##### 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, 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
    
    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
    
    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 Statements
    
    
    1Condensed Consolidated Balance Sheets as of July 31, 2010 and January 31, 2010
    
    
    1Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31,
2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. (Removed and Reserved)
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    23EX-10.2EX-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)
 July 31, 2010
    
    
    January 31, 2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,766
    
    
    $
    6,130Restricted cash
    
    
    670
    
    
    
    605Accounts receivable, net
    
    
    13,432
    
    
    
    15,444Current portion of contracts receivable
    
    
    1,162
    
    
    
    2,073Inventories, net
    
    
    3,985
    
    
    
    5,199Cost and estimated profit in excess of billings on uncompleted contract
    
    
    448
    
    
    
    398Income taxes receivable
    
    
    1,222
    
    
    
    1,438Deferred tax asset
    
    
    1,816
    
    
    
    1,400Prepaid expenses and other current assets
    
    
    2,218
    
    
    
    1,986Total current assets
    
    
    34,719
    
    
    
    34,673Seismic equipment lease pool and property and equipment, net
    
    
    71,517
    
    
    
    66,482Intangible assets, net
    
    
    5,586
    
    
    
    2,678Goodwill
    
    
    4,320
    
    
    
    4,320Prepaid foreign income tax
    
    
    2,891
    
    
    
    2,574Deferred tax asset
    
    
    21
    
    
    
    88Long-term portion of contracts receivable, net
    
    
    4,081
    
    
    
    4,533Other assets
    
    
    52
    
    
    
    49Total assets
    
    $
    123,187
    
    
    $
    115,397LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    11,559
    
    
    $
    6,489Current maturities  long-term debt
    
    
    729
    
    
    
    93Foreign income taxes payable
    
    
    1,916
    
    
    
    1,345Deferred revenue
    
    
    1,018
    
    
    
    854Accrued expenses and other current liabilities
    
    
    4,579
    
    
    
    2,668Total current liabilities
    
    
    19,801
    
    
    
    11,449Non-current income taxes payable
    
    
    3,539
    
    
    
    3,258Long-term debt, net of current maturities
    
    
    10,300
    
    
    
    15,735Total liabilities
    
    
    33,640
    
    
    
    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; 10,824 and
10,725 shares issued at July 31, 2010 and January 31, 2010, respectively
    
    
    108
    
    
    
    107Additional paid-in capital
    
    
    77,091
    
    
    
    75,746Treasury stock, at cost (925 shares at July 31, 2010 and January 31, 2010)
    
    
    (4,843
    )
    
    
    (4,843
    )Retained earnings
    
    
    12,495
    
    
    
    10,247Accumulated other comprehensive income
    
    
    4,696
    
    
    
    3,698Total shareholders equity
    
    
    89,547
    
    
    
    84,955Total liabilities and shareholders equity
    
    $
    123,187
    
    
    $
    115,397
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 Six MonthsEnded July 31,
    
    
    Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Equipment leasing
    
    $
    6,493
    
    
    $
    4,802
    
    
    $
    16,059
    
    
    $
    11,128Lease pool equipment sales
    
    
    159
    
    
    
    101
    
    
    
    522
    
    
    
    170Seamap equipment sales
    
    
    7,200
    
    
    
    7,043
    
    
    
    12,981
    
    
    
    9,641Other equipment sales
    
    
    1,303
    
    
    
    731
    
    
    
    2,093
    
    
    
    2,343Total revenues
    
    
    15,155
    
    
    
    12,677
    
    
    
    31,655
    
    
    
    23,282Cost of sales:Direct costs  equipment leasing
    
    
    846
    
    
    
    925
    
    
    
    1,590
    
    
    
    1,453Direct costs  lease pool depreciation
    
    
    5,355
    
    
    
    4,416
    
    
    
    10,267
    
    
    
    8,517Cost of lease pool equipment sales
    
    
    100
    
    
    
    87
    
    
    
    249
    
    
    
    97Cost of Seamap and other equipment sales
    
    
    4,199
    
    
    
    3,917
    
    
    
    7,951
    
    
    
