Share this page with someone.

Facebook Twitter LinkedIn Print Email
  • Third quarter 2004 revenues of $80.9 million
  • Company records a $5.2 million reserve ($0.07 per share) for a Russian
  • New System Four Analog System continues to penetrate market

HOUSTON, Oct. 27 /PRNewswire-FirstCall/ — Input/Output, Inc. (NYSE: IO)
today announced third quarter 2004 net loss of $5.0 million, or $(0.07) per
share, on revenues of $80.9 million compared to a net loss of $4.8 million, or
$(0.09) per share, on revenues of $30.3 million for the same period a year
ago. Included in the third quarter results is a $(0.07) per share loss
related to a Russian receivable.

Bob Peebler, I/O’s President and Chief Executive Officer, said, “As
indicated in our October 5th conference call, the third quarter financial
results were impacted by a number of events that negatively affected earnings.
Project delays, unexpected new product start-up costs and a product mix with
lower overall margins occurred simultaneously to affect our business. While
the quarter’s results are disappointing, the fundamental drivers of our
business model remain solid. Top line revenues increased by $51 million or
167% over the year ago period as the demand for seismic work continues to
grow. Our new products are gaining market acceptance and our technology
portfolio is focused on the highest value added segments of our markets.”


Third quarter revenues of $80.9 million were in line with the October 5th
guidance of approximately $80 million. Excluding GXT and Concept Systems,
revenues increased almost 100%. GX Technology, which was acquired in June of
this year, contributed revenues of $17.5 million during the quarter. Land
imaging revenues increased to $38.4 million compared to $20.7 million a year
ago, and marine imaging revenues more than doubled to $19.1 million compared
to $7.6 million a year ago. The land imaging division continued to enjoy
acceptance of System Four Analog with its first sale in the international
market. The marine imaging division completed the final sale of this year’s
VectorSeis Ocean contract.

Gross margin in the third quarter improved to 24% compared to 17% for the
same period a year ago. However, third quarter margins were lower than
expected as delays in higher margin system sales and data library sales were
replaced with lower margin sales of vibrator trucks and other older technology
based products. In addition, startup expenses on new products impacted the
overall gross margin by nearly 2 percentage points. Operating expenses as a
percentage of revenues for the third quarter fell to 28% compared to 38% for
the third quarter of last year. During this quarter, I/O sold its Alvin,
Texas facility, which was made redundant by the major outsourcing initiative
of the Company. The Company recorded a gain of $2.4 million from this sale.

In recent days, the increasing financial difficulties of one of its
Russian customers have led the Company to provide a reserve for the exposure
to receivables due from a subsidiary of Yukos. These receivables were
collateralized by the equipment, which was sold to the customer in late 2001
through early 2003. The majority of the equipment has been recovered.
However, the difference between the receivables and the estimated fair market
value, net of refurbishment cost, of the recovered equipment is $5.2 million,
or ($0.07 per share), which the Company recorded in the third quarter.

Loss from operations in the quarter was $3.3 million, including the
Russian reserve, compared to a loss from operations of $6.4 million in the
third quarter of 2003. EBITDA (earnings before net interest expense, taxes,
depreciation and amortization) for the third quarter was $4.3 million compared
to a negative $1.9 million for the third quarter of last year. You can find a
reconciliation of EBITDA to reported earnings at the end of this press


Revenues for the nine months ended September 30, 2004 increased 69% to
$179.5 million compared to $106.0 million in the comparable period of 2003.
Approximately half of this increase is due to better performance within the
land and marine imaging divisions, while the remaining increase is due to the
acquisitions of GX Technology and Concept Systems.

Gross margin for the first nine months of 2004 rose to 30% compared to
16% in the first nine months of 2003. EBITDA for the first nine months of
2004 was $17.5 million compared to a negative $12.9 million for the first nine
months of 2003. Income from operations increased to $3.3 million compared to
a loss from operations in the prior year of $21.8 million. For the nine
months ended September 30, 2004, I/O recorded a net loss of $1.3 million, or
($0.02) per share, compared to a net loss of $23.8 million, or $(0.46) per
share in the prior year.


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.

Mr. Peebler stated, “Looking at 2004 to date, I/O has accomplished a great
deal. We have launched two major next-generation product lines on time and
continue to increase market penetration of our full-wave VectorSeis
technology. VectorSeis sales are expected to grow in both the land and marine
environments as acceptance of this new technology continues. The additions of
GX Technology and Concept Systems have added the necessary key pieces we
needed to build a seismic solutions company. While we have a lot more work to
do, these are major steps in the first year of our plan.”

Mike Kirksey, Executive Vice President and Chief Financial Officer, added,
“Based on our current view of fourth quarter orders in the pipeline and our
judgment on expected shipments, we expect 2004 revenues to range between
$260 and $270 million. Much of our projected top line growth in the fourth
quarter is expected to come from continued market penetration of our new field
acquisition systems and continued growth of GX Technology’s Integrated Seismic
Solutions offering. We expect full year 2004 gross margin to be approximately
30% and EBITDA to range between $30 and $35 million. Excluding the Russian
reserve, we expect earnings per share to range between $0.14 and $0.20 for
2004. As a result, for the fourth quarter of 2004, we expect revenues to
range between $80 and $90 million and earnings per share to range between
$0.08 and $0.14.”


