Quarterly Report (10-q)

Date : 05/02/2019 @ 8:06PM
Source : Edgar (US Regulatory)
Stock : ION Geophysical Corporation New (IO)
Quote : 8.74  0.0 (0.00%) @ 11:59AM
ION Geophysical share price Chart

Quarterly Report (10-q)

    

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-12691
ION GEOPHYSICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
 
22-2286646
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
2105 CityWest Blvd. Suite 100
 
 
Houston, Texas
 
77042-2839
(Address of principal executive offices)
 
(Zip Code)
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 933-3339
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý      No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ý      No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
o
 
Accelerated filer
ý
 
 
 
 
 
 
Non-accelerated filer
 
o   
 
Smaller reporting company
o
 
 
 
 
 
 
 
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨      No   ý

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
IO
New York Stock Exchange
At April 29, 2019 , there were 14,069,520 shares of common stock, par value $0.01 per share, outstanding.

1

    

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS FOR FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2019
 
 
PAGE
PART I. Financial Information
 
Item 1. Financial Statements (Unaudited)
 
Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018
Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018
Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2019 and 2018
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018
Condensed Consolidated Statements of Stockholders' (Deficit) Equity for the three months ended March 31, 2019 and 2018
Footnotes to Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
 
 
PART II. Other Information
 
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits

2

    

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
March 31, 2019
 
December 31, 2018
 
(In thousands, except share data)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
38,407

 
$
33,551

Accounts receivable, net
29,104

 
26,128

Unbilled receivables
14,442

 
44,032

Inventories, net
14,094

 
14,130

Prepaid expenses and other current assets
7,486

 
7,782

Total current assets
103,533

 
125,623

Deferred income tax asset, net
8,594

 
7,191

Property, plant and equipment, net
13,257

 
13,041

Multi-client data library, net
66,932

 
73,544

Goodwill
23,592

 
22,915

Right-of-use assets
44,979

 
47,803

Other assets
1,819

 
2,435

Total assets
$
262,706

 
$
292,552

LIABILITIES AND (DEFICIT) EQUITY
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
1,787

 
$
2,228

Accounts payable
30,384

 
34,913

Accrued expenses
32,277

 
31,411

Accrued multi-client data library royalties
26,310

 
29,256

Deferred revenue
7,410

 
7,710

Current maturities of operating lease liabilities
11,964

 
12,214

Total current liabilities
110,132

 
117,732

Long-term debt, net of current maturities
119,482

 
119,513

Operating lease liabilities, net of current maturities
42,721

 
45,592

Other long-term liabilities
1,810

 
1,891

Total liabilities
274,145

 
284,728

(Deficit) Equity:
 
 
 
Common stock, $0.01 par value; authorized 26,666,667 shares; outstanding 14,069,520 and 14,015,615 shares at March 31, 2019 and December 31, 2018, respectively.
141

 
140

Additional paid-in capital
953,679

 
952,626

Accumulated deficit
(947,452
)
 
(926,092
)
Accumulated other comprehensive loss
(19,472
)
 
(20,442
)
Total stockholders’ (deficit) equity
(13,104
)
 
6,232

Noncontrolling interest
1,665

 
1,592

Total (deficit) equity
(11,439
)
 
7,824

Total liabilities and (deficit) equity
$
262,706

 
$
292,552

See accompanying Footnotes to Condensed Consolidated Financial Statements .

3

    

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands, except per share data)
Service revenues
$
28,128

 
$
25,086

Product revenues
8,828

 
8,422

Total net revenues
36,956

 
33,508

Cost of services
22,446

 
22,329

Cost of products
4,598

 
4,326

Gross profit
9,912

 
6,853

Operating expenses:
 
 
 
Research, development and engineering
5,357

 
4,255

Marketing and sales
5,793

 
5,098

General, administrative and other operating expenses
14,699

 
10,140

Total operating expenses
25,849

 
19,493

Loss from operations
(15,937
)
 
(12,640
)
Interest expense, net
(3,112
)
 
(3,836
)
Other expense, net
(792
)
 
(791
)
Loss before income taxes
(19,841
)
 
(17,267
)
Income tax expense
1,407

 
1,072

Net loss
(21,248
)
 
(18,339
)
Net income attributable to noncontrolling interest
(112
)
 
(87
)
Net loss attributable to ION
$
(21,360
)
 
$
(18,426
)
Net loss per share:
 
 
 
Basic
$
(1.52
)
 
$
(1.44
)
Diluted
$
(1.52
)
 
$
(1.44
)
Weighted average number of common shares outstanding:
 
 
 
Basic
14,033

 
12,813

Diluted
14,033

 
12,813


See accompanying Footnotes to Condensed Consolidated Financial Statements .



4

    

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Net loss
$
(21,248
)
 
$
(18,339
)
Other comprehensive loss, net of taxes, as appropriate:
 
 
 
Foreign currency translation adjustments
970

 
1,825

Comprehensive net loss
(20,278
)
 
(16,514
)
Comprehensive income attributable to noncontrolling interest
(112
)
 
(87
)
Comprehensive net loss attributable to ION
$
(20,390
)
 
$
(16,601
)
See accompanying Footnotes to Condensed Consolidated Financial Statements .


5

    

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(21,248
)
 
$
(18,339
)
Adjustments to reconcile net loss to cash provided by operating activities:
 
 
 
Depreciation and amortization (other than multi-client data library)
1,035

 
2,523

Amortization of multi-client data library
11,100

 
9,793

Stock-based compensation expense
1,293

 
812

Deferred income taxes
(1,398
)
 
(117
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(2,870
)
 
(10,084
)
Unbilled receivables
29,498

 
20,919

Inventories
81

 
(164
)
Accounts payable, accrued expenses and accrued royalties
(2,013
)
 
(10,155
)
Deferred revenue
(333
)
 
2,381

Other assets and liabilities
253

 
3,039

Net cash provided by operating activities
15,398

 
608

Cash flows from investing activities:
 
 
 
Investment in multi-client data library
(8,767
)
 
(9,240
)
Purchase of property, plant and equipment
(807
)
 
(61
)
Net cash used in investing activities
(9,574
)
 
(9,301
)
Cash flows from financing activities:
 
 
 
Payments under revolving line of credit

 
(10,000
)
Payments on notes payable and long-term debt
(715
)
 
(29,144
)
Net proceeds from issuance of stock

 
47,219

Other financing activities
(239
)
 
(575
)
Net cash (used in) provided by financing activities
(954
)
 
7,500

Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash
81

 
(113
)
Net increase (decrease) in cash, cash equivalents and restricted cash
4,951

 
(1,306
)
Cash, cash equivalents and restricted cash at beginning of period
33,854

 
52,419

Cash, cash equivalents and restricted cash at end of period
$
38,805

 
$
51,113

The following table is a reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
 
March 31,
 
2019
 
2018
 
(In thousands)
 Cash and cash equivalents
$
38,407

 
$
50,750

 Restricted cash included in prepaid expenses and other current assets
398

 
60

 Restricted cash included in other long-term assets

 
303

 Total cash, cash equivalents, and restricted cash shown in statements of cash flows
$
38,805

 
$
51,113

See accompanying Footnotes to Condensed Consolidated Financial Statements .

