ION reports fourth quarter and year end 2015 results
4Q 15 revenues of $77.5 million and EPS (adjusted 1-for-15 stock split) of $(0.51)
Total liquidity of $124.9 million at year end
HOUSTON – February 10, 2016 – ION Geophysical Corporation (NYSE: IO) today reported a fourth quarter 2015 net loss of $5.5 million on revenues of $77.5 million, or $(0.51) per share, compared to a net loss of $180.9 million on revenues of $136.8 million, or $(16.51) per share, in fourth quarter 2014. Excluding special items, ION's fourth quarter 2014 adjusted net loss was $11.0 million, or $(1.01) per share. The per share amounts for both years have been adjusted to reflect a 1-for-15 reverse stock split that went into effect on February 4, 2016.
For the full year 2015, the Company reported a net loss of $25.1 million on revenues of $221.5 million, or $(2.29) per share, compared to a net loss of $128.3 million on revenues of $509.6 million, or $(11.72) per share, in 2014. Both periods included special items related to reductions in the accrual for the WesternGeco legal matter, in addition to restructuring and other special items. Excluding special items, the Company's full year adjusted net loss was $118.7 million, or $(10.83) per share, compared to an adjusted net loss of $34.1 million, or $(3.12) per share, in 2014. A reconciliation of special items for 2015 and 2014 can be found in the financial tables of this press release.
At December 31, 2015, the Company's total liquidity was $124.9 million consisting of cash and cash equivalents of $84.9 million and $40.0 million available on the Company's credit facility. The Company generated positive net cash flows before financing activities of $0.4 million during the fourth quarter 2015, compared to $45.0 million in fourth quarter 2014. For the full year 2015, the Company consumed net cash before financing activities of $80.1 million while generating $81.0 million of cash before financing activities in 2014.
The Company reported a positive Adjusted EBITDA for fourth quarter 2015 of $18.4 million, compared to $25.3 million one year ago. Full year 2015 Adjusted EBITDA was $(41.6) million, compared to $108.3 million in 2014. A reconciliation of Adjusted EBITDA can be found in the financial tables of this press release.
Brian Hanson, the Company’s President and Chief Executive Officer, commented, “As anticipated, 2015 was an enormously challenging year for ION, as it was for our peers and E&P customers. Steadily deteriorating oil prices resulted in declining revenues, followed by industry-wide operational and financial restructurings. Through our cost reduction initiatives during the year, we were able to appropriately scale our businesses to bring them in line with our lower revenue streams, while maintaining our core capabilities and continuing to strategically invest in commercial opportunities and research & development of new technologies. Consistent with our asset light strategy, we are ready to scale up or down as business dictates.
“As usual, our fourth quarter was our strongest, with data library revenues up 6% over fourth quarter 2014. In addition, we generated revenues from our newly-acquired, industry-funded MexicoSPANTM program, delivering fast track data to our E&P customers in advance of Mexico's Round 1. However, the continued softness in other areas of our business more than offset the increase in our data library revenues.
“In the data processing arena, we were recently awarded an extension to our existing multi-year contract with Pemex, the national oil company of Mexico, under which we are providing a broad range of seismic data processing for multiple offshore and onshore surveys. Pemex plans to continue to invest in hydrocarbon exploration and production in the years ahead, and this contract extension was a solid vote of confidence in our ability to employ our differentiated technologies to deliver superior images within Pemex’s required timeframes.
“We are pleased with our fourth quarter cash results, having generated a slight positive net cash flow before financing activities. Taking into consideration our stock buybacks from our recently implemented stock repurchase program and debt repayments, we consumed only $3 million in cash. This slight use of cash was a significant improvement from our cash burn earlier in the year and results from our cost reductions taken earlier in the year.
“Looking ahead, we believe that the exploration landscape in 2016, as it impacts our business, will be similar to 2015. As commodity prices continue to decline and as many of our E&P customers have not yet finalized their 2016 budgets, we expect our first quarter to be our weakest, with improvement expected in the back half of the year. We believe our current liquidity, coupled with our cost reduction initiatives, will enable us to continue to weather the storm. We do not expect to see early signs of recovery in the markets we serve until sometime in 2017.”
