TSX Symbol - PSD
CALGARY, March 19 /CNW/ - Douglas Cutts, President and Chief Executive Officer of Pulse Data Inc. ("Pulse" or "the Company"), is pleased to report the financial and operating results of Pulse for the year ended December 31, 2007, which included achieving record annual seismic data library sales of $41.2 million.
Mr. Cutts is also pleased to announce that Pulse has declared its nineteenth consecutive quarterly dividend. The dividend is $0.05 per common share and will be paid on April 11, 2008 to shareholders of record at the close of business on March 28, 2008. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend. Pulse re-confirms that all dividends paid to shareholders in 2007, and subsequent years, 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.
A conference call to review the third quarter results has been scheduled for 1:00 pm EST (11:00 am MST) on Thursday March 20, 2008. The conference call dial-in number is (416) 644-3429 (Toronto) and 1-800-588-4490. A live webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2187240.
HIGHLIGHTS
- 21% increase in annual seismic data library sales to $41.2 million in
2007 compared to $34.2 million in 2006.
- 19% increase in total seismic revenues (including revenues from
participation surveys) to $44.2 million in 2007 compared to
$37.3 million in 2006.
- Pulse invested $11.7 million in strategic seismic acquisitions of
1,536 net square kilometres of 3D data and 65 net kilometres of 2D
data in two seismic data purchases.
- Pulse invested $7.0 million in one participation survey. The Cutbank
River 3D participation survey added a total of 248 net square
kilometres of 3D data to the seismic data library.
- Improved working capital position year-over-year to $12.3 million
(including cash of $6.5 million) at December 31, 2007 compared to
$5.7 million (including cash of $2.2 million) at December 31, 2006.
- Increase of 25% in cash EBITDA(b) to $33.0 million for the year ended
December 31, 2007 from $26.5 million for the year ended December 31,
2006.
- $8.4 million paid in dividends to shareholders in 2007. Based on the
Company's current share price, the annual dividend rate of $0.20 per
common share represents an approximate yield of 8.2%.
- Net earnings from continuing operations in 2007 decreased to
$2.5 million ($0.05 per share basic and diluted) from $3.5 million
($0.07 per share basic and diluted) in 2006 due to unplanned
corporate transaction costs ($2.4 million), increased amortization
($5.8 million) and higher interest expense ($1.0 million), offset by
increased revenues of $7.5 million.
- In 2007 the Company repurchased 610,000 common shares at an average
price of $2.86 through the Normal Course Issuer Bid for a total cost
of $1.7 million.
- On July 27, 2007 Pulse closed a private placement financing of
6.44 million common shares at an issue price of $2.70 per common
share for total gross proceeds of $17.4 million.
Financial Highlights
('000's of dollars except per share data)
3 months ended 12 months ended
December 31 December 31
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2007 2006 2007 2006
---- ---- ---- ----
(unaudited) (unaudited)
Revenue from continuing
operations:
Data library sales $ 10,995 $ 10,506 $ 41,215 $ 34,214
Participation surveys 1,310 - 3,010 3,058
Corporate & other - (520) - (520)
---------------------------------------------------
Total revenue from
continuing
operations $ 12,305 $ 9,986 $ 44,225 $ 36,752
Amortization of
seismic data
library $ 8,478 $ 5,587 $ 28,345 $ 22,574
Net earnings from
continuing
operations $ 1,617 $ 1,996 $ 2,511 $ 3,474
Net earnings from
continuing
operations
per share:
Basic and diluted $ 0.03 $ 0.04 $ 0.05 $ 0.07
Net earnings (loss) $ 305 $ 1,339 $ (4,982) $ (3,290)
Net earnings (loss)
per share:
Basic and diluted $ 0.01 $ 0.03 $ (0.10)(a) $ (0.07)(a)
Funds from continuing
operations(b) $ 9,308 $ 8,210 $ 31,208 $ 25,952
Funds from continuing
operations per
share(b):
Basic $ 0.17 $ 0.17 $ 0.61 $ 0.55
Diluted $ 0.17 $ 0.17 $ 0.61 $ 0.54
Cash EBITDA(b) $ 8,891 $ 8,683 $ 33,038 $ 26,468
Working capital $ 12,259 $ 5,681 $ 12,259 $ 5,681
Total assets $ 124,473 $ 131,910 $ 124,473 $ 131,910
Capital expenditures:
Seismic data
purchases $ - $ 33,000 $ 11,738 $ 36,850
Participation
surveys 4,700 (375) 6,979 6,696
Changes to work
in progress (3,991) - - (192)
Property & equipment
additions 475 7 422 119
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Total capital
expenditures $ 1,184 $ 32,632 $ 19,139 $ 43,473
Total long-term debt
(net of current
maturities and debt
financing costs) $ 23,543 $ 31,996 $ 23,543 $ 31,996
Shareholders' equity $ 79,174 $ 75,357 $ 79,174 $ 75,357
Weighted average
shares outstanding:
Basic 54,637,247 47,802,900 50,828,071 47,145,373
Diluted 55,328,803 48,470,921 51,378,310 48,007,006
Shares outstanding
at period end 54,481,601 47,919,342 54,481,601 47,919,342
(a) Basic weighted average shares outstanding are used to calculate loss
per share.
