8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 10, 2008

SEITEL, INC.

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)	333-144844 (Commission File Number)	76-0025431 (IRS Employer Identification No.)
10811 S. Westview Circle Drive Building C, Suite 100 Houston, Texas 77043 (Address of Registrant's principal executive offices) (713) 881-8900 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

≅   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

≅   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

≅   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

≅   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Section 2 - Financial Information

Item 2.02.       Results of Operations and Financial Condition

           Seitel, Inc. (the "Company") hereby incorporates by reference into this Item 2.02 the press release issued by the Company on November 10, 2008 with respect to its financial results for the quarter ended September 30, 2008.  The press release is furnished as Exhibit 99.1. 

           The earnings release includes cash resales and cash EBITDA (which we have previously referred to as cash margin), which are non-GAAP financial measures, and the related reconciliations to total revenue and operating income, respectively, the most directly comparable GAAP measures.

           Management uses these non-GAAP financial measures because they provide meaningful information to assist in the evaluation and management of the Company's operations.  Volatility in the trend for cash resales over several consecutive quarters could indicate changing market conditions.  Cash EBITDA is helpful in determining the level of cash from operations available for debt service and capital expenditures (net of customer underwriting).  These non-GAAP financial measures are intended to supplement the Company's presentation of its financial results prepared in accordance with GAAP.  Such measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies.

           The information in this Form 8-K, including the exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Section 9 - Financial Statements and Exhibits      

Item 9.01.       Financial Statements and Exhibits 

           (a)       Financial Statements of Businesses Acquired.

                      None.

           (b)       Pro Forma Financial Information.

                      None.

           (c)       Exhibits.

                      99.1     Press Release dated November 10, 2008.

SIGNATURE

            Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  November 10, 2008                                                                   SEITEL, INC.

                                                                                                              By:  /s/ William J. Restrepo                        

                                                                                                              William J. Restrepo

                                                                                                              Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated November 10, 2008.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:       William Restrepo

                   713-881-8900

SEITEL ANNOUNCES THIRD QUARTER 2008 RESULTS

Cash Resales of $37.3 million 28% above last year

HOUSTON, November 10, 2008 - Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the third quarter ended September 30, 2008.  Revenue for the third quarter of $46.1 million increased $17.7 million or 63% over the third quarter of 2007, primarily driven by $14.4 million growth in total resales from our library, that reflected an $8.1 million increase in cash resales and $4.8 million higher selections from library cards.  Acquisition revenue grew by $3.1 million or 36% with most of the growth coming from Canada, reflecting our strong summer shooting program in the Montney area of British Columbia.  Solutions revenue was $0.3 million or 24% higher than in 2007.

Revenue for the nine-month period was $138.2 million as compared to $95.0 million in 2007.  The 45% growth in revenue came from $29.1 million higher total library resales and a $12.7 million or 43% increase in acquisition revenue.  Solutions revenue was $1.3 million or 33% higher than in 2007.

Cash resales for the quarter were $37.3 million, compared to $29.2 million for the third quarter of last year.  The 28% growth in cash resales reflected 33% higher core resales (US 3D and Canada 2D and 3D), with Canada and the US delivering 93% and 9% increases, respectively. Our non-core US 2D and offshore cash resales were $0.3 million below the prior year.  For the nine-month period, cash resales of $89.8 million were $11.1 million or 14% higher than in the prior year, as core resales grew by 15% while non-core resales improved by 4% on healthy 2D licensing onshore.

For the third quarter of 2008, the net loss of $17.2 million improved as compared to last year's loss of $23.2 million. Both 2007 and 2008 third quarter periods included approximately $24.0 million in costs related to purchase accounting adjustments to the value of assets and liabilities, mainly the step-up in value of the data library.  The year-on-year $6.0 million reduction in the net loss resulted from the $17.7 million increase in revenue, compensated by higher data amortization expense of $7.5 million.  In addition, the Canadian dollar weakness resulted in currency losses for the quarter as compared to currency gains in 2007, for a net unfavorable impact of $2.1 million.  For the nine-month period, the net loss of $56.0 million was significantly lower than the $78.6 million for the equivalent period of 2007.  The incremental operating income from higher revenue and reduced merger expenses was offset by lower currency gains. Last year included $19.5 million in merger expenses as compared to $0.4 million in 2008, and currency gains of $2.9 million as compared to $1.4 million in losses during 2008.

