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HOUSTON, Nov. 4 /PRNewswire-FirstCall/ — ION Geophysical Corporation (NYSE: IO) today reported third quarter 2009 revenues of $102.4 million, resulting in a net loss of ($6.8 million), or ($0.06) per share. In the third quarter of 2008, ION’s net income was $24.9 million, or $0.25 per diluted share, on revenues of $218.5 million.

Bob Peebler, ION’s Chief Executive Officer, said, “Our third quarter operating results reflect the continuing impact of the economic downturn in several of our markets, especially in North America and Russia. We remain affected by the substantial cuts in capital expenditures for exploration and production by international oil and gas companies and the cautious approach taken by many of our contractor customers resulting from the uncertain economic environment and volatile commodity prices. Even though we expect the fourth quarter to continue to be challenging, we do believe the market has bottomed and, with stronger than expected oil prices, we are starting to see some early indications of strengthening markets for 2010 and the possibility of some incremental year-end spending by oil companies. Our recently announced BGP joint venture will allow us to enter 2010 in a much better position than last year with much lower debt and associated expenses and the strong probability of increasing land sales to both BGP and the remainder of our served markets.

“Also, despite the decreases in our revenues, our gross margins increased over prior year for the second consecutive quarter. In the third quarter of 2009, our gross margins were 34% compared to 33% both in the preceding quarter and in last year’s third quarter, primarily as a result of improved product sales mix mainly in our Marine Imaging Systems and ION Solutions divisions.

“Our Marine division generated better results sequentially, and our data processing unit experienced another excellent quarter. We continue to benefit from our data processing technology leadership and our oil company customers are starting to reprocess enormous amounts of high end data that has been collected over the last few years. However, the performance of our Land Imaging Systems division continues to be adversely affected by weakness in the land seismic markets, primarily in North America and Russia.”

THIRD QUARTER 2009

Total revenues in the third quarter of 2009 decreased 53% to $102.4 million compared to $218.5 million a year ago. While all of the Company’s segments experienced quarter-over-quarter revenue declines, the ION Solutions and Marine Imaging Systems divisions showed sequential improvement.

During the third quarter of 2009, the ION Systems group generated sales of $52.2 million compared to $141.0 million in the same period in 2008. Marine Imaging Systems’ revenues decreased to $29.4 million compared to $49.0 million a year ago, mainly due to the decrease in VectorSeis® Ocean system sales compared to last year. Market demand for DigiFIN(TM) remained strong during the third quarter as customers continue to retrofit their existing fleets with the latest streamer control technology. Land Imaging Systems’ revenues decreased to $15.2 million compared to $81.6 million in the third quarter of 2008. Despite the inclusion of ARAM’s operating results, the division continues to be adversely impacted by the continuing economic recession, depressed credit markets and general weakness in most land seismic markets, which resulted in dramatically reduced sales of systems, geophones and vibroseis trucks in North America and Russia. Data Management Solutions’ revenues decreased to $7.6 million for the second quarter compared to $10.4 million a year ago, due mainly to lower software sales of SPECTRA® and GATOR® compared to last year, which was partially offset by increased sales of ORCA®.

The ION Solutions group generated $50.2 million in revenues compared to $77.5 million in the same period a year ago. The decrease was primarily driven by lower multi-client data library and new venture program sales, partially offset by continued strong data processing revenues.

Consolidated gross margins for the third quarter of 2009 increased to 34% from 33% in the third quarter of 2008, primarily due to favorable product mix in both the Marine Imaging Systems and the ION Solutions groups. This improvement in margins was achieved despite lower gross margins in the remaining business units and the increased restructuring charges related to headcount reduction and the increased amortization charges related to the September 2008 ARAM acquisition.

Operating expenses as a percentage of revenues for the third quarter of 2009 increased to 35% compared to 19% in the prior year period. General and administrative expenses as a percentage of revenues for the third quarter of 2009 increased to 17.1% compared to 7.1% in the prior period. General and administrative expenses for the third quarter of 2009 included additional stock-based compensation expense of $1.2 million related to a change in estimate of anticipated forfeitures. The increases in operating expenses as a percentage of revenues were driven entirely by lower revenue as these expenses overall decreased year over year. Adjusted EBITDA (net income (loss) before net interest expense, taxes, depreciation and amortization and impairment of intangible assets) for the third quarter decreased to $27.5 million compared to $69.4 million in the third quarter of 2008. A reconciliation of Adjusted EBITDA to reported earnings can be found in the financial tables of this press release.