(b) These non-GAAP financial measures are defined below.
Operational Highlights:
Seismic library:
2D in net kilometres 257,281 257,216 257,281 257,216
3D in net square
kilometres 11,607 9,823 11,607 9,823
FINANCIAL SUMMARY
The Company's continuous disclosure documents provide discussion and analysis of "cash EBITDA", "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 cash EBITDA is cash available for interest payments, cash taxes if applicable, debt servicing, discretionary capital expenditures and the payment of dividends, and is calculated as earnings before interest, taxes, depreciation and amortization less participation survey revenue, plus non-cash and non-recurring G&A expenses. 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
Pulse attained record seismic data library sales of $41.2 million in the year ended December 31, 2007, an increase of 20.5 percent from $34.2 million in 2006. Total seismic revenue of $44.2 million in 2007 included participation survey revenue of $3.0 million, compared to total seismic revenue of $37.3 million including $3.1 of participation survey revenue in 2006. The year-over-year increase in total seismic revenue was 18.7 percent.
Total seismic revenue for the three months ended December 31, 2007 was $12.3 million, comprised of $11.0 million in data library sales and $1.3 million in participation survey revenue, compared to $10.5 million for the fourth quarter of 2006, comprised entirely of data library sales as no participation surveys were delivered during the fourth quarter of 2006. These results represent a 17.1 percent increase in total seismic revenue.
Earnings from continuing operations before income taxes decreased to $2.0 million in 2007 from $4.3 million in 2006. The reduction was due primarily to three factors. First, the Company incurred $2.4 million in unplanned corporate transaction costs in 2007 related to three unplanned and non-completed merger and acquisition transactions. Second, there was a 25.6 percent increase in amortization expense in 2007 over 2006 due to significant seismic data acquisitions in 2007 and the latter part of 2006. Third, there was 59.2 percent higher interest expense in 2007 due to the increased long-term debt balance through most of the year and the higher interest rate on long-term debt. In summary, the $7.5 million increase in total revenue was more than offset by a $5.8 million increase in data library amortization, $2.4 million in unplanned corporate transaction costs, and a $1.0 million increase in interest expense.
For the three months ended December 31, 2007 earnings from continuing operations before income taxes totalled $626,000 compared to $2.8 million for the three months ended December 31, 2006. The decrease quarter-over-quarter was again due primarily to the unplanned corporate transaction costs and increased amortization and interest expense. The $4.7 million addition to the data library upon completion of the participation survey in the fourth quarter of 2007 led to a related amortization expense of $1.6 million in the quarter.
Net earnings from continuing operations for the year ended December 31, 2007 totalled $2.5 million ($0.05 per share basic and diluted), compared to net earnings from continuing operations of $3.5 million ($0.07 per share basic and diluted) for 2006. The decrease in spite of record seismic data library sales was due to significant unplanned corporate transaction costs and increased amortization and interest expense. Net earnings from continuing operations for the three months ended December 31, 2007 was $1.6 million ($0.03 per share basic and diluted) compared to net earnings of $2.0 million ($0.04 per share basic and diluted) for the comparable period of 2006. This decrease reflects the same factors highlighted above.