6

    

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(UNAUDITED)
 
Three Months Ended March 31, 2019
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Noncontrolling Interests
 
Total Equity
(Deficit)
 (In thousands, except shares)
Shares
 
Amount
 
Balance at January 1, 2019
14,015,615

 
$
140

 
$
952,626

 
$
(926,092
)
 
$
(20,442
)
 
$
1,592

 
$
7,824

Net (loss) income

 

 

 
(21,360
)
 

 
112

 
(21,248
)
Translation adjustments

 

 

 

 
970

 
(39
)
 
931

Stock-based compensation expense

 

 
1,293

 

 

 

 
1,293

Exercise of stock options
5,750

 

 
18

 

 

 

 
18

Vesting of restricted stock units/awards
68,199

 
1

 
(1
)
 

 

 

 

Restricted stock cancelled for employee minimum income taxes
(20,044
)
 

 
(257
)
 

 

 

 
(257
)
Balance at March 31, 2019
14,069,520

 
$
141

 
$
953,679

 
$
(947,452
)
 
$
(19,472
)
 
$
1,665

 
$
(11,439
)
 
Three Months Ended March 31, 2018
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Noncontrolling Interests
 
Total Equity
 (In thousands, except shares)
Shares
 
Amount
 
Balance at January 1, 2018
12,019,701

 
$
120

 
$
903,247

 
$
(854,921
)
 
$
(18,879
)
 
$
1,239

 
$
30,806

Net (loss) income

 

 

 
(18,426
)
 

 
87

 
(18,339
)
Translation adjustments

 

 

 

 
1,825

 
(9
)
 
1,816

Stock-based compensation expense

 

 
812

 

 

 

 
812

Exercise of stock options
11,250

 

 
35

 

 

 

 
35

Vesting of restricted stock units/awards
81,014

 
1

 
(1
)
 

 

 

 

Restricted stock cancelled for employee minimum income taxes
(22,456
)
 

 
(610
)
 

 

 

 
(610
)
Public equity offering
1,820,000

 
18

 
46,981

 

 

 

 
46,999

Balance at March 31, 2018
13,909,509

 
$
139

 
$
950,464

 
$
(873,347
)
 
$
(17,054
)
 
$
1,317

 
$
61,519


7

    


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1)      Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated balance sheet of ION Geophysical Corporation and its subsidiaries (collectively referred to as the “Company” or “ION,” unless the context otherwise requires) at December 31, 2018 , has been derived from the Company’s audited consolidated financial statements at that date. The condensed consolidated balance sheet at March 31, 2019, and the condensed consolidated statements of operations, comprehensive loss and cash flows for the three months ended March 31, 2019 and 2018, are unaudited. In the opinion of management, all adjustments of a normal recurring nature that are necessary for a fair presentation of the results of the interim period have been included. Interim results are not necessarily indicative of the operating results for a full year or of future operations. Intercompany transactions and balances have been eliminated.
The Company’s condensed consolidated financial statements reflect a non-redeemable noncontrolling interest in a majority-owned affiliate which is reported as a separate component of equity in “Noncontrolling interest” in the condensed consolidated balance sheets. Net income attributable to noncontrolling interest is stated separately in the condensed consolidated statements of operations. The activity for this noncontrolling interest relates to proprietary processing projects in Brazil.
These condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements presented in accordance with GAAP have been omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 .
Certain prior period amounts have been reclassified to conform to the current period presentation, including the change in reportable segments presentation which had no impact on the condensed consolidated financial statements and the recognition of right-of-use (“ROU”) assets and operating lease liabilities on the condensed consolidated balance sheets as a result of the adoption of the new lease standard.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in Note 1 “Summary of Significant Accounting Policies.”  of the Annual Report on Form 10-K for the year ended December 31, 2018 . There have been no changes in such policies or the application of such policies during the  three months ended March 31, 2019  except as discussed in Note 2 “ Recent Accounting Pronouncements ” and Note 11 “ Lease Obligations.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management that affects the reported amounts in the condensed consolidated financial statements and accompanying notes. Areas involving significant estimates include, but not limited to, accounts and unbilled receivables, inventory valuation, sales forecast related to multi-client data libraries, impairment of property, plant and equipment and goodwill and deferred taxes. Actual results could materially differ from those estimates.
(2)      Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
On January 1, 2019, the Company adopted ASU 2016-2, “Leases (Topic 842)” using the modified retrospective method. This ASU requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under the previous guidance. The Company used January 1, 2018, the beginning of the earliest comparative period presented in its condensed consolidated financial statements, as the date of initial application. The Company elected the practical expedients upon transition which will retain the lease classification for leases and any unamortized initial direct costs that existed prior to the adoption of the standard.
The adoption of the standard resulted in ROU assets of $59.5 million and operating lease liabilities of $70.6 million  on the condensed consolidated balance sheets as of January 1, 2018. The difference between the ROU assets and operating lease liabilities is due to the derecognition of $11.1 million in deferred rent recorded within other long-term liabilities. There was no impact on the condensed consolidated statements of operations and cash flows. The standard had no impact on the debt

8

    

covenant compliance under existing agreements. Short-term leases. which are leases with a duration of twelve months or less, have not been recorded in the condensed consolidated balance sheets.
Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.”  The guidance will replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. The Company is in the initial stages of evaluating the impact of this standard on the condensed consolidated financial statements.
(3)      Segment Information
During the current quarter, the Company consolidated its operating segments from three into two therefore eliminating the separate presentation of Ocean Bottom Integrated Technologies segment. This consolidation aligns with the Company’s asset light business model and evolved strategy to commercialize components of the Company’s next generation ocean bottom nodal system, 4Sea, instead of operating a crew with vessel and equipment assets. The Company is offering 4Sea components more broadly to the growing number of OBS service providers under recurring revenue commercial strategies to enable it to share in the value the technology delivers. The Company may also license the right to manufacture and use the 4Sea nodal technology to a service provider on a value-based pricing model, such as a royalty stream. Such licensing would be recognized through the relevent segments, either E&P Technology & Services or Operations Optimization.
Accordingly, effective for the first quarter of 2019, the Company evaluates and reviews its results of operations based on two reporting segments: E&P Technology & Services and Operations Optimization. Refer to Item 2. “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information about each business segment’s business, products and services.
The segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Operating Decision Maker in determining how to allocate resources and evaluate performance. The Company measures segment operating results based on income (loss) from operations.
Previously reported segment information has been retrospectively revised throughout the condensed consolidated financial statements, as applicable, for all periods presented to reflect the changes in the Company’s reporting segments. These changes did not have an impact on the Company’s condensed consolidated financial statements. These changes did not affect the Company’s reporting units used for allocating and testing goodwill for impairment.

