Market Overview

Strong Improvement in CGGVeritas Third Quarter 2012 Results

PARIS--(BUSINESS WIRE)--

Regulatory News:

CGGVeritas (Paris:GA) (NYSE: CGV) announced today its non-audited third quarter 2012 consolidated1 results. All comparisons are made on a year-on-year basis unless stated otherwise.

Third quarter results

  • Revenue totaled $855 million, up 7%
  • Operating income increased by 17% to $114 million, a 13% margin
  • Services operating income was at $62 million, a 10% margin
  • Sercel operating income was at $93 million, a 33% margin

Acquisition of Fugro's Geoscience Division on track

  • The closing of the acquisition of Fugro's Geoscience Division is still expected by the end of the year or by early 2013
  • This acquisition remains currently subject to the approval of anti-trust authorities in the United Kingdom, in Norway, in Turkey and in Australia and to the work's council consultation
  • The Rights Issue of 414 million euros launched last September 26th was successful, having been 195% oversubscribed

Signature of a collaborative relationship agreement with Baker Hughes

  • CGGVeritas announces today a collaborative relationship agreement with Baker Hughes on the shale plays in order to develop a complete range of services using reservoir models with calibrated seismic data
  • This collaboration could help oil and gas companies to accurately pinpoint reservoir “sweet spots” and optimize well placement and completion design earlier in the asset lifecycle for more efficient well construction and more productive wells

CGGVeritas CEO, Jean-Georges Malcor, commented:

“As expected, quarter after quarter, CGGVeritas continues to strengthen its results, reflecting the improvement in our operational performance as well as the increase in marine prices.

The acquisition of Fugro's Geoscience Division is on track. Our capital increase with preferential subscription rights was favorably received by our shareholders who recognize that this operation will transform CGGVeritas into a fully integrated company in Geology, Geophysics and Reservoir.

We are also very pleased by the collaborative relationship agreement with Baker Hughes in the shale plays. This agreement is in line with our strategy of positioning our company on the entire value chain of Geoscience and to fully benefit from this favorable phase of the cycle.

For the end of the year, our multi-client activity should benefit from the recent announcement of lease sales in the Gulf of Mexico and Brazil and from the 27th round awards in the North Sea, after two exceptionally weak quarters. In this context, and with a fourth quarter expected to be strong across our activities, we confirm our 2012 objectives.

Looking forward, the current buoyant commercial climate bodes well for this favorable cycle continuing for the seismic industry in 2013. ”

1Effective January 1, 2012, CGGVeritas changed the presentation currency of its consolidated financial statements from the euro to the U.S. dollar to better reflect the profile of an industry with revenues, costs and cash flows primarily generated in U.S. dollars. The first, second and third quarter 2011 figures shown in this press release have been restated as if the change in the Group presentation currency had been effective since January 1, 2004 (IFRS transition). In the context of our new presentation of cash indicators, first, second and third quarter 2011 EBITDAs and multi-client Capex figures have been restated

Third Quarter 2012 Results

Third Quarter 2012 Key Figures

   
Third Quarter Third Quarter
In million $   2012   2011*
Revenue   855   797
EBITDAs   278   248
Operating Income   114   98
Net Income   48   40
Cash Flow from Operations   171   113
Free Cash Flow   -39   -66
Backlog   1 280   1 240
 

*Restated figures

  • Group revenue was $855 million, up 7% year-on-year and up 3% sequentially.
  • Group operating income was $114 million, up 17% year-on-year and up 35% sequentially and representing a 13% margin:
    • Sercel operating income totaled $93 million, which was stable sequentially and its margin stood at 33%.
    • Services operating income increased significantly to $62 million, mainly due to the increase in marine prices. This represented a 10% margin, the highest since the first quarter of 2009.
  • The contribution from equity investees was at $13 million, up 25% sequentially. This is mainly due to the strong performance of Argas, particularly the favorable start of the KJO contract, which was originally expected to be operated by Ardiseis.
  • Net income totaled $48 million, compared to $40 million in the third quarter of 2011.
  • Earnings Before Interest Tax Depreciation and Amortization (EBITDAs) was at $278 million, up 12% year-on-year and up 22% sequentially.
  • Cash flow from operations was $171 million, up 51% year-on-year.
  • Total Capex represented $196 million this quarter, Industrial Capex represented $70 million and Multi-Client Capex reached $126 million with 28% of the fleet being dedicated to multi-client programs. The level of multi-client prefunding was 71% this quarter.
  • After payment of interest and high capital expenditure especially in our multi-client activity, net free cash flow was negative at $39 million.
  • Backlog was at $1.280 billion at the end of September 2012, slightly up year-on-year, up in Services at $1.070 billion and down at Sercel at $210 million.

