##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 31, 2009
 or
 o
    
    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: 000-25142
 MITCHAM INDUSTRIES, INC.
  Texas
    
    76-0210849(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 8141 SH 75 South
P.O. Box 1175
Huntsville, Texas 77342
 (936) 291-2277
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



MITCHAM INDUSTRIES, INC.
Table of Contents
 PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of October 31, 2009
and January 31, 2009
    
    
    1Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended October 31, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended October 31, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4.
    
    Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    19Item 1A.
    
    Risk Factors
    
    
    20Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3.
    
    Defaults Upon Senior Securities
    
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21Item 5.
    
    Other Information
    
    
    21Item 6.
    
    Exhibits
    
    
    21Signatures
    
    
    22EX-31.1EX-31.2EX-32.1
  ii




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 October 31, 2009(unaudited)
    
    
    January 31, 2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,400
    
    
    $
    5,063Restricted cash
    
    
    483
    
    
    
    969Accounts receivable, net
    
    
    15,400
    
    
    
    12,415Current portion of contracts receivable
    
    
    872
    
    
    
    836Inventories, net
    
    
    5,931
    
    
    
    3,772Costs incurred and estimated profit in excess of billings on uncompleted contract
    
    
    509
    
    
    
    1,787Income taxes receivable
    
    
    
    
    
    
    1,000Deferred tax asset
    
    
    1,521
    
    
    
    1,682Prepaid expenses and other current assets
    
    
    1,241
    
    
    
    1,535Total current assets
    
    
    32,357
    
    
    
    29,059Seismic equipment lease pool and property and equipment, net
    
    
    64,888
    
    
    
    64,251Intangible assets, net
    
    
    2,742
    
    
    
    2,744Goodwill
    
    
    4,320
    
    
    
    4,320Deferred tax asset
    
    
    1,288
    
    
    
    Long-term portion of contracts receivable
    
    
    3,217
    
    
    
    3,806Other assets
    
    
    55
    
    
    
    47Total assets
    
    $
    108,867
    
    
    $
    104,227LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,850
    
    
    $
    13,561Current maturities  long-term debt
    
    
    308
    
    
    
    Income taxes payable
    
    
    1,678
    
    
    
    Deferred revenue
    
    
    508
    
    
    
    424Accrued expenses and other current liabilities
    
    
    2,466
    
    
    
    3,877Total current liabilities
    
    
    10,810
    
    
    
    17,862Non-current income taxes payable
    
    
    2,972
    
    
    
    3,260Deferred tax liability
    
    
    
    
    
    
    32Long-term debt, net of current maturities
    
    
    11,345
    
    
    
    5,950Total liabilities
    
    
    25,127
    
    
    
    27,104Shareholders equity:Preferred stock, $1.00 par value; 1,000 shares authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value; 20,000 shares authorized; 10,737 and 10,725 shares issued at
October 31, 2009 and January 31, 2009, respectively
    
    
    107
    
    
    
    107Additional paid-in capital
    
    
    75,460
    
    
    
    74,396Treasury stock, at cost (924 and 922 shares at October 31, 2009 and January 31, 2009,
respectively)
    
    
    (4,833
    )
    
    
    (4,826
    )Retained earnings
    
    
    9,663
    
    
    
    9,727Accumulated other comprehensive income (loss)
    
    
    3,343
    
    
    
    (2,281
    )Total shareholders equity
    
    
    83,740
    
    
    
    77,123Total liabilities and shareholders equity
    
    $
    108,867
    
    
    $
    104,227
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 1




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MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded October 31,
    
    
    Ended October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Equipment leasing
    
    $
    9,037
    
    
    $
    10,043
    
    
    $
    20,165
    
    
    $
    29,916Lease pool equipment sales
    
    
    808
    
    
    
    333
    
    
    
    978
    
    
    
    2,738Seamap equipment sales
    
    
    4,241
    
    
    
    2,385
    
    
    
    13,882
    
    
    
    10,952Other equipment sales
    
    
    444
    
    
    
    1,787
    
    
    
