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 March 31, 2000
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 70520
CARENCRO, LOUISIANA
(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 May 8, 2000 there were 15,979,505 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
ITEM 1.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(Thousands of dollars)
ASSETS March 31, December 31,
- ------ 2000 1999
------------ -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $21 $ 104
Accounts receivable, net 3,836 3,011
Parts and supplies inventory 2,343 2,438
Prepaid expenses and other 1,905 2,601
Net assets of discontinued operations 362 1,160
------------ -------------
Total current assets 8,467 9,314
------------ -------------
PROPERTY AND EQUIPMENT:
Land 1,209 1,209
Buildings and improvements 4,992 5,047
Drilling, field and support equipment 27,643 27,776
Shop equipment 698 698
Office equipment 1,748 1,748
Vehicles 2,398 2,404
------------ -------------
38,688 38,882
Less: accumulated depreciation 9,182 8,277
------------ -------------
Total property and equipment 29,506 30,605
------------ -------------
OTHER ASSETS:
Goodwill, net 7,722 7,853
Other 294 342
------------ -------------
Total other assets 8,016 8,195
------------ -------------
Total assets $ 45,989 $ 48,114
============ =============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-2-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(Thousands of dollars, except share data)
LIABILITIES AND EQUITY March 31, December 31,
- ---------------------- 2000 1999
------------ -------------
(Unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $11,168 $11,758
Line of credit 3,412 1,949
Accounts payable 3,025 3,326
Accrued expenses 1,882 2,076
------------ -------------
Total current liabilities 19,487 19,109
------------ -------------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 1,054 1,186
Subordinated debt 7,185 7,185
------------ -------------
Total long-term liabilities 8,239 8,371
------------ -------------
TOTAL LIABILITIES 27,726 27,480
------------ -------------
MINORITY INTEREST 233 238
------------ -------------
EQUITY:
Common Stock, $.01 par value, 45,000,000
shares authorized; 15,979,505 issued and
outstanding 160 160
Preferred Stock Subscribed 1,500 1,000
Additional paid-in capital 47,597 47,597
Accumulated deficit (31,217) (28,348)
Cumulative translation adjustment (10) (13)
------------ -------------
Total equity 18,030 20,396
------------ -------------
Total liabilities and equity $ 45,989 $ 48,114
============ =============
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 MONTHS ENDED MARCH 31, 2000 AND 1999
(Thousands of dollars, except per share amounts)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------------ --------------
(Unaudited)
Operating revenue $ 4,203 $ 7,448
Operating expenses 4,917 6,440
------------ --------------
Gross profit (loss) (714) 1,008
General and administrative expenses 1,435 2,265
------------ --------------
Operating income (loss) (2,149) (1,257)
Interest expense 687 490
Other income (expense) (36) 29
------------ --------------
728 461
------------ --------------
Income (loss) before taxes (2,872) (1,718)
Income tax expense (benefit) --- (613)
------------ --------------
Net income (loss), before
minority interest (2,872) (1,105)
Loss of minority interest (5) (35)
Income (loss) from continuing operations (2,866) (1,070)
Income (loss) from discontinued operations --- (155)
------------ --------------
Net loss $ (2,866) $ (1,225)
============ ==============
Net loss per share:
Continuing operations $ (0.18) $ (0.07)
Discontinued operations --- (0.01)
------------ --------------
(0.18) (0.08)
Weighted average shares outstanding:
Diluted 15,979 15,979
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 THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Thousands of dollars)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------------ -------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,866) $ (1,225)
Adjustments to reconcile net income to net cash
used in operating activities-
Depreciation 911 1,217
Amortization 133 224
Loss on fixed asset disposition 38 ---
Deferred compensation --- 24
Provision for bad debts --- (75)
Minority interest (5) (35)
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade (826) (615)
Other --- 1,707
Inventory 95 55
Prepaid expenses 1,494 586
Other 44 (53)
Increase (decrease) in liabilities-
Accounts payable and accrued expenses (494) (2,332)
------------ -------------
Net cash used in operating activities (1,476) (522)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 149 253
Purchase of fixed assets --- (969)
------------ -------------
Net cash provided by (used in) investing activities 149 (716)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Subordinated debt --- 2,500
Proceeds from preferred stock subscription 500 ---
Principal payments on long-term debt (722) (1,577)
Net borrowings (payments) on line of credit 1,462 (232)
------------ -------------
Net cash provided by financing activities 1,240 691
------------ -------------
Effect of exchange rate changes in cash 1 2
NET DECREASE IN CASH (84) (545)
CASH, at beginning of period 104 3,333
------------ -------------
CASH, at end of period $ 21 $ 2,788
============ =============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID FOR INTEREST $ 453 $ 467
============ =============
CASH PAID FOR TAXES $ --- ---
============ =============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-5-
OMNI ENERGY SERVICES CORP.
