Rob Capps, Co-CEO Mitcham Industries, Inc. 936-291-2277
Jack Lascar Dennard Lascar Associates 713-529-6600
MITCHAM INDUSTRIES REPORTS FISCAL 2017 SECOND QUARTER RESULTS
HUNTSVILLE, TX – SEPTEMBER 7, 2016– Mitcham Industries, Inc. (NASDAQ: MIND) (“the Company”) today announced financial results for its fiscal 2017 second quarter ended July 31, 2016.
Total revenues for the second quarter of fiscal 2017 were $8.7 million compared to $7.6 million in the second quarter of fiscal 2016. Revenues from the Equipment Manufacturing and Sales segment increased to $5.8 million in the second quarter compared to $2.8 million in the same period last year. Revenues from the Equipment Leasing segment were $2.9 million in the second quarter compared to $4.8 million in the same period last year. The Company reported a net loss available to common shareholders of $9.6 million, or $(0.80) per share, in the second quarter of fiscal 2017 compared to a net loss of $5.8 million, or $(0.49) per share, in the second quarter of fiscal 2016. Cash flow from operating activities was approximately $1.3 million in the second quarter of fiscal 2017 as compared to approximately $5.2 million in the second quarter of fiscal 2016.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation, impairment of intangible assets and non-cash foreign exchange losses) for the second quarter of fiscal 2017 was a loss of $0.6 million compared to a gain of $0.8 million in the same period last year. Adjusted EBITDA for the first quarter of fiscal 2017 was $2.2 million. Adjusted EBITDA, which is not a measure determined in accordance with United States generally accepted accounting principles (“GAAP”), is defined and reconciled to reported net income and cash provided by operating activities in the accompanying financial tables.
Rob Capps, Co-CEO, stated, “Our two segments produced different results during our second quarter. The Equipment Leasing segment results were weak but unfolded essentially as we had anticipated, but the Equipment Manufacturing and Sales segment generated improved performance. Land seismic exploration activity was suppressed throughout both Hemispheres as significant excess capacity remains in this market, which impacted our leasing business.
“While we continue to operate in the midst of a global slowdown in the oil and gas industry, we do currently believe that our second quarter leasing results probably reflect the bottom of this cycle. Due to these market conditions and normal seasonal declines, all areas, with the exception of Europe and Latin America, made only nominal contributions to our leasing revenues this quarter. Marine leasing activity remained soft during the second quarter due to ongoing consolidation in the industry. However, we do see signs of improvement to the current market conditions. Inquiries and prospects have increased in recent weeks, and we have bid on several significant projects in various parts of the world. We, therefore, anticipate an uptick in our leasing segment activity in the second half of fiscal 2017.
“Revenues from our Equipment Manufacturing and Sales segment increased approximately 110% this quarter as compared to last year’s second quarter, primarily due to the addition of Klein Marine Systems and strong performance from SAP. Results from Seamap were essentially flat when compared to the same period last year, despite the on-going downturn in the seismic market, as we benefitted from our diversification efforts to make Seamap revenues less dependent on the oil and gas industry. We are pursuing a number of opportunities with commercial and military applications, both internationally and in the United States.
“We anticipate a stronger second half in our Equipment Manufacturing and Sales segment driven by scheduled deliveries and improved visibility into oceanographic and hydrographic opportunities from Klein, SAP and Seamap.
“Operationally, we continue to look for ways to control costs and streamline our operations to meet the requirements of our changing markets. Cash flow from operating activities was over $1.3 million for the second quarter and approximately $3.1 million for the first half of our fiscal year. We do anticipate generating positive EBITDA in the second half of this fiscal year. Despite the challenging industry conditions, we have reduced our outstanding indebtedness by approximately $11 million during the first half of fiscal 2017. We solidified our capital structure in the second quarter with our preferred stock offering that resulted in net proceeds to us of approximately $7.0 million. Our net debt was approximately $6.0 million at the end of the second quarter.”
