10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended March 31, 2017 OR

[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from ____ to ____

Commission file number 001-13601

GEOSPACE TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Texas	76-0447780
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

7007 Pinemont Drive

Houston, Texas  77040-6601

(Address of Principal Executive Offices) (Zip Code)

(713) 986-4444

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    X    No

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

Yes    X    No

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

Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

YesNo    X

There were 13,440,566 shares of the Registrant’s Common Stock outstanding as of the close of business on April 30, 2017.

Table of Contents

	Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures about Market Risk	22
Item 4. Controls and Procedures	23
PART II. OTHER INFORMATION
Item 6. Exhibits	25

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

	March 31, 2017			September 30, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	19,307		$	10,262
Short-term investments		28,862			27,491
Trade accounts receivable, net		16,709			15,392
Current portion of notes receivable		1,890			1,533
Income tax receivable		483			13,290
Inventories, net		92,103			104,540
Prepaid expenses and other current assets		1,827			1,826
Total current assets		161,181			174,334
Rental equipment, net		24,485			30,973
Property, plant and equipment, net		44,484			44,732
Deferred income tax assets, net		247			216
Non-current notes receivable, net		427			1,817
Prepaid income taxes		1,843			2,620
Other assets		80			80
Total assets	$	232,747		$	254,772
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade	$	2,109		$	2,120
Accrued expenses and other current liabilities		5,301			7,849
Deferred revenue		166			174
Income tax payable		9			125
Total current liabilities		7,585			10,268
Deferred income tax liabilities		27			37
Total liabilities		7,612			10,305
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock		—			—
Common stock		134			133
Additional paid-in capital		80,846			77,967
Retained earnings		159,100			182,308
Accumulated other comprehensive loss		(14,945	)		(15,941	)
Total stockholders’ equity		225,135			244,467
Total liabilities and stockholders’ equity	$	232,747		$	254,772

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

3

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Revenue:
Products	$	14,775		$	10,106		$	25,072		$	21,858
Rental equipment		5,783			4,825			10,771			6,210
Total revenue		20,558			14,931			35,843			28,068
Cost of revenue:
Products		18,799			14,914			33,635			30,358
Rental equipment		4,317			4,611			8,093			8,706
Total cost of revenue		23,116			19,525			41,728			39,064
Gross profit (loss)		(2,558	)		(4,594	)		(5,885	)		(10,996	)
Operating expenses:
Selling, general and administrative expenses		5,026			5,617			10,120			11,191
Research and development expenses		3,412			3,510			6,784			7,115
Bad debt expense (recovery)		64			266			(418	)		(623	)
Total operating expenses		8,502			9,393			16,486			17,683
Loss from operations		(11,060	)		(13,987	)		(22,371	)		(28,679	)
Other income (expense):
Interest expense		(8	)		(4	)		(16	)		(11	)
Interest income		137			62			268			168
Foreign exchange losses, net		(215	)		679			(281	)		669
Other, net		(16	)		(18	)		(33	)		(34	)
Total other income (expense), net		(102	)		719			(62	)		792
Loss before income taxes		(11,162	)		(13,268	)		(22,433	)		(27,887	)
Income tax expense (benefit)		341			(2,303	)		775			(5,880	)
Net loss	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Loss per common share:
Basic	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)
Diluted	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)
Weighted average common shares outstanding:
Basic		13,146,330			13,049,696			13,120,286			13,037,069
Diluted		13,146,330			13,049,696			13,120,286			13,037,069

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

4

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Net loss	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Other comprehensive loss
Change in unrealized gains (losses) on available-for-sale securities, net of tax		11			31			(51	)		5
Foreign currency translation adjustments		1,353			(366	)		1,047			(1,588	)
Total other comprehensive income (loss)		1,364			(335	)		996			(1,583	)
Total comprehensive loss	$	(10,139	)	$	(11,300	)	$	(22,212	)	$	(23,590	)

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

5

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended
	March 31, 2017			March 31, 2016
Cash flows from operating activities:
Net loss	$	(23,208	)	$	(22,007	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income tax expense (benefit)		(14	)		2,786
Rental equipment depreciation		6,905			7,651
Property, plant and equipment depreciation		2,596			2,684
Accretion of discounts on short-term investments		30			70
Stock-based compensation expense		2,844			2,660
Bad debt recovery		(418	)		(623	)
Inventory obsolescence expense		8,397			4,818
Gross (profit) loss from sale of used rental equipment		(1,531	)		60
Realized loss on short-term investments		2			3
Excess tax expense from stock-based compensation		—			(1,390	)
Effects of changes in operating assets and liabilities:
Trade accounts and notes receivable		244			4,599
Income tax receivable		12,831			9,918
Inventories		1,176			2,212
Prepaid expenses and other current assets		39			(2,608	)
Prepaid income taxes		778			712
Accounts payable trade		(12	)		(2,567	)
Accrued expenses and other		(2,251	)		(4,534	)
Deferred revenue		(11	)		(110	)
Income tax payable		(117	)		73
Net cash provided by operating activities		8,280			4,407
Cash flows from investing activities:
Purchase of property, plant and equipment		(343	)		(822	)
Investment in rental equipment		(140	)		(468	)
Proceeds from the sale of used rental equipment		2,439			197
Purchases of short-term investments		(5,251	)		(5,602	)
Proceeds from the sale of short-term investments		3,814			8,753
Net cash provided by investing activities		519			2,058
Cash flows from financing activities:
Proceeds from the exercise of stock options		50			—
Net cash provided by financing activities		50			—
Effect of exchange rate changes on cash		196			(341	)
Increase in cash and cash equivalents		9,045			6,124
Cash and cash equivalents, beginning of fiscal year		10,262			22,314
Cash and cash equivalents, end of fiscal period	$	19,307		$	28,438

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

6

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.   Significant Accounting Policies

Basis of Presentation

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2016 was derived from the Company’s audited consolidated financial statements at that date.  The consolidated balance sheet at March 31, 2017 and the consolidated statements of operations, comprehensive loss and cash flows for the three and six months ended March 31, 2017 and 2016, were prepared by the Company without audit.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made.  The results of operations for the three and six months ended March 31, 2017 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to the rules of the Securities and Exchange Commission.  The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2016.

Reclassifications

Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation.  Such reclassifications had no effect on net loss, stockholders’ equity or cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes.  The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements.  The Company continually evaluates its estimates, including those related to bad debt reserves, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, impairment of long-lived assets and deferred income tax assets.  The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities which are not readily available from other sources.  Actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

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

Short-term Investments

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

Inventories

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

7

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company periodically reviews the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder its ability to recover its investment in such inventories.  The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates.  Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s inventory investment will not be realized in its operating activities.

Impairment of Long-lived Assets

The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable.  The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets.  If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value, which is measured by the expected future cash flows.  At March 31, 2017, no events or changes in circumstances were determined indicating the carrying amount of any of its assets or groups of assets may not be recoverable.

Revenue Recognition – Products and Services

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

Research and Development Costs

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

Product Warranties

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

Balance at October 1, 2016	$	392
Accruals for warranties issued during the period		439
Settlements made (in cash or in kind) during the period		(295	)
Balance at March 31, 2017	$	536

Recent Accounting Pronouncements

In November 2016 the Financial Accounting Standards Board (“FASB”) issued guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and should

8

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

be applied on a retrospective transition basis.  The Company has historically not held restricted cash balances and, therefore, does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.  However, upon adoption of this guidance, the Company will make any necessary changes to present restricted cash balances in accordance with the guidance.  

In October 2016 the FASB issued guidance which eliminates the exception of recognizing, at the time of transfer, current and deferred income taxes for intercompany profits on intra-entity asset transfers other than inventory.  This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and applied on a modified retrospective transition basis.  Since early adoption is permitted, the Company is planning to adopt this guidance in its first quarter of its fiscal year ending September 30, 2018.  Under current guidance, the Company maintains a non-current prepaid income tax asset on its consolidated balance sheets representing income taxes paid in the U.S. on profits realized from the sale of rental equipment to its foreign subsidiaries.  As this rental equipment is depreciated, the prepaid tax is recognized as a current income tax expense in the Company’s consolidated statement of operations.  Upon adoption of the new guidance, the Company will be required to recognize a deferred tax asset related to the intercompany profits realized on the sale of assets to its subsidiaries; however, profits realized from the intercompany sale of inventories will continue to be accounted for as a prepaid income tax asset under the current guidance.  The resulting deferred tax asset will be recognized at the jurisdictional tax rate of the subsidiary purchasing the asset.  Any differences between the subsidiary’s jurisdictional tax rate and the seller’s tax rate with regard to the intercompany profit will be charged to seller’s current income tax expense at the time of the sale.  Since the current U.S. income tax rate is substantially higher than the current income tax rates applicable to each of the Company’s foreign subsidiaries, adoption of the new guidance could have a significant impact on the Company’s provision for income taxes in future periods if significant amounts of rental equipment are sold by the Company’s U.S. subsidiaries to its foreign subsidiaries.  

In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in current U.S. generally accepted accounting principles (“GAAP”).  The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments.  For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities.  The standard is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods.  Early adoption for a fiscal year beginning after December 15, 2018 is permitted.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period.  The Company expects to adopt this standard during the first quarter of its fiscal year ending September 30, 2021 and is currently evaluating the impact of this new guidance on its consolidated financial statements.    

In March 2016, the FASB issued guidance to simplify key components of employee share-based payment accounting.  The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period.  The Company expects to adopt this guidance in the first quarter of its fiscal year ending September 30, 2018.  The new guidance simplifies several aspects of the accounting for share-based payment transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification of excess tax benefits from share-based payments on the statement of cash flows.  Under the current standard, the Company is required to track and record as a component of additional paid-in capital the tax impact of cumulative windfalls, net of any shortfalls, which result from excess tax benefits from share-based payments. As a result, the impact of net windfalls has not historically affected the Company’s provision for income taxes or its effective income tax rate.  Upon adoption of the new standard, the Company will record a cumulative-effect adjustment to retained earnings for the basis of historical net windfalls residing in its additional paid in capital account. In addition, the Company will no longer track windfalls or shortfalls resulting from share-based payments since all future windfalls and shortfalls will be recorded as a component of the Company’s current provision for income taxes.  Depending on the magnitude of future windfalls or shortfalls, this change could significantly affect the Company’s provision for income taxes in a positive or negative direction.

In February 2016, the FASB issued guidance requiring a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months.  Consistent with current GAAP, the recognition, measurement and presentation of expense and cash flows arising from a lease by a lessee primarily will depend on its classification of the lease as a finance or operating lease.  However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will also require operating leases of the lessee to be recognized on the balance sheet if the operating lease term is more than 12 months.  The guidance also requires disclosures to help investors and other financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases.  These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.  The guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2018 and is to be applied using the modified retrospective approach.  The Company expects to adopt this standard in its first quarter of its fiscal year ending September 30, 2020.  The Company currently is not a lessee under any lease agreements with a term longer than one year.  The Company is routinely a lessor in its rental contracts with customers; however,

9

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

these rental agreements are short-term in nature and would be treated as operating leases under the new guidance.  As a result, the Company does not expect the adoption of this guidance to have a material effect upon its consolidated financial statements.  

In July 2015, the FASB issued guidance requiring management to measure inventory at the lower of cost or net realizable value.  Under the new guidance, net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period and should be applied retrospectively, with early application permitted.  The Company expects to adopt this standard in its first quarter of its fiscal year ending September 30, 2018.  Since the Company is a manufacturer and the nature of its inventory is generally unique to its designs and applications thus preventing the gathering of relevant external market data, its practice for calculating net realizable value under the current standard is consistent with the practice prescribed by the new guidance. Therefore, the Company does not expect the adoption of the new guidance to have a material effect upon its consolidated financial statements.  

In August 2014, the FASB issued guidance requiring management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern and to provide disclosures in certain circumstances.  The new guidance was issued to reduce diversity in the timing and content of footnote disclosures.  This guidance is effective for fiscal years ending after December 15, 2016 and interim reporting periods thereafter.  The Company’s management will begin evaluating any potential events and conditions which raise substantial doubt about the Company’s ability to continue as a going concern upon adoption on September 30, 2017.  The adoption of this guidance may result in additional disclosures to our consolidated financial statements.

