0000866609-18-000041.txt : 20180802 0000866609-18-000041.hdr.sgml : 20180802 20180802090008 ACCESSION NUMBER: 0000866609-18-000041 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20180801 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20180802 DATE AS OF CHANGE: 20180802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ION GEOPHYSICAL CORP CENTRAL INDEX KEY: 0000866609 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 222286646 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12691 FILM NUMBER: 18986833 BUSINESS ADDRESS: STREET 1: 2105 CITYWEST BLVD STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 770422855 BUSINESS PHONE: 2819333339 MAIL ADDRESS: STREET 1: 2105 CITYWEST BLVD STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 770422855 FORMER COMPANY: FORMER CONFORMED NAME: INPUT OUTPUT INC DATE OF NAME CHANGE: 19930328 8-K 1 a8k-2018xq2xearnings.htm 8-K Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
 
FORM 8-K 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: (Date of earliest event reported): August 1, 2018

ION Geophysical Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation)
1-12691
(Commission file number)
22-2286646
(I.R.S. Employer Identification No.)

2105 CityWest Blvd, Suite 100
Houston, Texas 77042-2839
(Address of principal executive offices, including Zip Code)

(281) 933-3339
(Registrant’s telephone number, including area code)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 
 
 


Item 2.02.    Results of Operations and Financial Condition
On August 1, 2018, ION Geophysical Corporation (the “Company”) issued a press release containing information regarding the Company’s results of operations for the quarter ended June 30, 2018. A copy of the press release is furnished as Exhibit 99.1 hereto.
    
Item 7.01.    Regulation FD Disclosure
In conjunction with the above press release, the Company has scheduled a conference call, which will be broadcast live over the Internet, for Thursday, August 2, at 10:00 a.m. Eastern Time (9:00 a.m. Central). The information for accessing the conference call is included in the press release. The webcast of the conference call will be accompanied by a slide presentation, which can be accessed from the ION home page in the Investor Relations section of the ION website by 9:00 AM eastern time.
The information contained in Items 2.02, and 7.01 and the exhibits of this report (i) is not to be considered “filed” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (ii) shall not be incorporated by reference into any previous or future filings made by or to be made by the Company with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
The information 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 may include information 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 risks associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased demand; changes in oil prices; and political, execution, regulatory, and currency risks. These risks and uncertainties also include risks associated with the WesternGeco litigation and other related proceedings. We cannot predict the outcome of this litigation or the related proceedings.  For additional information regarding these various risks and uncertainties, including the WesternGeco litigation, see our Form 10-K for the year ended December 31, 2017, filed on February 8, 2018. Additional risk factors, which could affect actual results, are disclosed by the Company in its fillings with the Securities and Exchange Commission ("SEC"), including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.



2
 
 
 


Item 9.01.    Financial Statements and Exhibits
(a)    Financial statements of businesses acquired.
Not applicable.
(b)    Pro forma financial information.
Not applicable.
(c)    Shell company transactions.
Not applicable.
(d)    Exhibit.
Exhibit Number
 
Description
 
 
 
99.1
 
Press Release dated August 1, 2018.


3
 
 
 


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



Date: August 2, 2018
 
 
ION GEOPHYSICAL CORPORATION
 
 
 
 
 
 
 
 
 
 
By:
/s/ Matthew Powers
 
 
 
Matthew Powers
 
 
 
Executive Vice President, General Counsel and Corporate Secretary
 
 
 
 
 
 
 
 

4
 
 
 



EXHIBIT INDEX

 
 
 
Exhibit Number
 
Description
 
 
 
99.1
 



5
 
 
 

