Share this page with someone.

Facebook Twitter LinkedIn Print Email
                Revenues Increase 91 Percent to $165 Million;
                     Earnings of $0.04 per Diluted Share

HOUSTON, May 9 /PRNewswire-FirstCall/ — Input/Output, Inc. (NYSE: IO)
today announced a first quarter 2007 net income of $3.1 million, or $0.04 per
diluted share, on revenues of $165.0 million compared to a net loss of $3.3
million, or $0.04 loss per share, on revenues of $86.3 million for the same
period a year ago.

Bob Peebler, I/O’s President and Chief Executive Officer, said, “We are
particularly pleased with our first quarter results because, as we stated in
the Guidance call last December and the fourth quarter earnings call this
March, and not unlike previous years, we expected the first quarter to be the
weakest of the year from a seasonal standpoint. We continue to expect our
financial results to improve throughout 2007, with a larger portion of the
revenues and earnings occurring in the second half of the year.”

Marine Imaging Systems revenues increased 65.9 percent to $44.1 million
from $26.6 million a year ago, due to continued strength in the worldwide
marine market, a strong contribution from the company’s positioning source and
towed streamer product lines and the delivery of the last portion of RXT’s
third VectorSeis(R) Ocean (VSO) order.

I/O Solutions (GXT) revenues more than doubled to $40.9 million during the
quarter compared to $20.3 million a year ago, primarily attributable to
continued strong processing revenues and a low margin, pre-funded multi-client
BasinSpan(TM) survey. The survey was strategically beneficial to I/O, but the
low margins on the survey negatively affected overall margin rate for the
division and, consequently, I/O.

Land Imaging Systems revenues also more than doubled to $73.5 million from
$34.9 million a year ago, driven by stronger than expected vibroseis truck
sales and the recognition of revenue from the sale of the first FireFly(R)
system used on the Wamsutter survey with BP. Gross margin in Land Imaging was
impacted by the limited margin on the first FireFly system sale and the
overall mix of lower margin vibroseis trucks and geophone sales, somewhat
offset by improved margins on Scorpion(R) cabled system sales.

Gross margin for the first quarter was 23.0 percent compared to 27.5
percent for the same period a year ago. Overall consolidated margins were
negatively affected by 2 percentage points due to the higher mix of lower
margin vibroseis trucks and geophone sales in the Land Division and 4
percentage points due to the recognition of the sale of the first FireFly
system, the impact of the low margin yet strategic multi-client survey, and
the sale of a replacement cable to RXT, our strategic launch partner for VSO.

Operating expenses for the first quarter declined to 19.4 percent of
revenues compared to 28.8 percent for the first quarter of last year, despite
an increase in R&D expense of $1.4 million to support FireFly. General and
administrative expenses were $1.6 million higher than the comparable quarter
last year, primarily as a result of investing in infrastructure to support the
increasing size and activity of the business.

Earnings from operations in the first quarter were $5.9 million compared
to a loss from operations of $1.1 million in the first quarter of 2006.
EBITDA (earnings before net interest expense, taxes, depreciation and
amortization) for the first quarter improved to $20.4 million compared to $5.2
million in the first quarter of last year. A reconciliation of EBITDA to
reported earnings can be found at the end of this press release.

Mr. Peebler added, “Our Marine Imaging Systems Division had another very
good quarter, led by a strong seismic marine market. We are looking forward to
the roll-out later this year of DigiFin(TM), our new lateral streamer control
technology that addresses positioning constraints in marine towed streamer
data acquisition. During the quarter, RXT placed a $29 million order for
their fourth VSO system. The system is scheduled to be delivered in the fourth
quarter of 2007, in line with our expectations related to our exclusive
agreement with RXT. We were also pleased to announce the extension of the RXT
exclusivity agreement which includes a commitment of $160 million of equipment
sales over a four year period and a royalty paid on RXT’s revenues.”