Third Quarter 2012 Financial Results

Third Quarter 2012 key figures

   
In million $   Second Quarter

2012

 

Third Quarter

2012

  2011*
Group Revenue   831   855   797
Sercel   285   283   275
Services   599   634   592
Group Operating Income   85   114   98
Margin   10%   13%   12%
Sercel   92   93   87
Margin   32%   33%   31%
Services   19   62   53
Margin   3%   10%   9%
Net Income   34   48   40
Margin   4%   6%   5%
Net Debt 1 600 1 660   1 543
Net Debt to Equity Ratio 42% 43% 41%
Net Debt to LTM EBITDAs Ratio   1.7x   1.7x   1.8x
 

*Restated figures

Revenue

Group revenue was up 7% year-on-year and up 3% sequentially. Services revenue was up 7% year-on-year, and Sercel revenue up 3%.

In million $   Second Quarter   Third Quarter
  2012   2012   2011*
Group Revenue   831   855   797
Sercel Revenue   285   283   275
Services Revenue   599   634   592
Eliminations   -54   -62   -70
Marine contract   288   257   291
Land contract   112   138   68
Processing   113   123   113
Multi-client   87   117   119
Marine MC   52   52   83
Land MC   35   64   36
 

*Restated figures

Sercel

Total revenue rose by 3% year-on-year and was stable sequentially. External revenue increased by 8%. Total equipment sales were well distributed between the Americas, Europe, CIS, China and Asia Pacific. 47% of total sales were dedicated to marine equipment driven by the delivery of a large number of Sentinel® solid streamer sections while land equipment sales remained at a high level. As of October 1st, Sercel backlog was down following strong marine sales during the month of September. Internal sales totaled $62 million and represented 22% of total revenue.

Services

Revenue was up 7% year-on-year and up 6% sequentially. This growth in revenue is mainly due to a strong operational performance, an increase in marine prices and a sustained level of activity in land and processing.

  • Marine contract revenue was down 12% year-on-year and down 11% sequentially due to a larger share of our fleet being dedicated to our multi-client activity. This quarter was characterized by the positive impact of price increases and by the continued improvement in our marine operating performance with our vessel production rate2 above or equal to 90% for the third consecutive quarter. During the quarter, four 3D vessels were operating in the North Sea on BroadSeisTM projects. Two vessels were operating in West Africa, four in Asia including one in the China Sea for a BroadSeisTM acquisition program. In America, the Alize vessel continued with its program in the Mexican waters of the Gulf of Mexico and one vessel was operating off French Guyana.
    Four vessels were dedicated to multi-client activities this quarter. The Viking ended its acquisition program in Brazil. The Oceanic Vega and Sirius began acquiring the first multi-client program deploying StagSeisTM, the new CGGVeritas marine acquisition solution offering full azimuth coverage and long-offsets for deep subsalt imaging, in the Mexican waters of the Gulf of Mexico. The Oceanic Endeavour completed a multi-client survey off Angola.
  • Land contract revenue was up 102% year-on-year and 23% sequentially.
    This quarter, eleven crews operated in North America including four crews operating on multi-client programs and thirteen in the rest of the world. Activity was sustained in Alaska and in the Lower 48. We continued with our strategy to focus on high-end land activity by leaving South America where we terminated our activities in Columbia. Our operations in North Africa have started-up in Tunisia and Algeria. In the Middle-East, our land and Ocean Bottom-Cable (OBC) operations maintained high productivity and we were awarded a contract for an acquisition program between Kuwait and Saudi Arabia (‘the KJO contract'). Originally expected to be executed by Ardiseis, a majority-owned subsidiary, this contract is finally operated by Argas, the corresponding operating income - $3 million this quarter – being then recorded within the income of companies accounted for under equity method.
  • Processing, Imaging & Reservoir revenue was up 9% year-on-year and 9% sequentially. Demand for high-end processing is increasing, supported by high-resolution surveys and by the growth of BroadSeisTM surveys. The BroadSeisTM pricing premium is shared between marine and processing. This high level of activity in Processing, Imaging & Reservoir indicates our recent strategic decision to acquire of Fugro's Geoscience Division.
  • Multi-client revenue was almost stable year-on-year and up 35% sequentially. Capex was $126 million with a prefunding rate of 71%, despite some clients postponing formal commitments to the next quarter. With a depreciation rate averaging 80%, this quarter, the Net Book Value at the end of September 2012 totaled $613 million compared to $560 million at the end of June 2012.
    • Marine multi-client revenue was at $52 million, down 37% year-on-year. Prefunding revenue was $33 million and after-sales were at $20 million. Capex was $87 million and was concentrated on Brazil, Angola and the Gulf of Mexico where we started our IBALT multi-client program with our new StagSeisTM technology. With a depreciation rate at 73% this quarter, the Net Book Value at the end of September 2012 totaled at $476 million.
    • Land multi-client revenue significantly increased to $64 million, up 77% year-on-year. Prefunding revenue was at $57 million and after-sales were at $8 million. Capex was $39 million dedicated with the continuation of our Marcellus program where we registered a very strong operational performance. With a depreciation rate at 85%, the Net Book Value at the end of September 2012 totaled at $137 million.

