financial and operating information:
|
|
|
|
|
as at and for the nine months ended September 30, 2006 and
2005 in accordance with both IFRS and U.S. GAAP; |
|
|
|
as at and for the years ended December 31, 2005 and 2004 in
accordance with IFRS; and |
|
|
|
as at and for each of the five years in the period ending
December 31, 2005 in accordance with U.S. GAAP. |
The following selected historical consolidated financial
information as at and for the years ended December 31, 2005
and 2004 is derived from CGGs consolidated audited
financial statements included elsewhere in this prospectus.
CGGs consolidated financial statements for the years ended
December 31, 2005 and 2004 have been audited by Barbier
Frinault & Autres Ernst & Young and
Mazars & Guérard. The following selected
historical consolidated financial information for the nine-month
periods ended September 30, 2006 and 2005 is unaudited and
is derived from CGGs unaudited financial statements
included elsewhere in this prospectus. The unaudited financial
statements include all adjustments, consisting of normal
recurring accruals, which CGG considers necessary for a fair
presentation of its financial position and results of operations
for these periods. The results of operations for the nine-month
periods presented below are not necessarily indicative of the
results for the full fiscal year.
The tables should be read in conjunction with, and are qualified
in their entirety by reference to, CGGs consolidated
financial statements and Managements Discussion and
Analysis of Financial Condition and Results of
Operations CGG Results of Operations included
elsewhere in this prospectus.
42
IFRS differs from U.S. GAAP in certain significant
respects. For a discussion of significant differences between
U.S. GAAP and IFRS as they relate to CGGs
consolidated financial statements and a reconciliation to
U.S. GAAP of CGGs net income and shareholders
equity for 2005 and 2004, see Note 31 to CGGs audited
consolidated financial statements included elsewhere in this
prospectus and Note 3 to CGGs unaudited consolidated
financial statements included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the nine | |
|
|
|
|
months ended | |
|
As at and for the | |
|
|
September 30, | |
|
year ended | |
|
|
| |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except for | |
|
|
per share and ratio data) | |
Amounts in accordance with IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
955.6 |
|
|
|
607.5 |
|
|
|
869.9 |
|
|
|
687.4 |
|
Other revenues from ordinary activities
|
|
|
1.4 |
|
|
|
1.2 |
|
|
|
1.9 |
|
|
|
0.4 |
|
Cost of operations
|
|
|
(636.7 |
) |
|
|
(473.2 |
) |
|
|
(670.0 |
) |
|
|
(554.0 |
) |
Gross profit
|
|
|
320.3 |
|
|
|
135.5 |
|
|
|
201.8 |
|
|
|
133.8 |
|
Research and development expenses, net
|
|
|
(27.8 |
) |
|
|
(23.6 |
) |
|
|
(31.1 |
) |
|
|
(28.8 |
) |
Selling, general and administrative expenses
|
|
|
(86.9 |
|
|
|
(64.2 |
) |
|
|
(91.2 |
) |
|
|
(78.6 |
) |
Other revenues (expenses)
|
|
|
12.0 |
|
|
|
2.7 |
|
|
|
(4.4 |
) |
|
|
19.3 |
|
Operating income
|
|
|
217.6 |
|
|
|
45.0 |
|
|
|
75.1 |
|
|
|
45.7 |
|
Cost of financial debt, net
|
|
|
(19.2 |
) |
|
|
(26.7 |
) |
|
|
(42.3 |
) |
|
|
(27.8 |
) |
Derivative and other expenses on convertible bonds
|
|
|
(23.0 |
) |
|
|
(38.0 |
) |
|
|
(11.5 |
) |
|
|
(23.5 |
) |
Other financial income (loss)
|
|
|
(8.4 |
|
|
|
1.3 |
|
|
|
(14.5 |
) |
|
|
0.8 |
|
Income taxes
|
|
|
(54.9 |
) |
|
|
(18.5 |
) |
|
|
(26.6 |
) |
|
|
(10.9 |
) |
Equity in income of affiliates
|
|
|
8.9 |
|
|
|
9.6 |
|
|
|
13.0 |
|
|
|
10.3 |
|
Net income (loss)
|
|
|
121.0 |
|
|
|
(27.3 |
) |
|
|
(6.8 |
) |
|
|
(5.4 |
) |
Attributable to minority interests
|
|
|
1.2 |
|
|
|
0.6 |
|
|
|
(1.0 |
) |
|
|
(1.0 |
) |
Attributable to shareholders
|
|
|
119.8 |
|
|
|
(27.9 |
) |
|
|
(7.8 |
) |
|
|
(6.4 |
) |
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1)
|
|
|
6.92 |
|
|
|
(2.37 |
) |
|
|
(0.64 |
) |
|
|
(0.55 |
) |
|
Diluted(2)
|
|
|
6.78 |
|
|
|
(2.37 |
) |
|
|
(0.64 |
) |
|
|
(0.55 |
) |
|
Other Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed
charges(3)
|
|
|
10.9 |
x |
|
|
1.7 |
x |
|
|
1.4 |
x |
|
|
1.8 |
x |
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
168.7 |
|
|
|
|
|
|
|
112.4 |
|
|
|
130.6 |
|
Working
capital(4)
|
|
|
254.0 |
|
|
|
|
|
|
|
154.1 |
|
|
|
116.4 |
|
Property, plant & equipment, net
|
|
|
485.0 |
|
|
|
|
|
|
|
480.1 |
|
|
|
204.1 |
|
Multi-client surveys
|
|
|
69.8 |
|
|
|
|
|
|
|
93.6 |
|
|
|
124.5 |
|
Total assets
|
|
|
1,751.7 |
|
|
|
|
|
|
|
1,565.1 |
|
|
|
971.2 |
|
Financial
debt(5)
|
|
|
430.8 |
|
|
|
|
|
|
|
400.3 |
|
|
|
249.6 |
|
Stockholders equity
|
|
|
850.5 |
|
|
|
|
|
|
|
698.5 |
|
|
|
393.2 |
|
|
Other Historical Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBDA(6)
|
|
|
359.9 |
|
|
|
148.9 |
|
|
|
229.5 |
|
|
|
172.5 |
|
Capital expenditures (property, plant &
equipment)(7)
|
|
|
117.2 |
|
|
|
75.4 |
|
|
|
125.1 |
|
|
|
49.8 |
|
Capital expenditures for multi-client surveys
|
|
|
38.9 |
|
|
|
19.2 |
|
|
|
32.0 |
|
|
|
51.1 |
|
Net
debt(8)
|
|
|
273.0 |
|
|
|
500.5 |
|
|
|
297.2 |
|
|
|
121.8 |
|
Net
debt(8)/
ORBDA(6)
|
|
|
|
|
|
|
|
|
|
|
1.3 |
x |
|
|
0.7x |
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the nine | |
|
|
|
|
|
|
|
|
|
|
|
|
months ended | |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, | |
|
|
|
|
| |
|
As at and for the year ended December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except for per share, ratio and operational data) | |
Amounts in accordance with U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
967.7 |
|
|
|
601.6 |
|
|
|
860.8 |
|
|
|
709.5 |
|
|
|
645.6 |
|
|
|
719.0 |
|
|
|
795.0 |
|
Operating income
|
|
|
215.0 |
|
|
|
38.2 |
|
|
|
61.9 |
|
|
|
55.0 |
|
|
|
42.7 |
|
|
|
81.9 |
|
|
|
48.6 |
|
Net income (loss)
|
|
|
94.0 |
|
|
|
(15.3 |
) |
|
|
8.3 |
|
|
|
(20.2 |
) |
|
|
3.1 |
|
|
|
15.1 |
|
|
|
9.3 |
|
Per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common stock
holder(1)
|
|
|
5.43 |
|
|
|
(1.30 |
) |
|
|
0.69 |
|
|
|
(1.73 |
) |
|
|
0.27 |
|
|
|
1.29 |
|
|
|
0.80 |
|
|
Diluted common stock
holder(9)
|
|
|
5.32 |
|
|
|
(1.30 |
) |
|
|
0.67 |
|
|
|
(1.73 |
) |
|
|
0.26 |
|
|
|
1.29 |
|
|
|
0.80 |
|
|
Other Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed
charges(3)
|
|
|
8.8 |
x |
|
|
2.0 |
x |
|
|
1.6 |
x |
|
|
1.4 |
x |
|
|
0.5 |
x |
|
|
2.2 |
x |
|
|
2.0 |
x |
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,751.2 |
|
|
|
|
|
|
|
1,573.8 |
|
|
|
975.8 |
|
|
|
924.2 |
|
|
|
1,036.8 |
|
|
|
1,008.0 |
|
Financial
debt(5)
|
|
|
436.7 |
|
|
|
|
|
|
|
416.7 |
|
|
|
266.5 |
|
|
|
232.4 |
|
|
|
307.8 |
|
|
|
279.5 |
|
Stockholders equity
|
|
|
811.7 |
|
|
|
|
|
|
|
689.5 |
|
|
|
372.2 |
|
|
|
413.4 |
|
|
|
431.0 |
|
|
|
456.4 |
