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Press release from PR Newswire

ION Reports Strong First Quarter Results

Wednesday, May 02, 2012

ION Reports Strong First Quarter Results16:45 EDT Wednesday, May 02, 2012First Quarter EPS of $0.05HOUSTON, May 2, 2012 /PRNewswire/ -- ION Geophysical Corporation (NYSE: IO) today reported first quarter 2012 revenues of $111.7 million, a 23% increase from revenues of $90.6 million in first quarter 2011.  First quarter 2012 net income was $8.2 million, or $0.05 per diluted share, compared to net income of $0.1 million, or $0.00 per share, in first quarter 2011.  Adjusted EBITDA increased 20% to $36.7 million compared to $30.5 million in first quarter 2011 due to improved overall results of operations.Brian Hanson, ION's Chief Executive Officer, commented, "We are pleased with our quarterly results as this quarter was one of the strongest first quarters in ION's history in terms of revenue, operating income, and net income.  Our robust performance was led by a very solid start in our marine positioning equipment, data processing and multi-client businesses."We are benefiting from our focus on execution of our business strategy, as we continue to drive each of our businesses to deliver more even results throughout the year."Our data processing business has recovered nicely and delivered another sequential improvement as activity in the international market continues to improve, particularly in Europe, Africa, and the Middle East.  We are also benefiting from increased activity in the Gulf of Mexico. "In our multi-client business, our ResSCAN?  offerings in North America and our PolandSPAN?  program continue to position us for growth in the land-based shale plays around the world.  Additionally, our marine multi-client business is uniquely positioned for opportunities in the Arctic and for future licensing rounds in Australia, Brazil, Greenland, and parts of Africa."Our marine and software divisions saw increased activities in the ocean-bottom cable market during the quarter.  These divisions also continue to benefit from a healthy repair and replacement business."As we disclosed a few weeks ago, INOVA generated its first quarterly profit in their fourth quarter results. Their new product offerings have been well received, as they recently announced the first sale and delivery of G3i?, their newly-released mega channel recording system, to BGP.  In addition, we are seeing more market interest in the Hawk? product line."  FIRST QUARTER 2012Total revenues increased 23% to $111.7 million compared to $90.6 million in first quarter 2011, with increased activity in all business units. Systems segment sales increased 53% to $36.7 million compared to $24.0 million in first quarter 2011, due to increased sales of ocean-bottom and other marine products and growth in the land sensor business.Solutions segment revenues increased 14% to $66.1 million compared to $57.9 million in first quarter 2011, driven by growth in the data processing business, strong multi-client activity related to ION's ResSCAN programs, and continued interest in ION's marine multi-client programs in the Arctic, offshore Africa, and Brazil.  Software segment sales increased to $8.9 million compared to $8.7 million in first quarter 2011 due to demand for Orca® and Gator® software.  Excluding foreign currency effects, Software segment revenues increased 4%.  Consolidated gross margins increased to 37% from 34% in first quarter 2011. The improvement is due to higher revenues in ION's data processing business while leveraging a relatively consistent cost structure.  Consolidated operating margins increased to 10% compared to 7% in first quarter 2011.  Solutions and Software operating margins improved five and six percentage points, respectively, due to the expansion in international data processing, along with strength in the Gulf of Mexico, and growth in the Orca and Gator software product lines.  Systems segment operating margin remained relatively flat compared to first quarter 2011.  ION's effective tax rate was 28.9% compared to 24.6% in first quarter 2011.  The increase in the effective tax rate for first quarter 2012 was due to the establishment of a valuation allowance adjustment for certain foreign operating loss carry-forwards in first quarter 2012.  