EX-99.1 2 d302270dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO    NEWS RELEASE

ION Reports Solid Fourth Quarter and Full Year 2011 Results

Fourth Quarter EPS of $0.15, excluding special items

Full Year EPS of $0.22, excluding special items

HOUSTON, TX – February 15, 2012 – ION Geophysical Corporation (NYSE: IO) today reported fourth quarter 2011 revenues of $159.9 million, compared to $158.6 million in the fourth quarter of 2010. Excluding special items as noted in the attached tables, ION reported fourth quarter 2011 net income of $23.2 million, or $0.15 per diluted share, compared to net income of $21.2 million, or $0.14 per diluted share, in the fourth quarter of 2010. Including special items, fourth quarter 2011 net income was $12.0 million, or $0.08 per diluted share, compared to net income of $20.0 million, or $0.13 per diluted share, in 2010.

For full year 2011, ION reported revenues of $454.6 million, compared to $444.3 million in 2010. Total revenues excluding Legacy Land Systems (INOVA) grew 6% during 2011. ION reported 2011 net income of $34.6 million, or $0.22 per diluted share, compared to 2010 net income of $22.8 million, or $0.16 per diluted share, both excluding special items. Actual reported net income in 2011 was $23.4 million, or $0.15 per diluted share, compared to a net loss of ($38.8) million, or ($0.27) per share, in 2010.

Three pre-tax adjustments totaling $0.07 per diluted share affected fourth quarter 2011 net income. The first resulted from a $7.7 million charge for write-down of excess inventory by INOVA Geophysical. This charge reflects an adjustment to inventory values for older products, given INOVA’s launch of Hawk™ and a new version of FireFly®. The second is a $2.9 million restructuring as ION moved its geophone manufacturing operations from the Netherlands to lower-cost centers in Asia. The last is a $1.3 million impairment of one of ION’s investments.

Brian Hanson, ION’s Chief Executive Officer, commented, “We finished with strong results, as expected. Our marine group continues to deliver excellent results, driven by the ongoing transition of the towed streamer market to more complex surveys, which promotes sales of our leading Digi positioning equipment product line and our latest software platform, Orca®. As a major milestone, we installed our Orca software platform on our 51st vessel, further expanding our market share to over 40%. We are also pleased that we completed the BGP 12-streamer deal, as expected, in the fourth quarter with their new marine vessel, Prospector, successfully completing its first commercial job.

“As previously reported, our data processing business experienced a revenue and earnings decline in 2011, which was the direct impact of the Macondo oil spill. This was the first decline in our DP business after several years of year-over-year growth and represented an approximate 12 cent negative pre-tax impact from the prior year. The good news is we have seen an extremely strong build up in our backlog, including the fourth quarter award of the single largest data processing contract in our history, which we believe indicates a healing of the Gulf of Mexico, but also the significant increase in our global data processing footprint over the last year.


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“One important highlight for the year is the continuing expansion of our GeoVentures™ group portfolio, which had another strong growth year. This included finishing our third Arctic program in Greenland, as well as our first land ResSCANS™ survey for North American shale oil and gas geologies. We continue to develop our leading data acquisition and processing technologies in the North American oil and gas shale plays centered on recording the full wavefield and proprietary processing. We also recently started our first international effort in the shale play with a regional land survey in Poland. The recent weak gas prices make technology such as ResSCANS even more important to oil companies to further drive productivity.

“Despite a challenging year for the land equipment market, INOVA experienced another sequential improvement in sales, which should result in their first profitable quarter in the fourth quarter. As a result of INOVA’s significant R&D program, they have launched a series of new products, including a new version of FireFly and their first offering of autonomous land nodes, branded Hawk. We are confident these new products place INOVA in a much stronger position for 2012. As indicated in our December call, we anticipate INOVA to be break-even in 2012.”

FOURTH QUARTER 2011

Total revenues for the fourth quarter increased to $159.9 million, compared to $158.6 million a year ago. Systems segment revenues increased by 58% over the same period in 2010, while Solutions segment revenues decreased by 22%. Software segment revenues were relatively flat to the same quarter last year.

Sales in the Systems segment increased to $67.3 million in the fourth quarter, compared to $42.6 million in the same period of 2010, which includes the 12-streamer system sold to BGP.

