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 September 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 72-1395273
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4500 N.E. EVANGELINE THRUWAY
CARENCRO, LOUISIANA
(Address of principal 70520
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 November 5, 2001 there were 27,242,974 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(In thousands)
ASSETS September 30, December 31,
------ 2001 2000
------------- ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 160 $ 317
Accounts receivable, net 6,501 3,329
Parts and supplies inventory 2,142 2,649
Prepaid expenses 933 1,086
Assets held for sale 1,099 1,678
------- -------
Total current assets 10,835 9,059
------- -------
PROPERTY AND EQUIPMENT:
Land 359 359
Buildings and improvements 4,505 4,505
Drilling, field and support equipment 25,034 25,102
Shop equipment 392 374
Office equipment 1,497 1,485
Vehicles 2,483 2,248
Construction in progress 58 74
------- -------
34,328 34,147
Less: accumulated depreciation 12,984 10,721
------- -------
Total property and equipment, net 21,344 23,426
------- -------
OTHER ASSETS:
Goodwill, net 2,032 2,059
Other 492 80
------- -------
Total other assets 2,524 2,139
------- -------
Total assets $34,703 $34,624
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(In thousands, except share and per share amounts)
LIABILITIES AND EQUITY September 30, December 31,
---------------------- 2001 2000
------------- ------------
(unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,137 $ 2,068
Line of credit 284 1,688
Accounts payable 3,771 3,162
Accrued expenses 1,706 2,578
Sales tax payable 862 1,355
Due to affiliate 175 ---
Accrued interest --- 1,586
-------- --------
Total current liabilities 8,935 12,437
-------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 5,722 8,500
Subordinated debt --- 5,448
-------- --------
Total long-term liabilities 5,722 13,948
-------- --------
TOTAL LIABILITIES 14,657 26,385
-------- --------
MINORITY INTEREST 221 221
-------- --------
EQUITY:
Common stock, $.01 par value, 45,000,000
Shares authorized; 27,045,074 and 26,911,724, issued
and outstanding as of September 30, 2001 and
December 31, 2000, respectively 270 269
Preferred stock, $1,000 par value, Series A, 7,500
shares issued and outstanding as of September 30, 2001
and December 31, 2000; Series B, 4,600 shares issued
and outstanding as of September 30, 2001 12,100 7,500
Additional paid-in capital 55,292 54,406
Accumulated deficit (47,676) (54,121)
Cumulative translation adjustment (78) (36)
Treasury stock (83) ---
-------- --------
Total equity 19,825 8,018
-------- --------
Total liabilities and equity $ 34,703 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(In thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- ---------------------------------
2001 2000 2001 2000
------- --------- ------- ---------
(Unaudited) (Unaudited)
Operating revenue $ 9,180 $ 4,296 $19,378 $ 13,344
Operating expenses 7,612 4,687 17,635 16,088
------- -------- ------- --------
Gross profit (loss) 1,568 (391) 1,743 (2,744)
General and administrative expenses 565 1,405 1,878 4,412
Asset impairment charges --- 11,418 180 11,444
------- -------- ------- --------
Operating income (loss) 1,003 (13,214) (315) (18,600)
Interest expense 169 823 1,095 2,237
Other income (expense) 160 24 7,854 (8)
------- -------- ------- --------
9 801 (6,759) 2,245
------- -------- ------- --------
Income (loss) before income taxes 994 (14,015) 6,444 (20,845)
Income taxes --- --- --- ---
------- -------- ------- --------
Net income (loss), before
minority interest 994 (14,015) 6,444 (20,845)
Minority interest --- (5) --- (15)
------- -------- ------- --------
Net income (loss) $ 994 $(14,010) $ 6,444 $(20,830)
======= ======== ======= ========
Basic net income (loss) per share: $ 0.04 $ (0.88) $ 0.24 $ (1.30)
Diluted net income (loss) per share: $ 0.03 $ (0.88) $ 0.22 $ (1.30)
Weighted average shares outstanding:
Basic 27,623 15,994 26,972 15,987
Diluted 28,980 15,994 29,533 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 NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(In thousands)
Nine months ended
September 30,
-----------------------------
2001 2000
------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 6,444 $(20,830)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation 2,396 2,716
Amortization 125 394
(Gain) loss on fixed asset disposition (53) 13
