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Assets

12 Months Ended

Dec. 31, 2011

NOTE 4: Assets

(a) Restricted Cash

As of December 31, 2011 and 2010, restricted cash was approximately $3.1 million and $2.5 million, respectively. At both periods, restricted cash included cash held to collateralize standby letters of credit and performance guarantees. Additionally, December 31, 2011 includes $0.2 million held in trust in connection with a short-term project financing agreement entered into in November 2011 by one of our subsidiaries in Latin America. See note 6.

(b) Accounts Receivable

A summary of accounts receivable is as follows (in thousands):

	December 31,
	2011			2010
Trade	$	113,382		$	103,778
Unbilled	32,557			48,297
Other	17,554			15,767
Total accounts receivable	163,493			167,842
Less allowance for doubtful accounts	(2,757		)	(2,519		)
	$	160,736		$	165,323

The Company utilizes the specific identification method for establishing and maintaining its allowance for doubtful accounts. The activity in the allowance for doubtful accounts is as follows (in thousands):

	Year Ended December 31,
	2011			2010			2009
Balance at beginning of period	$	2,519		$	1,167		$	3,944
Bad debt expense	1,921			1,549			1,110
Write-offs, net of recoveries	(1,683		)	(197		)	(3,887		)
Balance at the end of the period	2,757			$	2,519		$	1,167

Sales of Certain Accounts Receivable

In order to improve the Company’s liquidity, one of the Company’s international subsidiaries in Latin America sells certain eligible trade accounts receivable without recourse under a program sponsored by a financial agent of the foreign government to accelerate collections. There is no recourse to the subsidiary for uncollectible receivables and, once sold, the subsidiary’s effective control over the accounts is ceded. The cost associated with these sales is calculated based on LIBOR plus five percentage points and the value and due date of the accounts receivable sold.

At the time of sale, the related accounts receivable are removed from the balance sheet and the proceeds and cost are recorded. Accounts receivable sold under this arrangement totaled $59.9 million and $3.0 million during the years ended December 31, 2011 and 2010, respectively. The loss on the sale of these accounts receivable during the years ended December 31, 2011 and 2010 was $0.3 million and $0.0 million, respectively, and is included in operating expenses in the Company’s consolidated statement of operations. There were no sales of trade accounts receivable during 2009.

Property and equipment is comprised of the following (in thousands):

	Estimated	December 31,
	Useful Life	2011			2010
Field operating equipment	3-10 years	$	318,530		$	311,187
Vehicles	3-10 years	76,849			66,709
Buildings and improvements	6-39 years	10,948			14,819
Software	3-5 years	25,554			25,561
Data processing equipment	3-5 years	9,765			10,136
Furniture and equipment	3-5 years	3,994			3,253
		445,640			431,665
Less: accumulated depreciation and amortization		(235,281		)	(176,549		)
		210,359			255,116
Assets under construction		2,277			11,288
		$	212,636		$	266,404

The Company reviews the useful life and residual values of property and equipment on an ongoing basis considering the effect of events or changes in circumstances.

Depreciation expense was $69.9 million, $68.9 million, and $49.5 million during the years ended December 31, 2011, 2010, and 2009, respectively.

If appropriate, the Company capitalizes interest cost incurred on funds used to construct property and equipment. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. The Company did not capitalized interest during 2011 or 2009. Interest cost capitalized was $1.1 million for the year ended December 31, 2010.

In April 2011, the Company experienced a loss of certain equipment as a result of a wild fire in Colorado, in the United States, which reached the Company’s staging area. The lost assets were fully insured. During the year ended December 31, 2011, the Company recorded a net loss of $0.2 million in connection with this event, which includes insurance proceeds received of $1.5 million. The claims process was finalized during the first quarter of 2012 and the Company received additional insurance proceeds of $2.1 million. All insurance proceeds will be used to replace the lost equipment.

The Company stores and maintains property and equipment in the countries in which it does business. In connection with the acquisition of PGS Onshore in February 2010, the Company acquired certain property and equipment in Libya and entered into an agreement with PGS to operate the business there on the Company’s behalf. The Company subsequently completed the formation of a subsidiary and acquired certain required licenses to operate its seismic acquisition business. However, as a result of the civil unrest in Libya, the Company has been unable to operate its business or utilize its equipment in Libya since the first quarter of 2011 and is currently evaluating options regarding transfer of this equipment out of the area. At December 31, 2011, the net book value of the equipment in Libya was $9.7 million. While the Company maintains insurance coverage on these assets, including political risk coverage, this coverage is limited only to certain defined loss events. To date, these defined events have not occurred.