    2,787
    
    
    
    6,971Total revenues
    
    
    14,530
    
    
    
    14,548
    
    
    
    37,812
    
    
    
    50,577Cost of sales:Direct costs  equipment leasing
    
    
    748
    
    
    
    810
    
    
    
    2,201
    
    
    
    1,595Direct costs  lease pool depreciation
    
    
    4,610
    
    
    
    3,781
    
    
    
    13,127
    
    
    
    11,094Cost of lease pool equipment sales
    
    
    473
    
    
    
    143
    
    
    
    570
    
    
    
    1,375Cost of Seamap and other equipment sales
    
    
    2,534
    
    
    
    2,554
    
    
    
    8,645
    
    
    
    10,511Total cost of sales
    
    
    8,365
    
    
    
    7,288
    
    
    
    24,543
    
    
    
    24,575Gross profit
    
    
    6,165
    
    
    
    7,260
    
    
    
    13,269
    
    
    
    26,002Operating expenses:General and administrative
    
    
    3,809
    
    
    
    3,893
    
    
    
    11,280
    
    
    
    13,103Provision for doubtful accounts
    
    
    730
    
    
    
    424
    
    
    
    1,379
    
    
    
    519Depreciation and amortization
    
    
    213
    
    
    
    287
    
    
    
    690
    
    
    
    1,046Total operating expenses
    
    
    4,752
    
    
    
    4,604
    
    
    
    13,349
    
    
    
    14,668Operating income (loss)
    
    
    1,413
    
    
    
    2,656
    
    
    
    (80
    )
    
    
    11,334Other income (expenses):Interest, net
    
    
    (122
    )
    
    
    36
    
    
    
    (303
    )
    
    
    409Other, net
    
    
    123
    
    
    
    29
    
    
    
    405
    
    
    
    37Total other income
    
    
    1
    
    
    
    65
    
    
    
    102
    
    
    
    446Income before income taxes
    
    
    1,414
    
    
    
    2,721
    
    
    
    22
    
    
    
    11,780Benefit (provision) for income taxes
    
    
    (388
    )
    
    
    20
    
    
    
    (86
    )
    
    
    (3,136
    )Net (loss) income
    
    $
    1,026
    
    
    $
    2,741
    
    
    $
    (64
    )
    
    $
    8,644Net (loss) income per common share:Basic
    
    $
    0.10
    
    
    $
    0.28
    
    
    $
    (0.01
    )
    
    $
    0.89Diluted
    
    $
    0.10
    
    
    $
    0.27
    
    
    $
    (0.01
    )
    
    $
    0.84Shares used in computing net (loss) income per common share:Basic
    
    
    9,805
    
    
    
    9,776
    
    
    
    9,795
    
    
    
    9,764Diluted
    
    
    9,969
    
    
    
    10,188
    
    
    
    9,795
    
    
    
    10,303
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 2




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MITCHAM
INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 For the Nine Months EndedOctober 31,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (64
    )
    
    $
    8,644Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    13,912
    
    
    
    12,258Stock-based compensation
    
    
    1,119
    
    
    
    1,691Provision for doubtful accounts
    
    
    1,379
    
    
    
    518Provision for inventory obsolescence
    
    
    13
    
    
    
    230Gross profit from sale of lease pool equipment
    
    
    (408
    )
    
    
    (1,363
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    (45
    )
    
    
    (96
    )Benefit from deferred income taxes
    
    
    (1,553
    )
    
    
    (190
    )Changes in non-current income taxes payable
    
    
    (288
    )
    
    
    (598
    )Changes in working capital items:Accounts receivable
    
    
    (2,186
    )
    
    
    (3,970
    )Contracts receivable
    
    
    (36
    )
    
    
    (88
    )Inventories
    
    
    (1,468
    )
    
    
    (601
    )Prepaid expenses and other current assets
    
    
    (268
    )
    
    
    (1,051
    )Income taxes receivable and payable
    
    
    3,073
    
    
    
    (390
    )Costs incurred and estimated profit in excess of billings on
uncompleted contract
    