FOURTH QUARTER 2015
The Company's segment revenues for the fourth quarter were as follows (in thousands):
Three Months Ended December 31, | |||||||||||||
2015 | 2014 | % Change | |||||||||||
Solutions | $ | 63,256 | $ | 80,170 | (21 | )% | |||||||
Systems | 8,536 | 16,469 | (48 | )% | |||||||||
Software | 5,674 | 8,411 | (33 | )% | |||||||||
Ocean Bottom Services | — | 31,790 | — | ||||||||||
Total | $ | 77,466 | $ | 136,840 | (43 | )% | |||||||
Within the Solutions segment, new venture revenues were $13.0 million, a 41% decrease from fourth quarter 2014; data library revenues were $38.4 million, an increase of 6%; and data processing revenues were $11.9 million, a 46% decrease. While all businesses within the Solutions segment continue to be impacted by the slowdown in exploration spending, data library revenues showed improvement year over year due to increased sales of the Company's Latin American data libraries.
The decrease in Systems segment revenues was primarily due to a reduction in new marine positioning system sales and repair and replacement revenues, attributable to reduced activity by seismic contractors that have taken vessels out of service.
The decrease in Software segment revenues was primarily due to lower Orca® licensing revenues. While Software segment revenues declined 33% year over year, the segment generated positive gross and operating margins of 66% and 33%, respectively, during the quarter.
The Company’s Ocean Bottom Services segment was impacted by the OceanGeo crew being idle, resulting in a lack of revenue generation in fourth quarter 2015. OceanGeo is actively pursuing several tenders for long-term work in 2016.
Consolidated gross margins were 29%, compared to adjusted gross margins of 34% in fourth quarter 2014. Operating margins were 0%, compared to adjusted operating margins of 4% in the prior year quarter. The decreases in gross and operating margins were driven by the significant decline in revenues across all business segments. These decreases were partially offset by the Company’s ongoing cost reduction efforts that have taken out approximately $80 million of costs on an annualized basis.
As the Company wrote its investment in INOVA Geophysical down to zero at the end of 2014, it did not record any losses on its share of the joint venture in fourth quarter 2015, compared to its share of losses, including the write-down, of $40.5 million in fourth quarter 2014.
FULL YEAR 2015
The Company's segment revenues for the full year were as follows (in thousands):
Years Ended December 31, | |||||||||||||
2015 | 2014 | % Change | |||||||||||
Solutions | $ | 157,250 | $ | 277,904 | (43 | )% | |||||||
Systems | 36,269 | 88,417 | (59 | )% | |||||||||
Software | 27,994 | 39,993 | (30 | )% | |||||||||
Ocean Bottom Services | — | 103,244 | — | ||||||||||
Total | $ | 221,513 | $ | 509,558 | (57 | )% | |||||||
Within the Solutions segment, new venture revenues were $48.3 million, a 51% decrease from 2014; data library revenues were $63.3 million, a 4% decrease; and data processing revenues were $45.6 million, a 60% decrease. While all businesses within the Solutions segment were impacted by the slowdown in exploration spending, data library revenues remained relatively stable, declining by only 4% year over year.
The decrease in Systems segment revenues was primarily due to a reduction in new marine positioning system sales and repair and replacement revenues, attributable to reduced activity by seismic contractors that have taken vessels out of service.
Software segment revenues were down primarily due to lower Orca licensing revenues and, to a lesser extent, the effects of foreign currency translation. While Software segment revenues declined 30% from 2014, the segment generated positive gross and operating margins of 64% and 35%, respectively, during 2015.
The Company’s Ocean Bottom Services segment was impacted by the OceanGeo crew being idle, resulting in a lack of revenue generation in 2015.
Full year 2015 operating expenses, as adjusted, were $105.4 million, a 28% reduction compared to $146.8 million in 2014. This reduction resulted from the Company's cost reduction efforts throughout 2015.
Consolidated adjusted gross margins were 5%, compared to adjusted gross margins of 34% in 2014. Adjusted operating margins were (42)%, compared to adjusted operating margins of 5% in the prior year. The decreases in gross and operating margins were driven by the significant decline in revenues within the Solutions and Systems segments and, to a lesser extent, the Software segment, and from the lack of revenues generated in the Company’s Ocean Bottom Services segment.
The Company did not recognize any equity losses related to INOVA Geophysical in 2015, compared to equity losses of $49.5 million in 2014.
