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, 1998
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
(Address of principal executive offices) 70520
(Zip Code)
Registrant's telephone number, including area code: (318) 896-6664
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of August 10, 1998 there were 15,791,867 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
TABLE OF CONTENTS
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and December 31,
1997........................................................... 1
Consolidated Statements of Income for the three and six months
ended June 30, 1998
and 1997.................................................. 3
Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1997.................................... 4
Notes to Financial Statements................................. 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 7
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.. 11
Part II - Other Information
Item 2 - Changes in Securities and Use of Proceeds................... 11
Item 4 - Submission of Matters to a Vote of Security Holders......... 12
Item 6 - Exhibits and Reports on Form 8-K............................ 12
Signatures.................................................................S-1
Exhibit Index..............................................................E-1
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Thousands of dollars)
ASSETS June 30, December 31,
1998 1997
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 1,295 $ 8,723
Accounts receivable, net 20,102 11,958
Parts and supplies inventory 6,566 2,988
Deferred tax asset 212 212
Prepaid expenses and other 3,074 1,753
---------- ----------
Total current assets 31,249 25,634
---------- ----------
PROPERTY AND EQUIPMENT:
Land 359 359
Building and improvements 4,726 3,949
Drilling, field and support equipment 27,251 21,940
Shop equipment 707 408
Office equipment 749 582
Aircraft 9,830 9,266
Vehicles 4,078 3,448
Construction in progress 1,552 800
---------- ----------
49,252 40,752
Less: accumulated depreciation 4,808 2,909
---------- ----------
Total property and equipment 44,444 37,843
---------- ----------
OTHER ASSETS:
Goodwill, net 12,214 10,680
Other 1,696 756
---------- ----------
Total other assets 13,910 11,436
---------- ----------
Total assets $ 89,603 $ 74,913
========== ==========
The accompanying notes are an integral part of these financial
statements.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Thousands of dollars)
LIABILITIES AND EQUITY June 30, December 31,
1998 1997
----------- ------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 4,482 $ 5,713
Accounts payable 5,488 5,998
Accrued expenses 2,960 1,772
Unearned revenue 1 637
----------- ------------
Total current liabilities 12,931 14,120
----------- ------------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 15,705 14,558
Line of credit 8,547 ---
Deferred taxes 1,650 1,650
----------- ------------
Total long-term liabilities 25,902 16,208
----------- ------------
EQUITY:
Common Stock, $.01 par value, 45,000,000
shares authorized; 15,791,867 and 15,726,282
issued and outstanding 158 157
Additional paid-in capital 44,886 44,038
Retained earnings 5,746 390
Cumulative translation adjustment (20) ---
----------- ------------
Total equity 50,770 44,585
----------- ------------
Total liabilities and equity $ 89,603 $ 74,913
=========== ============
The accompanying notes are an integral part of these financial
statements.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Operating revenue $ 24,250 $ 11,594 $ 42,579 $ 17,014
Operating expenses 15,632 8,175 28,360 12,503
---------- ---------- ---------- ----------
Gross profit 8,618 3,419 14,219 4,511
General and administrative expenses 2,565 544 4,836 1,274
---------- ---------- ---------- ----------
Operating income 6,053 2,875 9,383 3,237
Interest expense 429 344 736 622
Other income 229 12 281 16
---------- ---------- ---------- ----------
200 332 455 606
---------- ---------- ---------- ----------
Income before taxes 5,853 2,543 8,928 2,631
Income tax expense 2,342 --- 3,572 ---
---------- ---------- ---------- ----------
Net income $ 3,511 2,543 $ 5,356 2,634
========== ==========
Pro forma tax provision 1,017 1,052
---------- ----------
Pro forma net income S 1,526 $ 1,579
========== ==========
Net income per share:
Basic $ 0.22 $ 0.24 $ 0.34 $ 0.25
Diluted (a) $ 0.22 $ 0.24 $ 0.34 $ 0.25
Pro forma income per share:
Basic $ 0.14 $ 0.15
Diluted (a) $ 0.13 $ 0.12
Weighted average shares outstanding:
Basic 15,769 10,709 15,748 10,709
Diluted 16,163 10,750 15,991 10,729
- --------------
(a)Gives effect to the payment of dividends on the outstanding preferred units
of OMNI Geophysical, L.L.C. of approximately $137,500 and $275,000,
respectively, for the three and six month periods ended June 30, 1997.
