Omega Protein Corporation
OMEGA PROTEIN CORP (Form: 8-K, Received: 11/08/2017 16:16:45)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

Form 8-K

 

 

 

Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934

 

 

 

Date of Report (Dat e of earliest event reported): November 8, 2017

 

 

 

Omega Protein Corporation
(Exact name of registrant as specified in its charter)

 

 

 

Nevada
(State or other jurisdiction
of incorporation)

 

001-14003
(Commission
File Number)

 

 

 

 

76-0562134
(I.R.S. Employer
Identification No.)

 

 

210 5 City   West Blvd., Suite 500

Houston , Texas
(Address of principal executive offices)

770 42
(Zip Code)

 

 

(713) 623-0060
(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[  ]     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14-2(b))

[  ]     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CRF 240.133-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

 

Item 2.02 . Results of Operations and Financial Condition

 

On November 8, 2017, Omega Protein Corporation (the “Company”) issued a press release reporting the Company’s earnings for the quarter ended September 30, 2017. For additional information regarding the Company’s third quarter earnings, please refer to the Company’s press release attached to this Current Report on Form 8-K as Exhibit 99.1 and incorporated into this Item 2.02 by reference.

 

Item 9.01 Financial Statements and Exhibits

 

 

(a)

Financial Statements of business acquired.

 

None.

 

 

(b)

Pro Forma Financial Information.

 

None.

 

 

(c)

Shell Company Transactions.

 

None.

 

 

(d)

Exhibits.

 

 

99.1

T ext of Press Release dated November 8, 2017 titled “ Omega Protein Announces Third Quarter 2017 Financial Results .”

     
 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

Omega Protein Corporation

 

       

 

 

 

 

Dated:      November 8, 2017  

 

           /s/John D. Held               

 

 

 

John D. Held

 

 

 

Executive Vice President and General Counsel

 

 

Exhibit 99.1

 

 

 

Omega Protein Announces Third Quarter 2017 Financial Results

 

HOUSTON, TX – November 8, 2017 – Omega Protein Corporation (NYSE:OME), a nutritional product company and a leading integrated provider of specialty oils and specialty protein products, today reported financial results for the third quarter and nine months ended September 30, 2017.

 

Third Quarter 2017 Highlights

 

Revenues: $90.3 million, compared to $108.8 million in the same period a year ago

 

Gross profit margin: 15.3%, compared to 30.4% in the same period a year ago

 

Net income: $0.9 million, or $2.0 million on an adjusted basis, compared to $14.6 million, or $15.4 million on an adjusted basis, in the same period a year ago

 

Earnings per diluted share: $0.04, or $0.09 on an adjusted basis, compared to $0.64, or $0.68 on an adjusted basis, in the same period a year ago

 

Adjusted EBITDA: $9.7 million, compared to $29.4 million in the same period a year ago

 

Third Quarter 2017 Results

The Company’s revenues decreased 17% from $108.8 million in the same period last year to $90.3 million, due to a decrease of $19.8 million in animal nutrition revenues, partially offset by a $1.3 million increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to decreased sales volumes of 21% and 20% for the Company’s fish oil and fish meal, respectively, and decreased sales prices of 5% and 8% for the Company’s fish oil and fish meal, respectively. The decreases in fish oil and fish meal sales volumes were primarily due to decreased production as a result of lower fish catch and total yield, the decreased level of beginning inventory and the timing of contracts compared to the prior year period. Total sales volumes for the animal nutrition segment were approximately 43,900 tons in the third quarter of 2017. The decreases in fish oil and fish meal sales prices were primarily due to prevailing market conditions, including global supply and demand, at the time sales contracts were entered into. The increase in human nutrition revenues was primarily a result of increased specialty oil sales, most notably coconut oils. The composition of revenues by nutritional product line for the third quarter of 2017 was 46% fish meal, 18% fish oil and 36% human nutrition.

 

Third quarter of 2017 revenues decreased 4% from $93.9 million in the second quarter of 2017 to $90.3 million. This decrease was due to lower human nutrition revenues of $4.4 million, partially offset by a $0.8 million increase in animal nutrition revenues. The increase in animal nutrition revenues was due to a 50% increase in fish meal sales volumes and a product-mix driven 20% increase in fish oil sales prices, partially offset by a 51% decrease in fish oil sales volumes and 6% decrease in fish meal sales prices. The decrease in human nutrition revenues was primarily a result of decreased specialty oil and protein product sales.

