Mitcham Industries Reports Fiscal 2018 Second Quarter Results

Contacts:  

Rob Capps, Co-CEO

Mitcham Industries, Inc.

936-291-2277

Jack Lascar

Dennard ▪ Lascar Associates

713-529-6600

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

July 31,
2017

January 31,
2017

ASSETS

Current assets:

Cash and cash equivalents

$  6,916

$  2,902

Restricted cash

236

609

Accounts and contracts receivable, net of allowance for doubtful accounts of $3,419 and $3,716 at July 31, 2017 and January 31, 2017, respectively

12,439

15,830

Inventories, net

12,465

11,960

Prepaid income taxes

-

1,565

Prepaid expenses and other current assets

1,934

2,193

Total current assets

33,990

35,059

Seismic equipment lease pool and property and equipment, net

29,842

43,838

Intangible assets, net

8,536

9,012

Goodwill

3,997

3,997

Non-current prepaid income taxes

1,173

-

Long-term receivables net of allowance for doubtful accounts of $2,188 at July 31, 2017 and January 31, 2017

4,027

2,780

Other assets

29

28

Total assets

$81,594

$94,714

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 1,770

$ 1,929

Current maturities - long-term debt

-

6,371

Deferred revenue

455

651

Income taxes payable

52

-

Accrued expenses and other current liabilities

4,366

4,514

Total current liabilities

6,643

13,465

Deferred tax liability

275

317

Total liabilities

6,918

13,782

Shareholders' equity:

Preferred stock, $1.00 par value; 1,000  shares authorized; 380 and 343 shares issued and outstanding at July 31, 2017 and January 31, 2017, respectively

8,133

7,294

Common stock, $0.01 par value; 20,000 shares authorized;  14,019 shares issued at July 31 2017 and January 31, 2017

140

140

Additional paid-in capital

121,861

121,401

Treasury stock, at cost (1,929 shares at July 31, 2017 and January 31, 2017)

(16,858)

(16,858)

Accumulated deficit

(28,881)

(20,451)

Accumulated other comprehensive loss

(9,719)

(10,594)

Total shareholders' equity

74,676

80,932

Total liabilities and shareholders' equity

$81,594

$94,714

MITCHAM INDUSTRIES, 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,

2017

2016

2017

2016

Revenues:

Equipment manufacturing and sales

$9,586

$ 5,754

$16,474

$12,942

Equipment leasing

977

1,634

3,694

5,242

Lease pool and other equipment sales

273

1,275

9,101

2,210

 Total revenues

10,836

8,663

29,269

20,394

Cost of sales:

Cost of equipment manufacturing and sales

5,868

3,097

9,843

7,118

Direct costs - equipment leasing

540

785

1,484

1,537

Direct costs - lease pool depreciation

3,750

6,675

7,931

13,548

Cost of lease pool and other equipment sales

60

348

6,199

799

Total cost of sales

10,218

10,905

25,457

23,002

Gross profit (loss)

618

(2,242)

3,812

(2,608)

Operating expenses:

General and administrative

5,065

5,426

9,967

10,739

Depreciation and amortization

525

647

1,106

1,299

Total operating expenses

5,590

6,073

11,073

12,038

Operating loss

(4,972)

(8,315)

(7,261)

(14,646)

Other income (expense):

Interest, net

17

(164)

(29)

(428)

Other, net

(52)

(612)

(153)

(161)

Total other expense

(35)

(776)

(182)

(589)

Loss before income taxes

(5,007)

(9,091)

(7,443)

(15,235)

Provision for income taxes

(357)

(435)

(586)

(734)

Net loss

$(5,364)

$ (9,526)

$ (8,029)

$ (15,969)

Preferred stock dividends

(207)

(114)

(401)

(114)

Net loss available to common shareholders

$(5,571)

$ (9,640)

$ (8,430)

$ (16,083)

Net loss per common share:

Basic

$ (0.46)

$ (0.80)

$ (0.70)

$ (1.33)

Diluted

$ (0.46)

$ (0.80)

$ (0.70)

$ (1.33)

Shares used in computing net loss per common share:

Basic

12,082

12,070

12,080

12,065

Diluted

12,082

12,070

12,080

12,065

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Six Months
Ended July 31,

2017

2016

Cash flows from operating activities:

Net loss

$(8,029)

$(15,969)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

9,095

14,910

Stock-based compensation

461

433

Provision for inventory obsolescence

67

43

Gross profit from sale of lease pool equipment

(2,852)

(1,456)

Deferred tax benefit

(57)

(375)

Changes in working capital items:

Trade accounts and contracts receivable

5,877

8,769

Inventories

(107)

181

Prepaid expenses and other current assets

201

(673)

Income taxes payable

430

658

Accounts payable, accrued expenses, other current liabilities and deferred revenue

(929)

(4,014)

Foreign exchange gains net of losses

(71)

577

Net cash provided by operating activities

4,086

3,084

Cash flows from investing activities:

Purchases of seismic equipment held for lease

(234)

(583)

Purchases of property and equipment

(128)

(77)

Sale of used lease pool equipment

6,020

2,169

Net cash provided by investing activities

5,658

1,509

Cash flows from financing activities:

