ION Geophysical Corporation
Q4 2008 Earnings Call Transcript

Published: 27 Feb 2009

[Operator:]

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the ION Geophysical’s fourth quarter earnings conference call. During today’s presentation all parties will be in a listen-only mode and following the presentation the conference will be opened for questions. (Operator instructions) This conference is being recorded today, Wednesday, February, 27th of 2009. I would now like to turn the conference over to Jack Lascar of DRG&E. Please go ahead, sir.

[Jack Lascar:]

Thank you. Good morning everyone and welcome to ION Geophysical Corporation’s fourth quarter earnings conference call. We appreciate your joining us today. With me are Bob Peebler, President and Chief Executive Officer and Brian Hanson, Executive Vice President and Chief Financial Officer. Before I turn the call over to management I have a couple of items to cover. If you would like to be on an email distribution list to receive future news releases, please call DRG&E and provide us with that information. That number is 713-529-6600. If you would like to listen to a replay of today’s call, it is available via webcast by going to the Investor Relations section of the Company’s website at www.iongeo.com or via a recorded instant replay until March 13th. The information was provided in yesterday’s earnings release. Information reported on this call speaks only as of today, February, 27, 2009, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control that may cause the Company’s actual result or performance to differ materially from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the Company from time-to-time in its filings with the SEC, including in its Annual Report on Form 10-K for the year ended December 31, 2007, and 2008, and its quarterly report on Form 10-Q. Furthermore, as we start this call, please refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday and please note that the contents of our conference call this morning are covered by these statements. I will now turn the call now to Bob Peebler.

[Bob Peebler:]

Good morning, and thanks for joining us. I don’t plan on spending much time describing the macroeconomic situation related to the world crisis and its related impact on oil and gas; I suspect about everything I can say has already been covered by others in our industry. However, I will share with you what we have done in reaction to the dramatic drop in oil and natural prices, the assumptions we are making, and our short and long terms plans, and how we believe our business will play out over time. Saying we are disappointed in what has happened is an under-statement because we were on a path for an exceptional year in 2008 with record-breaking quarters, including Q3. We are also excited about the acquisition of ARAM, the progress we have made with FireFly, our strong and high-end data processing and multi-client business, and our growing leadership and the commercialization of our intelligent acquisition system in Marine. Even though many of our business lines remained relatively strong through the whole year, the significant weakening of our Land business, both systems and vibrator truck sales, and an unexpected last minute fall-off of some data library sales caused the very disappointing Q4 results. Our problems were compounded by our debt related to the ARAM acquisition, and a fact that the markets prevented us from completing our planned $175 million bond offering during the fourth quarter that was going to be used to pay down the short term debt obligations and add a little cushion to our balance sheet. \ Due to the quick response of our financial group in working with the various stakeholders, we did manage to find solutions to our short term debt issues, including restructuring the ARAM sellers note and taking out a 13-month bridge loan from Jefferies. We are continuing to strengthen our financial situation by cutting expenses, including the 13% headcount reduction, and managing our business conservatively with a stronger focus on cash generation. Our working capital needs are down substantially due to the fact we have significant inventories in Land that should cover most of our 2009 needs and we are also pulling back in other areas as appropriate. I would like to speak more specifically about our Land business since this is where we have the most serious challenges, but also some of the significant opportunities. The market crisis and related industry slowdown couldn’t have happened at a worse time for ION as we had just completed our acquisition of ARAM in mid-September, and were just starting the normal integration of the two companies. Although ARAM had made some early gains in international markets, their main market penetration and related system sales were North America. Unfortunately, with the dramatic and sudden slowdown of Land activity in the lower 48 states in Canada, ARAM’s main customers put the breaks on, so to speak, for new equipment purchases in the fourth quarter. With the exception of sales to support expansions for high channel count and the usual spares and repairs, ARAM’s North American non-rental equipment sales business nearly dried up and we don’t expect that to change in 2009. On the ION side, one of our stronger Land markets has been in Russia. Unlike North America for ARAM, activity in the Russian Land market also suddenly stopped. This drop not only caused several high-priority sales to drop out off the fourth quarter, but we also pulled back on shifting some equipment due to concerns about certain customers’ ability to pay due to the lack of customer financing options available at the time. Our reaction to this new reality has been to accelerate the integration of ION and ARAM Land businesses and to promote the leadership of ARAM’s ARIES II in our international markets. We have restructured our Land Systems business into one group managed by the ARAM executive team. We have also adjusted our cost structure across the entire Company, but focused primarily on the Land Systems business to better align our cost with the current market. We believe that these steps will result in a Land Systems business that will generate solid profitability despite significantly lower projected 2009 revenues. In addition, we are aggressively promoting the ARIES II ARAM product line through the ION international sales channel and are already seeing some success. I would like to point out that by our market estimates, there are over 800 seismic land crews operating around the world with only 100 of those North America. There are approximately 300 plus crews in the combined China and India market alone. So it’s not unrealistic to assume that we have sufficient sales potential when we consider that many of these crews are operating their old 2D systems, and the long term trend is to switch to 3D and to continue to increase channel count. There are also many crews that are using older equipment that will eventually be upgraded to new systems and that doesn’t count the eventual evolution to digital full-wave and cableless systems. I have no doubt that 2009 is going to be a difficult year for our Land Systems business, including vibrator trucks and vibrator trucks and geophones, and we may see a further contraction of our Land business due to the spreading concern of low oil prices, credit market problems, and potentially the lower oil company and related contractor activities. That being said, I also believe that we have opportunities that help offset these problems, including our growth potential in the international markets with a highly reliable and lower cost ARIES II system, and our continued focus on the opportunities for our Scorpion VectorSeis systems in China and elsewhere. I should mention that Sinopec successfully completed a high density survey in December using the recently purchased, 10,000 station Scorpion VectorSeis system, and they were very pleased with both the performance of this system and the quality of the data. We believe that this success combined with the previous Sinopec and PetroChina VectorSeis surveys will lead to more demand for our higher end systems in China and other areas with similar geological problems. In addition to the restructuring of our Land business, we have also reduced headcount throughout the remainder of the organization, including a 20% reduction in our corporate group and reductions in R&D groups. We are assuming that the recession will likely last well into 2009, and there will be in a low oil and natural gas price environment, during most if not all of the year. Our top priorities for the year and our plans for managing the Company are as follows. First, manage conservatively the cash generation. We have implemented tight cost controls, including the freeze on employee salaries, restrictions on employee travel with greater use of video conferencing for both internal and client meetings, and the usual spending cuts across the board in every department. Second, maintain our strategic R&D programs with approximately 10% cut compared to last year, but still spending over $45 million in R&D. That equates to approximately 7% of our forecasted 2009 revenues, which we believe is appropriate for a technology company. However, if 2009 goes slower than planned, we have the flexibility to re-evaluate each R&D program and make further cuts a necessary. Third, focus on our solutions approach where we will work the oil companies to solve their most difficult imaging problems while leveraging our products and services across the Company. We believe this approach is more important than ever to generate demand or our new technologies as the contractors are going to be even more conservative in purchasing new equipment. Fourth, keep our workforce engaged and motivated. We are a technology company that depends on high quality innovative workforce. Similar to many companies in these unusual times, we may have compensation related issues to confront as a result of the collapse of our stock price. I would now like to mention our other business lines to better put our situation in perspective. First, an exceptionally strong part of our portfolio is our proprietary Data Processing business. Our Data Processing business finished 2008 strong and has entered 2009 with a record backlog. We don’t see any indications of weakening and if anything we have a capacity issue, which is good problem to have in these tough times. We believe the strong Data Processing business is due to our technical leadership in areas such as reverse time migration and the globalization of our business that is putting us closer to the major oil companies. In addition, even though oil companies may be slowing down their acquisition spend, they are still pushing forward on their geoscience work such as reprocessing of wide [ph] surveys to further reduce geotechnical risk in these projects. But lower oil and gas prices just becomes even more important. Our multi-client business also finished with a record year in 2008, even with some disappointments at the end of the fourth quarter. The disappointment in the fourth quarter was caused by the decline of anticipated year-end sales historically driven by year-end discretionary spending by oil companies. With fall in oil prices, many oil companies tightened up on spending during the last part of the fourth quarter and several of our deals fell off at the last minute or slipped into 2009 when the oil companies start new budgets. Most large oil companies have stated, most recently they plan to continue with their long term exploration spend and since our SPAN libraries are aimed at the hot exploration areas such as the Artic, off the coast of Brazil, we believe we should have – still have a solid year in 2009 albeit not at the same record levels as 2008. We also entered 2009 with a solid book of business in our Marine Systems division. A large number of new vessels are coming into the market, but we believe that the effect of the new vessels will not be felt by the industry until 2010 or 2011. We believe in the short term, any excess capacity will be dealt with by shutting down older vessels. The vessels coming out of the shipyards in 2009 will likely be put into service, and we have several large new vessel orders for our products, including DigiFIN, DigiBIRD, and Orca. We also have several opportunities for DigiSTREAMER and in addition to new vessel related equipment sales; we have a growing business for DigiFIN to retrofit existing vessels. The primary driver for DigiFIN is much more efficient operations due to a robust streamer lateral steering [ph] that benefit both the oil company and the contractor. Pressure on acquisition prices make DigiFIN as a productivity offering even more relevant. Our Concept Systems revenues are expected to continue to grow as this business is mainly a software subscription business and is growing due to the sales of Orca and the cumulative effect of adding new vessels throughout 2008 and into 2009. Overall, we do expect some reductions of activity in Marine, mainly due to the general spending pullbacks by contractors. However, we also still expect Marine to also have a solid year. I will update you on our new technology initiatives and a brief look forward on our longer term business assumptions after Brian has reviewed the financial aspects of our business. I will now turn the call over to Brian.

