Pulse Seismic Inc. press release
Pulse Data Inc. reports Q2 2005 results and doubles its quarterly dividend
TSX - Toronto Stock Exchange ยท Canada
TSX Symbol - PSD
CALGARY, Aug. 8 /CNW/ - Mr. Ken MacDonald, President and Chief Executive Officer of Pulse Data Inc. ("Pulse" or the "Company") is pleased to report the financial and operating results of Pulse for the three and six months ended June 30, 2005. In addition, Mr. MacDonald is pleased to announce that in light of continuing strong data library sales and significant free cash flow, Pulse has doubled its quarterly dividend from $0.0125 to $0.025 per common share. The dividend will be paid on September 20, 2005 to shareholders of record at the close of business on September 6, 2005. The Company's Dividend Reinvestment Plan (DRIP) for eligible shareholders will be available for this dividend.
HIGHLIGHTS
The Company successfully completed the acquisition of approximately 2,500 net square kilometres of 3D seismic data and 500 net kilometres of 2D seismic data for a purchase price of $15.2 million. This data purchase increased Pulse's 3D seismic data library by 40%.
Seismic data library sales increased by 11.4% to a record first half of $13.9 million for the six months ended June 30, 2005 compared to $12.4 million for the six months ended June 30, 2004.
Free cash flow(1) for the six months ended June 30, 2005 was $5.4 million, compared to $2.5 million in the same period in 2004. This significant increase in free cash flow in 2005 is attributed to higher data library sales in 2005 and lower cash requirements for participation surveys conducted in the first half of 2005.
Pulse had a working capital position of $5.3 million at June 30, 2005, compared to a slight deficiency at June 30, 2004.
Pulse repaid $5.3 million of long-term debt over the twelve month period ended June 30, 2005.
The Company's decision to add to its data library by purchasing a significant seismic data base, in addition to the lower number of participation surveys compared to the unusually high number of participation surveys in the first half of 2004, resulted in lower total revenue, net earnings and funds from operations(1) for the first half of 2005 compared to the same period in 2004. However it is expected that going forward the data acquired will have a higher potential to generate net earnings due to the lower capitalized cost and corresponding lower amortization.
<< Financial Highlights ('000's except per share data)
3 months ended 6 months ended June 30 June 30 2005 2004 2005 2004 (unaudited) (unaudited) Revenue Data library sales $ 8,059 $ 8,400 $ 13,852 $ 12,433 Participation surveys $ 68 $ - $ 5,031 $ 12,375 LiDAR $ 2,556 $ 506 $ 4,036 $ 506 Trango & other $ 437 $ 172 $ 735 $ 429 Total revenue $ 11,120 $ 9,078 $ 23,654 $ 25,743 Amortization of data libraries $ 3,996 $ 3,513 $ 10,130 $ 12,741 Net earnings $ 683 $ 1,053 $ 1,407 $ 4,004 Net earnings per share: basic $ 0.01 $ 0.03 $ 0.03 $ 0.10 diluted $ 0.01 $ 0.03 $ 0.03 $ 0.10 Funds from operations(1) $ 5,167 $ 5,406 $ 11,517 $ 19,484 Funds from operations per share(1): basic $ 0.11 $ 0.13 $ 0.25 $ 0.47 diluted $ 0.11 $ 0.13 $ 0.25 $ 0.46 Free cash flow(1) $ 5,162 $ 5,360 $ 5,415 $ 2,546 Working capital (deficiency) $ 5,348 $ (57) $ 5,348 $ (57) Total assets $ 121,635 $ 104,167 $ 121,635 $ 104,167 Capital expenditures Seismic data purchases $ 15,225 $ - $ 15,225 $ - Participation surveys $ 5 $ 46 $ 6,102 $ 16,938 Changes to work in progress $ 4 $ 6 $ 2 $ (8,366) Property & equipment additions $ 694 $ 7 $ 1,125 $ 36 Total capital expenditures $ 15,928 $ 59 $ 22,454 $ 8,608 Total long-term debt $ 29,475 $ 19,341 $ 29,475 $ 19,341 Shareholders' equity $ 78,679 $ 74,381 $ 78,679 $ 74,381
Weighted average shares outstanding: basic 46,078,884 42,664,997 45,927,686 41,516,049 diluted 46,750,196 43,208,065 46,559,971 42,090,640 Shares outstanding at period end 46,219,768 45,568,724 46,219,768 45,568,724
(1) These non-GAAP financial measures are defined in the Financial Summary below.
