Equity Method Investment in INOVA Geophysical

12 Months Ended

Dec. 31, 2012

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investment in INOVA Geophysical

Equity Method Investment in INOVA Geophysical

In March 2010, the Company completed the disposition of most of its land seismic equipment businesses in connection with its formation of a land equipment joint venture with BGP. BGP is a subsidiary of China National Petroleum Corporation (“CNPC”) and is a leading global geophysical services contracting company. The resulting joint venture company, organized under the laws of the People’s Republic of China, was named INOVA Geophysical Equipment Limited (“INOVA Geophysical”). BGP owns a 51% interest in INOVA Geophysical, and the Company owns a 49% interest. INOVA Geophysical is managed through a Board of Directors consisting of four members appointed by BGP and three members appointed by the Company. The Company accounts for its 49% interest in INOVA Geophysical as an equity method investment. The Company accounts for its share of earnings in INOVA Geophysical on a one fiscal quarter lag basis. Thus, the Company’s share of INOVA Geophysical’s results for the period from October 1, 2011 to September 30, 2012 (“Fiscal 2012”), are included in the Company’s financial results for 2012, the Company’s share of INOVA Geophysical’s results for the period from October 1, 2010 to September 30, 2011 (“Fiscal 2011”), are included in the Company’s financial results for 2011, and the Company’s share of INOVA Geophysical’s results for the period from March 26, 2010 to September 30, 2010 (“Fiscal 2010”), are included in the Company’s financial results for 2010.

The following table reflects summarized financial information for INOVA Geophysical as of September 30, 2012 and 2011 and for Fiscal 2012, Fiscal 2011 and Fiscal 2010 (in thousands):

	September 30,
	2012		2011
Current assets	$	138,401	$	104,291
Non-current assets	101,280		108,039
Current liabilities	78,241		38,849
Non-current liabilities	9,290		25,701
Equity	$	152,150	$	147,780

	Fiscal 2012		Fiscal 2011				Fiscal 2010
Total net revenues	$	188,336	$	138,735			$	47,609
Gross profit (loss)	$	39,320	$	5,765		(A)	$	(21,574	)	(B)
Income (loss) from operations	$	3,241	$	(41,836	)		$	(45,423	)
Net income (loss)	$	2,197	$	(46,033	)		$	(48,416	)

(A) Includes approximately $15.7 million of excess inventory charge reflected in INOVA’s third quarter of 2011 and ION’s fourth quarter of 2011.

(B) Includes approximately $19.3 million of excess inventory charge reflected in INOVA’s third quarter of 2010 and ION’s fourth quarter of 2010.

The difference between the amount of the Company’s share in INOVA Geophysical’s net income (loss) for Fiscal 2012 and Fiscal 2011 and the “Equity in earnings (losses) of INOVA Geophysical” reflected on the Consolidated Statement of Operations for the years ended December 31, 2012 and 2011 is primarily due to transactions between the Company’s multi-client data library business and INOVA Geophysical, specifically the Company’s rental of land seismic equipment from INOVA Geophysical to acquire seismic data for its new venture projects. The Company initially defers its 49% of the net income related to these intercompany sales, which will then be recognized over time in proportion to the amortization expense of the associated data library.