Sales in the Solutions segment decreased to $83.4 million during the fourth quarter, down $23.2 million compared to $106.6 million for the same period a year ago. This decrease was primarily the result of lower data library sales as compared to an exceptionally strong fourth quarter of 2010, which was partially driven by money being shifted from drilling programs in the Gulf of Mexico to international exploration programs. This decrease in data library sales was partially offset by more than a 60% increase in new venture revenues related to projects in North American shale plays, East Africa and the Arctic.

Consolidated gross margins for fourth quarter 2011 decreased slightly to 40% from 42% in fourth quarter 2010. Gross margins in the Software and Solutions segments improved by 8 and 7 percentage points, respectively, due to favorable sales mix, while gross margins in the Systems segment decreased by 16 percentage points, partially attributed to the mix of the lower-margin streamer system sale to BGP in the fourth quarter.


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As a percentage of revenue, operating expenses during the fourth quarter remained essentially flat at 20%. Adjusted EBITDA for the quarter decreased to $59.0 million, compared to $71.4 million in fourth quarter 2010, mostly related to higher data library sales in fourth quarter 2010.

ION accounts for its 49% interest in INOVA on a one fiscal quarter lag. ION’s share of INOVA’s third quarter financial results is included in ION’s fourth quarter. For fourth quarter 2011, ION recognized a loss on its INOVA equity investment of approximately $13.0 million, which includes approximately $7.7 million (ION’s 49% share) of the write-down of excess inventory by INOVA.

FULL YEAR 2011

Consolidated revenues for full year 2011 increased to $454.6 million, compared to $444.3 million for 2010. Excluding the Legacy Land Systems (INOVA) segment revenues, which were consolidated in the company’s first quarter 2010 results, 2011 revenues increased 6%, or $26.8 million, versus 2010 levels. Revenues in the Systems segment increased 34%, driven by strong towed streamer and other marine equipment sales. Revenues in the Software segment increased 4% and were flat on a currency-adjusted basis. Revenues in the Solutions segment decreased $13.5 million, or 5%, compared to prior year, primarily as a result of lower data processing sales. Data processing revenues improved sequentially each quarter, but decreased 18% over the prior year due to the lagging effects of the Gulf of Mexico oil spill. However, multi-client revenues increased 3%, as new venture activity was successfully carried out in the Arctic, East Africa and the North American shale plays.

Gross margins for full year 2011 improved slightly to 38%, compared to 37% for 2010. Excluding the results of the Legacy Land Systems (INOVA) segment, the overall gross margin of the remaining segments remained consistent with 2010.

ION’s operating expenses as a percentage of revenues for 2011 were 23%, consistent with 2010, excluding the Legacy Land Systems (INOVA) segment. ION’s 2011 effective tax rate of 29.2% was impacted by the establishment of valuation allowances associated with equity in losses of INOVA Geophysical and the write-down of one of ION’s investments. Excluding these items, the 2011 effective tax rate would have been 17.2% compared to 14.5% for 2010. The increase in the effective tax rate relates to the changes in the distribution of earnings between U.S. and foreign jurisdictions.

Income from operations for 2011 totaled $66.8 million, compared to $52.8 million in 2010. Excluding the first quarter 2010 results of the Legacy Land Systems (INOVA) segment, income from operations during 2010 was $62.5 million.


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Adjusted EBITDA for 2011 decreased 5% to $155.9 million, compared to $163.8 million in 2010. At year end, ION had no outstanding balance associated with its $100 million revolving credit facility, bringing total liquidity to $162.4 million.

OUTLOOK

Greg Heinlein, ION’s Chief Financial Officer, further commented, “Our fourth quarter results were strong, as expected, and we anticipate the positive momentum experienced in the quarter to continue as we head into 2012.

“Our marine business delivered a strong fourth quarter performance, supported by the streamer sale to BGP. Our multi-client business is currently executing several new venture programs on land and offshore, which positions us well for a strong 2012. In addition, our Solutions backlog is at record levels, and we expect revenue growth rates to return to historically high levels.

