Omega Protein profits up 20%

Omega Protein profits up 20%

Human nutrition revenues increased 44 percent, due in part to sales of OmegaActiv concentrated fish oil, launched early 2012.

Omega Protein Corp. reported financial results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter and Full Year 2012 Highlights:

  • Revenues: $63.1 million for the quarter and $235.6 million for the year
  • Gross profit margin: 20.5 percent for the quarter and 17.8 percent for the year
  • U.S. Attorney investigation charge: Recorded $3.6 million for the quarter and $8.0 million for the year
  • Net income/loss: Net loss of $0.5 million, or net income of $4.0 million excluding the investigation charge and net loss on disposal of assets, for the quarter, and net income of $4.1 million, or $10.4 million excluding the investigation charge and net gain on disposal of assets, for the year
  • Earnings: Loss per diluted share of $0.03, or earnings per diluted share of $0.20 excluding the investigation charge and net loss on disposal of assets, for the quarter, and earnings per diluted share of $0.20, or $0.52 excluding the investigation charge and net gain on disposal of assets, for the year
  • Adjusted EBITDA: $11.6 million for the quarter and $35.6 million for the year

"Fourth quarter gross profit as a percentage of revenues increased for the second consecutive quarter due to improved animal nutrition pricing, which helped to mitigate the impact of this season's unusually low fish oil yields," commented Bret Scholtes, Omega Protein's president and CEO. "For the year, our human nutrition revenues increased 44 percent, due in part to sales of our OmegaActiv concentrated fish oil which was launched earlier in the year."

Mr. Scholtes concluded, "We are excited by our recently announced acquisition of Wisconsin Specialty Protein, as we accelerate the growth of our human nutrition business by expanding our nutritional ingredient offerings into specialty whey proteins and further leveraging our global distribution network."

Fourth quarter 2012 results
In the fourth quarter, the Company revised the presentation of shipping and handling costs, which had previously been netted against revenue, to cost of sales. As a result, prior period numbers have been revised, increasing both revenues and cost of sales. This had no impact on gross profit, net income or earnings per share, but reduced gross profit as a percentage of revenues. In addition, for greater transparency into the Company's operating performance, financial tables are included in this release for the animal and human nutrition reported segments for the quarters and years ended December 31, 2012 and 2011.

The Company's revenues decreased 25 percent from the third quarter of 2012 to $63.1 million in the fourth quarter. The decrease in revenues was primarily due to a $20.6 million decrease in animal nutrition revenues, which reflected lower sales volumes of 26 percent and 64 percent for fish meal and fish oil, partially offset by higher fish meal and fish oil sales prices of 3 percent and 51 percent, respectively. Fourth quarter 2012 fish oil sales volumes were negatively impacted by the lack of available inventory due to low fish oil yields. The increase in fish oil sales prices was primarily due to an increased percentage of higher priced refined oil sales relative to lower priced crude oil sales compared to the third quarter of 2012. Human nutrition revenues were virtually unchanged at $5.0 million compared to $5.2 million in the previous quarter. The composition of revenue by nutritional product line for the fourth quarter of 2012 was 77 percent fish meal, 12 percent fish oil, 6 percent specialty nutraceutical ingredients, and 5 percent fish solubles and other.

Fourth quarter of 2012 revenues decreased 8 percent from $68.8 million in the same period last year. The decrease in revenues was primarily due to a $6.0 million decrease in animal nutrition revenues, partially offset by a $0.4 million, or 8 percent, increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to lower sales volumes of 15 percent and 46 percent for fish meal and fish oil, respectively, partially offset by higher fish meal and fish oil sales prices of 10 percent and 34 percent, respectively. The increase in human nutrition revenues was due to higher revenues of 11 percent for Cyvex.

The Company reported gross profit of $12.9 million, or 20.5 percent as a percentage of revenues, for the fourth quarter of 2012, versus gross profit of $13.4 million, or 16.0 percent as a percentage of revenues, for the third quarter of 2012. The increase in gross profit as a percentage of revenues was primarily due to an increase from 15.9 percent to 20.1 percent in the animal nutrition segment as a result of higher fish oil and fish meal sales prices. The human nutrition segment reported $1.2 million in gross profit in the fourth quarter of 2012, or 24.9 percent as a percentage of revenues, an increase from 16.7 percent in the previous quarter.

Fourth quarter gross profit increased from $10.8 million, or 15.7 percent as a percentage of revenues, in the fourth quarter of 2011. The rise was primarily due to a 5.0 percent increase in the animal nutrition segment gross profit as a percentage of revenues from 15.1 percent as a result of higher fish meal and fish oil sales prices, which were partially offset by a higher cost per unit of sales. The human nutrition segment gross profit increased from $1.1 million, or 23.7 percent as a percentage of revenues, in the fourth quarter of 2011.

