ENP Newswire - 14 February 2014
Release date- 13022014 - HOUSTON - ION Geophysical Corporation (NYSE: IO) today reported record quarterly revenues of $218.7 million for fourth quarter 2013, an increase of 26% from revenues of $173.1 million in fourth quarter 2012.
Income from operations, also a quarterly record, was $64.2 million, compared to $24.9 million in fourth quarter 2012. Fourth quarter 2013 net income was $19.8 million, or $0.12 per diluted share, compared to net income of $26.8 million, or $0.17 per diluted share, in fourth quarter 2012. Fourth quarter 2013 net income was impacted by the Company's share of restructuring and special items from its INOVA Geophysical joint venture, as well as losses incurred by the OceanGeo joint venture.
Excluding the impact of the restructuring and special items, net income was $53.4 million, or $0.33 per diluted share, in fourth quarter 2013. Adjusted EBITDA increased 67% to$104.5 million, compared to $62.7 million in fourth quarter 2012.
For full year 2013, ION reported a 4% increase in revenues to $549.2 million, compared to $526.3 million in 2012. Including all reserves and other adjustments taken earlier in the year, 2013 reported net income was a loss of $251.9 million, or $(1.59) per share, compared to net income of $62.0 million, or $0.39 per diluted share in 2012. Excluding restructuring and special items, 2013 full-year net income was $19.3 million, or $0.12 per diluted share.
Brian Hanson, the Company's President and Chief Executive Officer, commented, 'We are pleased with the results we delivered in the fourth quarter. The first nine months of the year were challenging, as the first two quarters were impacted by cost overruns on a 3D marine program, and during the third quarter we experienced cautious spending by our E&P customers.
However, our customers saw value in our library as our Solutions segment had a record quarter for data library sales, up 131% over fourth quarter 2012. This increase was seen across the broad portfolio of our data library, particularly in areas offshore East and West Africa, East and West India, and the Gulf of Mexico. Also, a significant portion of our fourth quarter data library sales were to new customers, a further testament to the value of our data library portfolio.
'Our data processing business had solid revenues in 2013, up 4% from 2012. This increase was driven by strong demand in Europe, the Middle East and the Gulf of Mexico, as well as continued demand for our broadband processing solution, WiB and, which we introduced in 2012. During 2013, we were awarded and performed a substantial amount of data processing work with a national oil company, but to date, we were not able to recognize revenues for the work as the customer contract was not signed until February 2014. Now that this contract has been executed, our first quarter 2014 results will benefit from the $14 million to $16 million of work performed during 2013.
'Our Software business experienced a year-over-year decline in revenues of 9% due to customer consolidations but finished the year strong with a record fourth quarter, which was our second best quarter ever in terms of revenues and operating income, driven by increased Orca software and hardware sales.
'Our Systems business revenues declined 7% in 2013, primarily due to a decline in revenues associated with new positioning system sales, partially offset by an increase in repair and replacement systems. In the fourth quarter we recorded higher operating margins, as we begin to benefit from our third quarter restructuring. As a result of our restructuring efforts, we have improved operating margins in our Systems segment by approximately 8 to 10 percentage points.
'Our fourth quarter earnings were impacted by restructuring efforts within our INOVA Geophysical joint venture, as well as losses incurred as a result of our taking a larger ownership interest in OceanGeo. INOVA's restructuring plan was initiated in the third quarter, but because we report our share of their results on a one-quarter lag basis, these charges impacted our fourth quarter results. INOVA's restructuring has reduced their annual operating costs by approximately$12 million, and we will share in 49% of those savings.
'As we announced in late January, we have taken a 70% controlling stake in OceanGeo, our ocean bottom joint venture. Because of our increasing influence to the joint venture during the fourth quarter, we recognized 70% of OceanGeo's losses, even though our formal ownership and control did not become effective until January. Our focus remains on building a project pipeline and gaining new awards for OceanGeo beyond the Trinidad project they are currently working.
'We generated $25 million in incremental cash flow during the fourth quarter, excluding draws under our revolver. As we look to 2014, we expect progress strengthening our balance sheet as we continue to invest in key new technologies, and as we manage operations and new venture programs for cash flow generation in 2014. Industry analysts believe there will be a modest overall increase in E&P spending compared to 2013, and we expect this increase will likely occur in the back half of 2014, similar to 2013.'
FOURTH QUARTER 2013
Total revenues increased 26% to $218.7 million, compared to $173.1 million in fourth quarter 2012. Solutions and Software segment revenues increased 37% and 13%, respectively, while Systems segment revenues declined by 2%.
Solutions segment revenues increased to $166.1 million, compared to $121.1 million in fourth quarter 2012. This improved performance resulted from record quarterly data library revenues, which increased 131% from fourth quarter 2012. New venture revenues increased 9%, while data processing revenues declined 9%, compared to fourth quarter 2012. Data processing revenues were down due to approximately $6.0 million of unrecorded revenues for work performed during the fourth quarter in anticipation of the final customer contract that was executed in February 2014.
Software segment sales increased to $12.1 million from $10.7 million in fourth quarter 2012, due to increased licensing revenues and hardware sales from the Company's Orca software. Fourth quarter 2013 Software revenues were a fourth quarter record and the second highest of any quarter in the segment's history.
