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CGG: 2013 FOURTH QUARTER AND FULL-YEAR RESULTS

Very good resilience in 2013

2016 Objectives confirmed

  • Full-year performance reflects continued resilience in a contrasting market:
  • 2013 revenue up 10%, at $3.766bn
  • EBIT at $423m before non-recurring with EBIT margin at 11.2%
  • Positive Free Cash Flow before NRFI* at $5m
  • NRFI at $(17)m
  • $800 million impairment and write-off in Acquisition Division. Excluding this non-recurring item, net income was at $101 million compared to $92 million in 2012
  • Backlog was $1.35bn as of 1st January 2014, up 9% and marine fleet coverage is at 100% for Q1, 75% for Q2 and 35% for Q3
  • CGG's 2014-2016 strategic roadmap confirmed :
    --
    Rebalancing of our portfolio of activities
    --
    Targeting revenue above $4bn and 400bps EBIT margin improvement by the end of 2016 versus 2013

PARIS, Feb. 27, 2014 (GLOBE NEWSWIRE) -- CGG (ISIN: 0000120164 - NYSE: CGG), world leader in Geoscience announced today its non-audited 2013 fourth quarter and full-year consolidated results.

Full -Year 2013 Key Figures

FY

2012
FY

2013
Variation
In million $
Group Revenue 3411 3766 10%
EBITDAs 1012 1160 15%
EBIT 404 423 5%
EBIT margin 12% 11% (100)bps
Equipment margin 32% 28% (400)bps
Acquisition margin 1% 3% 200bps
GGR margin 19% 24% 500bps
Non-Recurring Items linked to Fugro (NRFI) (36) (17) NA
Non-Recurring Items linked to impairment & write-off 0 (800) NA
EBIT after NFRI and impairment & write-off 368 (394) NA
Net Income after NRFI and before impairment & wo 92 101 10%
Net Income after NRFI and after impairment & wo 92 (691) NA
Cash Flow from Operations 921 908 (1)%
Free Cash Flow before NRFI 63 5 (92)%
Net Debt 785 2218 NS**
Capital Employed after impairment & write-off 5367 6108 14%
Backlog 1240 1350 9%

*Non-recurring Fugro Items (NRFI)

**2012 included Fugro financing proceeds

CGG CEO, Jean-Georges Malcor commented:

« In a contrasting year with deteriorating market conditions in H2, CGG demonstrated resilience in its 2013 performance. The successful integration of the Geoscience activities within CGG reinforces the Group in a growing and profitable market segment.

As announced during our Capital Market Day in December, we are rebalancing our portfolio of activities and implementing our 2014-2016 strategic roadmap focused on cash & profitability. The down-sizing of our Acquisition division, combined with the Acquisition market outlook, result in a $800 million impairment in our 2013 accounts. Concerning marine activity, our objective is to reduce the fleet from 18 to 13 3D high-end vessels by the end of 2016. Mid-February, the CGG Symphony has stopped operating and will be de-rigged. Concerning land activity, we have reinforced our partnership in the Middle East with ARGAS and we are restructuring our activities in North America. The restructuring costs across the 2014-2016 period are expected to remain below $100m.

In 2014, we expect Acquisition market conditions to remain stable with however a low Q1, as already indicated. Our priorities are to deliver our plan and stay focused on tight cash management, cost reductions, and operational and commercial efficiency.

In 2016, in unchanged market conditions, we confirm our objectives of revenues above $4bn and improved Ebit margin by 400bps compared to 2013. »

Q4 Performance

  • Revenue up 2%, at $955m
  • EBIT at $73m before non-recurring items with EBIT margin at 7.6%
  • Net income of $(17) million after NRFI and before impairment & write-off
  • Positive Free Cash Flow before NRFI at $179m

2013 Fo urth Quarter Key Figures

Fourth

Quarter

2012
Third

Quarter

2013
Fourth

Quarter

2013
Variation

Year-on-year
Variation quarter-to-quarter
In million $
Group Revenue 938 908 955 2% 5%
Equipment 288 223 317 10% 42%
Acquisition 502 568 459 (9)% (19)%
Geology, Geophysics & Reservoir (GGR) 291 298 371 28% 25%
Eliminations (143) (181) (192) NA NA
EBITDAs 294 274 280 (5)% 2%
EBIT 124 95 73 (41)% (23)%
Equipment 81 51 102 26% 100%
Acquisition 18 42 (61) (441)% (245)%
GGR 63 54 86 38% 59%
Corporate & Eliminations (37) (53) (54) NA NA
EBIT margin 13% 10% 8% (500)bps (200)bps
Equipment margin 28% 23% 32% 400bps 900bps
Acquisition margin 4% 7% (13)% (1700)bps (2000)bps
GGR margin 21% 18% 23% 200bps 500bps
Non-Recurring Items linked to Fugro (NRFI) (36) (21) (20) NA NA
Non-Recurring Items linked to impairment & write-off NA NA (800) NA NA
EBIT after NRFI and impairment & write-off 88 73 (747) NA NA
Net Income after NRFI and before impairment & write-off 14 4 (17) (227)% (542)%
Net Income after NRFI and after impairment & write-off 14 4 (810) NA NA
Cash Flow from Operations 454 189 451 (1)% 139%
Free Cash Flow before NRFI 238 (17) 179 (25)% NA

Fourth Quarter 2013 Financial Results by Division

Equipment

Equipment Fourth Quarter

2012
Third

Quarter

2013
Fourth Quarter

2013
Variation

Year-on-year
Variation

quarter-to-quarter
In million $
Equipment Total Revenue 288 223 317 10% 42%
External Revenue 246 187 270 10% 44%
EBITDAs 93 63 111 20% 77%
Margin 32% 28% 35% 300bps 700bps
EBIT 81 51 102 26% 100%
Margin 28% 23% 32% 400bps 900bps
Capital Employed (in billion $) 0.7 0.9 0.9 29% 0%

Equipment division total Revenue was $317 million, up 10% compared to the fourth quarter of 2012 and up 42% sequentially. This typically strong seasonal sales rebound, linked to the budgetary cycle of our customers, was mainly driven by land equipment sales. External sales were $270 million, up 10% year-on-year while internal sales represented 15% of total revenue. Sales in Russia were strong to prepare for the winter season while China and Middle East were also active.

