FORM 10-Q |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Texas | 76-0210849 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
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Item 4. | ||
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Item 1A. | ||
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Item 3. | ||
Item 4. | ||
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Item 6. | ||
October 31, 2017 | January 31, 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 |
For the Three Months Ended October 31, | For the Nine Months 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 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 | ) | ||||||||
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 |
For the Three Months Ended October 31, | For the Nine Months Ended October 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss available to common shareholders | $ | (5,510 | ) | $ | (7,510 | ) | $ | (13,940 | ) | $ | (23,593 | ) | ||||
Change in cumulative translation adjustment | (254 | ) | (748 | ) | 621 | 1,676 | ||||||||||
Comprehensive loss attributable to common shareholders | $ | (5,764 | ) | $ | (8,258 | ) | $ | (13,319 | ) | $ | (21,917 | ) |
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 |
October 31, 2017 | January 31, 2017 | |||||||
(in thousands) | ||||||||
Accounts receivable | $ | 16,015 | $ | 21,762 | ||||
Contracts receivable | 5,374 | 2,752 | ||||||
21,389 | 24,514 | |||||||
Less long-term portion | (6,259 | ) | (4,968 | ) | ||||
Current accounts and contracts receivable | 15,130 | 19,546 | ||||||
Less current portion of allowance for doubtful accounts | (2,965 | ) | (3,716 | ) | ||||
Current portion of accounts and contracts receivable, net of allowance for doubtful accounts | $ | 12,165 | $ | 15,830 |
October 31, 2017 | January 31, 2017 | |||||||
(in thousands) | ||||||||
Inventories: | ||||||||
Raw materials | $ | 5,157 | $ | 5,781 | ||||
Finished goods | 5,642 | 5,985 | ||||||
Work in progress | 2,003 | 1,146 | ||||||
12,802 | 12,912 | |||||||
Less allowance for obsolescence | (862 | ) | (952 | ) | ||||
Total inventories, net | $ | 11,940 | $ | 11,960 |
October 31, 2017 | January 31, 2017 | |||||||
(in thousands) | ||||||||
Seismic equipment lease pool and property and equipment: | ||||||||
Seismic equipment lease pool | $ | 185,304 | $ | 219,001 | ||||
Land and buildings | 3,380 | 3,379 | ||||||
Furniture and fixtures | 9,904 | 9,462 | ||||||
Autos and trucks | 701 | 675 | ||||||
199,289 | 232,517 | |||||||
Accumulated depreciation and amortization | (172,917 | ) | (188,679 | ) | ||||
Total seismic equipment lease pool and property and equipment, net | $ | 26,372 | $ | 43,838 |
Weighted Average Life at 10/31/2017 | October 31, 2017 | January 31, 2017 | ||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||
Goodwill | $ | 3,997 | $ | 3,997 | ||||||||||||||||||||||
Proprietary rights | 5.1 | $ | 5,973 | $ | (3,430 | ) | 2,543 | $ | 5,810 | $ | (3,003 | ) | 2,807 | |||||||||||||
Customer relationships | 4.1 | 4,835 | (2,206 | ) | 2,629 | 4,679 | (1,656 | ) | 3,023 | |||||||||||||||||
Patents | 5.2 | 1,663 | (705 | ) | 958 | 1,608 | (558 | ) | 1,050 | |||||||||||||||||
Trade name | 8.6 | 889 | (36 | ) | 853 | 884 | (27 | ) | 857 | |||||||||||||||||
Developed technology | 8.2 | 1,430 | (262 | ) | 1,168 | 1,430 | (155 | ) | 1,275 | |||||||||||||||||
Amortizable intangible assets | $ | 14,790 | $ | (6,639 | ) | $ | 8,151 | $ | 14,411 | $ | (5,399 | ) | $ | 9,012 |
For fiscal years ending January 31 (in thousands): | |||
2018 | $ | 364 | |
2019 | 1,458 | ||
2020 | 1,458 | ||
2021 | 1,310 | ||
2022 | 838 | ||
2023 and thereafter | 2,723 | ||
Total | $ | 8,151 | |
October 31, 2017 | January 31, 2017 | |||||||
Revolving line of credit | $ | — | $ | 3,500 | ||||
Term credit facility | — | 2,800 | ||||||
Other equipment notes | — | 71 | ||||||
— | 6,371 | |||||||
Less current portion | — | (6,371 | ) | |||||
Long-term debt | $ | — | $ | — |
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
(in thousands) | (in thousands) | |||||||||||
Basic weighted average common shares outstanding | 12,087 | 12,075 | 12,082 | 12,068 | ||||||||
Stock options | 35 | 8 | 81 | 6 | ||||||||
Unvested restricted stock | 28 | 37 | 34 | 46 | ||||||||
Total weighted average common share equivalents | 63 | 45 | 115 | 52 | ||||||||
Diluted weighted average common shares outstanding | 12,150 | 12,120 | 12,197 | 12,120 |
As of October 31, 2017 | As of January 31, 2017 | |||||||
Total Assets | Total Assets | |||||||
(in thousands) | ||||||||
Equipment Manufacturing and Sales | $ | 39,258 | $ | 37,294 | ||||
Equipment Leasing | 37,602 | 57,544 | ||||||
Eliminations | (63 | ) | (124 | ) | ||||
Consolidated | $ | 76,797 | $ | 94,714 |
Revenues | Operating loss | Income (loss) before taxes | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Equipment Manufacturing and Sales | $ | 5,992 | $ | 5,251 | $ | (74 | ) | $ | (647 | ) | $ | 4 | $ | (513 | ) | |||||||||
Equipment Leasing | 2,730 | 2,806 | (3,927 | ) | (6,341 | ) | (3,933 | ) | (6,292 | ) | ||||||||||||||
Corporate expenses | — | — | (792 | ) | (688 | ) | (792 | ) | (688 | ) | ||||||||||||||
Eliminations | (78 | ) | — | — | (58 | ) | 26 | (65 | ) | |||||||||||||||
Consolidated | $ | 8,644 | $ | 8,057 | $ | (4,793 | ) | $ | (7,734 | ) | $ | (4,695 | ) | $ | (7,558 | ) |