9

    

The following table is a summary of segment information (in thousands):
 
Three Months Ended March 31,
 
 
2019
 
2018
 
Net revenues:
 
 
 
 
E&P Technology & Services:
 
 
 
 
New Venture
$
13,471

 
$
13,726

 
Data Library
9,948

 
5,948

 
Total multi-client revenues
23,419

 
19,674

 
Imaging Services
3,684

 
4,894

 
Total
27,103

 
24,568

 
Operations Optimization:
 
 
 
 
Devices
4,820

 
4,158

 
Optimization Software & Services
5,033

 
4,782

 
Total
9,853

 
8,940

 
Total
$
36,956

 
$
33,508

 
Gross profit (loss):




E&P Technology & Services
$
5,440

 
$
4,343

 
Operations Optimization
4,516

 
4,311

 
Segment gross profit
9,956

 
8,654

 
Other
(44
)
(a)
(1,801
)
(a)
Total
$
9,912

 
$
6,853

 
Gross margin:
 
 
 
 
E&P Technology & Services
20
%
 
18
%
 
Operations Optimization
46
%
 
48
%
 
Segment gross margin
27
%
 
26
%
 
Other
%
 
%
 
Total
27
%
 
20
%
 
Income (loss) from operations:
 
 
 
 
E&P Technology & Services
$
(1,615
)
 
$
(794
)
 
Operations Optimization
170

 
786

 
Support and other
(14,492
)
(b)
(12,632
)
(b)
Loss from operations
(15,937
)
 
(12,640
)
 
Interest expense, net
(3,112
)
 
(3,836
)
 
Other expense, net
(792
)
 
(791
)
 
Loss before income taxes
$
(19,841
)
 
$
(17,267
)
 
(a) Relates to gross loss of previously reported Ocean Bottom Integrated Technologies segment.
(b) Includes loss from operations of previously reported Ocean Bottom Integrated Technologies segment of $0.8 million and $2.8 million for the three months ended March 31, 2019 and 2018, respectively, which includes item (a) above and operating expenses of $0.8 million and $1.0 million for the three months ended March 31, 2019 and 2018, respectively.
(4)      Revenue From Contracts With Customers
The Company derives revenue from the (i) sale or license of multi-client and proprietary data, imaging services and E&P Advisors consulting services within its E&P Technologies & Services segment; (ii) sale, license and repair of seismic data acquisition systems and other seismic equipment; and (iii) sale or license of seismic command and control software systems and software solutions for operations management within its Operations Optimization segment. All E&P Technology & Services’ revenues and the services component of Optimization Software & Services’ revenues under Operations Optimization segment are classified as service revenues. All other revenues are classified as product revenues.
The Company uses a five-step model to determine proper revenue recognition from customer contracts. Revenue is recognized when (i) a contract is approved by all parties; (ii) the goods or services promised in the contract are identified; (iii) the consideration we expect to receive in exchange for the goods or services promised is determined; (iv) the consideration is allocated to the goods and services in the contract; and (v) control of the promised goods or services is transferred to the customer. The Company does not disclose the value of contractual future performance obligations such as backlog with an original expected length of one year or less within the footnotes.

10

    

Revenue by Geographic Area
The following table is a summary of net revenues by geographic area (in thousands):
 
Three months ended March 31,
 
2019
 
2018
Latin America
$
13,531

 
$
9,852

Europe
10,392

(a)  
5,549

North America
7,157

 
8,048

Africa
2,389

 
5,019

Asia Pacific
1,867

 
3,934

Middle East
1,359

 
749

Commonwealth of Independent States
261

 
357

Total
$
36,956

 
$
33,508

(a) Increase is primarily attributable to data library sales to European customers.
See Footnote 3 “Segment Information” of footnotes to condensed consolidated financial statements for revenue by segment for the three months ended March 31, 2019 and 2018 .
Unbilled Receivables
Unbilled receivables relate to revenues recognized on multi-client surveys, imaging services and devices equipment repairs on a proportionate basis, and on licensing of multi-client data libraries for which invoices have not yet been presented to the customer. The following table is a summary of unbilled receivables (in thousands):
 
March 31, 2019
 
December 31, 2018
New Venture
$
7,342

 
$
38,430

Imaging Services
6,159

 
5,075

Devices
941

 
527

Total
$
14,442

 
$
44,032

The changes in unbilled receivables are as follows (in thousands):
 Unbilled receivables at December 31, 2018
$
44,032

 Recognition of unbilled receivables
36,376

 Revenues billed to customers
(65,966
)
Unbilled receivables at March 31, 2019
$
14,442

Deferred Revenue
Billing practices are governed by the terms of each contract based upon achievement of milestones or pre-agreed schedules. Billing does not necessarily correlate with revenue recognized on a proportionate basis as work is performed and control is transferred to the customer. Deferred revenue represents cash received in excess of revenue not yet recognized as of the reporting period, but will be recognized in future periods. The following table is a summary of deferred revenues (in thousands):
 
March 31, 2019
 
December 31, 2018
New Venture
$
6,059

 
$
5,797

Imaging Services
51

 
307

Devices
562

 
626

Optimization Software & Services
738

 
980

Total
$
7,410

 
$
7,710


11

    

The changes in deferred revenues are as follows (in thousands):
Deferred revenue at December 31, 2018
$
7,710

Cash collected in excess of revenue recognized
280

Recognition of deferred revenue  (a)
(580
)
Deferred revenue at March 31, 2019
$
7,410

(a) The majority of deferred revenue recognized relates to Company’s Ventures group.
The Company expects to recognize all deferred revenue within the next 12 months.
Credit Risks
The Company had one customer with sales that exceeded 10% of the Company’s consolidated net revenues for the three months ended March 31, 2019 . The Company had two customers with sales that each exceeded 10% of the Company’s consolidated net revenues for the three months ended March 31, 2018 . Revenues related to these customers are included within the E&P Technology & Services segment.
At  March 31, 2019 , the Company had two customers that accounted for 26% of the Company’s total combined accounts receivable and unbilled receivable balances. At March 31, 2018 , the Company had no customers with a balance greater than 10%  of the Company’s total combined accounts receivable and unbilled receivable balances.
(5)      Long-term Debt

