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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-14003
OMEGA PROTEIN CORPORATION
(Exact name of Registrant as specified in its charter)
State of Nevada 76-0562134
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1717 St. James Place, Suite 550
Houston, Texas 77056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 623-0060
_________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X NO .
--- ---
Number of shares outstanding of the Registrant's Common Stock, par value
$0.01 per share, on August 11, 1999: 23,874,786
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OMEGA PROTEIN CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of June 30, 1999
and December 31, 1998............................................ 3
Unaudited Condensed Consolidated Statement of Operations for the
three months and six months ended June 30, 1999 and 1998......... 4
Unaudited Condensed Consolidated Statement of Cash Flows for the
six months ended June 30, 1999 and 1998.......................... 5
Notes to Unaudited Condensed Consolidated Financial Statements...... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation................................................ 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 25
Item 2. Changes in Securities............................................... 25
Item 6. Exhibits and Reports on Form 8-K.................................... 26
Signatures................................................................... 27
Exhibit Index................................................................ 28
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(in thousands)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.................................................. $ 32,884 $ 44,828
Receivables, net........................................................... 6,929 8,902
Inventories................................................................ 59,271 43,351
Prepaid expenses and other current assets.................................. 407 1,039
----------- ------------
Total current assets................................................... 99,491 98,120
----------- ------------
Other assets................................................................... 5,559 5,665
----------- ------------
Property and equipment, net.................................................... 92,366 86,068
----------- ------------
Total assets................................................... $ 197,416 $ 189,853
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt....................................... $ 865 $ 997
Accounts payable........................................................... 4,177 1,672
Accrued liabilities........................................................ 15,975 11,858
Amounts due to parent...................................................... - 36
----------- ------------
Total current liabilities.............................................. 21,017 14,563
----------- ------------
Long-term debt................................................................. 10,832 11,205
----------- ------------
Deferred income taxes.......................................................... 3,789 2,860
----------- ------------
Other liabilities.............................................................. 375 375
----------- ------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock, $0.01 par value: authorized 10,000,000 shares: none
issued................................................................. - -
Common stock, $0.01 par value; authorized 80,000,000 shares:
24,282,586 shares and 24,276,812 shares issued and outstanding,
respectively........................................................... 243 243
Capital in excess of par value............................................. 111,768 111,722
Reinvested earnings, from October 1, 1990.................................. 51,427 48,885
Common stock in treasury, at cost - 413,100 shares......................... (2,035) -
----------- ------------
Total stockholders' equity............................................. 161,403 160,850
----------- ------------
Total liabilities and stockholders' equity.................... $ 197,416 $ 189,853
=========== ============
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
3
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OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues.......................................... $ 18,222 $ 31,488 $ 40,377 $ 61,529
Cost of sales..................................... 16,883 19,217 32,369 36,677
-------- -------- -------- --------
Gross profit...................................... 1,339 12,271 8,008 24,852
Selling, general, and administrative expense...... 2,300 1,909 4,488 3,356
-------- -------- -------- --------
Operating income (loss)........................... (961) 10,362 3,520 21,496
Interest income (expense), net.................... 274 430 659 (174)
Other income (expense), net....................... (120) (51) (208) (117)
-------- -------- -------- --------
Income (loss) before income taxes................. (807) 10,741 3,971 21,205
Provision (benefit) for income taxes.............. (289) 4,072 1,429 7,962
-------- -------- -------- --------
Net income (loss)................................. $ (518) $ 6,669 $ 2,542 $ 13,243
======== ======== ======== ========
Earnings (loss) per share (basic)................. $ (.02) $ 0.28 $ .11 $ .61
======== ======== ======== ========
Average common shares outstanding................. 23,897 23,951 24,053 21,825
======== ======== ======== ========
Earnings (loss) per share (diluted)............... $ (.02) $ 0.27 $ .11 $ .60
======== ======== ======== ========
Average common shares and common share
equivalents outstanding....................... 23,897 24,429 24,053 22,066
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Cash flows provided by operating activities:
Net income............................................................ $ 2,542 $ 13,243
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Gain on disposal of assets, net................................... - (143)
Depreciation and amortization..................................... 4,440 3,717
Deferred income taxes............................................. 929 1,445
Changes in assets and liabilities:
Receivables................................................... 1,973 (4,684)
Inventories................................................... (15,920) (7,710)
Accounts payable and accrued liabilities...................... 6,622 7,623
Amounts due to parent......................................... (36) (8,943)
Other, net.................................................... 284 (121)
---------- ----------
Total adjustments........................................ (1,708) (8,816)
---------- ----------
Net cash provided by operating activities............... 834 4,427
---------- ----------
Cash flows (used in) provided by investing activities:
Proceeds from sale of assets, net..................................... - 460
Capital expenditures.................................................. (10,238) (13,204)
---------- ----------
Net cash (used in) investing activities.................. (10,238) (12,744)
---------- ----------
Cash flows (used in) provided by financing activities:
Principal payments of short and long-term debt obligations............ (505) (2,581)
Purchase of treasury stock............................................ (2,035) -
Proceeds from borrowings - Bank Debt.................................. - 2,579
Repayments on borrowings - Parent..................................... - (28,116)
Proceeds from issuance of common stock................................ - 68,037
---------- ----------
Net cash (used in) provided by financing activities...... (2,540) 39,919
---------- ----------
Net (decrease) increase in cash and cash equivalents...................... (11,944) 31,602
Cash and cash equivalents at beginning of year............................ 44,828 10,258
---------- ----------
Cash and cash equivalents at end of period................................ $ 32,884 $ 41,860
========== ==========
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
5
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OMEGA PROTEIN CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Summary of Operations and Basis of Presentation
Business Description
Omega Protein Corporation ("Omega" or the "Company"), produces and markets
a variety of products produced from menhaden (a fish found in commercial
quantities), including regular grade and value added specialty fish meals, crude
and refined fish oils and fish solubles. The Company's fish meal products are
used as nutritional feed additives by animal feed manufacturers and by
commercial livestock producers. The Company's crude fish oil is sold to food
producers in Europe, and its refined fish oil products are used as a high Omega-
3 ingredient in foods for human consumption, in aquaculture feeds and in certain
industrial applications. Fish solubles are sold as protein additives for animal
feed and as organic fertilizers.
