Press Release Details
Mitcham Industries Reports Strong Fiscal 2007 Third Quarter Results
- Revenues up 30 percent to $12.7 million
- Diluted EPS up 31 percent to $0.38
- Outlook for the seismic industry remains very favorable
Billy F. Mitcham, Jr., the Company's President and CEO, stated, "We continue to experience high demand for our equipment, driven by the strong worldwide market for seismic services. From a seasonal standpoint, our fiscal third quarter core leasing activity delivered solid performance with revenues up 24 percent from the second quarter as we penetrate new markets globally.
"We continue to see strong seismic activity across our customer base with more complex surveys, which generally require more equipment, as most oil and gas companies are striving to expand their reservoir base. This seismic expansion is taking place in both land and marine, and we believe that we will continue to be a major beneficiary of this market growth. In response to the increasing demand for our services, we have committed to significantly increase our lease pool. We expect to have added approximately $25.0 million of new equipment to our lease pool by the end of fiscal 2007, or shortly thereafter. Included in this amount is the purchase of 5,000 stations (15,000 channels) of DSU3 428XL pursuant to our recently announced arrangement with Sercel. Looking ahead, we expect exploration spending by the oil & gas companies to continue to grow, which supports our very favorable outlook for the seismic industry."
The Company reported net income of $3.9 million, or $0.38 per diluted share, for the third quarter of fiscal 2007 compared to net income of $2.9 million, or $0.29 per diluted share, for the third quarter of fiscal 2006. Total revenues for the third quarter increased 30 percent to $12.7 million compared to $9.8 million in the same period last year. The majority of the revenue increase resulted from a 133 percent increase in other equipment sales, mainly from the sale of new seismic equipment. Seamap revenues increased $946,000 over last year's third quarter, while equipment leasing sales declined $515,000 from an unusually strong third quarter a year ago due to a large job in South America.
Gross profit in the third quarter of fiscal 2007 declined to 46.4 percent from 55.2 percent in the third quarter of last year. The decline in gross profit was due primarily to a higher proportion of lower margin other equipment sales, as well as higher costs associated with a design issue in one of the versions of the new GunLink 4000 system that was introduced to the marketplace in the first quarter of fiscal 2007. Design changes have already been implemented, and the Company expects these changes to be completed in the next 60 days. The Company currently has $7.0 million of firm orders for the GunLink 4000 in its backlog.
EBITDA (net income before interest, taxes, depreciation and amortization) for the third quarter was $4.5 million, or 36 percent of revenue, compared to $5.1 million, or 52 percent of revenue, in the same period last year. EBITDA, which is not a measure determined in accordance with generally accepted accounting principles ("GAAP"), is defined and reconciled to reported net income in Note A under the accompanying financial tables.
For the first nine months of fiscal 2007, the Company reported net income of $8.6 million, or $0.84 per diluted share, compared to $6.2 million, or $0.64 per diluted share, in the same period in fiscal 2006. Due to the improved financial performance of the Company over the past two years and its expectation of continued profitability, Mitcham is now in a position to recognize certain deferred tax assets that arose in prior years primarily as a result of net operating loss carryovers. For the first nine months of fiscal 2007, the Company has recognized approximately $2.0 million in deferred tax benefits.
Total revenues for the first nine months of fiscal 2007 increased 55 percent to $37.8 million compared to $24.5 million in the same period last year. Year-to-date EBITDA rose to $13.2 million in fiscal 2007, or 35 percent of revenue, compared to $12.6 million, or 51 percent of revenue, during the same period in fiscal 2006.
Mitcham Industries, Inc., a geophysical equipment supplier, offers for lease or sale, new and "experienced" seismic equipment to the oil and gas industry, seismic contractors, environmental agencies, government agencies and universities. Headquartered in Texas, with sales and services offices in Calgary, Canada; Brisbane, Australia; Singapore; Ufa, Bashkortostan, Russia; and the United Kingdom and with associates throughout Europe, South America and Asia, Mitcham conducts operations on a global scale and is the largest independent exploration equipment lessor in the industry.
