EXHIBIT 99.1
[INPUT/OUTPUT LOGO APPEARS HERE] CONTACTS: J. Michael Kirksey
Chief Financial Officer
(281) 879-3658Input/O Input/Output (281) 879-3672
Jack Lascar, Partner
Karen Roan, Vice President
DRG&E (713) 529-6600
INPUT/OUTPUT REPORTS FOURTH QUARTER
AND YEAR-END RESULTS
o FOURTH QUARTER 2003 REVENUES OF $44 MILLION AND EARNINGS PER SHARE OF
$0.01, IN LINE WITH PRIOR GUIDANCE
o 2003 REVENUES INCREASED 27 PERCENT
o 2003 VECTORSEIS SALES REACHED OVER $20 MILLION
HOUSTON - JANUARY 29, 2004 - Input/Output, Inc. (NYSE: IO) today announced
fourth quarter 2003 net earnings applicable to common shares of $633 thousand or
$0.01 per share, on revenues of $44.0 million compared to a net loss applicable
to common shares of $6.5 million, or $(0.13) per share, on revenues of $37.0
million for the same period a year ago. For the year ended December 31, 2003,
Input/Output recorded a net loss applicable to common shareholders of $23.2
million, or $(0.45) per share, on revenues of $150.0 million compared to a net
loss applicable to common shares of $120.8 million, or $(2.37) per share, on
revenues of $118.6 million for the year ended December 31, 2002.
Bob Peebler, I/O's President and Chief Executive Officer, said, "We are
pleased with our return to profitability in the fourth quarter and with our
improvements in our gross margin, cost structure and financial flexibility. We
are excited about the market acceptance of our VectorSeis product line during
its first year of commercialization."
"Also, the strategic technology alliance with Apache, which was
announced last quarter, should enable I/O to accelerate the adoption of advanced
seismic imaging technologies. We expect these new technologies, when combined
with the new processing capabilities that were acquired from Axis Geophysics, to
provide I/O with a new competitive advantage in the market place," added Mr.
Peebler.
FOURTH QUARTER 2003
Fourth quarter revenues increased 19 percent over the fourth quarter a
year ago primarily due to continued strength in land seismic activity among
non-Western contractors. Land revenues rose significantly to $35.4 million
versus $20.4 million in the fourth quarter a year ago. Marine revenues declined
to $8.6 million from $16.6 million in the fourth quarter a year ago driven by
continued overcapacity and consolidation in the industry.
Gross margin percentage for the fourth quarter improved to 26 percent
from 15 percent for the same period a year ago primarily due to volume
improvements in the land division, higher margin sales of VectorSeis System Four
land acquisition platforms, as well as improved revenue mix in the marine
division.
Adjusted EBITDA (adjusted earnings before net interest expense, taxes,
depreciation and amortization) for the fourth quarter was $3.0 million compared
to a negative $5.8 million for the fourth quarter of last year. You can find a
reconciliation of Adjusted EBITDA to reported earnings at the end of this press
release.
Operating expense levels in the fourth quarter of 2003 decreased 31
percent compared to last year's fourth quarter. As a percentage of revenues,
SG&A expenses decreased to approximately 15 percent compared to 21 percent in
the fourth quarter of 2002. Earnings from operations in the quarter were $744
thousand compared to a loss from operations of $9.7 million in the fourth
quarter of 2002.
FULL YEAR 2003
Revenues for the full year increased 27 percent over 2002 primarily due
to strength in the land division. Land revenues rose 75 percent versus last year
due to higher volumes. Marine revenues declined 33 percent from the same period
a year ago due to continued overcapacity and reduction in capital spending in
the marine contractor market.
Gross margin percentage for 2003 rose to 19 percent compared to 15
percent in 2002, reflecting significant improvement in the gross margin for the
land division from a negative 3 percent to 15 percent.
Adjusted EBITDA (adjusted earnings before net interest expense, taxes,
depreciation and amortization) for 2003 was a negative $8.9 million for 2003
compared to a negative $51.1 million in 2002.
Operating expenses decreased approximately 39 percent compared to 2002.
Approximately half of this improvement was driven primarily by lower research
and development expenses and general and administrative expenses. Included in
2003 and 2002 operating expenses were charges related to the impairment of
certain long-lived assets and goodwill of $1.1 million and $22.0 million,
respectively. As a percentage of revenues, SG&A expenses decreased to
approximately 20 percent in 2003 compared to 26 percent in 2002. Loss from
operations for the full year was $21.3 million compared to a $63.6 million loss
from operations in 2002.
2003 HIGHLIGHTS
During 2003 the Company strengthened its financial condition by issuing
$60 million of convertible securities in early December. Approximately $16
million of the net proceeds were used to repay existing short-term, high
interest debt, and the balance will be used for general corporate purposes and
potential acquisitions that support the Company's growth strategy. In addition,
the previously existing warrants for 2,673,517 shares were exchanged for 125,000
common shares.