Equipment division EBITDAs was $111.4 million, a margin of 35.1%.

Equipment division EBIT was $101.9 million, a margin of 32.1%.

Equipment division Capital Employed was $0.9 billion at the end of December 2013.

Acquisition

Acquisition Fourth Quarter

2012
Third

Quarter

2013
Fourth Quarter

2013
Variation

Year-on-year
Variation

quarter-to-quarter
In million $
Acquisition Total Revenue 502 568 459 (9)% (19)%
External Revenue 401 423 315 (22)% (26)%
Total Marine 369 462 363 (1)% (21)%
Total Land and Airborne Acquisition 132 106 95 (28)% (10)%
EBITDAs 72 115 12 (83)% (89)%
Margin 14% 20% 3% (1100)bps (1700)bps
EBIT 18 42 (61) (441)% (245)%
Margin 4% 7% (13)% (1700)bps (2000)bps
Capital Employed (in billion $) after impairment & write-off 2.8 3.4 2.4 (14)% (29)%

Acquisition division Total Revenue was $459 million, down 9% year-on-year and down 19% sequentially. This decrease is mainly due to challenging winter market conditions both in marine and land. External revenue was $315 million.

  • Marine Acquisition revenue was $363 million, stable year-on-year and down 21% sequentially. Our fleet utilization rate was down this quarter with availability rate at 83%. This was mainly due to planned dockings and large program awards delayed leading to commercial standby. Production rate remained at a satisfactory 90% level. 34% of the fleet was dedicated to multi-client programs.
  • Land and Airborne Acquisition revenue totaled $95 million, down 28% year-on-year and down 10% sequentially. Land winter activity was particularly low in North America this quarter, where we operated two land crews compared to six last year, hitting severely the bottom line. The conditions of the Airborne activity remain tight, with a mining market, still depressed.

Acquisition division EBITDAs was $12.5 million, a margin of 2.7%.

Acquisition division EBIT was $(61.4) million.

Acquisition division Capital Employed was $2.4 billion at the end of December 2013 after impairment & write-off.

Geology, Geophysics & Reservoir (GGR)

GGR Fourth Quarter

2012
Third

Quarter

2013
Fourth Quarter

2013
Variation

Year-on-year
Variation

quarter-to-quarter
In million $
GGR Total Revenue 291 298 371 28% 25%
Multi-client 155 122 166 7% 35%
Prefunding 87 97 81 (7)% (17)%
Subsurface Imaging & Reservoir 136 175 206 51% 18%
EBITDAs 177 169 230 30% 36%
Margin 61% 57% 62% 100bps 500bps
EBIT 63 54 86 38% 59%
Margin 21% 18% 23% 200bps 500bps
Capital Employed (in billion $) 1.8 2.8 2.8 56% 0%

GGR Division Total Revenue was $371 million, up 28% year-on-year and up 25% sequentially. This strong performance by the GGR division clearly demonstrates, less than one year after the transaction, the value of the Fugro Geoscience acquisition.

  • Multi-client revenue increased to $166 million, up 7% year-on-year and up 35% sequentially. Multi-client prefunding revenue was impacted by delays of large programs as some clients deferred their spending decisions.
  • Prefunding revenue was $81 million. Multi-client cash capex was $117 million, 69% pre-funded, and mainly focused on the Gulf of Mexico with the continuation of our IBALT program, in preparation for the future lease rounds but also offshore in the North Sea. Late in the quarter CGG was also awarded, three large high-end 3D multi-client survey programs offshore Brazil that will cover 30,000 km2 including the promising provinces of Foz do Amazonas Basin, Barreirinhas and Campos.
  • After-sales were $85 million, up 25% year-on-year.
  • Subsurface Imaging & Reservoir revenue was $206 million, up 51% year-on-year and up 18% sequentially. Demand for subsurface imaging was strong in all centers. Subsurface Imaging centers in France and Oman were renewed and two new centers opened in Thailand and Myanmar. The contribution of reservoir businesses to revenue was solid. Our Data Management Services activity was awarded a significant contract in Norway with the Norwegian Petroleum Directorate (NPD) relating to the Diskos Database. This solution will streamline data management through the shared electronic storage of seismic data of Norway.

GGR Division EBITDAs was $230.0 million, a margin of 61.9%.

GGR Division EBIT was $86.3 million, a margin of 23.2%. The multi-client depreciation rate amounted to 74%, leading to a $783 million Net Book Value at the end of December 2013 (not including the Geospec library and other libraries with a $35m Net Book Value).

GGR Division Capital Employed was $2.8 billion at the end of December 2013.

Fourth Quarter 2013 Group Financial Results

Group Total Revenue was $955 million, up 2% year-on-year and up 5% sequentially. This breaks down to 28% from the Equipment division, 33% from the Acquisition division, and 39% from the GGR division.

Fourth Quarter

2012
Third

Quarter

2013
Fourth Quarter

2013
Variation

Year-on-year
Variation

quarter-to-quarter
In million $
Group Total Revenue 938 908 955 2% 5%
Equipment 288 223 317 10% 42%
Acquisition 502 568 459 (9)% (19)%
GGR 291 298 371 28% 25%
Eliminations (143) (181) (192) NA NA

Group EBITDAs was $280.3 million, a margin of 29.3%. After the Non-Recurring Items relating to Fugro (NRFI), Group EBITDAs was $230.4 million, a margin of 24.1%

Fourth Quarter

2012
Third

Quarter

2013
Fourth Quarter

2013
Variation

Year-on-year
Variation

quarter-to-quarter
In million $
Group EBITDAs before NRFI 294 274 280 (5)% 2%
Margin 31% 30% 29% (200)bps (100)bps
Equipment 93 63 111 20% 77%
Acquisition 72 115 12 (83)% (89)%
GGR 177 169 230 30% 36%
Eliminations (37) (62) (61) NA NA
Corporate (11) (10) (12) NA NA
Non-Recurring Items linked to Fugro (6) (2) (50) NA NA

Group EBIT was $72.9 million, a margin of 7.6%. After NRFI, Group EBIT was $53 million, and after impairment & write-off, Group EBIT was $(746.9) million.

