Pulse Seismic Inc. press release
Pulse Data Inc. reports Q1 2006 results and declaration of quarterly dividend
TSX - Toronto Stock Exchange ยท Canada
TSX Symbol - PSD
CALGARY, May 10 /CNW/ - Mr. Ken MacDonald, President and Chief Executive Officer of Pulse Data Inc. ("Pulse" or "the Company") reports the financial and operating results of Pulse for the three months ended March 31, 2006. Mr. MacDonald is also pleased to announce that Pulse has declared its twelfth consecutive quarterly dividend. This dividend is $0.0375 per common share and will be paid on June 20, 2006 to shareholders of record at the close of business on June 6, 2006. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend.
HIGHLIGHTS
Seismic data library sales increased by 74 percent to $10.1 million for the three months ended March 31, 2006 compared to $5.8 million for the first quarter of 2005.
Free cash flow(1) for the first quarter of 2006 was $6.4 million, compared to $253,000 in the first quarter of 2005.
Pulse had a working capital position of $20.1 million (including cash of $20.2 million) at March 31, 2006 compared to $17.0 million at December 31, 2005 and $1.7 million at March 31, 2005.
Pulse had no participation survey revenue in the first quarter of 2006; however, the seismic division is currently conducting a 224 square kilometre 3D participation survey which is expected to be completed and delivered in the second quarter.
Pulse's LiDAR segment incurred a loss before income taxes of $2.3 million, which included a $1.2 million additional depreciation provision on certain capital assets.
<<
Financial Highlights ($000s except per share data) 3 Months Ended Year Ended March 31, December 31, 2006 2005 2005 (unaudited) (audited) Revenue: Data library sales $ 10,098 $ 5,793 $ 34,905 Participation surveys $ - $ 4,963 $ 10,006 LiDAR $ 1,453 $ 1,480 $ 8,452 Trango & other $ 238 $ 298 $ 1,229 Total revenue $ 11,789 $ 12,534 $ 54,592
Amortization of data libraries $ 4,723 $ 6,134 $ 21,536 Net earnings $ 39 $ 724 $ 6,488 Net earnings per share: Basic and diluted $ 0.00 $ 0.02 $ 0.14
Funds from operations(1) $ 6,314 $ 6,350 $ 35,017 Funds from operations per share(1): Basic $ 0.14 $ 0.14 $ 0.76 Diluted $ 0.13 $ 0.14 $ 0.75 Free cash flow(1) $ 6,408 $ 253 $ 23,458 Working capital $ 20,075 $ 1,672 $ 16,996 Total assets $ 126,226 $ 108,476 $ 129,569 Capital expenditures: Seismic data purchases $ - $ - $ 15,225 Participation surveys $ (94) $ 6,097 $ 11,559 Changes to work in progress $ 932 $ (2) $ 190 Property & equipment additions $ 148 $ 431 $ 1,510 Total capital expenditures $ 986 $ 6,526 $ 28,484
Long-term debt (net of current maturities) $ 19,322 $ 9,558 $ 20,772 Shareholders' equity $ 81,214 $ 77,816 $ 82,432 Weighted average shares outstanding: Basic 46,612,473 45,774,816 46,161,608 Diluted 47,687,104 46,560,743 46,842,744 Shares outstanding at period-end 46,676,444 45,774,816 46,559,778
Dividends per share $ 0.0375 $ 0.125 $ 0.025
(1) These non-GAAP financial measures are defined in the Financial Summary below.
Operational Highlights
Seismic library: 2D in net kilometres 239,822 239,288 239,822 3D in net square kilometres 9,442 6,763 9,442
FINANCIAL SUMMARY
The Company's continuous disclosure documents may provide discussion and analysis of "free cash flow", "funds from operations" and "funds from operations per share". These financial measures do not have a standard definition prescribed by generally accepted accounting principles in Canada 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. The Company defines funds from operations as 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 cash flow from operations divided by the weighted average number of shares outstanding for the period.
Overview
Net earnings for the three months ended March 31, 2006 were $39,000 ($0.00 per share diluted), compared to $724,000 ($0.02 per share diluted) for the first quarter in 2005. Funds from operations for the first three months of 2006 were $6.3 million ($0.13 per share diluted), compared to $6.4 million ($0.14 per share diluted) generated for the three months ended March 31, 2005. These per share figures are based on the weighted average diluted shares outstanding of 47,687,104 for the first quarter of 2006, compared to 46,560,743 for the first quarter of 2005.