Revenues | Operating income (loss) | Income (loss) before taxes | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Equipment Manufacturing and Sales | $ | 22,565 | $ | 18,229 | $ | 1,160 | $ | (867 | ) | $ | 999 | $ | (1,699 | ) | ||||||||||
Equipment Leasing | 15,546 | 10,258 | (10,571 | ) | (19,087 | ) | (10,494 | ) | (18,627 | ) | ||||||||||||||
Corporate expenses | — | — | (2,643 | ) | (2,390 | ) | (2,643 | ) | (2,390 | ) | ||||||||||||||
Eliminations | (198 | ) | (36 | ) | — | (36 | ) | — | (77 | ) | ||||||||||||||
Consolidated | $ | 37,913 | $ | 28,451 | $ | (12,054 | ) | $ | (22,380 | ) | $ | (12,138 | ) | $ | (22,793 | ) |
• | decline in the demand for seismic data and our services; |
• | the effect of changing economic conditions and fluctuations in oil and natural gas prices on exploration activities; |
• | the effect of uncertainty in financial markets on our customers’ and our ability to obtain financing; |
• | loss of significant customers; |
• | increased competition; |
• | loss of key suppliers; |
• | uncertainties regarding our foreign operations, including political, economic and currency risks; |
• | seasonal fluctuations that can adversely affect our business; |
• | fluctuations due to circumstances beyond our control or that of our customers; |
• | defaults by customers on amounts due us; |
• | possible further impairment of our long-lived assets due to technological obsolescence or changes in anticipated cash flow generated from those assets; |
• | inability to obtain funding or to obtain funding under acceptable terms; |
• | intellectual property claims by third parties; |
• | risks associated with our manufacturing operations; |
• | the impact of economic and trade sanctions imposed on Russia by the United States and the European Union in response to the political unrest in Ukraine; and |
• | other risks associated with our foreign operations, including foreign currency exchange risk. |
For the Three Months Ended October 31, | For the Nine Months Ended October 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
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 | ) | ||||
EBITDA (1) | $ | (623 | ) | $ | (430 | ) | $ | 1,058 | $ | (327 | ) | |||||
Adjusted EBITDA (1) | $ | (406 | ) | $ | (513 | ) | $ | 8,291 | $ | 1,055 | ||||||
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 | ) | $ | 1,058 | $ | (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 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 we believe 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. |
• | Increased emphasis on our Equipment Manufacturing and Sales segment. We intend to expand our product offerings with an emphasis on products and services that are not exclusively dependent upon oil and gas exploration activity. We expect new products and services to come from a combination of internally developed products and those acquired from third parties, such as the acquisition of Klein in fiscal 2016 |
• | Redeploy capital from lease pool. We expect our Equipment Leasing segment to remain an important component of our business. However, we believe there are opportunities to selectively sell certain lease pool assets and redeploy that capital in order to invest in other opportunities. |
• | Selectively invest in new lease pool assets. Due to the increased competition and challenging economic conditions in the seismic equipment industry, we intend to limit future acquisitions of lease pool assets to situations that enhance the value of our existing assets or in which we enjoy a competitive advantage due to pricing, operational considerations or exclusivity arrangements. As a part of this strategy, we are attempting to develop arrangements with various manufacturers of land seismic equipment in order to reduce the capital requirements for this segment of our business, while continuing to provide important services to our customers. |
• | Continually monitor and assess overhead and administrative cost structures. We will continue to monitor and proactively manage our overhead and administrative cost structures to ensure we are providing the necessary support to our operations and customers in a cost efficient and economical manner as the strategy is implemented. |
• | Maintain a capital structure with limited leverage. Historically, we have utilized short-term commercial banking facilities to temporarily finance capital expenditures and business acquisitions. Due to conditions within the oil and gas industry, including our own recent financial results, and associated regulatory pressures, access to such capital has become more limited and may not be available to us in amounts historically available. Accordingly, we have reduced our exposure to short-term credit facilities. During the first quarter of fiscal 2018 we repaid all outstanding obligations under our Credit Agreement and terminated that agreement, and repaid all outstanding obligations under our Seamap Credit Facility and cancelled that facility. In the future, we intend to rely on other sources of expansion capital, including cash flow provided by operations, proceeds from the sale of lease pool assets, the issuance of debt securities and the issuance of equity securities. |
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
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 | % |
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