[Brian Hanson:]

Thank you, Bob, good morning everyone. As Bob mentioned, the global recession and subsequent market turn down significantly affected our fourth quarter earnings. The uncertainty generated by the economic slowdown combined with a complete shutdown in the credit markets forced many of our customers to postpone their capital expenditures. This resulted in lower-than-anticipated performances in our Land Systems sales and data library sales. Moving on to the financial results for the quarter, we generated revenues of $140 million compared to $209 million during the fourth quarter of 2008, a decrease of approximately 33%. Our full year 2008 revenues decreased five percentage points or $34 million to $680 million. Revenues in our ION Solutions and our Data Management Solutions divisions were fairly comparable to last year’s fourth quarter results. Our Marine Imaging Systems division recorded a decrease of revenues of $12 million compared to 2007. However, this decrease is due to the timing of VSO system sales that were delivered in the fourth quarter of 2007. Excluding these VSO system revenues that were not duplicated in the fourth quarter of 2008, our Marine Imaging Systems division showed an increase in fourth quarter 2008 revenues of $18 million. We saw a decrease in our gross margin in the fourth quarter to 20% compared to 33% in 2007. Our full year 2008 gross margin rate of 31% is 2% better than the prior year. The quarterly decrease in margins is due to several special items that occurred in the fourth quarter totaling $14 million. In our ION Solutions division, the decrease in gross margin is mainly related to the sales product mix for the quarter. Our Marine Imaging Systems segment gross margins showed marked improvement over the last year mainly due to sales product mix and the timing of our VSO sales (inaudible). The fourth quarter contained significant special charges, which directly impact our margins. In our earnings press release, we’ve provided a reconciliation of the charges to our financial statements. However, I want to take this time to review the charges and highlight where the charges are impacting our earnings. In regards to our margins, the fourth quarter includes approximately $13 million in restructuring charges primarily related to the ARAM integration. The largest charges relate to the write-off of our mature analog Land inventory. After our acquisition, our Land teams reviewed inventory to see if the increase in new technology would render some of our older offerings obsolete. They subsequently increased our excess and obsolescence reserve for these items in 2008. In the Land Imaging Systems segment, fourth quarter revenues decreased to $23 million compared to $82 million in 2007. For full year 2008, revenues of $200 million showed a decrease of $125 million from 2007. Our 2007 revenues included $21 million in revenue associated with the sale of the first FireFly system and $58 million associated with the delivery of the 14 land seismic acquisition systems ordered by ONGC. In the Land business in the fourth quarter, we experienced a slowing of demand for land seismic acquisition systems across the North American and Russia markets. While all of our segments are seasonal, the Land Imaging Systems division is most affected by market changes. We believe that demand for our Land products will increase again with the recovery of the economy in late 2009 or early 2010. However, we still believe that this economic recession also provides opportunity for us. With the addition of ARAM, we remain in a strong, strategic position to further penetrate international markets with a lower cost, yet highly reliable system. In addition, the acquisition provides further opportunity to strengthen our position in the North American market through ARAM’s current rental business in these capital-challenged times. ARAM’s proven ARIES Land System, eventually combined with our digital VectorSeis technology, should provide an even better product offering to meet the needs of our Land contractors. Gross margins in our Land business excluding the restructuring and special charges I mentioned earlier decreased during the fourth quarter of 2008 to 5% compared to 23% in 2007. Lower Land revenues for the quarter contributed to this decrease in margins. Additionally, margins were further diluted through the inclusion of the amortization of intangibles associated with the ARAM acquisition, which totaled approximately $3.5 million for the quarter. With this restructuring of our Land business and the associated headcount reductions, we believe that we have right-sized our Land business to meet and exceed our customers’ needs both now and in the future. Marine Imaging Systems finished another solid – $49 million in revenue as compared to $61 million in revenues for the fourth quarter of 2007. For full year 2008, revenues of $183 million in the division increased $5 million over 2007. Our 2008 full year Marine results exceeded our 2007 results despite the fact that the fourth quarter of 2007 included the delivery of the majority of our fourth VectorSeis Ocean system to RXT. Additionally, demand for our new systems in streamer positioning and seabed products remained strong in 2008, including increased sales of our new DigiSTREAMER and DigiFIN system. Fourth quarter gross margin in the Marine group increased dramatically to 46% compared to 32% in the fourth quarter of 2007. For full year 2008, gross margin in the Marine group slightly increased two points to 41%. These changes are primarily a result of sales product mix. Our fourth quarter Data Management Solutions segment revenues decreased to $8 million compared to $10 million in the fourth quarter of 2007. The main reason for the fourth quarter decline was the impact of foreign currency exchange rates. Our Data Management Solutions business conducts business primarily in pound sterling and during the fourth quarter the U.S. dollar strengthened significantly against the pound sterling. For full year 2008, revenues of $37 million in the division were essentially flat compared to 2007, including the effects of foreign currency. In our ION Solutions division, net revenues grew 6% to $60 million in the fourth quarter of 2008. For full year 2008, revenues grew to $250 million, an impressive 50% increase from the $173 million generated in 2007. This growth was primarily driven by increased multi-client data library and new venture sales, including new program off the coast of South America, Africa, and Alaska. Fourth quarter gross margins in the Solution division decreased from 43% to 23% due to sales product mix. Full year 2008 gross margin decreased to 30% compared to 32% in 2007. The slight decrease year-over-year was also mainly due to sales product mix. Moving to the expense side of the income statement, the fourth quarter of 2008 included impairment charges of our goodwill and intangible assets of $252 million. We had just completed our acquisition of ARAM when the global economy and credit markets collapsed. With the current state of the economy, our goodwill and intangible impairment analysis showed impairment in our Land segment and our ION Solutions segments. For ARAM, at our ION Land business, the impairment is straight forward since the met for these products experienced a significant decrease