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HOUSTON, Aug 03, 2005 /PRNewswire-FirstCall via COMTEX/ — Input/Output, Inc. (NYSE: IO)
today announced second quarter 2005 net income of $2.5 million, or $0.03 per
diluted share, on revenues of $84.0 million compared to net income of
$4.2 million, or $0.07 per diluted share, on revenues of $62.3 million for the
same period a year ago.

Bob Peebler, I/O’s President and Chief Executive Officer, said, “We remain
on track in terms of our anticipated gradual improvement throughout the year.
The Marine Imaging Systems Division is performing better than expected led by
a strong seismic marine market. Our first project with VectorSeis Ocean(TM)
(VSO) was completed with the E&P customer requesting an expansion of the
original scope of work. We are very pleased that the recent success of VSO
has resulted in a new purchase order from Reservoir Exploration Technology
(RXT) for a second VSO system and an agreement with RXT that provides the
framework for multiple VSO system purchases over the next two years. On the
land imaging side, the fundamental drivers behind the seismic market remain
strong, including a continuing expansion of digital, full-wave surveys. GX
Technology (GXT) made progress in the second quarter, and processing backlog
continues to improve. We continue to make significant progress towards our
goal of introducing game-changing solutions to the seismic market.”


Land Imaging revenues were $37.4 million compared to $36.6 million a year
ago. Marine Imaging revenues increased to $16.8 million from $13.1 million a
year ago, driven by a strong rebound in seismic marine activity. GXT, which
was acquired by I/O in June 2004, generated revenues of $24.2 million during
the quarter, a sequential increase of 17 percent from the first quarter of

Gross margin for the second quarter was 28 percent compared to 23 percent
in the first quarter and 34 percent for the same period a year ago. In the
second quarter of 2005, the Company experienced pricing pressures on land
systems related to entering new markets and low processing margins at GXT due
to excess capacity. The Company expects the excess capacity to be absorbed as
processing backlog continues to improve. Operating expenses for the second
quarter declined to 22 percent of revenues compared to 25 percent for the
second quarter of last year and 28 percent in the first quarter of 2005.

Income from operations in the second quarter was $4.8 million compared to
income from operations of $5.6 million in the second quarter of 2004. EBITDA
(earnings before net interest expense, taxes, depreciation and amortization)
for the second quarter improved to $12.5 million compared to $9.7 million for
the second quarter of last year. A reconciliation of EBITDA to reported
earnings can be found at the end of this press release.


Revenues for the six months ended June 30, 2005 increased 53 percent to
$150.9 million from $98.6 million in the first half of 2004. The Imaging
Systems Group grew 15 percent while the rest of the increase is due to the
acquisition of GXT.

Gross margin for the first six months of 2005 declined to 25 percent
compared to 34 percent in the first six months of last year. The gross margin
in the first half of 2004 primarily reflects the mix of higher margin sales,
such as imaging systems and data library products, when compared to the first
half of 2005. EBITDA for the first six months of 2005 increased to
$17.4 million from $13.2 million in the same period a year ago. Income from
operations for the first half of 2005 was $1.2 million compared to
$6.6 million in the first half of 2004. For the six months ended
June 30, 2005, I/O reported a net loss of $1.6 million, or $0.02 loss per
share, compared to net income of $3.6 million, or $0.07 per diluted share for
the same period a year ago.


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.

Mike Kirksey, Executive Vice President and Chief Financial Officer,
commented, “Based on the first half results and our current pipeline of
business, we are updating the guidance we provided during the first quarter.
We now expect 2005 revenues to range between $330 and $350 million with much
of the revenue growth coming from continued market penetration of our new
field acquisition systems, improving financial performance at GXT and a strong
overall marine seismic market. We expect sales and margins to continue
improving as we move through the second half of the year, with full year 2005
gross margins to range between 25 and 30 percent. We anticipate operating
expenses as a percentage of revenues to range between 20 and 23 percent during
the last half of the year. As a result, we anticipate 2005 earnings will
range between $0.12 and $0.25 per diluted share. Several multi-client
projects at GXT are in process, but some uncertainty exists around the exact
timing, as well as the permitting requirements. In addition, the next VSO
system may be delivered in phases and therefore the revenue which will be
recognized in 2005 could vary accordingly. These uncertainties have led us to
reduce the lower end of the range.”


During the second quarter, the Company’s internal review process
determined that approximately $778,000 of royalty expenses were incurred by
GXT and should have been recorded in the first quarter of 2005. The Company
intends to revise its financial statements for the first quarter of 2005 to
include the royalty expenses.

The impact of this revision is to increase cost of sales in the first
quarter by $778,000, resulting in an aggregate loss per share during the first
quarter of 2005 of $0.05 compared to a loss per share of $0.04 previously
reported. The Company will amend its Quarterly Report on Form 10-Q for the
first quarter of 2005 to reflect the revised financial statements.


I/O has scheduled a conference call for Thursday, August 4, 2005, at
9:30 a.m. EDT. To participate in the conference call, dial 303-262-2142 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
August 11, 2005. To access the replay, dial 303-590-3000 and use pass code

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.