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 | 34 | 51 | 6,228 | 764 | ||||||||||||
Cost of other equipment sales | 177 | 31 | 182 | 118 | ||||||||||||
4,647 | 7,249 | 20,282 | 23,134 | |||||||||||||
Gross loss | $ | (1,917 | ) | $ | (4,443 | ) | $ | (4,736 | ) | $ | (12,876 | ) |
For the Nine Months Ended October 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Net cash provided by operating activities | $ | 2,174 | $ | 3,687 | ||||
Net cash provided by investing activities | 6,093 | 1,535 | ||||||
Net cash used in financing activities | (5,090 | ) | (5,135 | ) | ||||
Effect of changes in foreign exchange rates on cash and cash equivalents | 82 | (624 | ) | |||||
Net increase (decrease) in cash and cash equivalents | $ | 3,259 | $ | (537 | ) |
(a) | Not applicable. |
(b) | Not applicable. |
Exhibit Number | Document Description | Report or Registration Statement | SEC File or Registration Number | Exhibit Reference |
3.1 | Incorporated by reference to Mitcham Industries, Inc.’s Registration Statement on Form S-8, filed with the SEC on August 9, 2001. | 333-67208 | 3.1 | |
3.2 | Incorporated by reference to Mitcham Industries, Inc.’s Current Report on Form 8-K, filed with the SEC on August 2, 2010. | 000-25142 | 3.1(i) | |
3.3 | Incorporated by reference to Mitcham Industries, Inc.’s Form 8-K filed with SEC on June 10, 2016. | 001-13490 | 3.1 | |
3.4 | Incorporated by reference to Mitcham Industries, Inc.’s form 8-K filed with the SEC on October 7, 2016. | 001-13490 | 3.1 | |
31.1† | ||||
31.2† | ||||
32.1* | ||||
101.INS† | XBRL Instance Document | |||
101.SCH† | XBRL Taxonomy Extension Schema Document | |||
101.CAL† | XBRL Taxonomy Extension Calculation of Linkbase Document | |||
101.DEF† | XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB† | XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE† | XBRL Taxonomy Extension Presentation Linkbase Document |
MITCHAM INDUSTRIES, INC. | ||||||
Date: December 7, 2017 | /s/ Robert P. Capps | |||||
Robert P. Capps | ||||||
Co-Chief Executive Officer, | ||||||
Executive Vice President of Finance and Chief Financial Officer | ||||||
(Duly Authorized Officer) |
Document and Entity Information - shares |
9 Months Ended | |
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Oct. 31, 2017 |
Dec. 06, 2017 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Oct. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | MIND | |
Entity Registrant Name | MITCHAM INDUSTRIES INC | |
Entity Central Index Key | 0000926423 | |
Current Fiscal Year End Date | --01-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 12,089,339 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful accounts | $ 2,965 | $ 3,716 |
Long-term receivables, net of allowance for doubtful accounts | $ 2,188 | $ 2,188 |
Preferred stock, par value (in dollars per share) | $ 1.00 | $ 1.00 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 425,000 | 343,000 |
Preferred stock, shares outstanding | 425,000 | 343,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 14,019,000 | 14,019,000 |
Treasury stock, shares | 1,929,000 | 1,929,000 |
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 31, 2017 |
Oct. 31, 2016 |
Oct. 31, 2017 |
Oct. 31, 2016 |
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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 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) |
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 (in dollars per share) | $ (0.46) | $ (0.62) | $ (1.15) | $ (1.96) |
Diluted (in dollars per share) | $ (0.46) | $ (0.62) | $ (1.15) | $ (1.96) |
Shares used in computing net loss per common share: | ||||
Basic (in shares) | 12,087 | 12,075 | 12,082 | 12,068 |
Diluted (in shares) | 12,087 | 12,075 | 12,082 | 12,068 |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 31, 2017 |
Oct. 31, 2016 |
Oct. 31, 2017 |
Oct. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss available to common shareholders | $ (5,510) | $ (7,510) | $ (13,940) | $ (23,593) |
Change in cumulative translation adjustment | (254) | (748) | 621 | 1,676 |
Comprehensive loss attributable to common shareholders | $ (5,764) | $ (8,258) | $ (13,319) | $ (21,917) |
Organization |
9 Months Ended |
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Oct. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Mitcham Industries, Inc. (for purposes of these notes, the “Company”) was incorporated in Texas in 1987. The Company, through its wholly owned subsidiaries, Seamap International Holdings Pte, Ltd. (“Seamap”) and Klein Marine Systems, Inc. (“Klein”), designs, manufactures and sells a broad range of proprietary products for the seismic, hydrographic and offshore industries with product sales and support facilities based in New Hampshire, Singapore and the United Kingdom. The Company, through its wholly owned Australian subsidiary, Seismic Asia Pacific Pty Ltd. (“SAP”), provides seismic, oceanographic and hydrographic leasing and sales worldwide, primarily in Southeast Asia and Australia. The Company, through its corporate headquarters in the United States, its wholly owned Canadian subsidiary, Mitcham Canada, ULC (“MCL”), its wholly owned Russian subsidiary, Mitcham Seismic Eurasia LLC (“MSE”), its wholly owned Hungarian subsidiary, Mitcham Europe Ltd. (“MEL”), its wholly owned Singaporean subsidiary, Mitcham Marine Leasing Pte. Ltd. (“MML”), and its branch operations in Colombia, provides full-service equipment leasing, sales and service to the seismic industry worldwide. All intercompany transactions and balances have been eliminated in consolidation. |