 EX-99.1 2 ex991earningsrelease2018-q2.htm EXHIBIT 99.1 Exhibit


ION reports second quarter 2018 results
Second quarter revenues down 46% compared to one year ago
Delayed sales in second quarter build momentum for a strong second half
HOUSTON – August 1, 2018 – ION Geophysical Corporation (NYSE: IO) today reported revenues of $24.7 million in the second quarter 2018, a 46% decrease compared to revenues of $46.0 million one year ago. ION’s net loss was $25.9 million, or $(1.86) per share, compared to a net loss of $10.4 million, or $(0.88) per share in the second quarter 2017. Excluding special items in the second quarter 2018, the Company reported an Adjusted net loss of $23.4 million, or $(1.68) per share. A reconciliation of special items to the financial results can be found in the tables of this press release.
The Company reported Adjusted EBITDA of $(7.9) million for the second quarter 2018, a decrease from the Adjusted EBITDA of $13.6 million one year ago. A reconciliation of Adjusted EBITDA to the closest comparable GAAP numbers can be found in the tables of this press release.
Net cash flows from operations were $(0.8) million during the second quarter 2018, compared to $1.7 million in the second quarter 2017. Total net cash flows, including investing and financing activities, were $(6.4) million, which are comparable to one year ago. At June 30, 2018, the Company had $44.3 million of cash on hand, and nothing drawn from its $23.3 million of available borrowing capacity under its revolving credit facility.
Brian Hanson, ION’s President and Chief Executive Officer, commented, “We are disappointed with the quarterly results, where a number of deals in our pipeline did not close. The opportunities did not disappear; the timing of the decision slipped, setting the potential for a strong back half of the year. For example, we experienced a decrease in multi-client revenues partially due to a delayed license round that resulted in certain customers pushing their commitments to our program to the second half of 2018. For this reason, and based on heightened activity and momentum, we still believe that 2018 will be a significant improvement on 2017 on a full-year basis. All key leading indicators and metrics of our business are up including our multi-client sales pipeline, license round activity, imaging services tenders, Marlin deployments, the number of active ocean bottom crews and oil and gas reserve replenishment becoming a greater priority than capital efficiency for our oil and gas customers. I encourage you to join our earnings call for more details about the upward trajectory of our business.”
For the first half of 2018, the Company reported revenues of $58.3 million, a net loss of $44.3 million, or $(3.31) per share, compared revenues of $78.6 million, a net loss of $33.8 million, or $(2.85) per share in the first half of 2017. Excluding special items in both periods, the Company reported an Adjusted net loss of $40.6 million, or $(3.03) per share, compared to an Adjusted net loss of $28.8 million, or $(2.43) per share in the first half of 2017. First half of 2018 Adjusted EBITDA was $(7.8) million, compared to $13.6 million in the first half of 2017.
Net cash flows from operations were $(0.2) million, compared to $3.5 million in the first half of 2017. Total net cash flows, including investing and financing activities, were $(7.7) million, compared to $(9.5) million in the first half of 2017. Net cash flows for the first half of 2018 reflect the $47.2 million of net proceeds received from the Company’s first

1


quarter equity offering. A portion of those proceeds were used to retire the $28.5 million of third lien notes. The Company also repaid the $10.0 million of outstanding indebtedness under its revolving credit facility during the first quarter. As a result of the Company’s 2018 debt repayments, only $0.5 million of current debt remained outstanding at June 30, 2018, and the Company’s remaining long-term debt is $120.6 million of second lien notes that mature in December 2021.
SECOND QUARTER 2018
The Company’s segment revenues for the second quarter were as follows (in thousands):
 
 
Three Months Ended June 30,
 
 
 
 
2018
 
2017
 
% Change
E&P Technology & Services
 
$
15,188

 
$
33,882

 
(55
)%
Operations Optimization
 
9,555

 
12,119

 
(21
)%
Ocean Bottom Integrated Technologies
 
—

 
—

 
—

Total
 
$
24,743

 
$
46,001

 
(46
)%
Within the E&P Technology & Services segment, multi-client revenues were $9.9 million, a decrease of 67%, with both new venture and data library revenues experiencing significant declines compared to the second quarter 2017. The decrease in multi-client revenues was partially due to a delay in a key bid round announcement. The delayed announcement resulted in many customers pushing their commitments to the Company’s program to the second half of 2018. Imaging Services revenues were $5.3 million, a 28% increase, due to an increase in proprietary ocean bottom nodal imaging projects.
Within the Operations Optimization segment, Optimization Software & Services revenues were $4.8 million, an 8% increase from the second quarter 2017. The increase in Optimization Software & Services revenues was due to an increase in subscription-based software revenues and hardware sales of its Gator™ ocean bottom command and control software and from a positive impact due to changes in foreign currencies. Devices revenues were $4.8 million, a 38% decrease from the second quarter 2017. Devices continues to be impacted by reduced towed streamer seismic contractor activity, resulting in further declines in new system sales as well as repair and replacement revenues.
The Ocean Bottom Integrated Technologies segment contributed no revenues during the second quarter.
Consolidated gross margin for the quarter was (6)%, compared to 34% in the second quarter 2017. Gross margin in E&P Technology & Services was (32)%, compared to 35% one year ago. The decrease in E&P Technology & Services gross margin was result of the decline in revenues. Operations Optimization gross margin was 52%, consistent with the second quarter 2017.
Consolidated operating expenses, as adjusted, were $18.5 million, down 4% from $19.2 million in the second quarter 2017. Operating margin, as adjusted, was (81)%, compared to (8)% in the second quarter 2017. The decline in operating margin was the result of the decrease in revenues.
YEAR-TO-DATE 2018
The Company’s segment revenues for the first six months of the year were as follows (in thousands):

