UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly period ended June 30, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period _________ to _________
COMMISSION FILE NUMBER 0-23383
OMNI ENERGY SERVICES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
LOUISIANA
(STATE OR OTHER JURISDICTION OF 72-1395273
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
4500 N.E. EVANGELINE THRUWAY
CARENCRO, LOUISIANA 70520
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (337) 896-6664
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 7, 2001 there were 27,017,974 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
ITEM 1. FINANCIAL STATEMENTS
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
(In thousands)
June 30, December 31,
ASSETS 2001 2000
----------- --------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 83 $ 317
Accounts receivable, net 4,535 3,329
Parts and supplies inventory 2,207 2,649
Prepaid expenses 603 1,086
Assets held for sale 1,321 1,678
------- -------
Total current assets 8,749 9,059
------- -------
PROPERTY AND EQUIPMENT:
Land 359 359
Buildings and improvements 4,505 4,505
Drilling, field and support equipment 25,067 25,102
Shop equipment 374 374
Office equipment 1,489 1,485
Vehicles 2,394 2,248
Construction in progress 58 74
------- -------
34,246 34,147
Less: accumulated depreciation 12,284 10,721
------- -------
Total property and equipment, net 21,962 23,426
------- -------
OTHER ASSETS:
Goodwill, net 2,009 2,059
Other 508 80
------- -------
Total other assets 2,517 2,139
------- -------
Total assets $33,228 $34,624
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-2-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
(In thousands, except per share amounts)
June 30, December 31,
LIABILITIES AND EQUITY 2001 2000
----------- ---------------
(unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,731 $ 2,068
Line of credit 454 1,688
Accounts payable 2,695 3,162
Accrued expenses 1,987 2,578
Sales tax payable 1,337 1,355
Due to affiliate 175 --
Accrued interest 10 1,586
-------- --------
Total current liabilities 8,389 12,437
-------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 5,692 8,500
Subordinated debt -- 5,448
-------- --------
Total long-term liabilities 5,692 13,948
-------- --------
TOTAL LIABILITIES 14,081 26,385
-------- --------
MINORITY INTEREST 221 221
-------- --------
EQUITY:
Common Stock, $.01 par value, 45,000,000
shares authorized; 27,007,974 and
26,911,724, issued and outstanding
as of June 30, 2001 and
December 31, 2000, respectively 270 269
Preferred Stock, Series A, 7,500 shares
issued and outstanding as of June 30, 2001
and December 31, 2000; Series B, 4,600
shares issued and outstanding as of
June 30, 2001 12,100 7,500
Additional paid-in capital 55,271 54,406
Accumulated deficit (48,670) (54,121)
Cumulative translation adjustment (45) (36)
-------- --------
Total equity 18,926 8,018
-------- --------
Total liabilities and equity $ 33,228 $ 34,624
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------
(Unaudited) (Unaudited)
Operating revenue $ 5,985 $ 3,238 $ 10,197 $ 9,048
Operating expenses 5,225 4,548 10,022 11,401
-------- -------- -------- --------
Gross profit (loss) 760 (1,310) 175 (2,353)
General and administrative expenses 458 1,283 1,313 3,006
Asset impairment charges -- -- 180 26
-------- -------- -------- --------
Operating income (loss) 302 (2,593) (1,318) (5,385)
Interest expense 278 727 925 1,415
Other income (expense) 172 4 7,693 (30)
-------- -------- -------- --------
106 723 6,768 1,445
-------- -------- -------- --------
Income (loss) before taxes 196 (3,316) 5,450 (6,830)
Income tax expense (benefit) -- -- -- --
-------- -------- -------- --------
Net income (loss), before
Minority interest 196 (3,316) 5,450 (6,830)
Loss of minority interest -- (5) -- (10)
-------- -------- -------- --------
Net income (loss) $ 196 $ (3,311) $ 5,450 $ (6,820)
======== ======== ======== ========
Basic net income (loss) per share: $ 0.01 $ (0.21) $ 0.20 $ (0.43)
Diluted net income (loss) per share: $ 0.01 $ (0.21) $ 0.18 $ (0.43)
Weighted average shares outstanding:
Basic 26,957 15,994 26,947 15,987
Diluted 30,234 15,994 30,449 15,987
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-4-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
--------------------------
2001 2000
------- -------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 5,450 $(6,820)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation 1,609 1,817
Amortization 76 262
(Gain) loss on fixed asset disposition (78) 34
Asset impairment and other charges 180 --
Provision for bad debts 59 --
Minority interest -- (10)
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade (763) (173)
