Note 1 - Significant Accounting Policies Summary of Operations and Basis of Presentation | 3 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | NOTE 1. | SIGNIFICANT ACCOUNTING POLICIES | | | | | | | | | | | | | | | | | | | |
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SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION |
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Business Description |
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Omega Protein Corporation (the “Company”) is a 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. The Company operates through two industry segments: animal nutrition and human nutrition. |
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The animal nutrition segment is comprised primarily of two subsidiaries: Omega Protein, Inc. (“Omega Protein”) and Omega Shipyard, Inc. (“Omega Shipyard”). Omega Protein, the Company’s principal operating subsidiary, is the successor to a business conducted since 1913. Omega Protein produces and markets a variety of products produced from menhaden (a herring-like species of fish found in commercial quantities in the U.S. coastal waters of the Atlantic Ocean and Gulf of Mexico), including regular grade and value-added specialty fish meals, crude and refined fish oils and fish solubles. Omega Protein’s fish meal products are primarily used as a protein ingredient in animal feed for swine, aquaculture and household pets. Fish oil is utilized primarily for animal and aquaculture feeds, as well as additives to human food products and dietary supplements. Omega Protein’s fish solubles are sold primarily to livestock feed manufacturers, aquaculture feed manufacturers and for use as an organic fertilizer. Omega Protein’s business is seasonal in nature and generally has higher revenues during the third quarter of each fiscal year. A portion of Omega Protein’s production is transferred to the human nutrition segment where it is further processed and sold. Omega Shipyard owns and operates a drydock facility in Moss Point, Mississippi that is used to provide shoreside maintenance for Omega Protein’s fishing fleet and, subject to outside demand and excess capacity, occasionally for third-party vessels. |
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The human nutrition segment, which operates under the names Nutegrity and Bioriginal, has three primary product lines: protein products, specialty oils and essential fatty acids and other nutraceutical ingredients. Nutegrity is comprised primarily of three subsidiaries: Cyvex Nutrition, Inc. (“Cyvex”), InCon Processing, L.L.C. (“InCon”) and Wisconsin Specialty Protein, L.L.C. (“WSP”). Cyvex, acquired by the Company in December 2010, is located in Irvine, California and is an ingredient provider in the nutraceutical industry. InCon, acquired by the Company in September 2011, is located in Batavia, Illinois and is a specialty processor that utilizes molecular distillation technology to concentrate Omega-3 fish oils and, subject to outside demand and excess capacity, a variety of other compound products for third-party tolling customers. WSP, acquired by the Company in February 2013, is a manufacturer and marketer of specialty dairy proteins and other related products headquartered in Madison, Wisconsin and operates a production facility in Reedsburg, Wisconsin. |
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Bioriginal Food & Science Corp. (“Bioriginal”), acquired by the Company in September 2014 and headquartered in Saskatoon, Canada with additional operations in the Netherlands, is a supplier of plant and marine based specialty oils and essential fatty acids to the food and nutraceutical industries. See Note 2 – Acquisition of Bioriginal Food & Science Corp. for additional information related to the Company’s acquisition of Bioriginal. |
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Basis of Presentation |
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These interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally provided have been omitted. The interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014. The year end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. |
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In the opinion of management the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2015, and the results of its operations for the three month periods ended March 31, 2015 and 2014 and its cash flows for the three month periods ended March 31, 2015 and 2014. Quarterly operating results are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. |
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Consolidation |
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The consolidated financial statements include the accounts of Omega Protein Corporation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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Financial Statement Preparation |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 Company’s financial statements and the accompanying notes and the reported amounts of revenues and expenses during the reporting period. Actual amounts, when available, could differ from those estimates and those differences could have a material effect on the financial statements. |
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As of December 31, 2014, the Company revised the unaudited consolidated balance sheet to correct for the classification of $0.4 million of accounts payable to other long-term liabilities. This revision was not considered to be material, individually or in the aggregate, to previously issued financial statements. The revisions had no effect on the results of operations (net or comprehensive income) or financial condition (stockholders’ equity). |
