HOUSTON, May 4, 2016
/PRNewswire/ -- ION Geophysical Corporation (NYSE: IO) today
reported a first quarter 2016 net loss of $35.0 million, or $(3.30) per share, on revenues of $22.7 million, compared to a net loss of
$55.3 million, or $(5.04) per share, on revenues of $40.6 million in first quarter 2015.
Excluding special items reported one year ago, the Company's first
quarter 2015 adjusted net loss was $51.5
million, or $(4.70) per
share.
At March 31, 2016, the Company's total liquidity was
$102.5 million, consisting of cash
and cash equivalents of $76.7 million
and $25.8 million available on the
Company's revolving credit facility. While the Company had no
borrowings under its maximum $40.0
million revolving credit facility, the amount available to
draw under this facility was temporarily reduced due to a decline
in eligible account and unbilled receivables that collateralize the
facility.
The Company consumed cash of $8.3
million during the first quarter 2016, compared to
$29.2 million in the prior year
period. The Company reported EBITDA for the first quarter
2016 of $(17.2) million, compared to
$(38.1) million one year ago. A
reconciliation of EBITDA can be found in the financial tables of
this press release.
Brian Hanson, ION's President and
Chief Executive Officer, commented, "We expected our first quarter
results to be our weakest, with our revenues down approximately 44%
compared to our first quarter 2015. Despite this very low
revenue quarter, our 2015 cost reduction initiatives resulted in
first quarter cash from operations of $2.5
million, compared to $(6.7)
million a year ago.
"In April, we implemented additional cost saving initiatives,
further reducing our current workforce by over 12%. While
extremely difficult, we believe these steps were needed to further
streamline our organization and rightsize our company to be in line
with our current revenues. We have maintained the necessary
core capabilities to continue operations and to progress our
strategic initiatives. These reductions will produce approximately
$15 million in annualized savings, an
estimated $9 million in 2016, on top
of the $80 million in savings from
our initiatives last year.
"On a very positive note, as we announced yesterday, we are
about to begin mobilizing our ocean bottom vessels and crew to
conduct an OBS survey offshore Nigeria. A letter of
commitment for the project has been issued by an International Oil
Company, and we expect the contract to be finalized within the next
few weeks. We expect to begin acquiring data in late June or early
July, and to complete full demobilization by late in the third
quarter. Our technology is well suited for additional
opportunities in Nigeria and
West Africa, and we continue to
pursue active tenders and leads for projects in the area. We remain
optimistic about our ability to keep the crew deployed upon
completion of this project.
"Our first quarter Systems and Software segment revenues were
indicative of the low capacity utilization among our installed base
of equipment and of vessels utilizing our command and control
software. Our Solutions data processing revenues were very
low due in part because we did not receive final sales orders under
a significant data processing master contract by quarter end.
We expect our data processing revenues to increase through the
remainder of the year as we receive these final sales orders.
Also, similar to last year, we expect our Solutions new venture and
data library revenues to be stronger in the second half of the
year, as our customers are just now locking in their budgets for
2016 and are assessing the impact of the recent increase in oil
prices.
"In late April, we completed our bond exchange offer, retiring
$26 million in principal value of our
$175 million high yield bonds, using
$15 million of our cash. We
extended the maturity of $121 million
of our outstanding debt until the end of 2021, providing us with
additional flexibility and liquidity and putting us in a better
position to execute our strategic and operating plans in 2016 and
for years to come. As part of the Exchange Offer, we
increased the interest rate on the new bonds by 1%, to 9.125%, and
issued 1,205,477 of our common shares, utilizing 508,464 of our
treasury shares. We previously repurchased 451,791 shares,
pursuant to our stock repurchase program, which effectively reduces
the ultimate dilution attributable to the issuance of the 1,205,477
shares.
"Despite this very slow start to the year, we are pleased with
our OBS crew going back to work and the completion of our financial
restructurings. We expect our second half to be stronger than
the first, and we believe our current liquidity, coupled with our
further operational and financial restructurings, will enable us to
maintain our core capabilities and to continue to weather this deep
economic storm."
