Add
MIND to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MIND > SEC Filings for MIND > Form 10-Q on 5-Dec-2012 | All Recent SEC Filings |
5-Dec-2012
Quarterly Report
Overview
We operate in two segments, equipment leasing ("Equipment Leasing") and equipment manufacturing. Our equipment leasing operations are conducted from our Huntsville, Texas headquarters and from our locations in Calgary, Canada; Brisbane, Australia; Ufa, Bashkortostan, Russia; Budapest, Hungary; Singapore; Bogota, Colombia; and Lima, Peru. Our Equipment Leasing segment includes the operations of our Mitcham Canada, ULC. ("MCL"), Absolute Equipment Solutions, Inc. ("AES"), Seismic Asia Pacific Pty. Ltd. ("SAP"), Mitcham Europe Ltd ("MEL"), Mitcham Marine Leasing Pte Ltd. ("MML") and Mitcham Seismic Eurasia LLC ("MSE") subsidiaries and our branch operations in Peru and Colombia. We acquired AES effective March 1, 2010 and established MEL in August 2011 and MML in November 2011. Effective February 1, 2012, AES was merged into MCL. Our equipment manufacturing segment is conducted by our Seamap subsidiaries and, therefore, is referred to as our "Seamap" segment. Seamap operates from its locations near Bristol, United Kingdom and in Singapore.
Management believes that the performance of our Equipment Leasing segment is indicated by revenues from equipment leasing and by the level of our investment in lease pool equipment. Management further believes that the performance of our Seamap segment is indicated by revenues from equipment sales and by gross profit from those sales. Management monitors EBITDA and Adjusted EBITDA, both as defined in the following table, as key indicators of our overall performance and liquidity.
The following table presents certain operating information by operating segment.
For the Three Months Ended For the Nine Months Ended
October 31, October 31,
2012 2011 2012 2011
(in thousands) (in thousands)
Revenues:
Equipment Leasing $ 14,078 $ 21,822 $ 53,983 $ 54,719
Seamap 4,839 6,743 23,134 22,009
Inter-segment sales (344 ) (545 ) (833 ) (928 )
Total revenues 18,573 28,020 76,284 75,800
Cost of sales:
Equipment Leasing 12,177 11,636 38,193 30,972
Seamap 2,052 2,485 10,065 9,041
Inter-segment costs (10 ) (446 ) (614 ) (696 )
Total cost of sales 14,219 13,675 47,644 39,317
Gross profit 4,354 14,345 28,640 36,483
Operating expenses:
General and administrative 5,854 4,961 16,907 15,403
Provision for (recovery of) doubtful
accounts - 679 (443 ) 187
Depreciation and amortization 362 304 1,031 921
Total operating expenses 6,216 5,944 17,495 16,511
Operating (loss) income $ (1,862 ) $ 8,401 $ 11,145 $ 19,972
EBITDA (1) $ 6,446 $ 16,640 $ 36,451 $ 41,018
Adjusted EBITDA (1) $ 6,705 $ 16,836 $ 37,774 $ 42,151
Reconciliation of Net income to EBITDA
and Adjusted EBITDA
Net (loss) income $ (1,222 ) $ 6,763 $ 13,636 $ 14,156
Interest (income) expense, net (79 ) 25 22 295
Depreciation and amortization 8,703 7,559 26,270 21,038
(Benefit) provision for income taxes (956 ) 2,293 (3,477 ) 5,529
EBITDA (1) 6,446 16,640 36,451 41,018
Stock-based compensation 259 196 1,323 1,133
Adjusted EBITDA (1) $ 6,705 $ 16,836 $ 37,774 $ 42,151
|
Reconciliation of Net cash provided by operating activities to EBITDA Net cash provided by operating activities $ 6,849 $ 8,722 $ 36,129 $ 28,360 Stock-based compensation (259 ) (196 ) (1,323 ) (1,133 ) Changes in trade accounts, contracts and notes receivable (6,029 ) 7,169 (16,901 ) 8,204 Interest paid 122 77 447 574 Taxes paid , net of refunds 1,187 677 8,222 4,206 Gross profit from sale of lease pool equipment 532 1,923 3,657 2,380 Changes in inventory 253 407 623 972 Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue 758 (424 ) 2,801 (2,447 ) Other 3,033 (1,715 ) 2,796 (98 ) EBITDA (1) $ 6,446 $ 16,640 $ 36,451 $ 41,018 |
(1) EBITDA is defined as net income before (a) interest expense, net of interest
income, (b) provision for (or benefit from) income taxes and
(c) depreciation, amortization and impairment. Adjusted EBITDA excludes
stock-based compensation. We consider EBITDA and Adjusted 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 ("U.S. 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 covenants of our revolving credit facility require us to maintain a
minimum level of 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 and liquidity of our core cash operations. EBITDA and Adjusted
EBITDA are not measures of financial performance or liquidity under U.S. 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 U.S. 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.