In May 2014, the FASB issued guidance requiring entities to recognize revenue from contracts with customers by applying a five-step model in accordance with the core principle to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In addition, this guidance specifies the accounting for some costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition.  In August 2015, the FASB issued guidance deferring the effective date of this guidance to annual periods beginning after December 15, 2017, including interim reporting periods therein.  Entities have the option to adopt this guidance either retrospectively or through a modified retrospective transition method.  This new standard will supersede existing revenue guidance and affect the Company's revenue recognition process and the presentations or disclosures of the Company's consolidated financial statements and footnotes.  The Company recognizes revenue through three primary transactions types:  (i) the immediate recognition of revenue through the routine delivery of products to its customers, (ii) the rental of equipment to its customers through short-term operating leases, and (iii) the recognition of revenue utilizing the percentage of completion method for the delivery of complex products requiring long manufacturing times and substantial engineering resources.  While the Company does not expect the new guidance to impact its routine product sales or rental contracts, the new guidance could impact the manner in which it recognizes revenue using the percentage of completion method. The Company expects to adopt this standard in the first quarter of its fiscal year ending September 30, 2019 and is in the early stages of evaluating the standard including the method of adoption to determine the impact on its consolidated financial statements.  Further disclosures around policy changes or quantitative effects will be made as the Company moves closer to the adoption of this standard.

2.   Short-term Investments

	As of March 31, 2017 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	18,767	$	—	$	(44	)	$	18,723
Government bonds		10,165		—		(26	)		10,139
Total	$	28,932	$	—	$	(70	)	$	28,862

10

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

	As of September 30, 2016 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	17,342	$	—	$	(19	)	$	17,323
Government bonds		10,169		—		(1	)		10,168
Total	$	27,511	$	—	$	(20	)	$	27,491

3.   Derivative Financial Instruments

At March 31, 2017 and September 30, 2016, the Company’s Canadian subsidiary had $27.1 million of Canadian dollar denominated intercompany accounts payable owed to one of the Company’s U.S. subsidiaries.  In order to mitigate its exposure to movements in foreign currency rates between the U.S. dollar and Canadian dollar, the Company routinely enters into foreign currency forward contracts to hedge a portion of its exposure to changes in the value of the Canadian dollar.  Approximately $2.9 million of these Canadian dollar denominated intercompany accounts payable are considered by management to be of a short-term nature whereby the appreciation or devaluation of the Canadian dollar against the U.S. dollar will result in a gain or loss, respectively, to the consolidated statement of operations.  The Company considers the remaining $24.2 million Canadian dollar denominated intercompany accounts payable to be of a long-term nature whereby settlement is not planned or anticipated in the foreseeable future; therefore, any resulting foreign exchange gains and losses are reported in the consolidated balance sheets as a component of other comprehensive income in accordance with ASC 830 “Foreign Currency Matters”.  On March 31, 2017, the Company entered into a $3.0 million Canadian dollar 90-day hedge contract with a United States bank to hedge a portion of its short-term Canadian dollar foreign exchange rate exposure.  This contract reduces the impact on cash flows from movements in the Canadian dollar/U.S. dollar currency exchange rate, but has not been designated as a hedge for accounting purposes.

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

Derivative Instrument	Location	March 31, 2017		September 30, 2016
Foreign Currency Forward Contracts	Prepaid Expenses and Other Current Assets	$	—		$	5

The following table summarizes the Company’s gains on derivative instruments in the consolidated statements of operations for the three and six month periods ended March 31, 2017 and 2016 (in thousands):

		Three Months Ended						Six Months Ended
Derivative Instrument	Location of Gain on Derivative Instrument	March 31, 2017			March 31, 2016			March 31, 2017		March 31, 2016
Foreign Currency Forward Contracts	Other Income (Expense)	$	(44	)	$	(88	)	$	28	$	28

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

4.   Fair Value of Financial Instruments

At March 31, 2017, the Company’s financial instruments included cash and cash equivalents, short-term investments, foreign currency forward contract, trade and notes receivables and accounts payable.  Due to the short-term maturities of cash and cash equivalents, trade and other receivables and accounts payable, the carrying amounts approximate fair value on the respective balance sheet dates.

11

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

	As of March 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments
Corporate bonds	$	18,723	$	—	$	—	$	18,723
Government bonds		10,139		—		—		10,139
Total	$	28,862	$	—	$	—	$	28,862

	As of September 30, 2016
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments
Corporate bonds	$	17,323	$	—	$	—	$	17,323
Government bonds		10,168		—		—	$	10,168
Foreign currency forward contract		—		5		—		5
Total	$	27,491	$	5	$	—	$	27,496

5.   Accounts and Notes Receivable

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

	March 31, 2017			September 30, 2016
Trade accounts receivable	$	18,118		$	17,841
Allowance for doubtful accounts		(1,409	)		(2,449	)
	$	16,709		$	15,392

The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses.  The Company determines the allowance based upon historical experience and a current review of its balances.  Accounts receivable balances are charged off against the allowance whenever it is probable that the receivable will not be recoverable.

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

	March 31, 2017			September 30, 2016
Notes receivable	$	3,337		$	3,850
Allowance for doubtful notes		(1,020	)		(500	)
		2,317			3,350
Less current portion		1,890			1,533
Non-current notes receivable	$	427		$	1,817

12

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

6.   Inventories

Inventories consist of the following (in thousands):

	March 31, 2017			September 30, 2016
Finished goods	$	34,929		$	40,260
Work in process		2,943			8,272
Raw material		71,646			65,682
Obsolescence reserve		(17,415	)		(9,674	)
	$	92,103		$	104,540

During the six months ended March 31, 2017 and 2016, the Company made non-cash inventory transfers of $1.0 million and $1.7 million, respectively, to rental equipment and $1.9 million and $0.1 million, respectively, to property, plant and equipment.  Raw materials include semi-finished goods and component parts totaling $48.2 million and $43.8 million, respectively, at March 31, 2017 and September 30, 2016.

7.   Long-Term Debt

The Company had no long-term debt outstanding at March 31, 2017 and September 30, 2016.

On March 2, 2011, the Company entered into a credit agreement with Frost Bank with borrowing availability of $50.0 million (the “Credit Agreement”).  On May 4, 2015, the Company amended the Credit Agreement which reduced its borrowing availability to $30.0 million with amounts available for borrowing determined by a borrowing base.  Under the amendments to the Credit Agreement, the borrowing base is determined based upon certain of the Company’s and its U.S. subsidiaries’ assets which include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii) 25% of certain inventories (excluding work-in-process inventories).  As of March 31, 2017, the Company’s borrowing base was $30.7 million resulting in borrowing availability of $30.0 million less $0.4 million of outstanding letters of credit.  The Company’s domestic subsidiaries have guaranteed the obligations of the Company under the Credit Agreement and such subsidiaries have secured their obligations under such guarantees by the pledge of substantially all of the assets of such subsidiaries, except real property assets.  The Credit Agreement expires on May 4, 2018 and all borrowed funds are due and payable at that time.  The Company is required to make monthly interest payments on borrowed funds.  The Credit Agreement as amended limits the incurrence of additional indebtedness, requires the maintenance of a single financial ratio that compares certain of the Company’s assets to certain of its liabilities, restricts the Company and its subsidiaries’ ability to pay cash dividends and contains other covenants customary in agreements of this type.  The interest rate for borrowings under the Credit Agreement as amended is based on the Wall Street Journal prime rate, which was 4.00% at March 31, 2017.  At March 31, 2017, the Company was in compliance with all covenants under the Credit Agreement.

8.   Accumulated Other Comprehensive Loss

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

	Unrealized Losses on Available-for-Sale Securities			Foreign Currency Translation Adjustments			Totals
Balance at October 1, 2016	$	(15	)	$	(15,926	)	$	(15,941	)
Changes in unrealized losses on available-for-sale    securities		(51	)		—			(51	)
Foreign currency translation adjustments		—			1,047			1,047
Balance at March 31, 2017	$	(66	)	$	(14,879	)	$	(14,945	)

9.   Stock-Based Compensation

During the six months ended March 31, 2017, the Company issued 109,500 shares of restricted stock under its 2014 Long Term Incentive Plan, as amended (the “Plan”).  The weighted average grant date fair value of the restricted stock was $21.12 per share.  The grant date fair value of these awards was $2.3 million, which will be charged to expense over the next four years as the restrictions lapse.  Compensation expense for restricted stock awards was determined based on the closing market price of the

13

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Company’s stock on the date of grant applied to the total number of shares that are anticipated to fully vest.  Recipients of restricted stock awards are entitled to vote such shares and are entitled to dividends, if paid.

During the six months ended March 31, 2017, the Company also issued 51,300 nonqualified stock options under the Plan.  The options issued are based upon three tiers, each with separate service based vesting conditions and market conditions that affect exercisability.  Market based conditions are based on achieving a specified market return on the Company’s stock price.  Compensation expense for the nonqualified stock option awards was determined based on a Monte Carlo simulation, which incorporates the possibility that the market conditions may not be satisfied.  The weighted average grant date fair value of the options issued was determined to be $9.35 per option resulting in unrecognized compensation costs of $0.5 million, which will be charged to expense over the requisite service period of the options, ranging from 18 to 36 months.

As of March 31, 2017, the Company had unrecognized compensation expense of $6.5 million relating to restricted stock awards.  This unrecognized compensation expense is expected to be recognized over a weighted average period of 2.8 years.  In addition, the Company had $0.5 million of unrecognized compensation expense related to nonqualified stock option awards which is expected to be recognized over a weighted average period of 1.7 years.

As of March 31, 2017, a total of 293,500 shares of restricted stock and 206,300 nonqualified stock options shares were outstanding.

10.   Loss Per Common Share

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

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Net loss	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Less: Income allocable to unvested restricted stock		—			—			—			—
Loss available to common shareholders		(11,503	)		(10,965	)		(23,208	)		(22,007	)
Reallocation of participating earnings		—			—			—			—
Loss attributable to common shareholders for diluted    earnings per share	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Weighted average number of common share equivalents:
Common shares used in basic loss per share		13,146,330			13,049,696			13,120,286			13,037,069
Common share equivalents outstanding related to    stock options		—			—			—			—
Total weighted average common shares and common    share equivalents used in diluted loss per share		13,146,330			13,049,696			13,120,286			13,037,069
Loss per share:
Basic	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)
Diluted	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)

14

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the calculation of diluted loss per share for the three and six months ended March 31, 2017 and 2016,206,300stock options and 159,000 stock options, respectively, were excluded in the calculation of weighted average shares outstanding as a result of their impact being antidilutive.

11.   Commitments and Contingencies

The Company is involved in various pending or potential legal actions in the ordinary course of our business.  Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty of litigation.  Management is not aware of any material pending or known to be contemplated legal or government proceedings against the Company.

12.   Segment Information

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

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

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Revenue:
Seismic	$	13,944		$	8,501		$	23,350		$	16,075
Non-Seismic		6,468			6,287			12,204			11,720
Corporate		146			143			289			273
Total	$	20,558		$	14,931		$	35,843		$	28,068
Income (loss) from operations:
Seismic	$	(9,156	)	$	(11,834	)	$	(18,609	)	$	(23,969	)
Non-Seismic		1,052			848			2,104			1,410
Corporate		(2,956	)		(3,001	)		(5,866	)		(6,120	)
Total	$	(11,060	)	$	(13,987	)	$	(22,371	)	$	(28,679	)

13.   Income Taxes

The Company’s effective tax rates for the three months ended March 31, 2017 and 2016 were (3.1)% and (17.4)%, respectively.  The Company’s effective tax rates for the six months ended March 31, 2017 and 2016 were (3.4)% and (21.1)%, respectively.      The United States statutory tax rate for the same periods was 35%.  Compared to the United States statutory rate, the lower effective tax rates for the three and six months ended March 31, 2016 resulted primarily from a valuation allowance against the Company’s Canadian subsidiary’s net deferred tax assets.  The lower effective tax rates for the three and six months ended March 31, 2017 primarily resulted from the Company’s inability to recognize deferred tax assets and other tax benefits in connection with the losses it incurred in the United States and Canada due to the uncertainty surrounding the Company’s ability to utilize such deferred tax assets in the future to offset taxable income.