Seismic Library:
2D in net kilometres 239,820 239,013 239,820 239,013 3D in net square kilometres 9,256 6,080 9,256 6,080
Year ended Dec. 31 2004 (audited) Revenue Data library sales $ 25,611 Participation surveys $ 19,979 LiDAR $ 3,886 Trango & other $ 1,792 Total revenue $ 51,268 Amortization of data libraries $ 22,862 Net earnings $ 7,719 Net earnings per share: basic $ 0.18 diluted $ 0.18 Funds from operations(1) $ 36,776 Funds from operation per share(1): basic $ 0.84 diluted $ 0.84 Free cash flow(1) $ 11,988 Working capital (deficiency) $ 3,845 Total assets $ 108,426 Capital expenditures Seismic data purchases $ 1,295 Participation surveys $ 24,788 Changes to work in progress $ (8,436) Property & equipment additions $ 574 Total capital expenditures $ 18,221 Total long-term debt $ 16,865 Shareholders' equity $ 77,507
Weighted average shares outstanding: basic 43,646,866 diluted 43,990,061 Shares outstanding at period end 45,774,816
(1) These non-GAAP financial measures are defined in the Financial Summary below.
Seismic Library:
2D in net kilometres 239,288 3D in net square kilometres 6,522
FINANCIAL SUMMARY
The Company's continuous disclosure documents provide discussion and analysis of "free cash flow", "funds from operations" and "funds from operations per share". These financial measures do not have standard definitions prescribed by generally accepted accounting principles in Canada (GAAP) and therefore they may not be comparable to similar measures disclosed by other companies. The Company has included these non-GAAP financial measures because they are used by management, investors, analysts and others as measures of the Company's financial performance. The Company's definition of free cash flow is cash available for debt servicing, discretionary capital expenditures and the payment of dividends, and is calculated as funds from operations less participation survey additions to the data library and any monetary data exchanges. The Company's definition of funds from operations is cash flow from operations as prescribed by Canadian generally accepted accounting principles, but excluding the impact of changes in non-cash working capital. Funds from operations per share is defined as funds from operations divided by the weighted average number of shares outstanding for the period.
