Share this page with someone.

Facebook Twitter LinkedIn Print Email
                 Earnings per diluted share doubles to $0.16

                   Company reaffirms 2008 earnings guidance

HOUSTON, Aug. 5 /PRNewswire-FirstCall/ — ION Geophysical Corporation
(NYSE: IO) today announced second quarter 2008 net income of $15.4 million, or
$0.16 per diluted share, on revenues of $180.7 million compared to net income
of $7.1 million, or $0.08 per diluted share, on revenues of $165.2 million for
the same period a year ago.

Bob Peebler, President and Chief Executive Officer of ION, said, “We are
pleased with our strong second quarter and first half results. We continue to
deliver improved profitability as evidenced by the increase in our
consolidated gross margin to 32% during the second quarter compared to 28% a
year ago.

“We are delighted by the record performance of our data library and new
venture sales within our ION Solutions group. We also had another strong
quarter in our Marine Imaging Systems with the commercialization of the first
DigiSTREAMER(TM) system and continued penetration of DigiFIN(TM), our new
lateral streamer control technology.

“In our land division we are progressing on our first Version 2.0 FireFly
Durham Ranch survey in Western Colorado. We currently expect the survey to be
completed within our original schedule by the end of August, and assuming that
the system performs up to our expectations on Durham Ranch, we will be on
track to full commercialization during the second half of this year as
planned.

“Looking into the future, our recently announced proposed acquisition of
ARAM provides ION with the opportunity to significantly increase our
competitive position in land acquisition as we firmly establish ourselves as a
major player in the analog segment of the market. We believe the scope and
scale of the combined entity will offer our customers expanded and accelerated
access to a broader range of instrumentation options and enable our
consolidated land businesses to grow more rapidly and deliver bottom-line
results more effectively than either company could on its own.”

SECOND QUARTER 2008

Total revenues in the second quarter increased 9% to $180.7 million
compared to $165.2 million a year ago. This increase occurred even though last
year’s second quarter sales included a large shipment of nine systems to the
Oil & Natural Gas Corporation (ONGC) for $35.5 million, which illustrates the
lumpy nature of our business. ION Solutions delivered a very strong quarter
and more than doubled its revenue to $74.9 million.

Within the ION Systems group, Land Imaging Systems’ revenues decreased to
$45.8 million compared to $90.3 million in the second quarter of 2007, which
included the ONGC sales. Marine Imaging Systems revenues increased 41% to
$50.4 million compared to $35.7 million a year ago as demand for the Company’s
DigiFIN streamer positioning and seabed products remained strong. The second
quarter of 2008 also included the first commercialized sale of ION’s
DigiSTREAMER solid streamer acquisition system. Additionally, a portion of
the fifth VectorSeis(R) Ocean (VSO) acquisition system was delivered in the
second quarter, which demonstrates the continued success and acceptance of VSO
technology. ION’s Data Management Solutions’ revenues remained essentially
stable at $9.6 million for the second quarter compared to $10.6 million a year
ago.

The ION Solutions group had a record quarter, generating $74.9 million in
revenues compared to $28.6 million in the same period a year ago. The 162%
increase was primarily driven by very robust multi-client data library sales
in the Congo, East Africa and India regions and new venture sales related to
the Company’s programs off the coasts of South America and Asia.

Gross margin for the second quarter of 2008 significantly improved to
32% from 28% in the second quarter of 2007, primarily due to our Land Imaging
Systems and ION Solutions segments. Overall, ION Systems continued to see
notable margin improvements in Scorpion(R) cable systems and vibroseis vehicle
sales. For ION Solutions, the margin rate improvement was driven by higher
margin sales compared to 2007.

Operating expenses for the second quarters of 2008 and of 2007 remained
stable at 21% of revenues. General and administrative expenses as a percentage
of revenues increased to 7.9% in the second quarter compared to 6.8% for the
second quarter of 2007. The slight increase in expenses relates to the
company’s continued expansion of international operations and increased
infrastructure to support the overall growth of its business. Income from
operations in the second quarter increased 70% to $19.7 million compared to
$11.5 million in the second quarter of 2007. Adjusted EBITDA (earnings before
net interest expense, taxes, depreciation and amortization and the fair value
adjustment of preferred stock redemption features) for the second quarter more
than doubled to $49.9 million compared to $21.2 million in the second quarter
of 2007. A reconciliation of Adjusted EBITDA to reported earnings can be
found at the end of this press release.