Fourth

Quarter

2012
Third

Quarter

2013
Fourth

Quarter

2013
Variation

Year-on-year
Variation

quarter-to-quarter
In million $
Group EBIT before NRFI and impairment & write-off 124 95 73 (41)% (23)%
Margin 13% 10% 8% (500)bps (200)bps
Equipment 81 51 102 26% 100%
Acquisition 18 42 (61) (441)% (245)%
GGR 63 54 86 38% 59%
Eliminations (24) (41) (41) NA NA
Corporate (13) (12) (13) NA NA
Non-Recurring Items linked to Fugro (36) (21) (20) NA NA
Non-Recurring Items linked to impairment & write-off 0 0 (800) NA NA

Financial Charges were $57 million:

  • Cost of debt was $48 million.
  • Other financial items were negative at $10 million, due mainly to a negative $6 million impact of currency variations.

Taxes were $6 million including $10 million favorable impact of deferred tax on currency conversion.

Group Net Income was $(17) million after NRFI and before impairment & write-off. After impairment and write-off, the Group Net Income was $(810) million.

After minority interests and after NRFI and before impairment & write-off, Net Income attributable to the owners of CGG was a loss of $20 million/€15 million. EPS was negative at $0.11/€0.08.

Cash Flow

Cash Flow from operations was $451 million compared to $454 million for the fourth quarter 2012.

Global Capex was $229 million this quarter.

  • Industrial capex was $92 million.
  • Research & Development capex was $16 million.
  • Multi-client cash capex was $117 million.

Fourth Quarter

2012
Third Quarter

2013
Fourth Quarter

2013
In million $
Capex 160 206 229
Industrial 72 65 92
R&D 8 17 16
Multi-client Cash 81 122 117
Marine MC 74 93 105
Land MC 7 29 12
Other Geological Capex 0 3 3

Free Cash Flow

After the payment of $55 million in interest expenses during the quarter and Capex, free cash flow was positive at $179 million. After NRFI, free cash flow was positive at $166 million.

Fourth Quarter 2013 Comparisons with Fourth Quarter 2012

Consolidated Income Statements Fourth Quarter

2012
Third Quarter

2013
Fourth Quarter

2013
In million $
Exchange rate euro/dollar 1.297 1.320 1.359
Operating Revenue 937.9 908.0 955.4
Equipment 288.4 222.7 317.2
Acquisition 501.5 567.9 458.7
GGR 291.1 298.1 371.4
Eliminations (143.1) (180.7) (191.9)
Gross Margin 217.2 194.1 162.6
Operating Income 76.8 79.0 (747.2)
Equity from Investments 11.1 (5.8) 0.3
EBIT after NRFI and impairment & write-off 87.9 73.2 (746.9)
Equipment 80.7 51.0 101.9
Acquisition 18.0 42.2 (61.4)
GGR 62.5 54.3 86.3
Corporate & eliminations (37.0) (52.8) (53.6)
Non-Recurring Items linked to Fugro (36.3) (21.4) (20.1)
Non-Recurring Items linked to impairment & write-off 0.0 0.0 (800.0)
EBIT before NRFI and impairment & write-off 124.3 94.6 72.9
Net financial costs (62.2) (58.6) (57.3)
Income Taxes (11.9) (15.4) (15.6)
Deferred Tax on Currency Variations (0.2) 4.7 10.0
Net Income after NRFI and before impairment & write-off 13.6 3.9 (17.3)
Shareholder's Net Income after NRFI and before impairment & write-off 9.6 2.2 (20.0)
Earning per share in $ 0.06 0.01 (0.11)
Earning per share in 0.05 0.01 (0.08)
EBITDAs 293.9 273.9 280.3
Equipment 92.5 63.0 111.4
Acquisition 71.8 114.8 12.5
GGR 177.4 168.6 230.0
Corporate & eliminations (47.8) (72.5) (73.5)
Non-Recurring Items linked to Fugro & provisions (6.3) (1.6) (50.0)
EBITDAs after NRFI 287.6 272.3 230.4
Industrial Capex (including R&D capex) 79.6 81.0 108.4
Multi-client Cash Capex 80.7 121.9 117.4
Geological Capex 0.0 2.8 2.8

Full -Year 2013 Financial Results

Group Total Revenue was $3.766 billion, up 10% compared to 2012 as a result of an estimated 17% increase corresponding to the activities acquired from Fugro and a (4)% decrease relating to the transfer of the SWOBS activities to Seabed Geosolutions. Group revenue breaks down to 22% from the Equipment division, 43% from the Acquisition division and 35% from the GGR division.

  • Equipment revenue was down (13)%. 57% of the total sales related to land equipment and 43% to marine equipment. No high-channel-count crews were launched in 2013 compared to 2012 where $150 million related to high-channel- count crews in Oman and Saudi Arabia. Sales were at a record level in Russia where the size of crews increased although softer in China. Marine streamers sales were mainly driven by the replacement market this year.
  • Acquisition revenue was up 19%. The four C-Class vessels from Fugro joined CGG's fleet on 1st of February. Production rate was at a record high 92% level compared to 90% in 2012. Airborne joined in early September. Marine contract revenue was up 36% year-on-year at $1.786 billion, while land and airborne revenue was down (23)% at $440 million.
  • GGR revenue was up 36%. Multi-client revenue was up 24% with a particularly strong H1, mainly driven by Brazil and the North Sea. The year was excellent for Subsurface Imaging with sustained activity in all centers and large projects in the US. Reservoir businesses delivered a solid contribution as expected.