As part of the Company's continuing effort to reduce its operating cost
structure and increase its manufacturing flexibility, I/O entered into several
outsourcing agreements for the manufacture of its seismic equipment. These
agreements are part of a plan to reduce fixed costs and accelerate product
delivery to the Company's global customer base and will provide significant
operational and logistical benefits to I/O's existing and future customer base.
From a business development standpoint, I/O successfully commercialized
its VectorSeis System Four land acquisition system, which resulted in over $20
million of land system sales during 2003. This new technology introduction
allowed the Company to penetrate key new markets in North America, Russia,
Eastern Europe and China.
OUTLOOK
The following statements are based on our current expectations. These
statements are forward looking and actual results may differ materially. Factors
affecting these forward-looking statements are detailed below.
Bob Peebler stated, "Looking at 2004, we expect an exciting year in
terms of product transition and product introductions. In our land imaging
division, we expect to introduce our new System Four Analog/Cable, which gives
seismic contractors the flexibility to use either traditional analog geophone
sensors or digital full-wave VectorSeis sensors, even on the same survey. System
Four A/C will be the first land imaging platform in the market with this hybrid
analog-digital capability and will provide contractors with the ability to
benefit from the advantages of System Four in an analog environment and at the
same time provide them with the ability to migrate to full digital VectorSeis as
the market develops.
"On the marine side, we plan to introduce two new products. In our
towed streamer business, we have a product developed from our next generation
DigiCourse positioning technology. This new product will improve the accuracy of
both 3D and 4D surveys by delivering better understanding of the positioning of
the numerous recording hydrophones placed up and down a streamer on a marine
survey. In seabed imaging, which we believe will become an increasingly
important part of the total marine seismic imaging business, we have had early
successes with a prototype retrievable seabed system and plan to extend and
commercialize these technologies and introduce our VectorSeis Ocean retrievable
system later this year."
Mike Kirksey, Chief Financial Officer, stated, "Based on our current
backlog of business, our improved cost structure and the expected impact of our
new product introductions, we expect 2004 revenues to range between $175 to $195
million. We expect a slight strengthening of business from our traditional
customers and continued growth from our international markets. Much of our
projected top line growth is expected to come from our new product offerings,
including an expected doubling of VectorSeis sales from the $20 million level we
generated in 2003. We expect full year 2004 gross margin percentage to be in the
high 20's to the low 30's, EBITDA (earnings before net interest expense, taxes,
depreciation and amortization) to range between $20 and $25 million and earnings
of $0.05 to $0.15 per share. The first quarter of 2004 will be impacted by the
product transition from our existing analog Image System to the new System Four
analog technology, which will occur around mid-year, and by manufacturing lead
times for vibrator trucks that are pushing deliveries into the next two
quarters. As a result, for the first quarter of 2004, we expect revenue to range
between
$32 and $40 million and earnings per share to range between a loss of $0.02 and
a loss of $0.08."
CONFERENCE CALL
Input/Output has scheduled a conference call for Thursday, January 29,
2004 at 5:00 p.m. eastern time. To participate in the conference call, dial
(303) 262-2190 at least 10 minutes before the call begins and ask for the
Input/Output conference call. A replay of the call will be available
approximately two hours after the live broadcast ends and will be accessible
until February 5, 2004. To access the replay, dial (303) 590-3000 and use pass
code 567421.
Investors, analysts and the general public will also have the
opportunity to listen to the conference call live over the Internet by visiting
www.i-o.com. Also, an archive of the web cast will be available shortly after
the call on the company's website for approximately 90 days.
Input/Output, Inc. is the major independent provider of seismic equipment and
acquisition imaging technology for land, marine, and seabed applications. In
addition, through its GMG/AXIS group, I/O offers specialty seismic processing
services, including anisotropic imaging, that allow oil companies to more
accurately image subsurface features in petroleum reservoirs. The company's
technologies are applied in traditional 2D and 3D surveys along with rapidly
growing areas like time-lapse 4D reservoir monitoring and full-wave,
multicomponent data acquisition. I/O has offices in the United States, Canada,
Europe, China, Russia and the Middle East. Additional information about
Input/Output, Inc. is available at www.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 capital outlays by E&P companies and seismic contractors,
future VectorSeis revenues, and fourth quarter revenues, gross margin, and net
income per share. 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 competitor's product offerings and pricing pressures
resulting there from; 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.
