EXHIBIT 99.1
(INPUT/OUTPUT, INC. LOGO) NEWS RELEASE
Contact: Brad Eastman
Chief Administrative Officer
Input/Output, Inc.
281-933-3339
INPUT/OUTPUT REPORTS SECOND QUARTER RESULTS
GAAP LOSS PER SHARE FOR THE SECOND QUARTER WAS $0.27
NON-GAAP LOSS PER SHARE FOR THE SECOND QUARTER WAS $0.14
COMPANY REDUCES OUTSTANDING DEBT BY $15 MILLION
EXPECTS TO BECOME PROFITABLE IN THE FOURTH QUARTER
HOUSTON - JULY 30, 2003 - Input/Output, Inc. (NYSE: IO) today announced results
for the three months and six months ended June 30, 2003.
Net sales for the second quarter of 2003 were $34.6 million compared to
net sales of $22.9 million in the second quarter of 2002. Net sales were up 51%
primarily due to stronger sales in the recovering land division. Net loss
applicable to common shareholders in accordance with generally accepted
accounting principles (GAAP) was $13.7 million, or $0.27 loss per share,
compared to a GAAP loss of $78.9 million, or $1.55 loss per share, in the second
quarter of 2002.
Included in the 2003 second quarter GAAP loss are significant items
totaling $6.8 million: $0.8 million related to severance costs as the Company
continues to evaluate its staffing needs in light of current economic
conditions, $0.4 million of moving costs incurred in completing the relocation
out of the Company's Alvin, Texas facility, $2.5 million related to the
write-down of rental equipment associated with the Company's first generation
radio-based VectorSeis(R) land acquisition systems, $2.0 million related to the
impairment of the Company's investment in Energy Virtual Partners, Inc ("EVP"),
$1.7 million of warrant revaluations, partially offset by a federal tax refund
of $0.6 million. Included in the 2002 second quarter GAAP loss are significant
items totaling $67.8 million, which consisted of a $63.8 million net charge to
fully reserve I/O's deferred tax assets, $2.5 million in charges associated with
the closure of facilities and severance, and $1.5 million for a dividend on
preferred stock that was redeemed in the third quarter of 2002.
Excluding the significant items above, the non-GAAP loss for the second
quarter of 2003 was $6.9 million, or $0.14 loss per share, compared to a
non-GAAP loss of $11.1 million, or $0.22 loss per share in the second quarter of
2002. I/O believes that this non-GAAP information is useful to investors
because it is a consistent measure of the underlying operating results of I/O's
business. A discussion of the uses of non-GAAP measures and concerns with those
uses is detailed below. A detailed reconciliation of non-GAAP to GAAP-based
measures is included at the end of this press release.
Bob Peebler, I/O's President and Chief Executive Officer, said, "In
addition to increasing revenues, I/O has begun to realize efficiencies from our
cost reduction efforts. We are pleased that we were able to improve our gross
profit on an adjusted basis when compared with the same period last year. In
addition, we have brought our operating expenses down 12% on an adjusted basis,
despite a significant rise in sales. We believe continued improvements in
revenue and additional cost cutting measures should make us profitable in the
fourth quarter of 2003."
Land sales during the second quarter more than doubled to $23.7 million
this year, up from $10.9 million in 2002 mainly driven by a significant increase
in international sales. Marine sales declined to $10.9 million this quarter
compared to $12.1 million for the same period a year ago.
Adjusted earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) this quarter were a negative $6.9 million compared to a
negative $11.2 million for the second quarter of last year. A reconciliation of
adjusted EBITDA to reported earnings is presented at the end of this press
release. Similar to last year's second quarter, depreciation and amortization
was $3.0 million.
Additional second quarter highlights include the payment of $15 million
of debt to SCF Partners related to the repurchase of preferred stock last year.
Cash flow from operations was $0.8 million, but cash at June 30, 2003 declined
from the first quarter due to the repayment of the debt and the Company's
investment in EVP. The Company's debt-to-capital ratio at June 30, 2003 was 22%.
Net sales for the first six months of 2003 increased 43% to $75.7
million, up from $53.1 million during the same period last year. Land sales for
the first six months were $56.3 million, an increase of 98% compared to $28.4
million in the first six months of 2002. Marine activity decreased about 21%,
with sales of $19.4 million this year compared to $24.6 million last year.
The GAAP loss for the first six months of 2003 was $19.0 million, or
$0.37 loss per share, compared to a GAAP loss of $84.9 million, or $1.67 loss
per share in 2002.
