OMEGA PROTEIN CORPORATION HOUSTON, Nov. 8, 2017 /PRNewswire/ -- 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.
The 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 the 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 EBITDA 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, in 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.
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except par value amounts)
September 30, December 31,
2017 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 segments for three months ended September 30, 2017 and 2016 (in thousands):
Animal Human
Nutrition Nutrition
2017 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
Animal Human
Nutrition Nutrition
2016 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 about reported segments for the nine months ended September 30, 2017 and 2016 (in thousands):
Animal Human
Nutrition Nutrition
2017 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
Animal Human
Nutrition Nutrition
2016 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) provides 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, June 30, September 30,
2017 2017 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, September 30,
2017 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 closures
(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) provides 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, June 30, September 30,
2017 2017 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, September 30,
2017 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:
Total Concentrated Segment Less Dairy Other Products
Human Menhaden Concentrated Protein from Human
Three Months
Ended
September 30,
2017 Nutrition Oil Products Menhaden Products Nutrition
Segment Oil Products 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%
Total Concentrated Segment Less Other Products
Human Menhaden Concentrated from Human
Nine Months
Ended
September 30,
2017 Nutrition Oil Products Menhaden Dairy Nutrition
Segment Oil Products Protein Segment
Products
--------
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.
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SOURCE Omega Protein Corporation
