ION GEOPHYSICAL CORP - FORM 10-Q

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EX-32.2 - EXHIBIT 32.2 - ION GEOPHYSICAL CORP	ex322cfosec906cert09302015.htm
EX-31.1 - EXHIBIT 31.1 - ION GEOPHYSICAL CORP	ex311ceosec302cert09302015.htm
EX-32.1 - EXHIBIT 32.1 - ION GEOPHYSICAL CORP	ex321ceosec906cert09302015.htm
EX-31.2 - EXHIBIT 31.2 - ION GEOPHYSICAL CORP	ex312cfosec302cert09302015.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 SEPTEMBER 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 October 23, 2015, there were 164,790,322 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 SEPTEMBER 30, 2015



	PAGE
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	3
Condensed Consolidated Statements of Operations for the three- and nine-months ended September 30, 2015 and 2014	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three- and nine-months ended September 30, 2015 and 2014	5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 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	23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	33
Item 4. Controls and Procedures	33

PART II. Other Information
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 5. Other Information	38
Item 6. Exhibits	39

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	September 30, 2015			December 31, 2014
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	88,239		$	173,608
Accounts receivable, net	21,587			114,325
Unbilled receivables	32,387			22,599
Inventories	34,683			51,162
Prepaid expenses and other current assets	10,124			13,662
Total current assets	187,020			375,356
Deferred income tax asset	5,706			8,604
Property, plant, equipment and seismic rental equipment, net	77,081			69,840
Multi-client data library, net	135,907			118,669
Goodwill	26,809			27,388
Intangible assets, net	5,306			6,788
Other assets	9,380			10,612
Total assets	$	447,209		$	617,257
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	6,612		$	7,649
Accounts payable	27,950			36,863
Accrued expenses	54,302			65,264
Accrued multi-client data library royalties	12,443			35,219
Deferred revenue	5,575			8,262
Total current liabilities	106,882			153,257
Long-term debt, net of current maturities	179,666			182,945
Other long-term liabilities	39,830			143,804
Total liabilities	326,378			480,006
Redeemable noncontrolling interest	1,200			1,539
Equity:
Common stock, $0.01 par value; authorized 200,000,000 shares; outstanding 164,790,322 and 164,484,095 shares at September 30, 2015 and December 31, 2014, respectively, net of treasury stock	1,648			1,645
Additional paid-in capital	892,007			887,749
Accumulated deficit	(753,987		)	(734,409		)
Accumulated other comprehensive loss	(13,564		)	(12,807		)
Treasury stock, at cost, 849,539 shares	(6,565		)	(6,565		)
Total stockholders’ equity	119,539			135,613
Noncontrolling interest	92			99
Total equity	119,631			135,712
Total liabilities and equity	$	447,209		$	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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In thousands, except per share data)
Service revenues	$	53,515		$	71,923		$	96,918		$	272,386
Product revenues	13,159			34,617			47,129			100,332
Total net revenues	66,674			106,540			144,047			372,718
Cost of services	47,883			60,285			132,234			200,697
Cost of products	7,683			17,032			26,628			47,716
Gross profit (loss)	11,108			29,223			(14,815		)	124,305
Operating expenses:
Research, development and engineering	6,537			10,910			21,496			30,254
Marketing and sales	6,904			8,480			23,375			27,610
General, administrative and other operating expenses	10,541			15,182			40,566			48,334
Total operating expenses	23,982			34,572			85,437			106,198
Income (loss) from operations	(12,874		)	(5,349		)	(100,252		)	18,107
Interest expense, net	(4,854		)	(5,048		)	(14,086		)	(14,779		)
Equity in losses of investments	—			(5,558		)	—			(9,027		)
Other income (expense), net	(346		)	(622		)	98,035			73,970
Income (loss) before income taxes	(18,074		)	(16,577		)	(16,303		)	68,271
Income tax expense	2,082			8,345			3,597			14,261
Net income (loss)	(20,156		)	(24,922		)	(19,900		)	54,010
Net (income) loss attributable to noncontrolling interests	(227		)	381			322			(1,384		)
Net income (loss) attributable to ION	$	(20,383	)	$	(24,541	)	$	(19,578	)	$	52,626
Net income (loss) per share:
Basic	$	(0.12	)	$	(0.15	)	$	(0.12	)	$	0.32
Diluted	$	(0.12	)	$	(0.15	)	$	(0.12	)	$	0.32
Weighted average number of common shares outstanding:
Basic	164,755			164,149			164,672			164,021
Diluted	164,755			164,149			164,672			164,326

See accompanying Footnotes to Unaudited Condensed Consolidated Financial Statements.