Tables to follow
INPUT/OUTPUT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- ------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net sales...................................... $ 43,987 $ 36,981 $ 150,033 $ 118,583
Cost of sales.................................. 32,538 31,240 121,133 99,624
Amortization of intangibles.................... 258 387 1,059 1,394
------------ ------------ ------------ ------------
Gross profit.......................... 11,191 5,354 27,841 17,565
------------ ------------ ------------ ------------
Operating expenses:
Research and development.................... 3,765 6,318 18,696 28,756
Marketing and sales......................... 3,715 3,288 12,566 11,218
General and administrative.................. 2,967 4,458 16,753 19,160
Impairment of long-lived assets............. - 1,004 1,120 6,874
Goodwill impairment......................... - - - 15,122
------------ ------------ ------------ ------------
Total operating expenses............. 10,447 15,068 49,135 81,130
------------ ------------ ------------ ------------
Earnings (loss) from operations................ 744 (9,714) (21,294) (63,565)
Interest expense............................... (945) (1,381) (4,087) (3,124)
Interest income................................ 359 525 1,903 2,280
Fair value adjustment and exchange of warrant
obligation.................................. 769 907 1,757 3,252
Impairment of investment....................... (23) - (2,059) -
Other income (expense)......................... (81) 66 976 (798)
------------ ------------ ------------ ------------
Earnings (loss) before income taxes............ 823 (9,597) (22,804) (61,955)
Income tax (benefit) expense................... 190 (3,078) 348 57,919
------------ ------------ ------------ ------------
Net earnings (loss)............................ 633 (6,519) (23,152) (119,874)
Preferred dividend............................. - - - 947
------------ ------------ ------------ ------------
Net earnings (loss) applicable to common shares $ 633 $ (6,519) $ (23,152) $ (120,821)
============ ============ ============ ============
Basic earnings (loss) per common share......... $ 0.01 $ (0.13) $ (0.45) $ (2.37)
============ ============ ============ ============
Weighted average number of
common shares outstanding................... 51,288,975 51,101,765 51,236,771 51,014,505
============ ============ ============ ============
Diluted earnings (loss) per common share....... $ 0.01 $ (0.13) $ (0.45) $ (2.37)
============ ============ ============ ============
Weighted average number of diluted
common shares outstanding.................. 54,604,885 51,101,765 51,236,771 51,014,505
============ ============ ============ ============
INPUT/OUTPUT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
2003 2002
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 59,507 $ 76,218
Restricted cash................................................ 1,127 1,173
Accounts receivable, net....................................... 34,270 18,745
Current portion notes receivable, net.......................... 14,420 6,137
Inventories.................................................... 53,551 50,010
Prepaid expenses and other current assets...................... 3,703 3,136
------------- -------------
Total current assets................................... 166,578 155,419
Notes receivable.................................................. 6,409 12,057
Net assets held for sale.......................................... 3,331 -
Property, plant and equipment, net................................ 27,607 39,255
Goodwill, net..................................................... 35,025 33,758
Other assets, net................................................. 9,105 7,956
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Total assets........................................... $ 248,055 $ 248,445
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt......... $ 2,687 $ 2,142
Accounts payable............................................... 14,591 18,927
Accrued expenses............................................... 15,833 17,210
Warrant obligation............................................. - 2,200
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Total current liabilities.............................. 33,111 40,479
Long-term debt, net of current maturities......................... 78,516 51,430
Other long-term liabilities....................................... 3,813 5,199
Stockholders' equity:
Common stock................................................... 522 519
Additional paid-in capital..................................... 296,663 296,002
Accumulated deficit............................................ (159,685) (136,534)
Accumulated other comprehensive loss........................... 1,292 (2,380)
Treasury stock................................................. (5,826) (5,929)
Unamortized restricted stock compensation....................... (351) (341)
------------- -------------
Total stockholders' equity............................. 132,615 151,337
------------- -------------
Total liabilities and stockholders' equity............. $ 248,055 $ 248,445
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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 earnings
(loss) or earnings (loss) per share calculated under generally accepted
accounting principles (GAAP). We believe that EBITDA provides useful information
to investors because it is an indicator of the strength and performance of our
ongoing business operations, including our ability to service our debt. The
calculation of adjusted EBITDA shown below is based upon amounts derived from
the company's financial statements prepared in conformity with GAAP.
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- -----------------------------
2003 2002 2003 2002
---------- ----------- ------------ -----------
Earnings (loss) before income taxes............ $ 823 $ (9,597) $ (22,804) $ (61,955)
Interest expense............................... 945 1,381 4,087 3,124
Interest income................................ (359) (525) (1,903) (2,280)
---------- ----------- ------------ -----------
Earnings (loss) before net interest
expense and taxes (EBIT)................... 1,409 (8,741) (20,620) (61,111)
Fair value adjustment and exchange of
warrant obligation.......................... (769) (907) (1,757) (3,252)
Impairment of investment....................... 23 - 2,059 -
Total depreciation and amortization expense....
2,351 3,813 11,444 13,237
---------- ----------- ------------ -----------
Adjusted earnings (loss) before net
interest expense, taxes, depreciation
and amortization (adjusted EBITDA).......... $ 3,014 $ (5,835) $ (8,874) $ (51,126)
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