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included herein, including statements regarding potential future demand for the Company's products and services, business strategy and other plans and objectives for future operations, are forward-looking statements. Actual results may differ materially from such forward-looking statements. Important factors that could cause or contribute to such differences include the inherent volatility of oil and gas prices and the related volatility of demand for the Company's services; loss of significant customers; significant defaults by customers on amounts due to the Company; international economic and political instability; dependence upon additional lease contracts; the risk of technological obsolescence of the Company's lease fleet; vulnerability of seismic activity and demand to weather conditions and seasonality of operating results; dependence upon few suppliers; and other factors that are disclosed in the Company's 2006 Annual Report on Form 10-K and its other Securities and Exchange Commission filings and available from the Company without charge. All information in this release is as of the date of this release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
MITCHAM INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) October 31, January 31, 2006 2006 (Unaudited) ASSETS Current assets: Cash and cash equivalents $18,185 $16,438 Short-term investments -- 2,550 Trade accounts receivable, net 9,900 5,793 Current portion of notes receivable, net 2,024 3,088 Inventories, net 6,407 1,155 Prepaid expenses and other current assets 1,815 717 Current portion of deferred tax asset 2,094 - Total current assets 40,425 29,741 Seismic equipment lease pool and property and equipment, net 23,965 19,924 Intangible assets, net 2,241 2,584 Goodwill 3,358 2,358 Deferred tax asset, net 2,919 3,000 Long-term portion of notes receivable and other assets 1,260 13 Total assets $74,168 $57,620 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $6,615 $4,436 Accrued expenses and other current liabilities 3,668 2,066 Current portion of long-term debt 1,500 -- Deferred revenue 1,166 381 Income taxes payable 518 286 Total current liabilities 13,467 7,169 Long-term debt, net of current maturities 1,500 3,000 Total liabilities 14,967 10,169 Shareholders' equity: Preferred stock, $1.00 par value; 1,000 shares authorized; none issued and outstanding -- -- Common stock, $.01 par value; 20,000 shares authorized; 10,538 and 10,360 shares issued, respectively 106 104 Additional paid-in capital 66,966 64,396 Treasury stock, at cost (919 and 915 shares) (4,781) (4,686) Accumulated deficit (6,872) (15,427) Accumulated other comprehensive income 3,782 3,064 Total shareholders' equity 59,201 47,451 Total liabilities and shareholders' equity $74,168 $57,620 MITCHAM INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) For the Three Months For the Nine Months Ended October 31, Ended October 31, 2006 2005 2006 2005 Revenues: Equipment leasing $6,161 $6,676 $18,141 $17,668 Lease pool equipment sales 842 673 3,991 2,342 Other equipment sales 5,738 2,466 15,683 4,445 Total revenues 12,741 9,815 37,815 24,455 Direct costs: Equipment leasing 433 968 1,809 2,174 Lease pool depreciation 1,956 2,120 5,507 6,299 Cost of lease pool equipment sales 236 47 1,876 510 Cost of other equipment sales 4,206 1,261 10,284 2,562 Total direct costs 6,831 4,396 19,476 11,545 Gross profit 5,910 5,419 18,339 12,910 Operating costs: General and administrative 3,330 2,463 10,693 6,649 Depreciation and amortization 337 134 944 286 Total operating costs 3,667 2,597 11,637 6,935 Operating income 2,243 2,822 6,702 5,975 Interest and other income, net 296 85 664 281 Income before income taxes 2,539 2,907 7,366 6,256 Benefit from (provision for) income taxes 1,324 (57) 1,189 (25) Net income $ 3,863 $ 2,850 $8,555 $6,231 Net income per common share: Basic $0.40 $0.31 $0.89 $0.69 Diluted $0.38 $0.29 $0.84 $0.64 Shares used in computing net income per common share: Basic 9,609 9,152 9,584 9,061 Diluted 10,069 9,902 10,157 9,745 MITCHAM INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the Nine Months Ended October 31, 2006 2005 Cash flows from operating activities: Net income $8,555 $6,231 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,451 6,585 Stock-based compensation 1,198 82 Provision for doubtful accounts, net of charge offs -- 162 Gross profit from sale of lease pool equipment (2,115) (1,806) Excess tax benefit from exercise of non-qualified stock options (497) -- Deferred tax benefit (2,009) -- Changes in: Trade accounts receivable (1,622) (58) Notes receivable (3,259) -- Inventories (4,725) (792) Income taxes payable 730 (133) Accounts payable, accrued expenses, other current liabilities and deferred revenue 4,561 (4,503) Current assets of discontinued operations 354 5 Prepaid expenses and other current assets (1,099) 322 Net cash provided by operating activities 6,523 6,095 Cash flows from investing activities: Purchases of seismic equipment held for lease (10,177) (3,655) Maturities (purchases) of short-term investments 2,550 (1,000) Purchases of property and equipment (1,585) (374) Acquisition of subsidiary, net of cash acquired (1,000) (2,529) Sale of used lease pool equipment 3,991 2,341 Long-term assets of discontinued operations -- 216 Net cash used in investing activities (6,221) (5,001) Cash flows from financing activities: Payments on borrowings -- (918) Proceeds from issuance of common stock upon exercise of stock options 783 882 Excess tax benefits from exercise of non-qualified stock options 497 -- Net cash provided by (used in) financing activities 1,280 (36) Effect of changes in foreign exchange rates on cash and cash equivalents 165 -- Net increase in cash and cash equivalents 1,747 1,058 Cash and cash equivalents, beginning of period 16,438 13,138 Cash and cash equivalents, end of period $18,185 $14,196 Note A MITCHAM INDUSTRIES, INC. Reconciliation of Net Income to EBITDA (In thousands) (Unaudited) For the For the Three Months Ended Nine Months Ended October 31, October 31, 2006 2005 2006 2005 Net income $3,863 $2,850 $8,555 $6,231 Interest income, net (284) (85) (617) (279) Depreciation and amortization 2,293 2,254 6,451 6,585 Provision for (benefit from) income taxes (1,324) 57 (1,189) 25 EBITDA (1) 4,548 5,076 13,200 12,562 (1) EBITDA is defined as net income (loss) before (i) interest income, net of interest expense, (ii) provision for (or benefit from) income taxes and (iii) depreciation and amortization. We consider EBITDA to be important indicators for the performance of our business, but not measures of performance calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We have included these non-GAAP financial measures because they provide management with important information for assessing our performance and as indicators of our ability to make capital expenditures and finance working capital requirements. EBITDA is not a measure of financial performance 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. Other companies in our industry may calculate EBITDA differently than we do and EBITDA may not be comparable with similarly titled measures reported by other companies. Contacts: Billy F. Mitcham, Jr., President & CEO Mitcham Industries, Inc. 936-291-2277 Jack Lascar / Karen Roan Dennard Rupp Gray & Easterly (DRG&E) 713-529-6600
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