UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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 October 31, 2001: 23,949,315
OMEGA PROTEIN CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheet as of September 30, 2001
and December 31, 2000......................................................... 3
Unaudited Condensed Consolidated Statement of Operations for the
three months and nine months ended September 30, 2001 and 2000................ 4
Unaudited Condensed Consolidated Statement of Cash Flows for the
nine months ended September 30, 2001 and 2000................................. 5
Notes to Unaudited Condensed Consolidated Financial Statements................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................................ 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................... 22
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................ 22
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................................... 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............................................. 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................... 22
ITEM 5. OTHER INFORMATION............................................................ 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................. 22
SIGNATURES............................................................................ 23
Explanatory Note
- ----------------
This amendment to Omega Protein Corporation's quarterly report on Form 10-Q
for the three and nine months ended September 30, 2001 includes changes from the
previous report to reflect:
. the re-characterization of a second quarter and third quarter charge as a
selling, general and administrative expense as opposed to a component of
inventory production cost, as previously reported. This expense was
recorded to appropriately value receivables due from a Company insurer as a
result of that insurer's recent bankruptcy.
. the re-characterization of a third quarter charge for abnormal costs
incurred by the Company as a result of the FAA's ban limiting the use of
Company's spotter aircraft for a period of nine days to a component of
inventory production cost as opposed to a period charge increasing cost of
good sold, as previously reported.
No attempt has been made in this Form 10-Q/A to modify or update other
disclosures as presented in the original Form 10-Q except as required to reflect
the effects of these restatements.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, DECEMBER 31,
2001 2000
(RESTATED)
------------- ---------------
(in thousands)
ASSETS
------
Current assets:
Cash and cash equivalents........................................... $ 14,634 $ 7,403
Receivables, net.................................................... 18,878 9,570
Inventories......................................................... 37,111 37,032
Prepaid expenses and other current assets........................... 1,689 978
------------ ---------------
Total current assets......................................... 72,312 54,983
Other assets............................................................ 7,314 9,786
Deferred tax assets, net................................................ 6,149 6,843
Property and equipment, net............................................. 83,283 88,872
------------ ---------------
Total assets........................................ $ 169,058 $ 160,484
============ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt................................ $ 1,236 $ 1,227
Accounts payable.................................................... 2,620 2,312
Accrued liabilities................................................. 21,548 14,600
------------ ---------------
Total current liabilities................................... 25,404 18,139
Long-term debt.......................................................... 13,972 14,827
------------ ---------------
Total liabilities........................................... 39,376 32,966
------------ ---------------
Minority interest in consolidated subsidiary............................ 53 41
------------ ---------------
Commitments and contingencies
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;
24,355,348 shares and 24,330,277 shares issued and outstanding,
respectively.................................................... 244 243
Capital in excess of par value...................................... 111,929 111,884
Retained earnings................................................... 19,491 17,385
Common stock in treasury, at cost - 413,100 shares............. (2,035) (2,035)
------------ ---------------
Total stockholders' equity.......................... 129,629 127,477
------------ ---------------
Total liabilities and stockholders' equity....... 169,058 160,484
============ ===============
The accompanying notes are an integral part of the unaudited condensed
consolidated statements.
3
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ----------------------------
2001 2000 2001 2000
(RESTATED) (RESTATED)
---------- ---------- ---------- ---------
(in thousands, except per share amounts)
Revenues........................................ $ 36,838 $ 17,864 $ 74,853 $ 58,124
Cost of sales................................... 31,069 18,295 66,093 57,321
Inventory write-down............................ - 13,742 - 13,742
---------- ---------- ---------- ---------
Gross profit (loss)............................. 5,769 (14,173) 8,760 (12,939)
Selling, general, and administrative expense.... 1,807 1,610 5,948 5,987
---------- ---------- ---------- ---------
Operating income (loss)......................... 3,962 (15,783) 2,812 (18,926)
Interest expense, net........................... (69) (101) (320) (115)
Other expense, net.............................. (56) (30) (66) (280)
---------- ---------- ---------- ---------
Income (loss) before income taxes............... 3,837 (15,914) 2,426 (19,321)
Provision (benefit) for income taxes............ 827 (5,725) 320 (6,952)
---------- ---------- ---------- ---------
Net income (loss)............................... $ 3,010 $ (10,189) $ 2,106 $ (12,369)
========== ========== ========== =========
Basic earnings (loss) per share................. $ 0.13 $ (0.43) $ 0.09 $ (0.52)
========== ========== ========== =========
Average common shares outstanding............... 23,942 23,908 23,934 23,899
========== ========== ========== =========
Diluted earnings (loss) per share............... $ 0.13 $ (0.43) $ 0.09 $ (0.52)
Average common shares and common share
equivalents outstanding....................... 23,982 23,908 23,968 23,899
========== ========== ========== =========
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
4
OMEGA PROTEIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
--------------------------------------
2001 2000
(RESTATED)
----------- -----------
(in thousands)
Cash flows provided by (used in) operating activities:
Net income (loss)....................................................... $ 2,106 $ (12,369)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Loss (gain) on disposal of assets, net.............................. (150) 84
Depreciation and amortization....................................... 7,273 7,358
Deferred income taxes............................................... 694 (5,778)
Changes in assets and liabilities:
Receivables..................................................... (9,308) 7,425
Inventories, net of write-down.................................. (79) (3,380)
Accounts payable and accrued liabilities........................ 7,256 7,954
Other, net...................................................... 911 (1,812)
----------- -----------
Total adjustments.......................................... 6,597 11,851
----------- -----------
Net cash provided by (used in) operating activities....... 8,703 (518)
----------- -----------
Cash flows used in investing activities:
Proceeds from sale of assets, net....................................... 387 55
----------- -----------
Capital expenditures.................................................... (1,013) (7,217)
----------- -----------
Net cash used in investing activities...................... (626) (7,162)
----------- -----------
Cash flows used in financing activities:
Principal payments of short and long-term debt obligations.............. (918) (867)
Proceeds from borrowing................................................. 72 -
----------- -----------
Net cash used in financing activities...................... (846) (867)
----------- -----------
Net increase (decrease) in cash and cash equivalents........................ 7,231 (8,547)
Cash and cash equivalents at beginning of year.............................. 7,403 15,673
----------- -----------
Cash and cash equivalents at end of period.................................. $ 14,634 $ 7,126
=========== ===========
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
5
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 (herring-like 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. The Company's fish meal
products are used as nutritional feed additives by animal feed manufacturers
and by commercial livestock producers. Omega operates its own fleet of fishing
vessels as well as four processing plants. The Company's crude fish oil is
sold primarily to food producers in Europe, and its refined fish oil products,
which are high in nutritionally desirable Omega-3 fatty acids, are used in a
variety of foods for human consumption, as well as in aquaculture feeds and
certain industrial applications. Fish solubles are sold as protein additives
for animal feed and as organic fertilizers.
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.
On April 5, 2000, the Company acquired for a nominal amount an additional
1% equity interest in a partially owned subsidiary previously accounted for
under the equity method. As a result of the transaction, the Company now owns
51% of the investment and consolidates its operations.
Revenue Recognition
The Company recognizes revenue for the sale of its products when title and
the risk and rewards of ownership are transferred to the customer, which
occurs upon shipment.
Cash and Cash Equivalents
The Company considers cash in banks and short-term investments with
original maturities of three months or less as cash equivalents.
Inventories
Inventory is stated at the lower-of-cost-or market. The Company's fishing
season runs from mid-April to the first of November in the Gulf of Mexico and
from the beginning of May into December in the Atlantic. Government
regulations preclude the Company from fishing during the off-season.
The Company's inventory cost system considers all costs associated with an
annual fish catch and its processing, both variable and fixed and including
both costs incurred during the off-season and during the fishing season. 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. The Company's lower-of-cost-or
market-value analyses at year-end and at interim periods compares the total
estimated per unit production cost of the Company's expected production to the
projected per unit market prices of the products. The impairment analyses
involve estimates of, among other things, future fish catches and related
costs, and expected commodity prices for the fish products. These estimates,
which management believes are reasonable and supportable, involve estimates of
future activities and events which are inherently imprecise and for which
actual results may differ.
During the off-seasons, in connection with the upcoming fishing 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.
These costs accumulate in inventory and are applied as elements of the cost of
production of the Company's products throughout the fishing season ratably
based on the Company's monthly fish catch and the expected total fish catch
for the season.
6
Advertising Costs
The costs of advertising are expensed as incurred in accordance with
Statement of Position 93-7, "Reporting on Advertising Costs."
Accounting for the Impairment of Long-Lived Assets
The Company accounts for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of", which was issued in March 1995. SFAS No. 121 requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the book value of the asset may not be recoverable. The Company
evaluates at each balance sheet date whether events and circumstances have
occurred that indicate possible operational impairment. In accordance with
SFAS No. 121, the Company uses an estimate of the future undiscounted net cash
flows of the related asset or asset grouping over the remaining life in
measuring whether its operating assets are recoverable
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 purposes. A valuation
allowance is provided for deferred tax assets if it is more likely than not
these items will either expire before the Company is able to realize the
benefits, or that future deductability is uncertain.
Property, Equipment and Depreciation
Property and equipment additions are recorded at cost. 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 of an
asset, the costs and related accumulated depreciation are eliminated from the
accounts. Any resulting gains or losses are included in the statement of
operations.
7
Pension Plans
Annual costs of pension plans are determined actuarially based on SFAS
No. 87, "Employers' Accounting for Pensions." The Company's policy is to
fund U.S. pension plans at amounts not less than the minimum requirements of
the Employee Retirement Income Security Act of 1974. In Fiscal 1999, the
Company adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other
Post-Retirement Benefits." SFAS No. 132 revised and standardized the
disclosure requirements for pensions and other post-retirement benefit plans
to the extent practicable. It does not change the measurement or recognition
of these plans.