    
    1,746
    
    
    
    Accounts payable, accrued expenses, other current liabilities
and deferred revenue
    
    
    (1,339
    )
    
    
    (4,885
    )Net cash provided by operating activities
    
    
    13,587
    
    
    
    10,109Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (18,828
    )
    
    
    (24,620
    )Purchases of property and equipment
    
    
    (358
    )
    
    
    (488
    )Sale of used lease pool equipment
    
    
    978
    
    
    
    2,738Net cash used in investing activities
    
    
    (18,208
    )
    
    
    (22,370
    )Cash flows from financing activities:Net proceeds from line of credit
    
    
    5,300
    
    
    
    8,400Payments on borrowings
    
    
    
    
    
    
    (1,500
    )Proceeds from (purchases of) short-term investments
    
    
    871
    
    
    
    (1,413
    )Proceeds from issuance of common stock upon exercise of stock
options, net of stock surrendered to pay taxes
    
    
    (12
    )
    
    
    184Excess tax benefit from exercise of non-qualified stock options
    
    
    45
    
    
    
    96Net cash provided by financing activities
    
    
    6,204
    
    
    
    5,767Effect of changes in foreign exchange rates on cash and cash equivalents
    
    
    (246
    )
    
    
    (1,588
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,337
    
    
    
    (8,082
    )Cash and cash equivalents, beginning of period
    
    
    5,063
    
    
    
    13,884Cash and cash equivalents, end of period
    
    $
    6,400
    
    
    $
    5,802Supplemental cash flow information:Interest paid
    
    $
    461
    
    
    $
    201Income taxes paid
    
    $
    820
    
    
    $
    3,314Purchases of seismic equipment held for lease in accounts payable
at end of period
    
    $
    4,577
    
    
    $
    4,526
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 3




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Mitcham Industries, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. Basis of Presentation
  2. Organization
  3. New Accounting Pronouncements
 Accounting Standards Updates
 Subsequent
Events
 4. Restricted Cash
  4




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5. Balance Sheet
 October 31,
    
    
    January 31,2009
    
    
    2009(in thousands)Accounts receivable:Accounts receivable
    
    $
    18,462
    
    
    $
    14,715Allowance for doubtful accounts
    
    
    (3,062
    )
    
    
    (2,300
    )Total accounts receivable, net
    
    $
    15,400
    
    
    $
    12,415Contracts receivable:Contracts receivable
    
    $
    4,089
    
    
    $
    4,642Less current portion of contracts receivable
    
    
    (872
    )
    
    
    (836
    )Long-term portion of contracts receivable
    
    $
    3,217
    
    
    $
    3,806
  October 31,
    
    
    January 31,2009
    
    
    2009(in thousands)Inventories:Raw materials
    
    $
    3,013
    
    
    $
    2,309Finished goods
    
    
    2,232
    
    
    
    1,593Work in progress
    
    
    1,440
    
    
    
    8346,685
    
    
    
    4,736Less allowance for obsolescence
    
    
    (754
    )
    
    
    (964
    )Total inventories, net
    
    $
    5,931
    
    
    $
    3,772
 October 31,
    
    
    January 31,2009
    
    
    2009(in thousands)Seismic equipment lease pool and property and
equipment:Seismic equipment lease pool
    
    $
    148,957
    
    
    $
    127,067Land and buildings
    
    
    366
    
    
    
    366Furniture and fixtures
    
    
    6,246
    
    
    
    5,380Autos and trucks
    
    
    530
    
    
    
    469156,099
    
    
    
    133,282Accumulated depreciation and amortization
    
    
    (91,211
    )
    
    
    (69,031
    )Total seismic equipment lease pool and
property and equipment, net
    
    $
    64,888
    
    
    $
    64,251
 5




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6. Goodwill and Other Intangible Assets
 Weighted
    
    
    October 31, 2009
    
    
    January 31, 2009Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife at
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying10/31/09
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(in thousands)
    
    
    (in thousands)Goodwill
    
    
    
    
    
    $
    4,320
    
    
    