In our Equipment Leasing segment, we lease seismic data acquisition equipment primarily to seismic data acquisition companies conducting land, transition zone and marine seismic surveys worldwide. We provide short-term leasing of seismic equipment to meet a customer's requirements. All active leases at October 31, 2012 were for a term of less than one year. Seismic equipment held for lease is carried at cost, net of accumulated depreciation. We acquire some marine lease pool equipment from our Seamap segment. These amounts are reflected in the accompanying condensed consolidated financial statements at the cost to our Seamap segment, net of accumulated depreciation. From time to time, we sell lease pool equipment to our customers. These sales are usually transacted when we have equipment for which we do not have near term needs in our leasing business and if the proceeds from the sale exceed the estimated present value of future lease income from that equipment. We also occasionally sell new seismic equipment that we acquire from other companies and sometimes provide financing on those sales. As a result of our acquisition of AES, we produce, sell, and lease equipment used to deploy and retrieve seismic equipment with helicopters. In addition to conducting seismic equipment leasing operations, SAP sells equipment, consumables, systems integration, engineering hardware and software maintenance support services to the seismic, hydrographic, oceanographic, environmental, and defense industries throughout Southeast Asia and Australia.
Seismic equipment leasing is normally susceptible to weather patterns in certain geographic regions. In Canada and Russia, a significant percentage of the seismic survey activity occurs in winter months, from December or January through March or April. During the months in which the weather is warmer, certain areas are not accessible to trucks, earth vibrators and other heavy equipment because of unstable terrain. In other areas of the world, such as South America, Southeast Asia and the Pacific Rim, periods of heavy rain can impair seismic operations. These periods of heavy rain often occur during the months of February through May in parts of South America. We are able, in some cases, to transfer our equipment from one region to another in order to deal with seasonal demand and to increase our equipment utilization.
Historically, our first fiscal quarter has produced the highest leasing revenues, due in large part to the effect of the Canadian and Russian winter seasons discussed above. With the expansion of our land leasing operations into other geographic areas, such as South America and Europe, and the recent strength of our marine leasing operations, we have recently seen a lessening of the seasonal variation in our leasing business. We do expect to continue to experience seasonal fluctuations, but such fluctuations may not be as great or as predictable as in the past.
Our leasing segment can also experience periodic fluctuations in activity levels due to matters unrelated to seasonal or weather factors. These factors include the periodic shift of seismic exploration activity from one geographic area to another and difficulties encountered by our customers due to permitting and other logistical challenges.
Our Seamap segment designs, manufactures and sells a variety of products used
primarily in marine seismic applications. Seamap's primary products include
(1) the GunLink seismic source acquisition and control systems, which provide
marine operators more precise control of their exploration systems, and (2) the
BuoyLink RGPS tracking system used to provide precise positioning of seismic
sources and streamers (marine recording channels that are towed behind a
vessel). Seamap's business is generally not impacted by seasonal conditions, as
is the case with our land leasing operations. However, Seamap can experience
significant fluctuations in its business. The timing of deliveries and sales is
often dependent upon the availability of the customer's vessel for delivery and
installation of the equipment. Given the relatively large size of some orders,
this can result in significant variations from period to period.
