##### 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, 2010
 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
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  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, 2010
and January 31, 2010
    
    
    1Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended October 31, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended October 31, 2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. (Removed and Reserved)
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24EX-10.1EX-31.1EX-31.2EX-32.1
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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)  (unaudited)
 October 31, 2010
    
    
    January 31, 2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,521
    
    
    $
    6,130Restricted cash
    
    
    687
    
    
    
    605Accounts receivable, net
    
    
    14,355
    
    
    
    15,444Current portion of contracts receivable
    
    
    3,721
    
    
    
    2,073Inventories, net
    
    
    4,704
    
    
    
    5,199Cost and estimated profit in excess of billings on uncompleted contract
    
    
    
    
    
    
    398Income taxes receivable
    
    
    
    
    
    
    1,438Deferred tax asset
    
    
    1,919
    
    
    
    1,400Prepaid expenses and other current assets
    
    
    2,908
    
    
    
    1,986Total current assets
    
    
    37,815
    
    
    
    34,673Seismic equipment lease pool and property and equipment, net
    
    
    74,997
    
    
    
    66,482Intangible assets, net
    
    
    5,475
    
    
    
    2,678Goodwill
    
    
    4,320
    
    
    
    4,320Prepaid foreign income tax
    
    
    2,960
    
    
    
    2,574Deferred tax asset
    
    
    
    
    
    
    88Long-term portion of contracts receivable, net
    
    
    5,262
    
    
    
    4,533Other assets
    
    
    36
    
    
    
    49Total assets
    
    $
    130,865
    
    
    $
    115,397LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    12,460
    
    
    $
    6,489Current maturities  long-term debt
    
    
    3,111
    
    
    
    93Income taxes payable
    
    
    1,771
    
    
    
    1,345Deferred revenue
    
    
    860
    
    
    
    854Accrued expenses and other current liabilities
    
    
    4,119
    
    
    
    2,668Total current liabilities
    
    
    22,321
    
    
    
    11,449Non-current income taxes payable
    
    
    3,402
    
    
    
    3,258Deferred tax liability
    
    
    224
    
    
    
    Long-term debt, net of current maturities
    
    
    13,426
    
    
    
    15,735Total liabilities
    
    
    39,373
    
    
    
    30,442Shareholders 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; 10,872 and 10,737 shares issued at
October 31, 2010 and January 31, 2010, respectively
    
    
    108
    
    
    
    107Additional paid-in capital
    
    
    77,261
    
    
    
    75,746Treasury stock, at cost (925 shares at October 31, 2010 and January 31, 2010)
    
    
    (4,843
    )
    
    
    (4,843
    )Retained earnings
    
    
    13,222
    
    
    
    10,247Accumulated other comprehensive income
    
    
    5,744
    
    
    
    3,698Total shareholders equity
    
    
    91,492
    
    
    
    84,955Total liabilities and shareholders equity
    
    $
    130,865
    
    
    $
    115,397
 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 Nine MonthsEnded October 31,
    
    
    Ended October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Equipment leasing
    
    $
    8,074
    
    
    $
    9,037
    
    
    $
    24,133
    
    
    $
    20,165Lease pool equipment sales
    
    
    976
    
    
    
    808
    
    
    
    1,498
    
    
    
    978Seamap equipment sales
    
    
    4,249
    
    
    
    4,241
    
    
    
    17,230
    
    
    
    13,882Other equipment sales
    
    
    6,674
    
    
    
    444
    
    
    
    8,767
    
    
    
    2,787Total revenues
    
    
    19,973
    
    
    
    14,530
    
    
    
    51,628
    
    
    
    37,812Cost of sales:Direct costs  equipment leasing
    
    
    895
    
    
    
    748
    
    
    
    2,485
    
    
    
    2,201Direct costs  lease pool depreciation
    
    
    5,289
    
    
    
    4,610
    
    
    
    15,556
    
    
    
    13,127Cost of lease pool equipment sales
    
    
    385
    
    
    
    473
    
    
    
    634
    
    
    
    570Cost of Seamap and other equipment sales
    
    
    7,425
    
    
    
    2,534
    
    
    
    15,376
    
    
    
    8,645Total cost of sales
    
    
    13,994
    
    
    
    8,365
    
    
    
