HOUSTON, Sept. 2, 2015 /PRNewswire/ -- ION Geophysical
Corporation (the "Company") (NYSE: IO) today announced an
aggressive cost reduction initiative as part of an overall plan to
align operating expenses with business conditions and recent
declines in the current commodity price environment for crude oil
and natural gas. The Company believes this cost reduction
program will more appropriately scale its operations to the current
commodity price environment.
The Company's business is a scalable, asset light business with
the flexibility to expand and contract in response to changing
market conditions. The Company is adopting the aggressive
cost reduction measures to reduce expenses to more closely align
with the decreases in revenue experienced in the first half of the
year. The Company's ability to rapidly decrease expenses is a
key part of the flexible, asset light strategy employed by the
business and enables the Company to more effectively manage
fluctuations in revenues like those experienced in the first half
of 2015. The Company remains rapidly scalable to respond to changes
in revenues. When market conditions improve, the Company will
be well positioned to efficiently grow to meet demand.
The cost reduction initiative is expected to result in an
approximate 25% decrease in the Company's global workforce and is
expected to be substantially completed by September 30, 2015. The Company expects to
incur $5-6 million in termination
costs, all of which are expected to require cash expenditures, and
the majority of which are expected to be incurred in the current
fiscal year. The Company will provide additional details of
these charges when it reports its results for the third quarter of
2015 later this year.
In connection with this plan, the Company expects to reduce
annual operating costs by approximately $40
million. Such cost savings will consist primarily of payroll
reductions and reductions in discretionary spending associated with
a smaller workforce, as well as additional cost control
measures. When combined with the cost savings undertaken
since December of 2014, the Company will have achieved a total
estimated annual savings of $80
million and a 50% reduction in its workforce. The cost
savings initiatives were across all groups within the Company, but
the Company is maintaining key capabilities in all its groups,
including Ocean Bottom, and its readiness to rescale the business
as revenues increase.
"The difficult cost reduction initiative we are undertaking
today is necessary to prudently scale the Company during this
period of significantly decreased revenues, which we believe will
extend into 2017," Brian Hanson, the
Chief Executive Officer for the Company commented. "We are an
asset light company and have the ability to adjust our cost
structure to align with revenue levels. When commodity prices and
consequently the business's revenues recover, we will rescale our
workforce to meet the demand."
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 iongeo.com.
Contacts
Jamey S.
Seely
Executive Vice President and General Counsel
+1.281.552.3011
This press release contains "forward-looking" statements,
including, without limitation, statements related to the estimated
charges for the restructuring, including related estimated cash
expenditures, and the timing for the completion of the reduction in
workforce. Any statements contained in this press release
that are not statements of historical fact are forward-looking
statements. These forward-looking statements are based upon
the Company's current expectations. Forward-looking
statements involve risks and uncertainties. The Company's
actual results and the timing of events could differ materially
from those anticipated in such forward-looking statements as a
result of these risks and uncertainties, which include, without
limitation, the risk that restructuring costs may be greater than
currently anticipated, and risks related to the impact of the work
force reduction on the Company's business and unanticipated charges
not currently contemplated that may occur as a result of the
reduction in workforce. The Company expressly disclaims any
obligation to publicly update or revise any forward-looking
statement, whether as a result of any change in events, conditions
or circumstances or otherwise.
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SOURCE ION Geophysical Corporation