2 - The vessel production rate, a metric measuring the effective utilization of the vessels once available; this metric is related to the entire fleet, and corresponds to the available time reduced by the operational downtime, all then divided by available time.

Group EBITDAs was $278 million, up 12% year-on-year and up 22% sequentially with a 32% margin.

  Second Quarter   Third Quarter
In million $   2012   2012   2011*
Group EBITDAs   228   278   248
Margin   27%   32%   31%
Sercel EBITDAs   103   105   100
Margin   36%   37%   36%
Services EBITDAs   150   210   187
Margin   25%   33%   32%
 

*Restated figures

Group Operating Income was $114 million, up 35% sequentially and up 17% year-on-year with a 13% margin.

  Second Quarter   Third Quarter
In million $   2012   2012   2011*
Group Operating Income   85   114   98
Margin   10%   13%   12%
Sercel Operating Income   92   93   87
Margin   32%   33%   31%
Services Operating Income   19   62   53
Margin   3%   10%   9%
 

*Restated figures

Financial Charges

Financial charges were $38 million and corresponded mainly this quarter to the sole Cost of Debt. The total amount of interest paid during the quarter was $7 million.

Taxes were at $41 million.

After the impact of income in companies accounted for under equity method totaling $13 million, Group Net Income stood at $48 million compared to $40 million in the third quarter of 2011.

Net Income attributable to the owners of CGGVeritas was at $44 million/€35 million after the impact of minority interests totaling $4 million/€3 million. EPS was positive at €0.23 per ordinary share and positive at $0.29 per ADS.

Cash Flow

Cash Flow from Operations

Cash flow from operations was at $171 million, up 51% compared to $113 million in the third quarter of 2011.

Capex

Global Capex stood at $196 million this quarter, up 13% year-on-year.

  • Industrial Capex was $70 million, down 33% year-on-year.
  • Multi-client Cash Capex was $126 million, up 83% year-on-year with a 71% prefunding rate.
In million $   Second Quarter   Third Quarter
  2012   2012   2011*
Capex   179   196   173
Industrial   97   70   104
Multi-client Cash 82 126   69
Marine MC 41 87 22
Land MC   41   39   46
 

*Restated figures

Free Cash Flow

After the payment of interest expenses during the quarter and particularly high Capex, especially in marine multi-client, net free cash flow was negative at $39 million compared to a negative free cash flow of $66 million in the third quarter of 2011.