Basis of Presentation |
9 Months Ended |
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Oct. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated balance sheet as of January 31, 2017 for the Company has been derived from audited consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2017. In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position as of October 31, 2017, the results of operations for the three and nine months ended October 31, 2017 and 2016, and the cash flows for the nine months ended October 31, 2017 and 2016, have been included in these condensed consolidated financial statements. The foregoing interim results are not necessarily indicative of the results of operations to be expected for the full fiscal year ending January 31, 2018. |
New Accounting Pronouncements |
9 Months Ended |
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Oct. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify impairment testing of goodwill and other intangible assets by eliminating step two of the impairment test. ASU No. 2017-04 will be effective during the fiscal year ended January 31, 2021. The Company does not believe the adoption will have a material effect on its financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to require that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company has adopted the provisions of ASU No. 2016-18 as of February 1, 2017. The adoption of ASU No. 2016-18 did not have a material effect on the Company’s condensed consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU No. 2016-15 will be effective during the fiscal year ended January 31, 2019. The Company is evaluating the impact of ASU No. 2016-15 on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation -Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this new standard as of February 1, 2017, utilizing the prospective transition method. As a result, the Company now recognizes all excess tax charges or benefits as income tax expense or benefit in the accompanying Consolidated Statements of Operations and in the accompanying Consolidated Statements of Cash Flows as operating activities. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. ASU No. 2016-02 will be effective during the fiscal year ended January 31, 2020. The Company is evaluating the impact of ASU No. 2016-02 on its financial statements. In July 2015, the FASB issued ASU No. 2015-11, Inventory: (Topic 330), to provide guidance on measurement of inventory. ASU 2015-11 requires that inventories utilizing the first-in, first-out (FIFO) method be measured at lower of cost or net realizable value. The Company has adopted the provisions of ASU 2015-11 as of February 1, 2017. The adoption of ASU 2015-11 did not have an impact on the Company’s consolidated financial statements as the Company’s inventory is determined using the average cost method. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU 2014-09 was later amended by ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients . ASU 2014-09, as amended, (the “Revenue Standard”) supersedes most industry specific guidance and intends to enhance comparability of revenue recognition practices across entities and industries by providing a principle-based, comprehensive framework for addressing revenue recognition issues. The Revenue Standard will be effective during the fiscal year ended January 31, 2019. The Company will adopt the Revenue Standard in the first quarter of fiscal 2018. The Company is currently analyzing its most significant revenue streams including those most likely to be impacted by the Revenue Standard. The Company anticipates that the adoption of the Revenue Standard will primarily affect the Equipment Manufacturing and Sales segment. Under the new standard, the Company expects that recognition of equipment sales revenues for certain contracts may be accelerated, but not materially different. Revenues for these contracts will be estimated and allocated over the life of the contract rather than recognized when equipment is delivered. The Company is continuing to evaluate the effect that the adoption will have on its financial statements, disclosures, and related internal controls. The Company plans to use the modified retrospective method to adopt the Revenue Standard. |
Balance Sheet |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet | Balance Sheet
Contracts receivable consisted of $5.4 million due from four customers at October 31, 2017 and $2.8 million due from three customers as of January 31, 2017. The balance of contracts receivable at October 31, 2017 and January 31, 2017 consisted of contracts bearing interest at an average rate of approximately 2.8% and 2.2% respectively and with remaining repayment terms from 1 to 40 months. These contracts are related to lease pool equipment sales and are collateralized by the equipment sold. During the quarter ended April 30, 2017, the Company entered into a long-term contract receivable totaling approximately $3.8 million for the sale of lease pool equipment with the balance due in 24 equal monthly installments through March of 2019.