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Revenue Recognition |
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The Company derives revenue principally from the sales of a variety of protein and oil products derived from menhaden. In addition and as a result of its acquisitions of Cyvex, InCon, WSP and Bioriginal the Company’s revenues include sales of dietary supplement and food ingredients and products. The Company recognizes revenue for the sale of its products when price is established, collectability is reasonably assured and risk and rewards of ownership of its products and title are transferred to the customer. |
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Shipping and Handling |
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Amounts billed to customers associated with shipping and handling are included in revenues and the related costs are included in cost of sales. |
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Inventories |
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During the off-seasons, in connection with the upcoming fishing seasons, Omega Protein incurs costs (e.g., plant and vessel related labor, utilities, rent, repairs, and depreciation) that are directly related to Omega Protein’s infrastructure. These costs accumulate in inventory and are applied as elements of the cost of production of Omega Protein’s products throughout the fishing season ratably based on Omega Protein’s monthly units of production and the expected total units of production for the season. |
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Any costs incurred during abnormal downtime related to activity at Omega Protein’s plants are charged to expense as incurred. |
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Energy Swap Agreements |
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The Company does not enter into financial instruments for trading or speculative purposes. Omega Protein entered into energy swap agreements to manage portions of its cash flow exposure related to the volatility of natural gas, diesel and fuel oil energy prices for its fish meal and fish oil production operations. The swaps effectively fix pricing for the quantities listed below during the consumption periods. The fair values of outstanding derivative instruments are summarized as follows: |
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Energy Swap | | Consumption Period | | | Quantity | | | Price Per Unit | | | Energy Swap Asset/(Liability) as of | | | Deferred Tax Asset/(Liability) as of | |
31-Mar-15 | 31-Mar-15 |
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Diesel - NYMEX Heating Oil Swap | | May - November, 2015 | | | 3,038,978 Gallons | | | $ | 2.53 | | | $ | (2,350 | ) | | $ | 822 | |
Natural Gas - NYMEX Natural Gas Swap | | April – October, 2015 | | | 187,575 MMBTUs | | | $ | 3.67 | | | | (175 | ) | | | 61 | |
Propane – Natural Gas Liquids Swap | | June - November, 2015 | | | 1,024,800 Gallons | | | $ | 0.86 | | | | (336 | ) | | | 118 | |
Diesel - NYMEX Heating Oil Swap | | May - November, 2016 | | | 2,050,679 Gallons | | | $ | 2.3 | | | | (833 | ) | | | 292 | |
Natural Gas - NYMEX Natural Gas Swap | | April – October, 2016 | | | 125,000 MMBTUs | | | $ | 3.35 | | | | (37 | ) | | | 13 | |
Propane – Natural Gas Liquids Swap | | June - November, 2016 | | | 1,355,000 Gallons | | | $ | 0.58 | | | | (47 | ) | | | 16 | |
| | | | | | | | | | | | | | $ | (3,778 | ) | | $ | 1,322 | |
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Energy Swap | | Consumption Period | | | Quantity | | | Price Per Unit | | | Energy Swap Asset/(Liability) as of | | | Deferred Tax Asset/(Liability) as of | |
31-Dec-14 | 31-Dec-14 |
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Diesel - NYMEX Heating Oil Swap | | May - November, 2015 | | | 2,333,848 Gallons | | | $ | 2.75 | | | $ | (2,097 | ) | | $ | 734 | |
Natural Gas - NYMEX Natural Gas Swap | | April – October, 2015 | | | 114,000 MMBTUs | | | $ | 4.09 | | | | (125 | ) | | | 44 | |
Propane – Natural Gas Liquids Swap | | June - November, 2015 | | | 1,024,800 Gallons | | | $ | 0.86 | | | | (346 | ) | | | 121 | |
Diesel - NYMEX Heating Oil Swap | | May - November, 2016 | | | 1,333,464 Gallons | | | $ | 2.5 | | | | (679 | ) | | | 238 | |
Propane – Natural Gas Liquids Swap | | June - November, 2016 | | | 341,600 Gallons | | | $ | 0.67 | | | | (41 | ) | | | 14 | |
| | | | | | | | | | | | | | $ | (3,288 | ) | | $ | 1,151 | |
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As of March 31, 2015, Omega Protein has recorded a long-term liability of $0.9 million, net of the current portion included in other current liabilities of $2.9 million, to recognize the fair value of energy swap derivatives, and has also recorded a deferred tax asset of $1.3 million associated therewith. As of December 31, 2014, Omega Protein has recorded a long-term liability of $0.7 million net of the current portion included in other current liabilities of $2.6 million to recognize the fair value of energy swap derivatives, and has also recorded a deferred tax asset of $1.2 million associated therewith. The effective portion of the change in fair value from inception to March 31, 2015 is recorded in “accumulated other comprehensive loss” in the Company’s unaudited condensed consolidated financial statements. The following table illustrates the changes recorded, net of tax, in accumulated other comprehensive loss resulting from the energy swap agreements. |