FIRST QUARTER 2016
The Company's segment revenues for the first quarter were as
follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
2015
|
|
% Change
|
Solutions
|
|
$
|
13,018
|
|
|
$
|
18,999
|
|
|
(31)%
|
Systems
|
|
5,359
|
|
|
12,769
|
|
|
(58)%
|
Software
|
|
4,288
|
|
|
8,810
|
|
|
(51)%
|
Ocean Bottom
Services
|
|
—
|
|
|
—
|
|
|
—%
|
Total
|
|
$
|
22,665
|
|
|
$
|
40,578
|
|
|
(44)%
|
Within the Solutions segment, new venture revenues were
$3.3 million, a 34% decrease from
first quarter 2015; data library revenues were $4.3 million, a 100% increase; and data
processing revenues were $5.4
million, a 54% decrease. While all businesses within
the Solutions segment continue to be impacted by the slowdown in
exploration spending, data processing revenues were also impacted
because the Company did not receive the final sales orders under a
significant master contract, thereby delaying the recognition of
revenue.
The decrease in Systems segment revenues was primarily due to a
reduction in new marine positioning system sales and repair and
replacement revenues attributable to reduced activity by seismic
contractors, as numerous vessels have been taken out of
service.
The decrease in Software segment revenues was primarily due to
lower Orca® licensing revenues. While Software
segment revenues were down 51% year over year, the segment
generated positive gross and operating margins of 59% and 23%,
respectively, during the quarter.
In the Ocean Bottom Services (OBS) segment, the Company's OBS
crew remained idle during the first quarter 2016, resulting in a
lack of revenue generation. However, with the recent award,
the Company is expected to begin recognizing project revenues
starting in late June or early July, with project completion
scheduled for late third quarter 2016.
Operating expenses were $21.2
million, down 31% from the $30.7
million of operating expenses, as adjusted, in first quarter
2015. This reduction was a result of the Company's cost
reduction efforts throughout 2015. With additional cost
reductions in second quarter 2016, the Company expects additional
savings in the second half of 2016.
Consolidated gross margins were (39)%, compared to gross
margins, as adjusted, of (34%) in first quarter 2015, and operating
margins were (133)%, compared to operating margins, as adjusted, of
(110%) in the prior year quarter. The decrease in
operating margins was driven by the decline in revenues across all
business segments and was partially offset by the Company's cost
reduction efforts.
CONFERENCE CALL
The Company has scheduled a conference call for Thursday,
May 5, 2016, 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 (877) 407-0672 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 May 19, 2016. To access the replay, dial
(877) 660-6853 and use pass code 13634520#.
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
Steve Bate
Executive 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, 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 performance of OceanGeo; 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, 2015 and its Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K filed during
2015.