Asset impairment and other charges 180 11,200
Provision for bad debts 59 177
Minority interest --- (15)
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade (3,264) (629)
Other (9) 393
Inventory 508 (1,526)
Prepaid expenses 152 825
Assets held for sale 580 (580)
Other (677) (61)
Increase (decrease) in liabilities-
Accounts payable 610 1,430
Accrued expenses (1,123) 2,916
------- --------
Net cash provided by (used in) operating activities 5,929 (3,577)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 147 403
Purchase of fixed assets (408) ---
------- --------
Net cash provided by (used in) investing activities (261) 403
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subordinated debt 1,500 1,812
Repayment of subordinated debt (3,209) ---
Proceeds from issuance of preferred stock --- 1,150
Proceeds from issuance of long-term debt 1,339 509
Principal payments on long-term debt (4,048) (1,567)
Proceeds from issuance of common stock 80 ---
Purchase of treasury stock (83) ---
Net borrowings (payments) on line of credit (1,404) 1,398
------- --------
Net cash provided by (used in) financing activities (5,825) 3,302
------- --------
NET INCREASE (DECREASE) IN CASH (157) 128
CASH, at beginning of period 317 104
------- --------
CASH, at end of period $ 160 $ 232
======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID FOR INTEREST $ 795 $ 1,437
======= ========
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 (loss) 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 nine month periods ended September 30, 2001, the Company had
dilutive stock options and warrants of approximately 1,356,995 and 2,560,894
shares, respectively, which were assumed exercised using the treasury stock
method.
The Company had 1,274,360 and 342,080 options outstanding for the three months
and nine months ended September 30, 2001, respectively, excluded from the
calculation of diluted EPS because of their antidilutive impact. On the same
basis, warrants to purchase 554,167 shares of common stock were also excluded
for both the three months and nine months ended September 30, 2001.
The Company had 880,705 and 810,917 options outstanding in the three and nine
months ended September 30, 2000, respectively, that were excluded from the
calculation of diluted EPS because they are antidilutive. On the same basis,
warrants to purchase 3,315,036 and 2,400,030 shares of common stock were also
excluded for the three months and nine months ended September 30, 2000.
NOTE 3. LONG-TERM DEBT
The Company's primary credit facility (the "Hibernia Facility") was amended in
November 2001 to provide the Company with a $9.1 million credit facility
consisting of a $4.1 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 monthly on both loans at the prime interest rate
plus 1.5%. As of September 30, 2001 outstanding borrowings under the Hibernia
Facility totaled $4.5 million, with $3.4 million of borrowings available to the
Company under its revolving line of credit. The Hibernia Facility matures
October 2004 and is secured by the Company's accounts receivable, inventory,
real estate and various equipment.
As of September 30, 2001, the Company had $2.6 million outstanding under its
assets-based equipment financing agreement with The CIT Group (the "CIT Loan").
The CIT Loan, as amended October 2001, is paid at a rate of
6
approximately $0.1 million per month, including interest accruing at the LIBOR
plus 5%, and matures August 2004. The CIT Loan is secured by certain seismic
drilling units and support equipment.
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 September 30, 2001 the Company was in compliance
with all of the financial covenants.
During the years ended December 31, 1999 and 2000 and the nine months ended
September 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 the date of their issuance. Interest
accrued at various rates ranging from a fixed rate of 12% per annum to a
variable interest rate of 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 Series A Preferred Stock. In
April 2001, the Company agreed to pay the affiliate $3.0 million cash and issue
to the affiliate $4.6 million of the Company's Series B Preferred Stock in full
satisfaction of all of the remaining outstanding subordinated debentures,
including accrued interest of approximately $1.8 million. This transaction
resulted in the affiliate agreeing to forgive approximately $1.0 million of
indebtedness which has been reflected as a capital contribution.