Third Quarter 2012 Comparisons with Third Quarter 2011

Consolidated Income Statement   Second Quarter   Third Quarter
In million $   2012   2012   2011*
Exchange rate euro/dollar   1.298   1.249   1.439
Operating Revenue   831.0   855.0   796.7
Sercel   285.2   282.9   275.1
Services   599.4   633.9   591.8
Elimination   -53.6   -61.8   -70.2
Gross Profit   177.8   195.1   158.6
Operating Income   84.6   114.3   97.7
Sercel   91.7   92.5   86.5
Services   19.3   61.6   52.8
Corporate and Elimination   -26.4   -39.8   -41.6
Net Financial Costs   -34.0   -38.3   -32.3
Income Tax   -24.1   -41.0   -19.0
Deferred Tax on Currency Variations   -2.8   0.2   -7.7
Income from Equity Investments   10.1   12.6   1.8
Net Income   33.8   47.8   40.5
Earnings per share (€)   0.15   0.23   0.18
Earnings per ADS ($)   0.19   0.29   0.25
EBITDAs   228.0   277.5   248.0
Sercel   102.5   104.6   100.3
Services   150.5   210.1   186.8
Industrial Capex   97.1   70.1   104.2
Multi-client Cash Capex   81.9   125.7   68.6

 

 

*Restated figures

Year to Date 2012 Financial Results

Group Revenue

Group Revenue was up 9% compared to the first nine months of 2011. Services revenue was up 6% and Sercel revenue up 12% compared to the first nine months of 2011.

In million $   YTD   Evolution
  2012   2011* In %
Group Revenue   2 473   2 276 9%
Sercel Revenue   916   816 12%
Services Revenue   1 764   1 657 6%
Eliminations   -208   -198 NA
Marine contract   734   732 0%
Land contract   372   309 21%
Processing   342   319 7%
Multi-client   317   298 6%
Marine MC   191   206 -7%
Land MC   126   92 37%
 

*Restated figures

Group EBITDAs was $718 million, a margin of 29%.

In millions $   YTD   Evolution
  2012   2011* En %
Group EBITDAs   718   553 30%
margin   29%   24% NA
Sercel EBITDAs   334   298 12%
margin   36%   36% NA
Services EBITDAs   497   368 35%
margin   28%   22% NA
 

*Restated figures

Group Operating Income was $253 million, a margin of 10%.

In millions $   YTD   Evolution
  2012   2011* En %
Group Operating Income   253   136 86%
margin   10%   6% NA
Sercel Op. Income   300   257 17%
margin   33%   31% NA
Services Op. Income   73   -2 NA
margin   4%   0% NA
 

*Restated figures

Financial Charges

Financial charges totaled $114 million including:

  • Net cost of debt was $115 million, while the total amount of interest paid during the first nine months of the year was $69 million.
  • Other financial items represented a positive contribution of $1 million, mainly related to the favorable impact of currency variations.

Taxes were at $87 million.

After the impact of income in companies accounted for under equity method totaling $26 million, Group Net Income stood at $78 million, compared to a loss of $35 million for the first nine months of 2011.

Net Income attributable to owners of CGGVeritas was at $65 million/€50 million, after the impact of minority interests totaling $13 million/€10 million, resulting in a positive EPS of €0.33 per ordinary share and $0.43 per ADS.

Cash Flow

Cash Flow from Operations

Cash flow from operations was $467 million, almost stable over the first nine months of 2011.

Capex

Global Capex was $577 million, up 33% year-on-year.

  • Industrial Capex was $294 million, almost stable year-on-year.
  • Multi-client Cash Capex was $283 million, up 87% year-on-year with a 62% prefunding rate.
In millions $   YTD   Evolution
  2012   2011* En %
Capex   577   434 33%
Industrial   294   283 0%
Multi-client Cash   283   151 87%
MC marine   178   49 264%
MC land   105   102 2%
 

*Restated figures

Free Cash Flow

After the payment of interest expenses for the first nine months in 2012 and given opposite changes in working capital, net free cash flow was negative at $175 million, compared to a negative net free cash flow at $8 million for the first nine months of 2011.

Balance Sheet

Net Debt to Equity Ratio

Group gross debt was $1.997 billion at the end of September 2012.

Available cash was $337 million. Group net debt was $1.660 billion at the end of September 2012 compared to $1.411 billion at the end of 2011.

Net debt to equity ratio at the end of September 2012 was 43%.

