ENP Newswire - 02 May 2014
Release date- 01052014 - HOUSTON - ION Geophysical Corporation (NYSE: IO) today reported first quarter 2014 net income, as adjusted of $6.4 million or $0.04 per diluted share, on revenues of $144.7 million, compared to net income of $1.5 million or $0.01 per diluted share, on revenues of $129.7 million in first quarter 2013.
The following is a summary of the Company's first quarter 2014 financial highlights:
Consolidated revenues increased 12% compared to first quarter 2013.
The Company consolidated OceanGeo, reporting it under the Ocean Bottom Services segment. First quarter results included the revenues of OceanGeo for February and March, which included $20.6 million of revenue for work performed on a five-month project in Trinidad.
Within the Solutions segment, the Company signed the single largest data processing contract in its history, which contributed $15 million to first quarter data processing revenues from work performed in 2013.
The Software segment recorded the largest first quarter revenue in the Company's history.
Consolidated gross margins were 39%, compared to 27% in first quarter 2013, and operating margins were 14%, compared to 1% in first quarter 2013.
Cash and cash equivalents were $197.3 million, and the Company had $125.0 million available under its $175.0 million credit facility, resulting in a first quarter increase in total liquidity of $34.2 million to $322.3 million at March 31, 2014.
Brian Hanson, ION's President and Chief Executive Officer, commented, 'We are pleased with our first quarter financial results and significant free cash generation, as well as our progress in improving operations and accelerating development and commercial acceptance of our strategic technologies.
'We are also pleased with the recent court developments in our ongoing lawsuit with WesternGeco. This order reduces the total damages to $123.8 million, resulting in a partial reversal of our prior reserve of approximately $70 million. We believe this development contains our potential liability to a more reasonable amount, and allows us to put this behind us as we await the next steps through the appeal process.
'In our Solutions segment we signed the largest data processing contract in our history. Executing this customer agreement allowed us to recognize revenue from work completed for one of our largest customers, most of which we performed in 2013.
'Also during the first quarter, our Solutions group initiated a proprietary project off the coast of Antarctica, extending our Arctic solution for under ice acquisition down to the south regions. We started and completed the acquisition phase of the project during the quarter and are now processing the data.
'We are pleased to report that during the first quarter, OceanGeo made substantial progress on their five-month survey offshore Trinidad. We deployed and tested Calypso, our new ocean bottom cable system, during this survey and were pleased with the system's geophysical performance and the data acquired. Beyond this survey, we continue working to help OceanGeo build a pipeline of projects and gain new awards.
'Overall, our first quarter was a good start to the year, though our forward outlook is cautious pending more clarity around seismic spending and the willingness of clients to fund multi-client programs. We continue to manage the business to maximize cash generation, and the first quarter was a solid start towards that goal.'
FIRST QUARTER 2014
Solutions segment revenues were $89.2 million, up slightly from first quarter 2013. Data processing revenues were$43.3 million, an increase of 38% over first quarter 2013. Data library revenues were $13.2 million, an increase of 40%, while new venture revenues were $32.7 million, a decrease of 32%, as the first quarter of 2013 included revenues from a large proprietary 3D marine program offshore Morocco.
Systems segment sales were $24.8 million, a decrease of 22%, reflecting a lack of ocean bottom cable system revenues in 2014. This decline was partially offset by an increase in repair and replacement marine positioning equipment revenues.
Software segment sales were a record first quarter at $10.0 million, an increase of 15% over first quarter 2013, primarily the result of increases in Orca and Gator licensing revenues.
The first quarter increase in gross and operating margins was driven primarily by four factors:
reduced expenses from the Company's restructuring of its Systems segment in 2013;
the recognition of data processing revenues following execution of a significant customer contract;
higher margins on the mix of new venture programs in the Solutions segment and
the consolidation of OceanGeo during first quarter 2014.
The Company's operating margins in the first quarters of 2014 and 2013 were impacted by approximately $3 million of bad debt expenses related to customer bankruptcies.
Prior to the consolidation of OceanGeo in February, the Company recorded $0.7 million of equity earnings compared to equity losses of $0.7 million in first quarter 2013. Also, the Company recognized $2.4 million of equity losses related to INOVA Geophysical compared to equity earnings of $1.9 million in first quarter 2013.
The Company's interest expense was $4.8 million, compared to $1.1 million in first quarter 2013. The increase in interest expense was primarily related to the Company's issuance of $175 million of 8.125% Senior Secured Second Priority Notes in May 2013, compared to borrowings under the Company's revolver in 2013.
The Company's effective tax rate was 6.4%, compared to 40.0% in first quarter 2013. The Company's effective tax rate was impacted by the large one time gain from the reduction of the loss contingency related to the WesternGeco legal proceeding.
Greg Heinlein, ION's Senior Vice President and Chief Financial Officer, commented, 'We continue to remain cautious in our expectations for 2014, with much of our focus on securing more work for OceanGeo. We currently expect investment in our data library for the year to be in the range of $90 million to $110 million. As the year progresses, we expect our effective tax rate to normalize in the 22% - 25% range. We remain focused on managing the business with an eye to driving shareholder value and increased cash generation during 2014.'
The Company has scheduled a conference call for Thursday, May 1, 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 888-549-7750 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 May 15, 2014. To access the replay, dial 800-406-7325 and use pass code 4678925#.
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 and Chief Financial Officer
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 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 pending and future litigation, including the risk that an unfavorable judgment in the lawsuit brought by WesternGeco 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 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, 2013 and its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed during 2014.