ION reports third quarter 2014 results
Revenues increased 33% to $107 million
HOUSTON, Nov. 5, 2014 /PRNewswire/ -- ION Geophysical Corporation (NYSE: IO) today reported a third quarter 2014 net loss of $24.5 million, or $(0.15) per share, on revenues of $106.5 million, compared to a net loss of $202.1 million, or $(1.29) per share, on revenues of $79.8 million in third quarter 2013. Excluding restructuring and special items from the prior year's results, third quarter 2013 net loss, as adjusted, was $20.1 million, or $(0.13) per share.
At September 30, 2014, the Company's cash and cash equivalents were $129.8 million. The Company generated net cash flows before financing activities of $36.0 million during the first nine months of 2014, compared to a use of cash before financing activities of $(36.6) million in the prior year period. Year-to-date Adjusted EBITDA was $89.5 million, a 68% increase over the first nine months of 2013, and was $13.0 million for the third quarter 2014, compared to $(4.2) million in the prior year quarter. Reconciliations of special items and Adjusted EBITDA can be found in the financial tables of this press release.
Brian Hanson, ION's President and Chief Executive Officer, commented, "As we anticipated, the continued slowdown in exploration spending had a significant impact on our third quarter and year-to-date base business results. Fortunately, our decision a year ago to focus more on production activities through OceanGeo, our Ocean Bottom Services segment, has helped cushion the weakness in other parts of our business.
"In light of this challenging environment, we are conservatively managing our business to generate positive cash flow and further strengthen our balance sheet. We have made significant progress during the third quarter in a couple key areas of strategic importance.
"First, we continued our penetration into the ocean bottom services market through OceanGeo. During the third quarter, we began acquisition on a three-month project offshore West Africa. We are currently negotiating with clients on potential extensions to this program, which should result in additional work in the fourth quarter. This is consistent with our strategy of putting this crew to work offshore West Africa, a growing market with significant tendering activities. We are currently participating in several large tenders, which, if awarded, would provide us with a backlog of longer-term projects.
"Also, in collaboration with Polarcus, we completed acquisition on a multi-client 3D seismic survey offshore Ireland. This was the first survey under our previously announced multi-year strategic alliance with Polarcus to jointly develop, execute and market 3D multi-client seismic programs globally. The survey was an industry funded opportunity in advance of an upcoming licensing round and represented a key opportunity for ION to enter the 3D multi-client market, a natural extension of our traditional 2D BasinSPANTM expertise. We see this market as a growth opportunity for us and are currently working to secure client commitments for additional 3D multi-client programs in other areas of the world.
"While we are pleased with our recent progress in execution of our key strategies, our outlook for the remainder of 2014 and into 2015 remains cautious. We plan to continue exercising spending discipline across all businesses, maximizing cash generation, funding new programs only when they have been adequately underwritten by our customers, while continuing to invest in key strategic technologies and market opportunities."
THIRD QUARTER 2014
The Company's segment revenues for the third quarter were as follows (in thousands):
| Three Months Ended September 30, |
|||||||||||
| 2014 |
2013 |
% Change |
|||||||||
| Solutions |
$ |
45,859 |
$ |
43,447 |
6 |
% |
|||||
| Systems |
24,695 |
26,267 |
(6) |
% |
|||||||
| Software |
11,010 |
10,124 |
9 |
% |
|||||||
| Ocean Bottom Services |
24,976 |
— |
— |
||||||||
| Total |
$ |
106,540 |
$ |
79,838 |
33 |
% |
|||||
Within the Solutions segment, new venture revenues were $18.4 million, a 54% increase from third quarter 2013; data library revenues were $3.3 million, a 37% decrease; and data processing revenues were $24.2 million, an 8% decrease. While new ventures revenues were up, all businesses within the Solutions segment were impacted by the continued softness of exploration spending.
The decrease in Systems segment revenues was due to a reduction in sales of land geophone strings, while new marine positioning system sales and repair and replacement revenues were relatively flat compared to third quarter 2013.
Software segment revenues were up primarily due to higher Orca® and Gator® licensing revenues, which generated overall gross and operating margins of 76% and 56%, respectively, during the quarter.
Ocean Bottom Services segment revenues were $25.0 million, related to work performed on OceanGeo's project offshore West Africa, which began work in late July and is expected to be completed in the fourth quarter this year.