|
|
Operational Data (end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land teams in operations
|
|
|
8 |
|
|
|
12 |
|
|
|
11 |
|
|
|
8 |
|
|
|
12 |
|
|
|
14 |
|
|
|
12 |
|
Operational
streamers(10)
|
|
|
44 |
|
|
|
52 |
|
|
|
46 |
|
|
|
39 |
|
|
|
42 |
|
|
|
42 |
|
|
|
48 |
|
Data processing centers
|
|
|
31 |
|
|
|
30 |
|
|
|
27 |
|
|
|
26 |
|
|
|
26 |
|
|
|
26 |
|
|
|
26 |
|
Notes:
|
|
|
(1) |
|
Basic per share amounts under IFRS and U.S. GAAP have been
calculated on the basis of 17,318,957 issued and
outstanding shares in the nine month period ended
September 30, 2006, 11,765,118 issued and outstanding
shares in the nine month period ended September 30, 2005,
12,095,925 issued and outstanding shares in 2005 and 11,681,406
issued and outstanding shares in 2004. Basic per share amounts
under U.S. GAAP have been calculated on the basis of
11,680,718 issued and outstanding shares in 2003 and 2002 and
11,609,393 issued and outstanding shares in 2001. |
|
(2) |
|
Diluted per share amount under IFRS has been calculated on the
basis of 17,675,616 issued and outstanding shares in the
nine month period ended September 30, 2006,
13,451,097 issued and outstanding shares in the nine month
period ended September 30, 2005, 12,095,925 issued and
outstanding shares in 2005 and 11,681,406 issued and outstanding
shares in 2004. For the nine-month period ended
September 30, 2005, the effect of convertible bonds was
anti-dilutive. |
|
(3) |
|
For purposes of calculating the ratio of earnings to fixed
charges, earnings in IFRS consist of income (loss) from
consolidated companies before income taxes, excluding derivative
and other expenses on convertible bonds included in CGGs
income statement for the relevant period included elsewhere in
this prospectus. Earnings under U.S. GAAP consist of income
from consolidated companies before income taxes and minority
interests, excluding equity in income of affiliates included in
CGGs income statement for the relevant period included
elsewhere in this prospectus. Fixed charges under each of IFRS
and U.S. GAAP consist of net cost of financial debt
(including amortization fees). For the year ended
December 31, 2003, our earnings were insufficient to cover
fixed charges by
13.5 million
under U.S. GAAP. |
|
(4) |
|
Working capital consists of trade accounts and notes receivable,
inventories and
work-in-progress, tax
assets, other current assets and assets held for sale less trade
accounts and notes payable, accrued payroll costs, income tax
payable, advance billings to customers, current provisions and
other current liabilities. |
|
(5) |
|
Financial debt means total financial debt, including
current maturities, capital leases and accrued interest but
excluding bank overdrafts. |
|
(6) |
|
A discussion of ORBDA (Operating Result Before
Depreciation and Amortization, previously denominated
Adjusted EBITDA), including (i) a
reconciliation to net cash provided by operating activities and
(ii) the reasons why our management believes that a
presentation of ORBDA provides useful information to investors
regarding our financial condition and results of operations, is
found in Managements Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources ORBDA. |
|
(7) |
|
Capital expenditures is defined as purchases of
property, plant and equipment plus equipment acquired under
capital lease. |
44
|
|
|
The following table presents a reconciliation of capital
expenditures to purchases of property, plant and equipment and
equipment acquired under capital lease for the periods indicated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months | |
|
For the year | |
|
|
ended September 30, | |
|
ended | |
|
|
| |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(in millions) | |
Purchase of property, plant and equipment
|
|
|
117.0 |
|
|
|
61.8 |
|
|
|
107.7 |
|
|
|
41.1 |
|
Equipment acquired under capital lease
|
|
|
0.2 |
|
|
|
13.6 |
|
|
|
17.4 |
|
|
|
8.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
117.2 |
|
|
|
75.4 |
|
|
|
125.1 |
|
|
|
49.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|
Net debt means bank overdrafts, financial debt
including current portion (including capital lease debt) net of
cash and cash equivalents. A discussion of net debt, including
(i) a reconciliation of net debt to financing items of the
CGG balance sheet and (ii) the reasons why our management
believes that a presentation of net debt provides useful
information to investors regarding our financial condition and
results of operations, is found in Managements
Discussion and Analysis of Financial Condition and Results of
Operations Net Debt. |
|
(9) |
|
Diluted per share amounts under U.S. GAAP have been
calculated on the basis of 17,675,616 issued and
outstanding shares in the nine month period ended
September 30, 2006, 13,451,097 issued and outstanding
shares in the nine month period ended September 30, 2005,
12,378,209 issued and outstanding shares in 2005, 11,681,406
issued and outstanding shares in 2004, 11,760,630 issued and
outstanding shares in 2003, 11,680,718 issued and outstanding
shares in 2002 and 11,609,393 issued and outstanding shares in
2001. In 2002 and 2001, the effects of stock options were not
dilutive (as a result of applying the treasury stock method). |
|
(10) |
|
Data includes Exploration Resources ASAs streamers (from
and including December 31, 2005) and excludes streamers of
vessels in transit or dry-dock. |
45
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VERITAS
The table below sets forth selected historical consolidated
financial data for Veritas as at and for the three months ended
October 31, 2006 and 2005 and as at and for each of the
five years in the period ending July 31, 2006, in each case
in accordance with U.S. GAAP.
The following selected historical consolidated financial
information as at and for the years ended July 31, 2006,
2005 and 2004 is derived from Veritas consolidated annual
financial statements under U.S. GAAP included elsewhere in
this prospectus. Veritas consolidated financial statements
as at and for the year ended July 31, 2006, 2005 and 2004
have been audited by PricewaterhouseCoopers LLP. The
following selected historical consolidated information for the
three-month periods
ended October 31, 2006 and 2005 is unaudited and is derived
from Veritas unaudited financial statements included
elsewhere in the prospectus. The unaudited financial statements
include all adjustments, consisting of normal recurring
accruals, which Veritas considers necessary for a fair
presentation of its financial position and results of operations
for these periods. The results of operations for the
three-month periods
presented below are not necessarily indicative of the results
for the full fiscal year.