“As mentioned on our market and business outlook call in December, we expect our investment in multi-client data libraries during 2012 to be in the range of $130 to $150 million, with a significant amount of this investment to be underwritten by our customers and with new venture projects spread more evenly throughout the year due to continued expansion on land. While we expect 2012 earnings to be back-end loaded, we continue to anticipate approximately one-fourth of annual results to be reflected in the first half of the year due to the growing impact of our GeoVentures business and the distribution of multi-client projects throughout the year.”

CONFERENCE CALL

The company has scheduled a conference call for Thursday, February 16, 2012, at 11:00 a.m. Eastern Time that will include a slide presentation. To participate in the conference call, dial 480-629-9819 at least 10 minutes before the call begins and ask for the ION conference call. Click here to access the earnings presentation slides.

A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until March 1, 2012. To access the replay, dial 303-590-3030 and use pass code 4510394#.

Investors, analysts and the general public will also have the opportunity to listen to the conference call live over the Internet by visiting www.iongeo.com. Also, an archive of the webcast will be available shortly after the call on the company’s website.

ABOUT ION:

ION Geophysical Corporation is a leading provider of geophysical technology, services, and solutions for the global oil & gas industry. ION’s offerings are designed to allow E&P operators to obtain higher resolution images of the subsurface to reduce the risk of exploration and reservoir development, and to enable seismic contractors to acquire geophysical data safely and efficiently. Additional information about ION is available at www.iongeo.com.


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CONTACTS:

Greg Heinlein

Chief Financial Officer

+1.281.552.3011

Jack Lascar

DRG&L

+1.713.529.6600

The information included herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include future sales and market growth, timing of sales, future liquidity and cash levels, future estimated revenues and earnings, sales expected to result from backlog, benefits expected to result from the INOVA Geophysical joint venture and related transactions and other statements that are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the timing and development of the Company’s products and services and market acceptance of the Company’s new and revised product offerings; risks associated with the operation of the INOVA Geophysical joint venture; risks associated with litigation; risks associated with the Company’s level and terms of indebtedness; risks associated with competitors’ product offerings and pricing pressures resulting therefrom; the relatively small number of customers that the Company currently relies upon; the fact that a significant portion of the Company’s revenues is derived from foreign sales; risks that sources of capital may not prove adequate; the Company’s inability to produce products to preserve and increase market share; collection of receivables; and technological and marketplace changes affecting the Company’s product lines. Additional risk factors, which could affect actual results, are disclosed by the Company from time to time in its filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2010 and its Quarterly Reports on Form 10-Q filed during 2011.

Tables to follow


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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2011     2010     2011     2010  

Product revenues

   $ 75,872      $ 51,228      $ 189,035      $ 165,202   

Service revenues

     84,011        107,395        265,586        279,120   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

     159,883        158,623        454,621        444,322   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of products

     49,389        26,237        103,220        94,658   

Cost of services

     45,877        66,029        177,956        183,931   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     64,617        66,357        173,445        165,733   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research, development and engineering

     6,499        5,479        24,569        25,227   

Marketing and sales

     8,190        9,082        31,269        30,405   

General and administrative

     16,500        17,325        50,812        57,254   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     31,189        31,886        106,650        112,886   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     33,428        34,471        66,795        52,847   

Interest expense, net

     (1,600     (1,893     (5,784     (30,770

Equity in losses of INOVA Geophysical

     (13,018     (15,541     (22,862     (23,724

Loss on disposition of land division

     —          —          —          (38,115

Fair value adjustment of warrant

     —          —          —          12,788   

Gain on legal settlement

     —          24,500        —          24,500   

Impairment of cost method investments

     (1,312     (7,650     (1,312     (7,650

Other income (expense)

     168        1,039        (2,135     228   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     17,666        34,926        34,702        (9,896

Income tax expense

     5,420        14,542        10,136        26,942   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     12,246        20,384        24,566        (36,838

Net income attributable to noncontrolling interests

     105        —          208        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to ION

     12,351        20,384        24,774        (36,838

Preferred stock dividends

     338        338        1,352        1,936   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) applicable to common shares

   $ 12,013      $ 20,046      $ 23,422      $ (38,774
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

        

Basic

   $ 0.08      $ 0.13      $ 0.15      $ (0.27

Diluted

   $ 0.08      $ 0.13      $ 0.15      $ (0.27

Weighted average number of common shares outstanding:

        

Basic

     155,292        152,572        154,811        144,278   

Diluted

     162,132        159,698        156,090        144,278   


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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     December 31,  
     2011     2010  
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 42,402      $ 84,419   

Short-term investments

     20,000        —     

Accounts receivable, net

     130,612        77,576   

Unbilled receivables

     25,628        70,590   

Inventories

     70,145        66,882   

Prepaid expenses and other current assets

     13,460        13,165   
  

 

 

   

 

 

 

Total current assets

     302,247        312,632   

Deferred income tax asset

     17,645        16,413   

Property, plant and equipment, net

     24,771        20,145   

Multi-client data library, net

     175,768        112,620   

Investment in INOVA Geophysical

     72,626        95,173   

Goodwill

     53,963        51,333   

Intangible assets, net

     17,716        20,317   

Other assets

     9,322        3,224   
  

 

 

   

 

 

 

Total assets

   $ 674,058      $ 631,857   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY   

Current liabilities:

    

Current maturities of long-term debt

   $ 5,770      $ 6,073   

Accounts payable

     22,296        30,940   

Accrued expenses

     61,384        67,250   

Accrued multi-client data library royalties

     15,318        18,667   

Deferred revenue

     33,802        17,851   
  

 

 

   

 

 

 

Total current liabilities

     138,570        140,781   

Long-term debt, net of current maturities

     99,342        102,587   

Other long-term liabilities

     7,719        8,042   
  

 

 

   

 

 

 

Total liabilities

     245,631        251,410   

Redeemable noncontrolling interests

     2,615        —     

Equity:

    

Cumulative convertible preferred stock

     27,000        27,000   

Common stock

     1,555        1,529   

Additional paid-in capital

     843,271        822,399   

Accumulated deficit

     (423,612     (448,386

Accumulated other comprehensive loss

     (16,193     (15,530

Treasury stock

     (6,565     (6,565
  

 

 

   

 

 

 

Total stockholders’ equity

     425,456        380,447   

Noncontrolling interests

     356        —     
  

 

 

   

 

 

 

Total equity

     425,812        380,447   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 674,058      $ 631,857   
  

 

 

   

 

 

 


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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Twelve Months Ended
December 31,
 
     2011     2010  

Cash flows from operating activities:

    

Net income (loss)

   $ 24,566      $ (36,838

Adjustments to reconcile net income (loss) to cash provided by operating activities:

    

Depreciation and amortization (other than multi-client data library)

     13,917        24,795   

Amortization of multi-client data library

     77,317        85,940   

Stock-based compensation expense

     6,344        8,147   

Bad debt expense

     597        1,689   

Equity in losses of INOVA Geophysical

     22,862        23,724   

Amortization of debt discount

     —          8,656   

Write-off of unamortized debt issuance costs

     —          10,121   

Fair value adjustment of warrant

     —          (12,788

Loss on disposition of land division

     —          38,115   

Impairment of cost method investments

     1,312        7,650   

Deferred income taxes

     (8,131     22,207   

Excess tax benefit from stock-based compensation

     (3,294     —     

Change in operating assets and liabilities:

    

Accounts receivable

     (53,552     7,826   

Unbilled receivables

     44,962        (48,935

Inventories

     (6,641     (16,138

Accounts payable, accrued expenses and accrued royalties

     (7,546     9,550   

Deferred revenue

     15,957        7,281   

Other assets and liabilities

     1,314        (7,634
  

 

 

   

 

 

 

Net cash provided by operating activities

     129,984        133,368   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property, plant and equipment

     (11,060     (7,372

Investment in multi-client data library

     (143,782     (64,426

Purchase of short-term investments

     (80,000     —     

Proceeds from sale of short-term investments

     60,000        —     

Investment in a convertible note

     (6,500     —     

Business acquisition, net of cash acquired

     (330     —     

Proceeds from disposition of land division, net of fees paid

     —          99,790   

Other investing activities

     50        (500
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (181,622     27,492   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under revolving line of credit

