ION GEOPHYSICAL CORP - FORM 10-Q

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EX-31.1 - EXHIBIT 31.1 CEO SECTION 302 CERTIFICATION - ION GEOPHYSICAL CORP	ex311ceosec302cert06302015.htm
EX-32.1 - EXHIBIT 32.1 CEO SECTION 906 CERTIFICATION - ION GEOPHYSICAL CORP	ex321ceosec906cert06302015.htm
EX-32.2 - EXHIBIT 32.2 CFO SECTION 906 CERTIFICATION - ION GEOPHYSICAL CORP	ex322cfosec906cert06302015.htm
EX-31.2 - EXHIBIT 31.2 CFO SECTION 302 CERTIFICATION - ION GEOPHYSICAL CORP	ex312cfosec302cert06302015.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-12691

ION GEOPHYSICAL CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



DELAWARE		22-2286646
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)



2105 CityWest Blvd.
Suite 400
Houston, Texas		77042-2839
(Address of principal executive offices)		(Zip Code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 933-3339

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	ý	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No ý

At July 24, 2015, there were 164,706,194 shares of common stock, par value $0.01 per share, outstanding.

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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS FOR FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2015



	PAGE
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	3
Condensed Consolidated Statements of Operations for the three- and six-months ended June 30, 2015 and 2014	4
Condensed Consolidated Statements of Comprehensive Income for the three- and six-months ended June 30, 2015 and 2014	5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014	6
Footnotes to Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures about Market Risk	33
Item 4. Controls and Procedures	33

PART II. Other Information
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 5. Other Information	36
Item 6. Exhibits	37

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	June 30, 2015			December 31, 2014
	( In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	117,060		$	173,608
Accounts receivable, net	26,477			114,325
Unbilled receivables	13,381			22,599
Inventories	35,947			51,162
Prepaid expenses and other current assets	13,333			13,662
Total current assets	206,198			375,356
Deferred income tax asset	8,430			8,604
Property, plant, equipment and seismic rental equipment, net	83,489			69,840
Multi-client data library, net	127,758			118,669
Goodwill	27,679			27,388
Intangible assets, net	5,811			6,788
Other assets	9,845			10,612
Total assets	$	469,210		$	617,257
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	7,213		$	7,649
Accounts payable	25,338			36,863
Accrued expenses	43,059			65,264
Accrued multi-client data library royalties	18,524			35,219
Deferred revenue	10,672			8,262
Total current liabilities	104,806			153,257
Long-term debt, net of current maturities	180,955			182,945
Other long-term liabilities	42,278			143,804
Total liabilities	328,039			480,006
Redeemable noncontrolling interest	1,080			1,539
Equity:
Common stock, $0.01 par value; authorized 200,000,000 shares; outstanding 164,706,194 and 164,484,095 shares at June 30, 2015 and December 31, 2014, respectively, net of treasury stock	1,647			1,645
Additional paid-in capital	890,811			887,749
Accumulated deficit	(733,604		)	(734,409		)
Accumulated other comprehensive loss	(12,199		)	(12,807		)
Treasury stock, at cost, 849,539 shares at both June 30, 2015 and December 31, 2014	(6,565		)	(6,565		)
Total stockholders’ equity	140,090			135,613
Noncontrolling interest	1			99
Total equity	140,091			135,712
Total liabilities and equity	$	469,210		$	617,257

See accompanying Footnotes to Unaudited Condensed Consolidated Financial Statements.

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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands, except per share data)
Service revenues	$	23,323		$	89,767		$	43,403		$	200,463
Product revenues	13,472			31,713			33,970			65,715
Total net revenues	36,795			121,480			77,373			266,178
Cost of services	38,817			68,341			84,351			140,412
Cost of products	8,113			14,911			18,945			30,684
Gross profit (loss)	(10,135		)	38,228			(25,923		)	95,082
Operating expenses:
Research, development and engineering	7,239			10,305			14,959			19,344
Marketing and sales	8,638			9,917			16,471			19,130
General, administrative and other operating expenses	14,677			14,221			30,025			33,152
Total operating expenses	30,554			34,443			61,455			71,626
Income (loss) from operations	(40,689		)	3,785			(87,378		)	23,456
Interest expense, net	(4,607		)	(4,934		)	(9,232		)	(9,731		)
Equity in losses of investments	—			(1,781		)	—			(3,469		)
Other income, net	101,600			6,066			98,381			74,592
Income before income taxes	56,304			3,136			1,771			84,848
Income tax expense	532			653			1,515			5,916
Net income	55,772			2,483			256			78,932
Net (income) loss attributable to noncontrolling interests	297			(1,295		)	549			(1,765		)
Net income attributable to ION	$	56,069		$	1,188		$	805		$	77,167
Net income per share:
Basic	$	0.34		$	0.01		$	0.00		$	0.47
Diluted	$	0.34		$	0.01		$	0.00		$	0.47
Weighted average number of common shares outstanding:
Basic	164,693			164,063			164,630			163,956
Diluted	164,712			164,423			164,651			164,243

See accompanying Footnotes to Unaudited Condensed Consolidated Financial Statements.

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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
	(In thousands)
Net income	$	55,772	$	2,483		$	256	$	78,932
Other comprehensive income, net of taxes, as appropriate:
Foreign currency translation adjustments	1,953		2,635			608		3,121
Equity interest in investees' other comprehensive loss	—		(690		)	—		(1,863		)
Other changes in other comprehensive income	—		—			—		26
Total other comprehensive income, net of taxes	1,953		1,945			608		1,284
Comprehensive net income	57,725		4,428			864		80,216
Comprehensive (income) loss attributable to noncontrolling interest	297		(1,295		)	549		(1,765		)
Comprehensive net income attributable to ION	$	58,022	$	3,133		$	1,413	$	78,451

See accompanying Footnotes to Unaudited Condensed Consolidated Financial Statements.