The table below should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated
financial statements of Veritas and its subsidiaries and
Managements Discussion and Analysis of Financial
Condition and Results of Operations Veritas Results
of Operations included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the three | |
|
|
|
|
months ended October 31, | |
|
As at and for the year ended July 31, | |
|
|
| |
|
| |
|
|
2006 | |
|
2005 | |
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
2006(1) | |
|
2005(2) | |
|
2004(3) | |
|
2003(4) | |
|
2002(5) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in $ millions, except per share amount) | |
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
230.8 |
|
|
|
168.7 |
|
|
|
822.2 |
|
|
|
634.0 |
|
|
|
564.5 |
|
|
|
501.8 |
|
|
|
452.2 |
|
Cost of services
|
|
|
165.8 |
|
|
|
136.7 |
|
|
|
623.2 |
|
|
|
519.0 |
|
|
|
495.7 |
|
|
|
423.2 |
|
|
|
347.9 |
|
Research and development
|
|
|
5.4 |
|
|
|
4.9 |
|
|
|
22.9 |
|
|
|
18.9 |
|
|
|
15.5 |
|
|
|
11.6 |
|
|
|
11.5 |
|
General and administrative
|
|
|
11.4 |
|
|
|
8.9 |
|
|
|
43.2 |
|
|
|
31.9 |
|
|
|
25.5 |
|
|
|
27.2 |
|
|
|
23.8 |
|
Operating income (loss)
|
|
|
37.9 |
|
|
|
18.3 |
|
|
|
132.9 |
|
|
|
64.2 |
|
|
|
27.8 |
|
|
|
(12.1 |
) |
|
|
(.83 |
) |
Interest expense
|
|
|
2.2 |
|
|
|
1.5 |
|
|
|
7.2 |
|
|
|
4.0 |
|
|
|
18.9 |
|
|
|
18.5 |
|
|
|
13.6 |
|
Interest income
|
|
|
(5.0 |
) |
|
|
(1.9 |
) |
|
|
(12.0 |
) |
|
|
(5.3 |
) |
|
|
(1.6 |
) |
|
|
(.96 |
) |
|
|
(1.4 |
) |
Gain on involuntary conversion of assets
|
|
|
|
|
|
|
(2.0 |
) |
|
|
(2.0 |
) |
|
|
(9.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
0.3 |
|
|
|
(.13 |
) |
|
|
.12 |
|
|
|
(.88 |
) |
|
|
1.6 |
|
|
|
1.2 |
|
|
|
5.8 |
|
Provision (benefit) for income tax expense
|
|
|
13.2 |
|
|
|
9.0 |
|
|
|
57.2 |
|
|
|
(6.8 |
) |
|
|
3.7 |
|
|
|
28.3 |
|
|
|
5.2 |
|
Net income (loss)
|
|
|
27.5 |
|
|
|
11.8 |
|
|
|
82.2 |
|
|
|
83.0 |
|
|
|
5.2 |
|
|
|
(59.1 |
) |
|
|
(24.1 |
) |
Net income (loss) per common share basic
|
|
|
0.77 |
|
|
|
0.34 |
|
|
|
2.33 |
|
|
|
2.45 |
|
|
|
0.16 |
|
|
|
(1.77 |
) |
|
|
(.74 |
) |
Net income (loss) per common share diluted
|
|
|
0.68 |
|
|
|
0.32 |
|
|
|
2.08 |
|
|
|
2.37 |
|
|
|
0.15 |
|
|
|
(1.77 |
) |
|
|
(.74 |
) |
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
353.8 |
|
|
|
228.0 |
|
|
|
402.0 |
|
|
|
249.4 |
|
|
|
116.3 |
|
|
|
72.1 |
|
|
|
10.0 |
|
Property and equipment, net
|
|
|
141.9 |
|
|
|
128.8 |
|
|
|
110.6 |
|
|
|
127.9 |
|
|
|
121.7 |
|
|
|
149.7 |
|
|
|
189.8 |
|
Multi-client data library
|
|
|
324.1 |
|
|
|
333.3 |
|
|
|
296.6 |
|
|
|
316.8 |
|
|
|
313.2 |
|
|
|
373.1 |
|
|
|
338.8 |
|
Total assets
|
|
|
1,175.6 |
|
|
|
954.5 |
|
|
|
1,158.0 |
|
|
|
966.6 |
|
|
|
776.2 |
|
|
|
790.9 |
|
|
|
781.4 |
|
Long-term debt (including current maturities)
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
155.0 |
|
|
|
194.2 |
|
|
|
140.0 |
|
Stockholders equity
|
|
|
749.8 |
|
|
|
607.8 |
|
|
|
710.5 |
|
|
|
582.5 |
|
|
|
489.7 |
|
|
|
487.5 |
|
|
|
520.7 |
|
Other Historical Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBDA(6)
|
|
|
123.5 |
|
|
|
81.6 |
|
|
|
383.7 |
|
|
|
265.9 |
|
|
|
278.3 |
|
|
|
|
|
|
|
|
|
46
Notes:
|
|
|
(1) |
|
Includes a gain on involuntary conversion of assets of
$2.0 million. |
|
(2) |
|
Includes a gain on involuntary conversion of assets of
$9.9 million and a release of deferred tax valuation
allowances of $36.9 million. |
|
(3) |
|
Includes charges of $22.1 million related to a change in
multi-client accounting policies and $7.4 million related
to debt refinancing. The change in multi-client accounting
policies may affect the comparability between periods and is
more fully described in Note 1 to the Veritas audited
consolidated financial statements included elsewhere in this
prospectus. |
|
(4) |
|
Includes charges of $39.3 million for goodwill impairment,
$4.9 million for impairment of a multi-client survey,
$7.6 million loss related to the sale of Veritas
(RC)2
software operations and $21.0 million related to deferred
tax asset valuation allowances. |
|
(5) |
|
Includes charges of $55.3 million for impairment of
multi-client surveys, $14.6 million for costs of a
terminated merger and $6.5 million valuation allowance for
deferred tax assets. |
|
(6) |
|
A discussion of ORBDA (Operating Result Before
Depreciation and Amortization, previously denominated
Adjusted EBITDA), including (i) a
reconciliation to net cash provided by operating activities and
(ii) the reasons why our management believes that a
presentation of ORBDA provides useful information to investors
regarding our financial condition and results of operations, is
found in Managements Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources ORBDA. |
47
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following unaudited pro forma condensed combined financial
information is presented in millions of euros and gives pro
forma effect to the merger and the financing transactions under
IFRS and U.S. GAAP as if they occurred on January 1,
2005 in the case of the pro forma statements of income, and
September 30, 2006, in the case of the pro forma balance
sheet. The pro forma condensed combined statements of income
give pro forma effect to the acquisition of Exploration
Resources and the related financings as if they occurred on
January 1, 2005. The merger and the acquisition of
Exploration Resources are reflected in the pro forma financial
statements using the purchase method of accounting under U.S.
GAAP and IFRS.
The unaudited pro forma adjustments reflect the following
assumptions:
|
|
|
|
|
under U.S. GAAP, the price of CGG ADSs was $32.44, the
average price of CGG ADSs for the period beginning two days
before and ending two days after September 5, 2006 (the
date that the merger was announced); |
|
|
|
under IFRS, the price of CGG ADSs was $40.50, the closing
price on the closing date of the merger; |
|
|
|
each outstanding share of Veritas common stock was converted in
the merger into the right to receive either (i) 2.25 CGG
ADSs (with respect to 50.664% of Veritas total common
stock) or (ii) $75.00 in cash (with respect to 49.336% of
Veritas total common stock); |
|
|
|
the cash consideration paid by CGG in connection with the merger
was financed by a $1.0 billion term loan facility, the
issuance of $600 million in notes offered hereby and cash
on hand; and |
|
|
|
each employee option to purchase shares of Veritas common stock
pursuant to any stock option plan, program or arrangement of
Veritas outstanding at the time of the merger, whether or not
vested, has been cancelled and converted into the right to
receive, for each share of Veritas common stock subject to such
option, an amount in cash equal to the excess, if any, of $75.00
over the exercise price per share under such option (less any
applicable withholding taxes). |
The unaudited pro forma condensed combined financial
information is presented for illustrative purposes only and is
not indicative of the results of operations or the financial
condition of CGGVeritas that would have been achieved had the
merger, the acquisition of Exploration Resources, and the
related financing transactions been completed as of the dates
indicated, nor is the unaudited pro forma condensed combined
financial information indicative of our future results of
operations or financial position. The unaudited pro forma
condensed combined financial information does not reflect any
cost savings or other synergies that may result from the merger
nor does it reflect any special items such as restructuring and
integration costs that may be incurred as a result of the merger.
CGGVeritas reports, and CGG reported, its financial results in
euros and in conformity with IFRS, with a reconciliation to
U.S. GAAP. Veritas reported its financial results in
U.S. dollars and in conformity with U.S. GAAP. IFRS
differs from U.S. GAAP in certain significant respects. For
a discussion of significant differences between U.S. GAAP
and IFRS as they relate to CGGs consolidated financial
statements and a reconciliation to U.S. GAAP of CGGs
net income and shareholders equity for 2005 and 2004, see
Note 31 to CGGs audited consolidated financial
statements included elsewhere in this prospectus and Note 3
to CGGs unaudited consolidated financial statements
included elsewhere in this prospectus. For an explanation of the
differences between IFRS and U.S. GAAP as they apply to
CGGs and Veritas historical accounting treatments,
see Note 2 to the unaudited pro forma condensed combined
financial statements.
The unaudited pro forma condensed combined financial information
has been derived from and should be read in conjunction with the
respective consolidated financial statements of CGG for the year
ended December 31, 2005 and as at and for the nine-month
period ended September 30, 2006 and the consolidated
financial statements of Veritas for the year ended July 31,
2006, and the consolidated financial statements of Veritas as at
and for the three-month period ended October 31, 2006, all
included elsewhere in this prospectus.
48
The unaudited pro forma condensed combined financial information
is based on preliminary estimates and assumptions, which we
believe to be reasonable. In the unaudited pro forma
condensed combined financial information, the cash to be paid
and CGG ADSs to be issued as merger consideration for
Veritas shares of common stock have been allocated to the
Veritas assets and liabilities based upon preliminary estimates
by the management of CGG of their respective fair values at the
date of the merger. Any difference between the consideration
paid and the fair value of the Veritas assets and liabilities
has been recorded as goodwill. Definitive allocations will be
performed after the effective time of the merger. Accordingly,
the pro forma adjustments relating to the purchase price
allocation are preliminary, have been made solely for the
purpose of preparing the unaudited pro forma condensed combined
financial information and are subject to revision based on the
final determination of fair value after the effective time of
the merger. Any such revisions may be material.
