<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-------------------------------------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED APRIL 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 81164-D
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MITCHAM INDUSTRIES, INC.
(Name of small business issuer as specified in its charter)
TEXAS 76-0210849
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
44000 HIGHWAY 75 SOUTH
HUNTSVILLE, TEXAS 77340
(Address of principal executive offices)
(409) 291-2277
(Issuer's telephone number)
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,378,650 shares of Common
Stock, $.01 par value, were outstanding as of June 6, 1996.
-------------
Transitional Small Business Disclosure Format (check one): Yes ___ No X
----- -----
1
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MITCHAM INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements................................ 3
Item 2. Management's Discussion and Analysis or Plan of
Operations.................................................... 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................. 10
Signatures.................................................... 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
MITCHAM INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
April 30,
ASSETS 1996
------ ---------
CURRENT ASSETS:
Cash $3,912
Accounts receivable, net 2,911
Installment notes receivable, trade 121
Inventories 360
Prepaid expenses and other current assets 68
-------
Total current assets 7,372
-------
Seismic equipment lease pool, net 8,746
Property plant and equipment, net 479
Other assets 60
-------
Total assets $16,657
-------
-------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 986
Accounts payable 585
Accrued liabilities and other current liabilities 265
Income taxes payable 565
Deferred income taxes payable 591
-------
Total current liabilities 2,992
-------
LONG-TERM DEBT
Long-term debt, net of current portion 3,387
DEFERRED INCOME TAXES 304
-------
Total liabilities 6,683
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized,
none issued and outstanding -
Common stock, $.01 par value; 20,000,000 shares authorized,
3,625,027 issued and outstanding 36
Additional paid-in capital 5,757
Retained earnings 4,181
-------
Total stockholders' equity 9,974
-------
Total liabilities and stockholders' equity $16,657
-------
-------
See accompanying notes.
3
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MITCHAM INDUSTRIES, INC.
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months
ended April 30,
----------------------------
1996 1995
------------ ------------
REVENUES:
Leases of seismic equipment $1,804 $1,094
Sales of seismic equipment 466 277
-------- --------
Total revenues 2,270 1,371
-------- --------
COSTS AND EXPENSES:
Seismic equipment subleases 47 91
Sales of seismic equipment 373 149
General and administrative 502 364
Depreciation 530 214
-------- --------
Total costs and expenses 1,452 818
-------- --------
OTHER INCOME (EXPENSE):
Interest, net (48) (3)
Other, net 19 23
-------- --------
Total other income (expense) (29) 20
-------- --------
INCOME BEFORE INCOME TAXES 789 573
PROVISION FOR INCOME TAXES 284 197
-------- --------
NET INCOME $505 $376
-------- --------
-------- --------
Earnings per common and common
equivalent share:
Primary $0.13 $0.12
-------- --------
-------- --------
Assuming full dilution $0.12 $0.12
-------- --------
-------- --------
Shares used in computing earnings
per common and common equivalent share:
Primary 4,024,029 3,170,000
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---------- ----------
Assuming full dilution 4,158,763 3,170,000
---------- ----------
---------- ----------
See accompanying notes.
4
<PAGE>
MITCHAM INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended April 30,
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
------------- --------------
<S> <C> <C>
Net income $505 $376
Adjustments to reconcile net income to net
cash flows from operating activities:
Receivables, net (702) (169)
Accounts payable and other current liabilities 139 392
Depreciation 530 214
Provision for doubtful accounts, net of charge offs 140 30
Other, net 61 (201)
--------- ---------
Net cash provided by operating activities 673 642
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of seismic equipment held for lease (1,145) (271)
Purchases of property, plant and equipment (23) (4)
--------- ---------
Net cash used in investing activities (1,168) (275)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term borrowings (400) (85)
Proceeds from long-term debt 3,126 -
Payments on long-term debt and capitalized lease obligations (377) (41)
Proceeds from issuance of common stock, net of offering expenses 1,421 -
--------- ---------
Net cash provided by financing activities 3,770 (126)
--------- ---------
NET INCREASE (DECREASE) IN CASH 3,275 241
CASH, BEGINNING OF PERIOD 637 874
--------- ---------
CASH, END OF PERIOD $3,912 $1,115
--------- ---------
--------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $55 $17
Taxes - $35
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
5
<PAGE>
MITCHAM INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements of Mitcham Industries, Inc. ("the
Company") have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles 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 financial statements should be read in
conjunction with the financial statements and the notes thereto included
in the Company's latest Annual Report to Shareholders and the Annual
Report on Form 10-KSB for the year ended January 31, 1996. In the
opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position as of April 30, 1996 and 1995, and cash flows for the three
months then ended have been included.