On January 26, 1998, Marine Genetics Corporation ("Marine Genetics") merged
into Omega, a Nevada corporation, wholly-owned by Zapata Corporation ("Zapata"),
with Omega being the surviving entity. The common control merger was accounted
for at historical cost in a manner similar to that in a pooling of interests
accounting. In connection with the merger, Marine Genetics outstanding Common
Stock was converted into Omega Common Stock at the rate of one share for 19,676
shares of Omega Common Stock and Omega's pre-merger outstanding Common Stock was
canceled and treated as treasury stock.
On April 8, 1998, the Company completed an initial public offering of
8,500,000 of its common stock at a gross price of $16.00 per share. On May 7,
1998, the Underwriters exercised their option to acquire 1,275,000 additional
shares at the same gross price. Of the 9,775,000 total shares sold in the
offering, the Company issued and sold 4,600,000 shares, and Zapata sold
5,175,000 shares. Immediately following the offering Zapata owned approximately
59.7% of the shares of the Company's outstanding common stock.
Change in Fiscal Year
On December 1, 1998 the Company's Board of Directors approved a change in
the Company's fiscal year end from September 30 to December 31, effective
beginning January 1, 1999.
Consolidation
The consolidated financial statements include the accounts of Omega and its
wholly and majority owned subsidiaries. Investments in affiliated companies and
joint ventures representing a 20% to 50% voting interest are accounted for using
the equity method. All significant intercompany accounts and transactions have
been eliminated in consolidation.
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The unaudited condensed consolidated financial statements included herein
have been prepared by Omega, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management, necessary to
fairly present such information. All such adjustments are of a normal recurring
nature. Although Omega believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations. These unaudited condensed consolidated
financial statements should be read in conjunction with the financial statements
and the notes thereto included in Omega's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998, filed with the Securities and Exchange
Commission on December 14, 1998. The results of operations for the fiscal
quarter ended June 30 and the six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for any subsequent quarter or the 12
months ending December 31, 1999.
Revenue Recognition
The Company recognizes revenue for the sale of its products when title to
its products is transferred to the customer.
Inventories
The Company's fishing season runs from mid-April to the end of October on
the Gulf Coast and from the beginning of May to the end of December on the
Atlantic Coast. Government regulations preclude the Company from fishing during
the off-seasons. During the off-seasons, the Company incurs costs (i.e., plant
and vessel-related labor, utilities, rent and depreciation) that are directly
related to the Company's infrastructure that will be used in the upcoming
fishing season. Costs that are incurred subsequent to a fish catch are deferred
until the next season and are included with inventory. Fishing product
inventories and materials, parts and supplies are stated at the lower of cost
(average cost) or market.
The Company's inventory cost system considers all costs, both variable and
fixed, associated with an annual fish catch and its processing. The Company's
costing system allocates cost to inventory quantities on a per unit basis as
calculated by a formula that considers total estimated inventoriable costs for a
fishing season (including off-season costs) to total estimated fish catch and
the relative fair market value of the individual products produced. The Company
adjusts the cost of sales, off-season costs and inventory balances at the end of
each quarter based on revised estimates of total inventoriable costs and fish
catch.
Income Taxes
The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax reporting basis of assets and liabilities, and
operating loss and tax credit carryforwards for tax
7
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purposes. Prior to the completion of the Company's public offering in April
1998, the Company was included in Zapata's consolidated U.S. federal income tax
return and its income tax effects reflected on a separate basis for financial
reporting purposes.
Property, Equipment and Depreciation
Property and equipment are initially recorded at cost except as adjusted by
the quasi-reorganization as of October 1, 1990. Because of the quasi-
reorganization, the carrying value of the assets was reduced to estimated fair
value.
Depreciation of property and equipment is computed by the straight-line
method at rates expected to amortize the cost of property and equipment, net of
salvage value, over their estimated useful lives. Estimated useful lives of
assets acquired new, determined as of the date of acquisition, are as follows:
Useful Lives
(years)
------------
Fishing vessels and fish processing plants................... 15-20
Furniture and fixtures....................................... 3-10
Replacements and major improvements are capitalized; maintenance and
repairs are charged to expense as incurred. Upon sale or retirement, the costs
and related accumulated depreciation are eliminated from the accounts. Any
resulting gains or losses are included in the statement of operations. The
Company periodically evaluates its long-lived assets for impairment if events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash and trade accounts receivable. The
Company's customer base generally remains consistent from year to year. The
Company performs ongoing credit evaluations of its customers and generally does
not require material collateral. The Company maintains reserves for potential
credit losses and such losses have historically been within management's
expectations.
At June 30, 1999 and December 31, 1998, the Company had cash deposits
concentrated primarily in two major banks. In addition, the Company had
Certificates of Deposit and commercial quality grade A2P2 rated or better
securities paper with companies and financial institutions. As a result of the
foregoing, the Company believes that credit risk in such investments is minimal.
Earnings Per Share
Basic earnings per share were computed by dividing income by the weighted
average number of common shares outstanding. Diluted earnings per share were
computed by
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dividing income by the sum of the weighted average number of common shares
outstanding and the effect of any dilutive stock options.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Quasi-Reorganization
In connection with the comprehensive restructuring accomplished in the year
ended September 30, 1991, the Company, in conjunction with Zapata, implemented,
for accounting purposes, a "quasi-reorganization," an elective accounting
procedure that permits a company that has emerged from previous financial
difficulty to restate its accounts and establish a fresh start in an accounting
sense. After implementation of the accounting quasi-reorganization, the
Company's assets and liabilities were revalued and its deficit in reinvested
earnings was charged to capital in excess of par value. The Company effected the
accounting quasi-reorganization as of October 1, 1990.
Note 2. Asset Acquisitions
On November 3, 1997, the Company acquired the fishing and processing assets
of American Protein, Inc. ("American Protein"), which operated ten fishing
vessels and a menhaden processing plant in the Chesapeake Bay area, for $14.5
million in cash (the "American Protein Acquisition").