Cash EBITDA, defined as cash resales and Solutions revenue less cash operating expenses, was $30.5 million for the third quarter of 2008, as compared to $23.8 million in the same quarter of 2007. This $6.7 million or 28% improvement was driven by an $8.4 million increase in cash revenue somewhat offset by a $1.7 million increase in cash operating expenses. The higher cash operating expenses were mainly due to increases in performance incentive accruals and in higher sales commissions. 

For the nine-month period, cash EBITDA was $69.6 million as compared to $62.5 million in 2007.  A $12.4 million increase in cash revenue for the period was offset by a $5.2 million increase in cash operating expenses.  The significant year on year growth in total revenue drove increases in compensation from higher sales commissions and employee performance incentives.  In addition, cash operating expenses in the first nine months of last year included $0.9 million in one-time recoveries from legal disputes. 

"The third quarter was our third best quarter ever in terms of cash resales, by a large margin, and trailed only two of our seasonally strong fourth quarters," stated Rob Monson, president and chief executive officer. "In fact, our core cash resales for the quarter increased by 33% versus last year and were second only to the fourth quarter of 2007.  We are particularly encouraged by the robust results of our Canadian subsidiary that experienced an almost doubling of their cash resales.

"It's clear that our investment decisions of the last couple of years continue to pay off," commented Monson.  "Nonetheless, we believe that the current macroeconomic environment has affected the ability of some of our clients to finance growth.  Continued uncertainty in the capital markets and the general economy will require us to remain cautious and keep our options open in terms of capital expenditures for 2009.  We must ensure that we continue to finance our investment program from the company's cash flow generation, and that we're able to take advantage of opportunities to purchase existing data at what could be very attractive prices during the quarters to come."

The company reduced its operating losses to $7.6 million in the third quarter of 2008 as compared to $18.4 million in 2007, as a result of the higher revenue and stable SG&A.  For the nine-month period, operating losses fell to $25.5 million from $59.5 million in 2007; last year included $19.5 million in merger expenses.

Depreciation and amortization expense for the third quarter of 2008 was $43.6 million compared to $36.0 million for the same period in 2007. For the third quarter of 2008, 14% of total resales were for fully amortized data, as compared to 20% for the second quarter.  In the 2007 third quarter, 11% of resales attracted no amortization.

Selling, general and administrative expenses excluding merger expenses were $9.9 million for the third quarter of 2008 flat with the third quarter of last year.  Increases in variable cash compensation were offset by a reduction in the amortization of option expenses related to employee incentives.

Net interest expense was $10.0 million for the third quarter, compared to $10.2 million for the second quarter of this year, and to $9.9 million for the third quarter of 2007.  Interest income on investments fell sequentially in line with the lower yields on our cash investments.  For the nine-month period net interest expense was $30.0 million as compared to $31.3 million in 2007.

Cash balances at the end of the third quarter were $36.8 million.  Cash consumption during the third quarter was $4.5 million, as cash EBITDA of $30.5 million was offset by $19.9 million in interest payments, net cash capital expenditures for the quarter of $11.8 million, and working capital needs. 

Gross capital expenditures for the third quarter of 2008 were $23.2 million, as compared to $12.1 million for the prior year.  Acquisition capital expenditures increased by $6.0 million as data creation activity grew in Canada, while data purchases and trades were $5.0 million higher than last year. 

For the nine-month period, gross capital expenditures increased to $82.6 million in 2008 from $51.3 million last year.  Acquisition capital expenditures grew by $18.7 million or 44% with both Canada and the US contributing.  Data purchases and trades were $12.1 million higher than last year.  Net cash capital expenditures for the period were $32.1 million as compared to $19.9 million in 2007.

Our forecast net cash capital expenditures for the year 2008 are currently estimated to be approximately $44.0 million.  The $4.0 million reduction versus the prior quarter's annual forecast primarily reflects lower cash purchases than previously anticipated.