NOTES TO 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,
1999 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 2000.
The Company has suffered recurring losses from operations and has a net
working capital deficiency, including significant current debt maturities,
that raises substantial doubt about its ability to continue as a going
concern. The terms of the Company's primary secured credit (see Note
3) agreements contain, among other provisions, requirements for maintaining
defined levels of EBITDA, working capital and tangible net worth and cash
flow coverage. Each agreement, including the Company's subordinated notes
(see Note 3), contains cross-default provisions for these covenants. At
December 31, 1999 and March 31, 2000 the Company was in violation of
certain of its covenants under these agreements. The Company has received
waivers from the creditors via amendments/waivers which waived financial
covenant violations through May 15, 2000. Due to current and anticipated
market conditions in the near term, the Company believes it will be
in violation of these covenants after May 15, 2000. In addition,
approximately $13 million will be due on May 15, 2000. The Company does
not have sufficient resources available to make the required payments on
May 15, 2000 should the creditors require the Company to repay the amounts
due. On May 11, 2000, Hibernia indicated its willingnes to extend the
maturity until May 22, 2000 in order to continue negotiations of a
forbearance agreement with the Company.
The Company is attempting to refinance its current credit agreements
through a combination of new agreements with its current creditors or other
parties, which appropriately matches principal amortization with the cash
flow capabilities of the assets pledged. In addition to attempting to
refinance the outstanding amounts due, the Company is evaluating other
capital raising alternatives, including additional debt, the sale of
operating assets or divisions, and other alternatives. In this regard, on
April 7, 2000, the Company signed a term sheet which outlines the following
transaction. The Company would acquire the common stock of another seismic
related company in return for the issuance of shares of common stock of the
Company and the issuance of a new junior convertible preferred stock.
Contemporaneously therewith, the Company would receive a substantial amount
of cash from new investors through the issuance of additional shares of its
senior convertible preferred stock. The Company's $7.5 million of
outstanding subordinated debt would be converted to shares of the newly
issued junior convertible preferred stock. The final terms, including the
number of common and preferred shares to be issued, the terms of the
preferred stock including conversion features, and the amount of cash to be
received, are subject to the completion of negotiations between the parties
to the term sheet, the new investors, and the Company's secured lenders.
In addition, final completion of this transaction will be subject to Board
of Directors and shareholder approval. The Company expects to restructure
all or substantially all of its remaining existing indebtedness in
connection with this transaction. Management believes the Company will be
able to successfully complete these negotiations or obtain appropriate
financing for its operations. However, there can be no assurances that the
Company can complete these negotiations or obtain appropriate financing for
its operations.
-6-
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities
that might result should the Company be unable to continue as a going
concern.
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.
The Company had 19,098 and 1,429,650 options outstanding in the quarters
ended March 31, 1999 and 2000, respectively, that were excluded from the
calculation of diluted EPS as antidilutive considering the net loss. In
addition, warrants to purchase up to 1,937,500 shares of common stock were
also excluded for the quarter ended March 31, 2000.
NOTE 3. LONG-TERM DEBT
--------------
The Company's primary credit facility is with Hibernia National Bank (the
"Hibernia Facility"). The Hibernia Facility, which was amended March 31,
2000, currently provides the Company with a $6.1 million term loan, a $6.0
million revolving line of credit to finance working capital requirements
and a $2.9 million note used to finance capital expenditures and
acquisitions. The loans bear interest at prime plus 3% and have a final
maturity of May 15, 2000. As of March 31, 2000, the Company had
approximately $13.3 million outstanding under the Hibernia Facility. On
May 11, 2000, Hibernia indicated its willingness to extend the maturity
until May 22, 2000 in order to continue the negotiations of a forbearance
agreement with the Company.