The accompanying notes are an integral part of these financial statements.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(THOUSANDS OF DOLLARS)
SIX MONTHS ENDED JUNE 30,
--------------------------------
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,356 $ 2,631
Adjustments to reconcile net income to net cash provided by (used
in) operating activities-
Depreciation 2,044 845
Amortization 319 35
Loss on fixed asset disposition 42 10
Deferred compensation 72 ---
Provision for bad debts 275 ---
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade (7,525) (3,716)
Other 210 (61)
Inventory (2,553) (901)
Prepaid expenses 320 206
Other (2,540) (196)
Increase (decrease) in liabilities-
Accounts payable (277) 2,269
Unearned revenue (637) ---
Due to affiliates and stockholders/members --- 3
--------- ---------
Net cash provided by (used in) operating activities (4,894) 1,125
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 2,984 ---
Purchase of fixed assets (10,472) (5,768)
Acquisitions, net of cash received (2,856) ---
--------- ---------
Net cash used in investing activities (10,344) (5,768)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 6,754 3,255
Principal payments on long-term debt (7,491) (1,378)
Net borrowings on line of credit 8,547 3,942
Capital contributions --- 1,078
Distributions to members --- (321)
--------- ---------
Net cash provided by financing activities 7,810 6,576
NET INCREASE (DECREASE) IN CASH (7,428) 1,933
CASH, at beginning of period 8,723 39
--------- ---------
CASH, at end of period $ 1,295 $ 1,972
SUPPLEMENTAL CASH FLOW DISCLOSURES: ========= =========
CASH PAID FOR INTEREST $ 769 $ 558
========= =========
CASH PAID FOR TAXES $ 1,911 $ ---
========= =========
The accompanying notes are an integral part of these 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, 1997 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Certain reclassifications have been made to the prior year's financial
statements in order to conform with the classifications adopted for reporting
in fiscal 1998.
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.
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.
Furthermore, demand for seismic data acquisition activity by oil and gas
companies in the first quarter is generally lower than at other times of the
year. As a result, the Company's revenue and gross profit during the first
quarter of each year are typically low as compared to the other quarters.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share," which simplifies the standards required under
existing accounting rules for computing earnings per share and replaces the
presentation of primary earnings per share and fully diluted earnings per share
with basic earnings per share ("basic EPS") and diluted earnings per share
("diluted EPS"), respectively. Basic 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 period. 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.
Dilutive common equivalent shares for the three and six month periods ended
June 30, 1998 and 1997 are 16,163,329; 15,991,435; 10,750,016 and 10,729,404,
respectively, all attributable to stock options.
NOTE 3. LONG-TERM DEBT
On January 20, 1998, the Company restructured its credit arrangements with
Hibernia National Bank. Under the restructured facility (the "Credit
Facility"), the Company refinanced an $11.0 million loan, obtained a $10.0
million revolving line of credit to finance working capital requirements, and
obtained a $9.0 million line of credit to finance capital expenditures and
acquisitions. As of June 30, 1998, the Company had approximately $22.1 million
outstanding under the Credit Facility. The Credit Facility has a final
maturity of January 20, 2000, and bears interest at LIBOR plus an applicable
margin, ranging from 1.25% to 2.25% (7.125% at June 30, 1998).
NOTE 4. ACQUISITIONS
In April 1998, the Company acquired Eagle Surveys International, Inc., a
seismic survey support company, headquartered in Houston, Texas. The aggregate
purchase price was $1.8 million consisting of $1.1 million in cash and 53,039
shares of common stock.
In April 1998, the Company acquired the assets of Coastal Turbines, Inc., a
helicopter support company, based in Lafayette, Louisiana. The aggregate
purchase price was approximately $1.2 million consisting of $1.1 million in
cash and 4,546 shares of common stock.
In May 1998, the Company acquired Hamilton Drill Tech, Inc., a specialty
seismic drilling support company, headquartered in Canada. The purchase price
was approximately $0.9 million in cash.