during the fourth quarter. The impairment analysis showed that the entire balance of goodwill totaling $155 million was impaired. We also determined that an additional $10 million of ARAM’s intangible assets were also impaired. These combined to a charge related to our Land business of $165 million for the fourth quarter. Our ION Solutions goodwill was also determined to be impaired. As we mentioned, this segment had a record year, and is expected to continue to generate solid results into 2009. While the segment itself is performing well, our market cap for the Company as a whole is not as healthy. Part of our goodwill analysis is to make sure that our fair value in each of the segments reconciles to the market’s current belief of our value. In order to accomplish that, we had to impair our ION Solutions goodwill entirely and take a charge of $87 million. Overall, consolidated operating expenses, including the impairment charges of $252 million for the fourth quarter of 2008 as a percentage of revenue increased significantly to 36% compared to 18% for the fourth quarter of 2007. However, this 2008 percentage includes $13 million of special charges. Additionally, in the fourth quarter, we pursued a bond offering as part of our financial and contractual commitments with Jefferies Finance CP Funding LLC. Ultimately, the collapse of the credit markets prevented us from completing the offering. The costs related to the offering and the other increased professional fees for our financings were $6 million. In addition, we increased our bad debt reserve by $4 million in response to the current economic environment. Finally, we had approximately $3 million in restructuring charges. Removing the impact of all of these special charges, operating expenses during the fourth quarter were 27%. We incurred an income tax benefit of approximately $8 million in the fourth quarter of 2008. For full year 2008, income tax expense decreased to $1 million compared to $13 million for 2007. The income tax benefit and expense for the fourth quarter represented an effective tax rate of 3% for 2008 compared to an effective tax rate of 31% for the fourth quarter of 2007. The decrease in effective tax rates was driven primarily by our lower consolidated results and the mix of tax jurisdictions for sales occurred around the world. For full year 2008, our effective tax rate was negative 0.5% compared to a rate of 23% for 2007. Excluding the special charges, our fourth quarter net income was $1 million compared to $17 million for the fourth quarter of 2007. Besides the charges mentioned above, we had additional one-time charges in our after tax earnings. In the fourth quarter of 2008 the terms of Series D Preferred Stock caused a reset of the conversion price and a termination of the holder’s redemption rights. This removed Fletcher’s ability to call a redemption in cash and stock and restricted them to covert entirely into common stock. These changes caused us to incur a $68 million non-cash beneficial conversion charge. In total, the fourth quarter had $343 million of special charges, which resulted in a fourth quarter net loss of $342 million. For the fourth quarter of 2008, excluding the special charges diluted EPS was $0.01 compared to $0.18 in the fourth quarter of 2007. The total impact of special charges is approximately $343 million or $3.44 per diluted share. Including these special items, diluted loss per share was $3.43 in the fourth quarter of 2008. Turning to the balance sheet, inventories rose during the fourth quarter by $8 million to $263 million. The increase was primarily due to anticipated end-of-year sales that largely did not occur. Accounts receivable decreased by $37 million from year-end 2007. CapEx, excluding the investment in a multi-client data library for full year 2008 was $18 million. Full year 2008 investment in the multi-client library totaled $110 million, which was a record year for investment. However, current expectations, the capital demand of our multi-client business for the last quarter of 2008 was lower than the average spent in the first three quarters of the year as much of the seismic acquisition expense occurred in the spring to early fall. Cash remains stable, decreased by $1.2 million from year-end 2007 mainly due to the increase in inventory levels, partially offset by increased receivables collections. As I mentioned earlier, we have entered into expanded financing arrangements in relation to our purchase of ARAM. While these agreements and the restructured criteria are listed in detail on our 8-K filed in January and will also be described in our upcoming 10-K, I wanted to again provide you a brief overview. As of December 31st, 20089, we had total indebtedness of $292 million, down from $315 million at the end of the third quarter. Of our year-end balance, approximately $38 million is classified as current. In late December, we entered into several new agreements with our lenders. We amended our revolving credit facility to lower the borrowing limit to $100 million and obtained approval for several transactions that we are considering in 2009. In addition to the amendment, we repaid $72 million of or revolver borrowings. This amount was borrowed in order to finance the ARAM acquisition of September and we paid it back using internally generated cash. The amended credit facility retained the same term and will mature in September 2013. Our borrowing on the revolver decreased from $106 million at the end of October to $66 million at year-end. The entire balance on the revolver is classified as long term. Additionally, we extended our short term bridge loan with Jefferies Finance CP Funding LLC. The extended loan has the same principal balance of $41 million, but will now mature at the end of January 2010. In addition to the expanded maturity dates, we paid Jefferies an upfront fee of 5% of the aggregate principal and have committed to pay 5% of the aggregate principal if we do not repay the balance by certain dates prior to its maturity. The effective interest rate on this loan is 25%, which includes the debt interest rate as well as the additional fees. This note is currently classified as long term. In the third quarter, we issued to the seller of ARAM a Senior Seller Note in the principal amount of $35 million, which was due within a year. In December, we extended the maturity date of the note to September 2013. This debt has a 15% interest rate and is classified as long term. Finally, in September, we issued to another sellers of ARAM, a Subordinates Seller Note in the principal amount of $10 million. In December the seller extinguished its liability in return for the rights to an expected Canadian federal income tax refund for approximately the same amount. However, while the liability is legally extinguishes, we are unable to remove it from our financial statements due to accounting requirements. As a result, the $10 million note remains on our balance sheet at year-end and is classified as short term. As of February 20th, 2009, we had received approximately $7 million of the refund from the Canadian federal taxing authorities and subsequently paid the amount to the ARAM seller. We expect to receive and subsequently pay to the seller the remaining balance of the note during the first half of 2009. Therefore, in total, we have