FISCAL 2017 SECOND QUARTER RESULTS
Total revenues for the second quarter of fiscal 2017 were $8.7 million compared to $7.6 million in the same period last year. A significant portion of our revenues is typically generated from geographic areas outside the United States. The percentage of revenues from international customers was approximately 79% in the second quarter of fiscal 2017 compared to approximately 93% in last year’s second fiscal quarter. Equipment manufacturing and sales increased 107% to $5.8 million in the second quarter of fiscal 2017 compared to $2.7 million in last year’s second quarter. The second quarter sales consisted of approximately $2.2 million of Seamap equipment, $2.3 million from Klein and $1.3 million by SAP.
Equipment leasing revenues for the second quarter of fiscal 2017, excluding lease pool equipment sales, were $1.6 million compared to $4.5 million in the same period last year. The year-over-year decrease in second quarter equipment leasing revenues was primarily driven by a major reduction in exploration activity due to depressed hydrocarbon prices.
Lease pool and other equipment sales were $1.3 million in the second quarter of fiscal 2017, compared to $0.3 million in the second quarter a year ago.
Lease pool depreciation expense in the second quarter of fiscal 2017 decreased to $6.7 million from $7.6 million in the same period a year ago, mainly due to the reduction in lease pool purchases in fiscal 2015 and 2016.
General and administrative expenses increased to $5.4 million in the second quarter of fiscal 2017 versus $5.0 million in the second quarter of fiscal 2016, due to the effect of the Klein acquisition partially offset by the cost reduction efforts implemented during fiscal 2015 and 2016.
CONFERENCE CALL
We have scheduled a conference call for Thursday, September 8 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) to discuss our fiscal 2017 second quarter results. To access the call, please dial (412) 902-0030 and ask for the Mitcham Industries call at least 10 minutes prior to the start time. Investors may also listen to the conference live on the Mitcham Industries corporate website,http://www.mitchamindustries.com, by logging onto the site and clicking “Investor Relations.” A telephonic replay of the conference call will be available through September 22, 2016 and may be accessed by calling (201) 612-7415 and using passcode 13642927#. A webcast archive will also be available athttp://www.mitchamindustries.com shortly after the call and will be accessible for approximately 90 days. For more information, please contact Donna Washburn at Dennard Lascar Associates (713) 529-6600 or emaildwashburn@dennardlascar.com.
About Mitcham Industries
Mitcham Industries, Inc. provides equipment to the geophysical, oceanographic and hydrographic industries. Headquartered in Huntsville, Texas, Mitcham has a global presence with operating locations in Salem, New Hampshire; Calgary, Canada; Brisbane, Australia; Singapore; Ufa, Bashkortostan, Russia; Budapest, Hungary; Lima, Peru; Bogota, Colombia and the United Kingdom. Through its Leasing Segment, Mitcham believes it is the largest independent provider of exploration equipment to the seismic industry. Mitcham’s worldwide Equipment Manufacturing and Sales Segment includes its Seamap business, which designs, manufactures and sells specialized seismic marine equipment and Klein Marine Systems, Inc. which develops and manufactures high performance side scan sonar systems.