    
    
    
    
    
    
    
    $
    4,320Proprietary rights
    
    
    8.4
    
    
    $
    3,523
    
    
    $
    (781
    )
    
    $
    2,742
    
    
    $
    3,313
    
    
    $
    (569
    )
    
    $
    2,744Covenants
not-to-compete
    
    
    
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    Amortizable intangible assets
    
    
    
    
    
    $
    4,523
    
    
    $
    (1,781
    )
    
    $
    2,742
    
    
    $
    4,313
    
    
    $
    (1,569
    )
    
    $
    2,744
   For fiscal years ending January 31
(in thousands):2010
    
    $
    982011
    
    
    2572012
    
    
    2572013
    
    
    2572014 and thereafter
    
    
    1,873Total
    
    $
    2,742
 7. Long-Term Debt and Notes Payable
    6




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8. Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Net (loss) income
    
    $
    1,026
    
    
    $
    2,741
    
    
    $
    (64
    )
    
    $
    8,644Gain (loss) from
foreign currency
translation
adjustment
    
    
    825
    
    
    
    (8,532
    )
    
    
    5,624
    
    
    
    (8,530
    )Comprehensive income
    
    $
    1,851
    
    
    $
    (5,791
    )
    
    $
    5,560
    
    
    $
    114
  9. Income Taxes
 Income
Taxes
    7




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10. Earnings (Loss) per Share
  Three Months Ended
    
    Nine Months EndedOctober 31,
    
    October 31,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    (in thousands)Basic weighted average common shares outstanding
    
    
    9,805
    
    
    
    9,776
    
    
    
    9,795
    
    
    
    9,764Stock options
    
    
    160
    
    
    
    387
    
    
    
    122
    
    
    
    517Unvested restricted stock
    
    
    4
    
    
    
    13
    
    
    
    8
    
    
    
    14Phantom stock
    
    
    
    
    
    
    12
    
    
    
    4
    
    
    
    8Total weighted average common share equivalents
    
    
    164
    
    
    
    412
    
    
    
    134
    
    
    
    539Diluted weighted average common shares
outstanding
    
    
    9,969
    
    
    
    10,188
    
    
    
    9,929
    
    
    
    10,303
  11. Stock-Based Compensation
  8




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12. Segment Reporting
    As of October 31,
    
    
    As of January 31,2009
    
    
    2009Total assets
    
    
    Total assets(in thousands)Equipment Leasing
    
    $
    90,327
    
    
    $
    89,240Seamap
    
    
    19,002
    
    
    
    15,529Eliminations
    
    
    (462
    )
    
    
    (542
    )Consolidated
    
    $
    108,867
    
    
    $
    104,227
  Revenues
    
    
    Operating income (loss)
    
    
    Income before taxes2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Equipment Leasing
    
    $
    10,289
    
    
    $
    12,163
    
    
    $
    711
    
    
    $
    2,894
    
    
    $
    721
    
    
    $
    2,567Seamap
    
    
    4,360
    
    
    
    2,601
    
    
    
    670
    
    
    
    (178
    )
    
    
    661
    
    
    
    214Eliminations
    
    
    (119
    )
    
    
    (216
    )
    
    
    32
    
    
    
    (60
    )
    
    
    32
    
    
    
    (60
    )Consolidated
    
    $
    14,530
    
    
    $
    14,548
    
    
    $
    1,413
    
    
    $
    2,656
    
    
    $
    1,414
    
    
    $
    2,721
  Revenues
    
    
    Operating (loss) income
    
    
    (Loss) income before taxes2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Equipment Leasing
    
    $
    23,930
    
    
    $
    39,625
    
    
    $
    (3,920
    )
    
    $
    10,707
    
    
    $
    (3,623
    )
    
    $
    10,817Seamap
    
    
    14,215
    
    
    
    11,208
    
    
    
    3,670
    
    
    
    603
    
    
    
    3,475
    
    
    
    939Eliminations
    
    
    (333
    )
    
    
    (256
    )
    
    
    170
    
    
    
    24
    
    
    
