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, 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
INCORPORATION OR ORGANIZATION) 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 July 24, 2000 there were 16,008,755 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, 2000 AND DECEMBER 31, 1999
(Thousands of dollars except per share data)
ASSETS June 30, December 31,
2000 1999
------------ ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 271 $ 104
Accounts receivable, net 2,798 3,011
Parts and supplies inventory 2,315 2,438
Prepaid expenses and other 1,574 2,601
Net assets of discontinued operations 829 1,160
------------ ------------
Total current assets 7,787 9,314
------------ ------------
PROPERTY AND EQUIPMENT:
Land 1,209 1,209
Buildings and improvements 4,992 5,047
Drilling, field and support equipment 27,645 27,776
Shop equipment 680 698
Office equipment 1,748 1,748
Vehicles 2,361 2,404
------------ ------------
38,635 38,882
Less: accumulated depreciation 10,052 8,277
------------ ------------
Total property and equipment 28,583 30,605
------------ ------------
OTHER ASSETS:
Goodwill, net 7,630 7,853
Other 419 342
------------ ------------
Total other assets 8,049 8,195
------------ ------------
Total assets $ 44,419 $ 48,114
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(Thousands of dollars except per share data)
LIABILITIES AND EQUITY June 30, December 31,
2000 1999
------------ ------------
(unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 11,453 $ 11,758
Line of credit 3,089 1,949
Accounts payable 3,771 3,326
Accrued expenses 1,634 2,076
------------ ------------
Total current liabilities 19,947 19,109
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 401 1,186
Subordinated debt 8,186 7,185
------------ ------------
Total long-term liabilities 7,987 8,371
------------ ------------
TOTAL LIABILITIES 27,933 27,480
------------ ------------
MINORITY INTEREST 228 238
------------ ------------
EQUITY:
Common Stock, $.01 par value, 45,000,000
shares authorized; 16,008,755 issued and
outstanding 160 160
Preferred Stock, 2,150 shares issued and
oustanding 2,150 1,000
Additional paid-in capital 47,597 47,597
Accumulated deficit (34,220) (28,348)
Cumulative translation adjustment (29) (13)
------------ ------------
Total equity 16,258 20,396
------------ ------------
Total liabilities and equity $ 44,419 $ 48,114
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Operating revenue $ 1,440 $ 7,054 $ 5,643 $ 14,503
Operating expenses 2,628 8,586 7,546 15,025
------------ ------------ ------------ ------------
Gross profit (loss) (1,188) (1,532) (1,903) (522)
General and administrative expenses 1,100 2,627 2,533 4,894
------------ ------------ ------------ ------------
Operating income (loss) (2,288) (4,159) (4,436) (5,416)
Interest expense 727 790 1,414 1,280
Other income (expense) 6 59 (30) 88
------------ ------------ ------------ ------------
721 731 1,444 1,192
------------ ------------ ------------ ------------
Income (loss) before taxes (3,009) (4,890) (5,880) (6,608)
Income tax expense (benefit) --- (960) --- (1,627)
------------ ------------ ------------ ------------
Net income (loss), before
minority interest (3,009) (3,930) (5,880) (4,981)
Loss of minority interest (5) (308) (10) (343)
------------ ------------ ------------ ------------
Loss from continuing operations (3,004) (3,622) (5,870) (4,638)
Loss from discontinued operations --- (701) --- (910)
------------ ------------ ------------ ------------
Net loss $ (3,004) $ (4,323) $ (5,870) $ (5,548)
============ ============ ============ ============
Net loss per share:
Continuing operations $ (0.19) $ (0.23) $ (0.37) $ (0.30)
Discontinued operations --- (0.04) --- (0.05)
------------ ------------ ------------ ------------
$ (0.19) $ (0.27) $ (0.37) $ (0.35)
Weighted average shares outstanding:
Diluted 16,009 15,962 16,009 15,960
The accompanying notes are an integral part of these condensed consolidated
financial statements.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(THOUSANDS OF DOLLARS)
SIX MONTHS ENDED JUNE 30,
-----------------------------
2000 1999
------------ ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,870) $ (5,548)
Adjustments to reconcile net income to net cash
provided by used in operating activities-
Depreciation 1,817 2,315