Year to Date 2012 Comparisons with Year to Date 2011

Consolidated Income Statement   YTD
In million $   2012   2011*
Exchange rate euro/dollar   1.288   1.417
Operating Revenue   2 472.6   2 276.0
Sercel   915.9   816.4
Services   1 764.4   1 657.4
Elimination   -207.7   -197.8
Gross Profit   511.5   358.6
Operating Income   252.7   135.6
Sercel   299.7   256.8
Services   73.2   -2.3
Corporate and Elimination   -120.2   -118.9
Financial Items   -114.2   -146.0
Income Tax   -86.9   -32.4
Deferred Tax on Currency Translation   0.2   -1.4
Income from Equity Investments   26.3   9.5
Net Income   78.1   -34.7
Earnings per share (€)   0.33   -0.21
Earnings per ADS ($)   0.43   -0.30
EBITDAs   717.5   552.7
Sercel   334.0   297.6
Services   496.9   368.5
Industrial Capex   294.3   283.2
Multi-client Cash Capex   283.1   151.3
 

Other Information

  • An English language conference call is scheduled today at 9:00am (Paris), 8:00am (London).
       

To take part in the English language conference simply dial in 5 to 10 minutes prior to the scheduled start time.

- US Toll-Free   1-877-317-6789
- International call-in 1-412-317-6789
- Replay 1-877-344-7529 or 1-412-317-0088
Conference Number: 10009288
You will be connected to the conference: “CGGVeritas Q3 2012 results”.
 
  • Copies of the presentation are posted on the Company website www.cggveritas.com and can be downloaded.
  • The conference call will be broadcast live on the CGGVeritas website www.cggveritas.com and a replay will be available for two weeks thereafter.

About CGGVeritas

CGGVeritas (www.cggveritas.com) is a leading international pure-play geophysical company delivering a wide range of technologies. services and equipment through Sercel. to its broad base of customers mainly throughout the global oil and gas industry. CGGVeritas is listed on the Euronext Paris SA (ISIN: 0000120164) and the New York Stock Exchange (in the form of American Depositary Shares. NYSE: CGV).

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.

CGGVeritas

Third Quarter 2012

CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS

   

Nine months ended September 30,

2012

 

2011(restated)

Amounts in millions of U.S.$, except per share data or unless indicated
Operating revenues 2,472.6 2,276.0
Other income from ordinary activities 2.7 2.4
Total income from ordinary activities 2,475.3 2,278.4
Cost of operations (1,963.8) (1,919.8)
Gross profit 511.5 358.6
Research and development expenses, net (65.4) (55.5)
Marketing and selling expenses (68.7) (58.4)
General and administrative expenses (137.5) (141.4)
Other revenues (expenses), net 12.8 32.3
Operating income 252.7 135.6
Expenses related to financial debt (117.5) (136.9)
Income provided by cash and cash equivalents 2.0 1.8
Cost of financial debt, net (115.5) (135.1)
Other financial income (loss) 1.3 (10.9)
Income (loss) of consolidated companies before income taxes 138.5 (10.4)
Deferred taxes on currency translation 0.2 (1.4)
Other income taxes (86.9) (32.4)
Total income taxes (86.7) (33.8)
Net income (loss) from consolidated companies 51.8 (44.2)
Share of income (loss) in companies accounted for under equity method 26.3 9.5
Net income (loss) 78.1 (34.7)
Attributable to :
Owners of CGGVeritas $ 64.9 (44.9)
Owners of CGGVeritas (1) 50.4 (31.7)
Non-controlling interests $ 13.2 10.2
 
Weighted average number of shares outstanding 151,927,186 151,746,775
Dilutive potential shares from stock-options 685,906 (2)
Dilutive potential shares from performance share plan 680,746 (2)
Dilutive potential shares from convertible bonds (3) (3)
Dilutive weighted average number of shares outstanding adjusted when dilutive 153,293,838 151,746,775
Net income (loss) per share

Basic

$ 0.43 (0.30)
Basic 0.33 (0.21)
Diluted $ 0.42 (0.30)
Diluted 0.33 (0.21)
 

(1) Converted at the average exchange rate of U.S.$1.2878 and U.S.$1.4166 per € for the periods ended September 30, 2012 and 2011, respectively.

(2) As our net result was a loss, stock-options and performance shares plans 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 (increase of our earning per share); 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.