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 September 30, 2001 and December 31, 2000, the Company had cash deposits
concentrated primarily in one major bank. 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 dividing income by the sum of the weighted average number of
common shares outstanding and the effect of any dilutive stock options.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which,
as amended, is effective for fiscal years beginning after June 15, 2000. SFAS
No. 133 establishes standards requiring all derivatives to be recognized in
the statement of financial position as either assets or liabilities and
measured at fair value. The Company adopted the provisions of the statement in
Fiscal 2001. The Company's implementation of the provisions of SFAS No.133 did
not have an impact on the Company's existing operations.
The Company adopted the provisions of Staff Accounting Bulletin ("SAB")
No. 101, "Revenue Recognition in Financial Statements," on January 1, 2001.
The implementation of the provisions of SAB No. 101 did not have an impact on
the Company's financial position or results of operations.
At the end of June 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 requires that obligations
associated with the retirement of a tangible long-lived asset be recorded as a
liability when those obligations are incurred, with the amount of the
liability initially measured at fair value. Upon initially recognizing a
liability for an asset retirement obligation, an entity must capitalize the
cost by recognizing an increase in the carrying amount of the related long-
lived asset. Over time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
The provisions of SFAS No. 143 will be required to be adopted by the Company
in fiscal 2003. The Company has not determined what impact, if any, this
statement will have on the Company's operations.
8
Use of Estimates
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 financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable as of September 30, 2001 and December 31, 2000 are
summarized as follows:
SEPTEMBER 30, DECEMBER 31,
2001 2000
------- ------
(IN THOUSANDS)
Trade....................................... $16,964 $6,714
Insurance................................... 254 740
Employee.................................... 97 43
Income tax.................................. 1,150 2,019
Other....................................... 653 272
------- ------
Total accounts receivable................... 19,118 9,788
Less: allowance for doubtful accounts....... (240) (218)
------- ------
Receivables, net............................ $18,878 $9,570
======= ======
NOTE 3. INVENTORY
Inventory as of September 30, 2001 and December 31, 2000 is summarized as
follows:
SEPTEMBER 30, DECEMBER 31,
2001 2000
(RESTATED)
----------- ----------
(IN THOUSANDS)
Fish meal....................................... $ 21,518 $ 19,474
Fish oil........................................ 10,053 7,590
Fish solubles................................... 828 938
Off season cost................................. 345 3,982
Other materials & supplies...................... 4,367 5,048
----------- ----------
Total inventory................................. $ 37,111 $ 37,032
=========== ==========
During the third and fourth quarter of Fiscal 2000, the Company
provided $18.1 million in write-downs of the value of its fish meal and fish
oil product inventories. Those inventory write-downs were made necessary due
to market prices the Company either had received or expected to receive for
its products which had declined to a level below the Company's costs basis in
those products. Product inventories at September 30, 2001 were stated at the
lower of cost or market (no write-downs were required).
9
NOTE 4. OTHER ASSETS
Other assets as of September 30, 2001 and December 31, 2000 are summarized
as follows:
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ ------------
(IN THOUSANDS)
Fishing nets................................................... $ 626 $ 1,134
Prepaid pension cost........................................... 3,198 3,425
Insurance receivable, net of allowance for doubtful accounts... 2,877 4,196
Title XI loan origination fee.................................. 358 396
Note receivable................................................ 110 369
Deposits....................................................... 131 140
Investments in unconsolidated affiliates....................... 1 1
Miscellaneous.................................................. 13 125
------------ ------------
Total other assets............................................. $ 7,314 $ 9,786
============ ============
Amortization expense for fishing nets amounted to approximately $603,000
and $720,000 for the nine months ended September 30, 2001 and September 30,
2000, respectively.
The Company carries insurance for certain losses relating to its vessels
and Jones Act liability for employees aboard its vessels (collectively,
"Vessel Claims Insurance"). The typical Vessel Claims Insurance policy
contains an annual aggregate deductible ("AAD") for which the Company remains
responsible, while the insurance carrier is responsible for all applicable
amounts which exceed the AAD. It is the Company's policy to accrue current
amounts due and record amounts paid out on each claim. Once payments exceed
the AAD the Company records an insurance receivable for a given policy year.
For the period from October 1, 1998 to March 31, 2000, the Company placed
its Vessel Claims Insurance coverage with HIH Casualty and General Insurance,
Ltd., an insurance company that is part of HIH Insurance Limited, the second
largest insurance company in Australia ("HIH"). In April 2001, HIH petitioned
a court in Australia to place it in provisional liquidation. The Company
estimates, based on previous payments made by the Company and its existing
reserves for open claims for the period covered by HIH, that HIH owes
approximately $1.6 million either to the Company or on the Company's behalf.