Overview
Net earnings for the six months ended June 30, 2005 were $1.4 million ($0.03 per share diluted), compared to $4.0 million ($0.10 per share diluted) for the same period in 2004. Funds from operations for the six months ended June 30, 2005 were $11.5 million ($0.25 per share diluted), compared to $19.5 million ($0.46 per share diluted) generated for the same period in 2004. These per share figures are based on the weighted average diluted shares outstanding of 46,559,971 for the first six months of 2005, compared to 42,090,640 for the comparative period in 2004. Free cash flow for the six months ended June 30, 2005 was $5.4 million, a 112.7% increase compared to free cash flow of $2.5 million for the six months ended June 30, 2004. Net earnings for the three-month period ended June 30, 2005 were $683,000 ($0.01 per share diluted) compared to $1.1 million ($0.03 per share diluted) for the same period in 2004. Funds from operations for the second quarter of 2005 of $5.2 million ($0.11 per share diluted) were slightly less than the $5.4 million ($0.13 per share diluted) generated in the second quarter of 2004. These per share figures are based on the weighted average diluted shares outstanding of 46,750,196 for Q2 2005 compared to 43,208,065 for Q2 2004. Free cash flow for the three months ended June 30, 2005 was $5.2 million, a 3.7% decrease compared to $5.4 million for the three months ended June 30, 2004. The primary reason for the reduced total revenues, funds from operations and net earnings for the six and three months ended June 30, 2005 compared to 2004 is that during the first half of 2005, the Company recorded $5.0 million of participation surveys, while in the first half of 2004, the Company recorded $12.4 million of participation surveys. Pre-funding commitments by clients for participation surveys are recorded as revenues when received, which increase total revenues, funds from operations and earnings for that period. The first half of 2005 reflected a more normal volume of participation surveys, while the first half of 2004 reflected an unusually high volume of participation surveys mainly due to the delay of a significant survey from late 2003 into early 2004. On June 15, 2005 Pulse successfully completed the acquisition of a significant seismic data base which has increased the Company's 3D data library by 40%. The acquisition consists of approximately 2,500 net square kilometres of 3D seismic data and 500 net kilometres of 2D seismic data and is located in the south-central area of Alberta. This valuable addition is complementary to Pulse's existing database and is located in an area that has recently seen a significant increase in exploration activity by oil and gas companies. The purchase price of $15.2 million was principally financed by term debt through Pulse's existing debt provider. The effective date of the transaction was May 2, 2005.
Revenue
Stated in thousands of dollars
For the six months ended June 30 Business Segment: 2005 2004 % of % of Total Total Revenue Revenue Revenue Revenue % Change Seismic revenue Data library sales $ 13,852 59 $ 12,433 48 11.4 Participation surveys 5,031 21 12,375 48 (59.3) LiDAR revenue 4,036 17 506 2 697.6 Trango revenue 862 4 351 1 145.6 Corporate and other (127) (1) 78 1 (262.8) Total $ 23,654 100 $ 25,743 100 (8.1)
For the three months ended June 30 Business Segment: 2005 2004 % of % of Total Total Revenue Revenue Revenue Revenue % Change Seismic revenue Data library sales $ 8,059 73 $ 8,400 93 (4.1) Participation surveys 68 1 - - - LiDAR revenue 2,556 23 506 6 405.1 Trango revenue 463 4 193 2 139.9 Corporate and other (26) (1) (21) (1) (23.8) Total $ 11,120 100 $ 9,078 100 22.5
Seismic Data Segment:
The seismic data segment contributed 80% of total revenue for the Company in the first half of 2005, and 74% of total revenue for the second quarter of the current year. In 2004, with the Terrapoint acquisition effective May 26, 2004 the seismic data segment contributed 96% of total revenue for the six- month period ended June 30, 2004 and 93% of total revenue for the second quarter. For the six-month period ended June 30, 2005, Pulse recorded seismic revenue of $18.9 million compared to $24.8 million for the same period in 2004. Within the seismic data segment the Company generates two types of revenue: data library sales and participation survey revenue. While participation surveys increase revenue and earnings significantly in periods of survey completion, the participation survey actually results in the capitalization of survey costs, which must be amortized, adding a further charge to earnings in future periods. Data library sales represent licenses of seismic data from the existing library of seismic data, which can occur many times over without further costs being incurred. Seismic data segment revenue for the six months ended June 30, 2005 reflects a 23.9% decrease from the comparable six-month period in 2004 but, includes an 11.4% increase in data library sales for the same period, and a 39.1% increase in data library sales for the second quarter of 2005 compared to the first quarter of 2005. The primary reason for the decrease in total seismic data segment revenue was that Pulse recorded $5.0 million of participation survey revenue in the first quarter of 2005, compared to $12.4 million of participation survey revenue in the first quarter of 2004. The 2004 period had a higher than normal level of participation surveys delivered. For the three-month comparative periods ended June 30, 2005 and 2004, the Company had a 4.1% decrease in data library sales and a negligible increase of $68,000 in participation survey revenue. This survey revenue related to project management work completed during the second quarter.
