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Q4 and Full Year EPS of $0.14 and $0.16, excluding special items
$68.5 million of net cash generation in Q4
Stronger seismic industry outlook expected in 2011

HOUSTON, Feb. 16, 2011 /PRNewswire via COMTEX/ —

ION Geophysical Corporation (NYSE: IO) today reported fourth quarter 2010 revenues of $158.6 million, a 31% increase from $121.3 million in the fourth quarter of 2009. Including special items, fourth quarter 2010 net income was $20.0 million, or $0.13 per diluted share, compared to a net loss of ($51.7) million, or ($0.44) per share, in the fourth quarter of 2009. Excluding special items, ION reported fourth quarter net income of $21.2 million, or $0.14 per diluted share. ION generated fourth quarter net cash of $68.5 million, bringing the year-end cash balance to $84.4 million.

In 2010, ION reported revenues of $444.3 million, a 6% increase from $419.8 million reported in 2009. Excluding the revenues of the Legacy Land Systems (INOVA) segment, total revenues increased 25%. Including special items, net loss in 2010 was ($38.8) million, or ($0.27) per share compared to a net loss of ($113.6) million, or ($1.03) per share. Excluding these special items, ION reported net income of $22.8 million, or $0.16 per diluted share.

In addition to the $44.1 million of first quarter pre-tax special charges associated with the formation of the land joint venture with BGP and the debt refinancing, 2010 results include three special items incurred in the fourth quarter. The first item relates to a $24.5 million pre-tax gain associated with net cash received from the Wilson Greatbatch legal settlement. The second item is a $7.7 million pre-tax impairment charge of one of ION’s investments. The last item is a $9.5 million pre-tax charge representing ION’s 49% share of a one-time write-down of excess inventory by INOVA Geophysical. These special items total $0.43 per diluted share.

Bob Peebler, ION’s Chief Executive Officer, said, “We are extremely pleased with our strong finish in 2010, with solid earnings over and above our portion of the losses from our INOVA joint venture. Highlights for the quarter included extremely robust data library sales driven by a return to year-end spending by oil companies. We shipped the positioning portion of the 12-streamer BGP deal and finalized the DigiSTREAMER(TM) testing. The system is now on its way to South Korea, where it will be installed on BGP’s new vessel in early spring. Our data processing business ended with a record year. We are pleased that 10% of our data processing revenues were from full wave processing, which appears to be moving into the mainstream in certain market segments. In addition, INOVA’s business has started to expand, with BGP purchases leading the way. Ending the year like we did further increases our confidence that we will see continued growth in 2011 in all of our product and service-lines. We now feel that we have a little wind to our back and that the industry is on a full recovery path.”

FOURTH QUARTER 2010

Total revenues for the fourth quarter of 2010 increased to $158.6 million compared to $121.3 million a year ago. Excluding the revenues of the Legacy Land Systems (INOVA) segment, total fourth quarter revenues increased 78%. The Solutions and Systems segments increased revenues by 131% and 27%, respectively, while the Software segment experienced a slight 3% decrease in revenues to $9.4 million as a result of currency exchange rates.

The Solutions group sales increased 131% and generated $106.6 million in revenues during the fourth quarter, up $60.4 million compared to $46.2 million for the same period a year ago. Of this increase, $48.1 million was the result of strong data library sales in basins across the world, including East and West Africa, Brazil and the Arctic regions, $8.2 million was from new venture activities and $4.1 million was due to increased data processing activities.

Systems segment sales increased 27% to $42.6 million in the fourth quarter compared to $33.5 million in the same period of 2009, principally due to increased sales of towed streamer products, including the sale of a 3-D positioning system to BGP.

