Mitcham Industries 3Q 2009 Results

Friday, December 12, 2008

 Mitcham Industries, Inc. (NASDAQ:MIND) announced financial results for its fiscal 2009 third quarter ended October 31, 2008.

Highlights include:

  • Core leasing revenues increased 19 percent to $10m for the third quarter of fiscal 2009 from $8.4m for the third quarter of fiscal 2008.
  • Net income for the third quarter increased to $2.7m, or $0.27 per diluted share, from $2.4m, or $0.24 per diluted share, in the third quarter of fiscal 2008.
  • The company announced today that Seamap was awarded orders totaling approximately $11m by The Polarcus Group of Companies (Polarcus), a new entrant in the marine seismic market, to equip all six of its new state-of-the-art vessels with the GunLink 4000 fully distributed digital gun controller systems and BuoyLink RGPS tail buoy positioning systems.
  • The company has modified its fiscal 2009 guidance to take into account the continuing turmoil and uncertainty in the financial markets with the resulting slowdown of the economy and the decline in commodity prices.


Bill Mitcham, the company's President and CEO, stated, "We are pleased with our core seismic equipment leasing revenues, which rose 19 percent over last year's third quarter. However, sales from Seamap did not meet our expectations in the third quarter. This is attributable primarily to a GunLink 4000 system that we had expected to ship in October. Due to delays from a specific supplier, we did not complete shipping the system until November.

"As a result of the additions in lease pool equipment made last year and earlier this year, our lease pool depreciation expense rose approximately 47 percent from the third quarter last year, which partially explains the lower gross profit margin in the third quarter of this year compared to a year ago. These lease pool additions, which also include newly deployed vertical seismic profiling and ultra light submersible equipment, have helped us diversify and strengthen our world-wide market presence.

"We are very pleased with the Polarcus award, which is to be delivered in fiscal 2010. Seamap is providing Polarcus with its GunLink 4000 fully distributed digital gun controller systems and BuoyLink RGPS tail buoy positioning systems. With this award, Seamap's backlog of firm orders amounts to a near record high of approximately $17m. With its solid backlog, Seamap appears to be well positioned going into fiscal 2010.

"Demand within our core leasing business has been strong overall, but we are seeing some weakness in certain markets such as Russia and projects involving higher cost, non-conventional sources of oil and gas. Historically, we have often provided financing to our customers for purchases of lease pool equipment or new seismic equipment. In the current economic environment, we are, and will be, much more reluctant to sell equipment under such arrangements.

"We certainly realize that, along with the rest of the industry, we are likely to be affected by the slowdown in economic activity. However, we believe we have adequate liquidity and credit availability to meet the challenges ahead. With the broad range of equipment in our lease pool, our geographic diversity and our focus on customer service, we believe we are well positioned both operationally and financially to deal with the uncertainties that are facing us and the rest of the energy industry."

Third Quarter Fiscal 2009 Results
Total revenues for the third quarter of fiscal 2009 were $14.5m compared to $17.2m for the third quarter of fiscal 2008, roughly a 16 percent decline. Core revenues from equipment leasing, excluding equipment sales, rose 19 percent to $10m from $8.4m in the same period a year ago. This increase in leasing revenues was driven by continued solid demand for seismic equipment in both domestic and international markets and expansion of the Company's lease pool. Year-to-date, approximately $20m of new equipment has been added to the Company's lease pool. This follows $26m in new equipment added during fiscal 2008.

Sales of new seismic, hydrographic and oceanographic equipment were $1.8m compared to $2m in the comparable period a year ago. Sales of lease pool equipment were $0.3m compared to $1.7m in the third quarter of fiscal 2008.

Seamap equipment sales in the third quarter declined 53 percent to $2.4m from $5.1m in the comparable period a year ago primarily due to the delayed shipment of a GunLink 4000 system and lower than expected purchasing activity by marine customers.

Total gross profit in the third quarter was $7.3m compared to $9.3m in the third quarter of fiscal 2008, a 22 percent decline. Gross profit margin was 50 percent in this year's third quarter compared to 54 percent a year ago. General and administrative costs for the third quarter were $4.3m, or 30 percent of total revenues, versus $5m, or 29 percent of total revenues, in the third quarter a year ago.

Operating income for the third quarter of fiscal 2009 was $2.7m compared to $3.8m in the comparable period a year ago. Net income for the third quarter was $2.7m, or $0.27 per diluted share, compared to $2.4m, or $0.24 per diluted share, in the third quarter of fiscal 2008. The benefit for income taxes for the third quarter of fiscal 2009 includes a tax benefit of $0.9m resulting from the elimination of uncertain tax positions upon the expiration of the period in which certain prior periods could be examined by taxing authorities.

EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter was $6.8m, or 47 percent of total revenues, compared to $6.8m, or 39 percent of total revenues, 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.

Year to Date Fiscal 2009 Results
Total revenues for the first nine months of fiscal 2009 declined approximately 9 percent to $50.6m from $55.6m in the first nine months of fiscal 2008; however, core revenues from equipment leasing, excluding equipment sales, increased 21 percent to $29.9m from $24.7m in the same period a year ago. Sales of new seismic, hydrographic and oceanographic equipment for the first nine months of fiscal 2009 were $7m versus $6.9m a year ago. Sales of lease pool equipment were $2.7m compared to $3.2m a year ago. Seamap equipment sales for the first nine months of fiscal 2009 were $11m compared to $20.8m in the first nine months of fiscal 2008.

Operating income for the first nine months of fiscal 2009 was $11.3m compared to $12.2m in the same period of fiscal 2008. Net income was $8.6m, or $0.84 per diluted share, compared to $8.1m, or $0.79 per diluted share, in the same period a year ago. Net income for the first nine months of fiscal 2009 also included the tax benefit from the elimination of uncertain tax positions. EBITDA (earnings before interest, taxes, depreciation and amortization) for the first nine months of fiscal 2009 increased 14 percent to $23.6m, or 47 percent of total revenues, from $20.7m, or 37 percent of total revenues, in the first nine months of fiscal 2008.

Outlook
Robert Capps, Executive Vice President and Chief Financial Officer, stated, "Regarding our outlook for the balance of fiscal 2009, while our core leasing business has continued its strong growth in recent periods, there is much uncertainty as to the timing and scope of several pending projects. Our earlier expectations for Seamap revenues to be stronger in the second half of the year are not expected to be realized in the current environment. We also expect little, if any, revenue from the sale of lease pool or new seismic equipment for the balance of fiscal 2009. Therefore, given our current pipeline of business and the uncertainties surrounding our year-end fiscal 2009 outlook, we are reducing our prior guidance for fiscal 2009. We expect revenues for the fiscal year ending January 31, 2009 to now range between $67m and $70m, operating income to range between $13.3m and $15.5m, and earnings per share to range between $0.96 and $1.10 per diluted share."

(www.mitchamindustries.com)

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