15

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

The following is management’s discussion and analysis of the major elements of our consolidated financial statements.  You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Quarterly Report on Form 10-Q and our annual report on Form 10-K for the year ended September 30, 2016.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein, if any, contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating” or similar words.  Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information.  Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the adoption and sale of our products in various geographic regions, anticipated levels of capital expenditures and the sources of funding therefore, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves.  These forward-looking statements reflect our best judgment about future events and trends based on the information currently available to us.  However, there will likely be events in the future that we are not able to predict or control.  The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as well as other cautionary language in such Annual Report and this Quarterly Report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.  Such examples include, but are not limited to, decreases in commodity price levels, which could reduce demand for our products, the failure of our products to achieve market acceptance, despite substantial investment by us, our sensitivity to short term backlog, delayed; or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, and bad debt write-offs associated with customer accounts.  The occurrence of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations.  We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

Business Overview

Geospace Technologies Corporation is a Texas corporation originally incorporated in Delaware on September 27, 1994.  Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries.

We design and manufacture instruments and equipment used in the acquisition and processing of seismic data as well as in the characterization and monitoring of producing oil and gas reservoirs.  Demand for our products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.  For more information, please refer to the risks discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

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

Available Information

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

16

Products and Product Development

Seismic Products

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

Traditional Products

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

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

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

Wireless Products

Our land-based wireless (or nodal) seismic data acquisition system is called the GSX.  Each GSX station operates independently and therefore can be deployed in virtually unlimited channel configurations.  Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each GSX station operates as an independent data collection system.  As a result, our GSX system requires less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight and ease of operation.  Our GSX system is designed into configurations ranging from one to four channels per station.  Since its introduction in 2008 and through March 31, 2017, we have sold 343,000 GSX channels and we have 127,000 GSX channels in our rental fleet.  We do not expect to expand our GSX rental fleet in the foreseeable future.

We have also developed a marine-based wireless seismic data acquisition system called the OBX.  Similar to our GSX land-based wireless system, the marine OBX system can be deployed in virtually unlimited channel configurations and does not require interconnecting cables between each station.  Our deep water versions of the OBX system can be deployed in depths of up to 3,450 meters.  Through March 31, 2017, we have sold 490 OBX stations and we have 5,600 OBX stations in our rental fleet.  In the absence of additional customer orders for OBX systems, we do not expect to make any cash investments into our OBX rental fleet during fiscal year 2017.

Reservoir Products

Seismic surveys repeated over selected time intervals show dynamic changes within the reservoir and can be used to monitor the effects of oil and gas production.  In this regard, we have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields.  We also produce a retrievable version of our ocean-

17

bottom system for use on fields where permanently installed systems are not appropriate or economical.  Utilizing these tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

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

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

We have not delivered nor did we receive orders for any permanent reservoir monitoring systems during fiscal year 2016 or during the first six months of fiscal year 2017.

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

Non-Seismic Products

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

Our non-seismic products include electronic pre-press products that employ direct thermal imaging and digital inkjet printing technologies targeted at the commercial graphics, industrial graphics, textile and flexographic printing industries.  Our other non-seismic products consist of (i) sensors and tools for vibration monitoring, mine safety application and earthquake detection, (ii) cables for power and communication for the offshore oil and gas and offshore construction industries, (iii) water meter cables and connectors, and (iv) other specialty industrial cable and connector products.

18

Consolidated Results of Operations

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

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Seismic
Traditional exploration product revenue	$	3,637		$	3,205		$	6,207		$	8,192
Wireless exploration product revenue		9,601			4,714			15,924			6,604
Reservoir product revenue		706			582			1,219			1,279
Total revenue		13,944			8,501			23,350			16,075
Operating loss		(9,156	)		(11,834	)		(18,609	)		(23,969	)
Non-Seismic
Industrial product revenue		3,301			3,372			6,380			6,096
Imaging product revenue		3,167			2,915			5,824			5,624
Total revenue		6,468			6,287			12,204			11,720
Operating income		1,052			848			2,104			1,410
Corporate
Revenue		146			143			289			273
Operating loss		(2,956	)		(3,001	)		(5,866	)		(6,120	)
Consolidated Totals
Revenue		20,558			14,931			35,843			28,068
Operating loss		(11,060	)		(13,987	)		(22,371	)		(28,679	)

Overview

Early in calendar year 2014, we began to experience a softening in the demand for our seismic exploration products, particularly in North America, as capital budgets for oil and gas producers were trending away from exploration-focused activities toward production and exploitation activities.  During this period oil production in North America’s unconventional shale reservoirs increased, as did oil production from other non-OPEC countries, resulting in an oversupply of crude oil in the world market.  Market prices for a barrel of crude oil declined from over $100 in July 2014 to approximately $27 in January 2016, and have recovered somewhat to approximately $50 today.  With the decline in oil and natural gas prices, oil and gas exploration and production companies experienced a significant reduction in cash flows, which resulted in sharp reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic activities.  In addition, we have not received any orders for permanent reservoir monitoring systems since the Statoil Order was completed in April 2014.  We expect revenue from our seismic products, and in particular our traditional and wireless products, to remain low until crude oil prices stabilize at higher levels and exploration-focused industry conditions improve.  We expect these challenging industry conditions to continue to negatively impact the demand for our seismic products throughout fiscal year 2017.

In January 2016, in light of the decrease in demand for our seismic products, we initiated a program to further reduce our operating costs.  The program was designed to produce approximately $7 million of annualized cash savings.  The majority of savings were realized through a reduction of over 150 employees from our Houston-area workforce.  In connection with the workforce reduction, the Company incurred $1.0 million of termination costs in its second fiscal quarter ended March 31, 2016, which are recorded to both cost of goods sold and to operating expenses.  The remaining cost savings were realized through a facility consolidation as well as expense reductions in other areas.

Three and six months ended March 31, 2017 compared to the three and six months ended March 31, 2016

Consolidated revenue for the three months ended March 31, 2017, increased $5.6 million, or 37.7%, from the corresponding period of the prior fiscal year.  Consolidated revenue for the six months ended March 31, 2017 increased $7.8 million, or 27.7% from the corresponding period of the prior fiscal year.  The increase in revenue for the three and six months ended March 31, 2017 was primarily due to an increase in wireless exploration product sales and rental revenue in our seismic business segment.

Consolidated gross profit (loss) for the three months ended March 31, 2017 was a loss of ($2.6) million, compared to a loss of ($4.6) million for the corresponding period of prior fiscal year.  Consolidated gross profit (loss) for the six months ended March 31, 2017 was a loss of ($5.9) million, compared to a loss of ($11.0) million for the corresponding period of prior fiscal year.  The

19

improvement in gross profit (loss) for the three and six months ended March 31, 2017 was primarily the result of increased wireless product sales and rental revenue and, to a lesser extent, a decrease in manufacturing costs resulting from the Company’s workforce reduction in the second fiscal quarter of 2016.  These improvements were partially offset by an increase in inventory obsolescence expenses due to higher levels of slow-moving seismic inventories.  Until seismic product demand increases to historical norms, we expect our consolidated gross margins to remain low.

In light of current market conditions, we have evaluated the level of our seismic product inventories at March 31, 2017 and we continue to believe that those inventory balances far exceed levels considered appropriate for the current level of product demand.  We expect our seismic product inventory levels to continue to decline slowly throughout fiscal year 2017 and beyond.  During periods of excessive inventory levels, our policy has been, and will continue to be, to record higher obsolescence expense in our consolidated income statement as we experience reduced levels of inventory turnover and as our inventories continue to age.  If current market conditions continue, we expect to record additional inventory obsolescence expense in fiscal year 2017 and beyond until seismic product demand and resulting seismic inventory turnover returns to acceptable levels.

Consolidated operating expenses for the three months ended March 31, 2017 were $8.5 million, a decrease of $0.9 million, or 9.5%, from the corresponding period of the prior fiscal year.   Consolidated operating expenses for the six months ended March 31, 2017 were $16.5 million, a decrease $1.2 million, or 6.8%, from the corresponding period of the prior fiscal year. The decrease in operating expenses for the three and six months ended March 31, 2017 was primarily attributable to the Company’s cost reduction program implemented during the second fiscal quarter of 2016.

Consolidated other income (expense) for the three months ended March 31, 2017 was ($0.1) million, a decrease of $0.8 million from the corresponding period of the prior fiscal year.  Consolidated other income (expense) for the six months ended March 31, 2017 was ($0.1) million, a decrease of $0.9 million from the corresponding period of the prior fiscal year.  The decreases for both periods primarily resulted from foreign exchange losses attributable to U.S. dollar deposits held by our Russian subsidiary.

Consolidated income tax expense (benefit) for the three months ended March 31, 2017 was $0.3 million compared to ($2.3) million for the corresponding period of the prior fiscal year.  Consolidated income tax expense (benefit) for the six months ended March 31, 2017 was $0.8 million compared to ($5.9) million for the corresponding period of the prior fiscal year.  Our effective tax rates for the three months ended March 31, 2017 and 2016 were (3.1)% and (17.4)%, respectively.  Our effective tax rates for the six months ended March 31, 2017 and 2016 were (3.4)% and (21.1)%, respectively. The United States statutory tax rate for the same periods was 35%.  Compared to the United States statutory rate, the lower effective tax rates for the three and six months ended March 31, 2016 resulted primarily from a valuation allowance against the Company’s Canadian subsidiary’s net deferred tax assets.  The lower effective tax rates for the three and six months ended March 31, 2017 primarily resulted from our inability to recognize deferred tax assets and other tax benefits in connection with the losses we incurred in the United States and Canada due to the uncertainty surrounding our ability to utilize such deferred tax assets in the future to offset taxable income.

Seismic Products

Revenue

Revenue from our seismic products for the three months ended March 31, 2017 increased $5.4 million, or 64.0%, from the corresponding period of the prior fiscal year.  Revenue from our seismic products for the six months ended March 31, 2017 increased $7.3 million, or 45.3%, from the corresponding period of the prior fiscal year. The components of these increases include the following:

• Traditional Exploration Product Revenue– For the three months ended March 31, 2017, revenue from our traditional products increased $0.4 million, or 13.5% from the corresponding period of the prior fiscal year.  The increase was primarily due to higher demand for certain specialty sensor products.  For the six months ended March 31, 2017, revenue from our traditional products decreased $2.0 million, or 24.2% from the corresponding period of the prior fiscal year. The decrease primarily reflects lower demand for our sensor products due to lower seismic crew activities.

• Wireless Exploration Product Revenue – For the three months ended March 31, 2017, revenue from our wireless exploration products increased by $4.9 million, or 103.7%, from the corresponding period of the prior fiscal year.  For the six months ended March 31, 2017, revenue from our wireless exploration products increased by $9.3 million, or 141.1%, from the corresponding period of the prior fiscal year.  The increase for both periods was primarily due to higher demand for the sale of our GSX products and increased rental revenue attributable from our OBX products.  We concluded two OBX rental contracts in the second quarter ended March 31, 2017.  As a result, we expect lower levels of rental income during our third quarter ending June 30, 2017.

20

• Reservoir Product Revenue – For the three months ended March 31, 2017, revenue from our reservoir products increased $0.1 million, or 21.3%, from the corresponding period of the prior fiscal year.  The increase was primarily due to an increase in reservoir monitoring service revenue.For the six months ended March 31, 2017, revenue from our reservoir products decreased $0.1 million, or 4.7%, from the corresponding period of the prior fiscal year.The revenue decrease primarily resulted from lower borehole product rentals.  We have not delivered nor did we receive orders for any permanent reservoir monitoring systems during fiscal year 2016 or during the first six months of fiscal year 2017.  We continue to actively market these products to our customers.