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| | (in thousands) | | | | | | | | | | | | | |
| | 2015 | | | 2014 | | | | | | | | | | | | | |
Balance at January 1, | | $ | (2,137 | ) | | $ | 179 | | | | | | | | | | | | | |
Net change associated with current period swap transactions, net of tax, | | | (64 | ) | | | (18 | ) | | | | | | | | | | | | |
Balance at March 31, | | $ | (2,201 | ) | | $ | 161 | | | | | | | | | | | | | |
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The $2.2 million reported in accumulated other comprehensive loss as of March 31, 2015 will be reclassified to the unallocated inventory cost pool in the period when the energy consumption takes place. The amount to be reclassified, net of taxes, during the next 12 months is expected to be approximately $1.7 million. |
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The aggregate fair value of derivative instruments in gross liability positions as of March 31, 2015 and December 31, 2014 was $3.8 million and $3.3 million, respectively. These amounts represent the maximum exposure to loss at the reporting date as a result of all of the counterparties failing to perform as contracted. |
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As of March 31, 2015 (in thousands) | | Gross Amounts of Recognized Assets (Liabilities) | | | Gross | | | Net Amounts of Assets (Liabilities) Presented in the Balance Sheet | | | | | | | | | |
Amounts of | | | | | | | | |
Assets | | | | | | | | |
(Liabilities) | | | | | | | | |
Offset | | | | | | | | |
Energy swap derivatives – liability position | | $ | (3,811 | ) | | $ | 33 | | | $ | (3,778 | ) | | | | | | | | |
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As of December 31, 2014 (in thousands) | | Gross Amounts of Recognized Assets (Liabilities) | | | Gross | | | Net Amounts of Assets (Liabilities) Presented in the Balance Sheet | | | | | | | | | |
Amounts of | | | | | | | | |
Assets | | | | | | | | |
(Liabilities) | | | | | | | | |
Offset | | | | | | | | |
Energy swap derivatives – liability position | | $ | (3,288 | ) | | $ | - | | | $ | (3,288 | ) | | | | | | | | |
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If, at any time, the swaps are determined to be ineffective due to changes in the Company’s energy usage or underlying hedge agreements or assumptions, the fair value of the portion of the energy swaps determined to be ineffective will be recognized as a gain or loss in cost of sales for the applicable period. For the three months ended March 31, 2015 and 2014, the Company recognized a charge of $0.4 million and $0, respectively, to cost of sales resulting from transactions associated with the ineffectiveness of diesel energy swaps. The fair value of all outstanding derivatives is determined using a model with inputs that are observable in the market or can be derived from or corroborated by observable data (level 2). |
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Plant Closure |
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Property, plant and equipment impairments related to the closure of Cameron, Louisiana plant are made in accordance with the impairment of long-lived assets policy. Employee severance related charges have been recognized to the extent that the amount is probable, measurable and no-future service is expected or for those still employed, recognized pro-rata over the remaining service period. Ongoing clean-up and dismantlement costs will be recognized as incurred unless obligated and measureable by a contractual commitment. See Note 3 – Plant Closure for additional information related to the charges incurred. |
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Acquisitions, Goodwill and Other Intangible Assets |
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All of the Company’s goodwill and other intangible assets are the result of acquisitions in the human nutrition segment. This segment is comprised of three reporting units, 1) InCon and Cyvex, 2) WSP and 3) Bioriginal. The Company has recorded goodwill and certain other identifiable intangible assets that are more fully explained in Note 2 – Acquisition of Bioriginal Food & Science Corp. and Note 9 – Goodwill and Other Intangible Assets. |
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Accumulated Other Comprehensive Loss |
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The components of accumulated other comprehensive (loss) gain, net of tax, included in stockholders’ equity are as follows: |
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Changes in Accumulated Other Comprehensive Loss by Component |
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For the Three Months Ended March 31, 2015 (in thousands) |
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| | Gains and Losses | | | | Defined Benefit | | | | Foreign currency | | | Total | | | |
On Cash Flow | Pension Items | Translation | | |
Hedges | | adjustment | | |
Balance as of December 31, 2014 | | $ | (2,137 | ) | | | $ | (7,804 | ) | | | $ | (915 | ) | | $ | (10,856 | ) | | |
Other comprehensive loss before reclassifications | | | (64 | ) | | | | — | | | | | (1,645 | ) | | | (1,709 | ) | | |
Amounts reclassified from accumulated other comprehensive loss | | | — | | (a) | | | 195 | | (b) | | | — | | | | 195 | | | |
Net current-period other comprehensive income | | | (64 | ) | | | | 195 | | | | | (1,645 | ) | | | (1,514 | ) | | |
Balance as of March 31, 2015 | | $ | (2,201 | ) | | | $ | (7,609 | ) | | | $ | (2,560 | ) | | $ | (12,370 | ) | | |
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| | Gains and Losses | | | | Defined Benefit | | | | Total | | | | | | | |
On Cash Flow | Pension Items | | | | | | |