YEAR-TO-DATE 2008

Revenues for the first six months of 2008 decreased slightly to
$320.8 million compared to $330.2 million for 2007. The revenues in 2007
included the sale of the first FireFly system for $20.8 million and the
delivery of nine of the 14 systems sold to ONGC for $35.5 million. Gross
margin for 2008 improved substantially to 33% compared to 26% for 2007.
Strong margin improvements were seen across the majority of the segments with
the largest improvements occurring in the ION Solutions and Land Imaging
segments.

Operating expenses for the first half of 2008 increased to 24% compared to
21% in 2007, which was mainly due to increased salary expense related to
increased headcount, increased bonus expense related to continued strong
performance and increased legal and accounting professional fees related to
our international expansion initiatives. Research and development expenses
were 8% of revenue, consistent with the prior year. The Company’s effective
tax rate year-to-date was 18.3% for 2008 compared to 22.8% for 2007.

Income from operations for the first half of 2008 totaled $30.0 million,
an increase of 70% over 2007. For the six months of 2008, ION reported net
income of $23.1 million, or $0.24 per diluted share compared to net income of
$10.1 million, or $0.12 per diluted share, in 2007. Adjusted EBITDA for the
period was $75.7 million compared to $41.6 million in 2007.

RECENT DEVELOPMENTS

The Company announced on July 9, 2008 that it has signed a definitive
agreement to acquire all of the outstanding shares of ARAM Systems Ltd., a
Canadian-based provider of cable-based land seismic recording systems, and its
affiliate company, Canadian Seismic Rentals, Inc. Of the gross purchase price
of CDN $350 million, US $275 million will be paid in cash while the remainder
will be paid in ION common stock. The transaction is expected to be earnings
neutral for the remainder of 2008 and accretive to ION’s consolidated
pro-forma earnings in 2009.

OUTLOOK

The following statements are based on the Company’s 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 our first half results and our current pipeline of
business, we are reiterating the earnings guidance we provided on December 17,
2007. We expect 2008 consolidated revenues to range between $780 and $830
million and earnings to be between $0.70 and $0.85 per diluted share.
Additionally, we expect seismic activity to remain robust throughout 2008 and
believe our company is in a strong competitive position with our new
technologies, such as DigiFIN, Orca(R), FireFly, reverse time migration and
full-wave processing. These technologies are designed to help oil companies
solve their more complex reservoir problems and help our contractor customers
deliver their services more efficiently. We continue to expect our results for
the second half of the year to exceed the current year-to-date results due to
the normal seasonal cycles experienced in our business.”

CONFERENCE CALL

ION has scheduled a conference call for Wednesday, August 6, 2008, at
10:00 a.m. Eastern Time. To participate in the conference call, dial
303-262-2175 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 August 20,
2008. To access the replay, dial 303-590-3000 and use pass code 11117436#.

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.iongeo.com. Also, an archive of the web cast will be available
shortly after the call on the Company’s website.

About ION

ION 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 http://www.iongeo.com.

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 2008, and estimated gross margins, Adjusted
EBITDA and operating expenses as a percentage of revenue for fiscal 2008,
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 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 Annual Report on Form 10-K for the
year ended December 31, 2007.

                               Tables to follow



                 ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)
                                 (Unaudited)

                                   Three Months Ended     Six Months Ended
                                        June 30,              June 30,
                                     2008      2007        2008      2007

    Product revenues              $104,360  $135,861    $197,394  $259,341
    Service revenues                76,305    29,295     123,430    70,860
       Total net revenues          180,665   165,156     320,824   330,201

    Cost of products                72,637    97,813     132,254   189,517
    Cost of services                50,007    21,136      82,155    55,312
       Gross profit                 58,021    46,207     106,415    85,372