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ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In thousands)
Net income (loss)	$	(20,156	)	$	(24,922	)	$	(19,900	)	$	54,010
Other comprehensive loss, net of taxes, as appropriate:
Foreign currency translation adjustments	(1,365		)	(2,632		)	(757		)	489
Equity interest in investees' other comprehensive income (loss)	—			738			—			(1,125		)
Other changes in other comprehensive income	—			28			—			54
Total other comprehensive loss, net of taxes	(1,365		)	(1,866		)	(757		)	(582		)
Comprehensive net income (loss)	(21,521		)	(26,788		)	(20,657		)	53,428
Comprehensive (income) loss attributable to noncontrolling interest	(227		)	381			322			(1,384		)
Comprehensive net income (loss) attributable to ION	$	(21,748	)	$	(26,407	)	$	(20,335	)	$	52,044

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)



	Nine Months Ended September 30,
	2015			2014
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(19,900	)	$	54,010
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Depreciation and amortization (other than multi-client data library)	19,660			20,989
Amortization of multi-client data library	24,531			46,014
Stock-based compensation expense	4,174			7,058
Reductions of accrual for loss contingency related to legal proceedings	(101,978		)	(69,557		)
Equity in losses of investments	—			9,027
Gain on sale of Source product line	—			(6,522		)
Deferred income taxes	5,992			(1,536		)
Change in operating assets and liabilities:
Accounts receivable	92,424			71,540
Unbilled receivables	(9,837		)	(8,036		)
Inventories	464			(4,272		)
Accounts payable, accrued expenses and accrued royalties	(43,676		)	(31,324		)
Deferred revenue	(2,576		)	(4,153		)
Other assets and liabilities	(5,274		)	3,738
Net cash (used in) provided by operating activities	(35,996		)	86,976
Cash flows from investing activities:
Cash invested in multi-client data library	(28,152		)	(57,340		)
Purchase of property, plant, equipment and seismic rental assets	(17,601		)	(6,842		)
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	1,262			928
Net cash used in investing activities	(44,491		)	(50,934		)
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	(5,431		)	(11,737		)
Costs associated with issuance of debt	(146		)	(2,126		)
Acquisition of non-controlling interest	—			(6,000		)
Other financing activities	94			423
Net cash used in financing activities	(5,483		)	(54,440		)
Effect of change in foreign currency exchange rates on cash and cash equivalents	601			189
Net decrease in cash and cash equivalents	(85,369		)	(18,209		)
Cash and cash equivalents at beginning of period	173,608			148,056
Cash and cash equivalents at end of period	$	88,239		$	129,847

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 September 30, 2015, and the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2015 and 2014 and the condensed consolidated statements of cash flows for the nine months ended September 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 nine months ended September 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 and the depressed level of natural gas prices have negatively impacted the economic outlook of the Company’s exploration and production (“E&P”) company 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 three quarters of 2015, the Company continued its restructuring program by (i) focusing on centralizing the Company’s global data processing capabilities to two 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 further reductions in personnel across all of the Company’s segments in the third quarter 2015 that, combined with reductions starting in December 2014 and continuing through the first nine months of 2015, have reduced the Company’s full-time employee base by approximately 50%. During the nine months ended September 30, 2015, the Company recognized the following charges and credits (in thousands):



	Severance Charges^(a)			Facility Charges^(b)			Total
Cost of goods sold	$	3,981		$	—		$	3,981
Operating expenses	1,910			1,323			3,233
Other (income) expense	—			1,618			1,618
Income tax benefit	(119		)	(150		)	(269		)
Net income attributable to noncontrolling interest	(172		)	—			(172		)
Consolidated total	$	5,600		$	2,791		$	8,391