Income tax expense was $4.0 million for full year 2015, related to income from the Company's non-U.S. businesses. This foreign tax expense has not been offset by the tax benefits on losses within the U.S. and other jurisdictions, from which the Company cannot currently benefit, resulting in an income tax expense on a consolidated pre-tax loss.
CONFERENCE CALL
The Company has scheduled a conference call for Thursday, February 11, 2016, 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 February 25, 2016. To access the replay, dial (877) 660-6853 and use pass code 13628608#.
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 is a leading provider of technology-driven solutions to the global oil & gas industry. ION’s offerings are designed to help companies reduce risk and optimize assets throughout the E&P lifecycle. For more information, visit www.iongeo.com.
Contact
Steve Bate
Executive Vice President and Chief Financial Officer
+1.281.552.3011
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 may include future sales, earnings and market growth, timing of sales, future liquidity and cash levels, future estimated revenues and earnings, sales expected to result from backlog, benefits expected to result from OceanGeo, expected outcome of litigation 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 risks associated with pending and future litigation, including the risk that the Company does not prevail in its appeal of the judgment in the lawsuit with WesternGeco and that the ultimate outcome of the lawsuit could have a material adverse effect on the Company’s financial results and liquidity; the timing and development of the Company’s products and services and market acceptance of the Company’s new and revised product offerings; the performance of OceanGeo; the Company’s level and terms of indebtedness; 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; 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 lines. 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, 2014 and its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed during 2015.
Tables to follow
ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Service revenues | $ | 63,562 | $ | 112,552 | $ | 160,480 | $ | 384,938 | |||||||||
Product revenues | 13,904 | 24,288 | 61,033 | 124,620 | |||||||||||||
Total net revenues | 77,466 | 136,840 | 221,513 | 509,558 | |||||||||||||
Cost of services | 47,582 | 77,930 | 179,816 | 278,627 | |||||||||||||
Cost of products | 6,667 | 20,892 | 33,295 | 68,608 | |||||||||||||
Impairment of multi-client data library | 399 | 100,100 | 399 | 100,100 | |||||||||||||
Gross profit (loss) | 22,818 | (62,082 | ) | 8,003 | 62,223 | ||||||||||||
Operating expenses: | |||||||||||||||||
Research, development and engineering | 4,949 | 10,755 | 26,445 | 41,009 | |||||||||||||
Marketing and sales | 7,118 | 12,072 | 30,493 | 39,682 | |||||||||||||
General, administrative and other operating expenses | 11,131 | 27,843 | 51,697 | 76,177 | |||||||||||||
Impairment of goodwill and intangible assets | — | 23,284 | — | 23,284 | |||||||||||||
Total operating expenses | 23,198 | 73,954 | 108,635 | 180,152 | |||||||||||||
Income (loss) from operations | (380 | ) | (136,036 | ) | (100,632 | ) | (117,929 | ) | |||||||||
Interest expense, net | (4,667 | ) | (4,603 | ) | (18,753 | ) | (19,382 | ) | |||||||||
Equity in losses of investments | — | (40,458 | ) | — | (49,485 | ) | |||||||||||
Other income (expense) | 240 | 5,890 | 98,275 | 79,860 | |||||||||||||
Loss before income taxes | (4,807 | ) | (175,207 | ) | (21,110 | ) | (106,936 | ) | |||||||||
Income tax expense | 447 | 6,321 | 4,044 | 20,582 | |||||||||||||
Net loss | (5,254 | ) | (181,528 | ) | (25,154 | ) | (127,518 | ) | |||||||||
Net (income) loss attributable to noncontrolling interests | (290 | ) | 650 | 32 | (734 | ) | |||||||||||