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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Six Months Ended June 30,
	2015			2014
	(In thousands)
Cash flows from operating activities:
Net income	$	256		$	78,932
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Depreciation and amortization (other than multi-client data library)	13,015			13,785
Amortization of multi-client data library	10,440			34,257
Stock-based compensation expense	3,047			5,033
Reductions of accrual for loss contingency related to legal proceedings	(101,978		)	(69,557		)
Equity in losses of investments	—			3,469
Gain on sale of Source product line	—			(6,522		)
Deferred income taxes	(24		)	(5,612		)
Change in operating assets and liabilities:
Accounts receivable	87,796			73,254
Unbilled receivables	9,198			(14,236		)
Inventories	(739		)	(3,197		)
Accounts payable, accrued expenses and accrued royalties	(40,649		)	(30,807		)
Deferred revenue	2,405			(4,988		)
Other assets and liabilities	(5,262		)	2,927
Net cash (used in) provided by operating activities	(22,495		)	76,738
Cash flows from investing activities:
Cash invested in multi-client data library	(13,598		)	(34,317		)
Purchase of property, plant, equipment and seismic rental assets	(17,213		)	(4,543		)
Repayment of advance 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
Other investing activities	257			605
Net cash used in investing activities	(30,554		)	(25,935		)
Cash flows from financing activities:
Borrowings under revolving line of credit	—			15,000
Payments under revolving line of credit	—			(50,000		)
Payments on notes payable and long-term debt	(3,560		)	(5,595		)
Other financing activities	22			(339		)
Net cash used in financing activities	(3,538		)	(40,934		)
Effect of change in foreign currency exchange rates on cash and cash equivalents	39			(146		)
Net (decrease) increase in cash and cash equivalents	(56,548		)	9,723
Cash and cash equivalents at beginning of period	173,608			148,056
Cash and cash equivalents at end of period	$	117,060		$	157,779

See accompanying Footnotes to Unaudited Condensed Consolidated Financial Statements.

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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

The condensed consolidated balance sheet of ION Geophysical Corporation and its subsidiaries (collectively referred to as the “Company” or “ION,” unless the context otherwise requires) at December 31, 2014 has been derived from the Company’s audited consolidated financial statements at that date. The condensed consolidated balance sheet at June 30, 2015, and the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2015 and 2014 and the condensed consolidated statements of cash flows for the six months ended June 30, 2015 and 2014, are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the operating results for a full year or of future operations.

These condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements presented in accordance with accounting principles generally accepted in the United States have been omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and Amendment No. 1 thereto on Form 10-K/A, which was filed on April 24, 2015 and contains the separate consolidated financial statements of INOVA Geophysical Equipment Limited (“INOVA Geophysical”) for its fiscal year ended December 31, 2014.

(2) Restructurings

The recent decline in crude oil prices to five-year lows has negatively impacted the economic outlook of the Company’s E&P customers, which has also negatively impacted the outlook for the Company’s seismic contractor customers. In response to the decline in crude oil prices, E&P companies have reduced their capital expenditures and shifted their spending from exploration- to production-related activities on existing assets. Seismic spending is discretionary; therefore, E&P companies have disproportionately cut their spending on seismic-related services and products.

During the first half of 2015, the Company continued its restructuring program by (i) focusing on centralizing the Company’s global data processing capabilities to core geographical hubs in the U.S. and the U.K., (ii) reducing the Company’s marine repair infrastructure to two locations in the U.S. and U.A.E., and (iii) making selected reductions in personnel across all segments of the Company. Under this program, the Company made additional reductions to its headcount. Including December 2014, these restructurings have resulted in approximately a 25% reduction of full-time employees. During the six months ended June 30, 2015, the Company recognized the following pre-tax charges and credits (in thousands):



	Severance Charges^(a)			Facility Charges^(b)			Total
Cost of goods sold	$	1,813		$	—		$	1,813
Operating expenses	198			1,324			1,522
Other (income) expense	—			1,913			1,913
Income tax benefit	—			(150		)	(150		)
Net income attributable to noncontrolling interest	(172		)	—			(172		)
Consolidated total	$	1,839		$	3,087		$	4,926


^(a)	Represents severance charges related to first half 2015 restructurings, a portion of which relates to a noncontrolling interest.


^(b)	Represents facility charges related to first half 2015 restructurings.

During the third quarter, the Company expects to incur additional restructuring charges in the range of $2 million to $3 million.

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(3) Segment Information

The Company operates through four business segments – Solutions, Systems, Software and Ocean Bottom Services. The Company measures segment operating results based on income (loss) from operations. In addition, the Company has an equity ownership interest in its INOVA Geophysical joint venture. As of December 31, 2014, the Company wrote down its investment in INOVA Geophysical to zero and has suspended recording its share of losses in the joint venture. If at a future date, the Company’s cumulative share of earnings during the period of suspension becomes greater than its share of losses during the same period, the Company will begin to record its share of earnings in the joint venture as long as its net equity method investment remains greater than zero.

