Pulse Seismic Inc. press release
Pulse Data Inc. reports Q3 2006 results and declaration of quarterly dividend
TSX - Toronto Stock Exchange ยท Canada
TSX Symbol - PSD
CALGARY, Nov. 6 /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 nine months ended September 30, 2006. The Company also declared its fourteenth consecutive quarterly dividend. The dividend of $0.0375 per common share will be paid on December 20, 2006 to shareholders of record at the close of business on December 6, 2006. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend.
<< HIGHLIGHTS
Seismic data library sales increased by 5.5 percent to $23.7 million for the nine months ended September 30, 2006 from $22.4 million for the first nine months of 2005.
Pulse repaid a total of $6.9 million in long-term debt during the first nine months of 2006, reducing long-term debt to $14.2 million at September 30, 2006 and a debt to equity ratio of 0.2:1.
Pulse closed the sale of Trango Technologies Inc. to Fugro Canada Inc. on July 31, 2006 for total proceeds of $1.8 million in cash and a working capital adjustment of approximately $400,000.
On August 29, 2006 Pulse Seismic purchased 3,445 net kilometres of 2D data and approximately 224 net square kilometres of 3D data in the Deep Basin of west central Alberta for cash consideration of $3.9 million.
On October 6, 2006 Pulse Seismic announced the signing of a letter agreement for the purchase of a significant seismic dataset. The data includes 14,000 net kilometres of 2D seismic data covering the exploration and development drilling areas of the Foothills region of Alberta and northeastern British Columbia. This acquisition is scheduled to close on November 15, 2006.
Free cash flow for the nine months ended September 30, 2006 was $9.9 million, compared to $15.7 million in the first nine months of 2005.
Pulse had a working capital position of $13.4 million (including cash of $15.5 million) at September 30, 2006 compared to $17.5 million at December 31, 2005 and $11.2 million at September 30, 2005.
Financial Highlights Continuing Operations (excludes the results of Trango) ('000's except per share data) Unaudited
3 months ended 9 months ended Year ended September 30 September 30 Dec. 31 2006 2005 2006 2005 2005
Revenue from continuing operations: Data library sales $ 6,976 $ 8,614 $ 23,708 $ 22,466 $ 34,905 Participation surveys $ - $ 607 $ 3,058 $ 5,638 $ 10,006 LiDAR $ 2,355 $ 2,453 $ 5,621 $ 6,489 $ 8,452 Corporate & other $ (75) $ (45) $ (158) $ (172) $ (226) Total revenue from continuing operations $ 9,256 $ 11,629 $ 32,229 $ 34,421 $ 53,137
Amortization of data libraries $ 5,068 $ 4,627 $ 17,119 $ 14,757 $ 21,536 Net earnings (loss) from continuing operations $ (760) $ 1,189 $ (5,838) $ 2,723 $ 6,700 Net earnings (loss) from continuing operations per share: basic and diluted $ (0.02)(a) $ 0.02 $ (0.13)(a) $ 0.05 $ 0.14 Net earnings (loss) $ 446 $ 1,061 $ (4,629) $ 2,468 $ 6,488 Net earnings (loss) per share: basic and diluted $ 0.01(a) $ 0.02 $ (0.10)(a) $ 0.05 $ 0.14 Funds from operations (b) $ 5,026 $ 9,640 $ 17,014 $ 21,157 $ 35,265 Funds from operations per share(b): basic $ 0.11 $ 0.21 $ 0.37 $ 0.46 $ 0.76 diluted $ 0.11 $ 0.20 $ 0.36 $ 0.45 $ 0.75 Free cash flow(b) $ 5,023 $ 9,019 $ 9,943 $ 15,676 $ 23,706 Working capital $ 13,437 $ 11,165 $ 13,437 $ 11,165 $ 17,503 Total assets $ 108,954 $ 122,106 $ 108,954 $ 122,106 $ 129,882 Capital expenditures: Seismic data purchases $ 3,850 $ - $ 3,850 $ 15,225 $ 15,225 Participation surveys $ 3 $ (621) $ 7,071 $ 5,481 $ 11,559 Changes to work in progress $ (11) $ 6 $ (192) $ 8 $ 190 Property & equipment additions $ 238 $ 246 $ 1,955 $ 1,371 $ 1,504 Total capital expenditures $ 4,080 $ (369) $ 12,684 $ 22,085 $ 28,478
Long-term debt $ 14,151 $ 22,303 $ 14,151 $ 22,303 $ 20,772 Shareholders' equity $ 75,479 $ 79,167 $ 75,479 $ 79,167 $ 82,432
Weighted average shares outstanding: Basic 46,834,854 46,282,828 46,351,164 46,047,366 46,161,608 Diluted 47,638,555 47,246,570 47,351,039 46,726,355 46,842,744 Shares outstanding at period end 47,634,337 46,460,354 47,634,337 46,460,354 46,559,778