“On the Land Imaging Systems front, the fundamental drivers behind the
seismic market continue to be strong, and our Sensor unit had another solid
quarter. In addition, we sold several more vibroseis trucks than originally
planned, which is a good indication of continued land crew expansion. Delivery
of the ONGC order in Q2/Q3 is on schedule, with the initial systems having
been shipped and awaiting acceptance inspections. The second 10,000 station
FireFly survey has commenced with Apache in East Texas. The initial layout
phase is complete and shooting is underway. We have had some weather and
technical delays, but the job is on-track and is expected to be completed
during the month. Industry interest in FireFly continues to be very high with
frequent inquiries on capabilities and future availability. We still expect
some limited commercial activity with FireFly sales in the later part of 2007
with the full commercialization starting in 2008.”


The following statements are based on our current expectations. These
statements are forward looking and actual results may differ materially.
Factors affecting these forward-looking statements are detailed below.

Brian Hanson, Executive Vice President and Chief Financial Officer,
commented, “Based on our 2007 operating plan and our current pipeline of
business, we are reiterating the guidance we provided on February 28, 2007. We
expect 2007 consolidated revenues to range between $610 and $670 million, with
much of the revenue growth originating from continued market penetration of
our new Scorpion land acquisition system, the introduction of FireFly, strong
financial performance in Marine Imaging Systems and our I/O Solutions (GXT)
data processing and data library businesses, and a strong overall seismic
market. Although the sales of FireFly and one strategic multi-client survey
impacted overall margin rate for the company in the first quarter, we are
starting to see margin improvement in the land systems side of the business
and we continue to expect ongoing margin improvement as we capture lower costs
associated with the manufacture and delivery of our Scorpion land system. It’s
important to note that the production cost of future FireFly systems will be
lower than the first system due to the optimization of manufacturing
processes, which should contribute to higher margins on future FireFly system
sales. We continue to anticipate 2007 earnings to be between $0.45 and $0.60
per diluted share, and that earnings will be back-end loaded due to timing
issues related to permitting and other operational considerations for I/O
Solutions (GXT’s) multi-client Integrated Seismic Solutions (ISS) business,
the delivery of the fourth VSO system to RXT later this year and the natural
budget and planning cycle of our larger contractor customers who formulate
capital spending plans early each year and execute upon them later in the


I/O has scheduled a conference call for Thursday, May 10, 2007, at 9:30
a.m. Eastern Time. To participate in the conference call, dial 303-205-0055
at least 10 minutes before the call begins and ask for the Input/Output
conference call. A replay of the call will be available approximately two
hours after the live broadcast ends and will be accessible until May 24, 2007.
To access the replay, dial 303-590-3000 and use pass code 11088923.

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

About I/O

I/O is a leading, technology-focused seismic solutions provider. The
company provides cutting-edge seismic acquisition equipment, software,
planning and seismic processing services and data libraries to the global oil
and gas industry. I/O’s technologies are applied in both land and marine
environments, in traditional 2D and 3D surveys, and in rapidly growing areas
like time-lapse (4D) reservoir monitoring and full-wave imaging. Headquartered
in Houston, Texas, I/O has regional offices in Canada, Latin America, Europe,
China, Russia, Africa and the Middle East. Additional information is available
at .

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 statements concerning estimated revenues, earnings and
earnings per share for fiscal 2007, and estimated gross margins, EBITDA and
operating expenses as a percentage of revenue for fiscal 2007, future sales
and market growth, future profit margins, and other statements that are not of
historical fact. Actual results may vary materially from those described in
these forward-looking statements. All forward-looking statements reflect
numerous assumptions and involve a number of risks and uncertainties. These
risks and uncertainties include the timing and development of the Company’s
products and services and market acceptance of the Company’s new and revised
product offerings; risks associated with competitor’s product offerings and
pricing pressures resulting therefrom; the relatively small number of
customers that the Company currently relies upon; the fact that a significant
portion of the Company’s revenues is derived from foreign sales; the 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 line. 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, including its Annual Report on Form 10-K for the year
ended December 31, 2006.

