Nov. 4, 2009 (PR Newswire) -- In the news release, ION Reports Third Quarter 2009 Results, issued 04-Nov-2009 by ION Geophysical Corporation over PR Newswire, we are advised by the company that the phone number in the sixteenth paragraph, second sentence, should read "480-629-9692" rather than "480-248-5085" and the pass code in the last sentence of the sixteenth paragraph should read "4175137#" rather than "4118276#" as originally issued inadvertently. The complete, corrected release follows:
ION Reports Third Quarter 2009 Results
HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- ION Geophysical Corporation (NYSE: IO) today reported third quarter 2009 revenues of $102.4 million, resulting in a net loss of ($6.8 million), or ($0.06) per share. In the third quarter of 2008, ION's net income was $24.9 million, or $0.25 per diluted share, on revenues of $218.5 million.
Bob Peebler, ION's Chief Executive Officer, said, "Our third quarter operating results reflect the continuing impact of the economic downturn in several of our markets, especially in North America and Russia. We remain affected by the substantial cuts in capital expenditures for exploration and production by international oil and gas companies and the cautious approach taken by many of our contractor customers resulting from the uncertain economic environment and volatile commodity prices. Even though we expect the fourth quarter to continue to be challenging, we do believe the market has bottomed and, with stronger than expected oil prices, we are starting to see some early indications of strengthening markets for 2010 and the possibility of some incremental year-end spending by oil companies. Our recently announced BGP joint venture will allow us to enter 2010 in a much better position than last year with much lower debt and associated expenses and the strong probability of increasing land sales to both BGP and the remainder of our served markets.
"Also, despite the decreases in our revenues, our gross margins increased over prior year for the second consecutive quarter. In the third quarter of 2009, our gross margins were 34% compared to 33% both in the preceding quarter and in last year's third quarter, primarily as a result of improved product sales mix mainly in our Marine Imaging Systems and ION Solutions divisions.
"Our Marine division generated better results sequentially, and our data processing unit experienced another excellent quarter. We continue to benefit from our data processing technology leadership and our oil company customers are starting to reprocess enormous amounts of high end data that has been collected over the last few years. However, the performance of our Land Imaging Systems division continues to be adversely affected by weakness in the land seismic markets, primarily in North America and Russia."
THIRD QUARTER 2009
Total revenues in the third quarter of 2009 decreased 53% to $102.4 million compared to $218.5 million a year ago. While all of the Company's segments experienced quarter-over-quarter revenue declines, the ION Solutions and Marine Imaging Systems divisions showed sequential improvement.
During the third quarter of 2009, the ION Systems group generated sales of $52.2 million compared to $141.0 million in the same period in 2008. Marine Imaging Systems' revenues decreased to $29.4 million compared to $49.0 million a year ago, mainly due to the decrease in VectorSeis® Ocean system sales compared to last year. Market demand for DigiFIN(TM) remained strong during the third quarter as customers continue to retrofit their existing fleets with the latest streamer control technology. Land Imaging Systems' revenues decreased to $15.2 million compared to $81.6 million in the third quarter of 2008. Despite the inclusion of ARAM's operating results, the division continues to be adversely impacted by the continuing economic recession, depressed credit markets and general weakness in most land seismic markets, which resulted in dramatically reduced sales of systems, geophones and vibroseis trucks in North America and Russia. Data Management Solutions' revenues decreased to $7.6 million for the second quarter compared to $10.4 million a year ago, due mainly to lower software sales of SPECTRA® and GATOR® compared to last year, which was partially offset by increased sales of ORCA®.
The ION Solutions group generated $50.2 million in revenues compared to $77.5 million in the same period a year ago. The decrease was primarily driven by lower multi-client data library and new venture program sales, partially offset by continued strong data processing revenues.
Consolidated gross margins for the third quarter of 2009 increased to 34% from 33% in the third quarter of 2008, primarily due to favorable product mix in both the Marine Imaging Systems and the ION Solutions groups. This improvement in margins was achieved despite lower gross margins in the remaining business units and the increased restructuring charges related to headcount reduction and the increased amortization charges related to the September 2008 ARAM acquisition.
Operating expenses as a percentage of revenues for the third quarter of 2009 increased to 35% compared to 19% in the prior year period. General and administrative expenses as a percentage of revenues for the third quarter of 2009 increased to 17.1% compared to 7.1% in the prior period. General and administrative expenses for the third quarter of 2009 included additional stock-based compensation expense of $1.2 million related to a change in estimate of anticipated forfeitures. The increases in operating expenses as a percentage of revenues were driven entirely by lower revenue as these expenses overall decreased year over year. Adjusted EBITDA (net income (loss) before net interest expense, taxes, depreciation and amortization and impairment of intangible assets) for the third quarter decreased to $27.5 million compared to $69.4 million in the third quarter of 2008. A reconciliation of Adjusted EBITDA to reported earnings can be found in the financial tables of this press release.
YEAR-TO-DATE 2009
The Company will be amending its Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 to reflect a restatement of its unaudited consolidated financial statements as of and for the three and six months ended June 30, 2009. The restatement was necessitated due to an error in revenue recognition of certain product revenues in connection with a delivery of a FireFly® land seismic data acquisition system and related hardware and components to a customer in China. The Company had originally recorded the sale for the second quarter of 2009. The error resulted from the fact that the sales records in the possession of the Company's management at June 30, 2009 did not contain all relevant documentation relating to the sale. Upon receipt by the Company's management of all documentation related to the sale, the Company concluded that it should not have recognized the revenues from the sale. The customer has confirmed that it has accepted the delivered system in the second quarter and that they will pay for the system in full by the end of the year, at which time the Company will recognize the sale. The following discussion of results of operations for the first nine months of 2009 includes the impact of the restatement described above.
Consolidated revenues for the first nine months of 2009 decreased 45% to $298.5 million compared to $539.4 million for the same period in 2008. Revenues decreased across all segments due to continued volatility in commodity prices, continued tightening of credit markets and continued decline in seismic activity in the North American and Russian markets. Notwithstanding the significant decrease in revenues, gross margin for the first nine months of 2009 and 2008 remained stable at 33%. Strong margin improvements in the Marine Imaging Systems segment were partially offset by lower gross margin percentages in the Land Imaging Systems segment. Gross margin percentages for the ION Solutions and the Data Management Solutions segments remained stable.
The results of operations for the nine months ended September 30, 2009 include three charges that were not duplicated in 2008. The first is the first quarter impairment of intangible assets of $38.0 million. The second relates to an out-of-period adjustment of $3.3 million related to adjustments between our estimated and actual forfeitures of stock-based compensation awards, and the final adjustment is the year-to-date restructuring charges from the 2009 headcount reductions of $2.6 million. A reconciliation of these three charges can be found in a table at the end of this press release. Excluding these charges, operating expenses as a percentage of revenues for the first nine months of 2009 increased to 37% compared to 22% in the prior year period, solely as a result of lower revenues. Excluding the above items, total operating expenses for the first nine months of 2009 decreased by $8.4 million when compared with 2008, which did not include the costs related to the ARAM business. Additionally, total operating expenses for 2009 included an additional $2.8 million of bad debt expense.
