Omega Protein Announces Third Quarter 2013 Financial Results Company Establishes New Record for Quarterly Revenues and Gross Profit

HOUSTON, Nov. 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 third quarter ended September 30, 2013.

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

Third Quarter 2013 Highlights

  • Revenues:  $87.6 million for the quarter, compared to $84.0 million in the same period a year ago and $41.8 million in the second quarter of 2013
  • Gross profit margin:  33.6% for the quarter, an increase from 16.0% in the same period a year ago and 31.8% in the second quarter of 2013
  • Net income:  Net income of $14.0 million for the quarter, compared to $0.2 million in the same period a year ago and $4.0 million in the second quarter of 2013
  • Earnings:  Earnings per diluted share of $0.66 for the quarter, compared to $0.01 in the same period a year ago and $0.19 in the second quarter of 2013
  • Adjusted EBITDA:  $27.1 million for the quarter, compared to $11.6 million in the same period a year ago and $11.8 million in the second quarter of 2013

"In the third quarter we reported the highest quarterly revenues and gross profits in the Company's history, reflecting strong pricing and yields in our animal nutrition segment and contributions from the protein business recently acquired by our human nutrition segment," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer. "We continue to make progress on our goal of building a more balanced nutrition company by growing our human nutrition business through the expansion of our dairy protein facility and additional value-added product offerings, a strategy we believe will generate stronger returns and decreased volatility over time."

Third Quarter 2013 Results

The Company's revenues increased 4% from $84.0 million in the same period last year to $87.6 million.  The increase in revenues was due to a $1.1 million increase in animal nutrition revenues and a $2.6 million, or 49%, increase in human nutrition revenues. The increase in animal nutrition revenues was primarily due to increased sales prices of 29% and 33% for the Company's fish meal and fish oil, respectively, as well as a 61% increase in fish oil volume, partially offset by decreased sales volume of 39% for the Company's fish meal.  The increase in human nutrition revenues was primarily due to sales of protein products from Wisconsin Specialty Protein ("WSP"), a business acquired by the Company in the first quarter of 2013.  The composition of revenue by nutritional product line for the third quarter of 2013 was 57% fish meal, 33% fish oil, 9% specialty nutraceutical and food ingredients and products, and 1% fish solubles and other. 

Third quarter of 2013 revenues increased 110% from $41.8 million in the second quarter of 2013.  The increase in revenues was due to a $45.4 million increase in animal nutrition revenues, which reflected higher fish meal sales prices of 6% and higher sales volumes of 83% for fish meal and 513% for fish oil, partially offset by 37% lower fish oil sales prices.  The increase in fish meal sales prices was primarily due to sales made pursuant to contracts entered into at higher prices, and the decrease in fish oil sales prices reflected a significant change in the product mix of refined and crude oils.  Sales volumes were positively impacted by normal seasonal demand.  Human nutrition revenues increased $0.5 million to $7.8 million in the third quarter compared to $7.3 million in the second quarter.  The increase in human nutrition revenues reflects higher revenues from protein products, partially offset by lower Omega-3 fish oil ingredients and tolling revenues. 

The Company reported gross profit of $29.4 million, or 33.6% as a percentage of revenues, for the third quarter of 2013, versus $13.4 million, or 16.0% as a percentage of revenues, in the third quarter of 2012.  The increase was primarily due to an increase in the animal nutrition segment gross profit as a percentage of revenues from 15.9% to 34.5% as a result of increased fish oil and fish meal sales prices.  The human nutrition segment gross profit as a percentage of revenues also increased, rising from 16.7% to 24.6%, due primarily to the addition of the protein products business.

Third quarter gross profit increased from $13.3 million, or 31.8% as a percentage of revenues, in the second quarter of 2013.  The increase in gross profit as a percentage of revenues was primarily due to higher animal nutrition segment sales volumes and an increase in gross profit as a percentage of revenues from 33.9% to 34.5% in the animal nutrition segment as a result of a 4% increase in revenue per ton.  The human nutrition segment gross profit as a percentage of revenues also increased from 22.1% in the second quarter. 

Selling, general and administrative expenses for the third quarter increased $1.3 million to $6.9 million compared to the third quarter of 2012, primarily as a result of the WSP acquisition.  Selling, general and administrative expenses increased from $6.0 million for the second quarter of 2013, primarily as a result of increased professional services expenses and employee compensation related costs.