Additionally, on November 25, 1997, the Company purchased the fishing and
processing assets of Gulf Protein, Inc. ("Gulf Protein"), which included six
fishing vessels, five spotter planes and the processing equipment located at the
Gulf Protein plant near Morgan City, Louisiana for $13.6 million in cash and the
assumption of $883,000 in liabilities (the "Gulf Protein Acquisition" together
with the "American Protein Acquisition" the "Acquisitions").
These acquisitions were financed by a $28.1 million intercompany loan from
Zapata. Interest on this loan was accrued at the rate of 8.5% per annum and was
repayable in quarterly installments beginning May 1, 1998. The loan, which was
to mature on August 1, 2002, was prepaid in May 1998 with a portion of the
proceeds from the Company's initial public offering described in Note 1.
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Note 3. Accounts Receivable
Accounts receivable as of June 30, 1999 and December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
June December
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Trade.................................................................. $ 4,782 $ 8,230
Insurance.............................................................. 1,131 304
Employee............................................................... 173 102
Current note receivable................................................ 389 -
Other.................................................................. 628 458
---------- ----------
Total accounts receivable.............................................. 7,103 9,094
Less allowance for doubtful accounts................................... (174) (192)
========== ==========
Receivables, net....................................................... $ 6,929 $ 8,902
========== ==========
Note 4. Inventory
Inventory as of June 30, 1999 and December 31, 1998 is summarized as
follows:
June December
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Fish meal.............................................................. $ 18,345 $ 19,025
Fish oil............................................................... 10,188 12,456
Fish solubles.......................................................... 893 906
Off-season cost........................................................ 24,392 5,973
Materials & supplies................................................... 5,458 5,019
Other.................................................................. 97 74
Less oil inventory reserve............................................. (102) (102)
---------- ----------
Total inventory........................................................ $ 59,271 $ 43,351
========== ==========
</TABLE>
Note 5. Other Assets
Other assets as of June 30, 1999 and December 31, 1998 are summarized
as follows:
<TABLE>
<CAPTION>
June December
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Fishing nets........................................................... $ 1,524 $ 1,263
Prepaid pension cost................................................... 3,040 2,890
Title XI loan origination fee.......................................... 383 399
Note receivable........................................................ - 384
Deposits............................................................... 117 116
Investments in unconsolidated affiliates............................... 78 78
Miscellaneous.......................................................... 417 535
---------- ----------
Total other assets..................................................... $ 5,559 $ 5,665
========== ==========
</TABLE>
10
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Amortization expense for fishing nets amounted to $400,000 and $455,500 for
the six-months ended June 30, 1999 and 1998, respectively.
Note 6. Property and Equipment
Property and equipment as of June 30, 1999 and December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
June December
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Land.............................................. $ 5,390 $ 5,390
Plant assets...................................... 58,565 53,696
Fishing vessels................................... 63,208 60,879
Furniture and fixtures............................ 1,595 1,552
Other............................................. 10,238 7,240
---------- ----------
Total property and equipment...................... 138,996 128,757
Less accumulated depreciation and impairment...... (46,630) (42,689)
---------- ----------
Property and equipment, net....................... $ 92,366 $ 86,068
========== ==========
</TABLE>
Depreciation expense for the six-months ended June 30, 1999 and 1998 was
$3.9 million and $3.1 million, respectively.
Note 7. Notes Payable and Long-Term Debt
At June 30, 1999 and December 31, 1998, the Company's long-term debt
consisted of the following:
<TABLE>
<CAPTION>
June December
1999 1998
---------- ----------
<S> <C> <C>
U.S. government guaranteed obligations (Title XI loan) collateralized by
a first lien on certain vessels and certain plant assets:
Amounts due in installments through 2013, interest from 6.63% to 8.25%.... $ 10,407 $ 10,872
Amounts due in installments through 2014, interest at Eurodollar rates
Plus .45%; 5.45% and 5.77% at June 30, 1999 and December 31, 1998,
respectively............................................................. 1,210 1,250
Other debt at 4% at June 30, 1999 and December 31, 1998...................... 80 80
---------- ----------
Total debt................................................................... 11,697 12,202
Less current maturities.............................................. (865) (997)
---------- ----------
Long-term debt............................................................... $ 10,832 $ 11,205
========== ==========
</TABLE>
At June 30, 1999 and December 31, 1998, the estimated fair value of debt
obligations approximated book value.
The Company is currently authorized to receive up to $20.6 million in loans
under the Title XI program. To date the Company has used $15.0 million of the
authorized Title XI funds. The Title XI facility requires the Company to
maintain a current ratio of at least 1.25:1 and maintain a debt to equity ratio
of not more than 2:1. Covenants also limit capital
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expenditures and investments. At June 30, 1999 and December 31, 1998, the
Company was in compliance with all restrictive covenants.
On August 11, 1998 the Company entered into a two year $20.0 million
revolving credit agreement with SunTrust Bank, South Florida, N.A. (the "Credit
Facility"). Under the Credit Facility the Company may make borrowings in a
principal amount not to exceed $20.0 million at any time. Borrowings under this
facility may be used for working capital and capital expenditures. Interest
accrues on borrowings that will be outstanding under the Credit Facility at the
Company's election, either (i) the bank's prime rate less 75 basis points, or
(ii) LIBOR plus a margin based on the Company's financial performance. The
revolving credit agreement requires a per annum commitment fee of one-eighth of
a percent (0.125%) on the average daily unused portion of the commitment of the
Lender. The Credit Facility is collateralized by all of the Company's trade
receivables, inventory and specific computer equipment. The Company and its
subsidiaries are required to comply with certain financial covenants, including
maintenance of a minimum tangible net worth, debt to tangible net worth ratio,
funded debt to cash flow ratio and fixed charges ratio, and certain other
covenants. As of June 30, 1999 and December 31, 1998, the Company had no
borrowings outstanding under the Credit Facility.