The following table is a summary of segment information (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net revenues:
Solutions:
New Venture	$	3,636		$	25,315		$	8,665		$	58,053
Data Library	7,509			13,625			9,646			26,842
Total multi-client revenues	11,145			38,940			18,311			84,895
Data Processing	11,205			23,694			23,038			66,980
Total	$	22,350		$	62,634		$	41,349		$	151,875
Systems:
Towed Streamer	$	2,682		$	10,265		$	7,847		$	22,116
Other	4,992			12,140			12,596			25,137
Total	$	7,674		$	22,405		$	20,443		$	47,253
Software:
Software Systems	$	5,798		$	9,308		$	13,527		$	18,462
Services	973			1,225			2,054			2,110
Total	$	6,771		$	10,533		$	15,581		$	20,572
Ocean Bottom Services	$	—		$	25,908		$	—		$	46,478
Total	$	36,795		$	121,480		$	77,373		$	266,178
Gross profit (loss):
Solutions	$	(7,856	)	$	12,269		$	(18,248	)	$	45,280
Systems	1,500			9,748			6,059			21,165
Software	4,208			7,805			9,798			15,062
Ocean Bottom Services	(7,987		)	8,406			(23,532		)	13,575
Total	$	(10,135	)	$	38,228		$	(25,923	)	$	95,082
Gross margin:
Solutions	(35		)%	20		%	(44		)%	30		%
Systems	20		%	44		%	30		%	45		%
Software	62		%	74		%	63		%	73		%
Ocean Bottom Services	—		%	32		%	—		%	29		%
Total	(28		)%	31		%	(34		)%	36		%
Income (loss) from operations:
Solutions	$	(19,756	)	$	(1,419	)	$	(41,534	)	$	17,693
Systems	(2,379		)	3,547			(1,365		)	6,918
Software	2,095			5,630			5,430			10,758
Ocean Bottom Services	(10,008		)	6,494			(27,567		)	10,656
Corporate and other	(10,641		)	(10,467		)	(22,342		)	(22,569		)
Income (loss) from operations	(40,689		)	3,785			(87,378		)	23,456
Interest expense, net	(4,607		)	(4,934		)	(9,232		)	(9,731		)
Equity in losses of investments	—			(1,781		)	—			(3,469		)
Other income, net	101,600			6,066			98,381			74,592
Income before income taxes	$	56,304		$	3,136		$	1,771		$	84,848

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(4) Long-term Debt



Obligations (in thousands)	June 30, 2015			December 31, 2014
Senior secured second-priority notes	$	175,000		$	175,000
Equipment capital leases	13,168			15,059
Other debt	—			535
Total	188,168			190,594
Current portion of long-term debt and lease obligations	(7,213		)	(7,649		)
Non-current portion of long-term debt and lease obligations	$	180,955		$	182,945

Credit Facility, including Revolving Line of Credit

In August 2014, ION and its material U.S. subsidiaries, ION Exploration Products (U.S.A.), Inc., I/O Marine Systems, Inc. and GX Technology Corporation (collectively, the “Subsidiary Borrowers”), entered into a credit facility (the “Credit Facility”). For a complete discussion of the terms, available credit and security of this Credit Facility, see Footnote 6 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

On August 4, 2015, the Company and the Subsidiary Borrowers amended the terms of the Credit Facility pursuant to a First Amendment to Revolving Credit and Security Agreement dated effective as of August 4, 2015 (the “First Amendment”). The First Amendment contemplated, among other things, (i) PNC Bank, National Association (“PNC”) becoming the sole lender under the Credit Facility, (ii) the reduction of the maximum amount of the revolving line of credit under the Credit Facility from $80.0 million to $40.0 million, (iii) the elimination of the requirement that the Company not exceed a maximum senior secured leverage ratio, (iv) the amendment of the borrowing base formula under the Credit Facility and (v) the removal of the accordion features under the Credit Facility for both the revolving line of credit and the last out term loan. For additional information regarding the terms of the First Amendment, see the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2015.

Both immediately before and after giving effect to the First Amendment, there was no outstanding indebtedness under the Credit Facility. The borrowing base will increase or decrease monthly using an amended formula based on certain eligible receivables, eligible inventory and other amounts, including a percentage of the net orderly liquidation value of the Company's multi-client data library (not to exceed $15.0 million for the multi-client data library data component). The amended formula also removes the qualified cash component of up to $20.0 million. In connection with the First Amendment, an updated independent appraisal (including with respect to the Company's multi-client data library) is being obtained, which will be used in the borrowing base formula determination. The Company expects that following completion of the independent appraisal and the next redetermination of the borrowing base, the Company will have a borrowing base of approximately $30 – $40 million under the Credit Facility. There is no assurance that the Company's borrowing base will not be less than this expected range, which could affect the Company's liquidity.

The revolving credit and security agreement contains covenants that, among other things, restrict the Company, subject to certain exceptions, from incurring additional indebtedness (including capital lease obligations), repurchasing equity, paying dividends or distributions, granting or incurring additional liens on the Company’s properties, pledging shares of the Company’s subsidiaries, entering into certain merger or other change-in-control transactions, entering into transactions with the Company’s affiliates, making certain sales or other dispositions of the Company’s assets, making certain investments, acquiring other businesses and entering into sale-leaseback transactions with respect to the Company’s property.

The revolving credit and security agreement requires that ION and the Subsidiary Borrowers maintain a minimum fixed charge coverage ratio of 1.1 to 1 as of the end of each fiscal quarter during the existence of a covenant testing trigger event. The fixed charge coverage ratio is defined as the ratio of (i) ION’s EBITDA, minus unfunded capital expenditures made during the relevant period, minus distributions (including tax distributions) and dividends made during the relevant period, minus cash taxes paid during the relevant period, to (ii) certain debt payments made during the relevant period. A covenant testing trigger event occurs upon (a) the occurrence and continuance of an event of default under the Credit Facility or (b) the failure to maintain certain measures of liquidity specified in the Credit Facility.

At June 30, 2015, the Company was in compliance with all of the covenants under the Credit Facility.