Consolidated gross margins for the fourth quarter of 2010 increased to 42% from 28% in the fourth quarter of 2009. The increase in gross margins was attributable in part to the contribution of the Company’s lower margin land business to INOVA Geophysical in March 2010, which had a gross margin of (6%) in the fourth quarter of 2009. Excluding the results of the legacy land business, the overall gross margin of the Company’s remaining segments increased to 42% compared to 40% for the prior period. Gross margins improved in each of the remaining segments, predominantly related to sales mix. Systems segment gross margin increased 8% as a result of sales mix and cost improvements, while Software and Solutions segment gross margins increased by 3 and 2 percentage points, respectively.

As a percentage of revenue, after excluding the 2009 results of the legacy land business, operating expenses declined to 20% during the quarter compared to 31% in the prior year period. Fourth quarter operating expenses exceeded normalized levels by $3.9 million primarily due to higher employment and bad debt-related expenses partially offset by lower professional fees. Adjusted EBITDA more than doubled to $55.9 million compared to $21.4 million for the same quarter of the prior year.

The Company accounts for its 49% interest in INOVA Geophysical as an equity method investment on a one fiscal quarter-lag basis. As a result, the Company’s share of INOVA Geophysical’s third quarter financial results is included in the Company’s fourth quarter financial results. For the three months ended December 31, 2010, the Company recognized a loss on its equity investment of approximately $15.5 million, which included approximately $9.5 million (ION’s 49% share) of a one-time write-down of excess inventory by INOVA Geophysical.

FULL YEAR 2010

Consolidated revenues for full year 2010 increased to $444.3 million compared to $419.8 million for 2009. Excluding the results of the Legacy Land Systems (INOVA) segment in 2009 and the first quarter of 2010, full year revenues increased 25% or $85.8 million. Solutions segment revenues increased $97.0 million or 54% over prior year, while Software segment revenues increased 9% or $2.9 million. Systems segment revenues decreased $14.1 million to $114.2 million primarily as a result of continued softness in land geophone sales and a decrease in ocean bottom revenues.

Gross margins for full year 2010 improved to 37% compared to 31% for 2009 entirely due to the disposition of the lower margin legacy land business to INOVA Geophysical in the first quarter. Excluding the results of the legacy land business, the overall gross margin of the remaining segments remained consistent at 39%.

Excluding the results of the Legacy Land Systems (INOVA) segment, operating expenses as a percentage of revenues for full year 2010 decreased to 24% compared to 33% in the prior year period. The 2010 effective tax rate was impacted by the formation of the joint venture and the establishment of valuation allowances associated with equity in losses of INOVA Geophysical and the write-down of one of ION’s investments partially offset by a benefit related to alternative minimum tax. Excluding these items, the 2010 effective tax rate would have been 14.5% (provision on income) compared to 15.4% (benefit on a loss) for 2009, as reported. The decrease in the effective tax rate relates to the changes in the distribution of earnings between U.S. and foreign jurisdictions.

Income from operations for full year 2010 totaled $52.8 million compared to a loss of ($58.2) million in the prior period. Excluding the first quarter 2010 results of the Legacy Land Systems (INOVA) segment, income from operations during 2010 was $62.5 million.

Excluding the after-tax impact of the special items for both periods as noted in the attached tables, the Company reported a net income of $22.8 million, or $0.16 per diluted share, for full year 2010, compared to a net loss of ($43.4) million, or ($0.39) per share, for 2009. Including the special items, the Company reported a net loss of ($38.8) million, or ($0.27) per share, for full year 2010, compared to ($113.6) million, or ($1.03) per share, in 2009. Adjusted EBITDA for 2010 increased 94% to $140.1 million compared to $72.2 million in 2009.

Fourth quarter cash generation increased $68.5 million, resulting in cash on hand at year-end of $84.4 million compared to total debt of $108.7 million or net debt of $24.3 million. At year end, ION had no outstanding balance associated with its $100 million revolving credit facility, bringing total liquidity to $184.4 million.

OUTLOOK

Brian Hanson, Executive Vice President and Chief Financial Officer, commented, “As previously mentioned in our third quarter earnings call, we expected the second half of 2010 to be considerably better than the first half and this proved to be the case as we finished the year by delivering strong fourth quarter results. We also delivered on our goal of profitability for ION in 2010, excluding one-time items, and expect that the momentum that we experienced during the second half of 2010 will likely continue into 2011.

