ION Geophysical Corp. (NYSE: IO) is planning to cuts its workforce by 25% by the end of the month and to reduce its annual operating costs by approximately $40 million as part of an “aggressive” cost-reduction initiative to scale down the company’s operations to the current commodity price environment.
The workforce reduction will be substantially completed by Sept. 30, and ION expects to incur $5-6 million in termination costs, all of which are expected to require cash expenditures, and the majority of which are expected to be incurred in the current fiscal year.
ION’s $40 million cost savings will consist primarily of payroll reductions and reductions in discretionary spending associated with a smaller workforce, as well as additional cost control measures. When combined with the cost savings undertaken since December 2014, ION will have achieved a total estimated annual savings of $80 million and a 50% reduction in its workforce. The cost savings initiatives were across all groups within the company, but ION is maintaining key capabilities in all its groups, including Ocean Bottom, and its readiness to rescale the business as revenues increase.
CEO Brian Hanson commented, "The difficult cost reduction initiative we are undertaking today is necessary to prudently scale the company during this period of significantly decreased revenues, which we believe will extend into 2017. When commodity prices and, consequently, the business' revenues recover, we will rescale our workforce to meet the demand."