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


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

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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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net revenues:
Solutions:
New Venture	$	26,650		$	18,446		$	35,315		$	76,499
Data Library	15,302			3,262			24,948			30,104
Total multi-client revenues	41,952			21,708			60,263			106,603
Data Processing	10,693			24,151			33,731			91,131
Total	$	52,645		$	45,859		$	93,994		$	197,734
Systems:
Towed Streamer	$	4,426		$	13,666		$	12,273		$	35,782
Other	2,864			11,029			15,460			36,166
Total	$	7,290		$	24,695		$	27,733		$	71,948
Software:
Software Systems	$	5,869		$	9,922		$	19,396		$	28,384
Services	870			1,088			2,924			3,198
Total	$	6,739		$	11,010		$	22,320		$	31,582
Ocean Bottom Services	$	—		$	24,976		$	—		$	71,454
Total	$	66,674		$	106,540		$	144,047		$	372,718
Gross profit (loss):
Solutions	$	11,294		$	5,927		$	(6,954	)	$	51,207
Systems	1,366			10,123			7,425			31,288
Software	4,399			8,326			14,197			23,388
Ocean Bottom Services	(5,951		)	4,847			(29,483		)	18,422
Total	$	11,108		$	29,223		$	(14,815	)	$	124,305
Gross margin:
Solutions	21		%	13		%	(7		)%	26		%
Systems	19		%	41		%	27		%	43		%
Software	65		%	76		%	64		%	74		%
Ocean Bottom Services	—		%	19		%	—		%	26		%
Total	17		%	27		%	(10		)%	33		%
Income (loss) from operations:
Solutions	$	768		$	(5,960	)	$	(40,766	)	$	11,733
Systems	(1,295		)	2,917			(2,660		)	9,835
Software	2,444			6,227			7,874			16,985
Ocean Bottom Services	(7,289		)	1,677			(34,856		)	12,333
Corporate and other	(7,502		)	(10,210		)	(29,844		)	(32,779		)
Income (loss) from operations	(12,874		)	(5,349		)	(100,252		)	18,107
Interest expense, net	(4,854		)	(5,048		)	(14,086		)	(14,779		)
Equity in losses of investments	—			(5,558		)	—			(9,027		)
Other income (expense), net	(346		)	(622		)	98,035			73,970
Income (loss) before income taxes	$	(18,074	)	$	(16,577	)	$	(16,303	)	$	68,271

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(4) Long-term Debt



Obligations (in thousands)	September 30, 2015			December 31, 2014
Senior secured second-priority notes	$	175,000		$	175,000
Equipment capital leases	11,278			15,059
Revolving credit facility	—			—
Other debt	—			535
Total	186,278			190,594
Current portion of long-term debt and lease obligations	(6,612		)	(7,649		)
Non-current portion of long-term debt and lease obligations	$	179,666		$	182,945

Revolving Credit Facility

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 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.

The borrowing base under the First Amendment 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. At September 30, 2015, the borrowing base under the Credit Facility was $40.0 million, and there was no outstanding indebtedness under the Credit Facility.

The Credit Facility as amended 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 Credit Facility, as amended requires that ION and the Subsidiary Borrowers maintain a minimum fixed charge coverage ratio of 1.1 to 1.0 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 a measure of liquidity greater than (i) $5.0 million for five consecutive business days or (ii) $4.0 million on any given business day. Liquidity, as defined in the Credit Facility, is the Company’s excess availability to borrow ($40.0 million at September 30, 2015) plus the aggregate amount of unrestricted cash held by ION, the Subsidiary Borrowers and their domestic subsidiaries.

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

The Credit Facility as amended 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 Credit Facility as amended.

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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 September 30, 2015, the Company was in compliance with the covenants on the Notes.