The revolving credit and security agreement contains customary event of default provisions (including a “change of control” event affecting ION), the occurrence of which could lead to an acceleration of the Company’s obligations under the revolving credit and security agreement.

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Senior Secured Second-Priority Notes

In May 2013, the Company sold $175.0 million aggregate principal amount of 8.125% Senior Secured Second-Priority Notes due 2018 (“Notes”) in a private offering pursuant to an Indenture dated as of May 13, 2013. The Notes are senior secured second-priority obligations of the Company, are guaranteed by the Company’s material U.S. subsidiaries, GX Technology Corporation, ION Exploration Products (U.S.A.), Inc. and I/O Marine Systems, Inc. (“the Guarantors”), and mature on May 15, 2018. Interest on the Notes accrues at the rate of 8.125% per annum and will be payable semiannually in arrears on May 15 and November 15 of each year during their term. In May 2014, the holders of the Notes exchanged their Notes for a like principal amount of registered Notes with the same terms. For a complete discussion of the terms and security of these Notes, see Footnote 6 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Notes contain certain covenants that, among other things, limit or prohibit the Company’s ability and the ability of its restricted subsidiaries to take certain actions or permit certain conditions to exist during the term of the Notes, including among other things:

•incurring additional indebtedness;

•creating liens;

•paying dividends and making other distributions in respect of the Company’s capital stock;

•redeeming the Company’s capital stock;

•making investments or certain other restricted payments;

•selling certain kinds of assets;

•entering into transactions with affiliates; and

•effecting mergers or consolidations.

These and other restrictive covenants contained in the Indenture are subject to certain exceptions and qualifications. All of the Company’s subsidiaries are currently restricted subsidiaries.

As of June 30, 2015, the Company was in compliance with the covenants on these Notes.

(5) Net Income per Share

Basic net income per common share is computed by dividing net income applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted net income per common share is determined based on the assumption that dilutive restricted stock and restricted stock unit awards have vested and outstanding dilutive stock options have been exercised and the aggregate proceeds were used to reacquire common stock using the average price of such common stock for the period. The total number of shares issued or reserved for future issuance under outstanding stock options at June 30, 2015 and 2014 was 9,321,649 and 9,425,725, respectively, and the total number of shares of restricted stock and shares reserved for restricted stock units outstanding at June 30, 2015 and 2014 was 1,470,813 and 1,453,366, respectively. All outstanding stock options for the three and six months ended June 30, 2015 were anti-dilutive.

The following table summarizes the computation of basic and diluted net income per common share (in thousands, except per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Net income attributable to ION	$	56,069	$	1,188	$	805	$	77,167
Weighted average number of common shares outstanding	164,693		164,063		164,630		163,956
Effect of dilutive stock awards	19		360		21		287
Weighted average number of diluted common shares outstanding	164,712		164,423		164,651		164,243
Basic net income per share	$	0.34	$	0.01	$	0.00	$	0.47
Diluted net income per share	$	0.34	$	0.01	$	0.00	$	0.47

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(6) Income Taxes

The Company maintains a valuation allowance for substantially all of its deferred tax assets. The valuation allowance is calculated in accordance with the provisions of the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) Topic 740 “Income Taxes,” which requires that a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. In the event the Company’s expectations of future operating results change, the valuation allowance may need to be adjusted upward or downward. As of June 30, 2015, the Company’s unreserved net U.S. deferred tax assets totaled $2.7 million, which is unchanged from December 31, 2014. These existing unreserved deferred tax assets are currently considered to be “more likely than not” realizable through the expected reversal of existing temporary differences and the ability to offset the related deductions against taxable income in open carryback years.

The provision for the three months and six months ended June 30, 2015 has been calculated based on the actual tax expense incurred for those periods. Given the current uncertainty in expected income generated in various foreign jurisdictions, where tax rates can vary greatly, the Company’s actual tax rate is the best estimate of year-to-date tax expense. The Company’s effective tax rates for the three months ended June 30, 2015 and 2014 were 0.9% and 20.8%, respectively, and for the six months ended June 30, 2015 and 2014 were 85.5% and 7.0%, respectively. The Company’s effective tax rates for the three and six months ended June 30, 2015 were impacted by the change in valuation allowance related to the reduction of the legal contingency reserve as well as operating losses for which the Company cannot currently recognize a tax benefit. The Company’s income tax expense for the six months ended June 30, 2015 of $1.5 million relates 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; therefore creating a high effective tax rate.

The Company has approximately $2.0 million of unrecognized tax benefits and does not expect to recognize significant increases in unrecognized tax benefits during the next 12-month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

As of June 30, 2015, the Company’s U.S. federal tax returns for 2011 and subsequent years remain subject to examination by tax authorities. The Company is no longer subject to U.S. Internal Revenue Service (“IRS”) examination for periods prior to 2011, although carryforward attributes that were generated prior to 2011 may still be adjusted upon examination by the IRS if they either have been or will be used in an open year. In the Company’s foreign tax jurisdictions, tax returns for 2009 and subsequent years generally remain open to examination.

(7) Litigation

WesternGeco

In June 2009, WesternGeco L.L.C. (“WesternGeco”) filed a lawsuit against the Company in the United States District Court for the Southern District of Texas, Houston Division. In the lawsuit, styled WesternGeco L.L.C. v. ION Geophysical Corporation, WesternGeco alleged that the Company had infringed several method and apparatus claims contained in four of its United States patents regarding marine seismic streamer steering devices.

The trial began in July 2012. A verdict was returned by the jury in August 2012, finding that the Company infringed the claims contained in the four patents by supplying its DigiFIN^® lateral streamer control units and the related software from the United States and awarded WesternGeco the sum of $105.9 million in damages, consisting of $12.5 million in reasonable royalty and $93.4 million in lost profits.