Revenue
For the three months ended March 31 (stated in thousands of dollars)
2006 2005 % of % of Business Total Total % Segment Revenue Revenue Revenue Revenue Change Seismic Data: Data library sales $ 10,098 85.7 $ 5,793 46.3 74.3 Participation surveys - - 4,963 39.7 (100.0) LiDAR 1,453 12.3 1,480 11.8 (1.8) Trango 287 2.4 399 3.2 (28.1) Corporate and other (49) (0.4) (101) (1.0) 51.5 Total $ 11,789 100 $ 12,534 100 (5.9)
Seismic Data Segment
The seismic data segment, which includes data library sales and participation survey revenues, contributed 85.7 percent of the Company's total revenue in the first quarter of 2006, which is consistent with the same period in 2005. For the three months ended March 31, 2006, Pulse recorded total seismic segment revenue of $10.1 million compared to $10.8 million for the same period in 2005. Within the seismic data segment the Company generates two types of revenue: data library sales and participation survey revenue. While participation survey revenue increases revenue and earnings significantly in periods of high survey activity, participation surveys represent an investment in the seismic data library that initially draws down the capital resources of the Company. Data library sales generate immediate free cash flow through licenses of seismic data from the existing library of seismic data, which can occur many times without incurring further costs. Seismic data library sales were $10.1 million for the first quarter of 2006, an increase of 74.3 percent from the $5.8 million for the first quarter of 2005. This increase was due in part to higher demand for seismic data from junior E&P companies engaged in exploration and in part to a greater proportion of higher-priced 3D data sales in the first quarter of 2006 compared to the same period in 2005. There was no revenue recorded for participation surveys during the first quarter of 2006. The one participation survey in progress at March 31, 2006 is expected to be delivered in the second quarter of 2006. In the first quarter of 2005, two participation surveys were completed and delivered for recorded revenue of $5.0 million.
LiDAR Segment
LiDAR revenue for the first quarter of 2006 remained consistent with revenue for the first quarter of 2005.
Trango Segment
Revenue for the first quarter of 2006 decreased by 28 percent to $287,000 from $399,000 for the same period in 2005. Pulse's initiative to monetize Trango in the first quarter has delayed implementation plans for its major clients.
Corporate and Other Segment
The corporate and other segment consists primarily of Pulse's corporate G&A costs, interest and items such as inter-company eliminations and foreign exchange gains and/or losses.
Data Library
Pulse acquires seismic data to grow its data library through two primary methods. The Company conducts participation surveys each year, and also purchases complementary seismic data when the opportunity arises to acquire the proprietary rights. During the first quarter of 2006, Pulse initiated a 224 square kilometre 3D participation survey in west central Alberta, which is expected to be completed in the second quarter. In the first quarter of 2005, the Company invested $6.1 million to complete two 3D participation surveys in northern Alberta for a total addition to the data library of 241 square kilometres of seismic data. There were no data purchases in either the first quarter of 2005 or 2006. The LiDAR data library acquired with Terrapoint includes approximately $805,000 of data acquired in 2003, of which $483,000 remains unamortized at March 31, 2006.
Liquidity, Capital Resources and Capital Requirements
At March 31, 2006 the working capital position of Pulse, including the current portion of long-term debt of $5.9 million, was $20.1 million, compared to $1.7 million at March 31, 2005. The year-over-year working capital position has improved by 1,082 percent as a result of increased accounts receivable and cash relating to the high level of seismic data library sales achieved during the past twelve months. Subsequent to the 2005 year-end, the Company collected $13.8 million of the December 31, 2005 accounts receivable. No cash was invested in participation surveys in the first quarter of 2006. With the continued trend of very strong seismic data sales levels, Pulse management expects that its funds from operations will be sufficient to finance operations, service debt, and pay dividends and budgeted capital expenditures throughout the remainder of 2006. The seismic data library is continually growing through the acquisition of new seismic data - principally 3D. The ongoing growth in the Company's seismic data library continues to position Pulse as a leading provider of valuable seismic data to industry participants well into the future. Historical data sales analysis shows that most seismic data retains its value for many years. Combined 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. Terrapoint's business is growing and significant market opportunities have been identified. Management is focusing on new ways to tap into a greater share of this growth industry. Quarterly results can show significant swings in working capital because of the impact of participation surveys. 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 non-cash amortization expense, funds from operations are usually much higher than net earnings.