Other (511) 482
Inventory 442 72
Prepaid expenses 483 877
Assets held for sale 357 --
Other (635) (120)
Increase (decrease) in liabilities-
Accounts payable (206) 981
Accrued expenses (616) 393
Due to affiliate 175 --
------- -------
Net cash provided by (used in) operating activities 6,022 (2,205)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 117 171
Purchase of fixed assets (183) --
------- -------
Net cash provided by (used in) investing activities (66) 171
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subordinated debt (3,209) 1,000
Repayment of subordinated debt 1,500 --
Proceeds from issuance of preferred stock -- 1,150
Proceeds from issuance of long-term debt 311 --
Principal payments on long-term debt (3,456) (1,089)
Proceeds from issuance of common stock (101) --
Net borrowings (payments) on line of credit (1,235) 1,140
------- -------
Net cash provided by (used in) financing activities (6,190) 2,201
------- -------
NET INCREASE (DECREASE) IN CASH (234) 167
CASH, at beginning of period 317 104
------- -------
CASH, at end of period $ 83 $ 271
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID FOR INTEREST $ 234 $ 930
======= =======
CASH PAID FOR TAXES $ -- $ --
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-5-
OMNI ENERGY SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared without audit as permitted by the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to such rules and
regulations. However, the management of OMNI Energy Services Corp. (the
"Company") believes that this information is fairly presented. These unaudited
condensed consolidated financial statements and notes thereto should be read in
conjunction with the financial statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary to fairly present the financial results for the
interim periods presented.
Certain reclassifications have been made to the prior year's financial
statements in order to conform with the classifications adopted for reporting in
fiscal 2001.
NOTE 2. EARNINGS PER SHARE
Basic Earnings Per Share (EPS) excludes dilution and is determined by dividing
income available to common stockholders by the weighted average number of shares
of common stock outstanding during the periods presented. Diluted EPS reflects
the potential dilution that could occur if options and other contracts to issue
shares of common stock were exercised or converted into common stock. For the
three and six month periods ended June 30, 2001, the Company had dilutive stock
options and warrants of approximately 3,276,297 and 3,511,644 shares,
respectively, which were assumed exercised using the treasury stock method.
The Company had 391,413 and 291,413 options outstanding for the three months and
six months ended June 30, 2001, respectively, that were excluded from the
calculation of diluted EPS because of their antidilutive impact. On the same
basis, warrants to purchase 704,167 shares of common stock were also excluded
for both the three months and six months ended June 30, 2001.
NOTE 3. LONG-TERM DEBT
The Company's primary credit facility (the "Hibernia Facility") was amended in
March 2001 to provide the Company with a credit facility consisting of a $4.9
million term loan and a $5.0 million revolving line of credit for working
capital requirements. The outstanding principal balance under the term loan is
paid at a rate of $0.1 million per month plus accrued interest. Interest accrues
and is paid weekly on both loans at the prime interest rate plus 1.5%. As of
June 30, 2001 outstanding borrowings under the term loan and revolving line of
credit were $4.5 million and $0.5 million, respectively. The Hibernia Facility
matures August 2002 but the Company expects to renegotiate the maturity date of
its credit facility during the third quarter of 2001.
As of June 30, 2001, the Company had $2.7 million outstanding under its
assets-based equipment financing agreement with The CIT Group (the "CIT Loan").
The CIT Loan is paid at a rate of approximately $0.1 million per month,
including interest accruing at the prime interest rate plus 3%, and matures
August 2002. The CIT Loan is secured by certain seismic drilling units and
support equipment. The Company also expects to renegotiate the maturity date of
this asset-based credit facility during the third quarter of 2001.
The Hibernia facility and the CIT loan contain customary financial covenants
requiring, among other things, minimum levels of EBITDA, working capital and
debt to EBITDA ratios. As of June 30, 2001 the Company was in
-6-
compliance with all of the financial covenants. The Company believes that it
will maintain compliance with all of its covenants throughout all of 2001.