Note 8. Accrued Liabilities
Accrued liabilities as of June 30, 1999 and December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
June December
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Salary and benefits................... $ 6,141 $ 2,826
Insurance............................. 4,232 3,598
Taxes, other than income tax.......... 1,061 868
Federal and state income taxes........ 1,707 1,674
Trade creditors....................... 2,738 2,865
Other................................. 96 27
---------- ----------
Total accrued liabilities............. $ 15,975 $ 11,858
========== ==========
</TABLE>
Note 9. Certain Transactions and Arrangements Between the Company and Zapata
The Company provides to Zapata payroll and certain administrative services
billed at their approximate cost. During the six-month periods ended June 30,
1999 and June 30, 1998 fees for these services totaled approximately $97,000 and
$76,000 respectively. The cost of such services were based on the estimated
percentage of time that employees spent working on the other party's matters as
a percent of total time worked. The Company's management deemed this allocation
method to be reasonable.
Upon completion of the Company's initial public offering in April 1998, the
Company and Zapata entered into certain agreements that include the Separation,
Sublease, Registration Rights, Tax Indemnity and Administrative Services
Agreements. The
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Separation Agreement required the Company to repay $33.3 million of indebtedness
owed by the Company to Zapata contemporaneously with the consummation of the
Company's initial public offering and also prohibits Zapata from competing with
the Company for a period of five years. The Sublease Agreement provides for the
Company to lease its principal corporate offices in Houston, Texas from Zapata
and provides for the Company to utilize certain shared office equipment for no
additional charge. The Registration Rights Agreement sets forth the rights and
responsibilities of each party concerning certain registration filings and
provides for the sharing of fees and expenses related to such filings. The Tax
Indemnity Agreement requires the Company to be responsible for federal, state
and local income taxes from its operations and the Administrative Services
Agreement allows the Company to provide certain administrative services to
Zapata at the Company's estimated cost.
Note 10. Stockholders' Equity
Treasury Stock
During the six months ended June 30, 1999, the Company acquired 413,100
shares of its Common Stock in connection with its stock repurchase program. That
program authorizes the Company to purchase up to 4.0 million common shares from
time to time on the open market at price levels the Company deems attractive.
Note 11. Commitments and Contingencies
Litigation
The Company is defending various claims and litigation arising from its
operations. In the opinion of management, uninsured losses, if any, resulting
from these matters will not have a material adverse effect on the Company's
results of operations, cash flows or financial position.
Environmental Matters
The Company is subject to various possible claims and lawsuits regarding
environmental matters. Management believes that costs, if any, related to these
matters will not have a material adverse effect on the results of operations,
cash flows or financial position of the Company.
13
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-looking statements in this Form 10-Q, future filings by the Company
with the Securities and Exchange Commission (the "Commission"), the Company's
press releases and oral statements by authorized officers of the Company 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, including without limitation, the
risks set forth under the caption "Significant Factors that May Affect Forward
Looking Statements" appearing in Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company 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, which
depend upon or refer to future events or conditions, which include the words
"estimate," "project," "anticipate," "expect," "predict," and "believe" and
similar expressions as well as the Company's statements concerning the state of
the Company's Year 2000 readiness. The Company assumes no obligation to update
forward-looking statements.
General
As used herein, the term "Omega" or the "Company" refers to Omega Protein
Corporation and its consolidated subsidiaries, as applicable. All references
herein to a "fiscal" year mean the 12-month period ended December 31 of such
year. The Company's principal executive offices are located at 1717 St. James
Place, Suite 550, Houston, Texas 77056 (Telephone: (713) 623-0060).
Omega is the largest U.S. producer of protein-rich meal and oil derived
from marine sources. The Company's products are produced from menhaden (a fish
found in commercial quantities), including regular grade and value added
specialty fish meals, crude and refined fish oils and fish solubles. The
Company's fish meal products are used as nutritional feed additives by animal
feed manufacturers and by commercial livestock producers. The Company's
crude fish oil is sold to food producers in Europe and its refined fish oil
products are used as a high Omega-3 ingredient in foods for human consumption,
in aquaculture feeds and in certain industrial applications. Fish solubles are
sold as protein additives for animal feed and as organic fertilizers.
The Company owns 66 fishing vessels (53 of which are directly involved in
the harvesting operations during fiscal 1999) and owns 33 and leases 11 aircraft
(of which 41 are directly involved in the harvesting operations) that are used
to harvest menhaden in coastal waters along the U.S. mid-Atlantic and Gulf of
Mexico coasts. The fish catch is processed into regular grade fish meal,
specialty fish meals, fish oils and fish solubles at the Company's five
processing plants located in Virginia, Mississippi and Louisiana.
14
<PAGE>
The Company closed the American Protein Acquisition on November 3, 1997 and
the Gulf Protein Acquisition on November 25, 1997. See Part I -Financial
Information - Note 2 to Financial Statements. Both Acquisitions were accounted
for as purchases and, therefore, their results of operations were included in
the Company's Statement of Operations as of the closing dates for each
Acquisition.
The Company completed its initial public offering on April 8, 1998.
Subsequent to the offering, the Underwriters elected to purchase over-allotment
options. These issuances generated net proceeds of approximately $68.0 million
(after deducting underwriting discounts and commissions and offering expenses).
Of these proceeds, the Company used approximately $33.3 million to repay
indebtedness to Zapata and $2.1 million to repay bank indebtedness. Of the $33.3
million indebtedness owed to Zapata, $28.1 million was incurred to fund the cash
portion of the purchase price for the Acquisitions and the balance was primarily
incurred to pay the Company's federal income taxes. The Company has invested the
remaining net proceeds in short-term government securities and interest bearing
cash equivalents pending their use. The Company intends to use these proceeds to
fund possible acquisitions and other capital expenditures as well as for general
corporate purposes.
The Company's harvesting season generally extends from May through December
on the mid-Atlantic Coast and from April through October on the Gulf Coast.