Net loss attributable to ION | $ | (5,544 | ) | $ | (180,878 | ) | $ | (25,122 | ) | $ | (128,252 | ) | |||||
Net income (loss) per share: | |||||||||||||||||
Basic | $ | (0.51 | ) | $ | (16.51 | ) | $ | (2.29 | ) | $ | (11.72 | ) | |||||
Diluted | $ | (0.51 | ) | $ | (16.51 | ) | $ | (2.29 | ) | $ | (11.72 | ) | |||||
Weighted average number of common shares outstanding: | |||||||||||||||||
Basic | 10,893 | 10,953 | 10,957 | 10,939 | |||||||||||||
Diluted | 10,893 | 10,953 | 10,957 | 10,939 | |||||||||||||
ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, | ||||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 84,933 | $ | 173,608 | ||||
Accounts receivable, net | 44,365 | 114,325 | ||||||
Unbilled receivables | 19,937 | 22,599 | ||||||
Inventories | 32,721 | 51,162 | ||||||
Prepaid expenses and other current assets | 14,807 | 13,662 | ||||||
Total current assets | 196,763 | 375,356 | ||||||
Deferred income tax asset | — | 8,604 | ||||||
Property, plant, equipment and seismic rental equipment, net | 72,027 | 69,840 | ||||||
Multi-client data library, net | 132,237 | 118,669 | ||||||
Goodwill | 26,274 | 27,388 | ||||||
Intangible assets, net | 4,810 | 6,788 | ||||||
Other assets | 6,305 | 10,612 | ||||||
Total assets | $ | 438,416 | $ | 617,257 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 7,912 | $ | 7,649 | ||||
Accounts payable | 29,799 | 36,863 | ||||||
Accrued expenses | 34,287 | 65,264 | ||||||
Accrued multi-client data library royalties | 25,045 | 35,219 | ||||||
Deferred revenue | 6,560 | 8,262 | ||||||
Total current liabilities | 103,603 | 153,257 | ||||||
Long-term debt, net of current maturities | 178,408 | 182,945 | ||||||
Other long-term liabilities | 44,365 | 143,804 | ||||||
Total liabilities | 326,376 | 480,006 | ||||||
Redeemable noncontrolling interest | — | 1,539 | ||||||
Equity: | ||||||||
Common stock | 107 | 110 | ||||||
Additional paid-in capital | 894,715 | 889,284 | ||||||
Accumulated deficit | (759,531 | ) | (734,409 | ) | ||||
Accumulated other comprehensive loss | (14,781 | ) | (12,807 | ) | ||||
Treasury stock | (8,551 | ) | (6,565 | ) | ||||
Total stockholders’ equity | 111,959 | 135,613 | ||||||
Noncontrolling interests | 81 | 99 | ||||||
Total equity | 112,040 | 135,712 | ||||||
Total liabilities and equity | $ | 438,416 | $ | 617,257 | ||||
ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net loss | $ | (5,254 | ) | $ | (181,528 | ) | $ | (25,154 | ) | $ | (127,518 | ) | |||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||||||
Depreciation and amortization (other than multi-client library) | 6,867 | 6,667 | 26,527 | 27,656 | |||||||||||||||
Amortization of multi-client data library | 11,253 | 18,360 | 35,784 | 64,374 | |||||||||||||||
Stock-based compensation expense | 1,312 | 1,649 | 5,486 | 8,707 | |||||||||||||||
Equity in losses of investments | — | 40,458 | — | 49,485 | |||||||||||||||
Gain on sale of Source product line | — | — | — | (6,522 | ) | ||||||||||||||
Gain on sale of cost method investments | — | (5,463 | ) | — | (5,463 | ) | |||||||||||||
Reduction of loss contingency related to legal proceedings | — | — | (101,978 | ) | (69,557 | ) | |||||||||||||
Impairment of goodwill and intangible assets | — | 23,284 | — | 23,284 | |||||||||||||||
Impairment of multi-client data library | 399 | 100,100 | 399 | 100,100 | |||||||||||||||
Write-down of excess and obsolete inventory | 151 | 6,952 | 151 | 6,952 | |||||||||||||||
Write-down of receivables from INOVA Geophysical | — | 5,510 | — | 5,510 | |||||||||||||||
Deferred income taxes | 1,452 | 1,099 | 7,444 | (437 | ) | ||||||||||||||
Change in operating assets and liabilities: | |||||||||||||||||||
Accounts receivable | (22,933 | ) | (29,597 | ) | 69,491 | 41,943 | |||||||||||||