FY 2012 FY 2013 Variation

Year-on-year
In million $
Group Total Revenue 3411 3766 10%
Eliminations (621) (801) NA
Equipment 1204 1045 (13)%
Acquisition 1878 2226 19%
Marine 1310 1786 36%
Land & Airborne 568 440 (23)%
GGR 950 1296 36%
Multi-client & basin data 472 585 24%
Subsurface Imaging & Reservoir 478 711 49%

EBITDAs was $1.160 billion up 15% and representing a 30.8% margin. After NRFI, Group EBITDAs was $1.140 billion, a margin of 30.3%.

FY 2012 FY 2013 Variation

Year-on-year
In million $
Group EBITDAs before NRFI 1012 1160 15%
Margin 30% 31% 100bps
Equipment 427 339 (21)%
Acquisition 248 369 49%
GGR 560 780 39%
Eliminations (179) (281) NA
Corporate Costs (43) (47) NA
Non-Recurring Items linked to Fugro (6) (20) NA

Group EBIT was $423.2 million up 5%, and representing a margin of 11.2%. After NRFI, Group EBIT was $406 million, and after impairment & write-off, Group EBIT was $(394.3) million:

  • The NFRI were $(17) million at the end of December. With the $63 million net capital gain from the SWOBS transaction (the $85 million capital gain was reduced by the negative contribution of the Seabed Geosolutions JV due to a slow start and operational issues on one project), the integration and restructuring costs relating to the Fugro Geoscience transaction eventually amounted to $(80) million.
  • Assets impairment & write-off at $800 million:
    -- Land: $79 million as a result of more difficult market conditions overall.
  • Marine $721 million: due to $139 million vessel fair value rebasement to reflect future utilization mode and $582 million as a consequence of the planned (25)% fleet downsizing plan and the change in market outlook.
  • Equipment EBIT margin was 28.0% with a very strong Q4, showing a strong resilience thanks to efficient cost management, despite the lower volume and lack of high-channel-count crews. R&D expenses were high at 5.6% of revenue. Sercel launched two new products: Sentinel MS (Multi-Sensor streamer) in marine and the 508XT land acquisition system.
  • Acquisition EBIT margin was 2.5%. After a H1 which was above expectations, H2 was tougher with difficult market conditions. Despite an excellent marine production rate at 92% and a high commercial success rate, marine activity was impacted by H2 delays and low pricing environment. Land suffered from challenging safety and weather conditions in H1 and from a very low winter season in North America. Airborne's contribution was limited as it joined CGG in early September.
  • GGR EBIT margin was at 24.5%, a solid performance across all the businesses. Multi-client activity was strong in H1 and the prefunding rate for the whole year was 69%. Subsurface Imaging performance was at a record high level in all centers across the world. Reservoir and geology activities continued to be solid driven by sustained demand for geology products & services and reservoir softwares.

FY 2012 FY 2013 Variation

Year-on-year
In million $
Group EBIT before NRFI and impairment & write-off 404 423 5%
Margin 12% 11% (100)bps
Equipment 380 293 (23)%
Acquisition 21 56 172%
GGR 183 317 74%
Eliminations (126) (189) NA
Corporate Costs (53) (54) NA
Non-Recurring Items linked to Fugro (36) (17) NA
Non-Recurring Items linked to impairment & write-off 0 (800) NA

Financial Charges were $214 million:

  • The cost of debt was $192 million, while the total amount of interest paid was $137 million.
  • Other financial items were negative at $22 million including notably $4 million relating to the financial cost of the Fugro Geoscience transaction (bridge loan), the $5 million accelerated amortization of the issuing fees of the former Revolving Credit Facilities we renewed in July, and the $6 million call premium relating to the $125 million early repayment of the 2016 High Yield Bond we made in August.

Taxes were $83 million, including the $10 million favorable impact of deferred tax on currency conversion.

Group Net Income was $101 million after NRFI and before the impairment and write-off. After impairment and write-off, Group Net Income was $(691) million.

After minority interests and after NRFI and before impairment & write-off, Net Income attributable to the owners of CGG was $94 million/€71 million. EPS was positive at $0.53/ €0.40, up 15% year-on-year.

Cash Flow

Cash Flow from operations was $908 million.

Global Capex was $834 million, up 13% year-on-year.

  • Industrial capex was $298 million, down 14% year-on-year.
  • Research & Development capex was $57 million, up 96% year-on-year.
  • Multi-client cash capex was $468 million, up 29% year-on-year.

FY 2012 FY 2013
In million $
Capex 738 834
Industrial 345 298
R&D 29 57
Multi-client Cash 364 468
Marine MC 252 405
Land MC 112 64
Other Geological Capex 0 11

Free Cash Flow

Free cash flow was negative at $(56) million and positive at $5 million excluding NRFI.

Balance Sheet

Debt Management :

As part of the company's proactive management of its debt, CGG accelerated the refinancing of its credit facilities during the year by extending the debt maturity periods:

In July:

  • A five-year-$200-million credit facility was signed with a 4.4% interest rate, notably to reimburse the 2013 tranche of our Fugro Vendor Loan
  • The two existing $289m Revolving Credit Facilities expiring in January/February 2014 were fully renewed with:
    • A-$165-million US Revolving Credit Facility for a period of five years
    • A-$325-million French Revolving Credit Facility for a period of three years with two extension options of one year each

In August:

  • CGG made an early repayment of $125 million of the 9.5% 2016 High Yield Bond

In September:

  • After full completion of the Fugro Geoscience transaction and repayment of the 2013 installment, the Fugro Vendor Loan totaled €112.5 million.

In December:

  • A $25 million streamer financing was signed.