Operating Loss

Our operating loss associated with revenue from our seismic products for the three months ended March 31, 2017 decreased $2.7 million, or 22.6%, from the corresponding period of the prior year.  Our operating loss associated with revenue from our seismic products for the six months ended March 31, 2017 decreased $5.4 million, or 22.4%, from the corresponding period of the prior year.  The decrease in operating loss for the three and six months ended March 31, 2017 was primarily due to (i) increased wireless product sales and rental revenue and (ii) lower manufacturing and operating costs due to workforce reductions initiated in the second fiscal quarter of 2016.  This decrease was partially offset by an increase in inventory obsolescence expense.

Non-Seismic Products

Revenue

Revenue from our non-seismic products for the three months ended March 31, 2017 increased $0.2 million, or 2.9%, from the corresponding period of the prior fiscal year.  Revenue from our non-seismic products for the six months ended March 31, 2017 increased $0.5 million, or 4.1%, from the corresponding period of the prior fiscal year.  The components of these increases included the following:

• Industrial Product Revenue – For the three months ended March 31, 2017, revenue from our industrial products decreased $0.1 million, or 2.1% from the corresponding period of the prior fiscal year.  We consider this small decrease to be normal and not indicative of any particular trend in product demand.  For the six months ended March 31, 2017, revenue from our industrial products increased $0.3 million, or 4.7% from the corresponding period of the prior fiscal year.  The increase was primarily attributable to higher demand for contract manufacturing services.  

• Imaging Product Revenue – For the three months ended March 31, 2017, revenue from our imaging products increase $0.3 million, or 8.6%, from the corresponding period of the prior fiscal year.  The increase reflects higher demand for our print head and film products.  For the six months ended March 31, 2017, revenue from our imaging products increased $0.2 million, or 3.6%, from the corresponding period of the prior fiscal year.  The increase was primarily due to higher demand for our thermal print head products.

Operating Income

Our operating income associated with sales of our non-seismic products for the three and six month periods ended March 31, 2017 increased by $0.2 million, or 24.1%, and $0.7 million, or 49.2%, respectively from the corresponding periods of the prior fiscal year.  The increase in operating income for both periods primarily resulted from increased product sales and improved gross profit margins.

Liquidity and Capital Resources

At March 31, 2017, we had approximately $19.3 million in cash and cash equivalents and $28.9 million in short-term investments.  For the six months ended March 31, 2017, we generated $8.3 million of cash in operating activities.  Sources of cash included our net loss of $23.2 million which was offset by (i) net non-cash charges of $20.3 million from deferred income taxes, depreciation, accretion, inventory obsolescence, stock-based compensation and bad debts, (ii) a $12.8 million decrease in income tax receivable resulting from a refund received in our second quarter, (iii) a $1.2 million decrease in inventories caused by a drawdown of our excess levels of finished goods due to increased product sales, (iv) a $0.2 million decrease in trade accounts and notes receivable resulting from collections and (v) a $0.8 million decrease in prepaid income taxes related to the depreciation of intercompany profits by our foreign subsidiary.   These sources of cash were partially offset by (i) a $2.3 million decrease in accrued and other expenses primarily due to the payment of calendar year 2016 property taxes and (ii) the removal of a $1.5 million gross profit from the sale of used rental equipment since such gross profit is reflected in the proceeds from the sale of used rental equipment under investing activities.  

21

For the six months ended March 31, 2017, we generatedcash of $0.5million from investing activities.  Proceeds of $2.4 million were generated from the sale of used rental equipment.  This source of cash was partially offset by(i) net disbursements of $1.4 million for the purchase of short-term investments, (ii) an investment of $0.3 million in property, plant and equipment and (iii) $0.1 million to expand our rental fleet.We estimate total fiscal year 2017 cash investments in property, plant and equipment will be approximately $3.5 million.  We expect fiscal year 2017 cash investments into our rental fleet to be minimal in the absence of any significant customer orders for OBX systems.  Our capital expenditures are expected to be funded from our cash on hand, internal cash flow or, if necessary, from borrowings under our credit agreement.

For the six months ended March 31, 2017, we generated cash proceeds of $0.1 million from financing activities from the exercise of stock options by our employees.

With the decline in oil and natural gas prices which have occurred since July 2014, exploration and production companies have experienced a significant reduction in cash flows resulting in sharp reductions in their capital spending budgets for exploration-focused activities, including seismic activities.  As a result, our seismic business segment has experienced a significant decline in product orders and associated revenue, resulting in substantial operating losses and the continued depletion of our cash balances.  Due to the uncertainty concerning a recovery of crude oil prices to levels capable of sustaining increased seismic exploration activities, we expect these depressed seismic market conditions to continue through fiscal year 2017.

Our available cash, cash equivalents and short-term investments totaled $48.2 million at March 31, 2017, including $7.1 million of cash and cash equivalents held by our foreign subsidiaries and branch offices.  We intend to permanently reinvest the undistributed earnings of our foreign subsidiaries.  If we were to repatriate the cash held by our foreign subsidiaries, we would be required to accrue and pay income taxes in the United States.

Our credit agreement allows for borrowings of up to $30.0 million with such amounts available for borrowing determined by a borrowing base.  At March 31, 2017, we had no outstanding borrowings under the credit agreement and, after consideration of $0.4 million of outstanding letters of credit, our borrowing availability under the credit facility was $29.6 million.  At March 31, 2017, we were in compliance with all covenants under the credit agreement, and we expect to remain in compliance with all covenants throughout fiscal year 2017.  We currently do not anticipate the need to borrow from the credit agreement during fiscal year 2017, however, we can make no assurance that we will not do so.

In March 2017, we received a $12.8 million income tax refund from the U.S. Department of Treasury.  The refund was a result of the significant tax losses we experienced in fiscal year 2016 which we elected to carryback to our fiscal year 2014 U.S. tax return to recoup taxes previously paid.  In addition, we expect to receive an additional $0.3 million income tax refund from the U.S. Department of Treasury later in fiscal year 2017. In March 2016, we received an $18.3 million income tax refund as result of our pretax loss in fiscal year 2015, which we elected to carryback to our fiscal year 2013 U.S. tax return.  For U.S. income tax purposes, we are now in a loss carryforward position in regards to our fiscal year 2017 tax losses.  As a result, we are not able to receive any additional U.S. federal income tax refunds in future years.  The tax refunds we received in fiscal years 2016 and 2017 have been significant contributors to our overall liquidity.  In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operating results, including liquidating short-term investments, executed rental contracts, available borrowings under our credit agreement, leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us.  However, currently we believe that our cash and short-term investment balances will be sufficient to finance our operating losses and planned capital expenditures for the next twelve months.

Critical Accounting Policies

During the six months ended March 31, 2017, there has been no material change to our critical accounting policies discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

Recent Accounting Pronouncements

Please refer to Note 1 to our consolidated financial statements contained in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

We have market risk relative to our short-term investments, foreign currency rates and interest rates.  We do not engage in commodity or commodity derivative instrument purchase or sales transactions.  Because of the inherent unpredictability of foreign currency rates and interest rates, as well as other factors, actual results could differ materially from those projected in this Item.

22

Foreign Currency and Operations Risk

One of our wholly-owned subsidiaries, Geospace Technologies Eurasia, is located in the Russian Federation.  In addition, we operate a branch office, Geospace Technologies Sucursal Sudamericana, in Colombia.  Our financial results for these entities may be affected by factors such as changes in foreign currency exchange rates, weak economic conditions or changes in the political climate.  Our consolidated balance sheet at March 31, 2017 reflected approximately USD $6.7 million and USD $0.2 million of foreign currency denominated net working capital related to our Russian and Colombian operations, respectively.  Both of these entities receive a portion of their revenue and pay a majority of their expenses primarily in their local currency.  To the extent that transactions of these entities are settled in their local currency, a devaluation of these currencies versus the U.S. dollar could reduce any contribution from these entities to our consolidated results of operations and total comprehensive income as reported in U.S. dollars.  We do not hedge the market risk with respect to our operations in these countries; therefore, such risk is a general and unpredictable risk of future disruptions in the valuation of such currencies versus U.S. dollars to the extent such disruptions result in any reduced valuation of these foreign entities’ net working capital or future contributions to our consolidated results of operations.  At March 31, 2017, the foreign exchange rate for $1.00 (one U.S. dollar) was equal to approximately 56.4 Russian Rubles and 2,893 Colombian Pesos, respectively.  If the value of the U.S. dollar were to strengthen by ten percent against these foreign currencies, our working capital in the Russian Federation and in Colombia would decline by USD $0.7 million and USD $17,000, respectively.

Foreign Currency Intercompany Accounts and Notes Receivable

From time to time, we provide access to capital to our foreign subsidiaries through U.S. dollar denominated interest bearing promissory notes.  Such funds are generally used by our foreign subsidiaries to purchase capital assets and for general working capital needs.  In addition, we sell products to our foreign subsidiaries on trade credit terms in both U.S. dollars and in the subsidiary’s local currency.  At March 31, 2017, we had outstanding Canadian-dollar denominated intercompany accounts receivable of CAN $27.1 million.  Approximately CAN $2.9 million of these intercompany receivables are considered by management to be of a short-term nature whereby the appreciation or devaluation of the Canadian dollar against the U.S. dollar will result in a gain or loss, respectively, to our consolidated statement of operations.  The Company considers the remaining CAN $24.2 million of the intercompany receivable to be of a long-term nature whereby settlement is not planned or anticipated in the foreseeable future; therefore, any resulting foreign exchange gains and losses are reported in the consolidated balance sheets as a component of other comprehensive income in accordance with ASC 830 “Foreign Currency Matters”.  At March 31, 2017, the foreign exchange rate for USD $1.00 was equal to approximately CAN $1.33.  In March 2017, we entered into a CAN $3.0 million 90-day hedge agreement with a United States bank to hedge a portion of our short-term Canadian dollar foreign exchange rate exposure, resulting in an over-hedged position of approximately CAN $0.1 million.  To the extent our over-hedged position remains, if the U.S. dollar exchange rate were to weaken by ten percent against the Canadian dollar, we would recognize a foreign exchange loss of USD $6,000 in our consolidated financial statements.

Floating Interest Rate Risk

Our credit agreement contains a floating interest rate which subjects us to the risk of increased interest costs associated with any upward movements in bank market interest rates.  Under our credit agreement our borrowing interest rate is the Wall Street Journal prime rate, which was 4.00% at March 31, 2017.  As of March 31, 2017 and September 30, 2016, there were no borrowings outstanding under our credit agreement.

Item 4.   Controls and Procedures

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

In connection with the preparation of this Quarterly Report on Form 10-Q, the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the CEO and CFO, as of March 31, 2017, of the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.  Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2017.

23

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

24

PART II - OTHER INFORMATION

Item 6.   Exhibits

The following exhibits are filed with this Report on Form 10-Q or are incorporated by reference

3.1	Amended and Restated Certificate of Formation of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 8, 2015).
3.2	Bylaws of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed April 17, 2015).
31.1	Certification of the Company's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Company's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Company's Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Company's Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive data file.

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GEOSPACE TECHNOLOGIES CORPORATION
Date:	May 5, 2017		By:	/s/ Walter R. Wheeler
				Walter R. Wheeler, President
				and Chief Executive Officer
				(duly authorized officer)

Date:	May 5, 2017	By:	/s/ Thomas T. McEntire
			Thomas T. McEntire, Vice President,
			Chief Financial Officer and Secretary
			(principal financial officer)

26

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Walter R. Wheeler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Geospace Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 5, 2017
			/s/ Walter R. Wheeler
	Name:	Walter R. Wheeler
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Thomas T. McEntire, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Geospace Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 5, 2017
			/s/ Thomas T. McEntire
	Name:	Thomas T. McEntire
	Title:	Vice President, Chief Financial Officer and Secretary

EX-32.1

Exhibit 32.1

Informational Addendum to Report on Form 10-Q

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Not Filed Pursuant to the Securities Exchange Act of 1934

The undersigned President and Chief Executive Officer of Geospace Technologies Corporation does hereby certify as follows:

Solely for the purpose of meeting the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and solely to the extent this certification may be applicable to this Report on Form 10-Q, the undersigned hereby certifies that this Report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in this Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Geospace Technologies Corporation.