The following table is a summary of long-term debt (in thousands):    
 
 
March 31, 2019
 
December 31, 2018
Senior secured second-priority lien notes  (maturing December 15, 2021)
 
$
120,569

 
$
120,569

Revolving credit facility (maturing August 16, 2023) (a)
 

 

Equipment finance leases (Note 11)
 
2,658

 
2,938

Other debt
 
724

 
1,159

Costs associated with issuances of debt
 
(2,682
)
 
(2,925
)
Total
 
121,269

 
121,741

Current maturities of long-term debt
 
(1,787
)
 
(2,228
)
Long-term debt, net of current maturities
 
$
119,482

 
$
119,513

(a) The maturity of the Credit Facility will accelerate to October 31, 2021 if the Company is unable to repay or extend the maturity of the Second Lien Notes.
Revolving Credit Facility
On August 16, 2018, ION Geophysical Corporation and its material U.S. subsidiaries; GX Technology Corporation, ION Exploration Products (U.S.A) Inc. and I/O Marine Systems Inc. (the “Material U.S. Subsidiaries”), along with GX Geoscience Corporation, S. de R.L. de C.V., a limited liability company (Sociedad de Responsibilidad Limitada de Capital Variable) organized under the laws of Mexico, and a subsidiary of the Company (the “Mexican Subsidiary”), (the Material U.S. Subsidiaries and the Mexican Subsidiary are collectively, the “Subsidiary Borrowers”, together with ION Geophysical Corporation are the “Borrowers”), the financial institutions party thereto, as lenders, and PNC Bank, National Association (“PNC”), as agent for the lenders, entered into that certain Third Amendment and Joinder to Revolving Credit and Security Agreement (the “Third Amendment”), amending the Revolving Credit and Security Agreement, dated as of August 22, 2014 (as previously amended by the First Amendment to Revolving Credit and Security Agreement, dated as of August 4, 2015 and the Second Amendment to Revolving Credit and Security Agreement, dated as of April 28, 2016, the “Credit Agreement”). The Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third Amendment is herein called the “Credit Facility”).
The Credit Facility is available to provide for the Borrowers’ general corporate needs, including working capital requirements, capital expenditures, surety deposits and acquisition financing.
The Third Amendment amended the Credit Agreement to, among other things:
extend the maturity date of the Credit Facility by approximately four years (from August 22, 2019 to August 16, 2023), subject to the Company’s retirement or extension of the maturity date of its Second Lien Notes, as defined below, which mature on December 15, 2021;
increase the maximum revolver amount by $10.0 million (from $40.0 million to $50.0 million );
increase the borrowing base percentage of the net orderly liquidation value as it relates to the multi-client data library (not to exceed $28.5 million , up from the previous maximum of $15.0 million for the multi-client data library component);

12

    

include the eligible billed receivables of the Mexican Subsidiary up to a maximum of $5.0 million in the borrowing base calculation and joins the Mexican Subsidiary as a borrower thereunder (with a maximum exposure of $5.0 million ) and require the equity and assets of the Mexican Subsidiary to be pledged to secure obligations under the facility;
modify the interest rate such that the maximum interest rate remains consistent with the fixed interest rate prior to the Third Amendment (that is, 3.00% per annum for domestic rate loans and 4.00% per annum for LIBOR rate loans), but now lowers the range down to a minimum interest rate of 2.00% for domestic rate loans and 3.00% for LIBOR rate loans based on a leverage ratio for the preceding four-quarter period;
decrease the minimum excess borrowing availability threshold which (if the Borrowers have minimum excess borrowing availability below any such threshold) triggers the agent’s right to exercise dominion over cash and deposit accounts; and
modify the trigger required to test for compliance with the fixed charges coverage ratio, which is further described below.
The maximum amount under the Credit Facility is the lesser of $50.0 million or a monthly borrowing base. The borrowing base under the Credit Facility will increase or decrease monthly using a formula based on certain eligible receivables, eligible inventory and other amounts, including a percentage of the net orderly liquidation value of the Borrowers’ multi-client library.  As of March 31, 2019 , the borrowing base under the Credit Facility was $39.7 million , and there was no indebtedness under the Credit Facility.
The obligations of Borrowers under the Credit Facility are secured by a first-priority security interest in 100% of the stock of the Subsidiary Borrowers and 65% of the equity interest in ION International Holdings L.P., and by substantially all other assets of the Borrowers. However, the first-priority security interest in the other assets of the Mexican Subsidiary is capped to a maximum exposure of $5.0 million .
The Credit Facility contains covenants that, among other things, limit or prohibit the Borrowers, subject to certain exceptions and qualifications, from incurring additional indebtedness in excess of permitted indebtedness (including capital lease obligations), repurchasing equity, paying dividends or distributions, granting or incurring additional liens on the Borrowers’ properties, pledging shares of the Borrowers’ subsidiaries, entering into certain merger transactions, entering into transactions with the Company’s affiliates, making certain sales or other dispositions of the Borrowers’ assets, making certain investments, acquiring other businesses and entering into sale-leaseback transactions with respect to the Borrowers’ property.
The Credit Facility requires that the Borrowers maintain a minimum fixed charge coverage ratio of 1.1 to 1.0 as of the end of each fiscal quarter during the existence of a covenant testing trigger event. The fixed charge coverage ratio is defined as the ratio of (i) ION Geophysical Corporation’s EBITDA, minus unfunded capital expenditures made during the relevant period, minus distributions (including tax distributions) and dividends made during the relevant period, minus cash taxes paid during the relevant period, to (ii) certain debt payments made during the relevant period. A covenant testing trigger event occurs upon (a) the occurrence and continuance of an event of default under the Credit Facility or (b) by a two-step process based on (i) a minimum excess borrowing availability threshold (excess borrowing availability less than $6.25 million for five consecutive days or $5.0 million on any given day), and (ii) the Borrowers’ unencumbered cash maintained in a PNC deposit account is less than the Borrowers’ then outstanding obligations.
At March 31, 2019 , ION Geophysical Corporation was in compliance with all of the covenants under the Credit Facility.
The Credit Facility contains customary event of default provisions (including a “change of control” event affecting ION Geophysical Corporation), the occurrence of which could lead to an acceleration of ION Geophysical Corporation’s obligations under the Credit Facility.
Senior Secured Notes
ION Geophysical Corporation’s 9.125% Senior Secured Second Priority Notes due December 2021 (the “Second Lien Notes”) are senior secured second-priority obligations guaranteed by the Material U.S. Subsidiaries and the Mexican Subsidiary (each as defined above and herein below, with the reference to the Second Lien Notes, the “Guarantors”). Interest on the Second Lien Notes is payable semiannually in arrears on June 15 and December 15 of each year during their term, except that the interest payment otherwise payable on June 15, 2021 will be payable on December 15, 2021.
The April 2016 indenture governing the Second Lien Notes contains certain covenants that, among other things, limits or prohibits ION Geophysical Corporation’s ability and the ability of its restricted subsidiaries to take certain actions or permit certain conditions to exist during the term of the Second Lien Notes, including among other things, incurring additional indebtedness in excess of permitted indebtedness, creating liens, paying dividends and making other distributions in respect of ION Geophysical Corporation’s capital stock, redeeming ION Geophysical Corporation’s capital stock, making investments or certain other restricted payments, selling certain kinds of assets, entering into transactions with affiliates, and effecting mergers or consolidations. These and other restrictive covenants contained in the Second Lien Notes Indenture are subject to certain exceptions and qualifications. All of ION Geophysical Corporation’s subsidiaries are currently restricted subsidiaries.
As of March 31, 2019 , the Company was in compliance with the covenants with respect to the Second Lien Notes.