Unbilled receivables | 11,467 | 34,798 | 1,630 | 26,762 | |||||||||||||||
Inventories | 1,787 | (9,620 | ) | 2,251 | (13,892 | ) | |||||||||||||
Accounts payable, accrued expenses and accrued royalties | 13,412 | 26,553 | (30,264 | ) | (4,771 | ) | |||||||||||||
Deferred revenue | 1,005 | (4,229 | ) | (1,571 | ) | (8,382 | ) | ||||||||||||
Other assets and liabilities | (1,446 | ) | 7,811 | (6,720 | ) | 11,549 | |||||||||||||
Net cash provided by (used in) operating activities | 19,472 | 42,804 | (16,524 | ) | 129,780 | ||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Investment in multi-client data library | (17,406 | ) | (10,445 | ) | (45,558 | ) | (67,785 | ) | |||||||||||
Purchase of property, plant, equipment and seismic rental equipment | (1,640 | ) | (1,422 | ) | (19,241 | ) | (8,264 | ) | |||||||||||
Repayment of (net advances to) INOVA Geophysical | — | — | — | 1,000 | |||||||||||||||
Net investment in and advances to OceanGeo B.V. prior to its consolidation | — | — | — | (3,074 | ) | ||||||||||||||
Net proceeds from sale of Source product line | — | — | — | 14,394 | |||||||||||||||
Proceeds from sale of cost method investments | — | 14,051 | — | 14,051 | |||||||||||||||
Other investing activities | 1 | — | 1,263 | 928 | |||||||||||||||
Net cash used in investing activities | (19,045 | ) | 2,184 | (63,536 | ) | (48,750 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Payments under revolving line of credit | — | — | — | (50,000 | ) | ||||||||||||||
Borrowings under revolving line of credit | — | — | — | 15,000 | |||||||||||||||
Repurchase of common stock | (1,989 | ) | — | (1,989 | ) | — | |||||||||||||
Payments on notes payable and long-term debt | (2,021 | ) | (1,261 | ) | (7,452 | ) | (12,998 | ) | |||||||||||
Cost associated with issuance of debt | 1 | (68 | ) | (145 | ) | (2,194 | ) | ||||||||||||
Acquisition of non-controlling interest | — | — | — | (6,000 | ) | ||||||||||||||
Proceeds from employee stock purchases and exercise of stock options | (21 | ) | 154 | 73 | 577 | ||||||||||||||
Other financing activities | — | (359 | ) | — | (359 | ) | |||||||||||||
Net cash used in financing activities | (4,030 | ) | (1,534 | ) | (9,513 | ) | (55,974 | ) | |||||||||||
Effect of change in foreign currency exchange rates on cash and cash equivalents | 297 | 307 | 898 | 496 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | (3,306 | ) | 43,761 | (88,675 | ) | 25,552 | |||||||||||||
Cash and cash equivalents at beginning of period | 88,239 | 129,847 | 173,608 | 148,056 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 84,933 | $ | 173,608 | $ | 84,933 | $ | 173,608 | |||||||||||
ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Net revenues: | |||||||||||||||||
Solutions: | |||||||||||||||||
New Venture | $ | 12,979 | $ | 22,150 | $ | 48,294 | $ | 98,649 | |||||||||
Data Library | 38,378 | 36,076 | 63,326 | 66,180 | |||||||||||||
Total multi-client revenues | 51,357 | 58,226 | 111,620 | 164,829 | |||||||||||||
Data Processing | 11,899 | 21,944 | 45,630 | 113,075 | |||||||||||||
Total | 63,256 | 80,170 | 157,250 | 277,904 | |||||||||||||
Systems: | |||||||||||||||||
Towed Streamer | 2,743 | 8,213 | 15,016 | 43,995 | |||||||||||||
Other | 5,793 | 8,256 | 21,253 | 44,422 | |||||||||||||
Total | 8,536 | 16,469 | 36,269 | 88,417 | |||||||||||||
Software: | |||||||||||||||||
Software Systems | 5,368 | 7,819 | 24,764 | 36,203 | |||||||||||||
Services | 306 | 592 | 3,230 | 3,790 | |||||||||||||
Total | 5,674 | 8,411 | 27,994 | 39,993 | |||||||||||||
Ocean Bottom Services | — | 31,790 | — | 103,244 | |||||||||||||
Total | $ | 77,466 | $ | 136,840 | $ | 221,513 | $ | 509,558 | |||||||||
Gross profit (loss): | |||||||||||||||||
Solutions | $ | 20,462 | $ | (75,552 | ) | $ | 13,508 | $ | (24,345 | ) | |||||||
