HOUSTON, Nov. 17, 2014 /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 third quarter ended September 30, 2014.
Third Quarter Highlights
- Revenues: $70.8 million for the quarter, compared to $87.6 million in the same period a year ago
- Gross profit margin: 20.0% for the quarter, compared to 33.6% in the same period a year ago
- Net income:$0.7 million, or $1.7 million excluding plant closure charges and loss on disposal of assets for the quarter, compared to $14.0 million, in the same period a year ago
- Earnings per diluted share:$0.03, or $0.08 excluding plant closure charges and loss on disposal of assets for the quarter, compared to $0.66 in the same period a year ago
- Adjusted EBITDA: $9.3 million for the quarter, compared to $27.1 million in the same period a year ago
“We remain focused on executing our strategic initiatives to drive long-term growth. These initiatives include leveraging our recently strengthened human nutrition product portfolio with the acquisition of Bioriginal Food & Science Corp., as we further diversify and balance our business to take advantage of global health and wellness trends,” commented Bret Scholtes, Omega Protein’s President and Chief Executive Officer. “Our third quarter results reflect previously discussed declines in fish catch and fish oil yields compared to last year’s exceptional season, which offset continued favorable pricing dynamics in our animal nutrition segment.”
Third Quarter 2014 Results
The Company’s revenues decreased 19% from $87.6 million in the same period last year to $70.8 million. This decrease was due to a $24.7 million decline in animal nutrition revenues, partially offset by a $7.9 million increase in human nutrition revenues. The decrease in animal nutrition revenues was primarily due to lower sales volumes of 28% and 41% for the Company’s fish meal and fish oil, respectively, and lower sales prices for the Company’s fish meal of 4%, partially offset by higher sales prices of 14% for the Company’s fish oil. The decrease in fish meal and fish oil sales volumes is primarily due to lower production as a result of decreased fish oil yields, slower than anticipated early season fish catch, and the previously announced Cameron plant closure. The increase in fish oil sales prices was primarily due to higher realized crude oil prices. The increase in human nutrition revenues was primarily attributable to the acquisition of Bioriginal Food & Science Corp. (“Bioriginal”), which was acquired on September 5, 2014. The composition of revenues by nutritional product line for the third quarter of 2014 was 49% fish meal, 27% fish oil, 22% dietary supplements and food, and 2% fish solubles and other.
Third quarter of 2014 revenues decreased 2% from $71.9 million in the second quarter of 2014 to $70.8 million. This decrease was due to lower animal nutrition revenues of $10.1 million, partially offset by higher human nutrition revenues of $9.0 million. The decrease in animal nutrition revenues was primarily due lower sales volumes of 37% and 8% for the Company’s fish oil and fish meal, respectively, partially offset by higher sales prices of 14% and 1% for the Company’s fish oil and fish meal, respectively. The increase in human nutrition revenues was primarily due to the acquisition of Bioriginal.
The Company reported gross profit of $14.2 million, or 20.0% as a percentage of revenues, for the third quarter of 2014, versus $29.4 million, or 33.6% as a percentage of revenues, in the third quarter of 2013. The decrease in gross profit as a percentage of revenues was due to reductions in both the animal and human nutrition segments. Animal segment gross profit as a percentage of revenues declined from 34.5% to 25.8%, due primarily to a higher cost per unit for current season production. Human nutrition gross profit as a percentage of revenues decreased from 24.6% to a gross loss of 0.1% due primarily to start-up costs associated with the Company’s protein plant expansion, increased protein raw material costs and $0.8 million of additional expense associated with the acquisition-related write-up of Bioriginal’s inventory to fair value.
Compared to the second quarter of 2014, third quarter gross profit decreased from $20.4 million, or 28.4% as a percentage of revenues, to $14.2 million, or 20.0% as a percentage of revenues. Animal nutrition gross profit as a percentage of revenues decreased from 30.3% to 25.8%, primarily reflecting a higher cost per unit for current season production. Human nutrition segment gross profit as a percentage of revenues decreased from 9.9% to a gross loss of 0.1% due largely to the start-up costs associated with the Company’s protein plant expansion and Bioriginal’s acquisition-related inventory write-up to fair value.