2. The Company called for redemption its 895,000 publicly traded Common Stock
Purchase Warrants on April 29, 1996. 892,750 of the 895,000 warrants
were exercised subsequent to the end of the quarter. The dilutive
effect of those warrants, as well as certain other stock options and
warrants, is reflected in the computation of primary and fully diluted
earnings per share.
3. The foregoing interim results are not necessarily indicative of the results
of operations for the full fiscal year ending January 31, 1997.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND APRIL 30, 1995. Revenues of
$2,270,000 for the three months ended April 30, 1996 represent an increase of
66% over revenues of $1,371,000 for the same prior year period. Leasing
services generated revenues of $1,804,000 for the three months ended April 30,
1996, an increase of $710,000, or 65%, as compared to $1,094,000 for the same
prior year period. The majority of this increase was attributable to additions
of lease fleet equipment throughout fiscal 1996 and the first quarter of fiscal
1997 to meet lease demand. Seismic equipment sales for the three months ended
April 30, 1996 were $466,000, an increase of $189,000, or 68%, for the same
prior year period.
While the Company's leasing revenues increased by $710,000 for the three
months ended April 30, 1996 as compared to the same prior year period, sublease
costs decreased by $44,000 and depreciation, which relates primarily to
equipment available for lease, increased by $316,000, resulting in an increase
in net leasing revenues of $438,000.
Gross margins on seismic equipment sales were 20% and 46% for the three
months ended April 30, 1996 and 1995, respectively. Margins on sales of used
equipment vary based upon the size of the transactions, the availability of the
product sold and the means by which the equipment was acquired. Higher dollar
transactions tend to yield lower margins than do lower dollar transactions,
while readily available equipment yields lower margins than equipment that is
difficult to locate. In addition, the Company's costs on a specific piece of
equipment may differ substantially based upon whether it was acquired through a
bulk purchase or a discrete search. The margin for the fiscal 1996 period was
significantly lower because of a few low-margin transactions.
General and administrative expenses increased 38%, or $138,000, for the
three months ended April 30, 1996 as compared to the same period in 1995 and
were 22% and 27% of total revenues for the three months ended April 30, 1996 and
1995, respectively. The increase was due primarily to increased personnel costs
and higher provision for bad debt expense. The Company's provision for doubtful
accounts expense increased from $30,000 in the fiscal 1996 period to $140,000 in
the fiscal 1997 period. The increase reflects additional allowances provided
for the increase in revenues and the corresponding increase in receivables.
While management expects its past due accounts to be collected in full,
additional reserves have been provided to reflect the increased credit risk
associated with the increase in receivables. As of April 30, 1996, the
Company's allowance for doubtful accounts receivable amounted to $487,000, which
is an amount management believes is sufficient to cover any losses which may
develop in trade accounts receivable as of that date.
Net income for the three months ended April 30, 1996 increased by $129,000,
as compared to the same fiscal 1995 period. The increase resulted primarily
from the increase in net leasing revenues, offset by increases in the cost of
equipment sold, general and administration and depreciation expense.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 1996, the Company had current assets of $7,372,000,
including $3,912,000 in cash, and current liabilities of $2,992,000, which
includes debt totaling $986,000. Cash flows from operations for the three
months ended April 30, 1996, increased by $31,000 as compared to the same 1995
period. Net income, which included an additional $316,000 of depreciation,
increased by $129,000 during the 1996 period. At April 30, 1996, the Company
had four customers with an aggregate of $738,000 more than 90 days past due. As
of the date of this report, $279,000 of these past due amounts had been
collected. The Company believes it has no other significant credit problems as
of April 30, 1996. Inventory increased by $42,000 as of April 30, 1996, as
compared to the same prior year period, as a result of the Company's acquisition
of used seismic equipment at favorable prices. Accounts payable, accrued
liabilities and other current liabilities and income taxes payable as of April
30, 1996 collectively amounted to $1,415,000, an increase of $301,000 as
compared to April 30, 1995. This represents additional amounts accrued for
income taxes at April 30, 1996 as compared to the same 1995 period.
As of April 30, 1996, the Company had an equipment loan and a revolving
line of credit with a bank. In January 1996 the Company obtained a $4.2 million
equipment loan and a $1.0 million line of credit. Approximately $1.0 million of
the equipment loan was advanced to the Company at January 31, 1996 and was used
primarily to pay amounts due to Input/Output, Inc. ("I/O") for 3-D channel boxes
acquired under the Exclusive Lease Referral Agreement with I/O (the "I/O
Agreement") in fiscal 1996. In March 1996, an additional approximately $3.1
million of the $4.2 million equipment loan was advanced to the Company and an
aggregate of approximately $1.5 million was used to pay all amounts outstanding
under a second equipment loan and second line of credit and to pay amounts due
to I/O for 3-D channel boxes acquired under the I/O Agreement in fiscal 1997.