During the off-season, the Company fills purchase orders from the inventory it
has accumulated during the fishing season. Prices for the Company's products
historically have been lower during the fishing season when product is more
abundant than in the off-season. Throughout the entire year, and from year to
year, prices are significantly influenced by supply and demand in world markets
for competing products, particularly soybean meal for its fish meal products and
vegetable oils and fats for its fish oil products when used as an alternative to
vegetable oils and fats. World grain and oilseed markets during the first six
months of 1999 have been burdened by excess supplies relative to demand which,
in turn, has resulted in prices for most major commodities being sharply lower
than in previous years. Correspondingly, the Company's product prices have been
adversely impacted during this period, resulting in decreased gross profit
margins and the Company's decision to defer sales of certain of its products
until a more favorable pricing atmosphere develops. Due to this decision to
defer sales until prices return to the higher levels and the success the Company
is experiencing during its current fishing season, management expects inventory
levels to increase significantly though third and fourth quarters. Although
management believes the net realizable value of inventory held as of June 30,
1999 is in excess of that inventory's cost, it is possible that in the event
prices do not increase during the remaining portion of the year that the Company
will be required to record an inventory valuation reserve for products to be
produced during the third and fourth quarters. Accordingly, it is possible that
gross profit margins may continue to decline in prospective quarters.
In an effort to reduce price volatility and to generate higher, more
consistent profit margin, the Company is continuing its efforts towards the
production and marketing of specialty meal products, which generally have higher
margins than the Company's regular grade meal product. Additionally, the Company
is attempting to introduce its refined fish oil into the U.S. food market where
initial marketing efforts have indicated significantly
15
<PAGE>
increased margin opportunities and more stable demand requirements over the
Company's traditional crude fish oil markets.
Liquidity and Capital Resources
Prior to Omega's initial public offering in April 1998, Zapata, as the sole
stockholder of Omega, caused cash to be moved between Omega and Zapata as each
company had cash needs. As a result of the offering, Omega and Zapata are now
separate public companies and each entity's capital resources and liquidity are
legally independent of the other and dedicated to its own operations. As a
result, the historical liquidity and capital resources of the Company may not be
indicative of the Company's future liquidity and capital resources.
The Company's primary sources of liquidity and capital resources have been
cash flows from operations, proceeds from its initial public offering, pre-
initial public offering borrowings from Zapata, bank credit facilities and term
loans from various lenders provided pursuant to the Title XI of the Marine Act
of 1936 ("Title XI"). These sources of cash flows have been used for capital
expenditures (including acquisitions) and payment of long-term debt. The Company
expects to finance future expenditures through existing cash balances,
internally generated cash flows and, if necessary, through funds available from
its $20.0 million credit facility and/or Title XI facilities described below.
Under the Title XI program offered through National Marine Fisheries
Service, the Company has the ability to secure loans for fishing vessels and
shoreside capital expenditures and maintenance through lenders with terms
generally ranging between 12 and 20 years at an interest rate between 6% and 8%
per annum which are enhanced with a government guaranty to the lender for up to
80% of the financing. The Company's current Title XI borrowings are secured by
liens on 14 fishing vessels and mortgages on the Company's Reedville, Virginia
and Abbeville, Louisiana plants. The Company is currently authorized to receive
up to $20.6 million in loans under this program. To date, the Company has used
$15.0 million of these funds and is currently negotiating to utilize the
remaining $5.6 million available from this program.
On September 17, 1998 the Company's Board of Directors authorized the
repurchase of up to 4.0 million shares of the Company common stock from time to
time, depending on market conditions. No time limit has been placed on the
duration of the program and no minimum number or value of shares to be
repurchased has been fixed. Subject to applicable securities laws, shares may be
repurchased from time to time in the open market or private transactions.
Purchases are subject to availability of shares at prices deemed appropriate by
the Company's management and other corporate considerations. Repurchased shares
will be held as treasury shares available for general corporate purposes. During
the six-months ended June 30, 1999, the Company repurchased 413,100 shares for a
total cost of $2.0 million or an average cost of $4.84 per share. To the extent
that additional shares are repurchased under the program the Company's liquidity
and working capital will be correspondingly reduced.
Omega had an unrestricted cash balance of $32.9 million at June 30, 1999,
down $11.9 million from December 31, 1998. This decrease was due to $12.8
million increase in cash
16
<PAGE>
used in investing and financing activities, offset by $0.8 million in cash
provided by operations.
Investing activities used $10.2 million in the six months ended June 30,
1999 and $12.7 million during the six months ended June 30, 1998. The Company's
investing activities consisted mainly of capital expenditures for equipment
purchases and equipment replacements in the six-month periods ended June 30,
1999 and 1998.
Net financing activities used $505,000 to repay debt obligations and $2.0
million to repurchase stock during the six-month period ended June 30, 1999
compared with $39.9 million cash provided by net financing activities during the
six-month period ended June 30, 1998 due primarily to the Company's completed
public offering on April 8, 1998.
The Company believes that its existing cash, cash equivalents, short-term
investments and funds available through its credit facility will be sufficient
to meet its working capital and capital expenditure requirements through at
least the end of 2000.
17
<PAGE>
Results of Operations
The following table sets forth as a percentage of revenues certain items of
the Company's operations for each of the indicated periods:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues.............................. 100.0% 100.0% 100.0% 100.0%
Cost of sales......................... 92.7 61.0 80.2 59.6
------------ ------------ ------------ ------------
Gross profit..................... 7.3 39.0 19.8 40.4
Selling, general and administrative... 12.6 6.1 11.1 5.5
------------ ------------ ------------ ------------
Operating income (loss)............... (5.3) 32.9 8.7 34.9
Interest income (expense), net........ 1.5 1.4 1.6 (0.3)
Other (expense) income, net........... (0.7) (0.2) (0.5) (0.2)
------------ ------------ ------------ ------------
Income (loss) before income taxes..... (4.5) 34.1 9.8 34.4
(Provision) for income taxes.......... 1.7 (12.9) (3.5) (12.9)
------------ ------------ ------------ ------------
Net income (loss)..................... (2.8) 21.2 6.3 21.5
============ ============ ============ ============
</TABLE>
Interim Results for the Quarter ended June 30, 1999 and 1998
Revenues. Revenues for the quarter ended June 30, 1999 decreased $13.3
million, or 42.2% from $31.5 million in the quarter ended June 30, 1998. The
decrease was attributable to lower sales volumes and lower sales prices for the
Company's fish meal and fish oil. Sales volumes for the Company's fish meal and
fish oil declined by 18.4% in the current quarter as compared to the quarter
ended June 30, 1998. Fish meal sales and fish oil sales volumes for the current
quarter decreased 22.3% and 9.6% respectively from the comparable prior year
quarter ended June 30, 1998. Sales prices for the Company's fish meal and fish
oil declined 21.2% and 45.3% respectively as compared to the prior year quarter
ended June 30, 1998. The lower sales volumes for the Company's fish meal and
fish oil is due to management's decision to defer sales during the current
quarter as a result of lower prices. The Company attributes the decrease in
selling prices to low cyclical feed costs affecting the protein industry.