On or after May 15, 2015, the Company may on one or more occasions redeem all or a part of the Notes at the redemption prices set forth below, plus accrued and unpaid interest and special interest, if any, on the Notes redeemed during the twelve-month period beginning on May 15th of the years indicated below:



Date		Percentage
2015		104.063%
2016		102.031%
2017 and thereafter		100.000%

(5) Net Income (Loss) per Share

Basic net income (loss) per common share is computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted net income (loss) 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 September 30, 2015 and 2014 was 8,643,375 and 9,111,725, respectively, and the total number of shares of restricted stock and shares reserved for restricted stock units outstanding at September 30, 2015 and 2014 was 1,363,534 and 1,386,336, respectively. All outstanding stock options for the three and nine months ended September 30, 2015 were anti-dilutive.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income (loss) attributable to ION	$	(20,383	)	$	(24,541	)	$	(19,578	)	$	52,626
Weighted average number of common shares outstanding	164,755			164,149			164,672			164,021
Effect of dilutive stock awards	—			—			—			305
Weighted average number of diluted common shares outstanding	164,755			164,149			164,672			164,326
Basic net income (loss) per share	$	(0.12	)	$	(0.15	)	$	(0.12	)	$	0.32
Diluted net income (loss) per share	$	(0.12	)	$	(0.15	)	$	(0.12	)	$	0.32

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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 downward. As of September 30, 2015, the Company has no unreserved U.S. deferred tax assets.

The provision for the three months and nine months ended September 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 September 30, 2015 and 2014 were (11.5)% and (50.3)%, respectively, and for the nine months ended September 30, 2015 and 2014 were (22.1)% and 20.9%, respectively. The Company’s effective tax rates for the three and nine months ended September 30, 2015 were impacted by the change in valuation allowance related to the reduction of the Company’s 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 nine months ended September 30, 2015 of $3.6 million primarily 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 negatively impacting the Company’s effective tax rate.

The Company has approximately $1.2 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 September 30, 2015, the Company’s U.S. federal tax returns for 2012 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 2012, although carryforward attributes that were generated prior to 2012 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. On October 30, 2015 the Court of Appeals denied WesternGeco’s petition for rehearing en banc. WesternGeco has up to 90 days to determine whether or not it will file a writ requesting the Supreme Court to review the case.

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, as of June 30, 2015, the Company reduced the loss contingency accrual to its current amount of $22 million. 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. The Company has received a request for $11 million in collateral and they are in negotiations with the sureties. 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 (Expense), Net

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Reductions of loss contingency related to legal proceedings (Footnote 7)	$	—		$	—		$	101,978		$	69,557
Facility restructuring charges (Footnote 2)	296			—			(2,791		)	—
Gain on sale of product line^(a)	—			—			—			6,522
Other expense, net	(642		)	(622		)	(1,152		)	(2,109		)
Total other income (expense), net	$	(346	)	$	(622	)	$	98,035		$	73,970


^(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.

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(9) Details of Selected Balance Sheet Accounts

Inventories



The following table is a summary of inventories (in thousands):	September 30, 2015			December 31, 2014
Raw materials and subassemblies	$	36,530		$	41,461
Work-in-process	6,467			18,221
Finished goods	16,213			21,284
Reserve for excess and obsolete inventories	(24,527		)	(29,804		)
Total	$	34,683		$	51,162

The $5.3 million reduction in the reserve for excess and obsolete inventories was due to the scrapping of fully reserved inventory.

Other Long-term Liabilities



The following table is a summary of other long-term liabilities (in thousands):	September 30, 2015		December 31, 2014
Accrual for loss contingency related to legal proceedings (Footnote 7)	$	22,000	$	123,770
Deferred rents	13,397		13,416
Facility restructuring accrual	3,298		3,353
Other long-term liabilities	1,135		3,265
Total	$	39,830	$	143,804

(10) Accumulated Other Comprehensive 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)	(757		)	(757		)
Accumulated other comprehensive loss at September 30, 2015	$	(13,564	)	$	(13,564	)

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

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



	Nine Months Ended September 30,
	2015			2014
Cash paid during the period for:
Interest	$	8,036		$	9,087
Income taxes	$	7,614		$	12,008
Non-cash items from investing and financing activities:
Purchases of computer equipment financed through capital leases	$	1,178		$	5,768
Investment in multi-client data library financed through accounts payable	$	13,617		$	1,298
Conversion of investment in a convertible note to equity	$	—		$	3,151
Transfer of inventory to property, plant, equipment and seismic rental equipment	$	15,936	^(a)	$	3,039