    Operating expenses:
       Research, development and
        engineering                 11,850    13,777      24,009    25,081
       Marketing and sales          12,222     9,608      23,378    20,245
       General and administrative   14,213    11,316      28,997    22,596
         Total operating expenses   38,285    34,701      76,384    67,922
    Income from operations          19,736    11,506      30,031    17,450
    Interest expense                  (652)   (1,800)     (1,139)   (3,253)
    Interest income                    540       524       1,077     1,139
    Other income (expense)             258      (420)        332      (647)
    Fair value adjustment of
     preferred stock redemption
     features                           (5)        -         173         -
       Income before income taxes   19,877     9,810      30,474    14,689
    Income tax expense               3,524     2,145       5,583     3,349
       Net income                   16,353     7,665      24,891    11,340
    Preferred stock dividends and
     accretion                         908       589       1,818     1,191
       Net income applicable to
        common shares              $15,445    $7,076     $23,073   $10,149

    Earnings per share:
       Basic net income share        $0.16     $0.09       $0.25     $0.13
       Diluted net income share      $0.16     $0.08       $0.24     $0.12

    Weighted average number of
     common shares outstanding:
       Basic                        94,222    80,550      94,095    80,384
       Diluted                     102,272    97,806      98,047    83,379



                 ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)
                                 (Unaudited)

                                                    June 30,     December 31,
                                                      2008           2007
                        ASSETS
    Current assets:
      Cash and cash equivalents                      $18,785        $36,409
      Restricted cash                                  6,066          7,052
      Accounts receivable, net                       171,110        188,029
      Notes receivable, net                            4,107          5,454
      Unbilled receivables                            52,506         22,388
      Inventories                                    189,197        128,961
      Prepaid expenses and other current assets        9,308         12,717
        Total current assets                         451,079        401,010
    Non-current deferred income tax asset              2,964          2,872
    Property, plant and equipment, net                38,321         36,951
    Multi-client data library, net                    82,792         59,689
    Investments at cost                                4,954          4,954
    Goodwill                                         151,478        153,145
    Intangible and other assets, net                  47,144         50,528
        Total assets                                $778,732       $709,149

                  LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Notes payable and current maturities
       of long-term debt                             $14,476        $14,871
      Accounts payable                                51,418         44,674
      Accrued expenses                                60,736         66,911
      Accrued multi-client data library royalties     36,352         29,962
      Deferred revenue                                20,835         21,278
      Deferred income tax liability                    2,792          2,792
        Total current liabilities                    186,609        180,488
    Long-term debt, net of current maturities          7,965          9,842
    Non-current deferred income tax liability          2,822          3,384
    Other long-term liabilities                        4,104          4,195
    Fair value of preferred stock redemption
     features                                          1,042              -
        Total liabilities                            202,542        197,909

    Cumulative convertible preferred stock            68,785         35,000

    Stockholders' equity:
      Common stock                                       945            948
      Additional paid-in capital                     567,564        559,255
      Accumulated deficit                            (59,766)       (82,839)
      Accumulated other comprehensive income           5,224          5,460
      Treasury stock                                  (6,562)        (6,584)
        Total stockholders' equity                   507,405        476,240
        Total liabilities and stockholders' equity  $778,732       $709,149



               Reconciliation of Adjusted EBITDA to Net Income
                             (Non-GAAP Measures)
                                (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 or net income per share calculated under generally accepted accounting
principals (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   Six Months Ended
                                           June 30,            June 30,
                                        2008      2007      2008     2007

    Net income applicable to
     common shares                    $15,445    $7,076   $23,073  $10,149
    Interest expense                      652     1,800     1,139    3,253
    Interest income                      (540)     (524)   (1,077)  (1,139)
    Income tax expense                  3,524     2,145     5,583    3,349
    Depreciation and amortization
     expense                           30,779    10,690    47,173   25,950
    Fair value adjustment of preferred
     stock redemption features              5         -      (173)       -
    Adjusted EBITDA                   $49,865   $21,187   $75,718  $41,562


     CONTACTS: R. Brian Hanson
               Chief Financial Officer
               ION Geophysical (281) 879-3672

               Jack Lascar
               DRG&E (713) 529-6600

SOURCE ION Geophysical Corporation

CONTACT: R. Brian Hanson, Chief Financial Officer of ION Geophysical,
1-281-879-3672; or Jack Lascar of DRG&E, 1-713-529-6600, for ION Geophysicalv
Corporation
Web site: http://www.iongeo.com
(IO)