49
CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME FOR THE TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 2005 UNDER IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical | |
|
|
|
|
|
Other | |
|
|
|
|
|
|
Exploration | |
|
|
|
|
|
pro forma | |
|
|
|
|
|
|
Resources | |
|
|
|
|
|
adjustments for the | |
|
Combined | |
|
|
|
|
and related | |
|
|
|
|
|
merger and the | |
|
pro forma | |
|
|
Historical | |
|
pro forma | |
|
Historical | |
|
Pro forma | |
|
financing | |
|
income | |
|
|
CGG 12 | |
|
adjustments | |
|
Veritas 12 | |
|
adjustments | |
|
transactions | |
|
statement 12 | |
|
|
months | |
|
8 months | |
|
months | |
|
12 months | |
|
12 months | |
|
months | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
August 31, | |
|
January 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2005 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
2005 | |
|
2005 | |
|
|
IFRS | |
|
IFRS | |
|
U.S. GAAP | |
|
IFRS | |
|
IFRS | |
|
IFRS | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note 1 | |
|
Note 1 | |
|
Note 1 | |
|
Notes 2 & 3 | |
|
Note 2 & 4 | |
|
Ref. | |
|
|
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
|
(unaudited) | |
|
|
(in millions, except per share data) | |
Operating revenues
|
|
|
869.9 |
|
|
|
68.7 |
|
|
|
579.6 |
|
|
|
(26.7 |
) |
|
|
(2.4 |
) |
|
|
2.7 |
|
|
|
1,489.1 |
|
Other income from ordinary activities
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from ordinary activities
|
|
|
871.8 |
|
|
|
68.7 |
|
|
|
579.6 |
|
|
|
(26.7 |
) |
|
|
(2.4 |
) |
|
|
|
|
|
|
1,491.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3.1; |
|
|
|
|
|
Cost of operations
|
|
|
(670.0 |
) |
|
|
(69.7 |
) |
|
|
(453.2 |
) |
|
|
26.1 |
|
|
|
(32.0 |
) |
|
|
4.3.4 |
|
|
|
(1,198.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
201.8 |
|
|
|
(1.0 |
) |
|
|
126.4 |
|
|
|
(0.6 |
) |
|
|
(34.4 |
) |
|
|
|
|
|
|
292.2 |
|
Research and development expenses net
|
|
|
(31.1 |
) |
|
|
|
|
|
|
(16.5 |
) |
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
(42.6 |
) |
Selling, general and administrative expenses
|
|
|
(91.2 |
) |
|
|
(5.8 |
) |
|
|
(30.0 |
) |
|
|
|
|
|
|
(2.3 |
) |
|
4.3.1; 4.3.4 |
|
|
(129.4 |
) |
Other revenues (expenses) net
|
|
|
(4.4 |
) |
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
5.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
75.1 |
|
|
|
(6.8 |
) |
|
|
79.9 |
|
|
|
14.2 |
|
|
|
(36.7 |
) |
|
|
|
|
|
|
125.7 |
|
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
(56.8 |
) |
|
|
(11.3 |
) |
|
|
12.8 |
|
|
|
(9.6 |
) |
|
|
(93.8 |
) |
|
4.3.2; 4.3.3 |
|
|
(158.7 |
) |
Variance on derivative of convertible bonds
|
|
|
(11.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income
taxes
|
|
|
6.8 |
|
|
|
(18.1 |
) |
|
|
92.7 |
|
|
|
4.7 |
|
|
|
(130.5 |
) |
|
|
|
|
|
|
(44.5 |
) |
Income taxes
|
|
|
(26.6 |
) |
|
|
3.9 |
|
|
|
(6.1 |
) |
|
|
(1.6 |
) |
|
|
45.6 |
|
|
|
4.3.5 |
|
|
|
15.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of consolidated companies
|
|
|
(19.8 |
) |
|
|
(14.2 |
) |
|
|
86.6 |
|
|
|
3.1 |
|
|
|
(84.9 |
) |
|
|
|
|
|
|
(29.3 |
) |
Equity in income of affiliates
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(6.8 |
) |
|
|
(14.2 |
) |
|
|
86.6 |
|
|
|
3.1 |
|
|
|
(84.9 |
) |
|
|
|
|
|
|
(16.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
(7.8 |
) |
|
|
(14.2 |
) |
|
|
86.6 |
|
|
|
3.1 |
|
|
|
(84.9 |
) |
|
|
|
|
|
|
(17.3 |
) |
minority interests
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0 |
|
Weighted average number of outstanding shares (in thousands)
|
|
|
12,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
21,704 |
|
Weighted average number of potential shares (in thousands)
|
|
|
12,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
21,704 |
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
(0.64 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
(0.64 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF INCOME FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30,
2006 UNDER IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other pro forma | |
|
|
|
|
|
|
|
|
|
|
adjustments for | |
|
|
|
|
|
|
|
|
|
|
the merger and | |
|
|
|
|
Historical | |
|
Historical | |
|
Pro forma | |
|
the financing | |
|
Combined | |
|
|
CGG 9 | |
|
Veritas | |
|
adjustments | |
|
transactions | |
|
pro forma | |
|
|
months | |
|
9 months | |
|
9 months | |
|
9 months | |
|
statement of | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
income | |
|
|
September 30, | |
|
October 31, | |
|
September 30, | |
|
September 30, | |
|
ended | |
|
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
September 30, | |
|
|
IFRS | |
|
U.S. GAAP | |
|
IFRS | |
|
IFRS | |
|
2006 IFRS | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note 1 | |
|
Note 1 | |
|
Notes 2 & 3 | |
|
Note 4 | |
|
Ref. | |
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
|
(unaudited) | |
|
|
(in millions, except per share data) | |
Operating revenues
|
|
|
955.6 |
|
|
|
519.7 |
|
|
|
(5.1 |
) |
|
|
|
|
|
|
|
|
|
|
1,470.1 |
|
Other income from ordinary activities
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from ordinary activities
|
|
|
957.0 |
|
|
|
519.7 |
|
|
|
(5.1 |
) |
|
|
|
|
|
|
|
|
|
|
1,471.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3.1; |
|
|
|
|
|
Cost of operations
|
|
|
(636.7 |
) |
|
|
(390.0 |
) |
|
|
9.5 |
|
|
|
(23.4 |
) |
|
|
4.3.4 |
|
|
|
(1,040.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
320.3 |
|
|
|
129.7 |
|
|
|
4.4 |
|
|
|
(23.4 |
) |
|
|
|
|
|
|
430.9 |
|
Research and development expenses net
|
|
|
(27.8 |
) |
|
|
(14.2 |
) |
|
|
4.3 |
|
|
|
|
|
|
|
|
|
|
|
(37.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3.1; |
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
(86.9 |
) |
|
|
(35.8 |
) |
|
|
8.3 |
|
|
|
(1.0 |
) |
|
|
4.3.4 |
|
|
|
(115.5 |
) |
Other revenues (expenses) net
|
|
|
12.0 |
|
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
11.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
217.6 |
|
|
|
79.7 |
|
|
|
16.8 |
|
|
|
(24.4 |
) |
|
|
|
|
|
|
289.6 |
|
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
(27.6 |
) |
|
|
4.4 |
|
|
|
|
|
|
|
(68.9 |
) |
|
4.3.2; 4.3.3 |
|
|
(92.1 |
) |
Derivative of convertible bonds and related costs
|
|
|
(23.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income
taxes
|
|
|
167.0 |
|
|
|
84.1 |
|
|
|
16.8 |
|
|
|
(93.4 |
) |
|
|
|
|
|
|
174.5 |
|
Income taxes
|
|
|
(54.9 |
) |
|
|
(30.2 |
) |
|
|
(5.9 |
) |
|
|
32.7 |
|
|
|
4.3.5 |
|
|
|
(58.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of consolidated companies
|
|
|
112.1 |
|
|
|
53.9 |
|
|
|
10.9 |
|
|
|
(60.7 |
) |
|
|
|
|
|
|
116.2 |
|
Equity in income of affiliates
|
|
|
8.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
121.0 |
|
|
|
53.9 |
|
|
|
10.9 |
|
|
|
(60.7 |
) |
|
|
|
|
|
|
125.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
119.8 |
|
|
|
53.9 |
|
|
|
10.9 |
|
|
|
(63.7 |
) |
|
|
|
|
|
|
123.9 |
|
minority interests
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
Weighted average number of outstanding shares (in thousands)
|
|
|
17,318 |
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
26,927 |
|
Weighted average number of potential shares (in thousands)
|
|
|
17,675 |
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
27,284 |
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
6.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
6.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AS AT SEPTEMBER 30, 2006 UNDER IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other pro forma | |