Hedges | | | | | | | |
Balance as of December 31, 2013 | | $ | 179 | | | | $ | (6,387 | ) | | | $ | (6,208 | ) | | | | | | |
Other comprehensive loss before reclassifications | | | (18 | ) | | | | — | | | | | (18 | ) | | | | | | |
Amounts reclassified from accumulated other comprehensive loss | | | — | | (a) | | | 149 | | (b) | | | 149 | | | | | | | |
Net current-period other comprehensive income | | | (18 | ) | | | | 149 | | | | | 131 | | | | | | | |
Balance as of March 31, 2014 | | $ | 161 | | | | $ | (6,238 | ) | | | $ | (6,077 | ) | | | | | | |
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| (b) | This accumulated other comprehensive income component is included in the computation of net periodic pension costs as amortization of actuarial loss which are explained in more detail in Note 15 to the consolidated financial statements in Item 8 of the Company’s Form 10-K for the fiscal year ended December 31, 2014. | | | | | | | | | | | | | | | | | | |
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Recently Issued Accounting Standards |
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In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest- Imputation of Interest (Subtopic 835-30). The amendments require that debt issuance costs related to recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debit issuance costs are not affected by the amendments in this update. The new standard is effective in annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. The Company’s adoption of FASB ASU No. 2015-03 is not expected to have a material impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810). The amendments (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminate the presumption that a general partner should consolidate a limited partnership, (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships (4) provide a scope exception from consolidation guidance for reporting entities with interest in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The new standard is effective in annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. The Company’s adoption of FASB ASU No. 2015-02 is not expected to have an impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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In January 2015, the FASB issued ASU 2015-01, Income Statement- Extraordinary and Unusual Items (Subtopic 225-20). The update eliminates from GAAP the concept of extraordinary items. Eliminating the concept of extraordinary items will save time and reduce costs for preparers because they will not have to assess whether a particular event or transaction event is extraordinary. This alleviates uncertainty for preparers, auditors, and regulators because auditors and regulators no longer will need to evaluate whether a preparer treated an unusual and/or infrequent item appropriately. The new standard is effective in annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. The Company’s adoption of FASB ASU No. 2015-01 is not expected to have an impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging: Determining whether the Host Contract in a Hybrid Financial Statement Issued in the Form of a Share is More Akin to Debt or Equity. This ASU amended the Derivatives and Hedging Accounting Standards Codification to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments used in the form of a share. The new standard is effective in annual periods beginning on or after December 15, 2015 with early adoption permitted. The Company’s adoption of FASB ASU No. 2014-16 is not expected to have an impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements- Going Concern (Subtopic 205-40). The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in the U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The guidance is effective for annual periods ending after December 15, 2016 and for annual periods thereafter. Early adoption is permitted. The Company does not expect this ASU to have a material impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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In June 2014, the FASB issued ASU No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award's grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. The Company does not expect this ASU to have a material impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. The Company is currently evaluating the potential impact of these changes on the consolidated results of operations, financial position and related disclosures. |
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In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements and Property, Plant and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has or will have a major effect on an entity's operations and financial results. The new standard is effective in annual periods beginning on or after December 15, 2014 with early adoption permitted. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. The Company’s adoption of FASB ASU No. 2014-08 effective January 1, 2015 did not have an impact on the Company’s consolidated results of operations, financial position and related disclosures. |
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Foreign Currency Translations |
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All amounts are expressed in U.S. dollars unless otherwise indicated. The U.S. dollar is the functional currency of Bioriginal’s Canadian-based subsidiaries (“Bioriginal Canada”). Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Non-monetary items are translated at rates of exchange in effect when the assets were acquired or obligations incurred. Revenue and expenses are translated at average rates in effect in the period of the transaction. Foreign exchange gains and losses are included in the unaudited condensed consolidated statement of comprehensive income. |
