Omega Protein third quarter revenues increase 28.1% to $71.7 million

Omega Protein Corporation (NYSE: OME), a nutritional ingredient company and the nation's leading vertically integrated producer of omega-3 fish oil and specialty fish meal products, today reported financial results for the third quarter ended September 30, 2011.

Third Quarter 2011 Highlights:

• Revenues:  $71.7 million, a 28.1% increase over the 2010 third quarter, due primarily to higher volumes
• Gross profit margin:  19%, down from 27% for the 2010 third quarter, reflecting low fish oil yields in 2011
• Net income: $4.7 million ($0.24 per diluted share) compared to $7.0 million ($0.37 per diluted share) in the 2010 third quarter
• Production:  Highest year-to-date production since 2007 and highest fish catch since 2002
• Growth: Completed acquisition of InCon Processing, L.L.C.

Third Quarter 2011 Results

Omega Protein third quarter of 2011 revenues increased 28.1% to $71.7 million from $56.0 million in the same period last year.  The composition of revenue by nutritional product line was 63% fish meal, 30% fish oil, 5% specialty nutraceutical ingredients, and 2% fish solubles and other.  Fish meal sales prices decreased 23% compared to the third quarter of 2010, but were 9% higher than the third quarter average for the prior five years.  Fish oil sales prices increased 12% compared to the third quarter of 2010 and were 22% higher than the third quarter average for the prior five years.  

The Company recorded gross profit of $13.4 million, or 18.7% as a percentage of revenues, for the third quarter of 2011, versus gross profit of $15.3 million, or 27.3% as a percentage of revenues, for the third quarter of 2010.  The decrease in gross profit was primarily due to a decrease in fish meal sales prices partially offset by an increase in fish oil sales prices and increased sales volumes of fish meal and fish oil.  The global availability of fish meal, particularly from South America, influenced the decrease in fish meal sales prices.  Strong export demand for quality oil and an increase in pricing of competitive fats and oils were significant factors related to the increase in fish oil pricing and the increase in sales volumes.  Cost per unit of production was consistent for the two periods, as low fish oil yields offset the positive impact of an increased fish catch in 2011.

Net income for the third quarter ended September 30, 2011 was $4.7 million ($0.24 per diluted share) compared to $7.0 million ($0.37 per diluted share) for the same period last year.  In addition to the items discussed above, the decrease was influenced by general and administrative expenses associated with a December 2010 acquisition.

"We are pleased with this season's strong catch and production results, as well as our ability to generate the highest quarterly revenues in our Company's history," commented Bret Scholtes, Omega Protein's Executive Vice President and Chief Financial Officer.  "At the same time, we believe that the steps we have taken with the recent acquisitions of Cyvex Nutrition and InCon Processing better position Omega Protein by improving our ability to penetrate the more profitable human nutrition market with our fish oil."

Mr. Scholtes continued, "We believe our vertically integrated business model provides a distinct competitive advantage that allows us to better serve our customers and increase long-term shareholder value."

Nine Month 2011 Results

Revenue in the current period increased 38.4% to $172.4 million compared to revenue of $124.6 million for the nine months ended September 30, 2010.  The composition of the 2011 revenue by nutritional product line was 66% fish meal, 26% fish oil, 6% specialty nutraceutical ingredients, and 2% fish solubles and other.

The Company recorded gross profit of $43.9 million, 25.4% as a percentage of revenues, for the first nine months of 2011, versus gross profit of $30.1 million, 24.2% as a percentage of revenues, for the first nine months of 2010.  The increase in gross profit was primarily due to an increase in sales volumes of fish meal and an increase in fish oil sales prices partially offset by a decrease in fish meal sales prices.  Cost per unit of production was consistent for the two periods.  

Net income for the nine months ended September 30, 2011 was $33.6 million ($1.69 per diluted share) compared to $9.9 million ($0.53 per diluted share) for the same period last year.  The 2011 net income results included $26.2 million of pre-tax final settlements with the Gulf Coast Claims Facility (GCCF) related to the 2010 Gulf of Mexico oil spill disaster and $0.8 million of pre-tax settlements with the Company's former insurance broker related to 2005 hurricane activity.   Excluding the impact of these two settlements, the Company's net income for the nine months ended September 30, 2011 would have been approximately $16.1 million ($0.81 per diluted share).

InCon Processing Acquisition

On September 9, 2011, the Company acquired InCon Processing, a recognized leader in the design, piloting, synthesis and purification of specialty compounds. Its areas of expertise are molecular distillation and the production of nutritional compounds, including Omega-3 fish oils. The Company believes that the acquisition of InCon Processing and its concentration technology will further allow the Company to provide its customers with an enhanced range of Omega-3 fish oils in concentrated forms such as ethyl esters and triglycerides.  

Balance Sheet

The Company's balance sheet continues to strengthen with stockholders equity of $198.1 million and working capital of $112.0 million as of September 30, 2011. The cash balance increased $31.2 million to $51.0 million as compared to $19.8 million at December 31, 2010.  This increase was primarily due to the sale of inventory, the final settlement of the Company's claims relating to damages resulting from the Gulf of Mexico oil spill disaster with the GCCF, partially offset by spending related to the 2011 fishing season, capital expenditures and the InCon Processing acquisition.