Net payments on revolving line of credit

(3,500)

(9,400)

Payments on term loan and other borrowings

(2,807)

(1,612)

Net proceeds from preferred stock offering

774

7,117

Preferred stock dividends

(401)

(114)

Net cash used in financing activities

(5,934)

(4,009)

Effect of changes in foreign exchange rates on cash and cash equivalents

(169)

(857)

Net change in cash and cash equivalents

3,641

(273)

Cash and cash equivalents, beginning of period

3,511

3,769

Cash and cash equivalents, end of period

$7,152

$ 3,496

Supplemental cash flow information:

Interest paid

$ 120

$ 504

Income taxes  paid

$ 159

$ 529

Purchases of seismic equipment held for lease in accounts payable at end of period

$ 42

$  148

Mitcham Industries, Inc.

Reconciliation of Net Loss and Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA

For the Three Months Ended July 31, 

For the Six Months Ended

July 31,

2017

2016

2017

2016

(in thousands)

(in thousands)

Reconciliation of Net loss to EBITDA and Adjusted EBITDA

Net loss

$ (5,364)

$ (9,526)

$ (8,029)

$ (15,969)

Interest expense, net

(17)

164

29

428

Depreciation and amortization

4,304

7,353

9,095

14,910

Provision for income taxes

357

435

586

734

EBITDA ⁽¹⁾

(720)

(1,574)

1,681

103

Non-cash foreign exchange losses

167

493

361

319

Stock-based compensation

237

186

461

433

Cost of lease pool sales

55

298

6,194

713

Adjusted EBITDA ⁽¹⁾

$    (261)

$    (597)

$    8,697

$    1,568

Reconciliation of Net cash provided by operating activities to EBITDA

Net cash provided by operating activities

$ 2,974

$ 1,335

$ 4,086

$ 3,084

Stock-based compensation

(237)

(186)

(461)

(433)

Provision for inventory obsolescence

(59)

-

(67)

(43)

Changes in trade accounts, contracts and notes receivable

(3,702)

(5,960)

(5,877)

(8,769)

Interest paid

28

166

120

504

Taxes paid, net of refunds

146

378

159

529

Gross profit from sale of lease pool equipment

163

965

2,852

1,456

Changes in inventory

(1,296)

116

107

(181)

Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue

977

1,970

929

4,014

Changes in prepaid expenses and other current assets

348

423

(201)

673

Foreign exchange gains net of losses

23

(696)

71

(577)

Other

(85)

(85)

(37)

(154)

EBITDA ⁽¹⁾

$   (720)

$   (1,574)

$ 1,681

$ 103

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 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 contained 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

July 31, 

For the Six Months Ended

July 31,

2017

2016

2017

2016

(in thousands)

(in thousands)

Revenues:

Equipment Manufacturing and Sales

$  9,662

$  5,758

$ 16,573

$  12,978

Equipment Leasing

1,271

2,909

12,816

7,452

Inter-segment sales

(97)

(4)

(120)

(36)

     Total revenues

10,836

8,663

29,269

20,394

Cost of sales:

Equipment Manufacturing and Sales

5,943

3,116

9,942

7,174

Equipment Leasing

4,373

7,809

15,636

15,885

Inter-segment costs

(98)

(20)

(121)

(57)

Total cost of sales

10,218

10,905

25,457

23,002

Gross profit (loss)

618

(2,242)

3,812

(2,608)

Operating expenses:

General and administrative

5,065

5,426

9,967

10,739

Depreciation and amortization

525

647

1,106

1,299

     Total operating expenses

5,590

6,073

11,073

12,038

Operating loss

$    (4,972)

$    (8,315)

$    (7,261)

$(14,646)

Equipment Manufacturing and Sales Segment:

Revenues:

  Seamap

$7,490

$2,208

$12,377

$7,126

  Klein

1,002

2,326

1,939

4,462

  SAP

1,622

1,332

2,911

1,813

  Intra-segment sales

(452)

(108)

(654)

(423)

9,662

5,758

16,573

12,978

Cost of sales:

  Seamap

4,206

900

6,767

3,439

  Klein

944

1,390

1,677

2,861

  SAP

1,245

934

2,262

1,297

  Intra-segment sales

(452)

(108)

(764)

(423)

5,943

3,116

9,942

7,174

Gross profit

$3,719

$    2,642

$6,631

$5,804

Gross profit margin

38%

46%

40%

45%

Equipment Leasing Segment:Equipment Leasing Segment:

Revenues:

Equipment leasing

$   977

$   1,634

$  3,694

$  5,242

Lease pool equipment sales

228

1,263

9,062

2,169

Other equipment sales

66

12

60

41

1,271

2,909

12,816

7,452

Cost of sales:

Direct costs-equipment leasing

561

785

1,505

1,537

Lease pool depreciation

3,750

6,675

7,931

13,548

Cost of lease pool equipment sales

66

298

6,195

713

Cost of other equipment sales

(4)

51

5

87

4,373

7,809

15,636

15,885

Gross loss

$    (3,102)

$    (4,900)

$ (2,820)

$ (8,433)