This amount could be adjusted upward or downward as additional claims and
their corresponding reserves become finalized.
The Company has put the trustees in the Australian liquidation proceedings
on notice of its $1.6 million claim. However, based on the early nature of the
proceedings, the Company believes that the ultimate outcome of the recovery
against HIH cannot be assured at this time and that it is probable that a
portion of these receivables will not be collectible. Accordingly, at
September 30, 2001, the allowance for doubtful accounts applicable to the HIH
receivable was $966,000 and the provision is reflected in selling, general,
and administrative expense. (Restated)
10
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2001 and December 31, 2000 are
summarized as follows:
SEPTEMBER 30, DECEMBER 31,
2001 2000
-------------- --------------
(IN THOUSANDS)
Land........................................ $ 5,390 $ 5,390
Plant assets................................ 69,319 69,772
Fishing vessels............................. 72,926 72,933
Furniture and fixtures...................... 1,811 1,837
Other....................................... 918 -
-------------- --------------
Total property and equipment................ 150,364 149,932
Less: accumulated depreciation.............. (67,081) (61,060)
-------------- --------------
Property and equipment, net................. $ 83,283 $ 88,872
============== ==============
Depreciation expense for the nine months ended September 30, 2001 and
September 30, 2000 was $6.3 million and $6.6 million, respectively.
NOTE 6. NOTES PAYABLE AND LONG-TERM DEBT
At September 30, 2001 and December 31, 2000, the Company's long-term debt
consisted of the following:
SEPTEMBER 30, DECEMBER 31,
2001 2000
----------- ------------
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 2014, interest from 6.63% to 8.25%........ $ 13,971 $ 14,678
Amounts due in installments through 2014, interest at Eurodollar rates
plus 4.5%; 4.16% and 7.17% at September 30, 2001 and December 31, 2000,
respectively................................................................ 1,032 1,092
Other debt at 2.9% to 8.0% at September 30, 2001 and December 31, 2000.............. 205 284
----------- ------------
Total debt.......................................................................... 15,208 16,054
Less current maturities............................................. (1,236) (1,227)
----------- ------------
Long-term debt...................................................................... $ 13,972 $ 14,827
=========== ============
At September 30, 2001 and December 31, 2000, the estimated fair value of
debt obligations approximated book value.
On December 22, 1999, the Company closed on its Fiscal 1999 Title XI
application and received $5.6 million of Title XI borrowings for qualified
Title XI projects. Originally, the Company was authorized to receive up to
$20.6 million in loans under the Title XI program, and has used the entire
amount authorized under such program. The Title XI loans are secured by liens
on certain of the Company's fishing vessels and mortgages on the Company's
Reedville, Virginia and Abbeville, Louisiana plants. Loans are now available
under similar terms pursuant to the Title XI program without intervening
lenders. In May 2001, the Company applied for an additional loan of $1.9
million under this new program to be used for qualified Title XI projects, and
on November 6, 2001 closed on its application and received $1.9 million of
Title XI funds for qualified Title XI projects.
11
On December 20, 2000 the Company entered into a three year $20.0 million
revolving credit agreement with Bank of America N.A. (the "Credit Facility").
Borrowings under this facility may be used for working capital and capital
expenditures. Borrowings under the Credit Facility bears interest at a rate
equal to (i) LIBOR plus 250 basis points or (ii) at the Company's option, the
Bank's prime rate. The Credit Facility requires a per annum commitment fee of
one-half of a percent (0.5%) on the daily average unused portion of the
commitment of the Lender. The Credit Facility is collateralized by all of the
Company's trade receivables, inventory and equipment. The Company and its
subsidiaries are required to comply with certain financial covenants,
including maintenance of a minimum tangible net worth and minimum EBITDA. In
addition, the Credit Facility does not allow for the payment of cash dividends
or stock repurchases and also limits capital expenditures and investments. As
of September 30, 2001 the Company had no borrowings outstanding under the
Credit Facility. The Credit Facility expires on December 20, 2003.
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities as of September 30, 2001 and December 31, 2000 are
summarized as follows:
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
(IN THOUSANDS)
Salary and benefits................. $ 10,051 $ 4,695
Insurance........................... 8,232 7,793
Taxes, other than income tax........ 1,070 79
Trade creditors..................... 1,982 1,908
Other............................... 213 125
------------- ------------
Total accrued liabilities........... $ 21,548 $ 14,600
============= ============
NOTE 8. 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 (including
those losses that may become uninsured due to the insolvency of HIH as
described in Note 4) 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 may be subject to various possible claims and lawsuits
regarding environmental matters from time to time. 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.