The Company had a loss from discontinued operations net of income taxes of $7.5 million, compared to an after-tax loss of $6.8 million for 2006. In 2007, the Terrapoint business unit revenues were $9.1 million, a 15.9 percent increase over $7.9 million for 2006. The 2007 loss includes a $4.4 million after-tax loss related to the write-down of Terrapoint's property and equipment in the third and fourth quarters of 2007, compared to a $5.6 million after-tax loss related to the write-down of Terrapoint's older, high-altitude LiDAR systems in 2006. In addition to the write-down of the assets, the future tax assets of the Terrapoint business unit were re-evaluated during the year. A valuation allowance has been applied to the future tax asset applicable to the United States as it is no longer reasonable to assume that it will be useful in the future, and the Canadian future tax asset has also been reduced to its expected value to Pulse in future years, after the disposition of the Terrapoint assets.
The loss from discontinued operations for the fourth quarter of 2007 was $1.3 million compared to a loss of $657,000 for the same period in 2006. The most significant item affecting the Terrapoint business unit's results in the fourth quarter of 2007 was the $1.1 million after-tax write-down of Terrapoint's assets. This write-down was recorded based on additional information garnered during the Terrapoint disposition process in the first quarter of 2008.
The net loss in 2007 was $5.0 million ($0.10 per share basic and diluted) compared to a net loss of $3.3 million ($0.07 per share basic and diluted) for 2006. The Company had net earnings for the three months ended December 31, 2007 of $305,000 ($0.01 per share basic and diluted) compared to net earnings of $1.3 million ($0.03 per share basic and diluted) for the same period in 2006. A significant factor contributing to the earnings decrease in both periods was the write-down of Terrapoint assets of $6.0 million for the year, including $1.3 million in the fourth quarter, and the increased expenses in continuing operations highlighted above. When calculating the loss per share for the years ended December 31, 2007 and 2006, the basic number of shares outstanding was utilized as applying diluted shares would have the effect of inappropriately decreasing the net loss per share.
Funds from continuing operations totalled $31.2 million ($0.61 per share basic and diluted) for 2007 compared to $26.0 million ($0.55 per share basic and $0.54 per share diluted) for 2006.
Cash EBITDA for 2007 was $33.0 million compared to $26.5 million for 2006. The 24.8 percent year-over-year increase is attributable primarily to the increase of 18.7 percent in total seismic revenue in 2007.
At December 31, 2007 Pulse had working capital of $12.3 million compared to working capital of $5.7 million at December 31, 2006.
On July 27, 2007 Pulse closed a private placement financing of 6.44 million common shares at an issue price of $2.70 per common share for total gross proceeds of $17,388,000 (the "offering"). Pulse used the proceeds of the offering to finance a 3D seismic data acquisition of $11.1 million from a joint venture partner and, subsequently, to partially fund a 3D seismic participation survey program consisting of 248 net square kilometres in the Deep Basin area of west-central Alberta.
During 2007, the Company repurchased 610,000 common shares under its Normal Course Issuer Bid at an average price of $2.86 per share, for a total cost of $1.7 million.
Pulse paid its eighteenth consecutive quarterly dividend on December 20, 2007. As per the September 21, 2007 announcement of a 33 percent increase in the annual dividend rate from $0.15 to $0.20 per share, the quarterly dividend was $0.05 per common share.
Revenue
Revenue from continuing operations includes seismic data library sales and participation survey revenues. One 3D participation survey was completed in each of the 2007 and 2006 years. The 2007 survey generated $3.0 million of participation survey revenue compared to $3.1 million from the program in 2006. For the year ended December 31, 2007, seismic data library sales increased by 20.5 percent to $41.2 million from $34.2 million in 2006. For the three months ended December 31, 2007, seismic data library sales were $11.0 million compared to $10.5 million for the comparable period in 2006. The increases for both the fourth quarter and 12 months of 2007 were due in part to higher demand for seismic data for exploration from junior oil and natural gas companies, along with the additional sales generated from the Foothills 2D dataset which Pulse purchased in November 2006, and in part to a general price increase for seismic data library licences effective January 1, 2007.
Data Library
Pulse acquires seismic data to grow its data library through two main methods. The Company purchases proprietary rights to complementary seismic data sets when the opportunity arises, and it conducts participation surveys. On occasion, Pulse may also conduct a "spec" survey with no participation survey funding if the Company believes there is a strong likelihood of subsequent license sales or the survey is strategically located.