At March 31, 2000, the Company also has approximately $2.9 million in
outstanding debt pursuant to agreements with The CIT Group (CIT),
consisting of two asset-based financing loans (the "CIT Loans"). Of the
principal outstanding under the CIT Loans, approximately $2.3 million bears
interest at LIBOR plus 3.75% and matures on July 19, 2001. The remaining
portion of the CIT Loans bear interest at LIBOR plus 3.0% and matures in
September 2000. These loans are collateralized by various seismic drilling
units, support equipment and aircraft.
See Note 1 for discussion of the Company's compliance with certain loan
covenants under these agreements.
In the year ended December 31, 1999, the Company privately placed a total
of $7.5 million in subordinated debentures with an affiliate of the
Company. Notes with a principal of $5.0 million bear interest at 12% per
annum and mature on March 1, 2004. An additional $2.5 million of notes
bear interest at 12.5% per annum until December 31, 1999, at which time the
rate increased by 0.5% per month not to exceed 20% per annum. This portion
of the notes mature on March 1, 2005, with interest payable March 1 of each
year. In connection with these debentures, the Company issued warrants to
purchase up to 1,937,500 shares of the Company's common stock at an
exercise price of $5.00, $3.00 and $2.00 per share for 1,600,000 shares,
300,000 shares and 37,500 shares, respectively. The warrants in relation
to the 1,600,000 shares vest equally over four years commencing in 1999
until 2002, unless the debentures are paid in full, in which case, those
warrants that have not become exercisable will become void. All warrants
that become exercisable will expire on March 1, 2004. The warrants for the
remaining 337,500 shares vest immediately and expire on March 1, 2005. The
fair value of all warrants is included as paid-in-capital and the effective
interest rate over the term of the debt, including the coupon and the
amortization of the fair value of the warrants, is approximately 19%. The
amount of the three notes included in subordinated debt in the Company's
balance sheet at March 31, 2000 is $7.2 million.
NOTE 4. PREFERRED STOCK SUBSCRIPTION
----------------------------
In December 1999, February and April 2000, the Company received from an
affiliate of the Company $1,000,000, $500,000, and $350,000, respectively,
pursuant to three preferred stock subscription agreements for an aggregate of
-7-
1,850 shares of preferred stock. The preferred stock, which was issued on
April 26, 2000, has an 8% cumulative dividend rate, is convertible into
common stock with an initial conversion rate of $2.50, is redeemable at the
option of the Company at par plus unpaid dividends, contains a liquidation
preference of $1,000 per share and has voting rights only with respect to
matters that would reduce the ranking of the stock compared to other
classes of stock. The Company issued an additional 300 shares of the
preferred stock to the affiliate in May 2000 for $300,000. The funds were
used for debt service and to fund operations.
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 March 31,
2000 1999
---- ----
Net Income (Loss) $ (2,866) $ (1,225)
Other Comprehensive Income:
Foreign currency translation adjustments (5) 16
---------- ----------
Comprehensive Income (Loss) $ (2,872) $ (1,209)
========== ==========
NOTE 6. SEGMENT INFORMATION
-------------------
The following shows industry segment information for its two operating
segments, Drilling and Survey, for the three month periods ended March 31,
2000 and 1999:
Three months ended March 31,
2000 1999
---- ----
Operating revenues:(1)(2)
Drilling $ 2,973 $ 6,152
Survey 1,230 1,296
------------ -----------
Total $ 4,203 $ 7,448
============ ===========
1) Net of inter-segment revenues of $0.2 million for the three month period
ended March 31, 1999.
(2) Includes $0.6 million of integrated services in South America for the three
month period ended March 31, 1999.
Three months ended March 31,
2000 1999
---- ----
Gross profit (loss):
Drilling $ (549) $ 1,068
Survey (38) (27)
Other (127) (33)
----------- ------------
Total $ (714) $ 1,008
General and administrative expenses 1,435 2,265
Other expense, net 723 461
----------- ------------
Income (loss) before taxes $ (2,872) $ (1,718)
=========== ============
-8-
Identifiable Assets:
Drilling $ 29,121 $ 35,401
Survey 5,883 5,481
Other 10,985 19,339
----------- ------------
Total $ 45,989 $ 60,221
=========== ============
Capital Expenditures:
Drilling $ --- $ 770
Survey --- 18
Other --- 120
----------- ------------
Total $ --- $ 969
=========== ============
NOTE 7. RECENT PRONOUNCEMENTS
---------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established accounting and
reporting standards that every derivative instrument be recorded in the
balance sheet as either an asset or a liability measured at its fair value.
