##### 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 July 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
(State or other jurisdiction of 
incorporation or organization)
    
    76-0210849
(I.R.S. Employer Identification No.)
 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 July 31, 2009 and
January 31, 2009
    
    
    1Condensed Consolidated Statements of Operations for the Three
and Six Months Ended July 31, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six
Months Ended July 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
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    19Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3.
    
    Defaults Upon Senior Securities
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20Item 5.
    
    Other Information
    
    
    20Item 6.
    
    Exhibits
    
    
    20Signatures
    
    
    21EX-10.2EX-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)
 July 31, 2009(unaudited)
    
    
    January 31, 2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,188
    
    
    $
    5,063Restricted cash
    
    
    444
    
    
    
    969Accounts receivable, net
    
    
    11,649
    
    
    
    12,415Current portion of contracts receivable
    
    
    569
    
    
    
    836Inventories, net
    
    
    6,074
    
    
    
    3,772Costs incurred and estimated profit in excess of billings on uncompleted contract
    
    
    1,240
    
    
    
    1,787Income taxes receivable
    
    
    
    
    
    
    1,000Deferred tax asset
    
    
    1,123
    
    
    
    1,682Prepaid expenses and other current assets
    
    
    1,039
    
    
    
    1,535Total current assets
    
    
    28,326
    
    
    
    29,059Seismic equipment lease pool and property and equipment, net
    
    
    65,824
    
    
    
    64,251Intangible assets, net
    
    
    2,827
    
    
    
    2,744Goodwill
    
    
    4,320
    
    
    
    4,320Deferred tax asset
    
    
    1,657
    
    
    
    Long-term portion of contracts receivable
    
    
    3,806
    
    
    
    3,806Other assets
    
    
    50
    
    
    
    47Total assets
    
    $
    106,810
    
    
    $
    104,227LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    10,325
    
    
    $
    13,561Income taxes payable
    
    
    722
    
    
    
    Deferred revenue
    
    
    439
    
    
    
    424Accrued expenses and other current liabilities
    
    
    2,985
    
    
    
    3,877Total current liabilities
    
    
    14,471
    
    
    
    17,862Non-current income taxes payable
    
    
    2,966
    
    
    
    3,260Deferred tax liability
    
    
    
    
    
    
    32Long-term debt
    
    
    7,450
    
    
    
    5,950Total liabilities
    
    
    24,887
    
    
    
    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
July 31, 2009 and January 31, 2009, respectively
    
    
    107
    
    
    
    107Additional paid-in capital
    
    
    75,488
    
    
    
    74,396Treasury stock, at cost (924 and 922 shares at July 31, 2009 and January 31, 2009, respectively)
    
    
    (4,827
    )
    
    
    (4,826
    )Retained earnings
    
    
    8,637
    
    
    
    9,727Accumulated other comprehensive income (loss)
    
    
    2,518
    
    
    
    (2,281
    )Total shareholders equity
    
    
    81,923
    
    
    
    77,123Total liabilities and shareholders equity
    
    $
    106,810
    
    
    $
    104,227
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 1




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except per share data)
 (unaudited)
 For the Three Months
    
    
    For the Six MonthsEnded July 31,
    
    
    Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Equipment leasing
    
    $
    4,802
    
    
    $
    7,500
    
    
    $
    11,128
    
    
    $
    19,873Lease pool equipment sales
    
    
    101
    
    
    
    1,844
    
    
    
    170
    
    
    
    2,405Seamap equipment sales
    
    
    7,043
    
    
    
    3,285
    
    
    
    9,641
    
    
    
    8,567Other equipment sales
    
    
    731
    
    
    
    4,866
    
    
    
    2,343
    
    
    
    5,184Total revenues
    
    
    12,677
    
    
    
    17,495
    
    
    
    23,282
    
    
    
    36,029Cost of sales:Direct costs - equipment leasing
    
    
    925
    
    
    
    343
    
    
    
    1,453
    
    
    
    785Direct costs - lease pool depreciation
    
    
    4,416
    
    
    
