Mitcham Industries Reports Fiscal 2019 First Quarter Results

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

April 30, 2018

January 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

8,613

$

9,902

Restricted cash

233

244

Accounts and contracts receivable, net of allowance for doubtful accounts of $3,560 and $3,885 at April 30, 2018 and January 31, 2018, respectively

12,333

10,494

Inventories, net

11,432

10,856

Prepaid expenses and other current assets

2,132

1,550

Total current assets

34,743

33,046

Seismic equipment lease pool and property and equipment, net

21,046

22,900

Intangible assets, net

11,484

8,015

Goodwill

2,531

2,531

Non-current prepaid income taxes

1,603

1,609

Long-term receivables, net of allowance for doubtful accounts of $94 and $2,282 at April 30, 2018 and January 31, 2018, respectively

706

4,652

Other assets

611

926

Total assets

$

72,724

$

73,679

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

2,889

$

1,271

Deferred revenue

723

741

Accrued expenses and other current liabilities

4,895

5,253

Income taxes payable

896

258

Total current liabilities

9,403

7,523

Deferred tax liability

105

307

Total liabilities

9,508

7,830

Shareholders' equity:

Preferred stock, $1.00 par value; 1,000 shares authorized; 698 and 532 issued and outstanding at April 30, 2018, and January 31, 2018, respectively

15,312

11,544

Common stock $.01 par value; 20,000 shares authorized; 14,019 shares issued at April 30, 2018 and January 31, 2018

140

140

Additional paid-in capital

122,430

122,304

Treasury stock, at cost (1,929 at April 30, 2018 and January 31, 2018)

(16,860)

(16,860)

Accumulated deficit

(48,715)

(42,425)

Accumulated other comprehensive loss

(9,091)

(8,854)

Total shareholders' equity

63,216

65,849

Total liabilities and shareholders' equity

$

72,724

$

73,679

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

For the Three Months Ended April 30,

2018

2017

Revenues:

Sale of marine technology products

$

3,566

$

6,888

Equipment leasing

2,697

2,717

Sale of lease pool equipment

1,350

8,828

Total revenues

7,613

18,433

Cost of sales:

Sale of marine technology products

2,086

3,975

Equipment leasing (including lease pool depreciation)

3,582

5,125

Lease pool equipment sales

700

6,139

Total cost of sales

6,368

15,239

Gross profit

1,245

3,194

Operating expenses:

Selling, general and administrative

5,630

4,804

Research and development

370

98

Provision for doubtful accounts

200

—

Depreciation and amortization

617

581

Total operating expenses

6,817

5,483

Operating loss

(5,572)

(2,289)

Other income (expense):

Interest, net

18

(46)

Other, net

86

(101)

Total other income (expense)

104

(147)

Loss before income taxes

(5,468)

(2,436)

Provision for income taxes

(437)

(229)

Net loss

$

(5,905)

$

(2,665)

Preferred stock dividends

(385)

(194)

Net loss attributable to common shareholders

$

(6,290)

$

(2,859)

Net loss per common share:

Basic

$

(0.52)

$

(0.24)

Diluted

$

(0.52)

$

(0.24)

Shares used in computing loss per common share:

Basic

12,087

12,078

Diluted

12,087

12,078

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Three Months
Ended April 30,

2018

2017

Cash flows from operating activities:

Net loss

$

(5,905)

$

(2,665)

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

Depreciation and amortization

3,303

4,791

Stock-based compensation

126

224

Provision for doubtful accounts, net of charge offs

(200)

—

Provision for inventory obsolescence

—

8

Gross profit from sale of lease pool equipment

(536)

(2,689)

Deferred tax benefit

(202)

(27)

Changes in working capital items:

Trade accounts and contracts receivable

2,418

2,175

Unbilled revenue

(930)

—

Inventories

(844)

(1,403)

Prepaid expenses and other current assets

(1,520)

549

Income taxes payable

642

149

Accounts payable, accrued expenses and other current liabilities

(47)

48

Deferred revenue

313

—

Foreign exchange losses net of gains

16

(48)

Net cash (used in) provided by operating activities

(3,366)

1,112

Cash flows from investing activities:

Purchases of seismic equipment held for lease

(190)

(158)

Acquisition of assets

(3,000)

—

Purchases of property and equipment

(113)

(28)

Sales of used lease pool equipment

1,620

4,496

Net cash (used in) provided by investing activities

(1,683)

4,310

Cash flows from financing activities:

Net payments on revolving line of credit

—

(3,500)

Payments on term loan and other borrowings

—

(2,807)

Net proceeds from preferred stock offering

3,812

27

Preferred stock dividends

(385)

(194)

Net cash provided by (used in) financing activities

3,427

(6,474)

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

322

(3)

Net change in cash, cash equivalents and restricted cash

(1,300)

(1,055)

Cash, cash equivalents and restricted cash, beginning of period

10,146

3,511

Cash, cash equivalents and restricted cash, end of period

$

8,846

$

2,456

MITCHAM INDUSTRIES, INC.

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

Adjusted EBITDA

(unaudited)

For the Three Months Ended
April 30,

2018

2017

(in thousands)

Reconciliation of Net loss to EBITDA and Adjusted EBITDA

Net loss

$

(5,905)

$

(2,665)

Interest (income) expense, net

(18)

46

Depreciation and amortization

3,303

4,791

Provision for income taxes

437

229

EBITDA (1)

(2,183)

2,401

Non-cash foreign exchange (gains) losses

(49)

194

Stock-based compensation

126

224

Cost of lease pool sales

627

6,139

Adjusted EBITDA (1)

$

(1,479)

$

8,958

Reconciliation of Net cash provided by operating activities to EBITDA

Net cash (used in) provided by operating activities

$

(3,366)

$

1,112

Stock-based compensation

(126)

(224)

Provision for doubtful accounts

(200)

—

Provision for inventory obsolescence

—

(8)

Changes in trade accounts, contracts and notes receivable

(1,488)

(2,175)

Interest paid

1

92

Taxes paid, net of refunds

46

13

Gross profit from sale of lease pool equipment

536

2,689

Changes in inventory

844

1,403

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

(266)

(48)

Changes in prepaid expenses and other current assets

1,520

(549)

Foreign exchange (losses) gains

(16)

48

Other

332

48

EBITDA (1)

$

(2,183)

$

2,401

(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 and stock-based compensation. 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 and finance working capital requirements. We believe 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
April 30,

2018

2017

(in thousands)

Revenues:

Sale of marine technology products

$

3,708

$

6,911

Equipment leasing

4,047

11,545

Inter-segment sales

(142)

(23)

Total revenues

7,613

18,433

Cost of sales:

Marine technology products

2,228

3,998

Equipment leasing

4,282

11,264

Inter-segment costs

(142)

(23)

Total cost of sales

6,368

15,239

Gross profit

1,245

3,194

Operating expenses:

Selling, general and administrative

5,630

4,804

Research and development

370

98

Provision for doubtful accounts

200

—

Depreciation and amortization

617

581

Total operating expenses

6,817

5,483

Operating loss

$

(5,572)

$

(2,289)

Marine Technology Products Segment:

Revenues:

Seamap

$

1,752

$

4,886

Klein

1,512

938

SAP

480

1,290

Intra-segment sales

(36)

(203)

3,708

6,911

Cost of sales:

Seamap

844

2,561

Klein

1,036

732

SAP

398

1,017

Intra-segment sales

(50)

(312)

2,228

3,998

Gross profit

$

1,480

$

2,913

Gross profit margin

40

%

42

%

Equipment Leasing Segment:

Revenue:

Equipment leasing

$

2,697

$

2,717

Lease pool equipment sales

1,163

8,828

Other equipment sales

187

—

4,047

11,545

Cost of sales:

Direct costs-equipment leasing

928

944

Lease pool depreciation

2,654

4,181

Cost of lease pool equipment sales

627

6,139

Cost of other equipment sales

73

—

4,282

11,264

Gross (loss) profit

$

(235)

$

281

Gross (loss) profit margin

(6)

%

2

%

Contacts:

Rob Capps, Co-CEO

Mitcham Industries, Inc.

936-291-2277

Jack Lascar / Mark Roberson

Dennard Lascar Investor Relations

713-529-6600