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ION Reports Solid Fourth Quarter and Full Year 2011 Results

2/15/2012 4:30:49 PM

Fourth Quarter EPS of $0.15, excluding special items
Full Year EPS of $0.22, excluding special items

HOUSTON, Feb. 15, 2012 /PRNewswire/ -- ION Geophysical Corporation (NYSE: IO) today reported fourth quarter 2011 revenues of $159.9 million, compared to $158.6 million in the fourth quarter of 2010. Excluding special items as noted in the attached tables, ION reported fourth quarter 2011 net income of $23.2 million, or $0.15 per diluted share, compared to net income of $21.2 million, or $0.14 per diluted share, in the fourth quarter of 2010. Including special items, fourth quarter 2011 net income was $12.0 million, or $0.08 per diluted share, compared to net income of $20.0 million, or $0.13 per diluted share, in 2010.

For full year 2011, ION reported revenues of $454.6 million, compared to $444.3 million in 2010. Total revenues excluding Legacy Land Systems (INOVA) grew 6% during 2011. ION reported 2011 net income of $34.6 million, or $0.22 per diluted share, compared to 2010 net income of $22.8 million, or $0.16 per diluted share, both excluding special items. Actual reported net income in 2011 was $23.4 million, or $0.15 per diluted share, compared to a net loss of ($38.8) million, or ($0.27) per share, in 2010.

Three pre-tax adjustments totaling $0.07 per diluted share affected fourth quarter 2011 net income. The first resulted from a $7.7 million charge for write-down of excess inventory by INOVA Geophysical. This charge reflects an adjustment to inventory values for older products, given INOVA's launch of Hawk™ and a new version of FireFly®. The second is a $2.9 million restructuring as ION moved its geophone manufacturing operations from the Netherlands to lower-cost centers in Asia. The last is a $1.3 million impairment of one of ION's investments.

Brian Hanson, ION's Chief Executive Officer, commented, "We finished with strong results, as expected. Our marine group continues to deliver excellent results, driven by the ongoing transition of the towed streamer market to more complex surveys, which promotes sales of our leading Digi positioning equipment product line and our latest software platform, Orca®. As a major milestone, we installed our Orca software platform on our 51st vessel, further expanding our market share to over 40%. We are also pleased that we completed the BGP 12-streamer deal, as expected, in the fourth quarter with their new marine vessel, Prospector, successfully completing its first commercial job.

"As previously reported, our data processing business experienced a revenue and earnings decline in 2011, which was the direct impact of the Macondo oil spill. This was the first decline in our DP business after several years of year-over-year growth and represented an approximate 12 cent negative pre-tax impact from the prior year. The good news is we have seen an extremely strong build up in our backlog, including the fourth quarter award of the single largest data processing contract in our history, which we believe indicates a healing of the Gulf of Mexico, but also the significant increase in our global data processing footprint over the last year.

"One important highlight for the year is the continuing expansion of our GeoVentures™ group portfolio, which had another strong growth year. This included finishing our third Arctic program in Greenland, as well as our first land ResSCANS™ survey for North American shale oil and gas geologies. We continue to develop our leading data acquisition and processing technologies in the North American oil and gas shale plays centered on recording the full wavefield and proprietary processing. We also recently started our first international effort in the shale play with a regional land survey in Poland. The recent weak gas prices make technology such as ResSCANS even more important to oil companies to further drive productivity.

"Despite a challenging year for the land equipment market, INOVA experienced another sequential improvement in sales, which should result in their first profitable quarter in the fourth quarter. As a result of INOVA's significant R&D program, they have launched a series of new products, including a new version of FireFly and their first offering of autonomous land nodes, branded Hawk. We are confident these new products place INOVA in a much stronger position for 2012. As indicated in our December call, we anticipate INOVA to be break-even in 2012."

FOURTH QUARTER 2011

Total revenues for the fourth quarter increased to $159.9 million, compared to $158.6 million a year ago. Systems segment revenues increased by 58% over the same period in 2010, while Solutions segment revenues decreased by 22%. Software segment revenues were relatively flat to the same quarter last year.