    3,673
    
    
    
    8,517
    
    
    
    7,313Cost of lease pool equipment sales
    
    
    87
    
    
    
    1,108
    
    
    
    97
    
    
    
    1,232Cost of Seamap and other equipment sales
    
    
    3,917
    
    
    
    5,257
    
    
    
    6,111
    
    
    
    7,957Total cost of sales
    
    
    9,345
    
    
    
    10,381
    
    
    
    16,178
    
    
    
    17,287Gross profit
    
    
    3,332
    
    
    
    7,114
    
    
    
    7,104
    
    
    
    18,742Operating expenses:General and administrative
    
    
    3,969
    
    
    
    4,430
    
    
    
    7,471
    
    
    
    9,210Provision for doubtful accounts
    
    
    649
    
    
    
    
    
    
    
    649
    
    
    
    95Depreciation and amortization
    
    
    223
    
    
    
    364
    
    
    
    477
    
    
    
    759Total operating expenses
    
    
    4,841
    
    
    
    4,794
    
    
    
    8,597
    
    
    
    10,064Operating (loss) income
    
    
    (1,509
    )
    
    
    2,320
    
    
    
    (1,493
    )
    
    
    8,678Other income (expenses):Interest, net
    
    
    (92
    )
    
    
    223
    
    
    
    (181
    )
    
    
    373Other, net
    
    
    163
    
    
    
    3
    
    
    
    282
    
    
    
    8Total other income
    
    
    71
    
    
    
    226
    
    
    
    101
    
    
    
    381(Loss) income before income taxes
    
    
    (1,438
    )
    
    
    2,546
    
    
    
    (1,392
    )
    
    
    9,059Benefit (provision) for income taxes
    
    
    428
    
    
    
    (921
    )
    
    
    302
    
    
    
    (3,156
    )Net (loss) income
    
    $
    (1,010
    )
    
    $
    1,625
    
    
    $
    (1,090
    )
    
    $
    5,903Net (loss) income per common share:Basic
    
    $
    (0.10
    )
    
    $
    0.17
    
    
    $
    (0.11
    )
    
    $
    0.61Diluted
    
    $
    (0.10
    )
    
    $
    0.16
    
    
    $
    (0.11
    )
    
    $
    0.57Shares used in computing net (loss) income per common share:Basic
    
    
    9,797
    
    
    
    9,764
    
    
    
    9,790
    
    
    
    9,758Diluted
    
    
    9,797
    
    
    
    10,385
    
    
    
    9,790
    
    
    
    10,361
 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 Six Months EndedJuly 31,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (1,090
    )
    
    $
    5,903Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    9,055
    
    
    
    8,153Stock-based compensation
    
    
    840
    
    
    
    1,163Provision for doubtful accounts
    
    
    649
    
    
    
    95Provision for inventory obsolescence
    
    
    (75
    )
    
    
    249Gross profit from sale of lease pool equipment
    
    
    (73
    )
    
    
    (1,173
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    (7
    )
    
    
    (96
    )(Benefit) provision for deferred income taxes
    
    
    (1,210
    )
    
    
    474Changes in non-current income taxes payable
    
    
    (294
    )
    
    
    331Changes in working capital items:Accounts receivable
    
    
    501
    
    
    
    (1,246
    )Contracts receivable
    
    
    267
    
    
    
    (779
    )Inventories
    
    
    (1,677
    )
    
    
    916Prepaid expenses and other current assets
    
    
    405
    
    
    
    942Income taxes receivable and payable
    
    
    2,213
    
    
    
    (1,190
    )Costs incurred and estimated profit in excess of billings on
uncompleted contract
    
    
    973
    
    
    
    Accounts payable, accrued expenses, other current liabilities
and deferred revenue
    
    
    240
    
    
    
    (7,298
    )Net cash provided by operating activities
    
    
    10,717
    
    
    
    6,444Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (11,597
    )
    
    
    (15,411
    )Purchases of property and equipment
    
    
    (283
    )
    