 

The Company reported gross profit of $13.8 million, or 15.3% as a percentage of revenues, for the third quarter of 2017, versus $33.0 million, or 30.4% as a percentage of revenues, in the third quarter of 2016. The decrease in gross profit as a percentage of revenues was due to a decrease in the animal nutrition segment, partially offset by an increase in the human nutrition segment. Animal nutrition gross profit as a percentage of revenues decreased from 37.5% to 16.0%, due primarily to an increase in the cost per unit of sales, which included a $0.5 million cost of sales adjustment related to prior period sales of 2017 production, as a result of lower anticipated fish catch and production volumes for the 2017 fishing season, and decreases in sales prices. Human nutrition gross profit as a percentage of revenues increased from 12.6% to 14.1% primarily due to increased gross profit as a percentage of revenues for protein products.

 

 

 

 

Compared to the second quarter of 2017, the third quarter of 2017 gross profit decreased from $22.5 million to $13.8 million, and as a percentage of revenues, third quarter 2017 gross profit decreased from 24.0% to 15.3%. The decrease in gross profit as a percentage of revenues was due to decreases in the animal and human nutrition segments. Animal nutrition gross profit as a percentage of revenues decreased from 26.6% to 16.0%, due to a decrease in sales prices and an increase in the cost per unit of sales. Human nutrition gross profit as a percentage of revenues decreased from 19.8% to 14.1% primarily as a result of decreased gross profit as a percentage of revenues for protein products, which was driven in part by product mix, and specialty oils.

 

Selling, general and administrative expense (“SG&A”), including research and development expense (“SG&A”), for the third quarter of 2017 increased to $11.7 million compared to $10.0 million in the third quarter of 2016 and $10.3 million in the second quarter of 2017, primarily due to increased professional fees related to various legal matters and strategic reviews. In addition, in the third quarter of 2017 the Company incurred $1.4 million of professional fees related to the signing of the Merger Agreement with Cooke Inc., which are not included in SG&A.

 

Th e Company recorded a gain on foreign currency of $1.0 million and $0.2 million for the third quarters of 2017 and 2016, respectively, and a loss on foreign currency of $0.4 million for the second quarter of 2017 related to Bioriginal Food & Science.

 

Net income for the third quarter of 2017 was $0.9 million ($0.04 per diluted share) compared to $14.6 million ($0.64 per diluted share) in the same period last year and $7.4 million ($0.32 per diluted share) in the second quarter of 2017. Excluding adjustments for certain items, adjusted net income for the third quarter of 2017 was $2.0 million ($0.09 per diluted share), compared to $15.4 million ($0.68 per diluted share) in the same period last year and $7.6 million ($0.34 per diluted share) for the second quarter of 2017.

 

Adjusted EBITDA totaled $9.7 million for the third quarter of 2017, compared to $29.4 million for the same period last year and $18.5 million for the second quarter of 2017.

 

Nine Month 2017 Results

Revenues in the first nine months of 2017 decreased 16% to $257.8 million compared to $306.2 million for the nine months ended September 30, 2016. The decrease in revenues was due to a $54.4 million decrease in animal nutrition revenues partially offset by a $6.0 million increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to decreased sales volumes of 26% and 21% for the Company's fish oil and fish meal, respectively, and decreased sales prices of 6% and 4% for the Company's fish oil and fish meal. The decreases in fish oil and fish meal sales volumes were primarily due to decreased production as a result of lower fish catch and total yield, the decreased level of beginning inventory and the timing of contracts compared to the prior year period. The decreases in fish oil and fish meal sales prices were primarily due to prevailing market conditions such as global supply and demand at the time sales contracts were entered into. The increase in human nutrition revenues was primarily due to increases in sales of coconut and marine specialty oils.

 

The Company recorded gross profit of $56.5 million, or 21.9% as a percentage of revenues, for the first nine months of 2017, versus gross profit of $91.3 million, or 29.8% as a percentage of revenues, for the first nine months of 2016. The decrease in gross profit as a percentage of revenues was due to a decrease in the animal nutrition segment from 38.2% to 24.9%, partially offset by an increase in the human nutrition segment from 11.5% to 17.4%.