|
|
|
|
|
|
|
|
|
|
adjustments for | |
|
|
|
|
Historical | |
|
Historical | |
|
|
|
the merger and | |
|
Combined pro | |
|
|
CGG | |
|
Veritas | |
|
Pro forma | |
|
the financing | |
|
forma | |
|
|
IFRS at | |
|
U.S. GAAP at | |
|
adjustments at | |
|
transactions at | |
|
balance sheet at | |
|
|
September 30, | |
|
October 31, | |
|
September 30, | |
|
September 30, | |
|
September 30, | |
|
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 IFRS | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note 1 | |
|
Note 1 | |
|
Notes 2 & 3 | |
|
Note 4 | |
|
Ref. | |
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
|
(unaudited) | |
|
|
(in millions) | |
ASSETS |
Cash and cash equivalents
|
|
|
168.7 |
|
|
|
279.5 |
|
|
|
0.1 |
|
|
|
(147.8 |
) |
|
|
4.2.5 |
|
|
|
300.5 |
|
Current assets, net
|
|
|
576.4 |
|
|
|
230.5 |
|
|
|
(8.5 |
) |
|
|
|
|
|
|
|
|
|
|
798.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
745.1 |
|
|
|
510.0 |
|
|
|
(8.4 |
) |
|
|
(147.8 |
) |
|
|
|
|
|
|
1,098.9 |
|
Goodwill
|
|
|
273.9 |
|
|
|
|
|
|
|
|
|
|
|
2,110.0 |
|
|
|
4.2.1 |
|
|
|
2,383.8 |
|
Intangible assets, net
|
|
|
134.5 |
|
|
|
256.0 |
|
|
|
6.4 |
|
|
|
207.7 |
|
|
|
4.2.1 |
|
|
|
604.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2.1; |
|
|
|
|
|
Other non-current assets, net
|
|
|
598.2 |
|
|
|
162.6 |
|
|
|
(3.0 |
) |
|
|
18.3 |
|
|
|
4.3.5 |
|
|
|
776.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
1,006.6 |
|
|
|
418.6 |
|
|
|
3.4 |
|
|
|
2,335.8 |
|
|
|
|
|
|
|
3,764.4 |
|
Total assets
|
|
|
1,751.7 |
|
|
|
928.6 |
|
|
|
(5.0 |
) |
|
|
2,188.0 |
|
|
|
|
|
|
|
4,863.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
Bank overdrafts
|
|
|
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9 |
|
Current portion of financial debt
|
|
|
44.0 |
|
|
|
122.4 |
|
|
|
(2.8 |
) |
|
|
(103.1 |
) |
|
|
4.2.5 |
|
|
|
60.6 |
|
Current liabilities
|
|
|
322.4 |
|
|
|
186.8 |
|
|
|
(15.2 |
) |
|
|
9.8 |
|
|
|
4.2.1 |
|
|
|
503.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
377.3 |
|
|
|
309.2 |
|
|
|
(18.0 |
) |
|
|
(93.3 |
) |
|
|
|
|
|
|
575.3 |
|
Financial debt
|
|
|
386.8 |
|
|
|
|
|
|
|
|
|
|
|
1,243.7 |
|
|
|
4.2.5 |
|
|
|
1,630.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2.1; |
|
|
|
|
|
Other non-current liabilities
|
|
|
113.6 |
|
|
|
27.1 |
|
|
|
18.0 |
|
|
|
69.9 |
|
|
|
4.3.5 |
|
|
|
228.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
500.4 |
|
|
|
27.1 |
|
|
|
18.0 |
|
|
|
1,313.6 |
|
|
|
|
|
|
|
1,859.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
850.5 |
|
|
|
592.3 |
|
|
|
(5.0 |
) |
|
|
967.7 |
|
|
|
4.2.2 |
|
|
|
2,405.5 |
|
Minority interests
|
|
|
23.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity and minority interests
|
|
|
874.0 |
|
|
|
592.3 |
|
|
|
(5.0 |
) |
|
|
967.7 |
|
|
|
|
|
|
|
2,429.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
1,751.7 |
|
|
|
928.6 |
|
|
|
(5.0 |
) |
|
|
2,188.0 |
|
|
|
|
|
|
|
4,863.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF INCOME
FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2005
UNDER U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other | |
|
|
|
|
|
|
Historical | |
|
|
|
|
|
pro forma | |
|
|
|
|
|
|
Exploration | |
|
|
|
|
|
adjustments | |
|
|
|
|
|
|
Resources | |
|
|
|
|
|
for the | |
|
Combined | |
|
|
|
|
and related | |
|
|
|
|
|
merger and | |
|
pro forma | |
|
|
Historical | |
|
pro forma | |
|
Historical | |
|
Pro forma | |
|
the financing | |
|
income | |
|
|
CGG | |
|
adjustments | |
|
Veritas | |
|
adjustments | |
|
transactions | |
|
statement | |
|
|
12 months | |
|
8 months | |
|
12 months | |
|
12 months | |
|
12 months | |
|
12 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
August 31, | |
|
January 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2005 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
2005 | |
|
2005 | |
|
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note 1 | |
|
Note 1 | |
|
Note 1 | |
|
Notes 2 & 3 | |
|
Note 4 | |
|
Ref. | |
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
|
|
|
|
(in millions, except per share data) | |
|
|
Operating revenues
|
|
|
860.8 |
|
|
|
63.8 |
|
|
|
579.6 |
|
|
|
(29.8 |
) |
|
|
|
|
|
|
|
|
|
|
1,474.4 |
|
Cost of operations
|
|
|
(665.4 |
) |
|
|
(68.8 |
) |
|
|
(453.2 |
) |
|
|
31.8 |
|
|
|
(30.6 |
) |
|
|
4.3.1 |
|
|
|
(1,186.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
195.4 |
|
|
|
(5.0 |
) |
|
|
126.4 |
|
|
|
2.0 |
|
|
|
(30.6 |
) |
|
|
|
|
|
|
288.3 |
|
Research and development expenses net
|
|
|
(39.3 |
) |
|
|
|
|
|
|
(16.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55.8 |
) |
Selling, general and administrative expenses
|
|
|
(92.7 |
) |
|
|
(8.4 |
) |
|
|
(30.0 |
) |
|
|
|
|
|
|
(3.6 |
) |
|
|
4.3.1 |
|
|
|
(134.8 |
) |
Other revenues (expenses) net
|
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
9.6 |
|
|
|
|
|
|
|
|
|
|
|
8.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
61.9 |
|
|
|
(13.4 |
) |
|
|
79.9 |
|
|
|
11.6 |
|
|
|
(34.2 |
) |
|
|
|
|
|
|
105.8 |
|
Interest, other financial income and expense, net, exchange
gains and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3.2 |
; |
|
|
|
|
|
losses, net and others |
|
|
(31.9 |
) |
|
|
(4.6 |
) |
|
|
12.8 |
|
|
|
(9.6 |
) |
|
|
(93.8 |
) |
|
|
4.3.3 |
|
|
|
(127.1 |
) |
Variance on derivative of convertible bonds
|
|
|
(11.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11.5 |
) |
Equity in income of affiliates
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income taxes
and minority interests
|
|
|
31.5 |
|
|
|
(18.0 |
) |
|
|
92.7 |
|
|
|
2.0 |
|
|
|
(128.0 |
) |
|
|
|
|
|
|
(19.8 |
) |
Income taxes
|
|
|
(22.2 |
) |
|
|
5.2 |
|
|
|
(6.1 |
) |
|
|
(0.7 |
) |
|
|
44.8 |
|
|
|
4.3.5 |
|
|
|
21.0 |
|
Minority interests
|
|
|
(1.0 |
) |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
8.3 |
|
|
|
(12.6 |
) |
|
|
86.6 |
|
|
|
1.3 |
|
|
|
(93.2 |
) |
|
|
|
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands)
|
|
|
12,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
21,704 |
|
Weighted average number of potential shares (in thousands)
|
|
|
12,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
21,966 |
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF INCOME
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 UNDER
U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other | |
|
|
|
|
|
|
|
|
|
|
pro forma | |
|
|
|
|
|
|
|
|
|
|
adjustments | |
|
|
|
|
|
|
|
|
|
|
for the | |
|
|
|
|
|
|
|
|
|
|
merger and | |
|
Combined | |
|
|
Historical | |
|
Historical | |
|
Pro forma | |
|
the financing | |
|
pro forma | |
|
|
CGG | |
|
Veritas | |
|
adjustments | |
|
transactions | |
|
statement of | |
|
|
9 months | |
|
9 months | |
|
9 months | |
|
9 months | |
|
income | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
September 30, | |
|
October 31, | |
|
September 30, | |
|
September 30, | |
|
September 30, | |
|
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note 1 | |
|
Note 1 | |
|
Notes 2 & 3 | |
|
Note 4 | |
|
Ref. | |
|
(unaudited) | |
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
|
|
|
|
(in millions, except per share data) | |
Operating revenues
|
|
|
967.7 |
|
|
|
519.7 |
|
|
|
(8.1 |
) |
|
|
|
|
|
|
|
|
|
|
1,479.3 |
|
Cost of operations
|
|
|
(636.4 |
) |
|
|
(390.0 |
) |
|
|
9.2 |
|
|
|
(22.9 |
) |
|
|
4.3.1 |
|
|
|
(1,040.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
331.3 |
|
|
|
129.7 |
|
|
|
1.1 |
|
|
|
(22.9 |
) |
|
|
|
|
|
|
439.2 |
|
Research and development expenses net