(d) Goodwill

All of the Company’s goodwill was related to its seismic data acquisition reportable segment. The changes in the carrying amounts of goodwill were as follows (in thousands):

	2011			2010
Balance at the beginning of the period	$	131,299		$	73,414
Changes to goodwill relating to the acquisition of PGS Onshore (see note 3)	1,077			57,885
Goodwill impairment (see below)	(132,376		)	—
Balance at the end of the period	$	—		$	131,299

Goodwill Impairment Assessment

Accounting guidance requires intangible assets with indefinite lives, including goodwill, be evaluated on an annual basis for impairment or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company historically performed its annual impairment assessment as of December 31.

Given the events impacting the Company during the third quarter of 2011, including the Mexico liftboat incident, a sustained decline in the Company’s market capitalization and the credit rating downgrades, the Company concluded that there were sufficient indicators to require an interim goodwill impairment analysis during the third quarter of 2011. In accordance with the applicable accounting guidance, the Company performed a two-step impairment test. In the first step of the impairment test the fair value of the Company’s reporting unit was compared to their carrying amount, including goodwill, to determine if a potential impairment existed. As the carrying amount of the reporting unit exceeded its fair value, the second step was performed to measure the amount of impairment by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. Due to the complexities inherent in the analysis required, the Company did not fully complete step two of the impairment analysis of goodwill at that time; however, it determined that an impairment loss could be reasonably estimated. As of September 30, 2011, the Company recorded a preliminary goodwill impairment charge of $40.0 million, representing the best estimate within the range of the estimated impairment loss at that time. During the fourth quarter of 2011, the Company finalized step two of the impairment analysis which resulted in the recognition of an additional impairment charge of $92.4 million. Accordingly, at December 31, 2011, the Company had no goodwill. These charges are included in asset impairments in the Company’s consolidated statement of operations.

The following summarizes the most significant estimates and assumptions used by the Company in the goodwill impairment analysis:

· The fair value estimate in step one was determined using a combination of the income approach and the market-based approach. In weighting the results of these valuation approaches, the Company placed a greater emphasis on the income approach.

· Income approach.

· Estimated cash flows were projected based on certain assumptions regarding revenues, direct costs, general and administrative expenses, depreciation, income taxes, capital expenditures and working capital requirements for the next five years.

· The terminal value assumed a long-term growth rate of 3%.

· The projected cash flows and the terminal value were discounted to present value using a discount rate of 16.2%. The discount rate reflected the Company’s current credit rating.

· Market approach.

· The Company primarily considered the guideline publicly traded company method. However, the Company utilized the guideline company transaction method as a reasonableness test for selected multiples from the guideline publicly traded company method and implied multiples from its valuation conclusions.

· The Company selected six publicly traded companies in the oil and gas equipment and services industry and focused on their enterprise value to last twelve month (“LTM”) and enterprise value to next twelve month (“NTM”) EBITDA multiples.

· The Company applied an unlevered control premium of 13% to the LTM EBITDA indication.

· The calculation of the implied fair value of the goodwill of the Company’s reporting unit required by step two included a full valuation of all the Company’s recognized assets and liabilities and any of its unrecognized intangible assets. In estimating the fair value for the subject assets, the Company utilized a combination of the market approach, cost approach, and the income approach. For the fixed assets, the Company relied on the market and cost approaches. The relief from royalty rate method, which considers both the market approach and the income approach, was used to value the trade name, marine vibrator technology license, and certain technology under development. The income approach, specifically the multi-period excess earnings method, was used to value the backlog and the multi-client seismic data library.

The estimates and assumptions described above used to estimate the goodwill impairment charges recorded during 2011 are subject to a high degree of bias and uncertainty. Different assumptions as to the Company’s future revenues and cost structure, growth rate and discount rate would result in estimated future cash flows that could be materially different than those considered in the impairment assessment performed. Any future fair value estimates for the Company’s reporting unit that are greater than the fair value estimate as of September 30, 2011, will not result in a reversal of the impairment charges.

Certain disclosures are required about nonfinancial assets and liabilities measured at fair value on a nonrecurring basis. This applies to our reporting unit for which the Company estimated its fair value under step two of the impairment test. A fair value hierarchy exists for inputs used in measuring fair value. See note 8 for further discussion about the fair value levels.