Business Outlook
Our revenues are directly related to the level of worldwide oil and gas exploration activities and the profitability and cash flows of oil and gas companies and seismic contractors, which, in turn, are affected by expectations regarding the supply and demand for oil and natural gas, energy prices and finding and development costs. Land seismic data acquisition activity levels are measured in terms of the number of active recording crews, known as the "crew count," and the number of recording channels deployed by those crews, known as "channel count." Because an accurate and reliable census of active crews does not exist, it is not possible to make definitive statements regarding the absolute levels of seismic data acquisition activity. Furthermore, a significant number of seismic data acquisition contractors are either private or state-owned enterprises and information about their activities is not available in the public domain.
During fiscal 2012, we experienced a significant increase in our equipment leasing business. We believe the factors contributing to this increase include the following:
• Increased exploration activity driven by higher worldwide oil prices;
• Increased exploration activity for natural gas, driven in part by non-conventional sources, such as shale reservoirs;
• Our geographic expansion;
• An increase in the channel count on seismic surveys; and
• The additions we made to our lease pool of equipment.
Particular areas of improved leasing revenues included South American, North American and European land operations and our marine leasing business.
In the first nine months of fiscal 2013, leasing revenues have declined as compared to the same period of fiscal 2012, despite significant improvements in Canadian land rentals and marine rentals. We have experienced lower activity levels in certain other areas. Leasing activity in South America has been lower year to date in fiscal 2013 as compared to fiscal 2012. Weather difficulties, permitting issues and other project delays have all contributed to this decline. Recently, we have seen increased activity in South America as a few projects have commenced and our bid activity has improved. We anticipate a sequential improvement in South America over the next two fiscal quarters. Activity in Europe has also been lower during the first nine months of fiscal 2013 as compared to the same period in fiscal 2012. Political changes, fiscal issues and environmental concerns have, we believe, caused a delay in many energy projects in Eastern Europe, particularly non-conventional natural gas projects. Leasing revenues in the United States in the first nine months of fiscal 2013 declined from the first nine months of fiscal 2012, due to an overall slow-down in exploration activity in the United States. This slow-down has contributed to lower leasing revenues from our downhole seismic tools in fiscal 2013 as compared to fiscal 2012. We believe this slow-down is temporary based on our recent bid activity and backlog information reported by certain seismic contractors.
We have received a number of inquiries and requests from customers in Canada and Russia regarding equipment for the upcoming winter seasons. Based on these inquiries, we expect strong leasing revenues in these areas, which we believe will positively impact our financial results for the fourth quarter of fiscal 2013 and first quarter of fiscal 2014. Based upon these inquiries, we have repositioned certain equipment into these markets, including some equipment that was previously deployed in South America. Additionally, we have placed orders for additional equipment that will be deployed in Canada, the United States and South America. We expect that a significant portion of that equipment will be delivered and utilized in the fourth quarter of fiscal 2013.
The majority of activity in the United States is taking place within various so called "shale plays," which tend to be primarily natural gas reservoirs. Natural gas prices in North America have been depressed and some exploration companies have curtailed activity within these areas. If North American natural gas prices remain at or near recent levels, we could experience a decline in demand for our services in North America. In other parts of the world, such as Europe, natural gas prices are significantly higher than in North America. We believe that this may drive increased exploration around possible shale plays in other parts of the world, such as Eastern Europe, although we have not yet experienced a significant increase in demand for our services in this area. Environmental concerns and political and economic uncertainties may negatively impact the demand for our services in those areas.