Consolidated gross margins were 27% compared to 19%, as adjusted, in third quarter 2013, and operating margins were (5)% compared to (18)%, as adjusted, in the prior year quarter. The third quarter increase in both gross and operating margins was driven primarily by the mix of revenues from new venture programs within the Solutions segment and the continued strong margins within the Software segment.
The Company recognized $5.6 million of equity losses related to INOVA Geophysical, compared to equity losses of $0.2 million in the third quarter 2013. This decline was due to continued softening within the land seismic market. See the attached financial tables for the summarized financial results of INOVA.
The Company's third quarter 2013 results included equity losses of $5.0 million related to OceanGeo. In late January 2014, the Company increased its ownership interest to 70%, and subsequently to 100% in July, at that time taking over direct management of OceanGeo.
Income tax expense was $8.3 million for third quarter 2014, at an effective tax rate of (50.3)%, related to income from the Company's non-U.S. businesses, including OceanGeo. This foreign tax expense has not been offset by the tax benefits on losses within the U.S. and other jurisdictions, from which the Company cannot currently benefit, resulting in an income tax expense on a consolidated pre-tax loss.
During the third quarter, the Company successfully secured a new credit facility with a group of Western banks, replacing its previous credit facility with China Merchants Bank. The lenders under this facility have currently committed $80 million of revolving credit, subject to a borrowing base, but the facility allows for an additional $95 million of indebtedness through a combination of revolving credit capacity and term loan, up to $175 million in total. The Company has not drawn upon any amounts under this new credit facility.
YEAR-TO-DATE 2014
The Company's segment revenues for the first nine months of the year were as follows (in thousands):
| Nine Months Ended September 30, |
|||||||||||
| 2014 |
2013 |
% Change |
|||||||||
| Solutions |
$ |
197,734 |
$ |
221,236 |
(11) |
% |
|||||
| Systems |
71,948 |
81,962 |
(12) |
% |
|||||||
| Software |
31,582 |
27,292 |
16 |
% |
|||||||
| Ocean Bottom Services |
71,454 |
— |
— |
||||||||
| Total |
$ |
372,718 |
$ |
330,490 |
13 |
% |
|||||
Within the Solutions segment, new venture revenues were $76.5 million, an 18% decrease from the first nine months of 2013; data library revenues were $30.1 million, a 17% decrease; and data processing revenues were $91.1 million, essentially flat to the prior year period. The decrease in new venture and data library revenues was due to the continued softness in exploration spending. Data processing revenues were also impacted by the softness in exploration spending, but benefited from $15.0 million of revenues recognized in first quarter 2014 related to work performed for a customer in 2013.
The decrease in Systems segment revenues was primarily due to (i) a lack of ocean bottom cable systems sales in 2014 compared to 2013; (ii) reduced land geophone string sales; and (iii) lower sales of new marine positioning systems; partially offset by (iv) additional marine repair and replacement revenues.
Software segment revenues were up primarily due to higher Orca and Gator licensing revenues, which generated overall gross and operating margins of 74% and 54%, respectively, during the first nine months of 2014.
Ocean Bottom Services segment revenues were $71.5 million, related to work performed on OceanGeo's project in Trinidad, completed in May, and from its current project offshore West Africa.
Consolidated gross margins increased to 33% compared to 26%, as adjusted, in the first nine months of 2013, and operating margins were 5% compared to (2)%, as adjusted, in the previous year period. The increase in both gross and operating margins was primarily due to (i) the positive impact from the consolidation of OceanGeo's results; (ii) the mix of revenues within the Solutions segment, which included the recognition of data processing revenues following execution of a significant customer contract in the first quarter this year; and (iii) reduced expenses within the Systems segment resulting from 2013 restructuring efforts.
The Company recognized $9.8 million of equity losses related to INOVA Geophysical, compared to equity losses of $3.0 million in the first nine months of 2013. Also, prior to the consolidation of OceanGeo in late January of this year, the Company recorded $0.7 million of equity earnings, compared to equity losses of $7.4 million in the first nine months of 2013.
Income tax expense was $14.3 million for the first nine months of 2014, at an effective tax rate of 20.9%, related to income from the Company's non-U.S. businesses, including OceanGeo.
