saex-10q_20190331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2019

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

 

Commission File Number 001-35471

 

SAExploration Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

27-4867100

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

1160 Dairy Ashford Road, Suite 160, Houston, Texas, 77079

(Address of principal executive offices)

(Zip Code)

 

(281) 258-4400

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes      No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001

 

SAEX

 

NASDAQ Capital Market

 

As of May 8, 2019, the registrant has 4,290,697 shares of common stock outstanding.

 

 

 


TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page

Part I. FINANCIAL INFORMATION

 

1

Item 1. Financial Statements

 

1

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

 

1

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018

 

2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2019 and 2018

 

3

Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018

 

4

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018

 

5

Notes to Unaudited Condensed Consolidated Financial Statements

 

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 4. Controls and Procedures

 

20

Part II. OTHER INFORMATION

 

20

Item 1A. Risk Factors

 

20

Item 6. Exhibits

 

20

Signatures

 

22

 

 

 

 


PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS 

 

SAExploration Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except number of shares)

(Unaudited)

 

 

 

March 31,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,100

 

 

$

7,192

 

Restricted cash

 

 

257

 

 

 

271

 

Accounts receivable, net

 

 

71,490

 

 

 

24,859

 

Deferred costs on contracts

 

 

5,273

 

 

 

3,717

 

Prepaid expenses and other current assets

 

 

2,173

 

 

 

2,813

 

Total current assets

 

 

88,293

 

 

 

38,852

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $84,617 and

   $81,904, respectively

 

 

32,913

 

 

 

35,334

 

Operating lease right-of-use assets

 

 

9,000

 

 

 

 

Goodwill

 

 

1,722

 

 

 

1,687

 

Intangible assets, net of accumulated amortization of $1,017 and $932, respectively

 

 

3,993

 

 

 

4,066

 

Long-term accounts receivable, net

 

 

52,804

 

 

 

52,804

 

Deferred income taxes

 

 

566

 

 

 

2,015

 

Other assets

 

 

2,417

 

 

 

2,715

 

Total assets

 

$

191,708

 

 

$

137,473

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,510

 

 

$

10,103

 

Accrued liabilities

 

 

20,184

 

 

 

10,498

 

Income and other taxes payable

 

 

5,398

 

 

 

3,331

 

Operating lease liabilities

 

 

3,493

 

 

 

 

Current portion of long-term debt and finance leases

 

 

7,866

 

 

 

7,837

 

Deferred revenue

 

 

1,471

 

 

 

4,298

 

Total current liabilities

 

 

68,922

 

 

 

36,067

 

 

 

 

 

 

 

 

 

 

Long-term debt and finance leases

 

 

95,701

 

 

 

85,653

 

Other long-term liabilities

 

 

5,902

 

 

 

380

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, 4,082,187 and 3,100,496 shares outstanding, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

234,039

 

 

 

232,661

 

Accumulated deficit

 

 

(212,798

)

 

 

(216,612

)

Accumulated other comprehensive loss

 

 

(3,076

)

 

 

(3,035

)

Treasury stock, at cost, 111,670 and 111,245 shares, respectively

 

 

(1,866

)

 

 

(1,866

)

SAExploration stockholders’ equity

 

 

16,299

 

 

 

11,148

 

Noncontrolling interest

 

 

4,884

 

 

 

4,225

 

Total stockholders’ equity

 

 

21,183

 

 

 

15,373

 

Total liabilities and stockholders’ equity

 

$

191,708

 

 

$

137,473

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


SAExploration Holdings, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months

Ended March 31,

 

 

 

2019

 

 

2018

 

Revenue from services

 

$

93,393

 

 

$

37,123

 

Cost of services

 

 

70,205

 

 

 

26,005

 

Depreciation and amortization

 

 

2,862

 

 

 

2,421

 

Gross profit

 

 

20,326

 

 

 

8,697

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

8,628

 

 

 

6,377

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

11,698

 

 

 

2,320

 

 

 

 

 

 

 

 

 

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(3,497

)

 

 

(3,141

)

Foreign exchange gain (loss), net

 

 

127

 

 

 

(174

)

Other income, net

 

 

13

 

 

 

145

 

Total other expense, net

 

 

(3,357

)

 

 

(3,170

)

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

8,341

 

 

 

(850

)

 

 

 

 

 

 

 

 

 

Income taxes

 

 

3,118

 

 

 

624

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

5,223

 

 

 

(1,474

)

 

 

 

 

 

 

 

 

 

Less: net income attributable to noncontrolling interest

 

 

1,409

 

 

 

835

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to SAExploration

 

