Mitcham Industries Q4 2009 Earnings Conference Call Transcript

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

Question: Pierre Conner - Capital One - Analyst : Bill, first on the leasing side -- and I understand about obviously the activity in the CIS and Canada, and wondered if you could tell us a little bit about -- was it just no activity? I know we had about, what was it, about 20,000 channels that would go to work in Canada, possibly, and maybe similar levels in the CIS? Was there any activity at all, or was it just lower than you expected?

Question: Pierre Conner - Capital One - Analyst : Those will probably -- the half of what you expected that you did see were winter grid and I guess I was trying to get a feel for sequentially as we begin to get into the breakup, those jobs, even that have will have its typical seasonality to it. Is that correct? 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: Pierre Conner - Capital One - Analyst : Okay. Bill, there's just a general pressure on pricing overall. I understand your commentary about maybe the customer not wanting to roll out additional CapEx, moving maybe to some leasing. But are you, you know, what kind of pressures are you getting or pricing, or is it small enough piece of the puzzle that you are kind of flying under the radar?

Question: Pierre Conner - Capital One - Analyst : Okay, so I'm just getting a range on that; that is helpful. I'll ask you a little bit about Seamap real quick, and then see what else others have and come back. But interesting quarter on Seamap -- and you mentioned the mix having a lot to do with the margins. So my question, of course, is was that unique mix or based on the largest deliveries that go forward for the next couple of quarters is -- would you expect similar type of mix?

Question: Pierre Conner - Capital One - Analyst : Okay, all right. Those are helpful. I have some others, but maybe I will let some other guys get in the queue and come back as necessary. Thank you, gentlemen.

Question: Neal Dingmann - Wunderlich Securities - Analyst : Bill, it sounds like -- a couple of questions on the Seamap on the offshore side first -- that it's still tracking pretty well. What do you see going forward? Do you have some fears as far as -- I know the market always talks about overcapacity at a certain point on the offshore marine vessels, but is there concern about that? Is that too far out even to worry about at this point?

Question: Neal Dingmann - Wunderlich Securities - Analyst : So that will help you, obviously, not just the number of boats coming out but it sounds like all of the vessels coming out are becoming obviously bigger than what they've been in the past, so they will kind of have a levered effect there as well.

Question: Neal Dingmann - Wunderlich Securities - Analyst : What are your thoughts these days. I mean obviously now over the last couple of years, Canada remains quite weak. I mean, do you keep as many units up there as in the past? Do you continue to mobilize those? What's sort of your mindset these days in Canada?

Question: Neal Dingmann - Wunderlich Securities - Analyst : Right, right. I'm sorry.

Question: Neal Dingmann - Wunderlich Securities - Analyst : Right, right.

Question: Neal Dingmann - Wunderlich Securities - Analyst : Okay, so you are still hearing just a lot of chatter, a lot of people still (technical difficulty) indications whether whatever comes back, they may have to be I guess (inaudible) lease next year rebound to close to normal levels?

Question: Neal Dingmann - Wunderlich Securities - Analyst : Sure, sure. Then lastly, you had mentioned, just on I guess the press release, Russia and Canada being a bit weak. What else is there, internationally speaking, some other spots? I mean Australia, are there other areas that are sort of sticking out that have become a bit better than you've had in the past? Now you've got a better presence there. Will it continue?

Question: Neal Dingmann - Wunderlich Securities - Analyst : I got it. Okay. Thanks, Bill.

Question: Terese Fabian - Sidoti & Company - Analyst : Thank you and good morning. I have a question on the bad debt expense. Can you provide some more detail on that, how many clients, customers were involved? Were they on a watchlist? Was the debt 90 days past due? How much of that went into that category? 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: Terese Fabian - Sidoti & Company - Analyst : Okay. Going forward, are you going to be screening customers, existing customers, for similar situations since we don't know how long the recession is going to last and where oil prices will be going at this point in the near term?

Question: Terese Fabian - Sidoti & Company - Analyst : Okay. Sticking with the customers for another minute, in the K last year, you said you had 55 lease customers. Are you seeing any change in those numbers? Are people shuttering up their shops or are the smaller places closing up?

Question: Terese Fabian - Sidoti & Company - Analyst : Okay, and then just a last question on the flipside of the coin, which is competition in equipment leasing. Are you seeing others getting into the market now in terms of leasing equipment? 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: Terese Fabian - Sidoti & Company - Analyst : Okay, fair enough. Let me just ask one last question, if I may? Vertical seismic profiling equipment, a lot of people use it, talk about it very favorably. What kind of revenue did it generate in the fourth quarter? Do you have a number on that? I think you had a number for the first nine months of the last (multiple speakers) or something. (multiple speakers)?

Question: Terese Fabian - Sidoti & Company - Analyst : How much does a piece of equipment like that cost?

Question: Terese Fabian - Sidoti & Company - Analyst : Okay, thanks.

Question: Ryan Fitzgibbon - Pritchard Capital - Analyst : Just a quick question on the Polarcus contract -- I know you mentioned that it's supposed to come online the second quarter of fiscal 2010. Can you kind of give us an idea of how we should expect those revenues to come in, if they will be more heavily weighted toward the second quarter or third quarter, fourth quarter? Any kind of color you could provide would be great. 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 - Pritchard Capital - Analyst : Okay, perfect. My other questions have been answered. Thank you.

Question: Tamara Manoukian - Greenwood Investments - Analyst : Good morning, Billy, Rob. Just a few questions -- most of my questions were answered. Could you break down your sales geographically for the fiscal year? Eurasia, US and Canada are what I am most interested in.