Certain statements and information in this press release concerning results for the quarter ended July 31, 2016 may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts of our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the SEC, including our Annual Report onForm 10-K, Quarterly Reports onForm 10-Q and Current Reports onForm 8-K.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publically update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
Tables to Follow
1
MITCHAM INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited)
July 31, 2016
January 31, 2016
ASSETS
Current assets:
Cash and cash equivalents
$
3,496
$
3,769
Accounts and contracts receivable, net of allowance for doubtful accounts of $5,828 and $5,821at July 31, 2016 and January 31, 2016, respectively
13,112
19,775
Inventories, net
13,091
12,944
Prepaid income taxes
1,391
2,523
Prepaid expenses and other current assets
1,544
1,685
Total current assets
32,634
40,696
Seismic equipment lease pool and property and equipment, net
60,965
73,516
Intangible assets, net
10,083
10,466
Goodwill
4,155
4,155
Prepaid income taxes
1,019
—
Deferred tax asset
—
586
Long-term receivables
4,967
4,972
Other assets
28
368
Total assets
$
113,851
$
134,759
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
1,687
$
3,543
Current maturities – long-term debt
3,220
3,218
Deferred revenue
351
326
Accrued expenses and other current liabilities
3,405
5,369
Total current liabilities
8,663
12,456
Long-term debt, net of current maturities
6,262
17,266
Total liabilities
14,925
29,722
Shareholders’ equity:
Preferred stock, $1.00 par value; 1,000 shares authorized; 320 issued and outstanding at July 31, 2016 and January 31, 2016, respectively
7,117
—
Common stock, $0.01 par value; 20,000 shares authorized; 14,019 shares issued at July 31, 2016 and January 31, 2016, respectively
140
140
Additional paid-in capital
121,097
120,664
Treasury stock, at cost (1,929 and 1,928 shares at July 31, 2016 and January 31, 2016, respectively)
(16,856
)
(16,854
)
Retained earnings (accumulated deficit)
(2,895
)
13,188
Accumulated other comprehensive loss
(9,677
)
(12,101
)
Total shareholders’ equity
98,926
105,037
Total liabilities and shareholders’ equity
$
113,851
$
134,759
MITCHAMINDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
For the Three Months Ended July 31,
For the Six Months
Ended July 31,
2016
2015
2016
2015
Revenues:
Equipment leasing
$
1,634
$
4,516
$
5,242
$
15,695
Lease pool and other equipment sales
1,275
295
2,210
652
Equipment manufacturing and sales
5,754
2,743
12,942
8,349
Total revenues
8,663
7,554
20,394
24,696
Cost of sales:
Direct costs — equipment leasing
785
1,051
1,537
2,418
Direct costs — lease pool depreciation
6,675
7,581
13,548
15,219
Cost of lease pool and other equipment sales
348
147
799
361
Cost of equipment manufacturing and sales
3,097
1,384
7,118
4,731
Total cost of sales
10,905
10,163
23,002
22,729
Gross (loss) profit
(2,242
)
(2,609
)
(2,608
)
1,967
Operating expenses:
General and administrative
5,426
4,964
10,739
9,860
Provision for doubtful accounts
—
600
—
600
Depreciation and amortization
647
631
1,299
1,268
Total operating expenses
6,073
6,195
12,038
11,728
Operating loss
(8,315
)
(8,804
)
(14,646
)
(9,761
)
Other (expense) income:
Interest, net
(164
)
(166
)
(428
)
(387
)
Other, net
(612
)
325
(161
)
1,111
Total other (expense) income
(776
)
159
(589
)
724
Loss before income taxes
(9,091
)
(8,645
)
(15,235
)
(9,037
)
Benefit (provision) for income taxes
(435
)
2,797
(734
)
2,952
Net loss
$
(9,526
)
$
(5,848
)
$
(15,969
)
$
(6,085
)
Preferred stock dividends
(114
)
—
(114
)
-
Net loss available to common shareholders
$
(9,640
)
$
(5,848
)
$
(16,083
)
$
(6,085
)
Net loss per common share:
Basic
$
(0.80
)
$
(0.49
)
$
(1.33
)
$
(0.51
)
Diluted
$
(0.80
)
$
(0.49
)
