Mitcham Industries Reports Fiscal 2019 Second Quarter Results

Contacts:

Rob Capps, Co-CEO

Mitcham Industries, Inc.

936-291-2277

Jack Lascar / Mark Roberson

Dennard Lascar Investor Relations

713-529-6600

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

July 31, 2018

January 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

6,886

$

9,902

Restricted cash

223

244

Accounts and contracts receivable, net of allowance for doubtful accounts of $3,115 and $3,885 at July 31, 2018 and January 31, 2018, respectively

11,498

10,494

Inventories, net

11,855

10,856

Prepaid expenses and other current assets

1,970

1,550

Total current assets

32,432

33,046

Seismic equipment lease pool and property and equipment, net

19,765

22,900

Intangible assets, net

11,037

8,015

Goodwill

2,531

2,531

Non-current prepaid income taxes

1,570

1,609

Long-term receivables, net of allowance for doubtful accounts of $532 and $2,282 at July 31, 2018 and January 31, 2018, respectively

168

4,652

Other assets

611

926

Total assets

$

68,114

$

73,679

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

2,038

$

1,271

Deferred revenue

460

741

Accrued expenses and other current liabilities

4,776

5,253

Income taxes payable

886

258

Total current liabilities

8,160

7,523

Deferred tax liability

-

307

Total liabilities

8,160

7,830

Shareholders' equity:

Preferred stock, $1.00 par value; 1,000 shares authorized; 768 and 532 issued and outstanding at July 31, 2018 and January 31, 2018, respectively

16,950

11,544

Common stock, $0.01 par value; 20,000 shares authorized; 14,049 and 14,019 shares issued at July 31, 2018 and January 31, 2018, respectively

140

140

Additional paid-in capital

122,672

122,304

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

(16,860)

(16,860)

Accumulated deficit

(53,715)

(42,425)

Accumulated other comprehensive loss

(9,233)

(8,854)

Total shareholders' equity

59,954

65,849

Total liabilities and shareholders' equity

$

68,114

$

73,679

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,

2018

2017

2018

2017

Revenues:

Sale of marine technology products

$

5,877

$

9,586

$

9,443

$

16,474

Equipment leasing

1,630

977

4,327

3,694

Sale of lease pool equipment

843

273

2,193

9,101

Total revenues

8,350

10,836

15,963

29,269

Cost of sales:

Sale of marine technology products

3,216

5,868

5,302

9,843

Equipment leasing (including lease pool depreciation)

3,242

4,290

6,824

9,415

Lease pool equipment sales

32

60

732

6,199

Total cost of sales

6,490

10,218

12,858

25,457

Gross profit

1,860

618

3,105

3,812

Operating expenses:

Selling, general and administrative

5,504

4,825

11,134

9,629

Research and development

312

240

682

338

Provision for doubtful accounts

—

—

200

—

Depreciation and amortization

620

525

1,237

1,106

Total operating expenses

6,436

5,590

13,253

11,073

Operating loss

(4,576)

(4,972)

(10,148)

(7,261)

Other income (expense):

Interest income (expense), net

17

17

35

(29)

Other, net

55

(52)

141

(153)

Total other income (expense)

72

(35)

176

(182)

Loss before income taxes

(4,504)

(5,007)

(9,972)

(7,443)

Provision for income taxes

(85)

(357)

(522)

(586)

Net loss

$

(4,589)

$

(5,364)

$

(10,494)

$

(8,029)

Preferred stock dividends

(411)

(207)

(796)

(401)

Net loss attributable to common shareholders

$

(5,000)

$

(5,571)

$

(11,290)

$

(8,430)

Net loss per common share:

Basic

$

(0.41)

$

(0.46)

$

(0.93)

$

(0.70)

Diluted

$

(0.41)

$

(0.46)

$

(0.93)

$

(0.70)

Shares used in computing loss per common share:

Basic

12,093

12,082

12,090

12,080

Diluted

12,093

12,082

12,090

12,080

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Six Months Ended
July 31,

2018

2017

Cash flows from operating activities:

Net loss

$

(10,494)

$

(8,029)

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

Depreciation and amortization

6,399

9,095

Stock-based compensation

368

461

Provision for inventory obsolescence

115

67

Provision for doubtful accounts, net of charge offs

200

—

Gross (profit) loss from sale of lease pool equipment

(1,246)

(2,852)

Deferred tax expense

(306)

(57)

Changes in:

Trade accounts and contracts receivable

2,227

5,877

Unbilled revenue

(341)

—

Inventories

(1,406)

(107)

Prepaids and other current assets, net

(1,435)

201

Income taxes receivable and payable

665

430

Accounts payable, accrued expenses and other current liabilities

(1,551)

(929)

Deferred revenue

942

—

Foreign exchange losses net of gains

64

(71)

Net cash (used in) provided by operating activities

(5,799)

4,086

Cash flows from investing activities:

Purchases of seismic equipment held for lease

(1,386)