2


 
 
Six Months Ended June 30,
 
 
 
 
2018
 
2017
 
% Change
E&P Technology & Services
 
$
39,756

 
$
57,192

 
(30
)%
Operations Optimization
 
18,495

 
21,365

 
(13
)%
Ocean Bottom Integrated Technologies
 
—

 
—

 
—

Total
 
$
58,251

 
$
78,557

 
(26
)%
Within the E&P Technology & Services segment, multi-client revenues were $29.5 million, a decrease of 38%, with new venture revenues decreasing 19% and data library revenues decreasing 62% from the first six months of 2017. Imaging Services revenues were $10.2 million, a 3% increase. The change in revenues during the first six months is fairly consistent with the changes described in the aforementioned section.
Within the Operations Optimization segment, Optimization Software & Services revenues were $9.6 million, a 10% increase compared to the first six months of 2017. Devices revenues were $8.9 million, a 30% decrease from the first six months of 2017.
The Ocean Bottom Integrated Technologies segment contributed no revenues during the first six months of the year.
Consolidated gross margin was 9%, compared to 28% in the first six months of 2017. Gross margin in E&P Technology & Services was (1)%, down from 28% in the first six months of 2017. The decrease in E&P Technology & Services gross margin was result of the decline in revenues. Operations Optimization gross margin was 50%, compared to 52% in the first six months of 2017.
Consolidated operating expenses, as adjusted, were $36.8 million, down 6% from $39.2 million in the first six months of 2017. Operating margin, as adjusted, was (54)%, compared to (22)% in the first six months of 2017. The decrease in operating margin was due to the decline in revenues.
CONFERENCE CALL
The Company has scheduled a conference call for Thursday, August 2, 2018, at 10:00 a.m. Eastern Time that will include a slide presentation to be posted in the Investor Relations section of the ION website by 9:00 a.m. Eastern Time. To participate in the conference call, dial (877) 407-0672 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 16, 2018. To access the replay, dial (877) 660-6853 and use pass code 13681609#.
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. An archive of the webcast will be available shortly after the call on the Company’s website.
About ION
ION develops and leverages innovative technologies, creating value through data capture, analysis and optimization to enhance critical decision-making, enabling superior returns. For more information, visit iongeo.com.

3


Contact
Steve Bate
Executive Vice President and Chief Financial Officer
+1.281.552.3011

The information 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 may include information 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 risks associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased demand; changes in oil prices; and political, execution, regulatory, and currency risks. These risks and uncertainties also include risks associated with the WesternGeco litigation and other related proceedings. We cannot predict the outcome of this litigation or the related proceedings. For additional information regarding these various risks and uncertainties, including the WesternGeco litigation, see our Form 10-K for the year ended December 31, 2017, filed on February 8, 2018. Additional risk factors, which could affect actual results, are disclosed by the Company in its fillings with the Securities and Exchange Commission ("SEC"), including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.


Tables to follow

4


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited) 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Service revenues
$
15,752

 
$
34,454

 
$
40,838

 
$
58,282

Product revenues
8,991

 
11,547

 
17,413

 
20,275

Total net revenues
24,743

 
46,001

 
58,251

 
78,557

Cost of services
22,033

 
24,827

 
44,362

 
47,126

Cost of products
4,227

 
5,556

 
8,553

 
9,712

Gross profit (loss)
(1,517
)
 
15,618

 
5,336

 
21,719

Operating expenses:
 
 
 
 
 
 
 
Research, development and engineering
4,259

 
4,107

 
8,514

 
7,602

Marketing and sales
6,007

 
4,931

 
11,105

 
9,417

General, administrative and other operating expenses
10,736

 
10,152

 
20,876

 
22,184

Total operating expenses
21,002

 
19,190

 
40,495

 
39,203

Loss from operations
(22,519
)
 
(3,572
)
 
(35,159
)
 
(17,484
)
Interest expense, net
(2,911
)
 
(4,241
)
 
(6,747
)
 