RECENT DEVELOPMENTS
In April 2003 I/O invested $3.0 million in Series B Preferred
securities of EVP for 22% of the outstanding ownership interests and 11% of the
outstanding voting interests. During the second quarter EVP failed to close two
anticipated asset management agreements. Since that time, EVP has reevaluated
its business model and adequacy of capital. Therefore, in the second quarter I/O
wrote its investment down to its approximate liquidation value of $1.0 million.
Jay Lapeyre, I/O's Chairman of the Board commented, "We originally
believed EVP would present unique opportunities to demonstrate the value of
VectorSeis in production operations. We also knew EVP was a development-stage
operation and therefore a high risk investment due to the unique nature of its
business model. EVP continues to evaluate its options, but EVP has voted to
liquidate if a clear feasible business strategy is not developed by August 15,
2003. In order to avoid any potential conflict of interest concerns, Bob Peebler
has suggested and the Company has agreed that all proceeds he receives from
liquidation of EVP will be paid to I/O."
OUTLOOK
The statements regarding fourth quarter profitability above and the
statements below are based on our current expectations. These statements are
forward looking, and actual results may differ materially. Factors that may
cause actual results to differ from these forward-looking statements are
detailed below.
Brad Eastman, Chief Administrative Officer, commented, "Based on our
current activity and our improved cost structure, we are expecting third quarter
sales of $35-$39 million and a gross margin percentage in the mid-20s, which
should yield a net loss per share of $0.05 - $0.09 including anticipated
severance charges. We are expecting an increase in gross margin in the second
half of this year as we realize further cost savings from the closing of the
Alvin facility and we implement additional headcount reductions later this year.
We are anticipating fourth quarter sales of $40-$50 million, with a gross margin
percentage in the mid- to upper-20s, and a net income per share of $0.00 -
$0.05."
CONFERENCE CALL DETAILS
Input/Output has scheduled a conference call for Wednesday, July 30,
2003 at 5:00 p.m. eastern / 4:00 p.m. central time to discuss quarterly results.
Please dial 888-603-6976 and ask for the Input/Output conference call at least
10 minutes prior to the start time. Investors, analysts and the general public
will also have the opportunity to listen to the conference call over the
Internet by visiting http://www.i-o.com. To listen to the live call on the web,
please visit the web site at least fifteen minutes before the call begins to
register, download and install any necessary audio software. For those who
cannot listen to the live call or live web cast, a telephonic replay of the
conference call will be available through August 6, 2003 and may be accessed by
calling 800-925-4670. A web archive will be available shortly after the call and
will remain available for 7 days at http://www.i-o.com. A transcript of the
conference call will be available on the I/O website for 12 months. For more
information, please contact Elisa Smith at 281-879-3593.
Input/Output, Inc. is a major provider of seismic acquisition imaging
technology for land, marine and transition zone exploration, production and
reservoir monitoring. The Company specializes in technology that creates value
for the energy industry in the areas of 2D, 3D, 4D and multicomponent seismic
data. Additional information on Input/Output, Inc. is available on the Internet
at www.i-o.com or contact us at ir@i-o.com.
The information included herein contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements include statements concerning future revenues, gross margin, cost
savings and net income. Actual results may vary materially from those described
in these forward-looking statements. All forward-looking statements reflect
numerous assumptions and involve a number of risks and uncertainties. These
risks and uncertainties include the timing and development of the Company's
products and services and market acceptance of the Company's new and revised
product offerings; risks associated with the Company's restructuring program;
risks associated with competitors' product offerings and pricing pressures
resulting therefrom; the Company's inability to produce products to preserve
and increase market share; and technological and marketplace changes affecting
the Company's product line. Additional risk factors, which could affect actual
results, are disclosed by the Company from time to time in its filings with the
Securities and Exchange Commission.
This press release contains certain non-GAAP financial measures.
Management uses these non-GAAP financial measures to evaluate I/O's financial
results from operations, develop budgets and manage expenditures. I/O's
calculation of non-GAAP measures is likely to differ from methods used by other
companies and should not be regarded as a replacement for corresponding GAAP
results. Investors are encouraged to review the reconciliation of these non-GAAP
financial measures to comparable GAAP results, which is attached to this press
release.