PULSE DATA INC. Interim Consolidated Balance Sheets (In thousands of dollars) March 31, December 2006 31,2005 (unaudited) (audited)
Assets
Current assets: Cash and cash equivalents $ 20,221 $ 11,909 Accounts receivable 15,385 20,594 Prepaid expenses 718 316 Work in progress 576 993 36,900 33,812
Long-term receivable - 800 Data libraries 75,439 80,256 Participation surveys in progress 1,124 192 Property and equipment 12,132 13,859 Investments 432 432 Deferred charges 199 218
$ 126,226 $ 129,569
Liabilities and Shareholders' Equity
Current liabilities: Accounts payable and accrued liabilities $ 6,199 $ 6,748 Deferred revenue 4,684 4,000 Current portion of long-term debt 5,942 6,068 16,825 16,816
Long-term debt 19,322 20,772 Future income taxes 8,865 9,549
Shareholders' equity: Share capital 52,081 51,808 Contributed surplus 1,299 1,079 Retained earnings 27,834 29,545 81,214 82,432 $ 126,226 $ 129,569
PULSE DATA INC. Interim Consolidated Statements of Earnings and Retained Earnings
Three months ended March 31, (In thousands of dollars, except per share data)(unaudited)
2006 2005
Revenue $ 11,789 $ 12,534 Operating expenses: Amortization of data libraries 4,723 6,134 Operating 2,545 2,503 Depreciation and amortization 1,875 598 9,143 9,235
Gross margin 2,646 3,299
General and administrative expenses 1,905 1,647 Research and development expenses 271 239 Interest: Long-term debt 420 227 Other (70) (39) 350 188
Earnings before income taxes 120 1,225
Income taxes: Current 765 1,778 Future (reduction) (684) (1,277) 81 501
Net earnings $ 39 $ 724
Retained earnings, beginning of period $ 29,545 $ 26,527
Dividends declared (1,750) (573)
Retained earnings, end of period $ 27,834 $ 26,678
Earnings per share, basic and diluted $ 0.00 $ 0.02
PULSE DATA INC. Interim Consolidated Statements of Cash Flows
Three months ended March 31, (In thousands of dollars)(unaudited)
2006 2005
Cash provided by (used in):
Operations: Net earnings $ 39 $ 724 Items not involving cash: Amortization of data libraries 4,723 6,134 Depreciation and amortization 1,875 598 Unrealized loss on foreign exchange 38 13 Future income taxes (reduction) (684) (1,277) Stock-based compensation 304 158 Other 19 - Funds from operations 6,314 6,350
Net change in non-cash working capital items related to operations 4,862 4,701 11,176 11,051 Financing: Repayment of long-term debt (1,576) (1,440) Issue of share capital 189 - (1,387) (1,440) Investing: Additions to data libraries through participation surveys 94 (6,097) (Increase) decrease in participation surveys in progress (932) 2 Increase in investments - 235 Additions to property and equipment (148) (431) Net change in non-cash working capital items related to investing (491) (2,139) (1,477) (8,430)
Increase in cash position 8,312 1,181
Cash and cash equivalents, beginning of period 11,909 3,827
Cash and cash equivalents, end of period $ 20,221 $ 5,008
During the first quarter of the year the Corporation paid interest of $350,000 (2005 - $232,000) and received interest of $82,000 (2005 - $26,000). During the first quarter of the year the Corporation paid income taxes of $225,000 (2005 - $51,000).