Net Debt to Equity Ratio:

Group gross debt was $2.748 billion at the end of December 2013. Available cash was $530 million and Group net debt was $2.218 billion.

Net debt to equity ratio, at the end of December 2013, was 58%.

Full -Year 2013 Comparisons with 2012

Consolidated Income Statements FY

2012
FY

2013
In million $
Exchange rate euro/dollar 1.290 1.325
Operating Revenue 3410.5 3765.8
Equipment 1204.3 1044.9
Acquisition 1878.2 2226.0
GGR 949.5 1296.0
Eliminations (621.5) (801.1)
Gross Margin 728.7 790.7
Operating Income 330.6 (394.9)
Equity from Investments 37.4 0.6
EBIT after NRFI and after impairment & write-off 368.0 (394.3)
Equipment 380.4 293.0
Acquisition 20.5 56.0
GGR 182.7 317.2
Corporate & eliminations (179.3) (243.1)
Non-Recurring Items linked to Fugro (36.3) (17.4)
Non-Recurring Items linked to impairment & write-off 0.0 (800.0)
EBIT before NRFI and impairment & write-off 404.4 423.2
Net financial costs (176.4) (214.0)
Income Taxes (99.2) (92.6)
Deferred Tax on Currency Translation 0.0 9.7
Net Income after NRFI and before impairment & write-off 92.4 101.5
Shareholder's Net Income after NRFI and before impairment & write-off 75.2 93.9
Earning per share in $ 0.46 0.53
Earning per share in 0.36 0.40
EBITDAs 1012.5 1159.8
Equipment 426.5 338.6
Acquisition 247.6 369.1
GGR 560.2 780.0
Corporate & eliminations (221.8) (328.0)
Non-Recurring Items linked to Fugro & provisions (6.3) (20.0)
EBITDAs after NRFI 1006.2 1139.7
Industrial Capex (including R&D capex) 373.8 354.4
Multi-client Cash Capex 363.8 468.4
Geological Capex 0.0 11.0

Other Information

  • An English language conference call is scheduled today Thursday 27th February, 2014 at 9:00 AM (Paris time) - 8:00 AM (London time).

To take part in the English language conference, simply dial five to ten minutes prior to the scheduled start time.

France call-in

UK call-in

Access code
+33 (0)1 76 77 22 23

+44 (0)20 3140 8286

9995562

You will be connected to the conference: "CGG Q4 and FY 2013 results".

  • Copies of the presentation are posted on the Company website www.cgg.com and can be downloaded.
  • The conference call will be broadcast live on the CGG website www.cgg.com and a replay will be available via webcast on CGG website.

About CGG:


CGG (www.cgg.com) is a fully integrated Geosciences company providing leading geological, geophysical and reservoir capabilities to its broad base of customers primarily from the global oil and gas industry. Through its three complementary business divisions of Equipment, Acquisition and Geology, Geophysics & Reservoir (GGR), CGG brings value across all aspects of natural resource exploration and exploitation.
CGG employs 9,800 people around the world, all with a Passion for Geosciences and working together to deliver the best solutions to its customers.
CGG is listed on the Euronext Paris SA (ISIN: 0000120164) and the New York Stock Exchange (in the form of American Depositary Shares. NYSE: CGG).

Contacts:

Group Communications Investor Relations

Christophe Barnini Catherine Leveau

Tel: +33 1 64 47 38 11 Tel: +33 1 64 47 34 89

E-Mail: invrelparis@cgg.com


The information included herein contains certain forward-looking statements within the meaning of Section 27A of the securities act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties as disclosed by the Company from time to time in its filings with the Securities and Exchange Commission. Actual results may vary materially .

CGG

CONSOLIDATED FINANCIAL STATEMENTS

December 31 st 2013

CONSOLIDATED BALANCE SHEET

December 31, 2013 December 31, 2012

(restated) (1)
Amounts in millions of U.S.$, unless indicated
ASSETS
Cash and cash equivalents 530.0 1,520.2
Trade accounts and notes receivable, net 987.4 888.7
Inventories and work-in-progress, net 505.2 419.2
Income tax assets 118.1 111.7
Other current assets, net 175.6 139.6
Assets held for sale, net 37.7 393.9
Total current assets 2,354.0 3,473.3
Deferred tax assets 222.6 171.4
Investments and other financial assets, net 47.8 53.7
Investments in companies under equity method 325.8 124.5
Property, plant and equipment, net 1,557.8 1,159.5
Intangible assets, net 1,271.6 934.9
Goodwill, net 2,483.2 2,415.5
Total non-current assets 5,908.8 4,859.5
TOTAL ASSETS 8,262.8 8,332.8
LIABILITIES AND EQUITY

Bank overdrafts
4.5 4.2
Current portion of financial debt 247.0 47.8
Trade accounts and notes payable 557.6 505.5
Accrued payroll costs 251.1 209.9
Income taxes liability payable 73.9 97.0
Advance billings to customers 52.4 36.0
Provisions - current portion 73.1 21.0
Other current liabilities 283.9 300.2
Total current liabilities 1,543.5 1,221.6
Deferred tax liabilities 148.9 106.0
Provisions - non-current portion 142.5 123.5
Financial debt 2,4796.1 2,253.2
Other non-current liabilities 41.7 46.6
Total non-current liabilities 2,829.2 2,529.3
Common stock 301,784,014 shares authorized and

176,890,866 shares with a €0.40 nominal value issued and outstanding at December 31, 2013
92.7 92.4
Additional paid-in capital 3,180.4 3,179.1
Retained earnings 1,273.8 1,190.6
Other reserves (61.8) (27.8)
Treasury shares (20.6) (20.6)
Net income (loss) for the period attributable to the owners of CGG (698.8) 75.2
Cumulative income and expense recognized directly in equity (7.6) (7.6)
Cumulative translation adjustment 41.8 1.9
Equity attributable to owners of CGG 3,799.9 4,483.2
Non-controlling interests 90.2 98.7
Total equity 3,890.1 4,581.9
TOTAL LIABILITIES AND EQUITY 8,262.8 8,332.8

  1. Starting January 1, 2013, CGG applies IAS19 revised - Employee benefits. As the application of this new standard is a change of accounting policy, all comparative financial information has been restated to present comparative amounts for each period presented as if the new accounting policy had always been applied. The adjustments resulting from the immediate recognition of past services costs were as follows as of December 31, 2012: Increase in employee benefit liability of U.S.$15.9 million, decrease in retained earnings of U.S.$(10.0) million and decrease in deferred tax liability of U.S.$(5.9) million.

