Omega Protein Corporation
Nov 8, 2011
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Omega Protein Announces Third Quarter Fiscal 2011 Financial Results

Reports Strongest Revenue Quarter in the Company's History

HOUSTON, Nov. 8, 2011 /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 third quarter ended September 30, 2011.

Third Quarter 2011 Highlights:

  • Revenues:  $71.7 million, a 28.1% increase over the 2010 third quarter, due primarily to higher volumes
  • Gross profit margin:  19%, down from 27% for the 2010 third quarter, reflecting low fish oil yields in 2011
  • Net income: $4.7 million ($0.24 per diluted share) compared to $7.0 million ($0.37 per diluted share) in the 2010 third quarter
  • Production:  Highest year-to-date production since 2007 and highest fish catch since 2002
  • Growth: Completed acquisition of InCon Processing, L.L.C.

Third Quarter 2011 Results

Omega Protein third quarter of 2011 revenues increased 28.1% to $71.7 million from $56.0 million in the same period last year.  The composition of revenue by nutritional product line was 63% fish meal, 30% fish oil, 5% specialty nutraceutical ingredients, and 2% fish solubles and other.  Fish meal sales prices decreased 23% compared to the third quarter of 2010, but were 9% higher than the third quarter average for the prior five years.  Fish oil sales prices increased 12% compared to the third quarter of 2010 and were 22% higher than the third quarter average for the prior five years.  

The Company recorded gross profit of $13.4 million, or 18.7% as a percentage of revenues, for the third quarter of 2011, versus gross profit of $15.3 million, or 27.3% as a percentage of revenues, for the third quarter of 2010.  The decrease in gross profit was primarily due to a decrease in fish meal sales prices partially offset by an increase in fish oil sales prices and increased sales volumes of fish meal and fish oil.  The global availability of fish meal, particularly from South America, influenced the decrease in fish meal sales prices.  Strong export demand for quality oil and an increase in pricing of competitive fats and oils were significant factors related to the increase in fish oil pricing and the increase in sales volumes.  Cost per unit of production was consistent for the two periods, as low fish oil yields offset the positive impact of an increased fish catch in 2011.

Net income for the third quarter ended September 30, 2011 was $4.7 million ($0.24 per diluted share) compared to $7.0 million ($0.37 per diluted share) for the same period last year.  In addition to the items discussed above, the decrease was influenced by general and administrative expenses associated with a December 2010 acquisition.

"We are pleased with this season's strong catch and production results, as well as our ability to generate the highest quarterly revenues in our Company's history," commented Bret Scholtes, Omega Protein's Executive Vice President and Chief Financial Officer.  "At the same time, we believe that the steps we have taken with the recent acquisitions of Cyvex Nutrition and InCon Processing better position Omega Protein by improving our ability to penetrate the more profitable human nutrition market with our fish oil."

Mr. Scholtes continued, "We believe our vertically integrated business model provides a distinct competitive advantage that allows us to better serve our customers and increase long-term shareholder value."

Nine Month 2011 Results

Revenue in the current period increased 38.4% to $172.4 million compared to revenue of $124.6 million for the nine months ended September 30, 2010.  The composition of the 2011 revenue by nutritional product line was 66% fish meal, 26% fish oil, 6% specialty nutraceutical ingredients, and 2% fish solubles and other.

The Company recorded gross profit of $43.9 million, 25.4% as a percentage of revenues, for the first nine months of 2011, versus gross profit of $30.1 million, 24.2% as a percentage of revenues, for the first nine months of 2010.  The increase in gross profit was primarily due to an increase in sales volumes of fish meal and an increase in fish oil sales prices partially offset by a decrease in fish meal sales prices.  Cost per unit of production was consistent for the two periods.  

Net income for the nine months ended September 30, 2011 was $33.6 million ($1.69 per diluted share) compared to $9.9 million ($0.53 per diluted share) for the same period last year.  The 2011 net income results included $26.2 million of pre-tax final settlements with the Gulf Coast Claims Facility (GCCF) related to the 2010 Gulf of Mexico oil spill disaster and $0.8 million of pre-tax settlements with the Company's former insurance broker related to 2005 hurricane activity.   Excluding the impact of these two settlements, the Company's net income for the nine months ended September 30, 2011 would have been approximately $16.1 million ($0.81 per diluted share).