Sales in the Systems segment increased to $67.3 million in the fourth quarter, compared to $42.6 million in the same period of 2010, which includes the 12-streamer system sold to BGP.

Sales in the Solutions segment decreased to $83.4 million during the fourth quarter, down $23.2 million compared to $106.6 million for the same period a year ago. This decrease was primarily the result of lower data library sales as compared to an exceptionally strong fourth quarter of 2010, which was partially driven by money being shifted from drilling programs in the Gulf of Mexico to international exploration programs. This decrease in data library sales was partially offset by more than a 60% increase in new venture revenues related to projects in North American shale plays, East Africa and the Arctic.

Consolidated gross margins for fourth quarter 2011 decreased slightly to 40% from 42% in fourth quarter 2010. Gross margins in the Software and Solutions segments improved by 8 and 7 percentage points, respectively, due to favorable sales mix, while gross margins in the Systems segment decreased by 16 percentage points, partially attributed to the mix of the lower-margin streamer system sale to BGP in the fourth quarter.

As a percentage of revenue, operating expenses during the fourth quarter remained essentially flat at 20%. Adjusted EBITDA for the quarter decreased to $59.0 million, compared to $71.4 million in fourth quarter 2010, mostly related to higher data library sales in fourth quarter 2010.

ION accounts for its 49% interest in INOVA on a one fiscal quarter lag. ION's share of INOVA's third quarter financial results is included in ION's fourth quarter. For fourth quarter 2011, ION recognized a loss on its INOVA equity investment of approximately $13.0 million, which includes approximately $7.7 million (ION's 49% share) of the write-down of excess inventory by INOVA.

FULL YEAR 2011

Consolidated revenues for full year 2011 increased to $454.6 million, compared to $444.3 million for 2010. Excluding the Legacy Land Systems (INOVA) segment revenues, which were consolidated in the company's first quarter 2010 results, 2011 revenues increased 6%, or $26.8 million, versus 2010 levels. Revenues in the Systems segment increased 34%, driven by strong towed streamer and other marine equipment sales. Revenues in the Software segment increased 4% and were flat on a currency-adjusted basis. Revenues in the Solutions segment decreased $13.5 million, or 5%, compared to prior year, primarily as a result of lower data processing sales. Data processing revenues improved sequentially each quarter, but decreased 18% over the prior year due to the lagging effects of the Gulf of Mexico oil spill. However, multi-client revenues increased 3%, as new venture activity was successfully carried out in the Arctic, East Africa and the North American shale plays.

Gross margins for full year 2011 improved slightly to 38%, compared to 37% for 2010. Excluding the results of the Legacy Land Systems (INOVA) segment, the overall gross margin of the remaining segments remained consistent with 2010.

ION's operating expenses as a percentage of revenues for 2011 were 23%, consistent with 2010, excluding the Legacy Land Systems (INOVA) segment. ION's 2011 effective tax rate of 29.2% was impacted by the establishment of valuation allowances associated with equity in losses of INOVA Geophysical and the write-down of one of ION's investments. Excluding these items, the 2011 effective tax rate would have been 17.2% compared to 14.5% for 2010. The increase in the effective tax rate relates to the changes in the distribution of earnings between U.S. and foreign jurisdictions.

Income from operations for 2011 totaled $66.8 million, compared to $52.8 million in 2010. Excluding the first quarter 2010 results of the Legacy Land Systems (INOVA) segment, income from operations during 2010 was $62.5 million.

Adjusted EBITDA for 2011 decreased 5% to $155.9 million, compared to $163.8 million in 2010. At year end, ION had no outstanding balance associated with its $100 million revolving credit facility, bringing total liquidity to $162.4 million.

OUTLOOK

Greg Heinlein, ION's Chief Financial Officer, further commented, "Our fourth quarter results were strong, as expected, and we anticipate the positive momentum experienced in the quarter to continue as we head into 2012.