In June 2013, the presiding judge entered a Memorandum and Order, ruling that WesternGeco is entitled to be awarded supplemental damages for the additional DigiFIN units that were supplied from the United States before and after the trial that were not included in the jury verdict due to the timing of the trial. In October 2013, the judge entered another Memorandum and Order, ruling on the number of DigiFIN units that are subject to supplemental damages and also ruling that the supplemental damages applicable to the additional units should be calculated by adding together the jury’s previous reasonable royalty and lost profits damages awards per unit, resulting in supplemental damages of $73.1 million.

In April 2014, the judge entered another Order, ruling that lost profits should not have been included in the calculation of supplemental damages in the October 2013 Memorandum and Order and reducing the supplemental damages award in the case from $73.1 million to $9.4 million. In the Order, the judge also further reduced the damages award in the case by $3.0 million to reflect a settlement and license that WesternGeco entered into with a customer of the Company that had purchased and used DigiFIN units that were also included in the damage amounts awarded against the Company.

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In May 2014, the judge signed and entered a Final Judgment in the amount of $123.8 million related to the case. The Final Judgment also included an injunction that enjoins the Company, its agents and anyone acting in concert with it, from supplying in or from the United States the DigiFIN product or any parts unique to the DigiFIN product, or any instrumentality no more than colorably different from any of these products or parts, for combination outside of the United States. The Company has conducted its business in compliance with the district court’s orders in the case, and the Company has reorganized its operations such that it no longer supplies the DigiFIN product or any parts unique to the DigiFIN product in or from the United States.

The Company and WesternGeco each appealed the Final Judgment to the United States Court of Appeals for the Federal Circuit in Washington, D.C. On July 2, 2015, the Court of Appeals reversed in part the judgment, holding the district court erred by including lost profits in the Final Judgment. Lost profits were $93.4 million and prejudgment interest was approximately $10.9 million of the $123.8 million Final Judgment. Pre-judgment interest on the lost profits portion will be treated in the same way as the lost profits. Post-judgment interest will likewise be treated in the same fashion. On July 29, 2015, WesternGeco filed a petition for rehearing en banc before the Court of Appeals. The Court of Appeals has not yet ruled on whether or not it will accept WesternGeco’s request for rehearing.

As previously disclosed, the Company had taken a loss contingency accrual of $124 million. As a result of the reversal by the Court of Appeals, the Company has reduced the loss contingency accrual to $22 million as of June 30, 2015. The Company’s assessment of its potential loss contingency may change in the future due to developments in the case and other events, such as changes in applicable law, and such reassessment could lead to the determination that no loss contingency is probable or that a greater or lesser loss contingency is probable. Any such reassessment could have a material effect on the Company’s financial condition or results of operations.

Prior to the reduction in damages by the Court of Appeals, the Company arranged with sureties to post an appeal bond at the trial court. The appeal bond is uncollateralized, but the terms of the appeal bond arrangements provide the sureties the contractual right for as long as the bond is outstanding to require the Company to post cash collateral. In light of the Court of Appeals’ decision, the Company does not anticipate any requests for collateral in excess of the reduced damages amount. If the sureties exercise their right to require collateral, the Company would intend to utilize cash on hand or undrawn balances available under the Company’s Credit Facility. The appeal bond will remain outstanding during the pendency of appeals.

Other

The Company has been named in various other lawsuits or threatened actions that are incidental to its ordinary business. Litigation is inherently unpredictable. Any claims against the Company, whether meritorious or not, could be time-consuming, cause the Company to incur costs and expenses, require significant amounts of management time and result in the diversion of significant operational resources. The results of these lawsuits and actions cannot be predicted with certainty. Management currently believes that the ultimate resolution of these matters will not have a material adverse impact on the financial condition, results of operations or liquidity of the Company.

(8) Other Income, Net

The following table is a summary of other income, net (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Reductions of loss contingency related to legal proceedings (Footnote 7)	$	101,978		$	—		$	101,978		$	69,557
Facility restructuring charges (Footnote 2)	—			—			(1,913		)	—
Gain on sale of product line^(a)	—			6,522			—			6,522
Other expense, net	(378		)	(456		)	(1,684		)	(1,487		)
Total other income, net	$	101,600		$	6,066		$	98,381		$	74,592


^(a)	In May 2014, the Company sold its Source product line for approximately $14.4 million, net of transaction fees, recording a gain of approximately $6.5 million before taxes. As a part of this transaction, the Company reduced Goodwill on the Marine reporting unit by $5.1 million. The historical results of this product line have not been material to the Company’s results of operations.

(9) Details of Selected Balance Sheet Accounts

Inventories



The following table is a summary of inventories (in thousands):	June 30, 2015			December 31, 2014
Raw materials and subassemblies	$	38,195		$	41,461
Work-in-process	10,405			18,221
Finished goods	12,294			21,284
Reserve for excess and obsolete inventories	(24,947		)	(29,804		)
Total	$	35,947		$	51,162

The $4.9 million reduction in the reserve for excess and obsolete inventories was due to the scrapping of fully reserved inventory.