$

3,814

 

 

$

(2,309

)

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.50

 

 

$

(92.06

)

Diluted

 

$

0.26

 

 

$

(92.06

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

3,689

 

 

 

535

 

Diluted

 

 

14,129

 

 

 

535

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


SAExploration Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months

Ended March 31,

 

 

 

2019

 

 

2018

 

Net income (loss)

 

$

5,223

 

 

$

(1,474

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(41

)

 

 

588

 

Comprehensive income (loss)

 

 

5,182

 

 

 

(886

)

Less comprehensive income attributable to noncontrolling interest

 

 

1,409

 

 

 

835

 

Comprehensive income (loss) attributable to SAExploration

 

$

3,773

 

 

$

(1,721

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


SAExploration Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Equity

 

 

Noncontrolling Interest

 

 

Total

Stockholders’

Equity

 

Balance at December 31, 2018

 

$

 

 

$

232,661

 

 

$

(216,612

)

 

$

(3,035

)

 

$

(1,866

)

 

$

11,148

 

 

$

4,225

 

 

$

15,373

 

Net income

 

 

 

 

 

 

 

 

3,814

 

 

 

 

 

 

 

 

 

3,814

 

 

 

1,409

 

 

 

5,223

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(41

)

 

 

 

 

 

(41

)

 

 

 

 

 

(41

)

Issuance of common stock

 

 

 

 

 

578

 

 

 

 

 

 

 

 

 

 

 

 

578

 

 

 

 

 

 

578

 

Equity-based compensation

  cost

 

 

 

 

 

800

 

 

 

 

 

 

 

 

 

 

 

 

800

 

 

 

 

 

 

800

 

Distribution to noncontrolling

  interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(750

)

 

 

(750

)

Balance at March 31, 2019

 

$

 

 

$

234,039

 

 

$

(212,798

)

 

$

(3,076

)

 

$

(1,866

)

 

$

16,299

 

 

$

4,884

 

 

$

21,183

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Equity

 

 

Noncontrolling Interest

 

 

Total

Stockholders’

(Deficit) Equity

 

Balance at December 31, 2017

 

$

 

 

$

133,742

 

 

$

(133,306

)

 

$

(5,082

)

 

$

(113

)

 

$

(4,759

)

 

$

4,570

 

 

$

(189

)

Adoption of ASU 2016-16

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

294

 

Net (loss) income

 

 

 

 

 

 

 

 

(2,309

)

 

 

 

 

 

 

 

 

(2,309

)

 

 

835

 

 

 

(1,474

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

588

 

 

 

 

 

 

588

 

 

 

 

 

 

588

 

Equity-based compensation

  cost

 

 

 

 

 

1,053

 

 

 

 

 

 

 

 

 

 

 

 

1,053

 

 

 

 

 

 

1,053

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(175

)

 

 

(175

)

 

 

 

 

 

(175

)

Common stock issued in

   debt exchange

 

 

 

 

 

472

 

 

 

 

 

 

 

 

 

 

 

 

472

 

 

 

 

 

 

472

 

Discount on Series A

  preferred stock issued in

  debt exchange

 

 

 

 

 

61,971

 

 

 

 

 

 

 

 

 

 

 

 

61,971

 

 

 

 

 

 

61,971

 

Accretion of discount on

  Series A preferred stock

 

 

 

 

 

(34,404

)

 

 

 

 

 

 

 

 

 

 

 

(34,404

)

 

 

 

 

 

(34,404

)

Accretion of Series A preferred

  stock to redemption value

 

 

 

 

 

(1,291

)

 

 

 

 

 

 

 

 

 

 

 

(1,291

)

 

 

 

 

 

(1,291

)

Dividend on Series A

  preferred stock

 

 

 

 

 

(456

)

 

 

 

 

 

 

 

 

 

 

 

(456

)

 

 

 

 

 

(456

)

Series B preferred stock

  issued in debt exchange

 

 

 

 

 

10,791

 

 

 

 

 

 

 

 

 

 

 

 

10,791

 

 

 

 

 

 

10,791

 

Discount on Series B

  preferred stock issued in

  debt exchange

 

 

 

 

 

(10,791

)

 

 

 

 

 

 

 

 

 

 

 

(10,791

)

 

 

 

 

 

(10,791

)

Accretion of discount on

  Series B preferred stock

 

 

 

 

 

10,791

 

 

 

 

 

 

 

 

 

 

 

 

10,791

 

 

 

 

 

 

10,791

 

Conversion of Series B

  preferred stock

 

 

 

 

 

(22,981

)

 

 

 

 