InCon Processing Acquisition

On September 9, 2011, the Company acquired InCon Processing, a recognized leader in the design, piloting, synthesis and purification of specialty compounds. Its areas of expertise are molecular distillation and the production of nutritional compounds, including Omega-3 fish oils. The Company believes that the acquisition of InCon Processing and its concentration technology will further allow the Company to provide its customers with an enhanced range of Omega-3 fish oils in concentrated forms such as ethyl esters and triglycerides.  

Balance Sheet

The Company's balance sheet continues to strengthen with stockholders equity of $198.1 million and working capital of $112.0 million as of September 30, 2011. The cash balance increased $31.2 million to $51.0 million as compared to $19.8 million at December 31, 2010.  This increase was primarily due to the sale of inventory, the final settlement of the Company's claims relating to damages resulting from the Gulf of Mexico oil spill disaster with the GCCF, partially offset by spending related to the 2011 fishing season, capital expenditures and the InCon Processing acquisition.

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 third quarter and nine months ended September 30, 2011 and 2010:




Three Months Ended

September 30,


Nine Months Ended

September 30,



2011


2010


2011


2010



(in thousands)


(in thousands)

Net Income


$     4,735


$     6,970


$   33,594


$      9,932

Reconciling items:









    Interest expense


496


676


1,638


1,934

    Income tax provision


1,873


4,089


18,134


5,758

    Depreciation and amortization


4,022


3,781


11,942


10,874

    GCCF, 2008 and 2005 hurricane settlements


--


(587)


(26,964)


(234)










Adjusted EBITDA


$   11,126


$   14,929


$    38,344


$    28,264




Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, and the GCCF and 2008 and 2005 hurricane litigation settlements. 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.

Conference Call Information

Omega Protein will host a conference call on its third quarter 2011 financial results at 4:30 p.m., Eastern Time, on Tuesday, November 8, 2011. The Company's senior management will be available to discuss recent financial results, current business trends and respond to questions.

Please dial 1-877-407-3982 domestically or 1-201-493-6780 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 November 22, 2011. Domestic callers can access the replay by dialing 877-870-5176 and international callers can dial 858-384-5517. The access code for the replay is 381524.

About Omega Protein

Omega Protein Corporation is a nutritional ingredient company and the nation's leading vertically integrated producer of omega-3 fish oil and specialty fish meal products. Omega Protein makes its products from menhaden, an Omega-3 rich fish which is abundantly available along the U.S. Gulf of Mexico and Atlantic Coasts.

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 projects, 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; and (7) the business, operations, potential or prospects for the Company's subsidiaries, Cyvex Nutrition, Inc. and InCon Processing, the dietary supplement market or the human health and wellness segment generally. Other factors are described in further detail in Omega'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,


December 31,



2011


2010








ASSETS







Current assets:







         Cash and cash equivalents


$

51,020


$

19,784

         Receivables, net



27,393



11,492

         Inventories



82,767



74,692

         Deferred tax asset, net



394



1,673

         Prepaid expenses and other current assets



4,723



3,641








               Total current assets



166,297



111,282

Other assets, net



6,454



3,051

Energy swap asset, net of current portion



--



23

Property, plant and equipment, net



117,722



111,726

Goodwill and other intangible assets, net



12,799



10,702

               Total assets


$

303,272


$

236,784








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







        Current maturities of long-term debt


$

2,992


$

2,994

        Current portion of capital lease obligation



496



439

        Accounts payable



3,270



2,776

        Accrued liabilities



47,496



21,360

             Total current liabilities



54,254



27,569

Long-term debt, net of current maturities



28,071



30,307

Capital lease obligation, net of current portion



407



820

Interest rate swap liability, net of current portion



--



98

Deferred tax liability, net



15,548



12,209

Pension liabilities, net



6,721



8,254

Energy swap liability, net of current portion



123



--

               Total liabilities



105,124



79,257








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;
        19,378,851 and 18,827,278 shares issued and outstanding at
        September 30, 2011 and December 31, 2010, respectively