These acquisitions were accounted for using the purchase method of accounting.
The excess of cost over the estimated fair value of the net assets acquired
resulted in goodwill of approximately $1.6 million. The operating results of
each of the acquired companies have been included in the consolidated
statements of income from the date of acquisition. The pro forma effect of the
acquisitions as though they occurred as of the beginning of each period
presented is not material.
In July 1997, the Company acquired substantially all of the assets and
liabilities of American Aviation Incorporated ("American Aviation") for
approximately $7.9 million in cash, stock and assumed debt (approximately $6.7
million). In October 1997, the company acquired American Helicopter Drilling,
Inc. ("American Helicopter") for approximately $3.6 million in cash and stock.
The following summarized unaudited income statement data reflects the Company's
results of operations as if the American Aviation and American Helicopter
transactions had taken place on January 1, 1997:
UNAUDITED PRO FORMA RESULTS
------------------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
(Thousands of dollars)
Revenue $ 21,353
Net income $ 2,369
Basic income per share $ 0.22
NOTE 5. RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. Management believes the implementation of this
statement will not have a material effect on its results of operations or
financial statement disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, 1997.
GENERAL
Demand. Demand for the Company's services is principally affected by
conditions affecting geophysical companies engaged in the acquisition of 3-D
seismic data. The level of activity among geophysical companies is primarily
affected by the level of capital expenditures by oil and gas companies for
seismic data acquisition activities. A number of factors influence 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. Onshore 3-D seismic data
acquisition activity has substantially increased over the past few years;
however, any significant reduction in seismic exploration activity in the areas
where the Company operates would result in a reduction in the demand for the
Company's services and could have a material adverse effect on the Company's
financial condition and results of operations.
Within the last decade, improvements in drilling and production
techniques and the acceptance of 3-D imaging as an exploration tool have
resulted in significantly increased seismic activity throughout the Transition
Zone (the marsh, swamp, shallow water and contiguous dryland areas along the
U.S. Gulf Coast). Due to this increased demand, the Company has significantly
increased its capacity, as measured by drilling units, support equipment and
employees. In addition, the Company has expanded the geographic scope of its
operations to Alaska, the Rocky Mountain region and Western states, the U.S.
plains areas and Canada. Recently, the Company also announced its intention to
expand into the South American market, initially in Bolivia. This expansion
has led to significant increases in the Company's revenue and generally
commensurate increases in operating expenses and selling, general and
administrative expenses. If anticipated expansion plans are realized,
management would expect these expenses to continue to increase as a direct
correlation to the growth in its operations.
Backlog. Most of the Company's seismic drilling projects are awarded
pursuant to a competitive bidding process. Once the Company's bid on a
particular project has been accepted and a start date for the project has been
scheduled, the Company will include the project in its backlog. As of June 30,
1998, the Company's backlog was $87.8 million, compared to $70.0 million at
December 31, 1997. Typically, the Company's backlog is higher at the end of
the first and fourth quarters as the Company's customers tend to plan their
exploration budgets for the coming year and award projects accordingly during
the first and fourth quarters of each year. Projects currently included in the
Company's backlog are subject to rescheduling or termination without penalty at
the option of the customer, which could substantially reduce the amount of
backlog currently reported and the revenue generated from the backlog.
Historically, the Company has not experienced a large volume of project delays
or terminations, and those projects that have been delayed or terminated have
typically been replaced by unscheduled projects. Nevertheless, delay or
termination of a number of large projects in the Company's existing backlog
could have a material adverse effect on the Company's revenue, net income and
cash flow.