As of today, we have added approximately a cumulative 2,400 square miles for the year.  We remain on target to increase the size of our onshore 3D library by approximately 10% or 3,000 square miles.

CONFERENCE CALL

Seitel will hold its quarterly conference call to discuss third quarter results for 2008 on Tuesday, November 11, 2008 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time).  The dial-in number for the call is 800-291-5365, passcode Seitel.  A replay of the call will be available until November 18, 2008 by dialing 888-286-8010, passcode 44661001, and will be available following the conference call at the Investor Relations section of the company's website at http://www.seitel-inc.com.  

ABOUT SEITEL

Seitel is a leading provider of seismic data to the oil and gas industry in North America. Seitel's data products and services are critical for the exploration for, and development and management of, oil and gas reserves by oil and gas companies. Seitel has ownership in an extensive library of proprietary onshore and offshore seismic data that it has accumulated since 1982 and that it licenses to a wide range of oil and gas companies. Seitel believes that its library of onshore seismic data is one of the largest available for licensing in the United States and Canada. Seitel's seismic data library includes both onshore and offshore 3D and 2D data. Seitel has ownership in over 41,000 square miles of 3D and approximately 1.1 million linear miles of 2D seismic data concentrated in the major active North American oil and gas producing regions. Seitel serves a market which includes over 1,600 companies in the oil and gas industry.

The Press Release contains "forward-looking statements" within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," "projects," or "anticipates" or similar expressions that concern the strategy, plans or intentions of the Company.  These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, actual results may differ materially from management expectations reflected in our forward-looking statements. These risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K, a copy of which may be obtained from the Company without charge.  Management undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The press release also includes certain non-GAAP financial measurers as defined under the SEC rules.  Non-GAAP financial measurers include cash resales, for which the most comparable GAAP measure is total revenue, and also include cash EBITDA or cash margin, for which the most comparable GAAP measure is operating income.

(Tables follow)

SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

		(Unaudited)
		September 30,			December 31,
		2008			2007
ASSETS
Cash and cash equivalents	$	36,828		$	43,333
Restricted cash		112			110
Receivables
Trade, net		51,386			51,915
Notes and other, net		427			2,190
Net seismic data library		297,469			349,039
Net property and equipment		9,478			10,996
Investment in marketable securities		1,798			4,224
Prepaid expenses, deferred charges and other		19,710			22,263
Intangible assets, net		45,647			51,785
Goodwill		200,458			207,246
TOTAL ASSETS	$	663,313		$	743,101
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Accounts payable and accrued liabilities	$	39,797		$	49,325
Income taxes payable		992			948
Debt
Senior Notes		402,269			402,333
Notes payable		268			300
Obligations under capital leases		3,494			3,848
Deferred revenue		50,889			48,151
Deferred income taxes		10,787			17,238
TOTAL LIABILITIES		508,496			522,143
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, par value $.001 per share; 100 shares authorized,
issued and outstanding at September 30, 2008 and
December 31, 2007		-			-
Additional paid-in capital		269,777			264,805
Retained deficit		(133,140	)		(77,113	)
Accumulated other comprehensive income		18,180			33,266
TOTAL STOCKHOLDER'S EQUITY		154,817			220,958
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	663,313		$	743,101

SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands)

		Three Months Ended
		September 30,
		2008			2007
REVENUE	$	46,091		$	28,356
EXPENSES:
Depreciation and amortization		43,592			36,005
Impairment of intangible asset		225			-
Cost of sales		72			72
Selling, general and administrative		9,850			9,902
Merger		-			807
		53,739			46,786
LOSS FROM OPERATIONS		(7,648	)		(18,430	)
Interest expense, net		(9,967	)		(9,895	)
Foreign currency exchange gains (losses)		(729	)		1,360
Other income		-			39
Loss before income taxes		(18,344	)		(26,926	)
Benefit for income taxes		(1,152	)		(3,701	)
NET LOSS	$	(17,192	)	$	(23,225	)

SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands)