Question: Tamara Manoukian - Greenwood Investments - Analyst : Okay. Are you seeing similar declines in the rest of Eurasia geographic region as in Russia, or do you see the same decline in Kazakhstan?

Question: Tamara Manoukian - Greenwood Investments - Analyst : I think Billy mentioned that two contracts in Russia and one in Kazakhstan were postponed during the quarter. Out of how many, let me ask?

Question: Tamara Manoukian - Greenwood Investments - Analyst : A half dozen (inaudible). In terms of just the follow-up question about bad debt, I was wondering if you are negotiating some of this, some of the bad debt, and if you expect to collect it at some point. 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: Tamara Manoukian - Greenwood Investments - Analyst : Geographically, are these mostly related to Eurasia region?

Question: Tamara Manoukian - Greenwood Investments - Analyst : Heavily weighted. Do you anticipate to take more as we go forward, or would you say that this is a conservative estimate?

Question: Tamara Manoukian - Greenwood Investments - Analyst : Okay, thank you. The last question about capital expenditures -- I think that, in the third quarter, you said that capital expenditure for the first three months was $20 million, and now it's about $35 million. So was it $15 million for the fourth quarter?

Question: Tamara Manoukian - Greenwood Investments - Analyst : So was this $15 million due to some commitment that you had before, or are these related to some specific projects in other parts of the world that (inaudible) good opportunity right now?

Question: Tamara Manoukian - Greenwood Investments - Analyst : What kind of equipment was it?

Question: Tamara Manoukian - Greenwood Investments - Analyst : Okay, I see. Thank you.

Question: Pierre Conner - Capital One - Analyst : Thank you, gentlemen. I wanted to ask you about the CapEx for this year. You talked about taking it down to about $10 million. How much of that is committed? What is sort of the range? I know you have some good opportunities, you may want to, but how much of that is committed, i.e., sort of maintenance? (multiple speakers)

Question: Pierre Conner - Capital One - Analyst : Okay, so no orders have been made against that $10 million to this point of any substantial amount?

Question: Pierre Conner - Capital One - Analyst : Would that mean that, if you did make the decision to acquire -- and I am assuming that VSPs are unique equipment, as you mentioned -- that the impact or the delivery would be, when, the second half?

Question: Pierre Conner - Capital One - Analyst : Okay. Going back to the leasing revenues, just to get a handle on that and then follow on to my earlier question about sort of -- so you did see about half of what you thought on the increase. That should be rolling down a bit. I know you're not giving guidance, but based on some further pricing pressures in other jobs sort of rolling off in North America, do we expect a sequentially down quarter on the leasing revenues? Can we say that?

Question: Pierre Conner - Capital One - Analyst : Correct.

Question: Pierre Conner - Capital One - Analyst : Yes, yes, okay. I'm just trying to get a feel for that. This is a tough one. I guess it depends very much on the level of profitability in the various geographic regions, but any perspective on tax rates at all, assuming that we still taking account of any NOLs, etc., so we are (multiple speakers)?

Question: Pierre Conner - Capital One - Analyst : Okay, all right. Another one -- back on Seamap and the activity there. Did you actually add some to the backlog during the quarter in it? I know the Polarcus contracts were actually prior to -- awarded prior to this quarter. But was there additional equipment or backlog added in this quarter?

Question: Pierre Conner - Capital One - Analyst : Okay, so any additional delivery either from prior backlog and/or short-term sales?

Question: Pierre Conner - Capital One - Analyst : Okay. Very good! All right, well, that's a lot of information, gentlemen. Thank you again.

Question: Terese Fabian - Sidoti & Company - Analyst : Thank you. I have a question on the CIS. How many channels do you have there now? Would you be considering moving some of those out to other markets?

Question: Terese Fabian - Sidoti & Company - Analyst : So there is no issue with internal taxation in Russia and value-added taxes in terms of moving that equipment?

Question: Terese Fabian - Sidoti & Company - Analyst : Okay. Is there work in Eastern Europe that you are looking at, or do you have operations there at all?

Question: Terese Fabian - Sidoti & Company - Analyst : Okay. Then to sort of change direction here, I don't know how much visibility you have on work on the US Outer Continental shelf in terms of your clients and leasing of equipment. But are you seeing any exploratory work being done there now?

Question: Terese Fabian - Sidoti & Company - Analyst : Okay, thank you. That's helpful.

Question: Tamara Manoukian - Greenwood Investments - Analyst : Just a quick follow-up about Seamap -- I was wondering if fourth-quarter sales included orders that were delayed from the third quarter.

Question: Tamara Manoukian - Greenwood Investments - Analyst : So are they still -- are they postponed or were they canceled?

Question: Tamara Manoukian - Greenwood Investments - Analyst : Yes. I am trying to remember the number that I'm coming up with is -- I think it was in the neighborhood of $1.2 million, the order that was postponed or canceled.

Question: Tamara Manoukian - Greenwood Investments - Analyst : You don't? Okay. The backlog for Seamap right now is about $11 million?

Question: George Melas - MKH Management - Analyst : Good morning, gentlemen. Can you tell us a little bit about or how you think about or how you measure equipment utilization and what kind of metrics to track and what kind of numbers do you have right now?

Question: George Melas - MKH Management - Analyst : Okay, fair enough. In terms of -- so I guess the key message, the key metric would be the return on assets deployed. Okay, thank you.