    
    (470
    )Sale of used lease pool equipment
    
    
    170
    
    
    
    2,405Net cash used in investing activities
    
    
    (11,710
    )
    
    
    (13,476
    )Cash flows from financing activities:Net proceeds from line of credit
    
    
    1,500
    
    
    
    2,000Payments on borrowings
    
    
    
    
    
    
    (1,500
    )Proceeds from (purchases of) short-term investments
    
    
    797
    
    
    
    (1,413
    )Proceeds from issuance of common stock upon exercise of stock
options, net of stock surrendered to pay taxes
    
    
    (6
    )
    
    
    196Excess tax benefit from exercise of non-qualified stock options
    
    
    7
    
    
    
    96Net cash provided by (used in) financing activities
    
    
    2,298
    
    
    
    (621
    )Effect of changes in foreign exchange rates on cash and cash equivalents
    
    
    (180
    )
    
    
    (79
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,125
    
    
    
    (7,732
    )Cash and cash equivalents, beginning of period
    
    
    5,063
    
    
    
    13,884Cash and cash equivalents, end of period
    
    $
    6,188
    
    
    $
    6,152Supplemental cash flow information:Interest paid
    
    $
    316
    
    
    $
    135Income taxes paid
    
    $
    649
    
    
    $
    3,306Purchases of seismic equipment held for lease in accounts payable
at end of period
    
    $
    8,196
    
    
    $
    6,933
 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
(in thousands, except per share amounts)
(unaudited)
 1. Basis of Presentation
  2. Organization
  3. New Accounting Pronouncements
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162
 4. Restricted Cash
  4




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##### Table of Contents



5. Balance Sheet
 July 31,
    
    
    January 31,2009
    
    
    2009Accounts receivable:Accounts receivable
    
    $
        14,572
    
    

    $
    14,715Allowance for doubtful accounts
    
    
    (2,923
    )
    

    
    (2,300
    )Total accounts receivable, net
    

    $
    11,649
    
    
    $
    12,415Contracts receivable:Contracts receivable
    
    $
    4,375
    
    
    $
    4,642Less current portion of contracts receivable
    
    
    (569
    )
    
    
    (836
    )Long-term portion of contracts receivable
    
    $
    3,806
    
    
    $
    3,806
  July 31,
    
    
    January 31,2009
    
    
    2009Inventories:Raw materials
    
    $
    3,224
    
    
    $
    2,309Finished goods
    
    
    1,463
    
    
    
    1,593Work in progress
    
    
    2,047
    
    
    
    8346,734
    
    
    
    4,736Less allowance for obsolescence
    
    
    (660
    )
    
    
    (964
    )Total inventories, net
    
    $
    6,074
    
    
    $
    3,772
 July 31,
    
    
    January 31,2009
    
    
    2009Seismic equipment lease pool and property and
equipment:Seismic equipment lease pool
    
    $
    144,016
    
    
    $
    127,067Land and buildings
    
    
    366
    
    
    
    366Furniture and fixtures
    
    
    6,122
    
    
    
    5,380Autos and trucks
    
    
    516
    
    
    
    469151,020
    
    
    
    133,282Accumulated depreciation and amortization
    
    
    (85,196
    )
    
    
    (69,031
    )Total seismic equipment lease pool and
property and equipment, net
    
    $
    65,824
    
    
    $
    64,251
 5




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6. Goodwill and Other Intangible Assets
 Weighted
    
    
    July 31, 2009
    
    
    January 31, 2009Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross

    
    
    
    
    
    
    NetLife at
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying7/31/09
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountGoodwill
    
    
    
    
    
    $
    4,320
    
    
    
    
    
    
    
    
    
    
    $
    4,320Proprietary rights
    
    
    10.9
    
    
    $
    3,547
    
    
    $
    (720
    )
    
    $
    2,827
    
    
    $
    3,313
    
    
    $
    (569
    )
    
    $
    2,744Covenants
not-to-compete
    
    
    
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    Amortizable intangible assets
    
    
    
    
    