"Our marine business delivered a strong fourth quarter performance, supported by the streamer sale to BGP. Our multi-client business is currently executing several new venture programs on land and offshore, which positions us well for a strong 2012. In addition, our Solutions backlog is at record levels, and we expect revenue growth rates to return to historically high levels.

"As mentioned on our market and business outlook call in December, we expect our investment in multi-client data libraries during 2012 to be in the range of $130 to $150 million, with a significant amount of this investment to be underwritten by our customers and with new venture projects spread more evenly throughout the year due to continued expansion on land. While we expect 2012 earnings to be back-end loaded, we continue to anticipate approximately one-fourth of annual results to be reflected in the first half of the year due to the growing impact of our GeoVentures business and the distribution of multi-client projects throughout the year."

CONFERENCE CALL

The company has scheduled a conference call for Thursday, February 16, 2012, at 11:00 a.m. Eastern Time that will include a slide presentation. To participate in the conference call, dial 480-629-9819 at least 10 minutes before the call begins and ask for the ION conference call. Click here to access the earnings presentation slides.

A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until March 1, 2012. To access the replay, dial 303-590-3030 and use pass code 4510394#.

Investors, analysts and the general public will also have the opportunity to listen to the conference call live over the Internet by visiting www.iongeo.com. Also, an archive of the webcast will be available shortly after the call on the company's website.

ABOUT ION:

ION Geophysical Corporation is a leading provider of geophysical technology, services, and solutions for the global oil & gas industry. ION's offerings are designed to allow E&P operators to obtain higher resolution images of the subsurface to reduce the risk of exploration and reservoir development, and to enable seismic contractors to acquire geophysical data safely and efficiently. Additional information about ION is available at www.iongeo.com.

CONTACTS:

Greg Heinlein
Chief Financial Officer
+1.281.552.3011

Jack Lascar
DRG&L
+1.713.529.6600

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 include future sales and market growth, timing of sales, future liquidity and cash levels, future estimated revenues and earnings, sales expected to result from backlog, benefits expected to result from the INOVA Geophysical joint venture and related transactions andother statements that are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the timing and development of the Company's products and services and market acceptance of the Company's new and revised product offerings; risks associated with the operation of the INOVA Geophysical joint venture; risks associated with litigation; risks associated with the Company's level and terms of indebtedness; risks associated with competitors' product offerings and pricing pressures resulting therefrom; the relatively small number of customersthat the Company currently relies upon; the fact that a significant portion ofthe Company's revenues isderived from foreign sales; risks that sources of capital may not prove adequate; the Company's inability to produce products to preserve and increase market share; collection of receivables; and technological and marketplace changes affecting the Company's product lines. Additional risk factors, which could affect actual results, are disclosed by the Company from time to time in its filings with the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K for theyear ended December 31, 2010 and its Quarterly Reports on Form 10-Q filed during 2011.

Tables to follow



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



Three Months Ended

December 31,

Twelve Months Ended

December 31,


2011

2010

2011

2010



Product revenues

$ 75,872

$ 51,228

$ 189,035

$ 165,202

Service revenues

84,011

107,395

265,586

279,120

Total net revenues

159,883

158,623

454,621

444,322

Cost of products

49,389

26,237

103,220

94,658

Cost of services

45,877

66,029

177,956

183,931

Gross profit

64,617

66,357

173,445

165,733

Operating expenses:





Research, development and engineering

6,499

5,479

24,569

25,227

Marketing and sales

8,190

9,082

31,269

30,405

General and administrative

16,500

17,325

50,812

57,254

Total operating expenses

31,189

31,886

106,650

112,886

Income from operations

33,428

34,471

66,795

52,847

Interest expense, net

(1,600)

(1,893)

(5,784)

(30,770)

Equity in losses of INOVA Geophysical

(13,018)

(15,541)

(22,862)

(23,724)

Loss on disposition of land division

-

-

-

(38,115)

Fair value adjustment of warrant

-

-

-

12,788

Gain on legal settlement

-

24,500

-

24,500

Impairment of cost method investments

(1,312)

(7,650)

(1,312)

(7,650)

Other income (expense)

168

1,039

(2,135)

