EX-99.1 2 a04-12273_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

 

NEWS RELEASE

CONTACTS:

J. Michael Kirksey

 

 

Chief Financial Officer

 

 

Input/Output (281) 879-3672

 

 

 

FOR IMMEDIATE RELEASE

 

Jack Lascar, Partner

 

 

Karen Roan, Vice President

 

 

DRG&E (713) 529-6600

 

I/O REPORTS THIRD QUARTER 2004 RESULTS

 

•      Third quarter 2004 revenues of $80.9 million

•      Company records a $5.2 million reserve ($0.07 per share) for a Russian receivable

•      New System Four Analog System continues to penetrate market

 

HOUSTON – October 27, 2004 – Input/Output, Inc. (NYSE: IO) today announced third quarter 2004 net loss of $5.0 million, or $(0.07) per share, on revenues of $80.9 million compared to a net loss of $4.8 million, or $(0.09) per share, on revenues of $30.3 million for the same period a year ago. Included in the third quarter results is a $(0.07) per share loss related to a Russian receivable.

 

Bob Peebler, I/O’s President and Chief Executive Officer, said, “As indicated in our October 5th conference call, the third quarter financial results were impacted by a number of events that negatively affected earnings.  Project delays, unexpected new product start-up costs and a product mix with lower overall margins occurred simultaneously to affect our business. While the quarter’s results are disappointing, the fundamental drivers of our business model remain solid. Top line revenues increased by $51 million or 167% over the year ago period as the demand for seismic work continues to grow. Our new products are gaining market acceptance and our technology portfolio is focused on the highest value added segments of our markets.”

 

THIRD QUARTER 2004

Third quarter revenues of $80.9 million were in line with the October 5th guidance of approximately $80 million. Excluding GXT and Concept Systems, revenues increased almost 100%. GX Technology, which was acquired in June of this year, contributed revenues of $17.5 million during the quarter.  Land imaging revenues increased to $38.4 million compared to $20.7 million a year ago, and marine imaging revenues more than doubled to $19.1 million compared to $7.6 million a year ago. The land imaging division

 


 

continued to enjoy acceptance of System Four Analog with its first sale in the international market.  The marine imaging division completed the final sale of this year’s VectorSeis Ocean contract.

 

Gross margin in the third quarter improved to 24% compared to 17% for the same period a year ago. However, third quarter margins were lower than expected as delays in higher margin system sales and data library sales were replaced with lower margin sales of vibrator trucks and other older technology based products.  In addition, startup expenses on new products impacted the overall gross margin by nearly 2 percentage points.  Operating expenses as a percentage of revenues for the third quarter fell to 28%   compared to 38% for the third quarter of last year.  During this quarter, I/O sold its Alvin, Texas facility, which was made redundant by the major outsourcing initiative of the Company.  The Company recorded a gain of $2.4 million from this sale.

 

In recent days, the increasing financial difficulties of one of its Russian customers have led the Company to provide a reserve for the exposure to receivables due from a subsidiary of Yukos.  These receivables were collateralized by the equipment, which was sold to the customer in late 2001 through early 2003. The majority of the equipment has been recovered.  However, the difference between the receivables and the estimated fair market value, net of refurbishment cost, of the recovered equipment is $5.2 million, or ($0.07 per share), which the Company  recorded in the third quarter.

 

Loss from operations in the quarter was $3.3 million, including the Russian reserve, compared to a loss from operations of $6.4 million in the third quarter of 2003.  EBITDA (earnings before net interest expense, taxes, depreciation and amortization) for the third quarter was $4.3 million compared to a negative $1.9 million for the third quarter of last year.  You can find a reconciliation of EBITDA to reported earnings at the end of this press release.

 

YEAR-TO-DATE 2004

Revenues for the nine months ended September 30, 2004 increased 69% to $179.5 million compared to $106.0 million in the comparable period of 2003.  Approximately half of this increase is due to better performance within the land and marine imaging

 


 

divisions, while the remaining increase is due to the acquisitions of GX Technology and Concept Systems.