    $
    4,547
    
    
    $
    (1,720
    )
    
    $
    2,827
    
    
    $
    4,313
    
    
    $
    (1,569
    )
    
    $
    2,744
   For fiscal years ending January 31:2010
    
    $
    1292011
    
    
    2592012
    
    
    2592013
    
    
    2592014 and thereafter
    
    
    1,921Total
    
    $
    2,827
 7. Long-Term Debt and Notes Payable
  8. Comprehensive Income
  6




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Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (1,010
    )
    
    $
    1,625
    
    
    $
    (1,090
    )
    
    $
    5,903Gain (loss) from
foreign currency
translation
adjustment
    
    
    3,304
    
    
    
    (299
    )
    
    
    4,799
    
    
    
    2Comprehensive income
    
    $
    2,294
    
    
    $
    1,326
    
    
    $
    3,709
    
    
    $
    5,905
  9. Income Taxes
 Accounting for Income
Taxes Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109, Accounting for Income Taxes
     7




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10. Earnings (Loss) per Share
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic weighted average common shares outstanding
    
    
    9,797
    
    
    
    9,764
    
    
    
    9,790
    
    
    
    9,758Stock options
    
    
    121
    
    
    
    596
    
    
    
    103
    
    
    
    583Unvested restricted stock
    
    
    8
    
    
    
    14
    
    
    
    10
    
    
    
    15Phantom stock
    
    
    2
    
    
    
    11
    
    
    
    7
    
    
    
    5Total weighted average common share equivalents
    
    
    131
    
    
    
    621
    
    
    
    120
    
    
    
    603Diluted weighted average common shares
outstanding
    
    
    9,928
    
    
    
    10,385
    
    
    
    9,910
    
    
    
    10,361
  11. Stock-Based Compensation
  8




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12. Segment Reporting
 Disclosures about Segments
of an Enterprise and Related Information.
    As of July 31,
    
    
    As of January 31,2009
    
    
    2009Total assets
    
    
    Total assetsEquipment Leasing
    
    $
    86,116
    
    
    $
    89,240Seamap
    
    
    21,180
    
    
    
    15,529Eliminations
    
    
    (486
    )
    
    
    (542
    )Consolidated
    
    $
    106,810
    
    
    $
    104,227
  Revenues
    
    
    Operating (loss) income
    
    
    (Loss) income before taxes2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Equipment Leasing
    
    $
    5,634
    
    
    $
    14,210
    
    
    $
    (4,178
    )
    
    $
    2,676
    
    
    $
    (3,941
    )
    
    $
    2,928Seamap
    
    
    7,172
    
    
    
    3,302
    
    
    
    2,629
    
    
    
    (413
    )
    
    
    2,463
    
    
    
    (439
    )Eliminations
    
    
    (129
    )
    
    
    (17
    )
    
    
    40
    
    
    
    57
    
    
    
    40
    
    
    
    57Consolidated
    
    $
    12,677
    
    
    $
    17,495
    
    
    $
    (1,509
    )
    
    $
    2,320
    
    
    $
    (1,438
    )
    
    $
    2,546
  Revenues
    
    
    Operating (loss) income
    
    
    (Loss) income before taxes2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Equipment Leasing
    
    $
    13,641
    
    
    $
    27,462
    
    
    $
    (4,631
    )
    
    $
    7,813
    
    
    $
    (4,344
    )
    
    $
    8,250Seamap
    
    
    9,855
    
    
    
    8,607
    
    
    
    3,000
    
    
    
    781
    
    
    
    2,814
    
    
    
    725Eliminations
    
    
    (214
    )
    
    
    (40
    )
    
    
    138
    
    
    
    84
    
    
    
    138
    
    
    
    84Consolidated
    
    $
    23,282
    
    
    $
    36,029
    
    
    $
    (1,493
    )
    
    $
    8,678
    
    
    $
    (1,392
    )
    
    $
    9,059
  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 Six Months EndedJuly 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Revenues:Equipment Leasing
    