 

Net income for th e nine months ended September 30, 2017 was $14.4 million ($0.63 per diluted share) compared to $28.6 million ($1.27 per diluted share) for the same period last year. Excluding adjustments for certain items, adjusted net income for the nine months ended September 30, 2017 would have been $15.6 million ($0.69 per diluted share) compared to $38.6 million ($1.71 per diluted share).

 

 

 

 

Adjusted EBIT DA totaled $43.4 million for nine months ended September 30, 2017, compared to $78.5 million for the same period last year.

 

Balance Sheet

Cash decreased $16.4 million from $37.4 million on December 31, 2016 to $21.0 million on September 30, 2017. Total debt decreased $0.2 million from $1.1 million on December 31, 2016 to $0.9 million on September 30, 2017. Stockholders' equity increased $14.1 million to $350.8 million as of September 30, 2017 compared to $336.7 million as of December 31, 2016.

 

Fourth Quarter Animal Nutrition Outlook

The animal nutrition segment ended the third quarter of 2017 with approximately 65,000 tons of product in inventory. As of September 30, 2017, the Company has sold forward approximately 24,000 short tons of fish meal and 10,000 metric tons of fish oil with anticipated 2017 delivery, at prices generally at, or modestly below, levels realized during the third quarter of 2017. These forward contracts are expected to account for virtually all of animal nutrition segment’s sales in the fourth quarter of 2017. Total 2017 animal nutrition segment production is currently expected to be in or near the range of 135,000 to 140,000 tons.

 

Definitive Merger Agreement

On October 6, 2017, Omega Protein and Cooke Inc. (“Cooke”) , a New Brunswick company and parent of Cooke Aquaculture Inc., announced that they have entered into a definitive agreement under which Cooke will acquire all outstanding shares of Omega Protein for $22.00 per share in cash. The transaction - which is expected to close near the end of 2017 or early in 2018 - is subject to the approval of Omega Protein stockholders, certain regulatory approvals and other customary closing conditions.

 

As previously announced, i n view of the merger agreement with Cooke Inc. the Company will not be holding an earnings conference call.

 

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, specialty protein products and nutraceuticals.

 

The Company operates seven 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 in 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: Forward-looking statements in this press release are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Omega Protein believes that forward-looking statements made by it are based on reasonable expectations; however, no assurances can be given that actual results will not differ materially from those contained in such forward-looking statements. Forward-looking statements involve statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include the words “estimate,” “project,” “anticipate,” “expect,” “predict,” “assume,” “believe,” “could,” “would,” “hope,” “may” or similar expressions. The statements in this press release that are not historical statements are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond Omega Protein’s control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: (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 acquisitions in the human nutrition segment; (7) the Company’s expectations regarding its human nutrition segment, its future prospects and the dietary supplement market or the human health and wellness segment generally; (8) increase in the price and shortage of key raw materials that could adversely affect the Company’s human nutrition business segment; (9) the cost of compliance or potential restrictions on sales caused by laws and regulations regarding fish meal or oil importation into foreign jurisdictions; (10) the impact of any resolution of a Department of Justice False Claims Act inquiry and two Securities and Exchange Commission subpoenas on the Company’s business, reputation, results of operations and financial condition; (11) the Company’s expectations regarding the suspension of its previously announced stock repurchase program and the duration of that suspension, on the ability of the Company to purchase shares of its common stock under that repurchase program, if it is resumed; (12) the Company’s expectations regarding the ASMFC’s 2017 harvest quota decision, including timing and allocations among ASMFC member states and user groups; (13) the ability or willingness of the Company to make further dividend payments under its previously announced quarterly dividend program, and the anticipated level of those payments; (14) the impact of the Company’s previous announcement of the Company’s review of strategic alternatives of its human nutrition segment, as well as any strategic transaction that may be pursued as a result of such review, including on its financial and operating results, or its employees, suppliers and customers, as well as the uncertainty associated with being able to identify, evaluate and complete any strategic alternative; (15) the impact of pending class action and derivative litigation on the Company’s business, reputation, results of operations and financial condition; and (16) the failure to close the acquisition of the Company by Cooke Inc.