entered into an additional three debt agreements and one legal debt extinguishment since the third quarter for a total of $152 million in new debt financing with $142 million classified as long term. Majority of our remaining debt balance consists of the $125 million Term A loan balance of which we paid approximately $5 million in December, bringing the balance to $120 million. Before jumping to the outlook for 2009, I think it’s important to have a basic understanding of our underlying assumptions for the year. Our current operating assumption is that we are 13 months into a deep recession that leads to slow economic recovery starting to occur in the first half of 2010. We are assuming near term oil prices of around $40 a barrel, showing improvement by year-end or early 2010 to $55 to $60 a barrel, driven by the reduction in production in North America, Russia, and the OPEC producing countries, and exasperated by the natural decline curve of existing reservoirs. Looking at our outlook for 2009, the current uncertainty surrounding the duration and the severity of this downturn is leading us to take a different approach in terms of managing our business more conservatively with a focus on generating cash flows. We have also taken a very deliberate approach to identifying areas of potential weakness in our business on a worldwide basis. We expect to face tight credit markets over the next several quarters, and as a result we plan to take a more conservative approach to extending credit terms to customers. We do expect a challenging 2009 for sales of Land Systems and vibroseis trucks in North America and Russia. Marine Imaging Systems business is anticipated to have a solid year as many new vessels are still in process and we currently have a solid backlog and pipeline of business. We also anticipate a strong year for the Solutions group driven by our processing backlog and the expected continued interest in our planned SPAN programs in 2009. Currently anticipate 2009 consolidated revenues to range between $620 million to $680 million with much of the revenue decline coming from the weakness in sales of Land Systems and vibrator trucks. Mainly as a result of the ARAM acquisition, we expect to book between $22 million and $24 million of amortization in 2009, which is an increase from the $14 million we incurred in 2008. As a result of our new debt agreements entered in 2009, we are anticipating interest expense of between $36 million and $40 million. Gross margin is expected to be relatively flat with 2008, ranging from 30% to 33% due to the increase in amortization of intangibles and the mix of higher margin products such as FireFly, DigiFIN, DigiSTREAMER, and Orca. At the same time, we recognize that our consolidated gross margin is highly sensitive to the overall mix of our portfolio of products and services. Operating expenses as a percentage of revenues are expected to increase between 22% and 24% in 2009, mainly as a result of lower expected revenues. We are in the process of reducing our overall spending while at the same time planning to fund key strategic programs to position ION for the expected recovery. We plan to generate approximately $130 million to $170 million of adjusted EBITDA and we anticipate 2009 earnings to be between zero and $0.16 per diluted share with an effective tax rate of 20% to 22%. Even more so than in past years, we anticipate 2009 financial performance to be back-end loaded. This is mainly due to the current budget planning cycle of our larger contractor customers and oil companies who formulate capital spending plans in the fourth quarter of each year as well as the current level of uncertainty affecting the seismic industry. As a result, we anticipate that most of our 2009 earnings will come in the second half of the year. Historically, the fourth quarter is our slowest quarter as this is when our customers, both oil companies and contractors, are still finalizing their plans for the year. This year, we expect this trend to be even more pronounced as the high uncertainty in the industry is resulting in an even slower start than usual. Therefore, we expect the first quarter will likely generate a loss. Moving to liquidity, currently we have redrawn a 100% of our revolving line of credit and have approximately $50 million of cash on hand. In addition, it’s our belief that the cash generated from our anticipated EBITDA range of $130 million to $170 million in 2009 is adequate to provide us with sufficient liquidity for operations this year. In addition, as I indicated earlier, we ended the year with robust inventory levels of $263 million, a lot of which we were building in growth mode in anticipation of a strong fourth quarter and continued demand into 2009. And at the end of September, when we completed the ARAM transaction, we had approximately $42 million of cables system inventory in our legacy Land business. ARAM, in addition, had approximately $48 million of ARIES cable system inventory. Our expectation was to sell down the combined inventories to a more normalized levels for the Land business in a time of growth to around $40 million, monetizing approximately $50 million in cash from inventory. With the soft Land sales in Q4, this behaves as more of an internal bank in 2009 as we monetize this inventory through sales this year. Overall, we believe that our working capital has the opportunity to be an additional significant source of cash for 2009. Under our credit facility and Jefferies loan, we are required to satisfy certain quarterly financial covenants and ratios. During 2009, we are operating to an internal plan that we believe will result in remaining in compliance with all financial covenants. As with most public companies, our announced earnings guidance is generally more conservative than the internal planned targets of (inaudible) performance. Although not probable, there are possible scenarios where results will follow within our announced guidance range, could still result in us not satisfying our financial covenants even though our cash flow may still be sufficient to service our debt. This outcome is possible because of our financial covenants are conservative. For example, we are required to maintain the leverage of less than 2.25 trailing 12 months EBITDA, which is considered lightly levered. Our ability to satisfy our covenants can be affected by many factors such as a continued rapid deterioration in the economy and sector, overall performance toward the lower end of our range, unexpected significant write-downs in accounts receivable, the specific mix of multi-client revenues in our portfolio, foreign currency fluctuations, especially between the U.S. dollar, the Canadian dollar or the pound sterling, as well as other factors. While we do not consider it probable to the extent we believe that we may be in danger of not complying with any one of our covenants as we move through the year, we will proactively work with our bank group to seek a waiver or amendment. In summary, we believe we have a realistic operating plan in place that provides sufficient liquidity to run our business, service our debt and remain in compliance with all of our covenants. We will also continue to look for ways to further strengthen our balance sheet as the year unfolds. With that, I will turn the call back over to Bob.