As of January 31, 2017, the Company completed an annual review of long-lived assets noting that the undiscounted future cash flows exceeded their carrying value and no impairment has been recorded. Since January 31, 2017 there have been no significant changes to the market, economic or legal environment in which the Company operates that would indicate additional impairment analysis is necessary as of October 31, 2017. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets
On January 31, 2016, based on a review of qualitative factors, the Company recorded an impairment of the goodwill associated with its Seamap reporting unit in the amount of $3.0 million. The Seamap reporting unit is included in the Equipment Manufacturing and Sales segment. Also at January 31, 2016, the Company recorded impairment of approximately $600,000 related to certain identifiable intangible assets related to its Equipment Leasing segment. As of January 31, 2017, the Company completed the annual review of goodwill and other intangible assets. Based on a review of qualitative and quantitative factors it was determined it was more likely than not that the fair value of our reporting units was greater than their carrying value. During the nine months ended October 31, 2017 there have been no substantive indicators of additional impairment. Amortizable intangible assets are amortized over their estimated useful lives of five to 15 years using the straight-line method. Aggregate amortization expense was $1.1 million for the nine months ended October 31, 2017 and 2016. As of October 31, 2017, future estimated amortization expense related to amortizable intangible assets was estimated to be:
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Long-Term Debt and Notes Payable |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Notes Payable | Long-Term Debt and Notes Payable Long-term debt and notes payable consisted of the following (in thousands):
As of January 31, 2017, the Company had a secured, revolving credit facility, as described below (the “Credit Agreement”). The Credit Agreement was a secured revolving facility in the maximum principal amount of $20.0 million and a maturity of August 31, 2017, among the Company, as borrower, HSBC Bank USA, N.A., as administrative agent and several banks and other financial institutions from time to time as lenders thereunder (initially consisting of HSBC Bank USA, N.A. and First Victoria National Bank). In November 2016, the Company reduced the commitment to $10.0 million from $20.0 million. In March 2017, the Company repaid all outstanding obligations under the Credit Agreement and terminated that agreement. The Credit Agreement provided for Eurodollar loans, which bore interest at the Eurodollar base rate, plus a margin of from 2.50% to 3.50% based on the Company’s leverage ratio and for ABR loans which bore interest at the applicable base rate plus a margin of from 1.50% to 2.50% based on the Company’s leverage ratio. As of January 31, 2017, the margin for ABR loans was 250 basis points and the margin for Eurodollar loans was 350 basis points. The Company agreed to pay a commitment fee on the unused portion of the Credit Agreement of 0.375% to 0.5%. Up to $10.0 million of available borrowings under the Credit Agreement may have been utilized to secure letters of credit. On August 22, 2014, Seamap Singapore, entered into a $15.0 million credit facility (the “Seamap Credit Facility”) with The Hongkong and Shanghai Banking Corporation Limited (“HSBC-Singapore”). The facility consisted of a $10.0 million term loan, a $3.0 million revolving credit facility, and a $2.0 million banker’s guarantee facility. In April 2017, the Company prepaid all amounts outstanding under the Seamap Credit Facility and cancelled that facility. The term loan portion of the Seamap Credit Facility provided for eleven quarterly principal payments of $800,000 and a final payment of the remaining $1.2 million on or before August 22, 2017. Interest on the term facility was payable quarterly at LIBOR plus 2.75%. Under the Seamap Credit Facility, Seamap Singapore may have borrowed up to $3.0 million for a period of one to three months to be utilized for working capital and other general corporate purposes. Borrowings under the revolving credit facility were subject to interest at LIBOR plus 3.00%. The Company’s average borrowings under the Credit Agreement and the Seamap Credit Facility for the nine months ended October 31, 2017 and 2016 were approximately $1.1 million and $13.9 million, respectively. |
Income Taxes |
9 Months Ended |
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Oct. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the nine months ended October 31, 2017 the provision for income taxes was approximately $1.2 million on a pre-tax net loss of $12.1 million, or an effective tax rate of -9.7%. For the nine months ended October 31, 2016 the provision for income taxes was approximately $506,000 on a pre-tax net loss of $22.8 million, or an effective tax rate of -2.2%. The variance between our effective rate and the U.S. statutory rate is due to the mix of pre-tax profit between the U.S. and international taxing jurisdictions with varying statutory rates, the impact of permanent differences, state income and foreign withholding taxes, other tax adjustments, such as valuation allowances against deferred tax assets, and discrete items. Non-current prepaid income taxes of approximately $1.2 million at October 31, 2017 and prepaid taxes of $1.6 million at January 31, 2017, consist primarily of foreign taxes. The Company and its subsidiaries file consolidated and separate income tax returns in the United States federal and several state jurisdictions. The Company is subject to United States federal income tax examinations for all tax years beginning with its fiscal year ended January 31, 2013. In addition, the Company and its subsidiaries file income tax returns and are subject to examination by taxing authorities throughout the world, including foreign jurisdictions such as Australia, Canada, Colombia, Hungary, Russia, Singapore and the United Kingdom. The Company and its subsidiaries are generally no longer subject to foreign income tax examinations for tax years before the fiscal year ended January 31, 2011. The Company has determined that the undistributed earnings of foreign subsidiaries, other than branch operations in Colombia, have been indefinitely reinvested outside of the United States as of October 31, 2017. For the nine months ended October 31, 2017 and October 31, 2016, the Company did not recognize any tax expense or benefit related to uncertain tax positions. The Company adopted the provisions of ASU 2015-17 in fiscal 2017. Accordingly, all net deferred tax assets and liabilities are classified as long-term assets as of October 31, 2017 and January 31, 2017 in the accompanying Condensed Consolidated Balance Sheets. The Company also prospectively adopted the provisions of ASU 2016-09 beginning February 1, 2017. Accordingly, all excess tax benefits or deficiencies related to employee share-based payments are recognized as income tax benefits or expense in the accompanying Consolidated Statement of Operations and as operating activities in the accompanying Consolidated Statements of Cash Flows. |