	September 30, 2011
	(in thousands)
	(Level 1)		(Level 2)		(Level 3)		Total Impairment Charge
Reporting unit’s fair value	$	—	$	—	$	296,543	$	132,376
Total	$	—	$	—	$	296,543	$	132,376

(e) Multi-client Seismic Data Library

At December 31, 2011 and 2010, multi-client seismic data library costs and accumulated amortization consisted of the following (in thousands):

	December 31,
	2011			2010
Acquisition and processing costs	$	169,881		$	97,904
Less accumulated amortization	(128,369		)	(44,692		)
Multi-client data library, net	$	41,512		$	53,212

During the fourth quarter of 2011, the Company performed its impairment review of the carrying value of the multi-client seismic data library and determined that a specific multi-client survey was fully impaired. Accordingly, the Company recorded an impairment charge of $2.4 million as of December 31, 2011, which is included in asset impairments in the Company’s consolidated statement of operations.

Multi-client seismic data library amortization expense for the years ended December 31, 2011, 2010 and 2009, were $85.0 million, $38.0 million and $6.6 million, respectively.

Multi-client seismic data library revenues for the years ended December 31, 2011, 2010 and 2009, were $119.5 million, $71.1 million and $10.3 million, respectively.

On March 15, 2012, the Company entered into a purchase and sale agreement pursuant to which the Company agreed to sell certain North America seismic data in exchange for $10.0 million in cash. See note 22.

(f) Deferred Financing Costs

The Company had deferred financing costs of $13.0 million and $11.8 million at December 31, 2011 and 2010, respectively.

Changes in deferred financing costs are as follows (in thousands):

	Year Ended December 31,
	2011			2010			2009
Balance at the beginning of the period	$	11,794		$	10,819		$	1,038
Capitalized (1)	6,422			4,570			10,341
Amortized (2)	(4,108		)	(2,784		)	(560		)
Write-offs associated with early extinguishment of debt (3)	(1,121		)	(811		)	—
Balance at the end of the period	$	12,987		$	11,794		$	10,819

(1) In 2011, the Company recorded $5.9 million in deferred financing costs in connection with the amended and restated credit agreement for the Whitebox Revolving Credit Facility. In 2010, the Company recorded $1.1 million, $2.4 million and $1.1 million in deferred financing costs in connection with the Notes, the RBC Revolving Credit Facility and the Series D Preferred Stock, respectively. In 2009, the Company recorded $0.2 million and $7.8 million in deferred financing costs in connection with the PNC Credit Facility and the Notes, respectively.

(2) In April 2011, the Company wrote off $1.1 million of deferred financing costs in connection with Amendment No. 4 to the RBC Revolving Credit Facility which modified the final maturity date. This amount is included in interest expense in the consolidated statement of operations.

(3) In May 2011, the Company wrote off $1.1 million of deferred financing costs in connection with the early extinguishment of the RBC Revolving Credit Facility which is included in other income (expense) in the Company’s consolidated statement of operations. In February 2010, in connection with the closing of the acquisition of PGS Onshore, the Company wrote off $0.8 million of deferred financing costs related to the early extinguishment of certain debt which is included in other income (expense) in the Company’s consolidated statement of operations.

(g) Other Assets

At December 31, 2011 and 2010, other assets, net consisted of the following (in thousands):

	December 31,
	2011							2010
	Gross Carrying Value		Accumulated Amortization			Total Net Book Value		Gross Carrying Value		Accumulated Amortization			Total Net Book Value
Intangible assets:
Customer lists(1)	$	3,609	$	(3,609	)	$	—	$	3,609	$	(3,276	)	$	333
Order backlog(2)	5,700		(5,629		)	71		5,700		(2,629		)	3,071
License agreement(2)	500		(94		)	406		500		(44		)	456
Total other intangible assets	$	9,809	$	(9,332	)	$	477	$	9,809	$	(5,949	)	$	3,860
Other:
Cost method investments(3)						6,713							4,810
Indemnification receivable from PGS and other						1,447							1,100
Total other						8,160							5,910
Total other assets, net						$	8,637						$	9,770

(1) Customer lists were acquired in the acquisitions of Trace in December 2005 and Grant in September 2006. Trace’s customer list was originally valued at $1.2 million with a fully depreciated net book value as of December 31, 2010. Grant’s customer list was originally valued at $2.4 million with a fully depreciated net book value as of December 31, 2011. Amortization expense for customer lists was $0.4 million, $0.7 million and $0.5 million for the years ended December 31, 2011, 2010 and 2009, respectively.

(2) Order backlog and license agreement were acquired though the acquisition of PGS Onshore. See note 3. The scheduled amortization for these assets is $0.1 million in 2012 and each year thereafter through 2015. Amortization expense for order backlog and license agreement was $3.1 million and $2.7 million for the years ended December 31, 2011 and 2010, respectively.

(3) The increase during 2011 is related to additional investments in these assets, which are capitalized in accordance with applicable accounting guidance. At December 31, 2011 and 2010, these investments were evaluated for impairment and there were no identified events or circumstances that had a significant adverse effect on their fair value.