Selling, general and administrative expenses for the third quarter increased $3.3 million to $10.2 million compared to the third quarter of 2013, primarily due to $2.7 million of pretax professional expenses ($2.5 million after tax) related to the acquisition of Bioriginal. Selling, general and administrative expenses increased $3.7 million from $6.5 million in the second 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 $1.5 million in the third quarter of 2014.
The third quarter of 2014 effective tax rate was 60.6% compared to 34.6% in the third quarter of 2013 and 36.9% in the second quarter of 2014. The increase in the effective tax rate was primarily a result of non-deductible expenses related to the acquisition of Bioriginal. The effective tax rate in the third quarter would have been approximately 23.3% were it not for these expenses.
Net income for the third quarter of 2014 was $0.7 million ($0.03 per diluted share) compared to $14.0 million ($0.66 per diluted share) in the same period last year and $6.6 million ($0.31 per diluted share) for the second quarter of 2014. Excluding plant closure charges and gain or loss on disposal of assets, net income for the third quarter of 2014 would have been $1.7 million ($0.08 per diluted share), compared to $13.9 million ($0.65 per diluted share) in the same period last year and $8.3 million ($0.38 per diluted share) for the second quarter of 2014. Net income for the third quarter of 2014 includes a net loss of $(0.3) million from Bioriginal.
Adjusted EBITDA totaled $9.3 million for the third quarter of 2014, compared to $27.1 million for the same period last year and $18.3 million for the second quarter of 2014.
Nine Month 2014 Results
Revenues in the first nine months of 2014 increased 16% to $206.2 million compared to revenues of $178.3 million for the nine months ended September 30, 2013. The increase in revenues was due to a $19.0 million increase in animal nutrition revenues and an $8.8 million increase in human nutrition revenues. The increase in animal nutrition revenues was primarily due to higher sales volumes of 49% for the Company’s fish oil and higher sales prices of 2% for the Company’s fish meal. This was partially offset by lower sales volumes of 5% for the Company’s fish meal and lower sales prices of 2% for the Company’s fish oil. The increase in human nutrition revenues was due primarily to the acquisition of Bioriginal.
The Company recorded gross profit of $55.1 million, or 26.7% as a percentage of revenues, for the first nine months of 2014, versus gross profit of $54.8 million, or 30.7% as a percentage of revenues, for the first nine months of 2013. The decrease in gross profit as a percentage of revenues was primarily due to the impact of decreased fish oil yields and slower than anticipated early season fish catch on cost per unit of sales as well as lower human nutrition gross profit as a percentage of revenues.
The effective tax rate was 37.0% for the nine months ended September 30, 2014 compared to 34.4% for the nine months ended September 30, 2013. The effective tax rate for the nine months ended September 30, 2014 would have been approximately 34.4% were it not for the non-deductible expenses related to the acquisition of Bioriginal.
Net income for the nine months ended September 30, 2014 was $15.3 million ($0.70 per diluted share) compared to $20.8 million ($0.99 per diluted share) for the same period last year. Excluding the impact of the plant closure and loss on disposal of assets, net income for the nine months ended September 30, 2014 would have been $19.0 million ($0.88 per diluted share) compared to $21.0 million ($1.00 per diluted share).
Adjusted EBITDA totaled $46.7 million for nine months ended September 30, 2014, a decrease from $48.9 million for the same period last year.
Balance Sheet
Due in large part to the Bioriginal acquisition, the Company’s September 30, 2014 cash balance decreased $32.3 million from December 31, 2013 to $1.7 million, and total debt increased $30.7 million from December 31, 2013 to $54.9 million on September 30, 2014. Stockholders’ equity increased $19.5 million to $266.7 million as of September 30, 2014 compared to $247.2 million as of December 31, 2013.
Conference Call Information
Omega Protein will host a conference call on its third quarter 2014 financial results at 8:30 a.m., Eastern Time, on Tuesday, November 18, 2014.
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