Mitcham Industries Inc. (MIND)
F3Q 2013 Earnings Call
December 5, 2012 9:00 am ET
Bill Mitcham – President, Chief Executive Officer
Robert Capps – Executive Vice President, Chief Financial Officer
Veny Aleksandrov – FIG Partners
Georg Venturatos – Johnson Rice
Ryan Fitzgibbon – Global Hunter
Tyson Bauer – KC Capital
Phil Engel – Semaphore
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I would now like to turn the call over to Jack Lascar of DRG&L. Jack, you may go ahead.
Thank you, Carrie. Good morning and welcome to the Mitcham Industries Fiscal 2013 Third Quarter conference call. We appreciate all of you joining us today. Your hosts are Bill Mitcham, President and Chief Executive Officer, and Rob Capps, Executive Vice President and Chief Financial Officer.
Before I turn the call over to management, I have a few items to cover. If you would like to listen to a replay of today’s call, it will be available via webcast by going to the Investor Relations section of the Company’s website at www.mitchamindustries.com, or via a recorded instant replay until December 12. Information on how to access the replay was provided in yesterday’s earnings release. Information reported on this call speaks only as of today, Wednesday, December 5, 2012 and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay.
Let me also remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause the Company’s actual future results or performance to materially differ from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the Company from time to time in its filings with the SEC, including in its annual report on Form 10-K for the year ended January 31, 2012. Furthermore, as we start this call please also refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday, and please note that the contents of our conference call this morning are covered by these statements.
Now I’d like to turn over the call to Mitcham’s President and CEO, Bill Mitcham.
Thanks, Jack. Good morning everyone. We’d like to thank all of you for joining us today on our fiscal 2013 third quarter conference call. As usual, I’ll begin by making a few general comments about the quarter. Rob will then discuss our financial performance in depth before I conclude with a discussion of our market outlook. Then we’ll open the call for your questions.
So turning to our recent results, it turned out to be a much more challenging quarter than we originally expected primarily due to the impact of reduced leasing revenues in certain geographic regions. We had expected continued softness in the leasing business this quarter and we even talked about it on our last call about a decline in our leasing revenues from last year’s record third quarter, but the level activity was lower than we even anticipated, resulting in a less than satisfactory third quarter result.
Our leasing revenues this quarter were hit hard by lower land activity in the U.S. and the slower than anticipated pickup in Latin America. A couple of large, long-term projects in the U.S. wrapped up early in the quarter and follow-on projects did not get started when expected. Ongoing project delays in Latin America, largely due to permitting issues, contributed to the lower than expected leasing activity. Revenues in that region did increase on a sequential basis but just not as much as we had thought. Keep in mind that our leverage to just two or three jobs can have a big impact on our financial results, as you can see.
European seismic activity remains slow in the quarter, similar to last quarter due to the fiscal, political and environmental issues that have caused many delays in energy projects in eastern Europe. Marine leasing continued it’s steady performance, as it has all year due to ongoing strength in the worldwide marine seismic market, and as we expected and mentioned on our last call, based on equipment delivery schedules Seamap had no major system deliveries in the quarter, resulting in a decline in Seamap revenues both compared to last year and sequentially. Third quarter Seamap revenues consisted of sales in aftermarket equipment, replacement parts, engineering service and ongoing support and repair services. As you know and we talk about this on every call, sales of Seamap products vary from quarter to quarter depending on customer delivery requirements. This quarter was no different but the upcoming fourth and first quarter look much better for scheduled system deliveries.
Let me say that the delays and the permitting issues we have experienced in the first nine months of this year do not, in our opinion, indicate any change in the positive fundamentals that remain in place for our industry and our company. They are simply part of the seismic business, which can be very uneven or lumpy. We are cautiously optimistic about the fourth and first quarters, particularly in Canada and Russia, and I’ll give more color on that following Rob’s remarks.