Earnings per Share |
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Earnings per Share | Earnings per Share Net income per basic common share is computed using the weighted average number of common shares outstanding during the period, excluding unvested restricted stock. Net income per diluted common share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period using the treasury stock method. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect and from the assumed vesting of unvested shares of restricted stock. The following table presents the calculation of basic and diluted weighted average common shares used in the earnings per share calculation:
For the three months ended October 31, 2017 and 2016 and the nine months ended October 31, 2017 and 2016, potentially dilutive common shares, underlying stock options and unvested restricted stock were anti-dilutive and were therefore not considered in calculating diluted loss per share for those period. |
Related Party Transaction |
9 Months Ended |
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Oct. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transaction | Related Party Transaction On June 8, 2016, the Company issued 320,000 shares of 9.00% Series A Cumulative Preferred Stock (the “Preferred Stock”), par value $1.00 per share, pursuant to an underwriting agreement, dated June 2, 2016, by and between the Company and Ladenburg Thalmann & Co. Inc. The Co-Chief Executive Officer and Co-President of Ladenburg Thalmann & Co. Inc is the Non-Executive Chairman of the Company’s board of directors. The underwriter received underwriting discounts and commissions totaling $440,000 in connection with this offering. In addition, the underwriter received a structuring fee equal to 0.50% of the gross proceeds from this offering, or $40,000. The Non-Executive Chairman of the Company received no direct compensation for these commissions, discounts and fees. On October 7, 2016 the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Agent”), pursuant to which the Company may sell up to 500,000 shares of the Preferred Stock through the Agent through an at the market (“ATM”) offering program. Under the Equity Distribution Agreement, the Agent will be entitled to compensation of up to 2.0% of the gross proceeds from the sale of Preferred Stock under the ATM program. For the three and nine months ended October 31, 2017, the Company issued 44,932 and 81,904 shares of Preferred Stock under the ATM offering program, respectively. Gross proceeds from these sales for the three and nine months ended October 31, 2017 were approximately $1.0 million and $1.9 million respectively and the Agent received compensation of approximately $20,000 and $37,000, respectively. The Non-Executive Chairman of the Company received no portion of this compensation. |
Treasury Stock |
9 Months Ended |
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Oct. 31, 2017 | |
Equity [Abstract] | |
Treasury Stock | Treasury Stock In April 2013, the Company’s Board of Directors authorized the repurchase of up to 1.0 million shares of the Company’s common stock through December 31, 2014. The Company purchased a total of 1.0 million shares under this program, representing the total amount of shares authorized for repurchase. These shares are reflected as treasury stock in the accompanying financial statements. |
Equity and Stock-Based Compensation |
9 Months Ended |
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Oct. 31, 2017 | |
Equity [Abstract] | |
Equity and Stock-Based Compensation | Equity and Stock-Based Compensation During the three months ended October 31, 2017, the Company’s Board of Directors declared quarterly dividends of $0.5625 per share for our Preferred Stock. See note 9 to our condensed consolidated financial statements. Total compensation expense recognized for stock-based awards granted under the Company’s equity incentive plan during the three and nine months ended October 31, 2017 was approximately $224,000 and $685,000, respectively, and, during the three and nine months ended October 31, 2016 was approximately $154,000 and $587,000, respectively. |
Segment Reporting |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting The Equipment Manufacturing and Sales segment is engaged in the design, manufacture and sale of state-of-the-art sonar, seismic and offshore telemetry systems. Manufacturing, support and sales facilities are maintained in New Hampshire, the United Kingdom and Singapore. The Equipment Leasing segment offers new and used seismic equipment for lease or sale to the oil and gas industry, seismic contractors, environmental agencies, government agencies and universities. The Equipment Leasing segment is headquartered in Huntsville, Texas, with sales and services offices in Calgary, Canada; Brisbane, Australia; Ufa, Bashkortostan, Russia; Budapest, Hungary; Singapore; and Bogota, Colombia. Financial information by business segment is set forth below (net of any allocations):
Results for the three months ended October 31, 2017 and 2016 were as follows (in thousands):
Results for the nine months ended October 31, 2017 and 2016 were as follows (in thousands):
Sales from the Equipment Manufacturing and Sales segment to the Equipment Leasing Segment are eliminated in consolidated revenues. Consolidated income before taxes reflects the elimination of profit from intercompany sales and depreciation expense on the difference between the sales price and the cost to manufacture the equipment. Fixed assets are reduced by the difference between the sales price and the cost to manufacture the equipment, less the accumulated depreciation related to the difference. |
Organization (Policies) |
9 Months Ended |