During the years ended December 31, 1999 and 2000 and the six months ended June
30, 2001, the Company privately placed with an affiliate subordinated debentures
totaling $7.5 million, $3.4 million and $1.5 million, respectively. The
debentures matured five years from their date of issue and accrued interest at
various rates ranging from a fixed rate of 12% per annum to a variable rate of
interest starting at 12% per annum and escalating to 20% per annum.
In November 2000, the Company and the affiliate agreed to convert $4.6 million
of the subordinated debentures into the Company's 8%, Series A Preferred Stock.
In April 2001, the Company agreed to pay the affiliate $3.0 million cash plus
issue to the affiliate $4.6 million of the Company's 8%, Series B Preferred
Stock in full satisfaction of all of the remaining outstanding subordinated
debentures including accrued interest of $1.8 million. This transaction resulted
in the affiliate agreeing to forgive $1.0 million of indebtedness which has been
reflected as a capital contribution from the affiliate rather than income in the
accompanying financial statements.
In connection with the original issuance of the subordinated debentures, the
Company issued to the affiliate detachable warrants to purchase 5,738,500 shares
of the Company's common stock of which 1,900,000 have been cancelled. The
warrants have various vesting periods up to four years with exercise prices
ranging from $0.75 to $2.00 per share. The Company has recorded each warrant at
its relative fair value at its date of issuance and included this amount as
additional paid in capital with the associated discount of the debt being
amortized as additional interest expense.
In July 2000 the Company entered into a series of transactions with the same
affiliate that enabled the Company to factor, with recourse to the Company,
substantially all of the trade receivables of a major customer totaling
approximately $1.0 million, which had become ineligible under the terms of the
Company's revolving credit facility with a bank. The Company guaranteed
repayment of the trade receivables and as of June 30, 2001 is liable to the
affiliate for approximately $0.2 million, which is payable in 12 equal monthly
installments commencing August 15, 2001.
NOTE 4. PREFERRED STOCK
The Series A preferred stock has an 8% cumulative dividend rate, is
convertible into common stock with a conversion rate of $0.75, is redeemable
at the option of the Company at par plus accrued dividends, contains a
liquidation preference of $1,000 per share and has voting rights on all
matters submitted to a vote of the Company's shareholders, and separate
voting rights with respect to matters that would affect the rights of the
holders of the preferred stock, with the aggregate voting rights of the
affiliate limited to 49% of the Company's total outstanding common and
preferred shares with voting rights. In respect to the preferred stock, the
affiliate has agreed to waive their conversion rights until the Company's
future cash flow from operations (as defined) for the preceding twelve months
reaches a mutually agreed upon level, after debt service, and in no event
prior to August 2003. The Company and the affiliate have also agreed that
dividends would not accrue on the outstanding stock from April 2001 through
June 2002. As of April 2001 there are no dividends in arrears relating to the
outstanding preferred shares.
In April 2001, the Company issued 4,600 shares of Series B preferred stock to
an affiliate of the Company in satisfaction of all outstanding principal and
interest owed under the subordinated debt agreements (See Note 3). The Series
B preferred stock has an 8% cumulative dividend rate, is convertible into
common stock with an initial conversion rate of $1.25, is redeemable at the
option of the Company at par plus accrued dividends, contains a liquidation
preference of $1,000 per share and has no voting rights. In respect to the
preferred stock, the affiliate has agreed to waive their conversion rights
until the Company's future cash flow from operations (as defined) for the
preceding twelve months reaches a mutually agreed upon level, after debt
service, and in no event before August 2003. The Company and the affiliate
have also agreed that dividends would not accrue on the outstanding stock
from April 2001 through June 2002. As of April 2001 there are no dividends in
arrears relating to the outstanding preferred shares.
At June 30, 2001 the Company had a total of 12,100 shares of preferred stock
outstanding, consisting of 7,500 shares of Series A preferred stock and 4,600
shares of Series B preferred stock, at a total liquidation value of $12.1
million.
