HOUSTON, Dec. 14 — Input/Output, Inc. (NYSE: IO) today
announced net income of $3.8 million, or $0.08 per share, on revenue of
$73.9 million for the fiscal second quarter ended November 30, 1998, compared
with net income of $15.1 million, or $0.34 per share, on revenue of
$103.7 million for the same period a year ago. Weighted average diluted
common shares outstanding for the second quarter increased from
44,414,098 million at November 30, 1997, to 48,508,229 million at November 30,
1998, primarily due to the company's second quarter merger with DigiCOURSE,
For the six months ended November 30, 1998, Input/Output recorded net
income of $6.0 million, or $0.13 per share, on revenue of $141.0 million,
compared to net income of $26.4 million, or $0.60 per share, on revenue of
$186.7 million for the six months ended November 30, 1997.
“Second quarter results reflect a significantly weaker market for new
seismic data acquisition equipment sales due to a reduction in our customers'
capital expenditures, particularly among our land customers,'' said W.J. “Zeke''
Zeringue, chairman and CEO of Input/Output. “On a positive note, we were
encouraged by the market's response to the System 2000, selling five systems
during the second quarter. In addition, our marine business increased,
selling products for five new vessels mobilized during the quarter.''
Of the five System 2000 systems sold during the quarter, two were sold to
customers in Poland and one each to customers in China, the Ukraine and the
United States. During the quarter the company sold 5,928 channels of its land
seismic data acquisition recording equipment and 4,496 marine channels, as
compared to 33,720 channels of land equipment and 3,838 channels of marine
equipment in the second quarter of the previous year.
“Without question, the next six months will be extremely challenging,''
Zeringue said. “Seismic crews are being stacked and contractors are leasing
equipment to each other. New vessels will not come to market at the rate
previously anticipated. Only six new hulls are expected to be placed into
service during the next six months. In addition, we anticipate that equipment
required for these vessels will be transferred from smaller, less capable
vessels which will probably be removed from service.''
To counter the difficult operating environment, the company intends to
aggressively market spare parts and other ancillary products, aggressively
market System 2000 and its telepresence capabilities as an efficient tool to
enhance crew productivity, and seek alternative financing arrangements that
will not tap into customers' limited capital expenditure budgets.
On the cost side, the company is adjusting manufacturing operations to the
anticipated product build level and implementing other operating and general
and administrative cost reductions. The company will continue to invest in
the development of high-impact technology-based products that will enable oil
and gas producers and service companies to be profitable in a low oil price
“In this market, we must focus our efforts on servicing seismic crews and
helping our customers become more operationally efficient,'' Zeringue said.
“We can anticipate a revenue shift toward service-related opportunities,
including spare parts, repairs and training. In addition, we will seek cost-
reduction efforts where we can. We will not, however, sacrifice our efforts
to develop high-impact technology. We are at an important juncture in the
next product development cycle, and will continue to focus on research and
Input/Output is a world leader in seismic acquisition imaging technology
for land, transition zone and marine exploration and production.
This press release contains forward-looking information, which are subject
the provisions of the Private Securities Litigation Reform Act of 1995,
including statements relating to marketing direction, effects of market
changes, product development efforts, and the company's performance for the
remainder of its current fiscal year. Investors are cautioned that all
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected,
including risks associated with the timing and development of, and market
acceptance of, the Company's products and services and the current downturn in
the oil and gas exploration industry, risks associated with competition and
competitive pricing pressures, defaults in financed purchase obligations and
changes in contract terms, risks associated with acquisitions and the
potential effects thereof and risks associated with sales to customers outside
the United States. Additional factors which could affect actual results are
described in the section entitled “Cautionary Statement for Purposes of
Forward-Looking Statements'' contained in the company's report on Form 10-K for
the year ended May 31, 1998.
INPUT/OUTPUT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (unaudited) For the three months ended For the six months ended November 30, November 30, 1998 1997 1998 1997 Net sales $73,918 $103,683 $140,913 $186,653 Cost of sales 45,936 61,892 90,968 111,548 Gross profit 27,982 41,791 49,945 75,105 Operating expenses: Research and development 10,052 8,228 19,113 15,616 Marketing and sales 3,962 3,707 7,924 6,591 General and administrative 8,100 8,442 14,435 14,510 Amortization of intangibles 2,226 1,229 4,086 2,416 Total operating expenses 24,340 21,606 45,558 39,133 Earnings from operations 3,642 20,185 4,387 35,972 Interest expense (217) (258) (459) (580) Other income 2,122 2,253 4,965 3,372 Earnings before income taxes 5,547 22,180 8,893 38,764 Income taxes 1,775 7,098 2,846 12,405 Net earnings $ 3,772 $15,082 $ 6,047 $26,359 Basic earnings per common share $0.08 $0.34 $0.13 $0.61 Weighted average number of common shares outstanding 48,459,101 43,736,043 46,522,301 43,559,551 Diluted earnings per common share $0.08 $0.34 $0.13 $0.60 Weighted average number of diluted common shares outstanding 48,508,229 44,414,098 46,605,248 44,103,991