Tables to follow
ION GEOPHYSICAL
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
Service
revenues
|
$
|
13,156
|
|
|
$
|
20,080
|
|
Product
revenues
|
9,509
|
|
|
20,498
|
|
Total net
revenues
|
22,665
|
|
|
40,578
|
|
Cost of
services
|
25,837
|
|
|
45,534
|
|
Cost of
products
|
5,758
|
|
|
10,832
|
|
Gross loss
|
(8,930)
|
|
|
(15,788)
|
|
Operating
expenses:
|
|
|
|
Research, development
and engineering
|
5,609
|
|
|
7,720
|
|
Marketing and
sales
|
4,010
|
|
|
7,833
|
|
General,
administrative and other operating expenses
|
11,580
|
|
|
15,348
|
|
Total operating
expenses
|
21,199
|
|
|
30,901
|
|
Loss from
operations
|
(30,129)
|
|
|
(46,689)
|
|
Interest expense,
net
|
(4,734)
|
|
|
(4,625)
|
|
Other income
(expense), net
|
120
|
|
|
(3,219)
|
|
Loss before income
taxes
|
(34,743)
|
|
|
(54,533)
|
|
Income tax
expense
|
293
|
|
|
983
|
|
Net loss
|
(35,036)
|
|
|
(55,516)
|
|
Net loss attributable
to noncontrolling interests
|
22
|
|
|
252
|
|
Net loss attributable
to ION
|
$
|
(35,014)
|
|
|
$
|
(55,264)
|
|
Net loss per
share:
|
|
|
|
Basic
|
$
|
(3.30)
|
|
|
$
|
(5.04)
|
|
Diluted
|
$
|
(3.30)
|
|
|
$
|
(5.04)
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
Basic
|
10,600
|
|
|
10,971
|
|
Diluted
|
10,600
|
|
|
10,971
|
|
ION GEOPHYSICAL
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
ASSETS
|
March
31, 2016
|
|
December
31, 2015
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
76,670
|
|
|
$
|
84,933
|
|
Accounts receivable,
net
|
15,057
|
|
|
44,365
|
|
Unbilled
receivables
|
17,730
|
|
|
19,937
|
|
Inventories
|
33,071
|
|
|
32,721
|
|
Prepaid expenses and
other current assets
|
13,724
|
|
|
14,807
|
|
Total current
assets
|
156,252
|
|
|
196,763
|
|
Property, plant,
equipment and seismic rental equipment, net
|
65,785
|
|
|
72,027
|
|
Multi-client data
library, net
|
123,581
|
|
|
132,237
|
|
Goodwill
|
25,595
|
|
|
26,274
|
|
Intangible assets,
net
|
4,381
|
|
|
4,810
|
|
Other
assets
|
3,029
|
|
|
2,977
|
|
Total
assets
|
$
|
378,623
|
|
|
$
|
435,088
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current maturities of
long-term debt
|
$
|
32,933
|
|
|
$
|
7,912
|
|
Accounts
payable
|
20,907
|
|
|
29,799
|
|
Accrued
expenses
|
29,001
|
|
|
34,287
|
|
Accrued multi-client
data library royalties
|
21,790
|
|
|
25,045
|
|
Deferred
revenue
|
6,021
|
|
|
6,560
|
|
Total current
liabilities
|
110,652
|
|
|
103,603
|
|
Long-term debt, net
of current maturities
|
148,410
|
|
|
175,080
|
|
Other long-term
liabilities
|
44,215
|
|
|
44,365
|
|
Total
liabilities
|
303,277
|
|
|
323,048
|
|
Equity:
|
|
|
|
Common
stock
|
106
|
|
|
107
|
|
Additional paid-in
capital
|
895,481
|
|
|
894,715
|
|
Accumulated
deficit
|
(794,545)
|
|
|
(759,531)
|
|
Accumulated other
comprehensive loss
|
(16,243)
|
|
|
(14,781)
|
|
Treasury
stock
|
(9,515)
|
|
|
(8,551)
|
|
Total stockholders'
equity
|
75,284
|
|
|
111,959
|
|
Noncontrolling
interest
|
62
|
|
|
81
|
|
Total
equity
|
75,346
|
|
|
112,040
|
|
Total liabilities and
equity
|
$
|
378,623
|
|
|
$
|
435,088
|
|
ION GEOPHYSICAL
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
Cash flows from