(8,705
)
Other income (expense), net
84

 
192

 
(707
)
 
(4,876
)
Loss before income taxes
(25,346
)
 
(7,621
)
 
(42,613
)
 
(31,065
)
Income tax expense
154

 
2,402

 
1,226

 
1,984

Net loss
(25,500
)
 
(10,023
)
 
(43,839
)
 
(33,049
)
Net income attributable to noncontrolling interest
(366
)
 
(418
)
 
(453
)
 
(734
)
Net loss attributable to ION
$
(25,866
)
 
$
(10,441
)
 
$
(44,292
)
 
$
(33,783
)
Net loss per share:
 
 
 
 
 
 
 
Basic
$
(1.86
)
 
$
(0.88
)
 
$
(3.31
)
 
$
(2.85
)
Diluted
$
(1.86
)
 
$
(0.88
)
 
$
(3.31
)
 
$
(2.85
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
13,928

 
11,875

 
13,374

 
11,847

Diluted
13,928

 
11,875

 
13,374

 
11,847


 

5


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 
ASSETS
June 30,
2018
 
December 31,
2017
Current assets:
 
 
 
Cash and cash equivalents
$
44,349

 
$
52,056

Accounts receivable, net
15,375

 
19,478

Unbilled receivables
15,046

 
37,304

Inventories
14,925

 
14,508

Prepaid expenses and other current assets
5,961

 
7,643

Total current assets
95,656

 
130,989

Deferred income tax asset
3,614

 
1,753

Property, plant, equipment and seismic rental equipment, net
48,442

 
52,153

Multi-client data library, net
82,576

 
89,300

Goodwill
23,543

 
24,089

Intangible assets, net
1,082

 
1,666

Other assets
731

 
1,119

Total assets
$
255,644

 
$
301,069

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
459

 
$
40,024

Accounts payable
26,173

 
24,951

Accrued expenses
28,936

 
38,697

Accrued multi-client data library royalties
27,988

 
27,035

Deferred revenue
8,402

 
8,910

Total current liabilities
91,958

 
139,617

Long-term debt, net of current maturities
117,159

 
116,720

Other long-term liabilities
12,606

 
13,926

Total liabilities
221,723

 
270,263

Equity:
 
 
 
Common stock
140

 
120

Additional paid-in capital
951,349

 
903,247

Accumulated deficit
(899,213
)
 
(854,921
)
Accumulated other comprehensive loss
(19,634
)
 
(18,879
)
Total stockholders’ equity
32,642

 
29,567

Noncontrolling interest
1,279

 
1,239

Total equity
33,921

 
30,806

Total liabilities and equity
$
255,644

 
$
301,069


6


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
 
 
 
Net loss
$
(25,500
)
 
$
(10,023
)
 
$
(43,839
)
 
$
(33,049
)
Adjustments to reconcile net loss to cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization (other than multi-client data library)
2,255

 
4,353

 
4,778

 
9,030

Amortization of multi-client data library
9,764

 
12,675

 
19,557

 
21,933

Stock-based compensation expense
1,231

 
535

 
2,043

 
1,169

Accrual for loss contingency related to legal proceedings
—

 
—

 
—

 
5,000

Deferred income taxes
(1,749
)
 
977

 
(1,866
)
 
(932
)
Change in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
13,980

 
(2,681
)
 
3,896

 
2,075

Unbilled receivables
3,094

 
(194
)
 
24,013

 
(5,542
)
Inventories
(281
)
 
714

 
(445
)
 
440

Accounts payable, accrued expenses and accrued royalties
(474
)
 
(3,571
)
 
(10,629
)
 
(6,059
)
Deferred revenue
(2,826
)
 
(1,672
)
 
(445
)
 
5,521

Other assets and liabilities
(306
)
 
537

 
2,733

 
3,905

Net cash (used in) provided by operating activities
(812
)
 
1,650

 
(204
)
 
3,491

Cash flows from investing activities:
 
 
 
 
 
 
 
Cash invested in multi-client data library
(4,542
)
 
(5,119
)
 
(13,782
)
 
(8,482
)
Purchase of property, plant, equipment and seismic rental assets
(363
)
 
(866
)
 
(424
)
 
(915
)
Net cash used in investing activities
(4,905
)
 
(5,985
)
 
(14,206
)
 
(9,397
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Payments under revolving line of credit
—

 
—

 
(10,000
)
 
—

Payments on notes payable and long-term debt
(555
)
 
(1,451
)
 
(29,699
)
 