In June 1999, the FASB delayed SFAS No. 133's effective date by one year to
fiscal years beginning after June 15, 2000, with earlier application
permitted. Management believes the implementation of SFAS No. 133 will not
have a material effect on its results of operations or financial statement
disclosures as the Company historically has not used these instruments.
NOTE 8. CONCENTRATION OF CREDIT RISK
----------------------------
The Company's accounts receivable includes unsecured amounts of
approximately $3.0 million from two customers who have recently filed for
Chapter 11 bankruptcy. The Company currently has specific reserves
totaling approximately $3.0 million related to those receivables.
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, 1999.
GENERAL
DEMAND. Demand for the Company's services is principally impacted
by conditions affecting geophysical companies engaged in the
acquisition o 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
-9-
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
Transition Zone. Due to this increased demand, the Company significantly
increased its capacity, primarily through acquisitions, 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 March 31, 1999
and 2000, the Company's operating revenues and loss from continuing
operations were $7.5 million and $1.1 million, and $4.2 million and $2.9
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 downsizing its operations. During 1999,
the Company requested and received from its primary secured creditors
reductions in principal payments and extension of maturities, initially
until March 31, 2000 and subsequently until May 15, 2000. In addition,
as of March 31, 2000 and December 31, 1999, the Company was not in
compliance with certain financial covenants of the Company's long-term debt
agreements. The Company obtained waivers through May 15, 2000. 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, 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.
RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31,
2000 1999
---- ----
Operating revenue ...................................... $ 4,203 $ 7,448
Operating expense ...................................... 4,917 6,440
-------- --------
Gross profit ........................................... (714) 1,008
General and administrative expenses .................... 1,435 2,265
-------- --------
Operating income (loss) ................................ (2,149) (1,257)
Interest expense ....................................... 687 490
Other income (expense) ................................. (36) 29
-------- --------
Income (loss) before income taxes ...................... (2,872) (1,718)
Income tax expense (benefit) ........................... --- (613)
-------- --------
Net income (loss), including minority interest ......... (2,872) (1,105)
Minority interest ...................................... (5) (35)
-------- --------
Income (loss) from continuing operations ............... (2,866) (1,070)
Income (loss) from discontinued operations ............. --- (155)
-------- --------
Net income (loss) ...................................... $ (2,866)$ (1,225)
======== ========
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1999
Operating revenues decreased 43%, or $3.2 million, from $7.4
million for the three months ended March 31, 1999 to $4.2 million
for the three months ended March 31, 2000. As a result of the
decline in seismic activity, drilling revenues decreased $3.4 million
to $3.0 million for the three months ended March 31, 2000. Survey
-10-
revenues increased 71% from the three months ended March 31, 1999 to
$1.2 million for the three months ended March 31, 2000. The Company's
South American joint venture had revenues of $0.6 million for the three
months ended March 31, 1999; there were no similar revenues for the three
months ended March 31, 2000.
Operating expenses decreased 23%, or $1.5 million, from $6.4 million
for the three months ended March 31, 1999 to $4.9 million for the three
months ended March 31, 2000. Declines in payroll costs accounted for 53%
of this decrease as operating payroll expense decreased from $3.2 million
to $2.4 million for the quarters ended March 31, 1999 and 2000,
respectively. The significant decrease in seismic activity has resulted in
a corresponding decrease in the amount of personnel employed by the
Company, as the average number of field employees has declined to 181 for
the three months ended March 31, 2000 compared to 204 for the three months
ended March 31, 1999. Also as a result of the lower activity levels in the
first quarter of 2000 as compared to the first quarter of 1999, explosives
and fuel costs, repairs and maintenance expenses, rentals and leases, and
insurance expenses decreased $0.6 million from $1.8 million to $1.2 million
for the three months ended March 31, 1999 and 2000, respectively.
Gross profit margins were 14% and (17)% for the three months ended
March 31, 1999 and 2000, respectively. The variance is attributable to
substantially lower domestic revenues relative to the fixed costs of the
Company's Drilling segment, as well as limited activity from the Company's
South American operations.