Systems segment sales decreased slightly to $40.5 million from $41.4 million in fourth quarter 2012. Fourth quarter 2012 included approximately $10.0 million of revenues attributed to a large DigiSTREAMER system sale. However, the lack of a large streamer system sale in fourth quarter 2013 was largely offset by increased revenues from traditional positioning and repair businesses as well as increased sales of land geophones.
Excluding the impact of restructuring and special items, consolidated gross margins were 47%, compared to 43% in fourth quarter 2012, and operating margins were 30%, compared to 22% in the earlier period. The increase in gross and operating margins was driven primarily by the increase in data library sales within the Solutions segment.
The Company's equity investments as of the fourth quarter include its 49% interest in INOVA Geophysical and its interest in OceanGeo, which increased from 30% to 70% in January 2014. During the fourth quarter, the Company recognized losses on its INOVA equity investment of $19.4 million. INOVA's results were impacted by its restructuring plan initiated in the third quarter 2013.
Excluding the impact of these restructuring charges, the Company's share of INOVA's third quarter results would have been a loss of $0.7 million, compared to a loss of $4.3 million for the prior year period. INOVA's improved results, excluding restructuring and special items, were due to a 62% increase in sales, primarily attributable to increased cabled systems and vibrator truck sales. Also, during fourth quarter 2013, the Company recognized losses on its OceanGeo joint venture of $12.4 million.
The Company's effective tax rate for the fourth quarter was 24%, compared to 27% in fourth quarter 2012. The change in the fourth quarter effective tax rate resulted primarily from establishment of a deferred tax valuation allowance in third quarter 2013.
At December 31, 2013, the Company had $140.0 million of capacity available under its $175.0 million credit facility, and the Company's total cash and cash equivalents were $148.1 million, for total liquidity of $288.1 million.
Adjusted EBITDA for the fourth quarter increased 67% to $104.5 million, compared to $62.7 million reported in fourth quarter 2012.
FULL YEAR 2013
Total revenues increased 4% to $549.2 million, compared to $526.3 million in 2012. Solutions segment revenues increased 10% to $387.4 million, primarily due to strong fourth quarter data library sales. Data library sales increased by 27% over the prior year, while new venture and data processing revenues increased 5% and 4%, respectively, compared to 2012.
Systems segment revenues decreased by 7%, compared to 2012, primarily due to a decline in revenues associated with new positioning and streamer system sales, which was partially offset by an increase in repair and replacement systems. Software segment revenues decreased 9% due to a decline in Orca and Gator revenues associated with customer consolidation.
Excluding the impact of restructuring and special items, consolidated gross margins decreased to 35%, compared to 41% in 2012, and operating margins were 11%, compared to 17% in 2012. The decreases in gross and operating margins were primarily due to Solutions segment cost overruns incurred during the first half of 2013 on a 3D marine program and from costs incurred on data processing work performed in 2013 for which revenue was not recognized in 2013. These decreases were partially offset by the increase in fourth quarter data library sales.
For 2013, the Company recognized losses on its INOVA equity investment of $22.5 million, or a loss of $3.7 million after adjusting for restructuring and special items, compared to earnings of $0.3 million for 2012. This decline was primarily due to the mix of product revenues between the periods, with revenues decreasing by 3%. Additionally, the Company recorded losses on its OceanGeo equity investment of $19.8 million.
Including the restructuring and special items, the Company reported a 2013 net loss of $251.9 million, or $(1.59) per share. Excluding the restructuring and special items, the Company reported 2013 net income of $19.3 million, or $0.12per diluted share, compared to net income of $62.0 million, or $0.39 per diluted share, in 2012.
Greg Heinlein, the Company's Chief Financial Officer, commented, 'We had a strong finish in 2013, with every part of our business contributing. Our data library continues to focus on the right places of the world where exploration spending is occurring. While not always consistent, we believe this quarter demonstrates that we remain well positioned for future licensing rounds.
We continue to be very customer-focused, supporting over 15 new customers this quarter, as well as assisting large national oil companies as they secure final signatures and funding for the next round of contracts. Our outlook for 2014 remains cautious until we see clarity in E&P spending between exploration and production. However, we continue to manage the business with some of the best people in the industry with an eye on driving shareholder value and increased cash generation during 2014.'
The Company has scheduled a conference call for Thursday, February 13, 2014, 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 (800) 762-8908 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 27, 2014. To access the replay, dial (800) 406-7325 and use pass code 4665602#.
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.
ION Geophysical Corporation is a leading provider of geophysical technology, services, and solutions for the global oil & gas industry. ION's offerings are designed to allow E&P companies to obtain higher resolution images of the subsurface to reduce the risk of exploration and reservoir development, and to enable seismic contractors to acquire geophysical data safely and efficiently.
Additional information about ION is available at www.iongeo.com
Senior Vice President
ION Geophysical Corporation
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 statements of 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 the INOVA Geophysical and OceanGeo joint ventures and related transactions, 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 litigation, including the risk that an unfavorable judgment in the lawsuit brought by WesternGeco could have a materially adverse effect on our 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 operation of the INOVA Geophysical and OceanGeo joint ventures; 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, 2012 and its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed during 2013.