Excluding the additional valuation allowance, the effective tax rate for first quarter 2012 was 25.2%.For fourth quarter 2011, INOVA Geophysical reported revenues of $59.0 million, up 29% from $45.6 million in fourth quarter 2010.  INOVA reported $5.7 million of net income for fourth quarter 2011, compared to a net loss of $2.3 million in fourth quarter 2010.  ION accounts for its 49% interest in INOVA Geophysical as an equity method investment on a one fiscal quarter-lag basis.  As a result, ION's share of INOVA Geophysical's fourth quarter 2011 financial results is included in ION's first quarter results.  For the first quarter, ION recognized earnings on its equity investment of approximately $2.5 million compared to a loss of $0.9 million for the prior year period.   Total cash and cash equivalents were $87.1 million as of March 31, 2012.  Additionally, ION has no outstanding balance associated with its $100 million revolving credit facility, bringing total available liquidity to greater than $187 million.  OUTLOOKGreg Heinlein, ION's Chief Financial Officer, added, "We enjoyed a strong start to 2012 with growth in all businesses. We continue to expect solid year-over-year growth for each of our segments, led by a recovery in our global data processing business, expanding land and marine offerings in GeoVentures, and clear improvements in the land equipment market supported by INOVA's exciting new product offerings.  We are seeing strong demand in the multi-client market this year.  Our 2012 investment in multi-client data libraries will be in the upper end of the range of $130 million to $150 million, with acquisition activity spread more evenly throughout the year.  The seabed and towed streamer markets are steadily improving, with a number of large projects awarded in the first quarter.  "INOVA's preliminary unaudited results for first quarter 2012 reflect another quarter of significant net income.  INOVA has now had two positive and improving quarters in a row and we are confident in their ability to at least break even in 2012.  "Based on our market outlook and robust pipeline of order activity, we are confidently investing in each of our businesses and remain positioned to achieve year-over-year quarterly improvement for the remainder of 2012." CONFERENCE CALLThe company has scheduled a conference call for Thursday, May 3, 2012, at 11:00 a.m. Eastern Time that will include a slide presentation.  To participate in the conference call, dial 480-629-9772 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 May 17, 2012.  To access the replay, dial 303-590-3030 and use pass code 4533628#. 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 IONION 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.ContactsGreg HeinleinChief Financial Officer+1.281.552.3011Jack Lascar DRG&L +1.713.529.6600The 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 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, 2011 and its Quarterly Reports on Form 10-Q filed during 2012. Tables to followION GEOPHYSICAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)   Three Months EndedMarch 31,20122011Product revenues$   45,076$   32,387Service revenues66,63458,165Total net revenues111,71090,552Cost of products23,14814,639Cost of services47,40644,774Gross profit41,15631,139Operating expenses:Research, development and engineering7,7265,839Marketing and sales7,4177,042General and administrative14,37012,187Total operating expenses29,51325,068Income from operations11,6436,071Interest expense, net(1,518)(1,615)Equity in earnings (losses) of INOVA Geophysical2,468(860)Other income (expense)(686)(2,999)Income before income taxes11,907597Income tax expense3,445147Net income8,462450Net income attributable to noncontrolling interest11325Net income attributable to ION8,575475Preferred stock dividends338338Net income applicable to common shares$     8,237$        137Net income per share:Basic$       0.05$       0.00Diluted$       0.05$       0.00Weighted average number of common shares outstanding:Basic155,543153,666Diluted156,547155,555ION GEOPHYSICAL CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)   March 31,      December 31,20122011      ASSETSCurrent assets:Cash and cash equivalents$      87,096$   42,402Short-term investments?20,000Accounts receivable, net70,003130,612Unbilled receivables48,64425,628Inventories69,33370,145Prepaid