Mitcham Industries Reports Fiscal 2018 Third 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)

October 31,

January 31,

2017

2017

ASSETS

Current assets:

Cash and cash equivalents

$6,541

$2,902

Restricted Cash

229

609

Accounts and contracts receivable, net of allowance for doubtful accounts of 2,965 and $3,716 at October 31, 2017 and January 31, 2017, respectively

12,165

15,830

Inventories, net

11,940

11,960

Prepaid income taxes 

-

1,565

Prepaid expenses and other current assets

2,135

2,193

Total current assets

33,010

35,059

Seismic equipment lease pool and property and equipment, net

26,372

43,838

Intangible assets, net

8,151

9,012

Goodwill

3,997

3,997

Non-current prepaid income taxes

1,167

-

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

4,071

2,780

Other assets

29

28

Total assets

$76,797

$94,714

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

2,118

1,929

Current maturities – long-term debt

-

6,371

Deferred revenue

236

651

Income taxes payable

329

Accrued expenses and other current liabilities

3,669

4,514

Total current liabilities

6,352

13,465

Deferred tax liability

296

317

Total liabilities

6,648

13,782

Shareholders' equity:

Preferred stock, $1.00 par value; 1,000  shares authorized; 425 and 343 shares issued and outstanding at October 31, 2017 and January 31, 2017, respectively

9,144

7,294

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

140

140

Additional paid-in capital

122,087

121,401

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

(16,858)

(16,858)

Accumulated deficit

(34,391)

(20,451)

Accumulated other comprehensive loss

(9,973)

(10,594)

Total shareholders' equity

70,149

80,932

Total liabilities and shareholders' equity

$76,797

$94,714

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,

2017

2016

2017

2016

Revenues:

Equipment manufacturing and sales

$5,955

$5,251

$22,429

$18,193

Equipment leasing

2,071

2,577

5,765

7,819

Lease pool and other equipment sales

618

229

9,719

2,439

 Total revenues

8,644

8,057

37,913

28,451

Cost of sales:

Cost of equipment manufacturing and sales

3,132

2,944

12,975

10,062

Direct costs - equipment leasing

822

739

2,306

2,276

Direct costs - lease pool depreciation

3,578

6,428

11,509

19,976

Cost of lease pool and other equipment sales

211

83

6,410

882

Total cost of sales

7,743

10,194

33,200

33,196

Gross (loss) profit

901

(2,137)

4,713

(4,745)

Operating expenses:

General and administrative

5,178

5,039

15,145

15,778

Depreciation and amortization

516

558

1,622

1,857

Total operating expenses

5,694

5,597

16,767

17,635

Operating loss 

(4,793)

(7,734)

(12,054)

(22,380)

Other income (expense):

Interest, net

52

(111)

23

(539)

Other, net

46

287

(107)

126

Total other income (expense)

98

176

(84)

(413)

Loss before income taxes

(4,695)

(7,558)

(12,138)

(22,793)

(Provision) benefit for income taxes

(586)

228

(1,172)

(506)

Net loss 

($5,281)

($7,330)

($13,310)

($23,299)

Preferred stock dividends

(229)

(180)

(630)

(294)

Net loss available to common shareholders

($5,510)

($7,510)

($13,940)

($23,593)

Net loss per common share:

Basic

($0.46)

($0.62)

($1.15)

($1.96)

Diluted

($0.46)

($0.62)

($1.15)

($1.96)

Shares used in computing net loss per common share:

Basic

12,087

12,075

12,082

12,068

Diluted

12,087

12,075

12,082

12,068

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Nine Months 

Ended October 31,

2017

2016

Cash flows from operating activities:

Net loss

(13,310)

(23,299)

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

Depreciation and amortization

13,219

21,927

Stock-based compensation

685

587

Provision for inventory obsolescence

58

65

Gross profit from sale of lease pool equipment

(3,080)

(1,420)

Deferred tax benefit

(31)

(582)

Changes in working capital items:

Trade accounts and contracts receivable

5,129

10,308

Inventories

79

471

Prepaid expenses and other current assets

207

(893)

Income taxes payable

714

384

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

(1,244)

(4,242)

Foreign exchange gains net of losses

(252)

381

Net cash provided by operating activities

2,174

3,687

Cash flows from investing activities:

Purchases of seismic equipment held for lease

(321)

(604)

Purchases of property and equipment

(276)

(117)

Sale of used lease pool equipment

6,690

2,256

Net cash provided by investing activities

6,093

1,535

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)

(2,414)

Net proceeds from preferred stock offering

1,847

6,975

Preferred stock dividends

(630)

(294)