13

    

On or after December 15, 2019, the Company may, on one or more occasions, redeem all or a part of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest and special interest, if any, on the Second Lien Notes redeemed during the twelve-month period beginning on December 15th of the years indicated below:
Date
 
Percentage
2019
 
105.500%
2020
 
103.500%
2021 and thereafter
 
100.000%
(6)      Net Loss Per Share
Basic net loss per share is computed by dividing net loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is determined based on the assumption that dilutive restricted stock and restricted stock unit awards have vested and outstanding dilutive stock options have been exercised and the aggregate proceeds were used to reacquire common stock using the average price of such common stock for the period. The total number of shares issuable pursuant to outstanding stock options at March 31, 2019 and 2018 of 778,875 and 871,757 , respectively, were excluded as their inclusion would have an anti-dilutive effect. The total number of shares issuable pursuant to restricted stock units awards outstanding at March 31, 2019 and 2018 of 988,426 and 182,053 , respectively, were excluded as their inclusion would have an anti-dilutive effect.
(7)      Income Taxes
The Company maintains a valuation allowance for substantially all of its deferred tax assets. A valuation allowance is established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. The Company will continue to record a valuation allowance for the substantial majority of its deferred tax assets until there is sufficient evidence to warrant reversal.
The tax provision for the three months ended March 31, 2019 has been calculated using the Company’s overall estimated annual effective tax rate based on projected 2019 full year results. The Company’s effective tax rates for the three months ended March 31, 2019 and 2018 were (7.1)% and (6.2)% , respectively. The Company’s effective tax rates for the three months ended March 31, 2019 and 2018 were negatively impacted by the change in valuation allowance related to U.S. operating losses for which the Company cannot currently recognize a tax benefit. The Company’s income tax expense for the three months ended March 31, 2019 of $1.4 million primarily relates to results from the Company’s non-U.S. businesses.
As of March 31, 2019, the Company has approximately $0.4 million of unrecognized tax benefits and does not expect to recognize significant increases in unrecognized tax benefits during the next twelve-month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.
As of March 31, 2019 , the Company’s U.S. federal tax returns for 2015 and subsequent years remain subject to examination by tax authorities. In the Company’s foreign tax jurisdictions, tax returns for 2012 and subsequent years generally remain open to examination.

(8) Litigation
WesternGeco
In June 2009, WesternGeco L.L.C. (“WesternGeco”) filed a lawsuit against the Company in the United States District Court for the Southern District of Texas (the “District Court”). In the lawsuit, styled WesternGeco L.L.C. v. ION Geophysical Corporation , WesternGeco alleged that the Company had infringed four of their patents concerning marine seismic surveys.
Trial began in July 2012, and the jury returned a verdict in August 2012. The jury found that the Company infringed the “claims” contained in four of WesternGeco’s patents by supplying its DigiFIN® lateral streamer control units from the United States, and awarded WesternGeco more than $100 million in damages. (In patent law, a “claim” is a technical legal term; an infringer infringes on one or more “claims” of a given patent.)

14

    

In May 2014, the District Court entered a Final Judgment against the Company in the amount of $123.8 million . This included the jury award ( $12.5 million in reasonable royalties plus $93.4 million in lost profits), $10.9 million in pre-judgment interest on lost profits, and $9.4 million in supplemental damages that the judge imposed for DigiFIN units that were supplied from the U.S. during the trial and during other periods that the jury did not consider. The Final Judgment also enjoined the Company from supplying DigiFINs or any parts unique to DigiFINs in or from the United States. The Company has conducted its business in compliance with the District Court’s orders, and has reorganized its operations such that it no longer supply DigiFINs or any parts unique to DigiFINs in or from the United States.
On July 2, 2015, the United States Court of Appeals for the Federal Circuit in Washington, D.C. (the “Court of Appeals”) reversed, in part, the District Court, holding that the lost profits, which were attributable to foreign seismic surveys, were not available to WesternGeco under the Patent Act. The Company had recorded a loss contingency accrual of $123.8 million because of the District Court’s ruling. As a result of the reversal by the Court of Appeals, the Company reduced the loss contingency accrual to $22.0 million .
On November 14, 2016, the District Court ordered our sureties to pay principal and interest on the royalty damages previously awarded. On November 25, 2016, the Company paid WesternGeco the $20.8 million due pursuant to the order, and it reduced its loss contingency accrual to zero .
On March 14, 2017, the District Court held a hearing on whether impose additional damages for willfulness. The Judge found that the Company’s infringement was willful, and awarded enhanced damages of $5.0 million to WesternGeco (WesternGeco had sought $43.6 million in such damages.) The District Court also ordered the appeal bond to be released and discharged. On June 30, 2017, the Company and WesternGeco agreed that neither would appeal the District Court's award of $5.0 million in enhanced damages. Upon assessment of the enhanced damages, the Company accrued $5.0 million in the first quarter of 2017 which was paid in full in 2018.
WesternGeco filed a petition in the Supreme Court on February 17, 2017, appealing the Court of Appeal’s decision that had eliminated lost profits. On January 12, 2018, the Supreme Court agreed to hear the appeal. The specific issue before the Supreme Court was whether lost profits arising from use of prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f)(2) (the statute under which the Company was held to have infringed WesternGeco’s patents, and upon which the District Court and Court of Appeals relied in entering their rulings).
The Supreme Court heard oral arguments on April 16, 2018. The Company argued that the Court of Appeals’ decision that eliminated lost profits ought to be affirmed. WesternGeco and the U.S. Solicitor General argued that the Court of Appeals’ decision that eliminated lost profits ought to be reversed.
On June 22, 2018, the Supreme Court reversed the judgment of the Court of Appeals, held that the award of lost profits to WesternGeco by the District Court was a permissible application of Section 284 of the Patent Act, and remanded the case back to the Court of Appeals for further proceedings consistent with its (the Supreme Court’s) opinion.
On July 27, 2018, the Court of Appeals vacated its earlier decision with respect to lost profits damages, and ordered WesternGeco and the Company to submit supplemental briefing on what relief would be appropriate in light of the Supreme Court’s decision.
The Company argued to the Court of Appeals that lost profits were not available to WesternGeco because the jury instructions required the jury to find that the Company had been WesternGeco’s direct competitor in the survey markets where WesternGeco had lost profits, and that the jury could not have found so. Additionally, the Company argued that the award of lost profits and reasonable royalties ought to be vacated and retried on separate grounds due to the outcome of an Inter Partes Review (“IPR”) filed with the Patent Trial and Appeal Board (“PTAB”) of the Patent and Trademark Office, in which the PTAB invalidated four of the six patent claims that formed the basis for the lawsuit judgment against the Company. (The Court of Appeals affirmed the PTAB’s findings, and on February 19, 2019, the Supreme Court declined to hear WesternGeco’s appeal on that issue.)
On January 11, 2019, the Court of Appeals issued its ruling. In its ruling, the Court of Appeals refused to disturb the award of reasonable royalties to WesternGeco (which the Company paid in 2016), and rejected the Company’s “direct competitor” argument, but vacated the District Court’s award of lost profits damages and remanded the case back to the District Court to determine whether to hold a new trial as to lost profits. The Court of Appeals also ruled that its affirmance of the PTAB’s decision eliminated four of the five patent claims that could have supported the award of lost profits, leaving only one remaining patent claim that could support an award of lost profits.

