(OMNI ENERGY SERVICES CORP. LOGO) NEWS RELEASE Nasdaq: OMNI
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4500 NE Evangeline Thwy o Carencro, LA 70520 o Phone o 337-896-6664 o
Fax 337-896-6655
FOR IMMEDIATE RELEASE NO. 04-37
FOR MORE INFORMATION CONTACT: G. Darcy Klug, Executive Vice President
PHONE: (337) 896-6664
OMNI REPORTS THIRD QUARTER RESULTS
Revenues Up 41%; Aviation Unit Consolidation Begins;
New Environmental Unit Exceeds Expectations
CARENCRO, LA - NOVEMBER 16, 2004 - OMNI ENERGY SERVICES CORP. (NASDAQ
NM: OMNI), reported today an operating loss of ($0.7) million, ($0.07) per
diluted share, for the three month period ended September 30, 2004. Revenues for
the third quarter of 2004 were $14.4 million, a 41% increase over revenues for
the same three month period ended September 30, 2003. After interest expense,
including non-cash accounting charges of $(0.7) million related to the Company's
6.5% Subordinated Convertible Debentures, OMNI reported a net loss from
continuing operations before income taxes of ($2.6) million, ($0.23) per diluted
share. For the three month period ended September 30, 2003 OMNI previously
reported net income from continuing operations before income taxes of $1.1
million on revenues of $10.2 million. Non-GAAP Operating Cash Flow (which we
define as earnings before interest, taxes, depreciation and amortization) was
$1.1 million for the quarter ended September 30, 2004 as compared to $2.5
million for the same quarter ended September 30, 2003. A reconciliation of this
non-GAAP measure to net loss from continuing operations is attached to this
release.
During the third quarter of 2004 the Company initiated a plan to
consolidate its aviation operations including the elimination of specific
duplicative managerial positions and the closing of certain aviation facilities
(collectively referred to herein as the "Discontinued Aviation Operations") and
re-certification of helicopters acquired through the November 2003 acquisition
of American Helicopters, Inc. In connection with the planned consolidation, the
Company reported a loss of $(1.5) million, $(0.13) per diluted share, related to
the Discontinued Aviation Operations.
On the results of each business unit, James C. Eckert, OMNI's Chief
Executive Officer, offered the following comments:
SEISMIC DRILLING SERVICES
"Our Seismic Drilling unit (comprised of seismic drilling, survey and
permitting services) reported gross profits of $0.8 million, 12.0%, for the
third quarter of 2004 on revenues of $7.1 million. This same business unit
reported gross profits of $2.4 million, 26.2%, on revenues of $9.0 million for
the three month period ended September 30, 2003. Revenues declined in the three
month 2004 period as compared to the same 2003 three month period due to (i)
lower permitting revenues in 2004, and (ii) project interruptions caused by
third party permitting and weather delays during the 2004 quarter," said Eckert.
"Currently, backlog for our Seismic Drilling unit is strong for this
time of the year. Poor weather conditions and third party permitting delays on
projects scheduled to be completed earlier in 2004 have resulted in work being
pushed into the fourth quarter of 2004 and the first quarter of 2005. As a
result, our Seismic Drilling unit is unusually active for this time of the year.
All of our drilling equipment that we can man with personnel is working and
remains scheduled at these levels well into 2005," continued Eckert.
"Third party permitting and weather delays, however, are not without a
cost to our bottom line. While we are able to invoice our customers for certain
stand-by charges during these delays, the amounts recovered are only sufficient
to recover a small portion of our stand-by costs. Further, seismic drilling
profitability has been adversely impacted throughout 2004 with significantly
greater levels of lower-margined, highland work, than was contracted in 2003. In
2003, approximately 52% of our seismic drilling contracts were higher-margin,
Transition Zone projects where we control 85% of the market, as compared to
2004, where only 38% of our work has been performed on Transition Zone
projects," added Eckert.
AVIATION SERVICES
"We've previously announced that our strategic initiative includes
expanding our current aviation fleet of 26 helicopters. To achieve this
objective, we are growing our fleet organically as well as having discussions
with certain targeted acquisitions. If completed, this business strategy would
(i) double the size of our fleet and (ii) add certain operational capabilities
which we believe are essential to establishing solid long-term growth and
profitability in this business segment. To improve the overall profitability
within this business unit and prepare for certain future equipment needs of
these possible targeted acquisitions, we initiated a plan during the third
quarter of 2004 to consolidate our aviation operations. While final cost
estimates are not yet complete, the plan includes the Discontinued Aviation
Operations and re-certifying our aviation fleet under a single FAA 135
certificate. Further, during this process we reviewed our aviation customer base
and have cancelled certain contracts whose returns were significantly less than
those we have established for our aviation operations. While certain significant
one-time charges have been and will continue to be incurred in connection with
this consolidation plan, it is important to note that OMNI's Aviation Services
business unit will emerge as a much more efficient business unit, better
positioned for us to build on in coming quarters," said Eckert.
"The implementation of the consolidation plan required substantial
third quarter cost and investment to upgrade and re-certify certain units in our
aviation fleet. As a result, our Aviation Services was able to report gross
profits of only $0.3 million, 9.4%, on revenues of $3.0 million, for the third
quarter of 2004. For the same three month period ended September 30, 2003, we
reported gross profits of $0.4 million, 27.9%, on revenues of $1.3 million,"
added Eckert.
"The 2004 year has been impacted by approximately $(0.8) million of
costs incurred in capital improvements, $(0.6) million, and re-certification
expense of the aviation fleet, $(0.2) million, added with the November 2003
acquisition of American Helicopters, Inc. and $(1.5) million of net costs
incurred with the Discontinued Aviation Operations, including severance costs
for terminated employees. Currently, 4 helicopters have been upgraded and
re-certified onto our FAA 135 certificate and 10 helicopters remain to be
upgraded, re-certified and moved onto our certificate. We are making a
substantial investment, at this time, in our aviation fleet. When the plan is
complete and available synergies are captured, we believe we will have
established this business unit as a recognized leading provider of
transportation services in the shallow waters of the Gulf of Mexico," continued
Eckert.
ENVIRONMENTAL SERVICES
"We are pleased with the initial performance of our Environmental
Services unit, formed with the June 2004 acquisition of Trussco, Inc. For the
first three months under OMNI's direction, this business segment reported gross
profits of $1.6 million, 38.2%, on revenues of $4.3 million. These operating
results were posted in spite of six named tropical storms during the third
quarter of 2004, which adversely impacted this business unit's offshore
operations. Currently, our Environmental Services unit is extremely active
assisting customers as they work to resume normal production levels in the Gulf
of Mexico. These production levels were interrupted in the third quarter of 2004
by the effects of Hurricane Ivan which caused severe structural damage to
certain offshore production platforms and pipelines," commented Eckert.
"To assist in developing this business unit and to further evidence
OMNI's commitment to maintaining the highest standards of safety and quality
control, Shawn L. Rice has joined OMNI as its Vice President - QHSE (Quality,
Health, Safety and Environment). Shawn joins the Company after more than twenty
years of international and domestic management experience with WesternGeco, a
subsidiary of Schlumberger. Since December 2000, he held the position of Vice
President, QHSE for WesternGeco's worldwide operations. In this capacity, he
developed and managed all aspects of WesternGeco's QHSE structure, systems and
programs for a base of more than 16,000 employees. Prior to December 2000, Shawn
held various management positions with Western Geophysical including Business
Services Manager responsible for Human Resources, QHSE and training for more
than 8,000 employees. He holds an engineering degree from Colorado School of
Mines and is a welcomed addition to OMNI's Senior Management Team," added
Eckert.
"We expect to continue pursuing additional managerial talent to support
the growth of our business units. We firmly believe that it is imperative to
align the interests of our key managers with those of our stockholders.
Accordingly, we have initiated a program to increase the number of shares
available under our Employee Stock Option Plan for the purpose of attracting and
maintaining high caliber, managerial talent necessary for the long-term success
of OMNI," said Eckert.
ADMINISTRATIVE COSTS AND EXPENSES
"General and administrative costs increased $2.3 million, from $1.1
million during the three month period ended September 30, 2003 to $3.4 million
during the same 2004 three month period. Of this increase (i) $1.3 million is
attributable to the June 2004 acquisition of Trussco, Inc.; (ii) $0.2 million
results from certain non-cash accounting charges related to the
Subordinated Convertible Debentures and (iii) $0.5 million is principally
attributable to increased legal and accounting fees," said Eckert.
"Trussco has historically maintained a substantially larger sales and
marketing department than has OMNI. Plans are currently being developed to
consolidate company-wide sales and marketing into one department and broaden the
services marketed by each. Importantly, this sales and marketing consolidation
will significantly increase the exposure of all of our business units to the
broader customer base we now service thereby affording OMNI substantial
cross-selling opportunities. We are also implementing programs to further
consolidate certain administrative functions. We continue to evaluate certain
potential strategic transactions focusing on maximizing stockholder value,"
added Eckert.
FINANCING COSTS
"The June 2004 acquisition of Trussco, the November 2003 acquisition of
American Helicopters, Inc. and the issuance of a total of $15.1 million of 6.5%
Subordinated Convertible Debentures in February 2004 and April 2004 resulted in
$0.5 million of the $1.4 million increase in interest expense. Further, we
recorded non-cash accounting charges of $0.7 million related to our Subordinated
Convertible Debentures during the three months ended September 30, 2004. The
remaining increase in our financing costs resulted from higher levels of debt
incurred with the organic expansion of our aviation fleet combined with higher
interest rates in 2004 versus 2003," commented Eckert.
"The issuance of the Convertible Debentures prevented a 5 million share
dilution to our stockholders at a point in time when less than 10 million shares
were outstanding. This additional debt combined with the acquisition debt from
Trussco and American Helicopters has significantly increased our debt-to-equity
ratios. The proposed $100 million Senior Credit facility is proposed at rates
and terms more attractive than our existing credit agreements. While this
proposed Senior Credit Facility partially addresses our long-term financing
needs, the Company steadfastly opposes adverse dilution to our stockholders,"
said Eckert.
"We are scheduled to close the proposed Senior Credit Facility in the
near-term. Accordingly, to reflect the impact of this proposed credit agreement
and other financial matters in our financial statements, we are deferring the
filing of our Form 10-Q for the quarter ended September 30, 2004 to coincide
with the completion of this proposed Senior Credit Facility," added Eckert.
CONCLUDING COMMENTS
"In short, OMNI has not performed as originally planned for the 2004
year. Seismic Drilling, a traditionally cyclical business, has been hurt this
year with an unusually high percentage of lower-margin highland contracts, poor
weather and third party permitting delays. Additionally, the integration of the
acquisition of American Helicopters, Inc. has required significant financial
investments that are now being committed to incorporate operational and
organizational changes necessary to establish our Aviation Services unit as a
recognized leader in providing safe, reliable offshore transportation services.
Improving returns in Seismic Drilling and Aviation Services business units,
combined with growth in our Environmental Services unit, will provide the basis
for OMNI to maximize stockholder value, whether organically or through strategic
initiative," concluded Eckert.
Headquartered in Carencro, LA, OMNI Energy offers a broad range of
integrated services to geophysical companies engaged in the acquisition of
on-shore seismic data and through its aviation division, transportations
services to oil and gas companies operating in the shallow, offshore waters of
the Gulf of Mexico. The company provides its services through several business
units: Geophysical Support Services, Aviation Transportation Services and
Environmental Services. OMNI's services play a significant role with geophysical
companies who have operations in marsh, swamp, shallow water and the U.S. Gulf
Coast also called transition zones and contiguous dry land areas also called
highland zones.
Forward-looking statements in this release are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks
associated with OMNI's dependence on activity in the oil and gas industry, labor
shortages, international expansion, dependence on significant customers,
seasonality and weather risks, competition, technological evolution, the outcome
of pending litigation, completion of strategic transactions under consideration
by OMNI, the completion of its recently announced Senior Credit Facility, the
availability of cash flow from operations to satisfy future Put Options, and
other risks detailed in the Company's filings with the Securities and Exchange
Commission.
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(In thousands, except per share data)
<Table>
<Caption>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- -------------------------------
2004 2003 2004 2003
---------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
Operating revenue...................................... $ 14,367 $ 10,218 $ 37,863 $ 26,834
Operating expenses..................................... 11,697 7,617 30,080 20,312
---------------- ------------- ------------- ------------
Gross profit........................................... 2,670 2,601 7,783 6,522
General and administrative expenses.................... 3,416 1,090 7,853 3,381
---------------- ------------- ------------- ------------
Operating income (loss)................................ (746) 1,511 (70) 3,141
Interest expense....................................... (1,613) (202) (3,222) (650)
Other expense, net..................................... (192) (170) (339) (250)
----------------- -------------- -------------- -------------
Income (loss) from continuing operations before income
taxes................................................ (2,551) 1,139 (3,631) 2,241
Income tax benefit..................................... -- (300) -- (625)
---------------- -------------- ------------- -------------
Net income (loss) from continuing operations........... (2,551) 1,439 (3,631) 2,866
Loss from discontinued operations...................... (1,465) -- (1,538) --
------------------ -------------- --------------- -------------
Net income (loss)...................................... (4,016) 1,439 (5,169) 2,866
Preferred stock dividends.............................. -- (242) (490) (242)
---------------- -------------- ------------- -------------
Net income (loss) applicable to common and common
equivalent shares.................................... $ (4,016) $ 1,197 $ (5,659) $ 2,624
================ ============= ============= ============
Basic income (loss) per share:
Income (loss) from continuing operations........... $ (0.23) $ 0.14 $ (0.40) $ 0.30
Loss from discontinued operations.................. $ (0.13) $ -- $ (0.13) $ --
Net income (loss) applicable to common and common
equivalent shares................................. $ (0.36) $ 0.14 $ (0.53) $ 0.30
Diluted income (loss) per share:
Income (loss) from continuing operations........... $ (0.23) $ 0.11 $ (0.40) $ 0.28
Loss from discontinued operations.................. $ (0.13) $ -- $ (0.13) $ --
Net income (loss) applicable to common and common
equivalent shares................................. $ (0.36) $ 0.11 $ (0.53) $ 0.28
Weighted average common shares outstanding:
Basic.............................................. 11,160 8,742 10,723 8,741
Diluted............................................. 11,160 13,388 10,723 10,290
</Table>
Set forth below is a reconciliation to GAAP measures of the pro forma measures
used herein. Management uses this non-GAAP information to measure the operating
results and effectiveness of our ongoing business. We believe this measurement
is important to our investors because it allows them to evaluate more
effectively the Company's performance using the same measurements that
management uses. These non-GAAP financial measures may not be comparable to
similarly titled measurements used by other companies and should not be used as
a substitute for net income, earnings per share or other GAAP operating
measurements. The results shown below include results from July 1 through
September 30, 2004 and 2003.
RECONCILIATION OF HISTORICAL
GAAP BASIS RESULTS TO HISTORICAL
NON-GAAP BASIS INFORMATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
----------------------- ---------------------
Net Income (loss) from continuing operations before income taxes $ (2,551) $ 1,139
Add: Interest Expense.......................................... 1,613 202
Depreciation and Amortization........................... 1,803 1,007
Other expense, net...................................... 192 170
----------------------- -----------------------
Non-GAAP Operating Cash Flow................................... $ 1,057 $ 2,518
======================= =======================
</Table>
<Table>
<Caption>
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
----------------------- ---------------------
Diluted Earnings Per Share:
Income (loss) from continuing operations....................... $ (0.23) $ 0.11
Income tax (benefit)........................................... $ -- $ (0.02)
Interest expense............................................... $ 0.14 $ 0.02
Other expense, net............................................. $ 0.02 $ 0.01
---------------------- ---------------------
Operating Income (loss)..................................... $ (0.07) $ 0.12
====================== =====================
</Table>