228

Income (loss) before income taxes

17,666

34,926

34,702

(9,896)

Income tax expense

5,420

14,542

10,136

26,942

Net income (loss)

12,246

20,384

24,566

(36,838)

Net income attributable to noncontrolling interests

105

-

208

-

Net income (loss) attributable to ION

12,351

20,384

24,774

(36,838)

Preferred stock dividends

338

338

1,352

1,936

Net income (loss) applicable to common shares

$ 12,013

$ 20,046

$ 23,422

$ (38,774)

Net income (loss) per share:





Basic

$ 0.08

$ 0.13

$ 0.15

$ (0.27)

Diluted

$ 0.08

$ 0.13

$ 0.15

$ (0.27)

Weighted average number of common shares outstanding:





Basic

155,292

152,572

154,811

144,278

Diluted

162,132

159,698

156,090

144,278




ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



December 31,


2011

2010

ASSETS



Current assets:



Cash and cash equivalents

$ 42,402

$ 84,419

Short-term investments

20,000

-

Accounts receivable, net

130,612

77,576

Unbilled receivables

25,628

70,590

Inventories

70,145

66,882

Prepaid expenses and other current assets

13,460

13,165

Total current assets

302,247

312,632

Deferred income tax asset

17,645

16,413

Property, plant and equipment, net

24,771

20,145

Multi-client data library, net

175,768

112,620

Investment in INOVA Geophysical

72,626

95,173

Goodwill

53,963

51,333

Intangible assets, net

17,716

20,317

Other assets

9,322

3,224

Total assets

$ 674,058

$ 631,857




LIABILITIES AND EQUITY



Current liabilities:



Current maturities of long-term debt

$ 5,770

$ 6,073

Accounts payable

22,296

30,940

Accrued expenses

61,384

67,250

Accrued multi-client data library royalties

15,318

18,667

Deferred revenue

33,802

17,851

Total current liabilities

138,570

140,781

Long-term debt, net of current maturities

99,342

102,587

Other long-term liabilities

7,719

8,042

Total liabilities

245,631

251,410




Redeemable noncontrolling interests

2,615

-




Equity:



Cumulative convertible preferred stock

27,000

27,000

Common stock

1,555

1,529

Additional paid-in capital

843,271

822,399

Accumulated deficit

(423,612)

(448,386)

Accumulated other comprehensive loss

(16,193)

(15,530)

Treasury stock

(6,565)

(6,565)

Total stockholders' equity

425,456

380,447

Noncontrolling interests

356

-

Total equity

425,812

380,447

Total liabilities and equity

$ 674,058

$ 631,857




ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Twelve Months Ended

December 31,


2011

2010



Cash flows from operating activities:



Net income (loss)

$ 24,566

$ (36,838)

Adjustments to reconcile net income (loss) to cash provided by operating activities:



Depreciation and amortization (other than multi-client data library)

13,917

24,795

Amortization of multi-client data library

77,317

85,940

Stock-based compensation expense

6,344

8,147

Bad debt expense

597

1,689

Equity in losses of INOVA Geophysical

22,862

23,724

Amortization of debt discount

-

8,656

Write-off of unamortized debt issuance costs

-

10,121

Fair value adjustment of warrant

-

(12,788)

Loss on disposition of land division

-

38,115

Impairment of cost method investments

1,312

7,650

Deferred income taxes

(8,131)

22,207

Excess tax benefit from stock-based compensation

(3,294)

-

Change in operating assets and liabilities:



Accounts receivable

(53,552)

7,826

Unbilled receivables

44,962

(48,935)

Inventories

(6,641)

(16,138)

Accounts payable, accrued expenses and accrued royalties

(7,546)

9,550

Deferred revenue

15,957

7,281

Other assets and liabilities

1,314

(7,634)

Net cash provided by operating activities

129,984

133,368




Cash flows from investing activities:



Purchase of property, plant and equipment

(11,060)

(7,372)

Investment in multi-client data library

(143,782)

(64,426)

Purchase of short-term investments

(80,000)