$
(1.33
)
$
(0.51
)
Shares used in computing net loss per common share:
Basic
12,070
12,037
12,065
12,028
Diluted
12,070
12,037
12,065
12,028
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
For the Six Months
Ended July 31,
2016
2015
Cash flows from operating activities:
Net loss
$
(15,969
)
$
(6,085
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
14,910
16,555
Stock-based compensation
433
519
Provision for inventory obsolescence
43
90
Provision for doubtful accounts, net of charge offs
—
600
Gross profit from sale of lease pool equipment
(1,456
)
(216
)
Excess tax benefit from exercise of non-qualified stock options and restricted shares
—
(72
)
Deferred tax benefit
(375
)
(3,301
)
Changes in working capital items:
Trade accounts and contracts receivable
8,769
5,338
Inventories
181
(3,349
)
Prepaid expenses and other current assets
(673
)
3,892
Income taxes payable
658
(640
)
Accounts payable, accrued expenses, other current liabilities and deferred revenue
(4,014
)
(661
)
Foreign exchange gains net of losses
577
(1,020
)
Net cash provided by operating activities
3,084
11,650
Cash flows from investing activities:
Purchases of seismic equipment held for lease
(583
)
(1,874
)
Purchases of property and equipment
(77
)
(171
)
Sale of used lease pool equipment
2,169
399
Net cash provided by (used in) investing activities
1,509
(1,646
)
Cash flows from financing activities:
Net payments on revolving line of credit
(9,400
)
(10,500
)
Payments on term loan and other borrowings
(1,612
)
(1,609
)
Net proceeds from short-term investments
—
113
Net proceeds from preferred stock offering
7,117
—
Preferred stock dividends
(114
)
—
Excess tax benefit from exercise of non-qualified stock options and restricted shares
—
72
Net cash used in financing activities
(4,009
)
(11,924
)
Effect of changes in foreign exchange rates on cash and cash equivalents
(857
)
(455
)
Net change in cash and cash equivalents
(273
)
(2,375
)
Cash and cash equivalents, beginning of period
3,769
5,175
Cash and cash equivalents, end of period
$
3,496
$
2,800
Supplemental cash flow information:
Interest paid
$
504
$
397
Income taxes paid
$
529
$
1,203
Purchases of seismic equipment held for lease in accounts payable at end of period
$
148
$
234
Mitcham Industries, Inc.
Reconciliation of Net Loss and Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
For the Three Months Ended
For the Six Months Ended
July 31,
July 31,
2016
2015
2016
2015
(in thousands)
(in thousands)
Reconciliation of Net loss to EBITDA and Adjusted EBITDA
Net loss
$
(9,526
)
$
(5,848
)
$
(15,969
)
$
(6,085
)
Interest expense, net
164
166
428
387
Depreciation and amortization
7,353
8,248
14,910
16,555
(Benefit) provision for income taxes
435
(2,797
)
734
(2,952
)
EBITDA (1)
(1,574
)
(231
)
103
7,905
Non-cash foreign exchange losses and (gains)
493
672
319
(87
)
Stock-based compensation
186
238
433
519
Cost of lease pool sales
298
85
713
182
Adjusted EBITDA (1)
$
(597
)
$
764
$
1,568
$
8,519
Reconciliation of Net cash provided by operating activities to EBITDA
Net cash provided by operating activities
$
1,335
$
5,212
$
3,084
$
11,650
Stock-based compensation
(186
)
(238
)
(433
)
(519
)
Provision for doubtful accounts
—
(600
)
—
(600
)
Provision for inventory obsolescence
—
(45
)
(43
)
(90
)
Changes in trade accounts, contracts and notes receivable
(5,960
)
(8,177
)
(8,769
)
(5,338
)
Interest paid
166
169
504
397
Taxes paid, net of refunds
378
407
529
1,203
Gross profit from sale of lease pool equipment
965
87
1,456
216
Changes in inventory
116
2,499
(181
)
3,349
Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue
1,970
914
4,014
661
Changes in prepaid expenses and other current assets
423
(615
)
673
(3,892
)
Foreign exchange gains net of losses
(696
)
242
(577
)
1,020
Other
(85
)
(86
)
(154
)
(152
)