Seasonality and Weather. 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 the winter
months than in summer months. Furthermore, demand for seismic data acquisition
activity by oil and gas companies in the first quarter is generally lower than
at other times of the year. In addition, the Company's operations in the Rocky
Mountain area and in Alaska and Canada are subject to the seasonal climatic
conditions of those areas. As a result, the Company's revenue and gross profit
during the first quarter of each year are typically less as compared to the
other quarters.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ---------------------------
1998 1997 1998 1997
----------- ----------- --------- ---------
Operating revenue $ 24,250 $ 11,594 $ 42,579 $ 17,014
Operating expense 15,632 8,175 28,360 12,503
----------- ----------- --------- ---------
Gross profit 8,618 3,419 14,219 4,511
General and administrative expenses 2,565 544 4,836 1,274
----------- ----------- --------- ---------
Operating income 6,053 2,875 9,383 3,237
Interest expense 429 344 736 622
Other income 229 12 281 16
----------- ----------- --------- ---------
Income before taxes 5,853 2,543 8,928 2,631
Income tax expense 2,342 --- 3,572 ---
----------- ----------- --------- ---------
Net income $ 3,511 $ 2,543 $ 5,356 $ 2,631
=========== =========== ========= =========
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
Operating revenues increased 109%, from $11.6 million for the three month
period ended June 30, 1997 to $24.3 million for the three month period ended
June 30, 1998. Internal growth resulting from the increase in industry demand
for 3-D seismic data accounted for approximately $4.9 million, or 39%, of this
increase. The remaining increase was due to the acquisition of six companies
in 1997 and three in the second quarter of 1998 and an increase in the rates
charged by the Company on selected drilling projects. In the second quarter of
1998, the Company's aviation division contributed approximately $2.9 million in
revenues, while the Company's survey division generated revenues of
approximately $5.1 million, a $4.9 million increase over June 30, 1997 survey
revenues of $0.2 million. The Company employed 760 employees for both field
and administrative operations at June 30, 1998 compared to 455 at June 30,
1997, a 67% increase. As of June 30, 1998, the Company's drilling capacity, as
measured by drilling units, had increased 132% to 202 units compared to 87
units at June 30, 1997. At June 30, 1997, the Company operated one helicopter,
compared to 20 at June 30, 1998, of which 19 were owned by the Company.
Operating expenses increased 90%, from $8.2 million in the three month
period ended June 30, 1997 to $15.6 million in the three month period ended
June 30, 1998, due to both the internal growth of the Company in 1997 and in
the first six months of 1998 and the expanded scope of the Company's operations
that resulted from the acquisitions described above. Total payroll expense
increased 81% from $3.7 million in the second quarter of 1997 to $6.7 million
in the second quarter of 1998, due to the significant increase in the size of
the Company's workforce. Repairs and maintenance costs were $1.7 million in
the three month period ended June 30, 1998, a 70% increase over the three month
period ended June 30, 1997 costs of $1.0 million, primarily due to the increase
in the number and utilization of the Company's seismic drilling and
transportation equipment. The Company's surveying division incurred $1.9
million in contract service expenses from third party survey companies during
the second quarter of 1998, an increase of $1.8 million over the second quarter
of 1997. Explosives costs increased from $1.1 million to $1.6 million for the
three month periods ended June 30, 1997 and 1998, respectively, due to the
increased number of projects for which the Company provided explosives.
Depreciation expense increased 120% to $1.1 million in the second quarter of
1998, from $0.5 million in the second quarter of 1997, primarily due to the
increased number of seismic drilling and support equipment units owned by the
Company, and the substantial increase in the number of aircraft owned by the
Company.
Gross profit increased 153%, from $3.4 million to $8.6 million in the
three months ended June 30, 1997 and 1998, respectively. Gross margins
increased from 29% in the second quarter of 1997 to 35% in the second quarter
of 1998. The lower margins in the second quarter of 1997 were a result of a
decreased utilization of assets, which was not matched with decreases in the
Company's workforce.
General and administrative expenses were $2.6 million for the three
months ended June 30, 1998, compared to $0.5 million for the three months ended
June 30, 1997, a 420% increase. Increases in office personnel, payroll taxes
and insurance accounted for $1.1 million of this increase. Demands of being a
public company and expanded operations contributed to this increase. Other
components of general and administrative expenses, including business
promotions, travel and entertainment, utilities, office and rentals increased
$0.7 million from $0.3 million in the second quarter of 1997 to $1.0 million in
the second quarter of 1998. Additionally, bad debt and amortization expense
totaled $0.3 million for the three month period ended June 30, 1998, compared
to a negligible amount in the second quarter of 1997.