 

 

 

 

 

 

 

(22,981

)

 

 

 

 

 

(22,981

)

Common stock and Series

  D warrants issued in

  conversion of Series B

  preferred stock

 

 

 

 

 

22,981

 

 

 

 

 

 

 

 

 

 

 

 

22,981

 

 

 

 

 

 

22,981

 

Series C warrants issued in

  debt exchange

 

 

 

 

 

4,810

 

 

 

 

 

 

 

 

 

 

 

 

4,810

 

 

 

 

 

 

4,810

 

Stock issuance costs

 

 

 

 

 

(1,026

)

 

 

 

 

 

 

 

 

 

 

 

(1,026

)

 

 

 

 

 

(1,026

)

Balance at March 31, 2018

 

$

 

 

$

175,662

 

 

$

(135,321

)

 

$

(4,494

)

 

$

(288

)

 

$

35,559

 

 

$

5,405

 

 

$

40,964

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


SAExploration Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

5,223

 

 

$

(1,474

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,032

 

 

 

2,499

 

Equity-based compensation cost

 

 

800

 

 

 

1,053

 

Gain on disposal of property and equipment

 

 

(1,274

)

 

 

(181

)

Provision for doubtful accounts

 

 

941

 

 

 

 

Amortization of loan issuance costs and debt discounts

 

 

921

 

 

 

1,229

 

Unrealized (gain) loss on foreign currency transactions

 

 

(255

)

 

 

213

 

Gain on debt extinguishment

 

 

 

 

 

(53

)

Deferred taxes

 

 

1,476

 

 

 

 

Changes in operating assets and liabilities

 

 

(18,758

)

 

 

(5,150

)

Net cash used in operating activities

 

 

(7,894

)

 

 

(1,864

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(327

)

 

 

(134

)

Proceeds from sale of property and equipment

 

 

1,278

 

 

 

182

 

Net cash provided by investing activities

 

 

951

 

 

 

48

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Long-term debt and finance lease repayments

 

 

(210

)

 

 

(995

)

Long-term debt borrowings

 

 

9,666

 

 

 

15,000

 

Proceeds from issuance of common stock

 

 

100

 

 

 

 

Stock issuance costs

 

 

 

 

 

(2,179

)

Purchase of treasury stock

 

 

 

 

 

(175

)

Distribution to noncontrolling interest

 

 

(750

)

 

 

 

Net cash provided by financing activities

 

 

8,806

 

 

 

11,651

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

31

 

 

 

(77

)

Net change in cash, cash equivalents and restricted cash

 

 

1,894

 

 

 

9,758

 

Cash, cash equivalents and restricted cash at the beginning of year

 

 

7,463

 

 

 

3,654

 

Cash, cash equivalents and restricted cash at the end of period

 

$

9,357

 

 

$

13,412

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

5


SAExploration Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Description of the Business

 

SAExploration Holdings, Inc. (“we,” “our” or “us) is a full–service provider of seismic data acquisition, logistical support, processing and integrated reservoir geosciences services in North America, South America, Asia Pacific, West Africa and the Middle East to customers in the oil and natural gas industry.

 

Our chief operating decision maker, our Chief Executive Officer, regularly reviews financial data by country to assess performance and allocate resources, resulting in the conclusion that each country in which we operate represents a reporting unit.  As these reporting units are similar in terms of economic characteristics, nature of products, processes and type of customers, we have concluded that our seismic data contract services operations comprise one single reportable segment.

Basis of Presentation

 

Our unaudited condensed consolidated financial statements included herein include our accounts and those of our subsidiaries, which are wholly–owned or controlled by us, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  We believe that the presentations and disclosures herein are adequate to make the information not misleading. The unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) for a fair presentation of the interim periods.  The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year.  These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in Item 8 of our Annual Report on Form 10–K for the year ended December 31, 2018.

 

All intercompany accounts and transaction have been eliminated in consolidation.  In the Notes to Unaudited Condensed Consolidated Financial Statements, all dollar and share amounts in tabulations are in thousands of dollars and shares, respectively, unless otherwise indicated.  

 

Recently Adopted Accounting Pronouncements

 

On January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016–02, Leasing, as amended by ASU 2018–10, Codification Improvements to Topic 842, ASU 2018–11, Targeted Improvements, and 2019–01, Codification Improvements.  These ASUs required the recognition of lease assets and lease liabilities for virtually all leases and required disclosure of key information about leasing arrangements.  We elected to adopt these new standards using the modified retrospective method of transition for all leases existing at or commencing after the date of initial application.