(a) Basic weighted average shares outstanding are used to calculate loss per share (b) These non-GAAP financial measures are defined in the Financial Summary below
Operational Highlights:
2D in net kilometres 243,267 239,820 243,267 239,820 239,822 3D in net square kilometres 9,903 9,256 9,903 9,256 9,442 >>
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 (GAAP) 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 management, investors, analysts and others use them 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 total participation survey additions to the data library. The Company's definition of funds from operations is cash flow from operations as prescribed by Canadian GAAP, 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
The loss from continuing operations for the nine months ended September 30, 2006 was $5.8 million ($0.13 per share basic and diluted), compared to earnings of $2.7 million ($0.05 per share basic and diluted) for the first nine months of 2005. When calculating loss per share, the basic weighted average number of shares outstanding for this period have been utilized, as diluted shares would have had the effect of inappropriately decreasing the net loss per share. This loss was due almost entirely to the one-time writedown of Terrapoint's capital assets taken in the first half of 2006. Without this writedown, the net loss from continuing operations for the nine months ended September 30, 2006 would have been $300,000 compared to earnings of $2.7 million for the 2005 period. The net loss for the nine months ended September 30, 2006 was $4.6 million ($0.10 per share basic and diluted) compared to net earnings of $2.5 million ($0.05 per share basic and diluted) for the same period in 2005. Funds from operations for the first nine months of 2006 totaled $17.0 million ($0.36 per share diluted) compared to $21.2 million ($0.45 per share diluted) for the first nine months of 2005. The earnings per share for 2005 and funds from operations figures for 2006 and 2005 are based on the weighted average diluted shares outstanding of 47,351,039 for the first nine months of 2006, compared to 46,726,355 for the first nine months of 2005. In 2006, the nine-month loss per share figure is based on the basic weighted average number of shares outstanding of 46,351,164. The loss from continuing operations for the three months ended September 30, 2006 was $760,000 ($0.02 per share basic and diluted), compared to net earnings of $1.2 million ($0.02 per share basic and diluted) for the comparable three-month period in 2005. Funds from operations for the third quarter of 2006 totaled $5.0 million ($0.11 per share diluted) compared to $9.6 million ($0.20 per share diluted) for the comparable period in 2005. The earnings per share in 2005 and funds from operations figures for 2006 and 2005 are based on the weighted average diluted shares outstanding of 47,638,555 for the three months ended September 30, 2006, compared to 47,246,570 for the three months ended September 30, 2005. In 2006, the three-month loss per share figure is based on the basic weighted average number of shares outstanding of 46,834,854. The disposition of Pulse's wholly-owned subsidiary Trango Technologies Inc. ("Trango") was completed on July 31, 2006 and was effective June 30, 2006. This disposition provided a net gain on sale of $1.2 million in Q3 2006. The depreciation expense in the LiDAR segment for the nine months ended September 30, 2006 was $10.1 million compared to $1.7 million for the same period in 2005. Included in the 2006 figure is an $8.8 million writedown primarily related to older high-altitude LiDAR data collection systems and their related proprietary processes and software. These were written down to their residual value in the first half of 2006. The residual value reflects the fair market value of the components that Terrapoint is currently using or will be able to use in its other systems. No further writedowns are expected.