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The Euro is the functional currency of Bioriginal’s Netherlands-based subsidiaries (“Bioriginal Europe”). The operations of these subsidiaries are considered self-sustaining and their financial statements are translated into U.S. dollars using the current rate method. Under this method, all assets and liabilities are translated to U.S. dollars at exchange rates in effect at the balance sheet date and all revenue and expenses are translated at rates in effect at the time of the transactions. Exchange gains and losses arising from this translation, representing the net unrealized foreign currency translation gain (loss) on the Company's net investment in its self-sustaining subsidiaries, are recorded in the accumulated other comprehensive income (loss) component of shareholders' equity. Adjustments to the accumulated other comprehensive income (loss) account are not recorded in the unaudited condensed consolidated statement of comprehensive income until realized through a reduction in the Company's net investment in such operations. |
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Stock-Based Compensation |
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Stock Options |
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The Company has issued non-qualified stock options under its incentive plans. The options generally vested in equal installments over three years and expire in ten years. As of and for the quarters ended March 31, 2015 and 2014, all stock options were vested and no stock-based compensation costs related to stock options was incurred. |
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Restricted Stock |
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The Company has issued shares of restricted stock under the 2006 Incentive Plan. Shares of restricted stock have generally vested on the third anniversary of the grant date or in equal installments over three years except for shares of restricted stock granted to non-employee directors which vest six months after the grant date. Non-vested shares are generally forfeited upon the termination of employment or service as a director. Holders of shares of restricted stock are entitled to all rights of a stockholder of the Company, including the right to vote the shares and receive any dividends or other distributions. The non-vested shares are considered participating securities and the Company has calculated earnings per share using the two-class method. See Note 12 – Reconciliation of Basic and Diluted Per Share Data. |
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During the three month periods ended March 31, 2015 and 2014, the Company issued 82,072 and 92,545 shares of restricted stock, respectively, under the 2006 Incentive Plan to employees and non-employee directors. The Company’s compensation expense related to restricted stock was approximately $0.5 million and $0.3 million ($0.4 million and $0.2 million after tax) for the three months ended March 31, 2015 and 2014, respectively, which is primarily reflected in selling, general and administrative expenses in the unaudited condensed consolidated statement of comprehensive income. As of March 31, 2015, there was approximately $4.3 million ($2.8 million after tax) of unrecognized compensation expense related to non-vested restricted stock that is expected to be recognized over a weighted-average period of 1.6 years, of which $1.5 million ($0.9 million after-tax) of compensation expense is expected to be recognized during the remainder of fiscal year 2015. |
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Performance Units |
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On February 6, 2014, the Company adopted the 2014 Cash Incentive Performance Unit Plan and on February 26, 2015, the Company adopted the 2015 Cash Incentive Performance Unit Plan. The value of the units under the plans will be determined by reference to the performance of the Company’s common stock during the relevant performance period compared to the performance of the Russell 2000 Index member companies (the “Peer Group”) during that same period. One third of the Performance Units granted will be earned at the end of each calendar year of the performance period and will be valued for the calendar year based on the Total Shareholder Return (“TSR”) of the Company compared to the TSR of the Peer Group. The performance units contain a service provision of approximately 3 years and are liability-classified awards included in other long-term liabilities which are adjusted to fair value on a quarterly basis. |
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The Company’s compensation expense related to performance units was approximately $0.3 million and $0.1 million ($0.2 million and $0.1 million after tax) for the three months ended March 31, 2015 and 2014, respectively, which is primarily reflected in selling, general and administrative expenses in the unaudited condensed consolidated statement of comprehensive income. As of March 31, 2015, there was approximately $2.7 million ($1.7 million after tax) of unrecognized compensation expense related to performance units that is expected to be recognized over a weighted-average period of 2.5 years, of which $0.8 million ($0.5 million after-tax) of compensation expense is expected to be recognized during the remainder of fiscal year 2015. |