The Company reported net income of $52.6 million, or $0.32 per diluted share, compared to a net loss of $271.7 million, or $(1.73) per share, in the first nine months of 2013. Both periods included special items related to the WesternGeco legal matter, while 2013 also reflected certain restructuring and other special items. Excluding these special items, in the first nine months of 2014, the Company reported a net loss of $23.1 million, or $(0.14) per share, compared to net loss of $18.2 million, or $(0.12) per share, in the prior year period.
CONFERENCE CALL
The Company has scheduled a conference call for Thursday, November 6, 2014, at 10:00 a.m. Eastern Time that will include a slide presentation to be posted in the Investor Relations section of the ION website by 9:00 a.m. Eastern Time. To participate in the conference call, dial (888) 504-7963 at least 10 minutes before the call begins and ask for the ION conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until November 13, 2014. To access the replay, dial (888) 203-1112 and use pass code 9061808#.
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. An archive of the webcast will be available shortly after the call on the Company's website.
About ION
ION is a leading provider of technology-driven solutions to the global oil & gas industry. ION's offerings are designed to help companies reduce risk and optimize assets throughout the E&P lifecycle. For more information, visit www.iongeo.com.
Contact
Greg Heinlein
Senior Vice President and Chief Financial Officer
+1.281.552.3011
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 may include future sales, earnings 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 OceanGeo and the INOVA Geophysical joint venture and related transactions, expected outcome of litigation 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 risks associated with pending and future litigation, including the risk that the Company does not prevail in its appeal of the judgment in the lawsuit with WesternGeco and that the ultimate outcome of the lawsuit could have a material adverse effect on the Company's financial results and liquidity; the timing and development of the Company's products and services and market acceptance of the Company's new and revised product offerings; the operation of OceanGeo and the INOVA Geophysical joint venture; the Company's level and terms of indebtedness; 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; 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, 2013 and its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed during 2014.
Tables to follow
| ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES |
|||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
| (In thousands, except per share data) |
|||||||||||||||
| (Unaudited) |
|||||||||||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
||||||||||||
| Service revenues |
$ |
71,923 |
$ |
44,679 |
$ |
272,386 |
$ |
224,231 |
|||||||
| Product revenues |
34,617 |
35,159 |
100,332 |
106,259 |
|||||||||||
| Total net revenues |
106,540 |
79,838 |
372,718 |
330,490 |
|||||||||||
| Cost of services |
60,285 |
52,256 |
200,697 |
188,494 |
|||||||||||
| Cost of products |
17,032 |
42,686 |
47,716 |
85,525 |
|||||||||||
| Gross profit (loss) |
29,223 |
(15,104) |
124,305 |
56,471 |
|||||||||||
| Operating expenses: |
|||||||||||||||
| Research, development and engineering |
10,910 |
10,288 |
30,254 |
28,665 |
|||||||||||
| Marketing and sales |
8,480 |
8,416 |
27,610 |
25,364 |
|||||||||||
| General, administrative and other operating expenses |
15,182 |
22,720 |
48,334 |
50,277 |
|||||||||||
| Total operating expenses |