[Bob Peebler:]

Thanks, Brian. First, I would like to comment on our longer term view of our business and why I am still optimistic about our longer term prospects. The fundamental question is how long will industry be in a low oil and gas price environment and unfortunately that comes back to trying to predict the global economy. We are using this year to do some much needed consolidation after five years of rapid growth, including a renewed focus on cost, which will better position us for more profitable growth once we more strength in our business. In addition to the macroeconomic and related commodity assumptions, we are also convinced that the underlying fundamental challenge to maintain the supply of oil and gas to fuel economic growth will come roaring back once the world economies start recovering. What gives us confidence about this is the knowledge that the 500 largest oil fields in the world are declining at a rate approaching 7% even with the assumptions of significant investment to keep them producing. The gas market in North America is even more profound as the aggregate decline rate approaches 30% and a dramatic reduction in drilling is only aggravating the problem. What hasn’t changed during this economic crisis is the fact that oil and gas reserves are getting harder and more costlier to find and produce, and that they are often in much more environmentally challenging areas. With lower commodity prices, technology that reduces uncertainty, and finding and developing oil and gas fields is even more valuable as the derivative of reducing uncertainty is improved success ratio or drilling fewer dry hole and better producers in the wells drilled. This is a much more effective way for oil companies to get more return on their exploration development dollars than just cutting cost. Significant improved efficiencies and finding and developing oil and gas fields also opens up new areas as the economics of projects can be dramatically improved. We only need to look back at the low price environment during the 1980s when the 3D seismic and horizontal drilling was so successful because it brought much needed improvements in both exploration and field development success. We believe that we are leading a third wave of seismic technologies that have the same promise to bring substantial improvements in both image quality and productivity. One example I will briefly discuss is our Land cable-assisted FireFly. As you likely know, we started 2008 with the completion of version 2 with the first commercial job on Durham Ranch in Colorado. That job, which was conducted in very difficult topography, was very successful and got the attention of the industry. We were positioned for commercial sales in North America before the dramatic turn down, which effectively eliminated our North American customers from having the financial strength to consider a purchase or the certainty of the market to take the risk of purchasing new technology. We quickly adjusted our marketing strategy with a new focus on international markets. In December, we signed an agreement with the world’s largest land seismic contractor for a multi-1000 station FireFly delivery, which we shift at the end of the year and should appear as revenue in the first half of 2009 after successful project. This agreement goes beyond the transaction and has a more strategic intent that includes joint cooperation to further develop a system to better fit the international markets and to also have a potential joint venture in new generation land sources. In addition, we still have growing oil company in FireFly in the Americas that ranges from their needs to access and cut the environmental areas and improved images that could be accomplished with high density full wave imaging. Our commercial model for our Americas customers will be a rental purchase option, which allows them to test drive the system while financing the system via rental payments, which can be absorbed on those commercial projects. When possible, we hope to use our Solutions approach through – which, though – which ION identifies opportunities with oil companies and is involved with both planning the survey in collaboration with the oil company and contractors, manage the project, and survey as required, and then providing the full wave processing, if needed, interpretation services. We believe that even in this tough market, we can generate work for FireFly within the context of this model by focusing on the more complex geological problems and leveraging the productivity of the FireFly system, deliver better quality images for lower prices than similar surveys with the cables system. We have several projects in our pipeline and will be announcing them as they come to fruition. Finally, I would like to remind our investors that we have an asset-light strategy, meaning that we participate in the highest value parts of the seismic workflow by providing high-end planning, processing, and interpretation services and state-of-the-art technology in the form of Marine and Land Systems that are used by our contractor customers. Since we don’t provide the actual contracting services we don’t have the large capital required to equip the Land and Marine crews. Our business is mainly of people who are either in our R&D groups or processing and interpretation specialist, or in our marketing and sales organizations plus the usual G&A functions. This means that our business is mainly made up of variables cost, which gives us substantial flexibility (inaudible) the market as needed. In addition, our revenue growth over the last five years has not been due to large price increases from selling capacity in a tight market as the contracting businesses experienced, but rather has an organic growth due to activity increases, market penetration and increases in our portfolio offering. We believe that with our over $185 million investment in R&D over the last five years, which was aimed at much better measurements to both reduce reservoir uncertainty before the decision to drill and/or develop a field, and provide systems that significantly improve field productivity such as FireFly, ARIES II, the Intelligent Acquisition, including DigiFIN and Orca that ION is well positioned to take advantage of the eventual upturn while continuing to be even more relevant to oil companies and contractors during this slowdown. We also understand that we are not immune to the downturn and will have a tough 2009, but we have faith in the fundamentals of our strategy and look forward to getting through this year and being well positioned in the future. With that, we will open up for questions.