-

Proceeds from sale of short-term investments

60,000

-

Investment in a convertible note

(6,500)

-

Business acquisition, net of cash acquired

(330)

-

Proceeds from disposition of land division, net of fees paid

-

99,790

Other investing activities

50

(500)

Net cash provided by (used in) investing activities

(181,622)

27,492




Cash flows from financing activities:



Borrowings under revolving line of credit

-

104,000

Repayments under revolving line of credit

-

(193,429)

Net proceeds from issuance of debt

-

105,695

Net proceeds from issuance of common stock

-

38,039

Payments on notes payable and long-term debt

(6,145)

(145,558)

Payment of preferred dividends

(1,352)

(1,936)

Proceeds from employee stock purchases and exercise of stock options

13,105

1,071

Excess tax benefit from stock-based compensation

3,294

-

Contribution from noncontrolling interests

961

-

Restricted stock cancelled for employee minimum income taxes

(59)

(612)

Net cash provided by (used in) financing activities

9,804

(92,730)




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

(183)

72

Net increase (decrease) in cash and cash equivalents

(42,017)

68,202

Cash and cash equivalents at beginning of period

84,419

16,217

Cash and cash equivalents at end of period

$ 42,402

$ 84,419







ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT INFORMATION

(In thousands)

(Unaudited)



Three Months Ended

December 31,

Twelve Months Ended

December 31,


2011

2010

2011

2010

Net revenues:





Solutions:





Data Processing

$ 25,434

$ 28,336

$ 88,783

$ 107,997

New Venture

30,516

18,979

98,335

81,293

Data Library

27,470

59,322

76,332

87,664

Total

$ 83,420

$ 106,637

$ 263,450

$ 276,954






Systems:





Towed Streamer

$ 51,453

$ 33,471

$ 111,453

$ 83,567

Other

15,832

9,117

41,551

30,659

Total

$ 67,285

$ 42,588

$ 153,004

$ 114,226






Software:





Software Systems

$ 8,587

$ 8,641

$ 36,031

$ 34,465

Services

591

757

2,136

2,166

Total

$ 9,178

$ 9,398

$ 38,167

$ 36,631






Legacy Land Systems (INOVA)

$ -

$ -

$ -

$ 16,511

Total

$ 159,883

$ 158,623

$ 454,621

$ 444,322






Gross profit:





Solutions

$ 37,541

$ 40,839

$ 84,647

$ 93,804

Systems

20,357

19,416

61,109

48,557

Software

6,719

6,102

27,689

24,536

Legacy Land Systems (INOVA)

-

-

-

(984)

Total

$ 64,617

$ 66,357

$ 173,445

$ 165,733






Gross margin:





Solutions

45%

38%

32%

34%

Systems

30%

46%

40%

43%

Software

73%

65%

73%

66%

Legacy Land Systems (INOVA)

-%

-%

-%

(6%)

Total

40%

42%

38%

37%






Income from operations:





Solutions

$ 27,869

$ 29,963

$ 50,620

$ 60,632

Systems

11,045

13,916

33,034

27,749

Software

6,054

5,423

24,463

21,936

Legacy Land Systems (INOVA)

-

-

-

(9,623)

Corporate and other

(11,540)

(14,831)

(41,322)

(47,847)

Income from operations

$ 33,428

$ 34,471

$ 66,795

$ 52,847









Reconciliation of Adjusted EBITDA to Net Income (Loss)
(Non-GAAP Measure)
(In thousands)
(Unaudited)

Adjusted EBITDA is a non-GAAP measurement that is presented as an additional indicator of operating performance and is not a substitute for net income (loss) or net income (loss) per share calculated under generally accepted accounting principles (GAAP). We believe that Adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to service our debt. The calculation of Adjusted EBITDA shown below is based upon amounts derived from the Company's financial statements prepared in conformity with GAAP.