(INPUT/OUTPUT, INC. LOGO)
INPUT/OUTPUT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- --------------------------------
2003 2002 2003 2002
-------------- -------------- ------------ --------------
Net sales.................................... $ 34,562 $ 22,850 $ 75,739 $ 53,063
Cost of sales................................ 31,343 20,365 63,759 43,617
-------------- -------------- ------------ --------------
Gross profit........................ 3,219 2,485 11,980 9,446
-------------- -------------- ------------ --------------
Operating expenses:
Research and development.................. 4,955 8,667 10,473 15,688
Marketing and sales....................... 3,025 2,775 5,836 5,305
General and administrative................ 5,362 4,709 9,427 9,336
Amortization of intangibles............... 245 321 549 637
Impairment of long-lived assets........... - - 1,120 -
-------------- -------------- ------------ --------------
Total operating expenses........... 13,587 16,472 27,405 30,966
-------------- -------------- ------------ --------------
Loss from operations......................... (10,368) (13,987) (15,425) (21,520)
Interest expense............................. (843) (461) (2,188) (496)
Interest income.............................. 525 753 1,116 1,244
Fair value adjustment of warrant obligation.. (1,712) - (841) -
Impairment of investment..................... (2,036) - (2,036) -
Other income (expense)....................... 451 (207) 700 (343)
-------------- -------------- ------------ --------------
Loss before income taxes..................... (13,983) (13,902) (18,674) (21,115)
Income tax (benefit) expense ................ (297) 63,511 291 60,840
-------------- -------------- ------------ --------------
Net loss..................................... (13,686) (77,413) (18,965) (81,955)
Preferred dividend........................... - 1,479 - 2,934
-------------- -------------- ------------ --------------
Net loss applicable to common shares......... $ (13,686) $ (78,892) $ (18,965) $ (84,889)
============== ============== ============ ==============
Basic loss per common share.................. $ (0.27) $ (1.55) $ (.37) $ (1.67)
============== ============== ============ ==============
Weighted average number of
common shares outstanding.................. 51,231,189 50,971,486 51,213,041 50,931,384
============== ============== ============ ==============
Diluted loss per common share................ $ (0.27) $ (1.55) $ (.37) $ (1.67)
============== ============== ============ ==============
Weighted average number of diluted
common shares outstanding.................. 51,231,189 50,971,486 51,213,041 50,931,384
============== ============== ============ ==============
(INPUT/OUTPUT, INC. LOGO)
INPUT/OUTPUT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<Table>
<Caption>
JUNE 30,
2003 DECEMBER 31,
(UNAUDITED) 2002
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents............................. $ 39,087 $ 77,144
Restricted cash....................................... 399 247
Accounts receivable, net.............................. 27,325 18,745
Current portion notes receivable, net................. 12,407 6,137
Inventories........................................... 48,886 50,010
Prepaid expenses and other current assets............. 2,125 3,136
------------ -------------
Total current assets.............................. 130,229 155,419
Notes receivable......................................... 6,093 12,057
Property, plant and equipment, net....................... 33,036 39,255
Goodwill, net............................................ 33,758 33,758
Other assets, net........................................ 6,394 7,956
------------ -------------
Total assets...................................... $ 209,510 $ 248,445
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.................. $ 2,151 $ 2,142
Accounts payable...................................... 13,267 18,927
Accrued expenses...................................... 16,540 17,210
Warrant obligation.................................... 3,041 2,200
------------ -------------
Total current liabilities..................... 34,999 40,479
Long-term debt, net of current maturities................ 35,510 51,430
Other long-term liabilities.............................. 4,897 5,199
Stockholders' equity:
Common stock.......................................... 520 519
Additional paid-in capital............................ 295,796 296,002
Accumulated deficit................................... (155,499) (136,534)
Accumulated other comprehensive loss.................. (597) (2,380)
Treasury stock........................................ (5,785) (5,929)
Unamortized restricted stock compensation............. (331) (341)
------------ -------------
Total stockholders' equity........................ 134,104 151,337
------------ -------------
Total liabilities and stockholders' equity........ $ 209,510 $ 248,445
============ =============
</Table>
(INPUT/OUTPUT, INC. LOGO)
CALCULATION OF EBIT AND ADJUSTED EBITDA
(NON-GAAP MEASURES)
(IN THOUSANDS)
(UNAUDITED)
Adjusted EBITDA is a Non-GAAP measurement that is presented as an additional
indicator of operating performance and is not a substitute for net income (loss)
or earnings (loss) per share calculated under generally accepted accounting
principals (GAAP). The calculation of adjusted EBITDA shown below is based upon
amounts derived from the company's financial statements prepared in conformity
with GAAP.