-7-
NOTE 5. COMPREHENSIVE INCOME
In 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130,
"Reporting Comprehensive Income", which requires an entity to report and display
comprehensive income and its components. Comprehensive income is as follows
(thousands of dollars):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------- ------- ------- -------
Net Income (Loss) $ 196 $(3,316) $ 5,450 $(6,830)
Other Comprehensive Income:
Foreign currency translation adjustments 33 (18) (8) (18)
------- ------- ------- -------
Comprehensive Income (Loss) $ 229 $(3,334) $ 5,442 $(6,848)
======= ======= ======= =======
NOTE 6. SEGMENT INFORMATION
The following shows industry segment information for its four operating segments
- Drilling, Aviation, Survey, and Permitting for the three and six month periods
ended June 30, 2001 and 2000:
-8-
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ---------------------------
2001 2000 2001 2000
------- ------- ------- -------
Operating revenues: (1)(2)
Drilling $ 4,642 $ 1,433 $ 7,936 $ 4,405
Aviation 798 1,797 1,349 3,405
Survey 205 8 482 1,238
Permitting 340 -- 430 --
------- ------- ------- -------
Total $ 5,985 $ 3,238 $10,197 $ 9,048
======= ======= ======= =======
(1) Net of inter-segment revenues of $0.1 million for the three and six month
periods ended June 30, 2001.
(2) The Company's Permitting Division commenced operations during the first
quarter of 2001.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Gross profit (loss):
Drilling $ 1,033 $ (913) $ 862 $ (1,462)
Aviation (131) (122) (460) (450)
Survey (64) (184) (132) (222)
Permitting 49 -- 58 --
Other (127) (91) (153) (219)
-------- -------- -------- --------
Total $ 760 $ (1,310) $ 175 $ (2,353)
General and administrative expenses 458 1,283 1,313 3,006
Asset impairment -- -- 180 26
Other expense (income), net 106 723 (6,768) 1,445
-------- -------- -------- --------
Income (loss) before taxes $ 196 $ (3,316) $ 5,450 $ (6,830)
======== ======== ======== ========
Identifiable Assets:
Drilling $ 22,574 $ 27,994
Aviation 1,222 2,433
Survey 1,849 5,296
Permitting -- --
Other 7,583 12,006
-------- --------
Total $ 33,228 $ 47,729
======== ========
Capital Expenditures:
Drilling $ 191 $ -- $ 195 $ --
Aviation -- -- -- --
Survey -- -- -- --
Permitting -- -- -- --
Other 4 -- 4 --
-------- -------- -------- --------
Total $ 195 $ -- $ 199 $ --
======== ======== ======== ========
In November 1999, Omni adopted a formal plan to dispose of its aviation
division, which was comprised of 20 leased aircraft, aviation and turbine engine
inventories and miscellaneous flight and other equipment. In November 2000, the
Company elected to renew its focus on its aviation division given the
anticipated market recovery in the oil and gas industry and determined it would
not discontinue this service line at this time. Management decided to reorganize
the aviation division to better align it with other divisions in the Company.
Therefore, the June 30, 2000 and June 30, 2001 financial statements include the
assets, liabilities and results of operations of the aviation division in
continuing operations.
-9-
NOTE 7. RECENT PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141 "Business Combinations", SFAS No. 142 "Goodwill and Other Intangible Assets"
and SFAS No. 143 "Accounting for Asset Retirement Obligations". SFAS No. 141
prohibits the use of the pooling-of-interests method of accounting for all
business combinations initiated after June 30, 2000. SFAS No. 142 requires that
goodwill not be amortized in any circumstance and also requires that goodwill be
tested for impairment annually or when events or circumstances occur between
annual tests indicating that goodwill for a reporting unit might be impaired.
The standard establishes a new method for testing goodwill for impairment based
on a fair value concept and is effective for fiscal years beginning after
December 15, 2001. Upon adoption, the Company will be required to cease
amortization of its remaining net goodwill balance and will be required to
perform impairment tests based on a fair value concept of its existing goodwill.
The Company has not completed an analysis of the potential impact upon adoption
of the impairment test of goodwill, however amortization of existing goodwill
which was approximately $26,000 and $48,000 for the three and six months ended
June 30, 2001, will cease upon adoption. SFAS No. 143 requires the Company to
record the fair value of liabilities related to future asset retirement
obligations in the period the obligation is incurred and is effective for fiscal
years beginning after June 15, 2002. The adoption of SFAS No. 143 is not
expected to have a material impact on the Company's financial statements because
the Company does not have any assets that require retirement obligations.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"), which reflect
management's best judgment based on factors currently known. Actual results
could differ materially from those anticipated in these "forward looking
statements" as a result of a number of factors, including but not limited to
those discussed under the heading "Cautionary Statements." "Forward looking
statements" provided by the Company pursuant to the safe harbor established by
the federal securities laws should be evaluated in the context of these factors.