     —          104,000   

Repayments under revolving line of credit

     —          (193,429

Net proceeds from issuance of debt

     —          105,695   

Net proceeds from issuance of common stock

     —          38,039   

Payments on notes payable and long-term debt

     (6,145     (145,558

Payment of preferred dividends

     (1,352     (1,936

Proceeds from employee stock purchases and exercise of stock options

     13,105        1,071   

Excess tax benefit from stock-based compensation

     3,294        —     

Contribution from noncontrolling interests

     961        —     

Restricted stock cancelled for employee minimum income taxes

     (59     (612
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     9,804        (92,730
  

 

 

   

 

 

 

Effect of change in foreign currency exchange rates on cash and cash equivalents

     (183     72   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (42,017     68,202   

Cash and cash equivalents at beginning of period

     84,419        16,217   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 42,402      $ 84,419   
  

 

 

   

 

 

 


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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2011     2010     2011     2010  

Net revenues:

        

Solutions:

        

Data Processing

   $ 25,434      $ 28,336      $ 88,783      $ 107,997   

New Venture

     30,516        18,979        98,335        81,293   

Data Library

     27,470        59,322        76,332        87,664   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 83,420      $ 106,637      $ 263,450      $ 276,954   
  

 

 

   

 

 

   

 

 

   

 

 

 

Systems:

        

Towed Streamer

   $ 51,453      $ 33,471      $ 111,453      $ 83,567   

Other

     15,832        9,117        41,551        30,659   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 67,285      $ 42,588      $ 153,004      $ 114,226   
  

 

 

   

 

 

   

 

 

   

 

 

 

Software:

        

Software Systems

   $ 8,587      $ 8,641      $ 36,031      $ 34,465   

Services

     591        757        2,136        2,166   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 9,178      $ 9,398      $ 38,167      $ 36,631   
  

 

 

   

 

 

   

 

 

   

 

 

 

Legacy Land Systems (INOVA)

   $ —        $ —        $ —        $ 16,511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 159,883      $ 158,623      $ 454,621      $ 444,322   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit:

        

Solutions

   $ 37,541      $ 40,839      $ 84,647      $ 93,804   

Systems

     20,357        19,416        61,109        48,557   

Software

     6,719        6,102        27,689        24,536   

Legacy Land Systems (INOVA)

     —          —          —          (984
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 64,617      $ 66,357      $ 173,445      $ 165,733   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin:

        

Solutions

     45     38     32     34

Systems

     30     46     40     43

Software

     73     65     73     66

Legacy Land Systems (INOVA)

     —       —       —       (6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     40     42     38     37
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations:

        

Solutions

   $ 27,869      $ 29,963      $ 50,620      $ 60,632   

Systems

     11,045        13,916        33,034        27,749   

Software

     6,054        5,423        24,463        21,936   

Legacy Land Systems (INOVA)

     —          —          —          (9,623

Corporate and other

     (11,540     (14,831     (41,322     (47,847
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

   $ 33,428      $ 34,471      $ 66,795      $ 52,847   
  

 

 

   

 

 

   

 

 

   

 

 

 


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Reconciliation of Adjusted EBITDA to Net Income (Loss)

(Non-GAAP Measure)

(In thousands)

(Unaudited)

Adjusted EBITDA is a non-GAAP measurement that is presented as an additional indicator of operating performance and is not a substitute for net income (loss) or net income (loss) per share calculated under generally accepted accounting principles (GAAP). We believe that Adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to service our debt. The calculation of Adjusted EBITDA shown below is based upon amounts derived from the Company’s financial statements prepared in conformity with GAAP.

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2011      2010     2011      2010  

Net income (loss)

   $ 12,246       $ 20,384      $ 24,566       $ (36,838

Interest expense, net

     1,600         1,893        5,784         30,770   

Income tax expense

     5,420         14,542        10,136         26,942   

Depreciation and amortization expense

     25,419         35,938        91,234         110,735   

Equity in losses of INOVA Geophysical

     13,018         15,541        22,862         23,724   

Gain on legal settlement

     —           (24,500     —           (24,500

Impairment of cost method investments

     1,312         7,650        1,312         7,650   

Loss on disposition of land division

     —           —          —           38,115   

Fair value adjustment of the warrant

     —           —          —           (12,788
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 59,015       $ 71,448      $ 155,894       $ 163,810   
  

 

 

    

 

 

   

 

 

    

 

 

 