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
Loss before income taxes....................... $ (13,983) $ (13,902) $ (18,674) $ (21,115)
Interest expense............................... 843 461 2,188 496
Interest income................................ (525) (753) (1,116) (1,244)
-------------- -------------- -------------- --------------
Earnings before net interest expense and
taxes (EBIT)................................. (13,665) (14,194) (17,602) (21,863)
Fair value adjustment of warrant obligation.... 1,712 - 841 -
Impairment of investment....................... 2,036 - 2,036 -
Total depreciation and amortization expense.... 3,035 3,027 6,609 6,019
-------------- -------------- -------------- --------------
Adjusted earnings before net interest
expense, taxes, depreciation and
amortization (adjusted EBITDA)............... $ (6,882) $ (11,167) $ (8,116) $ (15,844)
============== ============== ============== ==============
</Table>
(INPUT/OUTPUT, INC. LOGO)
A RECONCILIATION OF NET LOSS, EXCLUDING SIGNIFICANT ITEMS (NON-GAAP LOSS) IS AS
FOLLOWS (IN THOUSANDS):
THREE MONTHS FAIR VALUE THREE MONTHS
ENDED ADJUSTMENT WRITE-DOWN FEDERAL ENDED
JUNE 30, 2003 SEVERANCE MOVING OF WARRANT OF RENTAL IMPAIRMENT TAX JUNE 30, 2003
AS REPORTED COSTS COSTS OBLIGATION EQUIPMENT OF INVESTMENT REFUND AS ADJUSTED
------------- --------- ------ ---------- --------- ------------- ------- -------------
Net sales.................... $ 34,562 $ 34,562
Cost of sales................ 31,343 (280) (2,500) 28,563
------------- --------- ------ ---------- --------- ------------- ------- ------------
Gross profit................. 3,219 280 - - 2,500 - - 5,999
------------- --------- ------ ---------- --------- ------------- ------- ------------
Operating expenses:
Research and development.. 4,955 (22) 4,933
Marketing and sales....... 3,025 3,025
General and
administrative.......... 5,362 (457) (366) 4,539
Amortization of
intangibles............. 245 245
------------- --------- ------ ---------- --------- ------------- ------- ------------
Total operating
expenses.............. 13,587 (479) (366) - - - - 12,742
Loss from operations......... (10,368) 759 366 - 2,500 - - (6,743)
Other income (expense)....... (3,615) 1,712 2,036 133
------------- --------- ------ ---------- --------- ------------- ------- ------------
Loss before income taxes..... (13,983) 759 366 1,712 2,500 2,036 - (6,610)
Income tax expense
(benefit).................. (297) 632 335
------------- --------- ------ ---------- --------- ------------- ------- ------------
Net loss..................... $ (13,686) 759 366 1,712 2,500 2,036 (632) $ (6,945)
============= ========= ====== ========== ========= ============= ======= ============
</Table>
(INPUT/OUTPUT, INC. LOGO)
A RECONCILIATION OF NET LOSS, EXCLUDING SIGNIFICANT ITEMS (NON-GAAP LOSS) IS AS
FOLLOWS (IN THOUSANDS):
THREE MONTHS CLOSURE THREE MONTHS
ENDED COSTS TAX ENDED
JUNE 30, 2002 SEVERANCE ASSOCIATED VALUATION PREFERRED JUNE 30, 2002
AS REPORTED COSTS AUSTIN FACILITY ALLOWANCE DIVIDEND AS ADJUSTED
------------- --------- --------------- --------- --------- -------------
Net sales....................... $ 22,850 $ 22,850
Cost of sales................... 20,365 (531) 19,834
------------- --------- --------------- --------- --------- -------------
Gross profit.................... 2,485 531 3,016
------------- --------- --------------- --------- --------- -------------
Operating expenses:
Research and development..... 8,667 (372) (1,375) 6,920
Marketing and sales.......... 2,775 (47) 2,728
General and administrative... 4,709 (185) 4,524
Amortization of intangibles.. 321 321
------------- --------- --------------- --------- --------- -------------
Total operating expenses.. 16,472 (604) (1,375) 14,493
Loss from operations............ (13,987) 1,135 1,375 (11,477)
Other income (expense).......... 85 85
------------- --------- --------------- --------- --------- -------------
Loss before income taxes........ (13,902) 1,135 1,375 (11,392)
Income tax expense (benefit).... 63,511 (63,812) (301)
------------- --------- --------------- --------- --------- -------------
Net loss ....................... (77,413) 1,135 1,375 63,812 (11,091)
Preferred dividend.............. 1,479 (1,479) -
------------- --------- --------------- --------- --------- -------------
Net loss ....................... $ (78,892) 1,135 1,375 63,812 1,479 $ (11,091)
============= ========= =============== ========= ========= =============
</Table>