Ion Geophysical Corp Annual Report 2018

← All annual reports

FY2018 Annual Report · Ion Geophysical Corp

Loading PDF…

2018

Annual Report
Notice of 2019 Annual Meeting
Proxy Statement

CONTENTS

About ION

CEO Letter to Shareholders

Financial Highlights

Notice of 2019 Annual Meeting

Proxy Statement

Form 10-K Report

Around the globe, ION delivers the power

of data-driven decision-making. Decisions

today are

increasingly complex with

huge amounts of data to comprehend.

Leveraging

innovative

technologies,

ION translates raw data into actionable

insights to enhance companies’ critical

decision-making abilities and returns.

ION is focused on improving E&P decision-

making, enhancing reservoir management

and optimizing offshore operations.

Learn more at iongeo.com

VISION

Our vision is to be the leading innovator in decision
optimization, creating value for our customers,
shareholders and employees.

STRATEGY

Our strategy is to develop and leverage innovative
technologies, creating value through data capture,
analysis and optimization to enhance critical
decision-making, enabling superior returns.

VALUES

People Collaboration Innovation

QHSE

Results

A b o u t I O N

Leveraging innovative technologies, ION creates

value through data capture, analysis and optimization

to enhance companies’ critical decision-making abilities and returns. ION oﬀerings are focused on improving E&P decision-making,

enhancing reservoir management and optimizing oﬀshore operations. While ION’s traditional focus for its cutting-edge technology

has been on the E&P industry, the company is diversifying its business into relevant adjacent markets such as oﬀshore logistics,

port management, harbor security, military and marine robotics. The business is comprised of three reporting segments: E&P

Technology & Services, Operations Optimization and Ocean Bottom Integrated Technologies.

E&P TECHNOLOGY & SERVICES

The E&P Technology & Services segment creates digital data assets and delivers services that improve decision-making,

mitigate risk and maximize portfolio value for E&P companies. The segment consists of three synergistic activities that are o(cid:3)en

integrated to deliver value to clients: Imaging Services, E&P Advisors and Ventures.

ION has one of the most technologically advanced imaging teams in the industry. Imaging Services combines leading technologies

and experience to maximize image quality, delivering enhanced subsurface characterization. Raw data is transformed into

subsurface images by applying a series of complex proprietary algorithms through ION’s highly eﬃcient imaging platform.

E&P Advisors help host governments, E&P companies and private equity ﬁrms make optimal decisions throughout the E&P lifecycle. The experienced staﬀ provides

technical, commercial and strategic advice to evaluate and market oil and gas opportunities and assets world-wide, sharing in the value we create.

Ventures leverages the world-class geoscience skills of both the Imaging Services and E&P Advisors groups to create global digital data assets that are licensed

to multiple E&P companies to optimize their investment decisions. The global data library consists of over 600,000 km of 2D and 224,000 sq km of 3D multi-client

seismic data in virtually all major oﬀshore petroleum provinces.

OPERATIONS OPTIMIZATION

Operations Optimization develops mission-critical subscription oﬀerings and engineering services that enable operational

control and optimization oﬀshore. ION provides cutting-edge so(cid:3)ware, systems and services for both towed streamer and

ocean bottom seismic surveys.

ION so(cid:3)ware oﬀerings leverage a leading data integration platform to control and optimize operations in real time. ION is

a leading provider of oﬀshore seismic navigation systems, Orca® and Gator™, as well as survey design so(cid:3)ware, MESA®.

The newest so(cid:3)ware oﬀering, Marlin™, supports a step change oﬀshore as companies shi(cid:3) from traditional manual

processes to digital solutions that enable better, safer decisions. Similar to air traﬃc control, Marlin is designed to maximize

the safety and eﬃciency of oﬀshore operations by integrating a variety of data sources (AIS, GIS, GPS, radar, satellite, MetOcean) with operational plans, creating

an unparalleled picture of oﬀshore operations to enhance decision-making.

Devices develops intelligent equipment controlled by our so(cid:3)ware to optimize operations such as our industry-leading positioning solution. Engineering Services

experts help plan and optimize oﬀshore projects and provide equipment maintenance and training to maximize value from our oﬀerings.

ION is pursuing additional opportunities for its core competencies and technologies in relevant adjacent markets. For example, the industry-leading compass is

helping military Special Forces navigate underwater in GPS-deprived environments and acoustic technology is being leveraged to develop a novel underwater

communication system that enables naval diver teams to send critical messages to each other.

OCEAN BOTTOM INTEGRATED TECHNOLOGIES

The use of ocean bottom seismic (OBS) continues to expand, driven by the need for higher quality data to make better

reservoir development decisions. 4Sea®, ION’s next generation fully integrated ocean bottom nodal system, is designed to

deliver a step change in economics, image quality, QHSE and ﬁnal data delivery time, delivering superior OBS data faster for

enhanced reservoir understanding and improved returns.

L e t t e r t o
S h a r e h o l d e r s

Dear Fellow Shareholders,

R. Brian Hanson
President and Chief Executive Officer

While we faced some unexpected geopolitical headwinds in

activity resumes. Our 3D reimaging programs oﬀ shore Mexico

2018, we made signiﬁ cant progress on our strategic objectives,

and Brazil have been extremely successful. We expanded our

positioning ourselves for success in 2019 and beyond. We

cutting-edge full waveform inversion imaging capabilities and

achieved our

target number of sanctioned multi-client

were awarded multiple large proprietary ocean bottom imaging

programs, delivered on our higher return imaging strategy,

contracts that leveraged these algorithms to produce sharper,

and began diversifying our business into adjacent markets and

more detailed reservoir images. We also largely completed

commercializing our new ocean bottom technology, 4Sea. Our

development on our next generation ocean bottom nodal

eﬀ orts to surgically invest in areas where capital is ﬂ owing, such

system, 4Sea, which has had strong client interest due to its

as Mexico and Brazil, enabled our multi-client programs to far

ability to dramatically improve the safety and eﬃ ciency of ocean

outperform typical historical returns.

bottom imaging.

In 2018, our ﬁ nancial results continued to be driven by strong

The second goal is to de-lever our balance sheet. The successful

sales of our 3D multi-client reimaging programs as well as

public equity oﬀ ering in February 2018 was a big step forward. A

new 2D programs we launched during the year. 2018 revenues

portion of the $47 million net proceeds were used to retire ION’s

of $180 million were down 9% compared to last year. Adjusted

third lien indentures of $28 million. Over the last three years, we

EBITDA for the full year was $42 million. Net cash ﬂ ows from

have de-levered the business $61 million, from $183 million to

operations were $7 million, compared to $28 million in 2017. Our

$122 million.

net loss was $71 million, or $(5.20) per share, compared to a net

loss of $30 million, or $(2.55) per share in 2017. Our total liquidity

Our third objective is to broaden and diversify our oﬀ erings into

was $76 million at the end of the fourth quarter, an $8 million

adjacent markets. The E&P industry is extremely cyclical and

increase from one year ago.

the combination of moving closer to the reservoir, de-levering,

and moving into adjacent markets will position us better for

We are highly focused and making good progress executing

the next down cycle. We transformed our core command

against the three primary long-term strategic objectives we

and control platform to more broadly optimize a wide variety

established in 2017. First, we shi(cid:3) ed our business closer to the

oﬀ shore operations. This year we launched an enterprise version

reservoir, where capital continues to ﬂ ow more consistently in

of Marlin that transitions from a services-led to an oﬀ -the-shelf

downturns, while maintaining our exploration oﬀ erings for when

solution. The So(cid:3) ware as a Service (SaaS) application runs in

the Cloud and is available via a web browser, enabling wider

oﬀerings to excel in adjacent markets such as the military and

and more rapid take-up of Marlin by eliminating complex IT

port management. We have made great strides in changing

infrastructure and has already led to increased opportunities.

the oﬀshore paradigm from traditional manual processes to a

We engaged consultants to help us strategically evaluate which

smarter digital solution. In 2018, Marlin deployments nearly

adjacent markets have the most potential. Outside of the E&P

doubled again to 127 with 60 new deployments, building a

space, we believe that’s port and harbor management for

diverse portfolio of case studies where we added value across

Marlin so(cid:3)ware and the military for Devices’ technology. Our

a vast array of operations. We are also commercializing new

advanced marine sensing, positioning and communications

technologies that should positively contribute to 2019. We

Devices technology is already gaining traction in multiple military

anticipate our so(cid:3)ware business growing nicely in both core and

applications. For example, we evolved our industry-leading

adjacent markets, and our goal is to drive a signiﬁcant amount

compass from our positioning solution to help military Special

of ION’s revenues in 5 years through non-seismic markets. We

Forces navigate underwater diver propulsion devices in GPS-

broadened our so(cid:3)ware adoption into the production side of the

deprived environments. Leveraging our acoustic technology,

E&P space and now have multiple Devices’ military oﬀerings.

we are developing a novel underwater communication system

that enables naval diver teams to send critical messages to each

The OBS market is projected to continue growing due to its value

other. There’s a lot more potential to diversify and we are actively

in optimizing production and the improved economics of next

working with potential partners and associations to accelerate

generation systems, such as 4Sea. The remaining elements

our entry into these two markets.

of 4Sea are on track to be commercialized in 2019. We are

oﬀering 4Sea components more broadly to the growing number

In our E&P Technology and Services segment, we continued to

of OBS service providers under recurring revenue commercial

beneﬁt from our investment in multi-client data, generating the

strategies that enable us to share in the value our technology

majority of our revenue from new venture programs. We had

delivers rather than a crew service model. We believe this asset

tremendous success with our 3D reimaging programs, expanding

light approach will deliver a higher, more sustainable return over

our 3D data library 36% this year from 165,000 to 224,000 square

the long-term for our shareholders.

kilometers. In line with our expectations, we sanctioned 7 new

programs and invested $28 million in our multi-client data library

Looking forward to 2019, we expect continued near-term

in 2018, which should directly beneﬁt 2019 results and beyond.

volatility in commodity prices and a cautious backdrop for E&P

In addition, our data library is exceptionally well positioned for

spending. Market analysts are projecting E&P spending to

upcoming license round activity, with programs relevant to 46 of

increase another 8% in 2019, following 8% growth in 2018 and

the 86 active or anticipated oﬀshore license rounds in 2019. Our

4% growth in 2017. International spending is expected to increase

Imaging Services and E&P Advisors groups are executing their

again, where our oﬀerings are more relevant. However, we

strategies to deliver higher potential returns.

expect growth in seismic spending to lag behind some segments

of the oil and gas sector, especially in towed streamer, where we

In our Operations Optimization segment, we maintained our

expect continued pressure. As a result, we believe near-term

core so(cid:3)ware and equipment businesses while positioning our

exploration spending will remain lumpy and unpredictable.

That said, long-term oil and gas fundamentals remain strong.

A(cid:3)er several years of oversupply, the oil and gas industry

is predicted to face a supply crunch in the next decade due to

unsustainably low levels of investment. There’s an increasing

recognition of the

importance to reinvest

in conventional

resources before we reach a critical inﬂection point. This is what

will drive a resumption in exploration activity in 2019 and beyond,

which is very positive for our business.

I strongly believe in our asset light approach and I am optimistic

about the opportunities to grow and diversify our business.

Thank you for your continued conﬁdence in ION.

Brian Hanson

President & Chief Executive Oﬃcer

Financial Highlights

years ended December 31

2018

2017

2016

(in thousands, except per share data)

STATEMENT OF OPERATIONS DATA

Net revenues

Gross proﬁ t

Loss from operations

$ 180,045

$ 197,554

$ 172,808

59,620

75,639

36,032

(54,272)

(8,699)

(43,171)

Net loss per basic and diluted share

(71,171)

(30,242)

(65,148)

Net loss per diluted share

$ (5.20)

$ (2.55)

Weighted average number of common and diluted shares outstanding

13,692

11,876

$ (5.71)

11,400

Balance Sheet Data (end of year)

Working capital

Total assets

Long-term debt

Total equity

Other Data

Investment in multi-client library

Capital expenditures

Depreciation and amortization (other than multi-client library)

Amortization of multi-client library

$ 20,105

244,749

121,741

7,824

$ 28,276

1,514

8,763

48,988

$ (8,628) (1)

$ 16,555

301,069

313,216

156,744

158,790

30,806

53,398

$ 23,710

$ 14,884

1,063

1,488

16,592

21,975

47,102

33,335

(1) Working Capital at December 31, 2017 is negative due to $28.5 million of Third Lien Notes (maturing May 15, 2018). In the ﬁ rst quarter of 2018, the

Company issued and sold 1,820,000 shares of common stock, receiving proceeds of $47.5 million, excluding transaction expenses. A portion of these

proceeds were used to retire the Third Lien Notes early in March 2018.

The selected consolidated ﬁ nancial data set forth above with respect to our consolidated statements of operations for 2018, 2017 and 2016 and with respect to our consolidated

balance sheets at December 31, 2018, 2017 and 2016 have been derived from our audited consolidated ﬁ nancial statements. Our results of operations and ﬁ nancial condition

have been aﬀ ected by restructuring activities, legal contingencies, debt reﬁ nancing, and impairments and write-downs of assets during the periods presented, which aﬀ ect the

comparability of the ﬁ nancial information shown. For a detailed discussion of these items impacting the comparability of the ﬁ nancial information, please see Item 6, “Selected

Financial Data,” in our Annual Report on Form 10-K for the year ended December 31, 2018. Also, this information should not be considered as being indicative of future operations,

and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated ﬁ nancial statements

and the notes thereto included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018.

Annual Revenues

Consolidated
Revenues

509.6

221.5

172.8

197.6

180.0

E&P Technology & Services

Operations Optimization

Ocean Bottom Integrated
Technologies

100

150

200

250

300

350

400

450

500

550

600

$ Millions

Shareholder Returns

ION Geophysical Corporation

Dow Jones U.S. Oil Equipment & Services

This graph compares our cumulative total stockholder

S&P 500

2013

100.00
100.00
100.00

2014

83.33
113.69
82.78

2015

15.25
115.26
64.17

2016

12.12
129.05
81.70

2017

39.90
157.22
68.05

2018

10.46
150.33
39.22

return on our common stock for the ﬁve years ending

December 31, 2018, assuming reinvestment of

dividends, with (i) the S&P 500 Index and (ii) the Dow

Jones U.S. Oil Equipment and Services Index, an index

of companies that we believe are comparable in terms

of industry and their lines of business.

The graph assumes that $100 was invested in our

common stock and the above indices on January 1,

2013. We have not paid any dividends on our common

stock during the applicable period. Historic stock price

performance is not necessarily indicative of future

stock price performance.

2014

2015

2016

2017

2018

$250

$200

$150

$100

$50

ION GEOPHYSICAL CORPORATION
2105 CityWest Boulevard, Suite 100
Houston, Texas 77042-2855
(281) 933-3339

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 15, 2019

To ION’s Shareholders:

The 2019 Annual Meeting of Shareholders of ION Geophysical Corporation will be held in the

offices of the Company located at 2105 CityWest Boulevard, Houston, Texas, on Wednesday, May 15,
2019, at 10:30 a.m., local time, for the following purposes:

1. Elect the three directors named in the attached Proxy Statement to our Board, each to

serve for a three-year term;

2. Advisory (non-binding) vote to approve the compensation of our named executive

officers;

3. Ratify the appointment of Grant Thornton LLP as our independent registered public

accounting firm (independent auditors) for 2019; and

4. Consider any other business that may properly come before the annual meeting, or any

postponement or adjournment of the meeting.

ION’s Board of Directors has set March 29, 2019, as the record date for the meeting. This means

that owners of ION Common Stock at the close of business on that date are entitled to receive this
notice of meeting and vote at the meeting and any adjournments or postponements of the meeting.

Your vote is very important, and your prompt cooperation in voting your proxy is greatly

appreciated. Whether or not you plan to attend the meeting, please sign, date and return your enclosed
proxy card as soon as possible so that your shares can be voted at the meeting.

By Authorization of the Board of Directors

3APR201819024815

Matthew Powers
Executive Vice President, General Counsel and
Corporate Secretary

April 11, 2019
Houston, Texas

ION GEOPHYSICAL CORPORATION
2105 CityWest Boulevard, Suite 100
Houston, Texas 77042-2855
(281) 933-3339

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 15, 2019

April 11, 2019

Our Board of Directors (the ‘‘Board’’) is furnishing you this proxy statement (this ‘‘Proxy
Statement’’) to solicit proxies on its behalf to be voted at the 2019 Annual Meeting of Shareholders
(‘‘Annual Meeting’’) of ION Geophysical Corporation (‘‘ION’’). The Annual Meeting will be held at
2105 CityWest Boulevard, Houston, Texas, on May 15, 2019, at 10:30 a.m., local time. Directions to the
annual meeting are also provided in this Proxy Statement under ‘‘About the Meeting—Where will the
Annual Meeting be held?’’

The matters intended to be acted upon are:

1. Elect the three directors named in the attached Proxy Statement to our Board, each to

serve for a three-year term;

2. Advisory (non-binding) vote to approve the compensation of our named executive

officers;

3. Ratify the appointment of Grant Thornton LLP as our independent registered public

accounting firm (independent auditors) for 2019; and

4. Consider any other business that may properly come before the annual meeting, or any

postponement or adjournment of the meeting.

The Board of Directors recommends voting in favor of the nominees listed in the Proxy Statement,

the approval of the compensation of our named executive officers and the ratification of the
appointment of Grant Thornton LLP.

The mailing address of our principal executive offices is 2105 CityWest Boulevard, Suite 100,
Houston, Texas 77042-2855. We are mailing the proxy materials to our shareholders beginning on or
about April 11, 2019. All properly completed and returned proxies for the annual meeting will be voted
at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked
before the Annual Meeting. The proxies also may be voted at any adjournments or postponements of
the Annual Meeting.

Only owners of record of our outstanding shares of our Common Stock, par value $0.01

(‘‘Common Stock’’) on March 29, 2019 are entitled to vote at the Annual Meeting, or at adjournments
or postponements of the Annual Meeting. Each owner of Common Stock on the record date is entitled
to one vote for each share of Common Stock held. On March 29, 2019, there were 14,959,914 shares of
Common Stock issued and outstanding.

When used in this Proxy Statement, ‘‘ION Geophysical,’’ ‘‘ION,’’ ‘‘Company,’’ ‘‘we,’’ ‘‘our,’’ ‘‘ours’’

and ‘‘us’’ refer to ION Geophysical Corporation and its consolidated subsidiaries, except where the
context otherwise requires or as otherwise indicated.

Important Notice Regarding the Availability of Proxy Materials
For the Annual Shareholders’ Meeting to be held on May 15, 2019

The Proxy Statement and our 2018 annual report to shareholders
are available at www.iongeo.com under ‘‘Investor Relations—Investor Materials—
Annual Report & Proxy Statement.’’

TABLE OF CONTENTS

2019 PROXY STATEMENT HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABOUT THE MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1—ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . .
OWNERSHIP OF EQUITY SECURITIES OF ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 GRANTS OF PLAN-BASED AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END . . . . . . . . . . . . . . . . . . . . . . . .
2018 OPTION EXERCISES AND STOCK VESTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL . . . . . . . . . .
2018 PENSION BENEFITS AND NONQUALIFIED DEFERRED COMPENSATION . . . . . . . .
EQUITY COMPENSATION PLAN INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CEO PAY RATIO DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2—ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE

COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3—RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS . . . . . . . . . .
REPORT OF THE AUDIT COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL AUDITOR FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3
5
10
14
26
28
30
31
50
51
53
54
56
58
59
68
69
70

71
73
74
76

2019 PROXY STATEMENT HIGHLIGHTS

This summary highlights information contained elsewhere in our Proxy Statement. This summary does

not contain all of the information that you should consider. You should read the entire Proxy Statement
carefully before voting.

Board Nominees

Name

Director
Since

Age

Occupation

Independent Audit Comp Gov Fin

Committee
Memberships

David H. Barr . . . . . . . . . . 69

2010 Former President and Chief

Franklin Myers . . . . . . . . . . 66

Executive Officer, Logan
International, Inc.
2001 Senior Advisor, Quantum

Energy Partners

S. James Nelson, Jr.

. . . . . . 77

2004 Former Vice Chairman, Cal

Dive International, Inc.
(now Helix Energy Solutions
Group, Inc.)

Executive Compensation Highlights

ION is committed to paying for performance. We provide the majority of compensation to our
executives through programs in which the amounts ultimately received vary to reflect our performance.
Our executive compensation programs evolve and are adjusted over time to support our business goals
and to promote both near-term and long-term profitable company growth.

The majority of cash compensation is paid through base salary and under our annual incentive
cash plan (that is, annual cash bonuses). Payment under our annual incentive cash plan is based on
company performance relative to the Company’s goals and on individual performance. Under our
annual incentive cash plan, cash compensation reflects near-term (annual) business performance of the
Company. Our employees can also receive cash payments through awards of stock appreciation rights
(‘‘SARs’’).

Awards of SARs and equity awards (consisting of stock options, restricted stock and restricted
stock units) are used to align compensation with the long-term interests of our shareholders by focusing
our executive officers on total shareholder return. Equity and SARs awards generally contain a
time-based vesting restriction—that is, they become fully vested in either three or four years after the
grant date, contingent on continued employment—so that compensation realized under the awards is
dependent on the long-term performance of our Common Stock. Our most recent SARs and restricted
stock awards contain, in addition to a time-based vesting restriction, a performance-based vesting
restriction based on the price of our common stock (meaning, in addition to the time requirements, our
stock price must attain and maintain certain price levels within three years for the awards to vest).

In setting executive officer compensation, the Compensation Committee evaluates individual
performance reviews of the executive officers and compensation of executives at other companies as
reported by various research and advisory companies (such as Gartner, Inc.). This past year (2018), the
Company also engaged a compensation consulting firm, Aon Hewitt, to help determine appropriate
compensation for our executive officers and other key employees.

Total compensation for each executive officer varies with ION’s performance in achieving strategic

and financial objectives and with individual performance. Each executive officer’s compensation is
designed to reward his or her contribution to ION’s results. Our executive officers’ 2019 compensation

also reflects adjustments arising from our normal annual process of assessing pay competitiveness.
Year-over-year changes in salaries and equity award levels also reflect promotions, individual
performance and competitive market adjustments. The following table shows the total direct
compensation granted by the Compensation Committee to our named executive officers in 2018, 2017
and 2016 (except for Mr. Powers, who did not become a named executive officer until 2017):

Name and Principal Position

Year

Salary
($)

Bonus
($)

Stock
Awards
($)

Option
Awards Compensation Compensation

Incentive Plan Total Direct

($)

Non-Equity

3,332,432
1,758,689
1,805,717

1,870,849
800,484
947,859

857,170
845,804

1,752,775
700,808
723,844

1,815,772
869,905
750,703

R. Brian Hanson . . . . . . . . . . . . . . . 2018 600,000 — 1,888,032 262,400

President, Chief Executive
Officer and Director

2017 558,689 —
2016 540,000 — 341,900 203,817

—

Steven A. Bate . . . . . . . . . . . . . . . . . 2018 375,000 — 1,092,322 130,427

Executive Vice President
and Chief Financial Officer

2017 350,484 —
2016 337,500 — 170,950 101,909

—

582,000
— 1,200,000
720,000

273,100
— 450,000
337,500

Matthew R. Powers . . . . . . . . . . . . . 2018 275,000 — 365,943

56,027
2017 220,664 — 168,600 291,540

160,200
165,000

Executive Vice President,
General Counsel and
Corporate Secretary

Christopher T. Usher . . . . . . . . . . . . 2018 378,560 — 1,023,188 130,427

Executive Vice President
and Chief Operating Officer,
Operations Optimization

2017 353,808 —
2016 340,704 —

—
59,686

Kenneth G. Williamson . . . . . . . . . . 2018 387,213 — 1,086,632 130,427

220,600
— 347,000
272,500

50,954

211,500
— 508,000
260,000

71,336

Executive Vice President
and Chief Operating Officer,
E&P Technology & Services

2017 361,905 —
2016 348,492 —

—
70,875

What is a proxy, a proxy solicitation and a proxy statement?

ABOUT THE MEETING

A proxy is your legal designation of another person to vote the stock you own on your behalf. That

other person is also referred to as a ‘‘proxy.’’ A proxy solicitation is a request that a corporate
shareholder authorize another person to cast the shareholder’s vote at a corporate meeting. Our Board
has designated R. Brian Hanson and James M. Lapeyre, Jr. as proxies for the Annual Meeting of
Shareholders. By completing and submitting the enclosed proxy card, you are giving Mr. Hanson and
Mr. Lapeyre the authority to vote your shares in the manner you indicate on your proxy card. A proxy
statement is an informational document that the regulations of the Securities and Exchange
Commission (‘‘SEC’’) require us to give you when we ask you, in a proxy solicitation, to sign a proxy
card designating individuals as proxies to vote on your behalf.

Who is soliciting my proxy?

Our Board is soliciting proxies on its behalf to be voted at the Annual Meeting. All costs of
soliciting the proxies will be paid by ION. Copies of solicitation materials will be furnished to banks,
brokers, nominees and other fiduciaries and custodians to forward to beneficial owners of Common
Stock held by such persons. ION will reimburse such persons for their reasonable out-of-pocket
expenses in forwarding solicitation materials. In addition to solicitations by mail, some of ION’s
directors, officers and other employees, without extra compensation, might supplement this solicitation
by telephone, personal interview or other communication. ION has also retained Georgeson LLP to
assist with the solicitation of proxies from banks, brokers, nominees and other holders, for a fee not to
exceed $11,500 plus reimbursement for out-of-pocket expenses.

What are the voting rights of holders of Common Stock?

Each outstanding share of Common Stock is entitled to one vote on each matter considered at the

Annual Meeting.

What is the difference between a ‘‘shareholder of record’’ and a shareholder who holds stock in ‘‘street

name’’?

If your shares are registered directly in your name, you are a shareholder of record. If your shares

are registered in the name of your broker, bank or similar organization, then you are the beneficial
owner of shares held in street name.

Where will the Annual Meeting be held?

ION’s 2019 Annual Meeting of Shareholders will be held on the 1st Floor of 2105 CityWest

Boulevard in Houston, Texas.

Directions: The site for the Annual Meeting is located on CityWest Boulevard off of West Sam

Houston Parkway South (‘‘Beltway 8’’), near the intersection of Beltway 8 and Briar Forest Drive.
Traveling south on the Beltway 8 feeder road after Briar Forest Drive, turn right on Del Monte Drive.
Enter Garage Entrance 3 on your immediate left. Advise the guard that you are attending the ION
Annual Meeting. You may be required to show your driver’s license or other photo identification. The
guard will then direct you where to park in the visitors section of the parking garage. The guard can
also direct you to 2105 CityWest Boulevard, which is directly south of the garage. Once in the building,
check in at the security desk where you will then be directed to the first floor receptionist.

What is the effect of not voting?

It depends on how ownership of your shares is registered. If you are a shareholder of record, your

unvoted shares will not be represented at the Annual Meeting and will not count toward the quorum
requirement. Assuming a quorum is obtained, your unvoted shares will not be treated as a vote for or
against a proposal. Depending on the circumstances, if you own your shares in street name, your
broker or bank may represent your shares at the Annual Meeting for purposes of obtaining a quorum.
As described in the answer to the question immediately following, in the absence of your voting
instruction, your broker may or may not vote your shares.

If I don’t vote, will my broker vote for me?

If you own your shares in street name and you do not vote, your broker may vote your shares in
its discretion on proposals determined to be ‘‘routine matters’’ under the rules of the New York Stock
Exchange (‘‘NYSE’’). With respect to ‘‘non-routine matters,’’ however, your broker may not vote your
shares for you. Where a broker cannot vote your shares on non-routine matters because he has not
received any instructions from you regarding how to vote, the number of unvoted shares on those
matters is reported as ‘‘broker non-votes.’’ These ‘‘broker non-vote’’ shares are counted toward the
quorum requirement, but, generally speaking, they do not affect the determination of whether a matter
is approved. See ‘‘—How are abstentions and broker non-votes counted?’’ below. The election of
directors and the advisory vote on executive compensation are not considered to be routine matters
under current NYSE rules, so your broker will not have discretionary authority to vote your shares held
in street name on those matters. The proposal to ratify the appointment of Grant Thornton LLP
(‘‘Grant Thornton’’) as our independent registered public accounting firm is considered to be a routine
matter on which brokers will be permitted to vote your shares without instructions from you.

What is the record date and what does it mean?

The record date for the Annual Meeting of Shareholders is March 29, 2019. The record date is

established by the Board as required by Delaware law (the state in which we are incorporated).
Holders of Common Stock at the close of business on the record date are entitled to receive notice of
the Annual Meeting and vote at the Annual Meeting and any adjournments or postponements of the
Annual Meeting.

How can I revoke a proxy?

A shareholder can revoke a proxy prior to the vote at the Annual Meeting by (a) giving written

notice to the Corporate Secretary of ION, (b) delivering a later-dated proxy or (c) voting in person at
the Annual Meeting. Written notice to the Corporate Secretary should be sent to Corporate Secretary,
ION Geophysical Corporation, 2105 CityWest Boulevard, Suite 100, Houston, Texas 77042-2855. If you
hold shares through a bank or broker, you must contact that bank or broker in order to revoke any
prior voting instructions.

What constitutes a quorum?

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of
Common Stock constitutes a quorum. We need a quorum of shareholders to hold a validly convened
Annual Meeting. If you have submitted your proxy, your shares will be counted toward the quorum. If
a quorum is not present, the chairman may adjourn the Annual Meeting, without prior notice other
than by announcement at the Annual Meeting, until the required quorum is present. As of the record
date, 14,959,914 shares of Common Stock were outstanding. Thus, the presence of the holders of
Common Stock representing at least 7,479,958 shares will be required to establish a quorum.

What are my voting choices when voting for director nominees, and what vote is needed to elect

directors?

In voting on the election of the director nominees to serve until the 2022 Annual Meeting of

Shareholders, shareholders may vote in one of the following ways:

(a) in favor of all nominees,

(b) withhold votes as to all nominees or

Directors will be elected by a plurality of the votes of the shares of Common Stock present or
represented by proxy at the Annual Meeting. This means that director nominees receiving the highest
number of ‘‘for’’ votes will be elected as directors. Votes ‘‘for’’ and ‘‘withheld’’ are counted in
determining whether a plurality has been cast in favor of a director. Under ION’s Corporate
Governance Guidelines, any director nominee who receives a greater number of votes ‘‘withheld’’ from
his election than votes ‘‘for’’ such election shall promptly tender to the Board his resignation following
certification of the results of the shareholder vote. For a more complete explanation of this
requirement and process, please see ‘‘Item 1—Election of Directors—Board of Directors and Corporate
Governance—Majority Voting Procedure for Directors’’ below.

If you vote, you may not abstain from voting for purposes of the election of directors.

Shareholders are not permitted to cumulate their votes in the election of directors.

The Board recommends a vote ‘‘FOR’’ all of the nominees.

What are my voting choices when casting an advisory vote to approve the compensation of our named

executive officers?

In casting an advisory vote to approve the compensation of our named executive officers,

shareholders may vote in one of the following ways:

(a) in favor of the advisory vote to approve our executive compensation,

(b) against the advisory vote to approve our executive compensation or

The advisory vote to approve the compensation of our named executive officers will be approved if

the number of votes cast in favor of the proposal exceeds the number of votes cast against it.

The Board recommends a vote ‘‘FOR’’ this proposal.

What are my voting choices when voting on the ratification of the appointment of Grant Thornton as
our independent registered public accounting firm—or independent auditors—and what vote is
needed to ratify their appointment?

In voting to ratify the appointment of Grant Thornton as independent auditors for 2019,

shareholders may vote in one of the following ways:

(a) in favor of ratification,

(b) against ratification or

The proposal to ratify the appointment of Grant Thornton will require the affirmative vote of a
majority of the votes cast on the proposal by holders of Common Stock in person or represented by
proxy at the Annual Meeting.

The Board recommends a vote ‘‘FOR’’ this proposal.

Will any other business be transacted at the Annual Meeting? If so, how will my proxy be voted?

We do not know of any business to be transacted at the Annual Meeting other than those matters
described in this Proxy Statement. We believe that the periods specified in our Amended and Restated
Bylaws (our ‘‘Bylaws’’) for submitting proposals to be considered at the Annual Meeting have passed
and no proposals were submitted. However, should any other matters properly come before the Annual
Meeting, and should any adjournments or postponements of the Annual Meeting be proposed, shares
with respect to which voting authority has been granted to the proxies will be voted by the proxies in
accordance with the proxies’ respective judgment.

What if I do not specify a choice for a matter when submitting my proxy?

Shareholders should specify their choice for each matter on their proxy. If no instructions are
given, in a proxy that is properly submitted, that proxy will be voted ‘‘FOR’’ the election of all director
nominees, ‘‘FOR’’ the non-binding advisory vote to approve our Company’s executive compensation and
‘‘FOR’’ the proposal to ratify the appointment of Grant Thornton as independent auditors for 2019.

How are abstentions and broker non-votes counted?

Abstentions are counted for purposes of determining whether a quorum is present at the Annual
Meeting. A properly submitted proxy marked ‘‘withhold’’ with respect to the election of one or more
directors will not be voted with respect to the director or directors indicated, although it will be
counted for purposes of determining whether there is a quorum.

With respect to (i) the proposal regarding the advisory vote on executive compensation and (ii) the

proposal to ratify the appointment of the independent auditors, an abstention from voting on either
such proposal will be counted as present in determining whether a quorum is present but will not be
counted in determining the total votes cast on such proposal. Thus, abstentions will have no effect on
the outcome of the vote on these proposals.

Broker non-votes will have no effect on the outcome of the vote on any of the proposals.

What is the deadline for submitting proposals to be considered for inclusion in the 2020 proxy

statement and for submitting a nomination for director of ION for consideration at the Annual
Meeting of Shareholders in 2020?

Shareholder proposals requested to be included in our 2020 proxy statement must be received by

ION no later than December 13, 2019. A proper director nomination may be considered at ION’s 2020
Annual Meeting of Shareholders only if the proposal for nomination is received by ION not later than
December 13, 2019. Proposals and nominations should be directed to Corporate Secretary, ION
Geophysical Corporation, 2105 CityWest Boulevard, Suite 100, Houston, Texas 77042-2855.

Will I have electronic access to the proxy materials and Annual Report?

The notice of Annual Meeting, Proxy Statement and 2018 Annual Report to Shareholders are
posted on ION’s Internet website at www.iongeo.com under ‘‘Investor Relations—Investor Materials—
Annual Report & Proxy Statement’’.

How can I obtain a copy of ION’s Annual Report on Form 10-K?

A copy of our 2018 Annual Report on Form 10-K (without schedules or exhibits) forms a part of

our 2018 Annual Report to Shareholders, which is enclosed with this Proxy Statement. You may obtain
an additional copy of our 2018 Form 10-K at no charge by sending a written request to Corporate
Secretary, ION Geophysical Corporation, 2105 CityWest Boulevard, Suite 100, Houston,
Texas 77042-2855. Our Form 10-K is also available (i) through the Investor Relations section of our
website at www.iongeo.com and (ii) with exhibits on the SEC’s website at http://www.sec.gov.

Please note that the contents of these and any other websites referenced in this Proxy Statement

are not incorporated by reference herein. Further, our references to the URLs for these and other
websites listed in this Proxy Statement are intended to be inactive textual references only.

ITEM 1—ELECTION OF DIRECTORS

Our Board currently consists of seven members. (Michael Jennings, whom the Board plans to

replace, resigned from the Board in February of 2019.) The Board is divided into three classes.
Members of each class are elected for three-year terms and until their respective successors are duly
elected and qualified, unless the director dies, resigns, retires, is disqualified or is removed. Our
shareholders elect the directors in a designated class annually. Directors in Class II, which is the class
of directors to be elected at the Annual Meeting, will serve on the Board until our annual meeting in
2022 (except in the case of any earlier death, resignation, retirement, disqualification or removal).

The current Class II directors are David H. Barr, Franklin Myers and S. James Nelson, Jr. and

their current terms will expire when their successors are elected and qualified at the Annual Meeting.
At its meeting on February 4, 2019, the Board approved the recommendation of the Governance
Committee that Messrs. Barr, Myers and Nelson be nominated to stand for reelection at the Annual
Meeting to hold office until our 2022 Annual Meeting and until their successors are elected and
qualified.

We have no reason to believe that any of the nominees will be unable or unwilling to serve if
elected. However, if any nominee should become unable or unwilling to serve for any reason, proxies
may be voted for another person nominated as a substitute by our Board, or our Board may reduce the
number of directors.

The Board of Directors recommends a vote ‘‘FOR’’ the election of each of David H. Barr, Franklin
Myers and S. James Nelson, Jr.

The biographies of each nominee (each of whom is also a current director) contains information
regarding the nominee’s service as a director, business experience, education, director positions and the
experiences, qualifications, attributes or skills that caused the Governance Committee and our Board to
determine that the person should serve as a director for the Company:

Class II Director—Nominees for Re-Election for Term Expiring In 2022

DAVID H. BARR

Director since 2010

From May 2011 until December 2012, Mr. Barr, age 69, served as the President and Chief
Executive Officer of Logan International Inc., a Calgary-based Toronto Stock Exchange (TSX)-listed
manufacturer and provider of oilfield tools and services. In 2009, Mr. Barr retired from Baker Hughes
Incorporated, an oilfield services and equipment provider, after serving for 36 years in various
manufacturing, marketing, engineering and product management functions. At the time of his
retirement, Mr. Barr was Group President—Eastern Hemisphere, responsible for all Baker Hughes
products and services for Europe, Russia/Caspian, Middle East, Africa and Asia Pacific. From 2007 to
2009, he served as Group President—Completion & Production, and from 2005 to 2007, as Group
President—Drilling and Evaluation. Mr. Barr served as President of Baker Atlas, a division of Baker
Hughes Inc., from 2000 to 2005, and served as Vice President, Supply Chain Management for the
Cameron division of Cameron International Corporation from 1999 to 2000. Prior to 1999, he held
positions of increasing responsibility within Baker Hughes Inc. and its affiliates, including Vice
President—Business Process Development and various leadership positions with Hughes Tool Company
and Hughes Christensen. Mr. Barr initially joined Hughes Tool Company in 1972 after graduating from
Texas Tech University with a Bachelor of Science degree in mechanical engineering. He formerly served
on the Board of Directors, Compensation Committee, and as Chairman of the Safety and Social
Responsibility Committee of Enerplus Corporation (a NYSE- and TSX-listed independent oil and gas
exploration and production (‘‘E&P’’) company), on the Board of Directors and Compensation
Committee of Logan International Inc., and on the Board of Directors and Audit, Remuneration and
Governance Committees of Hunting PLC, a London Stock Exchange-listed provider of energy services.
Mr. Barr is the chairman of our Compensation Committee and a member of the Audit and
Governance Committees of our Board.

Mr. Barr’s more than 36 years of experience in the oilfield equipment and services industry
provides a uniquely valuable industry perspective for our Board. While at Baker Hughes, Mr. Barr
obtained experience within a wide range of company functions, from engineering to group President.
His breadth of experience enables him to better understand and inform the Board regarding a range of
issues and decisions involved in the operation of our business, including development of business
strategy.

FRANKLIN MYERS

Director since 2001

Mr. Myers, age 66, has served as a Senior Advisor of Quantum Energy Partners, a private equity

firm for the global energy industry, since February 2013. From 2009 to 2012, he was an Operating
Advisor with Paine & Partners, LLC, a private equity firm focused on leveraged buyout transactions.
Prior to joining Paine & Partners, Mr. Myers was employed by Cameron International Corporation, an
international manufacturer of oil and gas flow control equipment, as Senior Vice President, General
Counsel and Corporate Secretary (from 1995 to 1999), President of the Cooper Energy Services
Division (from 1998 until 2001), Senior Vice President (from 2001 to 2003), Senior Vice President and
Chief Financial Officer (from 2003 to 2008) and Senior Advisor (from 2008 to 2009). Prior to joining
Cameron, he was Senior Vice President and General Counsel of Baker Hughes Incorporated, an
oilfield services and equipment provider, and an attorney and partner with the law firm of Fulbright &
Jaworski L.L.P. in Houston, Texas. Mr. Myers also currently serves on the Boards of Directors of
Comfort Systems USA, Inc. (a NYSE-listed provider of heating, ventilation and air conditioning
services), HollyFrontier Corporation (a NYSE-listed independent oil refining and marketing company),
and NCS Multistage (a manufacturer of down-hole tubular equipment). From September 2010 until
March 15, 2018, Mr. Myers served on the Board of Directors of Forum Energy Technology, Inc. (a
NYSE-listed oilfield equipment manufacturing company). Mr. Myers is a member of the Compensation,
Governance and Finance Committees of our Board. He holds a Bachelor of Science degree in
industrial engineering from Mississippi State University and a Juris Doctorate degree with Honors from
the University of Mississippi.

Mr. Myers’ extensive experience as both a financial and legal executive makes him uniquely
qualified as a valuable member of our Board. While at Cameron, Baker Hughes and Fulbright &
Jaworski, Mr. Myers was responsible for numerous successful finance and acquisition transactions, and
his expertise gained through those experiences have proved to be a significant resource for our Board.
In addition, Mr. Myers’ service on Boards of Directors of other NYSE-listed companies enables
Mr. Myers to observe and advise on favorable governance practices pursued by other public companies.

S. JAMES NELSON, JR.

Director since 2004

Mr. Nelson, age 77, joined our Board in 2004. In 2004, Mr. Nelson retired from Cal Dive

International, Inc. (now named Helix Energy Solutions Group, Inc.), a marine contractor and operator
of offshore oil and gas properties and production facilities, where he was a founding shareholder, Chief
Financial Officer (prior to 2000), Vice Chairman (from 2000 to 2004) and a Director (from 1990 to
2004). From 1985 to 1988, Mr. Nelson was the Senior Vice President and Chief Financial Officer of
Diversified Energies, Inc., a NYSE-traded company with $1 billion in annual revenues and the former
parent company of Cal Dive. From 1980 to 1985, Mr. Nelson served as Chief Financial Officer of
Apache Corporation, an oil and gas E&P company. From 1966 to 1980, Mr. Nelson was employed with
Arthur Andersen & Co. where, from 1976 to 1980, he was a partner serving on the firm’s worldwide oil
and gas industry team. Mr. Nelson also currently serves on the Board of Directors and Audit
Committees of Oil States International, Inc. (a NYSE-listed diversified oilfield services company) and
W&T Offshore, Inc. (a NYSE-listed oil and natural gas E&P company), where he was appointed to the
Governance Committee in late 2016. From 2010 until October 2012, Mr. Nelson also served on the
Board of Directors and Audit and Compensation Committees of the general partner of Genesis

Energy LP, an operator of oil and natural gas pipelines and provider of services to refineries and
industrial gas users. From 2005 until the Company’s sale in 2008, he served as a member of the Board
of Directors, a member of the Compensation Committee and Chair of the Audit Committee of
Quintana Maritime, Ltd., a provider of dry bulk cargo shipping services based in Athens, Greece.
Mr. Nelson, who is also a Certified Public Accountant, is Chairman of the Audit and Finance
Committees of our Board. He holds a Bachelor of Science degree in accounting from Holy Cross
College and a Master of Business Administration degree from Harvard University.

Mr. Nelson is an experienced financial leader with the skills necessary to lead our Audit
Committee. His service as Chief Financial Officer of Cal Dive International, Inc., Diversified
Energies, Inc. and Apache Corporation, as well as his years with Arthur Andersen & Co., make him a
valuable asset to ION, both on our Board and as the Chairman of our Audit Committee, particularly
with regard to financial and accounting matters. In addition, Mr. Nelson’s service on audit committees
of other companies enables Mr. Nelson to remain current on audit committee best practices and
current financial reporting developments within the energy industry.

Class III Director—Term Expiring In 2020

JOHN N. SEITZ

Director since 2003

Mr. Seitz, age 67, has been Chairman and Chief Executive Officer of GulfSlope Energy, Inc., an

OTC-listed independent E&P company exploring for oil and gas using advanced seismic imaging, since
2013. From 1977 to 2003, Mr. Seitz held positions of increasing responsibility at Anadarko Petroleum
Company, serving most recently as a Director and as President and Chief Executive Officer. Mr. Seitz
is a Trustee of the American Geological Institute Foundation. Mr. Seitz currently serves on the
Investment Committee for Sheridan Production Company, LLC, a privately held oil & gas company
with interests in Texas, Oklahoma and Wyoming. He formerly serviced on the Board of Directors for
Endeavor International, Inc., Constellation Energy Partners LLC, and Gulf United Energy, Inc.
Mr. Seitz is chairman of the Governance Committee and a member of the Compensation Committee of
our Board. Mr. Seitz holds a Bachelor of Science degree in geology from the University of Pittsburgh, a
Master of Science degree in geology from Rensselaer Polytechnic Institute and is a Certified
Professional Geoscientist in Texas. He also completed the Advanced Management Program at the
Wharton School of Business.

Mr. Seitz’ extensive experience as a leader of global E&P companies has proven to be an
important resource for our Board when considering industry and customer issues. In addition,
Mr. Seitz’ geology background and expertise assists the Board in better understanding industry trends
and issues.

Class I Director—Term Expiring In 2021

R. BRIAN HANSON

Director since 2012

Mr. Hanson, age 54, has been our President and Chief Executive Officer since January 1, 2012. He

joined ION in May 2006 as our Executive Vice President and Chief Financial Officer and was
appointed our President and Chief Operating Officer in August 2011. Prior to joining ION,
Mr. Hanson served as the Executive Vice President and Chief Financial Officer of Alliance
Imaging, Inc., a NYSE-listed provider of diagnostic imaging services to hospitals and other healthcare
providers, from July 2004 until November 2005. From 1998 to 2003, Mr. Hanson held a variety of
positions at Fisher Scientific International, Inc., a NYSE-listed manufacturer and supplier of scientific
and healthcare products and services, including Vice President Finance of the Healthcare group from
1998 to 2002 and Chief Operating Officer from 2002 to 2003. From 1986 until 1998, Mr. Hanson served
in various positions with Culligan Water Conditioning, an international manufacturer of water
treatment products and producer and retailer of bottled water products, most recently as Vice President

of Finance and Chief Financial Officer. Mr. Hanson received a Bachelor’s degree in engineering from
the University of New Brunswick and a Master of Business Administration degree from Concordia
University in Montreal.

Mr. Hanson’s day-to-day leadership and involvement with our Company provides him with

personal knowledge regarding our operations. In addition, Mr. Hanson’s financial experience and skills
and technical background enable the Board to better understand and be informed with regard to our
Company’s operations, prospects and financial condition.

HUASHENG ZHENG

Director since 2018

Mr. Zheng, age 52, has been employed by China National Petroleum Corporation (‘‘CNPC’’),
China’s largest oil company, and its affiliates in various positions of increasing responsibility since 1994.
Since 2018, he has been Executive Vice President of BGP Inc., China National Petroleum Corporation
(‘‘BGP’’). BGP is a subsidiary of CNPC and is the world’s largest land seismic contractor. From 1994 to
1997, Mr. Zheng was Legal Representative & Financial Supervisor, Ecuador Branch. From 1997 to
1998, he was Representative of the Sudan Office of BGP International. From 1998 to 1999, Mr. Zheng
was Manager of Strategy & Planning Department, BGP International. From 1999 to 2003, Mr. Zheng
was Vice President of BGP International. From 2005 to 2009, Mr. Zheng was President of BGP
International and Assistant President of BGP. From 2010 to 2018, Mr. Zheng was Vice President of
BGP. He holds a Masters of Business Administration degree from the University of Calgary, Haskayne
School of Business.

Mr. Zheng has over 20 years of experience in geophysical program management, particularly in

international business. Mr. Zheng’s position with BGP and his extensive knowledge of the global
seismic industry enables our Board to receive current input and advice reflecting the perspectives of
our seismic contractor customers. In addition, our land equipment joint venture with BGP and the
ever-increasing importance of China in the global economy and the worldwide oil and gas industry has
elevated our commercial involvement with China and Chinese companies. Mr. Zheng’s insights with
regard to issues relating to China provide our Board with a valuable resource.

Mr. Zheng was appointed to our Board of Directors under the terms of the Company’s Investor

Rights Agreement with BGP. Under the agreement, BGP is entitled to designate one individual to
serve as a member of our Board unless BGP’s ownership of our Common Stock falls below 10%. In
April of 2018, Mr. Zheng replaced Hao Huimin, BGP’s prior appointee to our Board.

JAMES M. LAPEYRE, JR.

Director since 1998

Mr. Lapeyre, age 66, served as Chairman of our Board from 1999 until January 1, 2012, and again

from January 1, 2013 until present. During 2012, Mr. Robert P. Peebler held the role of Executive
Chairman and Mr. Lapeyre served as Lead Independent Director. Mr. Lapeyre has been President and
Manager of Laitram L.L.C., a privately-owned, New Orleans-based manufacturer of food processing
equipment and modular conveyor belts, and its predecessors since 1989. Mr. Lapeyre joined our Board
when we bought the DigiCOURSE marine positioning products business from Laitram in 1998.
Mr. Lapeyre is a member of the Audit, Compensation, Governance and Finance Committees of our
Board. He holds a Bachelor of Art degree in history from the University of Texas and Master of
Business Administration and Juris Doctorate degrees from Tulane University.

Mr. Lapeyre’s status as a significant shareholder of our Company enables our Board to have direct

access to the perspective of our shareholders and ensures that the Board will take into consideration
the interests of our shareholders in all Board decisions. In addition, Mr. Lapeyre has extensive
knowledge regarding the marine products and technology that we acquired from Laitram in 1998.

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Governance Initiatives.

ION is committed to excellence in corporate governance and maintains

clear practices and policies that promote good corporate governance. We review our governance
practices and update them, as appropriate, based upon Delaware law, rules and listing standards of the
NYSE, SEC regulations and practices recommended by our outside advisors.

Examples of our corporate governance initiatives include the following:

(cid:129) Six of our seven Board members are independent of ION and its management. R. Brian
Hanson, our President and Chief Executive Officer, is not independent because he is an
employee of ION.

(cid:129) All members of the principal standing committees of our Board—the Audit Committee, the

Governance Committee and the Compensation Committee—are independent.

(cid:129) The independent members of our Board and each of the principal committees of our Board
meet regularly without the presence of management. The members of the Audit Committee
meet regularly with representatives of our independent registered public accounting firm without
the presence of management. The members of the Audit Committee also meet regularly with
our Director of Internal Audit without the presence of other members of management.

(cid:129) Our Audit Committee has at least one member who qualifies as a ‘‘financial expert’’ in

accordance with Section 407 of the Sarbanes-Oxley Act of 2002.

(cid:129) The Board has adopted written Corporate Governance Guidelines to assist its members in

fulfilling their responsibilities.

(cid:129) Under our Corporate Governance Guidelines, Board members are required to offer their

resignation from the Board if they retire or materially change the position they held when they
began serving as a director on the Board.

(cid:129) We comply with and operate in a manner consistent with regulations prohibiting loans to our

directors and executive officers.

(cid:129) Members of our Disclosure Committee, consisting of management employees and senior finance
and accounting employees, must review and confirm they have reviewed all quarterly and annual
reports before filing with the SEC.

(cid:129) We have a dedicated hotline and website available to all employees to report ethics and

compliance concerns, anonymously if preferred, including concerns related to accounting,
accounting controls, financial reporting and auditing matters. The hotline and website are
administered and monitored by an independent hotline monitoring company. The Board has
adopted a policy and procedures for the receipt, retention and treatment of complaints and
employee concerns received through the hotline or website. The policy is available on our
website at http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhighlights.

(cid:129) On an annual basis, each director and each executive officer is obligated to complete a

questionnaire that requires disclosure of any transactions with ION in which the director or
executive officer, or any member of his or her immediate family, has a direct or indirect material
interest.

(cid:129) We have included as Exhibits 31.1 and 31.2 to our Annual Report on Form 10-K for the fiscal
year ended December 31, 2018, filed with the SEC, certificates of our Chief Executive Officer
and Chief Financial Officer, respectively, certifying as to the quality of our public disclosure. In
addition, in 2018, we submitted to the NYSE a certificate of our Chief Executive Officer

certifying that he is not aware of any violation by ION of the NYSE corporate governance listing
standards.

(cid:129) Our internal audit controls function maintains critical oversight over the key areas of our
business and financial processes and controls, and provides reports directly to the Audit
Committee.

(cid:129) We have a compensation recoupment (clawback) policy that applies to our current and former

executive officers. The policy is available on our website at
http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhighlights.

(cid:129) We have stock ownership guidelines for our non-employee directors and senior management.

(cid:129) Our employment contracts with our Chief Executive Officer, Chief Financial Officer and other
employees do not contain a ‘‘single-trigger’’ change of control severance provision or entitle the
employee to tax gross-up benefits.

Majority Voting Procedure for Directors. Our Corporate Governance Guidelines require a
mandatory majority voting, director resignation procedure. Any director nominee in an uncontested
election who receives a greater number of votes ‘‘withheld’’ from his election than votes ‘‘for’’ such
election is required to promptly tender to the Board his resignation following certification of the
shareholder vote. Upon receipt of the resignation, the Governance Committee will consider the
resignation offer and recommend to the Board whether to accept it. The Board will act on the
Governance Committee’s recommendation within 120 days following certification of the shareholder
vote. The Governance Committee and the Board may consider any factors they deem relevant in
deciding whether to accept a director’s resignation. Thereafter, the Board will promptly disclose its
decision whether to accept the director’s resignation offer (and the reasons for rejecting the resignation
offer, if applicable) in a Current Report on Form 8-K furnished to the SEC.

Code of Ethics. We have adopted a Code of Ethics that applies to all members of our Board and

all of our employees, including our principal executive officer, principal financial officer, principal
accounting officer and all other senior members of our finance and accounting departments. An
updated version of our Code of Ethics was approved by the Board on November 4, 2014. We require
all employees to adhere to our Code of Ethics in addressing legal and ethical issues encountered in
conducting their work. The Code of Ethics requires that our employees avoid conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest and ethical manner,
promote full and accurate financial reporting and otherwise act with integrity and in ION’s best
interest. Every year our senior management employees and senior finance and accounting employees
affirm their compliance with our Code of Ethics and other principal compliance policies. New
employees acknowledge receipt and compliance with Company policies through an online onboarding
portal, after the employment offer has been accepted.

We have made our Code of Ethics, Corporate Governance Guidelines, charters for the principal

standing committees of our Board and other information that may be of interest to investors available
on the Investor Relations section of our website at
http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhighlights. Copies of this information may also be
obtained by writing to us at ION Geophysical Corporation, Attention: Corporate Secretary, 2105
CityWest Boulevard, Suite 100, Houston, Texas 77042-2855. Amendments to, or waivers from, our Code
of Ethics will also be available on our website and reported as may be required under SEC rules;
however, any technical, administrative or other non-substantive amendments to our Code of Ethics may
not be posted.

Please note that the preceding Internet address and all other Internet addresses referenced in this

Proxy Statement are for information purposes only and are not intended to be a hyperlink. Accordingly,

no information found or provided at such Internet addresses or at our website in general is intended or
deemed to be incorporated by reference herein.

Lead Independent Director.

James M. Lapeyre, Jr. serves as our Chairman of the Board. Under

NYSE corporate governance listing standards, Mr. Lapeyre has also been designated as our Lead
Independent Director and presiding non-management director to lead non-management directors
meetings of the Board. Our non-management directors meet at regularly scheduled executive sessions
without management, over which Mr. Lapeyre presides. The powers and authority of the Lead
Independent Director also include the following:

(cid:129) Advise and consult with the Chief Executive Officer, senior management and the Chairperson of

each Committee of the Board, as to the appropriate information, agendas and schedules of
Board and Committee meetings;

(cid:129) Advise and consult with the Chief Executive Officer and senior management as to the quality,
quantity and timeliness of the information submitted by the Company’s management to the
independent directors;

(cid:129) Recommend to the Chief Executive Officer and the Board the retention of advisers and

consultants to report directly to the Board;

(cid:129) Call meetings of the Board or executive sessions of the independent directors;

(cid:129) Develop the agendas for and preside over executive sessions of the Board’s independent

directors;

(cid:129) Serve as principal liaison between the independent directors, and the Chief Executive Officer
and senior management, on sensitive issues, including the review and evaluation of the Chief
Executive Officer; and

(cid:129) Coordinate with the independent directors in respect of each of the foregoing.

Certain of the duties and powers described above are to be conducted in conjunction with our
Chairman of the Board if the Lead Independent Director is not also the Chairman of the Board.

Communications to Board and Lead Independent Director. Shareholders and other interested
parties may communicate with the Board and our Lead Independent Director or non-management
independent directors as a group by writing to ‘‘Chairman of the Board’’ or ‘‘Lead Independent
Director,’’ c/o Corporate Secretary, ION Geophysical Corporation, 2105 CityWest Boulevard, Suite 100,
Houston, Texas 77042-2855. Inquiries sent by mail will be reviewed by our Corporate Secretary and, if
they pertain to the functions of the Board or committees of the Board or if the Corporate Secretary
otherwise determines that they should be brought to the intended recipient’s attention, they will be
forwarded to the intended recipient. Concerns relating to accounting, internal controls, auditing or
compliance matters will be brought to the attention of our Audit Committee and handled in
accordance with procedures established by the Audit Committee.

Our Corporate Secretary’s review of these communications will be performed with a view that the

integrity of this process be preserved. For example, items that are unrelated to the duties and
responsibilities of the Board, such as personal employee complaints, product inquiries, new product
suggestions, resumes and other forms of job inquiries, surveys, service or product complaints, requests
for donations, business solicitations or advertisements, may not be forwarded to the directors. In
addition, material that is considered to be hostile, threatening, illegal or similarly unsuitable may not be
forwarded. Except for these types of items, the Corporate Secretary will promptly forward written
communications to the intended recipient. Within the above guidelines, the independent directors have
granted the Corporate Secretary discretion to decide what correspondence should be shared with ION
management and independent directors.

2018 Meetings of the Board and Shareholders. During 2018, the Board held six meetings and the

four standing committees of the Board held a total of 15 meetings. The rate of attendance by our
directors at such meetings was 91%. We do not require our Board members to attend our Annual
Meeting of Shareholders; however, seven out of eight of our directors were present at our Annual
Meeting held in May 2018 and six were present at the special shareholder meeting held in November
2018.

Independence.

In determining independence, each year the Board determines whether directors

have any ‘‘material relationship’’ with ION. When assessing the ‘‘materiality’’ of a director’s relationship
with ION, the Board considers all relevant facts and circumstances, not merely from the director’s
standpoint, but from that of the persons or organizations with which the director has an affiliation, and
the frequency or regularity of the services, whether the services are being carried out at arm’s length in
the ordinary course of business and whether the services are being provided substantially on the same
terms to ION as those prevailing at the time from unrelated parties for comparable transactions.
Material relationships can include commercial, banking, industrial, consulting, legal, accounting,
charitable and familial relationships. Factors that the Board may consider when determining
independence for purposes of this determination include (1) not being a current employee of ION or
having been employed by ION within the last three years; (2) not having an immediate family member
who is, or who has been within the last three years, an executive officer of ION; (3) not personally
receiving or having an immediate family member who has received, during any 12-month period within
the last three years, more than $120,000 per year in direct compensation from ION other than director
and committee fees; (4) not being employed or having an immediate family member employed within
the last three years as an executive officer of another company of which any current executive officer of
ION serves or has served, at the same time, on that company’s compensation committee; (5) not being
an employee of or a current partner of, or having an immediate family member who is a current
partner of, a firm that is ION’s internal or external auditor; (6) not having an immediate family
member who is a current employee of such an audit firm who personally works on ION’s audit; (7) not
being or having an immediate family member who was within the last three years a partner or
employee of such an audit firm and who personally worked on ION’s audit within that time; (8) not
being a current employee, or having an immediate family member who is a current executive officer, of
a company that has made payments to, or received payments from, ION for property or services in an
amount that, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of the other
company’s consolidated gross revenues; or (9) not being an executive officer of a charitable
organization to which, within the preceding three years, ION has made charitable contributions in any
single fiscal year that has exceeded the greater of $1 million or 2% of such organization’s consolidated
gross revenues.

Our Board has affirmatively determined that, with the exception of R. Brian Hanson, who is our

President and Chief Executive Officer and an employee of ION, no director has a material relationship
with ION within the meaning of the NYSE’s listing standards, and that each of our directors (other
than Mr. Hanson) is independent from management and from our independent registered public
accounting firm, as required by NYSE listing standard rules regarding director independence.

Our Chairman and Lead Independent Director, Mr. Lapeyre, is an executive officer and significant

shareholder of Laitram, L.L.C., a company with which ION has ongoing contractual relationships, and
Mr. Lapeyre and Laitram together owned approximately 8.8% of our outstanding Common Stock as of
February 28, 2019. Our Board has determined that these contractual relationships have not interfered
with Mr. Lapeyre’s demonstrated independence from our management, and that the services performed
by Laitram for ION are being provided at arm’s length in the ordinary course of business and
substantially on the same terms to ION as those prevailing at the time from unrelated parties for
comparable transactions. In addition, the services provided by Laitram to ION resulted in payments by
ION to Laitram in an amount less than 1% of Laitram’s 2018 consolidated gross revenues. As a result
of these factors, our Board has determined that Mr. Lapeyre, along with each of our other
non-management directors, is independent within the meaning of the NYSE’s director independence
standards. For an explanation of the contractual relationship between Laitram and ION, please see
‘‘—Certain Transactions and Relationships’’ below.

Our director, Mr. Zheng, is employed as Executive Vice President of BGP. For an explanation of
the relationships between BGP and ION, please see ‘‘—Certain Transactions and Relationships’’ below.

Risk Oversight. Our Board oversees an enterprise-wide approach to risk management, designed to

support the achievement of organizational objectives, including strategic objectives, to improve
long-term organizational performance and enhance shareholder value. A fundamental part of risk
management is not only understanding the risks a company faces and what steps management is taking
to manage those risks, but also understanding what level of risk is appropriate for the Company. The
involvement of the full Board in setting ION’s business strategy is a key part of its assessment of the
Company’s appetite for risk and also a determination of what constitutes an appropriate level of risk
for the Company. The Board also regularly reviews information regarding the Company’s credit,
liquidity and operations, as well as the risks associated with each. While the Board has the ultimate
oversight responsibility for the risk management process, various committees of the Board also have
responsibility for risk management. In particular, the Audit Committee focuses on financial risk,
including internal controls, and receives an annual risk assessment report from ION’s internal auditors.
The Audit Committee is also responsible for overseeing cybersecurity-related risks. In addition, in
setting compensation, the Compensation Committee strives to create incentives that encourage a level
of risk-taking behavior consistent with ION’s business strategies. While each committee is responsible
for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly
informed through committee reports about such risks.