 

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in Omega Protein ’s SEC filings. Omega Protein’s filings may be obtained by contacting Omega Protein or the SEC or through Omega Protein’s web site at www.omegaprotein.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval System at http://www.sec.gov. Omega Protein undertakes no obligation to publicly update or revise any forward-looking statement.

 

Contact:
Investor Relations
(713) 623-0060
hq@omegahouston.com

 

 

 

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except par value amounts)

 

 

 

   

September 30,

2017

   

December 31,

2016

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 20,988     $ 37,412  

Receivables, net

    47,888       38,796  

Inventories, net

    114,383       108,711  

Prepaid expenses and other current assets

    5,564       4,707  

Total current assets

    188,823       189,626  

Property, plant and equipment, net

    206,274       188,624  

Goodwill

    26,900       26,347  

Other intangible assets, net

    16,263       17,504  

Other assets, net

    4,221       5,764  

Total assets

  $ 442,481     $ 427,865  
                 

LIABILITIES AND STOCKHOLDERS ’ EQUITY

               
                 

Current liabilities:

               

Current maturities of long-term debt

  $ 936     $ 1,097  

Accounts payable

    12,567       17,099  

Accrued liabilities

    36,693       37,928  

Total current liabilities

    50,196       56,124  

Deferred tax liability, net

    33,216       25,678  

Pension liabilities, net

    5,406       5,659  

Other long-term liabilities

    2,821       3,717  

Total liabilities

    91,639       91,178  
                 

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; 22,652,670 and 22,579,626 shares issued and 22,464,028 and 22,411,695 shares outstanding at September 30, 2017 and December 31, 2016, respectively

    225       223  

Capital in excess of par value

    157,450       155,761  

Retained earnings

    203,140       192,150  

Treasury stock, at cost – 188,642 and 167,931 shares at September 30, 2017 and December 31, 2016, respectively

    (3,390 )     (2,894 )

Accumulated other comprehensive loss

    (6,583 )     (8,553 )

Total stockholders ’ equity

    350,842       336,687  

Total liabilities and stockholders ’ equity

  $ 442,481     $ 427,865  

 

 

 

 

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,

 
   

2017

   

2016

   

2017

   

2016

 

Revenues

  $ 90,285     $ 108,753     $ 257,777     $ 306,246  

Cost of sales

    76,491       75,706       201,284       214,982  

Gross profit

    13,794       33,047       56,493       91,264  
                                 

Selling, general, and administrative expense

    11,262       9,435       31,294       29,474  

Research and development expense

    393       605       1,422       1,954  

Impairment of goodwill and other intangible assets

                      11,614  

Merger related expenses

    1,420             1,420        

Loss related to plant closures

          663             2,328  

Charges related to U.S. Attorney investigation

          358             358  

Loss (gain) on disposal of assets

    28       (17 )     (182 )     (83 )

Operating income

    691       22,003       22,539       45,619  

Interest expense

    (49 )     (108 )     (202 )     (387 )

Gain (loss) on foreign currency

    998       159       (243 )     (1,199 )

Other income (expense), net

    (9 )     (221 )     (145 )     (184 )

Income before income taxes

    1,631       21,833       21,949       43,849  
                                 

Provision for income taxes

    713       7,280       7,593       15,253  

Net income

    918       14,553       14,356       28,596  
                                 

Other comprehensive income (loss):

                               

Foreign currency translation adjustment net of tax (expense) benefit of ($355), $31, ($995) and ($553), respectively

    659       (58 )     1,847       1,027  

Energy swap adjustment, net of tax benefit (expense) of  ($465), ($285), $257 and ($1,212), respectively

    864       530       (477 )     2,251  

Pension benefits adjustment, net of tax expense of $108, $119, $323 and $358, respectively

    200       221       600       665  

Comprehensive income

  $ 2,641     $ 15,246     $ 16,326     $ 32,539  
                                 

Basic earnings per share

  $ 0.04     $ 0.65     $ 0.64     $ 1.28  
                                 

Weighted average common shares outstanding

    22,209       21,935       22,164       21,894  
                                 

Diluted earnings per share

  $ 0.04     $ 0.64     $ 0.63     $ 1.27  
                                 

Weighted average common shares and potential common share equivalents outstanding