    34,051
    
    
    
    24,543Gross profit
    
    
    5,979
    
    
    
    6,165
    
    
    
    17,577
    
    
    
    13,269Operating expenses:General and administrative
    
    
    3,937
    
    
    
    3,809
    
    
    
    12,286
    
    
    
    11,280Provision for doubtful accounts
    
    
    
    
    
    
    730
    
    
    
    797
    
    
    
    1,379Depreciation and amortization
    
    
    296
    
    
    
    213
    
    
    
    871
    
    
    
    690Total operating expenses
    
    
    4,233
    
    
    
    4,752
    
    
    
    13,954
    
    
    
    13,349Operating (loss) income
    
    
    1,746
    
    
    
    1,413
    
    
    
    3,623
    
    
    
    (80
    )Other income (expenses):Gain from bargain purchase in business combination
    
    
    
    
    
    
    
    
    
    
    1,304
    
    
    
    Interest, net
    
    
    (90
    )
    
    
    (122
    )
    
    
    (302
    )
    
    
    (303
    )Other, net
    
    
    (553
    )
    
    
    123
    
    
    
    (618
    )
    
    
    405Total other income (expense)
    
    
    (643
    )
    
    
    1
    
    
    
    384
    
    
    
    102Income before income taxes
    
    
    1,103
    
    
    
    1,414
    
    
    
    4,007
    
    
    
    22Provision for income taxes
    
    
    (376
    )
    
    
    (388
    )
    
    
    (1,032
    )
    
    
    (86
    )Net income (loss)
    
    $
    727
    
    
    $
    1,026
    
    
    $
    2,975
    
    
    $
    (64
    )Net income (loss) per common share:Basic
    
    $
    0.07
    
    
    $
    0.10
    
    
    $
    0.30
    
    
    $
    (0.01
    )Diluted
    
    $
    0.07
    
    
    $
    0.10
    
    
    $
    0.29
    
    
    $
    (0.01
    )Shares used in computing net income (loss) per common share:Basic
    
    
    9,916
    
    
    
    9,805
    
    
    
    9,854
    
    
    
    9,795Diluted
    
    
    10,203
    
    
    
    9,969
    
    
    
    10,122
    
    
    
    9,795
 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 Ended October 31,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    2,975
    
    
    $
    (64
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    16,586
    
    
    
    13,912Stock-based compensation
    
    
    941
    
    
    
    1,119Gain from bargain purchase in business combination
    
    
    (1,304
    )
    
    
    Provision for doubtful accounts
    
    
    797
    
    
    
    1,379Provision for inventory obsolescence
    
    
    63
    
    
    
    13Gross profit from sale of lease pool equipment
    
    
    (864
    )
    
    
    (408
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    (3
    )
    
    
    (45
    )Deferred tax benefit
    
    
    (1,335
    )
    
    
    (1,553
    )Changes in non-current income taxes payable
    
    
    144
    
    
    
    (288
    )Changes in working capital items, net of effects from business combination:Accounts receivable
    
    
    609
    
    
    
    (2,186
    )Contracts receivable
    
    
    (2,376
    )
    
    
    (36
    )Inventories
    
    
    833
    
    
    
    (1,468
    )Prepaid expenses and other current assets
    
    
    (952
    )
    
    
    (268
    )Income taxes receivable and payable
    
    
    1,833
    
    
    
    3,073Costs incurred and estimated profit in excess of billings on
uncompleted contract
    
    
    573
    
    
    
    1,746Prepaid foreign income tax
    
    
    (221
    )
    
    
    Accounts payable, accrued expenses, other current liabilities and
deferred revenue
    
    
    1,996
    
    
    
    (1,339
    )Net cash provided by operating activities
    
    
    20,295
    
    
    
    13,587Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (16,049
    )
    
    
    (18,828
    )Purchases of property and equipment
    
    
    (262
    )
    
    
    (358
    )Sale of used lease pool equipment
    
    
    1,498
    
    
    
    978Acquisition of AES, net of cash acquired
    
    
    (2,100
    )
    
    
    Net cash used in investing activities
    
    
    (16,913
    )
    
    
    (18,208
    )Cash flows from financing activities:Net (payments on) proceeds from line of credit
    
    
    (4,250
    )
    