34,572 |
41,424 |
106,198 |
104,306 |
|||||||||||
| Income (loss) from operations |
(5,349) |
(56,528) |
18,107 |
(47,835) |
|||||||||||
| Interest expense, net |
(5,048) |
(4,281) |
(14,779) |
(8,103) |
|||||||||||
| Equity in losses of investments |
(5,558) |
(5,192) |
(9,027) |
(10,414) |
|||||||||||
| Other income (expense), net |
(622) |
(74,301) |
73,970 |
(180,392) |
|||||||||||
| Income (loss) before income taxes |
(16,577) |
(140,302) |
68,271 |
(246,744) |
|||||||||||
| Income tax expense |
8,345 |
56,954 |
14,261 |
19,450 |
|||||||||||
| Net income (loss) |
(24,922) |
(197,256) |
54,010 |
(266,194) |
|||||||||||
| Net (income) loss attributable to noncontrolling interests |
381 |
498 |
(1,384) |
515 |
|||||||||||
| Net income (loss) attributable to ION |
(24,541) |
(196,758) |
52,626 |
(265,679) |
|||||||||||
| Preferred stock dividends |
— |
338 |
— |
1,014 |
|||||||||||
| Conversion payment of preferred stock |
— |
5,000 |
— |
5,000 |
|||||||||||
| Net income (loss) applicable to common shares |
$ |
(24,541) |
$ |
(202,096) |
$ |
52,626 |
$ |
(271,693) |
|||||||
| Net income (loss) per share: |
|||||||||||||||
| Basic |
$ |
(0.15) |
$ |
(1.29) |
$ |
0.32 |
$ |
(1.73) |
|||||||
| Diluted |
$ |
(0.15) |
$ |
(1.29) |
$ |
0.32 |
$ |
(1.73) |
|||||||
| Weighted average number of common shares outstanding: |
|||||||||||||||
| Basic |
164,149 |
157,143 |
164,021 |
156,842 |
|||||||||||
| Diluted |
164,149 |
157,143 |
164,326 |
156,842 |
|||||||||||
| ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES |
|||||||
| CONSOLIDATED BALANCE SHEETS |
|||||||
| (In thousands) |
|||||||
| (Unaudited) |
|||||||
| ASSETS |
September 30, |
December 31, |
|||||
| Current assets: |
|||||||
| Cash and cash equivalents |
$ |
129,847 |
$ |
148,056 |
|||
| Accounts receivable, net |
86,738 |
149,448 |
|||||
| Unbilled receivables |
57,477 |
49,468 |
|||||
| Inventories |
55,376 |
57,173 |
|||||
| Prepaid expenses and other current assets |
26,453 |
24,772 |
|||||
| Total current assets |
355,891 |
428,917 |
|||||
| Deferred income tax asset |
14,340 |
14,650 |
|||||
| Property, plant, equipment and seismic rental equipment, net |
60,365 |
46,684 |
|||||
| Multi-client data library, net |
243,917 |
238,784 |
|||||
| Equity method investments |
40,174 |
53,865 |
|||||
| Goodwill |
50,385 |
55,876 |
|||||
| Intangible assets, net |
9,191 |
11,247 |
|||||
| Other assets |
19,482 |
14,648 |
|||||
| Total assets |
$ |
793,745 |
$ |
864,671 |
|||
| LIABILITIES AND EQUITY |
|||||||
| Current liabilities: |
|||||||
| Current maturities of long-term debt |
$ |
5,901 |
$ |
5,906 |
|||
| Accounts payable |
30,666 |
22,654 |
|||||
| Accrued expenses |
75,608 |
84,358 |
|||||
| Accrued multi-client data library royalties |
24,416 |
46,460 |
|||||
| Deferred revenue |
16,495 |
20,682 |
|||||
| Total current liabilities |
153,086 |
180,060 |
|||||
| Long-term debt, net of current maturities |
179,583 |
214,246 |
|||||
| Other long-term liabilities |
142,776 |
210,602 |
|||||
| Total liabilities |
475,445 |
604,908 |
|||||
| Redeemable noncontrolling interests |
2,086 |
1,878 |
|||||
| Equity: |
|||||||
| Common stock |
1,642 |
1,637 |
|||||
| Additional paid-in capital |
886,170 |
879,969 |
|||||
| Accumulated deficit |
(553,531) |
(606,157) |
|||||
| Accumulated other comprehensive loss |
(11,720) |
(11,138) |
|||||
| Treasury stock |
(6,565) |
(6,565) |
|||||
| Total stockholders' equity |
315,996 |
257,746 |
|||||
| Noncontrolling interests |
218 |
139 |
|||||
| Total equity |
316,214 |
257,885 |
|||||
| Total liabilities and equity |
$ |
793,745 |
$ |
864,671 |
|||
| ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES |
|||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
| (In thousands) |
|||||||
| (Unaudited) |
|||||||
| Nine Months Ended September 30, |
|||||||
| 2014 |
2013 |
||||||
| Cash flows from operating activities: |
|||||||
| Net income (loss) |
$ |
54,010 |
$ |
(266,194) |
|||
| Adjustments to reconcile net income (loss) to cash provided by operating activities: |
|||||||
| Depreciation and amortization (other than multi-client data library) |
20,989 |
13,146 |
|||||
| Amortization of multi-client data library |
46,014 |
50,892 |
|||||
| Stock-based compensation expense |
7,058 |
5,707 |
|||||
| Equity in losses of investments |
9,027 |
10,414 |
|||||
| Accrual for (reduction of) loss contingency related to legal proceedings |
(69,557) |
181,776 |
|||||
| Gain on sale of Source product line |
(6,522) |
— |
|||||
| Gain on sale of cost-method investment |
— |
(3,591) |
|||||
| Write-down of multi-client data library |
— |
5,461 |
|||||
| Write-down of receivables from OceanGeo |
— |
9,157 |
|||||
| Write-down of excess and obsolete inventory |
— |
21,197 |
|||||
| Deferred income taxes |
(1,536) |
7,768 |
|||||
| Change in operating assets and liabilities: |
|||||||
| Accounts receivable |
71,540 |
57,481 |
|||||
| Unbilled receivables |
(8,036) |
6,890 |
|||||
| Inventories |
(4,272) |
(13,157) |
|||||
| Accounts payable, accrued expenses and accrued royalties |
(31,324) |
(6,179) |
|||||
| Deferred revenue |
(4,153) |
(6,527) |
|||||
| Other assets and liabilities |
3,738 |
4,274 |
|||||
| Net cash provided by operating activities |
86,976 |
78,515 |
|||||
| Cash flows from investing activities: |
|||||||
| Cash invested in multi-client data library |
(57,340) |
(86,346) |
|||||
| Purchase of property, plant, equipment and seismic rental assets |
(6,842) |
(13,539) |
|||||
| Repayment of (advances to) INOVA Geophysical |
1,000 |
(8,000) |
|||||
| Investment in and advances to OceanGeo B.V. |
(3,683) |
(9,500) |
|||||
| Cash of OceanGeo B.V. upon acquiring a controlling interest |
609 |
— |
|||||
| Net proceeds from sale of Source product line |
14,394 |
— |
|||||
| Proceeds from sale of a cost-method investment |
— |
4,150 |
|||||
| Investment in convertible note |
— |
(2,000) |
|||||
| Other investing activities |
928 |
76 |
|||||
| Net cash used in investing activities |
(50,934) |
(115,159) |
|||||
| Cash flows from financing activities: |
|||||||
| Proceeds from issuance of notes |
— |
175,000 |
|||||
| Borrowings under revolving line of credit |
15,000 |
— |
|||||
| Payments under revolving line of credit |
(50,000) |
(97,250) |
|||||
| Payments on notes payable and long-term debt |
(11,737) |
(3,296) |
|||||
| Costs associated with issuance of debt |
(2,126) |
(6,731) |
|||||
| Acquisition of non-controlling interest |
(6,000) |
— |
|||||
| Payment of preferred dividends |
— |
(1,014) |
|||||
| Conversion payment of preferred stock |
— |
(5,000) |
|||||
| Proceeds from employee stock purchases and exercise of stock options |
577 |
2,367 |
|||||
| Other financing activities |
(154) |
790 |
|||||
| Net cash (used in) provided by financing activities |
(54,440) |
64,866 |
|||||
| Effect of change in foreign currency exchange rates on cash and cash equivalents |
189 |
(608) |
|||||
| Net (decrease) increase in cash and cash equivalents |
(18,209) |
27,614 |
|||||
| Cash and cash equivalents at beginning of period |
148,056 |
60,971 |
|||||
| Cash and cash equivalents at end of period |
$ |
129,847 |
$ |
88,585 |
|||
| ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES |
|||||||||||||||
| SUMMARY OF SEGMENT INFORMATION |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| (Unaudited) |