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 2,901,000 have been cancelled as of
September 30, 2001. The remaining warrants outstanding 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, approximately $1.0
million of the trade receivable of a major customer. This receivable had become
ineligible under the terms of the Company's Hibernia Facility. The Company
guaranteed and is currently renegotiating the terms of the repayment of the
trade receivable. As of September 30, 2001 the Company is liable to the
affiliate for approximately $0.2 million, which is payable in 12 equal monthly
installments commencing 30 days after execution of the definitive repayment
agreement between the Company and the affiliate.
NOTE 4. PREFERRED STOCK
At September 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
The Series A Preferred Stock has an 8% cumulative dividend rate, is convertible
into the Company's 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, has voting rights on all matters
submitted to a vote of the Company's shareholders, has separate voting rights
with respect to matters that would affect the rights of the holders of the
Preferred Stock, and has 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 Series A Preferred Stock, the affiliate has agreed to
waive its 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 capital expenditures. 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 were
approximately $0.3 million of dividends in arrears relating to these outstanding
shares of Series A Preferred Stock.
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 the
Company's 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 Series B Preferred Stock, the affiliate has agreed to waive its
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 capital expenditures. 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 were no dividends in arrears
relating to the outstanding shares of Series B Preferred Stock.
NOTE 5. COMPREHENSIVE INCOME
In 1998, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("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 September 30, Nine months ended September 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
------- -------- -------- --------
Net Income (Loss) $ 994 $(14,009) $6,444 $(20,829)
Other Comprehensive Income:
Foreign currency translation adjustments (33) (9) (43) (27)
----- -------- ------ --------
Comprehensive Income (Loss) $ 961 $(14,018) $6,401 $(20,856)
===== ======== ====== ========
NOTE 6. SEGMENT INFORMATION
The following shows industry segment information for the Company's four
operating segments - Drilling, Aviation, Survey, and Permitting - for the three
and nine month periods ended September 30, 2001 and 2000:
8
Three months ended September 30 Nine months ended September 30,
------------------------------- -------------------------------
2001 2000 2001 2000
------ ------ ------- -------
Operating revenues: (1)(2)
Drilling $7,093 $2,145 $15,029 $ 6,550
Aviation 1,362 2,070 2,711 5,474
Survey 129 81 611 1,319
Permitting 596 --- 1,027 ---
------ ------ ------- -------
Total $9,180 $4,296 $19,378 $13,343
====== ====== ======= =======
(1) Net of inter-segment revenues of $0.1 million and $0.2 million for the three
and nine month periods ended September 30, 2001, respectively
(2) The Company's Permitting Division commenced operations during the first
quarter of 2001.
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
------- -------- ------- --------
Gross profit (loss):
Drilling $ 1,622 $ (519) $ 2,415 $ (1,981)
Aviation 16 313 (357) (137)
Survey (3) (92) (136) (315)
Permitting 84 - 143 -
Other (151) (93) (322) (311)
------- -------- ------- --------
Total $ 1,568 $ (391) $ 1,743 $ (2,744)
General and administrative 565 1,405 1,878 4,412
expenses
Asset impairment - 11,418 180 11,444
Other expense (income), net 9 801 (6,759) 2,245
------- -------- ------- --------
Income (loss) before taxes $ 994 $(14,015) $ 6,444 $(20,845)
======= ======== ======= ========
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
------- ------- ------- -------
Identifiable Assets:
Drilling $23,890 $20,921
Aviation 1,748 3,213
Survey 1,640 2,052
Permitting --- ---
Other 7,425 8,703
------- -------
Total $34,703 $34,889
======= =======
Capital Expenditures:
Drilling $ 263 $ 25 $ 477 $ 25
Aviation --- --- --- ---
Survey --- --- --- ---
Permitting --- --- --- ---
Other 8 --- 11 ---
------- ------- -------- -----
Total $ 271 $ 25 $ 488 $ 25
======= ======= ======== =====
9
In November 1999, the Company 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. Management thus
determined it would not discontinue this service line and decided to reorganize
the aviation division to better align it with other divisions in the Company.
Therefore, the September 30, 2000 and September 30, 2001 financial statements
include the assets, liabilities and results of operations of the aviation
division in continuing operations.
NOTE 7. RECENT PRONOUNCEMENTS
In July 2001, the FASB issued SFAS No. 141 "Business Combinations", and SFAS No.