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Oct. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Mitcham Industries, Inc. (for purposes of these notes, the “Company”) was incorporated in Texas in 1987. The Company, through its wholly owned subsidiaries, Seamap International Holdings Pte, Ltd. (“Seamap”) and Klein Marine Systems, Inc. (“Klein”), designs, manufactures and sells a broad range of proprietary products for the seismic, hydrographic and offshore industries with product sales and support facilities based in New Hampshire, Singapore and the United Kingdom. The Company, through its wholly owned Australian subsidiary, Seismic Asia Pacific Pty Ltd. (“SAP”), provides seismic, oceanographic and hydrographic leasing and sales worldwide, primarily in Southeast Asia and Australia. The Company, through its corporate headquarters in the United States, its wholly owned Canadian subsidiary, Mitcham Canada, ULC (“MCL”), its wholly owned Russian subsidiary, Mitcham Seismic Eurasia LLC (“MSE”), its wholly owned Hungarian subsidiary, Mitcham Europe Ltd. (“MEL”), its wholly owned Singaporean subsidiary, Mitcham Marine Leasing Pte. Ltd. (“MML”), and its branch operations in Colombia, provides full-service equipment leasing, sales and service to the seismic industry worldwide. All intercompany transactions and balances have been eliminated in consolidation. |
Basis of Presentation | Basis of Presentation The condensed consolidated balance sheet as of January 31, 2017 for the Company has been derived from audited consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2017. In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position as of October 31, 2017, the results of operations for the three and nine months ended October 31, 2017 and 2016, and the cash flows for the nine months ended October 31, 2017 and 2016, have been included in these condensed consolidated financial statements. The foregoing interim results are not necessarily indicative of the results of operations to be expected for the full fiscal year ending January 31, 2018. |
New Accounting Pronouncements | New Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify impairment testing of goodwill and other intangible assets by eliminating step two of the impairment test. ASU No. 2017-04 will be effective during the fiscal year ended January 31, 2021. The Company does not believe the adoption will have a material effect on its financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to require that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company has adopted the provisions of ASU No. 2016-18 as of February 1, 2017. The adoption of ASU No. 2016-18 did not have a material effect on the Company’s condensed consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU No. 2016-15 will be effective during the fiscal year ended January 31, 2019. The Company is evaluating the impact of ASU No. 2016-15 on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation -Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this new standard as of February 1, 2017, utilizing the prospective transition method. As a result, the Company now recognizes all excess tax charges or benefits as income tax expense or benefit in the accompanying Consolidated Statements of Operations and in the accompanying Consolidated Statements of Cash Flows as operating activities. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. ASU No. 2016-02 will be effective during the fiscal year ended January 31, 2020. The Company is evaluating the impact of ASU No. 2016-02 on its financial statements. In July 2015, the FASB issued ASU No. 2015-11, Inventory: (Topic 330), to provide guidance on measurement of inventory. ASU 2015-11 requires that inventories utilizing the first-in, first-out (FIFO) method be measured at lower of cost or net realizable value. The Company has adopted the provisions of ASU 2015-11 as of February 1, 2017. The adoption of ASU 2015-11 did not have an impact on the Company’s consolidated financial statements as the Company’s inventory is determined using the average cost method. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU 2014-09 was later amended by ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients . ASU 2014-09, as amended, (the “Revenue Standard”) supersedes most industry specific guidance and intends to enhance comparability of revenue recognition practices across entities and industries by providing a principle-based, comprehensive framework for addressing revenue recognition issues. The Revenue Standard will be effective during the fiscal year ended January 31, 2019. The Company will adopt the Revenue Standard in the first quarter of fiscal 2018. The Company is currently analyzing its most significant revenue streams including those most likely to be impacted by the Revenue Standard. The Company anticipates that the adoption of the Revenue Standard will primarily affect the Equipment Manufacturing and Sales segment. Under the new standard, the Company expects that recognition of equipment sales revenues for certain contracts may be accelerated, but not materially different. Revenues for these contracts will be estimated and allocated over the life of the contract rather than recognized when equipment is delivered. The Company is continuing to evaluate the effect that the adoption will have on its financial statements, disclosures, and related internal controls. The Company plans to use the modified retrospective method to adopt the Revenue Standard. |
Balance Sheet (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and Contracts Receivables |
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Schedule of Inventories |
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Schedule of Seismic Equipment Lease Pool and Property and Equipment |
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Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Other Intangible Assets |
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Future Estimated Amortization Expense Related to Amortizable Intangible Assets | As of October 31, 2017, future estimated amortization expense related to amortizable intangible assets was estimated to be:
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Long-Term Debt and Notes Payable (Tables) |
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Long-Term Debt and Notes Payable | Long-term debt and notes payable consisted of the following (in thousands):
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Weighted Average Common Shares Used in Earnings Per Share Calculation | The following table presents the calculation of basic and diluted weighted average common shares used in the earnings per share calculation:
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Segment Reporting (Tables) |
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Financial Information by Business Segment | Financial information by business segment is set forth below (net of any allocations):
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Financial Information by Business Segment | Results for the three months ended October 31, 2017 and 2016 were as follows (in thousands):