CONSOLIDATED STATEMENT OF OPERATIONS

December 31,
2013 2012 (restated) (4)
Amounts in millions of U.S.$, except per share data or unless indicated
Operating revenues 3,765.8 3,410.5
Other income from ordinary activities 2.1 3.6
Total income from ordinary activities 3,767.9 3,414.1
Cost of operations (2,977.2) (2,685.4)
Gross profit 790.7 728.7
Research and development expenses, net (105.9) (92.8)
Marketing and selling expenses (118.6) (96.0)
General and administrative expenses (215.9) (182.6)
Other revenues (expenses), net (745.2) (26.7)
Operating income (394.9) 330.6
Expenses related to financial debt (193.3) (159.0)
Income provided by cash and cash equivalents 1.6 2.3
Cost of financial debt, net (191.7) (156.7)
Other financial income (loss) (22.3) (19.7)
Income (loss) of consolidated companies before income taxes (608.9) 154.2
Deferred taxes on currency translation 9.7
Other income taxes (92.6) (99.2)
Total income taxes (82.9) (99.2)
Net income (loss) from consolidated companies (691.8) 55.0
Share of income (loss) in companies accounted for under equity method 0.6 37.4
Net income (loss) (691.2) 92.4
Attributable to :
Owners of CGG $ (698.8) 75.2
Owners of CGG (527.2) 58.3
Non-controlling interests $ 7.6 17.2
Weighted average number of shares outstanding 176,734,989 162,077,608
Dilutive potential shares from stock-options (1) 827,902
Dilutive potential shares from performance share plan (1) 503,932
Dilutive potential shares from convertible bonds (1) (2)
Dilutive weighted average number of shares outstanding adjusted when dilutive 176,734,989 163,409,442
Net income (loss) per share

Basic
$ (3.95) 0.46 (3)
Basic (2.98) 0.36 (3)
Diluted $ (3.95) 0.46 (3)
Diluted (2.98) 0.36 (3)

  1. As our net result was a loss, stock-options performance shares plans and convertibles bonds had an anti-dilutive effect; as a consequence, potential shares linked to those instruments were not taken into account in the dilutive weighted average number of shares or in the calculation of diluted loss per share.
  2. Convertible bonds had an accretive effect; as a consequence, potential shares linked to those instruments were not taken into account in the dilutive weighted average number of shares or in the calculation of diluted income per share.
  3. As a result of the 2012 CGG SA capital increase via an offering of preferential subscription rights to existing shareholders, the calculation of basic and diluted earnings per shares for 2012 has been adjusted retrospectively. Number of ordinary shares outstanding has been adjusted to reflect the proportionate change in the number of shares.
  4. As a result of the capital increase of CGG in 2012 via an offering of preferential subscription rights to existing shareholders, the calculation of basic and diluted earnings per shares for 2012 has been adjusted retrospectively. Number of ordinary shares outstanding has been adjusted to reflect the proportionate change in the number of shares.
  5. Restatement related to IAS19 revised.

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

Three months ended December 31,
2013 2012 (restated) (5)
Amounts in millions of U.S.$, except per share data or unless indicated
Operating revenues 955.4 937.9
Other income from ordinary activities 0.6 0.9
Total income from ordinary activities 956.0 938.8
Cost of operations (793.4) (721.6)
Gross profit 162.6 217.2
Research and development expenses, net (21.8) (27.4)
Marketing and selling expenses (24.2) (27.3)
General and administrative expenses (54.6) (46.2)
Other revenues (expenses), net (809.2) (39.5)
Operating income (747.2) 76.8
Expenses related to financial debt (47.7) (41.5)
Income provided by cash and cash equivalents 0.2 0.3
Cost of financial debt, net (47.5) (41.2)
Other financial income (loss) (9.9) (21.0)
Income (loss) of consolidated companies before income taxes (804.6) 14.6
Deferred taxes on currency translation 10.0 (0.2)
Other income taxes (15.6) (11.9)
Total income taxes (5.6) (12.1)
Net income (loss) from consolidated companies (810.2) 2.5
Share of income (loss) in companies accounted for under equity method 0.3 11.1
Net income (loss) (809.9) 13.6
Attributable to :
Owners of CGG $ (812.6) 9.6
Owners of CGG(1) (613.8) 7.3
Non-controlling interests $ 2.7 4.0
Weighted average number of shares outstanding 176,892,464 172,012,492
Dilutive potential shares from stock-options (2) 940,454
Dilutive potential shares from performance share plan (2) 503,932
Dilutive potential shares from convertible bonds (2) (3)
Dilutive weighted average number of shares outstanding adjusted when dilutive 176,892,464 173,456,878
Net income (loss) per share

Basic
$ (4.59) 0.06 (4)
Basic (1) (3.47) 0.05 (4)
Diluted $ (4.59) 0.06 (4)
Diluted (1) (3.47) 0.05 (4)

  1. Corresponding to the full year amount in euros less the nine months amount in euros.
  2. As our net result was a loss, stock-options, performance shares plans and convertibles bonds had an anti-dilutive effect; as a consequence, potential shares linked to those instruments were not taken into account in the dilutive weighted average number of shares or in the calculation of diluted loss per share.
  3. Convertible bonds had an accretive effect; as a consequence, potential shares linked to those instruments were not taken into account in the dilutive weighted average number of shares or in the calculation of diluted income per share.
  4. As a result of the capital increase of CGG in 2012 via an offering of preferential subscription rights to existing shareholders, the calculation of basic and diluted earnings per shares for 2012 has been adjusted retrospectively. Number of ordinary shares outstanding has been adjusted to reflect the proportionate change in the number of shares.
  5. Restatement related to IAS19 revised.