Board Leadership. Our current Board leadership structure consists of a Chairman of the Board

(who is not our current CEO), a Lead Independent Director (who is also our Chairman of the Board)
and strong independent committee chairs. The Board believes this structure provides independent
Board leadership and engagement and strong independent oversight of management while providing
the benefit of having our Chairman and Lead Independent Director lead regular Board meetings as we
discuss key business and strategic issues. Mr. Lapeyre, a non-employee independent director, serves as
our Chairman of the Board and Lead Independent Director. Mr. Hanson has served as our CEO since
January 1, 2012. We separate the roles of CEO and Chairman of the Board in recognition of the
differences between the two roles. The CEO is responsible for setting the strategic direction for the
Company and the day-to-day leadership and performance of the Company, while the Chairman
provides guidance to the CEO and sets the agenda for Board meetings and presides over the meetings
of the full Board. Separating these positions allows our CEO to focus on our day-to-day business, while
allowing the Chairman to lead the Board in its fundamental role of providing advice to, and
independent oversight of, management. The Board recognizes the time, effort and energy that the CEO
is required to devote to his position, as well as the commitment required to serve as our Chairman.
The Board believes that having separate positions is the appropriate leadership structure for our
Company at this time and demonstrates our commitment to good corporate governance.

Political Contributions and Lobbying. Our Code of Ethics prohibits company contributions to

political candidates or parties. In addition, we do not advertise in or purchase political publications,
allow company assets to be used by political parties or candidates, use corporate funds to purchase
seats at political fund raising events, or allow company trademarks to be used in political or campaign
literature. ION is a member of certain trade associations that may use a portion of their membership
dues for lobbying and/or political expenditures.

Committees of the Board

The Board has established four standing committees to facilitate and assist the Board in the

execution of its responsibilities. The four standing committees are the Audit Committee, the
Compensation Committee, the Governance Committee and the Finance Committee. Each standing
committee operates under a written charter, which sets forth the functions and responsibilities of the
committee. A copy of the charter for each of the Audit Committee, the Compensation Committee and
the Governance Committee can be obtained by writing to us at ION Geophysical Corporation,
Attention: Corporate Secretary, 2105 CityWest Boulevard, Suite 100, Houston, Texas 77042-2855 and
can also be viewed on our website at http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhighlights.
The Audit Committee, Compensation Committee, Governance Committee and Finance Committee are
composed entirely of non-employee directors. In addition, the Board establishes temporary special
committees from time to time on an as-needed basis. During 2018, the Audit Committee met five
times, the Compensation Committee met five times, the Governance Committee met four times and
the Finance Committee met one time.

The current members of the four standing committees of the Board are identified below.

Director

James M. Lapeyre, Jr.
. . . . . . . . . . . . . . . . . . . . . . .
David H. Barr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
R. Brian Hanson . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franklin Myers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S. James Nelson, Jr.
. . . . . . . . . . . . . . . . . . . . . . . . .
John N. Seitz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HuaSheng Zheng . . . . . . . . . . . . . . . . . . . . . . . . . . .

* Member

Audit Committee

Compensation
Committee

Audit
Committee

Governance
Committee

Finance
Committee

*
Chair

*
*

Chair

*
*

*
Chair

The Audit Committee is a separately-designated standing audit committee as defined in

Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). The
Audit Committee oversees matters relating to financial reporting, internal controls, risk management
and compliance. These responsibilities include appointing, overseeing, evaluating and approving the
fees of our independent auditors, reviewing financial information that is provided to our shareholders
and others, reviewing with management our system of internal controls and financial reporting
processes, and monitoring our compliance program and system.

The Board has determined that each member of the Audit Committee is financially literate and
satisfies the definition of ‘‘independent’’ as established under the NYSE corporate governance listing
standards and Rule 10A-3 under the Exchange Act. In addition, the Board has determined that
Mr. Nelson, the Chairman of the Audit Committee, is qualified as an audit committee financial expert
within the meaning of SEC regulations, and that he has accounting and related financial management
expertise within the meaning of the listing standards of the NYSE and Rule 10A-3.

Compensation Committee

General. The Compensation Committee has responsibility for the compensation of our executive
officers, including our Chief Executive Officer, and the administration of our executive compensation
and benefit plans. The Compensation Committee also has authority to retain or replace outside
counsel, compensation and benefits consultants or other experts to provide it with independent advice,
including the authority to approve the fees payable and any other terms of retention. All actions
regarding named executive officer compensation require Compensation Committee approval. The
Compensation Committee completes a comprehensive review of all elements of compensation at least
annually. If it is determined that any changes to any executive officer’s total compensation are
necessary or appropriate, the Compensation Committee obtains such input from management as it
determines to be necessary or appropriate. All compensation decisions with respect to executives other
than our Chief Executive Officer are determined in discussion with, and frequently based in part upon
the recommendation of, our Chief Executive Officer. The Compensation Committee makes all
determinations with respect to the compensation of our Chief Executive Officer, including, but not
limited to, establishing performance objectives and criteria related to the payment of his compensation,
and determining the extent to which such objectives have been established, obtaining such input from
the Compensation Committee’s independent compensation advisors as it deems necessary or
appropriate.

As part of its responsibility to administer our executive compensation plans and programs, the
Compensation Committee, usually near the beginning of the calendar year, establishes the parameters
of the annual incentive plan awards, including the performance goals relative to our performance that
will be applicable to such awards and the similar awards for our other senior executives. It also reviews
our performance against the objectives established for awards payable in respect of the prior calendar
year, and confirms the extent, if any, to which such objectives have been obtained, and the amounts
payable to each of our executive officers in respect of such achievement.

The Compensation Committee also determines the appropriate level and type of awards, if any, to

be granted to each of our executive officers pursuant to our equity compensation plans, and approves
the total annual grants to other key employees, to be granted in accordance with a delegation of
authority to a corporate human resources officer or other Company officer.

The Compensation Committee reviews, and has the authority to recommend to the Board for
adoption, any new executive compensation or benefit plans that are determined to be appropriate for
adoption by ION, including those that are not otherwise subject to the approval of our shareholders. It
reviews any contracts with current or former elected officers of the corporation. In connection with the
review of any such contract, the Compensation Committee may seek from its independent advisors such
advice, counsel and information as it determines to be appropriate in the conduct of such review. The
Compensation Committee will direct such outside advisors as to the information it requires in
connection with any such review, including data regarding competitive practices among the companies
with which ION generally compares itself for compensation purposes.

Compensation Committee Interlocks and Insider Participation. The Board has determined that each
member of the Compensation Committee satisfies the definition of ‘‘independent’’ as established under
the NYSE corporate governance listing standards. No member of the Compensation Committee is, or
was during 2018, an officer or employee of ION. Mr. Lapeyre is President and Manager and a
significant equity owner of Laitram, L.L.C, which has had a business relationship with ION since 1999.
During 2018, the Company paid Laitram and its affiliates $0.4 million, which consisted of
manufacturing services and reimbursement of costs and less than $0.1 million for reimbursement for
costs related to providing administrative and other back-office support services in connection with the
Company’s Louisiana marine operations. In addition, in 2018, the Company subleased approximately
4,100 square feet of office space to Laitram. See ‘‘—Certain Transactions and Relationships’’ below.

During 2018:

(cid:129) No executive officer of ION served as a member of the compensation committee of another

entity, one of whose executive officers served as a director or on the Compensation Committee
of ION; and

(cid:129) No executive officer of ION served as a director of another entity, one of whose executive

officers served on the Compensation Committee of ION.

Governance Committee

The Governance Committee functions as the Board’s nominating and corporate governance
committee and advises the Board with regard to matters relating to governance practices and policies,
management succession, and composition and operation of the Board and its committees, including
reviewing potential candidates for membership on the Board and recommending to the Board
nominees for election as directors of ION. In addition, the Governance Committee reviews annually
with the full Board and our Chief Executive Officer the succession plans for senior executive officers
and makes recommendations to the Board regarding the selection of individuals to occupy these
positions. The Board has determined that each member of the Governance Committee satisfies the
definition of ‘‘independent’’ as established under the NYSE corporate governance listing standards.

In identifying and selecting new director candidates, the Governance Committee considers the

Board’s current and anticipated strengths and needs and a candidate’s experience, knowledge, skills,
expertise, integrity, diversity, ability to make independent analytical inquiries, understanding of our
Company’s business environment, willingness to devote adequate time and effort to Board
responsibilities, and other relevant factors. The Governance Committee has not established specific
minimum age, education, years of business experience, or specific types of skills for potential director
candidates, but, in general, expects that qualified candidates will have ample experience and a proven
record of business success and leadership. The Governance Committee also seeks an appropriate
balance of experience and expertise in accounting and finance, technology, management, international
business, compensation, corporate governance, strategy, industry knowledge and general business
matters. In addition, the Governance Committee seeks diversity on our Board, including diversity of
experience, professions, skills, geographic representation, and backgrounds. The committee may rely on
various sources to identify potential director nominees, including input from directors, management and
others the Governance Committee feels are reliable, and professional search firms. In 2018, our Board
engaged Heidrick & Struggles to assist in a search for potential new director candidates, with a
particular emphasis on increasing the gender diversity of our Board.

Our Bylaws permit shareholders to nominate individuals for director for consideration at an annual

shareholders’ meeting. A proper director nomination may be considered at our 2020 Annual Meeting
only if the proposal for nomination is received by ION no later than December 13, 2019. All
nominations should be directed to Corporate Secretary, ION Geophysical Corporation, 2105 CityWest
Boulevard, Suite 100, Houston, Texas 77042-2855.

The Governance Committee will consider properly submitted recommendations for director
nominations made by a shareholder or other sources (including self-nominees) on the same basis as
other candidates. For consideration by the Governance Committee, a recommendation of a candidate
must be submitted timely and in writing to the Governance Committee in care of our Corporate
Secretary at our principal executive offices. The submission must include sufficient details regarding the
qualifications of the potential candidate. In general, nominees for election should possess (1) the
highest level of integrity and ethical character, (2) strong personal and professional reputation,
(3) sound judgment, (4) financial literacy, (5) independence, (6) significant experience and proven
superior performance in professional endeavors, (7) an appreciation for Board and team performance,

(8) the commitment to devote the time necessary, (9) skills in areas that will benefit the Board and
(10) the ability to make a long-term commitment to serve on the Board.

Finance Committee

From time to time, the Finance Committee reviews, with ION management, and has the power
and authority to approve on behalf of the Board, ION’s strategies, plans, policies and actions related to
corporate finance, including, but not limited to, (a) capital structure plans and strategies and specific
equity or debt financings, (b) capital expenditure plans and strategies and specific capital projects,
(c) strategic and financial investment plans and strategies and specific investments, (d) cash
management plans and strategies and activities relating to cash flow, cash accounts, working capital,
cash investments and treasury activities, including the establishment and maintenance of bank,
investment and brokerage accounts, (e) financial aspects of insurance and risk management, (f) tax
planning and compliance, (g) dividend policy, (h) plans and strategies for managing foreign currency
exchange exposure and other exposures to economic risks, including plans and strategies with respect to
the use of derivatives, and (i) reviewing and making recommendations to the Board with respect to any
proposal by ION to divest any asset, investment, real or personal property, or business interest if such
divestiture is required to be approved by the Board. The Finance Committee does not have oversight
responsibility with respect to ION’s financial reporting, which is the responsibility of the Audit
Committee. The Board has determined that each member of the Finance Committee (including its
Chairman) satisfies the definition of ‘‘independent’’ as established under the NYSE corporate
governance listing standards.

Stock Ownership Requirements

The Board has adopted stock ownership requirements for ION’s directors. The Board adopted

these requirements in order to align the economic interests of the directors with those of our
shareholders and further focus our emphasis on enhancing shareholder value. Under these
requirements, each non-employee director is expected to own at least 7,500 shares of Common Stock,
which, at the $5.18 closing price per share of our Common Stock on the NYSE on December 31, 2018
equates to approximately 84% of the $46,000 annual retainer fee we pay to our non-employee
directors. Directors have three years to acquire and increase the director’s ownership of ION Common
Stock to satisfy the requirements. The stock ownership requirements are subject to modification by the
Board in its discretion. The Board has also adopted stock ownership requirements for senior
management of ION. See ‘‘Executive Compensation—Compensation Discussion and Analysis—Elements
of Compensation—Stock Ownership Requirements; Hedging Policy’’ below.

The Governance Committee and the Board regularly review and evaluate ION’s directors’
compensation program on the basis of current and emerging compensation practices for directors,
emerging legal, regulatory and corporate compliance developments and comparisons with director
compensation programs of other similarly-situated public companies.

Certain Transactions and Relationships

The Board has adopted a policy to be followed prior to any transaction, arrangement or

relationship, or series of similar transactions, arrangements or relationships, including any indebtedness
or guarantee of indebtedness, between ION and a ‘‘Related Party’’ where the aggregate amount
involved is expected to exceed $120,000 in any calendar year. Under the policy, ‘‘Related Party’’
includes (a) any person who is or was an executive officer, director or nominee for election as a
director (since the beginning of the last fiscal year); (b) any person or group who is a greater-than-5%
beneficial owner of ION voting securities; or (c) any immediate family member of any of the foregoing,
which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, sister-in-law, and anyone residing in the home of an

executive officer, director or nominee for election as a director (other than a tenant or employee).
Under the policy, the Audit Committee of the Board is responsible for reviewing the material facts of
any Related Party transaction and approving or ratifying the transaction. In making its determination to
approve or ratify, the Audit Committee is required to consider such factors as (i) the extent of the
Related Party’s interest in the transaction, (ii) if applicable, the availability of other sources of
comparable products or services, (iii) whether the terms of the Related Party transaction are no less
favorable than terms generally available in unaffiliated transactions under like circumstances, (iv) the
benefit to ION and (v) the aggregate value of the Related Party transaction.

Mr. Lapeyre is the President and Manager and a significant equity owner of Laitram, L.L.C.
(‘‘Laitram’’) and has served as President and Manager of Laitram and its predecessors since 1989.
Laitram is a privately-owned, New Orleans-based manufacturer of food processing equipment and
modular conveyor belts. Mr. Lapeyre and Laitram together owned approximately 8.8% of our
outstanding Common Stock as of February 28, 2019.

We acquired DigiCourse, Inc., our marine positioning products business, from Laitram in 1998. In
connection with that acquisition, we entered into a Continued Services Agreement with Laitram under
which Laitram agreed to provide us certain bookkeeping, software, manufacturing, and maintenance
services. Manufacturing services consist primarily of machining of parts for our marine positioning
systems. The term of this agreement expired in September 2001 but we continue to operate under its
terms. In addition, from time to time, when we have requested, the legal staff of Laitram has advised
us on certain intellectual property matters with regard to our marine positioning systems. During 2018,
the Company paid Laitram and its affiliates $0.4 million which consisted of manufacturing services and
reimbursement of costs. During 2017 and 2016, the Company paid less than $0.1 million in each year
for reimbursement for costs related to providing administrative and other back-office support services
in connection with the Company’s Louisiana marine operations. In addition, throughout 2018, the
Company subleased approximately 4,100 square feet of office space to Laitram. In the opinion of the
Company’s management, the terms of these services were fair and reasonable and as favorable to the
Company as those that could have been obtained from unrelated third parties at the time of their
performance.

Mr. Zheng is Executive Vice President of BGP, which has been a customer of our products and
services for many years. For 2018 and 2017, the Company recorded revenues from BGP of $4.9 million
and $4.4 million, respectively. Receivables due from BGP were $1.6 million and $0.6 million at
December 31, 2018 and 2017, respectively.

In March 2010, prior to Mr. Zheng being appointed to the Board, we entered into certain

transactions with BGP that resulted in the commercial relationships between our Company and BGP as
described below:

(cid:129) We issued and sold approximately 1,585,969 shares of our Common Stock to BGP for an

effective purchase price of $42.00 per share pursuant to (i) a Stock Purchase Agreement we
entered into with BGP and (ii) the conversion of the principal balance of indebtedness
outstanding under a Convertible Promissory Note dated as of October 23, 2009. As of
February 28, 2019, BGP held beneficial ownership of approximately 10.6% of our outstanding
shares of Common Stock. The shares of our Common Stock acquired by BGP are subject to the
terms and conditions of an Investor Rights Agreement that we entered into with BGP in
connection with its purchase of our shares. Under the Investor Rights Agreement, for so long as
BGP owns as least 10% of our outstanding shares of Common Stock, BGP will have the right to
nominate one director to serve on our Board. The appointment of Mr. Zheng to our Board was
made pursuant to this agreement. The Investor Rights Agreement also provides that whenever
we may issue shares of our Common Stock or other securities convertible into, exercisable or
exchangeable for our Common Stock, BGP will have certain pre-emptive rights to subscribe for

a number of such shares or other securities as may be necessary to retain its proportionate
ownership of our Common Stock that would exist before such issuance. These pre-emptive rights
are subject to usual and customary exceptions, such as issuances of securities as equity
compensation to our directors, employees and consultants and under employee stock purchase
plans.

(cid:129) We formed a joint venture with BGP, owned 49% by us and 51% by BGP, to design, develop,

manufacture and sell land-based seismic data acquisition equipment for the petroleum industry.
The name of the joint venture company is INOVA Geophysical Equipment Limited. Under the
terms of the joint venture transaction, INOVA Geophysical was initially formed as a wholly-
owned direct subsidiary of ION, and BGP acquired its interest in the joint venture by paying us
aggregate consideration of (i) $108.5 million in cash and (ii) contributing certain assets owned by
BGP relating to the business of the joint venture.

Director Compensation

ION employees who are also directors do not receive any fee or remuneration for services as
members of our Board. We currently have six non-employee directors who qualify for compensation as
directors. In addition to being reimbursed for all reasonable out-of-pocket expenses that the director
incurs attending Board meetings and functions, our outside directors receive an annual retainer fee of
$46,000. In addition, our Chairman of the Board receives an annual retainer fee of $25,000, our
Chairman of the Audit Committee receives an annual retainer fee of $20,000, our Chairman of the
Compensation Committee receives an annual retainer fee of $15,000, our Chairman of the Governance
Committee receives an annual retainer fee of $10,000 and our Chairman of the Finance Committee
receives an annual retainer fee of $10,000. Our non-employee directors also receive, in cash, $2,000 for
each Board meeting attended and $2,000 for each committee meeting attended (unless the committee
meeting is held in conjunction with a Board meeting, in which case the fee for committee meeting
attendance is $1,000) and $1,000 for each Board or committee meeting attended via teleconference.

Each non-employee director also receives an initial grant of 533 vested shares of our Common

Stock on the first quarterly grant date after joining the Board and follow-on grants each year of a
number of shares of our Common Stock equal in market value to $110,000, up to an annual grant of
2,500 shares per director.

The following table summarizes the compensation earned by our non-employee directors in 2018:

Name(1)

David H. Barr . . . . . . . . . . . .
Michael C. Jennings(4) . . . . . .
. . . . . .
James M. Lapeyre, Jr.
Franklin Myers . . . . . . . . . . . .
S. James Nelson, Jr.
. . . . . . . .
John N. Seitz . . . . . . . . . . . . .
HuaSheng Zheng . . . . . . . . . .

Fees
Earned
or Paid in
Cash ($)

67,000
66,000
97,000
79,000
88,000
77,000
34,200

Stock
Awards
($)(2)

71,125
71,125
71,125
71,125
71,125
71,125
58,153

Non-Equity
Incentive
Plan
Compensation
($)

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)

—
—
—
—
—
—
—

All Other
Compensation
($)(3)

53,594
53,594
53,594
53,594
53,594
53,594
24,813

Total
($)

191,719
190,719
221,719
203,719
212,719
201,719
117,166

(1) R. Brian Hanson, our President and Chief Executive Officer, is not included in this table because
he was an employee of ION during 2018, and therefore received no compensation for his services
as director. The compensation received by Mr. Hanson as an employee of ION during 2018 is
shown in the Summary Compensation Table contained in ‘‘—Executive Compensation’’ below.

(2) All of the amounts shown represent the value of Common Stock granted under our Second

Amended and Restated 2013 Long-Term Incentive Plan (the ‘‘2013 LTIP’’). On March 1, 2018,
each of our non-employee directors was granted an award of 2,500 shares of ION Common Stock.
The values contained in the table are based on the grant-date fair value of awards of stock during
the fiscal year.

(3) On March 1, 2018, the value of the 2,500 shares received by each of our non-employee directors

(except for Mr. Zheng) was only $71,125 (using the closing price on the NYSE of $28.45 per share
on the March 1, 2018 grant date) leaving a gap of $38,875 in the value of the equity awarded
versus the $110,000 compensation target. On June 1, 2018, Mr. Zheng received a prorated grant of
1,875 shares (prorated to reflect that he did not serve for the full year) valued at $45,281 (using
the closing price on the NYSE of $24.15 per share on the June 1, 2018 grant date) leaving a gap
of $37,219 in the value of equity awarded versus the $110,000 compensation target. As a result, the
Governance Committee approved additional cash compensation to be provided to the Board
(except for Mr. Zheng) in the amount of $38,875 and $37,219 for Mr. Zheng. The additional
compensation is paid in quarterly increments. In addition on June 1, 2018 (the first quarterly grant
date after his election to the Board), Mr. Zheng received an award of 533 vested shares valued at
$12,872 (using the closing price on the NYSE of $24.15 per share on the June 1, 2018 grant date).

(4) Mr. Jennings resigned from the Board on February 8, 2019.

As of December 31, 2018, our non-employee directors held the following unvested and unexercised

ION equity awards:

Name

Unvested
Stock
Awards(#)

Unexercised
Option
Awards(#)

David H. Barr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael C. Jennings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James M. Lapeyre, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franklin Myers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S. James Nelson, Jr.
John N. Seitz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HuaSheng Zheng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,500
2,500
2,500
2,500
2,500
2,500
1,875

—
—
—
—
—
—
—

(1) Mr. Jennings resigned from the Board on February 8, 2019.

OWNERSHIP OF EQUITY SECURITIES OF ION

Except as otherwise set forth below, the following table sets forth information as of February 28,
2019, with respect to the number of shares of Common Stock owned by (i) each person known by us to
be a beneficial owner of more than 5% of our Common Stock, (ii) each of our directors, (iii) each of
our executive officers named in the 2018 Summary Compensation Table included in this Proxy
Statement and (iv) all of our directors and executive officers as a group. Except where information was
otherwise known by us, we have relied solely upon filings of Schedules 13D and 13G to determine the
number of shares of our Common Stock owned by each person known to us to be the beneficial owner
of more than 5% of our Common Stock as of such date.

Name of Owner

Common
Stock(1)

Rights to
Acquire(2)

Restricted
Stock(3)

Percent of
Common
Stock(4)

BGP Inc., China National Petroleum Corporation(5) . . . . .
James M. Lapeyre, Jr.(6) . . . . . . . . . . . . . . . . . . . . . . . . .
Gates Capital Management, L.P.(7) . . . . . . . . . . . . . . . . . .
Renaissance Technologies Holding Company(8) . . . . . . . . .
Laitram, L.L.C.(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Empery Asset Management, LP(10) . . . . . . . . . . . . . . . . .
R. Brian Hanson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steven A. Bate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenneth G. Williamson . . . . . . . . . . . . . . . . . . . . . . . . . .
Christopher T. Usher . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David H. Barr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franklin Myers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
S. James Nelson, Jr.
Matthew R. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John N. Seitz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HuaSheng Zheng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,585,969
1,310,190
1,212,408
1,026,523
979,816
832,314
20,299
102,369
71,674
49,085
22,933
20,000
14,266
6,804
16,259
373

2,500

203,332
101,095
95,263
94,029
2,500
2,500
2,500
47,109
2,500
1,875

72,921
61,397
60,048
32,913

13,916

All directors and executive officers as a group (12 Persons)

1,637,875

249,051

565,480

10.6%
8.8%
8.1%
6.9%
6.5%
5.6%
2.0%
1.8%
1.5%
1.1%
*
*
*
*
*
*

16.1%

Less than 1%

(1) Represents shares for which the named person (a) has sole voting and investment power or (b) has
shared voting and investment power. Excluded are shares that (i) are unvested restricted stock
holdings or (ii) may be acquired through stock option exercises.

(2) Represents shares of Common Stock that may be acquired upon the exercise of stock options held
by our officers and directors that are currently exercisable or will be exercisable on or before
April 29, 2019.

(3) Represents unvested shares subject to a vesting schedule, forfeiture risk and other restrictions.
Although these shares are subject to risk of forfeiture, the holder has the right to vote the
unvested shares unless and until they are forfeited.

(4) Assumes shares subject to outstanding stock options that such person has rights to acquire upon

exercise, presently and on or before April 29, 2019, are outstanding.

(5) The address for BGP Inc., China National Petroleum Corporation is No. 189 Fanyang Middle

Road, ZhuoZhou City, HeBei Province 072750 P.R. China.

(6) The shares of Common Stock held by Mr. Lapeyre include 129,402 shares that Mr. Lapeyre holds
as a custodian or trustee for the benefit of his children, 979,816 shares owned by Laitram, L.L.C.

(which are set forth in the table under Laitram, L.L.C.), and 699 shares that Mr. Lapeyre holds as
a co-trustee with his wife for the benefit of his children, in all of which Mr. Lapeyre disclaims any
beneficial interest. Please read note 9 below. Mr. Lapeyre has sole voting power over only 202,773
of these shares of Common Stock.

(7) The address for Gates Capital Management, L.P. is 1177 Avenue of the Americas, 46th Floor, New
York, New York 10036. Gates Capital Management reports that it has shared voting power with
Gates Capital Management GP, LLC, Gates Capital Management, Inc. and Jeffrey L. Gates.

(8) The address for Renaissance Technologies Holdings Corporation is 800 Third Avenue, New York,
New York 10022. Renaissance Technologies reported that it has sole voting power with respect to
853,349 shares, sole dispositive powers with respect to 853,423 shares and shared dispositive power
with respect to 173,100 shares.

(9) The address for Laitram, L.L.C. is 220 Laitram Lane, Harahan, Louisiana 70123. Mr. Lapeyre is

the President and Manager of Laitram. Please read note 6 above. Mr. Lapeyre disclaims beneficial
ownership of any shares held by Laitram.

(10) The address for Empery Asset Management, LP is 1 Rockefeller Plaza, Suite 1205, New York,

New York 10020.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires directors and certain officers of ION, and persons who
own more than 10% of ION’s Common Stock, to file with the SEC and the NYSE initial statements of
beneficial ownership on Form 3 and changes in such ownership on Forms 4 and 5. Based on our review
of the copies of such reports, we believe that during 2018 our directors, executive officers and
shareholders holding greater than 10% of our outstanding shares complied with all applicable filing
requirements under Section 16(a) of the Exchange Act, and that all of their filings were timely made.

Our executive officers are as follows:

EXECUTIVE OFFICERS

Name

Age

Position with ION

R. Brian Hanson . . . . . . . . . . .
Steven A. Bate . . . . . . . . . . . .
Matthew R. Powers . . . . . . . . .

54
President, Chief Executive Officer and Director
56 Executive Vice President and Chief Financial Officer
43 Executive Vice President, General Counsel and Corporate

Secretary

Scott P. Schwausch . . . . . . . . .
Christopher T. Usher . . . . . . . .

44 Vice President and Corporate Controller
58 Executive Vice President and Chief Operating Officer,

Operations Optimization

Kenneth G. Williamson . . . . . .

54 Executive Vice President and Chief Operating Officer, E&P

Technology & Services

For a description of the business background of Mr. Hanson, please see ‘‘Class I—Term Expiring in

2021’’ above.

Mr. Bate is currently our Executive Vice President and Chief Financial Officer. Mr. Bate rejoined
ION in May 2013 as Senior Vice President, Systems Division, became the Executive Vice President and
Chief Operating Officer, Systems Division in February 2014 and became the Executive Vice President
and Chief Financial Officer in November 2014. Mr. Bate originally joined ION in 2005 as Chief
Financial Officer of our GX Technology business unit. In 2007, he was appointed Senior Vice
President, Sensor business unit and in 2009, his area of responsibility broadened to our Land Imaging
Systems Division. Following our formation in March 2010 of INOVA Geophysical, a land seismic
equipment joint venture with BGP, Mr. Bate was appointed as INOVA Geophysical’s first President and
Chief Executive Officer, and served in that role until October 2012. Prior to joining ION in 2005,
Mr. Bate founded a consulting business and served as President of a residential construction company.
Mr. Bate holds a Bachelor of Business Administration degree from the University of Houston.

Mr. Powers joined ION in 2013 as Senior Legal Counsel and held that position until February
2016 when he was promoted to Deputy General Counsel. In September 2017, he was promoted to
General Counsel and Corporate Secretary, and was further promoted to Executive Vice President in
October 2017. Prior to joining ION, Mr. Powers held a variety of positions in the Houston offices of
Mayer Brown LLP (beginning in 2005 and ending in 2012) and Sidley Austin LLP (beginning in 2012
and ending in 2013). Mr. Powers holds a Juris Doctor from the University of Chicago Law School and
a Bachelor’s degree in Economics, summa cum laude, from the University of Colorado-Denver. He is
licensed to practice in Texas.

Mr. Schwausch joined ION in 2006 as Assistant Controller and held that position until June 2010

when he became Director of Financial Reporting. In May 2012, he became Controller, Solutions
Business Unit, and in May 2013 became Vice President and Corporate Controller. Mr. Schwausch held
a variety of positions at Deloitte & Touche, LLP, a public accounting firm, from 2000 until he joined
ION. Mr. Schwausch is a Certified Public Accountant and a Certified Management Accountant. He
received a Bachelor of Science degree in accounting from Brigham Young University.

Mr. Usher is our Executive Vice President and Chief Operating Officer, Operations Optimization.
Mr. Usher joined ION in November 2012 as the Executive Vice President and Chief Operating Officer,
GeoScience Division. Prior to joining our Company, Mr. Usher served as the Senior Vice President,
Data Processing, Analysis and Interpretation and Chief Technology Officer (including significant merger
and acquisitions responsibility) of Global Geophysical Services, Inc., a NYSE-listed seismic products
and services company, since January 2010. Prior to joining Global, Mr. Usher served from October
2005 to January 2010 as Senior Director at Landmark Software and Services (including significant
merger and acquisition responsibility), a division of Halliburton Company, an oilfield services company.

From 2004 to 2005, he was Senior Corporate Vice President, Integrated Services, at Paradigm
Geotechnology, an E&P software company. From 2000 to 2003, Mr. Usher served as President of the
global data processing division of Petroleum Geo-Services (PGS), a marine geophysical contracting
company. He began his career at Western Geophysical where he served in a number of roles over his
17-year tenure before becoming the Worldwide VP Technology. Mr. Usher holds a Bachelor of Science
degree in geology and geophysics from Yale University.

Mr. Williamson is our Executive Vice President and Chief Operating Officer, E&P Technology &
Services. Mr. Williamson originally joined ION as Vice President of our GeoVentures business unit in
September 2006, became a Senior Vice President in January 2007, and became Executive Vice
President and Chief Operating Officer, GeoVentures Division, in November 2012 and Executive Vice
President and Chief Operating Officer of E&P Technology & Services in February of 2015. Between
1987 and 2006, Mr. Williamson was employed by Western Geophysical, which in 2000 became part of
WesternGeco, a seismic solutions and technology subsidiary of Schlumberger, Ltd., a global oilfield and
information services company. While at WesternGeco, Mr. Williamson served as Vice President,
Marketing from 2001 to 2003, Vice President, Russia and Caspian Region, from 2003 to 2005 and Vice
President, Marketing, Sales & Commercialization of WesternGeco’s electromagnetic services and
technology division from 2005 to 2006. Mr. Williamson holds a Bachelor of Science degree in
geophysics from Cardiff University in Wales.

EXECUTIVE COMPENSATION

Introductory note: The following discussion of executive compensation contains descriptions of various
employee benefit plans and employment-related agreements. These descriptions are qualified in their entirety
by reference to the full text or detailed descriptions of the plans and agreements, which are filed or
incorporated by reference as exhibits to our annual report on Form 10-K for the year ended December 31,
2018. In this discussion, the terms ‘‘ION,’’ ‘‘we,’’ ‘‘our’’ and ‘‘us’’ refer to ION Geophysical Corporation
and its consolidated subsidiaries, except where the context otherwise requires or as otherwise indicated.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides an overview of the Compensation Committee

of the Company’s Board of Directors, a discussion of the background and objectives of our
compensation programs for our senior executives, and a discussion of all material elements of the
compensation of each of the executive officers identified in the following table, whom we refer to as
our named executive officers (‘‘NEOs’’):

Name

Title

R. Brian Hanson . . . . . . . . . . . . President, Chief Executive Officer and Director
Steven A. Bate . . . . . . . . . . . . . Executive Vice President and Chief Financial Officer
Matthew R. Powers . . . . . . . . . . Executive Vice President, General Counsel and Corporate

Secretary

Christopher T. Usher . . . . . . . . . Executive Vice President and Chief Operating Officer, Operations

Kenneth G. Williamson . . . . . . . Executive Vice President and Chief Operating Officer, E&P
Technology & Services

Optimization

Executive Summary

General. Our executive compensation program provides our NEOs with total annual

compensation that includes three principal elements: base salary, performance-based annual non-equity
incentive plan compensation (annual cash bonuses), and long-term equity-based incentive awards. (For
the purposes of this Compensation Discussion and Analysis, our stock appreciation rights awards
(‘‘SARs’’) are categorized as long-term equity-based incentive awards because, while they are
cash-settled, their value is determined by the spread between the price of the Company’s common stock
on the date they are granted and the price of the Company’s common stock on date they are
exercised). A significant portion of each NEOs’ total annual compensation is performance based and is
at risk and dependent upon our Company’s achievement of specific, measurable performance goals.
Our performance-based pay closely aligns our NEOs’ interests with those of our shareholders and
promotes the creation of shareholder value, without encouraging excessive risk-taking. In addition, our
equity programs, combined with our executive share ownership requirements are designed to reward
long-term stock performance and encourage investment in the Company.

Annual Bonus Incentive Plan. Payments under our annual cash bonus incentive plan for 2018

(which were made in February 2019) reflected the Company’s performance and the level of
achievement of our 2018 plan performance goals. NEOs’ bonus targets range from 60% to 100% of
their annual base salaries. The total dollars that could have been achieved under the bonus plan pool
(by all participating employees of the Company, including the NEOs) were increased from $14 million
in 2017 to a maximum of $14.5 million in 2018.

The Compensation Committee determined that the bonus available for awards paid to our NEOs

under the 2018 plan should be based on a combination of long-term strategic initiatives and cash
generation goals. In early 2019, the Compensation Committee reviewed the Company’s progress
towards the achievement of the strategic initiatives and cash generation goals, and approved a bonus
for each NEO based on each individual’s achievement of key objectives and company performance. In
approving the individual awards to our NEOs in February 2019, the Compensation Committee noted
that, although the Company fell short of its cash generation goals, our NEOs’ efforts had helped the
Company execute on several of its long-term strategic initiatives. It was also noted that the Company’s
strategic vision helped to stimulate investor interest that culminated in a successful equity raise, and
that the NEOs’ efforts to execute that vision had contributed to that success.

Base Salaries. No NEO received an increase in base pay in 2018.

Long-Term Stock-Based Incentive Compensation. The Compensation Committee approved
significant grants of equity-based compensation in 2018, including to our NEOs, in the form of
restricted stock and SARs. However, these awards were structured differently than the Company’s
awards in the past. As described below, in addition to containing traditional time-based vesting
restrictions (the shares vest equally on the first, second and third anniversary of the grant, subject to
continued employment), they also contain very aggressive performance-based vesting restrictions tied to
the performance of our Company’s stock price. The Compensation Committee believes that these
performance-based vesting triggers allow a more efficient use of available equity from our long-term
incentive plan, and more closely align our NEOs’ interests with those of our shareholders by instilling
ownership thinking.

Compensation Committee

Corporate Governance

The Compensation Committee of our Board reviews and approves, or recommends to the Board

for approval, all salary and other remuneration for our NEOs and oversees matters relating to our
employee compensation and benefit programs. No member of the Compensation Committee is an
employee of ION. The Board has determined that each member of the Compensation Committee
satisfies the definition of ‘‘independent’’ as established in the NYSE corporate governance listing
standards. In determining the independence of each member of the Compensation Committee, the
Board considered all factors specifically relevant to determining whether the director has a relationship
to our Company that is material to the director’s ability to be independent from management in the
execution of his duties as a Compensation Committee member, including, but not limited to:

(cid:129) the source of compensation of the director, including any consulting, advisory or other

compensatory fee paid by us to the director; and

(cid:129) whether the director is affiliated with our Company, a subsidiary or affiliate.

When considering the director’s affiliation with us for purposes of independence, the Board
considered whether the affiliate relationship places the director under the direct or indirect control of
our Company or its senior management, or creates a direct relationship between the director and
members of senior management, in each case, of a nature that would impair the director’s ability to
make independent judgments about our executive compensation.

The Compensation Committee operates pursuant to a written charter that sets forth its functions

and responsibilities. A copy of the charter can be viewed on our website
at http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhighlights. For a description of the
responsibilities of the Compensation Committee, see ‘‘Item 1.—Election of Directors—Committees of the
Board—Compensation Committee’’ above.

During 2018, the Compensation Committee met five times and took action by unanimous written

consent one time.

Compensation Consultants

The Compensation Committee has the authority and necessary funding to engage, terminate and
pay compensation consultants, independent legal counsel and other advisors in its discretion. Prior to
retaining any such compensation consultant or other advisor, the Compensation Committee evaluates
the independence of such advisor and evaluates whether such advisor has a conflict of interest.

Role of Management in Establishing and Awarding Compensation

On an annual basis, our Chief Executive Officer, with the assistance of our Human Resources
department, recommends to the Compensation Committee any proposed increases in base salary, bonus
payments and equity awards for our NEOs other than himself. No NEO is involved in determining his
own salary increase, bonus payment or equity award. When making officer compensation
recommendations, our Chief Executive Officer takes into consideration compensation benchmarks,
which include data relating to the compensation of employees at comparable companies, the level of
inherent importance and risk associated with the position and function, and the executive’s job
performance over the previous year. See ‘‘—Objectives of Our Executive Compensation Programs—
Benchmarking’’ and ‘‘—Elements of Compensation—Base Salary’’ below.

Our Chief Executive Officer, with assistance and input from our senior management, also
formulates and proposes to the Compensation Committee an employee bonus incentive plan for the
ensuing year. For a description of our process for formulating the employee bonus incentive plan and
the factors that we consider, see ‘‘—Elements of Compensation—Bonus Incentive Plan’’ below.

The Compensation Committee reviews and approves all compensation and awards to NEOs and all

bonus incentive plans. With respect to equity compensation awarded to employees other than NEOs,
the Compensation Committee reviews and approves all grants of restricted stock and stock options
above 5,000 shares, generally based upon the recommendation of the Chief Executive Officer, and has
delegated option and restricted stock granting authority to the Chief Executive Officer as permitted
under Delaware law for grants to non-NEOs of up to 5,000 shares.

Of its own initiative, at least once a year, the Compensation Committee reviews the performance
and compensation of our Chief Executive Officer and, following discussions with the Chief Executive
Officer and other members of the Board, establishes his compensation level. Where it deems
appropriate, the Compensation Committee will also consider market compensation information from
independent sources. See ‘‘—Objectives of Our Executive Compensation Programs—Benchmarking’’
below.

Certain members of our senior management generally attend most meetings of the Compensation

Committee, including our Chief Executive Officer and our Executive Vice President, General
Counsel & Corporate Secretary. However, no member of management votes on items being considered
by the Compensation Committee. The Compensation Committee and Board do solicit the views of our
Chief Executive Officer on compensation matters, particularly as they relate to the compensation of the
other NEOs and the other members of senior management reporting to the Chief Executive Officer.
The Compensation Committee often conducts an executive session during meetings, during which
members of management are not present.

Objectives of Our Executive Compensation Programs

General Compensation Philosophy and Policy

Through our compensation programs, we seek to:

(cid:129) attract and retain qualified and productive executive officers and key employees by providing
total compensation competitive with that of other executives and key employees employed by
companies of similar size, complexity and industrial sector;

(cid:129) encourage our executives and key employees to drive the Company’s financial and operational

performance;

(cid:129) structure compensation to create meaningful links between corporate performance, individual

performance and financial rewards;

(cid:129) align the interests of our executives with those of our shareholders by providing a significant

portion of total pay in the form of equity-based incentives;

(cid:129) encourage long-term commitment to our Company; and

(cid:129) limit corporate perquisites to seek to avoid perceptions both within and outside of our Company

of ‘‘soft’’ compensation.

Our governing principles in establishing executive compensation have been:

Long-Term and At-Risk Focus. Compensation opportunities should be composed of long-term,

at-risk pay to focus our management on the long-term interests of our Company.

Equity Orientation. Equity-based plans should comprise a major part of the at-risk portion of total

compensation to instill ownership thinking and to link compensation to corporate performance and
shareholder interests.

Competitive. We emphasize total compensation opportunities consistent on average with our peer

group of companies. Competitiveness of annual base pay and annual bonuses is independent of stock
performance. However, overall competitiveness of total compensation is generally contingent on
long-term, equity-based compensation programs. Base salary, annual bonuses and employee benefits
should be close to competitive levels when compared to similarly situated companies.

Focus on Total Compensation.

In making decisions with respect to any element of an NEO’s

compensation, the Compensation Committee considers the total compensation that may be awarded to
the NEO, including salary, annual cash bonus and long-term equity-based incentive compensation. The
Compensation Committee analyzes all of these elements of compensation (including the compensation
mix) as well as the aggregate total amount of actual and projected compensation. In its most recent
review of total compensation, the Compensation Committee determined that annual compensation
amounts for our Chief Executive Officer and our other NEOs remained generally consistent with the
Compensation Committee’s expectations. However, the Compensation Committee reserves the right to
make changes that it believes are warranted.

Internal Pay Equity. Our core compensation philosophy is to pay our NEOs competitive levels of
compensation that best reflect their individual responsibilities and contributions to our Company, while
providing incentives to achieve our business and financial objectives. While comparisons to
compensation levels at other companies are helpful in assessing the overall competitiveness of our
compensation program, we believe that our executive compensation program also must be internally
consistent and equitable in order for our Company to achieve our corporate objectives. Over time,
there have been variations in the comparative levels of compensation of NEOs and changes in the
overall composition of the management team and the overall accountabilities of the individual NEOs;
however, we and the Compensation Committee are satisfied that total compensation received by NEOs
reflects an appropriate differential for executive compensation.

These principles apply to compensation policies for all of our NEOs and key employees. We do

not follow the principles in a mechanistic fashion; rather, we apply experience and judgment in
determining the appropriate mix of compensation for each individual. This judgment also involves
periodic review of discernible measures to determine the progress each individual is making toward
agreed-upon goals and objectives.

Benchmarking

When making compensation decisions, we also look at the compensation of our Chief Executive
Officer and other NEOs relative to the compensation paid to similarly situated executives at companies
that we consider to be our industry and market peers—a practice often referred to as ‘‘benchmarking.’’
We believe, however, that a benchmark should be just that—a point of reference for measurement—but
not the determinative factor for our executives’ compensation. The purpose of the comparison is not to
supplant the analyses of internal pay equity, shareholder interests and the individual performance of
the NEOs that we consider when making compensation decisions. Because the comparative
compensation information is just one of the several analytic tools that are used in setting executive
compensation, the Compensation Committee has discretion in determining the nature and extent of its
use. Further, given the limitations associated with comparative pay information for setting individual
executive compensation, including the difficulty of assessing and comparing wealth accumulation
through equity gains, the Compensation Committee may elect not to use the comparative compensation
information at all in the course of making compensation decisions.

In most years, at least once each year, our Human Resources department, under the oversight of

the Compensation Committee, reviews data from market surveys, independent consultants and other
sources to assess our competitive position with respect to base salary, annual bonuses and long-term
incentive compensation. When reviewing compensation data in the fall of 2018, we utilized data
primarily from Gartner Inc. At that same time, the Company also engaged the services of Aon Hewitt
a leading compensation consultant, to analyze our compensation program relative to industry practice
(see ‘‘—Long-Term Stock-Based Incentive Compensation’’, below).

Reviewing compensation data provides a starting point for our compensation analysis. We believe
that the data contain relevant compensation information from companies that are representative of the
sector in which we operate, have relative size as measured by market capitalization and experience
relative complexity in the business and the executives’ roles and responsibilities. We look extensively at
a number of other factors beyond the data, including our estimates of the compensation at our most
comparable competitors and other companies that were closest to our Company in size, profitability
and complexity. We also consider an individual’s current performance, the level of responsibility, risk of
attrition, and the employee’s skills and experience, collectively, in making compensation decisions.

In the case of our Chief Executive Officer and some of our other NEOs, we also consider our
Company’s performance during the person’s tenure and the anticipated level of compensation that
would be required to replace the person with someone of comparable experience and skill.

In addition to our periodic review of compensation, we also regularly monitor market conditions
and will adjust compensation levels from time to time as necessary to remain competitive and retain
our most valuable employees. When we experience a significant level of competition for retaining
current employees or hiring new employees, as was the case in 2018, we will typically reevaluate our
compensation levels within that employee group in order to ensure our competitiveness.

The primary components of our executive compensation program are as follows:

Elements of Compensation

ION Geophysical
Executive Compensation

Short-Term
Compensation

Benefits

Long-Term
Compensation

Base Salary

Bonus
Incentive Plan

Stock Options

Stock Appreciation
Rights (SARS)

Restricted Stock/
Units
29MAR201917134240

Below is a summary of each component:

Base Salary

General. The general purpose of base salary for our NEOs is to create a base of cash

compensation for the officer that is consistent on average with the range of base salaries for executives
in similar positions and with similar responsibilities at comparable companies. In addition to salary
norms for persons in comparable positions at comparable companies, base salary amounts may also
reflect the nature and scope of responsibility of the position, the expertise and experience of the
individual employee and the competitiveness of the market for the employee’s services. Base salaries of
executives other than our Chief Executive Officer may also reflect our Chief Executive Officer’s
evaluation of the individual NEO’s job performance. As a result, the base salary level for each
individual may be above or below the target market value for the position. The Compensation
Committee also recognizes that the Chief Executive Officer’s compensation should reflect the greater
policy-and decision-making authority that he holds and the higher level of responsibility he has with
respect to our strategic direction and our financial and operating results. As of December 31, 2018, our
Chief Executive Officer’s annual base salary was 55% higher than the annual base salary for the next
highest-paid NEO and 70% higher than the average annual base salary for all of our other NEOs. The
Compensation Committee does not intend for base salaries to be the vehicle for long-term capital and
value accumulation for our executives.

2018 Actions.

In typical years, base salaries are reviewed at least annually and may also be

adjusted from time to time to realign salaries with market levels after taking into account individual
responsibilities and changes in responsibilities, performance and contribution to ION, experience,
impact on total compensation, relationship of compensation to other ION officers and employees, and
changes in external market levels. No NEO received an increase in base salary in 2018. The chart

below depicts the base salaries of our NEOs, together with information on their base salaries vis-`a-vis
the median salaries of comparable NEOs based on survey data.

Named Executive Officer

Salary Information

R. Brian Hanson . . . . . . . . . Mr. Hanson’s salary throughout 2018 was $600,000. The 2018 MTCS

Survey indicated that the mean CEO base salary for surveyed
companies in the Services and Drilling sector was $641,000.

Steven A. Bate . . . . . . . . . . Mr. Bate’s salary throughout 2018 was $375,000. The 2018 MTCS

Survey indicated that the mean CFO base salary for surveyed
companies in the Services and Drilling sector was $448,000.

Matthew R. Powers . . . . . . . Mr. Powers’ salary throughout 2018 was $275,000. The 2018 MTCS
Survey indicated that the mean Top Legal Executive base salary for
surveyed companies in the Services and Drilling sector was $397,000.

Christopher T. Usher . . . . . . Mr. Usher’s salary throughout 2018 was $378,560. The 2018 MTCS

Survey indicated that the mean Chief Operating Officer—Subsidiary/
Group/Division base salary for surveyed companies in the Services and
Drilling sectors was $412,000.

Kenneth G. Williamson . . . . Mr. Williamson’s salary throughout 2018 was $387,213. The 2018 MTCS

Survey indicated that the mean Chief Operating Officer—Subsidiary/
Group/Division base salary for surveyed companies in the Services and
Drilling sectors was $412,000.

Annual Bonus Incentive Plan(1)

For several consecutive years, the Compensation Committee has approved an annual employee

bonus incentive plan. Our annual bonus incentive plan is intended to promote the achievement, each
year, of the Company’s performance objectives as set forth in the annual operating plan. These
objectives are defined early in the year, along with a target bonus pool, and these are communicated to
eligible employees. The Compensation Committee believes that placing a portion of our employees’
cash compensation at-risk, and tying it to the Company’s achieving important objectives under our
operating plan, incentivizes our employees in a way that aligns their interests with the interests of our
shareholders.

Early in the year, management prepares an operating budget for that year and individual operating

budgets for each operating unit. The budgets take into consideration our views on market
opportunities, customer and sale opportunities, technology enhancements for new products, product
manufacturing and delivery schedules and other operating factors known or foreseeable at the time.
The Board analyzes the proposed budgets with management extensively and, after analysis and
consideration, the Board approves a consolidated operating plan for the year. During this same time,
our Chief Executive Officer works with various members of senior management to formulate our bonus
incentive plan for the year, consistent with the operating plan approved by the Board. The annual
bonus incentive plan is subject to approval by the Compensation Committee. Bonuses attributable to a

(1) The Compensation Committee has discretion in circumstances it determines are appropriate to

authorize discretionary bonus awards apart from awards that would otherwise be payable under the
terms of the annual bonus incentive plan. (An example would be signing bonuses for new hires.)
These discretionary awards can be payable in cash, stock options, restricted stock, restricted stock
units, SARs, or a combination thereof. Any stock options, restricted stock, restricted stock units or
SARs awarded would be granted under one of our existing long-term equity compensation plans or
stock appreciation rights plans. Discretionary bonuses of this sort are not discussed in this section.

given year are generally paid in February of the next year. (For instance, 2018 bonuses were paid in
February of 2019.)

The Company’s bonus program thus includes a three-step process:

1. At the first quarterly meeting of the Board of Directors (generally in early February), the
Compensation Committee approves a target total bonus pool (the ‘‘Target Pool’’) for that
calendar year. The Target Pool is based in part on approximate percentages of base salary and
our expected headcount. The Target Pool consists of two variable components: the Company’s
execution of defined long-term strategic initiatives (‘‘Key Initiatives’’), and the Company’s
reaching a defined cash-generation target (‘‘Cash Generation Target’’). The Key Initiatives and
Cash Generation Target are derived from our annual operating plan, which is approved by the
Board at that same quarterly meeting. The Target Pool, Key Initiatives, and Cash Generation
Target are forward looking; that is, they are based on the Compensation Committee’s goals
and expectations for the Company’s performance that year.

2. The determination of the actual amount of the bonus pool (the ‘‘Actual Pool’’) is largely
backward looking. At the February meeting of the Board of Directors, in addition to
approving the Target Pool for that calendar year, the Compensation Committee determines
what the Actual Pool for the prior year should be. The Compensation Committee does this
with reference to the Target Pool for the prior year, and the Company’s success in achieving
the Key Initiatives and the Cash Generation Target for the prior year. However, the
Compensation Committee has the authority to fund the Actual Pool in an amount over the
Target Pool, an amount under the Target Pool, or not at all. In determining whether to deviate
from the Target Pool, the Compensation Committee may consider events that unfolded during
the prior year that impacted our performance as a whole that year (such as extraordinary cash
generating events (e.g. sales of assets, equity raises), unanticipated governmental actions or
economic conditions, indicators of growth or recession in our business segments, and other
factors).

3. Once the Actual Pool is funded, individual bonuses are determined by business unit managers
by evaluating each eligible employee’s individual and team performance during the prior year
(except that no manager participates in determining his or her own bonus). The computation
of individual awards for NEOs is approved by the Compensation Committee in accordance
with the compensation philosophy and policy described above.

Our bonus incentive plans are designed for payouts that generally track the financial performance

of our Company and, to a lesser extent, achievement of the Company’s strategic objectives. The general
intent of the plans is to reward key employees based on the Company’s and the employee’s
performance, in each case measured against internal targets and plans. In most years when our
Company’s financial performance is strong, cash bonus payments under the annual incentive plan are
generally higher. Likewise, when our financial performance is low as compared to our internal targets
and plans, cash bonus payments are generally lower. There are occasionally exceptions to this general
trend. (For instance in 2017, the Company exceeded the Cash Generation Target and executed all Key
Initiatives, but, in view of the difficult business climate that had prevailed for the past several years, the
Compensation Committee elected to fund the Actual Pool at $7.2 million—nearly $3 million less than
the amount calculated under the approved terms of the 2017 bonus incentive plan.)

2018 Bonus Incentive Plan. The purpose of the 2018 bonus incentive plan was to provide an
incentive for our participating employees to achieve their highest level of individual and business unit
performance, to align the employees to accomplish and share in the achievement of our Company’s
2018 strategic and financial goals, and to prevent attrition of our high-performing employees to
competitors. Designated employees, including our NEOs, were eligible to participate in our 2018 bonus
incentive plan.

The Target Pool under the 2018 plan was set at $8.8 million in February 2018. Approximately 35%

of this amount ($3.1 million) was tied to the Key Initiatives for 2018, and 65% ($5.7 million) was tied
to the Cash Generation Target for 2018.

The Key Initiatives for 2018 were (1) achieving a $10 million year-over-year increase in year-end

cash balance, (2) developing a strategic framework to enable successful diversification of certain of our
product lines into adjacent markets, (3) fostering the long-term integrity of our multi-client business by
growing our data library, (4) capitalizing on the refocusing going on in our industry by establishing
collaborative projects with multiple industry partners, and (5) implementing several cultural initiatives
and objectives designed to foster a company-wide QHSE (quality, health, safety, environment) culture.
The Compensation Committee found that the Company met, or exceeded, its goals as to all of the Key
Initiatives except for Item 1 (achieving a $10 million year-over-year increase in year-end cash balance).

The Cash Generation Target for 2018 required that the Company generate $37 million in cash in

2018 excluding cash from external funding arrangements, interest payments and any other special items
or modifications as approved by the Compensation Committee from time to time. As in prior years, if
the Company exceeded the Cash Generation Target, the Target Pool could increase by a factor of 65%
(from $8.8 million, if 100% funded, up to a maximum of $14.5 million, or 165% funded).(2) The table
below illustrates the level to which the Target Pool would be funded, based on achievement of the Key
Initiatives and the Cash Generation Target.

175%

150%

125%

100%

75%

50%

o
i
t
a
R

t
u
o
y
a
P

$37M
Cash Target
100% Cash
Target funded

165%

$5M
Cash Threshold
Begins Cash
funding

$60M
Cash Maximum
Funded 2x
Cash Target

100%

35% Funded for
Achieving
ION
Strategic
Initiatives

25% 35%

35%

Threshold

Target
Cash Generation

Maximum

29MAR201917133965

Cash generation was selected as the most important goal for our 2018 plan because the

Compensation Committee believes that generating cash is of paramount importance to our
shareholders. Additionally, the Compensation Committee believed that strong cash flow would indicate
that our Company was capitalizing on the improving business climate that appeared to be taking shape
for 2018. Accordingly, in addition to tying 65% of the Target Pool to the Cash Generation Target, the
Compensation Committee also selected one Key Initiative (achieving a $10 million year-over-year
increase in year-end cash balance) that was directly tied to cash generation. The other four Key
Initiatives were not directly related to cash generation in 2018 and were selected to ensure that the
Company’s cash generation efforts did not result in long-term harm to the Company, and to encourage
an appropriate balance between short-term cash generation and the long-term viability of our
Company.

(2) This same upside cap (165% achievement) was in the 2017 plan. In contrast, there was no upside
for over performance in 2016 (that is, the maximum funding opportunity was 100%), and the
upside cap was 150% in 2015.

In February 2019, the Compensation Committee reviewed the Company’s actual performance
against each of the plan performance goals established at the beginning of 2018 and evaluated the
individual performance of each NEO during 2018.

The Company did not meet its Cash Generation Target or the ‘‘Cash Threshold’’ set forth in the
above table in 2018. Due to this fact, and to the Company’s not achieving a year-over-year increase in
cash balance (our year end cash balance for 2018 was $33.6 million, compared with $42.1 million(3) for
2017), the bonus pool, based on Target Pool criteria, would have been $2.5 million. However, the
Compensation Committee elected to fund the Actual Pool at $4.25 million. In setting the actual pool at
$4.25 million, the Compensation Committee took into account several factors. There were a number of
unforeseen events in 2018 that caused cash generation to be lower than anticipated (notable among
these were a delay in licensing rounds in Panama, the accession of Andres Manuel Lopez Obrador to
the presidency of Mexico, and the collapse in oil prices in the last half of the year). The Compensation
Committee believed that increasing the Actual Pool was warranted given the Company’s strong
performance in executing our strategic initiatives, and the risk of attrition of our key employees.

NEOs’ bonus targets range from 60% to 100% of their respective annual base salaries. In years

prior to 2015, every participating NEO other than our Chief Executive Officer could earn up to 200%
of their bonus targets in a given year, depending on their individual performance and the performance
of the Company. Commencing in 2015, in view of the extremely challenging business climate that the
Company faced, the Compensation Committee reduced the maximum amount earnable by these NEOs
to 125% of their respective targets. This cap was continued through 2016 but lifted in 2017 in view of
the improved performance of the Company and improved business climate. In 2017, and again in 2018,
the Compensation Committee determined that each NEO, including our Chief Executive Officer, was
eligible to receive up to 200% of his bonus target. (The Compensation Committee has the discretion to
determine the amounts of individual bonus awards.)

Where an employee is primarily involved in a particular business unit, the financial performance

criteria under the bonus incentive plan are weighted toward the operational performance of the
employee’s business unit rather than consolidated company performance. The ‘‘Non-Equity Incentive
Plan Compensation’’ column of the 2018 Summary Compensation Table below reflects the payments
that our NEOs earned and received under our 2018 bonus incentive plan. (The ‘‘Bonus’’ column of the
same table would reflect any discretionary cash bonus payments received by our NEOs during 2018;
there were none in 2018.)

In addition to overall company performance, and, where applicable, business unit performance,

when considering the 2018 bonus incentive plan awards paid to our NEOs, the Compensation
Committee also considered the individual performances and accomplishments of each officer. In
considering the bonus award paid to Mr. Hanson, the Compensation Committee considered
Mr. Hanson’s achievement of four of the five Key Initiatives for the Company, as well as his leadership
in executing a successful equity raise. As previously stated, the five Key Initiatives were (1) achieving a
$10 million year-over-year increase in year-end cash balance, (2) developing a strategic framework to
enable successful diversification of certain of our product lines into adjacent markets, (3) fostering the
long-term integrity of our multi-client business by growing our data library, (4) capitalizing on the
refocusing going on in our industry by establishing collaborative projects with multiple industry
partners, and (5) implementing several cultural initiatives and objectives designed to foster a
company-wide QHSE (quality, health, safety, environment) culture.

When considering the bonus award paid to Mr. Bate, the Compensation Committee took into

consideration his performance against the objectives set for Mr. Bate. Mr. Bate’s objectives included

(3) The $42.1 million excludes $10 million in cash that the Company had on hand on Decemeber 31,
2017, because there was $10 million outstanding under our revolving credit facility on that date
(compared with $0 outstanding on December 31, 2018).

(1) achieving a $10 million year-over-year increase in year-end cash balance, (2) successfully retiring the
Company’s $28.5 million Third Lien Notes prior to their May 2018 maturity date, (3) implementing a
comprehensive Investor Relation Program (including roadshows and adding coverage of the Company’s
stock by at least one additional analyst), and (4) improving the Company’s year-end liquidity through a
combination of incremental operating cash flow, enhancing or replacing the Company’s revolver with
PNC, current short term borrowing facility, or other financing transactions. In the bonus awarded to
Mr. Bate, the Compensation Committee determined that Mr. Bate achieved three of his four
objectives.

When considering the bonus award paid to Mr. Powers, the Compensation Committee took into

consideration his performance against the objectives set for Mr. Powers. Mr. Powers’ objectives
included (1) successfully executing all legal tasks necessary to complete an equity raise and retirement
of the Company’s $28.5 million Third Lien Notes by their target dates, (2) recapturing momentum in
the Company’s legal proceedings against WesternGeco, (3) reinvigorating the legal department with two
new lawyer hires in the legal department, and (4) successfully executing all legal tasks with respect to
two significant collaboration agreements with industry partners. In the bonus awarded to Mr. Powers,
the Compensation Committee determined that Mr. Powers had achieved three of his four objectives
and partially achieved one of his four objectives.

When considering the bonus award paid to Mr. Usher, the Compensation Committee took into
consideration his performance against the objectives set for Mr. Usher. Mr. Usher’s objectives included
(1) contributing to the Company’s achieving a $10 million year-over-year increase in year-end cash
balance through execution of the Operations Optimization operating Plan, (2) developing a framework
for enabling successful diversification of certain of the Company product lines into adjacent markets,
(3) developing partnerships and alliances in adjacent markets that accelerate our market penetration
and commercial success, (4) successfully commercializing the Company’s SailWing system, and
(5) securing pilot programs for non-seismic uses of our Marlin program. In the bonus awarded to
Mr. Usher, the Compensation Committee determined that Mr. Usher had achieved three of his five
objectives and partially achieved an additional one of his other five.

When considering the bonus award paid to Mr. Williamson, the Compensation Committee took

into consideration his performance against the objectives set for Mr. Williamson. Mr. Williamson’s
objectives included (1) ensuring the long-term integrity of the Company’s multi-client business through
continued investment in the data library, (2) expanding the Company’s offerings to License Round
Management for host governments, (3) developing the Company’s capability to deliver a significant
uplift in multi-client and proprietary data using FWI based technology, and (4) establishing one
significant collaboration arrangement with an industry partner.

In the bonus awarded to Mr. Williamson, the Compensation Committee determined that

Mr. Williamson achieved three of his four objectives and partially achieved one of his four objectives.

The total compensation paid to each NEO is set forth in the graph titled ‘‘Summary Compensation

Table’’.

The Compensation Committee reviews the annual bonus incentive plan each year to ensure that

the key elements of the plan continue to meet the objectives described above.

Long-Term Stock-Based Incentive Compensation

We have structured our long-term incentive compensation to provide for an appropriate balance
between rewarding performance and encouraging employee retention and stock ownership. There is no
pre-established policy or target for the allocation between either cash or non-cash or short-term and
long-term incentive compensation; however, at executive management levels, the Compensation
Committee strives for compensation to focus increasingly on longer-term incentives. In conjunction with
the Board, executive management is responsible for setting and achieving long-term strategic goals. In
support of this responsibility, compensation for executive management, and most particularly our Chief
Executive Officer, tends to be weighted towards rewarding long-term value creation for shareholders.