(3,157
)
Net proceeds from issuance of stock
—

 
—

 
47,219

 
—

Dividend payment to non-controlling interest
(200
)
 
—

 
(200
)
 
—

Other financing activities
(306
)
 
(10
)
 
(881
)
 
(296
)
Net cash provided by (used in) financing activities
(1,061
)
 
(1,461
)
 
6,439

 
(3,453
)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash
377

 
(578
)
 
264

 
(169
)
Net decrease in cash, cash equivalents and restricted cash
(6,401
)
 
(6,374
)
 
(7,707
)
 
(9,528
)
Cash, cash equivalents and restricted cash at beginning of period
51,113

 
50,279

 
52,419

 
53,433

Cash, cash equivalents and restricted cash at end of period
$
44,712

 
$
43,905

 
$
44,712

 
$
43,905

The following table is a reconciliation of cash and cash equivalents to total cash, cash equivalents, and restricted cash:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Cash and cash equivalents
$
44,349

 
$
43,272

 
$
44,349

 
$
43,272

Restricted cash included in prepaid expenses and other current assets
60

 
330

 
60

 
330

Restricted cash included in other long-term assets
303

 
303

 
303

 
303

Total cash, cash equivalents, and restricted cash shown in statement of cash flows
$
44,712

 
$
43,905

 
$
44,712

 
$
43,905



7


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT INFORMATION
(In thousands)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net revenues:
 
 
 
 
 
 
 
E&P Technology & Services:
 
 
 
 
 
 
 
New Venture
$
8,125

 
$
19,986

 
$
21,851

 
$
26,935

Data Library
1,725

 
9,710

 
7,673

 
20,316

Total multi-client revenues
9,850

 
29,696

 
29,524

 
47,251

Imaging Services
5,338

 
4,186

 
10,232

 
9,941

Total
15,188

 
33,882

 
39,756

 
57,192

Operations Optimization:
 
 
 
 
 
 
 
Devices
4,761

 
7,679

 
8,919

 
12,669

Optimization Software & Services
4,794

 
4,440

 
9,576

 
8,696

Total
9,555

 
12,119

 
18,495

 
21,365

Ocean Bottom Integrated Technologies
—

 
—

 
—

 
—

Total
$
24,743

 
$
46,001

 
$
58,251

 
$
78,557

Gross profit (loss):
 
 
 
 
 
 
 
E&P Technology & Services
$
(4,856
)
 
$
11,921

 
$
(513
)
 
$
15,931

Operations Optimization
4,933

 
6,258

 
9,244

 
11,045

Ocean Bottom Integrated Technologies
(1,594
)
 
(2,561
)
 
(3,395
)
 
(5,257
)
Total
$
(1,517
)
 
$
15,618

 
$
5,336

 
$
21,719

Gross margin:
 
 
 
 
 
 
 
E&P Technology & Services
(32
)%
 
35
%
 
(1
)%
 
28
%
Operations Optimization
52
 %
 
52
%
 
50
 %
 
52
%
Ocean Bottom Integrated Technologies
—
 %
 
—
%
 
—
 %
 
—
%
Total
(6
)%
 
34
%
 
9
 %
 
28
%
Income (loss) from operations:
 
 
 
 
 
 
 
E&P Technology & Services
$
(10,206
)
 
$
6,353

 
$
(11,000
)
 
$
5,257

Operations Optimization
1,243

 
3,022

 
2,029

 
4,571

Ocean Bottom Integrated Technologies
(2,926
)
 
(3,860
)
 
(5,755
)
 
(7,868
)
Support and other
(10,630
)
 
(9,087
)
 
(20,433
)
 
(19,444
)
Loss from operations
(22,519
)
 
(3,572
)
 
(35,159
)
 
(17,484
)
Interest expense, net
(2,911
)
 
(4,241
)
 
(6,747
)
 
(8,705
)
Other income (expense), net
84

 
192

 
(707
)
 
(4,876
)
Loss before income taxes
$
(25,346
)
 
$
(7,621
)
 
$
(42,613
)
 
$
(31,065
)




8


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Reconciliation of Adjusted EBITDA to Net Loss
(Non-GAAP Measure)
(In thousands)
(Unaudited)
The term Adjusted EBITDA represents net loss before interest expense, interest income, income taxes, depreciation and amortization charges, and other charges including, without limitation, changes in the loss contingency reserve related to legal proceedings and stock appreciation rights expense. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Adjusted EBITDA as a supplemental disclosure because its management believes that Adjusted EBITDA provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. Additionally, due to the recent increase in the Company’s stock price and impact of reflecting its stock appreciation awards at their fair value, the Company is presenting Adjusted EBITDA, excluding the impact of stock appreciation awards, to assist in the comparability to its prior year results.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net loss
$
(25,500
)
 