During 2007, Pulse invested $18.7 million to acquire new seismic data or additional interests in existing data. Pulse acquired the remaining 50 percent interest from an industry partner in certain 3D data that it already partially owned. The data consists of 1,388 net square kilometres of 3D seismic data and 65 net kilometres of 2D seismic data. In a second, smaller transaction, Pulse purchased the remaining 50 percent interest in another 3D data set that it partially owned, which consisted of 148 net square kilometres of 3D data. The total cost of these acquired data sets was $11.7 million.
Pulse also invested $7.0 million to conduct a 248-square-kilometre, 3D participation survey in west-central Alberta. Pulse began this survey in July and delivered a portion of the data to the clients in the third quarter, but the work was hampered by bad weather in August and September, delaying delivery of the remainder until October. In comparison, in 2006 the Company completed a 237-net-square-kilometre 3D participation survey in west central Alberta at a cost of $6.7 million.
Liquidity, Capital Resources and Capital Requirements
At December 31, 2007 Pulse had working capital of $12.3 million, including the current portion of long-term debt of $8.0 million, compared to $5.7 million of working capital at December 31, 2006. In 2007 Pulse generated $31.2 million in funds from continuing operations, had a negative net change in non-cash working capital items relating to continuing operations of $1.4 million, and utilized working capital for long-term debt repayment ($8.0 million), dividends ($8.0 million) and to finance its Terrapoint business unit ($6.5 million). Additionally, the Company raised $16.3 million after transaction costs through a private placement financing, repurchased shares through its Normal Course Issuer Bid for $1.7 million, received cash on the exercise of stock options of $1.0 million and sold certain investments for $0.7 million. Capital expenditures included seismic data which was purchased for $11.7 million, a participation survey which cost $7.0 million and approximately $400,000 of property and equipment additions. These items combined resulted in an increase from the December 31, 2006 cash balance of $4.3 million to $6.5 million at December 31, 2007.
Following a year of record data library sales in 2007 and the recent work on Pulse's strategic plan and budget, Pulse management expects that the Company's funds from operations will be sufficient to finance future operations, service debt, pay dividends and carry out the budgeted capital expenditures through 2008. The ongoing growth in the Company's seismic data library continues to position Pulse to be 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 seismic data available in the Company's library.
Although quarterly results can show significant swings in working capital because of the impact of participation surveys, Pulse remains in a strong financial position. 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.
Consolidated Balance Sheets
December 31, 2007 and 2006
(In thousands of dollars)
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2007 2006
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Assets
Current assets:
Cash and cash equivalents $ 6,528 $ 2,181
Accounts receivable 14,686 16,191
Prepaid expenses 425 233
Assets held for sale 5,426 3,809
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27,065 22,414
Seismic data library 91,060 100,688
Assets held for sale 5,629 6,943
Property and equipment 663 904
Investments - 351
Other 56 610
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$ 124,473 $ 131,910
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 2,178 $ 4,002
Deferred revenue 2,897 3,781
Current portion of long-term debt 8,004 8,004
Liabilities held for sale 1,727 946
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14,806 16,733
Long-term debt 23,543 31,996
Future income taxes 6,950 7,824
Shareholders' equity:
Share capital 72,463 54,887
Contributed surplus 1,508 1,305
Retained earnings 5,203 19,165
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79,174 75,357
$ 124,473 $ 131,910
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PULSE DATA INC.