|||||||||||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
||||||||||||
| Net revenues: |
|||||||||||||||
| Solutions: |
|||||||||||||||
| New Venture |
$ |
18,446 |
$ |
11,945 |
$ |
76,499 |
$ |
93,630 |
|||||||
| Data Library |
3,262 |
5,184 |
30,104 |
36,153 |
|||||||||||
| Total multi-client revenues |
21,708 |
17,129 |
106,603 |
129,783 |
|||||||||||
| Data Processing |
24,151 |
26,318 |
91,131 |
91,453 |
|||||||||||
| Total |
$ |
45,859 |
$ |
43,447 |
$ |
197,734 |
$ |
221,236 |
|||||||
| Systems: |
|||||||||||||||
| Towed Streamer |
$ |
13,666 |
$ |
15,342 |
$ |
35,782 |
$ |
41,461 |
|||||||
| Ocean Bottom Equipment |
— |
159 |
— |
7,307 |
|||||||||||
| Other |
11,029 |
10,766 |
36,166 |
33,194 |
|||||||||||
| Total |
$ |
24,695 |
$ |
26,267 |
$ |
71,948 |
$ |
81,962 |
|||||||
| Software: |
|||||||||||||||
| Software Systems |
$ |
9,922 |
$ |
8,892 |
$ |
28,384 |
$ |
24,297 |
|||||||
| Services |
1,088 |
1,232 |
3,198 |
2,995 |
|||||||||||
| Total |
$ |
11,010 |
$ |
10,124 |
$ |
31,582 |
$ |
27,292 |
|||||||
| Ocean Bottom Services |
$ |
24,976 |
$ |
— |
$ |
71,454 |
$ |
— |
|||||||
| Total |
$ |
106,540 |
$ |
79,838 |
$ |
372,718 |
$ |
330,490 |
|||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
||||||||||||||||||||
| As Reported |
As Adjusted(1) |
As Reported |
As Adjusted(1) |
||||||||||||||||||||
| Gross profit (loss): |
|||||||||||||||||||||||
| Solutions |
$ |
5,927 |
$ |
(8,487) |
$ |
(3,026) |
$ |
51,207 |
$ |
33,600 |
$ |
39,061 |
|||||||||||
| Systems |
10,123 |
(13,987) |
11,093 |
31,288 |
3,195 |
28,275 |
|||||||||||||||||
| Software |
8,326 |
7,370 |
7,370 |
23,388 |
19,676 |
19,676 |
|||||||||||||||||
| Ocean Bottom Services |
4,847 |
— |
— |
18,422 |
— |
— |
|||||||||||||||||
| Total |
$ |
29,223 |
$ |
(15,104) |
$ |
15,437 |
$ |
124,305 |
$ |
56,471 |
$ |
87,012 |
|||||||||||
| Gross margin: |
|||||||||||||||||||||||
| Solutions |
13 |
% |
(20) |
% |
(7) |
% |
26 |
% |
15 |
% |
18 |
% |
|||||||||||
| Systems |
41 |
% |
(53) |
% |
42 |
% |
43 |
% |
4 |
% |
34 |
% |
|||||||||||
| Software |
76 |
% |
73 |
% |
73 |
% |
74 |
% |
72 |
% |
72 |
% |
|||||||||||
| Ocean Bottom Services |
19 |
% |
— |
% |
— |
% |
26 |
% |
— |
% |
— |
% |
|||||||||||
| Total |
27 |
% |
(19) |
% |
19 |
% |
33 |
% |
17 |
% |
26 |
% |
|||||||||||
| Income (loss) from operations: |
|||||||||||||||||||||||
| Solutions |
$ |
(5,960) |
$ |
(18,163) |
$ |
(12,702) |
$ |
11,733 |
$ |
215 |
$ |
5,676 |
|||||||||||
| Systems |
2,917 |
(23,610) |
3,686 |
9,835 |
(21,172) |
6,124 |
|||||||||||||||||
| Software |
6,227 |
6,280 |
6,280 |
16,985 |
16,396 |
16,396 |
|||||||||||||||||
| Ocean Bottom Services |
1,677 |
— |
— |
12,333 |
— |
— |
|||||||||||||||||
| Corporate and other |
(10,210) |
(21,035) |
(11,878) |
(32,779) |
(43,274) |
(34,117) |
|||||||||||||||||
| Total |
$ |
(5,349) |
$ |
(56,528) |
$ |
(14,614) |
$ |
18,107 |
$ |
(47,835) |
$ |
(5,921) |
|||||||||||
| Operating margin: |
|||||||||||||||||||||||
| Solutions |
(13) |
% |
(42) |
% |
(29) |
% |
6 |
% |
— |
% |
3 |
% |
|||||||||||
| Systems |
12 |
% |
(90) |
% |
14 |
% |
14 |
% |
(26) |
% |
7 |
% |
|||||||||||
| Software |
56 |
% |
62 |
% |
62 |
% |
54 |
% |
60 |
% |
60 |
% |
|||||||||||
| Ocean Bottom Services |
7 |
% |
— |
% |
— |
% |
17 |
% |
— |
% |
— |
% |
|||||||||||
| Corporate and other |
(10) |
% |
(26) |
% |
(15) |
% |
(9) |
% |
(13) |
% |
(10) |
% |
|||||||||||
| Total |
(5) |
% |
(71) |
% |
(18) |
% |
5 |
% |
(14) |
% |
(2) |
% |
|||||||||||
| (1) |
The "As Adjusted" columns remove the impact of the restructuring and other special items as presented and described in further detail by the Company in its Third Quarter 2013 earnings release on November 6, 2013. |