Systems | 3,404 | (1,459 | ) | 10,829 | 29,829 | ||||||||||||
Software | 3,740 | 5,447 | 17,937 | 28,835 | |||||||||||||
Ocean Bottom Services | (4,788 | ) | 9,482 | (34,271 | ) | 27,904 | |||||||||||
Total | $ | 22,818 | $ | (62,082 | ) | $ | 8,003 | $ | 62,223 | ||||||||
Gross margin: | |||||||||||||||||
Solutions | 32 | % | (94 | )% | 9 | % | (9 | )% | |||||||||
Systems | 40 | % | (9 | )% | 30 | % | 34 | % | |||||||||
Software | 66 | % | 65 | % | 64 | % | 72 | % | |||||||||
Ocean Bottom Services | — | % | 30 | % | — | % | 27 | % | |||||||||
Total | 29 | % | (45 | )% | 4 | % | 12 | % | |||||||||
Income (loss) from operations: | |||||||||||||||||
Solutions | $ | 11,850 | $ | (92,386 | ) | $ | (28,916 | ) | $ | (80,653 | ) | ||||||
Systems | (75 | ) | (33,356 | ) | (2,735 | ) | (23,521 | ) | |||||||||
Software | 1,874 | 3,227 | 9,748 | 20,212 | |||||||||||||
Ocean Bottom Services | (5,900 | ) | 6,737 | (40,756 | ) | 19,070 | |||||||||||
Corporate and other | (8,129 | ) | (20,258 | ) | (37,973 | ) | (53,037 | ) | |||||||||
Total | $ | (380 | ) | $ | (136,036 | ) | $ | (100,632 | ) | $ | (117,929 | ) | |||||
Operating margin: | |||||||||||||||||
Solutions | 19 | % | (115 | )% | (18 | )% | (29 | )% | |||||||||
Systems | (1 | )% | (203 | )% | (8 | )% | (27 | )% | |||||||||
Software | 33 | % | 38 | % | 35 | % | 51 | % | |||||||||
Ocean Bottom Services | — | % | 21 | % | — | % | 18 | % | |||||||||
Corporate and other | (10 | )% | (15 | )% | (17 | )% | (10 | )% | |||||||||
Total | — | % | (99 | )% | (45 | )% | (23 | )% | |||||||||
Reconciliation of Adjusted EBITDA to Net Loss
(Non-GAAP Measure)
(In thousands)
(Unaudited)
The term Adjusted EBITDA represents net income (loss) before interest expense, interest income, income taxes, depreciation and amortization, gains on sale of cost method investments and the Source product line, and other non-cash charges including, without limitation, equity in losses of investments, reduction of loss contingency related to legal proceedings and the impairment and write-down of assets. 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 useful information regarding our ability to service debt and to fund capital expenditures and 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.
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss | $ | (5,254 | ) | $ | (181,528 | ) | $ | (25,154 | ) | $ | (127,518 | ) | ||||||
Interest expense, net | 4,667 | 4,603 | 18,753 | 19,382 | ||||||||||||||
Income tax expense | 447 | 6,321 | 4,044 | 20,582 | ||||||||||||||
Depreciation and amortization expense | 18,120 | 25,027 | 62,311 | 92,030 | ||||||||||||||
Equity in losses of investments | — | 40,458 | — | 49,485 | ||||||||||||||
Reduction of loss contingency related to legal proceedings | — | — | (101,978 | ) | (69,557 | ) | ||||||||||||
Write-down of multi-client data library | 399 | 100,100 | 399 | 100,100 | ||||||||||||||
Impairment of goodwill and intangible assets | — | 23,284 | — | 23,284 | ||||||||||||||
Write-down of receivables from INOVA Geophysical | — | 5,510 | — | 5,510 | ||||||||||||||
Write-down of excess and obsolete inventory | — | 6,952 | — | 6,952 | ||||||||||||||
Gain on sale of cost method investments | — | (5,463 | ) | — | (5,463 | ) | ||||||||||||
Gain on sale of Source product line | — | — | — | (6,522 | ) | |||||||||||||
Adjusted EBITDA | $ | 18,379 | $ | 25,264 | $ | (41,625 | ) | $ | 108,265 | |||||||||
Reconciliation of Restructuring and Special Items to Diluted Earnings 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 income (loss) from operations or net income (loss) excluding 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 table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the twelve months ended December 31, 2015 and the three and twelve months ended December 31, 2014.