                               Tables to follow

                    (In thousands, except per share data)

                                                        Three Months Ended
                                                             March 31,
                                                       2007           2006
    Product revenues                                $123,480        $65,649
    Service revenues                                  41,565         20,700
      Total net revenues                             165,045         86,349

    Cost of products                                  92,889         46,536
    Cost of services                                  34,176         16,051
      Gross profit                                    37,980         23,762

    Operating expenses:
      Research and development                        10,119          7,081
      Marketing and sales                             10,637          8,175
      General and administrative                      11,280          9,633
        Total operating expenses                      32,036         24,889
    Income (loss) from operations                      5,944         (1,127)
    Interest expense                                  (1,453)        (1,399)
    Interest income                                      615            320
    Other income (expense)                              (227)           (19)
      Income (loss) before income
       taxes and change in accounting principle        4,879         (2,225)
    Income tax expense                                 1,204            942
      Net income (loss) before change in
       accounting principle                            3,675         (3,167)
    Cumulative effect of change in
     accounting principle                                ---            398
      Net income (loss)                                3,675         (2,769)
    Preferred stock dividends and accretion              602            565
      Net income (loss) applicable to common shares   $3,073        $(3,334)

    Basic and diluted income (loss) per share:
      Net Income (loss) per share before
       change in accounting principle                  $0.04         $(0.05)
      Cumulative effect of change in
       accounting principle                              ---           0.01
      Net Income (loss) per basic and diluted share    $0.04         $(0.04)

    Weighted average number of common
     shares outstanding:
      Basic                                           80,216         79,134
      Diluted                                         83,247         79,134

                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                                     March 31,    December 31,
                                                       2007           2006

    Current assets:
      Cash and cash equivalents                       $6,911        $17,056
      Restricted cash                                  1,326          1,044
      Accounts receivable, net                       153,300        167,747
      Current portion of notes receivable, net        14,113          6,299
      Unbilled receivables                            25,403         28,599
      Inventories                                    135,056        115,520
      Prepaid expenses and other current assets       13,925          9,854
        Total current assets                         350,034        346,119
    Notes receivable                                   1,789          4,968
    Non-current deferred income tax asset              6,914          6,197
    Property, plant and equipment, net                38,055         38,129
    Multi-client data library, net                    34,894         33,072
    Investments at cost                                4,254          4,254
    Goodwill                                         156,206        156,091
    Intangible and other assets, net                  63,415         66,306
      Total assets                                  $655,561       $655,136


    Current liabilities:
      Notes payable and current maturities
       of long-term debt                              $7,555         $6,566
      Accounts payable                                55,240         47,844
      Accrued expenses                                40,967         50,819
      Accrued multi-client data library royalties     28,010         27,197
      Deferred revenue                                21,203         37,442
      Deferred income tax liability                    5,909          5,909
        Total current liabilities                    158,884        175,777
    Long-term debt, net of current maturities         82,470         70,974
    Non-current deferred income tax liability          3,977          4,142
    Other long-term liabilities                        4,628          4,588
      Total liabilities                              249,959        255,481

    Cumulative convertible preferred stock            30,000         29,987

    Stockholders' equity:
      Common stock                                       813            810
      Additional paid-in capital                     496,604        493,605
      Accumulated deficit                           (120,022)      (123,095)
      Accumulated other comprehensive income           4,784          4,859
      Treasury stock                                  (6,577)        (6,511)
        Total stockholders' equity                   375,602        369,668
        Total liabilities and
         stockholders' equity                       $655,561       $655,136

                Reconciliation of EBITDA to Net Income (Loss)
                             (Non-GAAP Measures)
                                (In thousands)

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 principals (GAAP). We believe that 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 EBITDA shown below is based upon amounts
derived from the company’s financial statements prepared in conformity with

                                                      Three Months Ended
                                                            March 31,
                                                       2007           2006

    Net income (loss) applicable to common shares     $3,073        $(3,334)
    Interest expense                                   1,453          1,399
    Interest income                                     (615)          (320)
    Income tax expense                                 1,204            942
    Depreciation and amortization expense             15,260          6,941
    Cumulative effect of change in
     accounting principle                                ---           (398)
    EBITDA                                           $20,375         $5,230

CONTACTS: R. Brian Hanson
Chief Financial Officer
Input/Output (281) 879-3672

Jack Lascar, Partner
Karen Roan, SVP
DRG&E (713) 529-6600

SOURCE Input/Output, Inc.
Web site: