Omega Protein Corporation
May 11, 2015
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Omega Protein Announces First Quarter 2015 Financial Results

HOUSTON, May 11, 2015 /PRNewswire/ -- Omega Protein Corporation (NYSE:OME), a nutritional product company and a leading integrated provider of specialty oils, essential fatty acids and specialty protein products, today reported financial results for the first quarter ended March 31, 2015.

Omega Protein Corporation Logo.

First Quarter Highlights

  • Revenues:  $71.6 million for the quarter, compared to $63.5 million in the same period a year ago
  • Gross profit margin:  20.7% for the quarter, compared to 32.3% in the same period a year ago
  • Net income: $1.7 million, or $2.6 million on an adjusted basis for the quarter, compared to $8.0 million, or $9.0 million on an adjusted basis, in the same period a year ago
  • Earnings per diluted share: $0.08, or $0.12 on an adjusted basis for the quarter, compared to $0.37, or $0.42 on an adjusted basis in the same period a year ago
  • Adjusted EBITDA:  $10.4 million for the quarter, compared to $19.1 million in the same period a year ago

"We continued our movement towards becoming a more balanced nutrition company in the first quarter with our human nutrition segment generating a record $35 million of revenues," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer. "As we expected, our animal nutrition segment experienced lower sales volumes primarily due to lower beginning inventory levels. Looking ahead, our team remains focused on further integrating our recent acquisitions to drive growth and diversification in our nutrition businesses." 

First Quarter 2015 Results

The Company's revenues increased 13% from $63.5 million in the same period last year to $71.6 million.  This increase was due to growth in human nutrition revenues of $26.6 million, partially offset by a decline in animal nutrition revenues of $18.4 million. The increase in human nutrition revenues was largely due to the addition of Bioriginal Food & Science Corp. ("Bioriginal"), which was acquired in September 2014. The decrease in animal nutrition revenues was due to lower sales volumes of 76% and 12% for the Company's fish oil and fish meal, respectively, partially offset by increased sales prices of 56% and 6% for the Company's fish oil and fish meal, respectively. The composition of revenues by nutritional product line for the first quarter of 2015 was 49% dietary supplements and food, 37% fish meal, 13% fish oil and 1% fish solubles and other. 

First quarter of 2015 revenues decreased 30% from $102.5 million in the fourth quarter of 2014 to $71.6 million. This decrease was due to a $31.3 million decline in animal nutrition revenues, partially offset by a $0.5 million increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to lower fish meal and fish oil volumes of 46% and 66%, respectively, partially offset by higher fish meal and fish oil sales prices of 7% and 30%, respectively.

The Company reported gross profit of $14.8 million, or 20.7% as a percentage of revenues, for the first quarter of 2015, versus $20.5 million, or 32.3% as a percentage of revenues, in the first quarter of 2014. The decrease in gross profit as a percentage of revenues was due to corresponding reductions in both the animal and human nutrition segments.  Animal segment gross profit as a percentage of revenues declined from 34.6% to 28.6%, due primarily to a higher cost per unit for the most recent season's production, as well as a $0.4 million expense for fuel hedge ineffectiveness in the first quarter of 2015. Human nutrition gross profit as a percentage of revenues decreased from 16.9% to 12.2% due primarily to changes in product mix and a lower gross profit as a percentage of revenues for protein products.

Compared to the fourth quarter of 2014, first quarter gross profit decreased from $22.5 million, or 22.0% as a percentage of revenues, to $14.8 million, or 20.7% as a percentage of revenues, due primarily to lower animal nutrition revenues.  Animal nutrition gross profit as a percentage of revenues was nearly unchanged, decreasing from 28.7% to 28.6%.  Human nutrition segment gross profit as a percentage of revenues increased from 8.6% to 12.2% due primarily to improved results from protein products.

Selling, general and administrative expense ("SG&A") for the first quarter increased by $3.3 million to $9.4 million compared the first quarter of 2014, primarily as a result of the Bioriginal acquisition. SG&A expense increased $0.7 million from $8.7 million in the fourth quarter of 2014.

In the fourth quarter of 2013, the Company closed its menhaden fish processing plant located in Cameron, Louisiana and re-deployed certain vessels from that facility to the Company's other Gulf Coast facilities.  In conjunction with the closure, the Company incurred charges of $0.6 million and $1.3 million in the first quarters of 2015 and 2014, respectively. 

Loss on foreign currency related to Bioriginal was $0.5 million for the first quarter of 2015; there was no gain or loss on foreign currency in the first quarter of 2014.

The first quarter of 2015 effective tax rate was 36.9% compared to 33.9% in the first quarter of 2014 and 46.5% in the fourth quarter of 2014.  The first quarter of 2015 effective tax rate reflected the impact of non-deductible expenses and the fourth quarter of 2014 effective tax rate reflected lower deductions resulting from tax rules enacted during the quarter. 

Net income for the first quarter of 2015 was $1.7 million ($0.08 per diluted share) compared to $8.0 million ($0.37 per diluted share) in the same period last year and $3.2 million ($0.14 per diluted share) in the fourth quarter of 2014. Excluding adjustments for certain items, net income for the first quarter of 2015 would have been $2.6 million ($0.12 per diluted share), compared to $9.0 million ($0.42 per diluted share) in the same period last year and $7.8 million ($0.35 per diluted share) for the fourth quarter of 2014.  

Adjusted EBITDA totaled $10.4 million for the first quarter of 2015, compared to $19.1 million for the same period last year and $19.7 million for the fourth quarter of 2014.

Balance Sheet

The Company's March 31, 2015 cash balance decreased $1.2 million from December 31, 2014 to $0.2 million, and total debt increased $4.4 million from December 31, 2014 to $39.7 million on March 31, 2015, due primarily to business seasonality and capital expenditures.  Stockholders' equity increased $1.5 million to $267.4 million as of March 31, 2015 compared to $265.9 million as of December 31, 2014. 

Conference Call Information

Omega Protein will host a conference call on its first quarter 2015 financial results at 8:30 a.m., Eastern Time, on Tuesday, May 12, 2015. 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 and the prepared remarks will be available beginning shortly after the conclusion of the call at www.omegaprotein.com and will be available for 30 days. A telephonic replay of the conference call will be available through May 26, 2015. Domestic listeners can dial (877) 870-5176, and international listeners may dial (858) 384-5517. The replay access code is 13607881.

About Omega Protein Corporation

Omega Protein Corporation (NYSE: OME) is a century old nutritional product company that develops, produces and delivers healthy products throughout the world to improve the nutritional integrity of 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 specialty oils and essential fatty acids, specialty protein products and nutraceuticals.

The Company operates eight manufacturing facilities located in the United States, Canada and Europe. The Company also operates more than 30 vessels to harvest menhaden, a fish abundantly found off of the coasts of the Atlantic Ocean and Gulf of Mexico.

For More Information

Visit Omega Protein at www.omegaprotein.com, follow us on Twitter at https://twitter.com/omegaprotein, or find us on LinkedIn at https://www.linkedin.com/company/omega-protein-inc.

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 or increase the cost of compliance; (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, and the effect of forward sales of products on the Company's financial results; (5) fluctuations in the Company's quarterly operating results due to the seasonality of the Company's business, estimates of standard cost for inventory and subsequent adjustments to such costs, and the Company's deferral of inventory sales based on worldwide prices for competing products; (6) the Company's ability to realize the anticipated benefits from its acquisitions in the human nutrition business, and specifically, to integrate successfully its most recent acquisition of Bioriginal; (7) the Company's expectations regarding Nutegrity or Bioriginal, their future prospects and the dietary supplement market or the human health and wellness segment generally, proving to be incorrect; (8) increase in the price and shortage of key raw materials that could adversely affect Bioriginal's and Nutegrity's businesses; and (9) the cost of compliance or potential restrictions on sales caused by laws and regulations regarding fish meal or oil importation into foreign jurisdictions.  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.  Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking information whether as a result of new information, future events or otherwise.

 


OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in thousands, except par value amounts)




March 31,

2015


December 31,

2014

ASSETS







Current assets:







          Cash and cash equivalents


$

223


$

1,430

          Receivables, net



41,954



36,621

          Inventories



93,551



97,513

          Deferred tax asset, net



1,845



1,871

          Prepaid expenses and other current assets



4,083



4,936








                Total current assets



141,656



142,371

Other assets, net



2,176



2,309

Property, plant and equipment, net



175,579



169,932

Goodwill



41,945



42,501

Other intangible assets, net



22,197



23,002

                Total assets


$

383,553


$

380,115


LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







         Current maturities of long-term debt


$

18,379


$

14,741

          Accounts payable



19,173



21,047

         Accrued liabilities



23,140



23,216

              Total current liabilities



60,692



59,004

Long-term debt, net of current maturities



21,296



20,486

Deferred tax liability, net



24,949



25,949

Pension liabilities, net



4,968



5,375

Other long-term liabilities



4,229



3,419

                Total liabilities



116,134



114,233

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; 21,793,094 and 21,587,751 shares issued and 21,718,072 and 21,527,319 share outstanding at March 31, 2015 and December 31, 2014, respectively



 

212



 

 

210

        Capital in excess of par value



143,393



141,855

        Retained earnings



136,937



135,268

        Treasury stock, at cost  - 75,022 and 60,432 shares at March 31, 2015 and December 31, 2014, respectively



 

(753)



 

(595)

        Accumulated other comprehensive loss



(12,370)



(10,856)

                Total stockholders' equity



267,419



265,882

                    Total liabilities and stockholders' equity


$

383,553


$

380,115

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)






Three Months Ended



March 31,



2015


2014

Revenues

$

71,623

$

63,500

Cost of sales


56,828


43,007

Gross profit


14,795


20,493






Selling, general, and administrative expense


9,416


6,093

Research and development expense


774


484

Loss related to plant closure


638


1,323

Loss (gain) on disposal of assets


307


247

Operating income


3,660


12,346

Interest income


4


8

Interest expense


(362)


(247)

Loss on foreign currency


(545)


Other expense, net


(110)


(56)

Income before income taxes


2,647


12,051






Provision for income taxes


978


4,080

Net income


1,669


7,971






Other comprehensive income (loss):





Foreign currency translation adjustment net of tax benefit of $886  and $0, respectively


(1,645)


Energy swap adjustment, net of tax benefit

   of $34 and $10, respectively


(64)


(18)

Pension benefits adjustment, net of tax expense

   of $105 and $80, respectively


195


149

Comprehensive income

$

155

$

8,102

Basic earnings per share

$

0.08

$

0.38

Weighted average common shares outstanding


21,006


20,355

 

Diluted earnings per share

 

$

 

0.08

$

 

0.37

Weighted average common shares and potential

common share equivalents outstanding


21,466


21,014

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)




Three Months Ended

March 31,



2015


2014

Cash flows from operating activities:





       Net income

$

1,669

$

7,971

       Adjustments to reconcile net income to net

          cash provided by operating activities:





        Depreciation and amortization


5,878


5,217

        Loss related to plant closure



231

        Loss (gain) on disposal of assets


307


247

        Provisions for losses on receivables


12


12

        Share based compensation


546


392

        Deferred income taxes


(525)


285

        Unrealized loss on foreign currency fluctuations, net


545


        Changes in assets and liabilities:





                 Receivables


(5,855)


(6,952)

                   Inventories


3,477


12,716

                 Prepaid expenses and other current assets


465


1,592

                 Other assets


(215)


(135)

                 Accounts payable


(2,456)


(775)

                 Accrued liabilities


(453)


434

                 Pension liability, net


(212)


(172)

                 Other long term liabilities


614


(28)

                         Net cash provided by operating activities


 

3,797


 

21,035

Cash flows from investing activities:





        Proceeds from disposition of assets


15


61

        Capital expenditures


(10,560)


(12,815)

                         Net cash used in investing activities


(10,545)


(12,754)

Cash flows from financing activities:





        Principal payments of long-term debt


(3,133)


(1,219)

        Proceeds from long-term debt


7,838


        Purchase treasury stock at cost


(158)


(57)

        Proceeds from stock options exercised


843


93

        Excess tax benefit of stock options exercised


151


9

                         Net cash provided by (used in) financing activities


5,541


(1,174)

Net increase (decrease) in cash and cash equivalents


(1,207)


7,107

Cash and cash equivalents at beginning of year


1,430


34,059

Cash and cash equivalents at end of period

$

223

$

41,166

The tables below present information about reported segments for the three months ended March 31, 2015 and 2014 (in thousands).  It should be noted that all cash and cash equivalent balances have been included in the identifiable assets of the unallocated segment. 

 

Three Months Ended March 31, 2015


Animal Nutrition


Human Nutrition


Unallocated


Total

Revenue (1)


$  36,829


$  34,794


  $       


$   71,623

Cost of sales


26,283


30,545


           


56,828

Gross profit


10,546


4,249


           


14,795

Selling, general and administrative expenses

  (including research and development)


557


5,029


4,604


10,190

Loss related to plant closure


638


         


           


638

Other (gains) and losses


307


         


           


307

Operating income


$    9,044


$      (780)


$   (4,604)


$     3,660

Depreciation and amortization


$     4,273


$     1,499


$        106


$     5,878

Identifiable assets


$ 211,055


$ 171,559


$        899


$ 383,513

Capital expenditures


$     9,113


$        951


$        496


$   10,560


(1)  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.