Amortization 264 443
Loss on fixed asset disposition 34 ---
Deferred compensation --- 48
Provision for bad debts --- 70
Interest expense on detachable warrants --- 51
Minority interest (10) (343)
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade 220 (188)
Other (23) 1,261
Inventory 124 78
Prepaid expenses 1,358 700
Other (122) 182
Increase (decrease) in liabilities-
Accounts payable and accrued expenses 3 (1,973)
------------ ------------
Net cash used in operating activities (2,205) (2,904)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 171 8,917
Purchase of fixed assets --- (1,330)
------------ ------------
Net cash provided by (used in) investing
activities 171 7,587
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Subordinated debt 1,000 3,000
Proceeds from issuance of preferred stock 1,150 ---
Principal payments on long-term debt (1,089) (10,768)
Net borrowings (payments) on line of credit 1,140 (157)
------------ ------------
Net cash provided by financing activities 2,201 (7,925)
------------ ------------
Effect of exchange rate changes in cash --- 6
NET INCREASE (DECREASE) IN CASH 167 (3,236)
CASH, at beginning of period 104 3,333
------------ ------------
CASH, at end of period $ 271 $ 97
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID FOR INTEREST $ 930 $ 715
============ ============
CASH PAID FOR TAXES $ --- $ ---
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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 June 30, 2000, the Company was in violation of
certain of its covenants under these agreements. The Company has received
waivers from the creditors via amendments to the loan agreements which
waived financial covenant violations through September 30, 2000. In
addition, approximately $13 million will be due in September 2000. The
Company does not have sufficient resources available to make the required
payments in September 2000 should the creditors require the Company to
repay the amounts due.
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 issuing additional equity capital
and the sale of operating assets or divisions. In this regard, during the
second quarter of 2000, the Company's discussions with a seismic company
regarding a possible merger transaction were discontinued due to an
inability of the parties to reach an agreement on the terms, and the
Company has retained Raymond James & Associates to assist in raising
additional equity capital for the Company.
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 1,733,397 and 957,067 options outstanding in the quarters
ended June 30, 1999 and 2000, respectively, that were excluded from the
calculation of diluted EPS because of the antidilutive impact. On the same
basis, warrants to purchase 1,937,500 and 2,337,500 shares of common stock
were also excluded for the three months and six months ended June 30, 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 June 12,
2000, currently provides the Company with a $8.5 million term loan and a
$5.0 million revolving line of credit to finance working capital
requirements. The loans bear interest at prime plus 3% and have a final
maturity of September 30, 2000. As of June 30, 2000, the Company had
approximately $13 million outstanding under the Hibernia Facility.
At June 30, 2000, the Company also had 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 a 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 will increase by 0.5% per month not to exceed 20% per annum. This
portion of the notes matures 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%. In May and June 2000 the Company privately
placed an additional $0.4 million and $0.6 million, respectively, in
subordinated debentures with an affiliate of the Company. The notes bear
interest at 12.5% per annum through June 30, 2000, at which time the rate
increases by 0.5% per month not to exceed 20% per annum. The notes mature
on June 1, 2005 and July 1, 2005, respectively, with interest payable July
1 of each year. In connection with these debentures, the Company issued
warrants to purchase up to 400,000 shares of the Company's common stock at
an exercise price of $1.50, which vest immediately and expire on July 1,
2005. The amount of the notes included in subordinated debt in the
accompanying balance sheet at June 30, 2000 is $8.2 million.