    170
    
    
    
    24Consolidated
    
    $
    37,812
    
    
    $
    50,577
    
    
    $
    (80
    )
    
    $
    11,334
    
    
    $
    22
    
    
    $
    11,780
  9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement about Forward-Looking Statements
  
    
    our future financial position and results of operations;
    
    international and economic instability;
    
    planned capital expenditures;
    
    our business strategy and other plans for future operations;
    
    the future mix of revenues and business;
    
    our relationship with suppliers;
    
    our ability to retain customers;
    
    future demand for our services; and
    
    general conditions in the energy industry and seismic service industry.
  
    
    decline in the demand for seismic data and our services;
    
    the effect of fluctuations in oil and natural gas prices on exploration activities;
    
    the effect of uncertainty in financial markets on our customers and our ability to
obtain financing;
    
    loss of significant customers;
    
    defaults by customers on amounts due us;
    
    possible impairment of our long-lived assets;
    
    risks associated with our manufacturing operations; and
    
    foreign currency exchange risk.
  Overview
  10




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For the Three Months Ended
    
    
    For the Nine Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Revenues:Equipment Leasing
    
    $
    10,289
    
    
    $
    12,163
    
    
    $
    23,930
    
    
    $
    39,625Seamap
    
    
    4,360
    
    
    
    2,601
    
    
    
    14,215
    
    
    
    11,208Inter-segment sales
    
    
    (119
    )
    
    
    (216
    )
    
    
    (333
    )
    
    
    (256
    )Total revenues
    
    
    14,530
    
    
    
    14,548
    
    
    
    37,812
    
    
    
    50,577Cost of sales:Equipment Leasing
    
    
    6,254
    
    
    
    6,118
    
    
    
    18,444
    
    
    
    19,089Seamap
    
    
    2,262
    
    
    
    1,325
    
    
    
    6,602
    
    
    
    5,766Inter-segment costs
    
    
    (151
    )
    
    
    (155
    )
    
    
    (503
    )
    
    
    (280
    )Total cost of sales
    
    
    8,365
    
    
    
    7,288
    
    
    
    24,543
    
    
    
    24,575Gross profit
    
    
    6,165
    
    
    
    7,260
    
    
    
    13,269
    
    
    
    26,002Operating expenses:General and administrative
    
    
    3,809
    
    
    
    3,893
    
    
    
    11,280
    
    
    
    13,103Provision for doubtful accounts
    
    
    730
    
    
    
    424
    
    
    
    1,379
    
    
    
    519Depreciation and amortization
    
    
    213
    
    
    
    287
    
    
    
    690
    
    
    
    1,046Total operating expenses
    
    
    4,752
    
    
    
    4,604
    
    
    
    13,349
    
    
    
    14,668Operating income (loss)
    
    $
    1,413
    
    
    $
    2,656
    
    
    $
    (80
    )
    
    $
    11,334EBITDA(1)
    
    $
    6,393
    
    
    $
    6,790
    
    
    $
    14,237
    
    
    $
    23,629Adjusted EBITDA(1)
    
    $
    6,672
    
    
    $
    7,318
    
    
    $
    15,356
    
    
    $
    25,320Reconciliation of Net (Loss) Income
to EBITDA and Adjusted EBITDANet (loss) income
    
    $
    1,026
    
    
    $
    2,741
    
    
    $
    (64
    )
    
    $
    8,644Interest expense (income), net
    
    
    122
    
    
    
    (36
    )
    
    
    303
    
    
    
    (409
    )Depreciation and amortization
    
    
    4,857
    
    
    
    4,105
    
    
    
    13,912
    
    
    
    12,258Provision (benefit) for income taxes
    
    
    388
    
    
    
    (20
    )
    
    
    86
    
    
    
    3,136EBITDA (1)
    
    
    6,393
    
    
    
    6,790
    
    
    
    14,237
    
    
    
    23,629Stock-based compensation
    
    
    279
    
    
    
    528
    
    
    
    1,119
    
    
    
    1,691Adjusted EBITDA (1)
    