General and administrative expenses decreased $0.9 million from $2.3
million for the three months ended March 31, 1999 to $1.4 million for the
three months ended March 31, 2000, a 37% decrease. Payroll costs decreased
$0.5 million from $1.2 million for the first quarter of 1999 to $0.7
million for the first quarter of 2000. These decreases are due primarily
to lower personnel levels as the average number of administrative employees
declined to 32 for the three months ended March 31, 2000, from 77 for the
three months ended March 31, 1999. Travel and entertainment, rentals and
leases, and office and supplies expenses decreased $0.3 million, from $0.4
million for the three months ended March 31, 1999 to $0.1 million for the
three months ended March 31, 2000, due to the decreased activity levels.
Interest expense increased $0.2 million from $0.5 million for the
three month period ended March 31, 1999 to $0.7 million for the three month
period ended March 31, 2000, due to higher average levels of debt
outstanding during the periods, as well as increased interest rates charged
by the Company's primary lender.
Due to the loss for the period ended March 31, 1999, the Company
recorded an income tax benefit of $0.6 million. The Company continued to
record a valuation allowance during the period ended March 31, 2000 against
the Company's net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company has suffered recurring losses from operations and has a
net working capital deficiency, including significant current debt
maturities, that raises substantial doubt about its ability to continue as
a going concern. The terms of the Company's credit facilities with
Hibernia National Bank (the "Hibernia Facility") and the CIT Group ("CIT")
contain, among other provisions, requirements for maintaining defined
levels of EBITDA, working capital and tangible net worth and cash flow
coverage. Each agreement, including the Company's subordinated notes,
contains cross-default provisions for these covenants. At March 31, 2000,
the Company was in violation of certain of its covenants under these
agreements. The Company has received waivers from Hibernia and CIT via
amendments/waivers which waived financial covenant violations through May,
15, 2000 and extended maturities through May 15, 2000. The Company does
not have sufficient resources available to make the required payments on
May 15, 2000 should its creditors require the Company to repay the amounts
due upon maturity.
The Company is attempting to refinance its current credit
agreements through a combination of new agreements with its
current creditors or other parties, which appropriately matches principal
amortization with the cash flow capabilities of the assets pledged.
In addition to attempting to refinance the outstanding
amounts due, the Company is evaluating other capital raising
alternatives, including additional debt, the sale of operating assets or
-11-
divisions, and other alternatives. In this regard, on April 7, 2000, the
Company reached an agreement in principle on a term sheet which outlines
the following transaction. The Company would acquire the common stock of
another seismic related company in return for the issuance of shares of
common stock of the Company and the issuance of a new junior convertible
preferred stock. Contemporaneously therewith, the Company would receive a
substantial amount of cash from new investors through the issuance of
additional shares of its senior convertible preferred stock. The Company's
$7.5 million of outstanding subordinated debt would be converted to shares
of the newly issued junior convertible preferred stock. The final terms,
including the number of common and preferred shares to be issued, the terms
of the preferred stock including conversion futures, and the amount of cash
to be received, are subject to the completion of negotiations between the
parties to the term sheet, the new investors and the Company's secured
lenders. In addition, final completion of this transaction will be subject
to Board of Directors and shareholder approval. The Company expects to
restructure all or substantially all of its remaining existing indebtedness
in connection with this transaction. Management believes the Company will
be able to successfully complete these negotiations or obtain appropriate
financing for its operations. However, there can be no assurances that the
Company can complete these negotiations or obtain appropriate financing for
its operations.
At March 31, 2000, the Company had approximately zero cash balance
compared to approximately $0.1 million at December 31, 1999. The Company
had a $(11.0) million working capital deficit at March 31, 2000, compared
to $(9.8) million at December 31, 1999 due primarily to the Company's
secured debt being classified as a current liability. The decrease in
working capital is due to decreases in accounts receivable, prepaid
expenses and net assets of discontinued operations.
The Company's primary credit facility is the Hibernia Facility. The
Hibernia Facility, which was amended March 31, 2000, currently provides the
Company with a $6.1 million term loan, a $6.0 million revolving line of
credit to finance working capital requirements and a $2.9 million note used
to finance capital expenditures and acquisitions. The loans bear interest
at prime plus 3% and have a final maturity of May 15, 2000. As of March
31, 2000, the Company had approximately $13.3 million outstanding under the
Hibernia Facility. On May 11, 2000, Hibernia indicated its willingness
to extend the maturity until May 22, 2000 in order to continue the
negotiations of a forbearance agreement with the Company.