12
NOTE 9. RESTATEMENT
The Company's financial statements as of and for the three months and nine
months periods September 30, 2001 have been restated from amounts
previously reported to reflect (1) the re-characterization of a second
quarter charge as a selling, general and administrative expense as opposed
to a component of inventory production cost, as previously reported, which
expense was recorded to appropriately value receivables due from a Company
insurer as a result of that insurer's recent bankruptcy; and (2) the re-
characterization of a third quarter charge for abnormal costs incurred by
the Company as a result of the FAA's ban limiting the use Company's spotter
aircraft for a period of nine days to a component of inventory production
cost as opposed to a period charge increasing cost of good sold, as
previously reported. The following tables show the income statement and
balance sheet line items that have been restated:
Unaudited Condensed Consolidated Statement of Operations
Three Months Ended September 30, 2001
As Previously
Reported Restatements As Restated
---------------- --------------- --------------
Cost of sales..................................... $ 30,895 $ 174 $ 31,069
Selling, general and administrative expense....... 1,697 110 1,807
Provision for income taxes........................ 506 321 827
Net income........................................ 2,438 572 3,010
Earnings per share (basic & diluted).............. 0.10 0.03 0.13
Unaudited Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 2001
As Previously
Reported Restatements As Restated
---------------- --------------- --------------
Cost of sales..................................... $ 65,985 $ 108 $ 66,093
Selling, general and administrative expense....... 4,982 966 5,948
Provision for income taxes........................ 283 37 320
Net income........................................ 2,040 66 2,106
Earnings per share (basic & diluted).............. 0.09 0.00 0.09
Unaudited Condensed Consolidated Balance Sheet
at September 30, 2001
As Previously
Reported Restatements As Restated
---------------- --------------- --------------
Inventories $ 37,008 $ 103 $ 37,111
Deferred tax asset, net 6,186 (37) 6,149
Retained earnings 19,425 66 19,491
13
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," "assume," "believe" and similar expressions.
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 nation's largest producer of fish meal and fish oil. The
Company's products are produced from menhaden (a fish found in commercial
quantities), and includes 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 high-protein feed additives by animal feed manufacturers
and by commercial livestock and poultry farmers. The Company's crude fish oil
is sold to food producers in Europe and its refined fish oil products, which
are high in nutritionally desirable Omega-3 fatty acids, are used in a variety
of foods for human consumption, as well as in aquaculture feeds and certain
industrial applications. Fish solubles are sold as protein additives for
animal feed and as organic fertilizers.
The fish catch is processed into regular grade fish meal, specialty fish
meals, fish oils and fish solubles at the Company's four processing plants
located in Virginia, Mississippi and Louisiana. The Company owns 65 fishing
vessels (40 of which are directly involved in the harvesting operations during
Fiscal 2001) and owns 32 and leases 7 spotter aircraft (of which 38 are
directly involved in the Fiscal 2001 harvesting operations) that are used to
harvest menhaden in coastal waters along the U.S. mid-Atlantic and Gulf of
Mexico coasts. The Company also owns an additional processing plant in
Louisiana (located near Morgan City, Louisiana) in which its in-line
processing operations were halted during Fiscal 2000 due to high operating
costs. The Company did not reopen the processing operations of this plant for
the Fiscal 2001 fishing season due to continuing depressed pricing received
for the Company's products. Warehousing operations are being conducted at the
facility until market conditions improve or other opportunities develop for
the property. Certain processing equipment at this facility has been removed
and scrapped. The closure of this plant did not impact the Company's ability
to process its products because the Company had excess production capacity at
its other three Gulf Coast plants.
14
The Company's harvesting season generally extends from May through December
on the mid-Atlantic coast and from April through the first of November 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 tend to be lower during the fishing season when product is
more abundant than in the off season. Throughout the entire 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. Beginning early in Fiscal 1999 and continuing through
Fiscal 2000, world grain and oilseed markets were burdened by excess supplies
which, in turn, resulted in prices for most major commodities being sharply
lower than in previous years. Correspondingly, the Company's product prices
were adversely impacted during these periods, resulting in decreased gross
margins, and the recording of $18.1 million in inventory write-downs during
Fiscal 2000.
Product pricing for the Company's products experienced modest increases
during the first nine months of Fiscal 2001, compared with the first nine
months of Fiscal 2000. These price increases for the Company's products
resulted from diminished global fish meal and fish oil inventories during the
first nine months of Fiscal 2001 as opposed to a stronger world demand for
other competing products. Management believes that these moderate price
increases will continue throughout the remainder of Fiscal 2001 and possibly
plateau during the first quarter of 2002. Future product price volatility
will depend upon the perceived international availability of fish meal and
fish oil inventories. Accordingly, gross profit margins may vary in the
future.
In an effort to reduce price volatility and to generate higher, more
consistent profit margins, 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 introducing its refined fish oil into the U.S. food market
where initial marketing efforts have indicated significantly increased margin
opportunities and more stable demand requirements than the Company's
traditional crude fish oil markets.