    6,111Total cost of sales
    
    
    10,500
    
    
    
    9,345
    
    
    
    20,057
    
    
    
    16,178Gross profit
    
    
    4,655
    
    
    
    3,332
    
    
    
    11,598
    
    
    
    7,104Operating expenses:General and administrative
    
    
    4,162
    
    
    
    3,969
    
    
    
    8,349
    
    
    
    7,471Provision for doubtful accounts
    
    
    797
    
    
    
    649
    
    
    
    797
    
    
    
    649Depreciation and amortization
    
    
    296
    
    
    
    223
    
    
    
    575
    
    
    
    477Total operating expenses
    
    
    5,255
    
    
    
    4,841
    
    
    
    9,721
    
    
    
    8,597Operating (loss) income
    
    
    (600
    )
    
    
    (1,509
    )
    
    
    1,877
    
    
    
    (1,493
    )Other income (expenses):Gain from bargain purchase in business combination
    
    
    
    
    
    
    
    
    
    
    1,304
    
    
    
    Interest, net
    
    
    (118
    )
    
    
    (92
    )
    
    
    (212
    )
    
    
    (181
    )Other, net
    
    
    437
    
    
    
    163
    
    
    
    (65
    )
    
    
    282Total other income
    
    
    319
    
    
    
    71
    
    
    
    1,027
    
    
    
    101(Loss) Income before income taxes
    
    
    (281
    )
    
    
    (1,438
    )
    
    
    2,904
    
    
    
    (1,392
    )Benefit (provision) for income taxes
    
    
    135
    
    
    
    428
    
    
    
    (656
    )
    
    
    302Net (loss) income
    
    $
    (146
    )
    
    $
    (1,010
    )
    
    $
    2,248
    
    
    $
    (1,090
    )Net (loss) income per common share:Basic
    
    $
    (0.01
    )
    
    $
    (0.10
    )
    
    $
    0.23
    
    
    $
    (0.11
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.10
    )
    
    $
    0.22
    
    
    $
    (0.11
    )Shares used in computing net (loss) income per common
share:Basic
    
    
    9,838
    
    
    
    9,797
    
    
    
    9,824
    
    
    
    9,790Diluted
    
    
    9,838
    
    
    
    9,797
    
    
    
    10,081
    
    
    
    9,790
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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MITCHAM INDUSTRIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)  (unaudited)
 For the Six Months EndedJuly 31,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    2,248
    
    
    $
    (1,090
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    10,970
    
    
    
    9,055Stock-based compensation
    
    
    770
    
    
    
    840Gain from bargain purchase in business combination
    
    
    (1,304
    )
    
    
    Provision for doubtful accounts
    
    
    797
    
    
    
    649Provision for inventory obsolescence
    
    
    104
    
    
    
    (75
    )Gross profit from sale of lease pool equipment
    
    
    (273
    )
    
    
    (73
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    (3
    )
    
    
    (7
    )Deferred tax benefit
    
    
    (1,258
    )
    
    
    (1,210
    )Changes in non-current income taxes payable
    
    
    281
    
    
    
    (294
    )Changes in working capital items, net of effects from business
combination:Accounts receivable
    
    
    1,225
    
    
    
    501Contracts receivable
    
    
    1,363
    
    
    
    267Inventories
    
    
    1,353
    
    
    
    (1,677
    )Prepaid expenses and other current assets
    
    
    (196
    )
    
    
    405Income taxes receivable and payable
    
    
    778
    
    
    
    2,213Costs incurred and estimated profit in excess of billings on
uncompleted contract
    
    
    (38
    )
    
    
    973Prepaid foreign income tax
    
    
    (228
    )
    
    
    Accounts payable, accrued expenses, other current liabilities
and deferred revenue
    
    
    1,554
    
    
    
    240Net cash provided by operating activities
    
    
    18,143
    
    
    
    10,717Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (6,957
    )
    
    
    (11,597
    )Purchases of property and equipment
    
    
    (80
    )
    
    
    (283
    )Sale of used lease pool equipment
    
    
    522
    
    
    