15

    

The Court of Appeals further held that the lost profits award can be reinstated by the District Court if the existing trial record establishes that the jury must have found that the technology covered by the one remaining patent claim was essential for performing the surveys upon which lost profits were based. To make such a finding, the District Court must conclude that the present trial record establishes that there was no dispute that the technology covered by the one remaining patent claim, independent of the technology of the now-invalid claims, was required to perform the surveys. The Court of Appeals ruling further provides that if, but only if, the District Court concludes that WesternGeco established at trial, with undisputed evidence, that the remaining claim covers technology that was necessary to perform the surveys, then the District Court may deny a new trial and reinstate lost profits.
On February 19, 2019, the Company filed a motion for a new trial as to lost profits in the District Court. In the motion, the Company argued that a new trial on lost profits is necessary, since WesternGeco cannot demonstrate that it established, at trial, with undisputed evidence, that the one remaining patent claim covers technology that was necessary to perform the surveys upon which the lost profits award was based. On March 20, 2019, WesternGeco filed an opposition to our motion for a new trial, arguing that undisputed evidence established that the one remaining patent claim was necessary to perform the ten lost profits surveys. On that same date, WesternGeco filed a cross motion for entry of a judgment of $105.4 million in lost profits and pre- and post-judgment interest. The Company filed a reply to WesternGeco’s opposition motion on April 9, 2019 and an opposition to WesternGeco’s cross motion on April 18, 2019.
The Company may not ultimately prevail in the litigation and it could be required to pay some or all of the lost profits that were awarded by the District Court, plus interest, if the District Court denies a new trial on lost profits, or if a new trial is granted and a new judgment issues. The Company’s assessment that it does not have a loss contingency may change in the future due to developments at the Supreme Court, Court of Appeals, or District Court, and other events, such as changes in applicable law, and such reassessment could lead to the determination that a significant loss contingency is probable, which could have a material effect on the Company’s business, financial condition and results of operations. The Company’s assessments disclosed in this Quarterly Report on Form 10-Q or elsewhere are based on currently available information and involve elements of judgment and significant uncertainties.
Other Litigation
The Company has been named in various other lawsuits or threatened actions that are incidental to its ordinary business. Litigation is inherently unpredictable. Any claims against the Company, whether meritorious or not, could be time-consuming, cause the Company to incur costs and expenses, require significant amounts of management time and result in the diversion of significant operational resources. The results of these lawsuits and actions cannot be predicted with certainty. The Company currently believes that the ultimate resolution of these matters will not have a material adverse effect on its financial condition or results of operations.
(9)      Details of Selected Balance Sheet Accounts
Inventories
A summary of inventories follows (in thousands):
March 31, 2019
 
December 31, 2018
Raw materials and subassemblies
$
20,242

 
$
20,011

Work-in-process
895

 
1,032

Finished goods
7,095

 
8,111

Reserve for excess and obsolete inventories
(14,138
)
 
(15,024
)
Inventories, net
$
14,094

 
$
14,130


16

    

Property, Plant and Equipment
A summary of property, plant and equipment follows (in thousands):
March 31, 2019
 
December 31, 2018
Buildings
$
15,734

 
$
15,707

Machinery and equipment
132,699

 
132,135

Seismic rental equipment
1,484

 
1,423

Furniture and fixtures
3,870

 
3,859

Other
30,525

 
30,104

Total
184,312

 
183,228

Less accumulated depreciation
(134,502
)
 
(133,634
)
Less impairment of long-lived assets
(36,553
)
 
(36,553
)
Property, plant and equipment, net
$
13,257

 
$
13,041

Total depreciation expense, including amortization of assets recorded under equipment finance leases, for the three months ended March 31, 2019 and 2018 was $0.8 million and $2.2 million , respectively.
Multi-Client Data Library
The change in multi-client data library are as follows (in thousands):
March 31, 2019
 
December 31, 2018
Gross costs of multi-client data creation
$
976,797

 
$
972,309

Less accumulated amortization
(787,960
)
 
(776,860
)
Less impairments to multi-client data library
(121,905
)
 
(121,905
)
Multi-client data library, net
$
66,932

 
$
73,544

(10)      Stockholder's Equity and Stock-Based Compensation Expense
Public Equity Offering
On February 21, 2018, the Company completed a public equity offering (“Offering”) of its 1,820,000 shares of common stock at a public offering price of  $27.50  per share, and warrants to purchase an additional 1,820,000 shares of the Company’s common stock pursuant to the Registration Statement on Form S-3 (No. 33-213769) filed with the Securities and Exchange Commission under the Securities Act of 1933 and declared effective on December 2, 2016.  The net proceeds from this offering were $47.0 million , including transaction expenses. A portion of the net proceeds were used to retire the Company’s  $28.5 million  Third Lien Notes in March 2018. The warrants have an exercise price of  $33.60  per share, are immediately exercisable and were to expire on March 21, 2019. On February 4, 2019, the Company extended expiration of the warrants to March 21, 2020.
Stock-Based Compensation
The total number of shares issued or reserved for future issuance under outstanding stock options at March 31, 2019 and 2018 was 778,875 and 871,757 , respectively, and the total number of shares of restricted stock and shares reserved for restricted stock units outstanding at March 31, 2019 and 2018 was 988,426 and 182,053 , respectively. The total number of stock appreciation rights awards outstanding at March 31, 2019 and 2018 was 1,305,013 and 530,865 , respectively. The following table presents a summary of the activity related to stock options, restricted stock, restricted stock unit awards and stock appreciation rights awards for the three months ended March 31, 2019 :