(234)

Acquisition of assets

(3,000)

—

Purchases of property and equipment

(487)

(128)

Sales of used lease pool equipment

2,792

6,020

Net cash (used in) provided by investing activities

(2,081)

5,658

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

5,450

774

Preferred stock dividends

(796)

(401)

Net cash provided by (used in) financing activities

4,654

(5,934)

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

189

(169)

Net (decrease) increase in cash, cash equivalents and restricted cash

(3,037)

3,641

Cash, cash equivalents and restricted cash, beginning of period

10,146

3,511

Cash, cash equivalents and restricted cash, end of period

$

7,109

$

7,152

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
July 31,

For the Six Months Ended
July 31,

2018

2017

2018

2017

(in thousands)

(in thousands)

Reconciliation of Net loss to EBITDA and Adjusted EBITDA

Net loss

$

(4,589)

$

(5,364)

$

(10,494)

$

(8,029)

Interest (income) expense, net

(17)

(17)

(35)

29

Depreciation and amortization

3,096

4,304

6,399

9,095

Provision for income taxes

85

357

522

586

EBITDA (1)

(1,425)

(720)

(3,608)

1,681

Non-cash foreign exchange losses (gains)

62

167

13

361

Stock-based compensation

242

237

368

461

Cost of lease pool sales

7

55

634

6,194

Adjusted EBITDA (1)

$

(1,114)

$

(261)

$

(2,593)

$

8,697

Reconciliation of Net cash provided by operating activities to EBITDA

Net cash (used in) provided by operating activities

$

(2,433)

$

2,974

$

(5,799)

$

4,086

Stock-based compensation

(242)

(237)

(368)

(461)

Provision for doubtful accounts

—

—

(200)

—

Provision for inventory obsolescence

(115)

(59)

(115)

(67)

Changes in trade accounts, contracts and notes receivable

(398)

(3,702)

(1,886)

(5,877)

Interest received

1

28

2

120

Taxes paid, net of refunds

222

146

268

159

Gross profit (loss) from sale of lease pool equipment

710

163

1,246

2,852

Changes in inventory

562

(1,296)

1,406

107

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

875

977

609

929

Changes in prepaid expenses and other current assets

(85)

348

1,435

(201)

Foreign exchange (losses) gains, net

(48)

23

(64)

71

Other

(474)

(85)

(142)

(37)

EBITDA (1)

$

(1,425)

$

(720)

$

(3,608)

$

1,681

(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 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, service debt and finance working capital requirements and 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
July 31,

For the Six Months Ended
July 31,

2018

2017

2018

2017

(in thousands)

(in thousands)

Revenues:

Marine technology products

$

6,012

$

9,662

$

9,720

$

16,573

Equipment leasing

2,473

1,271

6,520

12,816

Inter-segment sales

(135)

(97)

(277)

(120)

Total revenues

8,350

10,836

15,963

29,269

Cost of sales:

Marine technology products

3,351

5,943

5,579

9,942

Equipment leasing

3,274

4,373

7,556

15,636

Inter-segment costs

(135)

(98)

(277)

(121)

Total cost of sales

6,490

10,218

12,858

25,457

Gross profit

1,860

618

3,105

3,812

Operating expenses:

Selling, general and administrative

5,504

4,825

11,134

9,629

Research and development

312

240

682

338

Provision for doubtful accounts

—

—

200

—

Depreciation and amortization

620

525

1,237

1,106

Total operating expenses

6,436

5,590

13,253

11,073

Operating loss

$

(4,576)

$

(4,972)

$

(10,148)

$

(7,261)

Marine Technology Products Segment:

Revenues:

Seamap

$

3,814

$

7,490

$

5,566

$

12,377

Klein

1,591

1,002

3,103

1,939

SAP

797

1,622

1,277

2,911

Intra-segment sales

(190)

(452)

(226)

(654)

6,012

9,662

9,720

16,573

Cost of sales:

Seamap

1,785

4,206

2,629

6,767

Klein

1,090

944

2,126

1,677

SAP

666

1,245

1,064

2,262

Intra-segment sales

(190)

(452)

(240)

(764)

3,351

5,943

5,579

9,942

Gross profit

$

2,661

$

3,719

$

4,141

$

6,631

Gross profit margin

44

%

38

%

43

%

40

%

Equipment Leasing Segment:

Revenue:

Equipment leasing

$

1,630

$

977

$

4,327

$

3,694

Lease pool equipment sales

718

228

1,881

9,062

Other equipment sales

125

66

312

60

2,473

1,271

6,520

12,816

Cost of sales:

Direct costs-equipment leasing

797

561

1,725

1,505

Lease pool depreciation

2,445

3,750

5,099

7,931

Cost of lease pool equipment sales

7

66

634

6,195

Cost of other equipment sales

25

(4)

98

5

3,274

4,373

7,556

15,636

Gross loss

$

(801)

$

(3,102)

$

(1,036)

$

(2,820)