194



188

       Capital in excess of par value



124,144



116,950

       Retained earnings



81,666



48,072

       Accumulated other comprehensive loss



(7,856)



(7,683)

               Total stockholders' equity



198,148



157,527

                   Total liabilities and stockholders' equity


$

303,272


$

236,784





OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)








Three Months Ended


Nine Months Ended



September 30,


September 30,



2011


2010


2011


2010

Revenues

$

71,741

$

56,014

$

172,373

$

124,571

Cost of sales


58,315


40,742


128,511


94,461

Gross profit


13,426


15,272


43,862


30,110










Selling, general, and administrative expense


5,613


3,603


15,231


10,825

Research and development expense


466


415


1,450


1,349

Proceeds/gains resulting from Gulf of Mexico oil spill disaster


--


(587)


(26,177)


--

Other proceeds/gains resulting from natural disaster, net — 2008 storms


--


--


--


(234)

Other proceeds/gains resulting from natural disaster, net — 2005 storms


--


--


(787)


--

Loss (gain) on disposal of assets


199


(15)


649


253

Operating income


7,148


11,856


53,496


17,917

Interest income


6


22


34


28

Interest expense


(496)


(676)


(1,638)


(1,934)

Other expense, net


(50)


(143)


(164)


(321)

Income before income taxes


6,608


11,059


51,728


15,690










Provision for income taxes


1,873


4,089


18,134


5,758

Net income


4,735


6,970


33,594


9,932










Other comprehensive income (loss):









Energy swap adjustment, net of tax (benefit) expense of ($864), $79, ($395) and ($254), respectively


(1,605)


153


(756)


(493)

Pension benefits adjustment, net of tax (benefit) expense of $105, $98, $123 and $293, respectively


194


190


583


568

Comprehensive income

$

3,324

$

7,313

$

33,421

$

10,007










Basic earnings per share

$

0.24

$

0.37

$

1.75

$

0.53










Weighted average common shares outstanding


19,374


18,819


19,200


18,792











Diluted earnings per share


$

0.24

$

0.37

$

1.69

$

0.53










Weighted average common shares and potential common share equivalents outstanding


20,073


18,929


19,931


18,852




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




Nine Months Ended



September 30,



2011


2010

Cash flows from operating activities:





      Net income

$

33,594

$

9,932

      Adjustments to reconcile net income to net cash provided by operating activities:





       Depreciation and amortization


12,072


11,003

       Other proceeds/gains resulting from natural disaster, net — 2008 storms


--


(234)

       Other proceeds/gains resulting from natural disaster, net — 2005 storms


(787)


--

       Loss on disposal of assets


649


253

       Provisions for losses on receivables


36


36

       Share based compensation


2,408


1,216

       Deferred income taxes


4,703


5,596

       Changes in assets and liabilities:





                Receivables


(14,557)


(6,323)

                Inventories


(8,075)


(7,069)

                Prepaid expenses and other current assets


(2,088)


(1,093)

                Other assets


(4,524)


(590)

                Accounts payable


252


(1,365)

                Accrued liabilities


28,124


8,902

                Pension liability, net


(639)


(732)

                        Net cash provided by operating activities


51,168


19,532

Cash flows from investing activities:





       Proceeds from insurance companies and grants, hurricanes


--


234

       Proceeds from disposition of assets


2,232


50

       Acquisition of InCon, net of cash acquired


(9,028)


--

       Acquisition of Cyvex, net of cash acquired


(2,086)


--

       Capital expenditures


(13,248)


(10,662)

                        Net cash used in investing activities


(22,130)


(10,378)

Cash flows from financing activities:





       Principal payments of long-term debt


(2,238)


(1,951)

       Principal payments of capital lease obligation


(356)


(279)

       Proceeds from long term debt


--


10,000

       Proceeds from stock options exercised


2,879


307

       Excess tax benefit of stock options exercised


1,913


47

                       Net cash provided by financing Activities


2,198


8,124

Net increase in cash and cash equivalents


31,236


17,278

Cash and cash equivalents at beginning of year


19,784


2,177

Cash and cash equivalents at end of period

$

51,020

$

19,455



OME-F

SOURCE Omega Protein Corporation

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