Income tax expense was $2.3 million for the second quarter of 1998. The
Company converted to a taxable entity on December 4, 1997. Accordingly, no
provision was made for income taxes during the first six months of 1997. The
proforma adjustment included in the Company's statement of income reflects a
provision for income taxes at a combined 40% federal and state income tax rate.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Operating revenues increased 151% from $17.0 million for the six month
period ended June 30, 1997 to $42.6 million for the six month period ended June
30, 1998. Drilling revenues increased $13.5 million, or 80%, from $16.8
million to $30.3 million for the six month periods ended June 30, 1997 and
1998, respectively. Survey revenues increased $7.1 million from $0.2 million
in the six month period ended June 30, 1997 to $7.3 million for the six month
period ended June 30, 1998. Aviation revenues were $5.0 million for the six
months ended June 30, 1998; there were no similar revenues for the first six
months of 1997. The acquisition of six companies in 1997 and three companies
in 1998 is the primary factor contributing to the significant increase in the
Company's revenues. These acquisitions contributed $0.2 million in revenues
for the six months ended June 30, 1997, compared to $15.4 million in the six
months ended June 30, 1998, a $15.2 million increase. Internal growth
resulting from increased industry demand for 3-D seismic data accounted for
$10.4 million, or 41%, of the increase in revenues.
Operating expenses increased $15.9 million, or 127%, from $12.5 million
to $28.4 million in the six months ended June 30, 1997 and 1998, respectively.
Total payroll expense increased $7.5 million to $13.1 million in the six months
ended June 30, 1998. Contract services increased from $0.2 million in the
first six months of 1997 to $3.1 million in the first six months of 1998.
Repairs and maintenance costs were $3.4 million in the six month period ended
June 30, 1998, a 100% increase over the six month period ended June 30, 1997
costs of $1.7 million. Explosives costs increased $1.3 million, or 93%, from
$1.4 million to $2.7 million in the first six months ended June 30, 1997 and
1998, respectively. Depreciation expense increased 150% from $0.8 million in
the first six months of 1997 to $2.0 million in the first six months of 1998.
These increases were the result of increases in the size of the Company's
workforce, increases in the number and utilization of the Company's drilling
and support equipment, and the expanded scope of the Company's operations due
primarily to the acquisitions described above. Although operating expenses
increased significantly, as a percentage of revenue operating expenses
decreased from 74% to 67% for the first six months ended June 30, 1997 and
1998, respectively.
Gross profit increased 216% from $4.5 million in the first six months
ended June 30, 1997 to $14.2 million in the first six months ended June 30,
1998. The nine acquired companies contributed $5.9 million in gross profit and
had gross margins of 38% for the six months ended June 30, 1998. Combined
gross margins for the Company increased from 26% to 33% for the six month
periods ended June 30, 1997 and 1998.
General and administrative expenses were $4.8 million for the six months
ended June 30, 1998, a 269% increase over the six months ended June 30, 1997
expenses of $1.3 million. Increases in office personnel, payroll taxes and
insurance accounted for $1.6 million, or 46%, of this increase. Other
components of general and administrative expenses, including office and
supplies, travel and entertainment, business promotions, rent and professional
services increased $1.3 million from $0.5 million for the first six months of
1997 to $1.8 million for the first six months of 1998. Additionally, bad debt
and amortization expense totaled $0.6 million for the six month period ended
June 30, 1998, with generally no similar expense in the first six months ended
June 30, 1997.
Income tax expense was $3.6 million for the first six months of 1998.
The Company converted to a taxable entity on December 4, 1997. Accordingly, no
provision was made for income taxes during the first six months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had approximately $1.3 million in cash,
compared to approximately $8.7 million at December 31, 1997. The decrease in
cash was primarily due to capital expenditures in the first six months of 1998,
totaling approximately $13.3 million, including the cash portion of the
consideration paid for the three acquisitions completed in the second quarter
of 1998, which totaled approximately $2.9 million. Expenditures during the
first six months of 1998 were partially offset by the sale of the Company's
fixed-wing charter division for approximately $2.9 million in cash and by net
cash provided by financing activities of $7.8 million. The remaining decrease
in cash is attributable to the increase in accounts receivable for the six
month period ended June 30, 1998. The Company's cash position at December 31,
1997 was also higher than normal due to the receipt of the net proceeds of the
Company's initial public offering of common stock that was completed in
December 1997. The Company had working capital of $18.3 million at June 30,
1998 compared to approximately $11.5 million at December 31, 1997. This
increase was primarily due to increased accounts receivable generated from
operations.