<< Revenue For the nine months ended September 30 (stated in thousands of dollars)
2006 2005 Revenue % of Revenue % of % Business Segment Total Total Change Revenue Revenue Seismic Data: Data library sales $ 23,708 73.6 $ 22,466 65.3 6 Participation surveys 3,058 9.5 5,638 16.4 (46) LiDAR 5,621 17.4 6,489 18.9 (13) Corporate and Other (158) (0.5) (172) (0.6) 8 Total $ 32,229 100 $ 34,421 100 (6)
For the three months ended September 30 (stated in thousands of dollars)
2006 2005 Revenue % of Revenue % of % Business Segment Total Total Change Revenue Revenue Seismic Data: Data library sales $ 6,976 75.4 $ 8,614 74.1 (19) Participation surveys - - 607 5.2 (100) LiDAR 2,355 25.4 2,453 21.0 (4) Corporate and Other (75) (0.8) (45) (0.3) (67) Total $ 9,256 100 $ 11,629 100 (20) >>
Seismic Data Segment
The seismic data segment, which includes data library sales and participation survey revenues, contributed 83.0 percent of total revenue from continuing operations for the Company in the first three quarters of 2006, and 75.4 percent of total revenue from continuing operations in the third quarter of 2006. In 2005, the seismic data segment contributed 81.6 percent of total revenue for the nine-month period ended September 30 and 79.3 percent of total revenue for the third quarter. For the nine months ended September 30, 2006, total seismic data segment revenue decreased by $1.3 million to $26.8 million from $28.1 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 investments in the seismic data library that initially draw down the Company's capital resources. 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. The data library sales revenue portion of this segment for the nine months ended September 30, 2006 increased by 5.5 percent from the same period in 2005. The increase year-over-year is due in part to a higher demand for seismic data from exploration from junior oil and natural gas companies in the first part of 2006. Overall, seismic data segment revenue for the nine months ended September 30, 2006 decreased by 4.8 percent from the same period in 2005 due to the decrease in participation survey revenue. Participation survey revenue decreased by 45.8 percent for the nine months ended September 30, 2006 from the comparable period in 2005. This was due to the Company's decision to pursue the purchase of quality existing seismic datasets rather than conducting further participation surveys during this period, other than the one completed in the second quarter of 2006, and to lower-than-normal client funding received for this participation survey. In the second quarter of 2006, Pulse completed and delivered a 237 square kilometre, 3D participation survey in west-central Alberta. For the three months ended September 30, 2006, seismic data segment revenue decreased by 24.3 percent from the comparable period in 2005. This was primarily due to a difference in the timing of data library sales which were more heavily weighted to the first half of 2006 compared to 2005.
LiDAR Segment
LiDAR segment revenue for the first three quarters of 2006 decreased by 13.4 percent from the same period in 2005. For the third quarter of 2006 revenue decreased by 4.0 percent from the third quarter of 2005. September, 2006 has seen a significant improvement in LiDAR sales, and Terrapoint ended the quarter with a significant sold backlog of contracts that are expected to be fulfilled in the fourth quarter of 2006. Terrapoint has strengthened its marketing efforts with the appointment of Jake Jenkins as Vice President Sales and Marketing of Terrapoint Canada Inc. Mr. Jenkins has 22 years of extensive worldwide experience in the fields of remote sensing, LiDAR technology and related sales and marketing. Terrapoint has also added several experienced sales people. Terrapoint also purchased a new high-altitude data collection system in the second quarter of 2006, which allows projects to be completed more quickly, at lower cost to customers and at higher margins.
Data Library
Pulse acquires seismic data to grow its data library through two methods. The Company conducts participation surveys each year, and also purchases proprietary rights to complementary seismic data when the opportunity arises. During the first nine months of 2006, Pulse invested a total of $10.9 million to acquire seismic data. Of this amount, $7.1 million was invested to conduct a 237 square kilometre, 3D participation survey in west-central Alberta in Q2 2006, and an additional $3.9 million was invested in Q3 2006 to purchase a seismic dataset consisting of approximately 224 net square kilometres of 3D data and 3,445 net kilometres of 2D data located in the Deep Basin of west central Alberta. In comparison, in the first nine months of 2005 the Company invested $20.7 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 nine months of 2005 the Company invested $5.5 million to acquire 240 net square kilometres of 3D data through participation surveys. The LiDAR data library acquired with Terrapoint in 2004 includes approximately $805,000 of data acquired by Terrapoint in 2003, of which $395,000 remained unamortized at September 30, 2006. The costs associated with acquiring LiDAR data since the acquisition of Terrapoint have not been significant, and have been expensed.