In July 2000 the Company privately placed approximately $0.3 million in
subordinated debentures with an affiliate of the Company. The note bears
interest at 12.5% per annum until July 31, 2000, at which time the rate
will increase by 0.5% per month not to exceed 20% per annum. This note
matures on August 1, 2005, with interest payable July 1 of each year. In
connection with this debenture, the Company issued warrants to purchase
up to 333,333 shares of the Company's common stock at an exercise price
of $0.75. The warrants vest immediately and expire on August 1, 2005.
In addition, in July 2000 the Company entered into a series of
transactions with an 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 Hibernia National Bank. These transactions included the forgiveness
of $1.0 million in principal on the oldest subordinated debt owed by the
Company to the affiliate in exchange for the Company transferring
ownership rights and title to the affiliate of approximately $1.0 million
in trade receivables of the major customer. Contemporaneously therewith,
the Company placed $1.0 million in new subordinated debt with the
affiliate. The Company incurred a fixed interest rate charge of 1.5% on
the $1.0 million in principal advanced against the trade receivables
transferred and will incur interest at the prime rate of interest plus
two percentage points on the balance outstanding until such time as the
trade receivables have been fully paid by the major customer. The
Company has guaranteed repayment of the trade receivables and expects
that the trade receivables will be fully collected by the end of October
2000. The subordinated note bears interest at 12.5% per annum until
July 31, 2000, at which time the rate will increase by 0.5% per month,
not to exceed 20% per annum. This note matures on August 1, 2005, with
interest payable July 1 of each year. In connection with this debenture,
the Company issued warrants to purchase up to 1,333,333 shares of the
Company's common stock at an exercise price of $0.75. The warrants vest
immediately and expire on August 1, 2005.
NOTE 4. PREFERRED STOCK SUBSCRIPTION
In December 1999 and February and April 2000, the Company received from an
affiliate of the Company $1,000,000, $500,000, and $350,000, respectively,
pursuant to preferred stock subscription agreements for an aggregate
of 1,850 shares of preferred stock that was issued on April 26, 2000. 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 preferred stock 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.
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,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net Income (Loss) $ (3,004) $ (4,323) $ (5,870) $ (5,548)
Other Comprehensive Income:
Foreign currency translation adjustments (18) 23 (18) 39
------------ ------------ ------------ ------------
Comprehensive Income (Loss) $ (3,022) $ (4,300) $ (5,888) $ (5,509)
============ ============ ============ ============
NOTE 6. SEGMENT INFORMATION
The following shows industry segment information for its two operating
segments, Drilling and Survey, for the three and six month periods ended
June 30, 2000 and 1999:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Operating revenues: (1)(2)
Drilling $ 1,432 $ 5,075 $ 4,405 $ 11,233
Survey 8 1,979 1,238 3,274
------------ ------------ ------------ ------------
Total $ 1,440 $ 7,054 $ 5,643 $ 14,507
============ ============ ============ ============
<FN>
________________________
(1) Net of inter-segment revenues of $0.2 million for the three month
period ended June 30, 1999 and $0.3 for the six month period ended
June 30, 1999.
(2) Includes $1.8 and $2.4 million of integrated services in South America
for the three and six month periods ended June 30, 1999, respectively.
---------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Gross profit (loss):
Drilling $ (913) $ (564) $ (1,462) $ 739
Survey (184) (850) (222) (982)
Other (91) (118) (219) (280)
------------ ------------ ------------ ------------
Total $ (1,188) $ (1,532) $ (1,903) $ (523)
General and administrative expenses 1,100 2,627 2,533 4,893
Other expense, net 716 731 1,434 849
------------ ------------ ------------ ------------
Income (loss) before taxes $ (3,004) $ (4,890) $ (5,870) $ (6,265)
============ ============ ============ ============
Identifiable Assets:
Drilling $ 28,018 $ 32,561
Survey 5,296 5,495
Other 11,105 18,343
------------ ------------
Total $ 44,419 $ 56,399
============ ============
Capital Expenditures:
Drilling $ --- $ 22 $ --- $ 792
Survey --- 5 --- 23
Other --- 311 --- 431
------------ ------------ ------------ ------------
Total $ --- $ 338 $ --- $ 1,246
============ ============ ============ ============
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. The receivable and
the reserve offset each other in the net accounts receivable number presented
on the balance sheet.