LOGO    NEWS RELEASE

 

Reconciliation of Income from Operations Excluding the

Legacy Land Systems (INOVA) Segment

(Non-GAAP Measure)

(In thousands)

(Unaudited)

The financial results reflected in the Consolidated Statements of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash Flows contained in this press release are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is our income from operations excluding our Legacy Land Systems (INOVA) segment. This segment was contributed to our joint venture (INOVA Geophysical) on March 25, 2010. Therefore, beginning on March 26, 2010, this contributed business is no longer consolidated into our results of operations. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income from operations or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the twelve months ended December 31, 2010:

 

     Twelve Months Ended
December 31, 2010
 
     As
Reported
     Legacy
Land

Systems
    As
Adjusted
 

Net revenues

   $ 444,322       $ (16,511   $ 427,811   

Cost of sales

     278,589         (17,495     261,094   
  

 

 

    

 

 

   

 

 

 

Gross profit

     165,733         984        166,717   
  

 

 

    

 

 

   

 

 

 

Operating expenses:

       

Research, development and engineering

     25,227         (4,181     21,046   

Marketing and sales

     30,405         (1,559     28,846   

General and administrative

     57,254         (2,899     54,355   
  

 

 

    

 

 

   

 

 

 

Total operating expenses

     112,886         (8,639     104,247   
  

 

 

    

 

 

   

 

 

 

Income from operations

   $ 52,847       $ 9,623      $ 62,470   
  

 

 

    

 

 

   

 

 

 


LOGO    NEWS RELEASE

 

Reconciliation of Special Items to Diluted Earnings per Share

(Non-GAAP Measure)

(In thousands, except per share data)

(Unaudited)

The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is income from operations or net income (loss) excluding certain charges or amounts. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income from operations, net income (loss) or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and twelve months ended December 31, 2011 and 2010:

 

     Three Months Ended December 31, 2011  
     As
Reported
    Restructuring
Charges1
    Investment
Charges2
     As
Adjusted
 

Net revenues

   $ 159,883      $ —        $ —         $ 159,883   

Cost of sales

     95,266        —          —           95,266   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     64,617        —          —           64,617   

Operating expenses

     31,189        (2,928     —           28,261   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     33,428        2,928        —           36,356   

Interest expense, net

     (1,600     —          —           (1,600

Equity in losses of INOVA Geophysical

     (13,018     —          7,680         (5,338

Impairment of cost method investment

     (1,312     —          1,312         —     

Other income

     168        —          —           168   

Income tax expense

     5,420        705        —           6,125   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

     12,246        2,223        8,992         23,461   

Net income attributable to noncontrolling interests

     105        —          —           105   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income attributable to ION

     12,351        2,223        8,992         23,566   

Preferred stock dividends

     338        —          —           338   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income applicable to common shares

   $ 12,013      $ 2,223      $ 8,992       $ 23,228   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share:

         

Basic

   $ 0.08           $ 0.15   
  

 

 

        

 

 

 

Diluted

   $ 0.08           $ 0.15   
  

 

 

        

 

 

 

Weighted average number of common shares outstanding:

         

Basic

     155,292             155,292   

Diluted

     162,132             162,132   


LOGO    NEWS RELEASE

 

 

     Twelve Months Ended December 31, 2011  
     As
Reported
    Restructuring
Charges1
    Investment
Charges2
     As
Adjusted
 

Net revenues

   $ 454,621      $ —        $ —         $ 454,621   

Cost of sales

     281,176        —          —           281,176   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     173,445        —          —           173,445   

Operating expenses

     106,650        (2,928     —           103,722   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     66,795        2,928        —           69,723   

Interest expense, net

     (5,784     —          —           (5,784

Equity in losses of INOVA Geophysical

     (22,862     —          7,680         (15,182

Impairment of cost method investment

     (1,312     —          1,312         —     

Other expense

     (2,135     —          —           (2,135

Income tax expense

     10,136        705        —           10,841   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

     24,566        2,223        8,992         35,781   

Net income attributable to noncontrolling interests

     208        —          —           208   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income attributable to ION

     24,774        2,223        8,992         35,989   

Preferred stock dividends

     1,352        —          —           1,352   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income applicable to common shares

   $ 23,422      $ 2,223      $ 8,992       $ 34,637   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share:

         

Basic

   $ 0.15           $ 0.22   
  

 

 

        

 

 

 

Diluted

   $ 0.15           $ 0.22   
  

 

 

        

 

 

 

Weighted average number of common shares outstanding:

         

Basic

     154,811             154,811   

Diluted

     156,090             156,090   

 

1 

Relates to restructuring charges related to ION’s geophone operations in the Netherlands.