Similar to years prior to the global financial collapse of 2008, we anticipate our 2011 financial performance to be back-end loaded. This is mainly due to the natural budget/planning cycle of our customers who usually formulate capital spending plans during the first quarter of each year, and the potential for data library sales in the fourth quarter as customers tap the unspent portions of their capital budgets.

While we are not providing earnings guidance, we are providing guidelines on certain items. In 2011, we anticipate investing between $90 and $110 million in our customer-underwritten multi-client data libraries. We estimate interest expense for 2011 to be between $5 and $7 million. In addition, we expect our effective tax rate to be between 24% and 26%.”

CONFERENCE CALL

The Company has scheduled a conference call for Thursday, February 17, 2011, at 10:00 a.m. Eastern Time. To participate in the conference call, dial 480-629-9645 at least 10 minutes before the call begins and ask for the ION conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until March 4, 2011. To access the replay, dial 303-590-3030 and use pass code 4406364#.

Investors, analysts and the general public will also have the opportunity to listen to the conference call live over the Internet by visiting www.iongeo.com. Also, an archive of the webcast will be available shortly after the call on the Company’s website.

About ION

ION Geophysical Corporation is a leading provider of geophysical technology, services, and solutions for the global oil & gas industry. ION’s offerings allow E&P operators to obtain higher resolution images of the subsurface to reduce the risk of exploration and reservoir development, and enable seismic contractors to acquire geophysical data more efficiently. Additional information about ION is available at www.iongeo.com.

CONTACTS:

R.Brian Hanson

Chief Financial Officer

+1.281.879.3672

Jack Lascar

DRG&L

+1.713.529.6600

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 future sales and market growth, timing of sales, future liquidity and cash levels, future estimated revenues and earnings, benefits expected to result from the INOVA Geophysical joint venture and related transactions andother 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 the operation of the INOVA Geophysical joint venture; risks associated with litigation; risks associated with the Company’s level and terms of indebtedness; risks associated with competitors’ product offerings and pricing pressures resulting therefrom; the relatively small number of customersthat the Company currently relies upon; the fact that a significant portion ofthe Company’s revenues isderived from foreign sales; 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 lines. 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 (“SEC”), including its Quarterly Reports on Form 10-Q filed during 2010 and its Annual Reports on Form 10-K for theyears ended December 31, 2010 and December 31, 2009.

Tables to follow

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

2010

2009

Product revenues

$ 51,228

$ 74,887

$ 165,202

$ 237,664

Service revenues

107,395

46,377

279,120

182,117

Total net revenues

158,623

121,264

444,322

419,781

Cost of products

26,237

57,916

94,658

165,923

Cost of services

66,029

29,511

183,931

121,720

Gross profit

66,357

33,837

165,733

132,138

Operating expenses:

Research, development and engineering

5,479

10,938

25,227

44,855

Marketing and sales

9,082

8,738

30,405

34,945

General and administrative

17,325

18,731

57,254

72,510

Impairment of intangible assets

38,044

Total operating expenses

31,886

38,407

112,886

190,354

Income (loss) from operations

34,471

(4,570)

52,847

(58,216)

Interest expense, net

(1,893)

(14,739)

(30,770)

(33,950)

Loss on disposition of land division

(38,115)

Fair value adjustment of warrant

(29,401)

12,788

(29,401)

Equity in losses of INOVA Geophysical

(15,541)

(23,724)

Gain on legal settlement

24,500

24,500

Impairment of cost method investments

(7,650)

(4,454)

(7,650)

(4,454)

Other income (expense)

1,039

711

228

(4,023)

Income (loss) before income taxes

34,926

(52,453)

(9,896)

(130,044)

Income tax expense (benefit)

14,542

(1,643)

26,942

(19,985)

Net income (loss)