YEAR-TO-DATE 2009

The Company will be amending its Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 to reflect a restatement of its unaudited consolidated financial statements as of and for the three and six months ended June 30, 2009. The restatement was necessitated due to an error in revenue recognition of certain product revenues in connection with a delivery of a FireFly® land seismic data acquisition system and related hardware and components to a customer in China. The Company had originally recorded the sale for the second quarter of 2009. The error resulted from the fact that the sales records in the possession of the Company’s management at June 30, 2009 did not contain all relevant documentation relating to the sale. Upon receipt by the Company’s management of all documentation related to the sale, the Company concluded that it should not have recognized the revenues from the sale. The customer has confirmed that it has accepted the delivered system in the second quarter and that they will pay for the system in full by the end of the year, at which time the Company will recognize the sale. The following discussion of results of operations for the first nine months of 2009 includes the impact of the restatement described above.

Consolidated revenues for the first nine months of 2009 decreased 45% to $298.5 million compared to $539.4 million for the same period in 2008. Revenues decreased across all segments due to continued volatility in commodity prices, continued tightening of credit markets and continued decline in seismic activity in the North American and Russian markets. Notwithstanding the significant decrease in revenues, gross margin for the first nine months of 2009 and 2008 remained stable at 33%. Strong margin improvements in the Marine Imaging Systems segment were partially offset by lower gross margin percentages in the Land Imaging Systems segment. Gross margin percentages for the ION Solutions and the Data Management Solutions segments remained stable.

The results of operations for the nine months ended September 30, 2009 include three charges that were not duplicated in 2008. The first is the first quarter impairment of intangible assets of $38.0 million. The second relates to an out-of-period adjustment of $3.3 million related to adjustments between our estimated and actual forfeitures of stock-based compensation awards, and the final adjustment is the year-to-date restructuring charges from the 2009 headcount reductions of $2.6 million. A reconciliation of these three charges can be found in a table at the end of this press release. Excluding these charges, operating expenses as a percentage of revenues for the first nine months of 2009 increased to 37% compared to 22% in the prior year period, solely as a result of lower revenues. Excluding the above items, total operating expenses for the first nine months of 2009 decreased by $8.4 million when compared with 2008, which did not include the costs related to the ARAM business. Additionally, total operating expenses for 2009 included an additional $2.8 million of bad debt expense. Based upon the recent cost reduction measures initiated in the fourth quarter of 2008, the Company expects to continue to incur lower operating expenses for the remainder of 2009 than were incurred last year and generate savings of approximately $48 million on an annualized basis.

The Company’s effective tax rate during the first nine months of 2009 was 23.6% (benefit on a loss) compared to 15.5% (provision on income) for 2008. The increase in effective tax rate relates primarily to the Company’s tax benefit related to the impairment of intangible assets, which is taxed at 29%. The inclusion of this benefit at the higher tax rate increased the Company’s overall effective tax rate for the first nine months of 2009.

Loss from operations for the first nine months of 2009, excluding the first quarter impairment, the stock-based compensation charge and the restructuring charge, totaled ($9.7) million compared to income of $61.6 million in the prior period. For the first nine months of 2009, including these charges, the Company reported a net loss of ($61.9) million, or ($0.57) per share, compared to net income of $48.0 million, or $0.49 per diluted share, in 2008. Excluding the after-tax impact of the first quarter impairment, the stock-based compensation adjustments and the restructuring charge, the Company reported a net loss of ($31.0) million, or ($0.29) per share for the first nine months of 2009. Adjusted EBITDA for the period was $50.8 million compared to $147.1 million in 2008.

OUTLOOK

Brian Hanson, Executive Vice President and Chief Financial Officer, commented, “In light of the uncertain economic environment and the current lack of visibility on year-end spending patterns, we are suspending earnings guidance until further notice. The market volatility that began in 2008 and has continued to date has greatly impacted our ability to accurately forecast our land seismic, new venture, and data library sales. These market conditions combined with the potential timing of the recently announced joint venture with BGP creates too much unpredictability and uncertainty to provide an accurate forecast. As a result, we will not be providing guidance for the remainder of 2009.”

CONFERENCE CALL

ION has scheduled a conference call for Thursday, November 5, 2009, at 10:00 a.m. Eastern Time. To participate in the conference call, dial 480-629-9692 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 November 20, 2009. To access the replay, dial 303-590-3030 and use pass code 4175137#.

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 web cast 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&E
+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, 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 the economic downturn and the volatile credit environment; risks associated with the completion of the proposed land equipment joint venture transactions; 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 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 (“SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2008 and its Quarterly Reports on Form 10-Q during 2009.