142 "Goodwill and Other Intangible Assets". SFAS No. 141 prohibits the use of
the pooling-of-interests method of accounting for all business combinations
initiated after June 30, 2001. 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 $28,000 and $76,000 for the three and nine months ended September
30, 2001, respectively, will cease upon adoption.
In July 2001 the FASB issued SFAS NO 143 "Accounting for Asset Retirement
Obligations. 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.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The FASB's new rules on asset impairment
supersede SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," and will be effective for the
Company's fiscal year beginning January 1, 2002. The Company is currently
evaluating the impact that adoption of this standard will have on its financial
statements.
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 "Forward-looking 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,
beginning in 1997, 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 September 30, 2001
and 2000, the Company's operating revenues and net income (loss) were $9.2
million and $4.3 million, and $1.0 million and $(14.0) 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
continues to adjust its operations to current market conditions by closely
monitoring the expenses of its operating segments and corporate overhead.
During October and November 2001, the Company renegotiated the terms and
maturity dates of its primary secured debt. Management continues 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 September 30 Nine months ended September 30
2001 2000 2001 2000
------ -------- ------- --------
Operating revenue $9,180 $ 4,296 $19,378 $ 13,344
Operating expense 7,612 4,687 17,635 16,088
------ -------- ------- --------
Gross profit 1,568 (391) 1,743 (2,744)
General and administrative expenses 565 1,405 1,878 4,412
Asset impairment charges --- 11,418 180 11,444
------ -------- ------- --------
Operating income (loss) 1,003 (13,214) (315) (18,600)
Interest expense 169 823 1,095 2,237
Other income (expense) 160 24 7,854 (8)
------ -------- ------- --------
Income (loss) before income taxes 994 (14,015) 6,444 (20,845)
Income taxes --- --- --- ---
------ -------- ------- --------
Net income (loss), including minority interest 994 (14,015) 6,444 (20,845)
Minority interest --- (5) --- (15)
------ -------- ------- --------
Net income (loss) $ 994 $(14,010) $ 6,444 $(20,830)
====== ======== ======= ========
12
Three Months Ended September 30, 2001 Compared to Three Months
Ended September 30, 2000
Operating revenues increased 114%, or $4.9 million, from $4.3 million for
the three months ended September 30, 2000 to $9.2 for the three months ended
September 30, 2001. The increase in revenues was principally due to an increase
in seismic related activities. Collectively, drilling and survey revenues
increased $5.0 million, or 227%, to $7.1 million and $0.1 million, respectively,
for the quarter ended September 30, 2001 as compared to the same three month
period ended September 30, 2000. Additionally, the Company commenced the
operations of its permitting division during the first quarter of 2001 and
reported revenues of $0.6 million during the third quarter of 2001. No
corresponding revenues were reported for the third quarter ended September 30,
2000. These operating revenue increases were offset by a $0.7 million decline in
the Company's aviation revenues from $2.1 million in 2000 to $1.4 million for
the third quarter 2001. The decline in aviation revenues is principally
attributable to fewer billable flight hours being flown during the quarter ended
September 30, 2001 as compared to the same period ended September 30, 2000.
Operating expenses increased 62%, or $2.9 million, from $4.7 million for
the three months ended September 30, 2000 to $7.6 million for the three months
ended September 30, 2001. This increase is principally attributable to higher
operating payroll and payroll related costs, which increased $1.0 million from
$1.8 million to $2.8 million for the three month periods ended September 30,
2000 and 2001, respectively. The Company's average number of field personnel
increased by 55 from 127 field operating employees during the third quarter of
2000 to 182 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 $1.0
million during the three months ended September 30, 2001 as compared to
September 30, 2000. Consistent with the increase in seismic related activity,
repairs and maintenance, fuel and oil, and rental and lease expenses increased
$0.1 million each from the third quarter of 2000 to the same period in 2001.
Likewise, explosives and down hole supplies expenses increased $0.8 million.
Increases in operating expenses were partially offset by a $0.1 million
decline in the Company's depreciation costs, resulting from reductions in the
Company's fleet of operating equipment.
