Mitcham Industries Inc. (MIND, Financial) filed Quarterly Report for the period ended 2009-04-30.
MITCHAM INDUSTRIES INC. specializes in the leasing and sale of seismic equipment to the oil and gas industry. Co. provides short-term leasing of peripheral seismic equipement to meet a customer's requirements as well as offering maintenance and support during the lease term. Co. leases its seismic equipment primarily to land-based seismic data acquisition companies and major oil and gas exploration companies conducting seismic data acquisition surveys in North and South America. Co. also sells and services new and used seismic data acquisition systems and peripheral equipment to companies. Mitcham Industries Inc. has a market cap of $51.5 million; its shares were traded at around $5.25 with a P/E ratio of 5.2 and P/S ratio of 0.8. Mitcham Industries Inc. had an annual average earning growth of 2.1% over the past 10 years.
Revenues for the three months ended April 30, 2009 were approximately $10.6 million, compared to approximately $18.5 million for the three months ended April 30, 2008. The decline is attributable primarily to a decrease in equipment leasing revenues and lower sales from the Seamap segment. For the three months ended April 30, 2009, operating profit amounted to approximately $16,000 as compared to approximately $6.4 million for the three months ended April 30, 2008 due primarily to the decline in revenues and an increase in lease pool depreciation. A more detailed explanation of the variations noted above follows.
Our provision for income taxes for the three months ended April 30, 2009 was approximately $126,000, which is significantly higher than that expected from the statutory rate of 34%. This variation relates primarily to estimated potential penalties and interest recognized in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109, Accounting for Income Taxes, which we adopted in the first quarter of fiscal 2008. Pursuant to this accounting standard, we have estimated and recorded the potential effect on our liabilities for income taxes should specific uncertain tax positions be resolved not in our favor. We are further required to estimate and record potential penalties and interest that could arise from these positions. We record these estimated penalties and interest as income tax expense. For the three months ended April 30, 2009 and 2008 the amount of estimated penalties and interest was $109,000 and $399,000, respectively.
As of April 30, 2009, we had working capital of approximately $16.1 million including cash and cash equivalents of approximately $5.9 million as compared to working capital of approximately $11.2 million including cash and cash equivalents of approximately $6.0 million at January 31, 2009. Our working capital increased during the three months ended April 30, 2009 primarily due to working capital generated from operations.
Net cash flows from investing activities for the three months ended April 30, 2009 includes purchases of seismic equipment held for lease totaling approximately $6.5 million. This amount reflects approximately $6.0 million attributable to equipment purchased in fiscal 2009, but not paid for until fiscal 2010. There were approximately $0.2 million in accounts payable at April 30, 2009 related to lease pool purchases made during the first three months of fiscal 2010. Accordingly, additions to our lease pool amounted to approximately $0.7 million in the first three months of fiscal 2010, as compared to approximately $5.5 million in the first three months of fiscal 2009. Due to the decline in demand for our equipment and services we have materially reduced our purchases of lease pool equipment in fiscal 2010. We expect the cost of purchases of lease pool equipment to total less than $10.0 million for all of fiscal 2010. As of April 30, 2009 approximately $6.1 million related to lease pool
During the three months ended April 30, 2009, we incurred net borrowings of $0.5 million under our revolving credit agreement. In September 2008 we entered into a new $25.0 million revolving credit agreement with First Victoria National Bank (the Bank), which replaced our then existing $12.5 million facility with the Bank. Amounts available for borrowing are determined by a borrowing base. The borrowing base is computed based upon eligible accounts receivable and eligible lease pool assets. Based upon the latest calculation of the borrowing base we believe that the entire $25.0 million of the facility is available to us. The revolving credit facility matures on September 24, 2010. However, at any time prior to maturity, we can convert any or all outstanding balances into a series of 48-month notes. Amounts converted into these notes are due in 48 equal monthly installments. The revolving credit facility is secured by essentially all of our domestic assets. Interest is payable monthly at the prime rate. The credit agreement contains certain financial covenants that require us, among other things, to maintain a debt to shareholders equity ratio of no more than 0.7 to 1.0, maintain a current assets to current liabilities ratio of not less than 1.25 to 1.0 and produce quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of not less than $2.0 million. As indicated by the following chart, we were in compliance with all financial covenants as of April 30, 2009:
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MITCHAM INDUSTRIES INC. specializes in the leasing and sale of seismic equipment to the oil and gas industry. Co. provides short-term leasing of peripheral seismic equipement to meet a customer's requirements as well as offering maintenance and support during the lease term. Co. leases its seismic equipment primarily to land-based seismic data acquisition companies and major oil and gas exploration companies conducting seismic data acquisition surveys in North and South America. Co. also sells and services new and used seismic data acquisition systems and peripheral equipment to companies. Mitcham Industries Inc. has a market cap of $51.5 million; its shares were traded at around $5.25 with a P/E ratio of 5.2 and P/S ratio of 0.8. Mitcham Industries Inc. had an annual average earning growth of 2.1% over the past 10 years.