operating activities:
|
|
|
|
Net loss
|
$
|
(35,036)
|
|
|
$
|
(55,516)
|
|
Adjustments to
reconcile net loss to cash provided by (used in) operating
activities:
|
|
|
|
Depreciation and
amortization (other than multi-client data library)
|
5,672
|
|
|
6,525
|
|
Amortization of
multi-client data library
|
7,139
|
|
|
5,289
|
|
Stock-based
compensation expense
|
743
|
|
|
1,480
|
|
Deferred income
taxes
|
54
|
|
|
(12)
|
|
Change in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
29,211
|
|
|
74,388
|
|
Unbilled
receivables
|
2,212
|
|
|
(1,523)
|
|
Inventories
|
350
|
|
|
(468)
|
|
Accounts payable,
accrued expenses and accrued royalties
|
(10,558)
|
|
|
(39,144)
|
|
Deferred
revenue
|
(527)
|
|
|
3,137
|
|
Other assets and
liabilities
|
3,219
|
|
|
(862)
|
|
Net cash provided by
(used in) operating activities
|
2,479
|
|
|
(6,706)
|
|
Cash flows from
investing activities:
|
|
|
|
Cash invested in
multi-client data library
|
(6,327)
|
|
|
(9,088)
|
|
Purchase of property,
plant, equipment and seismic rental assets
|
(266)
|
|
|
(11,994)
|
|
Other investing
activities
|
—
|
|
|
257
|
|
Net cash used in
investing activities
|
(6,593)
|
|
|
(20,825)
|
|
Cash flows from
financing activities:
|
|
|
|
Repurchase of common
stock
|
(964)
|
|
|
—
|
|
Payments on notes
payable and long-term debt
|
(2,212)
|
|
|
(2,066)
|
|
Costs associated with
issuance of debt
|
(1,315)
|
|
|
—
|
|
Other financing
activities
|
13
|
|
|
31
|
|
Net cash used in
financing activities
|
(4,478)
|
|
|
(2,035)
|
|
Effect of change in
foreign currency exchange rates on cash and cash
equivalents
|
329
|
|
|
396
|
|
Net decrease in cash
and cash equivalents
|
(8,263)
|
|
|
(29,170)
|
|
Cash and cash
equivalents at beginning of period
|
84,933
|
|
|
173,608
|
|
Cash and cash
equivalents at end of period
|
$
|
76,670
|
|
|
$
|
144,438
|
|
ION GEOPHYSICAL
CORPORATION AND SUBSIDIARIES
|
SUMMARY OF SEGMENT
INFORMATION
|
(In
thousands)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
Net
revenues:
|
|
|
|
Solutions:
|
|
|
|
New
Venture
|
$
|
3,306
|
|
|
$
|
5,029
|
|
Data
Library
|
4,272
|
|
|
2,137
|
|
Total multi-client
revenues
|
7,578
|
|
|
7,166
|
|
Data
Processing
|
5,440
|
|
|
11,833
|
|
Total
|
13,018
|
|
|
18,999
|
|
Systems:
|
|
|
|
Towed
Streamer
|
2,457
|
|
|
5,165
|
|
Other
|
2,902
|
|
|
7,604
|
|
Total
|
5,359
|
|
|
12,769
|
|
Software:
|
|
|
|
Software
Systems
|
4,150
|
|
|
7,729
|
|
Services
|
138
|
|
|
1,081
|
|
Total
|
4,288
|
|
|
8,810
|
|
Ocean Bottom
Services
|
$
|
—
|
|
|
—
|
|
Total
|
$
|
22,665
|
|
|
$
|
40,578
|
|
Gross profit
(loss):
|
|
|
|
Solutions
|
$
|
(9,773)
|
|
|
$
|
(10,392)
|
|
Systems
|
1,363
|
|
|
4,559
|
|
Software
|
2,526
|
|
|
5,590
|
|
Ocean Bottom
Services
|
(3,046)
|
|
|
(15,545)
|
|
Total
|
$
|
(8,930)
|
|
|
$
|
(15,788)
|
|
Gross
margin:
|
|
|
|
Solutions
|
(75)
|
%
|
|
(55)
|
%
|
Systems
|
25
|
%
|
|
36
|
%
|
Software
|
59
|
%
|
|
63
|
%
|
Ocean Bottom
Services
|
—
|
%
|
|
—
|
%
|
Total
|
(39)
|
%
|
|
(39)
|
%
|
Income (loss) from
operations:
|
|
|
|
Solutions
|
$
|
(15,477)
|
|
|
$
|
(21,778)
|
|
Systems
|
(2,509)
|
|
|
1,014
|
|
Software
|
996
|
|
|
3,335
|
|