 

Gross margin for the first nine months of 2004 rose to 30% compared to 16% in the first nine months of 2003.  EBITDA for the first nine months of 2004 was $17.5 million compared to a negative $12.9 million for the first nine months of 2003. Income from operations increased to $3.3 million compared to a loss from operations in the prior year of $21.8 million.  For the nine months ended September 30, 2004, I/O recorded a net loss of $1.3 million, or ($0.02) per share, compared to a net loss of $23.8 million, or $(0.46) per share in the prior year.

 

OUTLOOK

The following statements are based on our current expectations.  These statements are forward looking and actual results may differ materially.  Factors affecting these forward-looking statements are detailed below.

 

Mr. Peebler stated, “Looking at 2004 to date, I/O has accomplished a great deal.  We have launched two major next-generation product lines on time and continue to increase market penetration of our full-wave VectorSeis technology. VectorSeis sales are expected to grow in both the land and marine environments as acceptance of this new technology continues. The additions of GX Technology and Concept Systems have added the necessary key pieces we needed to build a seismic solutions company.  While we have a lot more work to do, these are major steps in the first year of our plan.”

 

Mike Kirksey, Executive Vice President and Chief Financial Officer, added,  “Based on our current view of fourth quarter orders in the pipeline and our judgment on expected shipments, we expect 2004 revenues to range between $260 and $270 million.  Much of our projected top line growth in the fourth quarter is expected to come from continued market penetration of our new field acquisition systems and continued growth of GX Technology’s Integrated Seismic Solutions offering.  We expect full year 2004 gross margin to be approximately 30% and EBITDA to range between $30 and $35 million. Excluding the Russian reserve, we expect earnings per share to range between $0.14 and $0.20 for 2004. As a result, for the fourth quarter of 2004, we expect revenues

 


 

to range between $80 and $90 million and earnings per share to range between $0.08 and $0.14.”

 

CONFERENCE CALL

I/O has scheduled a conference call for Thursday, October 28, 2004, at 9:30 a.m. eastern time.  To participate in the conference call, dial 303-262-2142 at least 10 minutes before the call begins and ask for the Input/Output conference call.  A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until November 4, 2004.  To access the replay, dial 303-590-3000 and use pass code 11011606.

 

Investors, analysts and the general public will also have the opportunity to listen to the conference call live over the Internet by visiting www.i-o.com.  Also, an archive of the web cast will be available shortly after the call on the company’s website for approximately 90 days.

 

I/O is a leading seismic services provider. The company provides cutting-edge seismic acquisition equipment, software, and planning and seismic processing services to the global oil and gas industry. The company’s technologies are applied in both land and marine environments, in traditional 2D and 3D surveys, and in rapidly growing areas like time-lapse (4D) reservoir monitoring and full-wave imaging. I/O has offices in the United States, Canada, Europe, China, Russia and the Middle East. Additional information is available at http://www.i-o.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 capital outlays by E&P companies and seismic contractors, future VectorSeis revenues, and fourth quarter revenues, gross margin, and net income per share.  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 there from; the Company’s inability to produce products to preserve and increase market share; 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.

 

Tables to follow

 


 

INPUT/OUTPUT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Net sales

 

$

80,861

 

$

30,307

 

$

179,475

 

$

106,046

 

Cost of sales

 

61,722

 

25,088

 

126,275

 

89,396

 

Gross profit

 

19,139

 

5,219

 

53,200

 

16,650

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

6,108

 

4,458

 

15,563

 

14,931

 

Marketing and sales

 

7,342

 

3,015

 

15,656

 

8,851

 

General and administrative

 

11,530

 

4,359

 

22,074

 

13,786

 

Gain on sale of assets

 

(2,498

)

(244

)

(3,394

)

(280

)

Impairment of long-lived assets

 

—

 