 

The new standards provide for certain practical expedients when adopting the new guidance.  We have elected the practical expedient package outlined in ASU No. 2016–02 under which we can carryforward our previous classification of a lease as either an operating or capital lease, and we do not have to reassess previously recorded initial direct costs.  Additionally, we made policy elections allowing us to exclude leases with original terms of 12 months or less from lease assets and liabilities and to not separate nonlease components from the associated lease component and instead account for both as a single lease component for all asset classes.  We did not elect the practical expedient allowing us to use hindsight to determine the lease term and to assess any impairment of lease assets during the lookback period.  

 

The adoption of the new standards had a material impact on our unaudited condensed consolidated balance sheet, with the most significant being the recognition of operating lease right–o-use (“ROU”) assets and operating lease liabilities of $10.0 million and $10.0 million, respectively.  ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The standard did not materially impact our unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows.

 

New Accounting Standards to be Adopted

 

No new accounting pronouncements issued or effective during the three months ended March 31, 2019 have had or are expected to have a material impact on our unaudited condensed consolidated financial statements.

6


SAExploration Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

NOTE 2.  LONG–TERM ACCOUNTS RECEIVABLE, NET

 

As of March 31, 2019, we have a $52.8 million receivable, net of an allowance for doubtful accounts of $19.0 million, from one customer.  This is our largest accounts receivable, constitutes the majority of our outstanding accounts receivable and is the largest single asset on our unaudited condensed consolidated balance sheet.  We have classified this receivable as long–term because of the length of time we expect it will take for us to collect on it.

 

Our customer had historically relied on the monetization of exploration tax credits under a State of Alaska tax credit program (the “Tax Credits”), which monetization was accomplished by receipt of payments from Alaska or from third party financing sources.  However, falling oil and natural gas prices have substantially reduced Alaska’s revenue from production taxes resulting in Alaska paying only statutorily established minimum amount of appropriations for Tax Credit certificates in the last several fiscal years rather than the amount to pay all the prior year’s Tax Credit certificates.  In an effort to satisfy the accounts receivable, our customer originally assigned to us $89.0 million of Tax Credit certificates and applications.  As of March 31, 2019, we have monetized approximately $17.6 million of Tax Credit certificates and have an estimated $60.8 million of Tax Credit certificates and applications remaining for future monetization, net of actual and estimated audit adjustments related to issued and anticipated Tax Credit certificates.  

  

Although our customer has been successful in prior years in licensing and selling the seismic data, we believe that it is unlikely that the customer will be able to fully satisfy the receivable directly and we continue to pursue other options to monetize the Tax Credits.  At this time, we believe that the most likely path to monetize the Tax Credit certificates may be from proceeds that Alaska recognizes from selling bonds, which legislation was passed in June 2018.  This path, however, has complexities and risks.  A lawsuit was filed asserting constitutional challenges to Alaska’s ability to issue the bonds; however, the Attorney General issued an opinion that the issuance of the bonds is not prohibited by the Alaskan constitution and an Alaskan Superior Court judge threw out the lawsuit challenging the constitutionality of the issuance of bonds.  An appeal of the Superior Court’s ruling to the Alaska Supreme Court has been made.  The Revenue Department of the State of Alaska has indicated, however, that until the courts have resolved the legal issues, it will not go into the bond markets.     

7


SAExploration Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

NOTE 3.  LONG–TERM DEBT AND FINANCE LEASES

 

Long–term debt and finance leases consisted of the following:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Credit facility:

 

 

 

 

 

 

 

 

Principal outstanding

 

$

22,000

 

 

$

12,334

 

Unamortized debt issuance costs

 

 

(113

)

 

 

(125

)

Carrying amount

 

 

21,887

 

 

 

12,209

 

 

 

 

 

 

 

 

 

 

Senior loan facility - principal outstanding

 

 

29,000

 

 

 

29,000

 

 

 

 

 

 

 

 

 

 

6% senior secured convertible notes due 2023:

 

 

 

 

 

 

 

 

Principal outstanding

 

 

60,000

 

 

 

60,000

 

Unamortized debt discount and debt issuance costs

 

 

(15,297

)

 

 

(15,906

)

Carrying amount

 

 

44,703

 

 

 

44,094

 

 

 

 

 

 

 

 

 

 

10% senior notes due 2019:

 

 

 

 

 

 

 

 

Principal outstanding

 

 

6,952

 

 

 

6,957

 

Unamortized debt issuance costs

 

 

1

 

 

 

(4

)

Carrying amount

 

 

6,953

 

 

 

6,953

 

 

 

 

 

 

 

 

 

 

Finance leases

 

 

1,024

 

 

 

1,234

 

 

 

 

 

 

 

 

 

 

Total debt

 

 

103,567

 

 

 

93,490

 

Current portion of long-term debt and finance leases

 

 

(7,866

)

 

 

(7,837

)

Total long-term debt and finance leases

 

$

95,701

 

 

$

85,653

 

 

In March 2019, the maturity date of our senior loan facility was extended to January 4, 2021.

