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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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 (I.R.S. EMPLOYER
OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
1717 ST. JAMES PLACE, SUITE 77056
550 (ZIP CODE)
HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 623-0060
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $0.01 par value........................... New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None.
On December 11, 1998, the Company had outstanding 24,276,812 shares of
Common Stock, $0.01 par value. As of such date, the aggregate market value of
the Company's common stock held by nonaffiliates of the Company is
$209,387,503, based on the closing price of the Common Stock in consolidated
trading. This figure does not include the value of Common Stock held by
Directors and Executive Officers of the Registrant and members of their
immediate families, some of whom may constitute "affiliates" for purpose of
the Securities Exchange Act of 1934.
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Documents incorporated by reference: Portions of the registrant's definitive
proxy statement for its 1999 annual meeting of stockholders, which will be
filed with the Securities and Exchange Commission within 120 days after
September 30, 1998, are incorporated by reference to the extent set forth in
Part III.
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TABLE OF CONTENTS
PAGE
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PART I
Items 1 and 2. Business and Properties................................ 1
General............................................... 1
Financial Information about Industry Segments......... 2
Company Overview...................................... 2
Employees............................................. 5
Geographical Information.............................. 5
Executive Officers of the Registrant.................. 5
Properties............................................ 6
Item 3. Legal Proceedings...................................... 6
Item 4. Submission of Matters to a Vote of Security Holders.... 6
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters................................... 7
Item 6. Selected Financial Data................................ 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 8
Item 7.A. Quantitative and Qualitative Disclosure About Market
Risk................................................... 16
Item 8. Financial Statements and Supplementary Data............ 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 36
PART III
Item 10. Directors and Executive Officers of the Registrant..... 37
Item 11. Executive Compensation................................. 37
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 37
Item 13. Certain Relationships and Related Transactions......... 37
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K............................................... 38
Forward-looking statements in this Annual Report on Form 10-K, 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 7 "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," "believe" and similar expressions as well
as the Company's statements concerning the state of the Company's Year 2000
readiness. The Company assumes no obligation to upgrade forward looking
statements.
PART I
ITEM 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Omega Protein Corporation is a Nevada corporation organized in 1998. As used
herein, the term "Omega" or the "Company" refers to Omega Protein Corporation
or to Omega Protein Corporation and its consolidated subsidiaries, as
applicable. All references herein to a "Fiscal" year mean the 12 month period
ended September 30 of such year. The Company's principal executive offices are
at 1717 St. James Place, Suite 550, Houston, Texas 77056 (Telephone: (713)
623-0060).
The Company is the successor by merger to Marine Genetics Corporation
(formerly known as Zapata Protein, Inc.), a Delaware corporation, which was
formed in March 1994 to act as the holding company for Omega Protein, Inc.
(formerly known as Zapata Protein (USA), Inc.). Omega Protein, Inc., which is
the operating entity for the Company's current business, was formed in
Virginia in October 1986, and is the successor to business conducted since
1913. The Company has a number of direct and indirect subsidiaries.
Until April 1998, the Company and its predecessors were a wholly-owned
subsidiary of Zapata Corporation ("Zapata"), a publicly traded company which
has shares listed on the New York Stock Exchange, Inc. ("NYSE"), since 1973
when Zapata acquired the Company's operations. In April 1998, the Company
completed an initial public offering (the "Offering") of 8,500,000 shares of
its Common Stock at a gross price of $16.00 per share. In May 1998, the
Underwriters exercised their option to acquire 1,275,000 additional shares at
the same gross price. Of the 9,775, 000 total shares sold in the Offering, the
Company issued and sold 4,600,000 shares, and Zapata sold 5,175,000 shares.
Immediately following the Offering, Zapata owned approximately 59.7% of the
Company's outstanding Common Stock. The Company used a portion of the net
proceeds of the Offering to repay amounts due Zapata and a certain bank; the
balance of the proceeds are invested in certificates of Deposits and A2P2
rated or better commercial paper. See Note 1 to the Company's Consolidated
Financial Statements in Item 8 of this Report.
To concentrate on and enhance its core business, the Company sold a
marginally profitable business in late Fiscal 1997 and acquired certain assets
in early Fiscal 1998 to increase the Company's harvesting and production
capabilities.
On September 16, 1997, the Company's wholly owned subsidiary, Venture
Milling Company, a Delaware corporation ("Venture Milling"), sold
substantially all of its assets to an unrelated third party (the "Venture
Milling Disposition"). Venture Milling was primarily in the business of
blending different animal protein products (i.e. fish meal, blood meal and
feather meal) for sale to producers of feed for broilers and other animals
with low nutritional requirements. Venture Milling had annual revenues and
operating income (loss) of $32.0 million and $174,000, respectively, in Fiscal
1997, $17.5 million and ($122,000), respectively, in Fiscal 1996 and $8.1
million and ($115,000), respectively, in Fiscal 1995. The Venture Milling
Disposition resulted in a
1
$531,000 pre-tax loss to the Company in Fiscal 1997 and did not have a
material impact on the Company's balance sheet since Venture Milling leased
most of the assets employed in its operations.
On November 3, 1997, the Company acquired for $14.5 million in cash, the
fishing and processing assets of American Protein, Inc. ("American Protein"),
which operated 10 fishing vessels and a menhaden processing plant in the
Chesapeake Bay area (the "American Protein Acquisition"). American Protein's
facilities were located in close proximity to the Company's Reedville,
Virginia facility. Shortly after closing this acquisition, the Company closed
the American Protein plant and began integrating its assets into the Company's
existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ("Gulf Protein"), which included six fishing
vessels, five spotter planes and the processing equipment at the Gulf Protein
plant located near Morgan City, Louisiana, for $13.6 million in cash and the
assumption of $883,000 in long-term liabilities (the "Gulf Protein
Acquisition" and, together with the American Protein Acquisition, the
"Acquisitions"). In connection with the Gulf Protein Acquisition, the Company
also entered into a five-year lease for the Gulf Protein plant at a $220,000
annual rental rate. The Company is currently upgrading this plant's processing
capabilities so that it can manufacture specialty meals. The Company began
operations at the Morgan City, Louisiana plant at the start of the 1998
fishing season, which began in April, 1998.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates within one industry segment, menhaden fishing.
Information concerning export sales and geographical distribution of revenues
based on location of customers is incorporated by reference from Note 15 of
Notes to the Company's Consolidated Financial Statements in Item 8 of this
Report.
COMPANY OVERVIEW
The Company's marine protein operations involve the production and sale of a
variety of protein products derived from menhaden, a species of fish found
along the Gulf of Mexico and Atlantic coasts. Omega is the largest processor,
marketer and distributor of marine products (fish meal) and fats (fish oil) in
the United States. The Company processes several grades of fish meal (regular
or "FAQ" meal and specialty meals), as well as fish oil and fish solubles. The
Company's fish meal products are primarily used as a protein ingredient in
animal feed for poultry, swine, cattle, aquaculture and household pets. The
Company's fish oil is primarily used as an ingredient in margarine and
shortening. The Company's fish solubles are sold primarily to livestock feed
manufacturers and for use as an organic fertilizer.
Fishing. During Fiscal 1998, the Company owned a fleet of 66 fishing vessels
and 33 spotter aircraft for use in its fishing operations and also leased
additional aircraft where necessary to facilitate operations. During the 1998
fishing season in the Gulf of Mexico, where the fishing season runs from mid-
April through October, the Company operated 38 fishing vessels and 32 spotter
aircraft. The fishing area in the Gulf stretches from the south Texas
coastline to the panhandle of western Florida, with a concentration off the
Louisiana and Mississippi coasts. The fishing season along the Atlantic coast
begins in early May and usually extends into December. The Company operated 13
fishing vessels and 9 spotter aircraft along the mid-Atlantic coast,
concentrated primarily in and around the Chesapeake Bay.
Menhaden usually school in large, tight clusters and are commonly found in
warm, shallow waters. Spotter aircraft locate the schools and direct the
fishing vessels to them. The principal fishing vessels transport two 40-foot
purse boats, each carrying several fishermen and one end of a 1,500-foot net.
The purse boats encircle the school and capture the fish in the net. The fish
are then pumped from the net into refrigerated holds of the fishing vessel,
and then are unloaded at the Company's processing plants.
Processing. During Fiscal 1998, the Company owned and operated five
processing plants, three in Louisiana, one in Mississippi and one in Virginia,
where the menhaden are processed into fish meal, fish oil and
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fish solubles. The fish are unloaded from the fishing vessels into storage
boxes and then conveyed into steam cookers. The fish are then passed through
presses to remove most of the oil and water. The solid portions of the fish
are dried and then ground into fish meal. The liquid that is produced in the
cooking and pressing operations contains oil, water, dissolved protein and
some fish solids. This liquid is decanted to remove the solids and is then put
through a centrifugal oil/water separation process. The separated fish oil is
a finished product. The separated water and protein mixture is further
processed through evaporators to remove the soluble protein, which can be sold
as a finished product or added to the solid portions of the fish for
processing into fish meal.