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Other Long-term Liabilities



The following table is a summary of other long-term liabilities (in thousands):	June 30, 2015		December 31, 2014
Accrual for loss contingency related to legal proceedings (Footnote 7)	$	22,000	$	123,770
Deferred rents	13,543		13,416
Facility restructuring accrual	3,633		3,353
Other long-term liabilities	3,102		3,265
Total	$	42,278	$	143,804

(10) Accumulated Other Comprehensive Income (Loss)

The following table is a summary of changes in accumulated other comprehensive loss by component (in thousands):



	Foreign currency translation adjustments			Total
Accumulated other comprehensive loss at December 31, 2014	$	(12,807	)	$	(12,807	)
Net current-period other comprehensive income (loss)	608			608
Accumulated other comprehensive loss at June 30, 2015	$	(12,199	)	$	(12,199	)

(11) Supplemental Cash Flow Information and Non-cash Activity

The following table is a summary of non-cash items from investing and financing activities (in thousands):



	Six Months Ended June 30,
	2015			2014
Cash paid during the period for:
Interest	$	7,843		$	8,803
Income taxes	$	9,649		$	7,326
Non-cash items from investing and financing activities:
Purchases of computer equipment financed through capital leases	$	1,178		$	4,780
Investment in multi-client data library financed through accounts payable	$	6,706		$	2,773
Transfer of inventory to property, plant, equipment and seismic rental equipment	$	15,936	^(a)	$	2,308


^(a)	This transfer of inventory to property, plant, equipment and seismic rental equipment relates to ocean bottom seismic equipment manufactured by the Company to be deployed in the acquisition of ocean bottom seismic data.

Additionally, during the six months ended June 30, 2015, the Company purchased approximately $17.2 million of property, plant, equipment and seismic rental equipment, including approximately $14.3 million related to the manufacture of ocean bottom seismic equipment that will be used by the Ocean Bottom Services segment.

(12) Acquisition of OceanGeo

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In 2014, the Company completed the acquisition of OceanGeo B.V. (“OceanGeo”). OceanGeo specializes in seismic acquisition operations using ocean bottom cables deployed from vessels leased by OceanGeo. For a complete discussion of the acquisition of OceanGeo, see Footnote 3 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The following summarized unaudited pro forma consolidated income statement information for the six months ended June 30, 2014, assumes that the OceanGeo acquisition had occurred as of the beginning of the period prior to the period the acquisition occurred. The Company has prepared these unaudited pro forma financial results for comparative purposes only. These unaudited pro forma financial results may not be indicative of the results that would have occurred if ION had completed the acquisition as of the beginning of that prior period or the results that may be attained in the future. Amounts presented below are in thousands, except for the per share amounts:



Pro forma Consolidated ION Income Statement Information	Six Months Ended June 30, 2014
Pro forma Consolidated ION Income Statement Information	Six Months Ended June 30, 2014
Net revenues	$	275,362
Income from operations	$	26,712
Net income	$	79,631
Net income attributable to ION	$	77,866
Basic and diluted net income per common share	$	0.47

OceanGeo did not record any revenues during the six months ended June 30, 2015 due to its vessels being idle while it attempts to secure a backlog of future orders. OceanGeo is actively in negotiations on two projects and anticipates that the crew will go back to work in the fourth quarter of 2015 or the first quarter of 2016.

(13) Fair Value of Financial Instruments

Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the related disclosure requirements. The Company follows a three-level hierarchy, prioritizing and defining the types of inputs used to measure fair value.

The carrying amounts of the Company’s long-term debt as of June 30, 2015 and December 31, 2014 were $188.2 million and $190.6 million, respectively, compared to its fair values of $138.5 million and $162.6 million as of June 30, 2015 and December 31, 2014, respectively. The fair value of the long-term debt was calculated using Level 1 inputs, including an active market price.

Fair Value of Other Financial Instruments. Due to their highly liquid nature, the amount of the Company’s other financial instruments, including cash and cash equivalents, accounts and unbilled receivables, notes receivable, accounts payable, and accrued multi-client data library royalties, represent their approximate fair value.

(14) Stock-based Compensation

Stock Appreciation Rights (“SARs”). On March 1, 2015, the Company issued 3,108,107 SAR awards to 16 individuals with an exercise price of $2.28. The vesting of these SARs is achieved through both a market condition and a service condition. The market condition is achieved, in part or in full, in the event that during the four-year period beginning on the date of grant the 20-day trailing volume-weighted average price of a share of common stock is (i) greater than 120% of the exercise price for the first 1/3 of the awards, (ii) greater than 125% of the exercise price for the second 1/3 of the awards and (iii) greater than 130% of the exercise price for the final 1/3 of the awards. The exercise condition restricts the ability of the holders to exercise awards until certain service milestones have been reached such that (i) no more than 1/3 of the awards may be exercised, if vested, on and after the first anniversary of the date of grant, (ii) no more than 2/3 of the awards may be exercised, if vested, on and after the second anniversary of the date of grant and (iii) all of the awards may be exercised, if vested, on and after the third anniversary of the date of grant. For the six months ended June 30, 2015, the Company recorded $0.3 million of share-based compensation expense attributable to SAR awards.

Pursuant to ASC 718, “Compensation – Stock Compensation,” the stock appreciation rights are considered liability awards and as such, these amounts are accrued in the liability section of the balance sheet. The Company calculated the fair value of each SAR award on the date of grant using a Monte Carlo simulation model. The following assumptions were used:

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	March 1, 2015
Risk-free interest rates	2.03%
Expected lives (in years)	2.7
Expected dividend yield	—%
Expected volatility	60.27%

(15) Related Party Transactions

BGP Inc. (“BGP”) owned approximately 14.4% of the Company’s outstanding common stock as of June 30, 2015. For the six months ended June 30, 2015 and 2014, the Company recorded revenues from BGP of $4.9 million and $3.9 million, respectively. Total receivables due from BGP were $1.1 million at June 30, 2015.