    22,449       22,232       22,438       22,194  
                                 

Dividends declared per common share outstanding

  $ 0.05     $     $ 0.15     $  

 

 

 

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)

 

 

   
Nine Months Ended
September 30,
 
   

2017

   

2016

 

Cash flows from operating activities:

               

Net income

  $ 14,356     $ 28,596  

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

               

Depreciation and amortization

    19,532       19,149  

Loss related to plant closures

          2,131  

Loss (gain) on disposal of assets

    (182 )     (83 )

Impairment of goodwill and other intangible assets

          11,614  

Provisions for losses on receivables

    7       29  

Share based compensation

    2,094       3,181  

Deferred income taxes

    7,712       (624 )

Unrealized loss (gain) on foreign currency fluctuations, net

    243       1,199  

Changes in assets and liabilities:

               

Receivables

    (8,520 )     (6,681 )

Inventories

    (5,140 )     7,675  

Prepaid expenses and other current assets

    (1,628 )     (85 )

Other assets

    194       (2,546 )

Accounts payable

    (4,616 )     (4,680 )

Accrued liabilities

    (677 )     19,770  

Pension liability, net

    347       323  

Other long term liabilities

    177       (1,853 )

Net cash provided by operating activities

    23,899       77,115  

Cash flows from investing activities:

               

Capital expenditures

    (37,130 )     (26,383 )

Proceeds from disposition of assets

    834       107  

Net cash used in investing activities

    (36,296 )     (26,276 )

Cash flows from financing activities:

               

Dividends paid

    (3,366 )      

Principal payments of long-term debt

    (280 )     (25,485 )

Proceeds from long-term debt

          6,376  

Treasury stock repurchase

    (496 )     (367 )

Proceeds from equity compensation transactions

    79       1,342  

Excess tax benefit of equity compensation transactions

          865  

Net cash used in financing activities

    (4,063 )     (17,269 )

Net (decrease) increase in cash and cash equivalents

    (16,460 )     33,570  

Translation effect on cash

    36       4  

Cash and cash equivalents at beginning of year

    37,412       661  

Cash and cash equivalents at end of period

  $ 20,988     $ 34,235  

 

 

 

 

The tables below present information about reported segm ents for three months ended September 30, 2017 and 2016 (in thousands):

 

 

2017

 

Animal

Nutrition

   

Human

Nutrition

   

 

Unallocated

   

 

Total

 

Revenue (1)

  $ 57,931     $ 32,354     $     $ 90,285  

Cost of sales

    48,687       27,804             76,491  

Gross profit

    9,244       4,550             13,794  

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

    539       4,266       6,850       11,655  

Merger related expenses

                1,420       1,420  

Loss (gain) on disposal of assets

    28                   28  

Operating income (loss)

  $ 8,677     $ 284     $ (8,270 )   $ 691  

Depreciation and amortization

  $ 5,001     $ 1,270     $ 233     $ 6,504  

Identifiable assets

  $ 279,282     $ 135,669     $ 27,530     $ 442,481  

Capital expenditures

  $ 9,730     $     $     $ 9,730  

 

 

2016

 

Animal

Nutrition

   

Human

Nutrition

   

 

Unallocated

   

 

Total

 

Revenue (2)

  $ 77,658     $ 31,095     $     $ 108,753  

Cost of sales

    48,532       27,174             75,706  

Gross profit

    29,126       3,921             33,047  

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

    559       3,719       5,762       10,040  

Loss (gain) related to plant closures

          663             663  

Charges related to U.S. Attorney investigation

    358                   358  

Loss (gain) on disposal of assets

    (17 )                 (17 )

Operating income (loss)

  $ 28,226     $ (461 )   $ (5,762 )   $ 22,003  

Depreciation and amortization

  $ 4,978     $ 1,383     $ 189     $ 6,550  

Identifiable assets

  $ 257,009     $ 139,709     $ 38,435     $ 435,153  

Capital expenditures

  $ 6,798     $ 95     $ 1,218     $ 8,111  

 

(1) Excludes revenue from internal customers of $0.8 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

(2) Excludes revenue from internal customers of $0.2 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

The tables below present information abo ut reported segments for the nine months ended September 30, 2017 and 2016 (in thousands):

 

 

2017

 

Animal

Nutrition

   

Human

Nutrition

   