|
|
|
(37.7 |
) |
|
|
(14.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51.9 |
) |
Selling, general and administrative expenses
|
|
|
(87.4 |
) |
|
|
(35.8 |
) |
|
|
8.3 |
|
|
|
(2.7 |
) |
|
|
4.3.1 |
|
|
|
(117.7 |
) |
Other revenues (expenses) net
|
|
|
8.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
215.0 |
|
|
|
79.7 |
|
|
|
9.4 |
|
|
|
(25.6 |
) |
|
|
|
|
|
|
278.5 |
|
Interest, other financial income and expense, net, exchange
gains and losses,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3.2 |
; |
|
|
|
|
|
net and others |
|
|
(64.3 |
) |
|
|
4.4 |
|
|
|
|
|
|
|
(68.9 |
) |
|
|
4.3.3 |
|
|
|
(128.8 |
) |
Derivative of convertible bonds and related costs
|
|
|
(23.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23.0 |
) |
Equity in income of affiliates
|
|
|
8.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income taxes
and minority interests
|
|
|
136.6 |
|
|
|
84.1 |
|
|
|
9.4 |
|
|
|
(94.5 |
) |
|
|
|
|
|
|
135.6 |
|
Income taxes
|
|
|
(41.4 |
) |
|
|
(30.3 |
) |
|
|
(3.3 |
) |
|
|
33.1 |
|
|
|
4.3.5 |
|
|
|
(41.8 |
) |
Minority interests
|
|
|
(1.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
94.0 |
|
|
|
53.9 |
|
|
|
6.1 |
|
|
|
(61.4 |
) |
|
|
|
|
|
|
92.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands)
|
|
|
17,318 |
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
26,927 |
|
Weighted average number of potential shares (in thousands)
|
|
|
17,675 |
|
|
|
|
|
|
|
|
|
|
|
9,609 |
|
|
|
|
|
|
|
27,284 |
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
5.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
5.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AS AT SEPTEMBER 30, 2006 UNDER U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other pro forma | |
|
|
|
|
|
|
Historical | |
|
|
|
adjustments for | |
|
Combined pro | |
|
|
Historical CGG | |
|
Veritas | |
|
Pro forma | |
|
the merger and | |
|
forma balance | |
|
|
U.S. GAAP at | |
|
U.S. GAAP at | |
|
adjustments at | |
|
the financing | |
|
sheet at | |
|
|
September 30, | |
|
October 31, | |
|
September 30, | |
|
transactions at | |
|
September 30, | |
|
|
2006 | |
|
2006 | |
|
2006 | |
|
September 30, 2006 | |
|
2006 U.S. GAAP | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Note 1 | |
|
Note 1 | |
|
Notes 2 and 3 | |
|
Note 4 | |
|
Ref. | |
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
|
(unaudited) | |
|
|
(in millions) | |
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
168.7 |
|
|
|
279.5 |
|
|
|
|
|
|
|
(147.8 |
) |
|
|
4.2.5 |
|
|
|
300.4 |
|
Current assets, net
|
|
|
581.5 |
|
|
|
230.5 |
|
|
|
(1.0 |
) |
|
|
20.1 |
|
|
|
4.2.3 |
|
|
|
831.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
750.2 |
|
|
|
510.0 |
|
|
|
(1.0 |
) |
|
|
(127.6 |
) |
|
|
|
|
|
|
1,131.5 |
|
Goodwill
|
|
|
286.4 |
|
|
|
|
|
|
|
|
|
|
|
1,747.4 |
|
|
|
4.2.1 |
|
|
|
2,033.8 |
|
Intangible assets, net
|
|
|
99.3 |
|
|
|
256.0 |
|
|
|
|
|
|
|
207.7 |
|
|
|
4.2.1 |
|
|
|
563.0 |
|
Other non-current assets, net
|
|
|
615.3 |
|
|
|
162.6 |
|
|
|
|
|
|
|
18.2 |
|
|
|
4.2.1 |
|
|
|
796.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
1,001.0 |
|
|
|
418.6 |
|
|
|
|
|
|
|
1,973.3 |
|
|
|
|
|
|
|
3,392.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,751.2 |
|
|
|
928.6 |
|
|
|
(1.0 |
) |
|
|
1,845.6 |
|
|
|
|
|
|
|
4,524.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdrafts
|
|
|
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9 |
|
Current portion of financial debt
|
|
|
44.0 |
|
|
|
122.4 |
|
|
|
|
|
|
|
(103.1 |
) |
|
|
4.2.5 |
|
|
|
63.4 |
|
Current liabilities
|
|
|
352.6 |
|
|
|
186.8 |
|
|
|
(9.1 |
) |
|
|
10.0 |
|
|
|
4.2.1 |
|
|
|
540.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
407.5 |
|
|
|
309.2 |
|
|
|
(9.1 |
) |
|
|
(93.1 |
) |
|
|
|
|
|
|
614.5 |
|
Financial debt
|
|
|
392.7 |
|
|
|
|
|
|
|
|
|
|
|
1,263.8 |
|
|
|
4.2.3 |
|
|
|
1,656.5 |
|
Other non-current liabilities
|
|
|
115.8 |
|
|
|
27.1 |
|
|
|
2.8 |
|
|
|
65.4 |
|
|
|
4.3.5 |
|
|
|
211.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
508.5 |
|
|
|
27.1 |
|
|
|
2.8 |
|
|
|
1,329.2 |
|
|
|
|
|
|
|
1,867.7 |
|
Total shareholders equity
|
|
|
811.7 |
|
|
|
592.3 |
|
|
|
5.3 |
|
|
|
609.5 |
|
|
|
|
|
|
|
2,018.8 |
|
Minority interests
|
|
|
23.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
1,751.2 |
|
|
|
928.6 |
|
|
|
(1.0 |
) |
|
|
1,845.6 |
|
|
|
|
|
|
|
4,524.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
NOTES TO CGGVERITAS UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION FOR THE TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 2005
AND AS AT AND FOR THE NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 2006
UNDER IFRS AND U.S. GAAP
NOTE 1 Description of transaction and basis
of presentation
|
|
|
Description of transaction |
The merger is described in the section entitled The
Veritas Merger contained elsewhere in this prospectus.
Pro forma adjustments related to the unaudited pro forma
condensed combined statement of income for each of the
12-month period ended
December 31, 2005 and the
nine-month period ended
September 30, 2006 are computed assuming the merger, the
acquisition of Exploration Resources and the financing
transactions for each of the merger and the acquisition of
Exploration Resources were completed on January 1, 2005.
Pro forma adjustments related to the unaudited pro forma
condensed combined balance sheet are computed assuming the
merger and the financing transactions were completed at
September 30, 2006.
There are certain differences in the way in which CGG and
Veritas present items on their respective statements of income
under U.S. GAAP. As a result, the gain recorded in
connection with the receipt of insurance proceeds for the loss
of seismic equipment in Veritas statement of income has
been reclassified in the IFRS and the U.S. GAAP unaudited pro
forma condensed combined financial information to comply with
CGGs accounting presentation.
Balances and transactions between CGG and Veritas as at and for
the periods presented were eliminated as intercompany
transactions.
The CGG ADS price used to compute the fair value, under
U.S. GAAP, of the CGG ADSs issued in the merger is based on
the average closing price of a CGG ADS for the period beginning
two days before and ending two days after the date the merger
was officially announced (September 5, 2006). However,
under IFRS, the CGG ADS price used is the CGG ADS closing price
at the effective date of the merger (January 12, 2007).
|
|
|
Historical financial statements and currency
translation |
CGGs historical financial statements for the fiscal year
ended December 31, 2005 are presented in euros and are
derived from CGGs audited consolidated financial
statements included elsewhere in this prospectus.
CGGs historical financial statements as at and for the
nine-month period ended
September 30, 2006 are presented in euros and are derived
from CGGs unaudited consolidated financial statements
included elsewhere in this prospectus.
Veritas unaudited historical financial statements for the
twelve-month period
ended January 31, 2006 are presented in U.S. dollars
and are derived from Veritas audited and unaudited
financial statements.
All data related to Veritas historical statement of income
for the 12-month period
ended January 31, 2006 and the pro forma adjustments to the
unaudited pro forma condensed combined statement of income for
the twelve-month period
ended December 31, 2005 are translated into euros at
CGGs average rate for this period of
1.00 = U.S.$1.2418.
