Pulse Seismic Inc. press release
Pulse Data Inc. reports 2006 results and declaration of quarterly dividend
TSX - Toronto Stock Exchange ยท Canada
TSX:PSD
CALGARY, March 19 /CNW/ - 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 year ended December 31, 2006.
Mr. MacDonald is also pleased to announce that Pulse has declared its fifteenth consecutive quarterly dividend. This dividend is $0.0375 per common share and will be paid on April 12, 2007 to shareholders of record at the close of business on March 29, 2007. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend. Pulse confirms that all dividends paid to shareholders in 2006 are designated as "eligible dividends", as defined by the Government of Canada's Bill C-28, entitling Canadian resident individuals to a higher gross up and dividend tax credit. Pulse also designates all dividends paid in 2007 and subsequent years as eligible dividends.
HIGHLIGHTS
Pulse added 17,862 net kilometres of 2D seismic and 461 net square kilometres of 3D seismic to its data library during 2006. This significant addition of seismic data during the year was accomplished through the purchase of two seismic datasets totaling 17,862 net kilometres of 2D data and 224 net square kilometres of 3D data and one participation survey totaling 237 net square kilometres of 3D data. This compares to the addition of 2,920 net square kilometres of 3D data and 534 net kilometres of 2D data in 2005.
Based on the Company's current share price, the annual dividend rate of $0.15 per share represents an approximate yield of 6.4%.
Free cash flow(b) for the year ended December 31, 2006 was $17.8 million, compared to $23.5 million in 2005.
Seismic data library sales decreased marginally by 2% to $34.2 million for the year ended December 31, 2006 from $34.9 million for the year ended December 31, 2005.
Pulse had a working capital position of $5.7 million at December 31, 2006 compared to a working capital position of $17.5 million at December 31, 2005.
Pulse repaid $11.8 million of long-term debt during 2006. In November 2006 Pulse restructured its long-term debt facility with its principal lenders to include an additional $25.0 million, which together with $7.5 million of cash resources, financed the purchase of the $32.5 million Foothills area dataset in November 2006.
On July 31, 2006, the Company completed the sale of its former wholly-owned subsidiary, Trango Technologies Inc., to Fugro Canada for total proceeds of $1.8 million plus a working capital adjustment of approximately $400,000.
On March 5, 2007, Pulse announced that it had initiated a process to evaluate strategic alternatives for its LiDAR business segment (also known as Terrapoint).
Financial Highlights Continuing operations (stated in thousands of dollars except per share data and numbers of shares)
Three months ended 12 months ended December 31 December 31 2006 2005 2006 2005 (unaudited) (audited) Revenue from continuing operations: Data library sales $ 10,506 $ 12,439 $ 34,214 $ 34,905 Participation surveys $ - $ 4,368 $ 3,058 $ 10,006 LiDAR $ 2,268 $ 1,963 $ 7,889 $ 8,452 Corporate & other $ (362) $ (54) $ (520) $ (226) Total revenue from continuing operations $ 12,412 $ 18,716 $ 44,641 $ 53,137 Amortization of data libraries $ 5,631 $ 6,779 $ 22,750 $ 21,536
Net earnings (loss) from continuing ops $ 1,339 $ 3,977 $ (4,499) $ 6,700 Net earnings (loss) from continuing ops per share: Basic $ 0.03 $ 0.09 $ (0.10)(a) $ 0.15 Diluted $ 0.03 $ 0.08 $ (0.10)(a) $ 0.14
Net earnings (loss) $ 1,339 $ 4,020 $ (3,290) $ 6,488 Net earnings (loss) per share: Basic $ 0.03 $ 0.09 $ (0.07)(a) $ 0.14 Diluted $ 0.03 $ 0.08 $ (0.07)(a) $ 0.14 Funds from operations(b) $ 7,494 $ 13,860 $ 24,508 $ 35,017 Funds from operations per share(b): Basic $ 0.16 $ 0.30 $ 0.52 $ 0.76 Diluted $ 0.15 $ 0.29 $ 0.51 $ 0.75 Free cash flow(b) $ 7,869 $ 7,782 $ 17,812 $ 23,458 Working capital $ 5,681 $ 17,503 $ 5,681 $ 17,503 Total assets $ 129,594 $ 129,882 $ 129,594 $ 129,882 Capital expenditures Seismic data purchases $ 33,000 $ - $ 36,850 $ 15,225 Participation surveys $ (375) $ 6,078 $ 6,696 $ 11,559 Changes to work in progress $ - $ 182 $ (192) $ 190 Property and equipment additions $ 266 $ 139 $ 2,221 $ 1,510 Total capital expenditures $ 32,891 $ 6,399 $ 45,575 $ 28,484 Total long-term debt (net of current maturities) $ 31,996 $ 20,772 $ 31,996 $ 20,772 Shareholders' equity $ 75,357 $ 82,432 $ 75,357 $ 82,432
Weighted average shares outstanding: basic 47,802,900 46,500,615 47,145,373 46,161,608 diluted 48,470,921 47,320,276 48,007,006 46,842,744 Shares outstanding at period-end 47,919,342 46,559,778 47,919,342 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.