 

Unallocated

   

 

Total

 

Revenue (3)

  $ 155,019     $ 102,758     $     $ 257,777  

Cost of sales

    116,429       84,855             201,284  

Gross profit

    38,590       17,903             56,493  

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

    1,662       11,948       19,106       32,716  

Merger related expenses

                1,420       1,420  

Loss (gain) on disposal of assets

    (193 )     11             (182 )

Operating income (loss)

  $ 37,121     $ 5,944     $ (20,526 )   $ 22,539  

Depreciation and amortization

  $ 15,030     $ 3,798     $ 704     $ 19,532  

Identifiable assets

  $ 279,282     $ 135,669     $ 27,530     $ 442,481  

Capital expenditures

  $ 36,999     $ 109     $ 22     $ 37,130  

 

 

 

 

 

2016

 

Anima l

Nutrition

   

Human

Nutrition

   

 

Unallocated

   

 

Total

 

Revenue (4)

  $ 209,455     $ 96,791     $     $ 306,246  

Cost of sales

    129,355       85,627             214,982  

Gross profit

    80,100       11,164             91,264  

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

    1,707       12,328       17,393       31,428  

Impairment of goodwill and other intangible assets

          11,614             11,614  

Loss (gain) related to plant closures

    (313 )     2,641             2,328  

Charges related to U.S. Attorney investigation

    358                   358  

Loss (gain) on disposal of assets

    (83 )                 (83 )

Operating income (loss)

  $ 78,431     $ (15,419 )   $ (17,393 )   $ 45,619  

Depreciation and amortization

  $ 14,388     $ 4,190     $ 571     $ 19,149  

Identifiable assets

  $ 257,009     $ 139,709     $ 38,435     $ 435,153  

Capital expenditures

  $ 22,702     $ 1,599     $ 2,082     $ 26,383  

 

(3) Excludes revenue from internal customers of $1.6 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

(4) Excludes revenue from internal customers of $0.6 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

Net Income to Adjusted EBITDA Reconciliation

The following table (in thousands) provide s a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016 and the nine months ended September 30, 2017 and 2016:

 

    Three Months Ended  
   

September 30,

2017

   

June 30,

2017

   

September 30,

2016

 

Net Income

  $ 918     $ 7,358     $ 14,553  

Reconciling items:

                       

Interest expense

    (9 )     15       43  

Income tax provision

    713       4,177       7,280  

Depreciation and amortization (1)

    6,504       6,499       6,550  

Merger related expenses (1)

    1,420              

Loss related to plant closures (1)

                663  

Charges related to U.S. Attorney investigation (3)

                358  

Acquisition post-closing consideration (2)

    152       228       (44 )

Loss (gain) on disposal of assets (1)

    28       175       (17 )

Adjusted EBITDA

  $ 9,726     $ 18,452     $ 29,386  

 

    Nine Months Ended  
   

September 30,

2017

   

September 30,

2016

 

Net Income

  $ 14,356     $ 28,596  

Reconciling items:

               

Interest expense

    28       204  

Income tax provision

    7,593       15,253  

Depreciation and amortization (1)

    19,532       19,149  

Impairment of goodwill and other intangible assets (2)

          11,614  

Merger related expenses (1)

    1,420        

Loss related to plant closure s (1)

          2,328  

Charges related to U.S. Attorney investigation (3)

          358  

Acquisition post-closing consideration (2)

    608       1,058  

Loss (gain) on disposal of assets (1)

    (182 )     (83 )

Adjusted EBITDA

  $ 43,355     $ 78,477  

 

(1) See segment disclosures for allocation among segments.

(2) Relates to human nutrition segment.

(3) Relates to animal nutrition segment.

 

 

 

 

Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, impairment of goodwill and other intangible assets, merger related expenses, loss related to plant closures, charges related to U.S. Attorney investigation, acquisition post-closing consideration 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 performance of its ongoing operations. The Company believes Adjusted EBITDA assists such investors in comparing a company's performance of its ongoing operations 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.