Gross profit margins were 17% for the three month period ended September
30, 2001 as compared to (9%) for the three month period ended September 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 $1.4
million for the three months ended September 30, 2000 to $0.6 million for the
three months ended September 30, 2001. Payroll and payroll related costs
accounted for $0.2 million of this decline. The average number of administrative
employees declined from 38 during the third quarter of 2000 to 31 for the same
three month period ended September 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 September 30, 2001, the Company also renegotiated
certain vendor and lease agreements at terms more favorable than those
agreements in existence during the third quarter of 2000, resulting in a savings
of approximately $0.3 million. The remaining decreases in general and
administrative expenses related to decreases in bad debt expense and
amortization expense.
Interest expense decreased $0.6 million from $0.8 million for the three
month period ended September 30, 2000 to $0.2 million for the three month period
ended September 30, 2001. This decline resulted from lower average outstanding
indebtedness at lower average interest rates during the period (See Liquidity
and Capital Resources).
Nine Months Ended September 30, 2001 Compared to Nine Months Ended
September 30, 2000
Operating revenues increased 46%, or $6.1 million, from $13.3 million for
the nine months ended September 30, 2000 to $19.4 million for the nine months
ended September 30, 2001. Revenues from the Company's drilling and survey
operations increased $7.8 million principally as a result of an increase in
drilling revenues which more than offset a decline in survey revenues. The $8.5
million increase in drilling revenues for the nine month period ended September
30, 2001 as compared to the nine month period ended September 30, 2000 resulted
from increased seismic activity. The $0.7 million
13
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 nine months ended September 30, 2001 the Company's newly formed
permitting division reported revenues of $1.0 million with no revenues reported
for the corresponding period in 2000. Aviation revenues declined $2.8 million
for the nine months ended September 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 increased 9%, or $1.5 million, from $16.1 million for
the nine months ended September 30, 2000 to $17.6 million for the nine months
ended September 30, 2001. As a result of increased drilling activity for the
seismic industry, payroll related expenses increased $0.8 million, as the
average number of field employees increased from 150 to 170 for the nine months
ended September 30, 2001 compared to the nine months ended September 30, 2000.
Likewise, explosive supplies used in the drilling operations increased $.7
million for the nine months ended September 30, 2001 as compared to the same
nine month period ended 2000. Contracting services increased $1.5 million during
the nine month period ended 2001 as compared to the same nine month period ended
2000 principally as a result of the commencement of the Company's newly formed
permitting division. These increases were partially offset by a $0.9 million
decrease in the rental expense and related insurance expense on leased aviation
equipment. The decreases resulted from fewer helicopters being leased from third
parties during the first nine months of 2001 as compared to the same nine month
period ended September 30, 2000. Depreciation expense and property and casualty
insurance expense decreased $0.3 million and $0.2 million, respectively, for the
nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000 because of an overall reduction in the level of the Company's
operating equipment.
Gross profit margins were 9% and (21%) for the nine months ended September
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 $2.5 million, or 57%, from
$4.4 million for the nine months ended September 30, 2000 to $1.9 million for
the nine months ended September 30, 2001. Payroll and payroll related costs
accounted for 40% of this decrease, or $1.0 million, declining from $2.0 million
for the first nine months of 2000 to $1.0 million for the same period of 2001.
This decrease is due to a 33% 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 $0.9 million in savings during the nine month period ended
September 30, 2001 on renegotiating certain lease and vendor agreements with
terms more favorable to the Company than those agreements for the nine month
period ended September 30, 2000. Amortization expense was reduced $0.3 million
from the nine month period ended September 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. Bad debt expense also decreased $0.2 million from the nine month
period ended September 30, 2000 to the same period in 2001.
Restructuring and asset impairment charges decreased $11.2 million, from
$11.4 million in 2000 to $0.2 million in 2001, due to the Company's elimination
of all its existing goodwill as well as revaluation of certain drilling
equipment in 2000 with only minor revaluation of certain drilling equipment in
2001.
Interest expense decreased $1.1 million from $2.2 million for the nine
month period ended September 30, 2000 to $1.1 million for the nine month period
ended September 30, 2001. The reduction was a result of lower average debt
outstanding coupled with lower average interest rates during the periods.
