Mitcham Industries Inc Q3 2013 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Veny Aleksandrov - FIG Partners - Analyst : My first question is on Canada and Russia. We expect stronger seasonal (inaudible), can you give us an idea in terms of channels that you had in Canada and in Russia last year, and how many channels do you think you're going to have this year?

Question: Veny Aleksandrov - FIG Partners - Analyst : Thank you, and then coming back to the US, my understanding is that there were some projects [that didn't] happen, and new projects have not kicked in, so that's why the lower revenues, you were between projects and also some delays. Do you still see bidding activities strong, and can we expect for these projects to start kicking in as we get into the beginning of next year?

Question: Veny Aleksandrov - FIG Partners - Analyst : Okay, and the last question and I will just requeue, on the Seamap side, it's all about the big projects part of the maintenance. But looking at fiscal 2014, do you see big projects in the bidding pipeline or do you already have big projects in the pipeline?

Question: Veny Aleksandrov - FIG Partners - Analyst : Okay, thank you so much, appreciate it.

Question: Georg Venturatos - Johnson Rice & Company - Analyst : Just wanted to talk a little more about what you're seeing in the domestic US. Just wanted to get your sense -- I know you mentioned some slowdown in activity, some of it was timing related. From a -- beyond timing related, are you seeing anything in basin-specific areas in terms of reduced activity levels?

Question: Georg Venturatos - Johnson Rice & Company - Analyst : Okay. And then in Latin America, I know you mentioned you had some larger jobs that were probably going to come on first quarter of next fiscal year. So, it sounds like we may still have some continued lingering issues in that region in the upcoming fourth quarter?

Question: Georg Venturatos - Johnson Rice & Company - Analyst : Okay, great. And then just last one and then I'll requeue. On the cost side, of that $5.9 million, can you maybe talk about how much of that was due to the expanded operations you talked about in Colombia and Singapore, Hungary?

Question: Georg Venturatos - Johnson Rice & Company - Analyst : Okay, great. Appreciate the answers, guys.

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Question for you on Canada and Russia, with the activity expected to pick up pretty significantly in Q4, did you incur expenses in Q3 redeploying channels to those markets, and if so, can you quantify that impact? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Got it. And then, Latin America, the large projects you've discussed starting up in Q1 of next year, are these the same projects that were previously anticipated starting in the back half of '13, and if so, what gives you confidence that the permitting issues will abate and be able to pick up activity next year?

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Okay, and then, Bill, (multiple speakers) how many channels will you have in Latin America?

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : How many channels will you have in Latin America at that point for Q1?

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Okay, makes sense. And then for Seamap, you mentioned the pick up this quarter with the GunLink 4000 system and the BuoyLink system going out, should we think of revenues closer to Q2, call it, $7.5 million? Or is it possible that you can get back to that Q1 $10 million level?

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Got it, and then final question for me. I believe, Bill, you mentioned 10,000 Geo Space channels delivered. Is that new equipment that you guys took on and are you -- I guess, is your thought process you'd lean more towards the Geo Space equipment versus [Unite] at this point?

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Understood. And did you take delivery of those 10,000 channels during the quarter, and was that included in the CapEx figure?

Question: Ryan Fitzgibbon - Global Hunter Securities - Analyst : Okay, thanks, guys.

Question: Tyson Bauer - KC Capital - Analyst : We're now far enough along in December, does it look like the start-up period in Canada, Russia, and those Northern hemisphere areas that'll be in the normalized range, we don't expect an early start or a delayed start, but on schedule there given the weather patterns?

Question: Tyson Bauer - KC Capital - Analyst : We'll take that for a change. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Tyson Bauer - KC Capital - Analyst : The bullet points you've given regarding Q1 of next year, with the increased activity in Russia, Canada, some jobs starting up in Latin America, deliveries on Seamap, are all these things together predictive or at least suggesting that we could see a record Q1?

Question: Tyson Bauer - KC Capital - Analyst : Well, I would hope so, with all those extra channels and the Latin America coming to life.