expenses and other current assets12,21813,460Total current assets287,294302,247Deferred income tax asset18,65217,645Property, plant and equipment, net25,38424,771Multi-client data library, net176,625175,768Investment in INOVA Geophysical75,44272,626Goodwill54,95653,963Intangible assets, net17,79017,716Other assets10,0329,322Total assets$    666,175$  674,058                LIABILITIES AND EQUITYCurrent liabilities:Current maturities of long-term debt$        6,216$     5,770Accounts payable21,78722,296Accrued expenses48,81661,384Accrued multi-client data library royalties12,20515,318Deferred revenue29,10533,802Total current liabilities118,129138,570Long-term debt, net of current maturities98,61499,342Other long-term liabilities7,6597,719Total liabilities224,402245,631Redeemable noncontrolling interest2,5042,615Equity:Cumulative convertible preferred stock27,00027,000Common stock1,5561,555Additional paid-in capital844,995843,271Accumulated deficit(415,037)(423,612)Accumulated other comprehensive loss(13,109)(16,193)Treasury stock(6,565)(6,565)Total stockholders' equity438,840425,456  Noncontrolling interests429356Total equity439,269425,812Total liabilities and equity$    666,175$  674,058ION GEOPHYSICAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)Three Months EndedMarch 31,20122011Cash flows from operating activities:Net income$     8,462$       450Adjustments to reconcile net income to cash provided by operating activities:Depreciation and amortization (other than multi-client library)3,0903,953Amortization of multi-client library22,62023,443Stock-based compensation expense1,4841,973Equity in (earnings) losses of INOVA Geophysical(2,468)860Deferred income taxes(1,063)(2,854)Change in operating assets and liabilities:Accounts receivable61,01814,508Unbilled receivables(23,016)29,593Inventories965(13,404)Accounts payable, accrued expenses and accrued royalties(13,025)(21,862)Deferred revenue(4,736)15,537Other assets and liabilities(1,491)(371)Net cash provided by operating activities51,84051,826Cash flows from investing activities:Investment in multi-client data library(24,527)(11,907)Purchase of property, plant and equipment(1,768)(3,674)Sales (purchases) of short-term investments20,000(80,000)Net cash used in investing activities(6,295)(95,581)Cash flows from financing activities:Payments on long-term debt(1,431)(1,748)Payment of preferred dividends(338)(338)Contribution from noncontrolling interest68200Proceeds from exercise of stock options24911,793Other financing activities385(37)Net cash (used in) provided by financing activities(1,067)9,870Effect of change in foreign currency exchange rates on cash and cash equivalents216300Net increase (decrease) in cash and cash equivalents44,694(33,585)Cash and cash equivalents at beginning of period42,40284,419Cash and cash equivalents at end of period$   87,096$   50,834ION GEOPHYSICAL CORPORATION AND SUBSIDIARIESSUMMARY OF SEGMENT INFORMATION(In thousands)(Unaudited)Three Months Ended March 31, 20122011Net revenues:   Solutions:      Data Processing$ 26,865$ 20,299      New Venture28,99422,450      Data Library10,26815,144      Total$ 66,127$ 57,893   Systems:      Towed Streamer$ 15,804$ 17,547      Ocean bottom3,5192      Other17,3836,411      Total$ 36,706$ 23,960   Software:      Software Systems$   8,370$ 8,427      Services507272      Total$   8,877$ 8,699   Total$ 111,710$ 90,552Gross profit:   Solutions$ 18,985$ 13,316   Systems15,81212,245   Software6,3595,578   Total$ 41,156$ 31,139Gross margin:   Solutions29%23%   Systems43%51%   Software72%64%   Total37%34%Income from operations:   Solutions$   9,606$ 5,812   Systems8,7406,080   Software5,4824,853   Corporate and other(12,185)(10,674)   Income from operations$ 11,643$ 6,071Operating margin:   Solutions15%10%   Systems24%25%   Software62%56%   Corporate and other(11%)(12%)   Total10%7%Reconciliation of Adjusted EBITDA to Net Income(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 or net income 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 EndedMarch 31,20122011Net income$        8,462$        450Interest expense, net1,5181,615Income tax expense3,445147Depreciation and amortization expense25,71027,396Equity in (earnings) losses of INOVA Geophysical(2,468)860Adjusted EBITDA$       36,667$    30,468SOURCE ION Geophysical Corporation