| INOVA GEOPHYSICAL EQUIPMENT LIMITED |
|||||||||||||||
| SUMMARIZED FINANCIAL HIGHLIGHTS |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| (Unaudited) |
|||||||||||||||
| The Company accounts for its 49% interest in INOVA Geophysical as an equity method investment and records its share of earnings and losses of INOVA Geophysical on a one fiscal quarter lag basis. The following table reflects the summarized financial information for INOVA Geophysical for the three months ended June 30, 2014 and 2013 and the nine-month periods from October 1 to June 30, 2014 and 2013: |
|||||||||||||||
| Three Months Ended June 30, |
Nine-Month Periods from October 1 |
||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
||||||||||||
| Net revenues |
$ |
11,092 |
$ |
61,241 |
$ |
77,774 |
$ |
142,947 |
|||||||
| Gross profit (loss) |
$ |
(2,164) |
$ |
12,243 |
$ |
8,020 |
$ |
26,378 |
|||||||
| Income (loss) from operations |
$ |
(9,851) |
$ |
1,658 |
$ |
(16,094) |
$ |
(7,103) |
|||||||
| Net loss |
$ |
(11,425) |
$ |
(488) |
$ |
(20,010) |
$ |
(6,518) |
|||||||
| ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES |
|||||||||||||||
| Reconciliation of Adjusted EBITDA to Net Income (Loss) |
|||||||||||||||
| (Non-GAAP Measure) |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| (Unaudited) |
|||||||||||||||
| The term Adjusted EBITDA represents net income (loss) before interest expense, interest income, income taxes, depreciation and amortization and other similar non-cash charges including, without limitation, equity in (earnings) losses of investments and the accrual (reduction) of loss contingency related to legal proceedings. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Adjusted EBITDA as a supplemental disclosure because its management believes that Adjusted EBITDA provides useful information regarding our ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. |
|||||||||||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
||||||||||||
| Net income (loss) |
$ |
(24,922) |
$ |
(197,256) |
$ |
54,010 |
$ |
(266,194) |
|||||||
| Interest expense, net |
5,048 |
4,281 |
14,779 |
8,103 |
|||||||||||
| Income tax expense |
8,345 |
56,954 |
14,261 |
19,450 |
|||||||||||
| Depreciation and amortization expense |
18,961 |
19,057 |
67,003 |
64,038 |
|||||||||||
| Equity in losses of investments |
5,558 |
5,192 |
9,027 |
10,414 |
|||||||||||
| Accrual for (reduction of) loss contingency related to legal proceedings |
— |
71,776 |
(69,557) |
181,776 |
|||||||||||
| Write-down of multi-client data library |
— |
5,461 |
— |
5,461 |
|||||||||||
| Write-down of receivables from OceanGeo |
— |
9,157 |
— |
9,157 |
|||||||||||
| Write-down of excess and obsolete inventory |
— |
21,197 |
— |
21,197 |
|||||||||||
| Adjusted EBITDA |
$ |
12,990 |
$ |
(4,181) |
$ |
89,523 |
$ |
53,402 |
|||||||
| ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES |
|||||||||||
| Reconciliation of Special Items to Diluted Earnings (Loss) 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 (loss) from operations or net income (loss) excluding certain charges or amounts. This adjusted income (loss) amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) 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 nine months ended September 30, 2014, and three and nine months ended September 30, 2013: |
|||||||||||
| Nine Months Ended September 30, 2014 |
|||||||||||
| As Reported |
Special Items(1) |
As Adjusted |
|||||||||
| Net revenues |
$ |
372,718 |
$ |
— |
$ |
372,718 |
|||||
| Cost of sales |
248,413 |
— |
248,413 |
||||||||
| Gross profit |
124,305 |
— |
124,305 |
||||||||
| Operating expenses |
106,198 |
— |
106,198 |
||||||||