/s/ Walter R. Wheeler
Name:	Walter R. Wheeler
Title:	President and Chief Executive Officer
May 5, 2017

EX-32.2

Exhibit 32.2

Informational Addendum to Report on Form 10-Q

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Not Filed Pursuant to the Securities Exchange Act of 1934

The undersigned Vice President, Chief Financial Officer and Secretary of Geospace Technologies Corporation does hereby certify as follows:

Solely for the purpose of meeting the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and solely to the extent this certification may be applicable to this Report on Form 10-Q, the undersigned hereby certifies that this Report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in this Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Geospace Technologies Corporation.

/s/ Thomas T. McEntire
Name:	Thomas T. McEntire
Title:	Vice President, Chief Financial Officer and Secretary
May 5, 2017

XML

Document and Entity Information - shares	6 Months Ended
	Mar. 31, 2017	Apr. 30, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	GEOS
Entity Registrant Name	GEOSPACE TECHNOLOGIES CORP
Entity Central Index Key	0001001115
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		13,440,566

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Current assets:
Cash and cash equivalents	$ 19,307	$ 10,262
Short-term investments	28,862	27,491
Trade accounts receivable, net	16,709	15,392
Current portion of notes receivable	1,890	1,533
Income tax receivable	483	13,290
Inventories, net	92,103	104,540
Prepaid expenses and other current assets	1,827	1,826
Total current assets	161,181	174,334
Rental equipment, net	24,485	30,973
Property, plant and equipment, net	44,484	44,732
Deferred income tax assets, net	247	216
Non-current notes receivable, net	427	1,817
Prepaid income taxes	1,843	2,620
Other assets	80	80
Total assets	232,747	254,772
Current liabilities:
Accounts payable trade	2,109	2,120
Accrued expenses and other current liabilities	5,301	7,849
Deferred revenue	166	174
Income tax payable	9	125
Total current liabilities	7,585	10,268
Deferred income tax liabilities	27	37
Total liabilities	7,612	10,305
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock
Common stock	134	133
Additional paid-in capital	80,846	77,967
Retained earnings	159,100	182,308
Accumulated other comprehensive loss	(14,945)	(15,941)
Total stockholders’ equity	225,135	244,467
Total liabilities and stockholders’ equity	$ 232,747	$ 254,772

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Revenue:
Total revenue	$ 20,558	$ 14,931	$ 35,843	$ 28,068
Cost of revenue:
Total cost of revenue	23,116	19,525	41,728	39,064
Gross profit (loss)	(2,558)	(4,594)	(5,885)	(10,996)
Operating expenses:
Selling, general and administrative expenses	5,026	5,617	10,120	11,191
Research and development expenses	3,412	3,510	6,784	7,115
Bad debt expense (recovery)	64	266	(418)	(623)
Total operating expenses	8,502	9,393	16,486	17,683
Loss from operations	(11,060)	(13,987)	(22,371)	(28,679)
Other income (expense):
Interest expense	(8)	(4)	(16)	(11)
Interest income	137	62	268	168
Foreign exchange losses, net	(215)	679	(281)	669
Other, net	(16)	(18)	(33)	(34)
Total other income (expense), net	(102)	719	(62)	792
Loss before income taxes	(11,162)	(13,268)	(22,433)	(27,887)
Income tax expense (benefit)	341	(2,303)	775	(5,880)
Net loss	$ (11,503)	$ (10,965)	$ (23,208)	$ (22,007)
Loss per common share:
Basic	$ (0.88)	$ (0.84)	$ (1.77)	$ (1.69)
Diluted	$ (0.88)	$ (0.84)	$ (1.77)	$ (1.69)
Weighted average common shares outstanding:
Basic	13,146,330	13,049,696	13,120,286	13,037,069
Diluted	13,146,330	13,049,696	13,120,286	13,037,069
Products
Revenue:
Total revenue	$ 14,775	$ 10,106	$ 25,072	$ 21,858
Cost of revenue:
Total cost of revenue	18,799	14,914	33,635	30,358
Rental equipment
Revenue:
Total revenue	5,783	4,825	10,771	6,210
Cost of revenue:
Total cost of revenue	$ 4,317	$ 4,611	$ 8,093	$ 8,706

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (11,503)	$ (10,965)	$ (23,208)	$ (22,007)
Other comprehensive loss
Change in unrealized gains (losses) on available-for-sale securities, net of tax	11	31	(51)	5
Foreign currency translation adjustments	1,353	(366)	1,047	(1,588)
Total other comprehensive income (loss)	1,364	(335)	996	(1,583)
Total comprehensive loss	$ (10,139)	$ (11,300)	$ (22,212)	$ (23,590)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net loss	$ (23,208)	$ (22,007)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income tax expense (benefit)	(14)	2,786
Rental equipment depreciation	6,905	7,651
Property, plant and equipment depreciation	2,596	2,684
Accretion of discounts on short-term investments	30	70
Stock-based compensation expense	2,844	2,660
Bad debt recovery	(418)	(623)
Inventory obsolescence expense	8,397	4,818
Gross (profit) loss from sale of used rental equipment	(1,531)	60
Realized loss on short-term investments	2	3
Excess tax expense from stock-based compensation		(1,390)
Effects of changes in operating assets and liabilities:
Trade accounts and notes receivable	244	4,599
Income tax receivable	12,831	9,918
Inventories	1,176	2,212
Prepaid expenses and other current assets	39	(2,608)
Prepaid income taxes	778	712
Accounts payable trade	(12)	(2,567)
Accrued expenses and other	(2,251)	(4,534)
Deferred revenue	(11)	(110)
Income tax payable	(117)	73
Net cash provided by operating activities	8,280	4,407
Cash flows from investing activities:
Purchase of property, plant and equipment	(343)	(822)
Investment in rental equipment	(140)	(468)
Proceeds from the sale of used rental equipment	2,439	197
Purchases of short-term investments	(5,251)	(5,602)
Proceeds from the sale of short-term investments	3,814	8,753
Net cash provided by investing activities	519	2,058
Cash flows from financing activities:
Proceeds from the exercise of stock options	50
Net cash provided by financing activities	50
Effect of exchange rate changes on cash	196	(341)
Increase in cash and cash equivalents	9,045	6,124
Cash and cash equivalents, beginning of fiscal year	10,262	22,314
Cash and cash equivalents, end of fiscal period	$ 19,307	$ 28,438

XML

Significant Accounting Policies

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies

1.   Significant Accounting Policies

Basis of Presentation

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2016 was derived from the Company’s audited consolidated financial statements at that date.  The consolidated balance sheet at March 31, 2017 and the consolidated statements of operations, comprehensive loss and cash flows for the three and six months ended March 31, 2017 and 2016, were prepared by the Company without audit.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made.  The results of operations for the three and six months ended March 31, 2017 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to the rules of the Securities and Exchange Commission.  The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2016.

Reclassifications

Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation.  Such reclassifications had no effect on net loss, stockholders’ equity or cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes.  The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements.  The Company continually evaluates its estimates, including those related to bad debt reserves, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, impairment of long-lived assets and deferred income tax assets.  The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities which are not readily available from other sources.  Actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

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

Short-term Investments

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

Inventories

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

The Company periodically reviews the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder its ability to recover its investment in such inventories.  The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates.  Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s inventory investment will not be realized in its operating activities.

Impairment of Long-lived Assets

The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable.  The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets.  If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value, which is measured by the expected future cash flows.  At March 31, 2017, no events or changes in circumstances were determined indicating the carrying amount of any of its assets or groups of assets may not be recoverable.

Revenue Recognition – Products and Services

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

Research and Development Costs

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

Product Warranties

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

Balance at October 1, 2016	$	392
Accruals for warranties issued during the period		439
Settlements made (in cash or in kind) during the period		(295	)
Balance at March 31, 2017	$	536

Recent Accounting Pronouncements

In November 2016 the Financial Accounting Standards Board (“FASB”) issued guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and should be applied on a retrospective transition basis.  The Company has historically not held restricted cash balances and, therefore, does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.  However, upon adoption of this guidance, the Company will make any necessary changes to present restricted cash balances in accordance with the guidance.  

In October 2016 the FASB issued guidance which eliminates the exception of recognizing, at the time of transfer, current and deferred income taxes for intercompany profits on intra-entity asset transfers other than inventory.  This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and applied on a modified retrospective transition basis.  Since early adoption is permitted, the Company is planning to adopt this guidance in its first quarter of its fiscal year ending September 30, 2018.  Under current guidance, the Company maintains a non-current prepaid income tax asset on its consolidated balance sheets representing income taxes paid in the U.S. on profits realized from the sale of rental equipment to its foreign subsidiaries.  As this rental equipment is depreciated, the prepaid tax is recognized as a current income tax expense in the Company’s consolidated statement of operations.  Upon adoption of the new guidance, the Company will be required to recognize a deferred tax asset related to the intercompany profits realized on the sale of assets to its subsidiaries; however, profits realized from the intercompany sale of inventories will continue to be accounted for as a prepaid income tax asset under the current guidance.  The resulting deferred tax asset will be recognized at the jurisdictional tax rate of the subsidiary purchasing the asset.  Any differences between the subsidiary’s jurisdictional tax rate and the seller’s tax rate with regard to the intercompany profit will be charged to seller’s current income tax expense at the time of the sale.  Since the current U.S. income tax rate is substantially higher than the current income tax rates applicable to each of the Company’s foreign subsidiaries, adoption of the new guidance could have a significant impact on the Company’s provision for income taxes in future periods if significant amounts of rental equipment are sold by the Company’s U.S. subsidiaries to its foreign subsidiaries.  

In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in current U.S. generally accepted accounting principles (“GAAP”).  The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments.  For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities.  The standard is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods.  Early adoption for a fiscal year beginning after December 15, 2018 is permitted.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period.  The Company expects to adopt this standard during the first quarter of its fiscal year ending September 30, 2021 and is currently evaluating the impact of this new guidance on its consolidated financial statements.    

In March 2016, the FASB issued guidance to simplify key components of employee share-based payment accounting.  The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period.  The Company expects to adopt this guidance in the first quarter of its fiscal year ending September 30, 2018.  The new guidance simplifies several aspects of the accounting for share-based payment transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification of excess tax benefits from share-based payments on the statement of cash flows.  Under the current standard, the Company is required to track and record as a component of additional paid-in capital the tax impact of cumulative windfalls, net of any shortfalls, which result from excess tax benefits from share-based payments. As a result, the impact of net windfalls has not historically affected the Company’s provision for income taxes or its effective income tax rate.  Upon adoption of the new standard, the Company will record a cumulative-effect adjustment to retained earnings for the basis of historical net windfalls residing in its additional paid in capital account. In addition, the Company will no longer track windfalls or shortfalls resulting from share-based payments since all future windfalls and shortfalls will be recorded as a component of the Company’s current provision for income taxes.  Depending on the magnitude of future windfalls or shortfalls, this change could significantly affect the Company’s provision for income taxes in a positive or negative direction.

In February 2016, the FASB issued guidance requiring a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months.  Consistent with current GAAP, the recognition, measurement and presentation of expense and cash flows arising from a lease by a lessee primarily will depend on its classification of the lease as a finance or operating lease.  However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will also require operating leases of the lessee to be recognized on the balance sheet if the operating lease term is more than 12 months.  The guidance also requires disclosures to help investors and other financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases.  These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.  The guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2018 and is to be applied using the modified retrospective approach.  The Company expects to adopt this standard in its first quarter of its fiscal year ending September 30, 2020.  The Company currently is not a lessee under any lease agreements with a term longer than one year.  The Company is routinely a lessor in its rental contracts with customers; however, these rental agreements are short-term in nature and would be treated as operating leases under the new guidance.  As a result, the Company does not expect the adoption of this guidance to have a material effect upon its consolidated financial statements.  

In July 2015, the FASB issued guidance requiring management to measure inventory at the lower of cost or net realizable value.  Under the new guidance, net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period and should be applied retrospectively, with early application permitted.  The Company expects to adopt this standard in its first quarter of its fiscal year ending September 30, 2018.  Since the Company is a manufacturer and the nature of its inventory is generally unique to its designs and applications thus preventing the gathering of relevant external market data, its practice for calculating net realizable value under the current standard is consistent with the practice prescribed by the new guidance. Therefore, the Company does not expect the adoption of the new guidance to have a material effect upon its consolidated financial statements.  

