Omega Protein Announces Second Quarter Fiscal 2012 Financial Results

HOUSTON, Aug. 7, 2012 /PRNewswire/ -- Omega Protein Corporation (NYSE: OME), a nutritional ingredient company and the nation's leading vertically integrated producer of omega-3 fish oil and specialty fish meal products, today reported financial results for the second quarter ended June 30, 2012.

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Second Quarter 2012 Highlights:

  • Revenues:  $45.0 million for the quarter, a 13% sequential increase compared to the first quarter of 2012
  • Gross profit margin:  15.2% for the quarter, compared to 22.4% in the first quarter of 2012
  • Gain on Disposal of Assets: $3.4 million, compared to $0.4 million in the first quarter of 2012
  • Net income:  $2.5 million ($0.13 per diluted share) for the quarter, compared to $1.8 million ($0.09 per diluted share) in the first quarter of 2012
  • Adjusted EBITDA:  $5.2 million for the quarter, compared to $7.0 million in the first quarter of 2012

"The 2012 fishing season is off to a good start with fish catch results exceeding the strong levels experienced in 2011, and the outlook for fish meal and fish oil pricing continues to improve," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer.  "Unfortunately, we are also experiencing the lowest oil yields in recent history, which is having an adverse impact on unit costs and gross profit margin."

Mr. Scholtes continued, "We continue to take steps to advance our manufacturing of concentrated fish oils and custom blends for dietary supplements to increasingly differentiate our product offerings to the end consumer. Although we expect the ramp-up to be gradual, we remain excited about the opportunities in our human nutrition business to build upon its strong first half sales results and gross margins."

Second Quarter 2012 Results

Omega Protein revenues increased 13% from the first quarter of 2012 to $45.0 million in the second quarter of 2012.  The increase was due to increased fish meal and fish oil sales volumes, resulting from larger fish meal production and higher export sales.  Increased volumes were partially offset by lower prices.  Fish meal sales prices declined due to the roll-off of older, higher priced contracts and fish oil prices decreased due to a lower proportion of higher-priced refined oil sales.  Cyvex, the Company's human nutritional ingredient subsidiary, contributed $4.2 million of revenues to the second quarter of 2012 compared to $6.0 million in the previous quarter.

Second quarter of 2012 revenues increased 2% from $44.2 million in the same period last year.  The increase in revenues compared to the same period last year was primarily due to higher sales volumes of 2% for fish meal and 54% for fish oil, partially offset by lower sales prices of 18% and 4% for fish meal and fish oil, respectively.  The increase in fish meal and fish oil sales volumes was primarily due to the higher export sales volumes.  The decrease in fish meal sales prices is primarily due to sales made pursuant to contracts entered into during 2011 when fish meal prices were lower.  The decrease in fish oil sales prices is due to a lower proportion of higher priced refined oil sales. The composition of revenue by nutritional product line was 55% fish meal, 31% fish oil, 9% specialty nutraceutical ingredients, and 5% fish solubles and other. Cyvex's revenues increased from $4.0 million in the same period last year. 

The Company reported gross profit of $6.8 million, or 15.2% as a percentage of revenues, for the second quarter of 2012, versus gross profit of $8.9 million, or 22.4% as a percentage of revenues, for the first quarter of 2012.  In addition to pricing and product mix, the decrease in gross profit was also attributable to a higher expected 2012 cost per unit of sales, which was the result of low fish oil yields.  The Company's oil yields for the 2012 fishing season through June 30, 2012 were lower by 25% compared to those in the same period in the 2011 fishing season and were lower by 45% compared to the Company's five year oil yield average.  The second quarter of 2012 also includes $1.7 million of gross profit from Cyvex, or 40.1% as a percentage of Cyvex's revenues, compared to $2.4 million of gross profit and 39.4% in the first quarter of 2012. 