Liquidity, Capital Resources and Capital Requirements
At September 30, 2006 the working capital position of Pulse, including the current portion of long-term debt of $5.8 million, was $13.4 million, compared to $17.5 million at December 31, 2005. During the third quarter of 2006, Pulse utilized cash resources for a seismic data purchase ($3.9 million), long-term debt repayment ($3.8 million) and dividends ($1.7 million). With the continued trend of strong seismic data sales levels, Pulse management expects that its funds from operations will be sufficient to finance operations, service debt, and pay dividends through the remainder of 2006. 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 recent technological advancements in reprocessing, the Company's clients are able to enhance the quality of older data in the library. Although quarterly results can show significant swings in working capital because of the impact of participation surveys, Pulse remains liquid with a substantial working capital position. Because Pulse's largest expense in any given period is a 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) (unaudited) September 30, December 31, 2006 2005
Assets
Current assets: Cash and cash equivalents $ 15,454 $ 11,012 Accounts receivable 11,746 20,249 Prepaid expenses 321 315 Work in progress 1,135 993 Assets of discontinued operations - 1,750 28,656 34,319
Long-term receivable - 800 Data libraries 74,558 80,256 Participation surveys in progress - 192 Property and equipment 5,222 13,665 Investments 351 432 Deferred charges 167 218
$ 108,954 $ 129,882
Liabilities and Shareholders' Equity
Current liabilities: Accounts payable and accrued liabilities $ 4,750 $ 6,700 Deferred revenue 4,637 3,848 Current portion of long-term debt 5,832 6,068 Liabilities of discontinued operations - 200 15,219 16,816
Long-term debt 14,151 20,772
Future income taxes 4,105 9,862
Shareholders' equity: Share capital 54,233 51,808 Contributed surplus 1,624 1,079 Retained earnings 19,622 29,545 75,479 82,432
$ 108,954 $ 129,882
PULSE DATA INC. Interim Consolidated Statements of Earnings (loss) and Retained Earnings
(In thousands of dollars, except per share data) (unaudited) Three months Nine months ended September 30 ended September 30 2006 2005 2006 2005
Revenue $ 9,256 $ 11,629 $ 32,229 $ 34,421 Operating expenses: Amortization of data libraries 5,068 4,627 17,119 14,757 Operating 2,535 2,274 7,314 7,074 Depreciation and amortization 302 745 10,398 1,945 7,905 7,646 34,831 23,776
Gross margin 1,351 3,983 (2,602) 10,645
General and administrative expenses 1,811 1,401 5,349 4,590 Research and development expenses 214 323 716 836
Interest: Long-term debt 417 408 1,276 878 Other (194) (18) (425) (81) 223 390 851 797
Earnings (loss) from continuing operations before income taxes (897) 1,869 (9,518) 4,422
Income taxes: Current (2) (2,510) 2,182 120 Future (reduction) (135) 3,190 (5,862) 1,579 (137) 680 (3,680) 1,699
Net earnings (loss) from continuing operations $ (760) $ 1,189 $ (5,838) $ 2,723
Earnings (loss) from discontinued operations, net of income taxes 1,206 (128) 1,209 (255)
Net earnings (loss) $ 446 $ 1,061 $ (4,629) $ 2,468
Retained earnings, beginning of period 20,952 26,784 29,545 26,527 Dividends paid (1,776) (1,158) (5,294) (2,308) Retained earnings, end of period $ 19,622 $ 26,687 $ 19,622 $ 26,687
Earnings (loss) per share from continuing operations, basic and diluted $ (0.02) $ 0.02 $ (0.13) $ 0.05
Earnings (loss) per share, basic and diluted $ 0.01 $ 0.02 $ (0.10) $ 0.05
PULSE DATA INC. Interim Consolidated Statements of Cash Flows
(In thousands of dollars) (unaudited) Three months Nine months ended September 30 ended September 30 2006 2005 2006 2005
Cash provided by (used in):
Operations: Net earnings (loss) $ 446 $ 1,061 $ (4,629) $ 2,468 Items not involving cash: Amortization of data libraries 5,068 4,627 17,119 14,757 Depreciation and amortization 302 765 10,426 2,003 Unrealized (gain) on foreign exchange 3 (151) (71) (87) Future income taxes (reduction) (30) 3,124 (5,754) 1,455 Stock-based compensation 545 204 1,195 561 Gain on sale of subsidiary (1,323) - (1,323) - Other 15 10 51 - Funds from operations 5,026 9,640 17,014 21,157 Net change in non-cash working capital items related to operations (16) (4,983) 8,831 (4,982) Increase (decrease) in non-current deferred revenue - (250) - - 5,010 4,407 25,845 16,175
Financing: Long-term debt - - - 15,439 Repayment of long-term debt (3,757) (1,081) (6,857) (3,910) Issue of share capital 621 381 1,571 939 Dividends paid (1,706) (1,158) (5,090) (2,308) Proceeds from sale of subsidiary 1,714 - 1,714 - (3,128) (1,858) (8,662) 10,160
Investing: Additions to data libraries through participation surveys (3) 621 (7,071) (5,481) Seismic data purchases (3,850) - (3,850) (15,225) (Increase) decrease in participation surveys in progress 11 (6) 192 (8) Decrease in investments 81 - 81 235 Additions to property and equipment (238) (246) (1,955) (1,371) Net change in non-cash working capital items related to investing (179) 572 (1,035) (839) (4,178) 941 (13,638) (22,689) Increase (decrease) in cash position (2,296) 3,490 3,545 3,646