    170Acquisition of AES, net of cash acquired
    
    
    (2,100
    )
    
    
    Net cash used in investing activities
    
    
    (8,615
    )
    
    
    (11,710
    )Cash flows from financing activities:Net (payments on) proceeds from line of credit
    
    
    (6,050
    )
    
    
    1,500Payments on borrowings
    
    
    (120
    )
    
    
    (Purchases of) proceeds from short-term investments
    
    
    (52
    )
    
    
    797Proceeds from issuance of common stock upon exercise of stock
options, net of stock surrendered to pay taxes
    
    
    244
    
    
    
    (6
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    3
    
    
    
    7Net cash (used in) provided by financing activities
    
    
    (5,975
    )
    
    
    2,298Effect of changes in foreign exchange rates on cash and cash equivalents
    
    
    83
    
    
    
    (180
    )Net change in cash and cash equivalents
    
    
    3,636
    
    
    
    1,125Cash and cash equivalents, beginning of period
    
    
    6,130
    
    
    
    5,063Cash and cash equivalents, end of period
    
    $
    9,766
    
    
    $
    6,188Supplemental cash flow information:Interest paid
    
    $
    314
    
    
    $
    316Income taxes paid
    
    $
    1,220
    
    
    $
    649Purchases of seismic equipment held for lease in accounts payable
at end of period
    
    $
    10,010
    
    
    $
    8,196
 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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Working capital
    
    $
    327Seismic equipment lease pool
    
    
    2,990Deferred taxes
    
    
    (1,086
    )Intangible assets
    
    
    3,154
  Pro Forma Results of Operations
  Three Months Ended July 31,
    
    Six Months Ended July 31,(In thousands except per share amounts)
    
    2010
    
    2009
    
    2010
    
    2009Revenues
    
    $
    15,155
    
    
    $
    13,901
    
    
    $
    31,816
    
    
    $
    24,934Net income (loss)
    
    $
    (146
    )
    
    $
    (833
    )
    
    $
    2,155
    
    
    $
    (949
    )Earnings per share:Basic
    
    $
    (0.01
    )
    
    $
    (0.09
    )
    
    $
    0.22
    
    
    $
    (0.10
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.09
    )
    
    $
    0.21
    
    
    $
    (0.10
    )
 5. Restricted Cash
  5




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6. Balance Sheet
 July 31,
    
    
    January 31,2010
    
    
    2010(in thousands)Accounts receivable:Accounts receivable
    
    $
    16,378
    
    
    $
    17,864Allowance for doubtful accounts
    
    
    (2,946
    )
    
    
    (2,420
    )Total accounts receivable, net
    
    $
    13,432
    
    
    $
    15,444
 Contracts receivable:Contracts receivable
    
    $
    6,730
    
    
    $
    8,093Valuation allowance
    
    
    (1,487
    )
    
    
    (1,487
    )Less current portion of contracts receivable
    
    
    (1,162
    )
    
    
    (2,073
    )Long-term portion of contracts receivable
    
    $
    4,081
    
    
    $
    4,533
  July 31,
    
    
    January 31,2010
    
    
    2010(in thousands)Inventories:Raw materials
    
    $
    2,253
    
    
    $
    2,695Finished goods
    
    
    1,787
    
    
    
    2,171Work in progress
    
    
    660
    
    
    
    1,0164,700
    
    
    
    5,882Less allowance for obsolescence
    
    
    (715
    )
    
    
    (683
    )Total inventories, net
    
    $
    3,985
    
    
    $
    5,199
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July 31,
    
    
    January 31,2010
    
    
    2010(in thousands)Seismic equipment lease pool and property and equipment:Seismic equipment lease pool
    
    $
    166,874
    
    
    $
    151,921Land and buildings
    
    
    366
    
    
    
    366Furniture and fixtures
    
    
    6,445
    
    
    
    6,305Autos and trucks
    
    
    551
    
    
    
    526174,236
    
    
    
    159,118Accumulated depreciation and amortization
    
    
    (102,719
    )
    