EBITDA (1)
$
(1,574
)
$
(231
)
$
103
$
7,905
(1)
EBITDA is defined as net income before (a) interest income and interest expense, (b) provision for (or benefit from) income taxes and (c) depreciation and amortization. Adjusted EBITDA excludes non-cash foreign exchange gains and losses, non-cash costs of lease pool equipment sales, certain non-recurring contract settlement costs, impairment of intangible assets and stock-based compensation. This definition of Adjusted EBITDA is consistent with the definition in the Credit Agreement. We consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our business, but not measures of performance or liquidity calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We have included these non-GAAP financial measures because management utilizes this information for assessing our performance and liquidity, and as indicators of our ability to make capital expenditures, service debt and finance working capital requirements. The Credit Agreement contains financial covenants based on EBITDA or Adjusted EBITDA. Management believes that EBITDA and Adjusted EBITDA are measurements that are commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us. In particular, we believe that it is useful to our analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP and should not be considered in isolation or as alternatives to cash flow from operating activities or as alternatives to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. In evaluating our performance as measured by EBITDA, management recognizes and considers the limitations of this measurement. EBITDA and Adjusted EBITDA do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the measurements that management utilizes. Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA and Adjusted EBITDA may not be comparable with similarly titled measures reported by other companies.
Mitcham Industries, Inc. Segment Operating Results (in thousands) (unaudited)
For the Three Months Ended
For the Six Months Ended
July 31,
July 31,
2016
2015
2016
2015
(in thousands)
(in thousands)
Revenues:
Equipment Leasing
$
2,909
$
4,811
$
7,452
$
16,347
Equipment Manufacturing and Sales
5,758
2,787
12,978
8,462
Inter-segment sales
(4
)
(44
)
(36
)
(113
)
Total revenues
8,663
7,554
20,394
24,696
Cost of sales:
Equipment Leasing
7,809
8,811
15,885
18,063
Equipment Manufacturing and Sales
3,116
1,429
7,174
4,825
Inter-segment costs
(20
)
(77
)
(57
)
(159
)
Total cost of sales
10,905
10,163
23,002
22,729
Gross (loss) profit
(2,242
)
(2,609
)
(2,608
)
1,967
Operating expenses:
General and administrative
5,426
4,964
10,739
9,860
Provision for doubtful accounts
—
600
—
600
Depreciation and amortization
647
631
1,299
1,268
Total operating expenses
6,073
6,195
12,038
11,728
Operating loss
$
(8,315
)
$
(8,804
)
$(14,646)
$
(9,761
)
Equipment Leasing Segment:
Revenue:
Equipment leasing
$
1,634
$
4,516
$
5,242
$
15,695
Lease pool equipment sales
1,263
172
2,169
399
Other equipment sales
12
123
41
253
2,909
4,811
7,452
16,347
Cost of sales:
Direct costs-equipment leasing
785
1,051
1,537
2,418
Lease pool depreciation
6,675
7,613
13,548
15,284
Cost of lease pool equipment sales
298
85
713
182
Cost of other equipment sales
51
62
87
179
7,809
8,811
15,885
18,063
Gross loss
$
(4,900
)
$
(4,000
)
$
(8,433
)
$
(1,716
)
Equipment Manufacturing and Sales Segment:
Revenues:
Seamap
$
2,208
$
2,273
$
7,126
$
7,388
Klein
2,326
—
4,462
—
SAP
1,332
514
1,813
1,074
Intra-segment sales
(108
)
—
(423
)
—
5,758
2,787
12,978
8,462
Cost of sales:
Seamap
900
1,028
3,439
4,015
Klein
1,390
—
2,861
—
SAP
934
401
1,297
810
Intra-segment sales
(108
)
—
(423
)
—
3,116
1,429
7,174
4,825
Gross profit
$
2,642
$
1,358
$
5,804
$
3,637
Gross profit margin
46
%
49
%
45
%
43
%
###
2
We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.