Three Months Ended

December 31,


Twelve Months Ended

December 31,


2011


2010


2011


2010









Net income (loss)

$ 12,246


$ 20,384


$ 24,566


$ (36,838)

Interest expense, net

1,600


1,893


5,784


30,770

Income tax expense

5,420


14,542


10,136


26,942

Depreciation and amortization expense

25,419


35,938


91,234


110,735

Equity in losses of INOVA Geophysical

13,018


15,541


22,862


23,724

Gain on legal settlement

-


(24,500)


-


(24,500)

Impairment of cost method investments

1,312


7,650


1,312


7,650

Loss on disposition of land division

-


-


-


38,115

Fair value adjustment of the warrant

-


-


-


(12,788)

Adjusted EBITDA

$ 59,015


$ 71,448


$ 155,894


$ 163,810




Reconciliation of Income from Operations Excluding the Legacy Land Systems (INOVA)
Segment
(Non-GAAP Measure)
(In thousands)
(Unaudited)

The financial results reflected in the Consolidated Statements of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash Flows contained in this press release 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 our income from operations excluding our Legacy Land Systems (INOVA) segment. This segment was contributed to our joint venture (INOVA Geophysical) on March 25, 2010. Therefore, beginning on March 26, 2010, this contributed business is no longer consolidated into our results of operations. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income from operations 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 twelve months ended December 31, 2010:



Twelve Months Ended

December 31, 2010


As

Reported

Legacy Land

Systems

As

Adjusted





Net revenues

$ 444,322

$ (16,511)

$ 427,811

Cost of sales

278,589

(17,495)

261,094

Gross profit

165,733

984

166,717





Operating expenses:




Research, development and engineering

25,227

(4,181)

21,046

Marketing and sales

30,405

(1,559)

28,846

General and administrative

57,254

(2,899)

54,355

Total operating expenses

112,886

(8,639)

104,247

Income from operations

$ 52,847

$ 9,623

$ 62,470







Reconciliation of Special Items to Diluted Earnings per Share
(Non-GAAP Measure)
(In thousands, except per share data)
(Unaudited)

The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is income from operations or net income (loss) excluding certain charges or amounts. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income from operations, net income (loss) or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and twelve months ended December 31, 2011 and 2010:



Three Months Ended December 31, 2011


As

Reported

Restructuring

Charges(1)

Investment

Charges(2)

As

Adjusted






Net revenues

$ 159,883

$ -

$ -

$ 159,883

Cost of sales

95,266

-

-

95,266

Gross profit

64,617

-

-

64,617

Operating expenses

31,189

(2,928)

-

28,261

Income from operations

33,428

2,928

-

36,356

Interest expense, net

(1,600)

-

-

(1,600)

Equity in losses of INOVA Geophysical

(13,018)

-

7,680

(5,338)

Impairment of cost method investment

(1,312)

-

1,312

-

Other income

168

-

-

168

Income tax expense

5,420

705

-

6,125

Net income

12,246

2,223

8,992

23,461

Net income attributable to noncontrolling interests

105

-

-

105

Net income attributable to ION

12,351

2,223

8,992

23,566

Preferred stock dividends

338

-

-

338

Net income applicable to common shares

$ 12,013

$ 2,223

$ 8,992

$ 23,228






Net income per share:





Basic

$ 0.08



$ 0.15

Diluted

$ 0.08



$ 0.15






Weighted average number of common shares outstanding:





Basic

155,292



155,292

Diluted

162,132



162,132






Twelve Months Ended December 31, 2011


As

Reported

Restructuring

Charges(1)

Investment

Charges(2)

As

Adjusted






Net revenues

$ 454,621

$ -

$ -

$ 454,621

Cost of sales

281,176

-

-

281,176

Gross profit

173,445

-

-

173,445

Operating expenses

106,650

(2,928)

-

103,722

Income from operations

66,795

2,928

-

69,723

Interest expense, net

(5,784)

-

-

(5,784)

Equity in losses of INOVA Geophysical

(22,862)

-

7,680

(15,182)

Impairment of cost method investment

(1,312)

-

1,312

-

Other expense

(2,135)

-

-

(2,135)

Income tax expense

10,136

705

-

10,841

Net income

24,566

2,223

8,992

35,781

Net income attributable to noncontrolling interests

208

-

-

208

Net income attributable to ION

24,774

2,223

8,992

35,989

Preferred stock dividends

1,352

-

-

1,352

Net income applicable to common shares

$ 23,422

$ 2,223

$ 8,992

$ 34,637






Net income per share:





Basic

$ 0.15



$ 0.22

Diluted

$ 0.15



$ 0.22






Weighted average number of common shares outstanding:





Basic

154,811



154,811

Diluted

156,090



156,090




(1)

Relates to restructuring charges related to ION's geophone operations in the Netherlands.