LiDAR Segment:
For the second quarter of 2005, LiDAR revenue increased 72.7% to $2.6 million over the first quarter of 2005, to reach a year-to-date total of $4.0 million. It is not relevant to make comparisons to the three and six- month periods ended June 30, 2004, as the acquisition of the Light Detection and Ranging (LiDAR) business occurred May 26, 2004. The increased second quarter sales results were attributable to an increased marketing effort, and improvements in weather that had hampered operations in the first quarter of 2005.
Trango Segment:
Revenue for the first half of 2005 increased 145.6% to $862,000 in 2005 from $351,000 in 2004. For the second quarter of 2005 the revenue of $463,000 was an increase of 139.9% from the $193,000 generated in the second quarter of 2004. These improved results in the second quarter are mainly the result of work completed on major contracts awarded to Trango by three oil and gas companies in the United States in late 2004.
Data Library
Pulse acquires seismic data to grow its data library through two primary methods. The Company conducts participation surveys every year, and also makes data purchases when the opportunity arises to acquire the proprietary rights to complementary seismic data. During the first six months of 2005 Pulse invested $21.3 million to acquire new seismic data. In the second quarter of 2005 the Company purchased the proprietary rights to approximately 2,500 net square kilometres of 3D seismic data and 500 net kilometres of 2D seismic data, located in the south-central area of Alberta, for $15.2 million. Additionally, in the first half of 2005 the Company invested $6.1 million to acquire new data through participation surveys. In comparison, the Company spent $8.6 million on participation surveys in the first half of 2004. This amount was in addition to $8.4 million that was recorded at December 31, 2003 as work in progress, relating to the participation survey programs completed in the first quarter of 2004, which was converted to data library additions in 2004 with the delivery of the data in February and March 2004. The total capital expenditures for the participation programs in 2005 related to two 3D participation surveys that were conducted in northern Alberta. The Company acquired a total of 241 square kilometres of 3D data, all of which is 100% owned by Pulse. The Company expects that capital expenditures directed to seismic data acquisition in 2005 will be higher than the 2004 level, due to the major seismic data purchase completed during the second quarter of 2005.
Liquidity, Capital Resources and Capital Requirements
The working capital position of Pulse at June 30, 2005, including the current portion of long-term debt of $5.6 million was $5.3 million, compared to $3.8 million at December 31, 2004 and a deficiency of $57,000 at June 30, 2004. The working capital position has improved by 39.1% compared to the December 31, 2004 position as a result of increased accounts receivable related to the high level of seismic data library and LiDAR sales achieved in the second quarter, as well as a decrease in accounts payable. The accounts payable balance decreased due to participation surveys that were carried out in the first quarter being fully settled in the second quarter, and no new participation surveys commencing in the second quarter. All working capital covenants with Pulse's lenders have been met throughout each of these periods. With the continuation of the trend of very strong existing seismic data sales levels, and significantly improved operational procedures and cost structures combined with a solid contract backlog position in Terrapoint, Pulse management expects that its funds from operations will be sufficient to finance operations, debt servicing, dividends and budgeted capital expenditures for the remainder of 2005. The seismic data library is continually growing through the acquisition of new, principally 3D, data. The ongoing growth in the Company's seismic data library continues to position Pulse to be able to provide valuable seismic data to industry participants into the future. Historical data sales analysis shows most seismic data retains its value for many years, and with the technological advancements in reprocessing that have been made in recent years, the Company's clients are able to enhance the quality of older data in the library. With the acquisition of Terrapoint, Pulse has added airborne and ground-based LiDAR services to its product offerings, and has begun accessing customers in new industries and markets. Although quarterly results can show significant swings in working capital, Pulse remains liquid. The capital-intensive nature of the seismic business is such that working capital deficiency balances can accumulate during the busy participation survey season, only to be reversed upon delivery of the seismic data to survey participants. In order to limit risk in participation surveys, the Company does not proceed with a participation survey without obtaining minimum pre-funding commitments from clients. Because Pulse's largest expense in any given period is the non-cash amortization expense, funds from operations is usually much higher than net earnings. Pulse also has a $10 million operating line of credit facility with Scotiabank. Any drawdowns on this facility are repayable on demand and bear interest at the bank's prime lending rate plus 0.25%. This facility was not utilized throughout 2002, 2003, 2004 and we do not anticipate using it in 2005.