In August 2014, the FASB issued guidance requiring management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern and to provide disclosures in certain circumstances.  The new guidance was issued to reduce diversity in the timing and content of footnote disclosures.  This guidance is effective for fiscal years ending after December 15, 2016 and interim reporting periods thereafter.  The Company’s management will begin evaluating any potential events and conditions which raise substantial doubt about the Company’s ability to continue as a going concern upon adoption on September 30, 2017.  The adoption of this guidance may result in additional disclosures to our consolidated financial statements.

In May 2014, the FASB issued guidance requiring entities to recognize revenue from contracts with customers by applying a five-step model in accordance with the core principle to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In addition, this guidance specifies the accounting for some costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition.  In August 2015, the FASB issued guidance deferring the effective date of this guidance to annual periods beginning after December 15, 2017, including interim reporting periods therein.  Entities have the option to adopt this guidance either retrospectively or through a modified retrospective transition method.  This new standard will supersede existing revenue guidance and affect the Company's revenue recognition process and the presentations or disclosures of the Company's consolidated financial statements and footnotes.  The Company recognizes revenue through three primary transactions types:  (i) the immediate recognition of revenue through the routine delivery of products to its customers, (ii) the rental of equipment to its customers through short-term operating leases, and (iii) the recognition of revenue utilizing the percentage of completion method for the delivery of complex products requiring long manufacturing times and substantial engineering resources.  While the Company does not expect the new guidance to impact its routine product sales or rental contracts, the new guidance could impact the manner in which it recognizes revenue using the percentage of completion method. The Company expects to adopt this standard in the first quarter of its fiscal year ending September 30, 2019 and is in the early stages of evaluating the standard including the method of adoption to determine the impact on its consolidated financial statements.  Further disclosures around policy changes or quantitative effects will be made as the Company moves closer to the adoption of this standard.

XML

Short-term Investments

6 Months Ended

Mar. 31, 2017

Investments Debt And Equity Securities [Abstract]

Short-term Investments

2.   Short-term Investments

	As of March 31, 2017 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	18,767	$	—	$	(44	)	$	18,723
Government bonds		10,165		—		(26	)		10,139
Total	$	28,932	$	—	$	(70	)	$	28,862

	As of September 30, 2016 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	17,342	$	—	$	(19	)	$	17,323
Government bonds		10,169		—		(1	)		10,168
Total	$	27,511	$	—	$	(20	)	$	27,491

XML

Derivative Financial Instruments

6 Months Ended

Mar. 31, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

3.   Derivative Financial Instruments

At March 31, 2017 and September 30, 2016, the Company’s Canadian subsidiary had $27.1 million of Canadian dollar denominated intercompany accounts payable owed to one of the Company’s U.S. subsidiaries.  In order to mitigate its exposure to movements in foreign currency rates between the U.S. dollar and Canadian dollar, the Company routinely enters into foreign currency forward contracts to hedge a portion of its exposure to changes in the value of the Canadian dollar.  Approximately $2.9 million of these Canadian dollar denominated intercompany accounts payable are considered by management to be of a short-term nature whereby the appreciation or devaluation of the Canadian dollar against the U.S. dollar will result in a gain or loss, respectively, to the consolidated statement of operations.  The Company considers the remaining $24.2 million Canadian dollar denominated intercompany accounts payable to be of a long-term nature whereby settlement is not planned or anticipated in the foreseeable future; therefore, any resulting foreign exchange gains and losses are reported in the consolidated balance sheets as a component of other comprehensive income in accordance with ASC 830 “Foreign Currency Matters”.  On March 31, 2017, the Company entered into a $3.0 million Canadian dollar 90-day hedge contract with a United States bank to hedge a portion of its short-term Canadian dollar foreign exchange rate exposure.  This contract reduces the impact on cash flows from movements in the Canadian dollar/U.S. dollar currency exchange rate, but has not been designated as a hedge for accounting purposes.

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

Derivative Instrument	Location	March 31, 2017		September 30, 2016
Foreign Currency Forward Contracts	Prepaid Expenses and Other Current Assets	$	—		$	5

The following table summarizes the Company’s gains on derivative instruments in the consolidated statements of operations for the three and six month periods ended March 31, 2017 and 2016 (in thousands):

		Three Months Ended						Six Months Ended
Derivative Instrument	Location of Gain on Derivative Instrument	March 31, 2017			March 31, 2016			March 31, 2017		March 31, 2016
Foreign Currency Forward Contracts	Other Income (Expense)	$	(44	)	$	(88	)	$	28	$	28

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

XML

Fair Value of Financial Instruments

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

4.   Fair Value of Financial Instruments

At March 31, 2017, the Company’s financial instruments included cash and cash equivalents, short-term investments, foreign currency forward contract, trade and notes receivables and accounts payable.  Due to the short-term maturities of cash and cash equivalents, trade and other receivables and accounts payable, the carrying amounts approximate fair value on the respective balance sheet dates.

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

	As of March 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments
Corporate bonds	$	18,723	$	—	$	—	$	18,723
Government bonds		10,139		—		—		10,139
Total	$	28,862	$	—	$	—	$	28,862

	As of September 30, 2016
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments
Corporate bonds	$	17,323	$	—	$	—	$	17,323
Government bonds		10,168		—		—	$	10,168
Foreign currency forward contract		—		5		—		5
Total	$	27,491	$	5	$	—	$	27,496

XML

Accounts and Notes Receivable

6 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Accounts and Notes Receivable

5.   Accounts and Notes Receivable

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

	March 31, 2017			September 30, 2016
Trade accounts receivable	$	18,118		$	17,841
Allowance for doubtful accounts		(1,409	)		(2,449	)
	$	16,709		$	15,392

The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses.  The Company determines the allowance based upon historical experience and a current review of its balances.  Accounts receivable balances are charged off against the allowance whenever it is probable that the receivable will not be recoverable.

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

	March 31, 2017			September 30, 2016
Notes receivable	$	3,337		$	3,850
Allowance for doubtful notes		(1,020	)		(500	)
		2,317			3,350
Less current portion		1,890			1,533
Non-current notes receivable	$	427		$	1,817

XML

Inventories

6 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Inventories

6.   Inventories

Inventories consist of the following (in thousands):

	March 31, 2017			September 30, 2016
Finished goods	$	34,929		$	40,260
Work in process		2,943			8,272
Raw material		71,646			65,682
Obsolescence reserve		(17,415	)		(9,674	)
	$	92,103		$	104,540

During the six months ended March 31, 2017 and 2016, the Company made non-cash inventory transfers of $1.0 million and $1.7 million, respectively, to rental equipment and $1.9 million and $0.1 million, respectively, to property, plant and equipment.  Raw materials include semi-finished goods and component parts totaling $48.2 million and $43.8 million, respectively, at March 31, 2017 and September 30, 2016.

XML

Long-Term Debt

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Long-Term Debt

7.   Long-Term Debt

The Company had no long-term debt outstanding at March 31, 2017 and September 30, 2016.

On March 2, 2011, the Company entered into a credit agreement with Frost Bank with borrowing availability of $50.0 million (the “Credit Agreement”).  On May 4, 2015, the Company amended the Credit Agreement which reduced its borrowing availability to $30.0 million with amounts available for borrowing determined by a borrowing base.  Under the amendments to the Credit Agreement, the borrowing base is determined based upon certain of the Company’s and its U.S. subsidiaries’ assets which include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii) 25% of certain inventories (excluding work-in-process inventories).  As of March 31, 2017, the Company’s borrowing base was $30.7 million resulting in borrowing availability of $30.0 million less $0.4 million of outstanding letters of credit.  The Company’s domestic subsidiaries have guaranteed the obligations of the Company under the Credit Agreement and such subsidiaries have secured their obligations under such guarantees by the pledge of substantially all of the assets of such subsidiaries, except real property assets.  The Credit Agreement expires on May 4, 2018 and all borrowed funds are due and payable at that time.  The Company is required to make monthly interest payments on borrowed funds.  The Credit Agreement as amended limits the incurrence of additional indebtedness, requires the maintenance of a single financial ratio that compares certain of the Company’s assets to certain of its liabilities, restricts the Company and its subsidiaries’ ability to pay cash dividends and contains other covenants customary in agreements of this type.  The interest rate for borrowings under the Credit Agreement as amended is based on the Wall Street Journal prime rate, which was 4.00% at March 31, 2017.  At March 31, 2017, the Company was in compliance with all covenants under the Credit Agreement.

XML

Accumulated Other Comprehensive Loss

6 Months Ended

Mar. 31, 2017

Stockholders Equity Note [Abstract]

Accumulated Other Comprehensive Loss

8.   Accumulated Other Comprehensive Loss

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

	Unrealized Losses on Available-for-Sale Securities			Foreign Currency Translation Adjustments			Totals
Balance at October 1, 2016	$	(15	)	$	(15,926	)	$	(15,941	)
Changes in unrealized losses on available-for-sale    securities		(51	)		—			(51	)
Foreign currency translation adjustments		—			1,047			1,047
Balance at March 31, 2017	$	(66	)	$	(14,879	)	$	(14,945	)

XML

Stock-Based Compensation

6 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

9.   Stock-Based Compensation

During the six months ended March 31, 2017, the Company issued 109,500 shares of restricted stock under its 2014 Long Term Incentive Plan, as amended (the “Plan”).  The weighted average grant date fair value of the restricted stock was $21.12 per share.  The grant date fair value of these awards was $2.3 million, which will be charged to expense over the next four years as the restrictions lapse.  Compensation expense for restricted stock awards was determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of shares that are anticipated to fully vest.  Recipients of restricted stock awards are entitled to vote such shares and are entitled to dividends, if paid.

During the six months ended March 31, 2017, the Company also issued 51,300 nonqualified stock options under the Plan.  The options issued are based upon three tiers, each with separate service based vesting conditions and market conditions that affect exercisability.  Market based conditions are based on achieving a specified market return on the Company’s stock price.  Compensation expense for the nonqualified stock option awards was determined based on a Monte Carlo simulation, which incorporates the possibility that the market conditions may not be satisfied.  The weighted average grant date fair value of the options issued was determined to be $9.35 per option resulting in unrecognized compensation costs of $0.5 million, which will be charged to expense over the requisite service period of the options, ranging from 18 to 36 months.

As of March 31, 2017, the Company had unrecognized compensation expense of $6.5 million relating to restricted stock awards.  This unrecognized compensation expense is expected to be recognized over a weighted average period of 2.8 years.  In addition, the Company had $0.5 million of unrecognized compensation expense related to nonqualified stock option awards which is expected to be recognized over a weighted average period of 1.7 years.

As of March 31, 2017, a total of 293,500 shares of restricted stock and 206,300 nonqualified stock options shares were outstanding.

XML

Loss Per Common Share

6 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Loss Per Common Share

10.   Loss Per Common Share

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

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Net loss	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Less: Income allocable to unvested restricted stock		—			—			—			—
Loss available to common shareholders		(11,503	)		(10,965	)		(23,208	)		(22,007	)
Reallocation of participating earnings		—			—			—			—
Loss attributable to common shareholders for diluted    earnings per share	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Weighted average number of common share equivalents:
Common shares used in basic loss per share		13,146,330			13,049,696			13,120,286			13,037,069
Common share equivalents outstanding related to    stock options		—			—			—			—
Total weighted average common shares and common    share equivalents used in diluted loss per share		13,146,330			13,049,696			13,120,286			13,037,069
Loss per share:
Basic	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)
Diluted	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)

For the calculation of diluted loss per share for the three and six months ended March 31, 2017 and 2016, 206,300 stock options and 159,000 stock options, respectively, were excluded in the calculation of weighted average shares outstanding as a result of their impact being antidilutive.

XML

Commitments and Contingencies

6 Months Ended

Mar. 31, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11.   Commitments and Contingencies

The Company is involved in various pending or potential legal actions in the ordinary course of our business.  Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty of litigation.  Management is not aware of any material pending or known to be contemplated legal or government proceedings against the Company.

