Omega Protein Corporation
May 2, 2012
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Omega Protein Announces First Quarter Fiscal 2012 Financial Results

HOUSTON, May 2, 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 net income of $1.8 million, or $0.09 per diluted share, and Adjusted EBITDA of $7.0 million for the first quarter ended March 31, 2012.

First Quarter 2012 Highlights:

  • Revenues:  $39.7 million for the quarter, a 37% decrease over the 2011 fourth quarter
  • Gross profit margin:  22.4% for the quarter, compared to 17.2% in the 2011 fourth quarter  
  • Net income:  $1.8 million ($0.09 per diluted share) for the quarter, compared to $0.6 million ($0.03 per diluted share) in the 2011 fourth quarter
  • Adjusted EBITDA:  $7.0 million for the quarter, compared to $6.4 million in the 2011 fourth quarter
  • Growth: Recorded the first sales of OmegaActiv, a fish oil for the human supplement market

"Despite lower-than-normal sales volumes, financial results in the first quarter improved over the fourth quarter of 2011.  Our fishing business has had a busy and productive 'off-season', as we diligently invested labor and capital to prepare for the start of the 2012 fishing season," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer.  "At the same time, we continued to make significant progress in our human nutrition business, generating strong supplement ingredient sales growth and recording our first sales of OmegaActiv fish oil to the human supplement market."

Mr. Scholtes continued, "While fish meal pricing remained under pressure in the first quarter, we are beginning to see some positive developments, including improved pricing for competing proteins such as soybean meal and encouraging supply/demand fundamentals.   The fish oil market remains robust, and we are excited about the upcoming fishing season."

First Quarter 2012 Results

Omega Protein recorded revenues of $39.7 million in the first quarter of 2012, a 37% decrease from the fourth quarter of 2011 and a 30% decrease from $56.4 million in the same period last year.  The decrease in revenues compared to the same period last year was primarily due to a 44% reduction in fish meal sales volumes and a 25% reduction in fish oil sales volumes, as well as a 7% reduction in sales prices for fish meal, partially offset by a 7% increase in the sales prices for fish oil.  The composition of revenue by nutritional product line was 53% fish meal, 26% fish oil, 15% specialty nutraceutical ingredients, and 6% fish solubles and other.

The decrease in fish meal and fish oil sales volumes in the first quarter of 2012 is primarily due to a lower quantity of inventory available for sale and other timing issues related to export sales that resulted in a lower proportion of available inventory sold in the first quarter.  The decrease in fish meal sales prices in the first quarter of 2012 is primarily due to an increased global supply of fish meal available for sale, particularly from South America. The increase in fish oil sales prices is due to increased export demand primarily from the aquaculture industry as well as a general increase in global commodity pricing for fats and oils. 

Cyvex, the Company's human nutritional ingredient subsidiary, contributed $6.0 million of revenues to the first quarter of 2012 compared to $3.0 million for the same period last year.  While not material to sales, Cyvex did record its first sales of OmegaActiv fish oil to the human supplement market. 

The Company reported gross profit of $8.9 million, or 22.4% as a percentage of revenues, for the first quarter of 2012, versus gross profit of $10.8 million, or 17.2% as a percentage of revenues, for the fourth quarter of 2011.  Compared to the same period a year ago, gross profit decreased from $15.7 million, or 27.8% as a percentage of revenues, primarily due to the decrease in fish meal sales prices as well as a 6% increase in cost per unit of sales.  The first quarter of 2012 results also include $2.3 million of gross profit from Cyvex, or 39.4% as a percentage of Cyvex's revenues.

Selling, general and administrative expenses for the first quarter of 2012 decreased $2.9 million to $5.5 million versus $8.4 million in the fourth quarter of 2011.  This decrease is primarily due to reduced employee compensation related costs, as well as lower professional fees, impairments and other non-recurring charges.  Compared to the same period a year ago, selling, general and administrative expenses increased $0.6 million from $4.9 million, primarily due to the addition of InCon's related expenses of $0.2 million and increased employee compensation related costs including stock option and restricted stock compensation expense.   

Net income for the first quarter of 2012 was $1.8 million ($0.09 per diluted share) compared to $0.6 million ($0.03 per diluted share) for the fourth quarter of 2011 and $6.0 million ($0.30 per diluted share) for the same period last year.  The decrease in net income from the first quarter of 2011 was a result of the factors previously described, most notably the decreased sales volumes, partially offset by a lower effective tax rate. 

Adjusted EBITDA totaled $7.0 million for the first quarter of 2012, an increase from $6.4 million for the fourth quarter of 2011 and a decrease from $14.2 million for the same period a year ago.

Balance Sheet

The Company's balance sheet continues to strengthen with stockholders equity of $200.4 million as of March 31, 2012. The Company's first quarter of 2012 cash balance decreased $4.7 million to $46.7 million from December 31, 2011.  This decrease is primarily due to expenditures made in preparation for the upcoming 2012 fishing season, capital spending and debt payments, and was partially offset by the sale of inventory. 

Conference Call Information

Omega Protein will host a conference call on its first quarter of fiscal 2012 financial results at 8:30 a.m., Eastern Time, on Thursday, May 3, 2012. The Company's senior management 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 May 17, 2012. Domestic listeners can dial (877) 870-5176, and international listeners may dial (858) 384-5517. The replay access code is 392561.