Cost of Sales. Cost of sales, including depreciation and amortization for
the quarter ended June 30, 1999 was $16.9 million, a $2.3 million decrease from
$19.2 million in the quarter ended June 30, 1998. The decrease in cost of sales
was primarily due to an 18.4% decline in sales volumes for the Company's fish
meal and fish oil in the current quarter as compared to the quarter ended June
30, 1998. Cost of sales as a percent of revenues was 92.7% in the quarter ended
June 30, 1999 as compared to 61.0% in the quarter ended June 30, 1998. The
increase in cost of sales as a percent of revenues was due primarily to the
decrease in the Company's selling prices for fish meal and fish oil during the
quarter ending June 30, 1998. Per ton cost of sales were 2.7% higher in the
quarter ended June 30, 1999 as compared to the quarter ended June 30, 1998, due
mainly to higher cost inventories carried forward from fiscal 1998. During
August and September of 1998, fishing operations were hampered by a series of
hurricanes and tropical storms that disrupted fishing operations, resulting in
higher cost inventory.
18
<PAGE>
Gross Profit. Gross Profit decreased $10.9 million or 88.7% from $12.3
million in the quarter ended June 30, 1998 to $1.4 million in the quarter ended
June 30, 1999. As a percentage of revenues, the Company's gross profit margin
decreased 31.7% in the quarter ended June 30, 1999 compared to the same period
in the prior fiscal year. The decline in gross profit was the result of both a
decrease in revenues and higher cost of sales due to the higher cost of
inventories carried forward from fiscal 1998, resulting in a lower gross profit
margin during the quarter ended June 30, 1999 as compared to the quarter ended
June 30, 1998.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $391,000 or 20.5% from $1.9 million in the
quarter ended June 30, 1998 compared to $2.3 million in the period ended June
30, 1999. The increase in expense was due primarily to increased personnel and
marketing costs associated with the Company's efforts to enter the U.S. food
market with its refined menhaden oil.
Operating Income. As a result of the factors discussed above, the Company's
operating income decreased from $10.4 million in the quarter ended June 30, 1998
to a loss of $1.0 million for the quarter ended June 30, 1999. As a percentage
of revenue, operating income decreased from 32.9 % in the quarter ended June 30,
1998 to negative 5.3% in the period ended June 30, 1999.
Interest income (expense), net. Interest income, net decreased by $156,000
in the quarter ended June 30, 1999 as compared to the previous quartered ended
June 30, 1998. The decrease in net interest income was due to the reduction of
cash and cash equivalents available for investment purposes during the quarter
ended June 30, 1999 as compared to the previous quarter ended June 30, 1998.
Other income (expense), net. Other expense, net increased $69,000 in the
quarter ended June 30, 1999 over the prior quarter ended June 30, 1998. During
the previous quarter ended June 30, 1998, the company experienced a gain on the
sale of non-productive assets.
Provision for income taxes. The Company recorded a $0.3 million provision
for an income tax benefit for the quarter ended June 30, 1999. This represents
an effective tax rate benefit of 36.0% on a $0.8 million loss in comparison to a
$4.1 million tax provision for income tax expense in the quarter ended June 30,
1998, representing an effective tax rate of 37.2%. The effective tax rate
approximates the applicable combined state and federal statutory tax rates for
the fiscal year.
Interim Results for the Six Months ended June 30, 1999 and 1998
Revenues. For the six months ended June 30, 1999 revenues decreased $21.1
million, or 34.3% from $61.5 million in the quarter ended June 30, 1998. The
decrease was attributable to lower sales volumes of the Company's fish meal and
fish oil and lower prices for the Company's fish meal and fish oil. Sales
volumes for the company's fish meal and fish oil declined 13.3% and 24.6%
respectively during the current six-month period ended June 30,
19
<PAGE>
1999 as compared to the prior year six-month period ended June 30, 1998. Fish
meal sales prices and fish oil prices declined 16.1% and 28.2% respectively as
compared to the prior year six-month period ended June 30, 1998. The lower sales
volumes for the Company's fish meal and fish oil is due to management's decision
to defer sales during the first six-month period ending June 30, 1999 as a
result of lower prices. The Company attributes the decrease in selling prices to
low cyclical feed cost affecting the protein industry.
Cost of Sales. Cost of sales, including depreciation and amortization, for
the six months ended June 30, 1999 was $32.4 million, a $4.3 million decrease
from $36.7 million from the comparable six-month period ended June 30, 1998
primarily due to a 17.6% decline in sales volumes for the Company's fish meal
and fish oil. As a percent of revenues, cost of sales was 80.2% in the six-month
period ended June 30, 1999 as compared to 59.6% in the comparable six-month
period ended June 30, 1998. The increase in cost of sales as a percent of
revenues was due to decreases in the Company's selling prices for fish meal and
fish oil of 16.1% and 28.2% respectively during the six-month period ended June
30, 1999. Per ton cost of sales were 5.6% higher in the six-month period ended
June 30, 1999 as compared to the previous six-month period ended June 30, 1998,
due mainly to higher cost inventories carried forward from fiscal 1998. During
August and September of 1998, fishing operations were hampered by a series of
hurricanes and tropical storms that disrupted fishing operations, resulting in
higher cost inventory.