UNAUDITED ANALYSIS BY SEGMENT

We previously reported our results on the basis of two segments: Geophysical Services and Geophysical Equipment. As a result of the acquisition of Fugro's Geoscience Division, we changed our organization, as well as the way management measures our performance. Since February 1, 2013, we have been organized in three Divisions:

  • Acquisition segment, which comprises the following business lines:

- Marine acquisition: seismic data acquisition offshore undertaken by us on behalf of a specific client or for our Multi-client business line (internal activity);
- Land and Airborne: other seismic data acquisition undertaken by us on behalf of a specific client, or for our Multi-client business line (internal activity);

  • Geology, Geophysics & Reservoir ("GGR") segment which comprises the following business lines:

- Multi-clients: development and management of seismic surveys undertaken by us and licensed to a number of clients on a non-exclusive basis;

  • Subsurface Imaging and Reservoir: processing and imaging of geophysical data, reservoir characterization, geophysical consulting and software services, geological data library and data management solutions.
  • Equipment segment, which we conduct through Sercel, comprises our manufacturing and sales activities for seismic equipment used for data acquisition, both on land and marine.

Financial information by segment is reported in accordance with our internal reporting system and provides internal segment information that is used by the chief operating decision maker to manage and measure the performance.

We also changed our main performance indicator from operating income to earnings before interest and tax ("EBIT"). We define EBIT as operating income plus our share of income in companies accounted for under the equity method. EBIT is used by management as a performance indicator because it captures the contribution to our results of the significant businesses that we manage through our joint-ventures.

Prior period segment disclosure has been restated to reflect the new segments.

December 31,
2013 2012 (restated)*
In millions of U.S.$,

except for assets and capital employed in billions of U.S.$
Acqui-sition GGR Equip-ment Eliminations

and

Other
Consolidated Total Acqui-sition GGR Equip-ment Eliminations

and

Other
Consolidated Total
Revenues from unaffiliated customers 1,635.5 1,296.0 834.3 - 3,765.8 1,507.3 949.5 953.7 - 3,410.5
Inter-segment revenues 590.5 - 210.6 (801.1) - 370.9 - 250.6 (621.5) -
Operating revenues 2,226.0 1,296.0 1,044.9 (801.1) 3,765.8 1,878.2 949.5 1,204.3 (621.5) 3,410.5
Depreciation and amortization (excluding multi-client surveys) (1,106.0) (62.8) (44.2) - (1,213.0) (258.2) (36.5) (43.3) (30.0) (368.0)
Depreciation and amortization of multi-client surveys - (398.7) - - (398.7) - (340.9) - - (340.9)
Share of income in companies accounted for under equity method (1) 22.2 0.2 - (21.8) 0.6 34.1 3.3 - - 37.4
Earnings before interest and tax (2) (744.0) 317.2 293.0 (260.5) (394.3) 20.5 182.7 380.4 (215.6) 368.0
Capital expenditures (excluding multi-client surveys) (3) 249.8 49.6 55.0 (7.2) 347.2 296.3 33.4 44.1 (5.0) 368.8
Investments in multi-client surveys, net cash - 479.4 - - 479.4 - 363.8 - - 363.8
Capital employed 2.4 2.8 0.9 - 6.1 2.9 1.8 0.7 - 5.4
Total identifiable assets (4) 3.1 3.1 1.2 0.3 7.7 3.3 2.0 1.0 0.5 6.8

* Restatement related to IAS19 revised.
(1) Share of operational results of companies accounted for under equity method were U.S.$(0.7) million and U.S.$49.2 million for the year ended December 31, 2013 and 2012, respectively.
(2) For the year ended December 31, 2013, Acquisition EBIT includes U.S.$(800,0) million of non-recurring items: (i) U.S.$(721,0) million related to the Marine business, out of which U.S.$(139,0) million of assets impairment and provisions for onerous contracts and U.S.$(582,0) million of goodwill depreciation as a consequence of the 25% fleet downsizing plan and change of market outlook; and (ii) U.S.$(79,0) million of goodwill and assets impairment as a consequence of more overall difficult Land market conditions.
GGR EBIT includes a gain of U.S.$19.8 million related to the sale of the Company's shareholding interest in Spectrum ASA.
"Eliminations and other" include general corporate expenses of U.S.$(54.0) million, U.S.$(189.1) million of intra-group margin and U.S.$(17.4) million of non-recurring items related to the Fugro Geoscience transaction including: (i) a gain of U.S.$84.5 million related to contribution of shallow-water and OBC assets to our Seabed joint-venture with Fugro; offset by (ii) share of income of our Seabed joint-venture of U.S.$(21.8) million; and (iii) acquisition and integration costs, net of reversal of provisions, of U.S.$(80.0) million, out of which U.S.$(41.1) million related to the Marine business and the acquired vessels from Fugro.
For the year ended December 31, 2012, general corporate expenses amounted to U.S.$ (53.8) million and an impairment loss of U.S.$(30,0) million related to the Veritas trade name.
(3) Capital expenditures include capitalized development costs of U.S.$(56.9) million and U.S.$(29.1) million for the year ended December 31, 2013 and 2012, respectively.
(4) In 2013, based on a preliminary Fugro purchase price allocation.

In 2012, included net assets corresponding to our shallow water and OBC businesses and reclassified as assets held for sale for U.S.$376.4 million.

