Condensed Consolidating Financial Information | Condensed Consolidating Financial Information The notes were issued by ION Geophysical Corporation, and are guaranteed by the Company’s current material U.S. subsidiaries: GX Technology Corporation, ION Exploration Products (U.S.A.), Inc. and I/O Marine Systems, Inc. (“the Guarantors”), which are 100-percent-owned subsidiaries. The Guarantors have fully and unconditionally guaranteed the payment obligations of ION Geophysical Corporation with respect to these debt securities. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for: • ION Geophysical Corporation and the guarantor subsidiaries (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting). • All other nonguarantor subsidiaries. • The consolid ating 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 notes. December 31, 2017 Balance Sheet ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 39,344 $ — $ 12,712 $ — $ 52,056 Accounts receivable, net 50 9,374 10,054 — 19,478 Unbilled receivables — 16,666 20,638 — 37,304 Inventories — 8,686 5,822 — 14,508 Prepaid expenses and other current assets 2,427 769 4,447 — 7,643 Total current assets 41,821 35,495 53,673 — 130,989 Deferred income tax asset 1,264 — 489 — 1,753 Property, plant, equipment and seismic rental equipment, net 511 7,170 44,472 — 52,153 Multi-client data library, net — 62,438 26,862 — 89,300 Investment in subsidiaries 693,679 321,934 — (1,015,613 ) — Goodwill — — 24,089 — 24,089 Intangible assets, net — 1,666 — — 1,666 Intercompany receivables — 132,184 90,227 (222,411 ) — Other assets 686 145 288 — 1,119 Total assets $ 737,961 $ 561,032 $ 240,100 $ (1,238,024 ) $ 301,069 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 39,774 $ 250 $ — $ — $ 40,024 Accounts payable 1,774 20,982 2,195 — 24,951 Accrued expenses 12,284 15,601 10,812 — 38,697 Accrued multi-client data library royalties — 26,824 211 — 27,035 Deferred revenue — 3,201 5,709 — 8,910 Total current liabilities 53,832 66,858 18,927 — 139,617 Long-term debt, net of current maturities 116,691 29 — — 116,720 Intercompany payables 537,417 — — (537,417 ) — Other long-term liabilities 454 6,084 7,388 — 13,926 Total liabilities 708,394 72,971 26,315 (537,417 ) 270,263 Equity: Common stock 120 290,460 49,394 (339,854 ) 120 Additional paid-in capital 903,247 180,701 202,290 (382,991 ) 903,247 Accumulated earnings (deficit) (854,921 ) 248,770 59,307 (308,077 ) (854,921 ) Accumulated other comprehensive income (loss) (18,879 ) 4,372 (19,681 ) 15,309 (18,879 ) Due from ION Geophysical Corporation — (236,242 ) (78,764 ) 315,006 — Total stockholders’ equity 29,567 488,061 212,546 (700,607 ) 29,567 Noncontrolling interests — — 1,239 — 1,239 Total equity 29,567 488,061 213,785 (700,607 ) 30,806 Total liabilities and equity $ 737,961 $ 561,032 $ 240,100 $ (1,238,024 ) $ 301,069 December 31, 2016 Balance Sheet ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 23,042 $ — $ 29,610 $ — $ 52,652 Accounts receivable, net — 12,775 7,995 — 20,770 Unbilled receivables — 5,275 8,140 — 13,415 Inventories — 8,610 6,631 — 15,241 Prepaid expenses and other current assets 3,387 4,624 1,548 — 9,559 Total current assets 26,429 31,284 53,924 — 111,637 Property, plant, equipment and seismic rental equipment, net 1,745 12,369 53,374 — 67,488 Multi-client data library, net — 97,369 8,566 — 105,935 Investment in subsidiaries 660,880 257,732 — (918,612 ) — Goodwill — — 22,208 — 22,208 Intangible assets, net — 3,008 95 — 3,103 Intercompany receivables — — 32,174 (32,174 ) — Other assets 2,469 145 231 — 2,845 Total assets $ 691,523 $ 401,907 $ 170,572 $ (950,786 ) $ 313,216 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 11,281 $ 3,166 $ 134 $ — $ 14,581 Accounts payable 2,101 19,720 5,068 — 26,889 Accrued expenses 8,579 10,016 7,645 — 26,240 Accrued multi-client data library royalties — 23,663 — — 23,663 Deferred revenue — 2,667 1,042 — 3,709 Total current liabilities 21,961 59,232 13,889 — 95,082 Long-term debt, net of current maturities 143,930 279 — — 144,209 Intercompany payables 472,276 10,155 — (482,431 ) — Other long-term liabilities 467 12,117 7,943 — 20,527 Total liabilities 638,634 81,783 21,832 (482,431 ) 259,818 Equity: Common stock 118 290,460 