PULSE DATA INC. Interim Consolidated Balance Sheets
(In thousands of dollars) June 30, December 31, 2005 2004 (unaudited) (audited) Assets
Current assets: Cash and cash equivalents $ 3,983 $ 3,827 Accounts receivable 14,268 12,832 Prepaid expenses 167 234 Work in progress 1,449 693 19,867 17,586
Data libraries 86,209 75,010 Property and equipment 14,929 15,042 Investments 432 667 Deferred charges 198 121
$ 121,635 $ 108,426
Liabilities and Shareholders' Equity
Current liabilities: Accounts payable and accrued liabilities $ 3,234 $ 4,466 Deferred revenue 3,314 3,613 Current portion of long-term debt 5,594 5,662 Income taxes payable 2,377 - 14,519 13,741
Long-term debt 23,881 11,203
Deferred revenue 250 -
Future income taxes 4,306 5,975
Shareholders' equity: Share capital 51,108 50,531 Contributed surplus 787 449 Retained earnings 26,784 26,527 78,679 77,507
$ 121,635 $ 108,426
PULSE DATA INC. Interim Consolidated Statements of Earnings and Retained Earnings
(In thousands of dollars, except per share data) Three months Six months ended June 30 ended June 30 2005 2004 2005 2004 (unaudited) (unaudited)
Revenue $ 11,120 $ 9,078 $ 23,654 $ 25,743
Operating expenses: Amortization of data libraries 3,996 3,513 10,130 12,741 Operating 3,218 1,744 5,721 2,474 Depreciation and amortization 640 328 1,238 405 7,854 5,585 17,089 15,620
Gross margin 3,266 3,493 6,565 10,123
General and administrative expenses 1,630 1,350 3,277 2,187 Research and development expenses 274 - 513 -
Interest: Long-term debt 243 263 470 555 Other (24) 301 (63) 275 219 564 407 830
Earnings before income taxes 1,143 1,579 2,368 7,106
Income taxes: Current 852 89 2,630 873 Future (reduction) (392) 437 (1,669) 2,229 460 526 961 3,102
Net earnings $ 683 $ 1,053 $ 1,407 $ 4,004
Retained earnings, beginning of the period 26,678 23,469 26,527 21,027 Dividend paid (577) (570) (1,150) (1,079) Retained earnings, end of the period $ 26,784 $ 23,952 $ 26,784 $ 23,952
Earnings per share, basic and diluted $ 0.01 $ 0.03 $ 0.03 $ 0.10
PULSE DATA INC. Interim Consolidated Statements of Cash Flows (In thousands of dollars) Three months Six months ended June 30 ended June 30 2005 2004 2005 2004 (unaudited) (unaudited) Cash provided by (used in):
Operations: Net earnings $ 683 $ 1,053 $ 1,407 $ 4,004 Items not involving cash: Amortization of data libraries 3,996 3,513 10,130 12,741 Depreciation and amortization 640 328 1,238 405 Unrealized loss on foreign exchange 51 - 64 - Future income taxes (reduction) (392) 437 (1,669) 2,229 Stock-based compensation 199 69 357 93 Other (10) 6 (10) 12 Funds from operations 5,167 5,406 11,517 19,484 Net change in non-cash working capital items related to operations (4,700) (3,987) 1 (6,646) Increase (decrease) in non-current deferred revenue 250 (14) 250 (55) 717 1,405 11,768 12,783