    
    5,300Proceeds from secured promissory note
    
    
    3,672
    
    
    
    Payments on borrowings
    
    
    (122
    )
    
    
    (Purchases of) proceeds from short-term investments
    
    
    (15
    )
    
    
    871Proceeds from issuance of common stock upon exercise of stock options, net
of stock surrendered to pay taxes
    
    
    244
    
    
    
    (12
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    3
    
    
    
    45Net cash (used in) provided by financing activities
    
    
    (468
    )
    
    
    6,204Effect of changes in foreign exchange rates on cash and cash equivalents
    
    
    477
    
    
    
    (246
    )Net change in cash and cash equivalents
    
    
    3,391
    
    
    
    1,337Cash and cash equivalents, beginning of period
    
    
    6,130
    
    
    
    5,063Cash and cash equivalents, end of period
    
    $
    9,521
    
    
    $
    6,400Supplemental cash flow information:Interest paid
    
    $
    465
    
    
    $
    461Income taxes paid
    
    $
    1,716
    
    
    $
    820Purchases of seismic equipment held for lease in accounts payable at end
of period
    
    $
    9,621
    
    
    $
    4,577
 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
 Business Combinations
 Subsequent
Events
 4. Acquisition
  4




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##### Table of Contents



Working capital
    
    $
    327Seismic equipment lease pool
    
    
    2,990Deferred taxes
    
    
    (1,086
    )Intangible assets
    
    
    3,154
  Pro Forma Results of Operations
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,(In thousands, except per share amounts)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    19,973
    
    
    $
    15,251
    
    
    $
    51,789
    
    
    $
    40,185Net income
    
    $
    727
    
    
    $
    1,169
    
    
    $
    2,882
    
    
    $
    220Earnings per share:Basic
    
    $
    0.07
    
    
    $
    0.12
    
    
    $
    0.29
    
    
    $
    0.02Diluted
    
    $
    0.07
    
    
    $
    0.12
    
    
    $
    0.28
    
    
    $
    0.02
 5. Restricted Cash
  5




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6. Balance Sheet
 October 31,
    
    
    January 31,2010
    
    
    2010(in thousands)Accounts receivable:Accounts receivable
    
    $
    17,051
    
    
    $
    17,864Allowance for doubtful accounts
    
    
    (2,696
    )
    
    
    (2,420
    )Total accounts receivable, net
    
    $
    14,355
    
    
    $
    15,444Contracts receivable:Contracts receivable
    
    $
    10,470
    
    
    $
    8,093Valuation allowance
    
    
    (1,487
    )
    
    
    (1,487
    )Less current portion of contracts receivable
    
    
    (3,721
    )
    
    
    (2,073
    )Long-term portion of contracts receivable, net
    
    $
    5,262
    
    
    $
    4,533
  October 31,
    
    
    January 31,2010
    
    
    2010(in thousands)Inventories:Raw materials
    
    $
    2,413
    
    
    $
    2,695Finished goods
    
    
    1,991
    
    
    
    2,171Work in progress
    
    
    992
    
    
    
    1,0165,396
    
    
    
    5,882Less allowance for obsolescence
    
    
    (692
    )
    
    
    (683
    )Total inventories, net
    
    $
    4,704
    
    
    $
    5,199
 6




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October 31,
    
    
    January 31,2010
    
    
    2010(in thousands)Seismic equipment lease pool and property and equipment:Seismic equipment lease pool
    
    $
    175,530
    
    
    $
    151,921Land and buildings
    
    
    366
    
    
    
    366Furniture and fixtures
    
    
    6,704
    
    
    
    6,305Autos and trucks
    
    
    631
    
    
    
    526183,231
    
    
    
    159,118Accumulated depreciation and amortization
    
    
    (108,234
    )
    
    
    (92,636
    )Total seismic equipment lease pool and
property and equipment, net
    
    $
    74,997
    
    
    $
    66,482
 7. Goodwill and Other Intangible Assets
 Weighted
    
    
    October 31, 2010
    
    
    January 31, 2010Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife at
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying10/31/10
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(in thousands)
    
    
    (in thousands)Goodwill
    
    
    
    
    
    $
    4,320
    
    
    
    
    
    
    
    
    
    
    $
    4,320Proprietary rights
    
    
    9.7
    
    
    $
    3,520
    
    
    $
    (1,033
    )
    
