Omega Protein reports record Q3

Omega Protein reports record Q3

Highest quarterly revenues and gross profits in company history reflect strong pricing and yields in animal nutrition and contributions from recently acquired protein business.

Omega Protein Corp. (NYSE: OME), a nutritional product company and a leading integrated producer of omega-3 fish oil and specialty protein products, announced results for the third quarter ended Sept. 30, 2013.

Third quarter 2013 highlights

  • Revenues: $87.6 million for the quarter, compared to $84.0 million in the same period a year ago and $41.8 million in the second quarter of 2013
  • Gross profit margin: 33.6 percent for the quarter, an increase from 16.0 percent in the same period a year ago and 31.8 percent in the second quarter of 2013
  • Net income: Net income of $14.0 million for the quarter, compared to $0.2 million in the same period a year ago and $4.0 million in the second quarter of 2013
  • Earnings: Earnings per diluted share of $0.66 for the quarter, compared to $0.01 in the same period a year ago and $0.19 in the second quarter of 2013
  • Adjusted EBITDA: $27.1 million for the quarter, compared to $11.6 million in the same period a year ago and $11.8 million in the second quarter of 2013

"In the third quarter we reported the highest quarterly revenues and gross profits in the Company's history, reflecting strong pricing and yields in our animal nutrition segment and contributions from the protein business recently acquired by our human nutrition segment," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer. "We continue to make progress on our goal of building a more balanced nutrition company by growing our human nutrition business through the expansion of our dairy protein facility and additional value-added product offerings, a strategy we believe will generate stronger returns and decreased volatility over time."

Third quarter 2013 results
The Company's revenues increased 4 percent from $84.0 million in the same period last year to $87.6 million. The increase in revenues was due to a $1.1 million increase in animal nutrition revenues and a $2.6 million, or 49 percent, increase in human nutrition revenues. The increase in animal nutrition revenues was primarily due to increased sales prices of 29 percent and 33 percent for the Company's fish meal and fish oil, respectively, as well as a 61 percent increase in fish oil volume, partially offset by decreased sales volume of 39 percent for the Company's fish meal. The increase in human nutrition revenues was primarily due to sales of protein products from Wisconsin Specialty Protein (WSP), a business acquired by the Company in the first quarter of 2013. The composition of revenue by nutritional product line for the third quarter of 2013 was 57 percent fish meal, 33 percent fish oil, 9 percent specialty nutraceutical and food ingredients and products, and 1 percent fish solubles and other.

Third quarter of 2013 revenues increased 110 percent from $41.8 million in the second quarter of 2013. The increase in revenues was due to a $45.4 million increase in animal nutrition revenues, which reflected higher fish meal sales prices of 6 percent and higher sales volumes of 83 percent for fish meal and 513 percent for fish oil, partially offset by 37 percent lower fish oil sales prices. The increase in fish meal sales prices was primarily due to sales made pursuant to contracts entered into at higher prices, and the decrease in fish oil sales prices reflected a significant change in the product mix of refined and crude oils. Sales volumes were positively impacted by normal seasonal demand. Human nutrition revenues increased $0.5 million to $7.8 million in the third quarter compared to $7.3 million in the second quarter. The increase in human nutrition revenues reflects higher revenues from protein products, partially offset by lower Omega-3 fish oil ingredients and tolling revenues.

The Company reported gross profit of $29.4 million, or 33.6 percent as a percentage of revenues, for the third quarter of 2013, versus $13.4 million, or 16.0 percent as a percentage of revenues, in the third quarter of 2012. The increase was primarily due to an increase in the animal nutrition segment gross profit as a percentage of revenues from 15.9 percent to 34.5 percent as a result of increased fish oil and fish meal sales prices. The human nutrition segment gross profit as a percentage of revenues also increased, rising from 16.7 percent to 24.6 percent, due primarily to the addition of the protein products business.

Third quarter gross profit increased from $13.3 million, or 31.8 percent as a percentage of revenues, in the second quarter of 2013. The increase in gross profit as a percentage of revenues was primarily due to higher animal nutrition segment sales volumes and an increase in gross profit as a percentage of revenues from 33.9 percent to 34.5 percent in the animal nutrition segment as a result of a 4 percent increase in revenue per ton. The human nutrition segment gross profit as a percentage of revenues also increased from 22.1 percent in the second quarter.

Selling, general and administrative expenses for the third quarter increased $1.3 million to $6.9 million compared to the third quarter of 2012, primarily as a result of the WSP acquisition. Selling, general and administrative expenses increased from $6.0 million for the second quarter of 2013, primarily as a result of increased professional services expenses and employee compensation related costs.

The third quarter of 2013 effective tax rate was 34.6 percent compared to 90.8 percent in the third quarter of 2012 and 34.7 percent in the second quarter of 2013.

Net income for the third quarter of 2013 was $14.0 million ($0.66 per diluted share) compared to net income of $0.2 million ($0.01 per diluted share) for the same period last year and net income of $4.0 million ($0.19 per diluted share) for the second quarter of 2013. Excluding the impact of the charge related to the U.S. Attorney's office investigation, net income for the third quarter of 2012 would have been $4.3 million ($0.21 per diluted share).

Adjusted EBITDA totaled $27.1 million for the third quarter of 2013, compared to $11.6 million for the same period last year and $11.8 million for the second quarter of 2013.

Nine month 2013 results
Revenues in the current period increased 3 percent to $178.3 million compared to revenue of $172.5 million for the nine months ended Sept. 30, 2012. The increase in revenues for 2013 was due to a $4.6 million increase in human nutrition revenues and a $1.2 million increase in animal nutrition revenues. The increase in human nutrition revenues was due primarily to the acquisition of WSP on February 27, 2013. The increase in animal nutrition revenues was primarily due to increased sales prices of 24 percent and 44 percent for the Company's fish meal and fish oil, respectively, partially offset by decreased sales volumes of 25 percent and 11 percent for the Company's fish meal and fish oil, respectively.

The Company recorded gross profit of $54.8 million, or 30.7 percent as a percentage of revenues, for the first nine months of 2013, versus gross profit of $29.1 million, or 16.9 percent as a percentage of revenues, for the first nine months of 2012. The increase in gross profit as a percentage of revenues was primarily due to an increase in animal nutrition segment gross profit as a percentage of revenues from 16.3 percent to 32.2 percent, reflecting an increase in animal segment revenue per unit as a result of higher fish meal and fish oil sales prices, partially offset by a decrease in human nutrition gross profit as a percentage of revenue from 22.2 percent to 20.2 percent.

Net income for the nine months ended Sept. 30, 2013 was $20.8 million ($0.99 per diluted share) compared to $4.6 million ($0.23 per diluted share) for the same period last year. Excluding the impact of the investigation charge and the net gain on disposal of assets, net income for the nine months ended Sept. 30, 2012 would have been $6.4 million ($0.32 per diluted share).

Adjusted EBITDA, totaled $48.9 million for nine months ended Sept. 30, 2013, an increase from $24.0 million for the same period last year.

Balance sheet
The Company's balance sheet remains strong, and stockholders' equity increased $27.2 million to $232.8 million as of Sept. 30, 2013 as compared to Dec. 31, 2012. Total debt decreased $2.3 million from Dec. 31, 2012 to $25.0 million on Sept. 30, 2013. The Company's Sept. 30, 2013 cash balance decreased $21.2 million from Dec. 31, 2012 to $34.8 million. This decrease was primarily due to the acquisition of WSP in February 2013, as well as expenditures related to 2013 fishing season, capital spending and debt payments, and was partially offset by the sale of inventory.

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