Question: Tyson Bauer - KC Capital - Analyst : We can have some good results, there. Latin America, obviously we've had the issues all year long that we haven't been able to resolve. You talked about permitting, wet weather early in the year, you have some contracts starting up in Q1. What changes, I guess I'll follow up on the other question -- what gives you any degree of confidence that these things are going to change? And once you lose the ability to have the channels on the ground earning revenue, it's not really delayed, it's just lost, is it not?

Question: Tyson Bauer - KC Capital - Analyst : Okay, and the last question or topic, given the business model, taking purchases of these channels, and then you have such a short depreciation schedule, yet the useful life is typically longer. It sets up for a scenario where you have a lot of off-balance-sheet assets that aren't reflected but truly are there for the Company's valuation. On the flip side, you talk a lot about wireless and the movement toward wireless. How do those gel together where we have those cable channels still there that are useful in certain projects, but yet an overall movement in the industry more toward wireless, help us understand what that

Question: Tyson Bauer - KC Capital - Analyst : All right. Just a commentary. Given your cash flow, given your lease pool or the asset base there, I know you've been looking at strategic alternatives for more than a year. It just seems, especially with today's reaction, that the cheapest company that you could buy is really when you look in the mirror, it's yourself, so just take that under for whatever that's worth. Thank you.

Question: Phil Engel - Semaphore Management - Analyst : I have a question which builds on the question from the previous caller. Maybe in a more direct way to put it, if we look at your balance sheet, look at the lease pool depreciated, which, as the previous caller stated, is on an aggressive depreciation schedule, so the true market value of that equipment is probably higher. And then even just your net working capital minus the debt is a value for Seamap for everything else. You're trading at a very substantial discount to tangible book. And if I was the management team of a company trading at -- there's not a lot of companies trading at a discount to tangible book as pronounced as yours. And if I was the management team of a company in that position, I would be pretty -- I'd be pretty fired up to find a way to close that value gap. And last quarter was disappointing, this quarter was disappointing, the commentary we're getting from you is steady as she goes, it's all going to be okay, it's just timing differences. But with interest rates where they are, a very unlevered balance sheet, and a management team with a fairly sizable stock option and other type of equity-link compensation package, I'm surprised you're not grabbing the bull more by the horns and trying to create some value for yourselves that way, particularly once the stocks of some of your competitors, or at least related businesses in the space, have been on fire. Am I missing something here? Is there just not that level of urgency? Because for me it seems that that'd be something if I was you I would be thinking about 24/7 everyday.

Question: Phil Engel - Semaphore Management - Analyst : Well, I know that the results last year were very good, and that it's not possible to sustain that pace forever. But to some degree, that was then, this is now. Now you're trading at a discount to your net tangible book. And unless you think that the book value of the lease pool equipment is overstated, or your receivables are overstated, you're still trading at a discount to net tangible book today. And as the previous caller said -- why worry about buying anything else when you can buy the equipment that you own that you already know at $0.75, $0.80 on the $1? Why not step up there and do that? By not doing that, you open yourself up to all sorts of criticism like the Director compensation is one thing I've heard people talk about. I mean, there are multi-billion-dollar companies where the Directors are making less per year than your Directors. The family members on the payroll, why not just put that all to rest by taking on a moderate amount of debt and buying back 10% of the stock and trying to close that valuation gap to get it back to book? Because it seems -- by not doing it, it makes it seem like you don't believe the book value of your own assets. And if you do, why would you not want to buy something that you think is capped at a level that's too low on the balance sheet for $0.80 on the $1 of that level that you already think is too low. It doesn't make mathematical sense not to do it. And it looks -- stock buybacks are generally -- people tend to do them when stocks are high, and then they're too nervous to do them when stocks are low. But you're in a rather unique position of, after a year of good results, now you haven't had good results, you're trading at a discount to net tangible book, interest rates are low, you have an unlevered balance sheet. It's hard to understand why either you're not stepping up and buying more shares yourselves, or doing this for everyone and buying back the stock for all the shareholders.

Question: Phil Engel - Semaphore Management - Analyst : Well, all I could say is that I think the expectations are now that you would do something like this, and you should carefully consider these with your advisors. Maybe I'm a little more forceful than the last caller, but it's a -- it seems to be an obvious point.