XML

Segment Information

6 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

12.   Segment Information

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

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

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Revenue:
Seismic	$	13,944		$	8,501		$	23,350		$	16,075
Non-Seismic		6,468			6,287			12,204			11,720
Corporate		146			143			289			273
Total	$	20,558		$	14,931		$	35,843		$	28,068
Income (loss) from operations:
Seismic	$	(9,156	)	$	(11,834	)	$	(18,609	)	$	(23,969	)
Non-Seismic		1,052			848			2,104			1,410
Corporate		(2,956	)		(3,001	)		(5,866	)		(6,120	)
Total	$	(11,060	)	$	(13,987	)	$	(22,371	)	$	(28,679	)

XML

Income Taxes

6 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

13.   Income Taxes

The Company’s effective tax rates for the three months ended March 31, 2017 and 2016 were (3.1)% and (17.4)%, respectively.  The Company’s effective tax rates for the six months ended March 31, 2017 and 2016 were (3.4)% and (21.1)%, respectively.      The United States statutory tax rate for the same periods was 35%.  Compared to the United States statutory rate, the lower effective tax rates for the three and six months ended March 31, 2016 resulted primarily from a valuation allowance against the Company’s Canadian subsidiary’s net deferred tax assets.  The lower effective tax rates for the three and six months ended March 31, 2017 primarily resulted from the Company’s inability to recognize deferred tax assets and other tax benefits in connection with the losses it incurred in the United States and Canada due to the uncertainty surrounding the Company’s ability to utilize such deferred tax assets in the future to offset taxable income.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2016 was derived from the Company’s audited consolidated financial statements at that date.  The consolidated balance sheet at March 31, 2017 and the consolidated statements of operations, comprehensive loss and cash flows for the three and six months ended March 31, 2017 and 2016, were prepared by the Company without audit.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made.  The results of operations for the three and six months ended March 31, 2017 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to the rules of the Securities and Exchange Commission.  The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2016.

Reclassifications

Reclassifications

Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation.  Such reclassifications had no effect on net loss, stockholders’ equity or cash flows.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes.  The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements.  The Company continually evaluates its estimates, including those related to bad debt reserves, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, impairment of long-lived assets and deferred income tax assets.  The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities which are not readily available from other sources.  Actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

Cash and Cash Equivalents

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

Short-term Investments

Short-term Investments

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

Inventories

Inventories

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

The Company periodically reviews the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder its ability to recover its investment in such inventories.  The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates.  Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s inventory investment will not be realized in its operating activities.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable.  The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets.  If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value, which is measured by the expected future cash flows.  At March 31, 2017, no events or changes in circumstances were determined indicating the carrying amount of any of its assets or groups of assets may not be recoverable.

Revenue Recognition

Revenue Recognition – Products and Services

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

Research and Development Costs

Research and Development Costs

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

Product Warranties

Product Warranties

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

Balance at October 1, 2016	$	392
Accruals for warranties issued during the period		439
Settlements made (in cash or in kind) during the period		(295	)
Balance at March 31, 2017	$	536

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2016 the Financial Accounting Standards Board (“FASB”) issued guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and should be applied on a retrospective transition basis.  The Company has historically not held restricted cash balances and, therefore, does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.  However, upon adoption of this guidance, the Company will make any necessary changes to present restricted cash balances in accordance with the guidance.  

In October 2016 the FASB issued guidance which eliminates the exception of recognizing, at the time of transfer, current and deferred income taxes for intercompany profits on intra-entity asset transfers other than inventory.  This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and applied on a modified retrospective transition basis.  Since early adoption is permitted, the Company is planning to adopt this guidance in its first quarter of its fiscal year ending September 30, 2018.  Under current guidance, the Company maintains a non-current prepaid income tax asset on its consolidated balance sheets representing income taxes paid in the U.S. on profits realized from the sale of rental equipment to its foreign subsidiaries.  As this rental equipment is depreciated, the prepaid tax is recognized as a current income tax expense in the Company’s consolidated statement of operations.  Upon adoption of the new guidance, the Company will be required to recognize a deferred tax asset related to the intercompany profits realized on the sale of assets to its subsidiaries; however, profits realized from the intercompany sale of inventories will continue to be accounted for as a prepaid income tax asset under the current guidance.  The resulting deferred tax asset will be recognized at the jurisdictional tax rate of the subsidiary purchasing the asset.  Any differences between the subsidiary’s jurisdictional tax rate and the seller’s tax rate with regard to the intercompany profit will be charged to seller’s current income tax expense at the time of the sale.  Since the current U.S. income tax rate is substantially higher than the current income tax rates applicable to each of the Company’s foreign subsidiaries, adoption of the new guidance could have a significant impact on the Company’s provision for income taxes in future periods if significant amounts of rental equipment are sold by the Company’s U.S. subsidiaries to its foreign subsidiaries.  

In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in current U.S. generally accepted accounting principles (“GAAP”).  The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments.  For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities.  The standard is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods.  Early adoption for a fiscal year beginning after December 15, 2018 is permitted.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period.  The Company expects to adopt this standard during the first quarter of its fiscal year ending September 30, 2021 and is currently evaluating the impact of this new guidance on its consolidated financial statements.    

In March 2016, the FASB issued guidance to simplify key components of employee share-based payment accounting.  The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period.  The Company expects to adopt this guidance in the first quarter of its fiscal year ending September 30, 2018.  The new guidance simplifies several aspects of the accounting for share-based payment transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification of excess tax benefits from share-based payments on the statement of cash flows.  Under the current standard, the Company is required to track and record as a component of additional paid-in capital the tax impact of cumulative windfalls, net of any shortfalls, which result from excess tax benefits from share-based payments. As a result, the impact of net windfalls has not historically affected the Company’s provision for income taxes or its effective income tax rate.  Upon adoption of the new standard, the Company will record a cumulative-effect adjustment to retained earnings for the basis of historical net windfalls residing in its additional paid in capital account. In addition, the Company will no longer track windfalls or shortfalls resulting from share-based payments since all future windfalls and shortfalls will be recorded as a component of the Company’s current provision for income taxes.  Depending on the magnitude of future windfalls or shortfalls, this change could significantly affect the Company’s provision for income taxes in a positive or negative direction.

In February 2016, the FASB issued guidance requiring a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months.  Consistent with current GAAP, the recognition, measurement and presentation of expense and cash flows arising from a lease by a lessee primarily will depend on its classification of the lease as a finance or operating lease.  However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will also require operating leases of the lessee to be recognized on the balance sheet if the operating lease term is more than 12 months.  The guidance also requires disclosures to help investors and other financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases.  These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.  The guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2018 and is to be applied using the modified retrospective approach.  The Company expects to adopt this standard in its first quarter of its fiscal year ending September 30, 2020.  The Company currently is not a lessee under any lease agreements with a term longer than one year.  The Company is routinely a lessor in its rental contracts with customers; however, these rental agreements are short-term in nature and would be treated as operating leases under the new guidance.  As a result, the Company does not expect the adoption of this guidance to have a material effect upon its consolidated financial statements.  

In July 2015, the FASB issued guidance requiring management to measure inventory at the lower of cost or net realizable value.  Under the new guidance, net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period and should be applied retrospectively, with early application permitted.  The Company expects to adopt this standard in its first quarter of its fiscal year ending September 30, 2018.  Since the Company is a manufacturer and the nature of its inventory is generally unique to its designs and applications thus preventing the gathering of relevant external market data, its practice for calculating net realizable value under the current standard is consistent with the practice prescribed by the new guidance. Therefore, the Company does not expect the adoption of the new guidance to have a material effect upon its consolidated financial statements.  

In August 2014, the FASB issued guidance requiring management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern and to provide disclosures in certain circumstances.  The new guidance was issued to reduce diversity in the timing and content of footnote disclosures.  This guidance is effective for fiscal years ending after December 15, 2016 and interim reporting periods thereafter.  The Company’s management will begin evaluating any potential events and conditions which raise substantial doubt about the Company’s ability to continue as a going concern upon adoption on September 30, 2017.  The adoption of this guidance may result in additional disclosures to our consolidated financial statements.

In May 2014, the FASB issued guidance requiring entities to recognize revenue from contracts with customers by applying a five-step model in accordance with the core principle to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In addition, this guidance specifies the accounting for some costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition.  In August 2015, the FASB issued guidance deferring the effective date of this guidance to annual periods beginning after December 15, 2017, including interim reporting periods therein.  Entities have the option to adopt this guidance either retrospectively or through a modified retrospective transition method.  This new standard will supersede existing revenue guidance and affect the Company's revenue recognition process and the presentations or disclosures of the Company's consolidated financial statements and footnotes.  The Company recognizes revenue through three primary transactions types:  (i) the immediate recognition of revenue through the routine delivery of products to its customers, (ii) the rental of equipment to its customers through short-term operating leases, and (iii) the recognition of revenue utilizing the percentage of completion method for the delivery of complex products requiring long manufacturing times and substantial engineering resources.  While the Company does not expect the new guidance to impact its routine product sales or rental contracts, the new guidance could impact the manner in which it recognizes revenue using the percentage of completion method. The Company expects to adopt this standard in the first quarter of its fiscal year ending September 30, 2019 and is in the early stages of evaluating the standard including the method of adoption to determine the impact on its consolidated financial statements.  Further disclosures around policy changes or quantitative effects will be made as the Company moves closer to the adoption of this standard.

XML

Significant Accounting Policies (Tables)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Changes in Warranty Reserve

Changes in the warranty reserve are reflected in the following table (in thousands):

Balance at October 1, 2016	$	392
Accruals for warranties issued during the period		439
Settlements made (in cash or in kind) during the period		(295	)
Balance at March 31, 2017	$	536

XML

Short-term Investments (Tables)

6 Months Ended

Mar. 31, 2017

Investments Debt And Equity Securities [Abstract]

Short-term Investments

	As of March 31, 2017 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	18,767	$	—	$	(44	)	$	18,723
Government bonds		10,165		—		(26	)		10,139
Total	$	28,932	$	—	$	(70	)	$	28,862

	As of September 30, 2016 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	17,342	$	—	$	(19	)	$	17,323
Government bonds		10,169		—		(1	)		10,168
Total	$	27,511	$	—	$	(20	)	$	27,491

XML

Derivative Financial Instruments (Tables)

6 Months Ended

Mar. 31, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Gross Fair Value of all Derivative Instruments

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

Derivative Instrument	Location	March 31, 2017		September 30, 2016
Foreign Currency Forward Contracts	Prepaid Expenses and Other Current Assets	$	—		$	5

Company's Derivatives on Consolidated Financial Statements of Operations

The following table summarizes the Company’s gains on derivative instruments in the consolidated statements of operations for the three and six month periods ended March 31, 2017 and 2016 (in thousands):

		Three Months Ended						Six Months Ended
Derivative Instrument	Location of Gain on Derivative Instrument	March 31, 2017			March 31, 2016			March 31, 2017		March 31, 2016
Foreign Currency Forward Contracts	Other Income (Expense)	$	(44	)	$	(88	)	$	28	$	28

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurement of Company's Short-term Investments and Derivative Instruments

The fair value measurement of the Company’s short-term investments and derivative instruments was determined using the following inputs (in thousands):

	As of March 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments
Corporate bonds	$	18,723	$	—	$	—	$	18,723
Government bonds		10,139		—		—		10,139
Total	$	28,862	$	—	$	—	$	28,862

	As of September 30, 2016
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments
Corporate bonds	$	17,323	$	—	$	—	$	17,323
Government bonds		10,168		—		—	$	10,168
Foreign currency forward contract		—		5		—		5
Total	$	27,491	$	5	$	—	$	27,496

XML

Accounts and Notes Receivable (Tables)

6 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Current Trade Accounts Receivable

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

	March 31, 2017			September 30, 2016
Trade accounts receivable	$	18,118		$	17,841
Allowance for doubtful accounts		(1,409	)		(2,449	)
	$	16,709		$	15,392

Notes Receivable

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

	March 31, 2017			September 30, 2016
Notes receivable	$	3,337		$	3,850
Allowance for doubtful notes		(1,020	)		(500	)
		2,317			3,350
Less current portion		1,890			1,533
Non-current notes receivable	$	427		$	1,817

XML

Inventories (Tables)