Three months ended December 31,
2013 2012 (restated)*
In millions of U.S.$,

except for assets and capital employed in billions of U.S.$
Acqui-sition GGR Equip-ment Eliminations

and

Other
Consolidated Total Acqui-sition GGR Equip-ment Eliminations

and

Other
Consolidated Total
Revenues from unaffiliated customers 314,5 371,4 269,5 - 955,4 401,3 291,1 245,5 - 937,9
Inter-segment revenues 144,2 - 47,7 (191,9) - 100,2 - 42,9 (143,1) -
Operating revenues 458,7 371,4 317,2 (191,9) 955,4 501,5 291,1 288,4 (143,1) 937,9
Depreciation and amortization (excluding multi-client surveys) (847,8) (15,7) (9,7) - (873,2) (64,6) (9,6) (11,2) (30,0) (115,4)
Depreciation and amortization of multi-client surveys - (128,5) - - (128,5) - (103,4) - - (103,4)
Share of income in companies accounted for under equity method (1) 7,2 (0,7) - (6,2) 0,3 11,8 (0,7) - - 11,1
Earnings before interest and tax (2) (861,4) 86,3 101,9 (73,7) (746,9) 18,0 62,5 80,7 (73,3) 87,9
Capital expenditures (excluding multi-client surveys) (3) 74,1 14,9 19,4 2,1 110,5 46,0 10,6 23,0 (1,3) 78,3
Investments in multi-client surveys, net cash - 120,2 - - 120,2 - 80,7 - - 80,7


* Restatement related to IAS19 revised.

  1. Share of operational results of companies accounted for under equity method were U.S.$0.2 million and U.S.$12.8 million for the three months ended December 31, 2013 and 2012, respectively.
  1. For the three months ended December 31, 2013, Acquisition EBIT includes U.S.$(800,0) million of non-recurring items: (i) U.S.$(721,0) million related to the Marine business, out of which U.S.$(139,0) million of assets impairment and provisions for onerous contratcs and U.S.$(582,0) million of goodwill depreciation as a consequence of the 25% fleet downsizing plan and change of market outlook; and (ii) U.S.$(79,0) million of goodwill and assets impairment as a consequence of more overall difficult Land market conditions.

"Eliminations and other" include general corporate expenses of U.S.$(12.6) million, U.S.$(41.0) million of intra-group margin and U.S.$(20.1) million of non-recurring items related to the Fugro Geoscience transaction: (i) acquisition and integration costs , net of reversal of provisions, of U.S.$(13.9) million, out of which U.S.$(7.2) million related to the Marine business and the acquired vessels from Fugro; and (ii) share of income of our Seabed joint-venture of U.S.$(6.2) million.

The three months ended December 31, 2012, included general corporate expenses of U.S.$(13.7) million and an impairment loss of U.S.$(30,0) million related to the Veritas trade name.

  1. Capital expenditures include capitalized development costs of U.S.$(15.9) million and U.S.$(8.1) million for the three months ended December 31, 2013 and 2012, respectively.

CONSOLIDATED STATEMENT OF CASH FLOWS

December 31,
2013 2012

(restated) (1)
Amounts in millions of U.S.$
OPERATING
Net income (loss) (691.2) 92.4
Depreciation and amortization 1,213.0 368.0
Multi-client surveys depreciation and amortization 398.7 340.9
Depreciation and amortization capitalized to multi-client surveys (92.9) (54.2)
Variance on provisions 39.6 (20.1)
Stock based compensation expenses 15.8 20.9
Net gain (loss) on disposal of fixed assets (90.3) (9.4)
Equity income (loss) of investees (0.6) (37.4)
Dividends received from affiliates 10.0 48.2
Other non-cash items 4.5 (0.5)
Net cash including net cost of financial debt and income tax 806.6 748.8
Less net cost of financial debt 191.7 156.7
Less income tax expense 82.9 99.2
Net cash excluding net cost of financial debt and income tax 1,081.2 1,004.7
Income tax paid (117.3) (145.1)
Net cash before changes in working capital 963.9 859.6
- change in trade accounts and notes receivable 46.5 (49.3)
- change in inventories and work-in-progress (46.8) (46.7)
- change in other current assets 25.5 7.1
- change in trade accounts and notes payable (76.9) 113.8
- change in other current liabilities 0.5 37.8
Impact of changes in exchange rate on financial items (5.0) (1.4)
Net cash provided by operating activities 907.7 920.9
INVESTING
Capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys) (347.2) (368.8)
Investment in multi-client surveys, net cash (479.4) (363.8)
Proceeds from disposals of tangible and intangible assets 6.1 6.2
Total net proceeds from financial assets 33.7 35.4
Acquisition of investments, net of cash and cash equivalents acquired (937.9) (52.5)
Impact of changes in consolidation scope - -
Variation in loans granted 3.9 1.7
Variation in subsidies for capital expenditures (1.5) (1.2)
Variation in other non-current financial assets 2.8 (1.6)
Net cash used in investing activities (1,719.5) (744.6)
FINANCING
Repayment of long-term debts (481.3) (94.8)
Total issuance of long-term debts 444.4 537.4
Lease repayments (16.8) (30.1)
Change in short-term loans (0.4) (1.7)
Financial expenses paid (136.9) (125.2)
Net proceeds from capital increase
- from shareholders 1.4 514.8
- from non-controlling interests of integrated companies - -
Dividends paid and share capital reimbursements
- to shareholders - -
- to non-controlling interests of integrated companies (7.5) (5.6)
Acquisition/disposal from treasury shares - -
Net cash provided by (used in) financing activities (197.1) 794.8
Effects of exchange rates on cash 21.4 17.7
Impact of changes in consolidation scope (2.7) -
Net increase (decrease) in cash and cash equivalents (990.2) 988.8
Cash and cash equivalents at beginning of year 1,520.2 531.4
Cash and cash equivalents at end of period 530.0 1,520.2

  1. Restatement related to IAS19 revised

Press Release - pdf version http://hugin.info/142000/R/1765059/598795.pdf

HUG#1765059

Source: CGG