    
    (92,636
    )Total seismic equipment lease pool and property and equipment, net
    
    $
    71,517
    
    
    $
    66,482
 7. Goodwill and Other Intangible Assets
 Weighted
    
    
    July 31, 2010
    
    
    January 31, 2010Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife at
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying7/31/10
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)Goodwill
    
    
    
    
    
    $
    4,320
    
    
    
    
    
    
    
    
    
    
    $
    4,320Proprietary rights
    
    
    9.9
    
    
    $
    3,487
    
    
    $
    (964
    )
    
    $
    2,523
    
    
    $
    3,516
    
    
    $
    (838
    )
    
    $
    2,678Customer relationships
    
    
    7.6
    
    
    
    2,335
    
    
    
    (121
    )
    
    
    2,214
    
    
    
    
    
    
    
    
    
    
    
    Patents
    
    
    7.6
    
    
    
    703
    
    
    
    (36
    )
    
    
    667
    
    
    
    
    
    
    
    
    
    
    
    Trade name
    
    
    7.6
    
    
    
    192
    
    
    
    (10
    )
    
    
    182
    
    
    
    
    
    
    
    
    
    
    
    Amortizable intangible assets
    
    
    
    $
    6,717
    
    
    $
    (1,131
    )
    
    $
    5,586
    
    
    $
    3,516
    
    
    $
    (838
    )
    
    $
    2,678
   For fiscal years ending January 31 (in thousands):2011
    
    $
    3292012
    
    
    6552013
    
    
    6552014
    
    
    6552015
    
    
    6552016 and thereafter
    
    
    2,637Total
    
    $
    5,586
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8. Long-Term Debt and Notes Payable
  July 31,
    
    
    January 31,2010
    
    
    2010Revolving line of credit
    
    $
    9,300
    
    
    $
    15,350MCL notes
    
    
    1,458
    
    
    
    SAP equipment notes
    
    
    271
    
    
    
    47811,029
    
    
    
    15,828Less current portion
    
    
    (729
    )
    
    
    (93
    )Long-term debt
    
    $
    10,300
    
    
    $
    15,735
     9. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Net income (loss)
    
    $
    (146
    )
    
    $
    (1,010
    )
    
    $
    2,248
    
    
    $
    (1,090
    )Gain (loss) from foreign
currency translation
adjustment
    
    
    (884
    )
    
    
    3,304
    
    
    
    998
    
    
    
    4,799Comprehensive income (loss)
    
    $
    (1,030
    )
    
    $
    2,294
    
    
    $
    3,246
    
    
    $
    3,709
  8




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10. Income Taxes
 Income Taxes
     11. Earnings (Loss) per Share
  9




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Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Basic weighted average common shares outstanding
    
    
    9,838
    
    
    
    9,797
    
    
    
    9,824
    
    
    
    9,790Stock options
    
    
    239
    
    
    
    121
    
    
    
    256
    
    
    
    103Unvested restricted stock
    
    
    3
    
    
    
    8
    
    
    
    1
    
    
    
    10Phantom stock
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    7Total weighted average common share equivalents
    
    
    242
    
    
    
    131
    
    
    
    257
    
    
    
    120Diluted weighted average common shares outstanding
    
    
    10,080
    
    
    
    9,928
    
    
    
    10,081
    
    
    
    9,910
  12. Stock-Based Compensation
  13. Segment Reporting
    As of July 31,
    
    
    As of January 31,2010
    
    
    2010Total assets
    
    
    Total assets(in thousands)Equipment Leasing
    
    $
    103,490
    
    
    $
    95,671Seamap
    
    
    20,011
    
    
    
    20,118Eliminations
    
    
    (314
    )
    
    
    (392
    )Consolidated
    
    $
    123,187
    
    
    $
    115,397
 10




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Revenues
    
    
    Operating loss
    
    
    Loss before taxes2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Equipment Leasing
    
    $
    7,955
    
    
    $
    5,634
    
    
    $
    (3,234
    )
    
    $
    (4,178
    )
    
    $
    (3,000
    )
    
    $
    (3,941
    )Seamap
    
    
    7,253
    
    
    
    7,172
    
    
    