		SUCCESSOR						PREDECESSOR
		PERIOD						PERIOD
		Nine Months Ended			February 14, 2007 -			January 1, 2007 -
		September 30, 2008			September 30, 2007			February 13, 2007
REVENUE	$	138,192		$	76,025		$	19,010
EXPENSES:
Depreciation and amortization		132,706			96,008			11,485
Impairment of intangible asset		225			-			-
Cost of sales		351			113			8
Selling, general and administrative		30,098			23,825			3,577
Merger		357			2,087			17,457
		163,737			122,033			32,527
LOSS FROM OPERATIONS		(25,545	)		(46,008	)		(13,517	)
Interest expense, net		(30,041	)		(29,018	)		(2,284	)
Foreign currency exchange gains (losses)		(1,442	)		3,017			(102	)
Other income		39			39			12
Loss before income taxes		(56,989	)		(71,970	)		(15,891	)
Provision (benefit) for income taxes		(962	)		(9,668	)		452
NET LOSS	$	(56,027	)	$	(62,302	)	$	(16,343	)

The following table summarizes the components of our revenue for the periods indicated (in thousands):

		SUCCESSOR												SUCCESSOR			PREDECESSOR
		PERIOD									COMBINED (1)			PERIOD			PERIOD
		Three Months						Nine Months			Nine Months			February 14,			January 1,
		Ended						Ended			Ended			2007 -			2007 -
		September 30,						September 30,			September 30,			September 30,			September 13,
		2008			2007			2008			2007			2007			2007
Acquisition revenue:
Cash underwriting	$	7,545		$	7,865		$	32,872		$	29,121		$	23,034		$	6,087
Underwriting from
non-monetary
exchanges		4,053			646			9,675			684			673			11
Total acquisition
revenue		11,598			8,511			42,547			29,805			23,707			6,098
Licensing revenue:
Cash resales		37,297			29,162			89,802			78,668			72,683			5,985
Non-monetary
exchanges		2,202			135			6,659			2,866			2,873			(7	)
Revenue deferred		(16,612	)		(15,984	)		(41,675	)		(39,938	)		(37,302	)		(2,636	)
Recognition of revenue
previously deferred		10,114			5,327			35,723			19,786			10,840			8,946
Total resale revenue		33,001			18,640			90,509			61,382			49,094			12,288
Total seismic revenue		44,599			27,151			133,056			91,187			72,801			18,386
Solutions and other		1,492			1,205			5,136			3,848			3,224			624
Total revenue	$	46,091		$	28,356		$	138,192		$	95,035		$	76,025		$	19,010

(1)   Our combined results for the nine months ended September 30, 2007 represent the addition of the Predecessor Period from January 1, 2007 to February 13, 2007 and the Successor Period from February 14, 2007 to September 30, 2007.  This combina/tion does not comply with U.S. GAAP or with the rules for pro forma presentation, but is presented because we believe it provides a meaningful comparison of our results.

Cash EBITDA (also referred to as cash margin) includes cash resales plus all other cash revenues other than from data acquisitions, less cash selling, general and administrative expenses (excluding Merger expenses and merger and acquisition transaction costs) and cost of goods sold.  We believe this measure is helpful in determining the level of cash from operations we have available for debt service and funding of capital expenditures (net of the portion funded or underwritten by our customers).  The following is a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, operating loss (in thousands):