20,384

(50,810)

(36,838)

(110,059)

Preferred stock dividends

338

875

1,936

3,500

Net income (loss) applicable to common shares

$ 20,046

$ (51,685)

$ (38,774)

$ (113,559)

Net income (loss) per share:

Basic

$ 0.13

$ (0.44)

$ (0.27)

$ (1.03)

Diluted

$ 0.13

$ (0.44)

$ (0.27)

$ (1.03)

Weighted average number of common shares outstanding:

Basic

152,572

118,526

144,278

110,516

Diluted

159,698

118,526

144,278

110,516

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

December 31,

2010

2009

ASSETS

Current assets:

Cash and cash equivalents

$ 84,419

$ 16,217

Accounts receivable, net

77,576

111,046

Unbilled receivables

70,590

21,655

Current portion notes receivable

13,367

Inventories, net

66,882

202,601

Deferred income tax asset

6,001

Prepaid expenses and other current assets

13,165

24,614

Total current assets

312,632

395,501

Deferred income tax asset

8,998

26,422

Property, plant and equipment, net

20,145

78,555

Multi-client data library, net

112,620

130,705

Investment in INOVA Geophysical

95,173

Goodwill

51,333

52,052

Intangible assets, net

20,317

61,766

Other assets

3,224

3,185

Total assets

$ 624,442

$ 748,186

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Notes payable and current maturities of long-term debt

$ 6,073

$ 271,132

Accounts payable

30,940

40,189

Accrued expenses

54,799

65,893

Accrued multi-client data library royalties

18,667

18,714

Fair value of warrant

44,789

Deferred revenue and other current liabilities

22,887

13,802

Total current liabilities

133,366

454,519

Long-term debt, net of current maturities

102,587

6,249

Non-current deferred income tax liability

688

1,262

Other long-term liabilities

7,354

3,688

Total liabilities

243,995

465,718

Stockholders’ equity:

Cumulative convertible preferred stock

27,000

68,786

Common stock

1,529

1,187

Additional paid-in capital

822,399

666,928

Accumulated deficit

(448,386)

(411,548)

Accumulated other comprehensive loss

(15,530)

(36,320)

Treasury stock

(6,565)

(6,565)

Total stockholders’ equity

380,447

282,468

Total liabilities and stockholders’ equity

$ 624,442

$ 748,186

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Twelve Months Ended

December 31,

2010

2009

Cash flows from operating activities:

Net loss

$ (36,838)

$ (110,059)

Adjustments to reconcile net loss to cash provided by operating activities:

Depreciation and amortization (other than multi-client data library)

24,795

47,911

Amortization of multi-client data library

85,940

48,449

Stock-based compensation expense

8,147

12,671

Bad debt expense

1,689

3,528

Amortization of debt discount

8,656

6,732

Write-off of unamortized debt issuance costs

10,121

Fair value adjustment of warrant

(12,788)

29,401

Loss on disposition of land division

38,115

Equity in losses of INOVA Geophysical

23,724

Impairment of cost method investments

7,650

4,454

Deferred income taxes

22,207

(38,150)

Impairment of intangible assets

38,044

Change in operating assets and liabilities:

Accounts and notes receivable

7,826

41,936

Unbilled receivables

(48,935)

14,817

Inventories

(16,138)

18,582

Accounts payable, accrued expenses and accrued royalties

9,550

(72,140)

Deferred revenue

7,281

(4,188)

Other assets and liabilities

(7,634)

9,998

Net cash provided by operating activities

133,368

51,986

Cash flows from investing activities:

Purchase of property, plant and equipment

(7,372)

(2,966)

Investment in multi-client data library

(64,426)

(89,635)

Proceeds from disposition of land division, net of fees paid

99,790

Other investing activities

(500)

963

Net cash provided by (used in) investing activities

27,492

(91,638)

Cash flows from financing activities:

Borrowings under revolving line of credit

104,000

77,000

Repayments under revolving line of credit

(193,429)