    $
    2,487
    
    
    $
    3,516
    
    
    $
    (838
    )
    
    $
    2,678Customer relationships
    
    
    7.3
    
    
    
    2,356
    
    
    
    (196
    )
    
    
    2,160
    
    
    
    
    
    
    
    
    
    
    
    Patents
    
    
    7.3
    
    
    
    710
    
    
    
    (59
    )
    
    
    651
    
    
    
    
    
    
    
    
    
    
    
    Trade name
    
    
    7.3
    
    
    
    193
    
    
    
    (16
    )
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    Amortizable intangible assets
    
    
    
    
    
    $
    6,779
    
    
    $
    (1,304
    )
    
    $
    5,475
    
    
    $
    3,516
    
    
    $
    (838
    )
    
    $
    2,678
   For fiscal years ending January 31 (in thousands):2011
    
    $
    1652012
    
    
    6612013
    
    
    6612014
    
    
    6612015
    
    
    6612016 and thereafter
    
    
    2,666Total
    
    $
    5,475
 7




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8. Long-Term Debt and Notes Payable
  October 31,
    
    
    January 31,2010
    
    
    2010Revolving line of credit
    
    $
    11,100
    
    
    $
    15,350Equipment note
    
    
    3,637
    
    
    
    MCL notes
    
    
    1,528
    
    
    
    SAP equipment notes
    
    
    272
    
    
    
    47816,537
    
    
    
    15,828Less current portion
    
    
    (3,111
    )
    
    
    (93
    )Long-term debt
    
    $
    13,426
    
    
    $
    15,735
      9. Comprehensive Income
  8




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Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Net income (loss)
    
    $
    727
    
    
    $
    1,026
    
    
    $
    2,975
    
    
    $
    (64
    )Gain (loss) from foreign
currency
translation adjustment
    
    
    1,048
    
    
    
    825
    
    
    
    2,046
    
    
    
    5,624Comprehensive income (loss)
    
    $
    1,775
    
    
    $
    1,851
    
    
    $
    5,021
    
    
    $
    5,560
  10. Income Taxes
 Income Taxes
      9




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11. Earnings (Loss) per Share
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Basic weighted average common shares outstanding
    
    
    9,916
    
    
    
    9,805
    
    
    
    9,854
    
    
    
    9,795Stock options
    
    
    268
    
    
    
    160
    
    
    
    261
    
    
    
    122Unvested restricted stock
    
    
    19
    
    
    
    4
    
    
    
    7
    
    
    
    8Phantom stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Total weighted average common share equivalents
    
    
    287
    
    
    
    164
    
    
    
    268
    
    
    
    134Diluted weighted average common shares
outstanding
    
    
    10,203
    
    
    
    9,969
    
    
    
    10,122
    
    
    
    9,929
  12. Stock-Based Compensation
  13. Segment Reporting
    As of October 31,
    
    
    As of January 31,2010
    
    
    2010Total assets
    
    
    Total assets(in thousands)Equipment Leasing
    
    $
    111,080
    
    
    $
    95,671Seamap
    
    
    20,061
    
    
    
    20,118Eliminations
    
    
    (276
    )
    
    
    (392
    )Consolidated
    
    $
    130,865
    
    
    $
    115,397
 10




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##### Table of Contents



Revenues
    
    
    Operating income
    
    
    Income before taxes2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Equipment Leasing
    
    $
    15,724
    
    
    $
    10,289
    
    
    $
    823
    
    
    $
    711
    
    
    $
    491
    
    
    $
    721Seamap
    
    
    4,338
    
    
    
    4,360
    
    
    
    887
    
    
    
    670
    
    
    
    576
    
    
    
    661Eliminations
    
    
    (89
    )
    
    
    (119
    )
    
    
    36
    
    
    
    32
    
    
    
    36
    
    
    
    32Consolidated
    
    $
    19,973
    
    
    $
    14,530
    
    
    $
    1,746
    
    
    $
    1,413
    
    
    $
    1,103
    
    
    $
    1,414
  Revenues
    
    
    Operating income (loss)
    
    
    Income before taxes2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Equipment Leasing
    
    $
    34,398
    
    
    $
    23,930
    
    
    $
    (1,373
    )
    