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)



March 31,

2012


December 31,

2011

ASSETS







 Current assets:







          Cash and cash equivalents


$

46,666


$

51,391

          Receivables, net



24,122



16,788

          Inventories



63,996



64,893

          Deferred tax asset, net



2,222



1,784

          Prepaid expenses and other current assets



2,627



2,238








                Total current assets



139,633



137,094








Other assets, net



4,872



5,423

Property, plant and equipment, net



126,835



122,512

Goodwill and other intangible assets, net



12,720



12,801








                Total assets


$

284,060


$

277,830








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







         Current maturities of long-term debt


$

3,053


$

2,992

         Current portion of capital lease obligation



537



517

         Accounts payable



4,785



3,779

         Accrued liabilities



21,017



19,818








              Total current liabilities



29,392



27,106








Long-term debt, net of current maturities



26,521



27,302

Capital lease obligation, net of current portion



129



268

Energy swap liability, net of current portion



171



113

Deferred tax liability, net



15,279



13,900

Pension liabilities, net



10,405



10,868

Other long-term liabilities



1,776



1,712








                Total liabilities



83,673



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;

          19,603,851 and 19,568,851 shares issued and outstanding at

          March 31, 2012 and December 31, 2011, respectively      



 

194



 

194

        Capital in excess of par value



125,835



124,817

        Retained earnings



84,059



82,229

        Accumulated other comprehensive loss



(9,701)



(10,679)








                Total stockholders' equity



200,387



196,561








                    Total liabilities and stockholders' equity


$

284,060


$

277,830















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




Three Months Ended



March 31,



2012


2011

Revenues

$

39,697

$

56,402

Cost of sales


30,805


40,709

Gross profit


8,892


15,693






Selling, general, and administrative expense


5,518


4,851

Research and development expense


601


485

Other proceeds/gains resulting from natural

  disaster, net — 2005 storms


 


 

Gain on disposal of assets


(397)


(18)

Operating income


3,170


10,375

Interest income


7


18

Interest expense


(396)


(614)

Other expense, net


(86)


(60)

Income before income taxes


2,695


9,719






Provision for income taxes


865


3,765

Net income


1,830


5,954






Other comprehensive income (loss):





Energy swap adjustment, net of tax expense

  of $394 and $951, respectively


731


1,847

Pension benefits adjustment, net of tax

   expense of $133 and $100, respectively


247


194

Comprehensive income

$

2,808

$

7,995






Basic earnings per share

$

0.09

$

0.32






Weighted average common shares outstanding


19,595


18,879






 

Diluted earnings per share

 

$

 

0.09

$

 

0.30






Weighted average common shares and potential

  common share equivalents outstanding


 

20,075


 

19,565







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



Three Months Ended
March 31,






2012


2011




Cash flows from operating activities:








       Net income

$

1,830

$

5,954




       Adjustments to reconcile net income to net

          cash provided by operating activities:








        Depreciation and amortization


4,327


3,979




        Other proceeds/gains resulting from natural

           disaster, net — 2005 storms


 


 




        Gain on disposal of assets


(397)


(18)




        Provisions for losses on receivables


12


12




        Share based compensation


959


707




        Deferred income taxes


547


859




        Changes in assets and liabilities:








                 Receivables


(7,527)


(2,691)




                   Inventories


897


16,112




                 Prepaid expenses and other current assets


794


69




                 Other assets


532


(1,932)




                 Accounts payable


1,006


623




                 Accrued liabilities


1,199


3,838




                 Pension liability, net 


(216)


(141)




                 Other long term liabilities    


64





                         Net cash provided by operating

                             activities


 

4,027


 

27,371




Cash flows from investing activities:








        Proceeds from disposition of assets


493


103




        Acquisition of InCon, purchase price adjustment


181





        Acquisition of Cyvex, net of cash acquired



(2,086)




        Capital expenditures


(8,316)


(3,408)




                         Net cash used in

                           investing activities


 

(7,642)


 

(5,391)




Cash flows from financing activities:








        Principal payments of long-term debt


(720)


(735)




        Principal payments of capital lease obligation


(119)


(96)




        Debt issuance costs


(330)





        Proceeds from stock options exercised


47


2,385




        Excess tax benefit of stock options exercised


12


1,545




                        Net cash (used in) provided by financing   

                            activities


 

(1,110)


 

3,099




Net (decrease) increase in cash and cash equivalents


(4,725)


25,079




Cash and cash equivalents at beginning of year


51,391


19,784




Cash and cash equivalents at end of period

$

46,666

$

44,863













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 March 31, 2012, December 31, 2011 and March 31, 2011:                                                                                              



Three Months Ended (in thousands)




March 31,
2012


December 31,
2011


March 31,
2011


Net Income

$

1,830

$

563

$

5,954


Reconciling items:








     Interest expense


354


428


571


     Income tax provision


865


(406)


3,765


     Depreciation and amortization


4,327


4,358


3,935


     Net gain or loss on disposal of assets


(397)


1,447


(18)


Adjusted EBITDA

$

6,979

$

6,390

$

14,207










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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