| Income from operations |
18,107 |
— |
18,107 |
||||||||
| Interest expense, net |
(14,779) |
— |
(14,779) |
||||||||
| Equity in losses of investments |
(9,027) |
— |
(9,027) |
||||||||
| Other income (expense), net |
73,970 |
(76,079) |
(2,109) |
||||||||
| Income tax expense |
14,261 |
(357) |
13,904 |
||||||||
| Net income (loss) |
54,010 |
(75,722) |
(21,712) |
||||||||
| Net (income) attributable to noncontrolling interests |
(1,384) |
— |
(1,384) |
||||||||
| Net income (loss) applicable to common shares |
$ |
52,626 |
$ |
(75,722) |
$ |
(23,096) |
|||||
| Net income (loss) per share: |
|||||||||||
| Basic |
$ |
0.32 |
$ |
(0.14) |
|||||||
| Diluted |
$ |
0.32 |
$ |
(0.14) |
|||||||
| Weighted average number of common shares outstanding: |
|||||||||||
| Basic |
164,021 |
164,021 |
|||||||||
| Diluted |
164,326 |
164,021 |
|||||||||
| Three Months Ended September 30, 2013 |
Nine Months Ended September 30, 2013 |
||||||||||||||||||||||
| As Reported |
Special Items(2) |
As Adjusted |
As Reported |
Special Items(2) |
As Adjusted |
||||||||||||||||||
| Net revenues |
$ |
79,838 |
$ |
— |
$ |
79,838 |
$ |
330,490 |
$ |
— |
$ |
330,490 |
|||||||||||
| Cost of sales |
94,942 |
(30,541) |
64,401 |
274,019 |
(30,541) |
243,478 |
|||||||||||||||||
| Gross profit (loss) |
(15,104) |
30,541 |
15,437 |
56,471 |
30,541 |
87,012 |
|||||||||||||||||
| Operating expenses |
41,424 |
(11,373) |
30,051 |
104,306 |
(11,373) |
92,933 |
|||||||||||||||||
| Income (loss) from operations |
(56,528) |
41,914 |
(14,614) |
(47,835) |
41,914 |
(5,921) |
|||||||||||||||||
| Interest expense, net |
(4,281) |
— |
(4,281) |
(8,103) |
— |
(8,103) |
|||||||||||||||||
| Equity in losses of investments |
(5,192) |
— |
(5,192) |
(10,414) |
— |
(10,414) |
|||||||||||||||||
| Other income (expense), net |
(74,301) |
72,940 |
(1,361) |
(180,392) |
182,940 |
2,548 |
|||||||||||||||||
| Income tax expense (benefit) |
56,954 |
(62,106) |
(5,152) |
19,450 |
(23,606) |
(4,156) |
|||||||||||||||||
| Net income (loss) |
(197,256) |
176,960 |
(20,296) |
(266,194) |
248,460 |
(17,734) |
|||||||||||||||||
| Net (income) attributable to noncontrolling interests |
498 |
— |
498 |
515 |
— |
515 |
|||||||||||||||||
| Net income (loss) attributable to ION |
(196,758) |
176,960 |
(19,798) |
(265,679) |
248,460 |
(17,219) |
|||||||||||||||||
| Preferred stock dividends |
5,338 |
(5,000) |
338 |
6,014 |
(5,000) |
1,014 |
|||||||||||||||||
| Net income (loss) applicable to common shares |
$ |
(202,096) |
$ |
181,960 |
$ |
(20,136) |
$ |
(271,693) |
$ |
253,460 |
$ |
(18,233) |
|||||||||||
| Net income (loss) per share: |
|||||||||||||||||||||||
| Basic |
$ |
(1.29) |
$ |
(0.13) |
$ |
(1.73) |
$ |
(0.12) |
|||||||||||||||
| Diluted |
$ |
(1.29) |
$ |
(0.13) |
$ |
(1.73) |
$ |
(0.12) |
|||||||||||||||
| Weighted average number of common shares outstanding: |
|||||||||||||||||||||||
| Basic |
157,143 |
157,143 |
156,842 |
156,842 |
|||||||||||||||||||
| Diluted |
157,143 |
157,143 |
156,842 |
156,842 |
|||||||||||||||||||
| (1) |
The nine months ended September 30, 2014 was impacted by the first quarter reduction of $69.6 million in the WesternGeco legal contingency due to the court order issued in April 2014, in addition to a second quarter non-recurring gain on the sale of the marine source product line of $6.5 million (before tax). |
| (2) |
The three and nine months ended September 30, 2013 were impacted by restructuring and other special items as presented and described in further detail by the Company in its Third Quarter 2013 earnings release on November 6, 2013. |
SOURCE ION Geophysical Corporation
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