Seismic Library:
Seismic library: 2D in net kilometres 257,684 239,822 257,684 239,822 3D in net square kilometres 9,903 9,442 9,903 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 GAAP in Canada and, therefore, 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 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 year ended December 31, 2006 was $4.5 million ($0.10 per share basic and diluted), compared to earnings of $6.7 million ($0.15 per share basic and $0.14 per share diluted) for 2005. When calculating this loss per share, the basic number of shares outstanding for this period has been utilized, as using diluted shares would have the effect of inappropriately decreasing the net loss per share. This loss was due entirely to the one-time write-down of Terrapoint's capital assets of $8.8 million taken in the first half of 2006. Without this write-down, the Company would have had net earnings from continuing operations of $1.1 million for the year ended December 31, 2006.
The net loss for 2006 was $3.3 million ($0.07 per share basic and diluted) compared to net earnings of $6.5 million ($0.14 per share basic and diluted) for 2005.
Funds from operations for 2006 totalled $24.5 million ($0.52 per share basic and $0.51 per share diluted), compared to $35.0 million ($0.76 per share basic and $0.75 per share diluted) generated for the year ended December 31, 2005. The earnings per share for 2005 and the funds from operations per share for 2006 and 2005 are based on the weighted average shares outstanding of 47,145,373 (diluted - 48,007,006) for 2006 compared to 46,161,608 (diluted - 46,842,744) for 2005. In 2006, the loss per share figure is based on the basic weighted average number of shares outstanding of 47,145,373, as discussed above.
Net earnings from continuing operations for the three-month period ended December 31, 2006 were $1.3 million ($0.03 per share basic and diluted) compared to $4.0 million ($0.09 per share basic and $0.08 per share diluted) for the same period in 2005. Funds from operations for the fourth quarter of 2006 of $7.5 million ($ 0.16 per share basic and $0.15 per share diluted) were 46.0 percent lower than the $13.9 million ($0.30 per share basic and $0.29 per share diluted) generated in the fourth quarter of 2005. The primary reason for these reductions is that Pulse purchased a large seismic data base rather than conduct participation surveys in the fourth quarter of 2006, while the Company conducted two participation surveys in the fourth quarter of 2005. These per share figures are based on the weighted average shares outstanding of 47,802,900 (diluted - 48,470,921) for the fourth quarter of 2006 compared to 46,500,615 (Diluted - 47,320,276) for the fourth quarter of 2005.
Effective October 6, 2006 Pulse acquired a significant seismic dataset consisting of 14,417 net kilometres of 2D data, located primarily in the Foothills region of Alberta and northeast British Columbia. Earlier in the year, effective August 29, 2006, Pulse acquired a seismic dataset consisting of 3,445 net kilometres of 2D data and 224 net square kilometres of 3D data in the Deep Basin of west central Alberta. In 2005 Pulse added 2,920 net square kilometres of 3D data through the purchase of a significant dataset which consisted of 2,502 net square kilometres of 3D data and 534 net kilometres of 2D data, and through four participation surveys consisting of 418 net square kilometres of 3D data.