—

 

—

 

1,120

 

Total operating expenses

 

22,482

 

11,588

 

49,899

 

38,408

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(3,343

)

(6,369

)

3,301

 

(21,758

)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(1,623

)

(954

)

(4,616

)

(3,142

)

Interest income

 

261

 

428

 

1,020

 

1,544

 

Fair value adjustment of warrant obligation

 

—

 

1,829

 

—

 

988

 

Write-down of investment

 

—

 

—

 

—

 

(2,036

)

Other income

 

36

 

113

 

193

 

777

 

Income (loss) before income taxes

 

(4,669

)

(4,953

)

(102

)

(23,627

)

Income tax expense (benefit)

 

305

 

(133

)

1,243

 

158

 

Net loss

 

$

(4,974

)

$

(4,820

)

$

(1,345

)

$

(23,785

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(0.07

)

$

(0.09

)

$

(0.02

)

$

(0.46

)

 

 

 

 

 

 

 

 

 

 

Weighed average number of common shares  outstanding

 

76,419,362

 

51,235,269

 

61,923,823

 

51,219,179

 

 


 

INPUT/OUTPUT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

September 30, 2004

 

December 31, 2003

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents.

 

$

31,917

 

$

59,507

 

Restricted cash

 

1,026

 

1,127

 

Accounts receivable, net

 

68,549

 

34,270

 

Current portion notes receivable, net

 

11,609

 

14,420

 

Income tax receivable

 

1,149

 

—

 

Unbilled revenue

 

7,987

 

—

 

Inventories

 

59,042

 

53,551

 

Prepaid expenses and other current assets

 

6,420

 

3,703

 

Total current assets

 

187,699

 

166,578

 

Notes receivable

 

6,123

 

6,409

 

Net assets held for sale

 

—

 

3,331

 

Property, plant and equipment, net

 

42,712

 

27,607

 

Multi-client data library, net

 

14,517

 

—

 

Deferred income taxes

 

—

 

1,149

 

Goodwill

 

149,324

 

35,025

 

Intangible and other assets, net

 

73,475

 

9,105

 

Total assets

 

$

473,850

 

$

249,204

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Notes payable and current maturities of long-term debt

 

$

7,506

 

$

2,687

 

Accounts payable

 

38,052

 

12,531

 

Accrued expenses

 

23,649

 

15,833

 

Deferred revenue

 

10,402

 

2,060

 

Total current liabilities

 

79,609

 

33,111

 

Long-term debt, net of current maturities

 

80,484

 

78,516

 

Other long-term liabilities

 

3,321

 

3,813

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

784

 

522

 

Additional paid-in capital

 

478,120

 

296,663

 

Accumulated deficit

 

(159,882

)

(158,537

)

Accumulated other comprehensive income

 

216

 

1,292

 

Treasury stock

 

(5,833

)

(5,826

)

Unamortized restricted stock compensation

 

(2,969

)

(350

)

Total stockholders’ equity

 

310,436

 

133,764

 

Total liabilities and stockholders’ equity

 

$

473,850

 

$

249,204

 

 


 

Reconciliation of EBITDA to Net Income

(Non-GAAP Measures)

(In thousands)

(Unaudited)

 

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 income (loss) per share calculated under generally accepted accounting principles (GAAP).  We believe that 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 EBITDA shown below is based upon amounts derived from the company’s financial statements prepared in conformity with GAAP.

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,974

)

$

(4,820

)

$

(1,345

)

$

(23,785

)

Interest expense

 

1,623

 

954

 

4,616

 

3,142

 

Interest income

 

(261

)

(428

)

(1,020

)

(1,544

)

Income tax expense (benefit)

 

305

 

(133

)

1,243

 

158

 

Depreciation and amortization expense

 

7,593

 

2,484

 

14,014

 

9,093

 

EBITDA

 

$

4,286

 

$

(1,943

)

$

17,508

 

$

(12,936

)