The below table illustrates the mix of total compensation received by Mr. Hanson, our CEO, and

our other current NEOs during 2018:

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Long-Term Equity

Annual Incentive

Base Salary

CEO

Other NEOs (average)

29MAR201917134109

LTIP and SAR Plan Changes

The Compensation Committee approved significant grants of equity-based compensation in 2018,

including to our NEOs, in the form of restricted stock and SARs. However, these awards were
structured differently than the Company’s awards in the past.

This was made possible by amendments to our Second Amended and Restated 2013 Long-Term

Incentive Plan (the ‘‘2013 LTIP’’) that our shareholders approved in November of 2018. (The 2013
LTIP, as amended in 2018, is sometimes referred to as the ‘‘2018 LTIP’’). Additionally, in that same
month, the Company put into place our 2018 SAR Plan to replace the 2008 SAR Plan which expired
that month.

During the recent protracted industry downturn, the Company had taken several steps to
streamline the business and reduce costs. As part of this effort, as of late 2018, the Company hadn’t
issued equity under our LTIP for almost three years except in limited cases involving new hires or
promotions that would reduce our cash outlay.

As the industry continued to pick up in 2018, some of the Company’s key employees received
attractive offers from other companies, and the Compensation Committee determined that equity-based
awards, primarily in the form of restricted stock and SARS, were the best means to stem attrition in
our upper and middle management. Equity-based awards provide value to our shareholders by allowing
us to attract and retain first rate talent, while tying our employees’ financial compensation to the
performance of the Company.

In the fall of 2018, the Company engaged Aon Hewitt, a leading compensation consultant, to
analyze our compensation program relative to industry practice, and Aon Hewitt concluded that, given
the metrics (dollar value) of the compensation that the Company would need to adequately retain and
attract talent for our key positions, the pool of available equity under the Company’s 2013 LTIP was
insufficient. Their analysis showed that to attract and retain top talent under a plan that would be
approved by ISS (a leading proxy advisory firm), the Company would need to make an annual grant of
approximately 800,000 shares compromised of stock options and restricted stock awards, which, over
three years, would have required an additional 2.4 million shares for the LTIP.

Aon Hewitt recommended a more creative, non-ISS-compliant option that would require half as

many shares to achieve the same result: granting all awards under the LTIP as performance-based
restricted stock, rather than having to make 2⁄3 of the grants as stock options. (This ratio of stock
options was required by the 2013 LTIP; ISS and other independent proxy advisory firms tend to
mandate that a certain amount of shares be dedicated to stock options so that the recipients don’t
benefit unless the stock price increases.)

Standard practice, and the historical practice of the Company, is to award restricted stock that

vests over time, regardless of the stock’s performance, and to couple that with stock options that are
worthless if the stock doesn’t appreciate. However, each share of restricted stock is intrinsically more
valuable to an employee than each single stock option, because, in the case of a stock option, even if
the stock appreciates, such that the option is not worthless, the employee only receives the benefit of
the spread between the exercise price of the option and the value of the stock.

Accordingly, at the Compensation Committees recommendation, the Board sought, from the
shareholders, amendments to our 2013 LTIP that would add 1.2 million shares to the 2013 LTIP, and
eliminate the restriction on the number of shares in the 2013 LTIP that could be issued as full value
awards. These amendments were approved by shareholders in a special meeting held on November 30,
2018.

After the special meeting, the Compensation Committee approved awards of restricted stock and

SARS to several employees, including all of our NEOs; but the form of these awards were different
than in prior years.

All of the restricted stock and SARs awards granted to our NEOs on December 1, 2018, contain

not only our traditional time-based vesting restrictions (the shares vest equally on the first, second and
third anniversary of the grant, subject to continued employment), but also contain very aggressive
performance-based vesting restrictions: one-third of any such award will vest only if ION’s common
stock attains, and maintains, a share price of $17.50 on or before the third anniversary of the grant
date; two-thirds of any such award will vest only if ION’s common stock attains, and maintains, a share
price of $22.50 on or before the third anniversary of the grant date; and full vesting as to any such
award will occur only if ION’s common stock attains, and maintains, a share price of $27.50 on or
before the third anniversary of the grant date (December 1, 2021). The foregoing performance-based
vesting restriction will be satisfied if and only if the volume weighted average price per share, at the
close of 20 consecutive trading days, meets or exceeds the target price, and are in addition to the
time-based vesting restrictions.

Our long-term incentive plans have provided the principal method for our NEOs to acquire equity

or equity-linked interests in our Company.

Restricted Stock and Restricted Stock Units. We use restricted stock and restricted stock units to
focus executives on our long-term performance and to help align their compensation more directly with
shareholder value. Historically, vesting of restricted stock and restricted stock units typically occurred
ratably over three years, based solely on continued employment of the recipient-employee, and the
terms of our LTIP (both prior to and after the 2018 amendments) require restricted stock and
restricted stock units granted under that plan to follow that vesting schedule unless the Compensation
Committee approves a different schedule when approving the grant. As noted above, the grants of
restricted stock and restricted stock units that were awarded on December 1, 2018, in addition to being
subject to the traditional three-year time vesting restriction, also are subject to performance-based
vesting restrictions that require our stock price to attain, and maintain, a certain price within the next
three years.

The only restricted stock awards granted to our NEOs in 2018 that were not subject to the

time-based and performance-based vesting restrictions noted in the immediately preceding section were
certain shares of restricted stock which were issued on March 1, 2018, as part of our 2017 Equity
Investment Program. These shares were subject to a ninety-day time-based vesting restriction, but no
performance-based restriction. (To encourage the Company’s executive officers and other key
employees to purchase common stock of the Company and further align their interests with those of
the Company’s stockholders, in 2017, the Board authorized and approved an equity investment program
(the ‘‘EIP’’), pursuant to which all of the NEOs, and certain other key employees of the Company,
were permitted, but not obligated, to purchase unregistered shares of common stock of the Company
directly from the Company at market prices. In connection with any such purchases, the Compensation
Committee authorized and approved a grant, by the Company, to such purchasing NEOs and other key
employees, of a certain number of shares of restricted stock. The Compensation Committee also
authorized and approved to grant the EIP participants a certain number of shares of restricted stock in
connection with certain purchases of shares of the Company’s common stock in the open market.
Specifically, for each five (5) shares directly purchased from the Company or in the open market
between December 13, 2017 and December 31, 2017, the Company agreed to issue one (1) share of
restricted stock, subject to certain limitations as to the total number of restricted shares to be issued by
the Company.)

Awards of restricted stock units have been made to certain of our foreign employees in lieu of
awards of restricted stock. Restricted stock units provide certain tax benefits to our foreign employees
as the result of foreign law considerations, so we expect to continue to award restricted stock units to
designated foreign employees for the foreseeable future.

Stock Options. Under our equity plans, stock options may be granted having exercise prices equal
to the closing price of our stock on the date before the date of grant. In any event, all awards of stock
options are made at or above the market price at the time of the award. The Compensation Committee
will not grant stock options having exercise prices below the market price of our stock on the date of
grant, and will not reduce the exercise price of stock options (except in connection with adjustments to
reflect recapitalizations, stock or extraordinary dividends, stock splits, mergers, spin-offs and similar
events, as required by the relevant plan) without the consent of our shareholders. Our stock options
generally vest ratably over four years, based on continued employment, and the terms of our LTIP
(prior to and after the 2018 amendments) require stock options granted under that plan to follow that
vesting schedule unless the Compensation Committee approves a different schedule when approving
the grant. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to
the shares subject to such option, including voting rights and the right to receive dividends or dividend
equivalents. New option grants normally have a term of ten years.

The purpose of stock options is to provide equity compensation with value that has been
traditionally treated as entirely at-risk, based on the increase in our stock price and the creation of
shareholder value. (However, as described above, the vast majority of our grants of restricted stock and
restricted stock units that were granted in 2018 are also entirely at-risk, due to the aggressive
performance-based vesting restrictions). Stock options also allow our NEOs and key employees to have
equity ownership and to share in the appreciation of the value of our stock, thereby aligning their
compensation directly with increases in shareholder value. Stock options only have value to their holder
if the stock price appreciates in value from the date options are granted.

Stock option award decisions are generally based on past business and individual performance. In

determining the number of options to be awarded, we also consider the grant recipient’s qualitative and
quantitative performance, the size of stock option and other stock based awards in the past, and
expectations of the grant recipient’s future performance. No NEOs received option awards in 2018.

Stock Appreciation Rights.

In order to achieve market-based compensation for our key employees

in line with the recommendations of Aon Hewitt, the Compensation Committee elected to have a
substantial portion of the equity-based compensation paid in SARs in 2018. The SARs grants approved
by the Compensation Committee are 100% cash-settled and were granted pursuant to our 2018 SAR
Plan. The vesting of the SARs issued in 2018 are achieved through both a market condition and a
service condition, which are identical to the time-based vesting restriction and the performance-based
vesting restriction on the restricted stock that was issued in December 2018, and which is described
above. As with our stock options, exercise prices for our SARs awards are equal to the closing price of
our stock on the date before the date of grant. New SARs grants normally have a term of ten years.

Approval and Granting Process. As described above, the Compensation Committee reviews and
approves all stock appreciation rights, stock option, restricted stock and restricted stock unit awards
made to NEOs, regardless of amount. With respect to equity compensation awarded to employees
other than NEOs, the Compensation Committee reviews and approves all grants of stock appreciation
rights, restricted stock, stock options and restricted stock units above 5,000 shares, generally based upon
the recommendation of our Chief Executive Officer. The Compensation Committee has granted to our
Chief Executive Officer the authority to approve grants to any employee other than an NEO of (i) up
to 5,000 shares of restricted stock and (ii) stock options for not more than 5,000 shares. Our Chief
Executive Officer is also required to provide a report to the Compensation Committee of all awards of
options and restricted stock made by him under this authority. We believe that this policy is beneficial
because it enables smaller grants to be made more efficiently. This flexibility is particularly important
with respect to attracting and hiring new employees, given the increasingly competitive market for
talented and experienced technical and other personnel in locales in which our employees work.

All grants of stock appreciation rights, restricted stock, restricted stock units and stock options to

employees or directors are granted on one of four designated quarterly grant dates during the year:
March 1, June 1, September 1 or December 1. The Compensation Committee approved these four
dates because they are not close to any dates on which earnings announcements or other
announcements of material events would normally be made by us. For an award to a current employee,
the grant date for the award is the first designated quarterly grant date that occurs after approval of
the award. For an award to a newly hired employee who is not yet employed by us at the time the
award is approved, the grant date for the award is the first designated quarterly grant date that occurs
after the new employee commences work. We believe that this process of fixed quarterly grant dates is
beneficial because it serves to remove any perception that the grant date for an award could be capable
of manipulation or change for the benefit of the recipient. In addition, having all grants occur on a
maximum of four days during the year simplifies certain fair value accounting calculations related to
the grants, thereby minimizing the administrative burden associated with tracking and calculating the
fair values, vesting schedules and tax-related events upon vesting of restricted stock and also lessening
the opportunity for inadvertent calculation errors.

Clawback Policy

We have a Compensation Recoupment Policy (commonly referred to as a ‘‘clawback’’ policy),

which provides that, in the event of a restatement of our financial results due to material
noncompliance with applicable financial reporting requirements, the Board will, if it determines
appropriate and subject to applicable laws and the terms and conditions of our applicable stock plans,
programs or arrangements, seek reimbursement of the incremental portion of performance-based
compensation, including performance-based bonuses and long-term equity-based incentive awards, paid
to current or former NEOs within three years of the restatement date, in excess of the compensation
that would have been paid had the compensation amount been based on the restated financial results.

Personal Benefits, Perquisites and Employee Benefits

Our Board and executives have concluded that we will not offer most perquisites traditionally

offered to executives of similarly sized companies. As a result, perquisites and any other similar
personal benefits offered to our NEOs are substantially the same as those offered to our general
salaried employee population. These offered benefits include medical and dental insurance, life
insurance, disability insurance, a vision plan, charitable gift matching (up to designated limits), a 401(k)
plan with a company match of certain levels of contributions, flexible spending accounts for healthcare
and dependent care and other customary employee benefits. Business-related relocation benefits may
be reimbursed on a case-by-case basis. We intend to continue applying our general policy of not
providing specific personal benefits and perquisites to our executives; however, we may, in our
discretion, revise or add to any executive’s personal benefits and perquisites if we deem it advisable.

Risk Management Considerations

The Compensation Committee believes that our Company’s bonus and equity programs create
incentives for employees to create long-term shareholder value. The Compensation Committee has
considered the concept of risk as it relates to our compensation programs and has concluded that our
compensation programs do not encourage excessive or inappropriate risk-taking. Several elements of
the compensation programs are designed to promote the creation of long-term value and thereby
discourage behavior that leads to excessive risk:

(cid:129) The compensation programs consist of both fixed and variable compensation. The fixed (or

salary) portion is designed to provide a steady income regardless of the Company’s stock price
performance so that executives do not focus exclusively on stock price performance to the
detriment of other important business metrics. The variable (cash bonus and equity) portions of
compensation are designed to reward both short- and long-term corporate performance. The
Compensation Committee believes that the variable elements of compensation are a sufficient
percentage of overall compensation to motivate executives to produce positive short- and
long-term corporate results, while the fixed element is also sufficiently high such that the
executives are not encouraged to take unnecessary or excessive risks in doing so.

(cid:129) The financial metrics used to determine the amount of an executive’s bonus are measures the
Compensation Committee believes contribute to long-term shareholder value and ensure the
continued viability of the Company. Moreover, the Compensation Committee attempts to set
ranges for these measures that encourage success without encouraging excessive risk taking to
achieve short-term results. In addition, the overall maximum bonus for each participating NEO
other than our Chief Executive Officer is not expected to exceed 150% of the executive’s base
salary under the bonus plan, and the overall bonus for our Chief Executive Officer under his
employment agreement will not exceed 200% of his base salary under the bonus plan, in each
case no matter how much the Company’s financial performance exceeds the ranges established
at the beginning of the year.

(cid:129) We have strict internal controls over the measurement and calculation of the financial metrics

that determine the amount of an executive’s bonus, designed to keep it from being susceptible to
manipulation by an employee, including our executives.

(cid:129) Stock options become exercisable over a four-year period, and SARs become exercisable over a
three-year period, generally conditioned on continuing employment with the Company, and
remain exercisable for up to ten years from the date of grant, encouraging executives to look to
long-term appreciation in equity values.

(cid:129) Restricted stock and SARs vest over a three-year period, generally conditioned on continuing
employment with the Company, which, again, encourages executives to look to long-term
appreciation in equity values. Additionally, as noted above, the majority of this year’s restricted
stock grants and all of this year’s SARs grants also require significant appreciation in our stock
price for vesting to occur.

(cid:129) Senior executives, including our NEOs, are required to acquire over time and hold shares of our

Company’s stock having a value of between one and four times the executive’s annual base
salary, depending on the level of the executive. The Compensation Committee believes that the
stock ownership guidelines provide a considerable incentive for management to consider the
Company’s long-term interests, since a portion of their personal investment portfolio consists of
our Common Stock.

(cid:129) In addition, we do not permit any of our NEOs or directors to enter into any derivative or

hedging transactions involving our stock, including short sales, market options, equity swaps and
similar instruments, thereby preventing executives from insulating themselves from the effects of
poor company stock price performance. Please refer to ‘‘—Stock Ownership Requirements;
Hedging Policy’’ below.

(cid:129) We have a compensation recoupment (clawback) policy that provides, in the event of a

restatement of our financial results due to material noncompliance with financial reporting
requirements, for reimbursement of the incremental portion of performance-based
compensation, including performance-based cash bonuses and long-term equity-based incentive
awards, paid to current or former NEOs within three years of the restatement date, in excess of
the compensation that would have been paid had such compensation amount been based on the
restated financial results. Please refer to ‘‘—Clawback Policy’’ above.

Consideration of Say-On-Pay Result. At our 2018 Annual Meeting of Shareholders held on

May 16, 2018, our shareholders approved all of our director nominees and proposals, including a
non-binding advisory vote to approve the compensation of our NEOs (‘‘say-on-pay’’). In the advisory
executive compensation vote, over 99% of the votes cast on the proposal voted in favor of our
executive compensation. Our general goal since our 2016 Annual Meeting has been to continue to act
consistently with the established practices that were approved by our shareholders. We believe that we
have accomplished that goal. At our 2017 Annual Meeting, our shareholders also voted on a
non-binding advisory vote on the frequency of advisory votes on executive compensation
(‘‘say-on-frequency’’) and approved ‘‘every year’’. The Board intends to hold advisory votes on executive
compensation within the time frame approved by the shareholders. When and if our Board determines
that it is in the best interest of our Company to hold our say-on-pay vote with a different frequency, we
will propose such a change to our shareholders at the next annual meeting of shareholders to be held
following the Board’s determination. Presently, under SEC rules, we are not required to hold another
say-on-frequency vote again until our 2023 Annual Meeting of Shareholders.

Indemnification of Directors and Executive Officers

Our Bylaws provide certain rights of indemnification to our directors and employees (including our

NEOs) in connection with any legal action brought against them by reason of the fact that they are or
were a director, officer, employee or agent of our Company, to the full extent permitted by law. Our
Bylaws also provide, however, that no such obligation to indemnify exists as to proceedings initiated by
an employee or director against us or our directors unless (a) it is a proceeding (or part thereof)
initiated to enforce a right to indemnification or (b) was authorized or consented to by our Board.

As discussed below, we have also entered into employment agreements with certain of our NEOs

that provide for us to indemnify the executive to the fullest extent permitted by our Restated
Certificate of Incorporation, as amended, and our Bylaws. The agreements also provide that we will
provide the executive with coverage under our directors’ and officers’ liability insurance policies to the
same extent as provided to our other executives.

Stock Ownership Requirements; Hedging Policy

We believe that broad-based stock ownership by our employees (including our NEOs) enhances

our ability to deliver superior shareholder returns by increasing the alignment between the interests of
our employees and our shareholders. Accordingly, the Board has adopted stock ownership guidelines
applicable to each of our senior executives, including our NEOs. The policy requires each executive to
retain direct ownership of at least 50% of all shares of our Company’s stock received upon exercise of
stock options and vesting of awards of restricted stock or restricted stock units until the executive owns
shares having an aggregate value equal to the following multiples of the executive’s annual base salary:

President and Chief Executive Officer—4x

Executive Vice President—2x

Senior Vice President—1x

The Compensation Committee and our Chief Executive Officer may, in their discretion, grant
temporary exemptions from the guidelines to prevent severe hardships to senior executives. As of the
date of this Proxy Statement, all of our NEOs were in compliance with the stock ownership
requirements. In addition, we do not permit any of our NEOs or directors to enter into any derivative
or hedging transactions with respect to our stock, including short sales, market options, equity swaps
and similar instruments.

Impact of Regulatory Requirements and Accounting Principles on Compensation

The financial reporting and income tax consequences to our Company of individual compensation

elements are important considerations for the Compensation Committee when it is analyzing the
overall level of compensation and the mix of compensation among individual elements. The
Compensation Committee seeks to balance its objective of ensuring an effective compensation package
for the NEOs with the need to maximize the immediate deductibility of compensation—while ensuring
an appropriate (and transparent) impact on reported earnings and other closely followed financial
measures.

Under Section 162(m) of the Internal Revenue Code and the related federal treasury regulations,

we may not deduct annual compensation in excess of $1 million paid to certain employees-generally our
Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated
NEOs. Prior to January 1, 2018, compensation in excess of $1 million was deductible if it qualified as
‘‘performance based’’ compensation but this exemption to the deductibility limit was eliminated by the
2017 Tax Cuts and Jobs Act.

In making its compensation decisions, the Compensation Committee has considered the limitations

on deductibility within the requirements of Section 162(m) and its related Treasury regulations. As a
result, for periods prior to January 1, 2018, the Compensation Committee has designed much of the
total compensation packages for the NEOs to qualify for the exemption of ‘‘performance-based’’
compensation from the deductibility limit. However, the Compensation Committee does have the
discretion to design and use compensation elements that may not be deductible within the limitations
under Section 162(m), if the Compensation Committee considers the tax consequences and determines
that those elements are in our best interests.

The Compensation Committee believes that the potential deductibility of the compensation

payable under the annual bonus plan and the Company’s other incentive compensation plans and
arrangements should be only one of a number of relevant factors taken into consideration in
establishing those plans and arrangements for our executive officers and not the sole governing factor.
For that reason, for the 2019 fiscal year, the Compensation Committee intends to structure our annual
bonus plan and the Company’s other incentive compensation plans and arrangements in a manner
similar to the 2018 fiscal year, acknowledging that a portion of those compensation payments may not
be deductible under Section 162(m), in order to assure appropriate levels of total compensation for our
executive officers based on the Company’s performance.

Likewise, the impact of Section 409A of the Internal Revenue Code is taken into account, and our

executive compensation plans and programs are, in general, designed to comply with the requirements
of that section so as to avoid possible adverse tax consequences that may result from non-compliance.

For accounting purposes, we apply the guidance in ASC Topic 718 to record compensation expense
for our equity-based compensation grants. ASC Topic 718 is used to develop the assumptions necessary
and the model appropriate to value the awards as well as the timing of the expense recognition over
the requisite service period, generally the vesting period, of the award.

Executive officers will generally recognize ordinary taxable income from stock option awards when

a vested option is exercised. We generally receive a corresponding tax deduction for compensation
expense in the year of exercise. The amount included in an NEO’s wages and the amount we may
deduct is equal to the Common Stock price when the stock options are exercised less the exercise
price, multiplied by the number of shares under the stock options exercised. We do not pay or
reimburse any NEO for any taxes due upon exercise of a stock option. We have not historically issued
any tax-qualified incentive stock options under Section 422 of the Internal Revenue Code.

Executives will generally recognize taxable ordinary income with respect to their shares of

restricted stock at the time the restrictions lapse (unless the recipient elects to accelerate recognition as
of the date of grant). Restricted stock unit awards are generally subject to ordinary income tax at the
time of payment or issuance of unrestricted shares of stock. We are generally entitled to a
corresponding federal income tax deduction at the same time the executive recognizes ordinary income.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and
Analysis included in this Proxy Statement and required by Item 402(b) of Regulation S-K with the
management of ION. Based on such review and discussions, the Compensation Committee has
recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy
Statement and incorporated into ION’s Annual Report on Form 10-K for the year ended December 31,
2018.

David H. Barr, Chairman
James M. Lapeyre, Jr.
Franklin Myers
John N. Seitz

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid to or earned by our named executive

officers at December 31, 2018.

Name and Principal Position

Salary Bonus Awards Awards Compensation Compensation

Year

($)

Total
($)

Stock

Option

Non-Equity
Incentive
Plan

All Other

R. Brian Hanson . . . . . . . . . . . . . . . . . 2018 600,000 — 1,888,032 262,400

President, Chief Executive Officer and
Director

2017 558,689 —
2016 540,000 —

341,900 203,817
Steven A. Bate . . . . . . . . . . . . . . . . . . 2018 375,000 — 1,092,322 130,427
—
170,950 101,909
365,943
56,027
168,600 291,540

2017 350,484 —
2016 337,500 —
. . . . . . . . . . . . . . . 2018 275,000 —
2017 220,664 —

Executive Vice President and
Chief Financial Officer

Matthew R. Powers

—

582,000
— 1,200,000
720,000
273,100
450,000
337,500
160,200
165,000

Executive Vice President, General
Counsel and Corporate Secretary

Christopher T. Usher . . . . . . . . . . . . . . . 2018 378,560 — 1,023,188 130,427
—
50,954

2017 353,808 —
2016 340,704 —

Executive Vice President and Chief
Operating Officer, Operations
Optimization

—
59,686

Kenneth G. Williamson . . . . . . . . . . . . . 2018 387,213 — 1,086,632 130,427
—
71,336

2017 361,905 —
2016 348,492 —

—
70,875

Executive Vice President and
Chief Operating Officer,
E&P Technology & Services

220,600
347,000
272,500

211,500
508,000
260,000

7,577
7,577
7,950
9,548
7,950
7,950
5,654
5,423

7,482
5,504
5,504

9,590
7,950
7,950

3,340,009
1,766,266
1,813,667
1,880,397
808,434
955,809
862,824
851,227

1,760,257
706,312
729,348

1,825,362
877,855
758,653

Discussion of Summary Compensation Table

Stock Awards Column. All of the amounts in the ‘‘Stock Awards’’ column reflect the grant-date

fair value of awards of restricted stock made during the applicable fiscal year (excluding any impact of
assumed forfeiture rates) under our LTIP. While unvested, a holder of restricted stock is entitled to the
same voting rights as all other holders of Common Stock. In each case, unless stated otherwise below,
the awards of shares of restricted stock vest in one-third increments each year, over a three-year
period. The values contained in the Summary Compensation Table under the Stock Awards column are
based on the grant date fair value of all stock awards (excluding any impact of assumed forfeiture
rates). The grants and awards listed immediately after this paragraph are grants that were made in 2016
and 2017.

(cid:129) On March 1, 2016, Mr. Hanson received an award of 50,000 shares of restricted stock.

(cid:129) On June 1, 2016, Mr. Hanson received an award of 20,000 shares of restricted stock.

(cid:129) On March 1, 2016, Mr. Bate received an award of 25,000 shares of restricted stock.

(cid:129) On June 1, 2016, Mr. Bate received an award of 10,000 shares of restricted stock.

(cid:129) On March 1, 2017, Mr. Powers received an award of 12,000 shares of restricted stock.

(cid:129) On March 1, 2016, Mr. Usher received an award of 12,500 shares of restricted stock.

(cid:129) On June 1, 2016, Mr. Usher received an award of 1,300 shares of restricted stock.

(cid:129) On March 1, 2016, Mr. Williamson received an award of 17,500 shares of restricted stock.

Grants and awards made in 2018 are described in the ‘‘—2018 Grants of Plan-Based Awards’’ table

below.

Option Awards Column. All of the amounts shown in the ‘‘Option Awards’’ column reflect stock
options granted under our 2013 LTIP and stock appreciation rights granted under our 2018 SAR Plan.
In each case, unless stated otherwise below, the options vest 1/4 each year over a four-year period and
the SARs vest 1/3 per year over a three-year period and also contain a performance-based restriction
further described in the footnotes to the next following table. The time-based vesting restrictions are
generally contingent on the grantee’s continued employment (with certain exceptions that allow earlier
vesting, such as in the event of a change of control in the Company’s ownership or the death, disability
or retirement of the grantee). The values contained in the Summary Compensation Table under the
Stock Options column are based on the grant date fair value of all option awards (excluding any impact
of assumed forfeiture rates). For a discussion of the valuation assumptions for the awards, see Note 10,
Shareholders’ Equity and Stock-Based Compensation—Valuation Assumptions, in our Notes to
Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended
December 31, 2018. All of the exercise prices for the options equal or exceed the fair market value per
share of ION Common Stock on the date of grant. In addition to the grants and awards in 2018
described in the ‘‘2018 Grants of Plan-Based Awards’’ table below:

(cid:129) On March 1, 2016, Mr. Hanson received an award of options to purchase 100,000 shares of our

Common Stock for an exercise price of $3.10 per share.

(cid:129) On March 1, 2016, Mr. Bate received an award of options to purchase 50,000 shares of our

Common Stock for an exercise price of $3.10 per share.

(cid:129) On March 1, 2017, Mr. Powers received an award of options to purchase 36,000 shares of our

Common Stock for an exercise price of $13.15 per share.

(cid:129) On March 1, 2016, Mr. Usher received an award of options to purchase 25,000 shares of our

Common Stock for an exercise price of $3.10 per share.

(cid:129) On March 1, 2016, Mr. Williamson received an award of options to purchase 35,000 shares of

our Common Stock for an exercise price of $3.10 per share.

Other Columns.

All payments of non-equity incentive plan compensation reported for 2018 were made in February
2019 with regard to the 2018 fiscal year and were earned and paid pursuant to our 2018 incentive plan.

We do not sponsor for our employees (i) any defined benefit or actuarial pension plans (including

supplemental plans), (ii) any non-tax-qualified deferred compensation plans or arrangements or
(iii) any nonqualified defined contribution plans.

Our general policy is that our executive officers do not receive any executive ‘‘perquisites,’’ or any

other similar personal benefits that are different from what our salaried employees are entitled to
receive. We provide the named executive officers with certain group life, health, medical and other
non-cash benefits generally available to all salaried employees, which are not included in the ‘‘All Other
Compensation’’ column in the Summary Compensation Table pursuant to SEC rules. The amounts
shown in the ‘‘All Other Compensation’’ column solely consist of employer matching contributions to
ION’s 401(k) plan.

2018 GRANTS OF PLAN-BASED AWARDS

Name

R. Brian Hanson .

Steven A. Bate .

Matthew R. Powers

Christopher T. Usher .

Kenneth G. Williamson .

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)

Grant
Date

Threshold Target Maximum Threshold Target Maximum

($)

(#)

All Other

Stock Awards: Option Awards:

Number of
Shares of
Stock or
Units
(#)(2)

Number of
Securities
Underlying
Options
(#)(3)

Exercise or
Base Price
of Option
Awards
($/Sh)

Grant Date
Fair Value
of Stock and
Option Awards
($)(4)

— 600,000

1,200,000

93,750

281,250

562,500

68,750

165,000

330,000

94,640

227,136

454,272

96,803

290,410

580,820

—
3/1/2018
12/1/2018

3/1/2018
12/1/2018

180,000

89,430

38,443

89,430

—
7,270

—
9,035

—
242

—
6,605

—

192,000
—

95,435
—

40,995
—

95,435
—

95,435

—

8.85
—

8.85

—
204,287
1,885,400
—
253,884
921,883
—
6,800
396,247
—
185,601
921,883
—
248,264
921,883

(1)

(2)

(3)

(4)

Reflects the estimated threshold, target and maximum award amounts for payouts under our 2018 incentive plan to our NEOs. Under the plan, every participating
NEO had the opportunity to earn a maximum of 200% of his target depending on performance of the Company against the designated performance goal, and
performance of the executive against personal performance criteria. Mr. Hanson’s employment agreement does not specify that he will earn a bonus upon
achievement of a threshold consolidated performance goal. Because award determinations under the plan were based in part on outcomes of personal evaluations of
employee performance by our Chief Executive Officer and the Compensation Committee, the computation of actual awards generated under the plan upon
achievement of threshold and target company performance criteria differed from the above estimates. See ‘‘—Compensation Discussion and Analysis—Elements of
Compensation—Bonus Incentive Plan’’ above. For actual payout amounts to our named executive officers under our 2018 bonus incentive plan, see the ‘‘Non-Equity
Incentive Plan Compensation’’ column in the ‘‘Summary Compensation Table’’ above.

All stock awards granted in March of 2018 reflect the number of shares of restricted stock granted under our 2013 LTIP. All stock awards granted in December of
2018 reflect the number of shares of restricted stock granted under our 2018 LTIP. While unvested, a holder of restricted stock is entitled to the same voting rights
as all other holders of Common Stock. The shares vest, if at all, in equal increments upon the first, second and third anniversary of the grant. Each vesting tranche is
contingent upon the grantee remaining employed by the Company through each applicable anniversary. In addition, the shares granted in December of 2018 require
the Company’s volume weighted average stock price to meet or exceed, for twenty consecutive days prior to December 1, 2021, $17.50 for 1/3 of the award to vest;
$22.50 for 2/3 of the award to vest; and $27.50 for complete vesting. The performance-based vesting restriction described in the foregoing sentence is in addition to
the time-based vesting restriction. Both the time-based vesting restriction and the performance-based vesting restriction are subject to certain exceptions that allow
earlier vesting (such as in the event of death, disability, or a change in control of the Company’s ownership).

All stock appreciation rights awards granted reflect grants under our 2018 SAR Plan. In each case, the SARs vest, if at all, upon the satisfaction of the same time
and performance-based vesting restrictions as are noted in footnote (2) above. Both the time-based vesting restriction and the performance-based vesting restriction
are subject to certain exceptions that allow earlier vesting (such as in the event of death, disability, retirement, or a change in control of the Company’s ownership).
The maximum value of each such award is $18.65 per share.

The values contained in the table are based on the grant date fair value of the award computed in accordance with ASC Topic 718 for financial statement reporting
purposes, but exclude any impact of assumed forfeiture rates. For a discussion of valuation assumptions, see Note 12, ‘‘Shareholders’ Equity and Stock-Based
Compensation’’, in our Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.

EMPLOYMENT AGREEMENTS

In recent years, we have not entered into employment agreements with employees other than our

Chief Executive Officer and Chief Financial Officer. We have generally entered into employment
agreements with employees only when the employee holds an executive officer position and we believe
that an employment agreement is desirable for us to obtain a measure of assurance as to the
executive’s continued employment in light of prevailing market competition for the particular position
held by the executive officer, or where we determine that an employment agreement is necessary and
appropriate to attract an executive in light of market conditions, the prior experience of the executive
or practices at ION with respect to other similarly situated employees.

The following discussion describes the material terms of our existing executive employment

agreements with our executive officers:

R. Brian Hanson

In connection with his appointment as our President and Chief Executive Officer on January 1,
2012, Mr. Hanson entered into a new employment agreement. The agreement provides for Mr. Hanson
to serve as our President and Chief Executive Officer for an initial term of three years, with automatic
two-year renewals thereafter. Any change of control of our Company after January 1, 2013 will cause
the remaining term of Mr. Hanson’s employment agreement to adjust automatically to a term of three
years, which will commence on the effective date of the change of control.

The agreement provides for Mr. Hanson to receive an initial base salary of $450,000 per year and

be eligible to receive an annual performance bonus under our incentive compensation plan, with a
target incentive plan bonus amount equal to 75% of his base salary and with a maximum incentive plan
bonus amount equal to 150% of his base salary.

Under the agreement, and as approved by the Compensation Committee, Mr. Hanson will be
entitled to receive grants of (i) options to purchase shares of our Common Stock and (ii) shares of our
restricted stock. Mr. Hanson will also be eligible to participate in other equity compensation plans that
are established for our key executives, as approved by the Compensation Committee. In the agreement,
we also agreed to indemnify Mr. Hanson to the fullest extent permitted by our Restated Certificate of
Incorporation, as amended, and Bylaws, and to provide him coverage under our directors’ and officers’
liability insurance policies to the same extent as other company executives.

We may at any time terminate our employment agreement with Mr. Hanson for ‘‘Cause’’ if
Mr. Hanson (i) willfully and continuously fails to substantially perform his obligations, (ii) willfully
engages in conduct materially and demonstrably injurious to our property or business (including fraud,
misappropriation of funds or other property, other willful misconduct, gross negligence or conviction of
a felony or any crime involving moral turpitude) or (iii) commits a material breach of the agreement.
In addition, we may at any time terminate the agreement if Mr. Hanson suffers permanent and total
disability for a period of at least 180 consecutive days, or if Mr. Hanson dies. Mr. Hanson may
terminate his employment agreement for ‘‘Good Reason’’ if we breach any material provision of the
agreement, we assign to Mr. Hanson any duties materially inconsistent with his position, we materially
reduce his duties, functions, responsibilities, budgetary or other authority, or take other action that
results in a diminution in his office, position, duties, functions, responsibilities or authority, we relocate
his workplace by more than 50 miles, or we elect not to extend the term of his agreement.

In his agreement, Mr. Hanson agrees not to compete against us, assist any competitor, attempt to

solicit any of our suppliers or customers, or solicit any of our employees, in any case during his
employment and for a period of two years after his employment ends. The employment agreement also
contains provisions relating to protection of our confidential information and intellectual property. The
agreement does not contain any tax gross-up benefits.

For a discussion of the provisions of Mr. Hanson’s employment agreement regarding compensation

to Mr. Hanson in the event of a change of control affecting our Company or his termination by us
without cause or by him for good reason, see ‘‘—Potential Payments Upon Termination or Change of
Control—R. Brian Hanson’’ below.

Steven A. Bate

In connection with his appointment as our Executive Vice President and Chief Financial Officer on

November 13, 2014, Mr. Bate entered into an employment agreement. The agreement provides for
Mr. Bate to serve as our Executive Vice President and Chief Financial Officer for an initial term of
three years, with automatic one-year renewals thereafter. Any change of control of our Company after
November 13, 2015 will cause the remaining term of Mr. Bate’s employment agreement to adjust
automatically to a term of two years, which will commence on the effective date of the change of
control.

The agreement provides for Mr. Bate to receive an initial base salary of $375,000 per year and be
eligible to receive an annual performance bonus under our incentive compensation plan, with a target
incentive plan bonus amount equal to 50% of his base salary beginning in 2015.

Under the agreement, Mr. Bate will be entitled to receive grants of (i) options to purchase shares

of our Common Stock and (ii) shares of our restricted stock. Mr. Bate will also be eligible to
participate in other equity compensation plans that are established for our key executives, as approved
by the Compensation Committee. In the agreement, we also agreed to indemnify Mr. Bate to the
fullest extent permitted by our Restated Certificate of Incorporation, as amended, and Bylaws, and to
provide him coverage under our directors’ and officers’ liability insurance policies to the same extent as
other company executives.

We may at any time terminate our employment agreement with Mr. Bate for ‘‘Cause’’ if Mr. Bate

(i) willfully and continuously fails to substantially perform his obligations, (ii) willfully engages in
conduct materially and demonstrably injurious to our property or business (including fraud,
misappropriation of funds or other property, other willful misconduct, gross negligence or conviction of
a felony or any crime involving moral turpitude) or (iii) commits a material breach of the agreement.
In addition, we may at any time terminate the agreement if Mr. Bate suffers permanent and total
disability for a period of at least 180 consecutive days, or if Mr. Bate dies. Mr. Bate may terminate his
employment agreement for ‘‘Good Reason’’ if we breach any material provision of the agreement, we
assign to Mr. Bate any duties materially inconsistent with his position, we materially reduce his duties,
functions, responsibilities, budgetary or other authority, or take other action that results in a diminution
in his office, position, duties, functions, responsibilities or authority, or we relocate his workplace by
more than 50 miles.

In his agreement, Mr. Bate agrees not to compete against us, assist any competitor, attempt to

solicit any of our suppliers or customers, or solicit any of our employees, in any case during his
employment and for a period of twelve months after his employment ends. The employment agreement
also contains provisions relating to protection of our confidential information and intellectual property.

For a discussion of the provisions of Mr. Bate’s employment agreement regarding compensation to

Mr. Bate in the event of a change of control affecting our Company or his termination by us without
cause or by him for good reason, see ‘‘—Potential Payments Upon Termination or Change of Control—
Steven A. Bate’’ below.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth information concerning unexercised stock options (including
outstanding stock appreciation rights, or SARs) and shares of restricted stock held by our named
executive officers at December 31, 2018:

Option Awards(1)

Stock Awards(2)(3)

Name

R. Brian Hanson .

Steven A. Bate .

Matthew R. Powers .

Christopher T. Usher .

Kenneth G. Williamson

Equity
Incentive
Plan Awards:
Number of
Securities
Underlying

Number of
Securities
Underlying

Number of
Securities
Underlying
Unexercised Unexercised Unexercised Option
Options (#) Options (#)
Exercisable Unexercisable Options (#) Price ($)

Unearned

Number of
Shares or
Units of

Market
Value of
Shares or
Units of

Option
Exercise Expiration Have Not
Date

Stock That Stock That
Have Not

Vested (#) Vested ($)(3)

Equity
Incentive

Equity
Incentive
Plan Awards:

Plan Awards: Market or

Number of
Unearned

Payout Value
of Unearned
Shares, Units Shares, Units

or other
Rights That
Have Not
Vested (#)

or Other
Rights That
Have Not
Vested ($)

23,332

120,860

180,000

932,400

11,666

60,430

89,430

463,247

8,666

44,890

38,443

199,135

4,599

23,823

89,430

463,247

5,833

30,215

89,430

463,247

16,666
5,000
6,666
5,000
6,461
—
25,000
—

5,000
3,333
2,333
2,499
4,000
4,423
—
25,000
—

333
333
375
1,250
—
—

3,333
4,000
3,000
1,415
—
6,250
—

3,333
1,466
5,000
2,333
3,333
3,333
4,000
3,000
3,500
—
8,750
—

—
—
—
1,666
6,462

75,000
100,000(4)

—
—
—
834
—
1,475

25,000
50,000(4)

—
—
125
3,750

36,000

—
—
1,000
1,415

53,557(4)

192,000(5)

24,444(4)

95,435(5)

3,334(4)

40,995(5)

18,750
50,000(4)

11,728(4)

95,435(5)

—
—
—
—
—
—
—
1,000
3,501

26,250
50,000(4)

29,013(4)

95,435(5)

106.05
89.40
57.90
61.05
34.20
34.20
3.10
3.10
8.85

95.85
95.85
57.90
61.05
37.05
34.20
34.20
3.10
3.10
8.85

71.85
57.90
61.05
3.10
3.10
13.15
8.85

89.40
57.90
61.05
34.20
34.20
3.10
3.10
8.85

42.45
81.60
68.70
107.85
87.15
89.40
57.90
61.05
34.20
34.20
3.10
3.10
8.85

9/1/2021
12/1/2022
12/1/2023
3/1/2024
3/1/2025
3/1/2025
3/1/2026
3/1/2026
12/1/2028

6/1/2023
6/1/2023
12/1/2023
3/1/2024
12/1/2024
3/1/2025
3/1/2025
3/1/2026
3/1/2026
12/1/2028

9/1/2023
12/1/2023
3/1/2024
3/1/2026
3/1/2026
12/1/2027
12/1/2028

12/1/2022
12/1/2023
3/1/2024
3/1/2025
3/1/2025
3/1/2026
3/1/2026
12/1/2028

6/1/2019
12/1/2019
3/1/2020
12/1/2020
12/1/2021
12/1/2022
12/1/2023
3/1/2024
3/1/2025
3/1/2025
3/1/2026
3/1/2026
12/1/2028

(1)

All stock option information in this table relates to nonqualified stock options granted under either our 2004 LTIP or 2013 LTIP. All of the
unvested options in this table vest, if at all, 25% each year over a four-year period, generally contingent on continued employment of the
grantee (with certain exceptions that allow earlier vesting such as in the event of death, disability, or retirement of the grantee or a change in
control of the Company’s ownership).

(2)

(3)

(4)

The amounts shown represent shares of restricted stock granted under our 2013 LTIP or our 2018 LTIP. While unvested, the holder is
entitled to the same voting rights as all other holders of Common Stock. All of the restricted stock awards are subject to the time-based
vesting restrictions, and the restricted stock awards made in December 2018 are additionally subject to the performance-based vesting
restrictions, described in footnote (2) of the preceding table ‘‘—2018 GRANTS OF PLAN-BASED AWARDS’’.

Pursuant to SEC rules, the market value of each executive’s shares of unvested restricted stock was calculated by multiplying the number of
shares by $5.18 (the closing price per share of our Common Stock on the NYSE on December 31, 2018).

The amounts shown reflect awards of cash-settled SARs granted on March 1, 2015 and March 1, 2016 under our 2008 Stock Appreciation
Rights Plan (‘‘2008 SAR Plan’’). The vesting of the 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 per share of our 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 market condition has been achieved for the 2016 grants, but not the 2015 grants.) 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 (except with respect to the March 1, 2016 SARs, the vesting dates of which were
accelerated as set forth in the ‘‘—Compensation Discussion and Analysis’’ above) and (iii) all of the awards may be exercised, if vested, on
and after the third anniversary of the date of grant.

(5)

The amounts shown reflect awards of cash-settled SARs granted on December 1, 2018 under our 2018 SAR Plan. The vesting of the SARs is
subject to the time-based and performance based restrictions described in footnote (3) of the preceding table ‘‘—2018 GRANTS OF
PLAN-BASED AWARDS’’.

2018 OPTION EXERCISES AND STOCK VESTED

The following table sets forth certain information with respect to option and stock exercises by the

named executive officers during the year ended December 31, 2018:

Name

Option Awards

Stock Awards

Number of
Shares
Acquired on
Exercise (#)

Value
Realized on
Exercise ($)(1)

Number of
Shares
Acquired on
Vesting (#)

Value
Realized on
Vesting ($)(2)

R. Brian Hanson(3) . . . . . . . . . . . . . . . . . . . . . .
Steven A. Bate(4) . . . . . . . . . . . . . . . . . . . . . . . .
Matthew R. Powers(5) . . . . . . . . . . . . . . . . . . . .
Christopher T. Usher(6) . . . . . . . . . . . . . . . . . . .
Ken Williamson(7) . . . . . . . . . . . . . . . . . . . . . . .

50,000
—
—
—
—

987,500
—
—
—
—

30,602
24,884
4,908
11,833
16,224

815,065
660,188
62,298
310,349
428,883

(1) The value realized upon the exercise of the non-qualified stock options (the ‘‘NQSOs’’) was

calculated by (a) subtracting $3.10 (the NQSOs’ exercise price) from $22.85 (the closing price per
share of our Common Stock on June 22, 2018 the date of exercise) to get the realized value per
share, and (b) multiplying the realized value per share by the number of shares underlying NQSOs
exercised.

(2) The values realized upon vesting of stock awards contained in the table are based on the market

value of our Common Stock on the date of vesting.

(3) The value realized by Mr. Hanson on the vesting of his restricted stock awards was calculated by
multiplying (a) 16,666 shares by $28.45 (the closing price per share of our Common Stock on
March 1, 2018, the vesting date), (b) 7,270 shares by $24.75 (the closing price per share of our
Common Stock on May 30, 2018, the vesting date) and (c) 6,666 shares by $24.15 (the closing
price per share of our Common Stock on June 1, 2018, the vesting date).

(4) The value realized by Mr. Bate on the vesting of his restricted stock awards was calculated by
multiplying (a) 12,516 shares by $28.45 (the closing price per share of our Common Stock on
March 1, 2018, the vesting date); (b) 9,035 shares by $24.75 (the closing price per share of our
Common Stock on May 30, 2018, the vesting date) and (c) 3,333 shares by $24.15 (the closing
price per share of our Common Stock on June 1, 2018, the vesting date).

(5) The value realized by Mr. Powers on the vesting of his restricted stock awards was calculated by
multiplying (a) 666 shares by $28.45 (the closing price per share of our Common Stock on
March 1, 2018, the vesting date), (b) 242 shares by $24.75 (the closing price per share of our
Common Stock on May 30, 2018, the vesting date) and (c) 4,000 shares by $9.34 (the closing price
per share of our Common Stock on December 3, 2018, the first business day after the vesting
date).

(6) The value realized by Mr. Usher on the vesting of his restricted stock awards was calculated by
multiplying (a) 4,795 shares by $28.45 (the closing price per share of our Common Stock on
March 1, 2018, the vesting date), (b) 6,605 shares by $24.75 (the closing price per share of our
Common Stock on May 30, 2018, the vesting date and (c) 433 shares by $24.15 (the closing price
per share of our Common Stock on June 1, 2018, the vesting date).

(7) The value realized by Mr. Williamson on the vesting of his restricted stock awards was calculated

by multiplying (a) 7,389 shares by $28.45 (the closing price per share of our Common Stock on
March 1, 2018, the vesting date) and (b) 8,835 shares by $24.75 (the closing price per share of our
Common Stock on May 30, 2018, the vesting date).

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

Under the terms of our equity-based compensation plans and our employment agreements, our
Chief Executive Officer and certain of our other named executive officers are entitled to payments and
benefits upon the occurrence of specified events including termination of employment (with and
without cause) and upon a change in control of our Company. The specific terms of these
arrangements, as well as an estimate of the compensation that would have been payable had they been
triggered as of December 31, 2018, are described in detail below. In the case of each employment
agreement, the terms of these arrangements were established through the course of arms-length
negotiations with each executive officer, both at the time of hire and at the times of any later
amendment. As part of these negotiations, the Compensation Committee analyzed the terms of the
same or similar arrangements for comparable executives employed by companies in our industry group.
This approach was used by the committee in setting the amounts payable and the triggering events
under the arrangements. The termination of employment provisions of the employment agreements
were entered into in order to address competitive concerns by providing those individuals with a fixed
amount of compensation that would offset the potential risk of leaving their prior employer or
foregoing other opportunities in order to join our Company. At the time of entering into these
arrangements, the Compensation Committee considered the aggregate potential obligations of our
Company in the context of the desirability of hiring the individual and the expected compensation upon
joining us. However, these contractual severance and post-termination arrangements have not affected
the decisions the Compensation Committee has made regarding other compensation elements and the
rationale for compensation decisions made in connection with these arrangements.

The following summaries set forth estimated potential payments payable to each of our named
executive officers upon termination of employment or a change of control of our Company under their
current employment agreements and our stock plans and other compensation programs as if his
employment had so terminated for these reasons, or the change of control had so occurred, on
December 31, 2018. The Compensation Committee may, in its discretion, agree to revise, amend or add
to the benefits if it deems advisable. For purposes of the following summaries, dollar amounts are
estimates based on annual base salary as of December 31, 2018, benefits paid to the named executive
officer in fiscal 2018 and stock and option holdings of the named executive officer as of December 31,
2018. The summaries assume a price per share of ION Common Stock of $5.18 per share, which was
the closing price per share on December 31, 2018, as reported on the NYSE. The actual amounts to be
paid to the named executive officers can only be determined at the time of each executive’s separation
from the Company.

The amounts of potential future payments and benefits as set forth in the tables below, and the

descriptions of the assumptions upon which such future payments and benefits are based and derived,
may constitute ‘‘forward-looking statements’’ within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are estimates of payments and benefits to certain of our
executives upon their termination of employment or a change in control, and actual payments and
benefits may vary materially from these estimates. Actual amounts can only be determined at the time
of such executive’s actual separation from our Company or the time of such change in control event.
Factors that could affect these amounts and assumptions include the timing during the year of any such
event, the price of our Common Stock, unforeseen future changes in our Company’s benefits and
compensation methodology and the age of the executive.

R. Brian Hanson

Termination and Change of Control. Mr. Hanson is entitled to certain benefits under his

employment agreement upon the occurrence of any of the following events:

(cid:129) we terminate his employment other than for cause, death or disability;

(cid:129) Mr. Hanson resigns for ‘‘good reason’’; or

(cid:129) a ‘‘change in control’’ involving our Company occurs and, within 12 months following the change

in control, (a) we or our successor terminate Mr. Hanson’s employment or (b) Mr. Hanson
terminates his employment after we or our successor (i) elect not to extend the term of his
employment agreement, (ii) assign to Mr. Hanson duties inconsistent with his CEO position,
duties, functions, responsibilities, authority or reporting relationship to the Board under his
employment agreement, (iii) become a privately-owned company as a result of a transaction in
which Mr. Hanson does not participate within the acquiring group, (iv) are rendered a subsidiary
or division or other unit of another company; or (v) take any action that would constitute ‘‘good
reason’’ under his employment agreement.

Under Mr. Hanson’s employment agreement, a ‘‘change in control’’ occurs upon any of the

following (which we refer to in this section as an ‘‘Employment Agreement Change of Control’’):

(1) the acquisition by a person or group of beneficial ownership of 40% or more of our
outstanding shares of Common Stock other than any acquisitions directly from ION,
acquisitions by ION or an employee benefit plan maintained by ION, or certain permitted
acquisitions in connection with a ‘‘Merger’’ (as defined in sub-paragraph (3) below);

(2) changes in directors on our board of directors such that the individuals that constitute the

entire board cease to constitute at least a majority of directors of the board, other than new
directors whose appointment or nomination for election was approved by a vote of at least a
majority of the directors then constituting the entire board of directors (except in the case of
election contests);

(3) consummation of a ‘‘Merger’’—that is, a reorganization, merger, consolidation or similar

business combination involving ION—unless (i) owners of ION Common Stock immediately
following such business combination together own more than 50% of the total outstanding
stock or voting power of the entity resulting from the business combination in substantially the
same proportion as their ownership of ION voting securities immediately prior to such Merger
and (ii) at least a majority of the members of the board of directors of the corporation
resulting from such Merger (or its parent corporation) were members of our board of
directors at the time of the execution of the initial agreement providing for the Merger; or

(4) the sale or other disposition of all or substantially all of our assets.

Upon the occurrence of any of the above events and conditions, Mr. Hanson would be entitled to

receive the following (less applicable withholding taxes and subject to compliance with non-compete,
non-solicit and no-hire obligations):

(cid:129) over a two-year period, a cash amount equal to two times his annual base salary and two times

his target bonus amount in effect for the year of termination;

(cid:129) a prorated portion of any unpaid target incentive plan bonus for the year of termination; and

(cid:129) continuation of insurance coverage for Mr. Hanson as of the date of his termination for a period

of two years at the same cost to him as prior to the termination.

In addition, upon the occurrence of any of the above events or conditions, the vesting period for

all of Mr. Hanson’s unvested equity awards granted on or after January 1, 2012 having a remaining
vesting period of two years or less as of the date of termination will immediately accelerate to vest in
full. In such event, all restrictions on the awards will thereupon be immediately lifted and the exercise
period of all outstanding vested stock options (including the option awards that have been so
accelerated) granted on or after January 1, 2012 will continue in effect until the earlier of (a) two years

after the date of termination or (b) the expiration of the full original term, as specified in each
applicable stock option agreement.

We believe the double-trigger change-of-control benefit referenced above maximizes shareholder

value because it motivates Mr. Hanson to remain in his position for a sufficient period of time
following a change of control to ensure a smoother integration and transition for the new owners.
Given his experience with our Company and within the seismic industry as our CFO and CEO, we
believe Mr. Hanson’s severance structure is in our best interest because it ensures that for a two-year
period after leaving our employment, Mr. Hanson will not be in a position to compete against us or
otherwise adversely affect our business.

Change of Control Under Equity Compensation Plans. Mr. Hanson and our other named executive
officers currently hold outstanding awards under one or more of the following five equity compensation
plans: our 2004 LTIP, our 2013 LTIP, our 2018 LTIP, our 2008 SAR Plan and our 2018 SAR Plan.
Under these plans, a ‘‘change of control’’ will be deemed to have occurred upon any of the following
(which we refer to in this section as a ‘‘Plan Change of Control’’):

(1) the acquisition by a person or group of beneficial ownership of 40% or more of the

outstanding shares of Common Stock other than acquisitions directly from ION, acquisitions
by ION or an employee benefit plan maintained by ION, or certain permitted acquisitions in
connection with a business combination described in sub-paragraph (3) below;

(2) changes in directors such that the individuals that constitute the entire board of directors
cease to constitute at least a majority of directors of the board, other than new directors
whose appointment or nomination for election was approved by a vote of at least a majority
of the directors then constituting the entire board of directors (except in the case of election
contests);

(3) consummation of a reorganization, merger, consolidation or similar business combination

involving ION, unless (i) owners of our Common Stock immediately following such transaction
together own more than 50% of the total outstanding stock or voting power of the entity
resulting from the transaction and (ii) at least a majority of the members of the board of
directors of the entity resulting from the transaction were members of our board of directors
at the time the agreement for the transaction is signed; or

(4) the sale of all or substantially all of our assets.

Upon any such ‘‘Plan Change of Control,’’ all of Mr. Hanson’s stock options granted to him under

the 2013 LTIP and the 2018 LTIP will become fully exercisable, all unvested restricted stock awards
granted to him under the 2013 LTIP will automatically accelerate and become fully vested, and all
unvested stock appreciation rights granted to him under the 2008 SAR Plan and the 2018 SAR Plan
will become fully exercisable.

Death, Disability or Retirement. Upon his death or disability, all unvested options, restricted stock
and stock appreciation rights that Mr. Hanson holds would automatically accelerate and become fully
vested. Upon his retirement, all unvested options and stock appreciation rights that Mr. Hanson holds
would automatically accelerate and become fully vested. No unvested shares of restricted stock held by
Mr. Hanson would automatically accelerate and become fully vested upon his retirement.

Termination by Us for Cause or by Mr. Hanson Other Than for Good Reason. Upon any
termination by us for cause or any resignation by Mr. Hanson for any reason other than for ‘‘good
reason’’ (as defined in his employment agreement), Mr. Hanson is not entitled to any payment or
benefit other than the payment of unpaid salary and possibly accrued and unused vacation pay.

Mr. Hanson’s currently-held vested stock options and stock appreciation rights will remain

exercisable after his termination of employment, death, disability or retirement for periods of between
three months and one year following such event, depending on the event and the terms of the
applicable plan and grant agreement. If Mr. Hanson is terminated for cause, all of his vested and
unvested stock options, unvested restricted stock, and vested and unvested stock appreciation rights will
be immediately forfeited. We have not agreed to provide Mr. Hanson any additional payments in the
event any payment or benefit under his employment agreement is determined to be subject to the
excise tax for ‘‘excess parachute payments’’ under U.S. federal income tax rules, or any other ‘‘tax
gross-ups’’ under this employment agreement.

Assuming Mr. Hanson’s employment was terminated under each of these circumstances or a
change of control occurred on December 31, 2018, his payments and benefits would have an estimated
value as follows (less applicable withholding taxes):

Scenario

Without Cause or For Good Reason . . . . .
Termination after change in control
. . . . . .
Change of Control (if not terminated),

Death or Disability . . . . . . . . . . . . . . . .
Retirement . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary Termination . . . . . . . . . . . . . . . .

Cash
Severance
($)(1)

Bonus
($)(2)

1,200,000
1,200,000

—
—
—

Insurance

Tax

Continuation Gross-Ups

($)(3)

35,104
35,104

—
—
—

($)

—
—

—
—
—

Value of
Accelerated
Equity
Awards
($)(4)

—
1,365,260

1,365,260
312,000
—

(1) Payable over a two-year period. In addition to the listed amounts, if Mr. Hanson resigns or his

employment is terminated for any reason, he may be paid for his unused vacation days.
Mr. Hanson is currently entitled to accrue up to 25 vacation days per year. The above table
assumes that there is no earned but unpaid base salary as of the time of termination.

(2) Represents two times the estimate of the target bonus payment Mr. Hanson would be entitled to

receive pursuant to our 2018 bonus incentive plan. The actual bonus payment he would be entitled
to receive upon his termination may be different from the estimated amount, depending on the
achievement of payment criteria under the bonus plan.

(3) The value of insurance continuation contained in the above table is the total cost of COBRA

continuation coverage for Mr. Hanson, maintaining his same levels of medical, dental and other
insurance as in effect on December 31, 2018, less the amount of premiums to be paid by
Mr. Hanson for such coverage.

(4) As of December 31, 2018, Mr. Hanson held 203,332 unvested shares of restricted stock, unvested

stock options to purchase 53,231 shares of Common Stock and 345,557 unvested cash-settled stock
appreciation rights. The value of accelerated unvested options was calculated by multiplying 50,000
shares underlying Mr. Hanson’s unvested options by $5.18 (the closing price per share on
December 31, 2018) and then deducting the aggregate exercise price for those shares (equal to
$3.10 per share for those 50,000 options). The options having an exercise price greater than $5.18
per share were calculated as having a zero value. The value of the restricted stock that would
accelerate and fully vest in the event of a Change in Control, death or disability was calculated by
multiplying 203,332 shares by $5.18. The value of accelerated unvested stock appreciation rights
was calculated by multiplying 100,000 shares by $5.18 and then deducting the settlement price of
$3.10. Stock appreciation rights having an exercise price greater than $5.18 were calculated as
having a zero value.

Steven A. Bate

Termination and Change of Control. Mr. Bate is entitled to certain benefits under his employment

agreement upon the occurrence of any of the following events:

(cid:129) we terminate his employment other than for cause, death or disability;

(cid:129) Mr. Bate resigns for ‘‘good reason’’; or

(cid:129) an ‘‘Employment Agreement Change of Control’’ (see ‘‘—R. Brian Hanson—Termination and
Change of Control’’ above) involving our Company occurs and, within 12 months following the
change in control, (a) we or our successor terminate Mr. Bate’s employment or (b) Mr. Bate
terminates his employment after we or our successor (i) elect not to extend the term of his
employment agreement, (ii) assign to Mr. Bate duties inconsistent with his CFO position, duties,
functions, responsibilities, authority or reporting relationship to the Board under his employment
agreement, (iii) become a privately-owned company as a result of a transaction in which
Mr. Bate does not participate within the acquiring group, (iv) are rendered a subsidiary or
division or other unit of another company; or (v) take any action that would constitute ‘‘good
reason’’ under his employment agreement.

Upon the occurrence of any of the above events and conditions, Mr. Bate would be entitled to
receive the following (less applicable withholding taxes and subject to compliance with non-compete,
non-solicit and no-hire obligations):

(cid:129) over a two-year period, a cash amount equal to two times his annual base salary in effect for the

year of termination;

(cid:129) a prorated portion of any unpaid target incentive plan bonus for the year of termination; and

(cid:129) continuation of insurance coverage for Mr. Bate as of the date of his termination for a period of

eighteen months at the same cost to him as prior to the termination.

Change of Control Under Equity Compensation Plans. Upon a ‘‘Plan Change of Control’’, (see

‘‘—R. Brian Hanson—Change of Control Under Equity Compensation Plans’’ above), all of Mr. Bate’s
stock options granted to him under the 2013 LTIP will become fully exercisable, all unvested restricted
stock awards granted to him under the 2013 LTIP and the 2018 LTIP will automatically accelerate and
become fully vested, and all unvested stock appreciation rights granted to him under the 2008 SAR
Plan and the 2018 SAR Plan will become fully exercisable. In addition, any change of control of our
Company will cause the remaining term of Mr. Bate’s employment agreement to adjust automatically to
two years, commencing on the effective date of the change of control.

Upon his death or disability, all unvested options, restricted stock and stock appreciation rights

that Mr. Bate holds would automatically accelerate and become fully vested. Upon his retirement, all
unvested options and stock appreciation rights that Mr. Bate holds would automatically accelerate and
become fully vested. No unvested shares of restricted stock held by Mr. Bate would automatically
accelerate and become fully vested upon his retirement.

Upon any termination by us for cause or any resignation by Mr. Bate for any reason other than for

‘‘good reason’’ (as defined in his employment agreement), Mr. Bate is not entitled to any payment or
benefit other than the payment of unpaid salary and possibly accrued and unused vacation pay.

Mr. Bate’s currently-held vested stock options and stock appreciation rights will remain exercisable

after his termination of employment, death, disability or retirement for periods of between three
months and one year following such event, depending on the event and the terms of the applicable
plan and grant agreement. If Mr. Bate is terminated for cause, all of his vested and unvested stock
options, unvested restricted stock, and vested and unvested stock appreciation rights will be
immediately forfeited.