At March 31, 2000, the Company also has approximately $2.9 million in
outstanding debt pursuant to agreements with CIT, consisting of two asset-
based financing loans. Of the principal outstanding under the CIT Loans,
approximately $2.3 million bears interest at LIBOR plus 3.75% and matures
on July 19, 2001. The remaining portion of the CIT Loans bear interest at
LIBOR plus 3.0% and mature in September 2000. These loans are
collateralized by various seismic drilling units, support equipment and
aircraft.
In the year ended December 31, 1999, the Company privately placed a
total of $7.5 million in subordinated debentures with an affiliate of the
Company. Notes with a principal of $5.0 million bear interest at 12% per
annum and mature on March 1, 2004. An additional $2.5 million of notes
bear interest at 12.5% per annum until December 31, 1999, at which time
the rate increased by 0.5% per month not to exceed 20% per annum. This
portion of the notes mature on March 1, 2005, with interest payable March
1 of each year. In connection with these debentures, the Company issued
warrants to purchase up to 1,937,500 shares of the Company's common stock
at an exercise price of$5.00, $3.00 and $2.00 per share for 1,600,000
shares, 300,000 shares and 37,500 shares, respectively. The warrants in
relation to the 1,600,000 shares vest equally over four years commencing in
1999 until 2002, unless the debentures are paid in full, in which case,
those warrants that have not become exercisable will become void. All
warrants that become exercisable will expire on March 1, 2004. The
warrants for the remaining 337,500 shares vest immediately and expire on
March 1, 2005. The proceeds of all of these notes were used for current
working capital purposes. The fair value of all warrants is included as
paid-in-capital and the effective interest rate over the term of the
debt, including the coupon and the amortization of the fair value of the
warrants, is approximately 19%. The amount of the three notes included in
subordinated debt is $7.2 million.
In December 1999, February 2000 and April 2000, the Company received
from an affiliate of the Company $1,000,000, $500,000 and $350,000,
respectively, pursuant to three preferred stock subscription agreements for
an aggregate of 1,850 shares of preferred stock. The preferred stock,
which was issued on April 26, 2000, has an 8% cumulative dividend rate, is
convertible into common stock with an initial conversion rate of $2.50, is
redeemable at the option of the Company at par plus unpaid dividends,
contains a liquidation preference of $1,000 per share and has voting
rights only with respect to matters that would reduce the ranking
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of the stock compared to other classes of stock. The Company issued an
additional 300 shares of the preferred stock to the affiliate in May 2000
for $300,000. The funds were used for debt service and to fund operations.
The Company currently expects minimal capital expenditures for the
remainder of 2000.
YEAR 2000 UPDATE
By the end of 1999, the Company completed its remediation and testing
of critical information technology and non-information technology systems.
As a result of those efforts, the Company experienced no significant
disruptions in those systems and it is believed those systems successfully
responded to the year 2000 date change. The Company expended appropriately
in connection with remediating its systems. Management is not aware of any
material problems resulting from year 2000 issues, either with product or
service offerings, internal systems or the products and services of third
parties. The Company will continue to monitor its critical computer
applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent year 2000 matters that may arise are
addressed promptly.
FORWARD-LOOKING STATEMENTS
This Quarterly Report contains certain "forward-looking statements"
within in 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.
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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: May 15, 2000 /S/ John H. Untereker
---------------------------------------
John H. Untereker
President and Chief Executive Officer
May 15, 2000 /S/ Peter H. Nielsen
---------------------------------------
Peter H. Nielsen
Executive Vice President,
Chief Financial Officer and Treasurer
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OMNI ENERGY SERVICES CORP.
EXHIBIT INDEX
EXHIBIT
NUMBER
2.1 Exchange Agreement between the members of OMNI
Geophysical, L.L.C. and OMNI Energy Services Corp. (the
"Company")(1)
2.2 Exchange Agreement by and among American Aviation
Incorporated, American Aviation L.L.C. and OMNI
Geophysical, L.L.C., dated as of July 1, 1997.(2)
3.1 Amended and Restated Articles of Incorporation of
the Company(2)
3.2 Bylaws of the Company, as amended.(1)
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.(2)
27.1 Financial Data Schedule
________________________
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration Statement No. 333-36561).
E-1