19,138 (309,598 ) 118 Additional paid-in capital 899,198 180,700 232,590 (413,290 ) 899,198 Accumulated earnings (deficit) (824,679 ) 216,730 (3,639 ) (213,091 ) (824,679 ) Accumulated other comprehensive income (loss) (21,748 ) 4,420 (21,787 ) 17,367 (21,748 ) Due from ION Geophysical Corporation — (372,186 ) (78,071 ) 450,257 — Treasury stock — — Total stockholders’ equity 52,889 320,124 148,231 (468,355 ) 52,889 Noncontrolling interests — — 509 — 509 Total equity 52,889 320,124 148,740 (468,355 ) 53,398 Total liabilities and equity $ 691,523 $ 401,907 $ 170,572 $ (950,786 ) $ 313,216 Year Ended December 31, 2017 Income Statement ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) Total net revenues $ — $ 77,054 $ 120,500 $ — $ 197,554 Cost of goods sold — 80,427 41,488 — 121,915 Gross profit (loss) — (3,373 ) 79,012 — 75,639 Total operating expenses 39,000 27,950 17,388 — 84,338 Income (loss) from operations (39,000 ) (31,323 ) 61,624 — (8,699 ) Interest expense, net (16,729 ) (107 ) 127 — (16,709 ) Intercompany interest, net 1,084 (6,613 ) 5,529 — — Equity in earnings (losses) of investments 27,696 67,290 — (94,986 ) — Other income (expense) (4,610 ) (382 ) 1,047 — (3,945 ) Income (loss) before income taxes (31,559 ) 28,865 68,327 (94,986 ) (29,353 ) Income tax expense (benefit) (1,317 ) (3,175 ) 4,516 — 24 Net income (loss) (30,242 ) 32,040 63,811 (94,986 ) (29,377 ) Net income attributable to noncontrolling interests — — (865 ) — (865 ) Net income (loss) attributable to ION $ (30,242 ) $ 32,040 $ 62,946 $ (94,986 ) $ (30,242 ) Comprehensive net income (loss) $ (27,373 ) $ 31,992 $ 65,916 $ (97,043 ) $ (26,508 ) Comprehensive income attributable to noncontrolling interest — — (865 ) — (865 ) Comprehensive net income (loss) attributable to ION $ (27,373 ) $ 31,992 $ 65,051 $ (97,043 ) $ (27,373 ) Year Ended December 31, 2016 Income Statement ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) Total net revenues $ — $ 79,006 $ 93,802 $ — $ 172,808 Cost of goods sold — 84,373 52,403 — 136,776 Gross profit (loss) — (5,367 ) 41,399 — 36,032 Total operating expenses 31,438 27,274 20,491 — 79,203 Income (loss) from operations (31,438 ) (32,641 ) 20,908 — (43,171 ) Interest expense, net (18,406 ) (173 ) 94 — (18,485 ) Intercompany interest, net 978 (4,397 ) 3,419 — — Equity in earnings (losses) of investments (19,756 ) 23,368 — (3,612 ) — Other income (expense) 3,528 702 (2,880 ) — 1,350 Income (loss) before income taxes (65,094 ) (13,141 ) 21,541 (3,612 ) (60,306 ) Income tax expense 54 1,337 3,030 — 4,421 Net income (loss) (65,148 ) (14,478 ) 18,511 (3,612 ) (64,727 ) Net income attributable to noncontrolling interests — — (421 ) — (421 ) Net income (loss) attributable to ION $ (65,148 ) $ (14,478 ) $ 18,090 $ (3,612 ) $ (65,148 ) Comprehensive net income (loss) $ (72,331 ) $ (14,478 ) $ 10,907 $ 4,208 $ (71,694 ) Comprehensive loss attributable to noncontrolling interest — — (421 ) — (421 ) Comprehensive net income (loss) attributable to ION $ (72,331 ) $ (14,478 ) $ 10,486 $ 4,208 $ (72,115 ) Year Ended December 31, 2015 Income Statement ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) Total net revenues $ — $ 145,615 $ 76,954 $ (1,056 ) $ 221,513 Cost of goods sold — 126,176 88,390 (1,056 ) 213,510 Gross profit (loss) — 19,439 (11,436 ) — 8,003 Total operating expenses 26,091 47,579 34,965 — 108,635 Loss from operations (26,091 ) (28,140 ) (46,401 ) — (100,632 ) Interest expense, net (18,434 ) (351 ) 32 — (18,753 ) Intercompany interest, net 697 (3,140 ) 2,443 — — Equity in earnings (losses) of investments 16,604 (42,953 ) — 26,349 — Other income (expense) 192 101,978 (3,895 ) — 98,275 Income (loss) before income taxes (27,032 ) 27,394 (47,821 ) 26,349 (21,110 ) Income tax expense (benefit) (1,910 ) 5,031 923 — 4,044 Net income (loss) (25,122 ) 22,363 (48,744 ) 26,349 (25,154 ) Net loss attributable to noncontrolling interests — — 32 — 32 Net income (loss) attributable to ION $ (25,122 ) $ 22,363 $ (48,712 ) $ 26,349 $ (25,122 ) Comprehensive net income (loss) $ (27,096 ) $ 20,553 $ (50,551 ) $ 29,966 $ (27,128 ) Comprehensive income attributable to noncontrolling interest — — 32 — 32 Comprehensive net income (loss) attributable to ION $ (27,096 ) $ 20,553 $ (50,519 ) $ 29,966 $ (27,096 ) Year Ended December 31, 2017 Statement of Cash Flows ION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated (In thousands) Cash flows from operating activities: Net cash provided by (used in) operating activities $ (21,897 ) $ 61,390 $ (11,463 ) $ 28,030 Cash flows from investing activities: Investment in multi-client data library — (11,797 ) (11,913 ) (23,710 ) Purchase of property, plant, equipment and seismic rental equipment (165 ) (817 ) (81 ) (1,063 ) Net cash used in investing activities (165 ) (12,614 ) (11,994 ) (24,773 ) Cash flows from financing activities: Payments on notes payable and long-term debt (1,591 ) (3,167 ) (58 ) (4,816 ) Cost associated with issuance of debt (53 ) — — (53 ) Intercompany lending 38,732 (45,609 ) 6,877 — Proceeds from employee stock purchases and exercise of stock options 1,619 — — 1,619 Dividend payment to non-controlling interest (100 ) — — (100 ) Other financing activities (243 ) — — (243 ) Net cash provided by (used in) financing activities 38,364 (48,776 ) 6,819 (3,593 ) Effect of change in foreign currency exchange rates on cash and cash equivalents — — (260 ) (260 ) Net increase (decrease) in cash and cash equivalents 16,302 — (16,898 ) (596 ) Cash and cash equivalents at beginning of period 23,042 — 29,610 52,652 Cash and cash equivalents at end of period $ 39,344 $ — $ 12,712 $ 52,056 Year Ended December 31, 2016 Statement of Cash Flows ION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated (In thousands) Cash flows from operating activities: Net cash provided by (used in) operating activities $ (30,154 ) $ 52,385 $ (20,660 ) $ 1,571 Cash flows from investing activities: Investment in multi-client data library — (10,985 ) (3,899 ) (14,884 ) Purchase of property, plant, equipment and seismic rental equipment (73 ) (343 ) (1,072 ) (1,488 ) Proceeds from sale of a cost-method investment 2,698 — — 2,698 Other investing activities — 30 — 30 Net cash provided by (used in) investing activities 2,625 (11,298 ) (4,971 ) (13,644 ) Cash flows from financing activities: Borrowings under revolving line of credit 15,000 — — 15,000 Repayments under revolving line of credit (5,000 ) — — (5,000 ) Payments on notes payable and long-term debt (2,070 ) (6,316 ) (248 ) (8,634 ) Cost associated with issuance of debt (6,744 ) — — (6,744 ) Repurchase of common stock (964 ) — — (964 ) Intercompany lending 31,867 (34,771 ) 2,904 — Payments to repurchase bonds (15,000 ) — — (15,000 ) Other financing activities (252 ) — — (252 ) Net cash provided by (used in) financing activities 16,837 (41,087 ) 2,656 (21,594 ) Effect of change in foreign currency exchange rates on cash and cash equivalents — — 1,386 1,386 Net decrease in cash and cash equivalents (10,692 ) — (21,589 ) (32,281 ) Cash and cash equivalents at beginning of period 33,734 — 51,199 84,933 Cash and cash equivalents at end of period $ 23,042 $ — $ 29,610 $ 52,652 Year Ended December 31, 2015 Statement of Cash Flows ION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated (In thousands) Cash flows from operating activities: Net cash provided by (used in) operating activities $ (425,310 ) $ 225,581 $ 183,205 $ (16,524 ) Cash flows from investing activities: Investment in multi-client data library — (44,687 ) (871 ) (45,558 ) Purchase of property, plant and equipment (347 ) (3,945 ) (14,949 ) (19,241 ) Other investing activities — 1,263 — 1,263 Net cash used in investing activities (347 ) (47,369 ) (15,820 ) (63,536 ) Cash flows from financing activities: Payments on notes payable and long-term debt (153 ) (6,467 ) (832 ) (7,452 ) Cost associated with issuance of debt (145 ) — — (145 ) Repurchase of common stock (1,989 ) — — (1,989 ) Intercompany lending 352,091 (171,745 ) (180,346 ) — Other financing activities 73 — — 73 Net cash provided by (used in) financing activities 349,877 (178,212 ) (181,178 ) (9,513 ) Effect of change in foreign currency exchange rates on cash and cash equivalents — — 898 898 Net decrease in cash and cash equivalents (75,780 ) — (12,895 ) (88,675 ) Cash and cash equivalents at beginning of period 109,514 — 64,094 173,608 Cash and cash equivalents at end of period $ 33,734 $ — $ 51,199 $ 84,933 |