[Operator:]

Thank you, sir. We will now begin the question-and-answer session. (Operator instructions) Our first question comes from the line of James West with Barclays Capital. Please go ahead.

[James West:]

Good morning guys.

[Bob Peebler:]

Good morning, James.

[James West:]

Bob, if we looked at the North American business currently and let’s say there weren’t major issues with credit for Land contractors, due you think at this point, given the work you’ve done FireFly, given the very successful projects that have already happened that you would see sales come through.

[Bob Peebler:]

Yes.

[James West:]

And then if we look at the market overall, let me think about full wave it’s market share, I think the last time we did a lot of work and it was around 8% of the overall seismic business. Going into this downturn, it seems to me like you have an opportunity to increase market share as you sell some additional equipment although at a lower pace and you are going to see definitely retirements of older systems. Is that an accurate statement and how do you see full wave technology being positioned as we come out of this downturn?

[Bob Peebler:]

Well, one of the places, James, that I think we have the greatest short term interest is actually in China and in some other areas in Asia, but we have had some real success, as I mentioned in the script, we had some real success in December, finishing a job not only high-density full wave, but we finished the job in about 45 days quicker than they had anticipated. That combined with some other work we’ve done in China, really we are starting to see even more interest both in – both Sinopec and PetroChina. So, I think that the fair way of opportunities we have are in the short term and in China just because that’s where activity still is pretty high and I think they are further along, frankly, in understanding the value, since we’ve been working with them for two or three years. Canada is still a good market, though. There is a lot of multi-client or multi-component activity up in Canada. And obviously any FireFly we do in North America will be full wave, and so – and we will be doing some, like I said, we’ll be – once the projects are confirmed, we’ll be talking to those. And I will say, I used the word Americas just – instead of just North America because we also have interests in Mexico.

[James West:]

Okay. And then one last question from me and perhaps somewhat of an unfair question, but if we look at the investment you have made in R&D the last five years, I think you said $185 million, and then as you and the Board think about allocating capital going forward, clearly the equity markets at least aren’t paying for that investment at all. In fact, your market cap is almost half of that, that five-year investments. So, how do you think about where you want to put money to work? How do you think about investing in you own stock versus investing in R&D?

[Bob Peebler:]

Well, I don’t think we can – we are a technology company and the investments we are making are aimed at solving the oil company problems. I think to try to redirect that R&D spend to buy our own stock albeit right now it’s awfully tempting, we would probably be destroying our medium to long term capability. So I think the facts are that our whole strategy is still assuming, number one, that all oil prices will come back. I believe that strongly. In fact, I would say the turn down is going to aggravate the problem. And we are also assuming that technology is quite relevant to the oil companies and the contractors going forward. And we are seeing that already. I mean we are seeing, for example, in the Marine market, DigiFIN is really now adding value, not only from the image but from productivity. And so we are getting really a lot of good solid traction with that product line. And in fact a lot of the growth we’ll have this year in the Marine will come from DigiFIN. So, I am glad we made the investment.

[James West:]

Okay. I appreciate it, Bob. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Jack More [ph] with Hartford Capital [ph]. Please go ahead.

[Jack More:]

Good morning. To echo James’ sentiment, when the Company can cancel half their share count with the R&D budget, there is no doubt that FireFly and the full wave processing and all that has great value, but going forward, your stock is at 1991 levels, and I think that to ignore that – there might be a better use of your capital and I would suggest that. But I wanted to ask a question about the inventory, $260 million in inventory, which again is more than two and a half times your market cap. Can you give us some color on the nature of the inventory and how you would anticipate seeing opportunity to take that level down?

[Brian Hanson:]

Yes, this is Brian. First, I think it’s probably not a fair metric to be looking at our current market cap and be making decisions around how we mange our business in the future around what our current market cap is, even though it’s so attractively low. I mean I think there is not one person around the management table that’s not saying this isn’t probably a really great time to buy. When you look at the inventory, just the natural sales cycle, we monetize that inventory, as indicated in the call earlier, just naturally selling that Land inventory we are – just on the cable side, we have a combined inventory of around $90 million and in normalized times. And when you are in a growth mode, you would expect to stock about $40 million. Even one could argue that we need even less than $40 million. As we progressed through 2009 and sell our Land systems in the international marketplace it’s going to naturally monetize that inventory. We are – our internal estimates are that we will probably, through the years we execute our plan generate anywhere from $50 million to $70 million in cash just from liquidating inventory and bringing the inventory levels down to normal levels.

[Jack More:]

Great. And then my second question. I applaud you for putting the (inaudible) in place particularly at these levels. It seems ridiculously low and you wouldn’t want somebody coming in at $1.50 or $2.00, which at this point is a significant premium, and sweeping away a lot of the technology and embedded value that you’ve created. That being said, is there any – do you think you can comment on – has anybody approached you with respect to that or would you consider exploring any joint ventures or strategic relationship that might–?

[Brian Hanson:]

We don’t.

[Bob Peebler:]

Yes, we don’t. We obviously don’t comment on those. We don’t speculate or comment on those kinds of questions.

[Jack More:]

I am not asking you to speculate, but I guess–

[Bob Peebler:]

We don’t make comments on conversation we may or may not have.

[Brian Hanson:]

I think the general theme here is that as we said in the script, we are – we are comfortable with our liquidity. We are comfortable with the – when you look at EBITDA generation of the business, you look at our current cash levels, and you look at just the opportunity to generate cash out of inventories, we are comfortable from a liquidity perspective. So, absent that, there is really not a logic for us to explain strategic relationships.

[Operator:]

Thank you, sir. And our next question comes from the line of Joe Agular with Johnson Rice & Company. Please go ahead.

[Joe Agular:]

Thank you very much. Just to get to kind of the cash flow generation question for 2009. Thank you Brian for just sort of quantifying what your kind of working capital gains are from inventory at least. You gave the range of EBITDA, $130 million to $170 million. We know your interest expense. Could you may be help us understand your CapEx plans in terms of both just traditional CapEx and then on the multi-client side. Do you expect the multi-client to be a consumer of cash or a generator of cash in ’09?