(25,000)

Net proceeds from issuance of debt

105,695

19,218

Net proceeds from issuance of common stock

38,039

38,220

Payments on notes payable and long-term debt

(145,558)

(81,517)

Costs associated with debt amendments

(4,630)

Payment of preferred dividends

(1,936)

(3,500)

Other financing activities

459

(62)

Net cash (used in) provided by financing activities

(92,730)

19,729

Effect of change in foreign currency exchange rates on cash and cash equivalents

72

968

Net increase (decrease) in cash and cash equivalents

68,202

(18,955)

Cash and cash equivalents at beginning of period

16,217

35,172

Cash and cash equivalents at end of period

$ 84,419

$ 16,217

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT INFORMATION

(In thousands)

(Unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

2010

2009

Net revenues:

Systems:

Towed Streamer

$ 33,471

$ 22,889

$ 83,567

$ 83,398

Ocean Bottom

55

3,789

1,876

4,948

Other

9,062

6,857

28,783

39,943

Total

$ 42,588

$ 33,535

$ 114,226

$ 128,289

Software:

Software Systems

$ 8,641

$ 9,433

$ 34,465

$ 31,601

Services

757

219

2,166

2,132

Total

$ 9,398

$ 9,652

$ 36,631

$ 33,733

Solutions:

Data Processing

$ 28,336

$ 24,167

$ 107,997

$ 82,330

New Venture

18,979

10,758

81,293

71,135

Data Library

59,322

11,233

87,664

26,520

Total

$ 106,637

$ 46,158

$ 276,954

$ 179,985

Legacy Land Systems (INOVA)

$ —

$ 31,919

$ 16,511

$ 77,774

Total

$ 158,623

$ 121,264

$ 444,322

$ 419,781

Gross profit:

Systems

$ 19,416

$ 12,861

$ 48,557

$ 52,934

Software

6,102

5,965

24,356

21,998

Solutions

40,839

16,792

93,804

59,844

Legacy Land Systems (INOVA)

(1,781)

(984)

(2,638)

Total

$ 66,357

$ 33,837

$ 165,733

$ 132,138

Gross margin:

Systems

46%

38%

43%

41%

Software

65%

62%

66%

65%

Solutions

38%

36%

34%

33%

Legacy Land Systems (INOVA)

–%

(6%)

(6%)

(3%)

Total

42%

28%

37%

31%

Income (loss) from operations:

Systems

$ 13,916

$ 8,562

$ 27,749

$ 31,209

Software

5,423

5,445

21,936

19,970

Solutions

29,963

8,617

60,632

27,746

Legacy Land Systems (INOVA)

(12,204)

(9,623)

(40,881)

Corporate and other

(14,831)

(14,990)

(47,847)

(58,216)

Impairment of intangible assets

(38,044)

Total

$ 34,471

$ (4,570)

$ 52,847

$ (58,216)

Reconciliation of Adjusted EBITDA to Net Income (Loss)

(Non-GAAP Measure)

(In thousands)

(Unaudited)

Adjusted 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 principles (GAAP). We believe that Adjusted 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 Adjusted EBITDA shown below is based upon amounts derived from the Company’s financial statements prepared in conformity with GAAP.

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

2010

2009

Net income (loss)

$ 20,384

$ (50,810)

$ (36,838)

$ (110,059)

Interest expense, net

1,893

14,739

30,770

33,950

Income tax expense (benefit)

14,542

(1,643)

26,942

(19,985)

Depreciation and amortization expense

35,938

25,236

110,735

96,360

Gain on legal settlement

(24,500)

(24,500)

Impairment of cost method investments

7,650

4,454

7,650

4,454

Loss on disposition of land division

38,115

Fair value adjustment of warrant

29,401

(12,788)

29,401

Impairment of intangible assets

38,044

Adjusted EBITDA

$ 55,907

$ 21,377

$ 140,086

$ 72,165

Reconciliation of Income (Loss) from Operations Excluding the

Legacy Land Systems(INOVA) Segment

(Non-GAAP Measure)