    $
    5,634
    
    
    $
    14,210
    
    
    $
    13,641
    
    
    $
    27,462Seamap
    
    
    7,172
    
    
    
    3,302
    
    
    
    9,855
    
    
    
    8,607Inter-segment sales
    
    
    (129
    )
    
    
    (17
    )
    
    
    (214
    )
    
    
    (40
    )Total revenues
    
    
    12,677
    
    
    
    17,495
    
    
    
    23,282
    
    
    
    36,029Cost of sales:Equipment Leasing
    
    
    6,283
    
    
    
    8,483
    
    
    
    12,190
    
    
    
    12,971Seamap
    
    
    3,231
    
    
    
    1,972
    
    
    
    4,340
    
    
    
    4,441Inter-segment costs
    
    
    (169
    )
    
    
    (74
    )
    
    
    (352
    )
    
    
    (125
    )Total cost of sales
    
    
    9,345
    
    
    
    10,381
    
    
    
    16,178
    
    
    
    17,287Gross profit
    
    
    3,332
    
    
    
    7,114
    
    
    
    7,104
    
    
    
    18,742Operating expenses:General and administrative
    
    
    3,969
    
    
    
    4,430
    
    
    
    7,471
    
    
    
    9,210Provision for doubtful accounts
    
    
    649
    
    
    
    
    
    
    
    649
    
    
    
    95Depreciation and amortization
    
    
    223
    
    
    
    364
    
    
    
    477
    
    
    
    759Total operating expenses
    
    
    4,841
    
    
    
    4,794
    
    
    
    8,597
    
    
    
    10,064Operating income (loss)
    
    $
    (1,509
    )
    
    $
    2,320
    
    
    $
    (1,493
    )
    
    $
    8,678EBITDA(1)
    
    $
    3,324
    
    
    $
    6,400
    
    
    $
    7,844
    
    
    $
    16,839Adjusted EBITDA(1)
    
    $
    3,748
    
    
    $
    6,927
    
    
    $
    8,684
    
    
    $
    18,002Reconciliation of Net (Loss) Income
to EBITDA and Adjusted EBITDANet (loss) income
    
    $
    (1,010
    )
    
    $
    1,625
    
    
    $
    (1,090
    )
    
    $
    5,903Interest expense (income), net
    
    
    92
    
    
    
    (223
    )
    
    
    181
    
    
    
    (373
    )Depreciation and amortization
    
    
    4,670
    
    
    
    4,077
    
    
    
    9,055
    
    
    
    8,153(Benefit) provision for income taxes
    
    
    (428
    )
    
    
    921
    
    
    
    (302
    )
    
    
    3,156EBITDA (1)
    
    
    3,324
    
    
    
    6,400
    
    
    
    7,844
    
    
    
    16,839Stock-based compensation
    
    
    424
    
    
    
    527
    
    
    
    840
    
    
    
    1,163Adjusted EBITDA (1)
    
    $
    3,748
    
    
    $
    6,927
    
    
    $
    8,684
    
    
    $
    18,002
 
 (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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##### Table of Contents



Results of Operations
  13




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##### Table of Contents



Revenues and Cost of Sales
 Equipment Leasing
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008($ in thousands)
    
    
    ($ in thousands)Revenue:Equipment leasing
    
    $
    4,802
    
    
    $
    7,500
    
    
    $
    11,128
    
    
    $
    19,873Lease pool equipment sales
    
    
    101
    
    
    
    1,844
    
    
    
    170
    
    
    
    2,405New seismic equipment sales
    
    
    17
    
    
    
    3,518
    
    
    
    27
    
    
    
    3,647SAP equipment sales
    
    
    714
    
    
    
    1,348
    
    
    
    2,316
    
    
    
    1,5375,634
    
    
    
    14,210
    
    
    
    13,641
    
    
    
    27,462Cost of sales:Lease pool depreciation
    
    
    4,463
    
    
    
    3,712
    
    
    
    8,609
    
    
    
    7,392Direct costs-equipment leasing
    
    
    925
    
    
    