 

 

Three Months Ended March 31, 2014


Animal Nutrition


Human Nutrition


Unallocated


Total

Revenue (2)


$  55,270


$   8,230


  $       


$  63,500

Cost of sales


36,167


6,840


           


43,007

Gross profit


19,103


1,390


           


20,493

Selling, general and administrative expenses

  (including research and development)


553


1,921


4,103


6,577

Loss related to plant closure


1,323


         


           


1,323

Other (gains) and losses


56


191


           


247

Operating income


$  17,171


$     (722)


$   (4,103)


$  12,346

Depreciation and amortization


$     4,368


$       701


$        148


$     5,217

Identifiable assets


$ 222,761


$  71,814


$   42,256


$ 336,831

Capital expenditures


$     4,597


$    8,209


$            9


$   12,815


(2)  Excludes revenue from internal customers of $0.7 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

Adjusted EBITDA to Net Income Reconciliation
The following table (in thousands) 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 for the three months ended March 31, 2015, December 31, 2014 and March 31, 2014:



Three Months Ended




March 31,

 2015


December 31,

 2014


March 31,

 2014


Net Income

$

1,669

$

3,198

$

7,971


Reconciling items:








   Interest expense


332


574


216


   Income tax provision


978


2,783


4,080


   Depreciation and amortization


5,878


5,945


5,217


   Loss related to plant closure


638


1,576


1,323


   Impairment of intangible assets



4,718



   Acquisition post-closing consideration


574


600



   Acquisition costs and inventory adjustment



72



   Loss (gain) on disposal of assets


307


217


247


Adjusted EBITDA

$

10,376

$

19,683

$

19,054


Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, loss related to plant closure, impairment of intangible assets, acquisition post-closing consideration, acquisition costs and inventory adjustment and loss (gain) 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 changes, 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 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.

Adjusted Net Income and Diluted Earnings Per Share to Net Income Reconciliation
The following table (in thousands, except per share amounts) provides a reconciliation of Adjusted Net Income and Diluted Earnings Per Share, non-GAAP (Generally Accepted Accounting Principles) financial measures, to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended March 31, 2015, December 31, 2014 and March 31, 2014:



Three Months Ended




March 31,

 2015


December 31,

 2014


March 31,

 2014


Net Income

$

1,669

$

3,198

$

7,971


Reconciling items:








     Income tax provision prior to adjustments


978


2,783


4,080


     Loss related to plant closure


638


1,576


1,323


     Impairment of intangible assets


                


4,718


               


     Acquisition post-closing consideration


574


600


              


     Acquisition costs and inventory adjustment


                 


72


              


     Loss (gain) on disposal of assets


307


217


247


Adjusted income before income taxes


4,166

 


13,164

 


13,621


     Provision for income taxes after adjustments


1,539


5,372


4,612


Adjusted net income

$

2,627

$

7,792

$

9,009


Adjusted diluted earnings per share

$

0.12

$

0.35

$

0.42


Adjusted net income and Adjusted diluted earnings per share represent net income and diluted earnings per share without loss related to plant closure, impairment of intangible assets, acquisition post-closing consideration, acquisition costs and inventory adjustment and loss (gain) on disposal of assets and taxes associated with these items. The Company has reported Adjusted net income and Adjusted diluted earnings per share because it believes these measures are widely used by investors as an indicator of a company's operating performance. The Company believes Adjusted net income and Adjusted diluted earnings per share assist investors in comparing a company's performance on a consistent basis.  Adjusted net income and Adjusted diluted earnings per share are not calculations based on GAAP and should not be considered alternatives to net income or diluted earnings per share in measuring our performance. Investors should carefully consider the specific items included in our computation of Adjusted net income and Adjusted diluted earnings per share. While Adjusted net income and Adjusted diluted earnings per share has been disclosed herein to permit a more complete comparative analysis of our operating performance across time periods and relative to other companies, investors should be cautioned that these measures as reported by us may not be comparable in all instances to Adjusted net income and Adjusted diluted earnings per share as reported by us or by other companies. Adjusted net income and Adjusted diluted earnings per share are not intended to represent net income or diluted earnings per share as defined by GAAP and such information should not be considered as an alternative to net income, diluted earnings per share or any other measure of performance prescribed by GAAP in the United States.

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SOURCE Omega Protein Corporation

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