Twelve Months Ended December 31, 2015 | |||||||||||||||||||||||||||
Restructuring and Special Items by Segment | |||||||||||||||||||||||||||
As Reported | Solutions(a) | Software(a) | Systems(a) | Corporate and Other | As Adjusted | ||||||||||||||||||||||
Net revenues | $ | 221,513 | $ | — | $ | — | $ | — | $ | — | $ | 221,513 | |||||||||||||||
Cost of sales | 213,510 | (3,193 | ) | (225 | ) | (311 | ) | (252 | ) | (a) | 209,529 | ||||||||||||||||
Gross profit | 8,003 | 3,193 | 225 | 311 | 252 | 11,984 | |||||||||||||||||||||
Operating expenses | 108,635 | (1,102 | ) | (223 | ) | (1,031 | ) | (877 | ) | (a) | 105,402 | ||||||||||||||||
Income (loss) from operations | (100,632 | ) | 4,295 | 448 | 1,342 | 1,129 | (93,418 | ) | |||||||||||||||||||
Operating margin | (45 | )% | (42 | )% | |||||||||||||||||||||||
Interest expense, net | (18,753 | ) | — | — | — | — | (18,753 | ) | |||||||||||||||||||
Other income (expense), net | 98,275 | — | — | — | (100,360 | ) | (b) | (2,085 | ) | ||||||||||||||||||
Income tax expense | 4,044 | — | — | — | 269 | (c) | 4,313 | ||||||||||||||||||||
Net income (loss) | (25,154 | ) | 4,295 | 448 | 1,342 | (99,500 | ) | (118,569 | ) | ||||||||||||||||||
Net income attributable to noncontrolling interests | 32 | — | — | — | (172 | ) | (140 | ) | |||||||||||||||||||
Net income (loss) applicable to common shares | $ | (25,122 | ) | $ | 4,295 | $ | 448 | $ | 1,342 | $ | (99,672 | ) | $ | (118,709 | ) | ||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||||||
Basic | $ | (2.29 | ) | $ | (10.83 | ) | |||||||||||||||||||||
Diluted | $ | (2.29 | ) | $ | (10.83 | ) | |||||||||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||||||||
Basic | 10,957 | 10,957 | |||||||||||||||||||||||||
Diluted | 10,957 | 10,957 | |||||||||||||||||||||||||
(a) | Represents severance and facility charges related to the Company's restructurings. | |||
(b) | Primarily represents an additional partial reduction in the WesternGeco legal contingency. | |||
(c) | As the Company maintains a valuation allowance for substantially all its deferred tax assets, a majority of these special items have no associated net tax effect. | |||
Three Months Ended December 31, 2014 | |||||||||||||||||||||||||||
Restructuring and Special Items by Segment | |||||||||||||||||||||||||||
As Reported | Solutions(1) | Systems(2) | Software(3) | Corporate and Other | As Adjusted | ||||||||||||||||||||||
Net revenues | $ | 136,840 | $ | — | $ | — | $ | — | $ | — | $ | 136,840 | |||||||||||||||
Cost of sales | 198,922 | (100,825 | ) | (7,580 | ) | (137 | ) | — | 90,380 | ||||||||||||||||||
Gross profit (loss) | (62,082 | ) | 100,825 | 7,580 | 137 | — | 46,460 | ||||||||||||||||||||
Operating expenses | 73,954 | (1,915 | ) | (24,912 | ) | (86 | ) | (6,487 | ) | (4) | 40,554 | ||||||||||||||||
Income (loss) from operations | (136,036 | ) | 102,740 | 32,492 | 223 | 6,487 | 5,906 | ||||||||||||||||||||
Operating margin | (99 | )% | 4 | % | |||||||||||||||||||||||
Interest expense, net | (4,603 | ) | — | — | — | — | (4,603 | ) | |||||||||||||||||||
Equity in losses of investments | (40,458 | ) | — | — | — | 34,199 | (5) | (6,259 | ) | ||||||||||||||||||
Other income (expense), net | 5,890 | — | — | — | (5,463 | ) | (6) | 427 | |||||||||||||||||||
Income tax expense | 6,321 | 283 | — | 26 | — | 6,630 | |||||||||||||||||||||
Net income (loss) | (181,528 | ) | 102,457 | 32,492 | 197 | 35,223 | (11,159 | ) | |||||||||||||||||||
Net loss attributable to noncontrolling interests | 650 | (504 | ) | — | — | — | 146 | ||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (180,878 | ) | $ | 101,953 | $ | 32,492 | $ | 197 | $ | 35,223 | $ | (11,013 | ) | |||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||||||