Assuming Mr. Bate employment was terminated under each of these circumstances or a change of

control occurred on December 31, 2018, his payments and benefits would have an estimated value as
follows (less applicable withholding taxes):

Scenario

Cash
Severance
($)(1)

Bonus
($)(2)

Insurance
Continuation
($)(3)

Without Cause or For Good Reason . . . . . . . . . . . . . . . . .
Termination after change in control
. . . . . . . . . . . . . . . . . .
Change of Control (if not terminated), Death or Disability .
Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . .

750,000 —
750,000 —
— —
— —
— —

18,334
18,334
—
—
—

Value of
Accelerated
Equity
Awards
($)(4)

—
679,677
679,677
156,000
—

(1) Payable over a two-year period. In addition to the listed amounts, if Mr. Bate resigns or his

employment is terminated for any reason, he may be paid for his unused vacation days. Mr. Bate
is currently entitled to accrue up to 30 vacation days per year. The above table assumes that there
is no earned but unpaid base salary as of the time of termination.

(2) The actual bonus payment he would be entitled to receive upon his termination may be different
from the estimated amount, depending on the achievement of payment criteria under the bonus
plan.

(3) The value of insurance continuation contained in the above table is the total cost of COBRA
continuation coverage for Mr. Bate, maintaining his same levels of medical, dental and other
insurance as in effect on December 31, 2018, less the amount of premiums to be paid by Mr. Bate
for such coverage.

(4) As of December 31, 2018, Mr. Bate held 101,096 unvested shares of restricted stock, unvested

stock options to purchase 26,475 shares of Common Stock and 169,879 unvested cash-settled stock
appreciation rights. The value of accelerated unvested options was calculated by multiplying 25,000
shares underlying Mr. Bate’s unvested options by $5.18 (the closing price per share on
December 31, 2018) and then deducting the aggregate exercise price for those shares (equal to
$3.10 per share for those 25,000 options). The options having an exercise price greater than $5.18
per share were calculated as having a zero value. The value of the restricted stock that would
accelerate and fully vest in the event of a Change in Control, death or disability was calculated by
multiplying 101,096 shares by $5.18. The value of accelerated unvested stock appreciation rights
was calculated by multiplying 50,000 shares by $5.18 and then deducting the settlement price of
$3.10. Stock appreciation rights having an exercise price greater than $5.18 per share were
calculated as having a zero value.

Matthew R. Powers

Mr. Powers is not entitled to receive any contractual severance pay if we terminate his employment

without cause. Upon a ‘‘Plan Change of Control’’ (see ‘‘—R. Brian Hanson—Change of Control Under
Equity Compensation Plans’’ above), all of his unvested stock options granted to him under the 2013
LTIP will become fully exercisable, all unvested restricted stock awards granted to him under the 2013
LTIP and the 2018 LTIP will automatically accelerate and become fully vested, and all unvested stock
appreciation rights granted to him under the 2008 SAR Plan and the 2018 SAR Plan will become fully
exercisable. Upon his death or disability, all unvested options, restricted stock and stock appreciation
rights that Mr. Powers holds would automatically accelerate and become fully vested. Upon his
retirement, all unvested options and stock appreciation rights that Mr. Powers holds would

automatically accelerate and become fully vested. No shares of unvested restricted stock held by
Mr. Powers would automatically accelerate and become fully vested upon his retirement.

The vested stock options and stock appreciation rights held by Mr. Powers will remain exercisable

after his termination of employment, death, disability or retirement for periods of between three
months and one year following such event, depending on the event and the terms of the applicable
stock plan and grant agreement. If Mr. Powers is terminated for cause, all of his vested and unvested
stock options, unvested restricted stock, and vested and unvested stock appreciation rights will be
immediately forfeited.

Assuming his employment was terminated under each of these circumstances or a change of
control occurred on December 31, 2018, his payments and benefits would have an estimated value as
follows (less applicable withholding taxes):

Scenario

Cash
Severance
($)(1)

Without Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of Control (regardless of termination), Death or

Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—
—
—

Value of
Accelerated
Equity
Awards
($)(2)

—

256,159
12,135
—

(1) If Mr. Powers resigns or his employment is terminated for any reason, he may be paid for
his unused vacation days. Mr. Powers is currently entitled to accrue up to 25 vacation
days per year. The above table assumes that there is no earned but unpaid base salary as
of the time of termination.

(2) As of December 31, 2018, Mr. Powers held 47,109 unvested shares of restricted stock,

unvested stock options to purchase 29,500 shares of Common Stock and 44,329 unvested
cash-settled stock appreciation rights. The value of accelerated unvested options was
calculated by multiplying 2,500 shares underlying Mr. Powers’ unvested options by $5.18
(the closing price per share on December 31, 2018) and then deducting the aggregate
exercise price for those shares (equal to $3.10 per share for 2,500 options). The options
having an exercise price greater than $5.18 per share were calculated as having a zero
value. The value of the restricted stock that would accelerate and fully vest in the event
of a Change in Control, death or disability was calculated by multiplying 47,109 shares by
$5.18. The value of accelerated unvested stock appreciation rights was calculated by
multiplying 3,334 shares by $5.18 and then deducting the settlement price of $3.10. Stock
appreciation rights having an exercise price greater than $5.18 per share were calculated
as having a zero value.

Christopher T. Usher

Mr. Usher is not entitled to receive any contractual severance pay if we terminate his employment

without cause. Upon a ‘‘Plan Change of Control’’ (see ‘‘—R. Brian Hanson—Change of Control Under
Equity Compensation Plans’’ above), all of his unvested stock options granted to him under the 2013
LTIP will become fully exercisable, all restricted stock awards granted to him under the 2013 LTIP and
the 2018 LTIP will automatically accelerate and become fully vested, and all unvested stock
appreciation rights granted to him under the 2008 SAR Plan and the 2018 SAR Plan will become fully
exercisable. Upon his death or disability, all unvested options, restricted stock and stock appreciation
rights that Mr. Usher holds would automatically accelerate and become fully vested. Upon his

retirement, all unvested options and stock appreciation rights that Mr. Usher holds would automatically
accelerate and become fully vested. No unvested shares of restricted stock held by Mr. Usher would
automatically accelerate and become fully vested upon his retirement.

The vested stock options and stock appreciation rights held by Mr. Usher will remain exercisable

after his termination of employment, death, disability or retirement for periods of between three
months and one year following such event, depending on the event and the terms of the applicable
stock plan and grant agreement. If Mr. Usher is terminated for cause, all of his vested and unvested
stock options, unvested restricted stock, and vested and unvested stock appreciation rights will be
immediately forfeited.

Scenario

Cash
Severance
($)(1)

Without Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of Control (regardless of termination), Death or

—

—
—
—

Value of
Accelerated
Equity
Awards
($)(2)

—

617,070
130,000
—

(1) If Mr. Usher resigns or his employment is terminated for any reason, he may be paid for
his unused vacation days. Mr. Usher is currently entitled to accrue up to 25 vacation days
per year. The above table assumes that there is no earned but unpaid base salary as of
the time of termination.

(2) As of December 31, 2018, Mr. Usher held 94,029 unvested shares of restricted stock,

unvested stock options to purchase 13,208 shares of Common Stock and 157,163 unvested
cash-settled stock appreciation rights. The value of accelerated unvested options was
calculated by multiplying 12,500 shares underlying Mr. Usher’s unvested options by $5.18
(the closing price per share on December 31, 2018) and then deducting the aggregate
exercise price for those shares (equal to $3.10 per share for those 12,500 options). The
options having an exercise price greater than $5.18 per share were calculated as having a
zero value. The value of the restricted stock that would accelerate and fully vest in the
event of a Change in Control, death or disability was calculated by multiplying 94,029
shares by $5.18. The value of accelerated unvested stock appreciation rights was
calculated by multiplying 50,000 shares by $5.18 and then deducting the settlement price
of $3.10. Stock appreciation rights having an exercise price greater than $5.18 per share
were calculated as having a zero value.

Kenneth G. Williamson

Mr. Williamson is not entitled to receive any contractual severance pay if we terminate his
employment without cause. Upon a ‘‘Plan Change of Control’’ (see ‘‘—R. Brian Hanson—Change of
Control Under Equity Compensation Plans’’ above), all of his unvested stock options granted to him
under the 2013 LTIP will become fully exercisable, all unvested restricted stock awards granted to him
under the 2013 LTIP and the 2018 LTIP will automatically accelerate and become fully vested, and all
unvested stock appreciation rights granted to him under the 2008 SAR Plan and the 2018 SAR Plan
will become fully exercisable. Upon his death or disability, all unvested options, restricted stock and

stock appreciation rights that Mr. Williamson holds would automatically accelerate and become fully
vested. Upon his retirement, all unvested options and stock appreciation rights that Mr. Williamson
holds would automatically accelerate and become fully vested. No unvested shares of restricted stock
held by Mr. Williamson would automatically accelerate and become fully vested upon his retirement.

The vested stock options and stock appreciation rights held by Mr. Williamson will remain

Scenario

Cash
Severance
($)(1)

Without Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of Control (regardless of termination), Death or

—

—
—
—

Value of
Accelerated
Equity
Awards
($)(2)

—

633,862
140,400
—

(1) If Mr. Williamson resigns or his employment is terminated for any reason, he may be
paid for his unused vacation days. Mr. Williamson is currently entitled to accrue up to
25 vacation days per year. The above table assumes that there is no earned but unpaid
base salary as of the time of termination.

(2) As of December 31, 2018, Mr. Williamson held 95,263 unvested shares of restricted stock,
unvested stock options to purchase 19,251 shares of Common Stock and 174,448 unvested
cash-settled stock appreciation rights. The value of accelerated unvested options was
calculated by multiplying 17,500 shares underlying Mr. Williamson’s unvested options by
$5.18 (the closing price per share on December 31, 2018) and then deducting the
aggregate exercise price for those shares (equal to $3.10 per share for those 17,500
options). The options having an exercise price greater than $5.18 per share were
calculated as having a zero value. The value of the restricted stock that would accelerate
and fully vest in the event of a Change in Control, death or disability was calculated by
multiplying 95,263 shares by $5.18. The value of accelerated unvested stock appreciation
rights was calculated by multiplying 50,000 shares by $5.18 and then deducting the
settlement price of $3.10. Stock appreciation rights having an exercise price greater than
$5.18 per share were calculated as having a zero value.

2018 PENSION BENEFITS AND NONQUALIFIED DEFERRED COMPENSATION

None of our named executive officers participates or has account balances in (i) any qualified or

non-qualified defined benefit plans or (ii) any non-qualified defined contribution plans or other
deferred compensation plans maintained by us.

EQUITY COMPENSATION PLAN INFORMATION
(as of December 31, 2018)

The following table provides certain information regarding our equity compensation plans under
which equity securities are authorized for issuance, categorized by (i) the equity compensation plans
previously approved by our shareholders and (ii) the equity compensation plans not previously
approved by our shareholders:

Plan Category

Number of Securities
to be Issued
Upon Exercise
of Outstanding
Options,
Warrants and Rights
(a)

Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(b)

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
(c)

Equity Compensation Plans Approved by

Shareholders
2004 Long-Term Incentive Plan (‘‘2004 LTIP’’)
Third Amended and Restated 2013

263,674

Long-Term Incentive Plan (‘‘2018 LTIP’’) . .

522,216

2010 Employee Stock Purchase Plan

(‘‘2010 ESPP’’) . . . . . . . . . . . . . . . . . . . . .

—

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785,890

Equity Compensation Plans Not Approved by

Shareholders

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785,890

$79.57

$12.99

—

732,720

47,241

779,961

—

779,961

A description of our Stock Appreciation Rights Plans has not been provided in this sub-section

because awards of SARs made under those plans may be settled only in cash.

CEO PAY RATIO DISCLOSURE

As required by Item 402(u) of Regulation S-K, we are providing the following information about

the relationship of the median of the annual total compensation of our employees and the annual total
compensation of Mr. R. Brian Hanson, our Chief Executive Officer (our ‘‘CEO’’):

For 2018, our last completed fiscal year:

(cid:129) the median of the annual total compensation of all employees of our company (other than our

CEO), was $95,487; and

(cid:129) the annual total compensation of our CEO was $3,340,009.

Based on this information, for 2018, the ratio of the annual total compensation of Mr. R. Brian
Hanson, our Chief Executive Officer, to the median of the annual total compensation of all employees
was 35 to 1.

The ‘‘median employee’’ that was used for purposes of calculating the ratio of the annual total
compensation of our CEO to the median of the annual total compensation of all employees is the same
employee that was identified for purposes of our 2018 disclosure. There has been no change in our
employee population or employee compensation arrangements since that median employee was
identified that we believe would significantly impact our pay ratio disclosure.

ITEM 2—ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION

As required by Section 14A of the Exchange Act, we are asking our shareholders to approve, on

an advisory basis, the compensation of our named executive officers as we have described it in the
‘‘Executive Compensation’’ section of this Proxy Statement. This advisory vote is sometimes referred to
as ‘‘Say on Pay.’’ While this vote is not binding on our Company, management and the Compensation
Committee will review the voting results for purposes of obtaining information regarding investor
sentiment about our executive compensation philosophy, policies and practices. If there are a significant
number of negative votes, we will seek to understand the concerns that influenced the negative votes,
and consider them in making decisions about our executive compensation programs in the future. At
our 2018 Annual Meeting, our shareholders approved our non-binding advisory vote to approve the
compensation of our named executive officers, with approximately 99% of the votes cast on the
proposal voting in favor of its approval.

We believe that the information we have provided within the Executive Compensation section of
this Proxy Statement demonstrates that our executive compensation program is designed appropriately
and is working to ensure management’s interests are aligned with our shareholders’ interests to support
long-term value creation. As described above in detail under ‘‘—Compensation Discussion and
Analysis,’’ our compensation program reflects a balance of short-term incentives (including
performance-based cash bonus awards), long-term incentives (including equity awards that vest over up
to four years), and protective measures, such as clawback and anti-hedging policies and stock ownership
guidelines, that are designed to support our long-term business strategies and drive creation of
shareholder value. We believe that our program is (i) aligned with the competitive market for talent,
(ii) sensitive to our financial performance and (iii) oriented to long-term incentives, in order to
maintain and improve our long-term profitability. We believe our program delivers reasonable pay that
is strongly linked to our performance over time relative to peer companies and rewards sustained
performance that is aligned with long-term shareholder interests. Our executive compensation program
is also designed to attract and to retain highly-talented executive officers who are critical to the
successful implementation of our Company’s strategic business plan.

We routinely evaluate the individual elements of our compensation program in light of market

conditions and governance requirements and make changes as appropriate for our business. For
example, in 2009 and in 2015 we reduced base salaries for most company employees, with the largest
reductions borne by our executives, including our named executive officers. In addition, our
employment contract with our Chief Executive Officer does not contain tax gross-ups or single trigger
change of control provisions. We are continuously seeking to improve our executive compensation
programs and align our programs with shareholder interests. We believe that our executive
compensation program continues to drive and promote superior financial performance for our
Company and our shareholders over the long term through a variety of business conditions.

We have regularly sought approval from our shareholders regarding portions of our compensation
program that we have used to motivate, retain and reward our executives. Since 2000, our shareholders
have voted on and approved our equity compensation plans (and amendments to those plans) fourteen
times, in addition to approving our overall executive compensation program for each of the last eight
years. Those incentive plans make up a significant portion of the overall compensation that we provide
to our executives. Over the years, we have made numerous changes to our executive compensation
program in response to shareholder input. Because the vote is advisory, however, it will not be binding
upon our Board or the Compensation Committee, and neither our Board nor the Compensation
Committee will be required to take any action as a result of the outcome of the vote on this proposal.
The Compensation Committee will carefully evaluate the outcome of the vote when considering future
executive compensation arrangements. After our Annual Meeting in May 2019, our next say-on-pay
vote will occur at our next Annual Meeting scheduled to be held in May 2020.

Accordingly, our Board strongly endorses the Company’s executive compensation program and

recommends that shareholders vote in favor of the following advisory resolution:

RESOLVED, that the shareholders approve the compensation paid to the named executive officers

of the Company, pursuant to the compensation disclosure rules of the Securities and Exchange
Commission, including the compensation discussion and analysis, the compensation tables and any
related material disclosed in the Company’s Proxy Statement for the 2019 Annual Meeting of
Shareholders.

We encourage our shareholders to review closely the Compensation Discussion and Analysis, the
accompanying compensation tables and the related narrative disclosure before voting on this proposal.
The Compensation Discussion and Analysis describes and explains our executive compensation policies
and practices and the process that was used by the Compensation Committee of our Board to reach its
decisions on the compensation of our named executive officers for 2018. It also contains a discussion
and analysis of each of the primary components of our executive compensation program—base salary,
annual cash incentive awards and long-term incentive awards—and the various post-employment
arrangements that we have entered into with certain of our named executive officers.

The Board recommends that shareholders vote ‘‘FOR’’ the advisory (non-binding) vote to approve

the compensation of our named executive officers, as described in this Proxy Statement.

ITEM 3—RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

We have appointed Grant Thornton LLP (‘‘Grant Thornton’’) as our independent registered public

accounting firm (independent auditors) for the fiscal year ending December 31, 2019. Grant Thornton
served as our independent auditors for 2018.

The Board recommends that shareholders vote ‘‘FOR’’ ratification of the appointment of Grant

Thornton as our independent auditors for 2019.

In the event shareholders do not ratify the appointment, the appointment will be reconsidered by

the Audit Committee. Regardless of the outcome of the vote, however, the Audit Committee at all
times has the authority within its discretion to recommend and approve any appointment, retention or
dismissal of our independent auditors.

REPORT OF THE AUDIT COMMITTEE

The following Report of the Audit Committee does not constitute soliciting material and shall not be
deemed filed or incorporated by reference into any other filings under the Securities Act or the Exchange
Act, except to the extent ION specifically incorporates this Report by reference therein.

ION’s management is responsible for ION’s internal controls, financial reporting process,
compliance with laws, regulations and ethical business standards and the preparation of consolidated
financial statements in accordance with accounting principles generally accepted in the United States.
ION’s independent registered public accounting firm is responsible for performing an independent
audit of ION’s financial statements in accordance with generally accepted auditing standards and the
effectiveness of ION’s internal control over financial reporting, and issuing an opinion thereon. The
Board of ION appointed the undersigned directors as members of the Audit Committee and adopted a
written charter setting forth the procedures and responsibilities of the Audit Committee. Each year the
Audit Committee reviews its Charter and reports to the Board on its adequacy in light of applicable
rules of the NYSE. In addition, each year ION furnishes a written affirmation to the NYSE relating to
Audit Committee membership, the independence and financial management expertise of the Audit
Committee and the adequacy of the Charter of the Audit Committee.

The Charter of the Audit Committee specifies that the primary purpose of the Audit Committee is

to assist the Board in its oversight of: (1) the integrity of the financial statements of ION;
(2) compliance by ION with legal and regulatory requirements; (3) the independence, qualifications and
performance of ION’s independent registered public accountants; and (4) the performance of ION’s
internal auditors and internal audit function. In carrying out these responsibilities during 2018, and
early in 2019 in preparation for the filing with the SEC of ION’s Annual Report on Form 10-K for the
year ended December 31, 2018, the Audit Committee, among other things:

(cid:129) reviewed and discussed the audited financial statements with management and ION’s

independent registered public accounting firm;

(cid:129) reviewed the overall scope and plans for the audit and the results of the examinations of ION’s

independent registered public accounting firm;

(cid:129) met with ION management periodically to consider the adequacy of ION’s internal control over
financial reporting and the quality of its financial reporting and discussed these matters with its
independent registered public accounting firm and with appropriate ION financial personnel and
internal auditors;

(cid:129) discussed with ION’s senior management, independent registered public accounting firm and

internal auditors the process used for ION’s Chief Executive Officer and Chief Financial Officer
to make the certifications required by the SEC and the Sarbanes-Oxley Act of 2002 in
connection with the Form 10-K and other periodic filings with the SEC;

(cid:129) reviewed and discussed with ION’s independent registered public accounting firm (1) their

judgments as to the quality (and not just the acceptability) of ION’s accounting policies, (2) the
written disclosures and the letter from the independent registered public accounting firm
required by applicable requirements of the Public Company Accounting Oversight Board
regarding such firm’s communication with the Audit Committee concerning independence, and
the independence of the independent registered public accounting firm, and (3) the matters
required to be discussed with the Audit Committee under auditing standards generally accepted
in the United States, including the matters required by Statement of Public Company
Accounting Oversight Board (‘‘PCAOB’’) AS No. 1301, ‘‘Communications with Audit
Committees’’;

(cid:129) based on these reviews and discussions, as well as private discussions with ION’s independent

registered public accounting firm and internal auditors, recommended to the Board the inclusion
of the audited financial statements of ION and its subsidiaries in the 2018 Form 10-K for filing
with the SEC;

(cid:129) recommended the selection of Grant Thornton LLP as ION’s independent registered public

accounting firm for the fiscal year ending December 31, 2019; and

(cid:129) determined that the non-audit services provided to ION by its independent registered public

accounting firm (discussed below under ‘‘—Principal Auditor Fees and Services’’) are compatible
with maintaining the independence of the independent auditors.

The Audit Committee met five times during 2018. The Audit Committee schedules its meetings

with a view to ensuring that it devotes appropriate attention to all of its tasks. The Audit Committee’s
meetings include, whenever appropriate, executive sessions with ION’s independent registered public
accountants and with ION’s internal auditors, in each case without the presence of ION’s management.
The Audit Committee has also established procedures for (a) the receipt, retention and treatment of
complaints received by ION regarding accounting, internal accounting controls or auditing matters and
(b) the confidential, anonymous submission by ION’s employees of concerns regarding questionable
accounting or auditing matters. However, this oversight does not provide the Audit Committee with an
independent basis to determine that management has maintained appropriate accounting and financial
reporting principles or policies, or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit
Committee’s consideration and discussions with management and the independent registered public
accounting firm do not assure that ION’s financial statements are presented in accordance with
generally accepted accounting principles or that the audit of ION’s financial statements has been
carried out in accordance with generally accepted auditing standards.

S. James Nelson, Jr., Chairman
David H. Barr
James M. Lapeyre, Jr.

PRINCIPAL AUDITOR FEES AND SERVICES

In connection with the audit of the 2018 financial statements, we entered into an engagement
agreement with Grant Thornton that sets forth the terms by which Grant Thornton would perform
audit services for our Company. The following table shows the fees billed to us or accrued by us for the
audit and other services provided by Grant Thornton for 2018 and 2017:

Fees

2018

2017

Audit Fees(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,345,966
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,345,966

$1,110,900
—
—
$1,110,900

(a) Audit fees consist primarily of the audit and quarterly reviews of the consolidated

financial statements, the audit of the effectiveness of internal control over financial
reporting, audits of subsidiaries, statutory audits of subsidiaries required by governmental
or regulatory bodies, attestation services required by statute or regulation, comfort letters,
consents, assistance with and review of documents filed with the SEC, work performed by
tax professionals in connection with the audit and quarterly reviews, and accounting and
financial reporting consultations and research work necessary to comply with generally
accepted auditing standards.

Our Audit Committee Charter provides that all audit services and non-audit services must be
approved by the Audit Committee or a member of the Audit Committee. The Audit Committee has
delegated to the Chairman of the committee the authority to pre-approve audit, audit-related and
non-audit services not prohibited by law to be performed by our independent auditors and associated
fees, so long as (i) the estimate of such fees does not exceed $50,000, (ii) the Chairman reports any
decisions to pre-approve those services and fees to the full Audit Committee at a future meeting and
(iii) the term of any specific pre-approval given by the Chairman does not exceed 12 months from the
date of pre-approval.

All non-audit services were reviewed with the Audit Committee or the Chairman, which concluded

that the provision of such services by Grant Thornton, was compatible with the maintenance of such
firm’s independence in the conduct of its auditing functions.

Other Matters

A representative of Grant Thornton will be available at the Annual Meeting, will be afforded an

opportunity to make a statement if he/she desires to do so and will be available to respond to
appropriate questions.

This Proxy Statement has been approved by the Board of Directors and is being made available to

shareholders by its authority.

3APR201819024815

Matthew Powers
Executive Vice President, General Counsel and
Corporate Secretary

Houston, Texas
April 11, 2019

The 2018 Annual Report to Shareholders includes our financial statements for the fiscal year

ended December 31, 2018. We have mailed a notice of the 2018 Annual Report to Shareholders and
this Proxy Statement to all of our shareholders of record. The 2018 Annual Report to Shareholders
does not form any part of the material for the solicitation of proxies.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2018

(cid:3) 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
(State or Other Jurisdiction of
Incorporation or Organization)

22-2286646
(I.R.S. Employer
Identification No.)

2105 CityWest Blvd
Suite 100
Houston, Texas 77042-2839
(Address of Principal Executive Offices, Including Zip Code)
(281) 933-3339
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:3) No (cid:2)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Exchange Act Yes (cid:3) No (cid:2)

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 (cid:2) No (cid:3)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be

submitted 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 such files). Yes (cid:2) No (cid:3)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’,
‘‘smaller reporting company’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:3)

Non-accelerated filer (cid:3)

Accelerated filer (cid:2)

Smaller reporting company (cid:3)
Emerging growth company (cid:3)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. (cid:3)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:3) No (cid:2)
As of June 30, 2018 (the last business day of the registrant’s second quarter of fiscal 2018), the aggregate market value of

the registrant’s common stock held by non-affiliates of the registrant was $260.0 million based on the closing sale price per
share ($24.30) on June 29, 2018 as reported on the New York Stock Exchange.

As of February 4, 2019, the number of shares of common stock, $0.01 par value, outstanding was 14,015,615 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Document

Parts Into Which Incorporated

Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders

scheduled to be held on May 15, 2019, to be filed pursuant to Regulation 14A . . . . . . . . . .

Part III

TABLE OF CONTENTS

PART I

Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6.
Item 7.

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

3
17
37
37
37
40

41
42

43
62
62

62
62
65

65
65

65
65
65

Exhibits and Financial Statement Schedules

Item 15.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66
70
F-1

PART I

Preliminary Note: This Annual Report on Form 10-K contains ‘‘forward-looking statements’’ as

that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements should be read in conjunction with the cautionary statements and other important factors
included in this Form 10-K. See Item 1A. ‘‘Risk Factors’’ for a description of important factors which
could cause actual results to differ materially from those contained in the forward-looking statements.

In this Form 10-K, ‘‘ION Geophysical,’’ ‘‘ION,’’ ‘‘the company’’ (or, ‘‘the Company’’), ‘‘we,’’ ‘‘our,’’
‘‘ours’’ and ‘‘us’’ refer to ION Geophysical Corporation and its consolidated subsidiaries, except where
the context otherwise requires or as otherwise indicated. Certain trademarks, service marks and
registered marks of ION referred to in this Form 10-K are defined in Item 1. ‘‘Business—Intellectual
Property.’’

Item 1. Business

We have been a technology leader for 50 years with a strong history of innovation. While the
traditional focus of our cutting-edge technology has been on the exploration and production (‘‘E&P’’)
industry, we are now broadening and diversifying our business into relevant adjacent markets such as
offshore logistics, military and marine robotics.

Leveraging innovative technologies, we create value through data capture, analysis and

optimization to enhance companies’ critical decision-making abilities and returns. Our E&P offerings
are focused on improving decision-making, enhancing reservoir management and optimizing offshore
operations. They are designed to allow oil and gas companies to obtain higher resolution images of the
Earth’s subsurface to reduce their risk in hydrocarbon exploration and development. We acquire,
process and interpret seismic data from seismic surveys on a multi-client or proprietary basis. Seismic
surveys for our multi-client data library business are pre-funded, or underwritten, in part by our
customers, and we contract with third party seismic data acquisition companies to acquire the seismic
data, all of which is intended to minimize our risk exposure. We serve customers in most major energy
producing regions of the world from strategically located offices in 21 cities on six continents.

Seismic imaging plays a fundamental role in hydrocarbon exploration and reservoir development by

delineating structures, rock types and fluid locations in the subsurface. Our technologies, services and
solutions are used by E&P companies to generate high-resolution images of the Earth’s subsurface to
identify hydrocarbons and pinpoint drilling locations for wells and to monitor production from existing
wells.

We provide our services and products through three business segments—E&P Technology &
Services, Operations Optimization (formerly referred to as E&P Operations Optimization), and Ocean
Bottom Integrated Technologies (formerly referred to as Ocean Bottom Seismic Services). In addition,
we have a 49% ownership interest in our INOVA Geophysical Equipment Limited joint venture
(‘‘INOVA Geophysical,’’ or ‘‘INOVA’’).

The advanced technologies we currently offer include our Orca(cid:4) and Gator(cid:5) command and
control software systems, Full Waveform Inversion (‘‘FWI’’) data processing technology, our OBS
acquisition systems, and other technologies, each of which is designed to deliver improvements in image
quality, safety and/or productivity. In 2015, we introduced Marlin(cid:5) to optimize operations offshore. In
2017, we introduced our new fully integrated nodal system, 4Sea(cid:5) which is designed to deliver a step
change in economics, QHSE performance and final image delivery time, creating more value for clients
by providing data in time for critical reservoir decision, such as determining drilling locations and
informing enhanced recovery techniques.

We have approximately 500 patents and pending patent applications in various countries around
the world. Approximately 42% of our employees are involved in technical roles and over 21% of our
employees have advanced degrees.

E&P Technology & Services. Our E&P Technology & Services business provides three distinct

service activities that often work together.

Our E&P Technology & Services creates digital data assets and delivers services to help E&P
companies improve decision-making, reduce risk and maximize value. For example, E&P Technology &
Services provides information to better understand new frontiers or complex subsurface geologies, how
to maximize portfolio value, or how to optimize license round success and acreage values.

Our Ventures group leverages the world-class geoscience skills of both the Imaging Services and

E&P Advisors groups to create global digital data assets that are licensed to multiple E&P companies
to optimize their investment decisions. Our global data library consists of over 614,000 km of 2-D and
over 224,000 sq. km of 3-D multi-client seismic data in virtually all major offshore petroleum provinces.
Ventures provides services to manage multi-client or proprietary surveys, from survey planning and
design to data acquisition and management, to final subsurface imaging and reservoir characterization.
We focus on the technologically intensive components of the image development process, such as
survey planning and design, and data processing and interpretation, while outsourcing asset-intensive
components (such as field acquisition) to experienced contractors.

Our Imaging Services group offers data processing and imaging services designed to maximize

image quality, helping E&P companies reduce exploration and production risk, evaluate and develop
reservoirs, and increase production. Imaging Services develops subsurface images by applying its
processing technology to data owned or licensed by its customers. We maintain approximately
19 petabytes of digital seismic data storage in four global data centers, including two core data centers
located in Houston and in the U.K.

Our E&P Advisors’ strategy is to provide technical, commercial and strategic advice to host

governments, E&P companies and private equity firms to evaluate and market oil and gas opportunities
and/or assets worldwide, sharing in the value we create.

Operations Optimization. Our Operations Optimization segment develops mission-critical

subscription offerings and provides engineering services that enable operational control and
optimization offshore. This segment is comprised of our Optimization Software & Services and Devices
offerings.

Our Optimization Software & Services group provides survey design and command and control

software systems and related services for marine towed streamer and seabed operations. Our Orca
software is installed on towed streamer marine vessels worldwide, and our Gator software is used by
seabed crews. Our latest offering, Marlin is used to optimize offshore operations.

Our Devices group is engaged in the manufacture and repair of marine towed streamer positioning

and control systems, analog geophone sensors and compasses which have been deployed in marine
robotics, scientific, E&P and other commercial applications.

Ocean Bottom Integrated Technologies. Higher quality data can be acquired from the sea floor
compared to the traditional method of acquiring it near the surface, which enables companies to have a
better image and better understanding of the subsurface to make optimal reservoir decisions. ION
provides a full suite of technology and services that includes survey design, planning, acquisition, data
processing, interpretation and reservoir services to optimize image quality, operational efficiency and
safety. ION’s Ocean Bottom Integrated Technologies group integrates a variety of ION’s advanced
technologies to accelerate Ocean Bottom Seismic (‘‘OBS’’) data capture and delivery for our clients’
enhanced reservoir decision-making, and improved returns.

Our team develops re-deployable ocean bottom data acquisition technology. In 2017, we

introduced 4Sea, our new fully integrated ocean bottom system. 4Sea is differentiated in its ability to
deliver a step change in economics, QHSE performance and final image delivery time, creating more
value for the client by providing information in time for critical decisions, such as determining drilling
locations, fluid injections, and the like.

We have continued to evolve our strategy for our Ocean Bottom Integrated Technologies segment

consistent with our asset light business model. The remaining elements of our next generation ocean
bottom nodal system, 4Sea, will be commercialized in 2019. We are offering 4Sea components more
broadly to the growing number of OBS service providers under recurring revenue commercial strategies
that will enable us to share in the value our technology delivers. We may also license the right to
manufacture and use the fully integrated system to a service provider on a value-based pricing model,
such as a royalty stream. Such licensing would be recognized through the relevant segment, either E&P
Technology & Services or Operations Optimization. While not our primary route to market, we
continue to evaluate acquisition projects on a case-by-case basis that meet our long-term risk and
return thresholds.

INOVA Geophysical. We conduct our land seismic equipment business through INOVA
Geophysical, a joint venture with BGP Inc., a subsidiary of China National Petroleum Corporation
(‘‘CNPC’’). BGP is generally regarded as the world’s largest land geophysical service contractor. BGP
owns a 51% equity interest in INOVA Geophysical, and we own the remaining 49% interest. INOVA
manufactures land seismic data acquisition systems, digital sensors, vibroseis vehicles (i.e., vibrator
trucks), and energy source controllers. We wrote our investment in INOVA down to zero as of
December 31, 2014.

Seismic Industry Overview

1930s - 1970s. Since the 1930s, oil and gas companies have sought to reduce exploration risk by

using seismic data to create an image of the Earth’s subsurface. Seismic data is recorded when listening
devices placed on the Earth’s surface, ocean bottom floor, or carried within the streamer cable of a
towed streamer vessel, measure how long it takes for sound vibrations to echo off rock layers
underground. For seismic data acquisition onshore, the acoustic energy producing the sound vibrations
is generated by the detonation of small explosive charges or by large vibroseis (vibrator) vehicles. In
marine acquisition, the energy is provided by a series of source arrays that deliver compressed air into
the water column.

The acoustic energy propagates through the subsurface as a spherical wave front, or seismic wave.
Interfaces between different types of rocks will both reflect and transmit this wave front. Onshore, the
reflected signals return to the surface where they are measured by sensitive receivers that are analog
coil-spring geophones. Offshore, the reflected signals are recorded by either hydrophones towed in an
array behind a streamer acquisition vessel or by multicomponent geophones or MEMS sensors that are
placed directly on the ocean floor. Once the recorded seismic energy is processed using advanced
algorithms and workflows, images of the subsurface can be created to depict the structure, lithology
(rock type), fracture patterns, and fluid content of subsurface horizons, highlighting the most promising
places to drill for oil and natural gas. This processing also aids in engineering decisions, such as drilling
and completion methods, as well as decisions affecting overall reservoir production and economic
decisions relating to drilling risk and reserves in place.

Typically, an E&P company engages the services of a geophysical acquisition contractor to develop
a seismic survey design, secure permits, coordinate logistics, and acquire seismic data in a selected area.
The E&P company generally relies on third parties, such as ION, to provide the contractor with
equipment, navigation and data management software, and field support services necessary for data
acquisition. After the data is collected, the same geophysical contractor, a third-party data processing

company, or the E&P company itself will process the data using proprietary algorithms and workflows
to create a series of seismic images. Geoscientists then interpret the data by reviewing the images of
the subsurface and integrating the geophysical data with other geological and production information
such as well logs or core information.

During the 1960s, digital seismic data acquisition systems (which converted the analog output from

the geophones into digital data for recording) and computers for seismic data processing were
introduced. Using the new systems and computers, the signals could be recorded on magnetic tape and
sent to data processors where they could be adjusted and corrected for known distortions. The final
processed data was displayed in a form known as ‘‘stacked’’ data. Computer filing, storage, database
management, and algorithms used to process the raw data quickly grew more sophisticated,
dramatically increasing the amount of subsurface seismic information.

1980s. Until the early 1980s, the primary commercial seismic imaging technology was

2-Dimension (‘‘2-D’’). 2-D seismic data is recorded using a single line of receivers. Once processed,
2-D seismic data allows geoscientists to see only a thin vertical slice of the Earth, and that image may
be distorted by reflections originating out of the place of the receiver line. A geoscientist using 2-D
seismic technology must speculate on the characteristics of the Earth between the slices and attempt to
visualize the true 3-Dimension (‘‘3-D’’) structure of the subsurface.

The commercial development of 3-D imaging technology in the early 1980s was an important

technological milestone for the seismic industry. Previously, the high cost of 3-D seismic data
acquisition techniques and the lack of computing power necessary to process, display, and interpret 3-D
data on a commercial basis slowed its widespread adoption. Today’s 3-D seismic techniques record the
reflected energy across a patch of receivers that collectively provide a more holistic, spatially-sampled
depiction of geological horizons and, in some cases, rock and fluid properties, within the Earth.

3-D seismic data and the associated computer-based processing platforms enable geoscientists to

generate more accurate subsurface maps than could be constructed from 2-D seismic lines. In
particular, 3-D seismic data provided more detailed information about and higher-quality images of
subsurface structures, including the geometry of bedding layers, salt structures, and fault planes. The
improved 3-D seismic images enabled the oil and gas industry to discover new reservoirs, reduce
finding and development costs, and lower overall hydrocarbon exploration risk. Driven by faster
computers and more sophisticated mathematical equations to process the data, the technology advanced
quickly.

1990s. As commodity prices decreased in the late 1990s and the pace of innovation in 3-D
seismic imaging technology slowed, E&P companies slowed the commissioning of new seismic surveys.
Also, business practices employed by geophysical contractors impacted demand for seismic data. In an
effort to sustain higher utilization of existing capital assets, geophysical contractors increasingly began
to collect speculative seismic data for their own data libraries in the hopes of selling it later to E&P
companies. There became an abundance of speculative multi-client data in many regions. Additionally,
since contractors incurred most of the costs of this speculative seismic data at the time of acquisition,
contractors lowered prices to recover as much of their investment as possible, which drove operating
margins down. During the 1990’s, the accuracy of 3-D seismic surveys improved to the point that a
survey acquired after significant oil production could be compared to a pre-production survey, and a
map of the drainage pattern of the reservoir could be produced. This technique became known as time
lapse, or 4-D seismic.

2000s. The conditions from the 1990s continued to prevail until 2004-2005, when commodity

prices began increasing and E&P companies increased capital spending programs, driving higher
demand for our services and products. During this time, the use of horizontal drilling and hydraulic
fracturing increased, as onshore North American production became economically viable with higher oil

prices. These techniques, used to extract oil from and gas from unconventional reservoirs, made once
‘‘hard to produce’’ oil and gas accessible and caused an upsurge in North American onshore oil and gas
activity. An increased use of the 4-D seismic technology has been noted during the 2000s where its
value in reservoir management, increasing reserves, upping recovery and optimizing infill well locations
has been established.

The financial crisis that occurred in 2008 and the resulting economic downturn drove hydrocarbon

prices down sharply, reducing exploration activities in North America and in many parts of the world.
However, crude oil prices rebounded and were fairly consistent from 2011-2014 exceeding $100 per
barrel, and U.S. oil production exceeded even the most optimistic forecasts. In late 2014, however, oil
prices began to decline significantly, dropping by approximately half and continued into 2015 and 2016
as signs emerged that non-U.S. demand was weakening.

During 2017 and 2018, crude oil prices rebounded resulting from sustained production cut by
Organization of the Petroleum Exporting Countries (‘‘OPEC’’) that reduced the overall crude supply.
In late 2018, crude oil prices began to decline again due to slower than expected pace of global
demand growth and record level crude oil production growth. Since 2015, Oil companies have
prioritized shareholder returns and cash flow generation over hydrocarbon resource growth, reducing
discretionary spending and shifting their focus from exploration to production. This shift caused a
contraction in E&P spending, especially on seismic data and services for exploration. In addition, E&P
companies have tended to shift toward reprocessing existing seismic data as a more cost-effective
alternative to acquiring new data where possible.

Our Strategy

The key elements of our business strategy are to:

(cid:129) Leverage our key technologies to create value through data capture, analysis and optimization to

enhance companies’ critical decision-making abilities and returns. Decisions today are increasingly
complex with huge amounts of data to comprehend. Companies capable of translating raw data
into actionable insights gain a competitive edge and deliver superior returns. ION offerings are
focused on improving E&P decision-making, enhancing reservoir management and optimizing
offshore operations. E&P Technology & Services creates digital data assets and delivers services
that improve decision-making, mitigate risk and maximize portfolio value for E&P companies,
such as our multi-client programs that are licensed to multiple E&P companies to optimize their
investment decisions. Operations Optimization develops mission-critical subscription offerings
and engineering services that enable operational control and optimization offshore. Ocean
Bottom Integrated Technologies integrates a variety of ION’s advanced technologies to
accelerate data capture and delivery. This information enables E&P companies to enhance their
reservoir decision-making and improve their returns.

(cid:129) Expand and globalize our E&P Technology & Services business. We seek to expand and grow our
E&P Technology & Services business into new regions, with new customers and new offerings,
including data processing services through our Imaging Services group and our Ventures multi-
client and proprietary programs. Historically known for our 2-D programs, we entered the 3-D
multi-client market in 2014 by acquiring and processing our first survey offshore Ireland. Since
then, we have expanded our 3-D seismic data library considerably by purchasing existing seismic
data and reimaging the data by using new data processing techniques and algorithms, such as
our advanced FWI. For the foreseeable future, we expect to continue investing in research and
development and computing infrastructure for our data processing business and to support our
multi-client projects. We believe this focus better positions our company as a full-service
technology company with an increasing proportion of revenues derived from E&P customers. In
2018, E&P companies accounted for approximately 77% of our total consolidated net revenues.

(cid:129) Continue investing in advanced software and equipment technology to provide next generation services
and products. We intend to continue investing in the development of new technologies for use by
E&P companies. In particular, we intend to focus on the development of our next generation
OBS technology, our Marlin operations optimization software, and derivative products and
continued advancement of our FWI and ocean bottom nodal algorithms, with the goal of
obtaining technical and market leadership in what we continue to believe are important and
expanding markets. In 2018, our total investment in research and development and engineering
was equal to approximately 10% of our total consolidated net revenues for the year.

(cid:129) Collaborate with our customers to provide products and solutions designed to meet their needs. A key

element of our business strategy has been to understand the challenges faced by E&P companies
in seismic survey planning, data acquisition, processing, and interpretation. We will continue to
develop and offer technology and services that enable us to work with E&P companies to solve
their unique challenges around the world. We have found collaborating with E&P companies to
better understand their imaging challenges and working with them to ensure the right
technologies are properly applied, is the most effective method for meeting their needs. Helping
solve the most difficult challenges for our customers is an important element of our long-term
business strategy, and we are implementing this partnership approach globally through local
personnel in our regional organizations who understand the unique challenges in their areas. We
formed an E&P Advisors group in 2015 designed to focus specifically on this element of our
strategy.

(cid:129) Expand our Operations Optimization business into relevant adjacent markets. While our traditional
focus for technology has been on the E&P industry, we are broadening and diversifying our
software and equipment businesses into relevant adjacent markets such as offshore logistics,
military and marine robotics. Adjacent markets broaden our opportunity to better monetize our
return on technology investments while reducing our susceptibility to E&P cycles. We intend to
derive a significant portion of revenues from these non-E&P markets over the next 5 years.

Our Strengths

We believe that we are solidly positioned to successfully execute the key elements of our business

strategy based on the following competitive strengths:

(cid:129) We leverage our innovative technologies to create value through data capture, analysis and optimization

to enhance companies’ critical decision-making abilities and returns. Our cutting-edge data
management and analysis platforms help derive insights from data we acquire to improve E&P
decision-making, enhance reservoir management and optimize offshore operations. The data can
be used to decide whether and how much to bid on a block, how to maximize production from a
field, or how to optimize the safety and efficiency of complex maritime projects. Our operations
optimization platform and imaging engine are the core underlying technology and we continually
advance our complex algorithms to improve the resulting analysis.

(cid:129) We focus on higher potential return offerings and creative business models to maximize shareholder
value. We streamlined our business and focused on the areas with the highest potential returns
because we believe every dollar invested should go further. In addition, we try to structure both
the project financing and payment in a way to maximize profit, such as sharing in the success of
a project.

(cid:129) Our ‘‘asset light’’ strategy enables us to avoid significant fixed costs and remain financially flexible.
We do not own a fleet of marine vessels and do not provide our own crews to acquire seismic
data. We outsource seismic data acquisition activity to third parties that operate fleets of seismic
vessels and equipment. This practice enables us to avoid fixed costs associated with these assets
and personnel and to manage our business in a manner designed to afford us the flexibility to

quickly scale up or down our capital investments based on E&P spending levels. We actively
manage the costs of developing our multi-client data library business by having our customers
partially pre-fund, or underwrite, the investment for any new project. Our target goal is to have
a vast majority of the total cost of each new project’s data acquisition to be underwritten by our
customers. We believe this conservative approach to data library investment is the most prudent
way to reduce the impact of any sudden reduction in the demand for seismic data, giving us the
flexibility to aggressively reduce cash outflows as we have successfully implemented in the
current industry downturn.

(cid:129) Our global footprint and diversified portfolio approach enable us to offset regional downturns.

Conducting business around the world has been and will continue to be a key component of our
strategy. This global focus and diversified portfolio approach has been helpful in minimizing the
impact of any regional or country-specific slowdown for short or extended periods of time. While
the traditional focus of our cutting-edge technology has been on the E&P industry, we are now
broadening and diversifying our business into relevant adjacent markets such as offshore
logistics, military and marine robotics. Adjacent markets broaden our opportunity to better
monetize our return on technology investments while reducing our susceptibility to E&P cycles.

(cid:129) We have a diversified and blue chip customer base. We provide services and products to a diverse,
global customer base that includes many of the largest oil and gas and geophysical companies in
the world, including National Oil Companies (‘‘NOCs’’) and International Oil Companies
(‘‘IOCs’’). Over the past decade, we have made significant progress expanding our customer list
and revenue sources. Whereas almost all of our revenues in the early 2000s were derived
principally from seismic service providers, in 2018, E&P companies accounted for approximately
77% of our total consolidated net revenues.

Services and Products

E&P Technology & Services Segment

Our E&P Technology & Services segment includes the following:

Ventures—Our Ventures group provides complete seismic data services, from survey planning and

design through data acquisition to final subsurface imaging and reservoir characterization. We work
backwards through the seismic workflow, with the final image in mind, to select the optimal survey
design, acquisition technology, and processing techniques.

We offer our services to customers on both a proprietary and multi-client (non-exclusive) basis. In

both cases, the customers generally pre-fund a majority of the survey costs. The period during which
our multi-client surveys are being designed, acquired or processed is referred to as the ‘‘New Venture’’
phase. For proprietary services, the customer has exclusive ownership of the data. For multi-client
surveys, we generally retain ownership of or long-term exclusive marketing rights to the data and
receive ongoing revenue from subsequent data license sales.

Since 2002, we have acquired and processed a growing multi-client data library consisting of
non-exclusive marine and ocean bottom data from around the world. The majority of the data licensed
by ION consists of ultra-deep 2-D seismic data that E&P companies use to evaluate petroleum systems
at the basin level, including insights into the character of source rocks and sediments, migration
pathways, and reservoir trapping mechanisms. In some cases, we extend beyond seismic data to include
magnetic, gravity, well log, and electromagnetic information, to provide a more comprehensive picture
of the subsurface. Known as ‘‘BasinSPAN’’ programs, these geophysical surveys cover most major
offshore basins worldwide and we continue to build on them. In addition to our 2-D multi-client
programs, in 2013, we acquired our first 3-D marine proprietary program, then in 2014, in collaboration

with Polarcus Limited, a marine geophysical company, we jointly acquired and processed our first 3-D
survey offshore Ireland.

In 2016, we began a 3-D multi-client broadband reimaging program offshore Mexico in

collaboration with Schlumberger leveraging Mexico’s National Hydrocarbons Commission (CNH) data
library. The successful Campeche program has since expanded due to customer demand and now
consists of approximately 100,000 km2 offshore southern Mexico. Since 2016, we have added an
additional 216,000 km2 of 3-D data offshore Mexico and in Brazil. Our programs in Brazil make up a
significant portion of our backlog at December 31, 2018.

We also have a library of 3-D onshore reservoir imaging and characterization programs that
provide E&P companies with the ability to better understand unconventional reservoirs to maximize
production. Known as ‘‘ResSCAN(cid:5)’’ programs, these 3-D multicomponent seismic data programs were
designed, acquired and depth-imaged using advanced geophysical technology and proprietary processing
techniques, resulting in high-definition images of the subsurface.

Imaging Services—Our Imaging Services group provides advanced marine and land seismic data
processing and imaging. In addition to applying processing and imaging technologies to data we own or
data licensed by our customers, we also provide our customers with seismic data acquisition support
services, such as data pre-conditioning for imaging and quality control of seismic data acquisition.

We utilize a globally distributed network of Linux-cluster processing centers in combination with
our major hubs in Houston and London to process seismic data using advanced, proprietary algorithms
and workflows.

Our Imaging Services team has pioneered several differentiated processing and imaging solutions

for both offshore and onshore environments including: Reverse Time Migration (RTM), Surface
Related Multiple Elimination (SRME), and WiBand broadband deghosting. In 2013, we released FWI
and non-parametric picking Tomography techniques to improve subsurface image resolution in areas
with complex geologies. The advantages of these techniques are that they allow for the resolution of
complex, small-scale velocity variations. We continue to research and develop processing and imaging
technologies for commercial application, including our latest developments in Reflection FWI and
Least Squares RTM. In addition to improving our algorithms, we also continue to optimize the
efficiency of our proprietary software, Perseus, such that we can turnaround larger projects faster,
e.g. a 42,000 km2 fast track product in the Northern Campeche Basin in Mexico in just 6 weeks. Our
continued investment in hardware infrastructure complements these research and development efforts,
ensuring faster turnaround time and less expensive computational costs for clients, whether they are
seeking 2-D, 3-D, proprietary, multi-client, towed streamer or seabed solutions.

At December 31, 2018, our E&P Technology & Services segment backlog, which consists of

commitments for (i) data processing work and (ii) both multi-client New Venture and proprietary
projects that have been underwritten, had decreased to $21.9 million compared with $39.2 million at
December 31, 2017. The decrease in backlog is attributable to the timing of finalizing contracts. Our
E&P Technology & Services segment’s fiscal year-end backlog includes signed contracts that we can
usually fulfill within approximately six months. Investments in our multi-client data library are
dependent upon the timing of our New Venture projects and the availability of underwriting by our
customers. Our asset light strategy enables us to scale our business to avoid significant fixed costs and
to remain financially flexible as we manage the timing and levels of our capital expenditures.

E&P Advisors—Our E&P Advisors group partners with E&P operators, energy industry regulators

and capital institutions to capture and monetize E&P opportunities worldwide. This group provides
technical, commercial and strategic advice across the exploration and production value chain, working
at basin, prospect and field scales. E&P Advisors couples ION’s proven technical capabilities with the

industry’s best commercial and strategic minds to deliver fit-for-purpose solutions, employing a variety
of commercial models specific to our clients’ needs.

Operations Optimization Segment

Our Operations Optimization segment combines our Optimization Software & Services and

Devices offerings.

Through this segment, we supply command and control software systems and related services for

marine towed streamer and ocean bottom seismic operations. Software developed by our Optimizations
Software & Services group is installed on marine towed streamer vessels and used by many ocean
bottom survey crews. In addition, we recently began selling existing technology to new customers in
scientific, military and academic industries. An advantage of our underlying software platform is that it
provides common components from which to build other applications. This enables the acceleration of
development and commercialization of new products as market opportunities are identified. Marlin, our
newest software solution for optimizing offshore operations is an example where we leveraged the
underlying software platform to quickly develop a new offering.

Products and services for our Optimizations Software & Services group include the following:

Towed Streamer Command & Control System—Our command and control software for towed

streamer acquisition, Orca, integrates acquisition, planning, positioning, source and quality control
systems into a seamless operation.

Ocean Bottom Command & Control System—Gator is our integrated navigation and data

management system for multi-vessel OBS, electromagnetic and transition zone operations.

Survey Planning and Optimization—We offer consulting services for planning and supervising
complex surveys, including for 4-D (time lapse) and wide-azimuth survey operations. Our acquisition
expertise and in-field software platforms are designed to allow clients, including both E&P companies
and seismic data acquisition contractors, to optimize these complex surveys, improving efficiencies, data
quality and reducing costs. Our Orca and Gator systems are designed to integrate with our post-survey
tools for processing, analysis and data quality control. Orca and Gator both have modules that enable
in-field survey optimization. These modules are designed to enable improved, safer acquisition through
analysis and prediction of sea currents and integration of the information into the acquisition plan.

Optimization Software—Marlin is a cloud-based software designed to maximize the safety and
efficiency of complex offshore operations by automatically integrating a variety of data sources in
real-time with operational plans to improve situational awareness and decision making. Akin to air
traffic control systems, Marlin enables multiple stakeholders to share and visualize vessel route plans,
foresee and avoid conflicts between vessels and fixed assets, optimize schedules safely within a rules-
based environment, and measure and improve asset performance.

Products of our Devices group include the following:

Marine Positioning Systems—Our marine towed streamer positioning system includes streamer cable

depth control devices, lateral control devices, compasses, acoustic positioning systems and other
auxiliary sensors. This equipment is designed to control the vertical and horizontal positioning of the
streamer cables and provides acoustic, compass and depth measurements to allow processors to tie
navigation and location data to geophysical data to determine the location of potential hydrocarbon
reserves. DigiBIRD II(cid:5) is designed to maintain streamers at pre-defined target depths more safely,
efficiently, and cost effectively than ever before by eliminating workboat operations for battery changes
on the majority of seismic surveys. DigiFIN(cid:4) is an advanced lateral streamer control system that we
commercialized in 2008. DigiFIN(cid:4) is designed to maintain tighter, more uniform marine streamer
separation along the entire length of the streamer cable, which allows for better sampling of seismic

data and improved subsurface images. We believe DigiFIN(cid:4) also enables faster line changes and
minimizes the requirements for in-fill seismic work. In addition to manufacturing new marine
positioning system devices, the Devices group also repairs its positioning equipment previously sold to
its customers.

Analog Geophones—Analog geophones are sensors that measure acoustic energy reflected from

rock layers in the Earth’s subsurface using a mechanical, coil-spring element. We manufacture and
market a full suite of geophones and geophone test equipment that operate in most environments,
including land surface, transition zone and downhole. Our geophones are used in other industries as
well.

Ocean Bottom Integrated Technologies Segment

ION offers a fully-integrated OBS solution that includes expert survey design, planning and
optimization, to maximize seismic image quality; safe, efficient data acquisition; superior imaging; and
data processing, interpretation and reservoir services.

We believe the market for ocean bottom seismic imaging is growing. OBS provides more detailed

reservoir imaging typically used for development rather than exploration objectives, leading E&P
companies to prioritize in ocean bottom seismic activities, consistent with their desire for higher-quality
seismic imaging for complex geological formations and more detailed reservoir characteristics. Since
introducing our first ocean bottom acquisition system, VSO, in 2004, we have continued to develop
advanced ocean bottom systems and continue to evolve our strategy which now includes licensing of
our 4Sea(cid:5) technology making it available more broadly to all OBS service providers on a value-based
pricing model. Such licensing will be recognized through the relevant segment, either E&P
Technology & Services or Operations Optimization. This change in strategy resulted in a write down of
$36.6 million for our cable-based ocean bottom acquisition technologies.

INOVA Geophysical Products

INOVA manufactures land acquisition systems, including the G3i(cid:4) HD, ARIES(cid:4) and Hawk(cid:4)

recording platforms, land source products, including the AHV-IV series, UNIVIB(cid:4), and UNIVIB 2
vibroseis vehicles, and source controllers and multicomponent sensors, including the VectorSeis(cid:4) digital
3C receivers.

Product Research and Development

Our ability to compete effectively in the seismic market depends principally upon continued
innovation in our underlying technologies. As such, the overall focus of our research and development
efforts has remained on improving both the quality of the subsurface images we generate and the
economics, efficiency and quality of the seismic data. In particular, we have concentrated on enhancing
the nature and quality of the information that can be extracted from the subsurface images.

Research and development efforts in 2018 targeted the consolidation of key technologies across
ION, together with the expansion of our portfolio of product offerings. A range of new technologies
have been developed, including new and flexible seismic acquisition optimization and processing tools,
in-water control devices which improve the operational efficiency of marine sources and the next
generation ocean bottom nodal system.

The Optimization Software & Services group continued development of survey optimization and
integration capabilities across the software portfolio as well as with products from the Devices group.
Investment continued in the Marlin simultaneous operations tool including the aim of addressing
alternative market opportunities.

Development within the Devices group was focused on the new in-water control device,

SailWing(cid:5), including sea trials and integration with the Orca and Gator software products, as well as
further development of the successful Digi family of products, including the automatic Streamer
Recovery Device and rechargeable battery option. We continue to invest in the development of new
sensors with applicability both within and outside the seismic business.

The Imaging Services group continued to invest in production efficiencies, leading-edge

technologies and OBS capabilities. Research continued into advanced imaging techniques such as the
extension of FWI to allow the use of reflection data as well as high-frequency FWI.

As many of these new services and products are under development and, as the development
cycles from initial conception through to commercial introduction can extend over a number of years,
their commercial feasibility or degree of commercial acceptance may not yet be established. No
assurance can be given concerning the successful development of any new service or product, any
enhancements to them, the specific timing of their release or their level of acceptance in the
marketplace.

Markets and Customers

Our primary customers are E&P companies to whom we market and offer services, primarily
multi-client seismic data programs from our Ventures group, imaging-related processing services from
our Imaging Services group, as well as consulting services from our E&P Advisors and Optimization
Software & Services group. In 2018, E&P companies accounted for approximately 77% of our total
consolidated net revenues. Secondarily, seismic contractors purchase our towed streamer data
acquisition systems and related equipment and software to collect data in accordance with their E&P
company customers’ specifications or for their own seismic data libraries.

A significant portion of our marketing effort is focused on areas outside of the United States.

Foreign sales are subject to special risks inherent in doing business outside of the United States,
including the risk of political instability, armed conflict, civil disturbances, currency fluctuations,
embargo and governmental activities, customer credit risks and risk of non-compliance with U.S. and
foreign laws, including tariff regulations and import/export restrictions.

We sell our services and products through a direct sales force consisting of employees and

international third-party sales representatives responsible for key geographic areas. The majority of our
foreign sales are denominated in U.S. dollars. During 2018, 2017 and 2016, sales to destinations outside
of North America accounted for approximately 75%, 76% and 78% of our consolidated net revenues,
respectively. Further, systems and equipment sold to domestic customers are frequently deployed
internationally and, from time to time, certain foreign sales require export licenses.

Traditionally, our business has been seasonal, with strongest demand typically in the second half of

our fiscal year.

For information concerning the geographic breakdown of our consolidated net revenues, see
Footnote 2 ‘‘Segment and Geographic Information’’ of Footnotes to Consolidated Financial Statements
contained elsewhere in this Annual Report on Form 10-K for additional information.

Competition

Our Ventures group within our E&P Technology & Services segment faces competition in creating,

developing and selling multi-client data libraries from a number of companies. CGG (an integrated
geophysical company) and Schlumberger (a large integrated oilfield services company) are shifting to an
asset light strategy, joining TGS-NOPEC Geophysical Company ASA and Spectrum ASA. PGS and
Polarcus run acquisition crews and also compete in multi-client data acquisition. BGP operates in this

space by primarily partnering with the aforementioned competitors to develop and sell multi-client
data.

Our Imaging Services group within our E&P Technology & Services segment competes with
companies that provide data processing services to E&P companies. See ‘‘Services and Products—E&P
Technology & Services Segment.’’ While the barriers to enter this market are relatively low, we believe
the barriers to compete at the higher end of the market—the advanced pre-stack depth migration
market where our efforts are focused—are significantly higher. At the higher end of this market, CGG
and Schlumberger are our two primary competitors for advanced imaging services. Both of these
companies are significantly larger than ION in terms of revenue, processing locations and sales,
marketing and financial resources.

In the OBS market, we compete with a number of companies, including Magseis Fairfield, Seabed
Geosolutions (a joint venture of Fugro and CGG), and BGP. The OBS market primarily addresses the
production end of the E&P business. This market is primarily vertically integrated with a variety of
proprietary technologies, comprising both cable and nodal systems. Most companies operate one to
three crews, and there have been four new entrants in the last few years.

The market for seismic services and products is highly competitive and characterized by frequent

changes in technology. Our principal competitor for marine seismic equipment is Sercel (a
manufacturing subsidiary of CGG). Sercel has the advantage of being able to sell its products and
services to its parent company that operates both land and marine crews, providing it with a significant
and stable internal market and a greater ability to test new technology in the field. The recent
downturn in the industry has disrupted traditional buying patterns. We have seen a generally increasing
trend of companies such as Petroleum GeoServices ASA (‘‘PGS’’) developing their own instrumentation
to create a competitive advantage through products such as GeoStreamer. We also compete with other
seismic equipment companies on a product-by-product basis. Our ability to compete effectively in the
manufacture and sale of seismic instruments and data acquisition systems depends principally upon
continued technological innovation, as well as pricing, system reliability, reputation for quality and
ability to deliver on schedule.

Some seismic contractors design, engineer and manufacture seismic acquisition technology in-house

(or through a network of third-party vendors) to differentiate themselves. Although this technology
competes directly with our towed streamer, and ocean bottom equipment, it is not usually made
available to other seismic acquisition contractors. However, the risk exists that other seismic contractors
may decide to develop their own seismic technology, which would put additional pressure on the
demand for our acquisition equipment.

In addition, we expect reductions in the market for spare parts and service of existing equipment

as a result of the fleet reductions currently occurring in the marine seismic market. CGG and
WesternGeco, who traditionally had large fleet market shares, have both announced their intention to
move to an asset light business model.

In the land seismic equipment market, where INOVA competes, the principal competitors are
Sercel and Geospace Technologies. INOVA is a joint venture with BGP as a majority stake owner. BGP
purchases land seismic equipment from both INOVA and competing land equipment suppliers.

Intellectual Property

We rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality

procedures and contractual provisions to protect our proprietary technologies. We have approximately
500 patents and pending patent applications, including filings in international jurisdictions with respect
to the same kinds of technologies. Although our portfolio of patents is considered important to our

operations, and particular patents may be material to specific business lines, no one patent is
considered essential to our consolidated business operations.