I/O has scheduled a conference call for Thursday, October 28, 2004, at
9:30 a.m. eastern time. 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 November 4, 2004. To access the replay, dial 303-590-3000 and use pass
code 11011606.

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 for approximately 90 days.

I/O is a leading seismic services provider. The company provides cutting-
edge seismic acquisition equipment, software, and planning and seismic
processing services to the global oil and gas industry. The company’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. I/O has offices in the United States,
Canada, Europe, China, Russia 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 capital outlays by E&P companies and
seismic contractors, future VectorSeis revenues, and fourth quarter revenues,
gross margin, and net income per share. 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 there from; the
Company’s inability to produce products to preserve and increase market share;
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.

                               Tables to follow

               (In thousands, except share and per share data)

                               Three Months Ended      Nine Months Ended
                                  September 30,           September 30,
                                 2004        2003       2004        2003

    Net sales                  $80,861     $30,307    $179,475    $106,046
    Cost of sales               61,722      25,088     126,275      89,396
        Gross profit            19,139       5,219      53,200      16,650

    Operating expenses:
      Research and development   6,108       4,458      15,563      14,931
      Marketing and sales        7,342       3,015      15,656       8,851
      General and
       administrative           11,530       4,359      22,074      13,786
      Gain on sale of assets    (2,498)       (244)     (3,394)       (280)
      Impairment of long-lived
       assets                      ---         ---         ---       1,120
        Total operating
         expenses               22,482      11,588      49,899      38,408

    Income (loss) from
     operations                 (3,343)     (6,369)      3,301     (21,758)

    Interest expense            (1,623)       (954)     (4,616)     (3,142)
    Interest income                261         428       1,020       1,544
    Fair value adjustment of
     warrant obligation            ---       1,829         ---         988
    Write-down of investment       ---         ---         ---      (2,036)
    Other income                    36         113         193         777
    Income (loss) before
     income taxes               (4,669)     (4,953)       (102)    (23,627)
    Income tax expense
     (benefit)                     305        (133)      1,243         158
    Net loss                   $(4,974)    $(4,820)    $(1,345)   $(23,785)

    Basic and diluted net
     loss per common share      $(0.07)     $(0.09)     $(0.02)     $(0.46)

    Weighed average number
     of common shares
     outstanding            76,419,362  51,235,269  61,923,823  51,219,179

                         CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share data)

                     ASSETS                  September 30,     December 31,
                                                 2004             2003
    Current assets:
      Cash and cash equivalents                 $31,917          $59,507
      Restricted cash                             1,026            1,127
      Accounts receivable, net                   68,549           34,270
      Current portion notes receivable, net      11,609           14,420
      Income tax receivable                       1,149              ---
      Unbilled revenue                            7,987              ---
      Inventories                                59,042           53,551
      Prepaid expenses and other current
       assets                                     6,420            3,703
        Total current assets                    187,699          166,578
    Notes receivable                              6,123            6,409
    Net assets held for sale                        ---            3,331
    Property, plant and equipment, net           42,712           27,607
    Multi-client data library, net               14,517              ---
    Deferred income taxes                           ---            1,149
    Goodwill                                    149,324           35,025
    Intangible and other assets, net             73,475            9,105
        Total assets                           $473,850         $249,204


    Current liabilities:
      Notes payable and current maturities
       of long-term debt                         $7,506           $2,687
      Accounts payable                           38,052           12,531
      Accrued expenses                           23,649           15,833
      Deferred revenue                           10,402            2,060
        Total current liabilities                79,609           33,111
    Long-term debt, net of current maturities    80,484           78,516
    Other long-term liabilities                   3,321            3,813
    Stockholders' equity:
      Common stock                                  784              522
      Additional paid-in capital                478,120          296,663
      Accumulated deficit                      (159,882)        (158,537)
      Accumulated other comprehensive income        216            1,292
      Treasury stock                             (5,833)          (5,826)
      Unamortized restricted stock
       compensation                              (2,969)            (350)
        Total stockholders' equity              310,436          133,764
        Total liabilities and stockholders'
         equity                                $473,850         $249,204

                    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 income (loss) per share calculated under generally accepted
accounting principles (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     Nine Months Ended
                                  September 30,          September 30,
                                 2004       2003       2004        2003

    Net loss                   $(4,974)   $(4,820)   $(1,345)   $(23,785)
      Interest expense           1,623        954      4,616       3,142
      Interest income             (261)      (428)    (1,020)     (1,544)
      Income tax expense
       (benefit)                   305       (133)     1,243         158
      Depreciation and
       amortization expense      7,593      2,484     14,014       9,093
    EBITDA                      $4,286    $(1,943)   $17,508    $(12,936)

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

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

SOURCE Input/Output, Inc.

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