Selling, general and administrative expenses for the fourth quarter decreased $0.3 million to $5.4 million compared to the third quarter of 2012. Selling, general and administrative expenses were $7.8 million for the fourth quarter of 2011.

The Company recorded an investigation charge of $3.6 million in the fourth quarter of 2012 related to a previously disclosed ongoing investigation by the U.S. Attorney's office. This compares to charges of $4.1 million in the third quarter of 2012 and $0.5 million in the fourth quarter of 2011. The Company also recorded a $1.1 million net loss on disposal of assets in the fourth quarter compared to a net loss of $0.03 million in the third quarter of 2012 and a net loss of $1.4 million in the same period last year.

The fourth quarter of 2012 effective tax rate was 126.2 percent compared to 90.8 percent in the third quarter of 2012. The increase in the effective tax rate is mainly a result of the investigation charge, which is expected to be primarily non-deductible for tax purposes. The effective tax rate in the fourth quarter would have been approximately 38.9 percent were it not for this charge.

Net loss for the fourth quarter of 2012 was $0.5 million ($0.03 loss per diluted share) compared to net income of $0.2 million ($0.01 per diluted share) for the third quarter of 2012 and net income of $0.6 million ($0.03 per diluted share) for the same period last year. Excluding the impact of the investigation charge and net loss on disposal of certain assets, net income for the fourth quarter of 2012 would have been $4.0 million ($0.20 per diluted share), and excluding the impact of the net loss on disposal of certain assets and impact of the investigation charge, net income for the third quarter of 2012 would have been $4.3 million ($0.21 per diluted share).

Adjusted EBITDA, which excludes the investigation charge and net loss/gain on disposal of assets, among other adjustments, totaled $11.6 million for the fourth quarter of 2012, compared to $11.6 million for the third quarter of 2012 and $6.9 million for the same period last year.

Full year 2012 results
Revenues for the full year 2012 decreased 6 percent to $235.6 million compared to revenues of $251.7 million for the full year ended December 31, 2011. The decrease in revenues for 2012 was primarily due to a $22.9 million decrease in animal nutrition revenues, partially offset by a $6.8 million increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to lower sales volumes of 6 percent and lower prices of 2 percent for the Company's fish meal as well as lower sales volumes of 26 percent for the Company's fish oil, partially offset by increased sales prices of 11 percent for the Company's fish oil. Average revenues per ton for the animal segment declined slightly from $1,052 in 2011 to $1,045 in 2012. The increase in human nutrition revenues was due primarily to 35 percent higher revenues for Cyvex, which reflected higher sales volumes and prices for new and existing products, including $1.2 million of sales in its initial year selling concentrated Omega-3 fish oil.

The Company recorded gross profit of $42.1 million, or 17.8 percent as a percentage of revenues, for the full year 2012, versus gross profit of $54.7 million, or 21.7 percent as a percentage of revenues, for the full year 2011. The declines were largely due to the animal nutrition segment which realized an increase in cost per unit of sales primarily due to decreased yields.

The Company's total yields for 2012 decreased by 1.7 percent compared to those in the 2011 and were lower by 8.7 percent compared to the Company's five-year total yield average. These decreases were driven largely by fish oil yields, which were lower by 20.4 percent compared to those in the 2011 fishing season and were lower by 40.6 percent compared to the Company's five-year average.

The Company recorded an investigation charge of $8.0 million in 2012 related to the ongoing investigation by the U.S. Attorney's office. This compares to $0.5 million 2011. The Company also recorded a $2.6 million net gain on disposal of assets in 2012 compared to a net loss of $2.1 million in 2011.

The 2012 effective tax rate was 62.9 percent compared to 34.2 percent in 2011. The increase in the effective tax rate is mainly a result of the investigation charge, which is expected to be primarily non-deductible for tax purposes. The 2012 effective tax rate would have been approximately 36.1 percent were it not for this charge.

Net income for the full year ended December 31, 2012 was $4.1 million ($0.20 per diluted share) compared to $34.2 million ($1.71 per diluted share) for the same period last year. Excluding the impact of the investigation charge and net gain on disposal of assets, net income for the full year ended December 31, 2012 would have been $10.4 million ($0.52 per diluted share). Excluding the impact of two settlements totaling $27.0 million, the investigation charge of $0.5 million and net loss on disposal of assets, the Company's net income for the full year ended December 31, 2011 would have been approximately $18.1 million ($0.91 per diluted share).

Adjusted EBITDA, which excludes the investigation charge, net loss/gain on disposal of assets and two settlements in 2011, among other adjustments, totaled $35.6 million for year ended December 31, 2012, as compared to $45.9 million for the previous year.

 

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