Revenue
For the year ended December 31 (stated in thousands of dollars)
2006 2005 % of % of % Business Segment Revenue Total Revenue Total Change Revenue Revenue Seismic Data: Data library sales $ 34,214 76.6 $ 34,905 65.7 (2.0) Participation surveys 3,058 6.9 10,006 18.8 (69.4) LiDAR 7,889 17.7 8,452 15.9 (6.7) Corporate and other (520) (1.2) (226) (0.4) (130.1) Total $ 44,641 100.0 $ 53,137 100.0 (16.0)
For the three months ended December 31 (stated in thousands of dollars)
2006 2005 % of % of % Business Segment Revenue Total Revenue Total Change Revenue Revenue Seismic Data: Data library sales $ 10,506 84.6 $ 12,439 66.5 (15.5) Participation surveys - - 4,368 23.3 (100.0) LiDAR 2,268 18.3 1,963 10.5 15.5 Corporate and other (362) (2.9) (54) (0.3) (570.4) Total $ 12,412 100.0 $ 18,716 100.0 (33.7)
Seismic Data Segment
The seismic data segment, which includes data library sales and participation survey revenues, contributed 83.5 percent of total revenue from continuing operations for the Company in 2006, and 84.6 percent of total revenue from continuing operations for the fourth quarter of 2006. In comparison, the seismic data segment contributed 84.5 percent of total revenue for the year ended December 31, 2005 and 89.8 percent of total revenue for the fourth quarter of 2005. For the year ended December 31, 2006, Pulse recorded total seismic revenue of $37.3 million compared to $44.9 million for 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 similar to the purchase of existing seismic data. However, the process of purchasing seismic data does not generate "revenue" in the initial instance. Once the participation survey data or the purchased data enter our data library future licensing revenue generates free cash flow, which can occur many times while incurring minimal further cash costs.
Seismic data segment revenue for the year ended December 31, 2006 reflects an overall decrease of 17.0 percent from 2005. The primary reason for the decrease in total seismic data segment revenue is the Company's decision to grow the seismic data library through the purchase of existing datasets rather than conduct additional participation surveys after the first half of the year, and lower-than-normal client funding on the participation survey completed in the second quarter of 2006. Pulse recorded $3.1 million of participation survey revenue in 2006, compared to $10.0 million of participation survey revenue in 2005.
LiDAR Segment
LiDAR revenue for the fourth quarter of 2006 increased by 15.5 percent to $2.3 million from $2.0 million in the fourth quarter of 2005 and reached a full-year total of $7.9 million in 2006, down slightly from $8.5 million in 2005. The decrease was due to lower sales in the summer months of 2006; however, the increase in LiDAR revenue in the fourth quarter was due to a significant amount of contracts being sold in the third quarter that were executed during the fourth quarter.
Trango Segment
The Trango segment of Pulse has been reported as discontinued operations as of September 30, 2006. Trango, a former wholly-owned subsidiary of Pulse, was classified as assets held for sale as of June 30, 2006 and was subsequently sold on July 31, 2006, for $1.8 million in cash plus a working capital adjustment of approximately $400,000.
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.
General and Administrative Expenses (G&A) For the year ended December 31, 2006 Corporate G&A expenses were $5.6 million, a 19.3 percent increase from $4.7 million for 2005. The G&A increase is principally related to higher stock- based compensation expense, higher salary expense due to hiring more employees, increased consulting costs and higher public reporting costs.
Depreciation Expense Depreciation expense for the year ended December 31, 2006 increased by 25 percent to $363,000 from $290,000 in 2005. The depreciation provision in the fourth quarter of 2006 was $94,000, an increase of 17.5 percent from the $80,000 expense for the same three-month period in 2005. The increase in both periods is due primarily to the 2005 capital expenditures, mainly for technology-related equipment for improving data security and data flow as well as software upgrades, which results in higher depreciation in the subsequent year.
Interest Expense Total interest expense for the year ended December 31, 2006 increased to $1.1 million from $1.0 million in 2005. The increase is primarily due to the additional debt undertaken midway through 2005 to finance a $15.2 million seismic data purchase, as well as an increase in long-term debt at the end of 2006 to partially fund the $32.5 million seismic data purchase on November 15. In addition, the interest rate on the long-term debt increased slightly in 2006.
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 proprietary rights to complementary seismic data when the opportunity arises. During 2006, Pulse invested $43.5 million to acquire new seismic data. Of this amount, $6.7 million was invested to conduct a 237 square kilometre, 3D participation survey in west-central Alberta in the second quarter of 2006. An additional $36.9 million was invested to purchase two seismic datasets during the year. In the third quarter Pulse purchased a 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, followed by a fourth-quarter acquisition of 14,417 net kilometres of 2D data located primarily in the Foothills region of Alberta and northeast British Columbia, and including some data in Saskatchewan, Yukon, the Northwest Territories and the northwest United States. In comparison, in 2005 the Company invested a total of $26.8 million to acquire seismic data. The Company paid $15.2 million to purchase 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. Additionally in 2005, the Company invested $5.5 million to acquire 244 net square kilometres of 3D data through two participation surveys in northern Alberta and $6.1 million to acquire 174 net square kilometres of 3D data through two participation surveys in west-central Alberta.