		SUCCESSOR												SUCCESSOR			PREDECESSOR
		PERIOD									COMBINED (1)			PERIOD			PERIOD
		Three Months						Nine Months			Nine Months			February 14,			January 1,
		Ended						Ended			Ended			2007 -			2007 -
		September 30,						September 30,			September 30,			September 30,			February 13,
		2008			2007			2008			2007			2007			2007
Cash EBITDA	$	30,529		$	23,816		$	69,632		$	62,466		$	59,036		$	3,430
Add (subtract) other
revenue components
not included in
cash EBITDA:
Acquisition revenue		11,598			8,511			42,547			29,805			23,707			6,098
Non-monetary
exchanges		2,202			135			6,659			2,866			2,873			(7	)
Revenue deferred		(16,612	)		(15,984	)		(41,675	)		(39,938	)		(37,302	)		(2,636	)
Recognition of
revenue previously
deferred		10,114			5,327			35,723			19,786			10,840			8,946
Recognition of
Solutions revenue
previously deferred		-			-			44			6			-			6
Less:
Depreciation and
amortization		(43,592	)		(36,005	)		(132,706	)		(107,493	)		(96,008	)		(11,485	)
Impairment of
intangible asset		(225	)		-			(225	)		-			-			-
Merger expenses		-			(807	)		(357	)		(19,544	)		(2,087	)		(17,457	)
Merger and acquisition
transaction costs		-			(948	)		(5	)		(948	)		(948	)		-
Non-cash operating
expenses		(1,662	)		(2,475	)		(5,182	)		(6,531	)		(6,119	)		(412	)
Operating loss,
as reported	$	(7,648	)	$	(18,430	)	$	(25,545	)	$	(59,525	)	$	(46,008	)	$	(13,517	)

(1)   Our combined results for the nine months ended September 30, 2007 represent the addition of the Predecessor Period from January 1, 2007 to February 13, 2007 and the Successor Period from February 14, 2007 to September 30, 2007.  This combination does not comply with U.S. GAAP or with the rules for pro forma presentation, but is presented because we believe it provides a meaningful comparison of our results.

The following table summarizes the cash and non-cash components of our selling, general and administrative ("SG&A") expenses for the periods indicated (in thousands):

		SUCCESSOR								SUCCESSOR		PREDECESSOR
		PERIOD						COMBINED (1)		PERIOD		PERIOD
		Three Months				Nine Months		Nine Months		February 14,		January 1,
		Ended				Ended		Ended		2007 -		2007 -
		September 30,				September 30,		September 30,		September 30,		February 13,
		2008		2007		2008		2007		2007		2007
Cash SG&A expenses	$	8,188	$	7,427	$	24,916	$	20,871	$	17,706	$	3,165
Non-cash compensation
expense		1,594		2,407		4,972		6,366		5,954		412
Non-cash rent expense		68		68		210		165		165		-
Total	$	9,850	$	9,902	$	30,098	$	27,402	$	23,825	$	3,577

(1)   Our combined results for the nine months ended September 30, 2007 represent the addition of the Predecessor Period from January 1, 2007 to February 13, 2007 and the Successor Period from February 14, 2007 to September 30, 2007.  This combination does not comply with U.S. GAAP or with the rules for pro forma presentation, but is presented because we believe it provides a meaningful comparison of our results.

The following table summarizes our capital expenditures for the periods indicated (in thousands):

		SUCCESSOR												SUCCESSOR			PREDECESSOR
		PERIOD									COMBINED (1)			PERIOD			PERIOD
		Three Months						Nine Months			Nine Months			February 14,			January 1,
		Ended						Ended			Ended			2007 -			2007 -
		September 30,						September 30,			September 30,			September 30,			February 13,
		2008			2007			2008			2007			2007			2007
New data acquisition	$	17,338		$	11,351		$	61,218		$	42,493		$	34,527		$	7,966
Cash purchases of
seismic data and
other		1,638			396			2,879			6,102			5,576			526
Non-monetary
exchanges		3,825			73			17,566			2,228			2,235			(7	)
Other property and
equipment		407			275			910			469			409			60
Total capital
expenditures		23,208			12,095			82,573			51,292			42,747			8,545
Less: Non-monetary
exchanges		(3,825	)		(73	)		(17,566	)		(2,228	)		(2,235	)		7
Cash underwriting		(7,545	)		(7,865	)		(32,872	)		(29,121	)		(23,034	)		(6,087	)
Net cash capital
expenditures	$	11,838		$	4,157		$	32,135		$	19,943		$	17,478		$	2,465

(1)   Our combined results for the nine months ended September 30, 2007 represent the addition of the Predecessor Period from January 1, 2007 through February 13, 2007 and the Successor Period from February 14, 2007 to September 30, 2007.  This combination does not comply with GAAP or with the rules for pro forma presentation, but is presented because we believe it provides a meaningful comparison of our results.

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