6 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Inventories

Inventories consist of the following (in thousands):

	March 31, 2017			September 30, 2016
Finished goods	$	34,929		$	40,260
Work in process		2,943			8,272
Raw material		71,646			65,682
Obsolescence reserve		(17,415	)		(9,674	)
	$	92,103		$	104,540

XML

Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Mar. 31, 2017

Stockholders Equity Note [Abstract]

Accumulated Other Comprehensive Loss

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

	Unrealized Losses on Available-for-Sale Securities			Foreign Currency Translation Adjustments			Totals
Balance at October 1, 2016	$	(15	)	$	(15,926	)	$	(15,941	)
Changes in unrealized losses on available-for-sale    securities		(51	)		—			(51	)
Foreign currency translation adjustments		—			1,047			1,047
Balance at March 31, 2017	$	(66	)	$	(14,879	)	$	(14,945	)

XML

Loss Per Common Share (Tables)

6 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Calculation of Net Loss and Weighted Average Common Shares and Common Equivalent Shares Outstanding for Computation of Loss Per Share

The following table summarizes the calculation of net loss and weighted average common shares and common equivalent shares outstanding for purposes of the computation of loss per share (in thousands, except share and per share data):

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Net loss	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Less: Income allocable to unvested restricted stock		—			—			—			—
Loss available to common shareholders		(11,503	)		(10,965	)		(23,208	)		(22,007	)
Reallocation of participating earnings		—			—			—			—
Loss attributable to common shareholders for diluted    earnings per share	$	(11,503	)	$	(10,965	)	$	(23,208	)	$	(22,007	)
Weighted average number of common share equivalents:
Common shares used in basic loss per share		13,146,330			13,049,696			13,120,286			13,037,069
Common share equivalents outstanding related to    stock options		—			—			—			—
Total weighted average common shares and common    share equivalents used in diluted loss per share		13,146,330			13,049,696			13,120,286			13,037,069
Loss per share:
Basic	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)
Diluted	$	(0.88	)	$	(0.84	)	$	(1.77	)	$	(1.69	)

XML

Segment Information (Tables)

6 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Summary of Company's Segment Information

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

	Three Months Ended						Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Revenue:
Seismic	$	13,944		$	8,501		$	23,350		$	16,075
Non-Seismic		6,468			6,287			12,204			11,720
Corporate		146			143			289			273
Total	$	20,558		$	14,931		$	35,843		$	28,068
Income (loss) from operations:
Seismic	$	(9,156	)	$	(11,834	)	$	(18,609	)	$	(23,969	)
Non-Seismic		1,052			848			2,104			1,410
Corporate		(2,956	)		(3,001	)		(5,866	)		(6,120	)
Total	$	(11,060	)	$	(13,987	)	$	(22,371	)	$	(28,679	)

XML

Changes in Warranty Reserve (Details) $ in Thousands	6 Months Ended
	Mar. 31, 2017 USD ($)
Changes in product warranty reserve
Balance at the beginning of the period	$ 392
Accruals for warranties issued during the period	439
Settlements made (in cash or in kind) during the period	(295)
Balance at the end of the period	$ 536

XML

Significant Accounting Policies - Additional Information (Details)	6 Months Ended
	Mar. 31, 2017 USD ($) Transaction
Accounting Policies [Abstract]
Restricted cash | $	$ 0
Number of primary transactions type recognizes revenue | Transaction	3

XML

Short-term Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Schedule Of Available For Sale Securities [Line Items]
Short-term Investments, Amortized Cost	$ 28,932	$ 27,511
Short-term Investments, Unrealized Losses	(70)	(20)
Short-term Investments, Estimated Fair Value	28,862	27,491
Corporate bonds
Schedule Of Available For Sale Securities [Line Items]
Short-term Investments, Amortized Cost	18,767	17,342
Short-term Investments, Unrealized Losses	(44)	(19)
Short-term Investments, Estimated Fair Value	18,723	17,323
Government bonds
Schedule Of Available For Sale Securities [Line Items]
Short-term Investments, Amortized Cost	10,165	10,169
Short-term Investments, Unrealized Losses	(26)	(1)
Short-term Investments, Estimated Fair Value	$ 10,139	$ 10,168

XML

Derivative Financial Instruments - Additional Information (Details) - USD ($) $ in Millions		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2017	Sep. 30, 2016
Canadian Dollar Forward Contract
Derivative [Line Items]
Foreign currency forward contract to hedge	$ 3.0
Foreign currency forward contract term		90 days
Canadian Subsidiary
Derivative [Line Items]
Denominated intercompany accounts payable	27.1	$ 27.1	$ 27.1
Denominated intercompany accounts payable, short-term nature	2.9	2.9
Denominated intercompany accounts payable, long-term nature	$ 24.2	$ 24.2

XML

Gross Fair Value of all Derivative Instruments (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Foreign Currency Forward Contracts | Prepaid Expenses and Other Current Assets
Derivatives Fair Value [Line Items]
Derivative Assets	$ 5

XML

Company's Derivatives on Consolidated Financial Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Foreign Currency Forward Contracts | Other Income (Expense)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amount of Gain Recognized in Income	$ (44)	$ (88)	$ 28	$ 28

XML

Fair Value Measurement of Company's Short-term Investments and Derivative Instruments (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total	$ 28,862	$ 27,496
Foreign Currency Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Net Derivatives		5
Corporate bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term Investments, Estimated Fair Value	18,723	17,323
Government bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term Investments, Estimated Fair Value	10,139	10,168
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total	28,862	27,491
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term Investments, Estimated Fair Value	18,723	17,323
Quoted Prices in Active Markets for Identical Assets (Level 1) | Government bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term Investments, Estimated Fair Value	$ 10,139	10,168
Significant Other Observable (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total		5
Significant Other Observable (Level 2) | Foreign Currency Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Net Derivatives		$ 5

XML

Current Trade Accounts Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Current trade accounts receivable
Trade accounts receivable	$ 18,118	$ 17,841
Allowance for doubtful accounts	(1,409)	(2,449)
Total current trade accounts receivable	$ 16,709	$ 15,392

XML

Notes Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Accounts Receivable Net [Abstract]
Notes receivable	$ 3,337	$ 3,850
Allowance for doubtful notes	(1,020)	(500)
Total	2,317	3,350
Less current portion	1,890	1,533
Non-current notes receivable	$ 427	$ 1,817

XML

Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Inventory Disclosure [Abstract]
Finished goods	$ 34,929	$ 40,260
Work in process	2,943	8,272
Raw material	71,646	65,682
Obsolescence reserve	(17,415)	(9,674)
Total	$ 92,103	$ 104,540

XML

Inventories - Additional Information (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Sep. 30, 2016
Inventory Disclosure [Abstract]
Inventories transferred to rental equipment	$ 1.0	$ 1.7
Inventories transferred to property, plant and equipment	1.9	$ 0.1
Raw materials include semi-finished goods and component parts	$ 48.2		$ 43.8

XML

Long-Term Debt - Additional Information (Details) - Frost Bank Credit Agreement - USD ($)	6 Months Ended
	Mar. 31, 2017	Sep. 30, 2016	May 04, 2015	Mar. 02, 2011
Debt Instrument [Line Items]
Total long-term debt outstanding	$ 0	$ 0
Line of credit borrowing capacity	30,700,000			$ 50,000,000
Credit agreement borrowing availability	30,000,000		$ 30,000,000
Outstanding letters of credit	$ 400,000
Credit agreement expiration date	May 04, 2018
New Agreement
Debt Instrument [Line Items]
Credit agreement date	Mar. 02, 2011
Prime Rate
Debt Instrument [Line Items]
Marginal interest rate	4.00%
Certain Notes Receivable
Debt Instrument [Line Items]
Borrowing base as percentage of assets			50.00%
Maximum amount of borrowing based upon assets			$ 10,000,000
Certain Accounts Receivable
Debt Instrument [Line Items]
Borrowing base as percentage of assets			80.00%
Certain Inventories
Debt Instrument [Line Items]
Borrowing base as percentage of assets			25.00%

XML

Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Beginning Balance			$ 244,467
Changes in unrealized losses on available-for-sale securities	$ 11	$ 31	(51)	$ 5
Foreign currency translation adjustments	1,353	$ (366)	1,047	$ (1,588)
Ending Balance	225,135		225,135
Unrealized Losses on Available-for-Sale Securities
Beginning Balance			(15)
Changes in unrealized losses on available-for-sale securities			(51)
Ending Balance	(66)		(66)
Foreign Currency Translation Adjustments
Beginning Balance			(15,926)
Foreign currency translation adjustments			1,047
Ending Balance	(14,879)		(14,879)
Accumulated Other Comprehensive Loss
Beginning Balance			(15,941)
Ending Balance	$ (14,945)		$ (14,945)

XML

Stock-Based Compensation - Additional Information (Details) $ / shares in Units, $ in Millions	6 Months Ended
	Mar. 31, 2017 USD ($) $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation expense | $	$ 0.5
Expected period for recognition of unrecognized compensation expense	1 year 8 months 12 days
Share outstanding, restricted stock | shares	293,500
Nonqualified stock options outstanding | shares	206,300
2014 Long Term Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued | shares	51,300
Stock options, weighted average grant date fair value | $ / shares	$ 9.35
Unrecognized compensation expense | $	$ 0.5
2014 Long Term Incentive Plan | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected period for recognition of unrecognized compensation expense	18 months
2014 Long Term Incentive Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected period for recognition of unrecognized compensation expense	36 months
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation expense | $	$ 6.5
Expected period for recognition of unrecognized compensation expense	2 years 9 months 18 days
Restricted Stock | 2014 Long Term Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued | shares	109,500
Weighted average grant date fair value of the restricted stock | $ / shares	$ 21.12
Grant date fair value of restricted stock | $	$ 2.3
Restricted stock restriction period	4 years

XML

Loss Per Common Share - Additional Information (Details)	3 Months Ended		6 Months Ended
	Mar. 31, 2017 shares	Mar. 31, 2016 shares	Mar. 31, 2017 shares	Mar. 31, 2016 shares
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Split of common stock ratio			2
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Number of Stock options	206,300	159,000	206,300	159,000

XML

Calculation of Net Loss and Weighted Average Common Shares and Common Equivalent Shares Outstanding for Computation of Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Earnings Per Share [Abstract]
Net loss	$ (11,503)	$ (10,965)	$ (23,208)	$ (22,007)
Loss available to common shareholders	(11,503)	(10,965)	(23,208)	(22,007)
Loss attributable to common shareholders for diluted earnings per share	$ (11,503)	$ (10,965)	$ (23,208)	$ (22,007)
Weighted average number of common share equivalents:
Common shares used in basic loss per share	13,146,330	13,049,696	13,120,286	13,037,069
Total weighted average common shares and common share equivalents used in diluted loss per share	13,146,330	13,049,696	13,120,286	13,037,069
Loss per share:
Basic	$ (0.88)	$ (0.84)	$ (1.77)	$ (1.69)
Diluted	$ (0.88)	$ (0.84)	$ (1.77)	$ (1.69)

XML

Segment Information - Additional Information (Details)	6 Months Ended
	Mar. 31, 2017 Segment
Segment Reporting [Abstract]
Number of reportable segments	2

XML

Summary of Company's Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Revenue	$ 20,558	$ 14,931	$ 35,843	$ 28,068
Income (loss) from operations	(11,060)	(13,987)	(22,371)	(28,679)
Operating Segments | Seismic
Segment Reporting Information [Line Items]
Revenue	13,944	8,501	23,350	16,075
Income (loss) from operations	(9,156)	(11,834)	(18,609)	(23,969)
Operating Segments | Non-Seismic
Segment Reporting Information [Line Items]
Revenue	6,468	6,287	12,204	11,720
Income (loss) from operations	1,052	848	2,104	1,410
Corporate
Segment Reporting Information [Line Items]
Revenue	146	143	289	273
Income (loss) from operations	$ (2,956)	$ (3,001)	$ (5,866)	$ (6,120)

XML

Income Taxes - Additional Information (Details)	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Company's effective tax rates	(3.10%)	(17.40%)	(3.40%)	(21.10%)
United States statutory tax rate	35.00%	35.00%	35.00%	35.00%