 

2 

Relates to ION’s 49% share of a write-down of inventory by INOVA Geophysical and the impairment of one of ION’s investments.

 

     Three Months Ended December 31, 2010  
     As
Reported
    Gain on
Legal
Settlement4
    Investment
Charges5
     As
Adjusted
 

Net revenues

   $ 158,623      $ —        $ —         $ 158,623   

Cost of sales

     92,266        —          —           92,266   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     66,357        —          —           66,357   

Operating expenses

     31,886        —          —           31,886   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     34,471        —          —           34,471   

Interest expense, net

     (1,893     —          —           (1,893

Equity in losses of INOVA Geophysical

     (15,541     —          9,475         (6,066

Gain on legal settlement

     24,500        (24,500     —           —     

Impairment of cost method investment

     (7,650     —          7,650         —     

Other income

     1,039        —          —           1,039   

Income tax expense

     14,542        (8,575     —           5,967   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

     20,384        (15,925     17,125         21,584   

Preferred stock dividends

     338        —          —           338   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income applicable to common shares

   $ 20,046      $ (15,925   $ 17,125       $ 21,246   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share:

         

Basic

   $ 0.13           $ 0.14   
  

 

 

        

 

 

 

Diluted

   $ 0.13           $ 0.14   
  

 

 

        

 

 

 

Weighted average number of common shares outstanding:

         

Basic

     152,572             152,572   

Diluted

     159,698             159,698   


LOGO    NEWS RELEASE

 

 

     Twelve Months Ended December 31, 2010  
     As
Reported
    Loss on
Disposition
    Refinancing
and  Warrant
Charges3
    Gain on
Legal
Settlement4
    Investment
Charges5
     As
Adjusted
 

Net revenues

   $ 444,322      $ —        $ —        $ —        $ —         $ 444,322   

Cost of sales

     278,589        —          —          —          —           278,589   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     165,733        —          —          —          —           165,733   

Operating expenses

     112,886        —          —          —          —           112,886   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     52,847        —          —          —          —           52,847   

Interest expense, net

     (30,770     —          18,777        —          —           (11,993

Loss on disposition of land division

     (38,115     38,115        —          —          —           —     

Fair value adjustment of warrant

     12,788        —          (12,788     —          —           —     

Equity in losses of INOVA Geophysical

     (23,724     —          —          —          9,475         (14,249

Gain on legal settlement

     24,500        —          —          (24,500     —           —     

Impairment of cost method investment

     (7,650     —          —          —          7,650         —     

Other income

     228        —          —          —          —           228   

Income tax expense

     26,942        (19,841     3,542        (8,575     —           2,068   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net income (loss)

     (36,838     57,956        2,447        (15,925     17,125         24,765   

Preferred stock dividends

     1,936        —          —          —          —           1,936   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net income (loss) applicable to common shares

   $ (38,774   $ 57,956      $ 2,447      $ (15,925   $ 17,125       $ 22,829   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share:

             

Basic

   $ (0.27            $ 0.16   
  

 

 

         

 

 

    

 

 

 

Diluted

   $ (0.27            $ 0.16   
  

 

 

         

 

 

    

 

 

 

Weighted average number of common shares outstanding:

             

Basic

     144,278                 144,278   

Diluted

     144,278                 144,934   

 

3 

Relates to the write-off of unamortized debt issuance costs relating to our first quarter 2010 re-financings and the non-cash debt discount and fair value adjustment to the warrant from January 1, 2010 through March 25, 2010, the date of the closing of INOVA Geophysical.

 

4 

Relates to a gain associated with cash received from the Greatbatch legal settlement in Q4 2010.

 

5 

Relates to ION’s 49% share of a write-down of inventory by INOVA Geophysical and the impairment of one of ION’s investments.

 

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