Condensed Consolidating Financial Information

The Second Lien Notes were issued by ION Geophysical Corporation, and are guaranteed by the Company’s current material U.S. subsidiaries: GX Technology Corporation, ION Exploration Products (U.S.A.), Inc. and I/O Marine Systems, Inc. (“the Guarantors”), all of which are wholly-owned subsidiaries. The Guarantors have fully and unconditionally guaranteed the payment obligations of ION Geophysical Corporation with respect to these debt securities. In August 2018, as part of the Company entering into the Third Amendment to its Credit Agreement, the Company joined the Mexican Subsidiary as a guarantor with respect to the Second Lien Notes. All periods period presented below have been updated to include the Mexican Subsidiary within The Guarantors column. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:


•	ION Geophysical Corporation and the Guarantors (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting).


•	All other subsidiaries of ION Geophysical Corporation that are non-guarantors.


•	The consolidating adjustments necessary to present ION Geophysical Corporation’s results on a consolidated basis.

This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and footnotes. For additional information pertaining to the Notes, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part 2 of this Form 10-K.



	December 31, 2018
Balance Sheet	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	13,782		$	47		$	19,722		$	—		$	33,551
Accounts receivable, net	8			17,349			8,771			—			26,128
Unbilled receivables	—			12,697			31,335			—			44,032
Inventories	—			8,721			5,409			—			14,130
Prepaid expenses and other current assets	3,891			1,325			2,566			—			7,782
Total current assets	17,681			40,139			67,803			—			125,623
Deferred income tax asset	805			6,261			125			—			7,191
Property, plant, equipment and seismic rental equipment, net	489			8,922			3,630			—			13,041
Multi-client data library, net	—			70,380			3,164			—			73,544
Investment in subsidiaries	836,002			247,359			—			(1,083,361		)	—
Goodwill	—			—			22,915			—			22,915
Intercompany receivables	—			305,623			66,021			(371,644		)	—
Other assets	1,723			643			69			—			2,435
Total assets	$	856,700		$	679,327		$	163,727		$	(1,455,005	)	$	244,749
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	1,159		$	1,069		$	—		$	—		$	2,228
Accounts payable	2,407			29,602			2,904			—			34,913
Accrued expenses	7,011			10,036			14,364			—			31,411
Accrued multi-client data library royalties	—			29,040			216			—			29,256
Deferred revenue	—			6,515			1,195			—			7,710
Total current liabilities	10,577			76,262			18,679			—			105,518
Long-term debt, net of current maturities	117,644			1,869			—			—			119,513
Intercompany payables	721,817			—			—			(721,817		)	—
Other long-term liabilities	430			5,698			5,766			—			11,894
Total liabilities	850,468			83,829			24,445			(721,817		)	236,925
Equity:
Common stock	140			290,460			47,776			(338,236		)	140
Additional paid-in capital	952,626			180,700			203,908			(384,608		)	952,626
Accumulated earnings (deficit)	(926,092		)	390,691			(12,475		)	(378,216		)	(926,092		)
Accumulated other comprehensive income (loss)	(20,442		)	4,324			(22,023		)	17,699			(20,442		)
Due from ION Geophysical Corporation	—			(270,677		)	(79,496		)	350,173			—
Total stockholders’ equity	6,232			595,498			137,690			(733,188		)	6,232
Noncontrolling interests	—			—			1,592			—			1,592
Total equity	6,232			595,498			139,282			(733,188		)	7,824
Total liabilities and equity	$	856,700		$	679,327		$	163,727		$	(1,455,005	)	$	244,749