Consolidated Statements of Earnings (Loss) and Retained Earnings
Years ended December 31, 2007 and 2006
(In thousands of dollars, except per share data)
-------------------------------------------------------------------------
2007 2006
-------------------------------------------------------------------------
Revenue:
Data library sales $ 41,215 $ 34,214
Participation surveys 3,010 3,058
Corporate and other - (520)
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Total revenue 44,225 36,752
Expenses:
Amortization of seismic data library 28,345 22,574
Operating 3,330 3,843
Depreciation and amortization 194 363
(Loss) Gain on sale of assets 6 (1,100)
General and administrative expenses 5,605 5,633
Corporate transaction costs 2,415 -
Interest:
Long-term debt 2,729 1,714
Interest earned on cash balances (425) (608)
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2,304 1,106
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Earnings from continuing operations before
income taxes 2,026 4,333
Income taxes:
Current 121 1,293
Future (reduction) (606) (434)
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(485) 859
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Net earnings from continuing operations 2,511 3,474
Loss from discontinued operations,
net of income taxes (7,493) (6,764)
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Net loss for the year (4,982) (3,290)
Retained earnings, beginning of year 19,165 29,545
Change in accounting policy 322 -
Normal course issuer bid (936) -
Dividends paid (8,366) (7,090)
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Retained earnings, end of year $ 5,203 $ 19,165
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Earnings per share from continuing
operations, basic and diluted $ 0.05 $ 0.07
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Loss per share, basic and diluted $ (0.10) $ (0.07)
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PULSE DATA INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2007 and 2006
(In thousands of dollars)
-------------------------------------------------------------------------
2007 2006
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Cash provided by (used in):
Operations:
Net earnings from continuing operations $ 2,511 $ 3,474
Items not involving cash:
Amortization of seismic data library 28,345 22,574
Depreciation and amortization 194 363
Loss (Gain) on sale of assets 6 (1,100)
Future income taxes (606) (434)
Stock-based compensation 608 997
Other 150 78
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31,208 25,952
Net change in non-cash working capital items
related to continuing operations (1,395) 67
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Cash flow from continuing operations 29,813 26,019
Discontinued operations:
Funds used in discontinued operations (1,743) (1,444)
Additions to property and equipment (3,663) (2,102)
Net change in non-cash working capital items
related to discontinued operations (1,141) 1,658
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(6,547) (1,888)
Financing:
Issuance of long-term debt - 25,000
Repayment of long-term debt (8,004) (11,840)
Issuance of share capital 17,296 2,041
Financing costs (18) (470)
Proceeds from sale of subsidiary - 1,714
Dividends paid (8,013) (6,775)
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1,261 9,670
Investing:
Additions to data library through
participation surveys (6,979) (6,696)
Seismic data purchases (11,738) (36,850)
Decrease in participation surveys in progress - 192
Additions to property and equipment (422) (119)
Proceeds from sale of seismic data - 1,113
Normal course issuer bid (1,743) (48)
Proceeds on sales of investments 729 194
Decrease in investments - 81
Net change in non-cash working capital items
related to investing (27) (27)
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(20,180) (42,160)
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Increase (decrease) in cash position 4,347 (8,359)
Cash and cash equivalents, beginning of year 2,181 10,540
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Cash and cash equivalents, end of year $ 6,528 $ 2,181
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OUTLOOK
Pulse has a mixed outlook for 2008. The Company is cautious with respect to overall industry activity levels in the first half of 2008 due to the current uncertainty over the capital expenditure plans of exploration and production companies and energy trusts. Observed oil and gas energy services activity levels in the first quarter appear to have outperformed initial industry forecasts of a very weak first quarter, with somewhat higher rates of drilling, supported by higher than expected natural gas prices. Oil and gas energy service industry activity in the second quarter, however, is still expected to be flat to down slightly from the weak levels experienced in 2007.
Pulse expects that seismic data library sales levels in the first quarter of 2008 will be less than the record level achieved in the first quarter of 2007. However, the Company expects that demand for licensed seismic data for the balance of 2008 will be on-trend with prior years. Combined with growth in the size of the library, this should enable Pulse to generate solid levels of revenue and cash EBITDA in 2008. The Company is committed to maintaining a strong balance sheet while taking advantage of weaker industry conditions and its strong working capital position to continually seek opportunities to grow its data library through strategic seismic data acquisitions and additional seismic participation surveys. Pulse's 2008 budget also calls for maintaining the share buyback program and continuing to pay cash dividends.
CORPORATE PROFILE
Pulse is a market leader in the acquisition, marketing and licensing of 2D and 3D seismic data for the western Canadian energy sector. Pulse owns the second-largest licensable seismic data library in Canada, currently consisting of approximately 257,300 net kilometres of 2D seismic and 11,600 net square kilometres of 3D seismic. The library extensively covers the Western Canada Sedimentary Basin where most of Canada's oil and natural gas exploration and development occurs. The replacement value of Pulse's library is currently estimated at over $1 billion based on current field replacement costs.
Pulse has publicly traded on the TSX since 2001. The Company has paid its shareholders a quarterly dividend since 2003 and at Pulse's current share price provides one of the highest dividend yields on the TSX.
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 in the Company's most recent annual and interim reports 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, except as required by securities laws.