[Brian Hanson:]

Let me break it down. If you looked historically, for example, in 2008, Joe, we had $18 m in CapEx, primarily the majority of that was associated with doing capital leases for computing equipment for the Data Processing side of our house. And then we might add probably $3 million or $4 million associated with expansion facilities, office build-outs, things like that. If you went into the fourth quarter, we have flipped that to just doing operating leases for computing equipment, so we can truly line up that level of activity as an expense relative to the level of activity that we are experiencing for the Data Processing side of the house. So, I don’t think about that number as a CapEx number as much as I think about that as – two elements that you inject into the Data Processing are people and computers to refresh that technology to generate the revenues, so it’s more about an OpEx. From a CapEx numbers, we look at 2009, we have very little need because obviously we are not expanding facilities, we are not (inaudible) build-outs or very little requirement (inaudible) for us like we are doing – the majority of our manufacturing is outsourced. We have very little CapEx, so I don’t – I hesitate to give guidance, but I can say that my expectation is CapEx will be an extremely low-single digit number. And then when you take a look a the multi-client side of the business, we pretty much always run that business from a cash flow perspective when a car (inaudible) if I look at new ventures, so , we are sanctioning projects and floating vessels and writing checks for seismic acquisition expense. We do it in such a way that the portfolio of those active projects are underwritten from the oil companies perspective and they cover the cash requirements. So there is some times some timing, but we generally not more into that for more than $10 million or $15 million at any one time given the timing of receipts and disbursements. So, we’d expect that that piece of the business can certainly be pretty much neutral.

[Joe Agular:]

Okay. So, it sounds then like in just a general CapEx including multi-client, you really not going to consume a lot of cash in ’09.

[Brian Hanson:]

No, I don’t think that will be consumer of cash.

[Joe Agular:]

Okay, okay. I have a few other questions. Obviously I will get back in queue, but I guess for a follow-up, could you help us understand the preferred stock charge and kind of just maybe give a simplistic overview of the situation with the convert today? Thank you.

[Brian Hanson:]

Yes, I can. It’s fairly simple. If you look at the value of that preferred convert it was approximately $70 million of capital the injected into the business. And they originally had the right to either call a redemption in the form or cash and/or – and equity. So, if you just very simply run some math, they were sitting on about 7 million shares at the previous conversion price. If they had called the redemption, they would have essentially got, say the stock was trading at $2, they would have essentially – they would have been required to turn over then about 7 million in shares worth about 14 million and then pay the delta in cash. So, that would have been $56 million. When we fell below an average trading, 20-day trading volume, of $4.45, we were required to make an election that basically reset the conversion price to that $4.45 level. But it also eliminates their ability to call for a redemption in cash. So, their entire rights now are just to redeem for their – for essentially 9.9 million shares of equity. So, it’s – as a result of that, we had to re-value that beneficial conversion charge and basically run the entire called $70 million to our P&L. So, it’s funky accounting. Creates this appearance of a $70 million charge, but essentially it’s – quite frankly, it’s good for the business.

[Joe Agular:]

Okay. Thank you very much.

[Operator:]

Thank you. Our next question comes from the line of Terese Fabian with Sidoti & Company. Please go ahead.

[Terese Fabian:]

Thank you. My question, given the market deterioration that we all see, can you talk about reduce – in a broad term, where you see you competitive position against some of the other equipment manufacturers and service providers? And it seems to be pretty much a buyers market now. Are you seeing pricing pressure?

[Bob Peebler:]

On the – there is two questions – on the competitive position, (inaudible) go through the portfolio. I will do that real quick. If you look at the Marine side, we have an extremely strong competitive position, very high market share in the whole area of Intelligent acquisition, which includes DigiBIRD, DigiFIN, and Orca. And that continues and we will continue to have loss in that market, particularly driven by Orca and DigiFIN this year. On the streamer part of that market we’ve really haven’t had an offering until just most recently we have DigiSTREAMER. And although we are a late entrant in that market, there is still going to be opportunities for us, so that’s a nice add-on for our product line and becomes a more important part of the product line as we become more integrated with the rest of the system. We look at Land, as you know, we’ve had a low market share. Our perception is the international land although it’s weakened in places like Russia, there is still a lot of opportunities. So, what we’ve really missed and the – I think believe the ARAM acquisition is bringing to us is a product line that will be competitive in that market, and we are already getting some traction. In that particular case, it’s just the fact – in that case, because we have a low share there, it’s actually one we can sort of rifle-shot and pick often and actually be able to have some nice business starting out international markets. On the – and obviously in Land, in the new technology we believe we have a leadership position. Right now it’s not the easiest market to sell into, but we have managed to hook up with the world’s largest contractors, and that’s really good for us in international markets. Our Data Processing is actually a leadership position and that’s why they are growing strong. And in the multi-client niche that we are in, I’ll ask people understand we are not in the routine 3D multi-client, we are very targeted at these high-end areas that are hot exploration areas that we think are going to continue. We have a great position there. So, I’d day across our portfolio, the only place that we have some work to do is still in that Land business. I think we have the option [ph] to do it. We just are coming. Couldn’t have been more unfortunate. But we are making progress. As far pricing, I guess the bad news is that the equipment side of the business and actually all of our business, although we had some price increases over the last five years, we really went out there selling capacity, so we didn’t get these huge price increases. Coming down the other way, I think – we are having some price pressure on us, but I think people realize that we are not the – we are not the place where they can really make a lot of money. So, we are going to have to deal with that. obviously, we have a competitor that also has good technology and positions and I think we’ll see some price pressure. But I think it’s really more in some ways due to the tight credit markets and people just don’t have that much money, and so that makes them a lot more cost-sensitive.

[Terese Fabian:]

Okay, could I just shift into your rental business? I know you acquired some rental with the ARAM acquisition. How is that doing and you’ve talked earlier about a potential sale leaseback, is that something you are going to be pursuing?

[Bob Peebler:]

Well, yes, I think the – the one thing we – there is a couple of things about that rental business. One, it’s a nice business and when you are in a bit a bit of a down market, if you have some technology people want, it’s a good way for them to get into the business without having to make that front-end capital commitment. So, fortuitously, because we had built some FireFly inventory last year in anticipation of some sales, we got caught in the turn down. We have inventory and it’s really allowed us – now we are going to use to deploy some of that inventory unless if they – once tied up in the international job we are going to use that in the Americas for a rental purchase model. And I think it’s a great way to – I think it’s going to be a great way for us to monetize and actually when you look at the returns on that combinations, it’s a good return business. So, I think you’ll see us selectively using that not only to introduce their technologies that service some markets, we’ve got Canada that has a natural cycle (inaudible) and there is – eventually, the Russian market will come back and there is that opportunity there. We even have a little bit rental business from China.