The Company implemented several cost-cutting measures during Fiscal 2000,
which included, among other items, a reduction in its fishing fleet and
spotter planes, closure of in-line processing facilities at its highest cost
plant and implementation of a carry-vessel concept. Despite such cost-cutting
measures, the decline in product pricing outpaced the cost-cutting efforts
which resulted in further inventory write-downs towards the end of Fiscal
2000. Subsequent to the completion of the 2000 fishing season, the Company
implemented additional cost reduction measures in anticipation of the 2001
fishing season which included, among other things, a further reduction in the
number of fishing vessels and spotter planes and a corresponding reduction in
off-season maintenance expenses for the rest of the fleet. Additionally, the
Company reduced its off-season personnel associated with those maintenance
programs and suspended the Company's matching contribution to the Omega 401(k)
Savings and Retirement Plan for Fiscal 2001. Given the Company's current
projections of harvesting assumptions and assuming no significant changes in
product market prices, the Company expects that positive gross margins should
be attainable for Fiscal 2001.
15
LIQUIDITY AND CAPITAL RESOURCES (RESTATED)
The Company's primary resources of liquidity and capital resources have
been cash flows from operations, bank credit facilities and term loans from
various lenders provided pursuant to Title XI of the Marine Act of 1936
("Title XI"). These sources of cash flows have been used for capital
expenditures and payment of long-term debt. The Company expects to finance
future expenditures through internally generated cash flows and, if necessary,
through funds available from the Credit Facility and/or Title XI facilities
described below.
Under a program offered through National Marine Fisheries Services ("NMFS")
pursuant to Title XI, the Company has secured loans through lenders with terms
generally ranging between 12 and 20 years at interest rates between 6.0% and
8.0% per annum which are enhanced with a government guaranty to the lender for
up to 80.0% of the financing. The Company's current Title XI borrowings are
secured by liens on 17 fishing vessels and mortgages on the Company's
Reedville, Virginia and Abbeville, Louisiana plants. In 1996, Title XI
borrowing was modified to permit use of proceeds from borrowings obtained
through this program for shoreside construction. To date, the Company has used
the entire $20.6 million amount originally authorized under the program. Loans
are now available under similar terms pursuant to the Title XI program without
intervening lenders. The Company made application for an additional loan of
$1.9 million under this new program, which was funded on November 6, 2001.
Omega had an unrestricted cash balance of $14.6 million at September 30,
2001, an increase of $7.2 million from December 31, 2000. This increase was
primarily due to an $8.7 million increase in cash provided by operating
activities during the first nine months of Fiscal 2001.
Investing activities used $626,000 during the nine months ended September
30, 2001 and $7.2 million during the nine months ended September 30, 2000. The
Company's investing activities consisted mainly of the sale of assets and
capital expenditures for equipment purchases and equipment replacements in the
nine month periods ended September 30, 2001 and 2000.
If the Company elects to re-establish normal production at its Morgan City
plant operations for fish meal, fish oil and fish solubles, then various
components of the in-line processing equipment will have to be upgraded or
replaced. Such equipment would include the driers, cookers and presses. It is
estimated that replacement of this equipment would cost an estimated $2.0 to
$3.0 million.
Net financing activities used $846,000 and $867,000 to repay debt
obligations during the nine month periods ended September 30, 2001 and
September 30, 2000, respectively. The Company's long-term debt at September
30, 2001 and December 31, 2000, was $14.0 million and $14.8 million,
respectively. Current maturities attributable to the Company's long-term debt
were $1.2 million at both September 30, 2001 and December 31, 2000. The
Company has not utilized its working capital credit facility during Fiscal
2001 and Fiscal 2000.
The Company's principal raw material is menhaden, a species of fish that
inhabits coastal and inland tidal waters in the United States. Menhaden are
undesirable for human consumption due to their small size, boniness and high
oil content. Certain state agencies impose resource depletion restrictions on
menhaden pursuant to fisheries management legislation. To date, the Company
has not experienced any material adverse impact on its fish catch or results
of operations as a result of these restrictions.
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 2002.
16
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 (Restated)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
2001 2000 2001 2000
------- ------- ------- -------
Revenues..................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales................................ 84.3 102.4 88.3 98.6
Inventory write-down......................... 0.0 76.9 0.0 23.6
------- ------- ------- -------
Gross profit (loss).......................... 15.7 (79.3) 11.7 (22.2)
Selling, general and administrative expense.. 4.9 9.0 8.0 10.3
------- ------- ------- -------
Operating income (loss)...................... 10.8 (88.3) 3.7 (32.5)
Interest expense, net........................ (0.2) (0.6) (0.4) (0.2)
Other expense, net........................... (0.2) (0.1) (0.1) (0.5)
------- ------- ------- -------
Income (loss) before income taxes............ 10.4 (89.0) 3.2 (33.2)
Provision (benefit) for income taxes......... 2.2 (32.0) 0.4 (12.0)
------- ------- ------- -------
Net income (loss)............................ 8.2 (57.0) 2.8 (21.2)
======= ======= ======= =======
INTERIM RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2001 AND
SEPTEMBER 30, 2000
REVENUES. For the current quarter ended September 30, 2001,
revenues increased $18.9 million, or 105.6% from $17.9 million in the quarter
ended September 30, 2000, to $36.8 million in the quarter ended September 30,
2001. The increase in revenues was attributable to a 28.1% and a 577.0%
increase in the sales volumes of fish meal and fish oil respectively, along
with a 14.2% and 26.8% increase in fish meal and fish oil selling prices
respectively, during the current quarter ended September 30, 2001 as compared
to the quarter ended September 30, 2000.