Compared to the same period a year ago, gross profit decreased from $14.7 million, or 33.3% as a percentage of revenues, due primarily to the decrease in fish meal sales prices as well as a 10% increase in cost per unit of sales.  The increase in cost per unit of sales reflects changes in product mix and the expected increase in 2012 cost per unit of sales as a result of decreased fish oil yields.  Cyvex's results declined slightly from a gross profit of $1.7 million, or 43.7% as a percentage of revenues, in the second quarter of 2011.

Selling, general and administrative expenses for the first and second quarters of 2012 were consistent at $5.5 million.  Compared to the same period a year ago, selling, general and administrative expenses increased $0.7 million from $4.8 million, primarily due to increased severance expenses, increased other employee compensation related costs, including stock option and restricted stock compensation expense, and the addition of expenses related to InCon, an oil processing business we acquired in the third quarter of 2011.

The Company also recorded a net gain on disposal of assets of $3.4 million for the second quarter of 2012 primarily related to sale of its Morgan City, Louisiana facility, partially offset by the net loss on disposal of certain assets.  This compares to a net gain on disposal of assets of $0.4 million in the first quarter of 2012 and a net loss on disposal of assets of $0.5 million in the second quarter of 2011. 

The second quarter of 2012 effective tax rate was 34.0% compared to 32.1% in the first quarter of 2012 and 35.3% in the same period last year.  The decrease in the effective tax rate compared to the same period last year is primarily a result of the impact of certain items that are deductible for tax purposes but not expensed in our financial statements. 

Net income for the second quarter of 2012 was $2.5 million ($0.13 per diluted share) compared to $1.8 million ($0.09 per diluted share) for the first quarter of 2012 and $22.9 million ($1.14 per diluted share) for the same period last year.  Excluding the impact of the net gain on disposal of assets, net income for the second quarter of 2012 would have been $0.3 million ($0.01 per diluted share).  Excluding the impact of two settlements totaling $27.0 million, net income for the second quarter of 2011 would have been approximately $5.5 million ($0.27 per diluted share).

Adjusted EBITDA, which excludes the net gain of disposal of assets, totaled $5.2 million for the second quarter of 2012, a decrease from $7.0 million for the first quarter of 2012 and from $13.5 million for the same period a year ago.

Six Month 2012 Results

Revenue in the current period decreased 16% to $84.7 million compared to revenue of $100.6 million for the six months ended June 30, 2011. The decrease in revenues was primarily due to lower sales prices of 13% and lower sales volumes of 25% for the Company's fish meal partially offset by higher sales prices of 2% and higher sales volumes of 7% for the Company's fish oil.  In addition, Cyvex contributed $10.3 million of revenue to the six months ended June 30, 2012 as compared to $7.0 million for the six months ended June 30, 2011. 

The Company recorded gross profit of $15.7 million, 18.6% as a percentage of revenues, for the first six months of 2012, versus gross profit of $30.4 million, 30.2% as a percentage of revenues, for the first six months of 2011.  The decreases were primarily due to a decrease in fish meal sales prices and an increase in cost per unit of sales.

Net income for the six months ended June 30, 2012 was $4.3 million ($0.22 per diluted share) compared to $28.9 million ($1.45 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).  Excluding the impact of the two settlements previously mentioned, the Company's net income for the six months ended June 30, 2011 would have been approximately $11.6 million ($0.58 per diluted share).

Adjusted EBITDA, which excludes the net gain of disposal of assets and settlements, totaled $12.1 million for six months ended June 30, 2012, a decrease from $27.7 million for the same period last year.

Balance Sheet

The Company's balance sheet remains strong, and stockholders' equity increased to $203.4 million as of June 30, 2012.  Total debt decreased from $30.3 million on December 31, 2011 to $28.8 million on June 30, 2012.  The Company's June 30, 2012 cash balance decreased $29.5 million from December 31, 2011 to $21.9 million, due primarily to expenditures made for the 2012 fishing season, capital spending, taxes and debt payments, and was partially offset by the sale of inventory.   