    343
    
    
    
    1,453
    
    
    
    785Cost of lease pool equipment sales
    
    
    87
    
    
    
    1,107
    
    
    
    97
    
    
    
    1,232Cost of new seismic equipment
sales
    
    
    14
    
    
    
    2,398
    
    
    
    19
    
    
    
    2,485Cost of SAP equipment sales
    
    
    794
    
    
    
    923
    
    
    
    2,012
    
    
    
    1,0776,283
    
    
    
    8,483
    
    
    
    12,190
    
    
    
    12,971Gross (loss) profit
    
    $
    (649
    )
    
    $
    5,727
    
    
    $
    1,451
    
    
    $
    14,491Gross (loss) profit %
    
    
    (12
    )%
    
    
    40
    %
    
    
    11
    %
    
    
    53
    %
    14




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##### Table of Contents



Seamap
  Three Months Ended July 31,
    
    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008($ in thousands)
    
    
    ($ in thousands)Equipment sales
    
    $
    7,172
    
    
    $
    3,302
    
    
    $
    9,855
    
    
    $
    8,607Cost of equipment sales
    
    
    3,231
    
    
    
    1,972
    
    
    
    4,340
    
    
    
    4,441Gross profit
    
    $
    3,941
    
    
    $
    1,330
    
    
    $
    5,515
    
    
    $
    4,166Gross profit %
    
    
    55
    %
    
    
    40
    %
    
    
    56
    %
    
    
    48
    %
   15




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##### Table of Contents



Operating Expenses
  Interest and Other Income (Expense), net
  Provision for Income Taxes
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109, Accounting for Income Taxes
 Liquidity and Capital Resources
    16




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##### Table of Contents



Actual as of July 31,Description of Financial
    
    
    
    2009 or for periodCovenant
    
    Required Amount
    
    then endedRatio of debt to
shareholders equity
    
    Not more than 0.7:1.0
    
    0.09:1.0Ratio of current
assets to current
liabilities
    
    Not less than 1.25:1.0
    
    1.96:1.0Quarterly EBITDA
    
    Not less than $2.0
million
    
    $3.3 million
    17




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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
  18




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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
     (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)Total number of
    
    
    Maximumshares
    
    
    number ofpurchased 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)May 1-31, 2009
    
    
    1,020
    (2)
    
    $
    5.01
    
    
    
    
    
    
    
    June 1-30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    July 1-31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,020
    
    
    $
    5.01
    
    
    
    
    
    
    
    
 
 (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 enables 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
  19




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
   Name of Nominee
    
    For
    
    WithheldBilly F. Mitcham, Jr.
    
    
    7,920,745
    
    
    
    609,815Peter H. Blum
    
    
    7,784,311
    
    
    
    746,249Robert P. Capps
    
    
    7,803,210
    
    
    
    727,350R. Dean Lewis
    
    
    7,769,446
    
    
    
    761,114John F. Schwalbe
    
    
    7,768,986
    
    
    
    761,574Robert J. Albers
    
    
    7,915,911
    
    
    
    614,649
  For
    
    Against
    
    Abstaining
    
    Broker Non-Votes5,351,863
    
    
    999,819
    
    
    
    8,810
    
    
    
    2,170,068
  For
    
    Against
    
    Abstaining8,377,318
    
    
    112,323
    
    
    
    40,918
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
  20




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##### Table of Contents



SIGNATURES
  MITCHAM INDUSTRIES, INC.Date:  September 9, 2009
    /s/ Robert P. CappsRobert P. CappsExecutive Vice President-Finance and Chief Financial Officer(Duly Authorized Officer and Chief Accounting Officer) 21




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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
    
    Mitcham Industries,
Inc. Amended and
Restated Stock
Awards Plan
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Current Report on Form 8-K,
filed with the SEC on July 27,
2009.
    
    000-25142
    
    10.110.2
    
    Exclusive
Equipment Lease
Agreement dated
September 4, 2009
between Mitcham
Industries, Inc.
and Sercel Inc.31.1
    
    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