Highlight of Business Operations:
We have responded to the decline in demand for our services and products by reducing our additions to our lease pool of equipment. During the three months ended April 30, 2009, we added approximately $700,000 of equipment to our lease pool. During the fiscal years ended January 31, 2009, 2008 and 2007, we added approximately$34.9 million, $26.0 million and $25.5 million, respectively, of equipment to our lease pool in response to the strong demand for our equipment and services during those periods. Despite the recent decline in demand, we do expect to add certain types of equipment to our lease pool, such as additional equipment for vertical seismic profiling (VSP) during the balance of fiscal 2010. We expect these additions will be less than $10 million for all of fiscal 2010. In response to demand in specific geographic regions, we may also establish operating facilities in new geographic areas.Revenues for the three months ended April 30, 2009 were approximately $10.6 million, compared to approximately $18.5 million for the three months ended April 30, 2008. The decline is attributable primarily to a decrease in equipment leasing revenues and lower sales from the Seamap segment. For the three months ended April 30, 2009, operating profit amounted to approximately $16,000 as compared to approximately $6.4 million for the three months ended April 30, 2008 due primarily to the decline in revenues and an increase in lease pool depreciation. A more detailed explanation of the variations noted above follows.
Our provision for income taxes for the three months ended April 30, 2009 was approximately $126,000, which is significantly higher than that expected from the statutory rate of 34%. This variation relates primarily to estimated potential penalties and interest recognized in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109, Accounting for Income Taxes, which we adopted in the first quarter of fiscal 2008. Pursuant to this accounting standard, we have estimated and recorded the potential effect on our liabilities for income taxes should specific uncertain tax positions be resolved not in our favor. We are further required to estimate and record potential penalties and interest that could arise from these positions. We record these estimated penalties and interest as income tax expense. For the three months ended April 30, 2009 and 2008 the amount of estimated penalties and interest was $109,000 and $399,000, respectively.
As of April 30, 2009, we had working capital of approximately $16.1 million including cash and cash equivalents of approximately $5.9 million as compared to working capital of approximately $11.2 million including cash and cash equivalents of approximately $6.0 million at January 31, 2009. Our working capital increased during the three months ended April 30, 2009 primarily due to working capital generated from operations.
Net cash flows from investing activities for the three months ended April 30, 2009 includes purchases of seismic equipment held for lease totaling approximately $6.5 million. This amount reflects approximately $6.0 million attributable to equipment purchased in fiscal 2009, but not paid for until fiscal 2010. There were approximately $0.2 million in accounts payable at April 30, 2009 related to lease pool purchases made during the first three months of fiscal 2010. Accordingly, additions to our lease pool amounted to approximately $0.7 million in the first three months of fiscal 2010, as compared to approximately $5.5 million in the first three months of fiscal 2009. Due to the decline in demand for our equipment and services we have materially reduced our purchases of lease pool equipment in fiscal 2010. We expect the cost of purchases of lease pool equipment to total less than $10.0 million for all of fiscal 2010. As of April 30, 2009 approximately $6.1 million related to lease pool
During the three months ended April 30, 2009, we incurred net borrowings of $0.5 million under our revolving credit agreement. In September 2008 we entered into a new $25.0 million revolving credit agreement with First Victoria National Bank (the Bank), which replaced our then existing $12.5 million facility with the Bank. Amounts available for borrowing are determined by a borrowing base. The borrowing base is computed based upon eligible accounts receivable and eligible lease pool assets. Based upon the latest calculation of the borrowing base we believe that the entire $25.0 million of the facility is available to us. The revolving credit facility matures on September 24, 2010. However, at any time prior to maturity, we can convert any or all outstanding balances into a series of 48-month notes. Amounts converted into these notes are due in 48 equal monthly installments. The revolving credit facility is secured by essentially all of our domestic assets. Interest is payable monthly at the prime rate. The credit agreement contains certain financial covenants that require us, among other things, to maintain a debt to shareholders equity ratio of no more than 0.7 to 1.0, maintain a current assets to current liabilities ratio of not less than 1.25 to 1.0 and produce quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of not less than $2.0 million. As indicated by the following chart, we were in compliance with all financial covenants as of April 30, 2009:
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