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS

   
Three months ended September 30,
2012

 

2011(restated)

Amounts in millions of U.S.$, except per share data or unless indicated
 
Operating revenues 855.0 796.7
Other income from ordinary activities 0.6 0.7
Total income from ordinary activities 855.6 797.4
Cost of operations (660.5) (638.8)
Gross profit 195.1 158.6
Research and development expenses, net (20.9) (17.5)
Marketing and selling expenses (22.1) (18.2)
General and administrative expenses (44.6) (45.7)
Other revenues (expenses), net 6.8 20.5
Operating income 114.3 97.7
Expenses related to financial debt (38.8) (40.4)
Income provided by cash and cash equivalents 0.6 0.6
Cost of financial debt, net (38.2) (39.8)
Other financial income (loss) (0.1) 7.5
Income (loss) of consolidated companies before income taxes 76.0 65.4
Deferred taxes on currency translation 0.2 (7.7)
Other income taxes (41.0) (19.0)
Total income taxes (40.8) (26.7)
Net income (loss) from consolidated companies 35.2 38.7
Share of income (loss) in companies accounted for under equity method 12.6 1.8
Net income (loss) 47.8 40.5
Attributable to :
Owners of CGGVeritas $ 44.2 37.3
Owners of CGGVeritas (1) 34.6 26.8
Non-controlling interests $ 3.6 3.2
 
Weighted average number of shares outstanding 151,985,357 151,857,149
Dilutive potential shares from stock-options 810,629 360,279
Dilutive potential shares from performance share plan 680,746 471,643
Dilutive potential shares from convertible bonds (2) (2)
Dilutive weighted average number of shares outstanding adjusted when dilutive 153,476,732 152,689,071
Net income (loss) per share

Basic

$ 0.29 0.25
Basic 0.23 0.18
Diluted $ 0.29 0.24
Diluted 0.23 0.18
 

(1) Corresponding to the three quarter amount in euros less the half-year amount in euros.

(2) Convertible bonds had an accretive effect (increase of our earning per share); 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.

ANALYSIS BY OPERATING SEGMENT

                 
Nine months ended September 30,
2012 2011 (restated)

In millions of U.S.$

Services   Equipment  

Eliminations
and
Adjustments

 

Consolidated
Total

Services

  Equipment  

Eliminations
and
Adjustments

 

Consolidated
Total

 
Revenues from unaffiliated customers 1,764.4 708.2 2,472.6 1,657.4 618.6 2,276.0
Inter-segment revenues 0.6 207.7 (208.3) 0.9

197.8

(198.7) -
Operating revenues 1,765.0 915.9 (208.3) 2,472.6 1,658.3 816.4 (198.7) 2,276.0
 

Depreciation and amortization (excluding multi-clients survey)

(220.5) (32.1) (252.6) (219.8) (37.4) (257.2)
Depreciation and amortization of multi-client surveys (237.5) (237.5) (162.0) (162.0)
 

Operating income

73.2 299.7 (120.2) (a) 252.7 (2.3) 256.8 (118.9) (a) 135.6
 

Share of income in companies accounted for under equity method (b)

26.3 26.3 9.5 9.5
 

Capital expenditures (excluding multi-client surveys) (c)

273.2 21.1 294.3 267.4 15.8 283.2
 

Investments in multi-clients survey

323.7 323.7 164.6 164.6
 
 
Investment in companies under equity method 27.5 27.5 4.8 4.8
 

(a) Includes general corporate expenses of U.S.$40.1 million and U.S.$41,1 million for the nine months ended September 30, 2012 and 2011, respectively.

(b) Of which U.S.$36.4 million and U.S.$9.2 million relate to operational results for the nine months ended September 30, 2012 and 2011, respectively.

(c) Includes (i) equipment acquired under finance leases of U.S.$2.8 million and U.S.$15.9 million for the nine months ended September 30, 2012 and 2011 respectively (ii) capitalized development costs of U.S.$14 million and U.S.$13.6 million for the nine months ended September 30, 2012 and 2011, respectively, in the Services segment; capitalized development costs of U.S.$7 million and U.S.$4.1 million for the nine months ended September 30, 2012 and 2011, respectively, in the Equipment segment.