The third quarter of 2013 effective tax rate was 34.6% compared to 90.8% in the third quarter of 2012 and 34.7% in the second quarter of 2013. 

Net income for the third quarter of 2013 was $14.0 million ($0.66 per diluted share) compared to net income of $0.2 million ($0.01 per diluted share) for the same period last year and net income of $4.0 million ($0.19 per diluted share) for the second quarter of 2013.  Excluding the impact of the charge related to the U.S. Attorney's office investigation, net income for the third quarter of 2012 would have been $4.3 million ($0.21 per diluted share).

Adjusted EBITDA totaled $27.1 million for the third quarter of 2013, compared to $11.6 million for the same period last year and $11.8 million for the second quarter of 2013.

Nine Month 2013 Results

Revenues in the current period increased 3% to $178.3 million compared to revenue of $172.5 million for the nine months ended September 30, 2012. The increase in revenues for 2013 was due to a $4.6 million increase in human nutrition revenues and a $1.2 million increase in animal nutrition revenues. The increase in human nutrition revenues was due primarily to the acquisition of WSP on February 27, 2013. The increase in animal nutrition revenues was primarily due to increased sales prices of 24% and 44% for the Company's fish meal and fish oil, respectively, partially offset by decreased sales volumes of 25% and 11% for the Company's fish meal and fish oil, respectively.

The Company recorded gross profit of $54.8 million, or 30.7% as a percentage of revenues, for the first nine months of 2013, versus gross profit of $29.1 million, or 16.9% as a percentage of revenues, for the first nine months of 2012.  The increase in gross profit as a percentage of revenues was primarily due to an increase in animal nutrition segment gross profit as a percentage of revenues from 16.3% to 32.2%, reflecting an increase in animal segment revenue per unit as a result of higher fish meal and fish oil sales prices, partially offset by a decrease in human nutrition gross profit as a percentage of revenue from 22.2% to 20.2%.

Net income for the nine months ended September 30, 2013 was $20.8 million ($0.99 per diluted share) compared to $4.6 million ($0.23 per diluted share) for the same period last year.  Excluding the impact of the investigation charge and the net gain on disposal of assets, net income for the nine months ended September 30, 2012 would have been $6.4 million ($0.32 per diluted share). 

Adjusted EBITDA, totaled $48.9 million for nine months ended September 30, 2013, an increase from $24.0 million for the same period last year.

Balance Sheet

The Company's balance sheet remains strong, and stockholders' equity increased $27.2 million to $232.8 million as of September 30, 2013 as compared to December 31, 2012.  Total debt decreased $2.3 million from December 31, 2012 to $25.0 million on September 30, 2013.  The Company's September 30, 2013 cash balance decreased $21.2 million from December 31, 2012 to $34.8 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 with members of the executive management team to discuss these results with additional comments and details. The conference call is scheduled to begin at 8:30 a.m. ET on Thursday, November 7, 2013. The call will be broadcast live over the Internet hosted at the Investor Relations section of Omega Protein's website at www.omegaprotein.com, and will be available for 30 days.  In addition, listeners may dial (877) 407-3982 in North America, and international listeners may dial (201) 493-6780.

A telephonic playback will be available from 11:30 a.m. ET, November 7, 2013, through November 21, 2013. Participants may dial (877) 870-5176 in North America, and international listeners may dial (858) 384-5517. The replay pin number is 10000746.

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 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 and (7) 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)




September 30,

2013


December 31,

2012

ASSETS







 Current assets:







          Cash and cash equivalents


$

34,838


$

55,998

          Receivables, net



19,064



17,267

          Inventories



90,281



66,659

          Deferred tax asset, net



430



1,165

          Prepaid expenses and other current assets



5,265



3,430








                Total current assets



149,878



144,519

Other assets, net



4,384



10,789

Property, plant and equipment, net



144,636



127,640

Goodwill



19,128



7,986

Other intangible assets, net



8,755



4,362

                Total assets


$

326,781


$

295,296








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







         Current maturities of long-term debt


$

3,062


$

3,058

         Current portion of capital lease obligation





268

         Accounts payable



4,674



3,000

         Accrued liabilities



33,793



31,741

              Total current liabilities



41,529



38,067

Long-term debt, net of current maturities



21,922



24,242

Deferred tax liability, net



20,130



15,794

Pension liabilities, net



8,450



9,826

Other long-term liabilities



1,946



1,764

                Total liabilities



93,977



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; 20,628,646 and 19,883,940 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively



 

201



 

 

195

        Capital in excess of par value



134,690



129,040

        Retained earnings



107,089



86,292

        Accumulated other comprehensive loss



(9,176)



(9,924)

                Total stockholders' equity



232,804



205,603

                    Total liabilities and stockholders' equity


$

326,781


$

295,296















 


OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2013


2012


2013


2012

Revenues

$

87,620

$

83,970

$

178,320

$

172,506

Cost of sales


58,200


70,572


123,520


143,369

Gross profit


29,420


13,398


54,800


29,137










Selling, general, and administrative expense


6,930


5,645


19,403


16,373

Research and development expense


650


553


1,770


1,672

Charges related to U.S. Attorney investigation



4,137



4,440

 

Impairment of intangible assets


80


129


80


129

 

Loss (gain) on disposal of assets


(161)


30


213


(3,752)

Operating income


21,921


2,904


33,334


10,275

Interest income


5


11


15


21

Interest expense


(483)


(299)


(1,356)


(996)

Other expense, net


(104)


(94)


(285)


(282)

Income before income taxes


21,339


2,522


31,708


9,018










Provision for income taxes


7,377


2,291


10,911


4,447

Net income


13,962


231


20,797


4,571










Other comprehensive income (loss):









Energy swap adjustment, net of tax expense (benefit) of $54, $545, ($2) and $383, respectively


101


1,011


(5)


711

Pension benefits adjustment, net of tax expense of $135, $133, $405 and $398, respectively


251


248


753


740

Comprehensive income

$

14,314

$

1,490

$

21,545

$

6,022










Basic earnings per share

$

0.68

$

0.01

$

1.03

$

0.23










Weighted average common shares outstanding


20,150


19,462


19,801


19,406










 

Diluted earnings per share

 

$

 

0.66

 

$

 

0.01

 

$

 

0.99

$

 

0.23










Weighted average common shares and potential common share equivalents outstanding


 

20,762


 

20,018


 

20,520


 

19,878










 

                                                                                                                                   


OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)




 Nine Months Ended



September 30,



2013


2012

Cash flows from operating activities:





       Net income

$

20,797

$

4,571

       Adjustments to reconcile net income to net

          cash provided by operating activities:





        Depreciation and amortization


15,627


13,308

        Loss (gain) on disposal of assets


213


(3,752)

        Impairment of intangible assets


80


129

        Provisions for losses on receivables


36


36

        Share based compensation


1,461


2,777

        Deferred income taxes


5,074


443

        Changes in assets and liabilities:





                 Receivables


(604)


(13,312)

                   Inventories


(22,700)


(13,848)

                 Prepaid expenses and other current assets


(1,782)


(2,392)

                 Other assets


5,409


(3,958)

                 Accounts payable


938


(1,580)

                 Accrued liabilities


2,538


25,663

                 Pension liability, net


(622)


(1,224)

                 Other long term liabilities


182


30

                         Net cash provided by operating

                             activities


 

26,647


 

6,891

Cash flows from investing activities:





        Proceeds from disposition of assets


313


5,930

        Acquisition of InCon, purchase price adjustment



181

        Acquisition of Wisconsin Specialty Protein, net of

            cash acquired


 

(26,676)


 

        Land and building purchased in capital lease

            extinguishment


 

(5,005)


 

        Capital expenditures


(18,009)


(21,279)

                         Net cash used in investing activities


(49,377)


(15,168)

Cash flows from financing activities:





        Principal payments of long-term debt


(2,316)


(2,223)

        Principal payments of capital lease obligation


(309)


(378)

        Debt issuance costs



(389)

        Proceeds from stock options exercised


3,048


459

        Excess tax benefit of stock options exercised


1,147


34

                         Net cash provided by (used in) financing

                             activities


1,570


(2,497)

Net decrease in cash and cash equivalents


(21,160)


(10,774)

Cash and cash equivalents at beginning of year


55,998


51,391

Cash and cash equivalents at end of period

$

34,838

$

40,617






 

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

 

 

September 30, 2013


Animal
Nutrition


Human
Nutrition
(1)


 

Unallocated


 

Total

Revenue(2)


$   79,828


$     7,792


  $           ―


$   87,620

Cost of sales


52,321


5,879



58,200

Gross profit


27,507


1,913



29,420

Selling, general and administrative expenses (including research and development)


733


1,924


4,923


7,580

Other (gains) and losses


(160)


79



(81)

Operating income


$   26,934


$        (90)


$   (4,923)


$     21,921

Depreciation and amortization


$      4,531


$       651


$        192


$       5,374

Identifiable assets


$ 271,363


$ 54,095


$     1,323


$  326,781

Capital expenditures


$      3,960


$    1,062


$          90


$      5,112



(1) Includes revenues and related expenses for WSP.