	December 31, 2017
Balance Sheet	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	39,344		$	66		$	12,646		$	—		$	52,056
Accounts receivable, net	50			12,496			6,932			—			19,478
Unbilled receivables	—			34,484			2,820			—			37,304
Inventories	—			8,686			5,822			—			14,508
Prepaid expenses and other current assets	2,427			4,530			686			—			7,643
Total current assets	41,821			60,262			28,906			—			130,989
Deferred income tax asset	1,264			336			153			—			1,753
Property, plant, equipment and seismic rental equipment, net	511			7,170			44,472			—			52,153
Multi-client data library, net	—			81,442			7,858			—			89,300
Investment in subsidiaries	693,679			321,934			—			(1,015,613		)	—
Goodwill	—			—			24,089			—			24,089
Intercompany receivables	—			162,017			60,394			(222,411		)	—
Other assets	686			1,811			288			—			2,785
Total assets	$	737,961		$	634,972		$	166,160		$	(1,238,024	)	$	301,069
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	39,774		$	250		$	—		$	—		$	40,024
Accounts payable	1,774			20,982			2,195			—			24,951
Accrued expenses	12,284			16,957			9,456			—			38,697
Accrued multi-client data library royalties	—			26,824			211			—			27,035
Deferred revenue	—			7,231			1,679			—			8,910
Total current liabilities	53,832			72,244			13,541			—			139,617
Long-term debt, net of current maturities	116,691			29			—			—			116,720
Intercompany payables	537,417			—			—			(537,417		)	—
Other long-term liabilities	454			6,084			7,388			—			13,926
Total liabilities	708,394			78,357			20,929			(537,417		)	270,263
Equity:
Common stock	120			290,460			49,394			(339,854		)	120
Additional paid-in capital	903,247			180,701			202,290			(382,991		)	903,247
Accumulated earnings (deficit)	(854,921		)	317,324			(9,247		)	(308,077		)	(854,921		)
Accumulated other comprehensive income (loss)	(18,879		)	4,372			(19,681		)	15,309			(18,879		)
Due from ION Geophysical Corporation	—			(236,242		)	(78,764		)	315,006			—
Total stockholders’ equity	29,567			556,615			143,992			(700,607		)	29,567
Noncontrolling interests	—			—			1,239			—			1,239
Total equity	29,567			556,615			145,231			(700,607		)	30,806
Total liabilities and equity	$	737,961		$	634,972		$	166,160		$	(1,238,024	)	$	301,069



	Year Ended December 31, 2018
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Total net revenues	$	—		$	96,649		$	83,396		$	—		$	180,045
Cost of goods sold	—			85,186			35,239			—			120,425
Gross profit	—			11,463			48,157			—			59,620
Total operating expenses	32,888			29,235			51,769			—			113,892
Loss from operations	(32,888		)	(17,772		)	(3,612		)	—			(54,272		)
Interest expense, net	(13,010		)	(136		)	174			—			(12,972		)
Intercompany interest, net	1,124			(12,137		)	11,013			—			—
Equity in earnings (losses) of investments	(26,446		)	37,219			—			(10,773		)	—
Other income (expense)	(196		)	116			(356		)	—			(436		)
Income (loss) before income taxes	(71,416		)	7,290			7,219			(10,773		)	(67,680		)
Income tax expense (benefit)	(245		)	(6,711		)	9,674			—			2,718
Net income (loss)	(71,171		)	14,001			(2,455		)	(10,773		)	(70,398		)
Net income attributable to noncontrolling interests	—			—			(773		)	—			(773		)
Net income (loss) attributable to ION	$	(71,171	)	$	14,001		$	(3,228	)	$	(10,773	)	$	(71,171	)
Comprehensive net income (loss)	$	(72,734	)	$	13,953		$	(4,797	)	$	(8,383	)	$	(71,961	)
Comprehensive income attributable to noncontrolling interest	—			—			(773		)	—			(773		)
Comprehensive net income (loss) attributable to ION	$	(72,734	)	$	13,953		$	(5,570	)	$	(8,383	)	$	(72,734	)