COST OF SALES. Cost of sales, including depreciation and
amortization for the current quarter ended September 30, 2001 was $31.1
million, a $12.8 million increase, or 69.8% from $18.3 million in the quarter
ended September 30, 2000. Cost of sales as a percentage of revenues was 84.3%
in the current quarter ended September 30, 2001 as compared to 102.4% in the
quarter ended September 30, 2000. The 18.1% decrease in cost of sales, as a
percentage of revenues, during the current quarter ended September 30, 2001
was due primarily to a 28.1% and 577.0% increase in the sales volumes of the
Company's fish meal and fish oil, respectively along with a 14.2% and 26.8%
increase in the Company's selling prices for fish meal and fish oil,
respectively. (Restated)
GROSS PROFIT. Gross profit increased $20.0 million or 140.7%, from a
$14.2 million loss in the quarter ended September 30, 2000 to $5.8 million in
the current quarter ended September 30, 2001. As a percentage of revenues,
the Company's gross profit margin increased 95.0% in the current quarter ended
September 30, 2001 as compared to the same period in the prior fiscal year.
The increase in gross profit was primarily due to a 28.1% and 577.0% increase
in the sales volumes of the Company's fish meal and fish oil respectively,
along with a 14.2% and 26.8% increase in the Company's selling prices for fish
meal and fish oil, respectively. The Company attributes the higher fish meal
and fish oil sales prices and volumes in the third quarter ending September
30, 2001 to diminished global fish meal and fish oil inventories during the
first nine months of Fiscal 2001 as opposed to a general strengthening in
world markets for other competing products. (Restated)
17
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $197,000 or 12.2% from $1.6 million in the
quarter ended September 30, 2000 to $1.8 million in the quarter ended
September 30, 2001. The increase in expense was due primarily to the timing
of employee administrative costs and the recognition of $110,000 of
receivables due from an insurance company as uncollectible due to the
insurance carrier's bankruptcy filing. (Restated)
OPERATING INCOME (LOSS). As a result of the factors discussed
above, the Company's operating income increased $19.8 million from a $15.8
million loss in the quarter ended September 30, 2000 to a $4.0 million profit
in the quarter ended September 30, 2001. As a percentage of revenues,
operating income increased 99.1% in the current quarter ended September 30,
2001 as compared to the same period in the prior fiscal year. (Restated)
INTEREST EXPENSE, NET. Interest expense, net decreased by $32,000 in
the current quarter ended September 30, 2001 as compared to the quarter ended
September 30, 2000. The decrease in interest expense, net was the result of
an increase in interest income due to an increase in cash and cash equivalents
available for investment purposes during the quarter ended September 30, 2001
as compared to the quarter ended September 30, 2000.
OTHER EXPENSE, NET. Other expense, net increased $26,000 in the
current quarter ended September 30, 2001 as compared to the quarter ended
September 30, 2000. This increase in other expense was the result of fees
related to the non-use of Company's credit facility.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company recorded a $827,000
provision for income taxes on a $3.8 million profit before taxes for the
quarter ended September 30, 2001. This is compared to a $5.7 million benefit
for taxes on a $15.9 million loss for the quarter ended September 30, 2000.
The provision for income taxes for the current nine months ended September 30,
2001 reflects a year to date deferred state tax benefit of approximately
$750,000. During the quarter ended September 30, 2001, the Company completed
their 2000 state income tax returns and also successfully completed several
years of state income tax audits. Based on the completed tax returns and
audits, the Company recorded deferred tax assets for the resulting state net
operating loss carryforwards and believes that it is more probable than not
that the estimated tax benefits of the state net operating losses will be
realized. The effective tax rate of 34% for U.S. federal taxes was unchanged
between the periods. (Restated)
18
INTERIM RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30,
2000
REVENUES. For the nine months ended September 30, 2001, revenues increased
$16.8 million or 28.9% from $58.1 million for the nine months ended September
30, 2000 to $74.9 million for the nine months ended September 30, 2001. This
increase was attributable to a 102.3% increase in sales volume of the
Company's fish oil and an increase of 15.2% and 14.3% in the selling price of
the Company's fish meal and fish oil respectively, for the nine months ended
September 30, 2001.