56
Combined Historical Veritas U.S. GAAP Statement of
Income for the Twelve-Month Period Ended January 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical | |
|
Historical | |
|
Historical | |
|
Historical | |
|
Historical | |
|
|
Veritas | |
|
Veritas | |
|
Veritas | |
|
Veritas | |
|
Veritas | |
|
|
12 months | |
|
6 months | |
|
6 months | |
|
12 months | |
|
12 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
July 31, | |
|
January 31, | |
|
January 31, | |
|
January 31, | |
|
January 31, | |
|
|
2005 | |
|
2005 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in $ millions) | |
|
(in $ millions) | |
|
(in $ millions) | |
|
(in $ millions) | |
|
(in millions) | |
|
|
(A) | |
|
(B) | |
|
(C) | |
|
(A) - (B) + (C) | |
|
(unaudited) | |
|
|
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
Operating revenues
|
|
|
634.0 |
|
|
|
321.8 |
|
|
|
407.5 |
|
|
|
719.7 |
|
|
|
579.6 |
|
Cost of operations
|
|
|
(519.0 |
) |
|
|
(260.9 |
) |
|
|
(304.6 |
) |
|
|
(562.7 |
) |
|
|
(453.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
115.0 |
|
|
|
60.9 |
|
|
|
102.9 |
|
|
|
157.0 |
|
|
|
126.4 |
|
Research and development expenses net
|
|
|
(18.9 |
) |
|
|
(9.1 |
) |
|
|
(10.7 |
) |
|
|
(20.5 |
) |
|
|
(16.5 |
) |
Selling, general and administrative expenses
|
|
|
(31.9 |
) |
|
|
(15.0 |
) |
|
|
(20.4 |
) |
|
|
(37.3 |
) |
|
|
(30.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
64.2 |
|
|
|
36.8 |
|
|
|
71.8 |
|
|
|
99.2 |
|
|
|
79.9 |
|
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
12.0 |
|
|
|
(0.1 |
) |
|
|
3.8 |
|
|
|
15.9 |
|
|
|
12.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of consolidated companies before income taxes and
minority interests
|
|
|
76.2 |
|
|
|
36.7 |
|
|
|
75.6 |
|
|
|
115.1 |
|
|
|
92.7 |
|
Income taxes
|
|
|
6.8 |
|
|
|
(18.4 |
) |
|
|
(32.8 |
) |
|
|
(7.6 |
) |
|
|
(6.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
83.0 |
|
|
|
18.3 |
|
|
|
42.8 |
|
|
|
107.5 |
|
|
|
86.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands)
|
|
|
33,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,393 |
|
Weighted average number of potential shares (in thousands)
|
|
|
35,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,442 |
|
Earning per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
2.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
2.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of this unaudited schedule is to reflect
Veritas unaudited statement of income for the twelve month
period ended January 31, 2006. The schedule has been
prepared only in connection with the compilation of the
unaudited pro forma condensed combined financial statements.
Certain items included in Veritas annual statements of
income for the fiscal year ended July 31, 2006 are derived
from annual calculations including net pension and
post-retirement benefit obligations, employee incentive awards
and income taxes, among other items. This schedule does not
consider the impact of how these items would have been different
had Veritas fiscal year ended on December 31, 2005.
Veritas historical financial statements as at and for the
nine-month period ended October 31, 2006 are presented in
U.S. dollars and are derived from Veritas unaudited
financial statements.
All data related to Veritas historical balance sheet at
October 31, 2006 and the pro forma adjustments to the
balance sheet at September 30, 2006 are translated into
euros at CGGs closing rate at September 30, 2006 of
1.00 = U.S.$1.2660.
All data related to Veritas historical statement of income
for the nine-month
period ended October 31, 2006 and the pro forma adjustments
to the statement of income for the
nine-month period ended
September 30, 2006 are translated into euros at CGGs
average rate for this period of
1.00 = U.S.$1.2420.
57
Combined Historical Veritas U.S. GAAP Statement of
Income for the Nine-Month Period Ended October 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical | |
|
Historical | |
|
Historical | |
|
Historical | |
|
Historical | |
|
|
Veritas | |
|
Veritas | |
|
Veritas | |
|
Veritas | |
|
Veritas | |
|
|
12 months | |
|
6 months | |
|
3 months | |
|
9 months | |
|
9 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
July 31, | |
|
January 31, | |
|
October 31, | |
|
October 31, | |
|
October 31, | |
|
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
2006 | |
|
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in $ millions) | |
|
(in $ millions) | |
|
(in $ millions) | |
|
(in $ millions) | |
|
(in millions) | |
|
|
(A) | |
|
(B) | |
|
(C) | |
|
(A) - (B) + (C) | |
|
(unaudited) | |
|
|
|
|
(unaudited) | |
|
|
|
(unaudited) | |
|
|
Operating revenues
|
|
|
822.2 |
|
|
|
407.5 |
|
|
|
230.8 |
|
|
|
645.5 |
|
|
|
519.7 |
|
Cost of operations
|
|
|
(623.2 |
) |
|
|
(304.6 |
) |
|
|
(165.8 |
) |
|
|
(484.4 |
) |
|
|
(390.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
199.0 |
|
|
|
102.9 |
|
|
|
65.0 |
|
|
|
161.1 |
|
|
|
129.7 |
|
Research and development expenses net
|
|
|
(22.9 |
) |
|
|
(10.7 |
) |
|
|
(5.4 |
) |
|
|
(17.1 |
) |
|
|
(14.2 |
) |
Selling, general and administrative expenses
|
|
|
(43.2 |
) |
|
|
(20.4 |
) |
|
|
(21.7 |
) |
|
|
(44.5 |
) |
|
|
(35.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
132.9 |
|
|
|
71.8 |
|
|
|
37.9 |
|
|
|
99.0 |
|
|
|
79.7 |
|
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
6.5 |
|
|
|
3.8 |
|
|
|
2.8 |
|
|
|
5.5 |
|
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income taxes
and minority interests
|
|
|
139.4 |
|
|
|
75.6 |
|
|
|
40.7 |
|
|
|
104.5 |
|
|
|
84.1 |
|
Income taxes
|
|
|
(57.2 |
) |
|
|
(32.8 |
) |
|
|
(13.2 |
) |
|
|
(37.6 |
) |
|
|
(30.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
82.2 |
|
|
|
42.8 |
|
|
|
27.5 |
|
|
|
66.9 |
|
|
|
53.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands)
|
|
|
35,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,973 |
|
Weighted average number of potential shares (in thousands)
|
|
|
39,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,748 |
|
Earning per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
2.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
2.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration Resources was consolidated into CGGs
consolidated financial statements ended December 31, 2005
commencing on September 1, 2005.
The pro forma income statement for the eight months ended
August 31, 2005 of Exploration Resources has been derived
from the U.S. GAAP income statement of Exploration
Resources for the eight months ended August 31, 2005.
The U.S. GAAP income statement of Exploration Resources for
the eight months ended August 31, 2005 and the related pro
forma adjustments have been translated at an average exchange
rate of NOK 8.0839 per euro.
58
Combined Historical Exploration Resources U.S. GAAP
Statement of Income and Related Pro forma Adjustments for the
Eight-Month Period ended August 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical | |
|
|
|
|
|
|
|
|
Exploration | |
|
|
|
|
Purchase | |
|
Other | |
|
Resources and | |
|
|
Historical | |
|
accounting | |
|
adjustments | |
|
related | |
|
|
Exploration | |
|
Exploration | |
|
Exploration | |
|
pro forma | |
|
|
Resources | |
|
Resources | |
|
Resources | |
|
adjustments | |
|
|
8 months | |
|
8 months | |
|
8 months | |
|
8 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
August 31, | |
|
August 31, | |
|
August 31, | |
|
August 31, | |
|
|
2005 | |
|
2005 | |
|
2005 | |
|
2005 | |
|
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
U.S. GAAP | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
(in millions) | |
Operating revenues
|
|
|
66.3 |
|
|
|
|
|
|
|
(2.5 |
)(b) |
|
|
63.8 |
|
Cost of operations
|
|
|
(58.7 |
) |
|
|
(10.0 |
)(a) |
|
|
(0.1 |
) (b)(c) |
|
|
(68.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
7.6 |
|
|
|
(10.0 |
) |
|
|
(2.6 |
) |
|
|
(5.0 |
) |
Selling, general and administrative expenses
|
|
|
(8.4 |
) |
|
|
|
|
|
|
|
|
|
|
(8.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
(0.8 |
) |
|
|
(10.0 |
) |
|
|
(2.6 |
) |
|
|
(13.4 |
) |
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
1.1 |
|
|
|
|
|
|
|
(5.7 |
) (d)(f) |
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income taxes
and minority interests
|
|
|
0.3 |
|
|
|
(10.0 |
) |
|
|
(8.3 |
) |
|
|
(18.0 |
) |
Income taxes
|
|
|
(1.2 |
) |
|
|
2.8 |
(a) |
|
|
3.6 |
(e) |
|
|
5.2 |
|
Minority interests
|
|
|
0.6 |
|
|
|
|
|
|
|
(0.4 |
) |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(0.3 |
) |
|
|
(7.2 |
) |
|
|
(5.1 |
) |
|
|
(12.6 |
) |
Notes:
|
|
(a) |
Reflects the impact (depreciation adjustment and related income
tax adjustment) of the reassessment of the value of Exploration
Resources assets in accordance with the principles of
purchase method accounting under IFRS, which reassessment
resulted notably in an increase in the book value of the vessels
of
116.8 million
as at September 1, 2005. |
|
(b) |
Reflects the elimination of material
inter-company
transactions pursuant to which members of the CGG group sold
equipment to Exploration Resources during the period presented
but prior to September 1, 2005. |
|
(c) |
Conforming Exploration Resources
multi-client survey
amortization method to CGGs accounting policies for such
amortization. |
|
(d) |
Reflects the interest on the $165,000,000 of existing notes
issued on April 28, 2005 and the $165,000,000 of existing
notes issued on February 3, 2006 in connection with the
financing of the acquisition of Exploration Resources as if such
notes were issued at par on January 1, 2005 and
amortization of related fees. |
|
(e) |
Recognition of the impact of deferred tax liabilities to the
adjustments set forth in the column Other
Adjustments. |
|
(f) |
Elimination of interest on the bridge credit facility from
September 1, 2005 through September 30, 2005, that was
put in place and drawn in connection with the acquisition of
Exploration Resources. |
The pro forma income statement for the eight months ended
August 31, 2005 of Exploration Resources has been derived
from the IFRS income statement of Exploration Resources for the
nine months ended September 30, 2005, adjusted by the month
of September 2005 already consolidated in CGGs
consolidated financial statements at December 31, 2005. The
IFRS income statement of Exploration Resources for the eight
months ended August 31, 2005 and the related pro forma
adjustments have been translated at an average exchange rate of
NOK 8.0839 per euro.