Our patents, copyrights and trademarks offer us only limited protection. Our competitors may

attempt to copy aspects of our products despite our efforts to protect our proprietary rights, or may
design around the proprietary features of our products. Policing unauthorized use of our proprietary
rights is difficult, and we may be unable to determine the extent to which such use occurs. Our
difficulties are compounded in certain foreign countries where the laws do not offer as much protection
for proprietary rights as the laws of the United States, including the potential for adverse decisions by
judicial or administrative bodies in foreign countries with unpredictable or corrupt judicial systems.
From time to time, third parties inquire and claim that we have infringed upon their intellectual
property rights and we make similar inquiries and claims to third parties. Material intellectual property
litigation is discussed in detail in Item 3. ‘‘Legal Proceedings.’’

The information contained in this Annual Report on Form 10-K contains references to trademarks,

service marks and registered marks of ION and our subsidiaries, as indicated. Except where stated
otherwise or unless the context otherwise requires, the terms ‘‘VectorSeis,’’ ‘‘ARIES II,’’ ‘‘DigiFIN,’’
‘‘DigiCOURSE,’’ ‘‘Hawk,’’ ‘‘Orca,’’ ‘‘G3i,’’ ‘‘WiBand,’’,’’UNIVIB’’, ‘‘VectorSeis’’ and ‘‘MESA’’ refer to
the VECTORSEIS(cid:4), ARIES(cid:4) II, DigiFIN(cid:4), DigiCOURSE(cid:4), HAWK(cid:4), ORCA(cid:4), G3I(cid:4), WiBand(cid:4),
UNIVIB(cid:4), VectorSeis(cid:4) and MESA(cid:4) registered marks owned by ION or INOVA Geophysical or their
affiliates, and the terms ‘‘BasinSPAN,’’ ‘‘Calypso,’’ ‘‘DigiSTREAMER,’’ ‘‘Gator,’’ ‘‘AHV-IV,’’ ‘‘Vib Pro,’’
‘‘Shot Pro,’’ ‘‘Optimiser,’’ ‘‘Reflex,’’ ‘‘ResSCAN,’’ ‘‘PrecisION’’, ‘‘SailWing’’, ‘‘Marlin’’ and ‘‘4Sea,’’ refer
to the BasinSPAN(cid:5), Calypso(cid:5), DigiSTREAMER(cid:5), GATOR(cid:5), AHV-IV(cid:5), Vib Pro(cid:5), Shot Pro(cid:5),
Optimiser(cid:5), Reflex(cid:5), ResSCAN(cid:5), PrecisION(cid:5), SailWing(cid:5), Marlin(cid:5) and 4Sea(cid:5) trademarks and
service marks owned by ION or INOVA Geophysical or their affiliates.

Regulatory Matters

Our operations are subject to various international conventions, laws and regulations in the
countries in which we operate, including laws and regulations relating to the importation of and
operation of seismic equipment, currency conversions and repatriation, oil and gas exploration and
development, taxation of offshore earnings and earnings of expatriate personnel, environmental
protection, the use of local employees and suppliers by foreign contractors and duties on the
importation and exportation of equipment. Our operations are subject to government policies and
product certification requirements worldwide. Governments in some foreign countries have become
increasingly active in regulating the companies holding concessions, the exploration for oil and gas and
other aspects of the oil and gas industries in their countries. In some areas of the world, this
governmental activity has adversely affected the amount of exploration and development work done by
major oil and gas companies and may continue to do so. Operations in less developed countries can be
subject to legal systems that are not as mature or predictable as those in more developed countries,
which can lead to greater uncertainty in legal matters and proceedings (including the potential for
adverse decisions by judicial or administrative bodies in foreign countries with unpredictable or corrupt
judicial systems). We are required to consent to home country jurisdiction in many of our contracts
with foreign state-owned companies, particularly those countries where our data are acquired.

Changes in these conventions, regulations, policies or requirements could affect the demand for

our services and products or result in the need to modify them, which may involve substantial costs or
delays in sales and could have an adverse effect on our future operating results. Our export activities
are subject to extensive and evolving trade regulations. Certain countries are subject to trade
restrictions, embargoes and sanctions imposed by the U.S. government. These restrictions and sanctions
prohibit or limit us from participating in certain business activities in those countries.

Our operations are also subject to numerous local, state and federal laws and regulations in the

United States and in foreign jurisdictions concerning the containment and disposal of hazardous
materials, the remediation of contaminated properties and the protection of the environment. While
the industry has experienced an increase in general environmental regulation worldwide and laws and
regulations protecting the environment have generally become more stringent, we do not believe
compliance with these regulations has resulted in a material adverse effect on our business or results of
operations, and we do not currently foresee the need for significant expenditures in order to be able to
remain compliant in all material respects with current environmental protection laws. Regulations in
this area are subject to change, and there can be no assurance that future laws or regulations will not
have a material adverse effect on us.

Our customers’ operations are also significantly impacted in other respects by laws and regulations

concerning the protection of the environment and endangered species. For instance, many of our
marine contractors have been affected by regulations protecting marine mammals in the Gulf of
Mexico. To the extent that our customers’ operations are disrupted by future laws and regulations, our
business and results of operations may be materially adversely affected.

Employees

As of December 31, 2018, we had 496 regular, full-time employees, 292 of whom were located in

the U.S. From time to time and on an as-needed basis, we supplement our regular workforce with
individuals that we hire temporarily or retain as independent contractors in order to meet certain
internal manufacturing or other business needs. Our U.S. employees are not represented by any
collective bargaining agreement, and we have never experienced a labor-related work stoppage. We
believe that our employee relations are satisfactory.

Financial Information by Segment and Geographic Area

For a discussion of financial information by business segment and geographic area, see Footnote 2

‘‘Segment and Geographic Information’’ of Footnotes to Consolidated Financial Statements.

Available Information

Our executive headquarters are located at 2105 CityWest Boulevard, Suite 100, Houston,
Texas 77042-2839. Our telephone number is (281) 933-3339. Our home page on the Internet is
www.iongeo.com. We make our website content available for information purposes only. Unless
specifically incorporated by reference in this Annual Report on Form 10-K, information that you may
find on our website is not part of this report.

In portions of this Annual Report on Form 10-K, we incorporate by reference information from
parts of other documents filed with the Securities and Exchange Commission (‘‘SEC’’). The SEC allows
us to disclose important information by referring to it in this manner, and you should review this
information. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, annual reports to stockholders, and proxy statements for our stockholders’
meetings, as well as any amendments, available free of charge through our website as soon as
reasonably practicable after we electronically file those materials with, or furnish them to, the SEC.

You can learn more about us by reviewing our SEC filings on our website. Our SEC reports can
be accessed through the Investor Relations section on our website. The SEC also maintains a website
at www.sec.gov that contains reports, proxy statements, and other information regarding SEC
registrants, including our company.

Item 1A. Risk Factors

This report contains or incorporates by reference statements concerning our future results and

performance and other matters that are ‘‘forward-looking’’ statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (‘‘Securities Act’’), and Section 21E of the
Securities Exchange Act of 1934, as amended (‘‘Exchange Act’’). These statements involve known and
unknown risks, uncertainties and other factors that may cause our or our industry’s results, levels of
activity, performance, or achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by such forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘would,’’
‘‘should,’’ ‘‘intend,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘predict,’’ ‘‘potential,’’ or
‘‘continue’’ or the negative of such terms or other comparable terminology. Examples of other forward-
looking statements contained or incorporated by reference in this report include statements regarding:

(cid:129) any additional damages or adverse rulings in the WesternGeco litigation and future potential

adverse effects on our financial results and liquidity;

(cid:129) future levels of capital expenditures of our customers for seismic activities;

(cid:129) future oil and gas commodity prices;

(cid:129) the effects of current and future worldwide economic conditions (particularly in developing

countries) and demand for oil and natural gas and seismic equipment and services;

(cid:129) future cash needs and availability of cash to fund our operations and pay our obligations;

(cid:129) the effects of current and future unrest in the Middle East, North Africa and other regions;

(cid:129) the timing of anticipated revenues and the recognition of those revenues for financial accounting

purposes;

(cid:129) the effects of ongoing and future industry consolidation, including, in particular, the effects of

consolidation and vertical integration in the towed marine seismic streamers market;

(cid:129) the timing of future revenue realization of anticipated orders for multi-client survey projects and

data processing work in our E&P Technology & Services segment;

(cid:129) future levels of our capital expenditures;

(cid:129) future government laws or regulations pertaining to the oil and gas industry, including trade

restrictions, embargoes and sanctions imposed by the U.S. government;

(cid:129) future government actions that may result in the deprivation of our contractual rights, including
the potential for adverse decisions by judicial or administrative bodies in foreign countries with
unpredictable or corrupt judicial systems.

(cid:129) expected net revenues, income from operations and net income;

(cid:129) expected gross margins for our services and products;

(cid:129) future seismic industry fundamentals, including future demand for seismic services and

equipment;

(cid:129) future benefits to our customers to be derived from new services and products;

(cid:129) future benefits to be derived from our investments in technologies, joint ventures and acquired

companies;

(cid:129) future growth rates for our services and products;

(cid:129) the degree and rate of future market acceptance of our new services and products;

(cid:129) expectations regarding E&P companies and seismic contractor end-users purchasing our more

technologically-advanced services and products;

(cid:129) anticipated timing and success of commercialization and capabilities of services and products

under development and start-up costs associated with their development;

(cid:129) future opportunities for new products and projected research and development expenses;

(cid:129) expected continued compliance with our debt financial covenants;

(cid:129) expectations regarding realization of deferred tax assets;

(cid:129) expectations regarding the impact of the U.S. Tax Cuts and Jobs Act;

(cid:129) anticipated results with respect to certain estimates we make for financial accounting purposes;

and

(cid:129) compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign

laws prohibiting corrupt payments to government officials and other third parties.

These forward-looking statements reflect our best judgment about future events and trends based

on the information currently available to us. Our results of operations can be affected by inaccurate
assumptions we make or by risks and uncertainties known or unknown to us. Therefore, we cannot
guarantee the accuracy of the forward-looking statements. Actual events and results of operations may
vary materially from our current expectations and assumptions. While we cannot identify all of the
factors that may cause actual results to vary from our expectations, we believe the following factors
should be considered carefully:

An unfavorable outcome in our pending litigation matter with WesternGeco could have a materially adverse

effect on our financial results and liquidity.

In June 2009, WesternGeco L.L.C. (‘‘WesternGeco’’) filed a lawsuit against us in the United States

District Court for the Southern District of Texas (the ‘‘District Court’’). In the lawsuit, styled
WesternGeco L.L.C. v. ION Geophysical Corporation, WesternGeco alleged that we had infringed several
of their patents concerning marine seismic surveys.

Trial began in July 2012, and the jury returned a verdict in August 2012. The jury found that we
infringed the ‘‘claims’’ contained in four of WesternGeco’s patents by supplying our DigiFIN(cid:4) lateral
streamer control units from the United States, and awarded WesternGeco more than $100 million in
damages. (In patent law, a ‘‘claim’’ is the technical legal term; an infringer infringes on one or more
‘‘claims’’ of a given patent.)

In May 2014, the District Court entered a Final Judgment against us in the amount of

$123.8 million. This included the jury award ($12.5 million in reasonable royalties plus $93.4 million in
lost profits), $10.9 million in pre-judgment interest on lost profits, and $9.4 million in supplemental
damages that the judge imposed for DigiFIN(cid:4) units that were supplied from the U.S. during the trial
and during other periods that the jury did not consider. The Final Judgment also enjoined us from
supplying DigiFINs or any parts unique to DigiFINs in or from the United States. We have conducted
our business in compliance with the District Court’s orders, and have reorganized our operations such
that we no longer supply DigiFINs or any parts unique to DigiFINs in or from the United States.

On July 2, 2015, the United States Court of Appeals for the Federal Circuit in Washington, D.C.

(the ‘‘Court of Appeals’’) reversed, in part, the District Court, holding that the lost profits, which were
attributable to foreign seismic surveys, were not available to WesternGeco under the Patent Act. We
had recorded a loss contingency accrual of $123.8 million because of the District Court’s ruling. As a
result of the reversal by the Court of Appeals, we reduced the loss contingency accrual to $22.0 million.

On February 26, 2016, WesternGeco appealed the Court of Appeals’ decision to the Supreme

Court, as to both lost profits and ‘‘enhanced’’ damages (damages which are available for willful
infringement, and which neither the District Court nor the Trial Court awarded). On June 20, 2016, the
Supreme Court vacated the Court of Appeals’ ruling, although it did not address lost profits at that
time. Rather, in light of changes in case law regarding the standard of proof for willfulness in patent
infringement, the Supreme Court remanded the case to the Court of Appeals for a determination of
whether enhanced damages were appropriate.

On November 14, 2016, the District Court ordered our sureties to pay principal and interest on

the royalty damages previously awarded. On November 25, 2016, we paid WesternGeco the
$20.8 million due pursuant to the order, and reduced our loss contingency accrual to zero.

On March 14, 2017, the District Court held a hearing on whether impose additional damages for

willfulness. The Judge found that our infringement was willful, and awarded enhanced damages of
$5.0 million to WesternGeco (WesternGeco had sought $43.6 million in such damages.) The District
Court also ordered the appeal bond to be released and discharged. The Court’s findings and ruling
were memorialized in an order issued on May 16, 2017. On June 30, 2017, we and WesternGeco agreed
that neither of us would appeal the District Court’s award of $5.0 million in enhanced damages. Upon
assessment of the enhanced damages, we accrued $5.0 million in the first quarter of 2017. As we have
paid the $5.0 million, the accrual has been adjusted, and as of December 31, 2018, the loss contingency
accrual was zero.

WesternGeco filed a second petition in the Supreme Court on February 17, 2017, appealing the
lost profits issue again. On May 30, 2017, the Supreme Court called for the U.S. Solicitor General’s
views on whether or not the Supreme Court ought to hear WesternGeco’s appeal. On December 6,
2017, the Solicitor General filed its brief, and took the position that the Supreme Court ought to hear
the appeal and that foreign lost profits ought to be available. On January 12, 2018, the Supreme Court
agreed to hear the appeal. The specific issue before the Supreme Court was whether lost profits arising
from use of prohibited combinations occurring outside of the United States are categorically
unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f)(2) (the statute under
which we were held to have infringed WesternGeco’s patents, and upon which the District Court and
Court of Appeals relied in entering their rulings).

The Supreme Court heard oral arguments on April 16, 2018. We argued that the Court of
Appeals’ decision that eliminated lost profits ought to be affirmed. WesternGeco and the Solicitor
General argued that the Court of Appeals’ decision that eliminated lost profits ought to be reversed.

On June 22, 2018, the Supreme Court reversed the judgment of the Court of Appeals, held that

the award of lost profits to WesternGeco by the District Court was a permissible application of
Section 284 of the Patent Act, and remanded the case back to the Court of Appeals for further
proceedings consistent with its (the Supreme Court’s) opinion. On July 24, 2018, the Supreme Court
issued the judgment that returned the case to the Court of Appeals.

On July 27, 2018, the Court of Appeals vacated its September 21, 2016 judgment with respect to

damages, and ordered WesternGeco and us to submit supplemental briefing on what relief is
appropriate in light of the Supreme Court’s decision. We and WesternGeco each submitted briefing in
accordance with the Court of Appeals’ order (the last brief was filed on September 7, 2018).

We argued in our brief to the Court of Appeals that lost profits were not available to

WesternGeco because the jury instructions required them to find that we had been WesternGeco’s
direct competitor in the survey markets where WesternGeco had lost profits, and that the jury could
not have found so. Additionally, we argued that the award of lost profits and reasonable royalties ought
to be vacated and retried on separate grounds due to the outcome of an Inter Partes Review (‘‘IPR’’)
filed with the Patent Trial and Appeal Board (‘‘PTAB’’) of the Patent and Trademark Office.

Until the Court of Appeals’ January 11, 2019 decision issued (which is described below), the IPR

was an administrative proceeding that was separate from the 2009 lawsuit. By means of the IPR, we
joined a challenge to the validity of several of WesternGeco’s patent claims that another company had
filed. While the 2009 lawsuit was pending on appeal, the PTAB invalidated four of the six patent claims
that formed the basis for the lawsuit judgment against us. WesternGeco appealed the PTAB’s
invalidation of its patents to the Court of Appeals. On May 7, 2018, the Court of Appeals affirmed the
PTAB’s invalidation of the patents, and on July 16, 2018, the Court of Appeals denied WesternGeco’s
petition for a rehearing. On December 13, 2018, WesternGeco filed a petition with the Supreme Court,
arguing that the Court of Appeals ought to have overturned the decision of the PTAB. (As of
February 7, 2019, the Supreme Court has not indicated whether it will, or will not, hear WesternGeco’s
appeal.)

In the same brief to the Court of Appeals in which we made our ‘‘direct competitor’’ argument, we

argued that the Court of Appeals’ affirmation of the PTAB’s decision precluded WesternGeco’s
damages claims, and that the Court of Appeals should order a new trial as to the royalty damages
already paid by us. We also argued that if the Court of Appeals did not find our ‘‘direct competitor’’
argument persuasive, the Court should nonetheless vacate the District Court’s award of royalty
damages and lost profits damages and order a new trial as to both royalty damages and lost profits.

In its briefs to the Court of Appeals, WesternGeco argued that the only remaining issue was
whether lost profits were unavailable to WesternGeco due to our ‘‘direct competitor’’ argument, and
argued that the invalidation of four of its six patent claims by the PTAB (which was affirmed by the
Court of Appeals) should have no effect on lost profits or on the royalty award already paid by us.
WesternGeco also argued that lost profits should be available notwithstanding our ‘‘direct competitor’’
argument.

Oral arguments took place on November 16, 2018, and on January 11, 2019, the Court of Appeals
issued its ruling. In its ruling, the Court of Appeals refused to disturb the award of reasonable royalties
to WesternGeco (which we paid in 2016), and rejected our ‘‘direct competitor’’ argument, but vacated
the District Court’s award of lost profits damages and remanded the case back to the District Court to
determine whether to hold a new trial as to lost profits. The Court of Appeals also ruled that its
affirmance of the PTAB’s decision eliminated four of the five patent claims that could have supported
the award of lost profits, leaving only one remaining patent claim that could support an award of lost
profits.

The Court of Appeals further held that the lost profits award can be reinstated by the District
Court if the existing trial record establishes that the jury must have found that the technology covered
by the one remaining patent claim was essential for performing the surveys upon which lost profits
were based. To make such a finding, the District Court must conclude that the present trial record
establishes that there was no dispute that the technology covered by the one remaining patent claim,
independent of the technology of the now-invalid claims, was required to perform the surveys. The
Court of Appeals ruling further provides that if, but only if, the District Court concludes that
WesternGeco established at trial, with undisputed evidence, that the remaining claim covers technology
that was necessary to perform the surveys, then the District Court may deny a new trial and reinstate
lost profits.

We may not ultimately prevail in the litigation and we could be required to pay some or all of the

lost profits that were awarded by the District Court, plus interest, if the District Court denies a new
trial on lost profits, or if a new trial is granted and a new judgment issues. Our assessment that we do
not have a loss contingency may change in the future due to developments at the Supreme Court,
Court of Appeals, or District Court, and other events, such as changes in applicable law, and such
reassessment could lead to the determination that a significant loss contingency is probable, which
could have a material effect on the Company’s business, financial condition and results of operations.

Our business depends on the level of exploration and production activities by the oil and natural gas

industry. If capital expenditures by E&P companies decline, typically because of lower price realizations for oil
and natural gas, the demand for our services and products would decline and our results of operations would
be materially adversely affected.

Demand for our services and products depends upon the level of spending by E&P companies and

seismic contractors for exploration and production activities, and those activities depend in large part
on oil and gas prices. Spending by our customers on services and products that we provide is highly
discretionary in nature, and subject to rapid and material change. Any decline in oil and gas related
spending on behalf of our customers could cause alterations in our capital spending plans, project
modifications, delays or cancellations, general business disruptions or delays in payment, or
non-payment of amounts that are owed to us, any one of which could have a material adverse effect on
our financial condition. Additionally, the recent increases in oil and gas prices may not increase
demand for our services and products or otherwise have a positive effect on our financial condition or
results of operations. E&P companies’ willingness to explore, develop and produce depends largely
upon prevailing industry conditions that are influenced by numerous factors over which our
management has no control, such as:

(cid:129) the supply of and demand for oil and gas;

(cid:129) the level of prices, and expectations about future prices, of oil and gas;

(cid:129) the cost of exploring for, developing, producing and delivering oil and gas;

(cid:129) the expected rates of decline for current production;

(cid:129) the discovery rates of new oil and gas reserves;

(cid:129) weather conditions, including hurricanes, that can affect oil and gas operations over a wide area,

as well as less severe inclement weather that can preclude or delay seismic data acquisition;

(cid:129) domestic and worldwide economic conditions;

(cid:129) changes in government leadership, such as the change in presidency in Mexico and its impact on

the Mexican economy and offshore exploration programs;

(cid:129) political instability in oil and gas producing countries;

(cid:129) technical advances affecting energy consumption;

(cid:129) government policies regarding the exploration, production and development of oil and gas

reserves;

(cid:129) the ability of oil and gas producers to raise equity capital and debt financing;

(cid:129) merger and divestiture activity among oil and gas companies and seismic contractors; and

(cid:129) compliance by members of the OPEC and non-OPEC members such as Russia, with agreements

to cut oil production.

The level of oil and gas exploration and production activity has been volatile in recent years.
Trends in oil and gas exploration and development activities have declined, together with demand for
our services and products. Any prolonged substantial reduction in oil and gas prices would likely
further affect oil and gas production levels and therefore adversely affect demand for the services we
provide and products we sell.

Our operating results often fluctuate from period to period, and we are subject to cyclicality and seasonality

factors.

Our industry and the oil and gas industry in general are subject to cyclical fluctuations. Demand

for our services and products depends upon spending levels by E&P companies for exploration and
production of oil and natural gas and, in the case of new seismic data acquisition, the willingness of
those companies to forgo ownership of the seismic data. Capital expenditures by E&P companies for
these activities depend upon several factors, including actual and forecasted prices of oil and natural
gas and those companies’ short-term and strategic plans.

Since 2015, E&P companies shifted their focus more to production activities and less on
exploration due to declining oil and gas prices resulted in decreasing revenues and prompted cost
reduction initiatives across the industry. The price of Brent crude oil increased to an average of $71 per
barrel in 2018 due to the combination of robust global demand and sustained OPEC production cuts
after a long period of unrestrained output relative to past periods. Before the end of 2018, Brent crude
oil prices fell to nearly $50 per barrel and the U.S. Energy Information Administration (‘‘EIA’’)
forecasts the Brent crude oil spot price will average $61 per barrel in 2019 and $65 per barrel in 2020.
The price decrease resulted from concerns of oversupply and slower than expected pace of oil demand
growth. Energy prices, which include oil, natural gas and coal, are projected to stabilize overall in the
near-term as demand and supply comes into equilibrium. As of December 31, 2018, our E&P
Technology & Services segment backlog, consisting of commitments for data processing work and for
underwritten multi-client New Venture and proprietary projects decreased by 44% compared to our
existing backlog as of December 31, 2017. The decrease in our backlog is attributable to the timing of
finalizing contracts.

Our operating results are subject to fluctuations from period to period as a result of introducing

new services and products, the timing of significant expenses in connection with customer orders,
unrealized sales, levels of research and development activities in different periods, the product and
service mix of our revenues and the seasonality of our business. Because some of our products are
technologically complex and tend to be relatively large investments, we generally experience long sales
cycles for these types of products with a series of technical and commercial reviews by our customers
and historically incur significant expense at the beginning of these cycles. In addition, the revenues can
vary widely from period to period due to changes in customer requirements and demand. These factors
can create fluctuations in our net revenues and results of operations from period to period. Variability
in our overall gross margins for any period, which depend on the percentages of higher-margin and
lower-margin services and products sold in that period, compounds these uncertainties. As a result, if
net revenues or gross margins fall below expectations, our results of operations and financial condition
will likely be materially adversely affected.

Additionally, our business can be seasonal in nature, with strongest demand typically in the second

half of each year. Customer budgeting cycles at times result in higher spending activity levels by our
customers at different points of the year.

Due to the high value of many of our products and seismic data libraries as they tend to be
relatively large investments, our quarterly operating results have historically fluctuated from period to
period due to the timing of orders and shipments and the mix of services and products sold. This
uneven pattern makes financial predictions for any given period difficult, increases the risk of
unanticipated variations in our quarterly results and financial condition, and places challenges on our
inventory management. Delays caused by factors beyond our control can affect our E&P Technology &
Services segment’s revenues from its imaging and multi-client services from period to period. Also,
delays in ordering products or in shipping or delivering products in a given period could significantly
affect our results of operations for that period. Fluctuations in our quarterly operating results may
cause greater volatility in the market price of our common stock.

Our indebtedness could adversely affect our liquidity, financial condition and our ability to fulfill our

obligations and operate our business.

As of December 31, 2018, our total outstanding indebtedness (including capital lease obligations)

was approximately $121.7 million, consisting primarily of approximately $120.6 million outstanding
Second Lien Notes and $2.9 million of capital leases, partially offset by $2.9 million of debt issuance
costs. As of December 31, 2018, there was no outstanding indebtedness under our Credit Facility.
Under our Credit Facility, as amended, the lender has committed $50.0 million of revolving credit,
subject to a borrowing base. As of December 31, 2018, we have $41.9 million of borrowing base
availability under the Credit Facility. The amount available will increase or decrease monthly as our
borrowing base changes. We may also incur additional indebtedness in the future. See Item 7.
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’

In October 2016, S&P Global Ratings (‘‘S&P’’) raised our corporate credit rating to CCC+ from

SD and maintains a negative outlook. S&P continues to hold a negative outlook on our Company
reflecting the high debt leverage, expected negative free cash flow and the potential for liquidity to
weaken, if market conditions do not significantly improve. Following the redemption of our Third Lien
Notes in March 2018, Moody’s Investors Service has withdrawn all assigned public credit ratings on our
Company, including the Caa2 Corporate Family Rating.

Our high level of indebtedness could have negative consequences to us, including:

(cid:129) we may have difficulty satisfying our obligations with respect to our outstanding debt;

(cid:129) we may have difficulty obtaining financing in the future for working capital, capital expenditures,

acquisitions or other purposes;

(cid:129) we may need to use all, or a substantial portion, of our available cash flow to pay interest and

principal on our debt, which will reduce the amount of money available to finance our
operations and other business activities;

(cid:129) our vulnerability to general economic downturns and adverse industry conditions could increase;

(cid:129) our flexibility in planning for, or reacting to, changes in our business and in our industry in

general could be limited;

(cid:129) our amount of debt and the amount we must pay to service our debt obligations could place us

at a competitive disadvantage compared to our competitors that have less debt;

(cid:129) our customers may react adversely to our significant debt level and seek or develop alternative

licensors or suppliers;

(cid:129) we may have insufficient funds, and our debt level may also restrict us from raising the funds

necessary to repurchase all of the Notes, as defined below, tendered to us upon the occurrence
of a change of control, which would constitute an event of default under the Notes; and

(cid:129) our failure to comply with the restrictive covenants in our debt instruments which, among other
things, limit our ability to incur debt and sell assets, could result in an event of default that, if
not cured or waived, could have a material adverse effect on our business or prospects.

Our level of indebtedness will require that we use a substantial portion of our cash flow from
operations to pay principal of, and interest on, our indebtedness, which will reduce the availability of
cash to fund working capital requirements, capital expenditures, research and development and other
general corporate or business activities.

We are subject to intense competition, which could limit our ability to maintain or increase our market

share or to maintain our prices at profitable levels.

Many of our sales are obtained through a competitive bidding process, which is standard for our

industry. Competitive factors in recent years have included price, technological expertise, and a
reputation for quality, safety and dependability. While no single company competes with us in all of our
segments, we are subject to intense competition in each of our segments. New entrants in many of the
markets in which certain of our services and products are currently strong should be expected. See
Item 1. ‘‘Business—Competition.’’ We compete with companies that are larger than we are in terms of
revenues, technical personnel, number of processing locations and sales and marketing resources. A few
of our competitors have a competitive advantage in being part of a large affiliated seismic contractor
company. In addition, we compete with major service providers and government-sponsored enterprises
and affiliates. Some of our competitors conduct seismic data acquisition operations as part of their
regular business, which we have traditionally not conducted, and have greater financial and other
resources than we do. These and other competitors may be better positioned to withstand and adjust
more quickly to volatile market conditions, such as fluctuations in oil and natural gas prices, as well as
changes in government regulations. In addition, any excess supply of services and products in the
seismic services market could apply downward pressure on prices for our services and products. The
negative effects of the competitive environment in which we operate could have a material adverse
effect on our results of operations. In particular, the consolidation in recent years of many of our
competitors in the seismic services and products markets has negatively impacted our results of
operations.

There are a number of geophysical companies that create, market and license seismic data and

maintain seismic libraries. Competition for acquisition of new seismic data among geophysical service
providers historically has been intense and we expect this competition will continue to be intense.
Larger and better-financed operators could enjoy an advantage over us in a competitive environment
for new data.

Our OBS operations involve numerous risks.

Through our Ocean Bottom Integrated Technologies segment, we operate as a seismic acquisition
contractor concentrating on OBS data acquisition. There can be no assurance that we will achieve the
expected benefits from our acquisition projects and these projects may result in unexpected costs,
expenses and liabilities, which may have a material adverse effect on our business, financial condition
or results of operations. Our OBS operations exposed us to operating risks:

(cid:129) Seismic data acquisition activities in marine ocean bottom areas are subject to the risk of
downtime or reduced productivity, as well as to the risks of loss to property and injury to
personnel, mechanical failures and natural disasters. In addition to losses caused by human
errors and accidents, we may also become subject to losses resulting from, among other things,
political instability, business interruption, strikes and weather events; and

(cid:129) Our OBS acquisition equipment and services may expose us to litigation and legal proceedings,
including those related to product liability, personal injury and contract liability. We have in
place insurance coverage against operating hazards, including product liability claims and
personal injury claims, damage, destruction or business interruption and whenever possible, will
obtain agreements from customers that limit our liability. However, we cannot provide assurance
that the nature and amount of insurance will be sufficient to fully indemnify us against liabilities
arising from pending and future claims or that its insurance coverage will be adequate in all
circumstances or against all hazards, and that we will be able to maintain adequate insurance
coverage in the future at commercially reasonable rates or on acceptable terms.

(cid:129) increased costs associated with the operation of an OBS acquisition project and the management

of geographically dispersed operations;

(cid:129) Cash flows from OBS acquisition projects may be inadequate to realize the value of

manufactured equipment for use in its OBS surveys;

(cid:129) risks associated with our OBS acquisition technologies, including risks that the new technology

may not perform as well as we anticipate;

(cid:129) difficulties in retaining and integrating key technical, sales and marketing personnel and the

possible loss of such employees and costs associated with their loss;

(cid:129) the diversion of management’s attention and other resources from other business operations and

related concerns;

(cid:129) the requirement to maintain uniform standards, controls and procedures;

(cid:129) our inability to realize operating efficiencies, cost savings or other benefits that we expect from

OBS operations; and

(cid:129) difficulties and delays in securing new business and customer projects.

The indentures governing the 9.125% Senior Secured Second-Priority Notes due 2021 (the ‘‘Second Lien
Notes’’) contain a number of restrictive covenants that limit our ability to finance future operations or capital
needs or engage in other business activities that may be in our interest.

The indenture governing the Second Lien Notes imposes, and the terms of any future indebtedness
may impose, operating and other restrictions on us and our subsidiaries. Such restrictions affect, or will
affect, and in many respects limit or prohibit, among other things, our ability and the ability of certain
of our subsidiaries to:

(cid:129) incur additional indebtedness;

(cid:129) create liens;

(cid:129) pay dividends and make other distributions in respect of our capital stock;

(cid:129) redeem our capital stock;

(cid:129) make investments or certain other restricted payments;

(cid:129) sell certain kinds of assets;

(cid:129) enter into transactions with affiliates; and

(cid:129) effect mergers or consolidations.

The restrictions contained in the indenture governing the Second Lien Notes could:

(cid:129) limit our ability to plan for or react to market or economic conditions or meet capital needs or

otherwise restrict our activities or business plans; and

(cid:129) adversely affect our ability to finance our operations, acquisitions, investments or strategic

alliances or other capital needs or to engage in other business activities that would be in our
interest.

A breach of any of these covenants could result in a default under the indenture governing the
Second Lien Notes. If an event of default occurs, the trustee and holders of the Second Lien Notes
could elect to declare all borrowings outstanding, together with accrued and unpaid interest, to be
immediately due and payable. An event of default under the indenture governing the Second Lien
Notes would also constitute an event of default under our Credit Facility. In addition, if we are unable
to repay or extend the maturity of our Second Lien Notes prior to their scheduled maturity in 2021, the
maturity of our Credit Facility, which currently matures in 2023, will accelerate to mature in 2021 which
may cause us to face substantial liquidity problems and may force us to reduce or delay investments,
dispose of material assets or operations, or issue additional debt or equity. See Footnote 5 ‘‘Long-term
Debt and Lease Obligations’’ of the Footnotes to Consolidated Financial Statements appearing below in
this Form 10-K.

As a technology-focused company, we are continually exposed to risks related to complex, highly technical

services and products that are sometimes operated in dangerous marine environments.

We have made, and we will continue to make, strategic decisions from time to time as to the
technologies in which we invest. If we choose the wrong technology, our financial results could be
adversely impacted. Our operating results are dependent upon our ability to improve and refine our
seismic imaging and data processing services and to successfully develop, manufacture and market our
products and other services and products. New technologies generally require a substantial investment
before any assurance is available as to their commercial viability. If we choose the wrong technology, or
if our competitors develop or select a superior technology, we could lose our existing customers and be
unable to attract new customers, which would harm our business and operations.

New data acquisition or processing technologies may be developed. New and enhanced services
and products introduced by one of our competitors may gain market acceptance and, if not available to
us, may adversely affect us.

The markets for our services and products are characterized by changing technology and new

product introductions. We must invest substantial capital to develop and maintain a leading edge in
technology, with no assurance that we will receive an adequate rate of return on those investments. If
we are unable to develop and produce successfully and timely new or enhanced services and products,
we will be unable to compete in the future and our business, our results of operations and our financial
condition will be materially and adversely affected. Our business could suffer from unexpected
developments in technology, or from our failure to adapt to these changes. In addition, the preferences
and requirements of customers can change rapidly.

The businesses of our E&P Technology & Services segment and Optimization Software & Services

group within our Operations Optimization segment, being more concentrated in software, processing
services and proprietary technologies, have also exposed us to various risks that these technologies
typically encounter, including the following:

(cid:129) future competition from more established companies entering the market;

(cid:129) technology obsolescence;

(cid:129) dependence upon continued growth of the market for seismic data processing;

(cid:129) the rate of change in the markets for these segments’ technology and services;

(cid:129) further consolidation of the participants within this market;

(cid:129) research and development efforts not proving sufficient to keep up with changing market

demands;

(cid:129) dependence on third-party software for inclusion in these segments’ services and products;

(cid:129) misappropriation of these segments’ technology by other companies;

(cid:129) alleged or actual infringement of intellectual property rights that could result in substantial

additional costs;

(cid:129) difficulties inherent in forecasting sales for newly developed technologies or advancements in

technologies;

(cid:129) recruiting, training and retaining technically skilled, experienced personnel that could increase

the costs for these segments, or limit their growth; and

(cid:129) the ability to maintain traditional margins for certain of their technology or services.

Seismic data acquisition and data processing technologies historically have progressed rather
rapidly and we expect this progression to continue. In order to remain competitive, we must continue
to invest additional capital to maintain, upgrade and expand our seismic data acquisition and processing
capabilities. However, due to potential advances in technology and the related costs associated with
such technological advances, we may not be able to fulfill this strategy, thus possibly affecting our
ability to compete.

Our customers often require demanding specifications for performance and reliability of our
services and products. Because many of our products are complex and often use unique advanced
components, processes, technologies and techniques, undetected errors and design and manufacturing
flaws may occur. Even though we attempt to assure that our systems are always reliable in the field, the
many technical variables related to their operations can cause a combination of factors that can, and
have from time to time, caused performance and service issues with certain of our products. Product
defects result in higher product service, warranty and replacement costs and may affect our customer
relationships and industry reputation, all of which may adversely impact our results of operations.
Despite our testing and quality assurance programs, undetected errors may not be discovered until the
product is purchased and used by a customer in a variety of field conditions. If our customers deploy
our new products and they do not work correctly, our relationship with our customers may be
materially and adversely affected.

As a result of our systems’ advanced and complex nature, we expect to experience occasional
operational issues from time to time. Generally, until our products have been tested in the field under
a wide variety of operational conditions, we cannot be certain that performance and service problems
will not arise. In that case, market acceptance of our new products could be delayed and our results of
operations and financial condition could be adversely affected.

We also face exposure to product liability claims in the event that certain of our products, or
certain components manufactured by others that are incorporated into our products, fail to perform to
specification, which failure results, or is alleged to result, in property damage, bodily injury and/or
death. Marine exploration in particular can present dangerous conditions to those conducting it. Any
product liability claims decided adversely against us may have a material adverse effect on our results
of operations and cash flows. While we maintain insurance coverage with respect to certain product
liability claims, we may not be able to obtain such insurance on acceptable terms in the future, if at all,
and any such insurance may not provide adequate coverage against product liability claims. In addition,
product liability claims can be expensive to defend and can divert the attention of management and
other personnel for significant periods of time, regardless of the ultimate outcome. Furthermore, even
if we are successful in defending against a claim relating to our products, claims of this nature could
cause our customers to lose confidence in our products and us.

We have invested, and expect to continue to invest, significant sums of money in acquiring and processing

seismic data for our E&P Technology & Services’ multi-client data library, without knowing precisely how
much of this seismic data we will be able to license or when and at what price we will be able to license the
data sets. Our business could be adversely affected by the failure of our customers to fulfill their obligations to
reimburse us for the underwritten portion of our seismic data acquisition costs for our multi-client library.

We invest significant amounts in acquiring and processing new seismic data to add to our E&P
Technology & Services’ multi-client data library. The costs of most of these investments are funded by
our customers, with the remainder generally being recovered through future data licensing fees. In
2018, we invested approximately $28.3 million in our multi-client data library. Our customers generally
commit to licensing the data prior to our initiating a new data library acquisition program. However,
the aggregate amounts of future licensing fees for this data are uncertain and depend on a variety of
factors, including the market prices of oil and gas, customer demand for seismic data in the library, and
the availability of similar data from competitors.

By making these investments in acquiring and processing new seismic data for our E&P

Technology & Services’ multi-client library, we are exposed to the following risks:

(cid:129) We may not fully recover our costs of acquiring and processing seismic data through future sales.

The ultimate amounts involved in these data sales are uncertain and depend on a variety of
factors, many of which are beyond our control.

(cid:129) The timing of these sales is unpredictable and can vary greatly from period to period. The costs

of each survey are capitalized and then amortized as a percentage of sales and/or on a
straight-line basis over the expected useful life of the data. This amortization will affect our
earnings and, when combined with the sporadic nature of sales, will result in increased earnings
volatility.

(cid:129) Regulatory changes that affect companies’ ability to drill, either generally or in a specific

location where we have acquired seismic data, could materially adversely affect the value of the
seismic data contained in our library. Technology changes could also make existing data sets
obsolete. Additionally, each of our individual surveys has a limited book life based on its
location and oil and gas companies’ interest in prospecting for reserves in such location, so a
particular survey may be subject to a significant decline in value beyond our initial estimates.

(cid:129) The value of our multi-client data could be significantly adversely affected if any material

adverse change occurs in the general prospects for oil and gas exploration, development and
production activities.

(cid:129) The cost estimates upon which we base our pre-commitments of funding could be wrong. The
result could be losses that have a material adverse effect on our financial condition and results
of operations. These pre-commitments of funding are subject to the creditworthiness of our
clients. In the event that a client refuses or is unable to pay its commitment, we could incur a
substantial loss on that project.

(cid:129) As part of our asset-light strategy, we routinely charter vessels from third-party vendors to

acquire seismic data for our multi-client business. As a result, our cost to acquire our multi-
client data could significantly increase if vessel charter prices rise materially.

Reductions in demand for our seismic data, or lower revenues of or cash flows from our seismic

data, may result in a requirement to increase amortization rates or record impairment charges in order
to reduce the carrying value of our data library. These increases or charges, if required, could be
material to our operating results for the periods in which they are recorded.

A substantial portion of our seismic acquisition project costs (including third-party project costs)
are underwritten by our customers. In the event that underwriters for such projects fail to fulfill their

obligations with respect to such underwriting commitments, we would continue to be obligated to
satisfy our payment obligations to third-party contractors.

We derive a substantial amount of our revenues from foreign operations and sales, which pose additional

risks.

The majority of our foreign sales are denominated in U.S. dollars. Sales to customer destinations
outside of North America represented 75%, 76% and 78% of our consolidated net revenues for 2018,
2017 and 2016, respectively. We believe that export sales will remain a significant percentage of our
revenue. U.S. export restrictions affect the types and specifications of products we can export.
Additionally, in order to complete certain sales, U.S. laws may require us to obtain export licenses, and
we cannot assure you that we will not experience difficulty in obtaining these licenses.

Like many energy services companies, we have operations in and sales into certain international
areas, including parts of the Middle East, West Africa, Latin America, India, Asia Pacific and Russia,
that are subject to risks of war, political disruption, civil disturbance, political corruption, possible
economic and legal sanctions (such as possible restrictions against countries that the U.S. government
may in the future consider to be state sponsors of terrorism) and changes in global trade policies. Our
sales or operations may become restricted or prohibited in any country in which the foregoing risks
occur. In particular, the occurrence of any of these risks could result in the following events, which in
turn, could materially and adversely impact our results of operations:

(cid:129) disruption of E&P activities;

(cid:129) restriction on the movement and exchange of funds;

(cid:129) inhibition of our ability to collect advances and receivables;

(cid:129) enactment of additional or stricter U.S. government or international sanctions;

(cid:129) limitation of our access to markets for periods of time;

(cid:129) expropriation and nationalization of assets of our company or those of our customers;

(cid:129) political and economic instability, which may include armed conflict and civil disturbance;

(cid:129) currency fluctuations, devaluations and conversion restrictions;

(cid:129) confiscatory taxation or other adverse tax policies; and

(cid:129) governmental actions that may result in the deprivation of our contractual rights, including the
potential for adverse decisions by judicial or administrative bodies in foreign countries with
unpredictable or corrupt judicial systems.

Our international operations and sales increase our exposure to other countries’ restrictive tariff

regulations, other import/export restrictions and customer credit risk.

In addition, we are subject to taxation in many jurisdictions and the final determination of our tax

liabilities involves the interpretation of the statutes and requirements of taxing authorities worldwide.
Our tax returns are subject to routine examination by taxing authorities, and these examinations may
result in assessments of additional taxes, penalties and/or interest.

We may be unable to obtain broad intellectual property protection for our current and future products and

we may become involved in intellectual property disputes; we rely on developing and acquiring proprietary
data which we keep confidential.

We rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality

procedures and contractual provisions to protect our proprietary technologies. We believe that the

technological and creative skill of our employees, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are the foundations of our
competitive advantage. Although we have a considerable portfolio of patents, copyrights and
trademarks, these property rights offer us only limited protection. Our competitors may attempt to copy
aspects of our products despite our efforts to protect our proprietary rights, or may design around the
proprietary features of our products. Policing unauthorized use of our proprietary rights is difficult, and
we are unable to determine the extent to which such use occurs. Our difficulties are compounded in
certain foreign countries where the laws do not offer as much protection for proprietary rights as the
laws of the United States.

Third parties inquire and claim from time to time that we have infringed upon their intellectual

property rights. Many of our competitors own their own extensive global portfolio of patents,
copyrights, trademarks, trade secrets and other intellectual property to protect their proprietary
technologies. We believe that we have in place appropriate procedures and safeguards to help ensure
that we do not violate a third party’s intellectual property rights. However, no set of procedures and
safeguards is infallible. We may unknowingly and inadvertently take action that is inconsistent with a
third party’s intellectual property rights, despite our efforts to do otherwise. Any such claims from third
parties, with or without merit, could be time consuming, result in costly litigation, result in injunctions,
require product modifications, cause product shipment delays or require us to enter into royalty or
licensing arrangements. Such claims could have a material adverse effect on our results of operations
and financial condition.

Much of our litigation in recent years have involved disputes over our and others’ rights to

technology. See Item 3. ‘‘Legal Proceedings.’’

To protect the confidentiality of our proprietary and trade secret information, we require

employees, consultants, contractors, advisors and collaborators to enter into confidentiality agreements.
Our customer data license and acquisition agreements also identify our proprietary, confidential
information and require that such proprietary information be kept confidential. While these steps are
taken to strictly maintain the confidentiality of our proprietary and trade secret information, it is
difficult to ensure that unauthorized use, misappropriation or disclosure will not occur. If we are unable
to maintain the secrecy of our proprietary, confidential information, we could be materially adversely
affected.

If we do not effectively manage our transition into new services and products, our revenues may suffer.

Services and products for the geophysical industry are characterized by rapid technological
advances in hardware performance, software functionality and features, frequent introduction of new
services and products, and improvement in price characteristics relative to product and service
performance. Among the risks associated with the introduction of new services and products are delays
in development or manufacturing, variations in costs, delays in customer purchases or reductions in
price of existing products in anticipation of new introductions, write-offs or write-downs of the carrying
costs of inventory and raw materials associated with prior generation products, difficulty in predicting
customer demand for new product and service offerings and effectively managing inventory levels so
that they are in line with anticipated demand, risks associated with customer qualification, evaluation of
new products, and the risk that new products may have quality or other defects or may not be
supported adequately by application software. The introduction of new services and products by our
competitors also may result in delays in customer purchases and difficulty in predicting customer
demand. If we do not make an effective transition from existing services and products to future
offerings, our revenues and margins may decline.

Furthermore, sales of our new services and products may replace sales, or result in discounting of
some of our current product or service offerings, offsetting the benefits of a successful introduction. In

addition, it may be difficult to ensure performance of new services and products in accordance with our
revenue, margin and cost estimations and to achieve operational efficiencies embedded in our
estimates. Given the competitive nature of the seismic industry, if any of these risks materializes, future
demand for our services and products, and our future results of operations, may suffer.

Global economic conditions and credit market uncertainties could have an adverse effect on customer

demand for certain of our services and products, which in turn would adversely affect our results of
operations, our cash flows, our financial condition and our stock price.

Historically, demand for our services and products has been sensitive to the level of exploration
spending by E&P companies and geophysical contractors. The demand for our services and products
will be lessened if exploration expenditures by E&P companies are reduced. During periods of reduced
levels of exploration for oil and natural gas, there have been oversupplies of seismic data and
downward pricing pressures on our seismic services and products, which, in turn, have limited our
ability to meet sales objectives and maintain profit margins for our services and products. In the past,
these then-prevailing industry conditions have had the effect of reducing our revenues and operating
margins. The markets for oil and gas historically have been volatile and may continue to be so in the
future.

Turmoil or uncertainty in the credit markets and its potential impact on the liquidity of major

financial institutions may have an adverse effect on our ability to fund our business strategy through
borrowings under either existing or new debt facilities in the public or private markets and on terms we
believe to be reasonable. Likewise, there can be no assurance that our customers will be able to borrow
money for their working capital or capital expenditures on a timely basis or on reasonable terms, which
could have a negative impact on their demand for our services and products and impair their ability to
pay us for our services and products on a timely basis, or at all.

Our sales have historically been affected by interest rate fluctuations and the availability of
liquidity, and we and our customers would be adversely affected by increases in interest rates or
liquidity constraints. This could have a material adverse effect on our business, results of operations,
financial condition and cash flows.

The loss of any significant customer or the inability of our customers to meet their payment obligations to

us could materially and adversely affect our results of operations and financial condition.

Our business is exposed to risks related to customer concentration. In 2018, we had two customers

(ExxonMobil and Petrobras) with sales that each exceeded 10% of our consolidated net revenues. In
2017, we had one customer with sales that exceeded 10% of our consolidated net revenues and no
single customer represented 10% or more of our consolidated net revenues for 2016. Our top five
customers together accounted for approximately 39%, 34% and 50%, of our consolidated net revenues
during 2018, 2017 and 2016. The loss of any of our significant customers or deterioration in our
relations with any of them could materially and adversely affect our results of operations and financial
condition.

During the last ten years, our traditional geophysical contractor customers have been rapidly
consolidating, thereby consolidating the demand for our services and products. The loss of any of our
significant customers to further consolidation could materially and adversely affect our results of
operations and financial condition.

Our business is exposed to risks of loss resulting from nonpayment by our customers. Many of our

customers finance their activities through cash flow from operations, the incurrence of debt or the
issuance of equity. Declines in commodity prices, and the credit markets could cause the availability of
credit to be constrained. The combination of lower cash flow due to commodity prices, a reduction in
borrowing bases under reserve-based credit facilities and the lack of available debt or equity financing

may result in a significant reduction in our customers’ liquidity and ability to pay their obligations to us.
Furthermore, some of our customers may be highly leveraged and subject to their own operating and
regulatory risks, which increases the risk that they may default on their obligations to us. The inability
or failure of our significant customers to meet their obligations to us or their insolvency or liquidity
may adversely affect our financial results.

Our stock price has been volatile, declining and increasing from time to time.

The securities markets in general and our common stock in particular have experienced significant
price and volume volatility in recent years. The market price and trading volume of our common stock
may continue to experience significant fluctuations due not only to general stock market conditions but
also to a change in sentiment in the market regarding our operations or business prospects or those of
companies in our industry. In addition to the other risk factors discussed in this section, the price and
volume volatility of our common stock may be affected by:

(cid:129) operating results that vary from the expectations of securities analysts and investors;

(cid:129) factors influencing the levels of global oil and natural gas exploration and exploitation activities,
such as the decline in crude oil prices and depressed prices for natural gas in North America or
disasters such as the Deepwater Horizon incident in the Gulf of Mexico in 2010;

(cid:129) the operating and securities price performance of companies that investors or analysts consider

comparable to us;

(cid:129) actions by rating agencies related to the Notes;

(cid:129) announcements of strategic developments, acquisitions and other material events by us or our

competitors; and

(cid:129) changes in global financial markets and global economies and general market conditions, such as

interest rates, commodity and equity prices and the value of financial assets.

To the extent that the price of our common stock declines, our ability to raise funds through the
issuance of equity or otherwise use our common stock as consideration will be reduced. A low price for
our equity may negatively impact our ability to access additional debt capital. These factors may limit
our ability to implement our operating and growth plans. In addition, the volatility in the market price
of our common stock affects the value of our stock appreciation rights (‘‘SARs’’). To the extent that the
price of our common stock increases, the value of our SARs will increase and could have a negative
impact on our earnings and cash flows.

Goodwill, intangible assets and other long-lived assets (multi-client data library and property, plant and
equipment and seismic rental equipment) that we have recorded are subject to impairment evaluations. In
addition, our product inventory may become obsolete or excessive due to future changes in technology, changes
in market demand, or changes in market expectations. Write-downs of these assets may adversely affect our
financial condition and results of operations.

Reductions in or an impairment of the value of our goodwill, intangible assets and other long-lived

assets will result in additional charges against our earnings, which could have a material adverse effect
on our reported results of operations and financial position in future periods. At December 31, 2018,
our remaining goodwill, intangible assets, multi-client data library and property, plant and equipment
and seismic rental equipment balances were $22.9 million, $0.5 million, $73.5 million and $13.0 million,
respectively. For 2018, we recognized an impairment of $36.6 million in property, plant and equipment
for our cable-based ocean bottom acquisition technologies.

Our services and products’ technologies often change relatively quickly. Phasing out of old
products involves estimating the amounts of inventories we need to hold to satisfy demand for those

products and satisfy future repair part needs. Based on changing technologies and customer demand,
we may find that we have either obsolete or excess inventory on hand. Because of unforeseen future
changes in technology, market demand or competition, we might have to write off unusable inventory,
which would adversely affect our results of operations.

Due to the international scope of our business activities, our results of operations may be significantly

affected by currency fluctuations.

We derived approximately 75% of our 2018 consolidated net revenues from international sales,

subjecting us to risks relating to fluctuations in currency exchange rates. Currency variations can
adversely affect margins on sales of our products in countries outside of the United States and margins
on sales of products that include components obtained from suppliers located outside of the United
States. We operate in a wide variety of jurisdictions, including the United Kingdom, Brazil, Mexico,
China, Canada, Russia, the United Arab Emirates, Egypt and other countries. Certain of these
countries have experienced geopolitical instability, economic problems and other uncertainties from
time to time. To the extent that world events or economic conditions negatively affect our future sales
to customers in these and other regions of the world, or the collectability of receivables, our future
results of operations, liquidity and financial condition may be adversely affected.

We currently require customers in certain higher risk countries to provide their own financing. We

do not currently extend long-term credit through notes to companies in countries where we perceive
excessive credit risk.

Our foreign subsidiaries receive their income and pay their expenses primarily in their local
currencies. To the extent that transactions of these subsidiaries are settled in their local currencies, a
devaluation of those currencies versus the U.S. dollar could reduce the contribution from these
subsidiaries to our consolidated results of operations as reported in U.S. dollars. For financial reporting
purposes, such depreciation will negatively affect our reported results of operations since earnings
denominated in foreign currencies would be converted to U.S. dollars at a decreased value. In addition,
since we participate in competitive bids for sales of certain of our services and products that are
denominated in U.S. dollars, a depreciation of the U.S. dollar against other currencies could harm our
competitive position relative to other companies. While we periodically employ economic cash flow and
fair value hedges to minimize the risks associated with these exchange rate fluctuations, the hedging
activities may be ineffective or may not offset more than a portion of the adverse financial impact
resulting from currency variations. Accordingly, we cannot provide assurance that fluctuations in the
values of the currencies of countries in which we operate will not materially adversely affect our future
results of operations.

We rely on highly skilled personnel in our businesses, and if we are unable to retain or motivate key

personnel or hire qualified personnel, we may not be able to effectively operate our business.

Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our
future success depends on our continuing ability to identify, hire, develop, motivate and retain skilled
personnel for all areas of our organization. We require highly skilled personnel to operate and provide
technical services and support for our businesses. Competition for qualified personnel required for our
data processing operations and our other businesses has intensified recently. Our growth has presented
challenges to us to recruit, train and retain our employees while managing the impact of potential wage
inflation and the lack of available qualified labor in some markets where we operate. A well-trained,
motivated and adequately-staffed work force has a positive impact on our ability to attract and retain
business. Our continued ability to compete effectively depends on our ability to attract new employees
and to retain and motivate our existing employees.

Certain of our facilities could be damaged by hurricanes and other natural disasters, which could have an

adverse effect on our results of operations and financial condition.

Certain of our facilities are located in regions of the United States that are susceptible to damage

from hurricanes and other weather events, and, during 2005, were impacted by hurricanes or other
weather events. Our Devices group leases 144,000 square feet of facilities located in Harahan,
Louisiana, in the greater New Orleans metropolitan area. In late August 2005, we suspended
operations at these facilities and evacuated and locked down the facilities in preparation for Hurricane
Katrina. These facilities did not experience flooding or significant damage during or after the hurricane.
However, because of employee evacuations, power failures and lack of related support services, utilities
and infrastructure in the New Orleans area, we were unable to resume full operations at the facilities
until late September 2005. In August 2017, we lost use of our offices located in the Houston
metropolitan area for several days, as a result of Hurricane Harvey.

Future hurricanes or similar natural disasters that impact our facilities may negatively affect our
financial position and operating results for those periods. These negative effects may include reduced
production, product sales and data processing revenues; costs associated with resuming production;
reduced orders for our services and products from customers that were similarly affected by these
events; lost market share; late deliveries; additional costs to purchase materials and supplies from
outside suppliers; uninsured property losses; inadequate business interruption insurance and an inability
to retain necessary staff. To the extent that climate change increases the severity of hurricanes and
other weather events, as some have suggested, it could worsen the severity of these negative effects on
our financial position and operating results.

Our operations, and the operations of our customers, are subject to numerous government regulations,

which could adversely limit our operating flexibility. Regulatory initiatives undertaken from time to time, such
as restrictions, sanctions and embargoes, can adversely affect, and have adversely affected, our customers and
our business.

In addition to the specific regulatory risks discussed elsewhere in this Item 1A. ‘‘Risk Factors’’

section, our operations are subject to other laws, regulations, government policies and product
certification requirements worldwide. Changes in such laws, regulations, policies or requirements could
affect the demand for our products or services or result in the need to modify our services and
products, which may involve substantial costs or delays in sales and could have an adverse effect on our
future operating results. Our export activities in particular are subject to extensive and evolving trade
regulations. Certain countries (including Russia) are subject to restrictions, sanctions and embargoes
imposed by the United States government. These restrictions, sanctions and embargoes also prohibit or
limit us from participating in certain business activities in those countries. In addition, our operations
are subject to numerous local, state and federal laws and regulations in the United States and in
foreign jurisdictions concerning the containment and disposal of hazardous materials, the remediation
of contaminated properties, and the protection of the environment. These laws have been changed
frequently in the past, and there can be no assurance that future changes will not have a material
adverse effect on us. In addition, our customers’ operations are also significantly impacted by laws and
regulations concerning the protection of the environment and endangered species. Consequently,
changes in governmental regulations applicable to our customers may reduce demand for our services
and products. To the extent that our customers’ operations are disrupted by future laws and regulations,
our business and results of operations may be materially and adversely affected.

Offshore oil and gas exploration and development recently has been a regulatory focus. Future

changes in laws or regulations regarding such activities, and decisions by customers, governmental
agencies or other industry participants in response, could reduce demand for our services and products,
which could have a negative impact on our financial position, results of operations or cash flows. We
cannot reasonably or reliably estimate that such changes will occur, when they will occur, or whether

they will impact us. Such changes can occur quickly within a region, which may impact both the
affected region and global exploration and production, and we may not be able to respond quickly, or
at all, to mitigate these changes. In addition, these future laws and regulations could result in increased
compliance costs or additional operating restrictions that may adversely affect the financial health of
our customers and decrease the demand for our services and products.

Existing or future laws and regulations related to greenhouse gases and climate change could have a

material adverse effect on our business, results of operations, and financial condition.

Changes in environmental requirements related to greenhouse gases and climate change may
negatively impact demand for our services. For example, oil and natural gas exploration and production
may decline as a result of environmental requirements. Local, state, and federal agencies have been
evaluating climate-related legislation and other regulatory initiatives that would restrict emissions of
greenhouse gases in areas in which we conduct business. Because our business depends on the level of
activity in the oil and natural gas industry, existing or future laws and regulations related to greenhouse
gases and climate change, including incentives to conserve energy or use alternative energy sources,
could have a negative impact on our business if such laws or regulations reduce demand for oil and
natural gas.

We have outsourcing arrangements with third parties to manufacture some of our products. If these third
party suppliers fail to deliver quality products or components at reasonable prices on a timely basis, we may
alienate some of our customers and our revenues, profitability and cash flow may decline. Additionally,
current global economic conditions could have a negative impact on our suppliers, causing a disruption in our
vendor supplies. A disruption in vendor supplies may adversely affect our results of operations.

Our manufacturing processes require us to purchase quality components. In addition, we use
contract manufacturers as an alternative to our own manufacturing of products. We have outsourced
the manufacturing of our products, including our towed marine streamers, geophone manufacturing.
Certain components used in our towed marine manufacturing operations are currently provided by a
single supplier. Without these sole suppliers, we would be required to find other suppliers who could
build these components for us, or set up to make these parts internally. If, in implementing any
outsource initiative, we are unable to identify contract manufacturers willing to contract with us on
competitive terms and to devote adequate resources to fulfill their obligations to us or if we do not
properly manage these relationships, our existing customer relationships may suffer. In addition, by
undertaking these activities, we run the risk that the reputation and competitiveness of our services and
products may deteriorate as a result of the reduction of our control over quality and delivery schedules.
We also may experience supply interruptions, cost escalations and competitive disadvantages if our
contract manufacturers fail to develop, implement, or maintain manufacturing methods appropriate for
our products and customers.

Reliance on certain suppliers, as well as industry supply conditions, generally involves several risks,

including the possibility of a shortage or a lack of availability of key components, increases in
component costs and reduced control over delivery schedules. If any of these risks are realized, our
revenues, profitability and cash flows may decline. In addition, the more we come to rely on contract
manufacturers, we may have fewer personnel resources with expertise to manage problems that may
arise from these third-party arrangements.

Additionally, our suppliers could be negatively impacted by current global economic conditions. If
certain of our suppliers were to experience significant cash flow issues or become insolvent as a result
of such conditions, it could result in a reduction or interruption in supplies to us or a significant
increase in the price of such supplies and adversely impact our results of operations and cash flows.

Our business is subject to cybersecurity risks and threats.

Threats to our information technology systems associated with cybersecurity risk and cyber
incidents or attacks continue to grow. It is also possible that breaches to our systems could go
unnoticed for some period of time. Risks associated with these threats include, among other things, loss
of intellectual property, disseminating of highly confidential information, impairment of our ability to
conduct our operations, disruption of our customers’ operations, loss or damage to our customer data
delivery systems, and increased costs to prevent, respond to or mitigate cybersecurity events.

Our certificate of incorporation and bylaws, Delaware law and certain contractual obligations under our

agreement with BGP contain provisions that could discourage another company from acquiring us.

Provisions of our certificate of incorporation and bylaws, Delaware law and the terms of our
investor rights agreement with BGP may have the effect of discouraging, delaying or preventing a
merger or acquisition that our stockholders may consider favorable, including transactions in which you
might otherwise receive a premium for shares of our common stock. These provisions include:

(cid:129) authorizing the issuance of ‘‘blank check’’ preferred stock without any need for action by

stockholders;

(cid:129) providing for a classified board of directors with staggered terms;

(cid:129) requiring supermajority stockholder voting to effect certain amendments to our certificate of

incorporation and bylaws;

(cid:129) eliminating the ability of stockholders to call special meetings of stockholders;

(cid:129) prohibiting stockholder action by written consent; and

(cid:129) establishing advance notice requirements for nominations for election to the board of directors

or for proposing matters that can be acted on by stockholders at stockholder meetings.

In addition, the terms of our INOVA Geophysical joint venture with BGP and BGP’s investment
in our company contain a number of provisions, such as certain pre-emptive rights granted to BGP with
respect to certain future issuances of our stock, that could have the effect of discouraging, delaying or
preventing a merger or acquisition of our company that our stockholders may otherwise consider to be
favorable.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act

could have a material adverse effect on our stock price.

