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, 2002
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the transition period to
------- -------
COMMISSION FILE NUMBER 0-23383
OMNI ENERGY SERVICES CORP.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-1395273
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4500 N.E. EVANGELINE THRUWAY
CARENCRO, LOUISIANA 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 August 9, 2002 there were 9,101,825 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
-1-
ITEM 1. FINANCIAL STATEMENTS
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
(Thousands of dollars)
ASSETS June 30, December 31,
------ 2002 2001
------------- -------------
(unaudited) (Note 1)
CURRENT ASSETS:
Cash and cash equivalents $ 791 $ 1,233
Accounts receivable, net 6,227 5,250
Parts and supplies inventory 2,897 2,723
Prepaid expenses 1,239 857
Assets held for sale 694 630
------------- -------------
Total current assets 11,848 10,693
------------- -------------
PROPERTY AND EQUIPMENT:
Land 359 359
Buildings and improvements 4,505 4,505
Drilling, field and support equipment 26,126 24,834
Aviation equipment 4,526 5,109
Shop equipment 425 392
Office equipment 1,530 1,500
Vehicles 2,629 2,526
Construction in progress 225 50
------------- -------------
40,325 39,275
Less: accumulated depreciation 14,911 13,707
------------- -------------
Total property and equipment, net 25,414 25,568
------------- -------------
OTHER ASSETS:
Goodwill, net 3,926 2,006
Other 237 181
------------- -------------
Total other assets 4,163 2,187
------------- -------------
Total assets $ 41,425 $ 38,448
============= =============
The accompanying notes are an integral part of these financial statements.
-2-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
(Thousands of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
------------------------------------ 2002 2001
------------- -------------
(unaudited) (Note 1)
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt $ 2,600 $ 2,750
Accounts payable 3,897 2,598
Accrued expenses 1,765 2,843
Due to affiliates 1,056 175
------------- -------------
Total current liabilities 9,318 8,366
------------- -------------
LONG-TERM LIABILITIES:
Line of credit 3,003 2,012
Other long term liabilities 1,164 --
Long-term debt, less current maturities 7,909 9,289
------------- -------------
Total long-term liabilities 12,076 11,301
------------- -------------
TOTAL LIABILITIES 21,394 19,667
------------- -------------
MINORITY INTEREST 221 221
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred Stock, Series A, 7,500 shares issued and
outstanding; Series B, 4,600 shares issued and
outstanding 12,100 11,616
Common Stock, $.01 par value, 45,000,000
shares authorized; 9,101,825 issued and outstanding 91 91
Treasury Stock, 361,800 shares acquired at cost (706) (706)
Additional paid-in capital 56,831 56,825
Accumulated deficit (48,458) (49,183)
Cumulative translation adjustment (48) (83)
------------- -------------
Total equity 19,810 18,560
------------- -------------
Total liabilities and stockholders' equity $ 41,425 $ 38,448
============= =============
The accompanying notes are an integral part of these financial statements.
-3-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
Operating revenue $ 9,059 $ 5,985 $ 13,673 $ 10,197
Operating expenses 6,845 5,225 10,649 10,022
------------- ------------- ------------- -------------
Gross profit 2,214 760 3,024 175
General and administrative expenses 798 458 1,307 1,313
Asset impairment charges -- -- -- 180
------------- ------------- ------------- -------------
Operating income (loss) 1,416 302 1,717 (1,318)
Interest expense 259 278 478 925
Other income (expense) (15) 172 (32) 7,693
------------- ------------- ------------- -------------
274 106 510 6,768
------------- ------------- ------------- -------------
Income before taxes 1,142 196 1,207 5,450
Income taxes -- -- -- --
Net income 1,142 196 1,207 5,450
Accretion of preferred stock (242) (242) (484) (242)
------------- ------------- ------------- -------------
Net earnings (loss) applicable to
common and common equivalent shares $ 900 $ (46) $ 723 $ 5,208
============= ============= ============= =============
Basic net income (loss) per share: $ 0.10 $ (0.01) $ 0.08 $ 0.58
Diluted net income (loss) per share: $ 0.10 $ (0.00) $ 0.08 $ 0.51
Weighted average shares outstanding:
Basic 8,739 8,986 8,738 8,982
Diluted 9,004 10,078 9,019 10,150
The accompanying notes are an integral part of these financial statements.
-4-
OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(THOUSANDS OF DOLLARS)
Six months ended June 30,
-------------------------------
2002 2001
------------- -------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,207 $ 5,450
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation 1,776 1,609
Amortization 25 76
(Gain) loss on fixed asset disposition 15 (78)
Asset impairment and other charges -- 180
Provision for bad debts -- 59
Changes in operating assets and liabilities-
Decrease (increase) in assets-
Receivables-
Trade (341) (763)
Other (597) (511)
Inventory (20) 442
Prepaid expenses 945 483
Assets held for sale (64) 357
Other (2,001) (635)
Increase (decrease) in liabilities-
Accounts payable 1,864 (206)
Accrued expenses (1,643) (616)
Other long term liabilities 1,164 --
------------- -------------
Net cash provided by operating activities 2,330 5,847
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition paid with cash (2,076) --
Proceeds from disposal of fixed assets 703 117
Purchase of fixed assets, net 20 (183)
------------- -------------
Net cash used in investing activities (1,353) (66)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subordinated debt -- (3,209)
Repayment of subordinated debt -- 1,500
Proceeds from issuance of long-term debt -- 311
Principal payments on long-term debt (3,297) (3,456)
Proceeds from issuance of common stock 6 (101)
Due to affiliates 881 175
Net borrowings (payments) on line of credit 991 (1,235)
------------- -------------
Net cash used in financing activities (1,419) (6,015)
------------- -------------
NET DECREASE IN CASH (442) (234)
CASH, at beginning of period 1,233 317
------------- -------------
CASH, at end of period $ 791 $ 83
============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 478 $ 234
============= =============
Equipment acquired under capital lease $ 440 $ --
============= =============
Premiums financed with insurance carrier $ 1,280 $ --
============= =============
The accompanying notes are an integral part of these financial statements.
-5-
OMNI ENERGY SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements have been prepared without audit as permitted by the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to such rules and
regulations. However, the management of OMNI Energy Services Corp. 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 our Annual Report on Form 10-K for the year
ended December 31, 2001 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles.
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.
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, net of shares held in treasury 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 consolidated financial statements and related notes thereto include the
retroactive effect of a one for three reverse stock split effective July 3, 2002
(See Note 10). For the three and six months ended June 30, 2002, we had 313,345
and 311,350 options outstanding, respectively, and warrants to purchase 184,722
shares of common stock as of June 30, 2002 that were excluded from the
calculation of diluted EPS because they were antidilutive. Likewise, we had
130,471 and 97,138 options outstanding, respectively, for the three and six
months ended June 30, 2001 and warrants to purchase 234,722 shares of common
stock as of June 30, 2001 that were excluded from the calculation of diluted EPS
because they were antidilutive.
NOTE 3. LONG-TERM DEBT
Our primary credit facility is with Hibernia National Bank (the "Hibernia
Facility"). The Hibernia Facility, which was amended November 2, 2001, currently
provides us with a $2.0 million equipment loan, a $2.0 million real estate loan
and a $5.0 million revolving line of credit to finance working capital
requirements. The loans bear interest at prime plus 1.5% and have a final
maturity of August 31, 2004. As of June 30, 2002, we had approximately $6.4
million outstanding under the Hibernia Facility.
At June 30, 2002, we had approximately $1.9 million in outstanding debt pursuant
to agreements with The CIT Group (CIT), consisting of an asset-based financing
loan (the "CIT Loan"). The principal outstanding under the CIT Loan bears
interest at LIBOR plus 5.0%. The maturity date of the note has been extended to
August 2004. This loan is collateralized by various seismic drilling units and
support equipment.
At June 30, 2002, we had a note payable to a finance company with interest at
8%, to finance our aviation fleet. The loan amortizes over ten years, maturing
January 1, 2007 and is secured by our aviation fleet. The outstanding balance at
June 30, 2002 is approximately $4.1 million.
-6-
During the years ended December 31, 1999, 2000 and 2001, we privately placed
with an affiliate subordinated debentures totaling $7.5 million, $3.4 million
and $1.5 million, respectively. The debentures matured five years from their
date of issue and accrued interest at various rates ranging from a fixed rate of
12% per annum to a variable rate of interest starting at 12% per annum and
escalating to 20% per annum. In October 2000, we agreed to convert $4.6 million
of the subordinated debentures into our Series A Preferred Stock. In May 2001,
we agreed to pay the affiliate $3.0 million cash plus issue to the affiliate
$4.6 million of our Series B Preferred Stock in full satisfaction of all of the
remaining outstanding subordinated debentures including accrued interest of $1.8
million. This transaction resulted in the affiliate agreeing to forgive $1.0
million of indebtedness which has been reflected as a capital contribution from
the affiliate rather than as income in the accompanying financial statements.
(See Note 4).
In connection with the original issuance of the subordinated debentures, we
issued to the affiliate detachable warrants to purchase 1,912,833 shares of our
common stock, of which 967,000 have been cancelled as of June 30, 2002. The
remaining 945,833 warrants outstanding are all exercisable with exercise prices
ranging from $2.250 to $6.00 per share.
The following table summarizes the exercise prices of warrants to the affiliate
as of June 30, 2002:
Exercise Price Warrants
-------------- --------
$6.00 12,500
$4.50 172,222
$2.25 761,111
--------
945,833
NOTE 4. PREFERRED STOCK
At June 30, 2002 we had a total of 7,500 shares of Series A Preferred Stock, and
4,600 shares of Series B Preferred Stock issued and outstanding, at a total
liquidation value of $12.1 million.
The Series A Preferred Stock has an 8% cumulative dividend rate, is convertible
into our common stock with a conversion rate of $2.25, is redeemable at our
option at $1,000 per share plus accrued dividends, contains a liquidation
preference of $1,000 per share plus accrued dividends, has voting rights on all
matters submitted to a vote of our shareholders, has separate voting rights with
respect to matters that would affect the rights of the holders of the Preferred
Stock, and has aggregate voting rights of the affiliate limited to 49% of our
total outstanding common and preferred shares with voting rights. In respect to
the Series A Preferred Stock, the affiliate has agreed to waive its conversion
rights until our EBITDA (as defined) reaches a mutually agreed upon level. The
preferred shareholders have also agreed that dividends would not accrue on the
outstanding stock from April 2001 through June 2002. Dividends were accreted at
8% during the free dividend period. As of April 2001 there were approximately
$0.3 million of dividends in arrears relating to these outstanding shares of
Series A Preferred Stock.
In May 2001, we committed to issue 4,600 shares of Series B Preferred Stock to
an affiliate of ours in satisfaction of all outstanding principal and interest
owed under the subordinated debt agreements (See Note 3). These shares were
issued in March 2002. The Series B Preferred Stock has an 8% cumulative dividend
rate, is convertible into our common stock with an initial conversion rate of
$3.75, is redeemable at our option at $1,000 per share plus accrued dividends,
contains a liquidation preference of $1,000 per share plus accrued dividends and
has no voting rights until such time as it becomes convertible. The Series B
Preferred Stock does not have conversion rights until our EBITDA (as defined)
reaches a mutually agreed upon level, and until all shares of Series A Preferred
Stock become convertible. We have also agreed that dividends would not accrue on
the outstanding stock from May 2001 through June 2002. Dividends were accreted
at 8% during the free dividend period. As of May 2001 there were no dividends in
arrears relating to the outstanding shares of Series B Preferred Stock.
-7-
NOTE 5. SEGMENT INFORMATION
The following shows industry segment information for our four operating segments
- Drilling, Aviation, Survey, and Permitting for the three and six month periods
ended June 30, 2002 and 2001:
-8-
Three months ended June 30, Six months ended June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Operating revenues: (1)
Drilling $ 8,227 $ 4,642 $ 11,762 $ 7,936
Aviation 779 798 1,708 1,349
Survey -- 205 -- 482
Permitting 53 340 203 430
------------ ------------ ------------ ------------
Total $ 9,059 $ 5,985 $ 13,673 $ 10,197
============ ============ ============ ============
(1) Net of inter-segment revenues of $0.1 million for the three and six month
periods ended June 30, 2001.
Three months ended June 30, Six months ended June 30,
----------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Gross profit:
Drilling $ 2,235 $ 1,033 $ 2,474 $ 862
Aviation 133 (131) 866 (460)
Survey (30) (64) (69) (132)
Permitting 9 49 22 58
Other (Corporate) (133) (127) (269) (153)
------------ ------------ ------------ ------------
Total $ 2,214 $ 760 $ 3,024 $ 175
General and administrative expenses 798 458 1,307 1,313
Asset impairment -- -- -- 180
Other expense (income), net 274 106 510 (6,768)
------------ ------------ ------------ ------------
Income before taxes $ 1,142 $ 196 $ 1,207 $ 5,450
============ ============ ============ ============
Capital Expenditures (2):
Drilling $ 278 $ 191 $ 278 $ 195
Aviation -- -- -- --
Survey -- -- -- --
Permitting -- -- -- --
Other 29 4 30 4
------------ ------------ ------------ ------------
Total $ 307 $ 195 $ 308 $ 199
============ ============ ============ ============
(2) Net of assets acquired from AirJac (See Note 9) totaling $2.1 million.
Identifiable Assets: June 30, 2002 June 30, 2001
------------- -------------
Drilling $ 25,786 $ 22,574
Aviation 6,198 1,222
Survey 1,095 1,849
Permitting 54 --
Other 8,292 7,583
------------ ------------
Total $ 41,425 $ 33,228
============ ============
NOTE 6. RECENT PRONOUNCEMENTS
In July 2001, Statement of Financial Accounting Standards (SFAS) No. 141, "
Business Combinations" and SFAS No. 142, " Goodwill and Other Intangible Assets"
were issued. SFAS No. 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142,
goodwill and intangible assets with indefinite lives are no longer amortized but
are reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives
-9-
will continue to be amortized over their useful lives (but with no maximum
life). The amortization provisions of SFAS No. 142 apply to goodwill and
intangible assets acquired after June 30, 2001. With respect to goodwill and
intangible assets acquired prior to July 1, 2001, we adopted SFAS No. 142
effective January 1, 2002 and accordingly, no amortization of goodwill was
recorded in the quarter or six months ended June 30,2002. Goodwill amortization
expense for the quarter and six months ended June 30, 2001 were approximately
$26,000 and $48,000. The adoption of SFAS No. 142 did not have a significant
effect on our results of operations and financial condition.
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" was issued. These new rules on asset impairment supersede
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and was effective for our fiscal year
beginning January 1, 2002. Under SFAS No. 144 an impairment loss shall be
recognized if an evaluation of the carrying amount of an asset against the
undiscounted future cash flows associated with it is not sufficient to cover the
carrying value of such assets. An impairment loss shall also be recognized on
assets held for sale if the carrying amount of a long-lived asset or asset group
is not recognizable and exceeds the fair value. The adoption of SFAS No. 144 did
not have any impact on our financial statements.
In April 2002, Statement of Financial Accounting Standards (SFAS) No. 145,
"Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement
No. 13, and Technical Corrections" was issued SFAS No. 145 eliminates the
requirement under FASB Statement No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" (Statement 4) to report gains and losses from
extinguishments of debt as extraordinary items in the income statement.
Accordingly, gains or losses from extinguishments of debt for fiscal years
beginning after May 15, 2002 shall not be reported as extraordinary items unless
the extinguishment qualifies as an extraordinary item under the provisions of
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" (Opinion 30). The adoption of
SFAS 145 is not expected to have any impact on our financial statements upon
adoption.
NOTE 7. CONCENTRATION OF CREDIT RISK
We extend credit to customers and other parties in the normal course of
business. We regularly review outstanding receivables, and provide for estimated
losses through an allowance for doubtful accounts. In evaluating the level of
established reserves, we make judgments regarding the parties' ability to make
required payments, economic events and other factors. As the financial condition
of these parties change, circumstances develop or additional information becomes
available, adjustments to the allowance for doubtful account may be required.
Due to the nature of our industry, we have a concentration of credit risk. As a
result, adjustments to the allowance for doubtful accounts may be significant.
NOTE 8. ASSETS HELD FOR SALE
At June 30, 2002, we had $0.7 million in assets held for sale which includes 8
steel marsh buggies as well as the remaining assets of our South American
operation. We expect to dispose of the remaining assets held for sale during
2002. The carrying values, which we believe approximate fair market value of our
assets held for sale at June 30, 2002, is as follows (in thousands):
Asset Type June 30, 2002
---------- -------------
Steel marsh buggies $ 108
South American facility
and other 586
-------------
Total assets held for sale $ 694
=============
NOTE 9. ACQUISITION
On January 18, 2002 we acquired the assets of AirJac Drilling (AirJac), a
division of Veritas DGC Land, Inc., a seismic drilling support company
headquartered in New Iberia, Louisiana. The aggregate acquisition cost was $4.2
million, including $2.0 million cash, acquisition costs, assumption of a capital
lease and certain future consideration. In this acquisition we acquired
inventory, vehicles, shop equipment and drilling, field and support equipment.
We received advances from affiliates totaling approximately $1.3 million in
connection with the financing of this
-10-
transaction. At June 30, 2002 approximately $0.9 million remains outstanding of
which approximately $0.4 million is secured by treasury stock and approximately
$0.5 million of which is secured by accounts receivable from a customer. The
acquisition also resulted in the recognition of $1.9 million of goodwill
principally from discounts granted to Veritas in connection with minimum future
work. Offsetting liabilities have been recorded for these future minimum
discounts. The results of AirJac's operations have been included in our
consolidated financial statements since the acquisition date. The following
summarized unaudited data reflects our consolidated results of operations as if
the AirJac transaction had taken place on January 1, 2001 (in thousands):
Unaudited Pro forma Results
Three months ended Three months ended Six months ended Six months ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------------ ------------------ ---------------- ----------------
Revenue 9,059 8,843 13,673 16,302
Net operating income 1,416 885 1,717 636
Net income 1,142 87 1,207 5,442
Basic earnings per share $0.13 $0.01 $0.14 $0.61
Diluted earnings per share $0.13 $0.01 $0.13 $0.54
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition. The allocation of the
purchase price is subject to refinement as acquired asset and liability values
are being finalized and is expected to be completed by September 30,
2002(amounts in thousands):
Current assets $ 154
Property, plant, and equipment 2,101
Goodwill 1,920
Capital lease obligation assumed (179)
Obligation for future discounts (1,920)
------------
Net assets acquired $ 2,076
============
10. SUBSEQUENT EVENTS
On June 20, 2002 OMNI's stockholders approved a one for three reverse stock
split effective with the closing of the market on July 3, 2002. The consolidated
financial statements and related notes thereto give retroactive effect to the
reverse stock split.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains certain "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934 (the "Exchange Act"), which reflect
management's best judgment based on factors currently known. Actual results
could differ materially from those anticipated in these "forward looking
statements" as a result of a number of factors, including but not limited to
those discussed under the heading "Forward-Looking Statements." "Forward looking
statements" provided by us 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 our Annual Report
on Form 10-K for the year ended December 31, 2001.
GENERAL
Demand. We receive our revenues from customers in the energy industry.
Demand for our 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.
During 1999, with the reduction in the price of oil and gas, we began
to experience a decrease in demand for our services. In 2001, the market
experienced a rebound. Based upon bid activity and existing backlog, we expect
revenues to continue to improve in 2002.
Seasonality and Weather Risks. Our operations are subject to seasonal
variations in weather conditions and available daylight hours. Since our
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 rain, fog, and cold conditions and a
decrease in daylight hours.
Results of Operations Three months ended June 30, Six months ended June 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Operating revenue $ 9,059 $ 5,985 $ 13,673 $ 10,197
Operating expense 6,845 5,225 10,649 10,022
------------ ------------ ------------ ------------
Gross profit 2,214 760 3,024 175
General and administrative expenses 798 458 1,307 1,313
Asset impairment charges -- -- -- 180
------------ ------------ ------------ ------------
Operating income (loss) 1,416 302 1,717 (1,318)
Interest expense 259 278 478 925
Other income (expense) (15) 172 (32) 7,693
------------ ------------ ------------ ------------
Income before income taxes 1,142 196 1,207 5,450
Income taxes -- -- -- --
Net income 1,142 196 1,207 5,450
Accretion of preferred stock (242) (242) (484) (242)
------------ ------------ ------------ ------------
Net income (loss) applicable to common and
common equivalent shares $ 900 $ (46) $ 723 $ 5,208
============ ============ ============ ============
-12-
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001
Operating revenues increased 52%, or $3.1 million, from $6.0 million
for the three months ended June 30, 2001 to $9.1 for the three months ended June
30, 2002. Drilling revenues increased $3.6 million for the three months ended
June 30, 2002 as compared to the same three month period ended June 30, 2001.
However, this operating revenue increase was offset by a $0.5 million decline in
our permitting and survey revenues from $0.6 million for the second quarter of
2001 to $0.1 million for the second quarter of 2002. This decrease was primarily
attributable to our decision to concentrate personnel, equipment and available
working capital into more profitable segments of the seismic industry.
Operating expenses increased 31%, or $1.6 million, from $5.2 million
for the three months ended June 30, 2001 to $6.8 million for the three months
ended June 30, 2002. This increase is partially attributable to higher operating
payroll and payroll related costs, which increased $0.6 million from $2.1
million to $2.7 million for the three month periods ended June 30, 2001 and
2002, respectively. Our average number of field personnel increased by 37 from
167 employees during the second quarter of 2001 to 204 employees during the
second quarter of 2002. We currently utilize third party contractors to perform
survey and permitting services. Accordingly, third party contract services
increased $0.3 million during the three months ended June 30, 2002 as compared
to June 30, 2001 principally as a result of the drilling division's shortage of
personnel. Explosives and down hole expenses increased $0.7 million from the
three months ended June 30, 2001 to the same period of 2002 as a result of
increased drilling activity.
Gross profit margins were 24% for the three months ended June 30, 2002
as compared to 13% for the three months ended June 30, 2001. The increase in
profit margins in 2002 as compared to 2001 was attributable to a combination of
significantly greater domestic revenues resulting from increased seismic
activity, improved margins obtained for services rendered and implementation of
stringent controls over and a restructuring of our field operating expenses.
General and administrative expenses increased $0.3 million from $0.5
million for the three months ended June 30, 2001 to $0.8 million for the three
months ended June 30, 2002. Payroll and payroll related costs accounted for $0.1
million of this increase. The average number of administrative employees
increased from 24 during the second quarter of 2001 to 31 for the second quarter
of 2002. During the three month period ended June 30, 2001, we also renegotiated
certain vendor and lease agreements at terms more favorable than those
agreements previously in existence, resulting in a savings of approximately $0.3
million with no comparable adjustments in the three month period ended June 30,
2002. Theses increases were partially offset by a $0.2 million decrease in bad
debt expense due to the recovery of amounts previously expensed.
Interest expense remained constant at $0.3 million for the three months
ending June 30, 2001 and June 30, 2002.
No income tax expense was recognized on our income during the second
quarters of 2001 or 2002 as we expect to utilize our net operating loss
carryforwards, which have been reserved in prior periods, to offset our taxable
income during the periods.
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
Operating revenues increased 34%, or $3.5 million, from $10.2 million
for the six months ended June 30, 2001 to $13.7 million for the six months ended
June 30, 2002. Revenues from our drilling operations increased $3.9 million
principally as a result of an increase in seismic activity. The aviation
division also experienced an increase of $0.4 million, concentrating our focus
in the offshore aviation market. The permitting and survey divisions, however,
experienced a $0.7 million decrease in revenues over this same period,
attributable to our decision to concentrate personnel, equipment and available
working capital into more profitable segments of the seismic industry.
Operating expenses increased 6%, or $0.6 million, from $10.0 million
for the six months ended June 30, 2001 to $10.6 million for the six months ended
June 30, 2002. As a result of increased drilling activity for the seismic
industry, explosive supplies used in the drilling operations increased $0.8
million for the six months ended June 30, 2002 as compared to the same six month
period ended 2001. Contracting services increased $0.5 million during the six
month period ended 2002 as compared to the same six month period ended 2001
principally as a result of the drilling division's shortage of personnel. These
increases were partially offset by a $0.6 million decrease in repairs and
maintenance expenses on leased aviation equipment during the first half of 2002
as compared to the first half of 2001.
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Gross profit margins were 22% and 2% for the six months ended June 30,
2002 and 2001, respectively. The improvement in the profit margins is a direct
result of increased business activity in our more profitable business segments,
improved margins received for the services provided and more stringent controls
on operating expenses.
General and administrative expenses remained constant at $1.3 million
each for the six months ended June 30, 2001 and 2002. We realized approximately
$0.1 million in savings during the six month period ended June 30, 2001 from
renegotiating certain lease and vendor agreements with terms more favorable to
us than those agreements for prior periods with no corresponding savings for the
six month period ended June 30, 2002. These increases were partially offset by a
$0.1 million decrease in bad debt expense due to the recovery of amounts
previously expensed.
Restructuring and asset impairment charges decreased $0.2 million due
to revaluation of certain drilling equipment in 2001 with no corresponding
charges for the same period in 2002.
Interest expense decreased $0.4 million from $0.9 million for the six
month period ended June 30, 2001 to $0.5 million for the six month period ended
June 30, 2002. The reduction was a result of lower average debt outstanding
coupled with lower average interest rates during the periods.
No income tax expense was recognized on income during the first six
months of 2001 or 2002 as we expect to utilize our net operating loss
carryforwards, which have been reserved in prior periods, to offset our taxable
income during those periods.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, we had approximately $0.8 million in cash compared to
approximately $1.2 million at December 31, 2001. We had working capital of
approximately $2.5 million at June 30, 2002, compared to approximately $2.3
million at December 31, 2001. The increase in working capital from December 31,
2001 to June 30, 2002 is due primarily to the increase in accounts receivable
resulting from the increase in net sales.
Cash provided by operating activities was $2.3 million for the period
ended June 30, 2002. This compares to cash provided by operating activities
totalling $5.8 million for the period ended June 30, 2001 which included $7.5
million from the receipt of key-man life insurance proceeds used principally to
retire long term and subordinated debt.
Our primary credit facility is with Hibernia National Bank (the
"Hibernia Facility"). The Hibernia Facility, which was amended November 2, 2001,
currently provides us with a $2.0 million equipment loan, a $2.0 million real
estate loan and a $5.0 million revolving line of credit to finance working
capital requirements. The loans bear interest at prime plus 1.5% and have a
final maturity of August 31, 2004. As of June 30, 2002, we had approximately
$6.4 million outstanding under the Hibernia Facility, of which $3.0 million was
outstanding under the revolving line of credit, $1.6 million was outstanding
under the equipment term note, and $1.8 million was outstanding under the real
estate term note. Availability under the revolving line of credit is the lower
of: (i) $5.0 million or (ii) the sum of 80% of eligible accounts receivable,
plus 25% of eligible aviation inventory of parts and supplies. The revolving
line of credit is collateralized by our accounts receivable and inventory. At
June 30, 2002 additional borrowing capacity under the revolving line of credit
was $0.2 million. We expect the cash flow provided by our operating activities
will be adequate to finance our working capital needs for 2002.
At June 30, 2002, we also had approximately $7.1 million in other loans
outstanding, including approximately $1.9 million in outstanding debt pursuant
to agreements with a financing company. This loan is an asset-based financing
instrument bearing interest at LIBOR plus 5.0% and maturing in August, 2004. We
also had $4.1 million in outstanding debt to a financing company pursuant to the
acquisition of our aviation fleet previously financed through an operating
lease. This loan is secured by the aviation fleet, amortizes over ten years,
accrues interest at 8% per annum and matures January 1, 2007. Of the remaining
$1.1 million on other loans outstanding, $0.7 million is due pursuant to capital
lease obligations on our vehicle fleet, and $0.4 million is due to certain
insurance finance companies.
On January 18, 2002 we acquired the assets of AirJac Drilling, a
division of Veritas DGC Land, Inc., a seismic drilling support company
headquartered in New Iberia, Louisiana. The aggregate acquisition cost was $4.2
million, including $2.0 million cash, acquisition costs, assumption of a capital
lease and certain future consideration. In this acquisition we acquired
inventory, vehicles, shop equipment and drilling, field and support equipment.
The acquisition also resulted in the recognition of $1.9 million of goodwill
resulting principally from future discounts granted to Veritas in connection
with
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future minimum work. Offsetting liabilities have been recorded for these future
discounts. We received advances from affiliates totaling approximately $1.3
million in connection with the financing of this transaction. At June 30, 2002
approximately $0.9 million of these advances remain outstanding, of which $0.4
million is secured by treasury stock and approximately $0.5 million is secured
by accounts receivable from a customer. The results of AirJac's operations have
been included in our consolidated financial statements since acquisition date.
Historically, our capital requirements have primarily related to the
purchase or fabrication of new seismic drilling equipment and related support
equipment and business acquisitions. Other than the acquisition discussed in
Note 9, we have no material commitments outstanding for expenditures nor do we
anticipate significant capital expenditures in 2002.
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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 our financial position and liquidity, our strategic
alternatives, future capital needs, business strategies and other plans and
objectives of our management for future operations and activities, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by our management in light of our experience and our
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 our 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 our operations;
operating hazards, including the significant possibility of accidents resulting
in personal injury, property damage or environment damage; the effect on our
performance of regulatory programs and environmental matters; seasonality of the
offshore industry in the Gulf of Mexico; and our dependence on certain
customers. These and other uncertainties related to our business are described
in detail in our other public filings. Although we believe 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. We undertake no obligation to update any of our
forward-looking statements for any reason.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our market risks since the year ended
December 31, 2001. For more information, please read the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the
year ended December 31, 2001.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on June 20, 2002,
a proposal to elect the nominees listed in the following table as directors of
the Company was submitted to a vote of the Company's shareholders. The following
table shows the results of voting as to each nominee:
NOMINEES FOR WITHHELD AUTHORITY
Crichton W. Brown 19,955,312 16,585
Michael G. DeHart 19,957,312 14,585
James C. Eckert 19,955,312 16,585
Steven T. Stull 19,955,312 16,585
Richard C. White 19,957,312 14,585
Burton T. Zaunbrecher 19,955,312 16,585
At the same meeting, the following proposals were also approved by the
Company's shareholders:
FOR AGAINST ABSTENTIONS
Increase in the number of shares issuable under the Company's
stock incentive plan.............................................. 19,531,676 366,546 73,675
Amend the Company's Articles of Incorporation to effect a one
for three reverse split of the Company's common stock ............ 19,892,347 70,500 9050
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
(b) Reports on Form 8-K
Current Report on Form 8-K dated May 28, 2002 and filed June 5, 2002
regarding Nasdaq listing matters.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on our behalf by the
undersigned thereunto duly authorized.
OMNI ENERGY SERVICES CORP.
Dated: August 14, 2002 /S/ JAMES C. ECKERT
----------------------------------------
James C. Eckert
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 14, 2002 /S/ BURTON T. ZAUNBRECHER
----------------------------------------
Burton T. Zaunbrecher
Executive Vice President,
Chief Operating Officer and Treasurer
Dated: August 14, 2002 /S/ G. DARCY KLUG
----------------------------------------
G. Darcy Klug
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
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