(16) Recent Accounting Pronouncements

Revenue Recognition — In May 2014, the FASB and the International Accounting Standards Board (“IASB”) jointly issued new accounting guidance for recognition of revenue. This new guidance replaces virtually all existing U.S. GAAP and IFRS guidance on revenue recognition.

On July 9, 2015, the FASB voted to defer the effective date for its new revenue standard for public and nonpublic entities reporting under U.S. GAAP by one year. As a result, the new guidance is now effective for fiscal years beginning after December 15, 2017. This new guidance applies to all periods presented. Therefore, when the Company issues its financial statements on Forms 10-Q and 10-K for periods included in its year ended December 31, 2018, its comparative periods that are presented from the years ended December 31, 2016 and 2017, must be retrospectively presented in compliance with this new guidance. Early adoption is not allowed for U.S. GAAP. The new guidance requires companies to make more estimates and use more judgment than under current accounting guidance.

The FASB and IASB (collectively, the “Boards”) have discussed clarifying the guidance in their new revenue standards for: (1) licenses of intellectual property, (2) identifying performance obligations, (3) noncash consideration and (4) collectability. The Boards have also discussed whether to add practical expedients for the accounting for contract modifications at transition and the presentation of sales taxes, and the FASB separately discussed several technical corrections. The FASB and the IASB did not agree on the nature and breadth of all of the changes to be proposed. The Boards are expected to issue separate exposure drafts later this year.

The Company continues to evaluate (i) the two allowed adoption methods to determine which method it plans to use for retrospective presentation of comparative periods, (ii) the impact of proposed clarifications to the guidance on timing of the recognition of revenue within the Company’s various revenue streams, (iii) the Company’s option to adopt the new guidance either as of the originally proposed effective date or the proposed deferred effective date and (iv) whether the implementation of this new guidance will have a material impact on the Company’s consolidated financial position or results of operations for the periods presented.

(17) Condensed Consolidating Financial Information

In 2013, the Company sold $175.0 million aggregate principal amount of its 8.125% Senior Secured Second-Priority Notes due 2018 (the “Notes”). The Notes were issued by ION Geophysical Corporation and are guaranteed by the Guarantors, all of which are 100-percent-owned subsidiaries. The Guarantors have fully and unconditionally guaranteed the payment obligations of ION Geophysical Corporation with respect to the Notes. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:


•	ION Geophysical Corporation and the Guarantors (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting).


•	All other subsidiaries of ION Geophysical Corporation that are not Guarantors.


•	The consolidating adjustments necessary to present ION Geophysical Corporation’s results on a consolidated basis.

This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and footnotes.

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	June 30, 2015
Balance Sheet	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	60,097		$	—		$	56,963		$	—		$	117,060
Accounts receivable, net	(10		)	14,296			12,191			—			26,477
Unbilled receivables	—			11,603			1,778			—			13,381
Inventories	—			4,051			31,896			—			35,947
Prepaid expenses and other current assets	4,019			2,862			7,351			(899		)	13,333
Total current assets	64,106			32,812			110,179			(899		)	206,198
Deferred income tax asset	2,472			8,295			200			(2,537		)	8,430
Property, plant, equipment and seismic rental equipment, net	5,464			27,351			50,674			—			83,489
Multi-client data library, net	—			112,109			15,649			—			127,758
Investment in subsidiaries	700,267			245,983			—			(946,250		)	—
Goodwill	—			—			27,679			—			27,679
Intangible assets, net	—			5,389			422			—			5,811
Intercompany receivables	48,576			—			—			(48,576		)	—
Other assets	8,431			196			1,218			—			9,845
Total assets	$	829,316		$	432,135		$	206,021		$	(998,262	)	$	469,210
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	—		$	7,121		$	92		$	—		$	7,213
Accounts payable	2,664			15,920			6,754			—			25,338
Accrued expenses	11,124			21,308			10,679			(52		)	43,059
Accrued multi-client data library royalties	—			17,964			560			—			18,524
Deferred revenue	—			7,405			3,267			—			10,672
Total current liabilities	13,788			69,718			21,352			(52		)	104,806
Long-term debt, net of current maturities	175,000			5,903			52			—			180,955
Intercompany payables	497,966			29,949			18,627			(546,542		)	—
Other long-term liabilities	2,472			31,841			11,349			(3,384		)	42,278
Total liabilities	689,226			137,411			51,380			(549,978		)	328,039
Redeemable noncontrolling interest	—			—			1,080			—			1,080
Equity:
Common stock	1,647			290,460			19,138			(309,598		)	1,647
Additional paid-in capital	890,811			180,700			234,234			(414,934		)	890,811
Accumulated earnings (deficit)	(733,604		)	238,544			(11,538		)	(227,006		)	(733,604		)
Accumulated other comprehensive income (loss)	(12,199		)	6,868			(12,156		)	5,288			(12,199		)
Due from ION Geophysical Corporation	—			(421,848		)	(76,118		)	497,966			—
Treasury stock	(6,565		)	—			—			—			(6,565		)
Total stockholders’ equity	140,090			294,724			153,560			(448,284		)	140,090
Noncontrolling interests	—			—			1			—			1
Total equity	140,090			294,724			153,561			(448,284		)	140,091
Total liabilities and equity	$	829,316		$	432,135		$	206,021		$	(998,262	)	$	469,210