    2,595
    
    
    
    2,629
    
    
    
    2,680
    
    
    
    2,463Eliminations
    
    
    (53
    )
    
    
    (129
    )
    
    
    39
    
    
    
    40
    
    
    
    39
    
    
    
    40Consolidated
    
    
    15,155
    
    
    $
    12,677
    
    
    $
    (600
    )
    
    $
    (1,509
    )
    
    $
    (281
    )
    
    $
    (1,438
    )
  Revenues
    
    
    Operating income (loss)
    
    
    Income (loss) before taxes2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Equipment Leasing
    
    $
    18,674
    
    
    $
    13,641
    
    
    $
    (2,196
    )
    
    $
    (4,631
    )
    
    $
    (1,066
    )
    
    $
    (4,344
    )Seamap
    
    
    13,083
    
    
    
    9,855
    
    
    
    3,994
    
    
    
    3,000
    
    
    
    3,891
    
    
    
    2,814Eliminations
    
    
    (102
    )
    
    
    (214
    )
    
    
    79
    
    
    
    138
    
    
    
    79
    
    
    
    138Consolidated
    
    $
    31,655
    
    
    $
    23,282
    
    
    $
    1,877
    
    
    $
    (1,493
    )
    
    $
    2,904
    
    
    $
    (1,392
    )
  11




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##### Table of Contents



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;
    
    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



Overview
    For the Three Months Ended
    
    
    For the Six Months EndedJuly 31,

    
    
    July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Revenues:Equipment Leasing
    
    $
    7,955
    
    
    $
    5,634
    
    
    $
    18,674
    
    
    $
    13,641Seamap
    
    
    7,253
    
    
    
    7,172
    
    
    
    13,083
    
    
    
    9,855Inter-segment sales
    
    
    (53
    )
    
    
    (129
    )
    
    
    (102
    )
    
    
    (214
    )Total revenues
    
    
    15,155
    
    
    
    12,677
    
    
    
    31,655
    
    
    
    23,282Cost of sales:Equipment Leasing
    
    
    7,181
    
    
    
    6,283
    
    
    
    13,615
    
    
    
    12,190Seamap
    
    
    3,411
    
    
    
    3,231
    
    
    
    6,623
    
    
    
    4,340Inter-segment costs
    
    
    (92
    )
    
    
    (169
    )
    
    
    (181
    )
    
    
    (352
    )Total cost of sales
    
    
    10,500
    
    
    
    9,345
    
    
    
    20,057
    
    
    
    16,178Gross profit
    
    
    4,655
    
    
    
    3,332
    
    
    
    11,598
    
    
    
    7,104Operating expenses:General and administrative
    
    
    4,162
    
    
    
    3,969
    
    
    
    8,349
    
    
    
    7,471Provision for doubtful accounts
    
    
    797
    
    
    
    649
    
    
    
    797
    
    
    
    649Depreciation and amortization
    
    
    296
    
    
    
    223
    
    
    
    575
    
    
    
    477Total operating expenses
    
    
    5,255
    
    
    
    4,841
    
    
    
    9,721
    
    
    
    8,597Operating (loss) income
    
    $
    (600
    )
    
    $
    (1,509
    )
    
    $
    1,877
    
    
    $
    (1,493
    )EBITDA(1)
    
    $
    5,516
    
    
    $
    3,324
    
    
    $
    12,782
    
    
    $
    7,844Adjusted EBITDA(1)
    
    $
    6,013
    
    
    $
    3,748
    
    
    $
    13,552
    
    
    $
    8,684Reconciliation of Net (loss) income
to EBITDA and Adjusted EBITDANet (loss) income
    
    $
    (146
    )
    
    $
    (1,010
    )
    
    $
    2,248
    
    
    $
    (1,090
    )Interest expense, net
    
    
    118
    
    
    
    92
    
    
    
    212
    
    
    
    181Depreciation and amortization
    
    
    5,679
    
    
    
    4,670
    
    
    
    10,970
    
    
    
    9,055(Benefit) provision for income taxes
    
    
    (135
    )
    
    
    (428
    )
    