17

    

 
Stock Options
 
Restricted Stock and Unit Awards
 
Stock Appreciation Rights
 
Number of Shares
Outstanding at December 31, 2018
785,890

 
1,044,125

 
1,481,541

Granted

 
15,000

 

Stock options and stock appreciation rights exercised/restricted stock and unit awards vested
(5,750
)
 
(68,199
)
 

Cancelled/forfeited
(1,265
)
 
(2,500
)
 
(176,528
)
Outstanding at March 31, 2019
778,875

 
988,426

 
1,305,013

Stock-based compensation expense recognized for the three months ended March 31, 2019 and 2018 , totaled $1.3 million and $0.8 million , respectively. Stock appreciation rights expense recognized for the three months ended March 31, 2019 and 2018 , totaled $4.5 million and $0.8 million , respectively.
(11)      Lease Obligations
The Company determines if an arrangement is a lease at inception by considering whether (1) explicitly or implicitly identified assets have been deployed in the agreement and (2) the Company obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the agreement. Operating leases are included in “ROU assets”, “Current maturities of operating lease liabilities” and “Operating lease liabilities, net of current maturities” in the condensed consolidated balance sheets. Finance leases are included in “Property, plant and equipment”, “Current maturities of long-term debt”, and “Long-term debt, net of current maturities” in the condensed consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized at the commencement date and consist of the present value of remaining lease payments over the lease term, initial direct costs, prepaid lease payments less any lease incentives. Operating lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. The Company used the implicit rate, when readily determinable or the incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease agreements with lease and non-lease components are accounted for separately. The Company will not recognize leases with terms of less than twelve months in the condensed consolidated balance sheets and will recognize those lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term.
The Company leases offices, processing centers, warehouse spaces and, to a lesser extent, certain equipment. These leases have remaining terms of 1 year to 12 years , some of which have options to extend for up to 10 years and/or options to terminate within 1 year . The options to renew are not recognized as part of the Company’s ROU assets and operating lease liabilities as the Company is not reasonably certain that it will exercise these options.
Total operating lease expense, including short-term lease expense was $3.1 million and $3.0 million for the three months ended March 31, 2019 and 2018 , respectively.
Future maturities of lease obligations follows (in thousands):
For the year ending March 31,
Operating Leases
 
Finance Leases
 
Total
2020
$
13,169

 
$
1,254

 
$
14,423

2021
12,775

 
1,254

 
14,029

2022
11,281

 
443

 
11,724

2023
11,286

 

 
11,286

2024
8,323

 

 
8,323

Thereafter
11,684

 

 
11,684

Total lease payments
68,518

 
2,951

 
71,469

Less imputed interest
(13,833
)
 
(293
)
 
(14,126
)
Total
$
54,685

 
$
2,658

 
$
57,343


18

    

The weighted average remaining lease term as of March 31, 2019 and December 31, 2018 was 5.19 years and 5.26 years , respectively. The weighted average discount rate used to determine the operating lease liability as of March 31, 2019 and December 31, 2018 was 6.47% and 6.25% , respectively.
Equipment Finance Leases
The Company has entered into equipment finance leases that are due in installments for the purpose of financing the purchase of computer equipment through August 2021. Interest accrues under these leases at rates from  4.3%  to  8.7%  per annum, and the leases are collateralized by liens on the computer equipment. The assets are amortized over the lesser of their related lease terms or their estimated useful lives and such charges are reflected within depreciation expense.
(12)      Supplemental Cash Flow Information and Non-cash Activity
Supplemental disclosure of cash flow information are as follows (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Cash paid during the period for:
 
 
 
Interest
$
198

 
$
1,039

Income taxes
3,176

 
546

Non-cash items from investing and financing activities:
 
 
 
Purchase of property, plant and equipment financed through accounts payable and accrued expenses
185

 

(13)      Fair Value of Financial Instruments
Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the related disclosure requirements. The Company follows a three-level hierarchy, under which the fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels, moving from quoted prices in active markets in (Level 1) to unobservable inputs in (Level 3).
Due to their highly liquid nature, the amount of the Company’s other financial instruments, including cash and cash equivalents, restricted cash, accounts and unbilled receivables, short term investments, accounts payable and accrued multi-client data library royalties, represent their approximate fair value.
The carrying amounts of the Company’s long-term debt as of March 31, 2019 and December 31, 2018 were $124.0 million and $124.7 million , respectively, compared to its fair values of $116.7 million and $120.7 million as of March 31, 2019 and December 31, 2018 , respectively. The fair value of the long-term debt was calculated using Level 1 inputs, including an active market price.
Fair value measurements are applied with respect to non-financial assets and liabilities on a non-recurring basis, which would consist measurement primarily of goodwill, multi-client data library and property, plant and equipment.
(14)      Condensed Consolidating Financial Information
The Second Lien Notes were issued by ION Geophysical Corporation and are guaranteed by 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 the Second Lien Notes. 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 not 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 condensed consolidated financial statements and footnotes. For additional information pertaining to the Second Lien Notes, See Item 2. “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II of this Form 10-Q.