This discussion should be read in conjunction with the financial
statements and the accompanying notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.
GENERAL
DEMAND. Demand for the Company's services is principally impacted by
conditions affecting geophysical companies engaged in the acquisition of 3-D
seismic data. The level of activity among geophysical companies is primarily
influenced by the level of capital expenditures by oil and gas companies for
seismic data acquisition activities. A number of factors affect the decision of
oil and gas companies to pursue the acquisition of seismic data, including (i)
prevailing and expected oil and gas demand and prices; (ii) the cost of
exploring for, producing and developing oil and gas reserves; (iii) the
discovery rate of new oil and gas reserves; (iv) the availability and cost of
permits and consents from landowners to conduct seismic activity; (v) local and
international political and economic conditions; (vi) governmental regulations;
and (vii) the availability and cost of capital. The ability to finance the
acquisition of seismic data in the absence of oil and gas companies' interest in
obtaining the information is also a factor, as some geophysical companies will
acquire seismic data on a speculative basis.
Within the last decade, improvements in drilling and production techniques
and the acceptance of 3-D imaging as an exploration tool resulted in
significantly increased seismic activity throughout the Company's primary
market, which includes the marsh, swamp, shallow water and contiguous dry land
areas along the U.S. Gulf Coast (the "Transition Zone"). Due to this increased
demand, the Company significantly increased its capacity, primarily through
acquisition, as measured by drilling units, support equipment and employees. The
additional capacity and related increase in work force led to significant
increases in the Company's revenue and generally commensurate increases in
operating expenses and selling, general and administrative expenses through the
second quarter of 1998. Beginning in mid-1998, seismic activity in the areas in
which the Company operates decreased substantially, resulting in corresponding
reductions in demand for the Company's services and adversely affected results
of operations. For the three months ended June 30, 2001 and 2000, the Company's
operating revenues and net income (loss) were $6.0 million and $3.2 million, and
$0.2 million and $(3.3) million, respectively.
The Company curtailed its expansion strategy in the last half of 1998 in
response to industry conditions and the short-term outlook. Management is
continuing its efforts to adjust its operations to current market conditions by
closely monitoring the expenses of its operating segments and corporate
overhead. During 2001, the Company requested and received from its primary
secured creditors extensions of maturities, until August 31, 2002. Management is
continuing to explore opportunities for restructuring its indebtedness and
alternative financing and capital opportunities.
SEASONALITY AND WEATHER RISKS. Results of operations for interim periods
are not necessarily indicative of the operating results that may be expected for
the full fiscal year. The Company's operations are subject to seasonal
variations in weather conditions and daylight hours. Since the Company's
activities take place outdoors, on average, fewer hours are worked per day,
aviation flight hours decline and fewer holes are generally drilled or surveyed
per day in winter months than in summer months, due to an increase in rainy,
foggy, and cold conditions and a decrease in daylight hours.
-11-
Results of Operations Three months ended June 30, Six months ended June 30,
----------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Operating revenue ................................... $ 5,985 $ 3,238 $ 10,197 $ 9,048
Operating expense ................................... 5,225 4,548 10,022 11,401
-------- -------- -------- --------
Gross profit ........................................ 760 (1,310) 175 (2,353)
General and administrative expenses ................. 458 1,283 1,313 3,006
Asset impairment charges ............................ -- -- 180 26
-------- -------- -------- --------
Operating income (loss) ............................. 302 (2,593) (1,318) (5,385)
Interest expense .................................... 278 727 925 1,415
Other income (expense) .............................. 172 4 7,693 (30)
-------- -------- -------- --------
Income (loss) before income taxes ................... 196 (3,316) 5,450 (6,830)
Income tax benefit .................................. -- -- -- --
-------- -------- -------- --------
Net income (loss), including minority interest ...... 196 (3,316) 5,450 (6,830)
Minority interest ................................... -- (5) -- (10)
-------- -------- -------- --------
Net income (loss) ................................... $ 196 $ (3,311) $ 5,450 $ (6,820)
======== ======== ======== ========
-12-
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
Operating revenues increased 88%, or $2.8 million, from $3.2 million for
the three months ended June 30, 2000 to $6.0 for the three months ended June 30,
2001. The increase in revenues was principally due to an increase in seismic
related activities. Drilling and survey revenues increased $3.2 million and $0.2
million, respectively, for the quarter ended June 30, 2001 as compared to the
same three month period ended June 30, 2000. Additionally, the Company commenced
the operations of its permitting division during the first quarter of 2001 and
reported revenues of $0.3 million during the second quarter of 2001. No
corresponding permitting revenues were reported for the second quarter ended
June 30, 2000. These operating revenue increases were offset by a $1.0 million
decline in the Company's aviation revenues from $1.8 million in 2000 to $0.8
million for the second quarter 2001. The decline is principally attributable to
fewer billable flight hours being flown during the quarter ended June 30, 2001
as compared to the same period ended June 30, 2000.