Conference Call Information

Omega Protein will host a conference call on its second quarter of fiscal 2012 financial results at 8:30 a.m., Eastern Time, on Wednesday, August 8, 2012. 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.omegaproteininc.com.  

A webcast replay of the conference call will be available beginning shortly after the conclusion of the call at www.omegaproteininc.com and will be available for 90 days. A telephonic replay of the conference call will be available through August 22, 2012. Domestic listeners can dial (877) 870-5176, and international listeners may dial (858) 384-5517. The replay access code is 397495.

About Omega Protein

Omega Protein Corporation is a nutritional ingredient company that serves the human and animal nutrition markets.  Omega Protein is the nation's leading vertically integrated producer of omega-3 fish oil and specialty fish meal products, which are made from menhaden, an omega-3 rich fish which is abundantly available along the U.S. Gulf of Mexico and Atlantic Coasts.  The Company also sells a variety of non-marine ingredients to the dietary supplement industry.

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," 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. and InCon Processing, LLC, the dietary supplement market or the human health and wellness segment generally; and (8) the cost of compliance with existing and future government regulations. 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,

2012


December 31,

2011

ASSETS







 Current assets:







          Cash and cash equivalents


$

21,875


$

51,391

          Receivables, net



29,523



16,788

          Inventories



83,546



64,893

          Deferred tax asset, net



36



1,784

          Prepaid expenses and other current assets



7,378



2,238








                Total current assets



142,358



137,094

Other assets, net



8,810



5,423

Property, plant and equipment, net



128,945



122,512

Goodwill and other intangible assets, net



12,639



12,801

                Total assets


$

292,752


$

277,830








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







         Current maturities of long-term debt


$

3,101


$

2,992

         Current portion of capital lease obligation



534



517

         Accounts payable



3,425



3,779

         Accrued liabilities



31,167



19,818

              Total current liabilities



38,227



27,106

Long-term debt, net of current maturities



25,724



27,302

Capital lease obligation, net of current portion



8



268

Energy swap liability, net of current portion



218



113

Deferred tax liability, net



13,577



13,900

Pension liabilities, net



9,864



10,868

Other long-term liabilities



1,774



1,712

                Total liabilities



89,392



81,269








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;
          19,679,597 and 19,568,851 shares issued and outstanding at
          June 30, 2012 and December 31, 2011, respectively    



 

195



 

194

        Capital in excess of par value



127,083



124,817

        Retained earnings



86,569



82,229

        Accumulated other comprehensive loss



(10,487)



(10,679)

                Total stockholders' equity



203,360



196,561

                    Total liabilities and stockholders' equity


$

292,752


$

277,830








 

OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)








Three Months Ended


Six Months Ended



June 30,


June 30,



2012


2011


2012


2011

Revenues

$

45,024

$

44,230

$

84,721

$

100,632

Cost of sales


38,177


29,487


68,982


70,196

Gross profit


6,847


14,743


15,739


30,436










Selling, general, and administrative expense


5,513


4,767


11,031


9,618

Research and development expense


518


499


1,119


984

Proceeds/gains resulting from Gulf of Mexico oil

  spill disaster


 


(26,177)


 


(26,177)

Other proceeds/gains resulting from natural

  disaster, net – 2005 storms


 


(787)


 


(787)

(Gain) loss on disposal of assets


(3,385)


468


(3,782)


450

Operating income


4,201


35,973


7,371


46,348

Interest income


3


10


10


28

Interest expense


(301)


(528)


(697)


(1,142)

Other expense, net


(102)


(54)


(188)


(114)

Income before income taxes


3,801


35,401


6,496


45,120










Provision for income taxes


1,291


12,496


2,156


16,261

Net income


2,510


22,905


4,340


28,859










Other comprehensive income (loss):









Energy swap adjustment, net of tax (benefit)

  expense of ($556), ($482), ($162) and $469,   

  respectively


(1,031)