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 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 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, 1999 and 2000, the Company's
operating revenues and loss from continuing operations were $7.1 million and
$1.4 million, and $4.9 million and $3.0 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 is
continuing its efforts to adjust to current market conditions by downsizing
its operations. In November 1999, the Company adopted a plan to dispose of
its aviation division; the Company is continuing to pursue this disposition.
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 September 30, 2000. In
addition, as of June 30, 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 of these covenant violations
through September 30, 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,
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.
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Operating revenue $ 1,440 $ 7,054 $ 5,643 $ 14,503
Operating expense 2,628 8,586 7,546 15,025
------------ ------------ ------------ ------------
Gross profit (1,188) (1,532) (1,903) (522)
General and administrative expenses 1,100 2,627 2,533 4,894
------------ ------------ ------------ ------------
Operating loss (2,288) (4,159) (4,436) (5,416)
Interest expense 727 790 1,414 1,280
Other income (expense) 6 59 (30) 88
------------ ------------ ------------ ------------
Loss before income taxes (3,009) (4,890) (5,880) (6,608)
Income tax benefit --- (960) --- (1,627)
------------ ------------ ------------ ------------
Net loss, including minority interest (3,009) (3,930) (5,880) (4,981)
Minority interest (5) (308) (10) (343)
------------ ------------ ------------ ------------
Loss from continuing operations (3,004) (3,622) (5,870) (4,638)
Loss from discontinued operations --- (701) --- (910)
------------ ------------ ------------ ------------
Net loss $ (3,004) $ (4,323) $ (5,870) $ (5,548)
------------ ------------ ------------ ------------
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30,
1999
Operating revenues decreased 81%, or $5.6 million, from $7.1 million
for the three months ended June 30, 1999 to $1.4 million for the three
months ended June 30, 2000. As a result of the decline in seismic
activity, drilling revenues decreased $3.7 million to $1.4 million for the
three months ended June 30, 2000; likewise, survey revenues decreased 100%
from the three months ended June 30, 1999 to $0 million for the three
months ended June 30, 2000.
Operating expenses decreased 70%, or $6.0 million, from $8.6 million
for the three months ended June 30, 1999 to $2.6 million for the three
months ended June 30, 2000. Declines in payroll costs accounted for 70% of
this decrease as operating payroll expense decreased from $5.2 million to
$1.0 million for the quarters ended June 30, 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 97 for the three
months ended June 30, 2000 compared to 201 for the three months ended June
30, 1999. Also as a result of the lower activity levels in the second
quarter of 2000 as compared to the second quarter of 1999, explosives and
supplies, and repairs and maintenance expenses decreased $0.5 million each
from $0.6 million to $0.1 million each for the three months ended June 30,
1999 and 2000, respectively.
Gross profit margins were (22)% and (86)% for the three months ended
June 30, 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 $1.5 million from $2.6
million for the three months ended June 30, 1999 to $1.1 million for the
three months ended June 30, 2000, a 58% decrease. Payroll costs decreased
$1.0 million from $1.4 million for the second quarter of 1999 to $0.4
million for the second quarter of 2000. These decreases are due primarily
to lower personnel levels as the average number of administrative employees
declined to 28 for the three months ended June 30, 2000, from 74 for the
three months ended June 30, 1999. Travel and entertainment, and
communications and utilities expenses decreased $0.1 million each, from
$0.2 million for the three months ended June 30, 1999 to $0.1 million each
for the three months ended June 30, 2000, due to the decreased activity
levels.
Interest expense decreased $0.1 million from $0.8 million for the
three month period ended June 30, 1999 to $0.7 million for the three month
period ended June 30, 2000, due to lower average levels of debt outstanding
during the periods.