Operating expenses increased 16%, or $0.7 million, from $4.5 million for
the three months ended June 30, 2000 to $5.2 million for the three months ended
June 30, 2001. This increase is principally attributable to higher operating
payroll and payroll related costs, which increased $0.6 million from $1.5
million to $2.1 million for the three month periods ended June 30, 2000 and
2001, respectively. The Company's average number of field personnel increased by
33 from 134 field operating employees during the second quarter of 2000 to 167
field operating employees during the same three month period ended 2001. The
Company currently utilizes third parties to perform survey and permitting
services. Accordingly, third party contract services increased $0.5 million
during the three months ended June 30, 2001 as compared to June 30, 2000.
Increases in operating expenses were offset by a $0.3 million decline in
the Company's rental and lease expenses, a $0.1 million decline in the Company's
property and casualty insurance and a $0.1 million decline in the Company's
depreciation costs. The decline in rental and lease costs and property and
casualty insurance costs were both principally attributable to a reduction in
the number of helicopters leased from third parties. The decline in depreciation
costs between the second quarter of 2001 and the second quarter 2000 resulted
from reductions in the Company's fleet of operating equipment.
Gross profit margins were 13% for the three month period ended June 30,
2001 as compared to (40%) for the three month period ended June 30, 2000. The
increase in profit margins in 2001 as compared to 2000 was attributable to a
combination of significantly greater domestic revenues resulting from increased
seismic activity, higher prices obtained for services rendered by the Company
and implementation of stringent controls over and a restructuring of the
Company's field operating expenses.
General and administrative expenses decreased $0.8 million from $1.3
million for the three months ended June 30, 2000 to $0.5 million for the three
months ended June 30, 2001. Payroll and payroll related costs accounted for $0.2
million of this decline. The average number of administrative employees declined
from 37 during the second quarter of 2000 to 24 for the same three month period
ended June 30, 2001. Additionally, the compensation levels of the Company's
current management are at base compensation rates significantly lower than the
rates of the Company's previous management. During the three month period ended
June 30, 2001, the Company also renegotiated certain vendor and lease agreements
at terms more favorable than those agreements previously in existence during the
second quarter of 2000, resulting in a savings of approximately $0.3 million.
Interest expense decreased $0.4 million from $0.7 million for the three
month period ended June 30, 2000 to $0.3 million for the three month period
ended June 30, 2001. This decline resulted from lower average outstanding
indebtedness at lower average interest rates during the period (See Liquidity
and Capital Resources).
The Company recognized no income tax expense on its income during 2001 as
it expects to utilize its net operating loss carryforwards, which have been
reserved in prior periods, to offset its taxable income during 2001.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
Operating revenues increased 13%, or $1.2 million, from $9.0 million for
the six months ended June 30, 2000 to $10.2 million for the six months ended
June 30, 2001. Revenues from the Company's drilling and survey operations
increased $2.8 million principally as a result of an increase in drilling
revenues which more than offset a decline in survey revenues. The $3.5 million
increase in drilling revenues for the six month period ended June 30, 2001 as
compared to the
-13-
six month period ended June 30, 2000 resulted from increased seismic activity.
The $0.7 million decrease in survey revenues over this same period can be
attributed to the Company's decision to concentrate its personnel, equipment and
its available working capital into more profitable segments of the seismic
industry.
For the six months ended June 30, 2001 the Company's newly formed
permitting division reported revenues of $0.4 with no revenues reported for the
corresponding period in 2000. Aviation revenues declined $2.1 million for the
six months ended June 30, 2001 versus the same period of 2000 primarily as a
result of a decrease in the number of flight hours billed between the periods.