Gross Profit. Gross Profit decreased $16.9 million or 67.9% from $24.9
million in the six-month period ended June 30, 1998 to $8.0 million in the six-
months ended June 30, 1999. As a percentage of revenues, the Company's gross
profit margin decreased 20.6% in the six-month period ended June 30, 1999
compared to the same six-month period in the prior fiscal year. The decline in
gross profit was the result of a 16.1% and 28.2% decline in selling prices for
the Company's fish meal and fish oil and a 5.6% higher cost of sales due to the
higher cost of inventories carried forward from fiscal 1998, resulting in a
lower gross profit margin during the first six-month period of fiscal 1999
compared to the six-months ended June 30, 1998.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.1 million or 32.4% from $3.4 million in the
six-month period ended June 30, 1998 compared to $4.5 million in the period
ended June 30, 1999. The increase in expense was due primarily to increased
personnel and marketing costs associated with the Company's efforts to enter the
U.S. food market with its refined menhaden oil, along with increased costs
associated with being a public company.
Operating Income. As a result of the factors discussed above, the Company's
operating income decreased from $21.5 million in the six-months ended June 30,
1998 to $3.5 million for the period ended June 30, 1999. As a percentage of
revenue, operating income decreased from 34.9% in the quarter ended June 30,
1998 to 8.7% in the period ended June 30, 1999.
Interest income (expense), net. Interest income, net increased by $833,000
from net interest expense in the six-month period ended June 30, 1998 to net
interest income during the current six-month period ended June 30, 1999. The
decrease in net interest expense was
20
<PAGE>
due to the Company's repayment of $33.3 million intercompany to Zapata in April
1998 with a portion of the proceeds from the Company's initial public offering
and the investment of the approximately $40.0 million in remaining net proceeds
from the offering.
Other income (expense), net. Other expense, net increased $91,000 in the
six-month period ended June 30, 1999. During the previous six months ended June
30, 1998, the Company experienced a gain on the sale of non-productive assets.
Provision for income taxes. The Company recorded a $1.4 million provision
for income tax expense for the six-month period ended June 30, 1999. This
represents an effective tax rate of 36.0% in comparison to a $8.0 million tax
provision in the quarter ended June 30, 1998, representing an effective tax rate
of 38.0%. The effective tax rate approximates the applicable combined state and
federal statutory tax rates for the fiscal year.
Seasonal and Quarterly Results
The Company's menhaden harvesting and processing business is seasonal in
nature. The Company generally has higher sales during the menhaden harvesting
season (which includes the three-month periods ending June 30 and September 30)
due to increased product availability, but prices during the fishing season tend
to be lower than during the off-season. As a result, the Company's quarterly
operating results have fluctuated in the past and may fluctuate in the future.
In addition, from time to time the Company defers sales of inventory based on
worldwide prices for competing products that affect prices for the Company's
products which may affect comparable period comparisons.
Year 2000
The Year 2000 ("Y2K") issue is the result of computer programs using a two-
digit format, as opposed to four digits, to indicate the year. Some computer
systems will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to disruptions in
operations.
The Company is aware of the issues surrounding the Y2K and the problems
that may occur. In 1997 the Company developed a program for Y2K compliance.
Since 1997 the Company has converted all of its computer information systems to
enable proper processing of critical management information systems ("MIS")
related to the Y2K issue and beyond. Critical MIS systems consist of software
programs such as the operating system, spreadsheets, accounting and financial
programs. Testing methodology involved changing the date on the system being
tested to be in the year 2000 and then exercising all relevant applications to
verify Y2K compliance. The Company's current estimates indicate that the costs
of addressing potential problems are not expected to have a material impact upon
the Company's financial position, result of operations or cash flows in future
periods. To date, the cost of the Company's Y2K Compliance program (including
software conversion) has been immaterial.
21
<PAGE>
The Company continues to evaluate its non-critical MIS systems and expects
that they will be compliant prior to the year 2000. Non-critical MIS systems
refer to embedded technology such as micro controllers found in computers and
other hardware systems that the Company has identified as non-critical MIS
systems. Non-critical MIS systems are those that would not cause a disruption in
any harvesting or manufacturing application involved in producing product.
Internal systems are not the only ones that may have a material effect on
the Company. External relationships to the Company, such as vendors and
customers may also impact the Company by their inability to deliver goods and
services required by the Company to operate. Customers could impact the Company
by their inability to operate, reducing the sale of product, or their inability
to pay the Company for products purchased. The Company has decided to address
this issue in fiscal 1999 by identifying major vendors and customers and sending
surveys to discover their level of Y2K compliance. Major vendors are defined as
those that provide critical goods or services to the Company or those that
provide critical components to the Company (such as fuel suppliers and financial
institutions). Major customers are identified as those customers that are at the
greatest risk of being impacted by the Y2K problem (mainly large domestic and
foreign industrial and commercial customers). The projected completion date of
system surveys of external parties is September 30, 1999. There can be no
guarantee that the systems of other companies on which Omega's systems rely will
be timely converted or that a failure to convert by another company or that a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.
At this point in time, management has not engaged any firm, nor does it
plan to engage any firm, to perform an independent verification and validation
of the Company's Y2K compliance.
At present, the Company does not have a contingency plan in place to
specifically cover the Y2K issues. However, the Company's management continues
to evaluate its systems and those of its vendors and customers and expects that
all of its systems will be compliant prior to the year 2000.
Significant Factors That May Affect Forward-Looking Statements
The Company wishes to caution investors that the following significant
factors, and those factors described elsewhere in this Report, other filings by
the Company with the SEC from time to time and press releases issued by the
Company could affect the Company's actual results causing such results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company:
1. The Company's ability to meet its raw material requirements through
its annual menhaden harvest, which is subject to fluctuation due to
natural conditions over which the Company has no control, such as
varying fish population, adverse weather conditions and disease.
22
<PAGE>
2. The impact on the prices for the Company's products of worldwide
supply and demand relationships over which the Company has no control
and which tend to fluctuate to a significant extent over the course of
a year and from year to year.