Tables to follow

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

                                  Three Months Ended     Nine Months Ended
                                     September 30,         September 30,
                                     -------------         -------------
                                     2009       2008      2009       2008
                                     ----       ----      ----       ----

    Product revenues               $51,263   $140,332  $162,777   $337,726
    Service revenues                51,107     78,197   135,740    201,627
                                    ------     ------   -------    -------
      Total net revenues           102,370    218,529   298,517    539,353
                                   -------    -------   -------    -------

    Cost of products                34,114     92,347   108,007    224,601
    Cost of services                33,627     53,561    92,209    135,716
                                    ------     ------    ------    -------
      Gross profit                  34,629     72,621    98,301    179,036
                                    ------     ------    ------    -------

    Operating expenses:
      Research, development and
       engineering                  10,659     13,498    33,917     37,507
      Marketing and sales            8,006     12,062    26,207     35,440
      General and administrative    17,523     15,487    53,779     44,484
      Impairment of intangible
       assets                            -          -    38,044          -
                                       ---        ---    ------        ---
          Total operating
           expenses                 36,188     41,047   151,947    117,431
                                    ------     ------   -------    -------
    Income (loss) from
     operations                     (1,559)    31,574   (53,646)    61,605
    Interest expense                (6,380)    (1,592)  (20,658)    (2,731)
    Interest income                    451         40     1,447      1,117
    Other income (expense)           1,669       (404)   (4,734)       101
                                     -----      -----   -------        ---
      Income (loss) before
       income taxes                 (5,819)    29,618   (77,591)    60,092
    Income tax expense (benefit)       131      3,760   (18,342)     9,343
                                       ---      -----  --------      -----
      Net income (loss)             (5,950)    25,858   (59,249)    50,749
    Preferred stock dividends          875        925     2,625      2,743
                                       ---        ---     -----      -----
      Net income (loss)
       applicable to common
       shares                      $(6,825)   $24,933  $(61,874)   $48,006
                                   =======    =======  ========    =======

    Earnings per share:
      Basic net income (loss)
       per share                    $(0.06)     $0.26    $(0.57)     $0.51
                                    ======      =====    ======      =====
      Diluted net income (loss)
       per share                    $(0.06)     $0.25    $(0.57)     $0.49
                                    ======      =====    ======      =====

    Weighted average number of
     common shares outstanding:
      Basic                        118,380     95,823   107,816     94,676
      Diluted                      118,380    102,653   107,816    102,127



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

                                                   September 30, December 31,
                                                       2009          2008
                                                       ----          ----
                                  ASSETS
    Current assets:
      Cash and cash equivalents                      $19,556       $35,172
      Restricted cash                                  1,503         6,610
      Accounts receivable, net                        73,999       150,565
      Current portion notes receivable                10,523        11,665
      Unbilled receivables                            30,669        36,472
      Inventories, net                               227,111       262,519
      Prepaid expenses and other current assets       14,075        20,386
                                                      ------        ------
         Total current assets                        377,436       523,389
    Notes receivable                                   3,517         4,438
    Deferred income tax asset                         19,036        11,757
    Property, plant, equipment and seismic rental
     equipment, net                                   85,568        59,129
    Multi-client data library, net                   127,657        89,519
    Goodwill                                          52,043        49,772
    Intangible assets, net                            63,601       107,443
    Other assets                                      18,976        15,984
                                                      ------        ------
         Total assets                               $747,834      $861,431
                                                    ========      ========

                  LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Notes payable and current maturities of
       long-term debt                               $264,066       $38,399
      Accounts payable                                43,191        94,586
      Accrued expenses                                67,148        77,046
      Accrued multi-client data library royalties     19,031        28,044
      Deferred revenue and other current
       liabilities                                    12,971        18,159
                                                      ------        ------
         Total current liabilities                   406,407       256,234
    Long-term debt, net of current maturities          7,122       253,510
    Non-current deferred income tax liability          1,562        22,713
    Other long-term liabilities                        3,789         3,904
                                                       -----         -----
          Total liabilities                          418,880       536,361

    Stockholders' equity:
      Cumulative convertible preferred stock          68,786        68,786
      Common stock                                     1,184           996
      Additional paid-in capital                     743,300       694,261
      Accumulated deficit                           (438,426)     (376,552)
      Accumulated other comprehensive loss           (39,325)      (55,859)
      Treasury stock                                  (6,565)       (6,562)
                                                     -------       -------
          Total stockholders' equity                 328,954       325,070
                                                     -------       -------
          Total liabilities and stockholders'
           equity                                   $747,834      $861,431
                                                    ========      ========



                  ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
                        SUMMARY OF SEGMENT INFORMATION
                                (In thousands)
                                 (Unaudited)

                                     Three Months Ended    Nine Months Ended
                                        September 30,        September 30,
                                        -------------        -------------
                                       2009       2008      2009       2008
                                       ----       ----      ----       ----
    Net revenues:
      Land Imaging Systems           $15,187    $81,562   $68,531   $177,270
      Marine Imaging Systems          29,400     49,016    72,077    133,872
      Data Management Solutions        7,618     10,408    24,081     29,170
                                       -----     ------    ------     ------
         Total ION Systems            52,205    140,986   164,689    340,312
      ION Solutions                   50,165     77,543   133,828    199,041
                                      ------     ------   -------    -------
      Total                         $102,370   $218,529  $298,517   $539,353
                                    ========   ========  ========   ========