(In thousands)

(Unaudited)

The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is our income (loss) from operations excluding our Legacy Land Systems (INOVA) segment. This segment was contributed to our joint venture (INOVA Geophysical) on March 25, 2010. Therefore, beginning on March 26, 2010, this contributed business is no longer consolidated into our results of operations. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) from operations or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the twelve months ended December 31, 2010 and for the three and twelve months ended December 31, 2009:

Twelve Months Ended December 31, 2010

Excluding

As

Reported

Legacy Land

Systems

As

Adjusted

Net revenues

$ 444,322

$ (16,511)

$ 427,811

Cost of sales

278,589

(17,495)

261,094

Gross profit

165,733

984

166,717

Operating expenses:

Research, development and engineering

25,227

(4,181)

21,046

Marketing and sales

30,405

(1,559)

28,846

General and administrative

57,254

(2,899)

54,355

Total operating expenses

112,886

(8,639)

104,247

Income from operations

$ 52,847

$ 9,623

$ 62,470

Twelve Months Ended December 31, 2009

Excluding

As

Reported

Legacy Land

Systems

As

Adjusted

Net revenues

$ 419,781

$ (77,774)

$ 342,007

Cost of sales

287,643

(80,412)

207,231

Gross profit

132,138

2,638

134,776

Operating expenses:

Research, development and engineering

44,855

(21,359)

23,496

Marketing and sales

34,945

(5,582)

29,363

General and administrative

72,510

(11,302)

61,208

Impairment of intangible assets

38,044

(38,044)

Total operating expenses

190,354

(76,287)

114,067

Income (loss) from operations

$ (58,216)

$ 78,925

$ 20,709

Three Months Ended December 31, 2009

Excluding

As

Reported

Legacy Land

Systems

As

Adjusted

Net revenues

$ 121,264

$ (31,919)

$ 89,345

Cost of sales

87,427

(33,700)

53,727

Gross profit

33,837

1,781

35,618

Operating expense:

Research, development and engineering

10,938

(5,411)

5,527

Marketing and sales

8,738

(1,281)

7,457

General and administrative

18,731

(3,731)

15,000

Total operating expenses

38,407

(10,423)

27,984

Income (loss) from operations

$ (4,570)

$ 12,204

$ 7,634

Reconciliation of Special Items to Diluted Earnings per Share

(Non-GAAP Measure)

(In thousands, except per share data)

(Unaudited)

The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is income (loss) from operations or net income (loss) excluding certain charges or amounts. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) from operations, net income (loss) or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and twelve months ended December 31, 2010 and 2009:

Three Months Ended December 31, 2010

As

Reported

Gain on

Legal

Settlement(2)

Investment

Charges(3)

As

Adjusted

Net revenues

$ 158,623

$ —

$ —

$ 158,623

Cost of sales

92,266

92,266

Gross profit

66,357

66,357

Operating expenses

31,886

31,886

Loss from operations

34,471

34,471

Interest expense, net

(1,893)

(1,893)

Equity in losses of INOVA Geophysical

(15,541)

9,475

(6,066)

Gain on legal settlement

24,500

(24,500)

Impairment of cost method investment

(7,650)

7,650

Other income

1,039

1,039

Income tax (benefit) expense

14,542

(8,575)

5,967

Net income (loss)

20,384

(15,925)

17,125

21,584

Preferred stock dividends

338

338

Net loss applicable to common shares

$ 20,046

$ (15,925)

$ 17,125

$ 21,246

Net income per share:

Basic

$ 0.13

$ 0.14

Diluted

$ 0.13

$ 0.14

Weighted average number of common shares outstanding:

Basic

152,572

152,572

Diluted

159,698

159,698

Twelve Months Ended December 31, 2010

As

Reported

Loss on

Disposition

Refinancing

and Warrant

Charges(1)

Gain on

Legal

Settlement(2)