    $
    6,672
    
    
    $
    7,318
    
    
    $
    15,356
    
    
    $
    25,320
 
 (1)
    
    EBITDA is defined as net income (loss) before (a) interest income, net of interest
expense, (b) provision for (or benefit from) income taxes and (c) depreciation,
amortization and impairment. Adjusted EBITDA excludes stock-based compensation. We
consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our
business, but not measures of performance calculated in accordance with accounting
principles generally accepted in the United States of America (GAAP). We have included
these non-GAAP financial measures because management utilizes this information for
assessing our performance and as indicators of our ability to make capital expenditures,
service debt and finance working capital requirements. The covenants of our revolving
credit agreement require us to maintain a minimum level of EBITDA. Management believes
that EBITDA and Adjusted EBITDA are measurements that are commonly used by analysts and
some investors in evaluating the performance of companies such as us. In particular, we
believe that it is useful to our analysts and investors to understand this relationship
because it excludes transactions not related to our core cash operating activities. We
believe that excluding these transactions allows investors to meaningfully trend and
analyze the performance of our core cash operations. EBITDA and Adjusted EBITDA are not
measures of financial performance under GAAP and should not be considered in isolation or
as alternatives to cash flow from operating activities or as alternatives to net income
as indicators of operating performance or any other measures of performance derived in
accordance with GAAP. In evaluating our performance as measured by EBITDA, management
recognizes and considers the limitations of this measurement. EBITDA and Adjusted EBITDA
do not reflect our obligations for the payment of income taxes, interest expense or other
obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are
only two of the measurements that management utilizes. Other companies in our industry
may calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA and Adjusted
EBITDA may not be comparable with similarly titled measures reported by other companies. 11




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Business Outlook
    12




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Results of Operations
  13




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Revenues and Cost of Sales
 Equipment Leasing
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008($ in thousands)
    
    
    ($ in thousands)Revenue:Equipment leasing
    
    $
    9,037
    
    
    $
    10,043
    
    
    $
    20,165
    
    
    $
    29,916Lease pool equipment sales
    
    
    808
    
    
    
    333
    
    
    
    978
    
    
    
    2,738New seismic equipment sales
    
    
    19
    
    
    
    117
    
    
    
    46
    
    
    
    3,764SAP equipment sales
    
    
    425
    
    
    
    1,670
    
    
    
    2,741
    
    
    
    3,20710,289
    
    
    
    12,163
    
    
    
    23,930
    
    
    
    39,625Cost of sales:Lease pool depreciation
    
    
    4,657
    
    
    
    3,822
    
    
    
    13,266
    
    
    
    11,214Direct costs-equipment leasing
    
    
    748
    
    
    
    810
    
    
    
    2,201
    
    
    
    1,595Cost of
lease pool equipment sales
    
    
    473
    
    
    
    143
    
    
    
    570
    
    
    
    1,375Cost of new seismic equipment
sales
    
    
    43
    
    
    
    64
    
    
    
    62
    
    
    
    2,549Cost of SAP equipment sales
    
    
    333
    
    
    
    1,279
    
    
    
    2,345
    
    
    
    2,3566,254
    
    
    
    6,118
    
    
    
    18,444
    
    
    
    19,089Gross profit
    
    $
    4,035
    
    
    $
    6,045
    
    
    $
    5,486
    
    
    $
    20,536Gross profit %
    
    
    39
    %
    
    
    50
    %
    
    
    23
    %
    
    
    52
    %
    14




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Seamap
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008($ in thousands)
    
    
    ($ in thousands)Equipment sales
    
    $
    4,360
    
    
    $
    2,601
    
    
    $
    14,215
    
    
    $
    11,208Cost of equipment sales
    
    
    2,262
    
    
    
    1,325
    
    
    
    6,602
    
    
    
    5,766Gross profit
    
    $
    2,098
    
    
    $
    1,276
    
    
    $
    7,613
    
    
    $
    5,442Gross profit %
    
    
    48
    %
    
    
    49
    %
    
    
    54
    %
    
    
    49
    %
  15




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Operating Expenses
  Other Income (Expense)
  Provision for Income Taxes
  16