If, in the future, we fail to maintain the adequacy of our internal controls, as such standards are

modified, supplemented or amended from time to time, we may not be able to ensure that we can
conclude on an ongoing basis that we have effective internal controls over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective
internal control environment could have a material adverse effect on the price of our common stock.

Note: The foregoing factors pursuant to the Private Securities Litigation Reform Act of 1995
should not be construed as exhaustive. In addition to the foregoing, we wish to refer readers to other
factors discussed elsewhere in this report as well as other filings and reports with the SEC for a
further discussion of risks and uncertainties that could cause actual results to differ materially from
those contained in forward-looking statements. We undertake no obligation to publicly release the
result of any revisions to any such forward-looking statements, which may be made to reflect the
events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal operating facilities at December 31, 2018 were as follows:

Operating Facilities

Square
Footage

Segment

Houston, Texas . . . . . . . . . . . . . . . . . . . . . .

210,000 Global Headquarters, E&P Technology &

Harahan, Louisiana . . . . . . . . . . . . . . . . . . .

144,000 Devices group within Operations

Services and Ocean Bottom Integrated
Technologies

Chertsey, England . . . . . . . . . . . . . . . . . . . .
Edinburgh, Scotland . . . . . . . . . . . . . . . . . .

Optimization

18,000 E&P Technology & Services
16,000 Optimization Software & Services group
within Operations Optimization

388,000

Each of these operating facilities is leased by us under long-term lease agreements. These lease

agreements have terms that expire ranging from 2018 to 2030. See Footnote 14 ‘‘Operating Leases’’ of
Footnotes to Consolidated Financial Statements.

In addition, we lease offices in Dubai, UAE; Beijing, China; Rio de Janeiro, Brazil; and Moscow,

Russia to support our global sales force. We lease offices for our seismic data processing centers in
Port Harcourt, Nigeria; Luanda, Angola; Cairo, Egypt; Villahermosa, Mexico; and Rio de Janeiro,
Brazil. Our executive headquarters is located at 2105 CityWest Boulevard, Suite 100, Houston, Texas.
The machinery, equipment, buildings and other facilities owned and leased by us are considered by our
management to be sufficiently maintained and adequate for our current operations.

Item 3. Legal Proceedings

WesternGeco

A more thorough treatment of history of this litigation is set forth above in Item 1.A, ‘‘Risk
Factors’’. As noted in that section, in 2014, because a jury found that we infringed four WesternGeco
patents, the United States District Court for the Southern District of Texas (the ‘‘District Court’’)
entered a Final Judgment against us in the amount of $123.8 million ($12.5 million in reasonable
royalties, $93.4 million in lost profits, $10.9 million in pre-judgment interest on lost profits, and
$9.4 million in supplemental damages).

In 2015, the United States Court of Appeals for the Federal Circuit in Washington, D.C. (the
‘‘Court of Appeals’’) reversed, in part, the District Court, holding that the lost profits, which were
attributable to foreign seismic surveys, were not available to WesternGeco under the Patent Act. We
had recorded a loss contingency accrual of $123.8 million because of the District Court’s ruling. As a
result of the reversal by the Court of Appeals, we reduced the loss contingency accrual to $22.0 million.

On February 26, 2016, WesternGeco appealed the Court of Appeals’ decision to the Supreme

infringement, the Supreme Court remanded the case to the Court of Appeals for a determination of
whether enhanced damages were appropriate.

On November 14, 2016, the District Court ordered our sureties to pay principal and interest on

the royalty damages previously awarded. On November 25, 2016, we paid WesternGeco the
$20.8 million due pursuant to the order, and reduced our loss contingency accrual to zero.

On March 14, 2017, the District Court held a hearing on whether impose additional damages for

On June 22, 2018, the Supreme Court reversed the judgment of the Court of Appeals, held that

On July 27, 2018, the Court of Appeals vacated its September 21, 2016 judgment with respect to

We argued in our brief to the Court of Appeals that lost profits were not available to

Until the Court of Appeals’ January 11, 2019 decision issued (which is described below), the IPR

invalidation of its patents to the Court of Appeals. On May 7, 2018, the Court of Appeals affirmed the
PTAB’s invalidation of the patents, and on July 16, 2018, the Court of Appeals denied WesternGeco’s
petition for a rehearing. On December 13, 2018, WesternGeco filed a petition with the Supreme Court,
arguing that the Court of Appeals ought to have overturned the decision of the PTAB. (As of
February 7, 2019, the Supreme Court has not indicated whether it will, or will not, hear WesternGeco’s
appeal.)

In the same brief to the Court of Appeals in which we made our ‘‘direct competitor’’ argument, we

We may not ultimately prevail in the litigation and we could be required to pay some or all of the

Other Litigation

We have been named in various other lawsuits or threatened actions that are incidental to our
ordinary business. Litigation is inherently unpredictable. Any claims against us, whether meritorious or
not, could be time-consuming, cause us 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. We currently believe that the ultimate
resolution of these matters will not have a material adverse effect on our financial condition or results
of operations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Our common stock trades on the New York Stock Exchange (‘‘NYSE’’) under the symbol ‘‘IO.’’

We have not historically paid, and do not intend to pay in the foreseeable future, cash dividends

on our common stock. We presently intend to retain cash from operations for use in our business, with
any future decision to pay cash dividends on our common stock dependent upon our growth,
profitability, financial condition and other factors our board of directors consider relevant.

The terms of our Credit Facility contain covenants that restrict us from paying cash dividends on

our common stock, or repurchasing or acquiring shares of our common stock, unless (i) there is no
event of default under the Credit Facility, (ii) there is excess availability under the Credit Facility
greater than $20.0 million (or, at the time that the borrowing base formula amount is less than
$20.0 million, the borrowers’ level of liquidity (as defined in the Credit Facility) is greater than
$20.0 million) and (iii) the agent receives satisfactory projections showing that excess availability under
the Credit Facility for the immediately following period of ninety (90) consecutive days will not be less
than $20.0 million (or, at the time that the borrowing base formula amount is less than $20.0 million,
the borrowers’ level of liquidity is greater than $20.0 million). The aggregate amount of permitted cash
dividends and stock repurchases may not exceed $10.0 million in any fiscal year or $40.0 million in the
aggregate from and after the closing date of the Credit Facility.

The indenture governing the Second Lien Notes contains certain covenants that, among other
things, limit our ability to pay certain dividends or distributions on our common stock or purchase,
redeem or retire shares of our common stock, unless (i) no default under the indenture has occurred
or would occur as a result of that payment, (ii) we would have, after giving pro forma effect to the
payment, been permitted to incur at least $1.00 of additional indebtedness under a fixed charge
coverage ratio test under the indenture, and (iii) the total cumulative amount of all such payments
would not exceed a sum calculated by reference to, among other items, our consolidated net income,
proceeds from certain sales of equity or assets, certain conversions or exchanges of debt for equity and
certain other reductions in our indebtedness and in aggregate not to exceed at any one time
$25.0 million.

On December 31, 2018, there were 567 holders of record of our common stock.

On November 30, 2018, the Company’s stockholders approved certain amendments to the

Company’s Second Amended and Restated 2013 Long-term Incentive Plan (the ‘‘2013 LTIP’’) including
increasing the total number of shares of common stock available for issuance under the 2013 LTIP by
1.2 million shares, for a total of approximately 1.7 million shares, eliminating the restriction on the
number of shares in the 2013 LTIP that can be issued as full value awards and certain other technical
updates and clarifications related to Section 162(m) of the internal revenue code, as amended.

On February 21, 2018, in connection with the Public Equity Offering (as described in Footnote 12

‘‘Stockholders’ Equity and Stock-based Compensation’’ of Footnotes to the Consolidated Financial
Statements), we issued and sold 1,820,000 shares of common stock at a public offering price of $27.50
per share, and warrants to purchase an additional 1,820,000 shares of the Company’s common stock.
The net proceeds from this offering were $47.0 million, including transaction expenses. A portion of
the net proceeds were used to retire the Company’s $28.5 million Third Lien Notes in March 2018
(several weeks before their maturity date). The warrants have an exercise price of $33.60 per share, are
immediately exercisable and currently expire on March 21, 2019.

On December 14, 2017, in connection with the Equity Investment Program (as described in
Footnote 12 ‘‘Stockholders’ Equity and Stock-based Compensation’’ of Footnotes to the Consolidated

Financial Statements), we sold, in a private placement under Section 4(a)(2) of the Securities Act of
1933, as amended, 120,567 shares of our common stock at $13.05 per share (the closing price of the
our common stock on the NYSE on such date).

Item 6. Selected Financial Data

Special Items Affecting Comparability

The selected consolidated financial data set forth below under ‘‘Historical Selected Financial Data’’

with respect to our consolidated statements of operations for 2018, 2017, 2016, 2015 and 2014, and with
respect to our consolidated balance sheets at December 31, 2018, 2017, 2016, 2015 and 2014, have been
derived from our audited consolidated financial statements.

Our results of operations and financial condition have been affected by restructuring activities,
legal contingencies, dispositions, debt refinancing and impairments and write-downs of assets during the
periods presented, which affect the comparability of the financial information shown. In particular, our
results of operations for the fiscal years ended December 31, 2014 - 2018 time period were impacted by
the following items (before tax):

Years Ended December 31,

2018

2017

2016

2015

2014

(In thousands)

Cost of sales:

Write-down of multi-client data library . . . . . .
Write-down of excess and obsolete inventory . .

$
$

— $(2,304) $ — $
(665) $ (398) $ (429) $

(399) $(100,100)
(6,952)
(151) $

Operating expenses:

Impairment of long-lived assets . . . . . . . . . . . .
Write-down of receivables . . . . . . . . . . . . . . . .
Accelerated vesting and cash exercise of stock

$(36,553) $ — $ — $
— $ — $ — $
$

— $ (23,284)
(8,214)
— $

appreciation right awards . . . . . . . . . . . . . .

$ (2,105) $(6,141) $ — $

— $

—

Other income (expense):

Reversal of (accrual for) loss contingency

related to legal proceedings . . . . . . . . . . . . .
Gain on sale of Source product line . . . . . . . .
Gain on sale of cost method investments . . . . .
Recovery of INOVA bad debts . . . . . . . . . . . .
Loss on bond exchange . . . . . . . . . . . . . . . . .
Equity in losses of INOVA investments . . . . . . . .

$
$
$
$
$
$

— $(5,000) $ 1,168
— $ — $ — $
— $ — $ — $
$
— $
— $ — $(2,182) $
— $ — $ — $

$ 3,983

844

$101,978

$ 69,557
6,522
— $
5,463
— $
—
— $
— $
—
— $ (49,485)

The historical selected financial data shown below should not be considered as being indicative of

future operations, and should be read in conjunction with Item 7. ‘‘Management’s Discussion and
Analysis of Financial Condition and Results of Operations’’ and the consolidated financial statements and
the notes thereto included elsewhere in this Form 10-K.

Historical Selected Financial Data

Statement of Operations Data:
Net revenues . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . . .
Net loss applicable to common shares . . . . .
Net loss per basic share . . . . . . . . . . . . . . .
Net loss per diluted share . . . . . . . . . . . . . .
Weighted average number of common

Years Ended December 31,

2018

2017

2016

2015

2014

(In thousands, except for per share data)

$180,045
59,620
(54,272)
(71,171)

$
$

(5.20) $
(5.20) $

$197,554
75,639
(8,699)
(30,242)
(2.55)
(2.55)

$172,808
36,032
(43,171)
(65,148)

$ 221,513
8,003
(100,632)
(25,122)

$
$

(5.71) $
(5.71) $

(2.29) $
(2.29) $

$ 509,558
62,223
(117,929)
(128,252)
(11.72)
(11.72)

shares outstanding . . . . . . . . . . . . . . . . .

13,692

11,876

11,400

10,957

10,939

Weighted average number of diluted shares

outstanding . . . . . . . . . . . . . . . . . . . . . .

13,692

11,876

11,400

10,957

10,939

Balance Sheet Data (end of year):
Working capital . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(b) . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Investment in multi-client data library . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . .
Depreciation and amortization (other than

multi-client data library) . . . . . . . . . . . . .
Amortization of multi-client data library . . .

$ 20,105
244,749
121,741
7,824

$ (8,628)(a) $ 16,555
313,216
301,069
158,790
156,744
53,398
30,806

$ 93,160
435,088
182,992
112,040

$ 222,099
617,257
190,594
135,712

$ 28,276
1,514

$ 23,710
1,063

$ 14,884
1,488

$ 45,558
19,241

$ 67,785
8,264

8,763
48,988

16,592
47,102

21,975
33,335

26,527
35,784

27,656
64,374

(a) Working capital at December 31, 2017 is negative due to $28.5 million of Third Lien Notes

(redeemed March 26, 2018) being reclassified from long-term to current.

(b)

Includes current maturities of long-term debt.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note: The following should be read in conjunction with our Consolidated Financial Statements and

related Footnotes to Consolidated Financial Statements that appear elsewhere in this Annual Report on
Form 10-K. References to ‘‘Footnotes’’ in the discussion below refer to the numbered Footnotes to
Consolidated Financial Statements.

Executive Summary

Our Business

The terms ‘‘we,’’ ‘‘us’’ and similar or derivative terms refer to ION Geophysical Corporation and

its consolidated subsidiaries, except where the context otherwise requires or as otherwise indicated.

We have been a technology leader for 50 years with a strong history of innovation. While the
traditional focus of our cutting-edge technology has been on the E&P industry, we are now broadening
and diversifying our business into relevant adjacent markets such as offshore logistics, military and
marine robotics.

Leveraging innovative technologies, we create value through data capture, analysis and

optimization to enhance companies’ critical decision-making abilities and returns. Our E&P offerings

are focused on improving decision-making, enhancing reservoir management and optimizing offshore
operations. We provide our services and products through three business segments—E&P Technology &
Services, Operations Optimization and Ocean Bottom Integrated Technologies.

For a full discussion of our business, see Part I, Item 1. ‘‘Business.’’

Macroeconomic Conditions

Demand for our services and products is cyclical and dependent upon activity levels in the oil and

gas industry, particularly our customers’ willingness to invest capital in the exploration for oil and
natural gas. Our customers’ capital spending programs are generally based on their outlook for
near-term and long-term commodity prices, economic growth, commodity demand and estimates of
resource production. Third-party reports now indicate that global exploration and production spending
is expected to increase by 8% in 2019, consistent with 8% in 2018 and up from the 4% growth of 2017.
This is an improvement from the double-digit declines sustained from 2014 to 2016. In addition, this is
the second consecutive year that international spending is expected to increase, where our offerings are
more relevant.

Shale production has dominated activity during the downturn due to its competitive break-even

prices and short payback period compared to conventional exploration. However, we believe that
investment in conventional resources during the next decade will be required to meet longer-term
demand. We’re starting to see increasing pressure for a resumption in offshore investment and
exploration activity to replace reserves.

The following is a summary of recent oil and gas pricing trends:

Brent Crude
(per bbl)

West Texas
Intermediate
Crude (per bbl)

Henry Hub
Natural Gas
(per mcf)

Quarter ended

High

Low

High

Low

High

Low

12/31/2018 . . . . . . . . . . . . . . . . .
9/30/2018 . . . . . . . . . . . . . . . . . .
6/30/2018 . . . . . . . . . . . . . . . . . .
3/31/2018 . . . . . . . . . . . . . . . . . .
12/31/2017 . . . . . . . . . . . . . . . . .
9/30/2017 . . . . . . . . . . . . . . . . . .
6/30/2017 . . . . . . . . . . . . . . . . . .
3/31/2017 . . . . . . . . . . . . . . . . . .

$86.07
$82.72
$80.42
$71.08
$66.80
$59.77
$55.05
$56.34

$50.57
$68.38
$66.04
$61.94
$55.29
$46.47
$43.98
$49.56

$76.40
$74.19
$77.41
$66.27
$60.46
$52.14
$53.38
$54.48

$44.48
$65.07
$62.03
$59.20
$49.34
$44.25
$42.48
$47.00

$4.70
$3.12
$3.08
$6.24
$3.69
$3.18
$3.27
$3.71

$3.10
$2.73
$2.74
$2.49
$2.60
$2.76
$2.85
$2.44

Source: EIA.

Crude oil prices can be volatile due to a number of factors. Significant downward price volatility in

Brent crude oil began late in 2014 and reached a low average of $33 per barrel in early 2016 before
improving to approximately $55 per barrel by the end of 2016. The prices for Brent crude oil increased
to an average of $71 per barrel for the full year 2018. This represents an $18 per barrel improvement
over the average crude oil prices for the full year 2017 of $53. This price increase was due to robust
global demand and sustained OPEC production cuts, the combination of which resulted in net
inventory crude draws that reduced the overall crude surplus. Daily Brent crude oil spot prices reached
a peak of $86 per barrel in October 2018, which was the highest level since October 2014, before
falling to nearly $50 per barrel before the end of 2018. The price decrease in the latter part of 2018
reflected global oil inventory builds and record levels of production from the world’s three largest
producers—United States, Saudi Arabia and Russia. The EIA forecasts the Brent crude oil spot price
will average $61 per barrel in 2019, $11 per barrel lower than 2018, resulting from concerns of
oversupply and slower than expected pace of oil demand growth. In December 2018, OPEC and other

non-OPEC participants such as Russia reached an agreement to cut their oil production for six months
beginning January 2019 in response to increasing evidence that the global crude oil market could
become oversupplied in 2019. This production cut is expected to keep global crude oil supply and
demand in equilibrium, stabilizing prices. E&P spending is expected to increase over the near-term as
crude oil prices are forecasted to remain more stable. In 2018, Mexico’s new President has announced
that the Mexican government will not offer any new license rounds for the next three years while
assuring that existing contracts will not be cancelled. In the medium-term, global crude oil demand is
expected to continue growing while the oil & gas industry is predicted to face a supply crunch due to
unsustainably low levels of exploration investments. As a result, E&P companies are expected to
increase their focus on offshore oil exploration to replenish reserves.

Given the historical volatility of crude prices, there is a continued risk that if prices do not

continue to improve, or if they start to decline again due to high levels of crude oil production, there is
a potential for slowing growth rates in various global regions and/or for ongoing supply/demand
imbalances. If commodity prices do not continue to improve, or if they start to deteriorate again,
demand for our services and products could decline.

Impact to Our Business

While our 2018 revenues were down compared to 2017, we are seeing signs of increasing activity in

our business, primarily due to the strategic shift we made to move our offerings closer to the reservoir
and the associated continued success of our 3-D multi-client programs as well as clients starting to
renew interest in conventional reserve replacement and offshore exploration. Historically, our revenue
and EBITDA generation is lower in the first part of the year as customers tend to set budgets in the
first quarter, firm up plans through the year, and spend excess budget in the fourth quarter.
Investments in our multi-client data library are dependent upon the timing of our New Venture projects
and the availability of underwriting by our customers. We continue to maintain high standards for
underwriting new projects. Our asset light strategy enables us to scale our business to market
conditions avoiding significant fixed costs and maintaining flexibility to manage the timing and amount
of our capital expenditures.

In our E&P Technology & Services segment, our New Venture revenues experienced significant

declines compared to 2017. In the current disciplined spending environment, many clients wait to
purchase data associated with a license round until a formal public announcement has been made by
the government. Delays in license round announcements can materially impact the timing of sales in
areas where our New Venture programs are underway. Our under performance was driven by the
continued delay of the Panama license round announcement, the three-year moratorium on new
upstream licensing in Mexico and the continued focus on cash preservation within E&P companies
restricting exploration spending. Imaging Services revenues increased as a result of an increase in
proprietary ocean bottom nodal imaging projects. Our data library sales increased in 2018 compared to
2017 due to sales of the recently completed phase of the Mexico and Brazil reimaging programs, along
with sales of 2-D data libraries in Libya. We invested $28.3 million in our multi-client data library
during 2018, approximately $4.6 million and $13.4 million more compared to 2017 and 2016,
respectively.

At December 31, 2018, our E&P Technology & Services segment backlog, which consists of

commitments for (i) data processing work, (ii) New Venture projects (both multi-client and proprietary)
by our Ventures group underwritten by our customers and (iii) E&P Advisors projects, decreased 44%
to $21.9 million, compared with $39.2 million at December 31, 2017. The majority of our backlog
relates to our 3-D multi-client reimaging programs offshore Brazil and our proprietary Imaging Services
and E&P Advisors work. We anticipate that the majority of our backlog will be recognized as revenue
over the first half of 2019.

Within the Operations Optimization segment, the increase in Optimization Software & Services

revenues was due to continued increase in sales of our Gator ocean bottom command and control
system. Devices revenues continue to be impacted by reduced towed streamer seismic contractor
activity and cash preservation focus.

We have continued to evolve our strategy for our Ocean Bottom Integrated Technologies segment

It is our view that technologies that add a competitive advantage through improved imaging, lower
costs, higher productivity, or enhanced safety will continue to be valued in our marketplace. We believe
that our newest technologies, such as Marlin and 4Sea, will continue to attract customer interest,
because these technologies are designed to deliver those desirable attributes.

Key Financial Metrics

The tables below provide (i) a summary of our net revenues for our company as a whole, and by

segment, for 2018, 2017 and 2016, and (ii) an overview of other certain key financial metrics for our
company as a whole and our three business segments on a comparative basis for 2018, 2017 and 2016,
as reported and as adjusted in all three years for the special items recorded for those years.

Years Ended December 31,

2018

2017

2016

(In thousands)

Net revenues:

E&P Technology & Services:

New Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data Library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 69,685
47,095

$100,824
40,016

$ 27,362
39,989

Total multi-client revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imaging Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116,780
19,740

140,840
16,409

67,351
25,538

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$136,520

$157,249

$ 92,889

Operations Optimization:

Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Optimization Software & Services . . . . . . . . . . . . . . . . . . . . . . .

$ 22,396
21,129

$ 23,610
16,695

$ 26,746
16,756

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43,525

$ 40,305

$ 43,502

Ocean Bottom Integrated Technologies . . . . . . . . . . . . . . . . . . . . .

— $

— $ 36,417

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$180,045

$197,554

$172,808

Year Ended December 31, 2018

Year Ended December 31, 2017

Year Ended December 31, 2016

As
Reported

Special
Items

As
Adjusted

As
Reported

Special
Items

As
Adjusted

As
Reported

Special
Items

As
Adjusted

(In thousands, except per share data)

Gross profit:

E&P Technology & Services
Operations Optimization . .
Ocean Bottom Integrated

Technologies . . . . . . . .

$ 43,369
22,293

$ — $ 43,369
22,293

—

$ 65,196
20,076

$ — $ 65,196
20,076

—

$ 4,708
21,745

$ 766
188

$ 5,474
21,933

(6,042)

—

(6,042)

(9,633)

—

(9,633)

9,579

123

9,702

Total

. . . . . . . . . . . . . .

$ 59,620

$ — $ 59,620

$ 75,639

$ — $ 75,639

$ 36,032

$1,077(d)

$ 37,109

Gross margin:

E&P Technology & Services
Operations Optimization . .
Ocean Bottom Integrated

Technologies . . . . . . . .

Total

. . . . . . . . . . . . . .

Income (loss) from

operations:
E&P Technology & Services
Operations Optimization . .
Ocean Bottom Integrated

Technologies . . . . . . . .
Support and other . . . . . .

32%
51%

—%

33%

—%
—%

—%

32%
51%

—%

33%

41%
50%

—%

38%

—%
—%

—%

41%
50%

—%

38%

5%
50%

27%

21%

1%
—%

—%

6%
50%

27%

21%

$ 21,758
7,295

$ — $ 21,758
7,295

—

$ 42,505
8,022

$ — $ 42,505
8,022

—

$(16,446)
9,652

$1,128
197

$(15,318)
9,849

(47,644)
(35,681)

36,553(a)
2,105(b)

(11,091)
(33,576)

(16,259)
(42,967)

—
6,141(b)

(16,259)
(36,826)

(1,756)
(34,621)

504
180

(1,252)
(34,441)

Total

. . . . . . . . . . . . . .

$(54,272)

$38,658

$(15,614)

$ (8,699)

$ 6,141

$ (2,558)

$(43,171)

$2,009(d)

$(41,162)

Operating margin:

E&P Technology & Services
Operations Optimization . .
Ocean Bottom Integrated

Technologies . . . . . . . .
Support and other . . . . . .

Total

. . . . . . . . . . . . . .

Net income (loss) applicable

16%
17%

—%
(20)%

(30)%

—%
—%

—%
1%

21%

16%
17%

—%
(19)%

(9)%

27%
20%

—%
(22)%

(4)%

—%
—%

—%
3%

27%
20%

—%
(19)%

(1)%

(18)%
22%

(5)%
(20)%

(25)%

2%
1%

2%
—%

(16)%
23%

(3)%
(20)%

(24)%

to common shares . . . . . .

$(71,171)

$38,658

$(32,513)

$(30,242)

$11,141(c) $(19,101)

$(65,148)

$ (960)(e) $(66,108)

Diluted net income (loss) per
common share . . . . . . . .

(5.20)

$ 2.83

(2.37)

(2.55)

$ 0.94

(1.61)

(5.71)

$ (0.09)

(5.80)

(a)

(b)

(c)

(d)

(e)

Represents a write-down of the cable-based ocean bottom acquisition technologies.

Represents accelerated vesting and cash exercise of stock appreciation right awards.

In addition to item (b), also impacting net loss applicable to common shares was a loss contingency accrual of $5.0 million related
to legal proceedings.

Represents severance and facility charges related to the Company’s 2016 restructuring.

Represents a $3.9 million recovery of INOVA bad debts, partially offset by item (d).

We intend that the following discussion of our financial condition and results of operations will
provide information that will assist in understanding our consolidated financial statements, the changes
in certain key items in those financial statements from year to year, and the primary factors that
accounted for those changes.

For a discussion of factors that could impact our future operating results and financial condition,

see Item 1A. ‘‘Risk Factors’’ above.

Results of Operations

Year Ended December 31, 2018 (As Adjusted) Compared to Year Ended December 31, 2017 (As Adjusted)

Our total net revenues of $180.0 million for 2018 decreased $17.6 million, or 9%, compared to total
net revenues of $197.6 million for 2017. Our overall gross profit percentage for 2018 was 33%, compared to
a gross profit percentage of 38% for 2017. Total operating expenses as a percentage of total net revenues

for 2018 and 2017 were 42% and 40%, as adjusted, respectively. During 2018, our loss from operations was
$15.6 million, as adjusted, compared to a loss of $2.6 million, as adjusted, for 2017.

Our net loss for 2018 was $32.5 million, as adjusted, or $(2.37) per share, compared to net loss of

$19.1 million, as adjusted, or $(1.61) per share for 2017. As noted above, our net loss for 2018 and
2017 included other special items totaling $38.7 million and $11.1 million, respectively, impacting our
loss per share by $2.83 and $0.94, respectively.

Net Revenues, Gross Profits and Gross Margins

E&P Technology & Services—Net revenues for 2018 decreased by $20.7 million, or 13%, to

$136.5 million, compared to $157.2 million for 2017. Within the E&P Technology & Services segment,
total multi-client revenues were $116.8 million, a decrease of 17%, with New Venture revenues
experiencing significant declines during 2018. Partially offsetting the overall decline in New Venture
revenues was an increase in Data Library revenues, attributable to sales of the recently completed
phases of the Brazil and Mexico reimaging programs, along with sales of 2-D data libraries in Libya.
The decrease in multi-client revenues was driven by the continued delay of the Panama license round
announcement, the deferment of new E&P investments in Mexico and the continued focus on cash
preservation within E&P companies restricting exploration spending. Imaging Services revenues were
$19.7 million, a 20% increase, due to an increase in proprietary ocean bottom nodal imaging projects.

Gross profit decreased by $21.8 million to $43.4 million, representing a 32% gross margin,

compared to $65.2 million, or 41% gross margin, for 2017. The decline in gross profit and margin were
due to the decrease in New Venture revenues partly offset by the increases in Data Library and
Imaging Services revenues, as noted above.

Operations Optimization—Net revenues for 2018 increased by $3.2 million, or 8%, to $43.5 million,

compared to $40.3 million for 2017. Optimization Software & Services net revenues increased by
$4.4 million, or 26%, to $21.1 million, compared to $16.7 million for 2017 due to increase in sales of
our Gator ocean bottom command and control system. Devices revenues for 2018 decreased by
$1.2 million, or 5%, to $22.4 million, compared to $23.6 million for 2017. This decrease was due to a
decline in our repairs business due to seismic contractors focus on cash preservation and decrease in
sales of our various product offerings. Operations Optimization gross profit for 2018 increased by
$2.2 million to $22.3 million, in 2018, compared to $20.1 million, for 2017. Gross margin increased to
51% in 2018 from 50% in 2017.

Ocean Bottom Integrated Technologies—Net revenues for both 2018 and 2017 were zero. In line

with our component strategy, revenues for the elements of fully integrated 4Sea system will be
recognized in the relevant segment, either E&P Technology & Services or Operations Optimization.
Gross loss was $6.0 million for 2018 compared to gross loss of $9.6 million for 2017. This decline was
due to reduced depreciation expense as some assets were fully depreciated in late 2017 and early 2018.

Operating Expenses (As Adjusted)

The following table presents the ‘‘As Adjusted’’ in both 2018 and 2017, excluding other special

items (in thousands):

Year Ended December 31, 2018

Year Ended December 31, 2017

As Reported

Special Items

As Adjusted

As Reported

Special Items

As Adjusted

Operating expenses:

Research, development

and engineering . . . . .
Marketing and sales . . .
General, administrative
and other operating
expenses . . . . . . . . . .
Impairment of long-lived
assets . . . . . . . . . . . .

Total operating

$ 18,182
21,793

—
—

$18,182
21,793

$16,431
20,778

$ —
—

$16,431
20,778

37,364

(2,105)(a)

35,259

47,129

(6,141)(a)

40,988

36,553

(36,553)(b)

—

expenses . . . . . . . .

$113,892

$(38,658)

$75,234

$84,338

$(6,141)

$78,197

(a) Represents accelerated vesting and cash exercise of stock appreciation rights awards.

(b) Represents a write-down of the cable-based ocean bottom acquisition technologies.

Research, Development and Engineering—Research, development and engineering expense increased

$1.8 million, or 11%, to $18.2 million, for 2018, compared to $16.4 million, for 2017. Increase is
primarily driven by increased employment costs as we continue to invest in imaging algorithms and
infrastructure, devices and software. We see significant long-term potential for investing in technologies
that improve image quality, safety and productivity.

Marketing and Sales—Marketing and sales expense increased $1.0 million, or 5%, to $21.8 million,
for 2018, compared to $20.8 million, for 2017. This increase was primarily due to increased marketing
expenses to broaden and diversify our offerings into adjacent markets including consulting fees, partly
offset by decrease in commission expense.

General, Administrative and Other Operating Expenses—General, administrative and other operating

expenses decreased $5.7 million, or 14%, to $35.3 million, as adjusted, for 2018 compared to
$41.0 million, as adjusted, for 2017. The decrease was driven by reductions in bonus expense due to
current operating results.

Other Items

Interest Expense, net—Interest expense, net, of $13.0 million for 2018 compared to $16.7 million for

2017. The decrease in interest expense was a result of lower outstanding debt during 2018. For
additional information, please refer to ‘‘—Liquidity and Capital Resources—Sources of Capital’’ below.

Other Expense—Other expense for 2018 was $0.4 million compared to other expense of

$3.9 million for 2017. The difference primarily relates to changes in our accrual for loss contingency
related to the WesternGeco legal proceedings. See further discussion at Footnote 8 ‘‘Legal Matters’’ and
in Part 1, Item 3, ‘‘Legal Proceedings.’’

The following table reflects the significant items of other income (in thousands):

Years Ended
December 31,

2018

2017

Accrual for contingency related to legal proceedings (Footnote 8) .
Recovery of INOVA bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $(5,000)
844
211

—
(436)

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . .

$(436) $(3,945)

Income Tax Expense—Income tax expense for 2018 was $2.7 million compared to less than

$0.1 million for 2017. Our effective tax rates for 2018 and 2017 were 4.0% and 0.1%, respectively. The
income tax expense for 2018 and 2017 primarily relates to profits generated by our non-U.S. businesses.
Tax expense for 2018 and 2017 includes a $0.3 million and $1.3 million, respectively tax benefit for the
release of the valuation allowance against refundable U.S. alternative minimum tax (‘‘AMT’’) credits.
Tax expense has not been offset by the tax benefits on losses within the U.S. and other jurisdictions,
from which we cannot currently benefit. Our effective tax rate for 2018 was negatively impacted by the
change in valuation allowance related to U.S. operating losses for which we cannot currently recognize
a tax benefit. See further discussion of establishment of the deferred tax valuation allowance at
Footnote 7 ‘‘Income Taxes’’ of Footnotes to Consolidated Financial Statements.

Results of Operations

Year Ended December 31, 2017 (As Adjusted) Compared to Year Ended December 31, 2016 (As Adjusted)

Our total net revenues of $197.6 million for 2017 increased $24.8 million, or 14%, compared to
total net revenues of $172.8 million for 2016. Our overall gross profit percentage for 2017 was 38%,
compared to a gross profit percentage of 21%, as adjusted, for 2016. Total operating expenses as a
percentage of net revenues for 2017 and 2016 were 40% and 45%, as adjusted, respectively. During
2017, our loss from operations was $2.6 million, as adjusted, compared to a loss of $41.2 million, as
adjusted, for 2016.

Our net loss for 2017 was $19.1 million, as adjusted, or $(1.61) per share, compared to net loss of

$66.1 million, as adjusted, or $(5.80) per share for 2016. As noted above, our net loss for 2017 and
2016 included restructuring charges and other special items totaling $11.1 million and $(1.0) million,
respectively, impacting our earnings per share by $0.94 and $(0.09), respectively.

Net Revenues, Gross Profits and Gross Margins (As Adjusted for 2016)

E&P Technology & Services—Net revenues for 2017 increased by $64.4 million, or 69%, to
$157.2 million, compared to $92.9 million for 2016. Within the E&P Technology & Services, total
multi-client revenues were $140.8 million, an increase of 109%, driven by New Venture revenues from
our 3-D multi-client reimaging programs offshore Mexico and Brazil, as well as revenues from a new
2-D multi-client program in Panama and other programs that have recently been launched. Imaging
Services revenues were $16.4 million, a decrease of 36%, as result of the shift towards higher return
multi-client programs during 2017. Revenues from Data Library sales were consistent year over year.

Gross profit increased by $59.7 million to $65.2 million, representing a 41% gross margin,
compared to $5.5 million, as adjusted, or 6% gross margin, for 2016. These improvements in gross
profit and margin were due to the increase in revenues and the mix of higher margin 3-D reimaging
programs as noted above, as well as the full benefit of our cost control initiatives implemented in prior
years. These increases were partially offset by higher sales-based amortization of our multi-client data
library.

Operations Optimization—Net revenues for 2017 decreased by $3.2 million or 7% to $40.3 million
compared to $43.5 million for 2016. Devices net revenues for 2017 decreased by $3.1 million, or 12%,
to $23.6 million, compared to $26.7 million for 2016. This decrease was due to a decline in our repairs
business, partially offset by sales of new product offerings during 2017. Optimization Software &
Services net revenues remained flat at $16.7 million. Excluding the effect of foreign currencies,
Optimization Software & Services revenues were up 4% in terms of local GBP currency. Operations
Optimization gross profit for 2017 decreased by $1.9 million to $20.0 million, in 2017, compared to
$21.9 million, as adjusted, for 2016. Gross margin remained flat at 50%.

Ocean Bottom Integrated Technologies—Net revenues for 2017 were zero compared to $36.4 million

for 2016. The crew was idle throughout 2017 as we pursued additional OBS work. Gross loss was
$9.6 million for 2017 compared to gross income of $9.7 million, as adjusted, for 2016. This decline was
due to the decrease in revenues, partially offset by several cost control initiatives implemented in 2017,
including the renegotiation of our vessel leases, which reduced our vessel lease costs.

Operating Expenses (As Adjusted)

The following table presents the ‘‘As Adjusted’’ in both 2017 and 2016, excluding other special

items (in thousands):

Year Ended December 31, 2017

Year Ended December 31, 2016

As Reported Special Items(b) As Adjusted As Reported Special Items(a) As Adjusted

Operating expenses:

Research, development and

engineering . . . . . . . . . . . .
Marketing and sales . . . . . . .
General, administrative and

$16,431
20,778

$ —
—

$16,431
20,778

$ 17,833
17,371

$ (397)
(262)

$ 17,436
17,109

other operating expenses . .

47,129

(6,141)

40,988

43,999

(273)

43,726

Total operating expenses . .

$84,338

$(6,141)

$78,197

$ 79,203

$ (932)

$ 78,271

Income (loss) from

operations . . . . . . . . . . . . .

$ (8,699)

$ 6,141

$ (2,558)

$(43,171)

$2,009

$(41,162)

(a)

Includes severance affecting operating expenses.

(b) Represents accelerated vesting and cash exercise of stock appreciation rights awards.

Research, Development and Engineering—Research, development and engineering expense
decreased $1.0 million, or 6%, to $16.4 million, for 2017, compared to $17.4 million, as adjusted, for
2016. During the current down-cycle in E&P exploration spending, we have been selective in spending
on research and development (‘‘R&D’’) projects in order to reduce expenses without sacrificing our
ability to develop our technologies. As discussed above, despite the extended market downturn and
uncertainty, we see significant long-term potential for our technologies to improve OBS productivity.
We continue to invest in our 4Sea system and we expect long-term demand for OBS production surveys
(4-D) to increase.

Marketing and Sales—Marketing and sales expense increased $3.7 million, or 22%, to $20.8 million,

for 2017, compared to $17.1 million, as adjusted, for 2016. This increase was primarily due to higher
commissions driven by increased sales in the E&P Technology & Services segment.

General, Administrative and Other Operating Expenses—General, administrative and other operating
expenses decreased $2.7 million, as adjusted, or 6%, to $41.0 million, as adjusted for 2017 compared to
$43.7 million, as adjusted, for 2016. This decrease for 2017 was primarily due to the full benefit of our
cost control initiatives implemented in prior years.

Other Items

Interest Expense, net—Interest expense, net, of $16.7 million for 2017 compared to $18.5 million for

2016. This improvement was primarily due to reduced debt caused by the bond exchange during 2016.
For additional information, please refer to ‘‘—Liquidity and Capital Resources—Sources of Capital’’
below.

Other Income (Expense)—Other income (expense) for 2017 was $(3.9) million compared to other

income of $1.4 million for 2016. The difference primarily relates to changes in our accrual for loss
contingency related to a legal matter. See further discussion at Footnote 8 ‘‘Legal Matters’’ and in
Part 1, Item 3, ‘‘Legal Proceedings.’’

The following table reflects the significant items of other income (in thousands):

Years Ended
December 31,

2017

2016

Reduction of (accrual for) loss contingency related to legal

proceedings (Footnote 8) . . . . . . . . . . . . . . . . . . . . . . . . . .
Recovery of INOVA bad debts . . . . . . . . . . . . . . . . . . . . . . . .
Loss on bond exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(5,000)
844
—
211
$(3,945)

$ 1,168
3,983
(2,182)
(1,619)
$ 1,350

Income Tax Expense—Income tax expense for 2017 was less than $0.1 million compared to
$4.4 million for 2016. Our effective tax rates for 2017 and 2016 were (0.1)% and (7.3)%, respectively.
The income tax expense for 2017 and 2016 primarily relates to results generated by our non-U.S.
businesses. Tax expense for 2017 includes a $1.3 million tax benefit for the release of the valuation
allowance against refundable U.S. alternative minimum tax (‘‘AMT’’) credits. Tax expense has not been
offset by the tax benefits on losses within the U.S. and other jurisdictions, from which we cannot
currently benefit. Our effective tax rate for 2017 was negatively impacted by the change in valuation
allowance related to U.S. operating losses for which we cannot currently recognize a tax benefit. See
further discussion of establishment of the deferred tax valuation allowance at Footnote 7 ‘‘Income
Taxes’’ of Footnotes to Consolidated Financial Statements.

Liquidity and Capital Resources

Sources of Capital

As of December 31, 2018, we had total liquidity of $75.5 million, consisting of $33.6 million in cash

on hand and $41.9 million of available borrowing capacity under the Credit Facility. Our cash
requirements include working capital requirements and cash required for our debt service payments,
multi-client seismic data acquisition activities and capital expenditures. As of December 31, 2018, we
had working capital of $20.1 million. Working capital requirements are primarily driven by our
investment in our (i) multi-client data library ($28.3 million in 2018) and royalty payments for multi-
client sales. Also, our headcount has traditionally been a significant driver of our working capital needs.
As a significant portion of our business is involved in the planning, processing and interpretation of
seismic data, one of our largest investments is in our employees, which involves cash expenditures for
their salaries, bonuses, payroll taxes and related compensation expenses, typically in advance of related
revenue billings and collections.

Our working capital requirements may change from time to time depending upon many factors,

including our operating results and adjustments in our operating plan in response to industry
conditions, competition and unexpected events. In recent years, our primary sources of funds have been
cash flows generated from operations, existing cash balances, debt and equity issuances and borrowings
under our revolving credit facility.

Public Equity Offering and Retirement of Debt

On February 21, 2018, we announced our successful completion of a public equity offering to begin

de-levering our balance sheet. We issued and sold 1,820,000 shares of common stock at a public
offering price of $27.50 per share, and warrants to purchase an additional 1,820,000 shares of our
common stock. The net proceeds from this offering were $47.0 million, including transaction expenses.
A portion of the net proceeds were used to retire our $28.5 million Third Lien Notes in March 2018
(several weeks before their maturity date). The warrants have an exercise price of $33.60 per share, are
immediately exercisable and expire on March 21, 2019.

Equity Investment Program

To encourage our executive officers and other key employees to purchase our common stock and

further align their interests with those of our stockholders, the Board authorized and approved an
equity investment program pursuant to which certain of our executive officers and other key employees
are permitted, but not obligated, to purchase unregistered shares of our common stock directly from
the Company at market prices. In connection with any such purchases, the Committee authorized and
approved, on December 13, 2017, a grant by us to such purchasing executive officers and key
employees of a certain number of shares of restricted stock. On December 13, 2017, the Committee
also authorized and approved to grant to certain executive officers and key employees a certain number
of shares of restricted stock in connection with certain purchases of shares of our common stock in the
open market.

On December 14, 2017, we sold, in a private placement under Section 4(a)(2) of the Securities Act
of 1933, as amended, 120,567 shares of our common stock at $13.05 per share (the closing price of the
our common stock on the NYSE on such date) and executive officers and other key employees
purchased 219,346 shares in the open market.

Revolving Credit Facility

On August 16, 2018, we and our material U.S. subsidiaries; GX Technology Corporation, ION
Exploration Products (U.S.A) and I/O Marine Systems, Inc. (the ‘‘Material U.S. Subsidiaries’’), along
with GX Geoscience Corporation, S. de R.L. de C.V., a limited liability company (Sociedad de
Responsibilidad Limitada de Capital Variable) organized under the laws of Mexico, and a subsidiary of
the Company (the ‘‘Mexican Subsidiary,’’) (the Material U.S. Subsidiaries and the Mexican Subsidiary
are collectively, the ‘‘Subsidiary Borrowers’’, together with ION Geophysical Corporation are the
‘‘Borrowers’’), the financial institutions party thereto, as lenders, and PNC Bank, National Association
(‘‘PNC’’), as agent for the lenders, entered into that certain Third Amendment and Joinder to
Revolving Credit and Security Agreement (the ‘‘Third Amendment’’), amending the Revolving Credit
and Security Agreement, dated as of August 22, 2014 (as previously amended by the First Amendment
to Revolving Credit and Security Agreement, dated as of August 4, 2015 and the Second Amendment
to Revolving Credit and Security Agreement, dated as of April 28, 2016, the ‘‘Credit Agreement’’). The
Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third
Amendment is herein called, the ‘‘Credit Facility’’).

The Third Amendment amends the Credit Agreement to, among other things:

(cid:129) extend the maturity date of the Credit Facility by approximately four years (from August 22,
2019 to August 16, 2023), subject to the retirement or extension of the maturity date of the
Second Lien Notes, as defined below, which mature on December 15, 2021;

(cid:129) increase the maximum revolver amount by $10 million (from $40 million to $50 million);

(cid:129) increase the borrowing base percentage of the net orderly liquidation value as it relates to the

multi-client data library (not to exceed $28.5 million, up from the previous maximum of
$15 million for the multi-client data library component);

(cid:129) include the eligible billed receivables of the Mexican Subsidiary up to a maximum of $5 million
in the borrowing base calculation and joins the Mexican Subsidiary as a borrower thereunder
(with a maximum exposure of $5 million) and require the equity and assets of the Mexican
Subsidiary to be pledged to secure obligations under the Credit Facility;

(cid:129) modify the interest rate such that the maximum interest rate remains consistent with the fixed
interest rate prior to the Third Amendment (that is, 3.00% per annum for domestic rate loans
and 4.00% per annum for LIBOR rate loans), but now lowers the range down to a minimum
interest rate of 2.00% for domestic rate loans and 3.00% for LIBOR rate loans based on a
leverage ratio for the preceding four-quarter period;

(cid:129) decrease the minimum excess borrowing availability threshold which (if the Borrowers have

minimum excess borrowing availability below any such threshold) triggers the agent’s right to
exercise dominion over cash and deposit accounts; and

(cid:129) modify the trigger required to test for compliance with the fixed charge coverage ratio.

The borrowing base under the Credit Facility will increase or decrease monthly using a formula
based on certain eligible receivables, eligible inventory and other amounts, including a percentage of
the net orderly liquidation value of our multi-client data library. As of December 31, 2018, the
borrowing base under the Credit Facility was $41.9 million, and there was no outstanding indebtedness
under the Credit Facility.

The Credit Facility requires us to maintain compliance with various covenants. At December 31,

2018, we were in compliance with all of the covenants under the Credit Facility. For further
information regarding our Credit Facility see Footnote 5 ‘‘Long-term Debt and Lease Obligations’’ of
Footnotes to Consolidated Financial Statements.

Senior Secured Notes

As of December 31, 2018, ION Geophysical Corporation’s 9.125% Senior Secured Second Priority

Notes due December 2021 (the ‘‘Second Lien Notes’’) had an outstanding principal amount of
$120.6 million. Prior to its early redemption, ION Geophysical Corporation’s 8.125% Senior Secured
Second-Priority Notes due May 2018 (the ‘‘Third Lien Notes’’) had an aggregate principal amount of
$28.5 million. In March 2018, ION Geophysical Corporation obtained consent from a majority of the
Second Lien Notes holders and from PNC to redeem, in full, the Third Lien Notes prior to their stated
maturity. On March 26, 2018, ION Geophysical Corporation redeemed the Third Lien Notes by paying
the then outstanding principal amount, plus all accrued and unpaid interest through the redemption
date.

The Second Lien Notes remain outstanding and are senior secured second-priority obligations
guaranteed by the Material U.S. Subsidiaries and the Mexican Subsidiary. Interest on the Second Lien
Notes accrues at the rate of 9.125% per annum and is payable semiannually in arrears on June 15 and
December 15 of each year during their term, except that the interest payment otherwise payable on
June 15, 2021 will be payable on December 15, 2021.

The April 2016 indenture governing the Second Lien Notes contains certain covenants that, among

other things, limits or prohibits our ability and the ability of our restricted subsidiaries to take certain
actions or permit certain conditions to exist during the term of the Second Lien Notes, including
among other things, incurring additional indebtedness in excess of permitted indebtedness, creating
liens, paying dividends and making other distributions in respect of our capital stock, redeeming our

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 Second Lien Notes Indenture are subject to certain exceptions
and qualifications. All of our subsidiaries are currently restricted subsidiaries.

As of December 31, 2018, we are in compliance with the covenants with respect to the Second

Lien Notes.

On or after December 15, 2019, we may on one or more occasions redeem all or a part of the
Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest and
special interest, if any, on the Second Lien Notes redeemed during the twelve-month period beginning
on December 15th of the years indicated below:

Date

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percentage

105.500%
103.500%
100.000%

Meeting our Liquidity Requirements

As of December 31, 2018, our total outstanding indebtedness (including capital lease obligations)

was approximately $121.7 million, consisting primarily of approximately $120.6 million outstanding
Second Lien Notes (maturing in December 2021) and $2.9 million of capital leases, partially offset by
$2.9 million of debt issuance costs. As of December 31, 2018, there was no outstanding indebtedness
under our Credit Facility.

For 2018, total capital expenditures, including investments in our multi-client data library, were
$29.8 million. We currently expect that our capital expenditures, including investments in our multi-
client data library, will be a range of $40.0 million to $60.0 million in 2019. Investments in our multi-
client data library are dependent upon the timing of our New Venture projects and the availability of
underwriting by our customers.

We believe that our existing cash balance, cash from operations and undrawn availability under our

Credit Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months.
However, as described at Part I, Item 3. ‘‘Legal Proceedings,’’ there are possible scenarios involving an
outcome in the WesternGeco lawsuit that could materially and adversely affect our liquidity.

Cash Flow from Operations

Net cash provided by operating activities was $7.1 million for 2018, compared to $27.6 million for

2017. The decrease was driven by lower revenue activity compared to 2017, payment of $3.75 million
damages payment for the WesternGeco lawsuit, reductions in accounts payable and accrued expenses
and increase in our combined accounts and unbilled receivable balance.

Net cash provided by operating activities was $27.6 million for 2017, compared to $1.0 million for

2016. The increase in net cash provided by operations was due to a significant increase in New Venture
revenues in 2017, compared to 2016 and due to $20.8 million damages payment in 2016 for the
WesternGeco lawsuit, which was partially offset by increases in unbilled receivables as of December 31,
2017.

Cash Flow Used In Investing Activities

Net cash flow used in investing activities was $29.8 million for 2018, compared to $24.8 million for

2017. The principal uses of cash in our investing activities during 2018 were $28.3 million of

investments in our multi-client data library and $1.5 million of investments in property, plant and
equipment.

Net cash flow used in investing activities was $24.8 million for 2017, compared to $13.6 million for

2016. The principal uses of cash in our investing activities during 2017 were $23.7 million of
investments in our multi-client data library and $1.1 million of investments in property, plant and
equipment.

Cash Flow Used in Financing Activities

Net cash flow provided by financing activities was $3.8 million for 2018, compared to $3.6 million
of net cash flow used in financing activities for 2017. The net cash flow provided by financing activities
during 2018 was primarily related to $47.0 million of net cash received from our public equity offering,
partially offset by $30.8 million of payments on long-term debt including equipment capital leases and a
$10.0 million repayment of our Credit Facility.

Net cash flow used in financing activities was $3.6 million for 2017, compared to $21.6 million of

net cash flow used in financing activities for 2016. The net cash flow used in financing activities during
2017 was primarily related to $4.8 million of payments on long-term debt related to equipment capital
leases, partially offset by $1.6 million of proceeds from employee stock purchases.

Inflation and Seasonality

Inflation in recent years has not had a material effect on our costs of goods or labor, or the prices

for our products or services. Traditionally, our business has been seasonal, with strongest demand
typically in the second half of our fiscal year.

Future Contractual Obligations

The following table sets forth estimates of future payments of our consolidated contractual

obligations, as of December 31, 2018 (in thousands):

Contractual Obligations

. . . . . . . . . . . .
Long-term and short-term debt
Interest on long-term debt obligations
. . . . . . .
Equipment capital lease obligations . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . . . .

Total

$121,728
34,901
2,938
68,938
2,908

Less Than
1 Year

1 - 3
Years

3 - 5
Years

More Than
5 Years

$ 1,159
11,344
1,069
13,248
2,908

$120,569
23,236
1,869
34,753
—

$ — $ —
—
—
7,023
—

321
—
13,914
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$231,413

$29,728

$180,427

$14,235

$7,023

The long-term and short-term debt at December 31, 2018 included $120.6 million of principal

indebtedness outstanding under our Second Lien Notes that mature in December 2021. The
$2.9 million of equipment capital lease obligations relates to Imaging Services’ financing of computer
and other equipment purchases.

The operating lease commitments at December 31, 2018 relate to our leases for certain equipment,

offices, processing centers, and warehouse space. Our purchase obligations primarily relate to our
committed inventory purchase orders under which deliveries of inventory are scheduled to be made in
2019.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with generally accepted
accounting principles in the United States requires management to make choices between acceptable
methods of accounting and to use judgment in making estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the
reported amounts of revenue and expenses. The following accounting policies are based on, among
other things, judgments and assumptions made by management that include inherent risk and
uncertainties. Management’s estimates are based on the relevant information available at the end of
each period. We believe that all of the judgments and estimates used to prepare our financial
statements were reasonable at the time we made them, but circumstances may change requiring us to
revise our estimates in ways that could be materially adverse to our results of operations and financial
condition. We describe our significant accounting policies more fully in Footnote 1 ‘‘Summary of
Significant Accounting Policies’’ of Footnotes to Consolidated Financial Statements.

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Codification Topic 606—Revenue from
Contracts with Customers and all the related amendments, (‘‘ASC 606’’) using the modified retrospective
method. This standard applies to all contracts with customers, except for contracts that are within the
scope of other standards, such as leases, insurance, collaborative arrangements and financial
instruments. The adoption of ASC 606 did not have a material impact on our consolidated balance
sheets or consolidated statements of operations for any of our reporting segments.

We derive revenue from the sale or license of (i) multi-client and proprietary data, imaging
services and E&P Advisors consulting services within our E&P Technology & Services segment;
(ii) seismic data acquisition systems and other seismic equipment, (iii) seismic command and control
software systems and software solutions for operations management within our Operations
Optimization segment; and (iv) a full suite of technology and services within our Ocean Bottom
Integrated Technologies segment. All revenues of the E&P Technology & Services and Ocean Bottom
Integrated Technologies segments and the services component of revenues for the Optimization
Software & Services group as part of the Operations Optimization segment are classified as services
revenues. All other revenues are classified as product revenues.

We use a five-step model to determine proper revenue recognition from customer contracts.

Revenue is recognized when (i) a contract is approved by all parties; (ii) the goods or services promised
in the contract are identified; (iii) the consideration we expect to receive in exchange for the goods or
services promised is determined; (iv) the consideration is allocated to the goods and services in the
contract; and (v) control of the promised goods or services is transferred to the customer. We do not
disclose the value of contractual future performance obligations such as backlog with an original
expected length of one year or less.

Multi-client and Proprietary Surveys, Imaging Services and E&P Advisors Services—As multi-client
seismic surveys are being designed, acquired or processed (the ‘‘New Venture’’ phase), we enter into
non-exclusive licensing arrangements with our customers, who pre-fund or underwrite these programs
in part. License revenues from these surveys are recognized during the New Venture phase as the
seismic data is acquired and/or processed on a proportionate basis as work is performed and control is
transferred to the customer. Under this method, we recognize revenue based upon quantifiable
measures of progress, such as kilometers acquired or surveys of performance completed to date. Upon
completion of a multi-client seismic survey, it is considered ‘‘on-the-shelf,’’ and licenses to the survey
data are granted to customers on a non-exclusive basis.

We also perform seismic surveys, imaging and other services under contracts to specific customers,

whereby the seismic data is owned by those customers. We recognize revenue as the seismic data is

acquired and/or processed on a proportionate basis as work is performed. We use quantifiable
measures of progress consistent with our multi-client seismic surveys.

Acquisition Systems and Other Seismic Equipment—For sales of seismic data acquisition systems and

other seismic equipment, we recognize revenue when control of the goods has transferred to the
customer. Transfer of control generally occurs when (i) we have a present right to payment; (ii) the
customer has legal title to the asset; (iii) we have transferred physical possession of the asset; and
(iv) the customer has significant rewards of ownership; or (v) the customer has accepted the asset.

Software—Licenses for our navigation, survey design and quality control software systems provide
the customer with a right to use the software. We offer usage-based licenses under which we receive a
monthly fee based on the number of vessels and licenses used. For these usage-based licenses, revenue
is recognized as the performance obligations are performed over the contract term, which is generally
two to five years. In addition to usage-based licenses, we offer perpetual software licenses as it exists
when made available to the customer. Revenue from these licenses is recognized upfront at the point in
time when the software is made available to the customer.

These arrangements generally include us providing related services, such as training courses,
engineering services and annual software maintenance. We allocate consideration to each element of
the arrangement based upon directly observable or estimated standalone selling prices. Revenue is
recognized for these services as control transfers to the customer over time.

Ocean Bottom Integrated Technologies—We recognize revenue as the seismic data is acquired and
control transfers to the customer. We use quantifiable measures of progress consistent with our multi-
client surveys. In connection with acquisition contracts, we may receive revenues for preparation and
mobilization of equipment and personnel, capital improvements to vessels, or demobilization activities.
We defer the revenues earned and incremental costs incurred that are directly related to these activities
and recognizes such revenues and costs over the primary contract term of the acquisition project as we
transfer the goods and services to the customer. We recognize the costs of relocating vessels without
contracts to more promising market sectors as such costs are incurred.

Multi-Client Data Library

Our multi-client data library consists of seismic surveys that are offered for licensing to customers
on a non-exclusive basis. The capitalized costs include the costs paid to third parties for the acquisition
of data and related activities associated with the data creation activity and direct internal processing
costs, such as salaries, benefits, computer-related expenses and other costs incurred for seismic data
project design and management. For 2018, 2017 and 2016, we capitalized, as part of our multi-client
data library, $11.9 million, $12.7 million and $6.6 million, respectively, of direct internal processing
costs.

Our method of amortizing the costs of an in-process multi-client survey (the period during which

the seismic data is being acquired or processed, the New Venture phase) consists of determining the
percentage of actual revenue recognized to the total estimated revenues (which includes both revenues
estimated to be realized during the New Venture phase and estimated revenues from the licensing of
the resulting ‘‘on-the-shelf’’ survey data) and multiplying that percentage by the total cost of the project
(the sales forecast method). We consider a multi-client survey to be complete when all work on the
creation of the seismic data is finished and that survey is available for licensing.

Once a multi-client data survey is completed, the data survey is considered ‘‘on-the-shelf’’ and our
method of amortization is then the greater of (i) the sales forecast method or (ii) the straight-line basis
over a four-year period. The greater amount of amortization resulting from the sales forecast method
or the straight-line amortization policy is applied on a cumulative basis at the individual survey level.
Under this policy, we first record amortization using the sales forecast method. The cumulative

amortization recorded for each survey is then compared with the cumulative straight-line amortization.
The four-year period utilized in this cumulative comparison commences when the data survey is
determined to be complete. If the cumulative straight-line amortization is higher for any specific survey,
additional amortization expense is recorded, resulting in the accumulated amortization being equal to
the cumulative straight-line amortization for that survey. We have determined the amortization period
to be four years based upon our historical experience that indicates that the majority of our revenues
from multi-client surveys are derived during the acquisition and processing phases and during the four
years subsequent to survey completion.

Estimated sales are determined based upon discussions with our customers, our experience and our

knowledge of industry trends. Changes in sales estimates may have the effect of changing the
percentage relationship of cost of services to revenue. In applying the sales forecast method, an
increase in the projected sales of a survey will result in lower cost of services as a percentage of
revenue and higher earnings when revenue associated with that particular survey is recognized, while a
decrease in projected sales will have the opposite effect. Assuming that the overall volume of sales mix
of surveys generating revenue in the period was held constant in 2018, an increase of 10% in the sales
forecasts of all surveys would have increased our amortization expense by approximately $1.5 million.

We estimate the ultimate revenue expected to be derived from a particular seismic data survey
over its estimated useful economic life to determine the costs to amortize, if greater than straight-line
amortization. That estimate is made by us at the project’s initiation. For a completed multi-client
survey, we review the estimate quarterly. If during any such review, we determine that the ultimate
revenue for a survey is expected to be materially more or less than the original estimate of total
revenue for such survey, we decrease or increase (as the case may be) the amortization rate
attributable to the future revenue from such survey. In addition, in connection with such reviews, we
evaluate the recoverability of the multi-client data library, and, if required, record an impairment
charge with respect to such data.

Reserve for Excess and Obsolete Inventories

Our reserve for excess and obsolete inventories is based on historical sales trends and various
other assumptions and judgments, including future demand for our inventory, the timing of market
acceptance of our new products and the risk of obsolescence driven by new product introductions.
When we record a charge for excess and obsolete inventories, the amount is applied as a reduction in
the cost basis of the specific inventory item for which the charge was recorded. Should these
assumptions and judgments not be realized for these or for other reasons, our reserve would be
adjusted to reflect actual results. Our industry is subject to technological change and new product
development that could result in obsolete inventory. Our reserve for inventory at December 31, 2018
and 2017 was $15.0 million.

Goodwill

Goodwill is allocated to our reporting units, which is either the operating segment or one reporting

level below the operating segment. For purposes of performing the impairment test for goodwill, we
established the following reporting units: E&P Technology & Services, Optimization Software &
Services, Devices, and Ocean Bottom Integrated Technologies. To determine the fair value of our
reporting units, we use a discounted future returns valuation method. If we had established different
reporting units or utilized different valuation methodologies, our impairment test results could differ.
Additionally, we compared the sum of the estimated fair values of the individual reporting units less
consolidated debt to our overall market capitalization as reflected by our stock price.

We evaluate the carrying value of our goodwill at least annually for impairment, or more

frequently if facts and circumstances indicate that it is more likely than not impairment has occurred.

We formally evaluate the carrying value of our goodwill for impairment as of December 31 for each of
our reporting units. We first perform a qualitative assessment by evaluating relevant events or
circumstances to determine whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount. If we are unable to conclude qualitatively that it is more likely than not
that a reporting unit’s fair value exceeds its carrying value, then we will use a two-step quantitative
assessment of the fair value of a reporting unit. If the carrying value of a reporting unit of an entity
that includes goodwill is determined to be more than the fair value of the reporting unit, there exists
the possibility of impairment of goodwill. An impairment loss of goodwill is measured in two steps by
first allocating the fair value of the reporting unit to net assets and liabilities including recorded and
unrecorded other intangible assets to determine the implied carrying value of goodwill. The next step is
to measure the difference between the carrying value of goodwill and the implied carrying value of
goodwill, and, if the implied carrying value of goodwill is less than the carrying value of goodwill, an
impairment loss is recorded equal to the difference.

The goodwill balance as of December 31, 2018 was comprised of $20.0 million in our Optimization
Software & Services and $2.9 million in our E&P Technology & Services reporting units. Based on our
qualitative assessment performed as of December 31, 2018, we concluded it was more likely than not
that the fair values of our E&P Technology & Services, and Optimization Software & Services reporting
units exceeded their carrying values. Accordingly, no further testing was required and no impairment
was recognized. However, if the market value of our shares declines for a prolonged period, and if
management’s judgments and assumptions regarding future industry conditions and operations diminish,
it is reasonably possible that our expectations of future cash flows may decline and ultimately result in
a goodwill impairment for our E&P Technology & Services and Optimization Software & Services
reporting units.