(2)

Relates to ION's 49% share of a write-down of inventory by INOVA Geophysical and the impairment of one of ION's investments.





Three Months Ended December 31, 2010


As

Reported

Gain on

Legal

Settlement(4)

Investment

Charges(5)

As

Adjusted






Net revenues

$ 158,623

$ -

$ -

$ 158,623

Cost of sales

92,266

-

-

92,266

Gross profit

66,357

-

-

66,357

Operating expenses

31,886

-

-

31,886

Income from operations

34,471

-

-

34,471

Interest expense, net

(1,893)

-

-

(1,893)

Equity in losses of INOVA Geophysical

(15,541)

-

9,475

(6,066)

Gain on legal settlement

24,500

(24,500)

-

-

Impairment of cost method investment

(7,650)

-

7,650

-

Other income

1,039

-

-

1,039

Income tax expense

14,542

(8,575)

-

5,967

Net income

20,384

(15,925)

17,125

21,584

Preferred stock dividends

338

-

-

338

Net income applicable to common shares

$ 20,046

$ (15,925)

$ 17,125

$ 21,246






Net income per share:





Basic

$ 0.13



$ 0.14

Diluted

$ 0.13



$ 0.14






Weighted average number of common shares outstanding:





Basic

152,572



152,572

Diluted

159,698



159,698






Twelve Months Ended December 31, 2010


As

Reported

Loss on

Disposition

Refinancing

and Warrant

Charges(3)

Gain on

Legal

Settlement(4)

Investment

Charges(5)

As

Adjusted








Net revenues

$ 444,322

$ -

$ -

$ -

$ -

$ 444,322

Cost of sales

278,589

-

-

-

-

278,589

Gross profit

165,733

-

-

-

-

165,733

Operating expenses

112,886

-

-

-

-

112,886

Income from operations

52,847

-

-

-

-

52,847

Interest expense, net

(30,770)

-

18,777

-

-

(11,993)

Loss on disposition of land division

(38,115)

38,115

-

-

-

-

Fair value adjustment of warrant

12,788

-

(12,788)

-

-

-

Equity in losses of INOVA Geophysical

(23,724)

-

-

-

9,475

(14,249)

Gain on legal settlement

24,500

-

-

(24,500)

-

-

Impairment of cost method investment

(7,650)

-

-

-

7,650

-

Other income

228

-

-

-

-

228

Income tax expense

26,942

(19,841)

3,542

(8,575)

-

2,068

Net income (loss)

(36,838)

57,956

2,447

(15,925)

17,125

24,765

Preferred stock dividends

1,936

-

-

-

-

1,936

Net income (loss) applicable to common shares

$ (38,774)

$ 57,956

$ 2,447

$ (15,925)

$ 17,125

$ 22,829








Net income per share:







Basic

$ (0.27)





$ 0.16

Diluted

$ (0.27)





$ 0.16








Weighted average number of common shares outstanding:







Basic

144,278





144,278

Diluted

144,278





144,934




(3)

Relates to the write-off of unamortized debt issuance costs relating to our first quarter 2010 re-financings and the non-cash debt discount and fair value adjustment to the warrant from January 1, 2010 through March 25, 2010, the date of the closing of INOVA Geophysical.

(4)

Relates to a gain associated with cash received from the Greatbatch legal settlement in Q4 2010.

(5)

Relates to ION's 49% share of a write-down of inventory by INOVA Geophysical and the impairment of one of ION's investments.



SOURCE ION Geophysical Corporation

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