Basic | $ | (16.51 | ) | $ | (1.01 | ) | |||||||||||||||||||||
Diluted | $ | (16.51 | ) | $ | (1.01 | ) | |||||||||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||||||||
Basic | 10,953 | 10,953 | |||||||||||||||||||||||||
Diluted | 10,953 | 10,953 | |||||||||||||||||||||||||
(1) | Primarily relates to the write-down of the multi-client data library, in addition to the impairment of intangible assets and severance-related charges within the Solutions segment. | |||
(2) | Primarily relates to the write-down of goodwill, in addition to inventory write-downs, bad debt and severance-related charges within the Systems segment. | |||
(3) | Represents severance-related charges within the Software segment. | |||
(4) | Represents the write-down of receivables due from INOVA Geophysical, in addition to severance-related charges. | |||
(5) | Represents the full write-down of Company's equity method investment in INOVA Geophysical of $30.7 million, in addition to the Company's share of charges related excess and obsolete inventory and customer bad debts of $3.5 million. | |||
(6) | Represents a non-recurring gain on sale of a cost method investment. | |||
Twelve Months Ended December 31, 2014 | |||||||||||||||||||||||||||
Restructuring and Special Items by Segment | |||||||||||||||||||||||||||
As Reported | Solutions(a) | Systems(a) | Software(a) | Corporate and Other | As Adjusted | ||||||||||||||||||||||
Net revenues | $ | 509,558 | $ | — | $ | — | $ | — | $ | — | $ | 509,558 | |||||||||||||||
Cost of sales | 447,335 | (100,825 | ) | (7,580 | ) | (137 | ) | — | 338,793 | ||||||||||||||||||
Gross profit | 62,223 | 100,825 | 7,580 | 137 | — | 170,765 | |||||||||||||||||||||
Operating expenses | 180,152 | (1,915 | ) | (24,912 | ) | (86 | ) | (6,487 | ) | (a) | 146,752 | ||||||||||||||||
Income (loss) from operations | (117,929 | ) | 102,740 | 32,492 | 223 | 6,487 | 24,013 | ||||||||||||||||||||
Operating margin | (23 | )% | 5 | % | |||||||||||||||||||||||
Interest expense, net | (19,382 | ) | — | — | — | — | (19,382 | ) | |||||||||||||||||||
Equity in losses of investments | (49,485 | ) | — | — | — | 34,199 | (a) | (15,286 | ) | ||||||||||||||||||
Other income (expense), net | 79,860 | — | (6,522 | ) | — | (75,020 | ) | (b) | (1,682 | ) | |||||||||||||||||
Income tax expense | 20,582 | 283 | (357 | ) | 26 | — | 20,534 | ||||||||||||||||||||
Net income (loss) | (127,518 | ) | 102,457 | 26,327 | 197 | (34,334 | ) | (32,871 | ) | ||||||||||||||||||
Net income attributable to noncontrolling interests | (734 | ) | (504 | ) | — | — | — | (1,238 | ) | ||||||||||||||||||
Net income (loss) applicable to common shares | $ | (128,252 | ) | $ | 101,953 | $ | 26,327 | $ | 197 | $ | (34,334 | ) | $ | (34,109 | ) | ||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||||||
Basic | $ | (11.72 | ) | $ | (3.12 | ) | |||||||||||||||||||||
Diluted | $ | (11.72 | ) | $ | (3.12 | ) | |||||||||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||||||||
Basic | 10,939 | 10,939 | |||||||||||||||||||||||||
Diluted | 10,939 | 10,939 | |||||||||||||||||||||||||
(a) | Relates to the restructuring and special items impacting the fourth quarter 2014. See the notes for the three months ended December 31, 2014 for description of these restructuring and special items. | |||
(b) | In addition to the sale of a cost method investment of $5.5 million in the fourth quarter 2014, the Company's first quarter results were impacted by a reduction in the WesternGeco legal contingency by $69.6 million and in the second quarter a non-recurring gain on the sale of the marine source product line of $6.5 million (before tax). | |||
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