Property, Plant, Equipment and Seismic Rental Equipment

Property, plant, equipment and seismic rental equipment are stated at cost. Depreciation expense

is provided straight-line over their estimated useful lives.

Expenditures for renewals and betterments are capitalized; repairs and maintenance are charged to
expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are
removed from the accounts and any gain or loss is reflected in operating expenses.

We evaluate the recoverability of our property, plant, equipment and seismic rental equipment,

when indicators of impairment exist, relying on a number of factors including operating results,
business plans, economic projections and anticipated future cash flows. Impairment in the carrying
value of an asset held for use is recognized whenever anticipated future undiscounted cash flows from
an asset are estimated to be less than its carrying value. The amount of the impairment recognized is
the difference between the carrying value of the asset and its fair value. For 2018, we identified an
indicator of impairment as it relates to our cable-based ocean bottom acquisition technologies. As a
result, we recognized an impairment charge of $36.6 million.

Deferred Tax Assets

We established a valuation allowance on a substantial majority of our U.S. net deferred tax assets.

A valuation allowance is established or maintained when it is ‘‘more likely than not’’ that all or a
portion of deferred tax assets will not be realized. We will continue to record a valuation allowance for
the substantial majority of all of our deferred tax assets until there is sufficient evidence to warrant
reversal. In the event our expectations of future operating results change, an additional valuation
allowance may be required to be established on our existing unreserved net U.S. deferred tax assets. As
a result of passage of the Tax Cut and Jobs Act (the ‘‘Act’’) on December 22, 2017, the Company’s U.S.

deferred tax assets, liabilities, and associated valuation allowance as of December 31, 2018 and 2017
have been re-measured at the new U.S. federal tax rate of 21%.

Stock-Based Compensation

We estimate the value of stock-based payment awards on the date of grant using an option pricing
model such as Black-Scholes or Monte Carlo simulation. The determination of the fair value of stock-
based payment awards is affected by our stock price as well as assumptions regarding a number of
subjective variables. These variables include, but are not limited to, expected stock price volatility over
the term of the awards, actual and projected stock-based instrument exercise behaviors, risk-free
interest rate and expected dividends. Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. We recognize stock-
based compensation expense on the straight-line basis over the requisite service period of each award
that are ultimately expected to vest. As it relates to our SARs, in the event that the market price of
our common stock increases, our expectation of participants’ expected exercise behavior and risk free
interest rate change in the future, we may have to recognize additional SARs expense that could
ultimately affect our operating results and cash flows.

Foreign Sales Risks

For 2018, we recognized $68.9 million of sales to customers in Latin America, $31.1 million of
sales to customers in Europe, $17.8 million of sales to customers in Asia Pacific, $10.8 million of sales
to customers in Africa, $5.5 million of sales to customers in the Middle East and $1.4 million of sales
to customers in the Commonwealth of Independent States, or former Soviet Union (‘‘CIS’’). The
majority of our foreign sales are denominated in U.S. dollars. For 2018, 2017 and 2016, international
sales comprised 75%, 76% and 78%, respectively, of total net revenues. The volatility in oil prices have
continued to impact the global market through 2018. Our results of operations, liquidity and financial
condition related to our operations in Russia are primarily denominated in U.S. dollars. To the extent
that world events or economic conditions negatively affect our future sales to customers in many
regions of the world, as well as the collectability of our existing receivables, our future results of
operations, liquidity and financial condition would be adversely affected.

Off-Balance Sheet Arrangements

Variable interest entities. As of December 31, 2018, our investment in INOVA Geophysical
constitutes an investment in a variable interest entity, as that term is defined in Accounting Standards
Codification Topic 810-10 ‘‘Consolidation—Overall’’ and as defined in Item 303(a)(4)(ii) of SEC
Regulation S-K. See Footnote 1 ‘‘Summary of Significant Accounting Policies-Equity Method Investments’’
of Footnotes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional
information.

Indemnification

In the ordinary course of our business, we enter into contractual arrangements with our customers,

suppliers and other parties under which we may agree to indemnify the other party to such
arrangement from certain losses it incurs relating to our products or services or for losses arising from
certain events as defined within the particular contract. Some of these indemnification obligations may
not be subject to maximum loss limitations. Historically, payments we have made related to these
indemnification obligations have been immaterial.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Our primary

market risks include risks related to interest rates and foreign currency exchange rates.

Interest Rate Risk

As of December 31, 2018, we had outstanding total indebtedness of approximately $121.7 million.

As of December 31, 2018, all of this indebtedness, other than borrowings under our Credit Facility
(described below) accrues interest at fixed interest rates.

As our borrowings under the Credit Facility are subject to variable interest rates, we are subject to
interest rate risk to the extent we have outstanding balances under the Credit Facility. We are therefore
impacted by changes in LIBOR and/or our bank’s base rates. We may, from time to time, use
derivative financial instruments to help mitigate rising interest rates under our Credit Facility. We do
not use derivatives for trading or speculative purposes and only enter into contracts with major
financial institutions based on their credit rating and other factors.

Foreign Currency Exchange Rate Risk

Our operations are conducted in various countries around the world, and we receive revenue from

these operations in a number of different currencies with the most significant of our international
operations using British Pounds Sterling. As such, our earnings are subject to movements in foreign
currency exchange rates when transactions are denominated in currencies other than the U.S. dollar,
which is our functional currency, or the functional currency of many of our subsidiaries, which is not
necessarily the U.S. dollar. To the extent that transactions of these subsidiaries are settled in currencies
other than the U.S. dollar, a devaluation of these currencies versus the U.S. dollar could reduce the
contribution from these subsidiaries to our consolidated results of operations as reported in U.S.
dollars.

Through our subsidiaries, we operate in a wide variety of jurisdictions, including the United

Kingdom, Brazil, Mexico, China, Canada, Russia, the United Arab Emirates, Egypt and other
countries. Our financial results may be affected by changes in foreign currency exchange rates. Our
consolidated balance sheets at December 31, 2018 reflected approximately $9.2 million of net working
capital related to our foreign subsidiaries, a majority of which is within the United Kingdom and Brazil.
Our foreign subsidiaries receive their income and pay their expenses primarily in their local currencies.
To the extent that transactions of these subsidiaries are settled in the local currencies, a devaluation of
these currencies versus the U.S. dollar could reduce the contribution from these subsidiaries to our
consolidated results of operations as reported in U.S. dollars. For the year ended December 31, 2018,
we recorded net foreign currency losses of approximately $0.4 million in other income, a majority of
these losses are due to currency fluctuations related to our operations within Brazil and the United
Kingdom.

Item 8. Financial Statements and Supplementary Data

The financial statements and related notes thereto required by this item begin at page F-1 hereof.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures are

designed to ensure that information required to be disclosed in the reports we file with or submit to

the SEC under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), is recorded,
processed, summarized and reported within the time period specified by the SEC’s rules and forms.
Disclosure controls and procedures are defined in Rule 13a-15(e) under the Exchange Act, and they
include, without limitation, controls and procedures designed to ensure that information required to be
disclosed under the Exchange Act is accumulated and communicated to management, including the
principal executive officer and the principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure.

Our management carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of December 31, 2018. Based upon that evaluation, our principal
executive officer and principal financial officer have concluded that our disclosure controls and
procedures were effective as of December 31, 2018.

(b) Management’s Report on Internal Control Over Financial Reporting. Our management is
responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes those policies and
procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of the assets of our company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of our company are being made only in
accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use or disposition of our assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal

executive officer and principal financial officer, we assessed the effectiveness of our internal control
over financial reporting as of December 31, 2018 based upon criteria established in the 2013 Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (‘‘COSO’’).

The independent registered public accounting firm that has also audited our consolidated financial

statements included in this Annual Report on Form 10-K has issued an audit report on our internal
control over financial reporting. This report appears below.

control over financial reporting that occurred during the three months ended December 31, 2018,
which has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

ION Geophysical Corporation

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of ION Geophysical Corporation
(a Delaware corporation) and subsidiaries (the ‘‘Company’’) as of December 31, 2018, based on criteria
established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (‘‘COSO’’). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2018, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board (United States) (‘‘PCAOB’’), the consolidated financial statements of the Company as
of and for the year ended December 31, 2018, and our report dated February 7, 2019 expressed an
unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial

reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

/s/ GRANT THORNTON LLP

Houston, Texas

February 7, 2019

Item 9B. Other Information

Not applicable.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

Reference is made to the information appearing in the definitive proxy statement, under ‘‘Item 1—

Election of Directors,’’ for our annual meeting of stockholders to be held on May 15, 2019 (the ‘‘2019
Proxy Statement’’) to be filed with the SEC with respect to Directors, Executive Officers and Corporate
Governance, which is incorporated herein by reference and made a part hereof in response to the
information required by Item 10.

Item 11. Executive Compensation

Reference is made to the information appearing in the 2019 Proxy Statement, under ‘‘Executive

Compensation,’’ to be filed with the SEC with respect to Executive Compensation, which is
incorporated herein by reference and made a part hereof in response to the information required by
Item 11.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

Reference is made to the information appearing in the 2019 Proxy Statement, under ‘‘Item 1—
Ownership of Equity Securities of ION’’ and ‘‘Equity Compensation Plan Information,’’ to be filed with
the SEC with respect to Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters, which is incorporated herein by reference and made a part hereof in
response to the information required by Item 12.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Reference is made to the information appearing in the 2019 Proxy Statement, under ‘‘Item 1—
Certain Transactions and Relationships,’’ to be filed with the SEC with respect to Certain Relationships
and Related Transactions and Director Independence, which is incorporated herein by reference and
made a part hereof in response to the information required by Item 13.

Item 14. Principal Accounting Fees and Services

Reference is made to the information appearing in the 2019 Proxy Statement, under ‘‘Principal
Auditor Fees and Services,’’ to be filed with the SEC with respect to Principal Accountant Fees and
Services, which is incorporated herein by reference and made a part hereof in response to the
information required by Item 14.

Item 15. Exhibits and Financial Statement Schedules

PART IV

(a) List of Documents Filed

(1) Financial Statements

The financial statements filed as part of this report are listed in the ‘‘Index to Consolidated

Financial Statements’’ on page F-1 hereof.

(2) Financial Statement Schedules

The following financial statement schedule is listed in the ‘‘Index to Consolidated Financial

Statements’’ on page F-1 hereof, and is included as part of this Annual Report on Form 10-K:

Schedule II—Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the requested information is

shown in the financial statements or noted therein.

(3) Exhibits

3.1 — Restated Certificate of Incorporation, as amended, filed on November 3, 2016 as

Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q and incorporated by
reference.

3.2 — Amended and Restated Bylaws of ION Geophysical Corporation filed on

September 24, 2007 as Exhibit 3.5 to the Company’s Current Report on Form 8-K and
incorporated herein by reference.

4.1 — Indenture, dated May 13, 2013, among ION Geophysical Corporation, the subsidiary

guarantors named therein, Wilmington Trust, National Association, as trustee, and
U.S. Bank National Association, as collateral agent, filed on May 13, 2013 as
Exhibit 4.1 to the Company’s Current Report on Form 8-K and incorporated herein
by reference.

4.2

4.3

4.4

First Supplemental Indenture, dated as of April 28, 2016, to the Indenture, dated
May 13, 2013, among ION Geophysical Corporation, the subsidiary guarantors named
therein, Wilmington Savings Fund Society, FSB, as trustee, and U.S. Bank National
Association, as collateral agent, filed on April 28, 2016 as Exhibit 4.3 to the
Company’s Current Report on Form 8-K and incorporated by reference.

Indenture, dated as of April 28, 2016, among ION Geophysical Corporation, the
subsidiary guarantors named therein, Wilmington Savings Fund Society, FSB, as
trustee and collateral agent filed on April 28, 2016 as Exhibit 4.1 to the Company’s
Current Report on Form 8-K and incorporated by reference.

Intercreditor Agreement, dated as of April 28, 2016, by and among PNC Bank,
National Association, as first lien representative and first lien collateral agent for the
first lien secured parties, and Wilmington Savings Fund Society, FSB, as second lien
representative and second lien collateral agent for the second lien secured parties and
as third lien representative for the third lien secured parties, and U.S. Bank National
Association as third lien collateral agent for the third lien secured parties and
acknowledged and agreed to by ION Geophysical Corporation and the other grantors
named therein, filed on April 28, 2016 as Exhibit 10.1 to the Company’s Current
Report on Form 8-K and incorporated by reference.

**10.1 — Form of Employee Stock Option Award Agreement for ARAM Systems Employee

Inducement Stock Option Program, filed on November 14, 2008 as Exhibit 4.4 to the
Company’s Registration Statement on Form S-8 (Registration No. 333-155378) and
incorporated herein by reference.

**10.2 — Input/Output, Inc. 2003 Stock Option Plan, dated March 27, 2003, filed as Appendix B
of the Company’s definitive proxy statement filed with the SEC on April 30, 2003, and
incorporated herein by reference.

**10.3 — Sixth Amended and Restated—2004 Long-Term Incentive Plan, filed as Appendix A to

the definitive proxy statement for the 2011 Annual Meeting of Stockholders of
ION Geophysical Corporation, filed on April 21, 2011, and incorporated herein by
reference.

**10.4 — Form of Employment Inducement Stock Option Agreement for the Input/

Output, Inc.—GX Technology Corporation Employment Inducement Stock Option
Program, filed on April 4, 2005 as Exhibit 4.1 to the Company’s Registration
Statement on Form S-8 (Reg. No. 333-123831), and incorporated herein by reference.

**10.5 — ION Stock Appreciation Rights Plan dated November 17, 2008, filed as Exhibit 10.47

to the Company’s Annual Report on Form 10-K for the year ended December 31,
2008, and incorporated herein by reference.

10.6 — Stock Purchase Agreement dated as of March 19, 2010, by and between ION

Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed
on March 31, 2010 as Exhibit 10.1 to the Company’s Current Report on Form 8-K,
and incorporated herein by reference.

10.7 — Investor Rights Agreement dated as of March 25, 2010, by and between ION

Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed
on March 31, 2010 as Exhibit 10.2 to the Company’s Current Report on Form 8-K,
and incorporated herein by reference.

10.8 — Share Purchase Agreement dated as of March 24, 2010, by and among ION

Geophysical Corporation, INOVA Geophysical Equipment Limited and BGP Inc.,
China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.3 to the
Company’s Current Report on Form 8-K, and incorporated herein by reference.

10.9 — Joint Venture Agreement dated as of March 24, 2010, by and between ION

Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed
on March 31, 2010 as Exhibit 10.4 to the Company’s Current Report on Form 8-K,
and incorporated herein by reference.

**10.10 — Employment Agreement dated August 2, 2011, effective as of January 1, 2012,

between ION Geophysical Corporation and R. Brian Hanson, filed on November 3,
2011 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2011, and incorporated herein by reference.

10.11 — First Amendment to Credit Agreement and Loan Documents dated May 29, 2012,

filed on May 29, 2012 as Exhibit 10.1 to the Company’s Current Report on Form 8-K,
and incorporated herein by reference.

**10.12 — Consulting Services Agreement dated January 1, 2013, between ION Geophysical

Corporation and ThePeebler Group LLC, filed on January 4, 2013 as Exhibit 10.1 to
the Company’s Current Report on Form8-K, and incorporated herein by reference.

10.13 — Third Amended and Restated 2013 Long-Term Incentive Plan filed on November 1,

2018 as Annex A to the Registrant’s Proxy Statement on Schedule 14A and
incorporated herein by reference.

10.14 — Revolving Credit and Security Agreement dated as of August 22, 2014 among PNC

Bank, National Association, as agent for lenders, the lenders from time to time party
thereto, as lenders, and PNC Capital Markets LLC, as lead arranger and bookrunner,
with ION Geophysical Corporation, ION Exploration Products (U.S.A.), Inc.,
I/O Marine Systems, Inc. and GX Technology Corporation, as borrowers, filed on
November 6, 2014 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2014, and incorporated herein by
reference.

10.15 — First Amendment to Revolving Credit and Security Agreement dated as of August 4,
2015 among PNC Bank, National Association, as lender and agent, the lenders from
time to time party thereto, as lenders, with ION Geophysical Corporation, ION
Exploration Products (U.S.A.), Inc., I/O Marine Systems, Inc. and GX Technology
Corporation, as borrowers, filed on August 6, 2015 as Exhibit 10.1 to the Company’s
Current Report on Form 8-K, and incorporated herein by reference.

10.16 — Second Amendment to the Revolving Credit and Security Agreement, dated as of

April 28, 2016, among ION Geophysical Corporation and the subsidiary co-borrowers
named therein, as borrowers, the financial institutions party thereto, as lenders, and
PNC Bank, National Association, as agent for the lenders, filed on April 28, 2016 as
Exhibit 10.2 to the Company’s Current Report on Form 8-K and incorporated by
reference.

**10.17 — Employment Agreement dated effective as of November 13, 2014, between ION

Geophysical Corporation and Steve Bate, filed as Exhibit 10.44 to the Company’s
Annual Report 10-K for the year ended December 31, 2014, and incorporated herein
by reference.

**10.18 — Form of Rights Agreement dated March 1, 2015 issued under the ION Stock
Appreciation Rights Plan dated November 17, 2008, filed on May 7, 2015 as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2015, and incorporated herein by reference.

**10.19 — Form of Rights Agreement dated March 1, 2016 issued under the ION Stock

Appreciation Rights Plan Dated November 17, 2008, and incorporated herein by
reference.

**10.20 — Equity Investment Agreement dated December 14, 2017, issued under the Second

Amended and Restated 2013 Long-Term Incentive Plan dated December 31, 2016, and
incorporated herein by reference.

**10.21 — Employee Stock Purchase Plan dated May 26, 2010, and incorporated herein by

reference.

10.22 — Form of Warrant Agreement, filed on February 16, 2018 as Exhibit 10.1 to the

Company’s Current Report on Form 8-K, and incorporated herein by reference.

10.23 — Third Amendment and Joinder to the Revolving Credit and Security Agreement,

dated as of August 16, 2018, filed on August 21, 2018 as Exhibit 10.1 to the
Company’s Current Report on Form 8-K and incorporated herein by reference.

* **10.24 — ION Stock Appreciation Rights Plan dated November 30, 2018.

* **10.25 — Form of Stock Appreciation Rights Agreement dated December 1, 2018 issued under
the ION Stock Appreciation Rights Plans dated November 30, 2018.

* **10.26 — Form of Restricted Stock Awards Agreement dated December 1, 2018 issued under

the Third Amended and Restated 2013 Long-Term Incentive Plan dated November 1,
2018.

*21.1 — Subsidiaries of the Company.

*23.1 — Consent of Grant Thornton LLP.

*24.1 — The Power of Attorney is set forth on the signature page hereof.

*31.1 — Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).

*31.2 — Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).

*32.1 — Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.

*32.2 — Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.

*101 — The following materials are formatted in Extensible Business Reporting Language

(XBRL): (i) Consolidated Balance Sheets at December 31, 2018 and 2017,
(ii) Consolidated Statements of Operations for the years ended December 31, 2018,
2017 and 2016, (iii) Comprehensive Income (Loss) for the years ended December 31,
2018, 2017 and 2016, (iv) Consolidated Statements of Cash Flows for the years ended
December 31, 2018, 2017 and 2016, (v) Consolidated Statements of Stockholders’
Equity for the years ended December 31, 2018, 2017 and 2016, (vi) Footnotes to
Consolidated Financial Statements and (vii) Schedule II—Valuation and Qualifying
Accounts.

Filed herewith.

** Management contract or compensatory plan or arrangement.

(b) Exhibits required by Item 601 of Regulation S-K.

Reference is made to subparagraph (a) (3) of this Item 15, which is incorporated herein by

reference.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as

amended, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Houston, State of Texas, on February 7, 2019.

SIGNATURES

ION GEOPHYSICAL CORPORATION

/s/ R. BRIAN HANSON

R. Brian Hanson
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below

constitutes and appoints R. Brian Hanson and Matthew Powers and each of them, as his or her true
and lawful attorneys-in-fact and agents with full power of substitution and re-substitution for him or her
and in his or her name, place and stead, in any and all capacities, to sign any and all documents
relating to the Annual Report on Form 10-K for the year ended December 31, 2018, including any and
all amendments and supplements thereto, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual
Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

Name

Capacities

Date

/s/ R. BRIAN HANSON

R. Brian Hanson

President, Chief Executive Officer and
Director (Principal Executive Officer)

February 7, 2019

/s/ STEVEN A. BATE

Steven A. Bate

Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)

February 7, 2019

/s/ SCOTT SCHWAUSCH

Scott Schwausch

Vice President and Corporate
Controller (Principal Accounting
Officer)

February 7, 2019

/s/ JAMES M. LAPEYRE, JR.

James M. Lapeyre, Jr.

Chairman of the Board of Directors
and Director

February 7, 2019

Name

Capacities

Date

/s/ DAVID H. BARR

David H. Barr

Zheng HuaSheng

/s/ MICHAEL C. JENNINGS

Michael C. Jennings

/s/ FRANKLIN MYERS

Franklin Myers

/s/ S. JAMES NELSON, JR.

S. James Nelson, Jr.

/s/ JOHN N. SEITZ

John N. Seitz

Director

February 7, 2019

Director

February 7, 2019

Director

February 7, 2019

Director

February 7, 2019

Director

February 7, 2019

Director

February 7, 2019

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

ION Geophysical Corporation and Subsidiaries:

Report of Independent Registered Public Accounting Firms . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets—December 31, 2018 and 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations—Years ended December 31, 2018, 2017 and 2016 . . . .
Consolidated Statements of Comprehensive Loss—Years ended December 31, 2018, 2017 and

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows—Years ended December 31, 2018, 2017 and 2016 . . . .
Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2018, 2017 and

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Footnotes to Consolidated Financial Statements
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule II—Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-2
F-3
F-4

F-5
F-6

F-7
F-8
S-1

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

ION Geophysical Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of ION Geophysical Corporation

(a Delaware corporation) and subsidiaries (the ‘‘Company’’) as of December 31, 2018 and 2017, the
related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2018, and the related notes and schedule
included under Item 15(a) (collectively referred to as the ‘‘financial statements’’). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2018, in conformity with accounting principles generally
accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (‘‘PCAOB’’), the Company’s internal control over financial reporting
as of December 31, 2018, based on criteria established in the 2013 Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(‘‘COSO’’), and our report dated February 7, 2019 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility

is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2014.

Houston, Texas

February 7, 2019

F-2

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

2018

2017

(In thousands, except
share data)

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 33,551
26,128
44,032
14,130
7,782

$ 52,056
19,478
37,304
14,508
7,643

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax asset, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, equipment and seismic rental equipment, net
. . . . . . . . . . . . .
Multi-client data library, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125,623
7,191
13,041
73,544
22,915
2,435

130,989
1,753
52,153
89,300
24,089
2,785

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 244,749

$ 301,069

Current liabilities:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued multi-client data library royalties . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net of current maturities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,228
34,913
31,411
29,256
7,710

105,518
119,513
11,894

236,925

$ 40,024
24,951
38,697
27,035
8,910

139,617
116,720
13,926

270,263

Equity:

Common stock, $0.01 par value; authorized 26,666,667 shares; outstanding

14,015,615 and 12,019,701 shares at December 31, 2018 and 2017,
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140
952,626
(926,092)
(20,442)

120
903,247
(854,921)
(18,879)

6,232
1,592

7,824

29,567
1,239

30,806

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 244,749

$ 301,069

See accompanying Footnotes to Consolidated Financial Statements.

F-3

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended December 31,

2018

2017

2016

(In thousands, except per share data)
$130,640
$159,410
$139,038
42,168
38,144
41,007

Total net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

180,045

197,554

172,808

Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100,557
19,868

103,124
18,791

115,763
21,013

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59,620

75,639

36,032

Operating expenses:

Research, development and engineering . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General, administrative and other operating expenses . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,182
21,793
37,364
36,553

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113,892

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . .

(54,272)
(12,972)
(436)

(67,680)
2,718

(70,398)
(773)

16,431
20,778
47,129
—

84,338

(8,699)
(16,709)
(3,945)

(29,353)
24

(29,377)
(865)

17,833
17,371
43,999
—

79,203

(43,171)
(18,485)
1,350

(60,306)
4,421

(64,727)
(421)

Net loss attributable to ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (71,171) $ (30,242) $ (65,148)

Net loss per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(5.20) $
(5.20) $

(2.55) $
(2.55) $

(5.71)
(5.71)

Weighted average number of common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,692
13,692

11,876
11,876

11,400
11,400

See accompanying Footnotes to Consolidated Financial Statements.

F-4

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes, as appropriate:

Years Ended December 31,

2018

2017

2016

(In thousands)
$(70,398) $(29,377) $(64,727)

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . .

(1,563)

2,869

(6,967)

Comprehensive net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests . . . .

(71,961)
(773)

(26,508)
(865)

(71,694)
(421)

Comprehensive net loss attributable to ION . . . . . . . . . . . . . . . . . . . .

$(72,734) $(27,373) $(72,115)

See accompanying Footnotes to Consolidated Financial Statements.

F-5

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

2018

2017

2016

(In thousands)

Cash flows from operating activities:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(70,398) $(29,377) $(64,727)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization (other than multi-client library) . . . . . . . . . . . . . . . . . .
Amortization of multi-client data library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of multi-client data library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrual (reduction) of loss contingency related to legal proceedings . . . . . . . . . . . . . . .
Loss on bond exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of excess and obsolete inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, accrued expenses and accrued royalties . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,763
48,988
36,553
—
3,337
—
—
665
(6,252)

(7,024)
(5,245)
(353)
(7,600)
(1,112)
6,776

16,592
47,102
—
2,304
2,552
5,000
—
398
(5,420)

21,975
33,335
—
—
3,267
(1,168)
2,182
429
(1,181)

1,692
(23,947)
190
1,443
5,131
3,952

20,426
6,543
2,312
(5,085)
(2,759)
(14,556)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,098

27,612

993

Cash flows from investing activities:

Investment in multi-client data library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of property, plant, equipment and seismic rental equipment . . . . . . . . . . . . . .
Proceeds from sale of cost method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(28,276)
(1,514)
—

(23,710)
(1,063)
—

(14,884)
(1,458)
2,698

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(29,790)

(24,773)

(13,644)

Cash flows from financing activities:

Borrowings under revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments under revolving line of credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on notes payable and long-term debt
Cost associated with issuance of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from issuance of stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from employee stock purchases and exercise of stock options . . . . . . . . . . . . .
Dividend payment to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities

—
(10,000)
(30,807)
(1,247)
46,999
—
214
(200)
(1,151)

— 15,000
— (5,000)
(23,634)
(6,744)
—
(964)
—
—
(252)

(4,816)
(53)
—
—
1,619
(100)
(243)

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . .

3,808

(3,593)

(21,594)

Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted

cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

319

(260)

1,386

Net decrease in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . . .

(18,565)
52,419

(1,014)
53,433

(32,859)
86,292

Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . $ 33,854 $ 52,419 $ 53,433

The following table is a reconciliation of cash, cash equivalents and restricted cash:

December 31,

2018

2017

2016

(In thousands)

Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets . . . . . . . . . . . . . . . . . .
Restricted cash included in other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,551 $52,056 $52,652
260
521

60
303

—
303

Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows . . $33,854 $52,419 $53,433

See accompanying Footnotes to Consolidated Financial Statements.

F-6

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Amount

Additional
Paid-In
Capital

Accumulated
Other

Accumulated Comprehensive Treasury Noncontrolling

Deficit

Loss

Stock

Interests

Total
Equity

. . . . 10,702,689
—
—

$107
—
—

$894,715
—
—

$(759,531)
(65,148)
—

$ (14,781)
—
(6,967)

$(8,551)
—
—

81
421
7

$112,040
(64,727)
(6,960)

(In thousands, except shares)
Balance at January 1, 2016(a)

Net (loss) income . . . . . . . . . .
Translation adjustment . . . . . . .
Stock-based compensation

expense . . . . . . . . . . . . . .

Vesting of restricted stock units/

awards . . . . . . . . . . . . . . .
Purchase of treasury shares . . . .
Restricted stock cancelled for
employee minimum income
taxes . . . . . . . . . . . . . . . .
Issuance of stock for the ESPP .
Issuance of stock in bond

—

40,495
(155,304)

—

—
(1)

(4,973)
4,100

exchange . . . . . . . . . . . . .

1,205,440

Balance at December 31, 2016 . . . 11,792,447
—
—

Net (loss) income . . . . . . . . . .
Translation adjustment . . . . . . .
Dividend payment to

noncontrolling interest
Stock-based compensation

. . . . .

expense . . . . . . . . . . . . . .
Exercise of stock options . . . . .
Vesting of restricted stock units/

—

—
15,000

awards . . . . . . . . . . . . . . .

115,576

Employee purchases of

unregistered shares of common
stock . . . . . . . . . . . . . . . .

Restricted stock cancelled for
employee minimum income
taxes . . . . . . . . . . . . . . . .

120,567

(23,889)

Balance at December 31, 2017 . . . 12,019,701
—
—

Net (loss) income . . . . . . . . . .
Translation adjustment . . . . . . .
Dividend payment to

noncontrolling interest
Stock-based compensation

. . . . .

expense . . . . . . . . . . . . . .
Exercise of stock options . . . . .
Vesting of restricted stock units/

—

—
70,086

awards . . . . . . . . . . . . . . .

151,852

Restricted stock cancelled for
employee minimum income
taxes . . . . . . . . . . . . . . . .
Public equity offering . . . . . . .

(46,024)
1,820,000

3,267

—
—

(22)
23

1,215

899,198
—
—

—

2,552
46

(1)

1,572

(120)

903,247
—
—

—

3,337
213

(1)

(1,151)
46,981

—

—
—

—

—
—

—

—
(963)

—
—

9,514

(824,679)
(30,242)
—

(21,748)
—
2,869

—

—
—

—

—
—

—

(854,921)
(71,171)
—

(18,879)
—
(1,563)

—

—
—

—

—
—

—

—
—

—

—
—

—
—
—

—

—
—

—

—
—
—

—

—
—

—

—
—

—

—
—

—

509
865
(35)

3,267

—
(964)

(22)
23

10,741

53,398
(29,377)
2,834

(100)

—
—

—

1,239
773
(220)

(200)

—
—

—

—
—

2,552
46

—

1,573

(120)

30,806
(70,398)
(1,783)

(200)

3,337
214

—

(1,151)
46,999

—
—

118
—
—

—

—
—

—

120
—
—

—

—
1

—
18

Balance at December 31, 2018 . . . 14,015,615

$140

$952,626

$(926,092)

$ (20,442)

$ —

$1,592

$ 7,824

(a)

The figures for January 1, 2016, set forth in the tables above have been retroactively adjusted to reflect the one-for-fifteen reverse
stock split completed on February 4, 2016.

See accompanying Footnotes to Consolidated Financial Statements.

F-7

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

General Description and Principles of Consolidation

ION Geophysical Corporation and its subsidiaries offer a full suite of services and products for

seismic data acquisition and processing. The consolidated financial statements include the accounts of
ION Geophysical Corporation and its majority-owned subsidiaries (collectively referred to as the
‘‘Company’’ or ‘‘ION’’). Intercompany balances and transactions have been eliminated. Certain
reclassifications were made to previously reported amounts in the consolidated financial statements and
notes thereto to make them consistent with the current period presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted

in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant estimates are made at
discrete points in time based on relevant market information. These estimates may be subjective in
nature and involve uncertainties and matters of judgment and, therefore, cannot be determined with
precision. Areas involving significant estimates include, but are not limited to, accounts and unbilled
receivables, inventory valuation, sales forecasts related to multi-client data libraries, goodwill and
intangible asset valuation and deferred taxes. Actual results could materially differ from those
estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or

less to be cash equivalents. The Company places its temporary cash investments with high credit quality
financial institutions. At times such investments may be in excess of the Federal Deposit Insurance
Corporation insurance limit. At December 31, 2018 and 2017, there was $0.3 million and $0.4 million,
respectively, of long-term and short-term restricted cash used to secure standby and commercial letters
of credit, which is included within ‘‘Other long-term assets’’ and ‘‘Prepaid expenses and other current
assets’’ in the Consolidated Balance Sheets.

Accounts and Unbilled Receivables

Accounts and unbilled receivables are recorded at cost, less the related allowance for doubtful

accounts. The Company considers current information and events regarding the customers’ ability to
repay their obligations, such as the length of time the receivable balance is outstanding, the customers’
credit worthiness and historical experience. Unbilled receivables relate to revenues recognized on multi-
client surveys, imaging services and devices equipment repairs on a proportionate basis, and on
licensing of multi-client data libraries for which invoices have not yet been presented to the customer.

Inventories

Inventories are stated at the lower of cost (primarily first-in, first-out method) or net realizable

value. The Company provides reserves for estimated obsolescence or excess inventory equal to the
difference between cost of inventory and its estimated net realizable value based upon assumptions
about future demand for the Company’s products, market conditions and the risk of obsolescence
driven by new product introductions.

F-8

Property, Plant, Equipment and Seismic Rental Equipment

Property, plant, equipment and seismic rental equipment are stated at cost. Depreciation expense

is provided straight-line over the following estimated useful lives:

Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seismic rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased equipment and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years

3 - 7
5 - 25
3 - 5
3 - 10

The Company evaluates the recoverability of long-lived assets, including property, plant, equipment

and seismic rental equipment, when indicators of impairment exist, relying on a number of factors
including operating results, business plans, economic projections and anticipated future cash flows.
Impairment in the carrying value of an asset held for use is recognized whenever anticipated future
undiscounted cash flows from an asset are estimated to be less than its carrying value. The amount of
the impairment recognized is the difference between the carrying value of the asset and its fair value.
For 2018, the Company identified an indicator of impairment as it relates to its cable-based ocean
bottom acquisition technologies. As a result, the Company recognized an impairment charge of
$36.6 million.

Multi-Client Data Library

The multi-client data library consists of seismic surveys that are offered for licensing to customers
on a non-exclusive basis. The capitalized costs include costs paid to third parties for the acquisition of
data and related activities associated with the data creation activity and direct internal processing costs,
such as salaries, benefits, computer-related expenses and other costs incurred for seismic data project
design and management. For 2018, 2017 and 2016, the Company capitalized, as part of its multi-client
data library, $11.9 million, $12.7 million and $6.6 million, respectively, of direct internal processing
costs. At December 31, 2018 and 2017, multi-client data library costs and accumulated amortization
consisted of the following (in thousands):

Gross costs of multi-client data creation . . . . . . . . . . . . . . . .
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . .
Less impairments to multi-client data library . . . . . . . . . . . .

$ 972,309
(776,860)
(121,905)

$ 939,077
(727,872)
(121,905)

Multi-client data library, net . . . . . . . . . . . . . . . . . . . . . . . .

$ 73,544

$ 89,300

December 31,

2018

2017

The Company’s method of amortizing the costs of an in-process multi-client data library (the
period during which the seismic data is being acquired and/or processed, referred to as the ‘‘New
Venture’’ phase) consists of determining the percentage of actual revenue recognized to the total
estimated revenues (which includes both revenues estimated to be realized during the New Venture
phase and estimated revenues from the licensing of the resulting ‘‘on-the-shelf’’ data survey) and
multiplying that percentage by the total cost of the project (the sales forecast method). The Company
considers a multi-client data survey to be complete when all work on the creation of the seismic data is
finished and that data survey is available for licensing. Once a multi-client data survey is complete, the
data survey is considered ‘‘on-the-shelf’’ and the Company’s method of amortization is then the greater

F-9

of (i) the sales forecast method or (ii) the straight-line basis over a four-year period. The greater
amount of amortization resulting from the sales forecast method or the straight-line amortization policy
is applied on a cumulative basis at the individual survey level. Under this policy, the Company first
records amortization using the sales forecast method. The cumulative amortization recorded for each
survey is then compared with the cumulative straight-line amortization. The four-year period utilized in
this cumulative comparison commences when the data survey is determined to be complete. If the
cumulative straight-line amortization is higher for any specific survey, additional amortization expense is
recorded, resulting in accumulated amortization being equal to the cumulative straight-line amortization
for such survey. The Company has determined the amortization period of four years based upon its
historical experience that indicates that the majority of its revenues from multi-client surveys are
derived during the acquisition and processing phases and during four years subsequent to survey
completion.

The Company estimates the ultimate revenue expected to be derived from a particular seismic data

survey over its estimated useful economic life to determine the costs to amortize, if greater than
straight-line amortization. That estimate is made by the Company at the project’s initiation. For a
completed multi-client survey, the Company reviews the estimate quarterly. If during any such review,
the Company determines that the ultimate revenue for a survey is expected to be materially more or
less than the original estimate of ultimate revenue for such survey, the Company decreases or increases
(as the case may be) the amortization rate attributable to the future revenue from such survey. In
addition, in connection with such reviews, the Company evaluates the recoverability of the multi-client
data library, and, if required, records an impairment charge with respect to such data.

Equity Method Investment

The Company determined that INOVA Geophysical is a variable interest entity because the
Company’s voting rights with respect to INOVA Geophysical are not proportionate to its ownership
interest and substantially all of INOVA Geophysical’s activities are conducted on behalf of the
Company and BGP, a related party to the Company. The Company is not the primary beneficiary of
INOVA Geophysical because it does not have the power to direct the activities of INOVA Geophysical
that most significantly impact its economic performance. Accordingly, the Company does not
consolidate INOVA Geophysical, but instead accounts for INOVA Geophysical using the equity method
of accounting. Under this method, an investment is carried at the acquisition cost, plus the Company’s
equity in undistributed earnings or losses since acquisition, less distributions received.

At December 31, 2014, the Company fully impaired its investment in INOVA reducing its equity
investment in INOVA and its share of INOVA’s accumulated other comprehensive loss, both to zero.
As of December 31, 2018, the carrying value of this investment remains zero. The Company no longer
records its equity in losses or earnings and has no obligation, implicit or explicit, to fund any expenses
of INOVA Geophysical.

Noncontrolling Interests

The Company has non-redeemable noncontrolling interests. Non-redeemable noncontrolling

interests in majority-owned affiliates are reported as a separate component of equity in ‘‘Noncontrolling
interests’’ in the Consolidated Balance Sheets. Net income attributable to noncontrolling interests is
stated separately in the Consolidated Statements of Operations. The activity for this noncontrolling
interest relates to proprietary processing projects in Brazil.

Goodwill

Goodwill is allocated to reporting units, which are either the operating segment or one reporting
level below the operating segment. For purposes of performing the impairment test for goodwill, the

F-10

Company established the following reporting units: E&P Technology & Services, Optimization
Software & Services, Devices and Ocean Bottom Integrated Technologies.

The Company is required to evaluate the carrying value of its goodwill at least annually for
impairment, or more frequently if facts and circumstances indicate that it is more likely than not
impairment has occurred. The Company formally evaluates the carrying value of its goodwill for
impairment as of December 31 for each of its reporting units. The Company first performs a qualitative
assessment by evaluating relevant events or circumstances to determine whether it is more likely than
not that the fair value of a reporting unit exceeds its carrying amount. If the Company is unable to
conclude qualitatively that it is more likely than not that a reporting unit’s fair value exceeds its
carrying value, then it will use a two-step quantitative assessment of the fair value of a reporting unit.
To determine the fair value of these reporting units, the Company uses a discounted future returns
valuation model, which includes a variety of level 3 inputs. The key inputs for the model include the
operational three-year forecast for the Company and the then-current market discount factor.
Additionally, the Company compares the sum of the estimated fair values of the individual reporting
units less consolidated debt to the Company’s overall market capitalization as reflected by the
Company’s stock price. If the carrying value of a reporting unit that includes goodwill is determined to
be more than the fair value of the reporting unit, there exists the possibility of impairment of goodwill.
An impairment loss of goodwill is measured in two steps by first allocating the fair value of the
reporting unit to net assets and liabilities including recorded and unrecorded intangible assets to
determine the implied carrying value of goodwill. The next step is to measure the difference between
the carrying value of goodwill and the implied carrying value of goodwill, and, if the implied carrying
value of goodwill is less than the carrying value of goodwill, an impairment loss is recorded equal to
the difference. See further discussion below at Footnote 11 ‘‘Goodwill.’’

Revenue From Contracts With Customers

On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606—

’’Revenue from Contracts with Customers’’ and all the related amendments (‘‘ASC 606’’), using the
modified retrospective method. This standard applies to all contracts with customers, except for
contracts that are within the scope of other standards, such as leases, insurance, collaborative
arrangements and financial instruments. The adoption of ASC 606 did not have a material impact on
the Consolidated Balance Sheets or Consolidated Statements of Operations for any of our reporting
segments. See further discussion below at Footnote 3 ‘‘Revenue from Contracts with Customers.’’

Research, Development and Engineering

Research, development and engineering costs primarily relate to activities that are designed to

improve the quality of the subsurface image and overall acquisition economics of the Company’s
customers. The costs associated with these activities are expensed as incurred. These costs include
prototype material and field testing expenses, along with the related salaries and stock-based
compensation, facility costs, consulting fees, tools and equipment usage and other miscellaneous
expenses associated with these activities.

F-11

Stock-Based Compensation

The Company accounts for all stock-based payment awards issued to employees and directors,
including employee stock options, restricted stocks units, restricted stocks and stock appreciation rights
under the provisions of ASC 718 ‘‘Compensation—Stock Compensation’’ (‘‘ASC 718’’). The Company
estimates the value of stock-based payment awards on the date of grant using an option pricing model
such as Black-Scholes or Monte Carlo simulation. The determination of the fair value of stock-based
payment awards is affected by the Company’s stock price as well as assumptions regarding a number of
subjective variables. These variables include, but are not limited to, expected stock price volatility over
the term of the awards, actual and projected stock-based instrument exercise behaviors, risk-free
interest rate and expected dividends. Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company
recognizes stock-based compensation expense on the straight-line basis over the requisite service period
of each award that are ultimately expected to vest.

Income Taxes

Income taxes are accounted for under the liability method. Deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
including operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply in the years in which those temporary differences
are expected to be recovered or settled. The Company records a valuation allowance when it is more
likely than not that all or a portion of deferred tax assets will not be realized (see Footnote 7 ‘‘Income
Taxes’’). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

Debt Issuance Costs

The Company presents debt issuance costs related to a debt liability as a direct deduction from the

carrying amount of that debt liability on the Consolidated Balance Sheets and amortizes such costs
using the effective interest method whereas debt issuance costs related to line of credit arrangement is
presented within ‘‘Other assets’’ on the Consolidated Balance Sheets and amortized ratably over the
term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on
the line of credit arrangement.

Foreign Currency Gains and Losses

Assets and liabilities of the Company’s subsidiaries operating outside the United States that have a

functional currency other than the U.S. dollar have been translated to U.S. dollars using the exchange
rate in effect at the balance sheet date. Results of foreign operations have been translated using the
average exchange rate during the periods of operation. Resulting translation adjustments have been
recorded as a component of Accumulated Other Comprehensive Loss. Foreign currency transaction
gains and losses, as they occur, are included in ‘‘Other income (expense), net’’ on the Consolidated
Statements of Operations. Total foreign currency transaction losses were $0.4 million, $1.6 million and
$3.3 million for 2018, 2017 and 2016, respectively.

Concentration of Foreign Sales Risk

The majority of the Company’s foreign sales are denominated in U.S. dollars. For 2018, 2017 and
2016, international sales comprised 75%, 76% and 78%, respectively, of total net revenues. Since 2008,
global economic problems and uncertainties have generally increased in scope and nature. The volatility
in oil prices have continued to impact the global market throughout 2018. To the extent that world

F-12

events or economic conditions negatively affect the Company’s future sales to customers in many
regions of the world, as well as the collectability of the Company’s existing receivables, the Company’s
future results of operations, liquidity and financial condition would be adversely affected.

(2) Segment and Geographic Information

The Company evaluates and reviews its results based on three business segments:

E&P Technology & Services, Operations Optimization, and Ocean Bottom Integrated Technologies.
The Company measures segment operating results based on income (loss) from operations.

A summary of segment information follows (in thousands):

Years Ended December 31,

2018

2017

2016

Net revenues:

E&P Technology & Services:

New Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data Library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total multi-client revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
Imaging Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 69,685
47,095

116,780
19,740

$100,824
40,016

$ 27,362
39,989

140,840
16,409

67,351
25,538

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$136,520

$157,249

$ 92,889

Operations Optimization:

Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Optimization Software & Services . . . . . . . . . . . . . . . . . . . . . . .

$ 22,396
21,129

$ 23,610
16,695

$ 26,746
16,756

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43,525

$ 40,305

$ 43,502

Ocean Bottom Integrated Technologies . . . . . . . . . . . . . . . . . . . .

— $

— $ 36,417

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$180,045

$197,554

$172,808

Gross profit (loss):

E&P Technology & Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operations Optimization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ocean Bottom Integrated Technologies . . . . . . . . . . . . . . . . . . .

$ 43,369
22,293
(6,042)

$ 65,196
20,076
(9,633)

4,708
21,745
9,579

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 59,620

$ 75,639

$ 36,032

Gross margin:

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32%
51%
—%

33%

41%
50%
—%

38%

5%
50%
26%

21%

Income (loss) from operations:

$ 21,758
7,295
(47,644)(a)
(35,681)

$ 42,505
8,022
(16,259)
(42,967)

$ (16,446)
9,652
(1,756)
(34,621)

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net

(54,272)
(12,972)
(436)

(8,699)
(16,709)
(3,945)

(43,171)
(18,485)
1,350

Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(67,680)

$ (29,353) $ (60,306)

(a)

Includes a charge of $36.6 million to write-down the cable-based ocean bottom acquisition
technologies associated with the Ocean Bottom Integrated Technologies segment. This
impairment relates to property, plant, equipment and seismic rental equipment of

F-13

$21.3 million within the Operations Optimization segment and $15.3 million within the Ocean
Bottom Integrated Technologies segment.

Years Ended December 31,

2018

2017

2016

Depreciation and amortization (including multi-client

data library):
E&P Technology & Services . . . . . . . . . . . . . . . . . .
Operations Optimization . . . . . . . . . . . . . . . . . . . .
Ocean Bottom Integrated Technologies . . . . . . . . . .
Support and other . . . . . . . . . . . . . . . . . . . . . . . . .

$51,673
995
4,231
852

$53,663
1,349
7,001
1,681

$44,100
1,780
7,511
1,919

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$57,751

$63,694

$55,310

December 31,

2018

2017

Total assets:

E&P Technology & Services . . . . . . . . . . . . . . . . . . . . . . .
Operations Optimization . . . . . . . . . . . . . . . . . . . . . . . . . .
Ocean Bottom Integrated Technologies . . . . . . . . . . . . . . .
Support and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$165,132
51,783
1,177
26,657

$156,555
74,361
20,828
49,325
$244,749(a) $301,069

(a) Balance is net of impairment charge of $36.6 million related to the cable-based ocean

bottom acquisition technologies.

A summary of total assets by geographic area follows (in thousands):

December 31,

2018

2017

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 86,614
69,418
52,037
31,566
5,114

$116,598
55,661
70,308
51,876
6,626

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$244,749

$301,069

F-14

A summary of property, plant, equipment and seismic equipment less accumulated depreciation

and impairment by geographic area follows (in thousands):

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Middle East
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2018

2017

$11,663
1,140
143
36
59

$10,609
20,725
170
20,543
106
$13,041(a) $52,153

(a) Balance is net of impairment charge of $36.6 million related to the cable-based ocean

bottom acquisition technologies.

Intersegment sales are insignificant for all periods presented. Support and other assets include all

assets specifically related to support personnel and operation and a majority of cash and cash
equivalents. Depreciation and amortization expense is allocated to segments based upon use of the
underlying assets.

A summary of net revenues by geographic area follows (in thousands):

Years Ended December 31,

2018

2017

2016

Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commonwealth of Independent States . . . . . . . . . .

$ 68,871
44,474
31,077
17,817
10,837
5,526
1,443

$ 68,241
48,120
44,930
18,896
6,837
2,308
8,222

$ 24,090
38,005
41,674
16,226
41,417
9,467
1,929

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$180,045

$197,554

$172,808

Net revenues are attributed to geographic areas on the basis of the ultimate destination of the

equipment or service, if known, or the geographic area imaging services are provided. If the ultimate
destination of such equipment is not known, net revenues are attributed to the geographic area of
initial shipment.

(3) Revenue from Contracts with Customers

The Company derives revenue from the sale or license of (i) multi-client and proprietary data,
imaging services and E&P Advisors consulting services within its E&P Technology & Services segment;
(ii) seismic data acquisition systems and other seismic equipment, (iii) seismic command and control
software systems and software solutions for operations management within its Operations Optimization
segment; and (iv) a full suite of technology and services within its Ocean Bottom Integrated
Technologies segment. All revenues of the E&P Technology & Services and Ocean Bottom Integrated
Technologies segments and the services component of revenues for the Optimization Software &
Services group as part of the Operations Optimization segment are classified as services revenues. All
other revenues are classified as product revenues.

The Company uses a five-step model to determine proper revenue recognition from customer

contracts. Revenue is recognized when (i) a contract is approved by all parties; (ii) the goods or

F-15

services promised in the contract are identified; (iii) the consideration the Company expects to receive
in exchange for the goods or services promised is determined; (iv) the consideration is allocated to the
goods and services in the contract; and (v) control of the promised goods or services is transferred to
the customer. The Company does not disclose the value of contractual future performance obligations
such as backlog with an original expected length of one year or less within the footnotes.

Multi-client and Proprietary Surveys, Imaging Services and E&P Advisors Services—As multi-client
seismic surveys are being designed, acquired or processed (the ‘‘New Venture’’ phase), the Company
enters into non-exclusive licensing arrangements with its customers, who pre-fund or underwrite these
programs in part. License revenues from these surveys are recognized during the New Venture phase as
the seismic data is acquired and/or processed on a proportionate basis as work is performed and
control is transferred to the customer. Under this method, the Company recognizes revenue based
upon quantifiable measures of progress, such as kilometers acquired or surveys of performance
completed to date. Upon completion of a multi-client seismic survey, it is considered ‘‘on-the-shelf,’’
and licenses to the survey data are granted to customers on a non-exclusive basis.

The Company also performs seismic surveys, imaging and other services under contracts with

specific customers, whereby the seismic data is owned by those customers. The Company recognizes
revenue as the seismic data is acquired and/or processed on a proportionate basis as work is
performed. The Company uses quantifiable measures of progress consistent with its multi-client seismic
surveys.

Acquisition Systems and Other Seismic Equipment—For sales of seismic data acquisition systems and

other seismic equipment, the Company recognizes revenue when control of the goods has transferred
to the customer. Transfer of control generally occurs when (i) the Company has a present right to
payment; (ii) the customer has legal title to the asset; (iii) the Company has transferred physical
possession of the asset; and (iv) the customer has significant rewards of ownership; or (v) the customer
has accepted the asset.

Software—Licenses for the Company’s navigation, survey design and quality control software
systems provide the customer with a right to use the software. The Company offers usage-based
licenses under which it receives a monthly fee based on the number of vessels and licenses used. For
these usage-based licenses, revenue is recognized as the performance obligations are performed over
the contract term, which is generally two to five years. In addition to usage-based licenses, the
Company offers perpetual software licenses as it exists when made available to the customer. Revenue
from these licenses is recognized upfront at the point in time when the software is made available to
the customer.

These arrangements generally include the Company providing related services, such as training

courses, engineering services and annual software maintenance. The Company allocates consideration
to each element of the arrangement based upon directly observable or estimated standalone selling
prices. Revenue is recognized for these services as control transfers to the customer over time.

Ocean Bottom Integrated Technologies—The Company recognizes revenue as the seismic data is

acquired and control transfers to the customer. The Company uses quantifiable measures of progress
consistent with its multi-client surveys. In connection with acquisition contracts, the Company may
receive revenues for preparation and mobilization of equipment and personnel, capital improvements to
vessels, or demobilization activities. The Company defers the revenues earned and incremental costs
incurred that are directly related to these activities and recognizes such revenues and costs over the
primary contract term of the acquisition project as it transfers the goods and services to the customer.
The Company recognizes the costs of relocating vessels without contracts to more promising market
sectors as such costs are incurred.

F-16

Revenue by Segment and Geographic Area

See Footnote 2 ‘‘Segment Information’’ of Footnotes to Consolidated Financial Statements for
revenue by segment and revenue by geographic area for the years ended December 31, 2018, 2017 and
2016. In 2018, the Company had two customers with sales that each exceeded 10% of the consolidated
net revenues. Revenues related to these customers are included within the E&P Technology & Services
segment. In 2017, the Company had one customer with sales that exceeded 10% of the consolidated
net revenues and revenues related to this customer are included within the E&P Technology & Services
segment. No single customer represented 10% or more of the consolidated net revenues for 2016.

Unbilled Receivables

Unbilled receivables relate to revenues recognized on multi-client surveys, imaging services and

Devices equipment repairs on a proportionate basis, and on licensing of multi-client data libraries for
which invoices have not yet been presented to the customer. The following table is a summary of
unbilled receivables (in thousands):

December 31,

2018

2017

New Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imaging Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38,430
5,075
527

$33,183
4,121
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$44,032

$37,304

The changes in unbilled receivables were as follows (in thousands):

Unbilled receivables at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . .
Recognition of unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenues billed to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37,304
153,611
(146,883)

Unbilled receivables at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . .

$ 44,032

Deferred Revenue

Billing practices are governed by the terms of each contract based upon achievement of milestones

or pre-agreed schedules. Billing does not necessarily correlate with revenue recognized on a
proportionate basis as work is performed and control is transferred to the customer. Deferred revenue
represents cash received in excess of revenue not yet recognized as of the reporting period, but will be
recognized in future periods. The following table is a summary of deferred revenues (in thousands):

New Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imaging Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Optimization Software & Services . . . . . . . . . . . . . . . . . . . . . . . . .

$5,797
307
626
980

$6,548
676
633
1,053

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,710

$8,910

December 31,

2018

2017

F-17

The changes in deferred revenues were as follows (in thousands):

Deferred revenue at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . .
Cash collected in excess of revenue recognized . . . . . . . . . . . . . . . . . . .
Recognition of deferred revenue(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,910
25,234
(26,434)

Deferred revenue at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,710

(a) The majority of deferred revenue recognized relates to Company’s Ventures group.

The Company expects to recognize all deferred revenue within the next 12 months.

(4) Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting
Standards Update (‘‘ASU’’) 2016-2, ‘‘Leases (Topic 842)’’ which introduces the recognition of lease
assets and lease liabilities by lessees for those leases classified as operating leases under previous
guidance. The guidance will be effective for annual reporting periods beginning after December 15,
2018 and interim periods within those fiscal years with early adoption permitted. The Company will
adopt ASU 2016-2 on January 1, 2019 using the modified retrospective method. The Company has
completed its evaluation of operating leases related to offices, processing centers, warehouse spaces
and, to a lesser extent, certain equipment. The Company expects the adoption of the standard will
result in approximately $50 million to $60 million in right-of-use assets and lease obligations on the
Consolidated Balance Sheets. The Company expects the Income Statement recognition to appear
similar to its current methodology. The Company will elect the practical expedients upon transition
which will retain the lease classification for leases and any unamortized initial direct costs that existed
prior to the adoption of the standard.

On January 1, 2018, the Company adopted ASC 606 and all the related amendments using the
modified retrospective method. The adoption did not have a material impact to the Company’s revenue
recognition policy under the previous standard and adoption of the new standard did not result in an
adjustment to the Company’s beginning retained earnings balance.

On January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows ‘‘Restricted
Cash (a consensus of the FASB Emerging Issues Task Force)’’, using a retrospective transition method to
each period presented. The new standard no longer requires the Company to present transfers between
cash and cash equivalents and restricted cash in the statements of cash flows. Adoption of the new
standard resulted in a decrease of $0.4 million and $0.6 million in net cash provided by operating
activities as previously reported for the years ended December 31, 2017 and 2016, respectively. See the
Consolidated Statements of Cash Flows above which includes a reconciliation of cash and cash
equivalents to total cash, cash equivalents, and restricted cash.

In June 2016, the FASB issued ASU No. 2016-13, ‘‘Financial Instruments—Credit Losses:
Measurement of Credit Losses on Financial Instruments.’’ The guidance will replace the incurred loss
impairment methodology under current GAAP with a methodology that reflects expected credit losses
and requires consideration of a broader range of reasonable and supportable information to inform
credit loss estimates The guidance is effective for public companies for interim and annual periods
beginning after December 15, 2019, with early adoption permitted for interim and annual periods
beginning after December 15, 2018. The Company is in the initial stages of evaluating the impact of
this standard on the Consolidated Financial Statements.

F-18

(5) Long-term Debt and Lease Obligations

The following is a summary of long-term debt and lease obligation (in thousands):

December 31,

2018

2017

Senior secured second-priority lien notes (maturing

December 15, 2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$120,569

Senior secured third-priority lien notes (redeemed March 26,

2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

28,497

Revolving credit facility (amended August 16, 2018, maturing

August 16, 2023)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs associated with issuances of debt . . . . . . . . . . . . . . . . . .

—
2,938
1,159
(2,925)

10,000
279
1,382
(3,983)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt and lease obligations . . . . .

121,741
(2,228)

156,744
(40,024)

Non-current portion of long-term debt and lease obligations

$119,513

$116,720

(a) The maturity of the revolving credit facility will accelerate to December 15, 2021 if
the Company is unable to repay or extend the maturity of the Second Lien Notes.

Revolving Credit Facility

On August 16, 2018, ION and its material U.S. subsidiaries; GX Technology Corporation, ION
Exploration Products (U.S.A) Inc. and I/O Marine Systems Inc. (the ‘‘Material U.S. Subsidiaries’’),
along with GX Geoscience Corporation, S. de R.L. de C.V., a limited liability company (Sociedad de
Responsibilidad Limitada de Capital Variable) organized under the laws of Mexico, and a subsidiary of
the Company (the ‘‘Mexican Subsidiary’’), (the Material U.S. Subsidiaries and the Mexican Subsidiary
are collectively, the ‘‘Subsidiary Borrowers’’, together with ION Geophysical Corporation are the
‘‘Borrowers’’), the financial institutions party thereto, as lenders, and PNC Bank, National Association
(‘‘PNC’’), as agent for the lenders, entered into that certain Third Amendment and Joinder to
Revolving Credit and Security Agreement (the ‘‘Third Amendment’’), amending the Revolving Credit
and Security Agreement, dated as of August 22, 2014 (as previously amended by the First Amendment
to Revolving Credit and Security Agreement, dated as of August 4, 2015 and the Second Amendment
to Revolving Credit and Security Agreement, dated as of April 28, 2016, the ‘‘Credit Agreement’’). The
Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third
Amendment is herein called, the ‘‘Credit Facility’’).

The Credit Facility is available to provide for the Borrowers’ general corporate needs, including

working capital requirements, capital expenditures, surety deposits and acquisition financing.

The Third Amendment amends the Credit Agreement to, among other things:

(cid:129) increase the maximum revolver amount by $10 million (from $40 million to $50 million);

(cid:129) increase the borrowing base percentage of the net orderly liquidation value as it relates to the

multi-client data library (not to exceed $28.5 million, up from the previous maximum of
$15 million for the multi-client data library component);

F-19

(cid:129) decrease the minimum excess borrowing availability threshold which (if the Borrowers have

minimum excess borrowing availability below any such threshold) triggers the agent’s right to
exercise dominion over cash and deposit accounts; and

(cid:129) modify the trigger required to test for compliance with the fixed charge coverage ratio, which is

further described below.

The maximum amount under the Credit Facility is the lesser of $50.0 million or a monthly

borrowing base. The borrowing base under the Credit Facility will increase or decrease monthly using a
formula based on certain eligible receivables, eligible inventory and other amounts, including a
percentage of the net orderly liquidation value of the Borrowers’ multi-client data library. As of
December 31, 2018, the borrowing base under the Credit Facility was $41.9 million and there was no
outstanding indebtedness under the Credit Facility.

The obligations of Borrowers under the Credit Facility are secured by a first-priority security
interest in 100% of the stock of the Subsidiary Borrowers and 65% of the equity interest in ION
International Holdings L.P. and by substantially all other assets of the Borrowers. However, the first-
priority security interest in the other assets of the Mexican Subsidiary is limited to a maximum
exposure of $5.0 million.

The Credit Facility contains covenants that, among other things, limit or prohibit the Borrowers,

subject to certain exceptions and qualifications, from incurring additional indebtedness in excess of
permitted indebtedness (including capital lease obligations), repurchasing equity, paying dividends or
distributions, granting or incurring additional liens on the Borrowers’ properties, pledging shares of the
Borrowers’ subsidiaries, entering into certain merger transactions, entering into transactions with the
Company’s affiliates, making certain sales or other dispositions of the Borrowers’ assets, making certain
investments, acquiring other businesses and entering into sale-leaseback transactions with respect to the
Borrowers’ property.

The Credit Facility, 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) by a two-step process based on (i) a minimum excess borrowing availability
threshold (excess borrowing availability less than $6.25 million for five consecutive business days or
$5.0 million on any given business day, and (ii) the Borrowers’ unencumbered cash maintained in a
PNC deposit account is less that the Borrowers’ then outstanding obligations. Prior to the Third
Amendment, the test covenant compliance was tied to a total liquidity measure (liquidity less than
$7.5 million for five consecutive days or $6.5 million on any given day).

F-20

As of December 31, 2018, 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.

Senior Secured Notes

As of December 31, 2018, ION Geophysical Corporation’s 9.125% Senior Secured Second Priority

The Second Lien Notes remain outstanding and are senior secured second-priority obligations
guaranteed by the Material U.S. Subsidiaries and the Mexican Subsidiary (each as defined above and
herein below, with the reference to the Second Lien Notes, the ‘‘Guarantors’’). Interest on the Second
Lien Notes accrues at the rate of 9.125% per annum and is payable semiannually in arrears on June 15
and December 15 of each year during their term, except that the interest payment otherwise payable on
June 15, 2021 will be payable on December 15, 2021.

The April 2016 indenture governing the Second Lien Notes contains certain covenants that, among

other things, limits or prohibits ION Geophysical Corporation’s ability and the ability of its restricted
subsidiaries to take certain actions or permit certain conditions to exist during the term of the Second
Lien Notes, including among other things, incurring additional indebtedness, creating liens, paying
dividends and making other distributions in respect of ION Geophysical Corporation’s capital stock,
redeeming ION Geophysical Corporation’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 Second Lien Notes Indenture
are subject to certain exceptions and qualifications. All of ION Geophysical Corporation’s subsidiaries
are currently restricted subsidiaries.

As of December 31, 2018, the Company was in compliance with the covenants with respect to the

Second Lien Notes.