    
    656
    
    
    
    (302
    )Gain from bargain purchase
    
    
    
    
    
    
    
    
    
    
    (1,304
    )
    
    
    EBITDA (1)
    
    
    5,516
    
    
    
    3,324
    
    
    
    12,782
    
    
    
    7,844Stock-based compensation
    
    
    497
    
    
    
    424
    
    
    
    770
    
    
    
    840Adjusted EBITDA (1)
    
    $
    6,013
    
    
    $
    3,748
    
    
    $
    13,552
    
    
    $
    8,684
 
 (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 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. 13




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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
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009($ in thousands)
    
    
    ($ in thousands)Revenue:Equipment leasing
    
    $
    6,493
    
    
    $
    4,802
    
    
    $
    16,059
    
    
    $
    11,128Lease pool equipment sales
    
    
    159
    
    
    
    101
    
    
    
    522
    
    
    
    170New seismic equipment sales
    
    
    234
    
    
    
    17
    
    
    
    295
    
    
    
    27SAP equipment sales
    
    
    1,069
    
    
    
    714
    
    
    
    1,798
    
    
    
    2,3167,955
    
    
    
    5,634
    
    
    
    18,674
    
    
    
    13,641Cost of sales:Lease pool depreciation
    
    
    5,395
    
    
    
    4,463
    
    
    
    10,347
    
    
    
    8,609Direct costs-equipment leasing
    
    
    846
    
    
    
    925
    
    
    
    1,590
    
    
    
    1,453Cost of lease pool equipment sales
    
    
    100
    
    
    
    87
    
    
    
    249
    
    
    
    97Cost of new seismic equipment sales
    
    
    72
    
    
    
    14
    
    
    
    83
    
    
    
    19Cost of SAP equipment sales
    
    
    768
    
    
    
    794
    
    
    
    1,346
    
    
    
    2,0127,181
    
    
    
    6,283
    
    
    
    13,615
    
    
    
    12,190Gross profit (loss)
    
    $
    774
    
    
    $
    (649
    )
    
    $
    5,059
    
    
    $
    1,451Gross profit %
    
    
    10
    %
    
    
    (12
    )%
    
    
    27
    %
    
    
    11
    %
      17




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Seamap
  Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009($ in thousands)
    
    
    ($ in thousands)Equipment sales
    
    $
    7,253
    
    
    $
    7,172
    
    
    $
    13,083
    
    
    $
    9,855Cost of equipment sales
    
    
    3,411
    
    
    
    3,231
    
    
    
    6,623
    
    
    
    4,340Gross profit
    
    $
    3,842
    
    
    $
    3,941
    
    
    $
    6,460
    
    
    $
    5,515Gross profit %
    
    
    53
    %
    
    
    55
    %
    
    
    49
    %
    
    
    56
    %
   Operating Expenses
   Other Income (Expense)
  18




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Provision for Income Taxes
   Liquidity and Capital Resources
    19




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Actual as of July 31, 2010Description of Financial
    
    
    
    or for the period thenCovenant
    
    Required Amount
    
    endedRatio of debt to shareholders equity
    
    Not more than 0.7:1.0
    
    0.12:1.0Ratio of current assets to current liabilities
    
    Not less than 1.25:1.0
    
    1.75:1.0Quarterly EBITDA
    
    Not less than $2.0 million
    
    $5.5 million
    20




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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
  21




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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
  22




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SIGNATURES
  MITCHAM INDUSTRIES, INC.Date:  September 8, 2010
    /s/ Robert P. CappsRobert P. CappsExecutive Vice President-Finance and Chief Financial Officer
(Duly Authorized Officer and Chief Accounting Officer) 23




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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
    
    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
    
    Second Amendment to Loan Agreement dated July 27, 2010 by and between Mitcham Industries, Inc. and First Victoria National Bank
    
    Incorporated by reference to Mitcham Industries, Inc.s Current Report on Form 8-K, filed with the SEC on August 2, 2010.
    
    000-25142
    
    
    10.110.2
    
    Summary of non-employee director compensation (as of July 27, 2010)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