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Liquidity and Capital Resources
      17




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Actual as of OctoberDescription of
    
    
    
    31, 2009 or for theFinancial Covenant
    
    Required Amount
    
    period then endedRatio of debt to
shareholders equity
    
    Not more than 0.7:1.0
    
    0.14:1.0Ratio of current
assets to current
liabilities
    
    Not less than 1.25:1.0
    
    2.99:1.0Quarterly EBITDA
    
    Not less than $2.0 million
    
    $6.4 million
      18




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk
  Foreign Currency Risk
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II
 
 Item 1.Legal Proceedings
  19




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##### Table of Contents



Item 1A. Risk Factors
  The financial soundness of our customers could materially affect our business and operating
results.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
     (c)
    
    
    (d)Total number of
    
    
    Maximumshares
    
    
    number of(a)
    
    
    (b)
    
    
    purchased as
    
    
    shares that mayTotal
    
    
    Average
    
    
    part of publicly
    
    
    yet benumber of
    
    
    price
    
    
    announced
    
    
    purchasedshares
    
    
    paid per
    
    
    plans or
    
    
    under the plansPeriod
    
    purchased
    
    
    share
    
    
    programs
    
    
    or programs(1)August 1-31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1-30, 2009
    
    
    1,058
    (2)
    
    $
    6.10
    
    
    
    
    
    
    
    October 1-31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,058
    
    
    $
    6.10
    
    
    
    
    
    
    
    
 
 (1)
    
    In connection with the lapsing of restrictions on restricted shares granted by
our Company under our 2006 Stock Incentive Plan (the Plan), we adopted a policy that
gives employees the ability to surrender shares to cover the associated tax liability.
We are unable to determine at this time the total amount of securities or the
approximate dollar value of those securities that could potentially be surrendered to
us pursuant to the Plan.(2)
    
    These shares represent shares surrendered to us by a participant in the Plan to
settle the personal tax liability that resulted from the lapsing of restrictions on
Plan awards. 
 Item 3. Defaults Upon Senior Securities
  20




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Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
  21




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SIGNATURES
  
 MITCHAM INDUSTRIES, INC.Date:  December 9, 2009
    /s/ Robert P. CappsRobert P. CappsExecutive Vice President-Finance and
Chief Financial
Officer
(Duly Authorized Officer and Chief Accounting
Officer) 22




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##### Table of Contents



EXHIBIT INDEX
  SEC File orExhibit
    
    
    
    
    
    Registration
    
    ExhibitNumber
    
    Document Description
    
    Report or Registration Statement
    
    Number
    

Reference3.1
    
    Amended and
Restated Articles
of Incorporation of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Registration Statement on Form
S-8, filed with the SEC on
August 9, 2001.
    
    333-67208
    
    
    3.13.2
    
    Second Amended and
Restated Bylaws of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Annual Report on Form 10-K for
the fiscal year ended January
31, 2004, filed with the SEC on
May 28, 2004.
    
    000-25142
    
    
    3.210.1
    
    Exclusive Equipment
Lease Agreement
dated September 4,
2009 between
Mitcham Industries,
Inc. and Sercel
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Quarterly Report on Form 10-Q,
filed with the SEC on September
9, 2009.
    
    000-25142
    
    
    10.231.1
    
    Certification
of Billy F.
Mitcham, Jr., Chief
Executive Officer,
pursuant to Rule
13a-14(a) and Rule
15d-14(a) of the
Securities Exchange
Act, as amended31.2
    
    Certification
of Robert P. Capps,
Chief Financial
Officer, pursuant
to Rule 13a-14(a)
and Rule 15d-14(a)
of the Securities
Exchange Act, as
amended32.1
    
    Certification
of Billy F.
Mitcham, Jr., Chief
Executive Officer,
and Robert P.
Capps, Chief
Financial Officer,
under Section 906
of the Sarbanes
Oxley Act of 2002,
18 U.S.C. § 1350