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, 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 — 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 December 31, 2015 Balance Sheet ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 33,734 $ — $ 51,199 $ — $ 84,933 Accounts receivable, net — 35,133 9,232 — 44,365 Unbilled receivables — 19,046 891 — 19,937 Inventories — 10,939 21,782 — 32,721 Prepaid expenses and other current assets 5,435 1,458 7,914 — 14,807 Total current assets 39,169 66,576 91,018 — 196,763 Property, plant, equipment and seismic rental equipment, net 4,521 21,072 46,434 — 72,027 Multi-client data library, net — 120,550 11,687 — 132,237 Investment in subsidiaries 680,508 243,319 — (923,827 ) — Goodwill — — 26,274 — 26,274 Intangible assets, net — 4,523 287 — 4,810 Intercompany receivables 75,641 — — (75,641 ) — Other assets 1,724 146 1,107 — 2,977 Total assets $ 801,563 $ 456,186 $ 176,807 $ (999,468 ) $ 435,088 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 486 $ 6,856 $ 570 $ — $ 7,912 Accounts payable 2,086 19,839 7,874 — 29,799 Accrued expenses 11,199 16,200 6,888 — 34,287 Accrued multi-client data library royalties — 25,045 — — 25,045 Deferred revenue — 5,071 1,489 — 6,560 Total current liabilities 13,771 73,011 16,821 — 103,603 Long-term debt, net of current maturities 171,672 3,408 — — 175,080 Intercompany payables 503,621 68,286 7,355 (579,262 ) — Other long-term liabilities 540 33,305 10,520 — 44,365 Total liabilities 689,604 178,010 34,696 (579,262 ) 323,048 Equity: Common stock 107 290,460 19,138 (309,598 ) 107 Additional paid-in capital 894,715 180,700 234,234 (414,934 ) 894,715 Accumulated earnings (deficit) (759,531 ) 231,208 (21,729 ) (209,479 ) (759,531 ) Accumulated other comprehensive income (loss) (14,781 ) 4,420 (14,604 ) 10,184 (14,781 ) Due from ION Geophysical Corporation — (428,612 ) (75,009 ) 503,621 — Treasury stock (8,551 ) — — — (8,551 ) Total stockholders’ equity 111,959 278,176 142,030 (420,206 ) 111,959 Noncontrolling interests — — 81 — 81 Total equity 111,959 278,176 142,111 (420,206 ) 112,040 Total liabilities and equity $ 801,563 $ 456,186 $ 176,807 $ (999,468 ) $ 435,088 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 income 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 loss 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, 2014 Income Statement ION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated (In thousands) Total net revenues $ — $ 221,008 $ 291,302 $ (2,752 ) $ 509,558 Cost of goods sold — 262,829 187,258 (2,752 ) 447,335 Gross profit (loss) — (41,821 ) 104,044 — 62,223 Total operating expenses 38,961 88,481 52,710 — 180,152 Income (loss) from operations (38,961 ) (130,302 ) 51,334 — (117,929 ) Interest expense, net (18,537 ) (245 ) (600 ) — (19,382 ) Intercompany interest, net (340 ) 2,146 (1,806 ) — — Equity in earnings (losses) of investments (74,615 ) 32,043 738 (7,651 ) (49,485 ) Other income 4,536 74,295 1,029 — 79,860 Income (loss) before income taxes (127,917 ) (22,063 ) 50,695 (7,651 ) (106,936 ) Income tax expense 335 1,277 18,970 — 20,582 Net income (loss) (128,252 ) (23,340 ) 31,725 (7,651 ) (127,518 ) Net income attributable to noncontrolling interests — — (734 ) — (734 ) Net income (loss) attributable to ION $ (128,252 ) $ (23,340 ) $ 30,991 $ (7,651 ) $ (128,252 ) Comprehensive net income (loss) $ (129,921 ) $ (23,329 ) $ 30,850 $ (6,787 ) $ (129,187 ) Comprehensive income attributable to noncontrolling interest — — (734 ) — (734 ) Comprehensive net income (loss) attributable to ION $ (129,921 ) $ (23,329 ) $ 30,116 $ (6,787 ) $ (129,921 ) 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 cost method investments 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, equipment and seismic rental 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 Year Ended December 31, 2014 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 $ (53,925 ) $ 107,590 $ 76,115 $ 129,780 Cash flows from investing activities: Investment in multi-client data library — (67,552 ) (233 ) (67,785 ) Purchase of property, plant and equipment (1,240 ) (4,530 ) (2,494 ) (8,264 ) Repayment of advances by INOVA Geophysical 1,000 — — 1,000 Net investment in and advances to OceanGeo B.V. prior to its consolidation — — (3,074 ) (3,074 ) Net proceeds from sale of Source product line — 9,881 4,513 14,394 Proceeds from sale of a cost-method investment 14,051 — — 14,051 Other investing activities 579 26 323 928 Net cash provided by (used in) investing activities 14,390 (62,175 ) (965 ) (48,750 ) Cash flows from financing activities: Payments under revolving line of credit (50,000 ) — — (50,000 ) Borrowings under revolving line of credit 15,000 — — 15,000 Payments on notes payable and long-term debt — (5,384 ) (7,614 ) (12,998 ) Cost associated with issuance of debt (2,194 ) — — (2,194 ) Intercompany lending 61,324 (40,031 ) (21,293 ) — Payment of preferred dividends — — (6,000 ) (6,000 ) Other financing activities 218 — — 218 Net cash provided by (used in) financing activities 24,348 (45,415 ) (34,907 ) (55,974 ) Effect of change in foreign currency exchange rates on cash and cash equivalents — — 496 496 Net increase (decrease) in cash and cash equivalents (15,187 ) — 40,739 25,552 Cash and cash equivalents at beginning of period 124,701 — 23,355 148,056 Cash and cash equivalents at end of period $ 109,514 $ — $ 64,094 $ 173,608 |