	Year Ended December 31, 2017
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Total net revenues	$	—		$	148,590		$	48,964		$	—		$	197,554
Cost of goods sold	—			90,754			31,161			—			121,915
Gross profit	—			57,836			17,803			—			75,639
Total operating expenses	39,000			28,020			17,318			—			84,338
Income (loss) from operations	(39,000		)	29,816			485			—			(8,699		)
Interest expense, net	(16,729		)	(107		)	127			—			(16,709		)
Intercompany interest, net	1,084			(6,613		)	5,529			—			—
Equity in earnings (losses) of investments	27,696			67,290			—			(94,986		)	—
Other income (expense)	(4,610		)	(407		)	1,072			—			(3,945		)
Income (loss) before income taxes	(31,559		)	89,979			7,213			(94,986		)	(29,353		)
Income tax expense (benefit)	(1,317		)	(1,427		)	2,768			—			24
Net income (loss)	(30,242		)	91,406			4,445			(94,986		)	(29,377		)
Net income attributable to noncontrolling interests	—			—			(865		)	—			(865		)
Net income (loss) attributable to ION	$	(30,242	)	$	91,406		$	3,580		$	(94,986	)	$	(30,242	)
Comprehensive net income (loss)	$	(27,373	)	$	91,358		$	6,550		$	(97,043	)	$	(26,508	)
Comprehensive income attributable to noncontrolling interest	—			—			(865		)	—			(865		)
Comprehensive net income (loss) attributable to ION	$	(27,373	)	$	91,358		$	5,685		$	(97,043	)	$	(27,373	)



	Year Ended December 31, 2016
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Total net revenues	$	—		$	91,465		$	81,343		$	—		$	172,808
Cost of goods sold	—			87,660			49,116			—			136,776
Gross profit	—			3,805			32,227			—			36,032
Total operating expenses	31,438			27,279			20,486			—			79,203
Income (loss) from operations	(31,438		)	(23,474		)	11,741			—			(43,171		)
Interest expense, net	(18,406		)	(173		)	94			—			(18,485		)
Intercompany interest, net	978			(4,397		)	3,419			—			—
Equity in earnings (losses) of investments	(19,756		)	23,368			—			(3,612		)	—
Other income (expense)	3,528			723			(2,901		)	—			1,350
Income (loss) before income taxes	(65,094		)	(3,953		)	12,353			(3,612		)	(60,306		)
Income tax expense	54			1,337			3,030			—			4,421
Net income (loss)	(65,148		)	(5,290		)	9,323			(3,612		)	(64,727		)
Net income attributable to noncontrolling interests	—			—			(421		)	—			(421		)
Net income (loss) attributable to ION	$	(65,148	)	$	(5,290	)	$	8,902		$	(3,612	)	$	(65,148	)
Comprehensive net income (loss)	$	(72,331	)	$	(5,290	)	$	1,719		$	4,208		$	(71,694	)
Comprehensive income attributable to noncontrolling interest	—			—			(421		)	—			(421		)
Comprehensive net income (loss) attributable to ION	$	(72,331	)	$	(5,290	)	$	1,298		$	4,208		$	(72,115	)



	Year Ended December 31, 2018
Statement of Cash Flows	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Total Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	(37,659	)	$	39,407		$	5,350		$	7,098
Cash flows from investing activities:
Investment in multi-client data library	—			(25,307		)	(2,969		)	(28,276		)
Purchase of property, plant, equipment and seismic rental equipment	(392		)	(959		)	(163		)	(1,514		)
Net cash used in investing activities	(392		)	(26,266		)	(3,132		)	(29,790		)
Cash flows from financing activities:
Repayments under revolving line of credit	(10,000		)	—			—			(10,000		)
Payments on notes payable and long-term debt	(30,169		)	(638		)	—			(30,807		)
Cost associated with issuance of debt	(1,247		)	—			—			(1,247		)
Intercompany lending	7,983			(12,522		)	4,539			—
Proceeds from employee stock purchases and exercise of stock options	214			—			—			214
Net proceeds from issuance of stocks	46,999			—			—			46,999
Dividend payment to noncontrolling interest	(200		)	—			—			(200		)
Other financing activities	(1,151		)	—			—			(1,151		)
Net cash provided by (used in) financing activities	12,429			(13,160		)	4,539			3,808
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash	—			—			319			319
Net increase (decrease) in cash and cash equivalents	(25,622		)	(19		)	7,076			(18,565		)
Cash, cash equivalents and restricted cash at beginning of period	39,707			66			12,646			52,419
Cash, cash equivalents and restricted cash at end of period	$	14,085		$	47		$	19,722		$	33,854

The following table is a reconciliation of cash, cash equivalents and restricted cash:



	December 31, 2018
	ION Geophysical Corporation		The Guarantors		All Other Subsidiaries		Total Consolidated
	(In thousands)
Cash and cash equivalents	$	13,782	$	47	$	19,722	$	33,551
Restricted cash included in other long-term assets	303		—		—		303
Total cash, cash equivalents, and restricted cash shown in statements of cash flows	$	14,085	$	47	$	19,722	$	33,854