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^(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. During the nine months ended September 30, 2015, the Company purchased approximately $17.6 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

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 nine months ended September 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	Nine Months Ended September 30, 2014
Pro forma Consolidated ION Income Statement Information	Nine Months Ended September 30, 2014
Net revenues	$	381,902
Income from operations	$	22,492
Net income	$	55,838
Net income attributable to ION	$	53,684
Basic and diluted net income per common share	$	0.33

OceanGeo did not record any revenues during the nine months ended September 30, 2015 due to its vessels being idle while it attempts to secure a backlog of future orders.

(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 September 30, 2015 and December 31, 2014 were $186.3 million and $190.6 million, respectively, compared to its fair values of $108.9 million and $162.6 million as of September 30, 2015 and December 31, 2014, respectively. The fair value of the long-term debt was calculated using an active market price, based on Level 1 inputs defined as quoted prices for identical instruments in active markets.

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 nine months ended September 30, 2015, the Company recorded $0.6 million of share-based compensation expense attributable to SAR awards.

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Pursuant to ASC 718, “Compensation – Stock Compensation,” the SARs 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:



	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 September 30, 2015. For the nine months ended September 30, 2015 and 2014, the Company recorded revenues from BGP of $5.2 million and $5.1 million, respectively.

(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. The new guidance requires companies to make more estimates and use more judgment than under current accounting guidance. Public entities will be permitted to adopt the standard as early as the original public entity effective date (i.e, annual reporting periods beginning after December 15, 2016 and interim periods therein). Early adoption prior to that date will not be permitted.

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 in aggregate principal amount of its Notes. The Notes were issued by ION Geophysical Corporation and 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”), 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.

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



	September 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	$	25,470		$	—		$	62,769		$	—		$	88,239
Accounts receivable, net	6			11,017			10,564			—			21,587
Unbilled receivables	—			30,719			1,668			—			32,387
Inventories	—			12,578			22,105			—			34,683
Prepaid expenses and other current assets	2,638			1,971			6,160			(645		)	10,124
Total current assets	28,114			56,285			103,266			(645		)	187,020
Deferred income tax asset	—			8,296			200			(2,790		)	5,706
Property, plant, equipment and seismic rental equipment, net	5,051			24,064			47,966			—			77,081
Multi-client data library, net	—			121,329			14,578			—			135,907
Investment in subsidiaries	684,815			232,637			—			(917,452		)	—
Goodwill	—			—			26,809			—			26,809
Intangible assets, net	—			4,956			350			—			5,306
Intercompany receivables	78,982			—			—			(78,982		)	—
Other assets	8,000			141			1,239			—			9,380
Total assets	$	804,962		$	447,708		$	194,408		$	(999,869	)	$	447,209
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	—		$	6,533		$	79		$	—		$	6,612
Accounts payable	1,763			20,508			5,679			—			27,950
Accrued expenses	16,282			25,546			12,526			(52		)	54,302
Accrued multi-client data library royalties	—			11,926			517			—			12,443
Deferred revenue	—			3,135			2,440			—			5,575
Total current liabilities	18,045			67,648			21,241			(52		)	106,882
Long-term debt, net of current maturities	175,000			4,626			40			—			179,666
Intercompany payables	491,902			69,852			9,130			(570,884		)	—
Other long-term liabilities	476			31,834			10,904			(3,384		)	39,830
Total liabilities	685,423			173,960			41,315			(574,320		)	326,378
Redeemable noncontrolling interest	—			—			1,200			—			1,200
Equity:
Common stock	1,648			290,460			19,138			(309,598		)	1,648
Additional paid-in capital	892,007			180,700			234,234			(414,934		)	892,007
Accumulated earnings (deficit)	(753,987		)	224,206			(23,589		)	(200,617		)	(753,987		)
Accumulated other comprehensive income (loss)	(13,564		)	5,663			(13,361		)	7,698			(13,564		)
Due from ION Geophysical Corporation	—			(427,281		)	(64,621		)	491,902			—
Treasury stock	(6,565		)	—			—			—			(6,565		)
Total stockholders’ equity	119,539			273,748			151,801			(425,549		)	119,539
Noncontrolling interests	—			—			92			—			92
Total equity	119,539			273,748			151,893			(425,549		)	119,631
Total liabilities and equity	$	804,962		$	447,708		$	194,408		$	(999,869	)	$	447,209