Ocean Bottom
Services
|
(4,214)
|
|
|
(17,559)
|
|
Corporate and
other
|
(8,925)
|
|
|
(11,701)
|
|
Total
|
$
|
(30,129)
|
|
|
$
|
(46,689)
|
|
Operating
margin:
|
|
|
|
Solutions
|
(119)
|
%
|
|
(115)
|
%
|
Systems
|
(47)
|
%
|
|
8
|
%
|
Software
|
23
|
%
|
|
38
|
%
|
Ocean Bottom
Services
|
—
|
%
|
|
—
|
%
|
Corporate and
other
|
(39)
|
%
|
|
(29)
|
%
|
Total
|
(133)
|
%
|
|
(115)
|
%
|
ION GEOPHYSICAL CORPORATION AND
SUBSIDIARIES
Reconciliation of EBITDA to Net
Loss
(Non-GAAP Measure)
(In
thousands)
(Unaudited)
The term EBITDA represents net loss before interest expense,
interest income, income taxes, and depreciation and amortization
charges. 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 loss or
cash flow measures prepared in accordance with generally accepted
accounting principles or as a measure of profitability or
liquidity. Additionally, EBITDA may not be comparable to other
similarly titled measures of other companies. The Company has
included EBITDA as a supplemental disclosure because its management
believes that 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
March 31,
|
|
2016
|
|
2015
|
Net loss
|
$
|
(35,036)
|
|
|
$
|
(55,516)
|
|
Interest expense,
net
|
4,734
|
|
|
4,625
|
|
Income tax
expense
|
293
|
|
|
983
|
|
Depreciation and
amortization expense
|
12,811
|
|
|
11,814
|
|
EBITDA
|
$
|
(17,198)
|
|
|
$
|
(38,094)
|
|
ION GEOPHYSICAL CORPORATION AND
SUBSIDIARIES
Reconciliation of Special Items to Diluted
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 adjusted loss from operations or adjusted net loss,
which excludes certain charges or amounts. This adjusted loss
amount is not a measure of financial performance under GAAP.
Accordingly, it should not be considered as a substitute for loss
from operations, net 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 months ended March
31, 2015:
|
|
Three Months Ended
March 31, 2015
|
|
|
As
Reported
|
|
Special
Items
|
|
As
Adjusted
|
Net
revenues
|
|
$
|
40,578
|
|
|
$
|
—
|
|
|
$
|
40,578
|
|
Cost of
sales
|
|
56,366
|
|
|
(1,813)
|
|
|
54,553
|
|
Gross loss
|
|
(15,788)
|
|
|
1,813
|
|
|
(13,975)
|
|
Operating
expenses
|
|
30,901
|
|
|
(198)
|
|
|
30,703
|
|
Loss from
operations
|
|
(46,689)
|
|
|
2,011
|
|
|
(44,678)
|
|
Interest expense,
net
|
|
(4,625)
|
|
|
—
|
|
|
(4,625)
|
|
Other income
(expense), net
|
|
(3,219)
|
|
|
1,913
|
|
|
(1,306)
|
|
Income tax
expense
|
|
983
|
|
|
—
|
|
|
983
|
|
Net loss
|
|
(55,516)
|
|
|
3,924
|
|
|
(51,592)
|
|
Net loss attributable
to noncontrolling interest
|
|
252
|
|
|
(172)
|
|
|
80
|
|
Net loss attributable
to ION
|
|
$
|
(55,264)
|
|
|
$
|
3,752
|
|
|
$
|
(51,512)
|
|
Net loss per
share:
|
|
|
|
|
|
|
Basic
|
|
$
|
(5.04)
|
|
|
|
|
$
|
(4.70)
|
|
Diluted
|
|
$
|
(5.04)
|
|
|
|
|
$
|
(4.70)
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
10,971
|
|
|
|
|
10,971
|
|
Diluted
|
|
10,971
|
|
|
|
|
10,971
|
|
|
|
(1)
|
Represents severance
and facility charges related to first quarter 2015
restructuring.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/ion-reports-first-quarter-2016-results-300263144.html
SOURCE ION Geophysical Corporation