COST OF SALES. Cost of sales, including depreciation and amortization, for
the nine months ended September 30, 2001 was $66.1 million, a $8.8 million
increase from $57.3 million for the comparable nine month period ended
September 30, 2000. Cost of sales as a percentage of revenues was 88.3% in the
current nine month period as compared to 98.6% for the nine month period ended
September 30, 2000. The 10.3% decrease in cost of sales, as a percentage of
revenues, during the current nine month period ended September 30, 2001 is due
primarily to a 102.3% increase in sales volume for the Company's fish oil and
an increase of 15.2% and 14.3% in the selling price of the Company's fish meal
and fish oil, respectively, as compared to the nine months ended September 30,
2000. (Restated)
GROSS PROFIT. Gross profit increased $21.7 million or 167.7% from a $12.9
million loss in the nine month period ended September 30, 2000 to a $8.8
million gross profit for the nine month period ended September 30, 2001. As a
percentage of revenues the Company's gross profit margin increased 33.9% in
the current nine month period ended September 30, 2001. The increase in gross
profit was due primarily to a 102.3% increase in sales volume for the
Company's fish oil and an increase of 15.2% and 14.3% in the selling price of
the Company's fish meal and fish oil respectively. The Company attributes the
higher fish meal and fish oil sales prices for the nine months ending
September 30, 2001, to diminished global fish meal and fish oil inventories
during the first nine months of Fiscal 2001 as opposed to a general
strengthening in world markets for other competing products. (Restated)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $39,000 or 0.7% from $6.0 million for the
nine months ended September 30, 2000 to $5.9 million for the nine months ended
September 30, 2001. This decrease was primarily due to a reduction in staff
and related employee costs, partially offset by the recognition of $966,000 of
receivables due from an insurance company as uncollectible due to the
insurance carrier's bankruptcy filing. (Restated)
OPERATING INCOME (LOSS). As a result of the factors discussed above, the
Company's operating income increased $21.7 million from an $18.9 million loss
for the nine months ended September 30, 2000 to a $2.8 million operating
income for the nine months ended September 30, 2001. As a percentage of
revenues, operating income increased 36.2% for the current nine months ended
September 30, 2001 as compared to the nine months ended September 30, 2000.
(Restated)
INTEREST EXPENSE, NET. Interest expense net increased by $205,000 from net
interest expense of $115,000 for the nine months ended September 30, 2000 to
$320,000 for the nine months ended September 30, 2001. The increase in net
interest expense was primarily due to a reduction of interest income as a
result of lower returns on investments.
OTHER (EXPENSE), NET. Other expense, net decreased by $214,000 in the
current nine month period ended September 30, 2001 as compared to the nine
month period ended September 30, 2000. This decrease was the result of gains
during the nine months ended September 30, 2001 on the disposal of assets
which was netted against other expenses.
19
PROVISION (BENEFIT) FOR INCOME TAXES. The Company recorded a $320,000
provision for income taxes for the current nine months ended September 30,
2001. The provision for income taxes for the current nine months ended
September 30, 2001 reflects a year to date deferred state tax benefit of
approximately $750,000. During the quarter ended September 30, 2001, the
Company completed their 2000 state income tax returns and also successfully
completed several years of state income tax audits. Based on the completed tax
returns and audits, the Company recorded deferred tax assets for the resulting
state net operating loss carryforwards and believes that it is more probable
than not that the estimated tax benefits of the state net operating losses
will be realized. The effective tax rate of 34% for U.S. federal taxes was
unchanged between the periods. (Restated)
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, although this
general pricing trend has not persisted during Fiscal 2001 when compared to
Fiscal 2000. Prices received throughout Fiscal 2000 were the lowest the
industry had experienced in recent years. 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.
20
SIGNIFICANT FACTORS THAT MAY AFFECT FORWARD-LOOKING STATEMENTS
The Company cautions investors that the following significant factors, and
those factors described elsewhere in this Report, in other filings by the
Company with the SEC from time to time and in press releases issued by the
Company, could affect the Company's actual results of operations and thereby
cause 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.
2. The impact on the prices for the Company's products caused by 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. The products that influence the supply and demand
relationship are world supplies of fish meal made from other fish species,
palm oil, soy meal and oil, and other edible oils.
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 on the Company if it 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 the Company's 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 in 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. 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 operations and financial
condition could be adversely affected.
10. 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
21
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, the financial condition of the Company is
exposed to minimal market risk associated with interest rate movements on the
Company's borrowings. A one percent increase or decrease in the levels of
interest rates on variable rate debt would not result in a material change to
the Company's results of operations.
Although the Company sells products in foreign countries, all of the
Company's revenues are billed and paid for in US dollars. As a result,
management does not believe that the Company is exposed to any significant
foreign country currency exchange risk, and the Company does not utilize
market risk sensitive instruments to manage its exposure to this risk.
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. See also
Note 5 to Consolidated Financial Statements in Part I - Item 1.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
22
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)
March 26, 2002 By: /s/ ROBERT W. STOCKTON
---------------------------------------------
(Executive Vice President, Chief Financial
Officer and Corporate Secretary)
23