    Income (loss) from operations:
      Land Imaging Systems          $(10,328)   $11,216  $(25,920)   $15,831
      Marine Imaging Systems           9,386     14,063    19,890     35,245
      Data Management Solutions        4,277      6,820    14,525     17,496
                                       -----      -----    ------     ------
         Total ION Systems             3,335     32,099     8,495     68,572
      ION Solutions                    9,321     14,019    19,129     36,316
      Corporate                      (14,215)   (14,544)  (43,226)   (43,283)
      Impairment of intangible
       assets                              -          -   (38,044)         -
                                         ---        ---  --------        ---
      Total                          $(1,559)   $31,574  $(53,646)   $61,605
                                     =======    =======  ========    =======



                     ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
                                SUMMARY OF CASH FLOWS
                                   (In thousands)
                                     (Unaudited)

                                                      Nine Months Ended
                                                        September 30,
                                                        -------------
                                                        2009       2008
                                                        ----       ----

    Cash flows from operating activities             $51,597    $52,501
    Cash flows from investing activities             (77,966)  (329,844)
    Cash flows from financing activities               9,587    274,987
    Other changes in cash flows                        1,166     (1,864)
                                                       -----    -------
    Net decrease in cash and cash equivalents        (15,616)    (4,220)
    Cash and cash equivalents at beginning of period  35,172     36,409
                                                      ------     ------
    Cash and cash equivalents at end of period       $19,556    $32,189
                                                     =======    =======



                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 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      Nine Months Ended
                                    September 30,          September 30,
                                    -------------          -------------
                                  2009        2008      2009          2008
                                  ----        ----      ----          ----

    Net income (loss)          $(5,950)     $25,858  $(59,249)      $50,749
    Interest expense             6,380        1,592    20,658         2,731
    Interest income               (451)         (40)   (1,447)       (1,117)
    Income tax expense
     (benefit)                     131        3,760   (18,342)        9,343
    Depreciation and
     amortization expense       27,363       38,250    71,124        85,423
    Impairment of intangible
     assets                          -            -    38,044             -
                                   ---          ---    ------           ---
    Adjusted EBITDA            $27,473      $69,420   $50,788      $147,129
                               =======      =======   =======      ========



          Reconciliation of Special Charges to Diluted Earnings Per Share
                                 (Non-GAAP Measure)
                     (In thousands, except per share amounts)
                                     (Unaudited)

    The financial results are reported in accordance with generally accepted
    accounting principles (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
    financials performance under GAAP.  Accordingly, it should not be
    considered as a substitute for operating income (loss), 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 nine months ended September 30, 2009:

                                Nine Months Ended September 30, 2009
                                ------------------------------------

                                             Out-Of-Period
                                              Stock-Based
                            As    Impairment Compensation Restructuring As
                          Reported   Charges    Expense    Charges    Adjusted
                          --------   -------    -------    -------    --------

    Net revenues          $298,517        $-        $-        $-     $298,517
    Cost of sales          200,216         -         -      (991)     199,225
                           -------       ---       ---     -----      -------
    Gross profit            98,301         -         -       991       99,292
    Operating expenses     151,947   (38,044)   (3,267)   (1,622)     109,014
                           -------  --------   -------   -------      -------
    Income (loss) from
     operations            (53,646)   38,044     3,267     2,613       (9,722)
    Interest expense       (20,658)        -         -         -      (20,658)
    Other expense           (3,287)        -         -         -       (3,287)
    Income tax expense
     (benefit)             (18,342)   11,033     1,143       915       (5,251)
                          --------    ------     -----       ---      -------
    Net income (loss)      (59,249)   27,011     2,124     1,698      (28,416)
    Preferred stock
     dividends               2,625         -         -         -        2,625
                             -----       ---       ---       ---        -----
    Net income (loss)
     applicable
     to common shares
                          $(61,874)  $27,011    $2,124    $1,698     $(31,041)
                          ========   =======    ======    ======     ========

    Basic and diluted
     earnings per share     $(0.57)                                    $(0.29)
                            ======                                     ======

    Weighted average
     number of basic and
     diluted common
     shares outstanding    107,816                                    107,816

SOURCE ION Geophysical Corporation

R. Brian Hanson, Chief Financial Officer of ION Geophysical Corporation, +1-281-879-3672; or Jack Lascar of DRG&E, +1-713-529-6600, for ION Geophysical Corporation