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	December 31, 2014
Balance Sheet	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	109,514		$	—		$	64,094		$	—		$	173,608
Accounts receivable, net	123			49,892			64,310			—			114,325
Unbilled receivables	—			18,548			4,051			—			22,599
Inventories	—			4,013			47,149			—			51,162
Prepaid expenses and other current assets	6,692			2,697			8,769			(4,496		)	13,662
Total current assets	116,329			75,150			188,373			(4,496		)	375,356
Deferred income tax asset	(7,852		)	6,675			749			9,032			8,604
Property, plant, equipment and seismic rental equipment, net	6,412			33,065			30,363			—			69,840
Multi-client data library, net	—			96,423			22,246			—			118,669
Investment in subsidiaries	675,499			278,294			—			(953,793		)	—
Goodwill	—			—			27,388			—			27,388
Intangible assets, net	—			6,254			534			—			6,788
Intercompany receivables	29,979			—			—			(29,979		)	—
Other assets	10,191			147			274			—			10,612
Total assets	$	830,558		$	496,008		$	269,927		$	(979,236	)	$	617,257
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	—		$	6,965		$	684		$	—		$	7,649
Accounts payable	4,308			12,028			20,527			—			36,863
Accrued expenses	3,904			34,738			21,807			4,815			65,264
Accrued multi-client data library royalties	—			34,624			595			—			35,219
Deferred revenue	—			5,263			2,999			—			8,262
Total current liabilities	8,212			93,618			46,612			4,815			153,257
Long-term debt, net of current maturities	175,000			7,839			106			—			182,945
Intercompany payables	509,124			8,892			21,087			(539,103		)	—
Other long-term liabilities	2,609			130,985			10,489			(279		)	143,804
Total liabilities	694,945			241,334			78,294			(534,567		)	480,006
Redeemable noncontrolling interest	—			—			1,539			—			1,539
Equity:
Common stock	1,645			290,460			19,138			(309,598		)	1,645
Additional paid-in capital	887,749			180,700			234,234			(414,934		)	887,749
Accumulated earnings (deficit)	(734,409		)	208,846			26,981			(235,827		)	(734,409		)
Accumulated other comprehensive income (loss)	(12,807		)	6,229			(12,795		)	6,566			(12,807		)
Due from ION Geophysical Corporation	—			(431,561		)	(77,563		)	509,124			—
Treasury stock	(6,565		)	—			—			—			(6,565		)
Total stockholders’ equity	135,613			254,674			189,995			(444,669		)	135,613
Noncontrolling interests	—			—			99			—			99
Total equity	135,613			254,674			190,094			(444,669		)	135,712
Total liabilities and equity	$	830,558		$	496,008		$	269,927		$	(979,236	)	$	617,257

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	Three Months Ended June 30, 2015
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Net revenues	$	—		$	22,465		$	14,765		$	(435	)	$	36,795
Cost of sales	—			28,227			19,138			(435		)	46,930
Gross loss	—			(5,762		)	(4,373		)	—			(10,135		)
Total operating expenses	6,466			12,805			11,283			—			30,554
Loss from operations	(6,466		)	(18,567		)	(15,656		)	—			(40,689		)
Interest expense, net	(4,506		)	(100		)	(1		)	—			(4,607		)
Intercompany interest, net	143			(745		)	602			—			—
Equity in earnings (losses) of investments	66,986			(14,028		)	—			(52,958		)	—
Other income (expense)	(29		)	101,954			(325		)	—			101,600
Net income (loss) before income taxes	56,128			68,514			(15,380		)	(52,958		)	56,304
Income tax expense	59			123			350			—			532
Net income (loss)	56,069			68,391			(15,730		)	(52,958		)	55,772
Net loss attributable to noncontrolling interests	—			—			297			—			297
Net income (loss) attributable to ION	56,069			68,391			(15,433		)	(52,958		)	56,069
Comprehensive net income (loss)	$	58,022		$	70,390		$	(13,731	)	$	(56,956	)	$	57,725
Comprehensive loss attributable to noncontrolling interest	—			—			297			—			297
Comprehensive net income (loss) attributable to ION	$	58,022		$	70,390		$	(13,434	)	$	(56,956	)	$	58,022



	Three Months Ended June 30, 2014
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Net revenues	$	—		$	47,881		$	74,877		$	(1,278	)	$	121,480
Cost of sales	—			41,018			43,512			(1,278		)	83,252
Gross profit	—			6,863			31,365			—			38,228
Total operating expenses	7,518			15,326			11,599			—			34,443
Income (loss) from operations	(7,518		)	(8,463		)	19,766			—			3,785
Interest expense, net	(4,458		)	(48		)	(428		)	—			(4,934		)
Intercompany interest, net	(210		)	1,388			(1,178		)	—			—
Equity in earnings (losses) of investments	14,838			20,259			—			(36,878		)	(1,781		)
Other income (expense)	(1,711		)	3,572			4,205			—			6,066
Net income before income taxes	941			16,708			22,365			(36,878		)	3,136
Income tax expense (benefit)	(247		)	(133		)	1,033			—			653
Net income	1,188			16,841			21,332			(36,878		)	2,483
Net income attributable to noncontrolling interests	—			—			(1,295		)	—			(1,295		)
Net income attributable to ION	1,188			16,841			20,037			(36,878		)	1,188
Comprehensive net income	$	3,133		$	19,967		$	23,955		$	(42,627	)	$	4,428
Comprehensive income attributable to noncontrolling interest	—			—			(1,295		)	—			(1,295		)
Comprehensive net income attributable to ION	$	3,133		$	19,967		$	22,660		$	(42,627	)	$	3,133

Table of Contents



	Six Months Ended June 30, 2015
Income Statement	ION Geophysical Corporation		The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Net revenues	$	—	$	41,314		$	36,900		$	(841	)	$	77,373
Cost of sales	—		53,002			51,135			(841		)	103,296
Gross loss	—		(11,688		)	(14,235		)	—			(25,923		)
Total operating expenses

ION GEOPHYSICAL CORP - FORM 10-Q - August 6, 2015

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