 

In the three months ended March 31, 2019, we recorded interest expense of $1.5 million related to the 6% senior secured convertible notes due 2023 (the “2023 Notes”), of which $0.9 million related to contractual interest expense.

 

The credit agreements and indentures for our credit facility, senior loan facility, 2023 Notes and 10% senior notes due 2019 (the “Senior Notes”) contain certain representations, warranties, covenants and other terms and conditions which are customary for agreements of these types.  As of March 31, 2019, we were in compliance with these covenants.

 

NOTE 4.  COMMITMENTS AND CONTINGENCIES

 

We are involved in various disputes or legal actions involving contractual and employment relationships, liability claims, and a variety of other matters arising in the ordinary course of business.  We do not believe the outcome of such disputes or legal actions will have a material effect on our unaudited condensed consolidated financial statements.

 

NOTE 5.  LEASES

 

We have entered into various non–cancellable operating and finance lease agreements for certain of our offices, shop and warehouse facilities, equipment and vehicles.  We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our unaudited condensed consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

 

Our leases have remaining lease terms ranging from one year to eight years and often include options to extend the lease term for up to 3 years.  Some of our leases also include options to terminate the lease prior to the end of the agreed upon lease

8


SAExploration Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

term.  For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease.  Therefore, as of the lease commencement date, our lease terms generally do not include these options.  We include options to extend the lease when it is reasonably certain that we will exercise that option.

 

Lease expense for operating lease payments is recognized on a straight–line basis over the lease term. Certain operating leases provide for annual increases to lease payments based on an index or rate. We estimate the annual increase in lease payments based on the index or rate at the lease commencement date, for both our historical leases and for new leases commencing after January 1, 2019. Differences between the estimated lease payment and actual payment are expensed as incurred. Lease expense for finance lease payments is recognized as amortization expense of the finance lease ROU asset and interest expense on the finance lease liability over the lease term.

 

The balances for the operating and finance leases where we are the lessee are presented on our unaudited condensed consolidated balance sheet as follows:

 

 

 

Classification on Unaudited Condensed Consolidated Balance Sheet

 

March 31,

2019

 

Assets:

 

 

 

 

 

 

Operating lease right-of-use assets

 

Operating lease right-of-use assets

 

$

9,000

 

Finance lease assets

 

Property and equipment, net

 

 

987

 

Total lease assets

 

 

 

$

9,987

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Current:

 

 

 

 

 

 

Operating lease liabilities

 

Operating lease liabilities

 

$

3,493

 

Finance lease liabilities

 

Current portion of long-term debt and finance leases

 

 

884

 

Long-term:

 

 

 

 

 

 

Operating lease liabilities

 

Other long-term liabilities

 

 

5,515

 

Finance lease liabilities

 

Long-term debt and finance leases

 

 

140

 

Total lease liabilities

 

 

 

$

10,032

 

 

The components of lease expense on our unaudited condensed consolidated statement of operations are as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

2019

 

Operating lease expense:

 

 

 

 

Operating lease expense (1)

 

$

1,340

 

 

 

 

 

 

Finance lease expense:

 

 

 

 

Amortization of leased assets

 

$

221

 

Interest on lease liabilities

 

 

38

 

Total finance lease expense

 

$

259

 

 

 

 

 

 

Total lease expense

 

$

1,599

 

 

(1)

Includes short–term leases and variable lease costs, both of which are immaterial.

 

As of March 31, 2019, our operating leases and finance leases have weighted average remaining lease terms of 3.7 years and 1.1 years, respectively, and both our operating leases and finance leases have a weighted average discount rate of 13.0%.

 

Supplemental cash flows information related to leases where we are the lessee is as follows:

9


SAExploration Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

 

 

 

Three Months Ended

 

 

 

March 31,

2019

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

Operating cash flows from operating leases

 

$

1,340

 

Financing cash flows from finance leases

 

 

210

 

 

As of March 31, 2019, the maturities of the liabilities related to our operating leases and finance leases are as follows:

 

 

 

Operating Leases

 

 

Finance

Leases

 

Nine months ended December 31, 2019

 

$

4,062

 

 

$

745

 

2020

 

 

3,041