59
Combined Historical Exploration Resources IFRS Statement of
Income and Related Pro Forma Adjustments for the Eight-Month
Period ended August 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical | |
|
|
|
|
Purchase | |
|
|
|
|
|
Exploration | |
|
|
Historical | |
|
accounting | |
|
|
|
|
|
Resources | |
|
|
Exploration | |
|
Exploration | |
|
Exploration | |
|
Other pro | |
|
and related pro | |
|
|
Resources | |
|
Resources | |
|
Resources | |
|
forma | |
|
forma | |
|
|
9 months | |
|
8 months | |
|
1 month | |
|
adjustments | |
|
adjustments | |
|
|
IFRS ended | |
|
IFRS ended | |
|
IFRS ended | |
|
Exploration | |
|
8 months ended | |
|
|
September 30, | |
|
September 30, | |
|
September 30, | |
|
Resources (a) | |
|
August 31, 2005 | |
|
|
2005 | |
|
2005 | |
|
2005 | |
|
IFRS | |
|
IFRS | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
(unaudited) | |
|
|
(in millions) | |
Operating revenues
|
|
|
78.6 |
|
|
|
|
|
|
|
(8.7 |
) |
|
|
(1.3 |
)(b) |
|
|
68.7 |
|
Cost of operations
|
|
|
(67.4 |
) |
|
|
(9.4 |
)(a) |
|
|
7.0 |
|
|
|
|
(b)(c) |
|
|
(69.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
11.2 |
|
|
|
(9.4 |
) |
|
|
(1.6 |
) |
|
|
(1.2 |
) |
|
|
(1.0 |
) |
Selling, general and administrative expenses
|
|
|
(6.3 |
) |
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
(5.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
4.9 |
|
|
|
(9.4 |
) |
|
|
(1.2 |
) |
|
|
(1.2 |
) |
|
|
(6.8 |
) |
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
(2.1 |
) |
|
|
|
|
|
|
0.4 |
|
|
|
(9.6 |
)(d)(f) |
|
|
(11.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income
taxes
|
|
|
2.8 |
|
|
|
(9.4 |
)(a) |
|
|
(0.8 |
) |
|
|
(10.7 |
)(e) |
|
|
(18.1 |
) |
Income taxes
|
|
|
0.4 |
|
|
|
2.6 |
|
|
|
(0.8 |
) |
|
|
1.6 |
|
|
|
3.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
3.2 |
|
|
|
(6.8 |
) |
|
|
(1.5 |
) |
|
|
(9.2 |
) |
|
|
(14.2 |
) |
attributable to shareholders
|
|
|
3.8 |
|
|
|
(7.5 |
) |
|
|
(1.5 |
) |
|
|
(9.2 |
) |
|
|
(14.2 |
) |
attributable to minority interests
|
|
|
(0.6 |
) |
|
|
0.7 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
Notes:
|
|
(a) |
Reflects the impact (depreciation adjustments and related income
for adjustment) of the reassessment of the value of Exploration
Resources assets in accordance with the principles of
purchase method accounting under IFRS, which reassessment
resulted notably in an increase in the book value of the vessels
of 116.8 as at
September 1, 2005. |
|
|
(b) |
Reflects the elimination of material
inter-company
transactions pursuant to which members of the CGG group sold
equity. |
|
(c) |
Conforming Exploration Resources
multi-client survey
amortization method to CGGs accounting policies for such
amortization. |
|
(d) |
Reflects the interest on the $165,000,000 of existing notes
issued on April 28, 2005 and the $165,000,000 of existing
notes issued on February 3, 2006 in connection with the
financing of the acquisition of Exploration Resources as if such
notes were issued at par on January 1, 2005 and
amortization of related fees. |
|
(e) |
Recognition of the impact of deferred tax liabilities to the
adjustments set forth in the column Other
Adjustments. |
|
(f) |
Elimination of interest on the bridge credit facility from
September 1, 2005 through September 30, 2005, that was
put in place and drawn in connection with the acquisition of
Exploration Resources. |
NOTE 2 Adjustments to Veritas
historical financial statements to ensure consistency of
accounting principles with CGGs historical financial
statements under IFRS and U.S. GAAP
The unaudited pro forma condensed combined financial information
under IFRS and U.S. GAAP includes adjustments to
Veritas historical financial statements (i) to
account for differences between U.S. GAAP and IFRS and
(ii) to make Veritas application of U.S. GAAP
consistent with CGGs application of U.S. GAAP.
The deferred tax effect of these adjustments was computed at an
estimated tax rate of 35%.
60
PRO FORMA ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF INCOME FOR THE TWELVE-MONTH PERIOD
ENDED DECEMBER 31, 2005 UNDER IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma | |
|
|
|
|
|
|
Pro forma | |
|
adjustments to | |
|
|
|
|
intercompany | |
|
income statement | |
|
|
Pro forma consistency | |
|
elimination | |
|
12 months ended | |
|
|
adjustments | |
|
and other | |
|
December 31, 2005 | |
|
|
under IFRS | |
|
adjustments | |
|
IFRS | |
|
|
| |
|
| |
|
| |
|
|
|
|
Ref. | |
|
Note 3 | |
|
Ref. | |
|
|
|
|
|
|
|
|
(unaudited) | |
|
|
(unaudited) | |
|
(unaudited) | |
|
|
|
|
(in millions) | |
Operating revenues
|
|
|
3.1 |
|
|
|
2.6 |
|
|
|
(29.8 |
) |
|
|
3.1 |
|
|
|
(26.7 |
) |
Other income from ordinary activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from ordinary activities
|
|
|
3.1 |
|
|
|
|
|
|
|
(29.8 |
) |
|
|
|
|
|
|
(26.7 |
) |
Cost of operations
|
|
|
7.1 |
|
|
2.1, 2.4, 2.5, 2.6 |
|
|
19.0 |
|
|
|
3.1 |
|
|
|
26.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
10.2 |
|
|
|
|
|
|
|
(10.8 |
) |
|
|
3.1 |
|
|
|
(0.6 |
) |
Research and development expenses net
|
|
|
5.0 |
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
5.0 |
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues (expenses) net
|
|
|
9.9 |
|
|
|
2.2, 2.6 |
|
|
|
|
|
|
|
|
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
25.1 |
|
|
|
|
|
|
|
(10.8 |
) |
|
|
|
|
|
|
14.2 |
|
Interest, other financial income and expense, net, exchange
gains and losses, net and others
|
|
|
(9.6 |
) |
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
(9.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) of consolidated companies before income
taxes
|
|
|
15.5 |
|
|
|
|
|
|
|
(10.8 |
) |
|
|
|
|
|
|
4.7 |
|
Income taxes
|
|
|
(5.4 |
) |
|
|
4.3.5 |
|
|
|
3.8 |
|
|
|
4.3.5 |
|
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
10.1 |
|
|
|
|
|
|
|
(7.0 |
) |
|
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
PRO FORMA ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET AS AT SEPTEMBER 30, 2006 UNDER
IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma | |
|
|
|
|
|
|
|
|
intercompany | |
|
Pro forma | |
|
|
|
|
elimination | |
|
adjustments to | |
|
|
Pro forma consistency | |
|
and other | |
|
balance sheet at | |
|
|
adjustments | |
|
adjustments | |
|
September 30, 2006 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Ref. | |
|
Note 3 | |
|
Ref. | |
|
|
|
|
|
|
|
|
(unaudited) | |
|
|
(unaudited) | |
|
(unaudited) | |
|
|
|
|
(in millions) | |
ASSETS |
Cash and cash equivalents
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Current assets, net
|
|
|
(7.5 |
) |
|
|
2.3, 2.4, 2.6 |
|
|
|
(1.0 |
) |
|
|
3.1 |
|
|
|
(8.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
(7.4 |
) |
|
|
|
|
|
|
(1.0 |
) |
|
|
|
|
|
|
(8.4 |
) |
|