Purchase of Treasury Stock

-

(2)

Net cash used in financing activities

(5,090)

(5,135)

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

82

(624)

Net change in cash, cash equivalents and restricted cash

3,259

(537)

Cash, cash equivalents and restricted cash, beginning of period

3,511

3,769

Cash, cash equivalents and restricted cash, end of period

$6,770

$3,232

Supplemental cash flow information:

Interest paid

$84

$610

Income taxes  paid

$436

$705

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

$65

$160

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 Nine Months Ended

October 31, 

October 31,

2017

2016

2017

2016

(in thousands)

(in thousands)

Reconciliation of Net loss to EBITDA and Adjusted EBITDA

Net loss

$ (5,281)

$ (7,330)

$ (13,310)

$ (23,299)

Interest (income) expense, net 

(52)

111

(23)

539

Depreciation and amortization

4,124

7,017

13,219

21,927

Provision (benefit) for income taxes

586

(228)

1,172

506

EBITDA ⁽¹⁾

(623)

(430)

1,058

(327)

Non-cash foreign exchange (gains) losses

(41)

(288)

320

31

Stock based compensation

224

154

685

587

Cost of lease pool sales

34

51

6,228

764

Adjusted EBITDA ⁽¹⁾

(406)

(513)

8,291

1,055

Reconciliation of Net Cash Provided by Operating Activities to EBITDA

Net cash (used in) provided by operating activities

(1,912)

602

2,174

3,687

Stock-based compensation

(224)

(154)

(685)

(587)

Provision for inventory obsolescence

9

(22)

(58)

(65)

Changes in trade accounts, contracts and notes receivable

748

(1,539)

(5,129)

(10,308)

Interest (received) paid

(36)

106

84

610

Taxes paid, net of refunds

277

176

436

705

Gross profit (loss) from sale of lease pool equipment

228

(36)

3,080

1,420

Changes in inventory

(186)

(290)

(79)

(471)

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

315

228

1,244

4,242

Changes in prepaid expenses and other current assets

(6)

220

(207)

893

Foreign exchange gains net of losses

181

196

252

(381)

Other

(17)

83

(54)

(72)

EBITDA ⁽¹⁾

(623)

(430)

(327)

⁽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. 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 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

For the Nine Months

Ended October 31,

Ended October 31,

2017

2016

2017

Revenues:

Equipment Manufacturing and Sales

$5,992

$5,251

$22,565

$18,229

Equipment Leasing

2,730

2,806

15,546

10,258

Inter-segment sales

(78)

-

(198)

(36)

     Total revenues

$8,644

$8,057

$37,913

$28,451

Cost of sales:

Equipment Manufacturing and Sales

3,174

2,887

13,116

10,062

Equipment Leasing

4,647

7,249

20,282

23,134

Inter-segment costs

(78)

58

(198)

-

     Total cost of sales

7,743

10,194

33,200

33,196

Gross profit (loss)

901

(2,137)

4,713

(4,745)

Operating expenses:

General and administrative

5,178

5,039

15,145

15,778

Depreciation and amortization

516

558

1,622

1,857

     Total operating expenses

5,694

5,597

16,767

17,635

Operating loss 

($4,793)

($7,734)

($12,054)

($22,380)

Equipment Manufacturing and Sales Segment:

Revenues:

  Seamap

$3,676

$2,536

$16,053

$9,662

  Klein

1,517

1,999

3,456

6,462

  SAP

1,087

1,440

3,998

3,253

  Intra-segment sales

(288)

(724)

(942)

(1,148)

5,992

5,251

22,565

18,229

Cost of sales:

  Seamap

1,671

1,061

8,438

4,501

  Klein

894

1,468

2,571

4,330

  SAP

896

1,140

3,158

2,436

  Intra-segment sales

(287)

(782)

(1,051)

(1,205)

3,174

2,887

13,116

10,062

Gross profit

$2,818

$2,364

$9,449

$8,167

Gross profit margin

47%

45%

42%

45%

Equipment Leasing Segment:

Revenue:

Equipment leasing

$2,071

$2,577

$5,765

$7,819

Lease pool equipment sales

247

87

9,309

2,256

Other equipment sales

412

142

472

183

$2,730

$2,806

$15,546

$10,258

Cost of sales:

Direct costs-equipment leasing

858

739

2,363

2,276

Lease pool depreciation

3,578

6,428

11,509

19,976

Cost of lease pool equipment sales

33

51

6,228

764

Cost of other equipment sales

178

31

182

118

4,647

7,249

20,282

23,134

Gross loss

($1,917)

($4,443)

($4,736)

($12,876)