  Three months ended September 30,
2012     2011 (restated)

In millions of U.S.$

Services   Equipment  

Eliminations
and
Adjustments

 

Consolidated
Total

Services

  Equipment  

Eliminations
and
Adjustments

 

Consolidated
Total

 
Revenues from unaffiliated customers 633.9   221.1     855.0 591.8  

204.9

 

 

796.7

Inter-segment revenues 0.6 61.8 (62.4) 0.4 70.2 (70.6) -
Operating revenues 634.5 282.9 (62.4) 855.0 592.2 275.1 (70.6) 796.7
 

Depreciation and amortization (excluding multi-clients survey)

(71.4) (11.2) (82.6) (77.0) (11.7) (88.7)
Depreciation and amortization of multi-client surveys (92.6) (92.6) (64.2) (64.2)
 

Operating income

61.6 92.5 (39.8) (a) 114.3 52.8 86.5 (41.6) (a) 97.7
 

Share of income in companies accounted for under equity method (b)

12.6 12.6 1.8 1.8
 

Capital expenditures (excluding multi-client surveys) (c)

60.7 9.4 70.1 99.3 4.9 104.2
 

Investments in multi-clients survey

143.9 143.9 75.2 75.2
 

(a) Includes general corporate expenses of U.S.$13.0 million and U.S.$12.7 million for the three months ended September 30, 2012 and 2011, respectively.

(b) Of which U.S.$15.7 million and U.S.$1.8 million relate to operational results for the three months ended September 30, 2012 and 2011, respectively.

(c) Includes (i) equipment acquired under finance leases of U.S.$2.8 million for the three months ended September 30, 2012 (ii) capitalized development costs of U.S.$4.8 million and U.S.$6.3 million for the three months ended September 30, 2012 and 2011, respectively, in the Services segment; capitalized development costs of U.S.$2.1 million and U.S.$1.2 million for the three months ended September 30, 2012 and 2011, respectively, in the Equipment segment.

UNAUDITED INTERIM CONSOLIDATED BALANCE SHEET

     

 

September 30,
2012
(unaudited)

 

December 31,
2011
(restated)

Amounts in millions of U.S.$, unless indicated

 
 

ASSETS

Cash and cash equivalents 337.1 531.4
Trade accounts and notes receivable, net 845.2 876.0
Inventories and work-in-progress, net 424.0 361.5
Income tax assets 109.8 119.4
Other current assets, net 155.4 157.0
Assets held for sale, net 425.5 64.5

Total current assets

2,297.0

2,109.8

Deferred tax assets 178.8 188.8
Investments and other financial assets, net 52.6 24.7
Investments in companies under equity method 139.5 131.7
Property, plant and equipment, net 1,171.3 1,183.2
Intangible assets, net 974.8 865.1
Goodwill, net 2,413.0 2,688.2

Total non-current assets

4,930.0

5,081.7

TOTAL ASSETS

7,227.0

7,191.5

 

LIABILITIES AND EQUITY

Bank overdrafts 4.0 6.0
Current portion of financial debt 120.6 64.5
Trade accounts and notes payable 415.0 386.4
Accrued payroll costs 172.2 185.7
Income taxes liability payable 104.4 159.7
Advance billings to customers 26.8 51.0
Provisions – current portion 32.5 34.6
Other current liabilities 265.3 272.3

Total current liabilities

1,140.8

1,160.2

Deferred tax liabilities 83.9 110.8
Provisions – non-current portion 95.9 106.7
Financial debt 1,872.2 1,871.6
Other non-current liabilities 44.2 49.8

Total non-current liabilities

2,096.2

2,138.9

 
Common stock: 251,597,913 shares authorized and

152,031,873 shares with a €0.40 nominal value issued and outstanding at September 30, 2012 and 151,861,932 at December 31, 2011

79.9 79.8
Additional paid-in capital 2,671.2 2,669.3
Retained earnings 1,145.1 1,161.1
Other reserves (18.6) (17.0)
Treasury shares (20.6) (20.6)
Net income (loss) for the period attributable to the owners of CGGVeritas 64.9 (28.2)
Cumulative income and expense recognized directly in equity (7.0) (11.5)
Cumulative translation adjustment (19.2) (27.6)

Equity attributable to owners of CGGVeritas SA

3,895.7

3,805.3

Non-controlling interests 94.3 87.1

Total equity

3,990.0

3,892.4

TOTAL LIABILITIES AND EQUITY

7,227.0

7,191.5

 

(1) Effective January 1, 2012, we changed the presentation currency of our consolidated financial statements from the euro to the U.S. dollar to better reflect the profile of our revenues, costs and cash-flows, which are primarily generated in U.S. dollars, and hence, to better present the financial performance of the Group. As a change in presentation currency is a change of accounting policy, all comparative financial information has been restated into U.S. dollars.