Results for the nine months ended October 31, 2017 and 2016 were as follows (in thousands):
|
Balance Sheet - Accounts and Contracts Receivables (Detail) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Accounts Receivable, Net, Current [Abstract] | ||
Accounts receivable | $ 16,015 | $ 21,762 |
Contracts receivable | 5,374 | 2,752 |
Accounts and contracts receivable | 21,389 | 24,514 |
Less long-term portion | (6,259) | (4,968) |
Current accounts and contracts receivable | 15,130 | 19,546 |
Less current portion of allowance for doubtful accounts | (2,965) | (3,716) |
Current portion of accounts and contracts receivable, net of allowance for doubtful accounts | $ 12,165 | $ 15,830 |
Balance Sheet - Additional Information (Detail) |
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Oct. 31, 2017
USD ($)
customer
|
Jan. 31, 2017
USD ($)
customer
|
Apr. 30, 2017
USD ($)
Installment
|
|
Balance Sheet [Line Items] | |||
Contracts receivable | $ 5,374,000 | $ 2,752,000 | |
Number of customers due | customer | 4 | 3 | |
Contracts receivable, interest rate | 2.80% | 2.20% | |
Long-term contract receivable for sale of lease pool equipment | $ 3,800,000 | ||
Number of installments | Installment | 24 | ||
Impairment charges related to long-lived assets | $ 0 | ||
Minimum [Member] | |||
Balance Sheet [Line Items] | |||
Contracts receivable repayment term | 1 month | ||
Maximum [Member] | |||
Balance Sheet [Line Items] | |||
Contracts receivable repayment term | 40 months |
Balance Sheet - Schedule of Inventories (Detail) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Inventories: | ||
Raw materials | $ 5,157 | $ 5,781 |
Finished goods | 5,642 | 5,985 |
Work in progress | 2,003 | 1,146 |
Cost of inventories | 12,802 | 12,912 |
Less allowance for obsolescence | (862) | (952) |
Total inventories, net | $ 11,940 | $ 11,960 |
Balance Sheet - Schedule of Seismic Equipment Lease Pool and Property and Equipment (Detail) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Seismic equipment lease pool and property and equipment: | ||
Cost of seismic equipment lease pool and property and equipment | $ 199,289 | $ 232,517 |
Accumulated depreciation and amortization | (172,917) | (188,679) |
Total seismic equipment lease pool and property and equipment, net | 26,372 | 43,838 |
Seismic Equipment Lease Pool [Member] | ||
Seismic equipment lease pool and property and equipment: | ||
Cost of property and equipment | 185,304 | 219,001 |
Land and Buildings [Member] | ||
Seismic equipment lease pool and property and equipment: | ||
Cost of property and equipment | 3,380 | 3,379 |
Furniture and Fixtures [Member] | ||
Seismic equipment lease pool and property and equipment: | ||
Cost of property and equipment | 9,904 | 9,462 |
Autos and Trucks [Member] | ||
Seismic equipment lease pool and property and equipment: | ||
Cost of property and equipment | $ 701 | $ 675 |
Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Jan. 31, 2016 |
Oct. 31, 2017 |
Oct. 31, 2016 |
|
Finite-Lived Intangible Assets [Line Items] | |||
Goodwill impairment | $ 3,000,000 | ||
Additional impairment charges | $ 0 | ||
Aggregate amortization expense | $ 1,100,000 | $ 1,100,000 | |
Equipment Leasing [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Impairment of intangible assets | $ 600,000 | ||
Minimum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life of intangible assets | 5 years | ||
Maximum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life of intangible assets | 15 years |
Goodwill and Other Intangible Assets - Future Estimated Amortization Expense Related to Amortizable Intangible Assets (Detail) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2018 | $ 364 | |
2019 | 1,458 | |
2020 | 1,458 | |
2021 | 1,310 | |
2022 | 838 | |
2023 and thereafter | 2,723 | |
Net Carrying Amount | $ 8,151 | $ 9,012 |
Long-Term Debt and Notes Payable - Long-Term Debt and Notes Payable (Detail) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Debt | $ 0 | $ 6,371 |
Less current portion | 0 | (6,371) |
Long-term debt | 0 | 0 |
Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Debt | 0 | 3,500 |
Term Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Debt | 0 | 2,800 |
Other Equipment Notes [Member] | ||
Debt Instrument [Line Items] | ||
Debt | $ 0 | $ 71 |
Income Taxes - Additional Information (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 31, 2017 |
Oct. 31, 2016 |
Oct. 31, 2017 |
Oct. 31, 2016 |
Jan. 31, 2017 |
|
Income Tax Disclosure [Abstract] | |||||
Provision for income taxes | $ 586,000 | $ (228,000) | $ 1,172,000 | $ 506,000 | |
Pre-tax net loss | (4,695,000) | (7,558,000) | $ (12,138,000) | $ (22,793,000) | |
Effective tax rate | (9.70%) | (2.20%) | |||
Non-current prepaid income taxes | 1,167,000 | $ 1,167,000 | $ 0 | ||
Prepaid income taxes | 0 | 0 | $ 1,565,000 | ||
Unrecognized Tax Benefit | $ 0 | $ 0 | $ 0 | $ 0 |
Earnings per Share - Basic and Diluted Weighted Average Common Shares Used in Earnings Per Share Calculation (Detail) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 31, 2017 |
Oct. 31, 2016 |
Oct. 31, 2017 |
Oct. 31, 2016 |
|
Earnings Per Share [Abstract] | ||||
Basic weighted average common shares outstanding | 12,087 | 12,075 | 12,082 | 12,068 |
Stock options | 35 | 8 | 81 | 6 |
Unvested restricted stock | 28 | 37 | 34 | 46 |
Total weighted average common share equivalents | 63 | 45 | 115 | 52 |
Diluted weighted average common shares outstanding | 12,150 | 12,120 | 12,197 | 12,120 |
Treasury Stock - Additional Information (Detail) |
1 Months Ended |
---|---|
Apr. 30, 2013
shares
| |
Equity [Abstract] | |
Number of shares authorized to repurchase | 1,000,000 |
Shares purchased under repurchase program | 1,000,000 |
Equity and Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 31, 2017 |
Oct. 31, 2016 |
Oct. 31, 2017 |
Oct. 31, 2016 |
|
Equity And Stock Based Compensation [Abstract] | ||||
Quarterly dividends declared (in usd per share) | $ 0.5625 | |||
Compensation expense related to stock-based awards granted | $ 224 | $ 154 | $ 685 | $ 587 |
Segment Reporting - Financial Information by Business Segment (Assets) (Detail) - USD ($) $ in Thousands |
Oct. 31, 2017 |
Jan. 31, 2017 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Total Assets | $ 76,797 | $ 94,714 |
Operating Segments [Member] | Equipment Manufacturing and Sales [Member] | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 39,258 | 37,294 |
Operating Segments [Member] | Equipment Leasing [Member] | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 37,602 | 57,544 |
Eliminations [Member] | ||
Segment Reporting Information [Line Items] | ||
Total Assets | $ (63) | $ (124) |
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