* Strong Revenue Performance in All Divisions * Company Increases Guidance for 2006
HOUSTON, Nov. 8 /PRNewswire-FirstCall/ — Input/Output, Inc. (NYSE: IO)
today announced third quarter 2006 net income of $2.9 million, or $0.04 per
diluted share, on revenues of $110.0 million compared to previously restated
net income of $2.7 million, or $0.03 per diluted share, on previously restated
revenues of $79.5 million for the same period a year ago.
Bob Peebler, I/O’s President and Chief Executive Officer, stated, “We
continued to see a strong market for our products and services in the third
quarter with a 38 percent revenue increase over the same period last year.
One important highlight for the quarter was strong land system sales,
reflecting the growing recognition of our improved analog systems, including
the recently announced Scorpion(R) land system, and continued strong sales of
our vibrator trucks.
“The only shortfall for the quarter was not obtaining the expected
earnings on higher year over year land revenues. We are making a significant
effort through cost reduction programs to improve our land margins and better
align them with the performance of our other divisions. We are already seeing
the positive impact of those programs and will enter 2007 in a much improved
situation, which will benefit the acceleration of future earnings growth.
“Our marine business continued to show strength across its entire product
line, reflecting a buoyant marine seismic market and growth of the seismic
fleet. We generated strong sales in our positioning products and in our towed
streamer product line, and we are heading into a strong fourth quarter, led by
the expected partial delivery of our third VectorSeis(R) Ocean (VSO) system to
our launch partner.
“Our Sensor unit had another strong quarter, with the majority of our
business originating from Africa and the Middle East. GXT had another solid
quarter in multi-client and processing sales and continues to experience
strong processing backlog. We are most excited about the upcoming field trial
of FireFly(TM). FireFly is on track to begin the BP WarmSutter project in
late-November, and we expect the 10,000 station shoot to be completed by the
end of December. FireFly is a cableless land imaging system that we believe
will change the way land seismic imaging is done, including enabling a much
broader use of VectorSeis full-wave.”
THIRD QUARTER 2006
Land Imaging Systems revenues increased 19 percent to $46.1 million
compared to $38.8 million a year ago, driven by strong land systems sales and
continued strong performance from Sensor geophone sales.
Marine Imaging Systems revenues increased 52 percent to $24.9 million from
$16.3 million a year ago, led by robust sales of the company’s positioning
products and a solid contribution from the towed streamer product line.
Seismic Imaging Solutions revenues increased 65 percent to $32.4 million
during the quarter compared to $19.6 million a year ago. This strong
performance was the result of strong processing and multi-client acquisition
Gross margin for the third quarter was 30 percent, the same as in the
third quarter a year ago, compared to 33 percent in the second quarter of
2006. Operating expenses for the third quarter were 24 percent of revenues,
flat with the third quarter of last year and up from 21 percent of revenues
during the second quarter of 2006 because of higher revenues in the second
quarter of 2006. The third quarter included $7.8 million in research and
development expenses, an increase of $2.9 million over the third quarter last
year. In addition, the quarter included an increase of $2.2 million in sales
and marketing expenses associated with our international expansion, and
$1.4 million in Sarbanes-Oxley and audit expenses as compared to the same
quarter in 2005. In total, the company had an increase in the third quarter
of $0.6 million in stock-based compensation expense as compared to 2005.
Income from operations in the third quarter was $6.5 million compared to
$5.0 million in the third quarter of 2005. EBITDA (earnings before net
interest expense, taxes, depreciation and amortization) for the third quarter
improved to $18.0 million compared to a restated $10.8 million for the third
quarter of last year. A reconciliation of EBITDA to reported earnings can be
found at the end of this press release.
Revenues for the nine months ended September 30, 2006 increased 46 percent
to $337.3 million from a restated $231.7 million for the first nine months of
2005. Gross margin for the first nine months of 2006 increased to 31 percent
compared to 27 percent in the comparable period of 2005.
Operating expenses for the first nine months of 2006 were 24 percent of
revenue, consistent with 2005. Investment in research and development totaled
$23 million, or 7 percent of revenue, an increase of $8.9 million over 2005.
SG&A expenses increased $16.2 million, which includes an investment in sales
and marketing of $5.9 million. In addition Sarbanes-Oxley and audit expenses
increased $3.3 million, legal expenses increased $1.0 million as result of the
litigation with Paulsson Geophysical Services, and bonus expense increased
$1.9 million, reflecting current year performance. In total, the company
incurred an increase in stock based compensation expense of $2.5 million.
EBITDA for the first nine months of 2006 increased to $52.8 million from
$29.4 million in the same period a year ago. Income from operations for the
first nine months of 2006 increased to $22.7 million from $6.6 million in the
first nine months of 2005. For the nine months ended September 30, 2006, I/O
reported net income of $13.9 million, or $0.17 per diluted share, compared to
a restated net income of $1.6 million, or $0.02 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.
Brian Hanson, Executive Vice President and Chief Financial Officer,
commented, “Based on the first nine months results and our current pipeline of
business, we are updating the previous guidance we provided earlier this year.
