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Omega Protein Announces Second Quarter 2013 Financial Results

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HOUSTON, Aug. 6, 2013 /PRNewswire/ -- Omega Protein Corporation (NYSE: OME), a nutritional product company and a leading integrated producer of omega-3 fish oil and specialty protein products, today announced results for the second quarter ended June 30, 2013. 

(Logo: http://photos.prnewswire.com/prnh/20120717/NE41641LOGO)

Second Quarter 2013 Highlights

  • Revenues:  $41.8 million for the quarter, compared to $48.9 million in the first quarter and $47.5 million in the 2012 second quarter
  • Gross profit margin:  31.8% for the quarter, an increase from 24.7% in the first quarter and 14.4% in the 2012 second quarter
  • Net income:  Net income of $4.0 million for the quarter, compared to $2.8 million in the first quarter and $2.5 million in the 2012 second quarter
  • Earnings:  Earnings per diluted share of $0.19 for the quarter, compared to $0.14 in the first quarter and $0.13 in the 2012 second quarter
  • Adjusted EBITDA:  $11.8 million for the quarter, compared to $10.0 million in the first quarter and $5.2 million in the 2012 second quarter
  • Growth: Announced plans to double capacity of the Company's dairy protein business

"We are pleased with the Company's increased earnings in the second quarter as we continued to benefit from better animal nutrition sales prices which helped drive higher revenue per ton and consolidated gross margin expansion versus the comparable period last year," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer. "While 2013 fish catch to date has been below average, we are pleased to see fish oil yields rebound sharply from last year and return to more normal year-to-date levels."

Mr. Scholtes continued, "We believe we are still in the early stages of capitalizing on our human nutrition growth opportunities with second quarter segment revenue 47% higher than the second quarter last year.  Our investments in human nutrition over the last three years provide us with more control over the manufacturing process, create avenues for organic growth, and allow us to better develop additional value-added products to expand consolidated margins in the long-term.  To this point, today we announced an expansion of our dairy protein production facility, which is expected to double its capacity and expand our dairy product offerings."

Second Quarter 2013 Results
The Company's revenues decreased 15% from $48.9 million in the first quarter of 2013 to $41.8 million in the second quarter.  The decrease in revenues was due to a $7.9 million decrease in animal nutrition revenues, which reflected lower sales volumes of 14% for fish meal and 66% for fish oil, partially offset by higher sales prices of 10% for fish meal and 64% for fish oil.  Second quarter 2013 sales volumes were negatively impacted by normal seasonal demand and the timing of contracts.  The increase in fish meal sales prices was primarily due to sales made pursuant to contracts entered into at higher prices, and the increase in fish oil sales prices reflected a significant change in product mix.  Human nutrition revenues increased $0.7 million to $7.3 million in the second quarter compared to $6.6 million in the first quarter.  The increase in human nutrition revenues reflects revenues from Wisconsin Specialty Protein (WSP) for a full quarter, partially offset by lower nutraceutical and tolling revenues.  The composition of revenue by nutritional product line for the second quarter of 2013 was 62% fish meal, 18% fish oil, 16% specialty food and nutraceutical ingredients, and 4% fish solubles and other.  

Second quarter of 2013 revenues decreased 12% from $47.5 million in the same period last year.  The decrease in revenues was due to an $8.0 million decrease in animal nutrition revenues, partially offset by a $2.3 million, or 47%, increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to a decrease in sales volume of 25% and 77% for the Company's fish meal and fish oil, respectively, partially offset by increased sales prices of 30% and 127% for the Company's fish meal and fish oil, respectively.  The increase in human nutrition revenues was primarily due to the Company's acquisition of WSP on February 27, 2013.

The Company reported gross profit of $13.3 million, or 31.8% as a percentage of revenues, for the second quarter of 2013, versus gross profit of $12.1 million, or 24.7% as a percentage of revenues, for the first quarter of 2013.  The increase in gross profit as a percentage of revenues was primarily due to an increase in gross profit as a percentage of revenues from 26.6% to 33.9% in the animal nutrition segment as a result of higher fish oil and fish meal sales prices.  The human nutrition segment reported gross profit as a percentage of revenues of 22.1% in the second quarter of 2013, an increase from 13.0% in the first quarter.  The increase reflects the February 27, 2013 acquisition of WSP and lower transition costs related to the Company's Chicago-area production facility.

Second quarter gross profit increased from $6.8 million, or 14.4% as a percentage of revenues, in the second quarter of 2012.  The increase was primarily due to an increase in the animal nutrition segment gross profit as a percentage of revenues from 13.4% to 33.9% as a result of increased fish oil and fish meal sales prices.  The human nutrition segment gross profit decreased slightly from 23.3% to 22.1%, as a percentage of revenues, in the second quarter of 2013.

Selling, general and administrative expenses for the second quarter decreased $0.4 million to $6.0 million compared to the first quarter of 2013 due primarily to reduced professional expenses related to the acquisition of WSP.  Selling, general and administrative expenses increased from $5.4 million for the second quarter of 2012, primarily as a result of the acquisition of WSP.

The second quarter of 2013 effective tax rate was 34.7% compared to 33.2% in the first quarter of 2013 and 34.0% in the second quarter of 2012. 

Net income for the second quarter of 2013 was $4.0 million ($0.19 per diluted share) compared to net income of $2.8 million ($0.14 per diluted share) for the first quarter of 2013 and net income of $2.5 million ($0.13 per diluted share) for the same period last year.  Excluding the impact of the net gain or loss on disposal of certain assets, net income for the first quarter of 2013 would have been $3.1 million ($0.15 per diluted share), and net income for the second quarter of 2012 would have been $0.3 million ($0.01 per diluted share).

Adjusted EBITDA totaled $11.8 million for the second quarter of 2013, compared to $10.0 million for the first quarter of 2013 and $5.2 million for the same period last year.

Six Month 2013 Results
Revenues in the current period increased 2% to $90.7 million compared to revenue of $88.5 million for the six months ended June 30, 2012. The increase in revenues for 2013 was due to a $2.1 million increase in human nutrition revenues and a $0.1 million increase in animal nutrition revenues. The increase in human nutrition revenues was due primarily to the acquisition of WSP on February 27, 2013, which contributed $3.3 million of revenue for the six months ended June 30, 2013. The increase in animal nutrition revenues was primarily due to increased sales prices of 22% and 57% for the Company's fish meal and fish oil, respectively, partially offset by decreased sales volumes of 9% and 47% for the Company's fish meal and fish oil, respectively.

The Company recorded gross profit of $25.4 million, or 28.0% as a percentage of revenues, for the first six months of 2013, versus gross profit of $15.7 million, or 17.8% as a percentage of revenues, for the first six months of 2012.  The increase in gross profit as a percentage of revenues was primarily due to the increase in sales prices.

Net income for the six months ended June 30, 2013 was $6.8 million ($0.33 per diluted share) compared to $4.3 million ($0.22 per diluted share) for the same period last year.  Excluding the impact of net gain on disposal of assets, net income for the six months ended June 30, 2012 would have been $1.8 million ($0.09 per diluted share). 

Adjusted EBITDA, totaled $21.8 million for six months ended June 30, 2013, an increase from $12.4 million for the same period last year.

Balance Sheet
The Company's balance sheet remains strong, and stockholders' equity increased $12.3 million to $217.9 million as of June 30, 2013 as compared to December 31, 2012.  Total debt decreased $1.6 million from December 31, 2012 to $25.7 million on June 30, 2013.  The Company's June 30, 2013 cash balance decreased $34.5 million from December 31, 2012 to $21.5 million. This decrease was primarily due to the acquisition of WSP in February 2013, as well as expenditures related to 2013 fishing season, capital spending and debt payments, and was partially offset by the sale of inventory.

Conference Call
Omega Protein will host a conference call on its second quarter 2013 financial results at 8:30 a.m., Eastern Time, on Wednesday, August 7, 2013. The Company's senior management team will be available to discuss recent financial results and current business trends as well as respond to questions.

Please dial (877) 407-3982 domestically or (201) 493-6780 internationally to join the call. Interested parties may also listen to the webcast live over the Internet at www.omegaprotein.com

A webcast replay of the conference call will be available beginning shortly after the conclusion of the call at www.omegaprotein.com and will be available for 90 days. A telephonic replay of the conference call will be available through August 21, 2013. Domestic listeners can dial (877) 870-5177, and international listeners may dial (858) 384-5517. The replay access code is 417268.

About Omega Protein
Omega Protein Corporation (NYSE: OME) is a century old nutritional company that develops, produces and delivers healthy products throughout the world to improve the nutritional integrity of functional foods, dietary supplements and animal feeds.  Omega Protein's mission is to help people lead healthier lives with better nutrition through sustainably sourced ingredients such as highly-refined omega-3 rich fish oil, specialty proteins and nutraceuticals.

Forward Looking Statements
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: The statements contained in this press release that are not historical facts are forward-looking statements that involve a number of risks and uncertainties. Forward-looking information may be based on projections, predictions and estimates. Some statements in this press release may be forward-looking and use words like "may," "may not," "believes," "do not believe," "expects," "do not expect," "anticipates," "do not anticipate," "see," "do not see," "should," or other similar expressions. The actual results of future events described in any of these forward-looking statements could differ materially from those stated in the forward-looking statements. Important factors that could cause actual results to be materially different from those forward-looking statements include, among others: (1) the Company's ability to meet its raw material requirements through its annual menhaden harvest, which is subject to fluctuations due to natural conditions over which the Company has no control, such as varying fish population, fish oil yields, adverse weather conditions, natural and other disasters and disease; (2) the impact of laws and regulations that may be enacted that may restrict the Company's operations or the sale of the Company's products; (3) the impact of worldwide supply and demand relationships on prices for the Company's products; (4) the Company's expectations regarding demand and pricing for its products proving to be incorrect; (5) fluctuations in the Company's quarterly operating results due to the seasonality of the Company's business and its deferral of inventory sales based on worldwide prices for competing products; (6) the long-term effect of the Deepwater Horizon oil spill on the Company's business, operations and fish catch; (7) the business, operations, potential or prospects for the Company's subsidiaries, Cyvex Nutrition, Inc., InCon Processing, LLC, Wisconsin Specialty Protein, LLC, the dietary supplement market or the human health and wellness segment generally; (8) the cost of compliance with existing and future government regulations and (9)   the impact of the Company's  settlement with the U.S Attorney's Office on the Company's operations and financial results. Other factors are described in further detail in the Company's filings with the Securities and Exchange Commission, including its reports on Form 10-K, Form 10-Q and Form 8-K.



 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in thousands)

 










June 30, 2013


December 31,

2012

ASSETS







 Current assets:







          Cash and cash equivalents


$

21,458


$

55,998

          Receivables, net



21,186



17,267

          Inventories



83,344



66,659

          Deferred tax asset, net



298



1,165

          Prepaid expenses and other current assets



4,844



3,430








                Total current assets



131,130



144,519

Other assets, net



4,300



10,789

Property, plant and equipment, net



144,762



127,640

Goodwill



19,128



7,986

Other intangible assets, net



9,005



4,362

                Total assets


$

308,325


$

295,296








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







         Current maturities of long-term debt


$

3,025


$

3,058

         Current portion of capital lease obligation



121



268

         Accounts payable



3,435



3,000

         Accrued liabilities



29,083



31,741

              Total current liabilities



35,664



38,067

Long-term debt, net of current maturities



22,706



24,242

Capital lease obligation, net of current portion



4,884



Deferred tax liability, net



16,279



15,794

Pension liabilities, net



9,078



9,826

Other long-term liabilities



1,794



1,764

                Total liabilities



90,405



89,693








Commitments and contingencies







Stockholders' equity:







        Preferred stock, $0.01 par value; 10,000,000 authorized shares; none issued                                    



 



 

        Common Stock, $0.01 par value; 80,000,000 authorized shares; 20,595,610 and 19,883,940 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively



 

201



 

 

195

        Capital in excess of par value



134,120



129,040

        Retained earnings



93,127



86,292

        Accumulated other comprehensive loss



(9,528)



(9,924)

                Total stockholders' equity



217,920



205,603

                    Total liabilities and stockholders' equity


$

308,325


$

295,296

















 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

 



Three Months Ended


Six Months Ended



June 30,


June 30,



2013


2012


2013


2012

Revenues

$

41,777

$

47,448

$

90,700

$

88,536

Cost of sales


28,494


40,601


65,320


72,797

Gross profit


13,283


6,847


25,380


15,739










Selling, general, and administrative expense


6,030


5,443


12,473


10,728

Research and development expense


565


518


1,120


1,119

Charges related to U.S. Attorney investigation



70



303

Loss (gain) on disposal of assets


(2)


(3,385)


374


(3,782)

Operating income


6,690


4,201


11,413


7,371

Interest income


2


3


10


10

Interest expense


(481)


(301)


(873)


(697)

Other expense, net


(98)


(102)


(181)


(188)

Income before income taxes


6,113


3,801


10,369


6,496










Provision for income taxes


2,123


1,291


3,534


2,156

Net income


3,990


2,510


6,835


4,340










Other comprehensive income (loss):









Energy swap adjustment, net of tax benefit of

$195, $556, $56 and $162, respectively


(363)


(1,031)


(106)


(300)

Pension benefits adjustment, net of tax expense of $135, $132, $270 and $265, respectively


251


245


502


492

Comprehensive income

$

3,878

$

1,724

$

7,231

$

4,532










Basic earnings per share

$

0.20

$

0.13

$

0.34

$

0.22










Weighted average common shares outstanding


20,225


19,613


20,061


19,604










 

Diluted earnings per share

 

$

 

0.19

 

$

 

0.13

 

$

 

0.33

$

 

0.22










Weighted average common shares and potential

  common share equivalents outstanding


 

21,027


 

20,019


 

20,837


 

20,049










                                                                                                                       

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)

 












Six Months Ended

June 30,






2013


2012




Cash flows from operating activities:








       Net income

$

6,835

$

4,340




       Adjustments to reconcile net income to net

          cash provided by operating activities:








        Depreciation and amortization


10,253


8,798




        Loss (gain) on disposal of assets


374


(3,782)




        Provisions for losses on receivables


24


24




        Share based compensation


891


1,796




        Deferred income taxes


1,409


1,531




        Changes in assets and liabilities:








                 Receivables


(2,671)


(12,819)




                 Inventories


(15,763)


(18,653)




                 Prepaid expenses and other current assets


(1,515)


(5,497)




                 Other assets


5,874


(3,652)




                 Accounts payable


(301)


(354)




                 Accrued liabilities


(2,873)


11,349




                 Pension liability, net


(246)


(511)




                 Other long term liabilities


30


62




                         Net cash provided by (used in) operating

                             activities


 

2,321


 

(17,368)




Cash flows from investing activities:








        Proceeds from disposition of assets


161


5,811




        Acquisition of InCon, purchase price adjustment


 


181




        Acquisition of Wisconsin Specialty Protein, net of

            cash acquired


 

(26,779)


 




        Capital expenditures


(12,560)


(16,510)




                         Net cash used in

                           investing activities


 

(39,178)


 

(10,518)




Cash flows from financing activities:








        Principal payments of long-term debt


(1,569)


(1,469)




        Principal payments of capital lease obligation


(309)


(243)




        Debt issuance costs


 


(389)




        Proceeds from stock options exercised


3,048


437




        Excess tax benefit of stock options exercised


 

1,147


34




                        Net cash provided by (used in)

                          financing activities


 

2,317


 

(1,630)




Net decrease in cash and cash equivalents


(34,540)


(29,516)




Cash and cash equivalents at beginning of year


55,998


51,391




Cash and cash equivalents at end of period

$

21,458

$

21,875












 


The tables below present information about reported segments for the three months ended June 30, 2013 and 2012 (in thousands).

 

June 30, 2013


Animal Nutrition


Human Nutrition(1)


 

Unallocated


 

Total

Revenue(2)


$   34,453


$  7,324


  $        ―


$   41,777

Cost of sales


22,786


5,708


            ―


28,494

Gross profit


11,667


1,616


            ―


13,283

Selling, general and administrative expenses

  (including research and development)


662


1,861


4,072


6,595

Other (gains) and losses


(2)



            ―


(2)

Operating income


$  11,007


$     (245)


$   (4,072)


$     6,690

Depreciation and amortization


$     4,472


$      632


$        172


$     5,276

Identifiable assets


$ 248,656


$ 58,125


$     1,544


$ 308,325

Capital expenditures


$     5,741


$      324


$        119


$     6,184










(1) Includes revenues and related expenses for WSP.

(2) Excludes revenue from internal customers of $0.4 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

 

 

June 30, 2012


Animal Nutrition


Human Nutrition


 

Unallocated


 

Total

Revenue(3)


$  42,467


$    4,981


   $    ―


$   47,448

Cost of sales


36,782


3,819



40,601

Gross profit


5,685


1,162



6,847

Selling, general and administrative expenses

  (including research and development)


556


927


4,478


5,961

Charges related to U.S. Attorney investigation


70




70

Other (gains) and losses


(3,385)




(3,385)

Operating income


$    8,444


$      235


$   (4,478)


$     4,201

Depreciation and amortization


$    4,018


$      319


$       134


$     4,471

Identifiable assets


$263,276


$ 27,690


$    1,786


$ 292,752

Capital expenditures


$    7,260


$      685


$       249


$     8,194










(3) Excludes revenue from internal customers of $0.2 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

 

The tables below present information about reported segments for the six months ended June 30, 2013 and 2012 (in thousands).

 

June 30, 2013


Animal Nutrition


Human Nutrition(1)


 

Unallocated


 

Total

Revenue(2)


$   76,790


$  13,910


  $        ―


$   90,700

Cost of sales


53,880


11,440


            ―


65,320

Gross profit


22,910


2,470


            ―


25,380

Selling, general and administrative expenses

  (including research and development)


1,290


3,157


9,146


13,593

Other (gains) and losses


374




374

Operating income


$  21,246


$      (687)


$   (9,146)


$   11,413

Depreciation and amortization


$     8,821


$   1,070


$        362


$   10,253

Identifiable assets


$ 248,656


$ 58,125


$     1,544


$ 308,325

Capital expenditures


$   11,709


$      613


$        238


$   12,560










(1) Includes revenues and related expenses for WSP from February 27, 2013 through June 30, 2013.

(2) Excludes revenue from internal customers of $1.0 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

 

 

 

June 30, 2012


Animal Nutrition


Human Nutrition


 

Unallocated


 

Total

Revenue(3)


$  76,706


$  11,830


   $        ―


$   88,536

Cost of sales


63,880


8,917


          ―


72,797

Gross profit


12,826


2,913


          ―


15,739

Selling, general and administrative expenses

  (including research and development)


1,278


1,921


8,648


11,847

Charges related to U.S. Attorney investigation


303


           ―


           ―


303

Other (gains) and losses


(3,782)


           ―


           ―


(3,782)

Operating income


$  15,027


$      992


$   (8,648)


$     7,371

Depreciation and amortization


$    7,883


$      638


$       277


$     8,798

Identifiable assets


$263,276


$ 27,690


$    1,786


$ 292,752

Capital expenditures


$  14,895


$   1,326


$       289


$   16,510










(3) Excludes revenue from internal customers of $0.5 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

Adjusted EBITDA to Net Income (Loss) Reconciliation
The following table provides a reconciliation of Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended June 30, 2013, March 31, 2013 and June 30, 2012:

                                                                                                           



Three Months Ended (in thousands)




June 30, 2013


March 31, 2013


June 30, 2012


Net Income

$

3,990

$

2,845

$

2,510


Reconciling items:








   Interest expense


451


361


270


   Income tax provision


2,123


1,411


1,291


   Depreciation and amortization


5,276


4,977


4,471


   Charges related to U.S. Attorney investigation




70


   Net gain or loss on disposal of assets


(2)


376


(3,385)


Adjusted EBITDA

$

11,838

$

9,970

$

5,227


 

                                                                                                                            




Six Months Ended (in thousands)





June 30, 2013


June 30, 2012


Net Income


$

6,835

$

4,340


Reconciling items:







   Interest expense



812


624


   Income tax provision



3,534


2,156


   Depreciation and amortization



10,253


8,798


   Charges related to U.S. Attorney investigation



             ―


303


   Net gain or loss on disposal of assets



374


(3,782)


Adjusted EBITDA


$

21,808

$

12,439


 

Adjusted EBITDA represents net income (loss) before interest expense, income tax, depreciation and amortization, charges related to U.S. Attorney investigation and net (gain) loss on disposal of assets. The Company has reported Adjusted EBITDA because it believes Adjusted EBITDA is a measure commonly reported and widely used by investors as an indicator of a company's operating performance. The Company believes Adjusted EBITDA assists such investors in comparing a company's performance on a consistent basis. Adjusted EBITDA is not a calculation based on GAAP and should not be considered an alternative to net income (loss) in measuring our performance or used as an exclusive measure of cash flow because it does not consider the impact of working capital growth, capital expenditures, debt principal reductions and other sources and uses of cash which are disclosed in our consolidated statements of cash flows. Investors should carefully consider the specific items included in our computation of Adjusted EBITDA. While Adjusted EBITDA has been disclosed herein to permit a more complete comparative analysis of our operating performance relative to other companies, investors should be cautioned that Adjusted EBITDA as reported by us may not be comparable in all instances to Adjusted EBITDA as reported by us or by other companies. Adjusted EBITDA amounts may not be fully available for management's discretionary use, due to certain requirements to conserve funds for capital expenditures, debt service and other commitments, and therefore management relies primarily on our GAAP results. Adjusted EBITDA is not intended to represent net income (loss) as defined by GAAP and such information should not be considered as an alternative to net income (loss), cash flow from operations or any other measure of performance prescribed by GAAP in the United States.

SOURCE Omega Protein Corporation



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http://www.omegaprotein.com

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