On or after December 15, 2019, the Company may on one or more occasions redeem all or a part

of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest
and special interest, if any, on the Second Lien Notes redeemed during the twelve-month period
beginning on December 15th of the years indicated below:

Date

Percentage

105.500%
103.500%
100.000%

Equipment Capital Leases

The Company has entered into capital leases that are due in installments for the purpose of
financing the purchase of computer equipment through 2021. Interest accrues under these leases at

F-21

rates from 4.3% to 8.7% per annum, and the leases are collateralized by liens on the computer
equipment. The assets are amortized over the lesser of their related lease terms or their estimated
productive lives and such charges are reflected within depreciation expense.

A summary of future principal obligations under long-term debt and equipment capital lease

obligations follows (in thousands):

Years Ending December 31,

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-Term
and Long-
Term Debt

—
—
120,569

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$120,569

Capital Lease
Obligations

Other
Financing

$1,069
1,135
734

$2,938

Total

2,228
1,135
121,303

1,159
—
—

$1,159

$124,666

(6) Net Income (Loss) per Common 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 issuable under anti-dilutive
options at December 31, 2018, 2017 and 2016 were 785,890, 890,341 and 847,635, respectively. All
outstanding stock options for the twelve months ended December 31, 2018, 2017 and 2016 were
anti-dilutive.

(7) Income Taxes

The sources of income (loss) before income taxes are as follows (in thousands):

Years Ended December 31,

2018

2017

2016

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(59,212) $(12,487) $(41,246)
(19,060)
(16,866)

(8,468)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(67,680) $(29,353) $(60,306)

Components of income taxes are as follows (in thousands):

Years Ended December 31,

2018

2017

2016

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:

$ — $ (166) $ —
28
5,574

116
5,494

65
8,905

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(346)
(5,906)

(1,263)
(4,157)

—
(1,181)

Total income tax expense . . . . . . . . . . . . . . . . . . . . . . .

$ 2,718

$ 4,421

F-22

A reconciliation of the expected income tax expense on income (loss) before income taxes using

the statutory federal income tax rate of 21% for 2018 and 35% for 2017 and 2016 to income tax
expense follows (in thousands):

Expected income tax expense at 21% for 2018 and 35% for 2017 and

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
Foreign tax differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global intangible low tax income inclusion . . . . . . . . . . . . . . . . . . . . .
State and local taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in U.S. tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired capital loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance:

Years Ended December 31,

2018

2017

2016

$(14,213) $(10,274) $(21,107)
5,932
(2,914)
(4,828)
(5,610)
—
—
28
116
(259)
4,308
—
77,410
1,321
1,114

74
4,703
3,443
65
1,604
—
—

Valuation allowance on expiring capital losses . . . . . . . . . . . . . . . . .
Valuation allowance on operations . . . . . . . . . . . . . . . . . . . . . . . . .

—
7,042

(1,114)
(63,012)

(1,321)
24,655

Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,718

$ 4,421

As a result of passage of the Tax Cut and Jobs Act (the ‘‘Act’’) in December 2017, the Company’s

U.S. deferred tax assets, liabilities, and associated valuation allowance as of December 31, 2018 and
2017 have been re-measured at the new U.S. federal tax rate of 21%.

The tax effects of the cumulative temporary differences resulting in the net deferred income tax

asset (liability) are as follows (in thousands):

December 31,

2018

2017

Deferred income tax assets:

Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforward . . . . . . . . . . . . . . . . . .
Equity method investment . . . . . . . . . . . . . . . . . . . . . .
Original issue discount . . . . . . . . . . . . . . . . . . . . . . . . .
Interest limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basis in identified intangibles . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . .
Contingency accrual . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,126
6,415
96,854
35,292
8,073
5,845
4,146
5,345
—
4,600

1,976
2,960
87,705
35,292
9,624
—
9,408
6,929
788
4,035

Total deferred income tax asset . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

167,696
(160,505)

158,717
(153,463)

Net deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . .

7,191

5,254

Deferred income tax liabilities:

Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(3,501)

Total deferred income tax asset, net . . . . . . . . . . . . . . . . . . .

7,191

1,753

As of December 31, 2018, the Company has a valuation allowance on substantially all net U.S.

deferred tax assets. The valuation allowance was released in 2017 with respect to refundable U.S.
alternative minimum tax (‘‘AMT’’) credits that will be realized as a result of provisions in the Act.

F-23

A valuation allowance is established or maintained when it is ‘‘more likely than not’’ that all or a
portion of deferred tax assets will not be realized. The Company will continue to record a valuation
allowance for the substantial majority of its deferred tax assets until there is sufficient evidence to
warrant reversal.

At December 31, 2018, the Company had U.S. net operating loss carryforwards of approximately
$274.4 million, expiring in 2034 and beyond, and net operating loss carryforwards outside of the U.S. of
approximately $153.1 million, the majority of which expires beyond 2025.

As of December 31, 2018, the Company has approximately $0.4 million of unrecognized tax
benefits and does not expect to recognize any significant increases in unrecognized tax benefits during
the next twelve-month period. Interest and penalties, if any, related to unrecognized tax benefits are
recorded in income tax expense. During 2018, 2017 and 2016, the aggregate changes in the Company’s
total gross amount of unrecognized tax benefits are summarized as follows (in thousands):

Years Ended December 31,

2018

2017

2016

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$447

$1,299

$1,250

Increases in unrecognized tax benefits—current year

positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Decreases in unrecognized tax benefits—prior year

position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(911)

—

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$447

$ 447

$1,299

The Company’s U.S. federal tax returns for 2015 and subsequent years remain subject to

examination by tax authorities. The Company is no longer subject to Internal Revenue Service (‘‘IRS’’)
examination for periods prior to 2015, although carryforward attributes that were generated prior to
2015 may still be adjusted upon examination by the IRS if they either have been or will be used in a
future period. In the Company’s foreign tax jurisdictions, tax returns for 2012 and subsequent years
generally remain open to examination.

As of December 31, 2018, the Company considered the outside book-over-tax basis difference in

its foreign subsidiaries to be in the amount of approximately $85.0 million. United States income taxes
have not been provided on this basis difference as it is the Company’s intention to reinvest the
undistributed earnings of its foreign subsidiaries to the extent they cannot be remitted to the United
States without incurring incremental tax as provided in the Act.

(8) Legal Matters

WesternGeco

In 2015, the United States Court of Appeals for the Federal Circuit in Washington, D.C. (the
‘‘Court of Appeals’’) reversed, in part, the District Court, holding that the lost profits, which were
attributable to foreign seismic surveys, were not available to WesternGeco under the Patent Act. The
Company had recorded a loss contingency accrual of $123.8 million because of the District Court’s

F-24

ruling. As a result of the reversal by the Court of Appeals, the Company reduced the loss contingency
accrual to $22.0 million.

On February 26, 2016, WesternGeco appealed the Court of Appeals’ decision to the Supreme

On November 14, 2016, the District Court ordered our sureties to pay principal and interest on

the royalty damages previously awarded. On November 25, 2016, the Company paid WesternGeco the
$20.8 million due pursuant to the order, and it reduced its loss contingency accrual to zero.

On March 14, 2017, the District Court held a hearing on whether impose additional damages for

willfulness. The Judge found that the Company’s infringement was willful, and awarded enhanced
damages of $5.0 million to WesternGeco (WesternGeco had sought $43.6 million in such damages.)
The District Court also ordered the appeal bond to be released and discharged. The Court’s findings
and ruling were memorialized in an order issued on May 16, 2017. On June 30, 2017, the Company and
WesternGeco agreed that neither of them would appeal the District Court’s award of $5.0 million in
enhanced damages. Upon assessment of the enhanced damages, the Company accrued $5.0 million in
the first quarter of 2017. As the Company have paid the $5.0 million, the accrual has been adjusted,
and as of December 31, 2018, the loss contingency accrual was zero.

WesternGeco filed a second petition in the Supreme Court on February 17, 2017, appealing the
lost profits issue again. On May 30, 2017, the Supreme Court called for the U.S. Solicitor General’s
views on whether or not the Supreme Court ought to hear WesternGeco’s appeal. On December 6,
2017, the Solicitor General filed its brief, and took the position that the Supreme Court ought to hear
the appeal and that foreign lost profits ought to be available. On January 12, 2018, the Supreme Court
agreed to hear the appeal. The specific issue before the Supreme Court was whether lost profits arising
from use of prohibited combinations occurring outside of the United States are categorically
unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f)(2) (the statute under
which the Company were held to have infringed WesternGeco’s patents, and upon which the District
Court and Court of Appeals relied in entering their rulings).

The Supreme Court heard oral arguments on April 16, 2018. The Company argued that the Court

of Appeals’ decision that eliminated lost profits ought to be affirmed. WesternGeco and the Solicitor
General argued that the Court of Appeals’ decision that eliminated lost profits ought to be reversed.

On June 22, 2018, the Supreme Court reversed the judgment of the Court of Appeals, held that

On July 27, 2018, the Court of Appeals vacated its September 21, 2016 judgment with respect to
damages, and ordered WesternGeco and the Company to submit supplemental briefing on what relief is
appropriate in light of the Supreme Court’s decision. The Company and WesternGeco each submitted
briefing in accordance with the Court of Appeals’ order (the last brief was filed on September 7, 2018).

The Company argued in its brief to the Court of Appeals that lost profits were not available to

WesternGeco because the jury instructions required them to find that the Company had been
WesternGeco’s direct competitor in the survey markets where WesternGeco had lost profits, and that
the jury could not have found so. Additionally, we argued that the award of lost profits and reasonable

F-25

royalties ought to be vacated and retried on separate grounds due to the outcome of an Inter Partes
Review (‘‘IPR’’) filed with the Patent Trial and Appeal Board (‘‘PTAB’’) of the Patent and Trademark
Office.

Until the Court of Appeals’ January 11, 2019 decision issued (which is described below), the IPR

was an administrative proceeding that was separate from the 2009 lawsuit. By means of the IPR, the
Company joined a challenge to the validity of several of WesternGeco’s patent claims that another
company had filed. While the 2009 lawsuit was pending on appeal, the PTAB invalidated four of the six
patent claims that formed the basis for the lawsuit judgment against the Company. WesternGeco
appealed the PTAB’s invalidation of its patents to the Court of Appeals. On May 7, 2018, the Court of
Appeals affirmed the PTAB’s invalidation of the patents, and on July 16, 2018, the Court of Appeals
denied WesternGeco’s petition for a rehearing. On December 13, 2018, WesternGeco filed a petition
with the Supreme Court, arguing that the Court of Appeals ought to have overturned the decision of
the PTAB. (As of February 7, 2019, the Supreme Court has not indicated whether it will, or will not,
hear WesternGeco’s appeal.)

In the same brief to the Court of Appeals in which the Company made its ‘‘direct competitor’’

argument, the Company argued that the Court of Appeals’ affirmation of the PTAB’s decision
precluded WesternGeco’s damages claims, and that the Court of Appeals should order a new trial as to
the royalty damages already paid by the Company. The Company also argued that if the Court of
Appeals did not find its ‘‘direct competitor’’ argument persuasive, the Court should nonetheless vacate
the District Court’s award of royalty damages and lost profits damages and order a new trial as to both
royalty damages and lost profits.

In its briefs to the Court of Appeals, WesternGeco argued that the only remaining issue was
whether lost profits were unavailable to WesternGeco due to the Company’s ‘‘direct competitor’’
argument, and argued that the invalidation of four of its six patent claims by the PTAB (which was
affirmed by the Court of Appeals) should have no effect on lost profits or on the royalty award already
paid by the Company. WesternGeco also argued that lost profits should be available notwithstanding
the Company’s ‘‘direct competitor’’ argument.

Oral arguments took place on November 16, 2018, and on January 11, 2019, the Court of Appeals
issued its ruling. In its ruling, the Court of Appeals refused to disturb the award of reasonable royalties
to WesternGeco (which the Company paid in 2016), and rejected the Company’s ‘‘direct competitor’’
argument, but vacated the District Court’s award of lost profits damages and remanded the case back
to the District Court to determine whether to hold a new trial as to lost profits. The Court of Appeals
also ruled that its affirmance of the PTAB’s decision eliminated four of the five patent claims that
could have supported the award of lost profits, leaving only one remaining patent claim that could
support an award of lost profits.

F-26

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.

(9) Other Income (Expense)

A summary of other income (expense) follows (in thousands):

(Accrual for) reduction of loss contingency related to legal proceedings

(Footnote 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recovery of INOVA bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on bond exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $(5,000) $ 1,168
3,983
844
— (2,182)
(1,619)
211

—
—
(436)

Total other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(436) $(3,945) $ 1,350

Years Ended December 31,

2018

2017

2016

(10) Details of Selected Balance Sheet Accounts

Accounts Receivable

A summary of accounts receivable follows (in thousands):

Accounts receivable, principally trade . . . . . . . . . . . . . . . . . . . .
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . .

$26,558
(430)

$20,050
(572)

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$26,128

$19,478

December 31,

2018

2017

Inventories

A summary of inventories follows (in thousands):

Raw materials and purchased subassemblies . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less reserve for excess and obsolete inventories . . . . . . . . . . . .

$ 20,011
1,032
8,111
(15,024)

$ 20,448
1,146
7,953
(15,039)

Inventories, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,130

$ 14,508

December 31,

2018

2017

F-27

Property, Plant, Equipment and Seismic Rental Equipment

A summary of property, plant, equipment and seismic rental equipment follows (in thousands):

December 31,

2018

2017

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Seismic rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,707
132,135
1,423
3,859
30,104

$ 15,822
145,654
1,677
3,869
28,965

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . .
Less impairment of long-lived assets . . . . . . . . . . . . . . . . . .

183,228
(133,634)
(36,553)

195,987
(143,834)
—

Property, plant, equipment and seismic rental equipment, net

$ 13,041

$ 52,153

Total depreciation expense, including amortization of assets recorded under capital leases, for 2018,

2017 and 2016 was $7.6 million, $15.2 million and $20.3 million, respectively.

Accrued Expenses

A summary of accrued expenses follows (in thousands):

Compensation, including compensation-related taxes and

commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued multi-client data library acquisition costs . . . . . . . . . . . .
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrual for loss contingency related to legal proceedings

December 31,

2018

2017

$14,502
3,746
7,577

$19,809
5,104
1,868

(Footnote 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
5,586

3,750
8,166

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$31,411

$38,697

Other Long-term Liabilities

A summary of other long-term liabilities follows (in thousands):

Deferred lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,465
429

12,811
1,115

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,894

$13,926

December 31,

2018

2017

(11) Goodwill

On December 31, 2018, the Company completed the annual reviews of the carrying value of
goodwill in its E&P Technology & Services and Optimization Software & Services reporting units and
noted no impairments. The qualitative assessment concluded it was more likely than not that the fair

F-28

values of the Company’s E&P Technology & Services, and Optimization Software & Services reporting
units exceeded their carrying values.

The following is a summary of the changes in the carrying amount of goodwill for the years ended

December 31, 2018 and 2017 (in thousands):

Balance at January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of foreign currency translation adjustments . . . . . . .

Balance at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . .
Impact of foreign currency translation adjustments . . . . . . .

Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . .

$2,943
—

2,943
—

$2,943

E&P Technology &
Services

Optimization
Software &
Services

$19,265
1,881

21,146
(1,174)

Total

$22,208
1,881

24,089
(1,174)

$19,972

$22,915

(12) Stockholders’ Equity and Stock-based Compensation

Public Equity Offering

On February 21, 2018, the Company completed the public equity offering (the ‘‘Offering’’) of its

1,820,000 shares of common stock at a public offering price of $27.50 per share, and warrants to
purchase an additional 1,820,000 shares of the Company’s common stock pursuant to the Registration
Statement on Form S-3 (No. 33-213769) filed with the Securities and Exchange Commission under the
Securities Act of 1933 and declared effective on December 2, 2016. The net proceeds from this
Offering were $47.0 million, including transaction expenses. A portion of the net proceeds were used to
retire the Company’s $28.5 million Third Lien Notes in March 2018. The warrants have an exercise
price of $33.60 per share, are immediately exercisable and expire on March 21, 2019.

Stock Option Plans

The Company has adopted stock option plans for eligible employees, directors and consultants,

which provide for the granting of options to purchase shares of common stock. The options under
these plans generally vest in equal annual installments over a four-year period and have a term of ten
years. These options are typically granted at pre-established quarterly grant dates with an exercise price
per share equal to or greater than the current market price and, upon exercise, are issued from the
Company’s unissued common shares.

F-29

Transactions under the stock option plans are summarized as follows:

January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in shares authorized . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/forfeited . . . . . . . . . . . . . . . . . . . . .
Restricted stock granted out of option plans . .
Restricted stock forfeited or cancelled for
employee minimum income taxes and
returned to the plans . . . . . . . . . . . . . . . . .

December 31, 2016 . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/forfeited . . . . . . . . . . . . . . . . . . . . .
Restricted stock granted out of option plans . .
Restricted stock forfeited or cancelled for
employee minimum income taxes and
returned to the plans . . . . . . . . . . . . . . . . .

December 31, 2017 . . . . . . . . . . . . . . . . . . . . . .
Increase in shares authorized . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/forfeited . . . . . . . . . . . . . . . . . . . . .
Restricted stock granted out of option plans . .
Restricted stock forfeited or cancelled for
employee minimum income taxes and
returned to the plans . . . . . . . . . . . . . . . . .

Option Price
per Share

$34.20 - $245.85
—
3.10
—
3.10 - 245.85
—

Outstanding

Vested

Available
for Grant

560,797
—
415,000
—
(128,162)
—

384,305

97,003
— 1,150,940
— (415,000)
—
18,895
— (259,300)

67,480
(103,432)

—

7,182

$ 3.10 - $245.85
13.15
—
3.10
3.10 - 245.85
—

847,635
156,000

348,353

— 149,537
(15,000)
(47,612)
—

(15,000)
(98,294)
—

599,720
— (156,000)
—
—
82,118
(59,500)

—

22,065

3.10 - 245.85
—
24.50
—
3.10
3.10 - 245.85
—

890,341
—
10,000

435,278

488,403
— 1,200,000
(10,000)
—
—
— 153,944
—
(70,086)
2,568
(44,231)
— (996,775)

(70,086)
(44,365)
—

—

48,524

December 31, 2018 . . . . . . . . . . . . . . . . . . . . . .

$ 3.10 - $151.35

785,890

474,905

732,720

Stock options outstanding at December 31, 2018 are summarized as follows:

Option Price per Share

Outstanding

$3.10 - $57.90 . . . . . . . . . . . . . . . .
$61.05 - $71.85 . . . . . . . . . . . . . . .
$81.60 - $99.60 . . . . . . . . . . . . . . .
$106.05 - $151.35 . . . . . . . . . . . . .

Totals . . . . . . . . . . . . . . . . . . . .

558,997
75,231
108,610
43,052

785,890

Weighted
Average Exercise
Price of
Outstanding
Options

$ 15.64
$ 62.17
$ 88.94
$108.84

$ 35.33

Weighted
Average
Remaining
Contract Life

7.2 years
4.7 years
3.6 years
2.3 years

5.4 years

Weighted
Average Exercise
Price of Vested
Options

$ 24.32
$ 62.17
$ 88.94
$108.84

$ 52.76

Vested

248,012
75,231
108,610
43,052

474,905

F-30

Additional information related to the Company’s stock options follows:

Number
of Shares Exercise Price

Weighted
Average

Weighted
Average Grant
Date Fair
Value

Weighted
Average
Remaining

Aggregate
Intrinsic

Contractual Life Value (000’s)

Total outstanding at January 1, 2018 . . . . . 890,341
Options granted . . . . . . . . . . . . . . . . . .
10,000
Options exercised . . . . . . . . . . . . . . . . . (70,086)
(134)
Options cancelled . . . . . . . . . . . . . . . . .
Options forfeited . . . . . . . . . . . . . . . . . (44,231)

$ 36.17
$ 24.50
$
3.10
$ 61.05
$100.85

6.4 years

$6,774

$15.23

Total outstanding at December 31, 2018 . . 785,890

$ 35.33

5.4 years

$ 572

Options exercisable and vested at

December 31, 2018 . . . . . . . . . . . . . . . . 474,905

$ 52.76

5 years

$ 213

The total intrinsic value of options exercised during 2018, 2017 and 2016 was $1.4 million, less than

$0.1 million and less than $0.1 million, respectively. Cash received from option exercises under all
share-based payment arrangements for 2018 and 2017 was $0.2 million and less than $0.1 million,
respectively, and during 2016, there was no cash received. The weighted average grant date fair value
for stock option awards granted during 2018, 2017 and 2016 was $15.23, $8.10 and $2.04 per share,
respectively.

The Company calculated the fair value of each stock option on the date of grant using the Black-

Scholes option pricing model. The following assumptions were used for each respective period:

Years Ended December 31,

2018

2017

2016

Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected lives (in years) . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.78% 2.14% 1.3%
5.0
5.0
—% —% —%
73.67% 74.41% 78.76%

5.5

The computation of expected volatility during 2018, 2017 and 2016 was based on an equally

weighted combination of historical volatility and market-based implied volatility. Historical volatility was
calculated from historical data for a period of time approximately equal to the expected term of the
option award, starting from the date of grant. Market-based implied volatility was derived from traded
options on the Company’s common stock having a term of six months. The Company’s computation of
expected life in 2018, 2017 and 2016 was determined based on historical experience of similar awards,
giving consideration to the contractual terms of the stock-based awards, vesting schedules and
expectations of future employee behavior. The risk-free interest rate assumption is based upon the U.S.
Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of
the option.

Restricted Stock and Restricted Stock Unit Plans

On November 30, 2018, the Company’s stockholders approved certain amendments to the

F-31

The Company has issued restricted stock and restricted stock units under the Company’s 2013

LTIP, as amended and other applicable plans. Restricted stock units are awards that obligate the
Company to issue a specific number of shares of common stock in the future if continued service
vesting requirements are met. Non-forfeitable ownership of the common stock will vest over a period as
determined by the Company in its sole discretion, generally in equal annual installments over a
three-year period. Shares of restricted stock awarded may not be sold, assigned, transferred, pledged or
otherwise encumbered by the grantee during the vesting period.

On December 1, 2018, the Company issued 900,002 restricted stocks to selected employees with a

grant date fair value $7.19, $6.51 and $5.89 for each of the tranches. The vesting of these restricted
stocks 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 three-year period beginning on the date of
grant the 20-day trailing volume-weighted average price of a share of common stock reaches or exceeds
(i) $17.50 for the first 1/3 of the awards, (ii) $22.50 for the second 1/3 of the awards, and (iii) $27.50
for the final 1/3 of the awards. The service 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.

The status of the Company’s restricted stock and restricted stock unit awards for 2018 follows:

Total nonvested at January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares/Units

201,702
996,775
(151,852)
(2,500)

Total nonvested at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . .

1,044,125

At December 31, 2018, 2017 and 2016, the intrinsic value of restricted stock and restricted stock
unit awards was approximately $5.4 million, $4.0 million and $1.7 million, respectively. The weighted
average grant date fair value for restricted stock and restricted stock unit awards granted during 2018,
2017 and 2016 was $10.60, $11.36 and $3.81 per share, respectively. The total fair value of shares vested
during 2018, 2017 and 2016 was $3.8 million, $0.6 million and $0.2 million, respectively.

Stock Appreciation Rights Plan

The Company has adopted a stock appreciation rights plan which provides for the award of stock

appreciation rights (‘‘SARs’’) to directors and selected key employees and consultants. The awards
under this plan are subject to the terms and conditions set forth in agreements between the Company
and the holders. The exercise price per SAR is not to be less than one hundred percent of the fair
market value of a share of common stock on the date of grant of the SAR. The term of each SAR
shall not exceed ten years from the grant date. Upon exercise of a SAR, the holder shall receive a cash
payment in an amount equal to the spread specified in the SAR agreement for which the SAR is being
exercised. In no event will any shares of common stock be issued, transferred or otherwise distributed
under the plan.

On December 1, 2018, the Company issued 960,009 SARs awards to selected employees with an

exercise price of $8.85 (‘‘2018 SARs’’). None of these 2018 SARs were awarded to non-employee
directors. The 2018 SARs have the same service and market vesting conditions as the restricted stocks
issued on December 1, 2018, as described above. The maximum value of each 2018 SARs is capped at
$18.65 (the spread between the share price cap of $27.50 and the $8.85 per award price).

F-32

The 2018 SARs are considered liability awards and as such, these amounts are accrued in the
liability section of the consolidated balance sheets. The Company calculated the fair value of each 2018
SARs award as of December 31, 2018 using a Monte Carlo simulation model. The following
assumptions were used:

Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected lives (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —%
82.9%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.0%
5.31

On March 1, 2016, the Company issued 1,210,000 SARs awards to 15 selected key employees with

an exercise price of $3.10 (‘‘2016 SARs’’). None of these 2016 SARs were awarded to non-employee
directors. The vesting of these 2016 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 service 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. The maximum value of each 2016 SARs is capped at $19.40 (the spread between the
share price cap of $22.50 and the $3.10 per award price).

On December 13, 2017, the Compensation Committee (the ‘‘Committee’’) of the Board of

Directors (the ‘‘Board’’) of the Company authorized and approved the acceleration of the vesting date
to December 13, 2017 for the second tranche of the Company’s outstanding 2016 SARs. The second
tranche of the 2016 SARs awards was originally scheduled to vest on March 1, 2018. The vesting of the
second tranche of the 2016 SARs awards was accelerated to facilitate the exercise by the 2016 SARs
participants, if they so choose, of a larger portion of the 2016 SARs awards prior to year-end, as such
an exercise would minimize the potential cash flow impact of any such exercise in the first quarter of
2018, would mitigate the ongoing mark to market accounting requirements for cash-settled 2016 SARs,
and would afford the 2016 SARs participants liquidity to invest in common stock of the Company to
further align their interests with those of the Company’s stockholders. Participants exercised 663,330
SARs awards at a $9.95 gain per share.

The 2016 SARs are considered liability awards and as such, these amounts are accrued in the
liability section of the consolidated balance sheets. The Company calculated the fair value of each 2016
SARs award on the date of grant and remeasured at each reporting period using a Monte Carlo
simulation model. However, as of December 31, 2018, the fair value of the 2016 SARs awards were
derived using the intrinsic value method since the final tranche of the 2016 SARs awards vest on
March 1, 2019, less than twelve months from the balance sheet date.

On March 1, 2015, the Company issued 207,207 SARs awards to 16 selected key employees with
an exercise price of $34.20 (‘‘2015 SARs’’). None of these 2015 SARs were awarded to non-employee
directors. The 2015 SARs awards number and exercise price have been retroactively adjusted to reflect
the one-for-fifteen reverse stock split completed on February 4, 2016. The vesting of these 2015 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

F-33

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.

The 2015 SARs are considered liability awards and as such, these amounts are accrued in the
liability section of the consolidated balance sheets. The Company calculated the fair value of each 2015
SARs award on the date of grant and remeasured at each reporting period using a Monte Carlo
simulation model. As of December 31, 2018, the market condition had not been met for the 2015
SARs. If the market condition is not met by March 1, 2019, the 2015 SARs award will expire.

The Company recorded $0.8 million of share-based compensation expense during 2018,

$6.6 million during 2017 and $0.5 million in 2016, related to employee SARs.

Additional information related to the Company’s SARs follows:

Number of
Shares

Weighted
Average
Exercise Price

Weighted
Average Grant
Date Fair Value

Weighted
Average
Remaining
Contractual Life

Aggregate
Intrinsic
Value (000’s)

Total outstanding at January 1,

2016 . . . . . . . . . . . . . . . . . . .
SARs granted . . . . . . . . . . . . .
SARs cancelled . . . . . . . . . . . .

216,532
1,210,000
(10,399)

Total outstanding at

December 31, 2016 . . . . . . . . .
SARs exercised . . . . . . . . . . . .
SARs cancelled . . . . . . . . . . . .

1,416,133
(713,330)
(136,939)

Total outstanding at

December 31, 2017 . . . . . . . . .
SARs granted . . . . . . . . . . . . .
SARs exercised . . . . . . . . . . . .
SARs forfeited . . . . . . . . . . . .

565,864
960,009
(34,999)
(9,333)

Total outstanding at

$34.67
$ 3.10
$34.20

$ 7.70
$ 3.10
$ 7.70

$13.49
$ 8.85
$ 3.10
$45.00

$17.55

8.85

December 31, 2018 . . . . . . . . .

1,481,541

$10.53

8.1 years

$718

SARs exercisable and vested at

December 31, 2018 . . . . . . . . .

—

$ —

F-34

Stock-based Compensation Expense

The following tables summarizes stock-based compensation expense for the years ended

December 31, 2018, 2017 and 2016 as follows (in thousands):

Stock-based compensation expense . . . . . . . . . . . . . . . . .
Tax benefit related thereto . . . . . . . . . . . . . . . . . . . . . . .

$3,337
(698)

$2,552
(862)

$ 3,267
(1,168)

Stock-based compensation expense, net of tax . . . . . . .

$2,639

$1,690

$ 2,099

Years Ended December 31,

2018

2017

2016

Stock appreciation rights expense . . . . . . . . . . . . . . . . . . .
Tax benefit related thereto . . . . . . . . . . . . . . . . . . . . . . . .

$ 822
(173)

$ 6,611
(2,314)

547
(191)

Stock appreciation rights expense, net of tax . . . . . . . . .

$ 649

$ 4,297

$ 356

Years Ended December 31,

2018

2017

2016

Equity Investment Program

To encourage the Company’s executive officers and other key employees to purchase common
stock of the Company and further align their interests with those of the Company’s stockholders, the
Board authorized and approved an equity investment program (the ‘‘Program’’) pursuant to which
certain of the executive officers and other key employees of the Company are permitted, but not
obligated, to purchase unregistered shares of common stock of the Company directly from the
Company at market prices. In connection with any such purchases, the Committee authorized and
approved, on December 13, 2017, a grant by the Company to such purchasing executive officers and
key employees of a certain number of shares of restricted stock. On December 13, 2017, the
Committee also authorized and approved to grant to certain executive officers and key employees a
certain number of shares of restricted stock in connection with certain purchases of shares of the
Company’s common stock in the open market.

Specifically, for each five (5) shares directly purchased from the Company or in the open market

during a defined period (to expire no later than December 31, 2017), the Company will issue
one (1) share of restricted stock, subject to certain limitations as to the total number of restricted
shares to be issued by the Company. Provided that an executive officer or key employee remains
employed with the Company until March 1, 2018, the restricted stock will be granted as of March 1,
2018, will vest in full on the date that is 90 days after the grant date and will be subject to the other
terms and conditions of the Company’s form of restricted stock agreement and the Company’s 2013
LTIP. The Company sold, in a private placement under Section 4(a)(2) of the Securities Act of 1933, as
amended on December 14, 2017, 120,567 shares of Company common stock at $13.05 per share (the
closing price of the Company’s common stock on the NYSE on such date) and executive officers and
other key employees purchased 219,346 shares in the open market. On May 30, 2018, 43,865 shares of
restricted stock vested at $24.75 per share.

F-35

(13) Supplemental Cash Flow Information and Non-Cash Activity

Supplemental disclosure of cash flow information follows (in thousands):

Years Ended December 31,

2018

2017

2016

Cash paid during the period for:

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,731
3,260

$14,181
7,030

$15,691
4,474

Non-cash items from investing and financing activities:

Purchase of computer equipment financed through capital leases
. . . . .
Leasehold improvement paid by landlord . . . . . . . . . . . . . . . . . . . . . . .
Issuance of stock in bond exchange . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of inventory to property, plant and equipment . . . . . . . . . . . . .
Investment in multi-client data library financed through trade payables .

3,297
—
—
—
4,956

—
—
—
955
— 10,741
— 17,662(a)

9,059

—

(a) This transfer of $17.7 million of inventory to property, plant, equipment and seismic rental

equipment in December 2016, relates to ocean bottom seismic equipment manufactured by the
Company to be deployed in the acquisition of ocean bottom seismic data.

(14) Operating Leases

Lessee. The Company leases certain equipment, offices and warehouse space under

non-cancelable operating leases. Rental expense was $10.1 million, $11.4 million and $11.3 million for
2018, 2017 and 2016, respectively.

A summary of future rental commitments over the next five years under non-cancelable operating

leases follows (in thousands):

Years Ending December 31,

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,248
12,857
11,075
10,821
9,205

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$57,206

(15) 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.

Due to their highly liquid nature, the amount of the Company’s other financial instruments,
including cash and cash equivalents, restricted cash, accounts and unbilled receivables, short term
investments, accounts payable and accrued multi-client data library royalties, represent their
approximate fair value.

The carrying amounts of the Company’s long-term debt as of December 31, 2018 and 2017 were

$124.7 million and $160.7 million, respectively, compared to its fair values of $120.7 million and
$158.2 million as of December 31, 2018 and 2017, respectively. The fair value of the long-term debt was
calculated using Level 1 inputs, including an active market price.

F-36

Fair value measurements are applied with respect to non-financial assets and liabilities measured

on a non-recurring basis, which would consist of measurements primarily of goodwill, intangibles assets,
multi-client data library and property, plant and equipment and seismic rental equipment.

(16) Benefit Plans

The Company has a 401(k) retirement savings plan, which covers substantially all employees.
Employees may voluntarily contribute up to 60% of their compensation, as defined, to the plan. The
Company matched the employee contribution at a rate of 50% of the first 6% of compensation
contributed to the plan. Company contributions to the plans were $0.9 million, $0.8 million and
$0.8 million, during 2018, 2017 and 2016, respectively.

(17) Selected Quarterly Information—(Unaudited)

A summary of selected quarterly information follows (in thousands, except per share amounts):

Three Months Ended

March 31, 2018

June 30, 2018

September 30,
2018

December 31,
2018

Service revenues . . . . . . . . . . . . . . . . . . . . . .
Product revenues . . . . . . . . . . . . . . . . . . . . . .

$ 25,086
8,422

$ 15,752
8,991

$37,105
10,095

$ 61,095
13,499

Total net revenues

. . . . . . . . . . . . . . . . . . .
Gross profit (loss) . . . . . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . . . . .
Interest expense, net
. . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . .
Net income attributable to noncontrolling

33,508
6,853
(12,640)
(3,836)
(791)
1,072

24,743
(1,517)
(22,519)
(2,911)
84
154

47,200
16,475
(2,452)
(3,022)
91
2,079

74,594
37,809
(16,661)
(3,203)
180
(587)

interests . . . . . . . . . . . . . . . . . . . . . . . . . . .

(87)

(366)

(74)

(246)

Net loss applicable to ION . . . . . . . . . . . . .

$(18,426)

$(25,866)

$ (7,536)

$(19,343)

Net loss per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(1.44)
(1.44)

$
$

(1.86)
(1.86)

$ (0.54)
$ (0.54)

$
$

(1.38)
(1.38)

F-37

Three Months Ended

March 31, 2017

June 30, 2017

September 30,
2017

December 31,
2017

Service revenues . . . . . . . . . . . . . . . . . . . . . .
Product revenues . . . . . . . . . . . . . . . . . . . . . .

$ 23,828
8,728

$ 34,454
11,547

$52,615
8,480

$48,513
9,389

Total net revenues

. . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Interest expense, net
Other income (expense), net . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . .
Net income attributable to noncontrolling

32,556
6,101
(13,912)
(4,464)
(5,068)
(418)

46,001
15,618
(3,572)
(4,241)
192
2,402

61,095
30,109
9,936
(3,959)
722
1,686

57,902
23,811
(1,151)
(4,045)
209
(3,646)

interests . . . . . . . . . . . . . . . . . . . . . . . . . . .

(316)

(418)

(78)

(53)

Net income (loss) applicable to ION . . . . . .

$(23,342)

$(10,441)

$ 4,935

$ (1,394)

Net income (loss) per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(1.98)
(1.98)

$
$

(0.88)
(0.88)

$
$

0.42
0.41

$ (0.12)
$ (0.12)

The sum of the quarterly per share information may not tie to per share information in the

Consolidated Statements of Operations due to rounding.

(18) Certain Relationships and Related Party Transactions

For 2018, 2017 and 2016, the Company recorded revenues from BGP of $4.9 million, $4.4 million

and $3.6 million, respectively. Receivables due from BGP were $1.6 million and $0.6 million at
December 31, 2018 and 2017, respectively. BGP owned approximately 10.6% of the Company’s
outstanding common stock as of December 31, 2018.

Mr. James M. Lapeyre, Jr. is the Chairman of the Board on ION’s board of directors and a
significant equity owner of Laitram, L.L.C. (Laitram), and he has served as president of Laitram and
its predecessors since 1989. Laitram is a privately-owned, New Orleans-based manufacturer of food
processing equipment and modular conveyor belts. Mr. Lapeyre and Laitram together owned
approximately 8.8% of the Company’s outstanding common stock as of December 31, 2018.

The Company acquired DigiCourse, Inc., the Company’s marine positioning products business,
from Laitram in 1998. In connection with that acquisition, the Company entered into a Continued
Services Agreement with Laitram under which Laitram agreed to provide the Company certain
bookkeeping, software, manufacturing and maintenance services. Manufacturing services consist
primarily of machining of parts for the Company’s marine positioning systems. The term of this
agreement expired in September 2001 but the Company continues to operate under its terms. In
addition, from time to time, when the Company has requested, the legal staff of Laitram has advised
the Company on certain intellectual property matters with regard to the Company’s marine positioning
systems. During 2018 and 2017, the Company paid Laitram and its affiliates $0.4 million and
$0.2 million, respectively, which consisted of manufacturing services and reimbursement of costs.
During 2016, the Company paid less than $0.1 million for reimbursement for costs related to providing
administrative and other back-office support services in connection with the Company’s Louisiana
marine operations. In addition, the Company is currently subleasing approximately 4,100 square feet of
office space to Laitram. In the opinion of the Company’s management, the terms of these services are
fair and reasonable and as favorable to the Company as those that could have been obtained from
unrelated third parties at the time of their performance.

F-38

(19) Condensed Consolidating Financial Information

The Second Lien 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’’), all of which are wholly-owned
subsidiaries. The Guarantors have fully and unconditionally guaranteed the payment obligations of ION
Geophysical Corporation with respect to these debt securities. In August 2018, as part of the Company
entering into the Third Amendment to its Credit Agreement, the Company joined the Mexican
Subsidiary as a guarantor with respect to the Second Lien Notes. All periods period presented below
have been updated to include the Mexican Subsidiary within The Guarantors column. The following
condensed consolidating financial information presents the results of operations, financial position and
cash flows for:

(cid:129) ION Geophysical Corporation and the Guarantors (in each case, reflecting investments in

subsidiaries utilizing the equity method of accounting).

(cid:129) All other subsidiaries of ION Geophysical Corporation that are non-guarantors.

(cid:129) The consolidating 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 footnotes. For additional information pertaining to
the Notes, see Item 7. ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations’’ in Part 2 of this Form 10-K.

F-39

Balance Sheet

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . .
Accounts receivable, net . . . . . . . . . .
Unbilled receivables . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current

assets . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . .
Deferred income tax asset . . . . . . . . . .
Property, plant, equipment and seismic
rental equipment, net . . . . . . . . . . . .
Multi-client data library, net
. . . . . . . .
Investment in subsidiaries . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . .
Intercompany receivables . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . .

December 31, 2018

ION
Geophysical
Corporation

The
Guarantors

All Other
Subsidiaries

Consolidating
Adjustments

Total
Consolidated

(In thousands)

$ 13,782
8
—
—

3,891

17,681
805

489
—
836,002
—
—
1,723

47
17,349
12,697
8,721

1,325

40,139
6,261

8,922
70,380
247,359
—
305,623
643

$ 19,722
8,771
31,335
5,409

— $ 33,551
26,128
—
44,032
—
14,130
—

2,566

67,803
125

—

—
—

3,630
3,164

—
—
— (1,083,361)
—
(371,644)
—

22,915
66,021
69

7,782

125,623
7,191

13,041
73,544
—
22,915
—
2,435

Total assets . . . . . . . . . . . . . . . . .

$ 856,700

$ 679,327

$ 163,727

$(1,455,005)

$ 244,749

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt
Accounts payable . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . .
Accrued multi-client data library

royalties . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . .

1,159
2,407
7,011

—
—

Total current liabilities . . . . . . . . .

10,577

Long-term debt, net of current

maturities . . . . . . . . . . . . . . . . . . . .
Intercompany payables . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . .

117,644
721,817
430

850,468

1,069
29,602
10,036

29,040
6,515

76,262

1,869
—
5,698

— $

2,904
14,364

216
1,195

18,679

—
—
5,766

83,829

24,445

Equity:

Common stock . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . .
Accumulated earnings (deficit) . . . . .
Accumulated other comprehensive

140
952,626
(926,092)

290,460
180,700
390,691

47,776
203,908
(12,475)

— $
—
—

2,228
34,913
31,411

—
—

—

—
(721,817)
—

(721,817)

(338,236)
(384,608)
(378,216)

29,256
7,710

105,518

119,513
—
11,894

236,925

140
952,626
(926,092)

income (loss) . . . . . . . . . . . . . . . .

(20,442)

4,324

(22,023)

17,699

(20,442)

Due from ION Geophysical

Corporation . . . . . . . . . . . . . . . . .

— (270,677)

(79,496)

350,173

Total stockholders’ equity . . . . . . .
Noncontrolling interests . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . .

6,232
—

6,232

595,498
—

595,498

137,690
1,592

139,282

(733,188)
—

(733,188)

—

6,232
1,592

7,824

Total liabilities and equity . . . . . . .

$ 856,700

$ 679,327

$ 163,727

$(1,455,005)

$ 244,749

F-40

Balance Sheet

Current assets:

ASSETS

assets . . . . . . . . . . . . . . . . . . . . . .

December 31, 2017

ION
Geophysical
Corporation

The
Guarantors

All Other
Subsidiaries

Consolidating
Adjustments

Total
Consolidated

(In thousands)

$ 39,344
50
—
—

2,427

41,821
1,264

511
—
693,679
—
—
686

66
12,496
34,484
8,686

4,530

60,262
336

7,170
81,442
321,934
—
162,017
1,811

$ 12,646
6,932
2,820
5,822

— $ 52,056
19,478
—
37,304
—
14,508
—

686

28,906
153

—

—
—

44,472
7,858

—
—
— (1,015,613)
—
(222,411)
—

24,089
60,394
288

7,643

130,989
1,753

52,153
89,300
—
24,089
—
2,785

Total assets . . . . . . . . . . . . . . . . .

$ 737,961

$ 634,972

$166,160

$(1,238,024)

$ 301,069

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt
Accounts payable . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . .
Accrued multi-client data library

royalties . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . .

$ 39,774
1,774
12,284

—
—

Total current liabilities . . . . . . . . .

53,832

Long-term debt, net of current

maturities . . . . . . . . . . . . . . . . . . . .
Intercompany payables . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . .

116,691
537,417
454

708,394

250
20,982
16,957

26,824
7,231

72,244

29
—
6,084

— $

2,195
9,456

211
1,679

13,541

—
—
7,388

78,357

20,929

Equity:

Common stock . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . .
Accumulated earnings (deficit) . . . . .
Accumulated other comprehensive

120
903,247
(854,921)

290,460
180,701
317,324

49,394
202,290
(9,247)

— $ 40,024
24,951
—
38,697
—

—
—

—

—
(537,417)
—

(537,417)

(339,854)
(382,991)
(308,077)

27,035
8,910

139,617

116,720
—
13,926

270,263

120
903,247
(854,921)

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 . . . . . . .
Noncontrolling interests . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . .

29,567
—

29,567

556,615
—

556,615

143,992
1,239

145,231

(700,607)
—

(700,607)

—

29,567
1,239

30,806

Total liabilities and equity . . . . . . .

$ 737,961

$ 634,972

$166,160

$(1,238,024)

$ 301,069

F-41

Income Statement

Year Ended December 31, 2018

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Consolidating
Adjustments

Total
Consolidated

Total net revenues . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . .

— $ 96,649
85,186
—

(In thousands)
$83,396
35,239

Gross profit . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . .
Intercompany interest, net . . . . . . . . . .
Equity in earnings (losses) of

investments . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . .

Income (loss) before income taxes . .
Income tax expense (benefit) . . . . . . . .

Net income (loss) . . . . . . . . . . . . . .

Net income attributable to

—
32,888

(32,888)
(13,010)
1,124

(26,446)
(196)

(71,416)
(245)

(71,171)

11,463
29,235

(17,772)
(136)
(12,137)

37,219
116

7,290
(6,711)

14,001

48,157
51,769

(3,612)
174
11,013

—
(356)

7,219
9,674

(2,455)

—
—

—
—
—

(10,773)
—

(10,773)

$180,045
120,425

59,620
113,892

(54,272)
(12,972)
—

—
(436)

(67,680)
2,718

(70,398)

noncontrolling interests . . . . . . . . . .

—

(773)

—

(773)

Net income (loss) attributable to

ION . . . . . . . . . . . . . . . . . . . . . .

$(71,171)

$ 14,001

$ (3,228)

$(10,773)

$ (71,171)

Comprehensive net income (loss) . . . .
Comprehensive income attributable

$(72,734)

$ 13,953

$ (4,797)

$ (8,383)

$ (71,961)

to noncontrolling interest . . . . . . .

—

(773)

—

(773)

Comprehensive net income (loss)

attributable to ION . . . . . . . . . . . . .

$(72,734)

$ 13,953

$ (5,570)

$ (8,383)

$ (72,734)

F-42

Income Statement

Year Ended December 31, 2017

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Consolidating
Adjustments

Total
Consolidated

Total net revenues . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . .

— $148,590
90,754
—

(In thousands)
$48,964
31,161

Gross profit . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . .

Income (loss) from operations . . . . . . .
Interest expense, net . . . . . . . . . . . . . .
Intercompany interest, net . . . . . . . . . .
Equity in earnings (losses) of

investments . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . .

Income (loss) before income taxes . .
Income tax expense (benefit) . . . . . . . .

Net income (loss) . . . . . . . . . . . . . .

Net income attributable to

—
39,000

(39,000)
(16,729)
1,084

27,696
(4,610)

(31,559)
(1,317)

(30,242)

57,836
28,020

29,816
(107)
(6,613)

67,290
(407)

89,979
(1,427)

91,406

17,803
17,318

485
127
5,529

—
1,072

7,213
2,768

4,445

—
—

—
—
—

(94,986)
—

(94,986)

$197,554
121,915

75,639
84,338

(8,699)
(16,709)
—

—
(3,945)

(29,353)
24

(29,377)

noncontrolling interests . . . . . . . . . .

—

(865)

—

(865)

Net income (loss) attributable to

ION . . . . . . . . . . . . . . . . . . . . . .

$(30,242)

$ 91,406

$ 3,580

$(94,986)

$ (30,242)

Comprehensive net income (loss) . . . .
Comprehensive income attributable

$(27,373)

$ 91,358

$ 6,550

$(97,043)

$ (26,508)

to noncontrolling interest . . . . . . .

—

(865)

—

(865)

Comprehensive net income (loss)

attributable to ION . . . . . . . . . . . . .

$(27,373)

$ 91,358

$ 5,685

$(97,043)

$ (27,373)

F-43

Income Statement

ION
Geophysical
Corporation Guarantors

The

Total net revenues . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . .

— $ 91,465
87,660
—

All Other
Subsidiaries

Consolidating
Adjustments

Total
Consolidated

(In thousands)
$81,343
49,116

$ —
—

$172,808
136,776

Year Ended December 31, 2016

Gross profit . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . .

Income (loss) from operations . . . . . . .
Interest expense, net . . . . . . . . . . . . . .
Intercompany interest, net . . . . . . . . . .
Equity in earnings (losses) of

investments . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . .

Income (loss) before income taxes . .
Income tax expense . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . .

Net income attributable to

—
31,438

(31,438)
(18,406)
978

(19,756)
3,528

(65,094)
54

(65,148)

3,805
27,279

(23,474)
(173)
(4,397)

23,368
723

(3,953)
1,337

(5,290)

32,227
20,486

11,741
94
3,419

—
(2,901)

12,353
3,030

9,323

—
—

—
—
—

(3,612)
—

(3,612)

36,032
79,203

(43,171)
(18,485)
—

—
1,350

(60,306)
4,421

(64,727)

noncontrolling interests . . . . . . . . . .

—

(421)

—

(421)

Net income (loss) attributable to

ION . . . . . . . . . . . . . . . . . . . . . .

$(65,148)

$ (5,290)

$ 8,902

$(3,612)

$ (65,148)

Comprehensive net income (loss) . . . .
Comprehensive income attributable

$(72,331)

$ (5,290)

$ 1,719

$ 4,208

$ (71,694)

to noncontrolling interest . . . . . . .

—

(421)

—

(421)

Comprehensive net income (loss)

attributable to ION . . . . . . . . . . . . .

$(72,331)

$ (5,290)

$ 1,298

$ 4,208

$ (72,115)

F-44

Statement of Cash Flows

Cash flows from operating activities:

Net cash provided by (used in) operating

Year Ended December 31, 2018

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Total
Consolidated

(In thousands)

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(37,659)

$ 39,407

$ 5,350

$ 7,098

Cash flows from investing activities:

Investment in multi-client data library . . . . . . . . . .
Purchase of property, plant, equipment and seismic
. . . . . . . . . . . . . . . . . . . . . . .

rental equipment

Net cash used in investing activities . . . . . . . . . .

Cash flows from financing activities:

Repayments under revolving line of credit . . . . . . .
Payments on notes payable and long-term debt
. . .
Cost associated with issuance of debt . . . . . . . . . . .
Intercompany lending . . . . . . . . . . . . . . . . . . . . . .
Proceeds from employee stock purchases and

exercise of stock options . . . . . . . . . . . . . . . . . .
Net proceeds from issuance of stocks . . . . . . . . . .
Dividend payment to noncontrolling interest . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) financing

—

(25,307)

(2,969)

(28,276)

(392)

(10,000)
(30,169)
(1,247)
7,983

214
46,999
(200)
(1,151)

(959)

(163)

(1,514)

(26,266)

(3,132)

(29,790)

—
(638)
—
(12,522)

—
—
—
—

—
—
—
4,539

—
—
—
—

(10,000)
(30,807)
(1,247)
—

214
46,999
(200)
(1,151)

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,429

(13,160)

4,539

3,808

Effect of change in foreign currency exchange rates

on cash, cash equivalents and restricted cash . . . . .

—

319

Net increase (decrease) in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .

(25,622)

(19)

7,076

(18,565)

Cash, cash equivalents and restricted cash at

beginning of period . . . . . . . . . . . . . . . . . . . . . . .

39,707

Cash, cash equivalents and restricted cash at end of

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,085

12,646

52,419

$19,722

$ 33,854

The following table is a reconciliation of cash, cash equivalents and restricted cash:

December 31, 2018

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Total
Consolidated

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted cash included in other long-term assets .

$13,782
303

Total cash, cash equivalents, and restricted cash

shown in statements of cash flows . . . . . . . . . . . . .

$14,085

(In thousands)

$47
—

$47

$19,722
—

$33,551
303

$19,722

$33,854

F-45

Statement of Cash Flows

Cash flows from operating activities:

Net cash provided by (used in) operating

Year Ended December 31, 2017

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Total
Consolidated

(In thousands)

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(22,315)

$ 73,154

$(23,227)

$ 27,612

Cash flows from investing activities:

Investment in multi-client data library . . . . . . . . . .
Purchase of property, plant, equipment and seismic
. . . . . . . . . . . . . . . . . . . . . . .

rental equipment

Net cash used in investing activities . . . . . . . . . .

Cash flows from financing activities:

Payments on notes payable and long-term debt
. . .
Cost associated with issuance of debt . . . . . . . . . . .
Intercompany lending . . . . . . . . . . . . . . . . . . . . . .
Proceeds from employee stock purchases and

exercise of stock options . . . . . . . . . . . . . . . . . .
Dividend payment to noncontrolling interest . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) financing

—

(23,710)

—

(23,710)

(165)

(817)

(24,527)

(81)

(1,063)

(24,773)

(1,591)
(53)
38,732

1,619
(100)
(243)

(3,167)
—
(45,609)

—
—
—

(58)
—
6,877

—
—
—

(4,816)
(53)
—

1,619
(100)
(243)

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38,364

(48,776)

6,819

(3,593)

Effect of change in foreign currency exchange rates
on cash, cash equivalents and restricted cash . . .

Net increase (decrease) in cash and cash

—

(260)

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .

15,884

(149)

(16,749)

(1,014)

Cash, cash equivalents and restricted cash at

beginning of period . . . . . . . . . . . . . . . . . . . . . .

23,823

215

29,395

53,433

Cash, cash equivalents and restricted cash at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 39,707

$ 12,646

$ 52,419

The following table is a reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted cash included in prepaid expenses and

other current assets . . . . . . . . . . . . . . . . . . . . . .
Restricted cash included in other long-term assets .

Total cash, cash equivalents, and restricted cash

December 31, 2017

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Total
Consolidated

$39,344

$66

$12,646

$52,056

(In thousands)

60
303

—
—

60
303

shown in statements of cash flows . . . . . . . . . . . . .

$39,707

$66

$12,646

$52,419

F-46

Statement of Cash Flows

Cash flows from operating activities:

Net cash provided by (used in) operating

Year Ended December 31, 2016

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Total
Consolidated

(In thousands)

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(30,732)

$ 53,107

$(21,382)

993

Cash flows from investing activities:

Investment in multi-client data library . . . . . . . . . .
Purchase of property, plant and equipment . . . . . .
Proceeds from sale of a cost-method investment . . .

—
(73)
2,698

(14,884)
(313)
—

—
(1,072)
—

(14,884)
(1,458)
2,698

Net cash provided by (used in) investing

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,625

(15,197)

(1,072)

(13,644)

Cash flows from financing activities:

Payments under revolving line of credit . . . . . . . . .
Borrowings under revolving line of credit . . . . . . . .
Payments on notes payable and long-term debt
. . .
Cost associated with issuance of debt . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . .
Intercompany lending . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . .

(5,000)
15,000
(17,070)
(6,744)
(964)
31,867
(252)

—
—
(6,316)
—
—
(34,771)
—

—
—
(248)
—
—
2,904
—

(5,000)
15,000
(23,634)
(6,744)
(964)
—
(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, cash equivalents and restricted cash . . .

—

1,386

Net decrease in cash and cash equivalents . . . . .

(11,270)

(3,177)

(18,412)

(32,859)

Cash, cash equivalents and restricted cash at

beginning of period . . . . . . . . . . . . . . . . . . . . . .

35,093

3,392

47,807

86,292

Cash, cash equivalents and restricted cash at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23,823

215

$ 29,395

$ 53,433

The following table is a reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted cash included in prepaid expenses and

other current assets . . . . . . . . . . . . . . . . . . . . . .
Restricted cash included in other long-term assets .

Total cash, cash equivalents, and restricted cash

December 31, 2016

ION
Geophysical
Corporation Guarantors

The

All Other
Subsidiaries

Total
Consolidated

$23,042

$215

$29,395

$52,652

(In thousands)

260
521

—
—

260
521

shown in statements of cash flows . . . . . . . . . . . . .

$23,823

$215

$29,395

$53,433

F-47

SCHEDULE II
ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS

Year Ended December 31, 2016

Balance at
Beginning of
Year

Charged
(Credited) to
Costs and
Expenses

Deductions

Balance at
End of Year

(In thousands)

Allowances for doubtful accounts . . . . . . . . . . . . . . .
Allowances for doubtful notes receivable . . . . . . . . . .
Valuation allowance on deferred tax assets . . . . . . . .
Excess and obsolete inventory . . . . . . . . . . . . . . . . . .

4,919
4,000
194,255
24,475

$ 1,834
—
23,334
429

$(5,310)
—
—
(9,855)

1,443
4,000
217,589
15,049

Year Ended December 31, 2017

Balance at
Beginning of
Year

Charged
(Credited) to
Costs and
Expenses

Deductions

Balance at
End of Year

(In thousands)

1,443
4,000
217,589
15,049

949
—
(64,126)
398

$(1,820)
—
—
(408)

572
4,000
153,463
15,039

Year Ended December 31, 2018

Balance at
Beginning of
Year

Charged
(Credited) to
Costs and
Expenses

Deductions

Balance at
End of Year

(In thousands)

572
4,000
153,463
15,039

$ 222
—
7,042
665

$(364)
—
—
(680)

430
4,000
160,505
15,024

S-1

CO RP ORATE INFORMATION

EXECUTIVE OFFICERS
R. Brian Hanson
President and Chief Executive Officer

Steven A. Bate
Executive Vice President
and Chief Financial Officer

Matthew Powers
Executive Vice President, General Counsel
and Corporate Secretary

Christopher T. Usher
Executive Vice President and Chief Operating
Officer, Operations Optimization

Kenneth G. Williamson
Executive Vice President and Chief Operating
Officer, E&P Technology & Services

Lawrence T. Burke
Executive Vice President,
Global Human Resources

BOARD OF DIRECTORS
James M. (Jay) Lapeyre, Jr.
Chairman of the Board
President, Laitram, L.L.C.

David H. Barr
Former President and Chief Executive Officer,
Logan International Inc.

R. Brian Hanson
President and Chief Executive Officer,
ION Geophysical Corporation

Franklin Myers
Senior Advisor
Quantum Energy Partners

S. James Nelson, Jr.
Former Vice Chairman,
Cal Dive International, Inc.
(now Helix Energy Solutions Group, Inc.)

John N. Seitz
Chairman and Chief Executive Officer,
GulfSlope Energy, Inc.

HuaSheng Zheng
Executive Vice President, BGP Inc.,
China National Petroleum Corporation

INVESTOR RELATIONS
Stockholders, securities analysts, portfolio managers,
or brokers seeking information about the Company
are welcome to call Investor Relations at +1 281 933
3339. If you prefer, you may send your requests to the
Investor Relations e-mail address: ir@iongeo.com.
Recent news releases, financial information, and
SEC filings can be downloaded from the Company’s
website at iongeo.com.

ANNUAL REPORT ON FORM 10-K
ION Geophysical Corporation’s Annual Report on Form
10-K for the fiscal year ended December 31, 2018,
which is furnished as part of this Annual Report to
Shareholders, is also available upon request without
ION Geophysical Corporation, Attn:
charge
Investor Relations, 2105 CityWest Blvd., Suite 100,
Houston, Texas 77042-2855.

from:

ANNUAL MEETING
ION
The Annual Meeting of Stockholders of
Geophysical Corporation will be held at the offices of
the Company located at 2105 CityWest Blvd., Suite 100,
Houston, Texas, on May 15, 2019, at 10:30 AM CST.

STOCK TRANSFER AGENT
Computershare Investor Services
462 South 4th Street, Suite 1600
Louisville, KY 40202

INDEPENDENT AUDITORS
Grant Thornton LLP
700 Milam St., Suite 300
Houston, TX 77002
832 476 3600

CEO AND CFO CERTIFICATES
The Company has included as Exhibit 31 to its
Annual Report on Form 10-K for the fiscal year
ended December 31, 2018, filed with the Securities
and Exchange Commission, certificates of the Chief
Executive Officer and Chief Financial Officer of the
Company certifying the quality of the Company’s
public disclosure and the Company has submitted to
the New York Stock Exchange a certificate of the Chief
Executive Officer of the Company certifying that he is
not aware of any violation by the Company of the New
York Stock Exchange corporate governance listing
standards.

FORWARD-LOOKING STATEMENTS
This Annual Report
to Stockholders contains or
incorporates by reference statements concerning our
future results and performance and other matters that
are “forward-looking” statements within the meaning of
Section 27A of the Securities Act of 1933, as amended
(“Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (“Exchange Act”).
These statements involve known and unknown risks,
uncertainties and other factors that may cause our or
our industry’s results, levels of activity, performance, or
achievements to be materially different from any future
results, levels of activity, performance, or achievements
forward-looking
implied by such
expressed or
statements. In some cases, you can identify forward-
looking statements by terminology such as “may,” “will,”
“would,” “should,” “intend,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” or “continue”
or the negative of such terms or other comparable
terminology. Examples of other
forward-looking
statements contained or incorporated by reference in
this Annual Report to Stockholders include statements
regarding any additional damages or adverse rulings in
the WesternGeco litigation and future potential adverse
effects on our financial results and liquidity; future
levels of capital expenditures of our customers for

seismic activities; future oil and gas commodity prices;
the effects of current and future worldwide economic
conditions (particularly in developing countries) and
demand for oil and natural gas and seismic equipment
and services; future cash needs and availability of cash to
fund our operations and pay our obligations; the effects of
current and future unrest in the Middle East, North Africa
and other regions; the timing of anticipated revenues and
the recognition of those revenues for financial accounting
purposes; the effects of ongoing and future industry
consolidation, including, in particular, the effects of
consolidation and vertical integration in the marine towed
streamer market; the timing of future revenue realization
of anticipated orders for multi-client survey projects and
data processing work in our E&P Technology & Services
segment; future levels of our capital expenditures; future
government laws or regulations pertaining to the oil and
gas industry, including trade restrictions, embargoes
and sanctions imposed by the U.S. government; future
government actions that may result in the deprivation of
our contractual rights, including the potential for adverse
decisions by judicial or administrative bodies in foreign
countries with unpredictable or corrupt judicial systems;
expected net revenues, income from operations and
net income; expected gross margins for our services
and products; future seismic industry fundamentals,
including future demand for seismic services and
equipment; future benefits to our customers to be
derived from new services and products; future benefits
to be derived from our investments in technologies,
joint ventures and acquired companies; future growth
rates for our services and products; the degree and
rate of future market acceptance of our new services
and products; expectations regarding E&P companies
and seismic contractor end-users purchasing our
more technologically-advanced services and products;
anticipated timing and success of commercialization
and capabilities of services and products under
development and start-up costs associated with their
development; future opportunities for new products and
projected research and development expenses; expected
continued compliance with our debt financial covenants;
expectations regarding realization of deferred tax assets;
expectations regarding the impact of the U.S. Tax Cuts
and Jobs Act; anticipated results with respect to certain
estimates we make for financial accounting purposes;
and compliance with the U.S. Foreign Corrupt Practices
Act and other applicable U.S. and foreign laws prohibiting
corrupt payments to government officials and other third
parties. These forward-looking statements reflect our
best judgment about future events and trends based on
the information currently available to us. Our results of
operations can be affected by inaccurate assumptions we
make or by risks and uncertainties known or unknown to
us. Therefore, we cannot guarantee the accuracy of the
forward-looking statements. Actual events and results
of operations may vary materially from our current
expectations and assumptions. Information regarding
factors that may cause actual results to vary from our
expectations, referred to as “risk factors,” appears in our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2018 in Part I, Item 1A. “Risk Factors” and
in other documents that we file from time to time with the
Securities and Exchange Commission.

ION Geophysical Corporation

2105 CityWest Blvd., Suite 100

Houston, TX 77042 USA

+1 281 933 3339

iongeo.com