Liquidity, Capital Resources and Capital Requirements
At December 31, 2006 the working capital position of Pulse, including the current portion of long-term debt of $8.0 million, was $5.7 million, compared to $17.5 million at December 31, 2005. During the year, Pulse utilized working capital for seismic data purchases ($36.9 million), a participation survey ($6.7 million), long-term debt repayment ($11.8 million) and dividends, net of the Dividend Reinvestment Program proceeds ($6.8 million). The current portion of long-term debt increased by $1.9 million at December 31, 2006 over December 31, 2005 due to additional bank term debt of $25 million undertaken to finance the $32.5 million fourth quarter seismic data purchase.
With the continued trend of strong seismic data sales, Pulse management expects that its funds from operations will be sufficient to finance operations, service debt, and continue to pay dividends and carry out the budgeted capital expenditures through 2007. 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. Utilizing the recent technological advancements in data reprocessing, the Company's clients are able to enhance the quality of older data in the library.
PULSE DATA INC. Consolidated Balance Sheets December 31, 2006 and 2005 (In thousands of dollars) 2006 2005
Assets
Current assets: Cash and cash equivalents $ 2,549 $ 11,012 Accounts receivable 18,406 20,249 Prepaid expenses 362 315 Work in progress 1,098 993 Assets of discontinued operations - 1,750 22,415 34,319
Long-term receivable - 800 Data libraries 101,039 80,256 Participation surveys in progress - 192 Property and equipment 5,179 13,665 Investments 351 432 Deferred charges 610 218
$ 129,594 $ 129,882
Liabilities and Shareholders' Equity
Current liabilities: Accounts payable and accrued liabilities $ 4,944 $ 6,700 Deferred revenue 3,786 3,848 Current portion of long-term debt 8,004 6,068 Liabilities of discontinued operations - 200 16,734 16,816
Long-term debt 31,996 20,772
Future income taxes 5,507 9,862
Shareholders' equity: Share capital 54,887 51,808 Contributed surplus 1,305 1,079 Retained earnings 19,165 29,545 75,357 82,432
$ 129,594 $ 129,882
PULSE DATA INC. Consolidated Statements of Operations and Retained Earnings
Years ended December 31, 2006 and 2005 (In thousands of dollars, except per share data) 2006 2005
Revenue $ 44,641 $ 53,137
Operating expenses: Amortization of data libraries 22,750 21,536 Operating 10,677 9,497 Depreciation and amortization 10,707 2,615 44,134 33,648
General and administrative expenses 7,037 6,571 Research and development expenses 974 1,169
Gain on sale of assets 1,100 -
Interest: Long-term debt 1,714 1,300 Other (461) (288) 1,253 1,012
Earnings (loss) from continuing operations before income taxes (7,657) 10,737
Income taxes: Current 1,302 349 Future (reduction) (4,460) 3,688 (3,158) 4,037
Net earnings (loss) from continuing operations $ (4,499) $ 6,700
Earnings (loss) from discontinued operations, net of income taxes 1,209 (212) Net earnings (loss) (3,290) 6,488
Retained earnings, beginning of year $ 29,545 $ 26,527
Dividends paid (7,090) (3,470) Retained earnings, end of year $ 19,165 $ 29,545
Earnings (loss) per share from continuing operations, basic $ (0.10) $ 0.15 diluted $ (0.10) $ 0.14
Earnings (loss) per share, basic and diluted $ (0.07) $ 0.14
PULSE DATA INC. Consolidated Statements of Cash Flows
Years ended December 31, 2006 and 2005 (In thousands of dollars) 2006 2005
Cash provided by (used in):
Operations: Net earnings $ (3,290) $ 6,488 Items not involving cash: Amortization of data libraries 22,750 21,536 Depreciation and amortization 10,735 2,693 Unrealized gain (loss) on foreign exchange 13 (107) Future income taxes (4,352) 3,574 Stock-based compensation 997 813 Gain on sale of assets (1,100) - Gain on sale of subsidiary (1,323) - Amortization of deferred charges 78 20 24,508 35,017