The currency translation adjustment was set to nil as of January 1, 2004 on transition to IFRS and has been re-presented on the basis that the Group has reported in U.S. dollars since that date.

The functional currency of the parent company remains the euro. The currency translation adjustment resulting from the parent company is presented in other reserves.

Main restatements related to the change in the presentation currency from euro to U.S. dollar are as follows (in millions):

               

Historical
consolidated
financial statements as of
Dec.31, 2011 in
euros

 

Historical
consolidated financial statements
of Dec.31, 2011
converted into U.S.
dollars (a)

  Restatements (b)  

Restated
consolidated
financial
statements as of
Dec.31, 2011 to
U.S. dollars

Common stock, additional paid-in capital, retained earnings and other

2,883.1

 

3,730.5

 

+102.4

 

3,832.9

Cumulative translation adjustment 55.8   72.2   (99.8)   (27.6)
Equity attributable to owners of CGGVeritas

2,938.9

 

3,802.7

 

+2.6

 

3,805.3

 

a) Converted at the closing exchange rate of 1.2939 U.S.$ per euro

b) Differences between historical currency exchange rates and the closing rate of 1.2939 U.S.$ per 1 euro, including U.S.$(17) millions translation adjustments from the parent company presented in other reserves.

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

   

 

Nine months ended September 30,

 

2012

 

2011 (restated)

Amounts in millions of U.S.$
OPERATING
Net income (loss) 78.1 (34.7)
Depreciation and amortization 252.6 257.2
Multi-client surveys depreciation and amortization 237.5 162.0
Depreciation and amortization capitalized to multi-client surveys (40.6) (13.3)
Variance on provisions (3.0) (15.2)
Stock based compensation expenses 15.3 11.2
Net gain (loss) on disposal of fixed assets (13.0) (23.2)
Equity income (loss) of investees (26.3) (9.5)
Dividends received from affiliates 22.1 6.9
Other non-cash items 4.0 (8.5)
Net cash including net cost of financial debt and income tax 526.7 332.9
Less net cost of financial debt 115.5 135.1
Less income tax expense 86.7 33.8
Net cash excluding net cost of financial debt and income tax 728.9 501.8
Income tax paid (122.8) (71.8)
Net cash before changes in working capital 606.1 430.0
- change in trade accounts and notes receivables (77.7) 111.2
- change in inventories and work-in-progress (52.3) (37.3)
- change in other current assets (3.5) 50.6
- change in trade accounts and notes payable 23.2 (68.6)
- change in other current liabilities (31.1) 4.8
Impact of changes in exchange rate on financial items 2.2 (18.0)
Net cash provided by operating activities 466.9 472.7
INVESTING
Capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys) (290.5) (259.5)
Investment in multi-client surveys, net cash (283.1) (151.3)
Proceeds from disposals of tangible and intangible assets 3.3 6.1
Total net proceeds from financial assets 35.4 4.5
Acquisition of investments, net of cash and cash equivalents acquired (52.5) (0.7)
Impact of changes in consolidation scope
Variation in loans granted 0.4 2.8
Variation in subsidies for capital expenditures (1.2)
Variation in other non-current financial assets (1.4) 2.1
Net cash used in investing activities (589.6) (396.0)
FINANCING
Repayment of long-term debts (50.8) (1,194.1)
Total issuance of long-term debts 79.2 1,202.8
Lease repayments (19.5) (35.4)
Change in short-term loans (2.0)
Financial expenses paid (68.5) (69.6)
Net proceeds from capital increase
- from shareholders 2.0 3.3
- from non-controlling interests of integrated companies
Dividends paid and share capital reimbursements
- to shareholders
- to non-controlling interests of integrated companies (5.6) (4.0)
Acquisition/disposal from treasury shares
Net cash provided by (used in) financing activities (65.2) (97.0)
Effects of exchange rates on cash (6.4) 1.8
Net increase (decrease) in cash and cash equivalents (194.3) (18.5)
Cash and cash equivalents at beginning of year 531.4 448.8
Cash and cash equivalents at end of period 337.1 430.3
 

Investor Relations Contact
Christophe Barnini, +33 1 64 47 38 11
invrelparis@cggveritas.com
or
Group Communication Contact
Antoine Lefort, +33 1 64 47 34 89
media.relations@cggveritas.com

 

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