Fish meal, the principal product made from menhaden, is sold primarily as a
high-protein ingredient. It is used as a protein supplement in feed formulated
for pigs and other livestock. Each use requires certain standards to be met
regarding quality and protein content, which are determined by the freshness
of the fish and by processing conditions such as speed and temperatures. Fish
solubles are a liquid protein product used as an additive in fish meal and
also marketed as an independent product to animal feed formulators and the
fertilizer industry.
Fish oil from menhaden is widely used for human consumption as an edible fat
in Europe. Refined and hydrogenated menhaden oils have a wide variety of
applications as ingredients of margarine, cooking oil and solid cooking fats
used in baked goods. In June 1997, the U.S. Food and Drug Administration
approved the use of refined non-hydrogenated menhaden oil, a natural source of
Omega-3 fatty acids, for human consumption in the United States. Ongoing
scientific studies continue to link consumption of Omega-3-rich fish oil to a
number of nutritional and health benefits.
The Company owns a 50% equity interest in a joint venture involved in the
manufacturing and marketing of animal feed ingredients in the Peoples Republic
of China. While the Company's investment was made in 1995, initial operations
commenced in late 1996 with no material impact on the Company's financial
results for fiscal years 1996, 1997 and 1998. The investment is accounted for
in the Company's financial statements using the equity method of accounting.
Marketing. Most of the Company's marine protein products are sold directly
to about 300 customers by the Company's marketing department, while a smaller
amount is sold through independent sales agents. Product inventory was
$36,164,000 as of September 30, 1998 versus $35,210,000 on September 30, 1997.
The Company's fish meal is sold primarily to domestic feed producers for
utilization as a high-protein ingredient for the poultry, swine, aquaculture
and pet food industries. Fish oil sales primarily involve export markets where
the fish oil is refined for use as an edible oil. One Danish based customer
for fish oil, Denofa A/S, accounted for approximately 12.7% of the Company's
consolidated revenues in Fiscal 1998. Sales to Denofa A/S were approximately
$17.0 million in Fiscal 1998.
The Company's products are sold both in the U.S. and internationally.
International sales consist mainly of fish oil sales to Canada, Japan, Mexico
and The Netherlands. The Company's sales in these foreign markets are
denominated in U.S. dollars and are not directly affected by currency
fluctuations. Such sales could be adversely affected by changes in demand
resulting from fluctuations in currency exchange rates.
A number of countries in which the Company currently sells products impose
various tariffs and duties, none of which have a significant impact on the
Company's foreign sales. These duties are being reduced annually under the
North American Free Trade Agreement in the case of Mexico and Canada and under
the Uruguay Round Agreement of the General Agreement on Trade and Tariffs in
the case of Japan. In all cases, the Company's products are shipped to its
customers F.O.B. shipping point and therefore the customer is responsible for
any tariffs, duties or other levies imposed on the Company's products sold
into these markets.
Insurance. The Company maintains insurance against physical loss and damage
to its assets, coverage against liabilities to third parties it may incur in
the course of its operations, as well as workers' compensation, United States
Longshoremen and Harbor Workers' Act and Jones Act coverages. Assets are
insured at replacement cost, market value or assessed earning power. The
Company's limits for liability coverage are
3
statutory or $50.0 million. The $50.0 million limit is comprised of several
excess liability policies which are subject to deductibles, underlying limits
and exclusions. The Company believes its insurance coverage to be in such
form, against such risks, for such amounts and subject to such deductibles as
are prudent and normal for its operations.
Competition. Omega competes on price, quality and performance
characteristics of its products, such as protein level and amino acid profile
in the case of fish meal. The principal competition for the Company's fish
meal and fish solubles is from other protein sources such as soybean meal and
other vegetable or animal products. The Company believes, however, that these
other sources are not complete substitutes because fish meal offers
nutritional values not contained in such sources. Vegetable fats and oils,
such as soybean and palm oils, provide the primary market competition for fish
oil. In addition, the Company competes against domestic, privately owned
menhaden fishing companies as well as domestic and international producers of
fish meal and fish oil derived from species such as anchovy and horse
mackerel.
Fish meal prices have historically borne a relationship to prevailing
soybean meal prices, while prices for fish oil are generally influenced by
prices for vegetable fats and oils, such as soybean and palm oils. Thus, the
prices for the Company's products are established by worldwide supply and
demand relationships over which the Company has no control and tend to
fluctuate to a significant extent over the course of a year and from year to
year.
Regulation. The Company's operations are subject to federal, state and local
laws and regulations relating to the location and periods in which fishing may
be conducted as well as environmental and safety matters. At the state and
local level, certain state and local government agencies have either enacted
legislation and regulations or have the authority to enact with legislation
and regulation to prohibit, restrict or regulate menhaden fishing within their
jurisdictional waters. The Company, through its operation of fishing vessels,
is subject to the jurisdiction of the U.S. Coast Guard, the National
Transportation Safety Board and the U.S. Customs Service. The U.S. Coast Guard
and the National Transportation Safety Board set safety standards and are
authorized to investigate vessel accidents and recommend improved safety
standards. The U.S. Customs Service is authorized to inspect vessels at will.
The Company's operations are also subject to federal, state and local laws
and regulations relating to the protection of the environment, including the
federal Water Pollution Control Act of 1972, which was significantly modified
in 1977 to deal with toxic water pollutants and re-named as the Clean Water
Act, and which imposes strict controls against the discharge of oil and other
water pollutants into navigable waters. The Clean Water Act provides penalties
for any discharge of pollutants in reportable quantities and, along with the
Oil Pollution Act of 1990, imposes substantial liability for the costs of oil
removal, remediation and damages. The Company's marine protein operations also
are subject to the federal Clean Air Act, as amended; the federal Resource
Conservation and Recovery Act, which regulates treatment, storage and disposal
of hazardous wastes; the federal Comprehensive Environmental Response,
Compensation, and Liability Act, which imposes liability, without regard to
fault, on certain classes of persons that contributed to the release of any
"hazardous substance" into the environment; and the federal Occupational
Safety and Health Act ("OSHA"). The OSHA hazard communications standard, the
Environmental Protection Agency community right-to-know regulations under
Title III of the federal Superfund Amendment and Reauthorization Act and
similar state statutes require the Company to organize information about
hazardous materials used or produced in its operations. Certain of this
information must be provided to employees, state and local governmental
authorities and local citizens. Numerous other environmental laws and
regulations, along with similar state laws, also apply to the operations of
the Company, and all such laws and regulations are subject to change.
The Company has made, and anticipates that it will make in the future,
expenditures in the ordinary course of its business in connection with
environmental matters. Such expenditures have not been material in the past
and are not expected to be material in the future. However, there is no
assurance that environmental laws and regulations enacted in the future will
not adversely affect the Company's operations.
4
The Company's harvesting operations are subject to certain federal maritime
laws and regulations which require, among other things, that the Company be
incorporated under the laws of the U.S. or a state, the Company's chief
executive officer be a U.S. citizen, no more of the Company's directors be
non-citizens than a minority of the number necessary to constitute a quorum
and at least 50% of the Company's outstanding capital stock (including a
majority of the Company's voting capital stock) be owned by U.S. citizens. If
the Company fails to observe any of these requirements, it will not be
eligible to conduct its harvesting activities in U.S. jurisdictional waters.
Such a loss of eligibility would have a material adverse affect on the Company
business, results of operations and financial conditions.
The Company believes that during the past five years it has substantially
complied with all material statutes and regulations applicable to its
operations, the failure to comply with which would have had a material adverse
impact on its operations.
EMPLOYEES
At September 30, 1998, the Company employed approximately 1,300 persons.
Approximately 111 employees of the Company are represented by an affiliate of
the United Food and Commercial Workers Union. During the past five years Omega
has not experienced any strike or work stoppage which has had a material
impact on its operations. The Company considers its employee relations to be
generally satisfactory.
GEOGRAPHICAL INFORMATION
Certain geographical information with respect to the Company's business is
set forth in Note 15 of the Company's Consolidated Financial Statements
included in Item 8 of this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and current offices of the executive officers of the
Company, who are to serve until their successors are elected and qualified,
are set forth below. Also indicated is the date when each such person
commenced serving as an executive officer of the Company.
DATE BECAME
EXECUTIVE
NAME AND AGE OFFICE OFFICER
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Joseph L. von Rosenberg Chief Executive Officer, President and July 1997
III (40)............... Director
Robert W. Stockton Executive Vice President and Chief July 1997
(47)................... Financial Officer
Kelsey D. Short Jr. Executive Vice President-Operations and November 1993
(44)................... Marketing
Eric T. Furey (36)...... Vice President, General Counsel and January 1998
Corporate Secretary
Bernard H. White (51)... Corporate Vice President March 1998
A description of the business experience during the past five years for each
of the executive officers of Omega is set forth below.
Joseph L. von Rosenberg III is President and Chief Executive Officer of the
Company. He has served in these positions since July 1997. Prior to serving in
these positions Mr. von Rosenberg served as Executive Vice President of Zapata
from November 1995 until April 1998. Prior to becoming Executive Vice
President of Zapata, Mr. von Rosenberg served as General Counsel of Zapata
from August 1994 to July 1997 and Corporate Secretary of Zapata from June 1993
to July 1997. From August 1994 through November 1995, Mr. von Rosenberg also
held the position of Vice President of Zapata. Prior to joining Zapata in June
1993, he served as General Counsel and Corporate Secretary of The Simmons
Group.
5
Robert W. Stockton is Executive Vice President and Chief Financial Officer
of the Company. He has served in these positions since July 1997. For the five
years prior to joining the Company, Mr. Stockton was Vice President and Chief
Financial Officer of The Simmons Group and also served as Corporate Controller
of Proler International Corp.
Kelsey D. Short Jr. is Executive Vice President-Operations and Marketing of
the Company. He has served in this position since December, 1998. From 1993 to
1998, Mr. Short was the Senior Vice President of Marketing and Product
Development of the Company. From 1985 to 1993, Mr. Short held a variety of
positions in the Company's marketing department, including Regional Sales
Manager, Specialty Meal Manager and Director of Product Development.
Eric T. Furey has served as General Counsel and Corporate Secretary of the
Company since January 1998. Mr. Furey served as General Counsel and Corporate
Secretary of Zapata from July 1997 to April 1998. He was engaged in the
private practice of law for more than five years before joining the Company.
Bernard H. White was named Corporate Vice President in March 1998. From 1994
to 1998, Mr. White worked as a Public Affairs and Investor Relations
Consultant. Prior to that Mr. White served as Vice President--Corporate
Affairs of Zapata Corporation.
PROPERTIES
The Company owns the Reedville, Virginia, Moss Point, Mississippi and
Abbeville, Louisiana plants and the real estate on which they are located
(except for a small leased parcel comprising a portion of the Abbeville,
Louisiana real estate). The Company leases from unaffiliated third parties the
real estate on which the Cameron, Louisiana and Morgan City, Louisiana plants
are located. The Cameron plant lease provides for a 10 year term ending on
June 30, 2002 (with two successive 10 year options) and annual rent of
$56,000. The Morgan City plant lease provides for a 5 year term beginning on
November 25, 1997 at an annual rent of $220,000. The Company has an option
under the Morgan City lease to purchase the plant for $656,000 during the last
month of the lease or earlier if all rent through the end of the term is paid.
As of September 30, 1998, the Company's five processing plants had an
aggregate capacity to process approximately 950,000 tons of fish annually. The
Company's processing plants are located in coastal areas near the Company's
fishing fleet. Annual volume processed varies depending upon menhaden catch
and demand. Each plant maintains a dedicated dock to unload fish, fish
processing equipment and storage capacity. The Reedville, Virginia facility
contains an oil refining plant and net making facility. The Company
periodically reviews possible application of new processing technologies in
order to enhance productivity and reduce costs.
In July 1997, the Company commenced construction of a dry dock facility in
Moss Point, Mississippi to address the shortage of shoreside maintenance in
the U.S. Gulf coast and the increasing costs of these services. The facility
was completed in March 1998. The Company is using this facility and other
outside facilities to perform routine maintenance to its fishing fleet. The
Company also provides shoreside maintenance services to third party vessels if
excess capacity exists.
The Company also leases office space in Houston, Texas for its executive
offices pursuant to a sublease with Zapata. The Company believes its
facilities are adequate and suitable for its current level of operations. The
Company maintains customary workers' compensation insurance, as well as
liability, property and marine insurance for all of its operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is defending various claims and litigation arising from
operations. In the opinion of management, any losses resulting from these
matters will not have a material adverse affect on the Company's results of
operations, cash flows or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of Omega's stockholders during the fourth
quarter of Fiscal 1998.
6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Omega's Common Stock is listed on the New York Stock Exchange. The high and
low sales prices for the Common Stock, as reported in the consolidated
transactions reporting system, as well as the amounts per share of dividends
declared during such periods, for each quarterly period since the Company's
initial public offering in April 1998, are shown in the following table. Prior
to the Company's initial public offering April 8, 1998, there was no public
market for Omega's Common Stock.
SEPTEMBER 30, JUNE 30,
1998 1998
------------- --------
High sales price......................................... $17.50 $19.50
Low sales price.......................................... 5.50 13.75
Dividends declared....................................... -- --
On December 11, 1998, the closing price, as reported by the NYSE, was $8.625
per share. As of December 11, 1998, there were approximately 20 holders of
record of Common Stock. This number does not include the stockholders for whom
shares are held in a "nominee" or "street" name.
The Company filed registration statements with the Securities and Exchange
Commission on Form S-1 under the Securities Act of 1933 (File No. 333-44967
and 333-49321) which became effective April 2, 1998 and April 3, 1998,
respectively. In April and May 1998, the Company sold 4.6 million shares of
its Common Stock for an aggregate offering price of $73.6 million. Also
pursuant to the Registration Statement, Zapata, as selling stockholder, sold
5.175 million shares for an aggregate offering price of $82.8 million. The net
offering proceeds to the Company and Zapata, after underwriting discounts and
commissions and expenses, were $68.0 million and $77 million, respectively.
From the effective date of the Registration Statement through May 7, 1998,
the Company incurred expenses of approximately $11.9 million, of which
approximately $10.6 million represented underwriting discounts and commissions
and approximately $1.3 million represented other estimated expenses related to
the Offering.
The Company used approximately $33.3 million of the net proceeds from the
Offering to repay an acquisition loan and certain other indebtedness owed
Zapata and approximately $2.1 million to repay a bank loan. The Company
anticipates using the balance of the net proceeds for capital expenditures
(including possible acquisitions), working capital and general corporate
purposes. All unused net proceeds have been invested in cash, cash equivalents
and short-term investments. The use of the proceeds from the Offering to date
does not represent a material change in the use of the proceeds described in
the prospectus included in the Registration Statement.
The Company intends to retain earnings, if any, to support its growth
strategy and does not anticipate declaring or paying dividends on its Common
Stock in the foreseeable future. Any future determination as to payment of
dividends will be made at the discretion of the Board of Directors of the
Company and will depend upon the Company's operating results, financial
condition, capital requirements, general business conditions and such other
factors that the Board of Directors deems relevant. In addition, the payment
of cash dividends is limited by the terms of the Company's revolving credit
facility. At September 30, 1998, the Company could have declared and paid
dividends of $12.1 million in the aggregate within the limitations of the
Credit Facility.
On September 17, 1998, the Company's Board of Directors authorized a program
to repurchase up to 4,000,000 shares of its issued and outstanding common
stock. No time limit has been placed on the duration of the program and no
minimum number or value of shares to be repurchased has been fixed. Subject to
applicable securities laws, shares may be repurchased from time to time in the
open market or private transactions. Purchases are subject to availability of
shares at prices deemed appropriate by the Company and other corporate
considerations. Repurchased shares will be held as treasury shares available
for general corporate purposes. To date, Omega has not made any repurchases
under this program. Omega reserves the right to discontinue the repurchase
program at any time.
7
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial information for the periods presented and should be read in
conjunction with the Consolidated Financial Statements of the Company included
in Item 8 of this Report and the related notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Item 7 of this Report.
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
1998 1997 1996 1995 1994
-------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Revenues................. $133,555 $117,564(1) $93,609 $94,959 $96,614
Operating income (loss).. 38,118 18,205 10,504 5,904 (6,896)(3)
Net Income (loss)........ 24,207 10,425 5,928 3,250 (5,220)
Per share income (loss)
basic..................... 1.11 .53 .30 .17 (.27)
Per share income (loss)
diluted................... 1.10 .53 .30 .17 (.27)
Cash dividends paid........ -- -- -- -- --
CASH FLOW DATA:
Capital expenditures..... 21,540 9,825 4,673 5,574 3,671
Acquisitions of property
and equipment........... 28,116 -- -- -- --
BALANCE SHEET DATA:
Working capital.......... $ 80,498 $ 31,396 $20,719 $16,398 $27,472
Property and equipment,
net..................... 84,798(2) 40,889 36,511 35,842 30,793
Total assets............. 193,421 100,440 86,969 85,012 89,533
Current maturities of
long-term debt.......... 1,114 1,034 487 10,561 531
Long-term debt........... 11,408 11,294 50,187 50,694 62,367
Stockholders' equity..... 156,598(4) 64,354(5) 12,029 6,101 2,851
- --------
(1) In September 1997, the Company closed the Venture Milling Disposition. See
Note 2 to Company's Consolidated Financial Statements.
(2) In November 1997, the Company closed both the American Protein Acquisition
and the Gulf Protein Acquisition. See Note 2 to Company's Consolidated
Financial Statements.
(3) Includes a non-recurring charge of $12.3 million related to a write-down
of the Company's assets to estimated fair value which was computed in
connection with the Company's contemplated sale in Fiscal 1994. See Note 1
to Company's Consolidated Financial Statements.
(4) The Company's initial public offering closed in April 1998 which resulted
in net proceeds to the Company of $68.0 million, of which $33.3 million
was used to repay indebtedness. See Note 1 to Company's Consolidated
Financial Statements.
(5) In Fiscal 1997, Zapata contributed to the Company $41.9 million existing
intercompany debt owed to Zapata by the Company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the Company's financial condition and
results of operations. This discussion should be read in conjunction with the
Consolidated Financial Statements of the Company appearing under Item 8
herein.
Certain amounts applicable to the prior periods have been reclassified to
conform to the classifications currently followed. Such reclassifications do
not affect earnings or stockholders' equity.
GENERAL
Omega is the largest U.S. producer of protein-rich meal and oil derived from
marine sources. The Company's products are produced from menhaden (a fish
found in commercial quantities), including regular grade and value added
specialty fish meals, crude and refined fish oils and fish solubles. The
Company's fish
8
meal products are used as nutritional 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 are used in aquaculture feeds and certain industrial applications.
Fish solubles are sold as protein additives for animal feed and as organic
fertilizers.
The Company owns 66 fishing vessels (50 of which were directly involved in
the harvesting operations during Fiscal 1998) and owns 33 and leases 11
aircraft (of which 41 were directly involved in the harvesting operations)
that are used to harvest menhaden in coastal waters along the U.S. mid-
Atlantic and Gulf of Mexico coasts. The fish catch is processed into regular
grade fish meal , specialty fish meals, fish oils and fish solubles at the
Company's five plants located in Virginia, Mississippi and Louisiana.
The Company closed the Venture Milling Disposition on September 16, 1997.
The Company also closed the American Protein Acquisition on November 3, 1997
and the Gulf Protein Acquisition on November 25, 1997. Both Acquisitions were
accounted for as purchases and, therefore, their results of operations were
included in the Company's Statement of Operations as of the closing dates for
each Acquisition.
The following table summarizes the Company's harvesting and production for
the indicated periods:
YEAR ENDED SEPTEMBER
30,
-----------------------
1998 1997 1996
------- ------- -------
Fish catch (tons)(1).............................. 602,096 507,358 458,917
Production (tons):
Fish meal
Regular grade................................... 73,536 63,835 56,569
Special Select.................................. 63,163 46,409 46,325
Sea-Lac......................................... 11,917 14,741 10,631
Oil
Crude........................................... 68,245 61,905 60,257
Refined......................................... 7,230 9,657 8,834
Solubles......................................... 14,995 16,531 17,139
------- ------- -------
Total Production.............................. 239,086 213,078 199,755
======= ======= =======
- --------
(1) Fish catch has been converted to tons using the National Marine Fisheries
Service ("NMFS") fish catch conversion ratio of 670 pounds per 1,000 fish.
The Company's harvesting season generally extends from May through December
in the mid-Atlantic coast and from April through October in 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. In an effort to reduce price volatility and to generate higher, more
consistent profit margins, the Company has concentrated on the production and
marketing of specialty meal products, which generally have higher margins than
the Company's regular grade meal.
During Fiscal years 1998, 1997 and 1996, approximately 35% to 40% of Omega's
regular grade fish meal was sold on a two to six month forward contract basis.
The balance of regular grade fish meal and other products was substantially
sold on a spot basis through purchase orders. The Company's annual revenues
are highly dependent on both annual fish catch and inventories carried over
from the previous Fiscal year. The Company determines the level of inventory
to be carried over based on prevailing market prices of the products and
anticipated customer usage and demand during the off season. Thus, production
volume does not necessarily correlate with sales volume in the same Fiscal
year.
9
The following table sets forth the Company's revenues by product and the
approximate percentage of total revenues represented thereby, for the
indicated periods:
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1998 1997 1996
---------------- ------------------ ----------------
REVENUES PERCENT REVENUES PERCENT REVENUES PERCENT
-------- ------- -------- ------- -------- -------
Regular Grade............. $ 35.3 26.4% $ 23.7 20.2% $23.6 25.2%
Special Select............ 33.9 25.4 25.8 21.9 19.3 20.6
Sea-Lac................... 7.8 5.8 7.1 6.0 4.0 4.3
Crude Oil................. 46.7 35.0 18.6 15.8 20.4 21.8
Refined Oil............... 5.0 3.7 5.2 4.4 4.5 4.8
Fish Solubles............. 3.2 2.4 3.6 3.1 3.2 3.4
Venture Milling........... -- -- 32.0(1) 27.2 17.5 18.7
Nets and Other............ 1.6 1.3 1.6 1.4 1.1 1.2
------ ----- ------ ----- ----- -----
Total................. $133.5 100.0% $117.6 100.0% $93.6 100.0%
- --------
(1) The Company closed the Venture Milling Disposition on September 16, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Omega April 1998 initial public offering, Zapata, as the sole
stockholder of Omega, caused cash to be moved between the Company and Zapata
as each company had cash needs. During Fiscal 1997, Zapata contributed to the
Company as equity $41.9 million of inter-company debt owed to Zapata. As a
result of the Offering, Zapata and Omega are now separate public companies and
each entity's capital resources and liquidity is legally independent of the
other and dedicated to its own operations. As a result, the historical
liquidity and capital resources of the Company may not be indicative of the
Company's future liquidity and capital resources.
The Company's primary sources of liquidity and capital resources have been
cash flows from operations, borrowings from Zapata, bank credit facilities and
term loans from various lenders provided pursuant to the Title XI of the
Marine Act of 1936 ("Title XI"). These sources of cash flows have been used
for capital expenditures (including acquisitions) and payment of long-term
debt. The Company expects to finance future expenditures through 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 NMFS pursuant to Title XI of the Marine Act
of 1936 ("Title XI"), the Company has the ability to secure loans through
lenders with terms generally ranging between 12 and 20 years at interest rates
between 6% and 8% per annum which are enhanced with a government guaranty to
the lender for up to 80% of the financing. The Company's current Title XI
borrowings are secured by liens on 14 fishing vessels and mortgages on the
Company's Reedville, Virginia and Abbeville, Louisiana plants. In 1996, Title
XI borrowing was modified to permit use of proceeds from borrowings obtained
through this program for shoreside construction. The Company is currently
authorized to receive up to $20.6 million in loans under this program. To
date, the Company has used $15.0 million of these funds.
Omega had an unrestricted cash balance of $49.8 million at September 30,
1998, up $44.3 million from September 30, 1997. This increase was due
primarily to the completion of the April 8, 1998 initial public offering and
to net cash generated from operations in Fiscal 1998.
Investing activities used $48.7 million in Fiscal 1998 while using $10.9
million and $4.0 million during Fiscal 1997 and Fiscal 1996. The higher Fiscal
1998 investing activities reflect the Acquisitions. Other than the
Acquisitions, the Company's investing activities consisted mainly of capital
expenditures for equipment purchases and replacements in the 1996, 1997 and
1998 Fiscal years. The Company anticipates making approximately $17.0 million
of capital expenditures in Fiscal 1999, a significant portion of which will be
used to refurbish vessels, plant assets and to acquire certain equipment.
10
Net financing activities provided $67.4 million during Fiscal 1998 compared
with $3.5 in Fiscal 1997 and $10.6 million used in net financing activities in
Fiscal 1996. The Fiscal 1998 increase is due primarily to the Company's
completed initial public offering which provided $68.0 million in cash.
Financing activities also provided $2.6 million pursuant to the Title XI
financing program. The Company's net use of cash in Fiscal 1996 was
attributable to the Company's repayment of $21.1 million on its revolving line
of credit, offset by borrowings of $11.1 million under its bank debt.
The Company completed its initial public offering on April 8, 1998.
Subsequent to the Offering, the underwriters elected to purchase over-
allotment options. These issuances generated net proceeds of approximately
$68.0 million (after deducting underwriting discounts and commissions and
offering expenses). Of these proceeds, the Company used approximately $33.3
million to repay indebtedness to Zapata and $2.1 million to repay bank
indebtedness. Of the $33.3 million indebtedness owed to Zapata, $28.1 million
was incurred to fund the cash portion of the purchase price for the
Acquisitions and the balance was primarily incurred to pay the Company's
federal income taxes. The Company has invested the remaining net proceeds in
short-term government securities and interest bearing cash equivalents pending
their use. The Company intends to use these proceeds to fund possible
acquisitions and other capital expenditures as well as for general corporate
purposes.
On August 11, 1998 the Company entered into a $20.0 million revolving credit
agreement with SunTrust Bank, South Florida, N.A. (the "Credit Facility")
fulfilling the commitment letter dated December 30, 1997. Under the Credit
Facility the Company may make borrowings in a principal amount not to exceed
$20.0 million at any time. Borrowings under this facility may be used for
working capital and capital expenditures. Interest accrues on borrowings that
will be outstanding under the Credit Facility at the Company's election,
either (i) the bank's prime rate less 75 basis points, or (ii) LIBOR plus a
margin based on the Company's financial performance. The Credit Facility is
collateralized by all of the Company's trade receivables, inventory and
specific computer equipment. The Company and its subsidiaries are required to
comply with certain financial covenants, including maintenance of a minimum
tangible net worth, debt to tangible net worth ratio, funded debt to cash flow
ratio and fixed charges ratio, and certain other covenants. As of September
30, 1998, the Company had no borrowings outstanding under the Credit Facility.
On September 17, 1998, the Company's Board of Directors approved a stock
repurchase program allowing the Company to repurchase up to 4,000,000 shares
of its common stock. See "Item 5--Market For Registrant's Common Equity and
Related Stockholder Matters." As of December 14, 1998, the Company has not
repurchased any shares pursuant to such authorization. To the extent that
shares are repurchased under the program, the Company's liquidity and working
capital will be correspondingly reduced.
The Company is continually considering potential transactions including, but
not limited to, enhancement of physical facilities to improve production
capabilities and the acquisition of other businesses. Certain of the potential
transactions reviewed by the Company would, if completed, result in its
entering new lines of business, although, in general, these opportunities have
been related in some manner to the Company's existing operations. Although the
Company does not, as of the date hereof, have any commitment with respect to a
material acquisition, it could enter into such agreement in the future.
The Company believes that the net proceeds from the Offering, together with
existing cash, cash equivalents, short-term investments and funds available
through its Credit Facility will be sufficient to meet its working capital and
capital expenditure requirements through at least the end of 2000.
11
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:
YEAR ENDED SEPTEMBER
30,
---------------------
1998(1) 1997(2) 1996
------- ------- -----
Revenues........................................... 100.0% 100.0% 100.0%
Cost of sales...................................... 66.6 79.7 83.8
----- ----- -----
Gross profit..................................... 33.4 20.3 16.2
Selling, general and administrative................ 4.9 4.8 5.0
----- ----- -----
Operating income................................... 28.5 15.5 11.2
Interest expense................................... (0.1) (0.5) (1.1)
Other (expense) income............................. (0.2) (1.1) (0.1)
----- ----- -----
Income before income taxes......................... 28.2 13.9 10.0
(Provision) for income taxes....................... (10.1) (5.0) (3.7)
----- ----- -----
Net income......................................... 18.1 8.9 6.3
===== ===== =====
- --------
(1)The Acquisitions closed on November 3, 1997 and November 25, 1997,
respectively.
(2)The Venture Milling Disposition closed on September 16, 1997.
Fiscal 1998-1997
Revenues. Fiscal 1998 revenues increased $16.0 million, or 13.6 % from
$117.6 million in Fiscal 1997 to $133.6 million in Fiscal 1998. The increase
was attributable to increased sales volumes of the Company's specialty meals
and oil, and an overall increase in the average selling price of all regular
meal products. Increased sales volumes were due to the Acquisitions and
additional new sales which were partially offset by the lost Venture Milling
revenues (which totalled approximately $32.0 million in fiscal 1997). Average
selling prices for the Company's marine protein products continued a trend of
increasing in Fiscal 1998, reflecting the Company's continuing emphasis on
producing value-added products. Prices for the Company's fish meal and fish
oil products improved by 4% and 39% respectively in Fiscal 1998 as compared to
Fiscal 1997. During Fiscal 1998, the average per-ton price for fish meal
increased to $523 and the average per-ton price for fish oil increased to
$615. Sales volumes of fish meal increased approximately 31% in Fiscal 1998 as
compared to Fiscal 1997 sales. Sales volume of fish oil increased
approximately 56% in Fiscal 1998 as compared to Fiscal 1997 sales. The volume
increases are primarily due to increased inventory levels carried forward from
Fiscal 1997 and increased production due to the Acquisitions.
Gross Profit. Gross profit increased $20.9 million, or 87.6%, from $23.8
million in Fiscal 1997 to $44.7 million in Fiscal 1998, resulting from a 13.6%
increase in revenues and an increase in gross profit margin from 20.3% to
33.4% in Fiscal 1998. Revenues increased due to the factors indicated above.
Gross profit margins increased primarily due to an increase in fish catch of
18.7% from the previous Fiscal year, combined with the divestiture of the high
cost Venture Milling operations during late Fiscal 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $954,000, or 17.0% from $5.6 million in
Fiscal 1997 to $6.6 million in Fiscal 1998. As a percentage of revenues,
12
selling, general and administrative expenses were approximately 5.0% in each
of Fiscal 1997 and Fiscal 1998. The dollar increase was due primarily to
additional staffing necessary for the Company's expanded emphasis on specialty
meals and oils.
Operating income. As a result of the factors discussed above, the Company's
operating income increased to $38.1 million in Fiscal 1998 from $18.2 million
in Fiscal 1997. As a percentage of revenues, operating income increased from
15.5% in Fiscal 1997 to 28.5% in Fiscal 1998.
Interest expense. Interest expense declined $424,000 or 71.6% from $592,000
in Fiscal 1997 to $168,000 in Fiscal 1998. This decline resulted from the
Company's reduction in its average outstanding borrowings during Fiscal 1998
compared to the 1997 Fiscal year.
Other (expense) income. Other (expense) income decreased to ($291,000) in
Fiscal 1998 from ($1.3 million) in Fiscal 1997. Other expense decreased
primarily due to prior year losses in joint ventures, the sale of Venture
Milling's assets and the settlement of a lawsuit.
Income taxes. The Company had the same 36% tax rate for both Fiscal 1998 and
Fiscal 1997. The effective tax rates approximate the applicable combined state
and federal statutory tax rates for the respective periods.
Fiscal 1997-1996
Revenues. Fiscal 1997 revenues increased $24.0 million, or 25.6 % from $93.6
million in Fiscal 1996 to $117.6 million in Fiscal 1997. Of this increase,
$14.5 million was attributable to increased sales by Venture Milling. The
balance of the increase was attributable to a 26.5% increase in the tons of
specialty grade fish meal sold and an overall increase in the average selling
price of the Company's products. These increases were offset by a 12.0%
decline in the tons of fish oil shipped in Fiscal 1997 due to inventory
carryover to the following Fiscal year in anticipation of higher prices,
coupled with the Company's lower level of oil inventory carried over from the
previous Fiscal year. Excluding Venture Milling revenues, the Company had
revenues of $76.1 million in Fiscal 1996 and $85.6 million in Fiscal 1997.
Gross Profit. Gross profit increased $8.6 million, or 56.8%, from $15.2
million in Fiscal 1996 to $23.8 million in Fiscal 1997. As a percentage of
revenues, the Company's gross profit increased from 16.2% in Fiscal 1996 to
20.3% in Fiscal 1997. This increased percentage was primarily the result of
increasing sales of the Company's higher margin specialty brand products.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $923,000, or 19.7% from $4.7 million in
Fiscal 1996 to $5.6 million in Fiscal 1997. As a percentage of revenues,
selling, general and administrative expenses were approximately 5.0% in each
of Fiscal 1996 and Fiscal 1997. The dollar increase was primarily due to a
one-time contract payment to the Company's former Chief Executive Officer who
retired during Fiscal 1997 and to severance expenses incurred in connection
with the reduction of the Company's administrative staff during Fiscal 1997.
Operating income. As a result of the factors discussed above, the Company's
operating income increased to $18.2 million in Fiscal 1997 from $10.5 million
in Fiscal 1996. As a percentage of revenues, operating income increased from
11.2% in Fiscal 1996 to 15.5% in Fiscal 1997.
Interest expense. Interest expense declined $403,000 or 40.5% from $995,000
in Fiscal 1996 to $592,000 in Fiscal 1997. This decline resulted from the
Company's reduction in its average outstanding borrowings during Fiscal 1997
compared to the 1996 Fiscal year.
Other (expense) income. Other (expense) income increased to ($1.3 million)
in Fiscal 1997 from ($118,000) in Fiscal 1996. Other expense increased
primarily due to losses in joint ventures and the sale of Venture Milling's
assets.
13
Income taxes. The Company recorded a $5.9 million provision for income tax
for Fiscal 1997 for a 36.0% effective tax rate in comparison to a $3.5 million
provision, representing a 36.8% effective tax rate for Fiscal 1996. The
effective tax rates approximate the applicable combined state and federal
statutory tax rates for the respective periods.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. It requires (a) classification of items of other
comprehensive income by their nature in a financial statement and (b) display
of the accumulated balance of other comprehensive income separate from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Company will adopt the provisions of the
statement in Fiscal 1999. The Company anticipates that implementing the
provisions of SFAS 130 will not have a significant impact on the Company's
existing operations.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"), which is effective for periods beginning after
December 15, 1997. The statement need not be applied to interim financial
statements in the initial year of its application. SFAS 131 establishes
standards for reporting information about operating segments in annual
financial statements and requires selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This Statement supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise", but retains the
requirement to report information about major customers. The Company will
adopt the provisions of the statement in Fiscal 1999. The Company anticipates
that implementing the provisions of SFAS 131 will not have a significant
impact on the Company's existing operations.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers Disclosures About Pensions and Other
Postretirement Benefits" ("SFAS 132"), which is effective for fiscal years
beginning after December 15, 1997. SFAS 132 significantly changes current
financial statement disclosure requirements from those that were required
under SFAS 87, "Employers' Accounting for Pensions"; SFAS 88, "Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits"; and SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS 132 does not change the
existing measurement or recognition provisions of FASB Statement Nos. 87,88 or
106. It requires that additional information be disclosed regarding changes in
benefit obligation and fair values of plan assets, standardizes the disclosure
requirements for pensions and other postretirement benefits and presents them
in one footnote, and eliminates certain disclosures that are no longer
considered useful. The Company will adopt the provisions of the statement in
Fiscal 1999. The Company anticipates that implementing the provisions of SFAS
132 will not have a significant impact on the Company's existing operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133), which is effective for fiscal years beginning after June 15, 1999. SFAS
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 will adopt the provisions of the statement in
Fiscal 2000. The Company anticipates that implementing the provisions of SFAS
133 will not have a significant impact on the Company's existing operations.
YEAR 2000 SYSTEM ISSUES
The Year 2000 ("Y2K") issue is the result of computer programs using a two-
digit format, as opposed to four digits, to indicate the year. Some computer
systems will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to disruptions in
operations.
14
The Company is aware of the issues surrounding the Y2K and the problems that
may occur. In 1997 the Company developed a program for Y2K compliance. Since
1997 the Company has converted most of its computer information systems to
enable proper processing of critical management information systems ("MIS")
related to the Y2K issue and beyond. To conform the remaining system to be Y2K
compliant requires a new purchasing application. A new purchasing system has
been selected and implementation is expected to be completed by April 1999.
Critical MIS systems consist of software programs such as the operating
system, spreadsheets, accounting and financial programs. Testing methodology
involved changing the date on the system being tested to be in the year 2000
and then exercising all relevant applications to verify Y2K compliance. The
Company's current estimates indicate that the costs of addressing potential
problems are not expected to have a material impact upon the Company's
financial position, result of operations or cash flows in future periods. To
date, the cost of the Company's Y2K Compliance program (including software
conversion) has been immaterial.
The Company continues to evaluate its non-critical MIS systems and expects
that they will be compliant prior to the year 2000. Non-critical MIS systems
refer to embedded technology such as micro controllers found in computers and
other hardware systems that the Company has identified as non-critical MIS
systems. Non-critical MIS systems are those that would not cause a disruption
in any harvesting or manufacturing application involved in producing product.
Internal systems are not the only ones that may have a material effect on
the Company. External relationships to the Company, such as vendors and
customers may also impact the Company by their inability to deliver goods and
services required by the Company to operate. Customers could impact the
Company by their inability to operate, reducing the sale of product, or their
inability to pay the Company for products purchased. The Company has decided
to address this issue in Fiscal 1999 by identifying major vendors and
customers and sending surveys to discover their level of Y2K compliance. Major
vendors are defined as those that provide critical goods or services to the
Company or those that provide critical components to the Company (such as fuel
suppliers and financial institutions). Major customers are identified as those
customers that are at the greatest risk of being impacted by the Y2K problem
(mainly large domestic and foreign industrial and commercial customers). The
projected completion date of system surveys of external parties is June 30,
1999. There can be no guarantee that the systems of other companies on which
Omega's systems rely will be timely converted or that a failure to convert by
another company or that a conversion that is incompatible with the Company's
systems, would not have a material adverse affect on the Company.
At this point in time, management has not engaged any firm, nor does it plan
to engage any firm, to perform an independent verification and validation of
the Company's Y2K compliance.
At present, the Company does not have a contingency plan in place to
specifically cover the Y2K issues. However, the Company's management continues
to evaluate its systems and expects that all of its systems will be compliant
prior to the year 2000.
SEASONALITY 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 third and fourth quarter of each Fiscal year) due
to increased product availability, but prices during the fishing season tend
to be lower than during the off-season. As a result, the Company's quarterly
operating results have fluctuated in the past and may fluctuate in the future.
In addition, from time to time the Company defers sales of inventory based on
worldwide prices for competing products that affect prices for the Company's
products which may affect comparable period comparisons. Certain quarterly
financial data contained in Note 16 to the Company's Consolidated Financial
Statements included in Item 8 of this Report is incorporated herein by
reference.
15
SIGNIFICANT FACTORS THAT MAY AFFECT FORWARD-LOOKING STATEMENTS
The Company wishes to caution investors that the following significant
factors, and those factors described elsewhere in this Report, other filings
by the Company with the SEC from time to time and press releases issued by the
Company, could affect the Company's actual results causing such results to
differ materially from those expressed in any forward-looking statements made
by or on behalf of the Company:
1. The Company's ability to meet its raw material requirements through
its annual menhaden harvest, which is subject to fluctuation due to natural
conditions over which the Company has no control, such as varying fish
population, adverse weather conditions and disease.
2. The impact on the prices for the Company's products of worldwide
supply and demand relationships over which the Company has no control and
which tend to fluctuate to a significant extent over the course of a year
and from year to year.
3. The impact of a violation by the Company of federal, state and local
laws and regulations relating to menhaden fishing and the protection of the
environment and the health and safety of its employees or of the adoption
of new laws and regulations, or stricter interpretations of existing laws
or regulations that materially adversely affect the Company's business.
4. The impact if the Company cannot harvest menhaden in U.S.
jurisdictional waters if the Company fails to comply with U.S. citizenship
ownership requirements.
5. Risks inherent with the Company's venture into the sale of refined,
non-hydrogenated menhaden oil for consumption in the U.S., including the
unproven market for this product.
6. Fluctuations in the Company's quarterly operating results due to the
seasonality of the Company's business and the Company's deferral of sales
of inventory based on worldwide prices for competing products.
7. The ability of the Company to retain and recruit key officers and
qualified personnel, vessel captains and crew members.
8. Risks associated with the strength of local currencies of the
countries in which its products are sold, changes in social, political and
economic conditions inherent in foreign operations and international trade,
including changes in the law and policies that govern foreign investment
and international trade in such countries, changes in U.S. laws and
regulations relating to foreign investment and trade, changes of tax or
other laws, partial or total expatriation, currency exchange rate
fluctuations and restrictions on currency repatriation, the disruption of
labor, political disturbances, insurrection or war and the effect of
requirements of partial local ownership of operations in certain countries.
9. The unanticipated impact of Year 2000 issues, including the Company's
ability to address Year 2000 compliance and to develop information
technology and management information systems to support strategic goals
while continuing to control costs and expenses and counter-party issues.
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
November 18, 1998
To the Stockholders and Board of Directors,
Omega Protein Corporation:
In our opinion, the accompanying consolidated balance sheet of Omega Protein
Corporation (the "Company") as of September 30, 1998 and 1997 and the related
consolidated statements of operations and shareholders' equity and of cash
flows presents fairly, in all material respects, the financial position of the
Company and its subsidiaries at September 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
17
OMEGA PROTEIN CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, SEPTEMBER 30,
ASSETS 1998 1997
------ ------------- -------------
(IN THOUSANDS)
Current assets:
Cash and cash equivalents............................. $ 49,768 $ 5,504
Receivables, net...................................... 11,903 9,936
Inventories........................................... 40,784 38,448
Prepaid expenses and other current assets............. 351 746
-------- --------
Total current assets................................ 102,806 54,634
-------- --------
Other assets............................................ 5,817 4,917
-------- --------
Property and equipment, net............................. 84,798 40,889
-------- --------
Total assets...................................... $193,421 $100,440
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt.................. $ 1,114 $ 1,034
Accounts payable...................................... 2,012 1,622
Accrued liabilities................................... 18,883 15,423
Amounts due to parent................................. 299 5,159
-------- --------
Total current liabilities........................... 22,308 23,238
-------- --------
Long-term debt.......................................... 11,408 11,294
-------- --------
Deferred income taxes................................... 2,732 1,180
-------- --------
Other liabilities....................................... 375 374
-------- --------
Commitments and contingencies (Note 14)
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: 24,276,812 shares and 19,676,000 shares
issued and outstanding respectively.................. 243 197
Capital in excess of par value........................ 111,722 43,731
Reinvested earnings from October 1, 1990.............. 44,633 20,426
-------- --------
Total stockholders' equity.......................... 156,598 64,354
-------- --------
Total liabilities and stockholders' equity........ $193,421 $100,440
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
18
OMEGA PROTEIN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED SEPTEMBER 30,
---------------------------
1998 1997 1996
-------- -------- -------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Revenues......................................... $133,555 $117,564 $93,609
Cost of sales.................................... 88,870 93,746 78,415
-------- -------- -------
Gross Profit..................................... 44,685 23,818 15,194
Selling, general, and administrative............. 6,567 5,613 4,690
-------- -------- -------
Operating income ................................ 38,118 18,205 10,504
Interest income (expense), net................... (168) (592) (995)
Other income (expense), net...................... (291) (1,328) (118)
-------- -------- -------
Income before income taxes....................... 37,659 16,285 9,391
Provision for income taxes....................... 13,452 5,860 3,463
-------- -------- -------
Net income....................................... $ 24,207 $ 10,425 $ 5,928
======== ======== =======
Earnings per share (basic)....................... $ 1.11 $ 0.53 $ 0.30
======== ======== =======
Average common shares outstanding................ 21,901 19,676 19,676
======== ======== =======
Earnings per share (diluted)..................... $ 1.10 $ 0.53 $ 0.30
======== ======== =======
Average common shares and common share equiva-
lents outstanding............................... 22,021 19,676 19,676
======== ======== =======
The accompanying notes are an integral part of the consolidated financial
statements.
19
OMEGA PROTEIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
----------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
Cash flow provided by (used in) operating
activities:
Net income..................................... $ 24,207 $ 10,425 $ 5,928
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on disposal of assets, net......... (101) 483 42
Depreciation and amortization.................. 6,351 4,868 4,210
Deferred income taxes.......................... 1,552 743 389
Changes in assets and liabilities:
Receivables.................................. (1,967) (836) 3,762
Inventories.................................. (2,336) (9,291) (3,614)
Accounts payable and accrued liabilities..... 3,850 604 4,832
Amounts due to parent........................ (4,860) 2,433 2,726
Other, net................................... (1,180) 624 (2,053)
-------- -------- --------
Total adjustments.......................... 1,309 (372) 10,294
-------- -------- --------
Net cash provided by operating activities.. 25,516 10,053 16,222
-------- -------- --------
Cash flow provided by (used in) investing
activities:
Proceeds from sale of assets, net.............. 1,006 (771) 624
Increase in notes receivable................... -- (334) --
Capital expenditures........................... (21,540) (9,825) (4,673)
Acquisitions of property and equipment......... (28,116) -- --
-------- -------- --------
Net cash (used in) investing activities.... (48,650) (10,930) (4,049)
-------- -------- --------
Cash flow provided by (used in) financing
activities:
Proceeds from issuance of common stock......... 68,037 -- --
Proceeds from borrowings--Bank debt............ 2,644 4,061 11,100
Proceeds from borrowings--Parent............... 28,116 -- --
Repayments on borrowings--Parent............... (28,116) -- --
Payments on revolving line of credit........... -- -- (21,100)
Principal payments of short and long-term debt
obligations................................... (3,283) (579) (581)
-------- -------- --------
Net cash provided by (used in) financing
activities................................ 67,398 3,482 (10,581)
-------- -------- --------
Net increase in cash and cash equivalents........ 44,264 2,605 1,592
Cash and cash equivalents at beginning of year... 5,504 2,899 1,307
-------- -------- --------
Cash and cash equivalents at end of year......... $ 49,768 $ 5,504 $ 2,899
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
20
OMEGA PROTEIN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PREFERRED
STOCK COMMON STOCK CAPITAL IN
------------- ------------- EXCESS OF REINVESTED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS
------ ------ ------ ------ ---------- ----------
(IN THOUSANDS)
Balance at September 30,
1995........................ -- $ -- 19,676 $197 $ 1,831 $ 4,073
Net income................. -- -- -- -- -- 5,928
---- ----- ------ ---- -------- -------
Balance at September 30,
1996........................ -- -- 19,676 197 1,831 10,001
Net income................. -- -- -- -- -- 10,425
Capital contribution from
parent.................... -- -- -- -- 41,900 --
---- ----- ------ ---- -------- -------
Balance at September 30,
1997........................ -- -- 19,676 197 43,731 20,426
Initial public offering of
common stock.............. -- -- 4,600 46 67,991 --
Net income................. -- -- -- -- -- 24,207
---- ----- ------ ---- -------- -------
Balance at September 30,
1998........................ -- $ -- 24,276 $243 $111,722 $44,633
==== ===== ====== ==== ======== =======
The accompanying notes are an integral part of the consolidated financial
statements.
21
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF OPERATIONS AND BASIS OF
PRESENTATION
Business Description
Omega Protein Corporation ("Omega" or the "Company"), produces and markets a
variety of products produced from menhaden (a fish found in commercial
quantities), including regular grade and value added specialty fish meals,
crude and refined fish oils and fish solubles. The Company's fish meal
products are used as nutritional feed ingredients by animal feed manufacturers
and by commercial livestock and poultry farmers. The Company's crude fish oil
is sold primarily to food producers in Europe, and its refined fish oil
products are used in aquaculture feeds and certain industrial applications.
Fish solubles are sold as protein additives for animal feed and as organic
fertilizers.
On January 26, 1998, Marine Genetics Corporation ("Marine Genetics") merged
into Omega, a Nevada corporation wholly owned by Zapata Corporation
("Zapata"), with Omega being the surviving entity. The common control merger
was accounted for at historical cost in a manner similar to that of a pooling
of interests accounting. In connection with the merger, Marine Genetics
outstanding Common Stock was converted into Omega Common Stock at the rate of
one share for 19,676 shares of Omega Common Stock and Omega's pre-merger
outstanding Common Stock was cancelled and treated as treasury stock.
On April 8, 1998, the Company completed an initial public offering of
8,500,000 of its common stock at a gross price of $16.00 per share. On May 7,
1998, the Underwriters exercised their option to acquire 1,275,000 additional
shares at the same gross price. Of the 9,775,000 total shares sold in the
offering, the Company issued and sold 4,600,000 shares, and Zapata sold
5,175,000 shares. Immediately following the offering Zapata owned
approximately 59.7% of the shares of the Company's outstanding Common Stock.
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. The Company accounts for
the results of its operations on a fiscal year basis ending September 30.
Revenue Recognition
The Company recognizes revenue for the sale of its products when title to
its products is transferred to the customer.
Inventories
The Company's fishing season runs from mid-April to the end of October in
the Gulf Coast and from the beginning of May to the end of December in the
Atlantic Coast. Government regulations preclude the Company from fishing
during the off-seasons. During the off-seasons, the Company incurs costs
(i.e., plant and vessel-related labor, utilities, rent and depreciation) that
are directly related to the Company's infrastructure that will be used in the
upcoming fishing season. Costs that are incurred subsequent to a fish catch
are deferred until the next season and are included with inventory. Fishing
product inventories and materials, parts and supplies are stated at the lower
of cost (average cost) or market.
22
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's inventory cost system considers all costs, both variable and
fixed, associated with an annual fish catch and it's processing. The Company's
costing system allocates cost to inventory quantities on a per unit basis as
calculated by a formula that considers total estimated inventoriable costs for
a fishing season (including off-season costs) to total estimated fish catch
and the relative fair market value of the individual products produced. The
Company adjusts the cost of sales, off-season costs and inventory balances at
the end of each quarter based on revised estimates of total inventoriable
costs and fish catch.
Income Taxes
The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax reporting basis of assets and liabilities, and
operating loss and tax credit carryforwards for tax purposes. Prior to the
completion of the Company's public offering in April 1998, the Company was
included in Zapata's consolidated U.S. federal income tax return and its
income tax effects reflected on a separate return basis for financial
reporting purposes.
Property, Equipment and Depreciation
Property and equipment are initially recorded at cost except as adjusted by
the quasi-reorganization as of October 1, 1990. Because of the quasi-
reorganization, the carrying value of the assets was reduced to estimated fair
value.
Depreciation of property and equipment is computed by the straight-line
method at rates expected to amortize the cost of property and equipment, net
of salvage value, over their estimated useful lives. Estimated useful lives of
assets acquired new, determined as of the date of acquisition are as follows:
USEFUL LIVES
(YEARS)
------------
Fishing vessels and fish processing plants................... 15-20
Furniture and fixtures....................................... 3-10
Replacements and major improvements are capitalized; maintenance and repairs
are charged to expense as incurred. Upon sale or retirement, the costs and
related accumulated depreciation are eliminated from the accounts. Any
resulting gains or losses are included in the statement of operations. The
Company periodically evaluates its long-lived assets for impairment if events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
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
managements expectations.
At September 30, 1998 and 1997, the Company had cash deposits concentrated
primarily in two major banks. In addition, the Company had Certificates of
Deposit and commercial quality grade A2P2 rated or better securities paper
with companies and financial institutions. As a result of the foregoing, the
Company believes that credit risk in such investments is minimal.
23
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings per Share
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"), which established
standards for computing and presenting earnings per share. The Company adopted
the statement on October 1, 1997. Basic earnings per share was computed by
dividing income by the weighted average number of common shares outstanding.