Operating expenses decreased 12%, or $1.4 million, from $11.4 million for
the six months ended June 30, 2000 to $10.0 million for the six months ended
June 30, 2001. As a result of increased drilling activity for the seismic
industry, explosive supplies used in the drilling operations increased $0.2
million for the six months ended June 30, 2001 as compared to the same six month
period ended 2000. Contracting services increased $0.5 million during the six
month period ended 2001 as compared to the same six month period ended 2000
principally as a result of the commencement of the Company's newly formed
permitting division. These increases were more than offset by a $1.4 million
decrease in the rental expense and related insurance expense on leased aviation
equipment resulting from fewer helicopters being leased from third parties
during the first half of 2001 as compared to the same six month period ended
June 30, 2000. Depreciation expense decreased $0.2 million for the six months
ended June 30, 2001 as compared to the six months ended June 30, 2000 because of
an overall reduction in the level of the Company's operating equipment.
Gross profit margins were 2% and (27%) for the six months ended June 30,
2001 and 2000, respectively. The improvement in the profit margins is a direct
result of increased business activity in the Company's more profitable business
segments, increased prices received for the services provided by the Company and
more stringent controls on operating expenses.
General and administrative expenses decreased $1.7 million, or 57%, from
$3.0 for the six months ended June 30, 2000 to $1.3 million for the six months
ended June 30, 2001. Payroll and payroll related costs accounted for 41% of this
decrease, or $0.7 million, declining from $1.4 million for the first half of
2000 to $0.7 million the same period of 2001. This decrease is due to a 32%
decrease in the average number of administrative employees between the periods,
as well as significantly reduced base compensation levels of the Company's
management. The Company realized approximately $0.6 million in savings during
the six month period ended June 30, 2001 from renegotiating certain lease and
vendor agreements with terms more favorable to the Company than those agreements
for the six month period ended June 30, 2000. Amortization expense was reduced
$0.2 million from the six month period ended June 30, 2000 to the same period of
2001 as a result of the Company's asset impairment charges taken in the third
quarter of 2000.
Restructuring and asset impairment charges increased $0.2 million due to
revaluation of certain drilling equipment in 2001 with no corresponding charges
for the same period in 2000.
Interest expense decreased $0.5 million from $1.4 million for the six
month period ended June 30, 2000 to $0.9 million for the six month period ended
June 30, 2001. The reduction was a result of lower average debt outstanding
coupled with lower average interest rates during the periods.
The Company recognized no income tax expense on its income during 2001 as
it expects to utilize its net operating loss carryforwards, which have been
reserved in prior periods, to offset its taxable income during 2001.
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, the Company had approximately $0.1 million in cash as
compared to approximately $0.3 million at December 31, 2000. The Company's
working capital position increased $3.8 million to $0.4 million at June 30, 2001
from a working capital deficit of $(3.4) million at December 31, 2000. The
increase in the Company's working capital position resulted from an overall
increase in the Company's business activity and corresponding accounts
receivable since the year ended December 31, 2000 coupled with reductions in the
Company's outstanding indebtedness under its lines of credit and accrued
interest.
The Company's primary credit facility (the "Hibernia Facility") was
amended in March 2001 to provide the Company with a credit facility consisting
of a $4.9 million term loan and a $5.0 million revolving line of credit for
working capital requirements. The outstanding principal balance under the term
loan is paid at a rate of $0.1 million per month plus accrued interest. Interest
accrues and is paid weekly on both loans at the prime interest rate plus 1.5%.
As of June 30, 2001 outstanding borrowings under the term loan and revolving
line of credit were $4.5 million and $0.5 million, respectively. Additional
borrowings available under the Company's line of credit were $2.6 million as of
June 30, 2001. The Hibernia Facility matures August 2002 but the Company expects
to renegotiate the maturity date of its credit facility during the third quarter
of 2001.
As of June 30, 2001, the Company had $2.7 million outstanding under its
assets-based equipment financing agreement with The CIT Group (the "CIT Loan").
The CIT Loan is paid at a rate of approximately $0.1 million per month,
including interest accruing at the prime interest rate plus 3%, and matures
August 2002. The CIT Loan is secured by certain seismic drilling units and
support equipment. The Company also expects to renegotiate the maturity date of
this asset-based credit facility during the third quarter of 2001. ......