I/O is a leading, technology-focused seismic solutions provider. The
company provides cutting-edge seismic acquisition equipment, software, and
planning and seismic processing services 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 2005, and estimated gross margins, EBITDA and
operating expenses as a percentage of revenue for fiscal 2005, future sales
and market growth, 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 Company’s ability to
successfully manage the integration of its acquisitions into the Company’s
operations; 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, 2004 and its Quarterly Report on
Form 10-Q for the quarter ended March 31, 2005.

CONTACTS:  J. Michael Kirksey
                Chief Financial Officer
                Input/Output (281) 879-3672

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

               (In thousands, except share and per share data)

                             Three Months Ended         Six Months Ended
                                   June 30,                  June 30,
                              2005         2004         2005         2004

    Net sales                $84,024      $62,326     $150,861      $98,614
    Cost of sales             60,733       41,183      112,504       65,503
      Gross profit            23,291       21,143       38,357       33,111

    Operating expenses
      Research and
       development             4,779        4,722        9,422        8,505
      Marketing and sales      7,281        5,016       14,967        8,314
      General and
       administrative          6,394        5,852       12,716       10,545
      Loss (gain) on sale
       of assets                  81          (47)          76         (896)
        Total operating
         expenses             18,535       15,543       37,181       26,468

    Income from operations     4,756        5,600        1,176        6,643

    Interest expense          (1,618)      (1,497)      (3,411)      (2,993)
    Interest income              258          290          534          758
    Other income                  24          140           65          158
    Income (loss) before
     income taxes              3,420        4,533       (1,636)       4,566
    Income tax expense
     (benefit)                   521          347         (694)         938
    Net income (loss)          2,899        4,186         (942)       3,628

    Preferred dividend           422          ---          616          ---

    Net income (loss)
     applicable to
     common shares            $2,477       $4,186      $(1,558)      $3,628

    Basic net income
     (loss) per common
     share                     $0.03        $0.07       $(0.02)       $0.07

    Weighted average
     number of common
     shares outstanding   78,744,692   57,073,916   78,694,481   54,596,409

    Diluted net income
     (loss) per common
     share                     $0.03        $0.07       $(0.02)       $0.07

    Weighted average
     number of diluted
     common shares
     outstanding          79,676,173   71,425,088   78,694,481   55,004,577

                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                                    June 30,     December 31,
                                                      2005           2004

    Current assets:
      Cash and cash equivalents                      $20,413        $14,935
      Restricted cash                                  1,645          2,345
      Accounts receivable, net                        72,816         61,598
      Current portion of notes receivable, net        10,455         10,784
      Unbilled revenue                                12,854          7,309
      Inventories                                     83,877         86,659
      Prepaid expenses and other current assets       13,064          7,974
        Total current assets                         215,124        191,604
    Notes receivable                                   2,462          4,143
    Property, plant and equipment, net                28,503         45,239
    Multi-client data library, net                     9,566          9,572
    Investments at cost                                4,000          3,500
    Goodwill                                         148,637        147,066
    Intangible and other assets, net                  71,050         77,992
        Total assets                                $479,342       $479,116

    Current liabilities:
      Notes payable and current maturities of
       long-term debt and lease obligations           $3,648         $6,564
      Accounts payable                                24,479         40,856
      Accrued expenses                                25,750         26,686
      Deferred revenue                                 7,924          8,423
        Total current liabilities                     61,801         82,529
    Long-term debt and lease obligations,
     net of current maturities                        70,544         79,387
    Other long-term liabilities                        4,561          2,688

    Cumulative convertible preferred stock            29,779            ---

    Stockholders' equity:
      Common stock                                       798            795
      Additional paid-in capital                     481,967        480,845
      Accumulated deficit                           (163,074)      (161,516)
      Accumulated other comprehensive income             163          2,449
      Treasury stock                                  (5,777)        (5,844)
      Unamortized restricted stock compensation       (1,420)        (2,217)
      Total stockholders' equity                     312,657        314,512
      Total liabilities and stockholders' equity    $479,342       $479,116

                    Reconciliation of EBITDA to Net Income
                             (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         Six Months Ended
                                     June 30,                  June 30,
                                2005         2004         2005         2004

    Net income (loss)
     applicable to common
     shares                     $2,477       $4,186      $(1,558)      $3,628
    Interest expense             1,618        1,497        3,411        2,993
    Interest income               (258)        (290)        (534)        (758)
    Income tax expense
     (benefit)                     521          347        (694)          938
    Depreciation and
     amortization expense        8,153        3,999       16,797        6,421
    EBITDA                     $12,511       $9,739      $17,422      $13,222

SOURCE  Input/Output, Inc.

J. Michael Kirksey, Chief Financial Officer of Input-Output, Inc., +1-281-879-3672;
or Jack Lascar, Partner, or Karen Roan, SVP, both of DRG&E, +1-713-529-6600, for
Input-Output, Inc.