(998)


(300)


849

Pension benefits adjustment, net of tax (benefit)

expense of $132, ($82), $265 and $18, respectively


245


195


492


389

Comprehensive income

$

1,724

$

22,102

$

4,532

$

30,097










Basic earnings per share

$

0.13

$

1.18

$

0.22

$

1.51










Weighted average common shares outstanding


19,613


19,343


19,604


19,112










 

Diluted earnings per share

 

$

 

0.13

 

$

 

1.14

 

$

 

0.22

$

 

1.45










Weighted average common shares and potential

  common share equivalents outstanding


 

20,019


 

20,141


 

20,049


 

19,866










 

OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)



Six Months Ended
June 30,



2012


2011

Cash flows from operating activities:





       Net income

$

4,340

$

28,859

       Adjustments to reconcile net income to net

          cash provided by operating activities:





        Depreciation and amortization


8,798


8,007

        Other proceeds/gains resulting from natural

           disaster, net – 2005 storms


 


 

(787)

        (Gain) loss on disposal of assets


(3,782)


450

        Provisions for losses on receivables


24


24

        Share based compensation


1,796


1,483

        Deferred income taxes


1,531


7,895

        Changes in assets and liabilities:





                 Receivables


(12,819)


(9,065)

                 Inventories


(18,653)


(7,078)

                 Prepaid expenses and other current assets


(5,497)


(1,561)

                 Other assets


(3,652)


(5,954)

                 Accounts payable


(354)


(402)

                 Accrued liabilities


11,349


13,918

                 Pension liability, net


(511)


(353)

                 Other long term liabilities


62


                       Net cash (used in) provided by operating

                           activities


 

(17,368)


 

35,436

Cash flows from investing activities:





        Proceeds from disposition of assets


5,811


298

        Acquisition of InCon, purchase price adjustment


181


        Acquisition of Cyvex, net of cash acquired



(2,086)

        Capital expenditures


(16,510)


(9,146)

                       Net cash used in

                         investing activities


 

(10,518)


 

(10,934)

Cash flows from financing activities:





        Principal payments of long-term debt


(1,469)


(1,481)

        Principal payments of capital lease obligation


(243)


(241)

        Debt issuance costs


(389)


        Proceeds from stock options exercised


437


2,858

        Excess tax benefit of stock options exercised


34


1,908

                        Net cash (used in) provided by financing   

                            activities


 

(1,630)


 

3,044

Net (decrease) increase in cash and cash equivalents


(29,516)


27,546

Cash and cash equivalents at beginning of year


51,391


19,784

Cash and cash equivalents at end of period

$

21,875

$

47,330

 

Adjusted EBITDA to Net Income Reconciliation

The following table provides a reconciliation of Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended June 30, 2012, March 31, 2012 and June 30, 2011 and six months ended June 30, 2012 and 2011:

                                                                                         



Three Months Ended




June 30, 2012


March 31, 2012


June 30, 2011


Net Income

$

2,510

$

1,830

$

22,905


Reconciling items:








     Interest expense


270


354


484


     Income tax provision


1,291


865


12,496


     Depreciation and amortization


4,471


4,327


4,072


     GCCF and 2005 hurricane litigation settlement




(26,964)


     Net gain or loss on disposal of assets


(3,385)


(397)


468


Adjusted EBITDA

$

5,157

$

6,979

$

13,461










                               



Six Months Ended




June 30,
2012



June 30,
2011


Net Income

$

4,340


$

28,859


Reconciling items:







     Interest expense


624



1,055


     Income tax provision


2,156



16,261


     Depreciation and amortization


8,798



8,007


     GCCF and 2005 hurricane litigation settlement




(26,964)


     Net gain or loss on disposal of assets


(3,782)



450


Adjusted EBITDA

$

12,136


$

27,668









 

Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, and net gain or 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 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 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 as defined by GAAP and such information should not be considered as an alternative to net income, 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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