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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 September 30, 2015
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Net revenues	$	—		$	41,768		$	25,072		$	(166	)	$	66,674
Cost of sales	—			31,712			24,020			(166		)	55,566
Gross profit	—			10,056			1,052			—			11,108
Total operating expenses	3,914			11,266			8,802			—			23,982
Loss from operations	(3,914		)	(1,210		)	(7,750		)	—			(12,874		)
Interest expense, net	(4,769		)	(107		)	22			—			(4,854		)
Intercompany interest, net	184			(806		)	622			—			—
Equity in losses of investments	(14,248		)	(12,141		)	—			26,389			—
Other income (expense)	326			(9		)	(663		)	—			(346		)
Net loss before income taxes	(22,421		)	(14,273		)	(7,769		)	26,389			(18,074		)
Income tax expense (benefit)	(2,038		)	65			4,055			—			2,082
Net loss	(20,383		)	(14,338		)	(11,824		)	26,389			(20,156		)
Net income attributable to noncontrolling interests	—			—			(227		)	—			(227		)
Net loss attributable to ION	(20,383		)	(14,338		)	(12,051		)	26,389			(20,383		)
Comprehensive net loss	$	(21,748	)	$	(15,543	)	$	(12,940	)	$	28,710		$	(21,521	)
Comprehensive income attributable to noncontrolling interest	—			—			(227		)	—			(227		)
Comprehensive net loss attributable to ION	$	(21,748	)	$	(15,543	)	$	(13,167	)	$	28,710		$	(21,748	)



	Three Months Ended September 30, 2014
Income Statement	ION Geophysical Corporation			The Guarantors			All Other Subsidiaries			Consolidating Adjustments			Total Consolidated
	(In thousands)
Net revenues	$	—		$	33,344		$	73,947		$	(751	)	$	106,540
Cost of sales	—			32,447			45,621			(751		)	77,317
Gross profit	—			897			28,326			—			29,223
Total operating expenses	7,599			15,357			11,616			—			34,572
Income (loss) from operations	(7,599		)	(14,460		)	16,710			—			(5,349		)
Interest expense, net	(4,931		)	(58		)	(59		)	—			(5,048		)
Intercompany interest, net	(90		)	566			(476		)	—			—
Equity in earnings (losses) of investments	(12,131		)	8,500			—			(1,927		)	(5,558		)
Other income (expense)	(17		)	21			(626		)	—			(622		)
Net income (loss) before income taxes	(24,768		)	(5,431		)	15,549			(1,927		)	(16,577		)
Income tax expense (benefit)	(227		)	800			7,772			—			8,345
Net income (loss)	(24,541		)	(6,231		)	7,777			(1,927		)	(24,922		)
Net loss attributable to noncontrolling interests	—			—			381			—			381
Net income (loss) attributable to ION	(24,541		)	(6,231		)	8,158			(1,927		)	(24,541		)
Comprehensive net income (loss)	$	(26,407	)	$	(8,838	)	$	5,168		$	3,289		$	(26,788	)
Comprehensive loss attributable to noncontrolling interest	—			—			381			—			381
Comprehensive net income (loss) attributable to ION	$	(26,407	)	$	(8,838	)	$	5,549		$	3,289		$	(26,407	)

Table of Contents

Nine Months Ended September 30, 2015

Income Statement

ION Geophysical Corporation

The Guarantors

All Other Subsidiaries

Consolidating Adjustments

Total Consolidated

(In thousands)

Net revenues

—

83,082

ION GEOPHYSICAL CORP - FORM 10-Q - November 5, 2015

Attached files