Due to the loss for the period ended June 30, 1999, the Company
recorded an income tax benefit of $1.0 million. The Company continued to
record a valuation allowance during the period ended June 30, 2000 against
the Company's net operating loss carryforwards.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Operating revenues decreased 62%, or $8.9 million, from $14.5 million
for the six months ended June 30, 1999 to $5.6 million for the six months
ended June 30, 2000. As a result of the decline in seismic activity,
drilling and survey revenues decreased $6.3 million to $4.4 million and
$0.5 million to $1.2 million, respectively, for the six months ended June
30, 2000. The Company's South American joint venture had revenues of $2.4
million for the six months ended June 30, 1999; there were no similar
revenues for the six months ended June 30, 2000.
Operating expenses decreased 50%, or $7.5 million, from $15.0 million
for the six months ended June 30, 1999 to $7.5 million for the three months
ended June 30, 2000. Declines in payroll costs accounted for 67% of this
decrease as operating payroll expense decreased from $8.4 million to $3.4
million for the six months ended June 30, 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 139 for the six months ended June
30, 2000 compared to 203 for the six months ended June 30, 1999. Also as a
result of the lower activity levels in the first half of 2000 as compared
to the first half of 1999, explosives and fuel costs, repairs and
maintenance expenses, rentals and leases, and insurance expenses decreased
$1.8 million from $3.5 million to $1.7 million for the six months ended
June 30, 1999 and 2000, respectively.
Gross profit margins were (4)% and (34)% for the six months ended June
30, 1999 and 2000, respectively. The variance is primarily attributable to
substantially lower domestic revenues relative to the fixed costs of the
Company's Drilling segment.
General and administrative expenses decreased $2.4 million from $4.9
million for the six months ended June 30, 1999 to $2.5 million for the six
months ended June 30, 2000, a 49% decrease. Payroll costs decreased $1.4
million from $2.5 million for the first half of 1999 to $1.1 million for
the first half of 2000. These decreases are due primarily to lower
personnel levels as the average number of administrative employees declined
to 30 for the six months ended June 30, 2000, from 76 for the six months
ended June 30, 1999. Travel and entertainment, rentals and leases, and
communications and utilities expenses decreased $0.2 million each, from
$0.3 million each for the six months ended June 30, 1999 to $0.1 million
each for the six months ended June 30, 2000, due to the decreased activity
levels.
Interest expense increased $0.1 million from $1.3 million for the six
month period ended June 30, 1999 to $1.4 million for the six month period
ended June 30, 2000, due to increased interest rates charged by the
Company's primary lender.
Due to the loss for the six month period ended June 30, 1999, the
Company recorded an income tax benefit of $1.6 million. The Company
continued to record a valuation allowance during the six month period ended
June 30, 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 June 30, 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 to the
loan agreements which waived financial covenant violations through
September 30, 2000 and extended maturities through September 30, 2000. The
Company does not have sufficient resources available to make the required
payments in September 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 issuing additional equity capital
and the sale of operating assets or divisions. In this regard, during the
second quarter of 2000, the Company's discussions with a seismic company
regarding a possible merger transaction were discontinued due to an
inability of the parties to reach an agreement on the terms, and the
Company has retained Raymond James & Associates to assist in raising
additional equity capital for the Company.
At June 30, 2000, the Company had approximately $0.3 million cash
balance compared to approximately $0.1 million at December 31, 1999. The
Company had a $(12.2) million working capital deficit at June 30, 2000,
compared to $(9.8) million at December 31, 1999. The decrease in working
capital is also 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 in June 2000, currently provides the
Company with a $8.5 million term loan and a $5.0 million revolving line of
credit to finance working capital requirements. The loans bear interest at
prime plus 3% and have a final maturity of September 30, 2000. As of June
30, 2000, the Company had approximately $13.0 million outstanding under the
Hibernia Facility.