19

    

 
March 31, 2019
Balance Sheet
ION Geophysical Corporation
 
The Guarantors
 
All Other Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
4,695

 
$
25

 
$
33,687

 
$

 
$
38,407

Accounts receivable, net
8

 
16,295

 
12,801

 

 
29,104

Unbilled receivables

 
7,610

 
6,832

 

 
14,442

Inventories

 
8,461

 
5,633

 

 
14,094

Prepaid expenses and other current assets
3,914

 
1,120

 
2,452

 

 
7,486

Total current assets
8,617

 
33,511

 
61,405

 

 
103,533

Deferred income tax asset
805

 
7,660

 
129

 

 
8,594

Property, plant and equipment, net
504

 
8,351

 
4,402

 

 
13,257

Multi-client data library, net

 
63,522

 
3,410

 

 
66,932

Investment in subsidiaries
834,683

 
246,331

 

 
(1,081,014
)
 

Goodwill

 

 
23,592

 

 
23,592

Intercompany receivables

 
95,861

 
62,922

 
(158,783
)
 

Right-of-use assets
17,394

 
20,005

 
7,580

 

 
44,979

Other assets
1,354

 
395

 
70

 

 
1,819

Total assets
$
863,357

 
$
475,636

 
$
163,510

 
$
(1,239,797
)
 
$
262,706

LIABILITIES AND (DEFICIT) EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$
724

 
$
1,063

 
$

 
$

 
$
1,787

Accounts payable
2,689

 
24,610

 
3,085

 

 
30,384

Accrued expenses
13,958

 
7,457

 
10,862

 

 
32,277

Accrued multi-client data library royalties

 
26,095

 
215

 

 
26,310

Deferred revenue

 
6,232

 
1,178

 

 
7,410

Current maturities of operating lease liabilities
5,112

 
5,540

 
1,312

 

 
11,964

Total current liabilities
22,483

 
70,997

 
16,652

 

 
110,132

Long-term debt, net of current maturities
117,887

 
1,595

 

 

 
119,482

Operating lease liabilities, net of current maturities
16,577

 
19,876

 
6,268

 

 
42,721

Intercompany payables
717,875

 

 

 
(717,875
)
 

Other long-term liabilities
1,639

 
171

 

 

 
1,810

Total liabilities
876,461

 
92,639

 
22,920

 
(717,875
)
 
274,145

(Deficit) Equity:
 
 
 
 
 
 
 
 
 
Common stock
141

 
290,460

 
47,776

 
(338,236
)
 
141

Additional paid-in capital
953,679

 
180,700

 
203,909

 
(384,609
)
 
953,679

Accumulated earnings (deficit)
(947,452
)
 
386,799

 
(11,751
)
 
(375,048
)
 
(947,452
)
Accumulated other comprehensive income (loss)
(19,472
)
 
4,281

 
(21,160
)
 
16,879

 
(19,472
)
Due from ION Geophysical Corporation

 
(479,243
)
 
(79,849
)
 
559,092

 

Total stockholders’ (deficit) equity
(13,104
)
 
382,997

 
138,925

 
(521,922
)
 
(13,104
)
Noncontrolling interest

 

 
1,665

 

 
1,665

Total (deficit) equity
(13,104
)
 
382,997

 
140,590

 
(521,922
)
 
(11,439
)
Total liabilities and (deficit) equity
$
863,357

 
$
475,636

 
$
163,510

 
$
(1,239,797
)
 
$
262,706


20

    

 
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 and 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

 
60,255

 
(365,878
)
 

Right-of-use assets
18,513

 
21,350

 
7,940

 

 
47,803

Other assets
1,723

 
643

 
69

 

 
2,435

Total assets
$
875,213

 
$
700,677

 
$
165,901

 
$
(1,449,239
)
 
$
292,552

LIABILITIES AND (DEFICIT) 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

Current maturities of operating lease liabilities
5,155

 
5,633

 
1,426

 

 
12,214

Total current liabilities
15,732

 
81,895

 
20,105

 

 
117,732

Long-term debt, net of current maturities
117,644

 
1,869

 

 

 
119,513

Operating lease liabilities, net of current maturities
17,841

 
21,237

 
6,514

 

 
45,592

Intercompany payables
716,051

 

 


 
(716,051
)
 

Other long-term liabilities
1,713

 
178

 

 

 
1,891

Total liabilities
868,981

 
105,179

 
26,619

 
(716,051
)
 
284,728

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’ (deficit) equity
6,232

 
595,498

 
137,690

 
(733,188
)
 
6,232

Noncontrolling interest

 

 
1,592

 

 
1,592

Total equity
6,232

 
595,498

 
139,282

 
(733,188
)
 
7,824

Total liabilities and equity
$
875,213

 
$
700,677

 
$
165,901

 
$
(1,449,239
)
 
$
292,552


21

    

 
Three Months Ended March 31, 2019
Income Statement
ION Geophysical Corporation
 
The Guarantors
 
All Other Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 
(In thousands)
Net revenues
$

 
$
17,613

 
$
19,343

 
$

 
$
36,956

Cost of sales

 
20,200

 
6,844

 

 
27,044

Gross profit (loss)

 
(2,587
)
 
12,499

 

 
9,912

Total operating expenses
12,839

 
9,075

 
3,935

 

 
25,849

Income (loss) from operations
(12,839
)
 
(11,662
)
 
8,564

 

 
(15,937
)
Interest expense, net
(3,166
)
 
(49
)
 
103

 

 
(3,112
)
Intercompany interest, net
300

 
4,649

 
(4,949
)
 

 

Equity in earnings (losses) of investments
(5,169
)
 
2,001

 

 
3,168

 

Other income (expense)
7

 
(122
)
 
(677
)
 

 
(792
)
Net income (loss) before income taxes
(20,867
)
 
(5,183
)
 
3,041

 
3,168

 
(19,841
)
Income tax expense (benefit)
493

 
(1,291
)
 
2,205

 

 
1,407

Net income (loss)
(21,360
)
 
(3,892
)
 
836

 
3,168

 
(21,248
)
Net income attributable to noncontrolling interest

 

 
(112
)
 

 
(112
)
Net income (loss) attributable to ION
$
(21,360
)
 
$
(3,892
)
 
$
724

 
3,168

 
$
(21,360
)
Comprehensive net income
$
(20,390
)
 
$
(3,935
)
 
$
1,699

 
$
2,348

 
$
(20,278
)
Comprehensive income attributable to noncontrolling interest

 

 
(112
)
 

 
(112
)
Comprehensive net income (loss) attributable to ION
$
(20,390
)
 
$
(3,935
)
 
$
1,587

 
$
2,348

 
$
(20,390
)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
Income Statement
ION Geophysical Corporation
 
The Guarantors
 
All Other Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 
(In thousands)
Net revenues
$

 
$
11,788

 
$
21,720

 
$

 
$
33,508

Cost of sales

 
16,795

 
9,860

 

 
26,655

Gross profit (loss)

 
(5,007
)
 
11,860

 

 
6,853

Total operating expenses
8,909

 
6,994

 
3,590

 

 
19,493

Income (loss) from operations
(8,909
)
 
(12,001
)
 
8,270

 

 
(12,640
)
Interest expense, net
(3,883
)
 
(6
)
 
53

 

 
(3,836
)
Intercompany interest, net
273

 
(2,319
)
 
2,046

 

 

Equity in earnings (losses) of investments
(4,915
)
 
10,220

 

 
(5,305
)
 

Other income (expense)
(188
)
 
65

 
(668
)
 

 
(791
)
Net income (loss) before income taxes
(17,622
)
 
(4,041