HOUSTON, March 15 — Input/Output, Inc. (NYSE: IO) announced
today it recorded a net loss of $61.2 million, or $(1.21) per share — which
includes a pretax charge of $85.7 million — on revenue of $37.8 million for
the fiscal third quarter ended February 28, 1999. The company would have
recorded a third quarter net loss of $5.3 million, or $(0.10) per share,
without the charges.
The special charges include asset, inventory and receivable writedowns and
restructuring costs due to reduced customer demand for the company’s equipment
as a result of lower commodity prices and oil company mergers which have
delayed seismic data acquisition projects. This reduced demand has created
excess capacity within I/O’s installed base, accelerating the obsolescence of
certain of its current-generation seismic equipment. The special charges are
listed at the end of the news release.
”The charges were necessary based on the current outlook for seismic
equipment sales,” said W.J. ”Zeke” Zeringue, chairman and CEO of Input/Output.
”We are restructuring to ride out the depressed market environment. Our
workforce has been reduced by 573 (from a total of 1,745, including full-time
and temporary employees) since August 1998 and we have consolidated
operations. Our balance sheet remains strong, with $36.9 million in cash and
long-term debt of less than $10 million.”
During the quarter I/O sold 2,034 channels of its land seismic data
acquisition recording equipment and 304 marine channels, as compared to 25,356
land channels and 7,712 marine channels in the third quarter of fiscal 1998.
I/O also sold four System 2000 systems.
”Our focus going forward is to deliver new, cost-effective technology that
will preserve our customers’ investment in I/O equipment,” said Axel Sigmar,
president and chief operating officer of Input/Output. ”Along those lines,
System 2000 has been well-received by early adopters in the market. The
system will soon integrate both radio and cable telemetry, giving it the
flexibility needed for use in a wide spectrum of environments, and operate
with existing RSR and MRX boxes, increasing their productivity and preserving
Company Completes Three Field Tests with Multi-Component Digital Sensor
The company has successfully completed three field tests with its
micro-machined digital sensor, which has been named VectorSeis(TM). The
purpose of the VectorSeis technology is to enable the cost-effective
acquisition of multi-component seismic data, thereby providing shear wave
information in addition to compression wave (P-wave) data.
Three successful field tests — two on land and one underwater —
demonstrated the superior data quality of the VectorSeis sensor as compared to
data acquired with conventional one-component (geophone) technology. The
company intends to complete several more tests during its fiscal 1999 fourth
quarter as part of its commercialization process.
The company anticipates the first commercial application for the
VectorSeis sensor will be for land data acquisition. I/O customers’
investment in the company’s equipment, starting with System 2000 and RSR
recording boxes, will become the initial platform for this new technology.
Third Quarter Charges
Included in the third quarter charges are the following:
(1) Inventory writedown totaling $47.3 million primarily due to reduced
customer demand for products rendered obsolete as a result of
prevailing industry conditions, and as a result of planned product
revisions. The write-down is included in cost of sales.
(2) Charge for accounts and notes receivable of $17.6 million, primarily
related to a customer’s vessel seizure in December 1998 followed by a
filing for creditor protection by the same customer in February, and
management’s assessment of business risk relating to three North
American customer notes as a result of the depressed market
environment. The charge is included in general and administrative
(3) A charge of $14.0 million relating to certain warranty reserves and
other product-related contingencies. The charge is included in cost
(4) A pretax, non-cash impairment charge of approximately $4.2 million as
a result of the company’s review of its long-lived assets and certain
identifiable intangibles for impairment relative to the recent
downturn in business activity. The charge is included in operating
(5) Charges of $2.6 million related to the termination of 302 employees
from Input/Output’s operations worldwide and the early termination of
a lease for a manufacturing facility in Houston. The charges are
included in general and administrative expenses.
Input/Output is a world leader in seismic acquisition imaging technology
for land, transition zone and marine exploration and production. The company
specializes in driving to market technology that creates value for the energy
industry in the areas of 2D, 3D, 4D and multi-component seismic data.
This press release contains forward-looking information, which is subject
to the provisions of the Private Securities Litigation Reform Act of 1995,
including statements relating to effects of market changes, the timing and
success of integrating radio and cable telemetry in the Company’s product
development efforts, the timing and commercial success of the Company’s
introduction of the VectorSeisa digital sensor, and the Company’s performance.
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,
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 nine months ended February 28, February 28, 1999 1998 1999 1998 Net sales $37,755 $95,266 $178,668 $281,919 Cost of sales (a) 83,649 54,455 174,617 166,003 Gross profit (45,894) 40,811 4,051 115,916 Operating expenses: Research and development 12,493 8,122 31,606 23,738 Marketing and sales 3,247 4,160 11,171 10,751 General and administrative (b) 29,963 6,572 44,398 21,082 Amortization of intangibles 3,771 1,628 7,857 4,044 Total operating expenses (c) 49,474 20,482 95,032 59,615 Earnings from operations (95,368) 20,329 (90,981) 56,301 Interest expense (229) (262) (688) (842) Other income 1,824 2,204 6,789 5,576 Earnings before income taxes (93,773) 22,271 (84,880) 61,035 Income taxes (32,553) 7,127 (29,708) 19,532 Net earnings (loss) $(61,220) $15,144 $(55,172) $41,503 Basic earnings (loss) per common share $ (1.21) $ 0.34 $ (1.15) $ 0.95 Weighted average number of common shares outstanding 50,499,898 44,157,319 47,848,166 43,758,807 Diluted earnings (loss) per common share $ (1.21) $ 0.34 $ (1.15) $ 0.94 Weighted average number of diluted common shares outstanding 50,499,898 44,564,745 47,848,166 44,257,576 (a) Includes third quarter 1999 charges of $47.3 million related to inventory writedown and $14.0 million related to certain warranty reserves and other product-related contingencies. (b) Includes third quarter 1999 charges of $17.6 million primarily related to notes receivables and $2.6 million related to reduction in workforce and facility closing. (c) Includes third quarter 1999 charge of $4.2 million related to long-lived assets and impaired intangibles.