    $
    (3,920
    )
    
    $
    (575
    )
    
    $
    (3,623
    )Seamap
    
    
    17,421
    
    
    
    14,215
    
    
    
    4,881
    
    
    
    3,670
    
    
    
    4,467
    
    
    
    3,475Eliminations
    
    
    (191
    )
    
    
    (333
    )
    
    
    115
    
    
    
    170
    
    
    
    115
    
    
    
    170Consolidated
    
    $
    51,628
    
    
    $
    37,812
    
    
    $
    3,623
    
    
    $
    (80
    )
    
    $
    4,007
    
    
    $
    22
  11




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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;
    
    our liquidity and access to capital;
    
    the effect of seasonality on our business;
    
    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;
    
    seasonal fluctuations that can adversely affect our business;
    
    defaults by customers on amounts due us;
    
    possible impairment of our long-lived assets;
    
    inability to obtain funding or to obtain funding under acceptable terms;
    
    intellectual property claims by third parties;
    
    risks associated with our manufacturing operations; and
    
    risks associated with our foreign operations, including foreign currency exchange risk.
  12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
    For the Three Months Ended
    
    
    For the Nine Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Revenues:Equipment Leasing
    
    $
    15,724
    
    
    $
    10,289
    
    
    $
    34,398
    
    
    $
    23,930Seamap
    
    
    4,338
    
    
    
    4,360
    
    
    
    17,421
    
    
    
    14,215Inter-segment sales
    
    
    (89
    )
    
    
    (119
    )
    
    
    (191
    )
    
    
    (333
    )Total revenues
    
    
    19,973
    
    
    
    14,530
    
    
    $
    51,628
    
    
    
    37,812Cost of sales:Equipment Leasing
    
    
    12,076
    
    
    
    6,254
    
    
    
    25,691
    
    
    
    18,444Seamap
    
    
    2,043
    
    
    
    2,262
    
    
    
    8,666
    
    
    
    6,602Inter-segment costs
    
    
    (125
    )
    
    
    (151
    )
    
    
    (306
    )
    
    
    (503
    )Total cost of sales
    
    
    13,994
    
    
    
    8,365
    
    
    
    34,051
    
    
    
    24,543Gross profit
    
    
    5,979
    
    
    
    6,165
    
    
    
    17,577
    
    
    
    13,269Operating expenses:General and administrative
    
    
    3,937
    
    
    
    3,809
    
    
    
    12,286
    
    
    
    11,280Provision for doubtful accounts
    
    
    
    
    
    
    730
    
    
    
    797
    
    
    
    1,379Depreciation and amortization
    
    
    296
    
    
    
    213
    
    
    
    871
    
    
    
    690Total operating expenses
    
    
    4,233
    
    
    
    4,752
    
    
    
    13,954
    
    
    
    13,349Operating income (loss)
    
    $
    1,746
    
    
    $
    1,413
    
    
    $
    3,623
    
    
    $
    (80
    )EBITDA(1)
    
    $
    6,809
    
    
    $
    6,393
    
    
    $
    19,591
    
    
    $
    14,237Adjusted EBITDA(1)
    
    $
    6,980
    
    
    $
    6,672
    
    
    $
    20,532
    
    
    $
    15,356Reconciliation of Net income
(loss) to EBITDA and Adjusted
EBITDANet income (loss)
    
    $
    727
    
    
    $
    1,026
    
    
    $
    2,975
    
    
    $
    (64
    )Interest expense, net
    
    
    90
    
    
    
    122
    
    
    
    302
    
    
    
    303Depreciation and amortization
    
    
    5,616
    
    
    
    4,857
    
    
    
    16,586
    
    
    
    13,912Provision for income taxes
    
    
    376
    
    
    
    388
    
    
    
    1,032
    
    
    
    86Gain from bargain purchase
    
    
    
    
    
    
    
    
    
    
    (1,304
    )
    
    
    EBITDA (1)
    
    
    6,809
    
    
    
    6,393
    
    
    
    19,591
    
    
    
    14,237Stock-based compensation
    
    
    171
    
    
    
    279
    
    
    
    941
    
    
    
    1,119Adjusted EBITDA (1)
    
    $
    6,980
    
    
    $
    6,672
    
    
    $
    20,532
    
    
    $
    15,356
 
 (1)
    