 

Net Income to Adjusted Net Income and Diluted Earnings Per Share Reconciliation

The following table (in thousands, except per share amounts) provide s a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Diluted Earnings Per Share, non-GAAP (Generally Accepted Accounting Principles) financial measures, for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016 and the nine months ended September 30, 2017 and 2016:

 

    Three Months Ended  
   

September 30,

2017

   

June 30,

2017

   

September 30,

2016

 

Net Income

  $ 918     $ 7,358     $ 14,553  

Reconciling items:

                       

Income tax provision prior to adjustments

    713       4,177       7,280  

Merger related expenses

    1,420              

Loss related to plant closures

                663  

Charges related to U.S. Attorney investigation

                358  

Acquisition post-closing consideration

    152       228       (44 )

Loss (gain) on disposal of assets

    28       175       (17 )

Adjusted income before income taxes

    3,231       11,938       22,793  

Provision for income taxes after adjustments

    1,267       4,309       7,399  

Adjusted net income

  $ 1,964     $ 7,629     $ 15,394  

Diluted earnings per share

  $ 0.04     $ 0.32     $ 0.64  

Adjusted diluted earnings per share

  $ 0.09     $ 0.34     $ 0.68  

 

    Nine Months Ended  
   

September 30,

2017

   

September 30,

2016

 

Net Income

  $ 14,356     $ 28,596  

Reconciling items:

               

Income tax provision prior to adjustments

    7,593       15,253  

Impairment of goodwill and other intangible assets

          11,614  

Merger related expenses

    1,420        

Loss related to plant closures

          2,328  

Charges related to U.S. Attorney investigation

          358  

Acquisition post-closing consideration

    608       1,058  

Loss (gain) on disposal of assets

    (182 )     (83 )

Adjusted income before income taxes

    23,795       59,124  

Provision for income taxes after adjustments

    8,230       20,557  

Adjusted net income

  $ 15,565     $ 38,567  

Diluted earnings per share

  $ 0.63     $ 1.27  

Adjusted diluted earnings per share

  $ 0.69     $ 1.71  

 

 

 

 

Adjusted net income and Adjusted diluted earnings per share represent net income and diluted earnings per share without impairment of goodwill and other intangible assets, merger related expenses, loss related to plant closures, charges related to U.S. Attorney investigation, acquisition post-closing consideration and loss (gain) on disposal of assets. Income tax expense associated with these items is adjusted on a year-to-date basis, as applicable. 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 performance of its ongoing operations. The Company believes Adjusted net income and Adjusted diluted earnings per share assist investors in comparing a company's performance of its ongoing operations 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 have 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.

 

Human Nutrition Segment Financial Information Reconciliation

The following table (in thousands) provides a breakdown of the total Human Nutrition Segment revenue, cost of sales and gross profit among concentrated menhaden oil products, dairy protein products and other products for the three and nine months ended September 30, 2017:

 

 

Three Months Ended September 30 , 201 7

 

Total Human

Nutrition

Segment

   

Concentrated

Menhaden

Oil Products

   

Segment Less

Concentrated

Menhaden

Oil Products

   

 

Dairy

Protein Products

   

 

Other Products

from Human

Nutrition Segment

 

Revenue

  $ 32,354     $ 80     $ 32,274     $ 4,003     $ 28,271  

Cost of sales

    27,804       69       27,735       4,075       23,660  

Gross profit (loss)

  $ 4,550     $ 11     $ 4,539     $ (72 )   $ 4,611  

Gross profit (loss) margin

    14.1 %     13.8 %     14.1 %     (1.8% )     16.3 %

 

 

Nine Months Ended September 30, 2017

 

Total Human

Nutrition

Segment

   

Concentrated

Menhaden

Oil Products

   

Segment Less

Concentrated

Menhaden

Oil Products

   

 

Dairy

Protein Products

   

 

Other Products

from Human

Nutrition Segment

 

Revenue

  $ 102,758     $ 923     $ 101,835     $ 14,110     $ 87,725  

Cost of sales

    84,855       727       84,128       12,572       71,556  

Gross profit

  $ 17,903     $ 196     $ 17,707     $ 1,538     $ 16,169  

Gross profit margin

    17.4 %     21.2 %     17.4 %     10.9 %     18.4 %

 

The Company has provided a breakdown of total Human Nutrition Segment revenue, cost of sales and gross profit among concentrated menhaden oil products, dairy protein products and other human nutrition products because it believes such a breakdown will provide investors with additional useful detail on the performance of the Human Nutrition Segment.