At June 30, 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
increases 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%. In May and June 2000 the Company
privately placed an additional $0.4 million and $0.6 million, respectively,
in subordinated debentures with an affiliate of the Company. The notes bear
interest at 12.5% per annum through June 30, 2000, at which time the rate
increases by 0.5% per month not to exceed 20% per annum. The notes mature on
June 1, 2005 and July 1, 2005, respectively, with interest payable July 1 of
each year. In connection with these debentures, the Company issued warrants
to purchase up to 400,000 shares of the Company's common stock at an exercise
price of $1.50, which vest immediately and expire on July 1, 2005. The amount
of the notes included in subordinated debt in the accompanying balance sheet
at June 30, 2000 is $8.2 million.
In July 2000 the Company privately placed approximately $0.3 million in
subordinated debentures with an affiliate of the Company. The note bears
interest at 12.5% per annum until July 31, 2000, at which time the rate
will increase by 0.5% per month not to exceed 20% per annum. This note
matures on August 1, 2005, with interest payable July 1 of each year. In
connection with this debenture, the Company issued warrants to purchase
up to 333,333 shares of the Company's common stock at an exercise price
of $0.75. The warrants vest immediately and expire on August 1, 2005.
In addition, in July 2000 the Company entered into a series of
transactions with an 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 Hibernia National Bank. These transactions included the forgiveness
of $1.0 million in principal on the oldest subordinated debt owed by the
Company to the affiliate in exchange for the Company transferring
ownership rights and title to the affiliate of approximately $1.0 million
in trade receivables of the major customer. Contemporaneously therewith,
the Company placed $1.0 million in new subordinated debt with the
affiliate. The Company incurred a fixed interest rate charge of 1.5% on
the $1.0 million in principal advanced against the trade receivables
transferred and will incur interest at the prime rate of interest plus
two percentage points on the balance outstanding until such time as the
trade receivables have been fully paid by the major customer. The
Company has guaranteed repayment of the trade receivables and expects
that the trade receivables will be fully collected by the end of October
2000. The subordinated note bears interest at 12.5% per annum until
July 31, 2000, at which time the rate will increase by 0.5% per month,
not to exceed 20% per annum. This note matures on August 1, 2005, with
interest payable July 1 of each year. In connection with this debenture,
the Company issued warrants to purchase up to 1,333,333 shares of the
Company's common stock at an exercise price of $0.75. The warrants vest
immediately and expire on August 1, 2005.
In December 1999 and February and April 2000, the Company received from
an affiliate of the Company $1,000,000, $500,000, and $350,000,
respectively, pursuant to preferred stock subscription agreements for an
aggregate of 1,850 shares of preferred stock that was issued on April 26,
2000. 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 preferred stock 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 currently expects minimal capital expenditures for the
remainder of 2000.
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.
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, 2000 /S/ JOHN H. UNTEREKER
John H. Untereker
President and Chief Executive Officer
Dated: August 14, 2000 /S/ PETER H. NIELSEN
Peter H. Nielsen
Executive Vice President, Chief Financial
Officer and Treasurer
EXHIBIT INDEX
EXHIBIT
NUMBER
3.1 Amended and Restated Articles of Incorporation of the Company,
as amended by Articles of Amendment dated April 26, 2000.
3.2 Bylaws of the Company, as amended through August 4, 2000.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's Articles
of Incorporation and Bylaws defining the rights of holders of
Common Stock.
4.2 Specimen Common Stock Certificate(1).
10.1 Eighth Amendment to Amended and Restated Loan Agreement, by and
among the Company, certain of its subsidiaries and Hibernia
National Bank, dated as of May 15, 2000.
10.2 Ninth Amendment to Amended and Restated Loan Agreement, by and
among the Company, certain of its subsidiaries and Hibernia
National Bank, dated as of June 12, 2000.
27.1 Financial Data Schedule.
________________________
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration Statement No. 333-36561).