Other Income increased $7.9 million from $0 for the nine-month period ended
September 30, 2000 to $7.9 million for the nine-month period ended September 30,
2001. The increase is due to the receipt of proceeds from a life insurance
policy purchased on the Company's CEO, who was killed in a private aircraft
accident in February, 2001.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, the Company had approximately $0.2 million in
cash as compared to approximately $0.3 million at December 31, 2000. The
Company's working capital position increased $5.3 million to $1.9 million at
14
September 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 November 2001 to provide the Company with a $9.1 million credit facility
consisting of a $4.1 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 monthly on both loans at the prime interest rate
plus 1.5%. As of September 30, 2001 outstanding borrowings under the Hibernia
Facility totaled $4.5 million, with $3.4 million of borrowings available to the
Company under its revolving line of credit. The Hibernia Facility matures
October 2004 and is secured by accounts receivable, inventory, real estate and
various equipment.
As of September 30, 2001, the Company had $2.6 million outstanding under
its assets-based equipment financing agreement with The CIT Group (the "CIT
Loan"). The CIT Loan, as amended October 2001, is paid at a rate of
approximately $0.1 million per month, including interest accruing at the LIBOR
plus 5%, and matures August 2004. The CIT Loan is secured by certain seismic
drilling units and support equipment.
During the years ended December 31, 1999 and 2000 and the nine months ended
September 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 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 Series B Preferred
Stock in full satisfaction of all of the remaining outstanding subordinated
debentures including accrued interest.
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 2,901,000 have been cancelled as
of September 30, 2001. The remaining warrants outstanding 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, approximately
$1.0 million of the trade receivable of a major customer. This receivable had
become ineligible under the terms of the Company's Hibernia Facility. The
Company guaranteed and is currently renegotiating the terms of the repayment of
the trade receivable. As of September 30, 2001 the Company is liable to the
affiliate for approximately $0.2 million, which is payable in 12 equal monthly
installments commencing 30 days after execution of the definitive repayment
agreement between the Company and the affiliate.
On October 31, 2001 the company authorized the repurchase of up to
1,000,000 shares of its common stock. The Company expects to repurchase its
shares from time to time through open market purchases or privately negotiated
transactions. The timing and amount of shares repurchased will depend on
prevailing share market prices and trading volume. The Company expects to fund
future repurchases of its common stock with operating cash or through its credit
facility.
Currently, the Company expects minimal capital expenditures during the
remainder of the year ending December 31, 2001.
AUDIT COMMITTEE
On October 11, 2001, the Board of Directors of the Company adopted
resolutions appointing Michael G. DeHart, Richard C. White and Crichton W. Brown
as members of the Audit Committee of the Board of Directors.
15
Each of Messrs. DeHart and White are independent, as that term is defined
in Rule 4200 of the National Association of Securities Dealers' listing
standards. Mr. Brown is an executive officer and a director of the Advantage
Capital Partners, a series of institutional venture capital funds under common
ownership and control, founded in 1992 (collectively, "Advantage Capital").
Advantage Capital beneficially owns more than 25% of the Company's common stock.
As a result, Mr. Brown is not independent, as that term is defined in Rule 4200
of the National Association of Securities Dealers' listing standards.
The Board of Directors carefully considered Mr. Brown's affiliation with
Advantage Capital as well as his accounting and financial expertise and has
determined that Mr. Brown's position with Advantage Capital will not interfere
with his providing impartial advice to the Audit Committee and that Mr. Brown's
service on the Audit Committee is in the best interest of the Company and its
shareholders.
16
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK
There have been no significant changes in our market risks since the year ended
December 31, 2000. For more information, please read the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the
year ended December 31, 2000.
PART II. OTHER INFORMATION
None.
17
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: November 9, 2001 /s/ James C. Eckert
-----------------------------------
James C. Eckert
President and Chief Executive Officer
Dated: November 9, 2001 /s/ Burton T. Zaunbrecher
-----------------------------------
Burton T. Zaunbrecher
Executive Vice President and
Chief Operating Officer
Dated: November 9, 2001 /s/ G. Darcy Klug
-----------------------------------
G. Darcy Klug
Chief Financial Officer
S-1
OMNI ENERGY SERVICES CORP.
EXHIBIT INDEX
EXHIBIT
NUMBER
------
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-1