	Year Ended December 31, 2017
Statement of Cash Flows	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Total Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	(22,315	)	$	73,154		$	(23,227	)	$	27,612
Cash flows from investing activities:
Investment in multi-client data library	—			(23,710		)	—			(23,710		)
Purchase of property, plant, equipment and seismic rental equipment	(165		)	(817		)	(81		)	(1,063		)
Net cash used in investing activities	(165		)	(24,527		)	(81		)	(24,773		)
Cash flows from financing activities:
Payments on notes payable and long-term debt	(1,591		)	(3,167		)	(58		)	(4,816		)
Cost associated with issuance of debt	(53		)	—			—			(53		)
Intercompany lending	38,732			(45,609		)	6,877			—
Proceeds from employee stock purchases and exercise of stock options	1,619			—			—			1,619
Dividend payment to noncontrolling interest	(100		)	—			—			(100		)
Other financing activities	(243		)	—			—			(243		)
Net cash provided by (used in) financing activities	38,364			(48,776		)	6,819			(3,593		)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash	—			—			(260		)	(260		)
Net increase (decrease) in cash and cash equivalents	15,884			(149		)	(16,749		)	(1,014		)
Cash, cash equivalents and restricted cash at beginning of period	23,823			215			29,395			53,433
Cash, cash equivalents and restricted cash at end of period	$	39,707		$	66		$	12,646		$	52,419

The following table is a reconciliation of cash, cash equivalents and restricted cash:



	December 31, 2017
	ION Geophysical Corporation		The Guarantors		All Other Subsidiaries		Total Consolidated
	(In thousands)
Cash and cash equivalents	$	39,344	$	66	$	12,646	$	52,056
Restricted cash included in prepaid expenses and other current assets	60		—		—		60
Restricted cash included in other long-term assets	303		—		—		303
Total cash, cash equivalents, and restricted cash shown in statements of cash flows	$	39,707	$	66	$	12,646	$	52,419



	Year Ended December 31, 2016
Statement of Cash Flows	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Total Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	(30,732	)	$	53,107		$	(21,382	)	$	993
Cash flows from investing activities:
Investment in multi-client data library	—			(14,884		)	—			(14,884		)
Purchase of property, plant and equipment	(73		)	(313		)	(1,072		)	(1,458		)
Proceeds from sale of a cost-method investment	2,698			—			—			2,698
Net cash provided by (used in) investing activities	2,625			(15,197		)	(1,072		)	(13,644		)
Cash flows from financing activities:
Payments under revolving line of credit	(5,000		)	—			—			(5,000		)
Borrowings under revolving line of credit	15,000			—			—			15,000
Payments on notes payable and long-term debt	(17,070		)	(6,316		)	(248		)	(23,634		)
Cost associated with issuance of debt	(6,744		)	—			—			(6,744		)
Repurchase of common stock	(964		)	—			—			(964		)
Intercompany lending	31,867			(34,771		)	2,904			—
Other financing activities	(252		)	—			—			(252		)
Net cash provided by (used in) financing activities	16,837			(41,087		)	2,656			(21,594		)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash	—			—			1,386			1,386
Net decrease in cash and cash equivalents	(11,270		)	(3,177		)	(18,412		)	(32,859		)
Cash, cash equivalents and restricted cash at beginning of period	35,093			3,392			47,807			86,292
Cash, cash equivalents and restricted cash at end of period	$	23,823		$	215		$	29,395		$	53,433

The following table is a reconciliation of cash, cash equivalents and restricted cash:



	December 31, 2016
	ION Geophysical Corporation		The Guarantors		All Other Subsidiaries		Total Consolidated
	(In thousands)
Cash and cash equivalents	$	23,042	$	215	$	29,395	$	52,652
Restricted cash included in prepaid expenses and other current assets	260		—		—		260
Restricted cash included in other long-term assets	521		—		—		521
Total cash, cash equivalents, and restricted cash shown in statements of cash flows	$	23,823	$	215	$	29,395	$	53,433