Amounts due under the term loan at April 30, 1996 are due in monthly
installments of $105,668, including interest at 9.5%, through January 2000.
Amounts borrowed under the $1.0 million line of credit will bear interest at
prime plus .5%. Total borrowings under the line are limited to 80% of the
Company's eligible accounts receivable and 50% of its eligible inventory. Both
of the foregoing obligations are secured by an assignment of leases, accounts
receivable, and inventory, including lease pool equipment.
At April 30, 1996, the Company also an outstanding bank loan of $276,000 in
connection with the Company's acquisition in fiscal 1996 of its office
facilities from Mitcham Properties, Inc., a corporation wholly owned by Billy F.
Mitcham, Jr. It is due in monthly installments of $2,803, including interest at
9%, through September 1998. In April 1996, the Company used proceeds from the
$4.2 million equipment loan described in the previous paragraph to pay all
amounts outstanding on a $50,000 loan used to renovate the facilities.
From June 1994 through January 1995, the consummation of the Company's
initial public offering (the "IPO"), the Company purchased an aggregate of $4.2
million of 3-D channel boxes from I/O. The Company acquired an additional $3.7
million of 3-D channel boxes from I/O throughout fiscal 1996 and $1.6 million of
seismic equipment from other manufacturers, for total capital expenditures in
fiscal 1996 of approximately $5.3 million. The equipment was acquired using
existing cash flows, advances from the $1.0 million line of credit obtained in
January 1995 and other bank financing.
8
<PAGE>
The Company is required to purchase an additional $2.1 million of channel
boxes by December 1996 under the I/O Agreement and expects total capital
expenditures for fiscal 1997 to be approximately $6.0 million. As of the date
of this report, the Company has received an aggregate of approximately $700,000,
$3.1 million and $440,000 from the exercise of bridge warrants, the public
warrants and warrants issued to the underwriter in the IPO ("Representative's
Warrants"), respectively, for an aggregate of approximately $4.2 million. The
Company plans to obtain the $6.0 million of capital equipment in fiscal 1997
with a combination of cash flows from operations, the available portions of its
term loan and line of credit, and a portion of the approximately $4.2 million it
has already received from the exercise of the bridge warrants, the public
warrants and the Representative's Warrants.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 11: Computation of Earnings Per Common and Common
Equivalent Share for the three months ended April 30, 1996
and 1995.
(b) REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MITCHAM INDUSTRIES, INC.
/s/ Roberto Rios
DATE: JUNE 13, 1996 ROBERTO RIOS
CHIEF FINANCIAL OFFICER
9
<PAGE>
EXHIBIT 11
MITCHAM INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
Three months ended
April 30,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Computation of primary earnings per common share:
Net income ............................................. $505,000 $376,000
--------- ---------
Weighted average number of common shares
outstanding ........................................... 3,435,006 3,170,000
Net effect of dilutive stock options and warrants,
based on the treasury stock method, using average
market price.. ........................................ 589,023 -
--------- ---------
Common shares outstanding .............................. 4,024,029 3,170,000
--------- ---------
--------- ---------
Earnings per common share .............................. $0.13 $0.12
--------- ---------
--------- ---------
Computation of earnings per common share
assuming full dilution:
Net income ............................................. $505,000 $376,000
--------- --------
Weighted average number of common shares
outstanding ........................................... 3,435,006 3,170,000
Net effect of dilutive stock options and warrants based
on the treasury stock method, using the end-of-period
market price .......................................... 723,757 -
--------- ---------
Common shares outstanding assuming full dilution ....... 4,158,763 3,170,000
--------- ---------
--------- ---------
Earnings per common share assuming full dilution ....... $0.12 $0.12
--------- ---------
--------- ---------
</TABLE>
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 3,912
<SECURITIES> 0
<RECEIVABLES> 3,519
<ALLOWANCES> 487
<INVENTORY> 360
<CURRENT-ASSETS> 7,372
<PP&E> 11,309
<DEPRECIATION> 2,084
<TOTAL-ASSETS> 16,657
<CURRENT-LIABILITIES> 2,992
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> 9,938
<TOTAL-LIABILITY-AND-EQUITY> 16,657
<SALES> 466
<TOTAL-REVENUES> 2,270
<CGS> 373
<TOTAL-COSTS> 1,452
<OTHER-EXPENSES> 29
<LOSS-PROVISION> 487
<INTEREST-EXPENSE> 66
<INCOME-PRETAX> 789
<INCOME-TAX> 284
<INCOME-CONTINUING> 505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 505
<EPS-PRIMARY> .13
<EPS-DILUTED> .12
</TABLE>