    EBITDA is defined as net income (loss) before (a) interest expense, net of
interest income, (b) provision for (or benefit from) income taxes (c) depreciation,
amortization and impairment and (d) the gain from bargain purchase. Adjusted EBITDA
excludes stock-based compensation. We consider EBITDA and Adjusted EBITDA to be
important indicators for the performance of our 13




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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.    Business Outlook
   14




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15




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Results of Operations
  16




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Revenues and Cost of Sales
 Equipment Leasing
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009($ in thousands)
    
    
    ($ in thousands)Revenue:Equipment leasing
    
    $
    8,074
    
    
    $
    9,037
    
    
    $
    24,133
    
    
    $
    20,165Lease pool equipment sales
    
    
    976
    
    
    
    808
    
    
    
    1,498
    
    
    
    978New seismic equipment sales
    
    
    5,156
    
    
    
    19
    
    
    
    5,451
    
    
    
    46SAP equipment sales
    
    
    1,518
    
    
    
    425
    
    
    
    3,316
    
    
    
    2,74115,724
    
    
    
    10,289
    
    
    
    34,398
    
    
    
    23,930Cost of sales:Lease pool depreciation
    
    
    5,327
    
    
    
    4,657
    
    
    
    15,674
    
    
    
    13,266Direct costs-equipment leasing
    
    
    895
    
    
    
    748
    
    
    
    2,485
    
    
    
    2,201Cost of lease pool equipment
sales
    
    
    385
    
    
    
    473
    
    
    
    634
    
    
    
    570Cost of new seismic equipment
sales
    
    
    4,188
    
    
    
    43
    
    
    
    4,271
    
    
    
    62Cost of SAP equipment sales
    
    
    1,281
    
    
    
    333
    
    
    
    2,627
    
    
    
    2,34512,076
    
    
    
    6,254
    
    
    
    25,691
    
    
    
    18,444Gross profit (loss)
    
    $
    3,648
    
    
    $
    4,035
    
    
    $
    8,707
    
    
    $
    5,486Gross profit %
    
    
    23
    %
    
    
    39
    %
    
    
    25
    %
    
    
    23
    %
   17




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##### Table of Contents



Seamap
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009($ in thousands)
    
    
    ($ in thousands)Equipment sales
    
    $
    4,338
    
    
    $
    4,360
    
    
    $
    17,421
    
    
    $
    14,215Cost of equipment sales
    
    
    2,043
    
    
    
    2,262
    
    
    
    8,666
    
    
    
    6,602Gross profit
    
    $
    2,295
    
    
    $
    2,098
    
    
    $
    8,755
    
    
    $
    7,613Gross profit %
    
    
    53
    %
    
    
    48
    %
    
    
    50
    %
    
    
    54
    %
 18




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Operating Expenses
   Other Income (Expense)
    19




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Provision for Income Taxes
   Liquidity and Capital Resources
      20




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Actual as of OctoberDescription of
    
    
    
    
    
    31, 2010 or for theFinancial Covenant
    
    Required Amount
    
    
    period then endedRatio of debt to
shareholders equity
    
    Not more than 0.7:1.0
    
    
    0.18:1.0Ratio of current
assets to current
liabilities
    
    Not less than 1.25:1.0
    
    
    1.69:1.0Quarterly EBITDA
    
    Not less than $2.0 million
    
    

    $6.8 million
     21




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk
  Foreign Currency Risk
   Interest Rate Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  22




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##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
  23




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##### Table of Contents



SIGNATURES
  MITCHAM INDUSTRIES, INC.Date:  December 8, 2010
    /s/ Robert P. CappsRobert P. CappsExecutive Vice President-Finance and Chief Financial Officer
(Duly Authorized Officer and Chief Accounting Officer) 24




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##### Table of Contents



EXHIBIT INDEX
  Exhibit Number
    
    Document Description
    
    Report or Registration Statement
    
    SEC File or
Registration Number
    
    ExhibitReference3.1
    
    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
    
    Third Amended and
Restated Bylaws of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Current Report on Form 8-K,
filed with the SEC on August 2,
2010.
    
    000-25142
    
    
    3.1
    (i)10.1
    
    Secured
Promissory Note
dated October 15,
201031.1
    
    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