[Terese Fabian:]

Okay. Thank you.

[Operator:]

Thank you. Our next question is from the line of Larj Shelfa [ph] with Acre [ph]. Please go ahead.

[Larj Shelfa:]

Good morning. Do you expect the RXT to commit to their minimum purchase obligation in 2009?

[Brian Hanson:]

We do not have – we do not expect them to. We don’t them in our current plan. We – all we have in our current plan is some spares and repairs assumptions. We’ve been working with RXT. As you know, they are going through a recapitalization, which we are looking forward to that – to them getting that piece done so we can sort of restart the conversations and see where we go from here. But we do not have it – we do have that built into our plan.

[Larj Shelfa:]

Okay, thank you. Just a follow-up on the question on multi-client investment. You said it was cash flow neutral. But what level do you bake into your guidance for ’09?

[Brian Hanson:]

Well, if you think about the way that business – I can't – we don’t carve it out, first of all. The way that we plan that multi-client business is we plan it at a fairly conservative level. And then to the extent we over-perform, for example, in 2008, I think we planned for about $65 million of investment, we ended up doing $110 million. to the extent there is over performance, it’s directly in relation to the activity with the oil companies.

[Larj Shelfa:]

Okay. Thank you.

[Operator:]

Thank you. (Operator instructions) And our next question is from the line of Jim Macry [ph] with Neuberger. Please go ahead.

[Jim Macry:]

Hey, Bob, Brian, just had a couple of things. I think what a lot of us are trying to understand is kind of the range of free cash flow the business might be able to generate in ’09 and is there a sense of urgency in terms of paying down some debt?

[Brian Hanson:]

Well, Jim, good morning, this is Brian. You know, there is, quite frankly, in today’s credit markets, there is no sense of urgency to pay down debt until we see credit markets crack open. I mean it’s – from my perspective cash is gold. So to answer the second part of your question, no. I hope that as I’ve talked about the EBITDA guidance, the current cash levels, the opportunity to monetize cash from working capital and given fairly specific guidance around interest and appreciation rates that you ought to be able to back into a fairly accurate free cash flow number.

[Jim Macry:]

Got it. So, even if you are at the low end of the range and you are bumping into some – even though those covenants are fairly – give you some room, I am just trying to understand how you guys are thinking about that. Would you pay down – I mean there is – you got a particularly obnoxious piece of debt that’s $40 million at 25% and I understand that’s all in with the fees. But we think that that would be priority to take down?

[Brian Hanson:]

In order of priorities first of all when we look at our plant, we believed we have the sufficient liquidity to run our operation through 2009. The second priority is even as we build cash, would we take up that expensive piece of debt? The first answer to that is when we see credit markets opening up that’s when you take that out. Yes, it’s obnoxious. It’s had an effective rate of 25%. But if you step back and really think about it relative to the scale of our business, that’s about $10 million of interest expense a year. At the end of the day, I look upon that as cheap insurance relative to credit market. I’d rather hold the cash until they crack open. And then to the extent we see those markets crack open that would be our first and highest priority to extinguish that piece of paper.

[Jim Macry:]

Okay. And then finally, I guess when we get into these types of situations, it’s – we know that management and the Board owns shares in the Company. But if you are not going to use the cash generated from the business and it sounds like you’ve got good uses for that in R&D and such and elsewhere, is – can we expect to see management and the Board step up and purchase some stock here?

[Brian Hanson:]

No, Jim, I think that we have demonstrated consistently with our personal incomes that we have jumped in. We bought throughout the fall of Q4. I can't speak for management or the Board at this point in time what they are going to do in the future, but I think that we’ve all demonstrated that we purchase consistently into the Company. We are as invested as any of our shareholders in this business. I can say that many of us around the table have had seen seven-digit losses in our portfolios as a result of the decline in the stock price. So I think we are very well aligned. I also think that fundamentally if you step back and just think about cash and market and how they work, credit markets opening up precede equity markets. So again I will come back to cash is king and we need to watch the credit markets and when we see those opening up then I think we’ll probably then see equity markets take a good look at our business and properly value our stock.

[Jim Macry:]

Yes, we would agree with that. Alright, thanks guys.

[Operator:]

Thank you. And our next question is from the line of Carter Newbold with Rutabaga Capital Management. Please go ahead.

[Carter Newbold:]

Good morning guys.

[Bob Peebler:]

Good morning.

[Carter Newbold:]

I want to come back to this free cash flow question. I am sorry if I am being dense on this, but you have given us all we need to construct a free cash flow model with the exception I think of not given us a precise disclosure on the direction of working capital, but, Brian, I think you hinted at – an enormous opportunity there. You think you’ve been asked here along the way about all the potential uses of cash, and I guess the disconnect, and I am sorry if you guys (inaudible) the amount of free cash flow that you are describing dwarfs any sort of near term need for operating cash flow for the business and dwarfs the amount of your most (inaudible) pieces of financing so what are we missing? Again, I know you want to hold cash, cash is king, but you are talking about generating an amount of cash that is massively, massively in excess of the normal capital requirements of your business and the par value of your most expensive debt. Are we missing something or are you just being extremely conservative about how much cash you want to hold in the business right now?

[Brian Hanson:]

Yes, I don’t we are behaving differently than any other business out there. We are being extremely conservative. It’s – again, I will come back to that one statement, I don’t think you are missing it, but I will say it one more time it’s until we see credit markets open up cash is king. And so we are holding our cash. And it’s nothing more than that. It’s being extremely conservative. And I – you are not seeing out there, but I am not seeing any other companies doing anything with their cash. They are holding it as well. And I think a great indicator of that is the complete lack of M&A activity in the sector and just across the board. There is a lot of companies out there with great balance sheets to be taken out competitors and companies with synergies and writing very inexpensive checks to do it. But none – nobody is doing it

[Carter Newbold:]

Okay. Alright

[Operator:]

Thank you. And there are no further questions at this time. I would like to turn the call back to management for any closing comments.

[Bob Peebler:]

Thank you for attending the call and we look forward to the next quarter call.

[Operator:]

Thank you. Ladies and gentlemen, this does conclude the ION Geophysical’s fourth quarter earnings conference call. We thank you for your participation. You may now disconnect.