The Hibernia facility and the CIT loan contains customary financial
covenants requiring, among other things, minimum levels of EBITDA, working
capital and debt to EBITDA ratios. As of June 30, 2001 the Company was in
compliance with all of the financial covenants. The Company believes that it
will maintain compliance with all of its covenants throughout all of 2001.
During the years ended December 31, 1999 and 2000 and the six months ended
June 30, 2001, the Company privately placed with an affiliate subordinated
debentures totaling $7.5 million, $3.4 million and $1.5 million, respectively.
The debentures matured five years from their date of issue and accrued interest
at various rates ranging from a fixed rate of 12% per annum to a variable rate
of interest starting at 12% per annum and escalating to 20% per annum.
In November 2000, the Company and the affiliate agreed to convert $4.6
million of the subordinated debentures into the Company's 8%, Series A Preferred
Stock. In April 2001, the Company agreed to pay the affiliate $3.0 million cash
plus issue to the affiliate $4.6 million of the Company's 8%, Series B Preferred
Stock in full satisfaction of all of the remaining outstanding subordinated
debentures including accrued interest of $1.8 million. This transaction resulted
in the affiliate agreeing to forgive $1.0 million of indebtedness which has been
reflected as a capital contribution from the affiliate rather than income in the
accompanying financial statements.
In connection with the original issuance of the subordinated debentures,
the Company issued to the affiliate detachable warrants to purchase 5,738,500
shares of the Company's common stock of which 1,900,000 have been cancelled. The
warrants have various vesting periods up to four years with exercise prices
ranging from $0.75 to $2.00 per share. The Company has recorded each warrant at
its relative fair value at its date of issuance and included this amount as
additional paid in capital with the associated discount of the debt being
amortized as additional interest expense.
Currently, the Company expects minimal capital expenditures during the
remainder of the year ending December 31, 2001. The Company believes that its
current availability under its revolving credit facility, together with the
working capital generated from its operations will be sufficient to fund
operations until as least August 2002. However, as previously discussed, the
Company's long-term debt agreements mature in August 2002. The Company
expects to renegotiate the maturity dates of these agreements during its
third quarter of this fiscal year.
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FORWARD-LOOKING STATEMENTS
This Quarterly Report contains certain "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical fact included in this
report regarding the Company's financial position and liquidity, its strategic
alternatives, future capital needs, business strategies and other plans and
objectives of management of the Company for future operations and activities,
are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company's management in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate under the
circumstances. Such forward-looking statements are subject to uncertainties that
could cause the Company's actual results to differ materially from such
statements. Such uncertainties include but are not limited to: the volatility of
the oil and gas industry, including the level of offshore exploration,
production and development activity; changes in competitive factors affecting
the Company's operations; operating hazards, including the significant
possibility of accidents resulting in personal injury, property damage or
environment damage; the effect on the Company's performance of regulatory
programs and environmental matters; seasonality of the offshore industry in the
Gulf of Mexico; and the Company's dependence on certain customers. These and
other uncertainties related to the Company's business are described in detail in
the Company's other public filings. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable; it can
give no assurance that such expectations will prove to be correct. You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to update
any of its forward-looking statements for any reason.
-16-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNI ENERGY SERVICES CORP.
Dated: August 14, 2001 /s/ James C. Eckert
-------------------------------
James C. Eckert
President and Chief Executive Officer
Dated: August 14, 2001 /s/ Burton T. Zaunbrecher
-------------------------------
Burton T. Zaunbrecher
Executive Vice President and
Chief Operating Officer
Dated: August 14, 2001 /s/ G. Darcy Klug
-------------------------------
G. Darcy Klug
Chief Financial Officer
S-1
OMNI ENERGY SERVICES CORP.
EXHIBIT INDEX
EXHIBIT
NUMBER
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3.1 Composite Articles of Incorporation of the Company (as of
November 7, 2000) (1)
3.2 Bylaws of the Company, as amended (2)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Articles of Incorporation and By-laws defining the rights of
holders of Common Stock.
4.2 Specimen Common Stock Certificate (3)
--------------------------------------------------------------------------------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.
(2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration Statement No. 333-36561).
E-1
S-2