The market for products sold by Seamap and the demand for the leasing of marine seismic equipment is dependent upon activity within the offshore, or marine, seismic industry, including the re-fitting of existing seismic vessels and the equipping of new vessels. Seamap has enjoyed increases in revenues over the past three fiscal years. Our Seamap business has benefited from equipping new-build vessels and from re-equipping older vessels with newer, more efficient technology. In addition, as Seamap has expanded its installed base of products, our business for replacements, spare parts, repair and support services has expanded. Certain existing and potential customers continue to express interest in our GunLink and BuoyLink products. Some of this interest involves the upgrade of exiting GunLink and BuoyLink products to newer versions or systems with greater functionality.
The oil and gas industry, in general, and the seismic industry, in particular, have historically been cyclical businesses. If worldwide oil and gas prices should decline from current levels, or if the expectations for future prices should change, we could see a material change in the level of our business.
Over the past several years, we have made significant additions to our lease pool of equipment, amounting to over $170 million in equipment purchases during the five years ended January 31, 2012. By adding this equipment, we have not only expanded the amount of equipment that we have, but have also increased the geographic expanse of our leasing operations and have expanded the types of equipment that we have in our lease pool. In the nine months ended October 31, 2012, we added approximately $26.5 million of equipment to our lease pool. However, a significant portion of this equipment has not yet been deployed and therefore has not contributed to our revenues during the first nine months of fiscal 2013. In the nine months ended October 31, 2011, we added about $56.2 million of new lease pool equipment. Additions to our lease pool during all of fiscal 2012 amounted to approximately $68.8 million.
In November 2012 we entered into equipment purchase agreements with Sercel related to its DSU3 three-component digital recording system and Unite cable-free recording system. These agreements are comparable to a series of prior agreements we have had with Sercel. Under the terms of the agreements, we are the exclusive third party provider of short-term leases for these two products throughout the world, except for China and the Commonwealth of Independent States. We have agreed to purchase minimum quantities of these products throughout the term of the agreements, which is through September 30, 2014, in the case of Unite, and December 31, 2013, in the case of DSU3.
We also have expanded the geographic breadth of our operations by acquiring or establishing operating facilities in new locations. In fiscal 2012, we established new leasing subsidiaries in Hungary and in Singapore and significantly expanded our operations in Colombia. We may seek to expand our operations into additional locations in the future either through establishing "green field" operations or by acquiring other businesses. However, we do not currently have specific plans to establish any such operations.
A significant portion of our revenues are generated from foreign sources. For the three months ended October 31, 2012 and 2011, revenues from international customers totaled approximately $15.0 million and $19.9 million, respectively. These amounts represent 81% and 71% of consolidated revenues in those periods, respectively. The majority of our transactions with foreign customers are denominated in United States, Australian, and Canadian dollars and Russian rubles. We have not entered, nor do we intend to enter, into derivative financial instruments for hedging or speculative purposes.
Our revenues and results of operations have not been materially impacted by inflation or changing prices in the past three fiscal years, except as described above.
Results of Operations
Revenues for the three months ended October 31, 2012 and 2011 were approximately $18.6 million and $28.0 million, respectively. The decrease was due primarily to decreased leasing revenues and Seamap sales. Revenues for the nine months ended October 31, 2012 and 2011 were approximately $76.3 million and $75.8 million, respectively. The decrease in leasing revenues in the three-month period reflects the changes in land leasing activity within the seismic industry as discussed above. For the three months ended October 31, 2012, we generated operating loss of approximately $1.9 million and in the nine months ended October 31, 2012 we
generated operating income of approximately $11.1 million. This compares to operating income approximately $8.4 million and $20.0 million, respectively, for the three and nine months ended October 31, 2011. The decrease in operating profit in the three months ended October 31, 2012 as compared to the same period a year ago was due primarily to decreased leasing revenues and higher depreciation costs. A more detailed explanation of these variations follows.