Investment

Charges(3)

As

Adjusted

Net revenues

$ 444,322

$ —

$ —

$ —

$ —

$ 444,322

Cost of sales

278,589

278,589

Gross profit

165,733

165,733

Operating expenses

112,886

112,886

Income from operations

52,847

52,847

Interest expense, net

(30,770)

18,777

(11,993)

Loss on disposition of land division

(38,115)

38,115

Fair value adjustment of warrant

12,788

(12,788)

Equity in losses of INOVA Geophysical

(23,724)

9,475

(14,249)

Gain on legal settlement

24,500

(24,500)

Impairment of cost method investment

(7,650)

7,650

Other income

228

228

Income tax expense (benefit)

26,942

(19,841)

3,542

(8,575)

2,068

Net income (loss)

(36,838)

57,956

2,447

(15,925)

17,125

24,765

Preferred stock dividends

1,936

1,936

Net income (loss) applicable to common shares

$ (38,774)

$ 57,956

$ 2,447

$ (15,925)

$ 17,125

$ 22,829

Net income per share:

Basic

$ (0.27)

$ 0.16

Diluted

$ (0.27)

$ 0.16

Weighted average number of common shares outstanding:

Basic

144,278

144,278

Diluted

144,278

144,934

(1) Relates to the write-off of unamortized debt issuance costs relating to our first quarter 2010 re-financings and the non-cash debt discount and fair value adjustment to the warrant from January 1, 2010 through March 25, 2010, the date of the closing of INOVA Geophysical.

(2) Relates to a gain associated with cash received from the Greatbatch legal settlement in Q4.

(3) Relates to ION’s 49% share of a write-down of inventory by INOVA Geophysical and the impairment of one of ION’s investments.

Three Months Ended December 31, 2009

As

Reported

Impairment

Charges

Adjustments

of the

the Warrant

As

Adjusted

Net revenues

$ 121,264

$ —

$ —

$ 121,264

Cost of sales

87,427

87,427

Gross profit

33,837

33,837

Operating expenses

38,407

38,407

Loss from operations

(4,570)

(4,570)

Interest expense, net

(14,739)

6,732

(8,007)

Fair value adjustment of warrant

(29,401)

29,401

Impairment of cost method investment

(4,454)

4,454

Other income

711

711

Income tax (benefit) expense

(1,643)

1,559

(84)

Net income (loss)

(50,810)

2,895

36,133

(11,782)

Preferred stock dividends

875

875

Net loss applicable to common shares

$ (51,685)

$ 2,895

$ 36,133

$ (12,657)

Basic and diluted earnings per share

$ (0.44)

$ (0.11)

Weighted average number of basic and diluted common shares outstanding

118,256

118,526

Twelve Months Ended December 31, 2009

As

Reported

Impairment

Charges

Restructuring

Charges

Out-of-Period

Stock-Based

Compensation

Expense

Adjustments of

the Warrant

As

Adjusted

Net revenues

$ 419,781

$ —

$ —

$ —

$ —

$ 419,781

Cost of sales

287,643

(996)

286,647

Gross profit

132,138

996

133,134

Operating expenses

190,354

(38,044)

(2,079)

(3,267)

146,964

Loss from operations

(58,216)

38,044

3,075

3,267

(13,830)

Interest expense, net

(33,950)

6,732

(27,218)

Other expense

(37,878)

4,454

29,401

(4,023)

Income tax (benefit) expense

(19,985)

12,592

1,076

1,143

(5,174)

Net loss

(110,059)

29,906

1,999

2,124

36,133

(39,897)

Preferred stock dividends

3,500

3,500

Net loss applicable to common shares

$ (113,559)

$ 29,906

$ 1,999

$ 2,124

$ 36,133

$ (43,397)

Basic and diluted earnings per share

$ (1.03)

$ (0.39)

Weighted average number of basic and diluted common shares outstanding

110,516

110,516

SOURCE ION Geophysical Corporation