$
(10,023
)
 
$
(43,839
)
 
$
(33,049
)
Interest expense, net
2,911

 
4,241

 
6,747

 
8,705

Income tax expense
154

 
2,402

 
1,226

 
1,984

Depreciation and amortization expense
12,019

 
17,028

 
24,335

 
30,963

Accrual for loss contingency related to legal proceedings
—

 
—

 
—

 
5,000

Stock appreciation rights expense
2,495

 
—

 
3,738

 
—

Adjusted EBITDA
$
(7,921
)
 
$
13,648

 
$
(7,793
)
 
$
13,603



9


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Reconciliation of Special Items to Net Loss 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 adjusted income (loss) from operations or adjusted net income (loss), which excludes certain charges or amounts. This adjusted income (loss) 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 tables below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three months ended June 30, 2018 and the six months ended June 30, 2018 and 2017:
 
Three Months Ended June 30, 2018
 
As Reported
 
Special
Items
 
As Adjusted
Net revenues
$
24,743

 
$
—

 
$
24,743

Cost of sales
26,260

 
—

 
26,260

Gross profit (loss)
(1,517
)
 
—

 
(1,517
)
Operating expenses
21,002

 
(2,495
)
(1) 
18,507

Loss from operations
(22,519
)
 
2,495

 
(20,024
)
Interest expense, net
(2,911
)
 
—

 
(2,911
)
Other income, net
84

 
—

 
84

Income tax expense
154

 
—

 
154

Net loss
(25,500
)
 
2,495

 
(23,005
)
Net income attributable to noncontrolling interest
(366
)
 
—

 
(366
)
Net loss attributable to ION
$
(25,866
)
 
$
2,495

 
$
(23,371
)
Net loss per share:
 
 
 
 
 
Basic
$
(1.86
)
 
 
 
$
(1.68
)
Diluted
$
(1.86
)
 
 
 
$
(1.68
)
Weighted average number of common shares outstanding:
 
 
 
 
 
Basic
13,928

 
 
 
13,928

Diluted
13,928

 
 
 
13,928




10


 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
 
As Reported
 
Special
Items
 
As Adjusted
 
As Reported
 
Special
Items
 
As Adjusted
Net revenues
$
58,251

 
$
—

 
$
58,251

 
$
78,557

 
$
—

 
$
78,557

Cost of sales
52,915

 
—

 
52,915

 
56,838

 
—

 
56,838

Gross profit
5,336

 
—

 
5,336

 
21,719

 
—

 
21,719

Operating expenses
40,495

 
(3,738
)
(1) 
36,757

 
39,203

 
—

 
39,203

Loss from operations
(35,159
)
 
3,738

 
(31,421
)
 
(17,484
)
 
—

 
(17,484
)
Interest expense, net
(6,747
)
 
—

 
(6,747
)
 
(8,705
)
 
—

 
(8,705
)
Other income (expense), net
(707
)
 
—

 
(707
)
 
(4,876
)
 
5,000

(2) 
124

Income tax expense
1,226

 
—

 
1,226

 
1,984

 


 
1,984

Net loss
(43,839
)
 
3,738

 
(40,101
)
 
(33,049
)
 
5,000

 
(28,049
)
Net income attributable to noncontrolling interest
(453
)
 
—

 
(453
)
 
(734
)
 
—

 
(734
)
Net loss attributable to ION
$
(44,292
)
 
$
3,738

 
$
(40,554
)
 
$
(33,783
)
 
$
5,000

 
$
(28,783
)
Net loss per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(3.31
)
 
 
 
$
(3.03
)
 
$
(2.85
)
 
 
 
$
(2.43
)
Diluted
$
(3.31
)
 
 
 
$
(3.03
)
 
$
(2.85
)
 
 
 
$
(2.43
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
13,374

 
 
 
13,374

 
11,847

 
 
 
11,847

Diluted
13,374

 
 
 
13,374

 
11,847

 
 
 
11,847


(1) 
Represents stock appreciation right awards expense in the first and second quarters of 2018
(2) 
Represents an accrual related to the WesternGeco legal contingency during the first quarter 2017


11