3. The impact of a violation by the Company of federal, state and local
laws and regulations relating to menhaden fishing and the protection
of the environment and the health and safety of its employees or of
the adoption of new laws and regulations, or stricter interpretations
of existing laws or regulations that materially adversely affect the
Company's business.
4. The impact if the Company cannot harvest menhaden in U.S.
jurisdictional waters if the Company fails to comply with the U.S.
citizenship ownership requirements.
5. Risks inherent with the Company's venture into the sale of refined,
non-hydrogenated menhaden oil for consumption in the U.S., including
the unproven market for this product.
6. Fluctuations in the Company's quarterly operating results due to the
seasonality of the Company's business and the Company's deferral of
sales of inventory based on worldwide prices for competing products.
7. The ability of the Company to retain and recruit key officers and
qualified personnel, vessel captains and crew members.
8. Risks associated with the strength of local currencies of the
countries in which its products are sold, changes in social, political
and economic conditions inherent in foreign investment and
international trade in such countries, changes in U.S. laws and
regulations relating to foreign investment and trade, changes of tax
or other laws, partial or total expatriation, currency exchange rate
fluctuations and restrictions on currency repatriation, the disruption
of labor, political disturbances, insurrection or war and the effect
of requirements of partial local ownership of operations in certain
countries.
9. The unanticipated impact of Y2K issues, including the Company's
ability to address Y2K compliance and to develop information
technology and management information systems to support strategic
goals while continuing to control costs and expenses and counter-party
issues.
10. Risks related to unanticipated material adverse outcomes in any
pending litigation or any other unfavorable outcomes or settlements.
There can be no assurance that the Company will prevail in any pending
litigation and to the extent that the Company sustains losses growing
out of any pending litigation which are not presently reserved or
otherwise provided for or insured against, its business, results of
operation and financial condition could be adversely effected.
23
<PAGE>
11. In the future the Company may undertake acquisitions, although there
is no assurance this will occur. Further, there can be no assurance
that the Company will be able to profitably manage future businesses
it may acquire or successfully integrate future businesses it may
acquire into the Company without substantial costs, delays or other
problems which could have a material adverse effect on the Company's
business, results of operations and financial condition.
24
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various claims and disputes arising in the
normal course of business, including claims made by employees under the Jones
Act which generally are covered by the Company's insurance. The Company believes
that it has adequate insurance coverage for all existing matters and that the
outcome of all pending proceedings, individually and in the aggregate, will not
have a material adverse effect upon the Company's business, results of
operations, cash flows or financial position.
Item 2. Changes in Securities
(a) None.
(b) In April and May 1998, the Company sold 4,600,000 shares of its common
stock for an aggregate offering price of $73.6 million. Also pursuant
to the Registration Statement, Zapata, as a selling stockholder, sold
5,175,000 shares of common stock of the Company for an aggregate
offering price of $82.8 million. The net offering proceeds to the
Company and Zapata, as selling stockholder, after underwriting
discounts and commissions expenses was $68.0 million and $77.2
million, respectively. All disbursements from the aggregate proceeds
of the offering (including expenses) were direct or indirect payments
to non-related parties. On April 8, 1998, the Company used
approximately $33.3 million of its net proceeds from the offering to
repay an acquisition loan and certain other indebtedness owed Zapata
and approximately $2.1 million to repay a bank loan. The Company
anticipates using the balance of the net proceeds for capital
expenditures (including possible acquisitions), working capital and
general corporate purposes. All unused net proceeds have been invested
in cash, cash equivalents and short-term investments. The use of the
proceeds from the offering to date does not represent a material
change in the use of the proceeds described in the prospectus included
in the Registration Statement.
25
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 - Financial Data Schedule
99.1 - Twelve Months Earnings Statement Pursuant to Section 11(C)of the
Securities Act 1133, as amended, and Rule 158 of the SEC.
(b) Reports on Form 8-K:
Omega filed the following Current Report on Form 8-K with the Securities
and Exchange Commission:
(1) Date of Earliest Event Reported: December 15, 1998
Item Reported: Change in Fiscal Year
26
<PAGE>
SIGNATURES
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
(Registrant)
August 11, 1999 By: /s/ ERIC T. FUREY
-------------------------------------
(Vice President, General Counsel
and Corporate Secretary)
August 11, 1999 By: /s/ ROBERT W. STOCKTON
-------------------------------------
(Executive Vice President and
Chief Financial Officer)
27
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27.1 - Financial Data Schedule
99.1 - Twelve Months Earnings Statement
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 32,884
<SECURITIES> 0
<RECEIVABLES> 6,929
<ALLOWANCES> 0
<INVENTORY> 59,271
<CURRENT-ASSETS> 99,491
<PP&E> 138,996
<DEPRECIATION> 46,630
<TOTAL-ASSETS> 197,416
<CURRENT-LIABILITIES> 21,017
<BONDS> 10,832
0
0
<COMMON> 243
<OTHER-SE> 111,768
<TOTAL-LIABILITY-AND-EQUITY> 197,416
<SALES> 40,377
<TOTAL-REVENUES> 40,377
<CGS> 32,369
<TOTAL-COSTS> 36,857
<OTHER-EXPENSES> 208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 659
<INCOME-PRETAX> 3,971
<INCOME-TAX> 1,429
<INCOME-CONTINUING> 2,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,542
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
<PAGE>
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED TWELVE MONTHS EARNINGS STATEMENT
Twelve Months Ended
June 30, 1999
-------------------
Revenues............................................... $108,659
Cost of sales.......................................... 82,841
--------
Gross profit........................................... 25,818
Selling, general and administrative expense............ 8,479
--------
Operating income....................................... 17,339
Interest income, net................................... 1,473
Other income (expense), net............................ (427)
--------
Income before income taxes............................. 18,385
Provision for income taxes............................. 5,939
--------
Net income............................................. $ 12,446
--------
Earnings per share (basic)............................. $ 0.52
--------
Average common shares outstanding...................... 24,053
--------
Earnings per share (diluted)........................... $ 0.52
--------
Average common shares and common shares equivalents
outstanding.......................................... 24,053
--------