Revenues and Cost of Sales
Equipment Leasing
Revenue and cost of sales from our Equipment Leasing segment were as follows:
Three Months Ended Nine Months Ended
October 31, October 31,
2012 2011 2012 2011
($ in thousands) ($ in thousands)
Revenue:
Equipment leasing $ 11,062 $ 17,411 $ 42,952 $ 46,458
Lease pool equipment sales 1,873 2,442 7,409 3,103
New seismic equipment sales 181 611 619 1,013
SAP equipment sales 962 1,358 3,003 4,145
14,078 21,822 53,983 54,719
Cost of sales:
Direct costs-equipment leasing 1,664 2,365 6,546 6,348
Lease pool depreciation 8,314 7,404 25,276 20,217
Cost of lease pool equipment sales 1,341 519 3,752 723
Cost of new seismic equipment sales 111 336 358 559
Cost of SAP equipment sales 747 1,012 2,261 3,125
12,177 11,636 38,193 30,972
Gross profit $ 1,901 $ 10,186 $ 15,790 $ 23,747
Gross profit % 14 % 47 % 29 % 43 %
|
Equipment leasing revenues decreased approximately 36% in the third quarter of fiscal 2013 from the third quarter of fiscal 2012 due primarily to declines in land leasing the United States, and Europe, and a decline in downhole leasing. These declines were partially offset by higher leasing revenues from our marine leasing business. As discussed above, we have recently experienced a decline in leasing activity in the United States due to what we believe to be a temporary slow-down in exploration activity in that region. We believe that this has also contributed to the decline in our downhole leasing activity, as the majority of that business has historically been conducted in the United Sates. The decline in leasing revenues in Europe in the third quarter of fiscal 2013 compared to the same period last year is attributable in large part, we believe, to the environmental, economic and political issues discussed above. For the nine months ended October 31, 2012, leasing revenues were approximately 8% lower than in the nine months ended October 31, 2011. In addition to the factors impacting the third quarter comparison, lower leasing activity in South America during the nine month period of fiscal 2013 contributed to the decline. Leasing activity in South America, particularly Colombia, has been negatively impacted in the first nine months of fiscal 2013 due to project delays arising from weather and permitting difficulties. Higher activity in Canada land leasing and increased marine leasing activity partially offset the declines in both the three and nine month periods ended October 31, 2012.
From time to time, we sell equipment from our lease pool based on specific customer demand and as opportunities present themselves in order to redeploy our capital in other lease pool assets. Accordingly, these transactions tend to occur sporadically and are difficult to predict. Often, the equipment that is sold from our lease pool has been in service, and therefore depreciated, for some period of time. Accordingly, the equipment sold may have a relatively low net book value at the time of the sale, resulting in a relatively high gross margin from the transaction. The amount of the margin on a particular transaction varies greatly based primarily upon the age of the equipment. In the nine months ended October 31, 2012, we took advantage of opportunities to sell certain older equipment including approximately 7,000 land channels and other ancillary equipment. The gross profit from sales of lease pool equipment for the three months ended October 31, 2012 and 2011 was approximately $532,000 and $1.9 million, respectively. The gross profit from sales of lease pool equipment for the nine months ended October 31, 2012 and 2011 was approximately $3.7 million and $2.4 million, respectively.
Periodically, we sell new seismic equipment that we acquire from others. On occasion, these sales may be structured with a significant down payment and the balance financed over a period of time at a market rate of interest. These sales are also difficult to predict and do not follow any seasonal patterns. Also, we regularly sell heli-picker equipment that we produce. The gross profit from sales of new seismic equipment for the three months ended October 31, 2012 and 2011 was approximately $70,000 and $275,000, respectively. For the nine months ended October 31, 2012 and 2011, the gross profit from the sale of new equipment was approximately $261,000 and $454,000, respectively.
SAP regularly sells new hydrographic and oceanographic equipment and provides . . .
|
|