On January 20, 1998, the Company restructured its credit arrangements
with its commercial lender, Hibernia National Bank. Under the restructured
facility (the "Credit Facility"), the Company refinanced an $11.0 million term
loan, obtained a $10.0 million revolving line of credit to finance working
capital requirements, and obtained a $9.0 million line of credit to finance
capital expenditures and acquisitions. As of June 30, 1998, the Company had
approximately $22.1 million of indebtedness outstanding under the Credit
Facility. Outstanding indebtedness under the Credit Facility bears interest at
LIBOR plus an applicable margin, ranging from 1.25% to 2.25% (7.125% at June
30, 1998). The Credit Facility has a final maturity of January 20, 2000, is
required to be guaranteed by all of the Company's U.S. subsidiaries, requires
the Company to maintain certain financial ratios, imposes certain limitations
on the Company's ability to pay cash dividends and is collateralized by a
mortgage on the Company's land and buildings and by substantially all of the
Company's assets not used as collateral for the Company's asset-based loans.
The Company had approximately $6.6 million in outstanding indebtedness in
addition to outstanding indebtedness under the Credit Facility at June 30,
1998. The majority of this debt (approximately $5.9 million) consists of
several asset-based financing loans with another lender. Of the principal
outstanding under these loans, approximately $4.9 million bears interest at
LIBOR plus 3.75% and matures on July 19, 2001. The remaining portion of this
loan bears interest at LIBOR plus 3.0% and is collateralized by various seismic
drilling, support equipment and aircraft. Remaining indebtedness at June 30,
1998 was approximately $0.7 million, including approximately $0.5 million owed
to finance companies incurred to finance certain of the Company's insurance
premiums.
In the second quarter of 1998, the Company made capital expenditures of
approximately $5.8 million, including $3.8 million for the purchase or
construction of seismic drilling and support equipment, $1.4 million for the
purchase of three helicopters, $0.2 million for the purchase of support
vehicles and $0.4 for various building and leasehold improvements. Currently,
the Company is committed to additional estimated capital expenditures for the
remainder of 1998 totaling approximately $11.0 million, including $7.1 million
for additional drilling, survey and other support equipment, $2.2 million for
helicopters, $0.5 million for vehicles, $0.5 million for the acquisition of
currently leased property and $0.4 million for computers and improvements.
In addition to the capital expenditures mentioned above, the Company
spent approximately $2.9 million in cash (net of cash received) for the
acquisition of three companies during the second quarter of 1998. In April
1998, the Company acquired by merger Eagle Surveys International, Inc., a
seismic survey support company headquartered in Houston, Texas, for $1.1
million in cash and $0.7 million in common stock. In April 1998, the Company
acquired the assets of Coastal Turbines, Inc., a helicopter support company
based in Lafayette, Louisiana, for approximately $1.1 million in cash and $0.1
million in common stock. In May 1998, the Company acquired Hamilton Drill
Tech, Inc., a specialty drilling support company headquartered in Canada, for
approximately $0.9 million in cash. These acquisitions added total revenues of
$1.9 million during the second quarter of 1998, consisting primarily of $1.8
million in survey revenue.
In June 1998, the Company executed a letter of intent with Edwin Waldman
Attie outlining a potential joint venture with Mr. Waldman that would
facilitate the Company's expansion into the South American Market. The letter
of intent provides that the Company and Mr. Waldman would establish a Cayman
Islands corporation (the "JV Company"), which would be owned 60% by the Company
and 40% by Mr. Waldman. In exchange for a 40% interest in the JV Company, Mr.
Waldman would transfer to the JV Company (i) all of the physical assets of
Liderco, Ltda. ("Liderco"), a Bolivian-based seismic support company that
primarily conducts line-cutting and survey operations, and (ii) 40% of the
goodwill and executory contracts of Liderco. Mr. Waldman would sell the
remaining 60% of Liderco's goodwill and executory contracts to the Company for
approximately $2.3 million in cash and shares of the Company's common stock,
which the Company would then contribute to the JV Company. The Company would
also contribute $0.5 million in cash to the JV Company and agree to contribute
an additional $2.0 million in cash or equipment by the end of the year. In
addition, the Company would provide a $525,000 line of credit to the JV
Company. This transaction is subject to the Company's entering into definitive
agreements with Mr. Waldman with respect to these matters, completion of the
Company's due diligence review of Liderco and its operations and approval of
these transactions of the Company's Board of Directors. There can be no
assurance that the Company will consummate this transaction or that its final
terms, if consummated, will be the same as those disclosed herein.
Management believes that cash generated from operations and the Company's
Credit Facility will be sufficient to meet the Company's anticipated capital
expenditures for 1998. However, part of the Company's strategy is to acquire
companies with operations related or complementary to the Company's current
operations. Depending on the size of such future acquisitions, the Company may
require additional debt financing, possibly in excess of the limits of the
Credit Facility, or equity financing.
FORWARD-LOOKING STATEMENTS AND ASSUMPTIONS
This quarterly report on Form 10-Q may contain certain forward-looking
statements, including by way of illustration and not of limitation, statements
relating to the Company's liquidity, revenues, expenses and margins. Any
statement made herein that is not a historical fact is a forward-looking
statement. The Company strongly encourages readers to note that such
statements are based on assumptions made about the Company's financial
position, operations and industry which management considers reasonable at this
time. Most of the factors upon which such assumptions are made are beyond the
Company's ability to control or estimate precisely, and may in some cases be
subject to rapid and material changes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 2.CHANGES IN SECURITIES AND USE OF PROCEEDS
Sales of Unregistered Securities. As part of the consideration paid by
the Company for the assets of Coastal Turbines, Inc. ("Coastal Turbines"),
which were acquired on April 17, 1998, the Company issued 4,546 shares of its
common stock, $0.01 par value per share (the "Common Stock") to Coastal
Turbines. In addition, on May 5, 1998, the Company issued 53,039 shares of
Common Stock to Timothy J. Flaman, the sole shareholder of Eagle Surveys
International, Inc. ("Eagle"), as part of the consideration for the merger of
Eagle with and into the Company.
All of these shares of Common Stock were offered and sold without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), inasmuch as they were deemed not subject to the registration
requirements thereof pursuant to the exception provided in Section 4(2) of the
Securities Act for securities sold in transactions not involving any public
offering.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 28,
1998 (the "Annual Meeting"). Proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
At the Annual Meeting, David A. Jeansonne, Roger E. Thomas, Allen R.
Woodard, David E. Crays, Steven T. Stull, Crichton W. Brown and William W.
Rucks, IV were elected to serve as directors of the Company until the next
annual meeting of the Company's shareholders. The votes cast for or withheld
for each of the foregoing by the Company's shareholders are set forth below:
NAME FOR WITHHELD
- ----------------- ---------- --------
David A. Jeansonne 14,212,462 3,300
Roger E. Thomas 14,212,462 3,300
Allen R. Woodard 14,212,462 3,300
David E. Crays 14,212,462 3,300
Steven T. Stull 14,212,462 3,300
Crichton W. Brown 14,212,462 3,300
William W. Rucks, IV 14,212,462 3,300
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. See Exhibit Index on Page E-1
(b) REPORTS ON FORM 8-K. None.
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, 1998 /S/ DAVID A. JEANSONNE
----------------------
David A. Jeansonne
Chief Executive Officer
Dated: August 14, 1998 /S/ JOHN H. UNTEREKER
---------------------
John H. Untereker
Executive Vice President
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. NUMBERED PAGE
3.1 Amended and Restated Articles of Incorporation of the
Company.(1)
3.2 By-laws of the Company.(1)
10.1 Second Amendment to Amended and Restated Loan Agreement, by
and among the Company, certain of its subsidiaries and
Hibernia National Bank.
10.2 Employment Agreement and Non-Competition Agreement between
John H. Untereker and the Company.
27.1 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration Statement No. 333-36561).