(2) Excludes revenue from internal customers of $0.3 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

 

September 30, 2012


Animal
Nutrition


Human
Nutrition


 

Unallocated


 

Total

Revenue(3)


$    78,745


$    5,225


   $          ―


$   83,970

Cost of sales


66,218


4,354



70,572

Gross profit


12,527


871


         ―


13,398

Selling, general and administrative expenses (including research and development)


555


905


4,738


6,198

Charges related to U.S. Attorney investigation


4,137




4,137

Other (gains) and losses


30


129



159

Operating income


$      7,805


$     (163)


$   (4,738)


$      2,904

Depreciation and amortization


$      4,020


$       329


$        161


$      4,510

Identifiable assets


$ 276,969


$ 26,422


$     1,624


$ 305,015

Capital expenditures


$      4,125


$       256


$           53


$      4,434



(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.

 

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

 

September 30, 2013


Animal
Nutrition


Human
Nutrition
(1)


 

Unallocated


 

Total

Revenue(2)


$ 156,618


$   21,702


  $             ―


$ 178,320

Cost of sales


106,201


17,319



123,520

Gross profit


50,417


4,383



54,800

Selling, general and administrative expenses (including research and development)


2,023


5,081


14,069


21,173

Other (gains) and losses


214


79



293

Operating income


$    48,180


$       (777)


$   (14,069)


$   33,334

Depreciation and amortization


$    13,352


$     1,721


$          554


$   15,627

Identifiable assets


$  271,363


$   54,095


$       1,323


$ 326,781

Capital expenditures


$    16,006


$     1,675


$          328


$   18,009



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



(2) Excludes revenue from internal customers of $1.3 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

 

September 30, 2012


Animal
Nutrition


Human
Nutrition


 

Unallocated


 

Total

Revenue(3)


$ 155,451


$  17,055


   $            ―


$ 172,506

Cost of sales


130,098


13,271



143,369

Gross profit


25,353


3,784



29,137

Selling, general and administrative expenses (including research and development)


1,833


2,826


13,386


18,045

Charges related to U.S. Attorney investigation


4,440




4,440

Other (gains) and losses


(3,752)


129



(3,623)

Operating income


$   22,832


$      829


$  (13,386)


$    10,275

Depreciation and amortization


$    11,903


$       967


$         438


$    13,308

Identifiable assets


$ 276,969


$ 26,422


$      1,624


$  305,015

Capital expenditures


$   19,355


$   1,582


$         342


$    21,279



(3) 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.

 

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 September 30, 2013, June 30, 2013 and September 30, 2012 and the nine months ended September 30, 2013 and September 30, 2012:                                                                                                            



Three Months Ended (in thousands)



September 30,
2013


June 30,
2013


September 30,
2012

Net Income

$

13,962

$

3,990

$

231

Reconciling items:







   Interest expense


452


451


268

   Income tax provision


7,377


2,123


2,291

   Depreciation and amortization


5,374


5,276


4,510

   Charges related to U.S. Attorney investigation


             ―


             ―


4,137

   Impairment of intangible assets


80




129

   Net gain or loss on disposal of assets


(161)


(2)


30

Adjusted EBITDA

$

27,084

$

11,838

$

11,596







Nine Months Ended (in thousands)




September 30,
2013


September 30,
2012

Net Income


$

20,797

$

4,571

Reconciling items:






   Interest expense



1,264


892

   Income tax provision



10,911


4,447

   Depreciation and amortization



15,627


13,308

   Charges related to U.S. Attorney investigation



             ―


4,440

   Impairment of intangible assets



80


129

   Net gain or loss on disposal of assets



213


(3,752)

Adjusted EBITDA


$

48,892

$

24,035

Adjusted EBITDA represents net income (loss) before interest expense, income tax, depreciation and amortization, charges related to U.S. Attorney investigation, impairment of intangible assets 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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