PULSE DATA INC. Segmented Information
Three months ended March 31, 2006 and 2005 (Tabular amounts in thousands of dollars)
Three months ended March 31, Seismic Corporate 2006 Data LiDAR Trango and Other Total Revenue Data library sales $ 10,098 $ - $ - $ - $ 10,098 Partici- pation surveys - - - - - LiDAR - 1,453 - - 1,453 Trango - - 287 - 287 Corporate and other - - - (49) (49) Total revenue 10,098 1,453 287 (49) 11,789 Amortization 4,679 44 - - 4,723 Segment profit (loss), before undernoted 5,419 1,409 287 (49) 7,066
Operating expenses 920 1,303 322 - 2,545 General and administrative - 354 1 1,550 1,905 Depreciation - 1,768 14 93 1,875 Research and development - 271 - - 271 Interest expense - 9 - 341 350 Earnings (loss) before income taxes $ 4,499 $ (2,296) $ (50) $ (2,033) $ 120
Total assets $ 107,542 $ 14,630 $ 1,660 $ 2,394 $ 126,226
Capital expenditures $ 838 $ 97 $ - $ 51 $ 986
Three months ended March 31, Seismic Corporate 2005 Data LiDAR Trango and Other Total Revenue Data library sales $ 5,793 $ - $ - $ - $ 5,793 Partici- pation surveys 4,963 - - - 4,963 LiDAR - 1,480 - - 1,480 Trango - - 399 - 399 Corporate and other - - (101) (101) Total revenue 10,756 1,480 399 (101) 12,534 Amortization 6,089 45 - - 6,134 Segment profit (loss), before undernoted 4,667 1,435 399 (101) 6,400
Operating expenses 704 1,352 498 (51) 2,503 General and administrative - 448 - 1,199 1,647 Depreciation - 544 19 35 598 Research and development - 239 - - 239 Interest expense - - - 188 188 Earnings (loss) before income taxes $ 3,963 $ (1,148) $ (118) $ (1,472) $ 1,225
Total assets $ 89,899 $ 16,033 $ 1,303 $ 1,241 $ 108,476
Capital expenditures $ 6,095 $ 290 $ 6 $ 135 $ 6,526
OUTLOOK
Based on continued strong commodity prices and increased oil and gas exploration activity in western Canada, Pulse expects high demand for both existing seismic data and new data throughout 2006. We will continue to add high quality seismic data to our data library throughout 2006. Terrapoint has not produced the financial results we anticipated. We have spent a tremendous amount of effort to revamp and restructure its entire operations. The weakest part of Terrapoint's operations has been the high- range data collection systems, which require high maintenance and offer low reliability. These systems were part of the purchase of assets from the United States operations of Mosaic and were developed outside of our existing R&D group. While the base technology and science incorporated into these systems was sound and held promise for future development, the operational design was not conducive to a high production environment. In late March 2006, we purchased a new Optech 3100 high-range LiDAR system. This equipment was put into operation in mid-April and as a result of the operational efficiency presented by this new system we have made the decision to no longer maintain or repair four older high-range systems during 2006 and lay off the engineering staff associated with its development. One system was retired in the first quarter, resulting in an additional depreciation provision of $1.2 million. While the remaining three older high- range systems continue to operate or to be capable of operating, we will continue to review the useful economic life of these systems, and we anticipate that depreciation relating to these systems may be accelerated. While this strategy will hurt short-term net earnings, it will increase production, competitiveness and reliability of our high-range business and bring gross profit margins in line with the low-range sector of this business which has exceeded expectations. The research and development effort during the last half of 2005 and early 2006 in Terrapoint has concentrated on developing a new mobile vehicle- mounted LiDAR system, TITAN, that we anticipate will be in production during the third quarter of this year. This system will target a large new market that, as yet, has not seen the benefits of LiDAR technology. TITAN is designed to be vehicle-mounted and to produce survey-grade digital elevation models of existing roadways, railways and shorelines. Specifications include the ability to survey at highway speeds, with a 360-degree field of view using a tightly coupled GPS/INS solution to provide accurate data in obstructed environments Our strategy in the last year has resulted in a very strong balance sheet with more than $20 million in cash and a strong working capital position. Our core seismic business has performed very well and we expect it to continue to generate very good levels of cash data sales. While we have suffered some setbacks with the Terrapoint older high-range systems, we have addressed the problem and are confident in the investment we have made in both internal R&D and new technology. We would like to thank all employees and Board members for their dedication and resourcefulness.
CORPORATE PROFILE
Pulse is a Calgary-based company specializing in data ownership through acquisition, marketing and information management, with a current focus on the energy sector. Through its three operating segments - Pulse Seismic, Terrapoint and Trango, the Company has evolved into an industry leader in providing better information faster. Pulse Seismic is at the forefront with regard to acquiring, marketing and licensing seismic data in Western Canada. Pulse Seismic's library currently consists of approximately 240,000 net kilometres of 2D data and more than 9,400 net square kilometres of 3D data. Cash is generated through licensing of our seismic data library to the oil and gas industry in Western Canada. Pulse trades on the Toronto Stock Exchange under the symbol PSD.
Certain information contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Investors are encouraged to review the "Risk Factors" section of the Management's Discussion and Analysis for the year ended December 31, 2005 for a discussion of risks that could affect the Company's operations and financial results. Forward-looking statements are based upon management's assumptions, expectations and estimates at the time that such statements are made. Pulse does not update forward-looking statements should circumstances change or management's assumptions, expectations or estimates change.