We now expect 2006 revenues to range between $450 and $490 million, with
earnings ranging between $0.25 and $0.36 per diluted share. Overall, our
business of seismic equipment and processing services is expected to remain
strong as the industry continues to refocus on exploration, and this bodes
well for the remainder of 2006 and for 2007.”
I/O has scheduled a conference call for Thursday, November 9, 2006, at
9:00 a.m. Eastern Time. To participate in the conference call, dial
303-262-2137 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 16, 2006. To access the replay, dial 303-590-3000 and use pass
Investors, analysts and the general public will also have the opportunity
to listen to the conference call live over the Internet by visiting
http://www.i-o.com . 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 2006, and estimated gross margins, EBITDA and
operating expenses as a percentage of revenue for fiscal 2006, 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 Quarterly Reports
on Form 10-Q for the quarters ended June 30, 2006 and September 30, 2006.
Tables to follow INPUT/OUTPUT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 (In thousands, except per share amounts) Product revenues $77,608 $59,862 $237,620 $162,361 Service revenues 32,365 19,646 99,693 69,356 Total net revenues 109,973 79,508 337,313 231,717 Cost of products 56,113 42,681 170,236 116,086 Cost of services 20,847 13,002 63,344 52,967 Total cost of sales 76,960 55,683 233,580 169,053 Gross profit 33,013 23,825 103,733 62,664 Operating expenses (income): Research and development 7,762 4,814 23,032 14,148 Marketing and sales 9,813 7,565 28,458 22,575 General and administrative 8,994 6,429 29,557 19,227 (Gain) loss on sale of assets (9) (1) (33) 75 Total operating expenses 26,560 18,807 81,014 56,025 Income from operations 6,453 5,018 22,719 6,639 Interest expense (1,484) (1,367) (4,309) (4,726) Interest income 630 218 1,517 482 Other income (expense) (687) (4) (1,309) 61 Income before income taxes and change in accounting principle 4,912 3,865 18,618 2,456 Income tax expense (benefit) 1,419 650 3,332 (202) Net income before change in accounting principle 3,493 3,215 15,286 2,658 Cumulative effect of change in accounting principle --- --- 398 --- Net income 3,493 3,215 15,684 2,658 Preferred stock dividends and accretion 636 488 1,801 1,104 Net income applicable to common shares $2,857 $2,727 $13,883 $1,554 Basic and diluted income per share: Net income per basic and diluted share before change in accounting principle $0.04 $0.03 $0.17 $0.02 Cumulative effect of change in accounting principle --- --- --- --- Net income per basic and diluted share $0.04 $0.03 $0.17 $0.02 Weighted average number of common shares outstanding: Basic 79,575 79,313 79,344 78,903 Diluted 81,354 80,646 80,976 79,957 INPUT/OUTPUT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) Sept. 30, Dec. 31, 2006 2005 ASSETS Current assets: Cash and cash equivalents $43,130 $15,853 Restricted cash 1,559 1,532 Accounts receivable, net 114,508 120,880 Current portion of notes receivable, net 6,030 8,372 Unbilled receivables 23,668 15,070 Inventories 104,079 81,428 Prepaid expenses and other current assets 12,824 10,919 Total current assets 305,798 254,054 Notes receivable 5,617 6,508 Non-current deferred income tax asset 3,183 3,183 Property, plant and equipment, net 33,773 28,997 Multi-client data library, net 31,862 18,996 Investments at cost 4,254 4,000 Goodwill 155,016 154,794 Intangible and other assets, net 63,151 67,329 Total assets $602,654 $537,861 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term debt $7,150 $4,405 Accounts payable 35,903 31,938 Accrued expenses 42,138 29,867 Accrued multi-client data library royalties 24,867 18,961 Deferred revenue 29,015 11,939 Deferred income tax liability 3,183 3,183 Total current liabilities 142,256 100,293 Long-term debt, net of current maturities 71,868 71,541 Non-current deferred income tax liability 4,138 4,304 Other long-term liabilities 4,405 4,340 Total liabilities 222,667 180,478 Cumulative convertible preferred stock 29,950 29,838 Stockholders' equity: Common stock 808 807 Additional paid-in capital 489,800 487,232 Accumulated deficit (136,124) (150,007) Accumulated other comprehensive loss 2,057 (728) Treasury stock, at cost (6,504) (5,968) Unamortized restricted stock compensation --- (3,791) Total stockholders' equity 350,037 327,545 Total liabilities and stockholders' equity $602,654 $537,861 Reconciliation of EBITDA to Net Income (Non-GAAP Measures) (In thousands) (Unaudited)
EBITDA is a Non-GAAP measurement that is presented as an additional
indicator of operating performance and is not a substitute for net income or
net income 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 GAAP.
Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Net income applicable to common shares $2,857 $2,727 $13,883 $1,554 Interest expense 1,484 1,367 4,309 4,726 Interest income (630) (218) (1,517) (482) Income tax expense (benefit) 1,419 650 3,332 (202) Depreciation and amortization expense 12,898 6,244 32,816 23,813 EBITDA $18,028 $10,770 $52,823 $29,409
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.