Diluted earnings per share was 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 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. It requires (a) classification of items of other
comprehensive income by their nature in a financial statement and (b) display
of the accumulated balance of other comprehensive income separate from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Company will adopt the provisions of the
statement in Fiscal 1999. The Company anticipates that implementing the
provisions of SFAS 130 will not have a significant impact on the Company's
existing operations.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"), which is effective for periods beginning after
December 15, 1997. The statement need not be applied to interim financial
statements in the initial year of its application. SFAS 131 establishes
standards for reporting information about operating segments in annual
financial statements and requires selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This Statement supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise", but retains the
requirement to report information about major customers. The Company will
adopt the provisions of the statement in Fiscal 1999.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers Disclosures About Pensions and Other
Postretirement Benefits" ("SFAS 132"), which is effective for fiscal years
beginning after December 15, 1997. SFAS 132 significantly changes current
financial statement disclosure requirements from those that were required
under SFAS 87, "Employers' Accounting for Pensions"; SFAS 88, "Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits"; and SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS 132 does not change the
existing measurement or recognition provisions of FASB Statement Nos. 87,88 or
106. It requires that additional information be disclosed regarding changes in
benefit obligation and fair values of plan assets, standardizes the disclosure
requirements for pensions and other postretirement benefits and presents them
in one footnote, and eliminates certain disclosures that are no longer
considered useful. The Company will adopt the provisions of the statement in
Fiscal 1999.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133), which is effective for fiscal years beginning after June 15, 1999. SFAS
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 will adopt the provisions of the statement in
Fiscal 2000. The Company anticipates that implementing the provisions of SFAS
133 will not have a significant impact on the Company's existing operations.
24
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Quasi-Reorganization
In connection with the comprehensive restructuring accomplished in 1991, the
Company, in conjunction with Zapata, implemented, for accounting purposes, a
"quasi-reorganization," an elective accounting procedure that permits a
company that has emerged from previous financial difficulty to restate its
accounts and establish a fresh start in an accounting sense. After
implementation of the accounting quasi-reorganization, the Company's assets
and liabilities were revalued and its deficit in reinvested earnings was
charged to capital in excess of par value. The Company effected the accounting
quasi-reorganization as of October 1, 1990.
Reclassifications
During 1998, reclassifications of prior year information have been made to
conform with the current year presentation. These reclassifications had no
effect on net income or stockholders' equity reported for prior periods.
NOTE 2. ASSET ACQUISITIONS AND DIVESTITURES
On November 3, 1997, the Company acquired the fishing and processing assets
of American Protein, Inc. ("American Protein") which operated ten fishing
vessels and a menhaden processing plant in the Chesapeake Bay area, for $14.5
million in cash (the "American Protein Acquisition"). American Protein's
facilities were located in close proximity to the Company's Reedville,
Virginia facility. Shortly after completing this transaction, the Company
closed the American Protein processing plant and began integrating its assets
into the Company's existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ("Gulf Protein"). which included six fishing
vessels, five spotter planes, and the processing equipment located at the Gulf
Protein plant near Morgan City, Louisiana for $13.6 million in cash and the
assumption of $883,000 in liabilities (the "Gulf Protein Acquisition"). The
Company accounted for this acquisition as a purchase; thus, the results of
operations began being included in the Company's Statement of Operations
beginning November 25, 1997. In connection with the Gulf Protein Acquisition,
the Company also entered a five-year lease for the Gulf Protein plant at a
$220,000 annual rental rate. The Company is currently upgrading this plant's
processing capabilities so that it can manufacture specialty meals.
These acquisitions were financed by a $28.1 million intercompany loan from
Zapata. The interest rate on this loan was 8.5% and was repayable in quarterly
installments beginning May 1, 1998. The loan, which was to mature on August 1,
2002, was prepaid in May 1998 with a portion of the proceeds from the
Company's initial public offering described in Note 1.
On September 16, 1997, the Company's wholly owned subsidiary, Venture
Milling Company, a Delaware corporation ("Venture Milling"), sold
substantially all of its assets to an unrelated third party (the "Venture
Milling Disposition"). Venture Milling was primarily in the business of
blending different animal protein products (i.e. fish meal, blood meal, and
feather meal for sale to producers of feed for broilers and other animals with
low nutritional requirements). The Company's net income for the 1997 and 1996
fiscal years was not materially impacted by activity related to Venture
Milling. The Venture Milling Disposition resulted in a $531,000 pre-tax loss
to the Company in the fourth quarter of fiscal 1997 and did not have a
material impact on the Company's balance sheet since Venture Milling leased
most of the assets employed in its operations.
25
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable as of September 30, 1998 and 1997 are summarized as
follows:
1998 1997
------- ------
(IN THOUSANDS)
Trade.................................................... $ 9,503 $8,821
Insurance................................................ 522 795
Employee................................................. 115 95
Income tax............................................... 1,507 --
Other.................................................... 448 401
------- ------
12,095 10,112
Less allowance for doubtful accounts..................... (192) (176)
------- ------
$11,903 $9,936
======= ======
NOTE 4. INVENTORY
Inventory as of September 30, 1998 and 1997 is summarized as follows:
1998 1997
------- -------
(IN THOUSANDS)
Fish meal............................................... $19,478 $19,048
Fish oil................................................ 12,269 12,746
Fish solubles........................................... 1,144 983
Off season cost......................................... 3,329 2,420
Materials & supplies.................................... 4,620 3,353
Other................................................... 46 --
Less oil inventory reserve.............................. (102) (102)
------- -------
Total inventory......................................... $40,784 $38,448
======= =======
NOTE 5. OTHER ASSETS:
Other assets as of September 30, 1998 and 1997 are summarized as follows:
1998 1997
------ ------
(IN
THOUSANDS)
Fishing nets............................................... $1,303 $1,309
Prepaid pension cost....................................... 2,927 2,588
Title XI loan origination fee.............................. 422 359
Note receivable............................................ 387 --
Property held for resale................................... -- 304
Deposits................................................... 116 116
Investments in unconsolidated affiliates................... 78 188
Miscellaneous.............................................. 584 53
------ ------
$5,817 $4,917
====== ======
Amortization expense for fishing nets amounted to $879,000, $965,000 and $1.0
million for the years ended September 30, 1998, 1997 and 1996, respectively.
26
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 1998 and 1997 are summarized as
follows:
1998 1997
-------- --------
(IN THOUSANDS)
Land.................................................. $ 5,349 $ 3,967
Plant assets.......................................... 52,077 38,310
Fishing vessels....................................... 59,088 30,101
Furniture and fixtures................................ 1,445 1,692
Other................................................. 7,769 2,304
-------- --------
125,728 76,374
Less accumulated depreciation and impairment.......... (40,930) (35,485)
-------- --------
$ 84,798 $ 40,889
======== ========
Depreciation expense for the years ended September 30, 1998, 1997 and 1996
was $5.5 million, $3.6 million and $3.2 million, respectively.
NOTE 7. NOTES PAYABLE AND LONG-TERM DEBT
At September 30, 1998 and 1997, the Company's long-term debt consisted of
the following:
1998 1997
------- -------
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 2011, interest from
6.63% to 8.25%............................................. $11,152 $ 8,678
Amounts due in installments through 2014, interest at
Eurodollar rates plus .45% ; 6.14% and 6.17% at September
30, 1998 and 1997, respectively............................ 1,270 1,350
Term note due 2002, interest at prime or Eurodollar rates plus
1.75%; 8.5% at September 30, 1997, collateralized by certain
assets of the Company........................................ -- 2,175
Other debt at 4% at September 30, 1998 and 1997............... 100 125
------- -------
Total debt.................................................... 12,522 12,328
Less current maturities................................... 1,114 1,034
------- -------
Long-term debt................................................ $11,408 $11,294
======= =======
At September 30, 1998 and 1997, the estimated fair value of debt obligations
approximated book value.
In 1995, the Company entered into a loan agreement with Internationale
Nederlanden (U.S.) Capital Corporation ("ING Loan Agreement"). The ING Loan
Agreement provided the Company with a $15 million revolving credit facility
that was due June 30, 1997. The ING Loan Agreement was terminated in Fiscal
1997.
On May 12, 1998, the Company closed on its Fiscal 1998 Title XI application
and received $2.6 million of additional Title XI borrowings for qualified
Title XI projects. The Company is currently authorized to receive up
27
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to $20.6 million in loans under the Title XI program. To date the Company has
used $15.0 million of the authorized Title XI funds. At September 30, 1998,
the Company was in compliance with all restrictive covenants contained in the
Title XI borrowing agreements. Under the most restrictive of these covenants,
the Company was required to maintain a current ratio of at least 1.25:1 and
maintain a debt to equity ratio of not more than 2:1. Covenants also limit
capital expenditures and investments.
On August 11, 1998 the Company entered into a two year $20.0 million
revolving credit agreement with SunTrust Bank, South Florida, N.A.(the "Credit
Facility") fulfilling the commitment letter dated December 30, 1997. Under the
Credit Facility the Company may make borrowings in a principal amount not to
exceed $20.0 million at any time. Borrowings under this facility may be used
for working capital and capital expenditures. Interest accrues on borrowings
that will be outstanding under the Credit Facility at the Company's election,
either (i) the bank's prime rate less 75 basis points, or (ii) LIBOR plus a
margin based on the Company's financial performance. The revolving credit
agreement requires a per annum commitment fee of one-eighth of a percent
(0.125%) on the average daily unused portion of the commitment of the Lender.
The Credit Facility is collateralized by all of the Company's trade
receivables, inventory and specific computer equipment. The Company and its
subsidiaries are required to comply with certain financial covenants,
including maintenance of a minimum tangible net worth, debt to tangible net
worth ratio, funded debt to cash flow ratio and fixed charges ratio, and
certain other covenants. As of September 30, 1998, the Company had no
borrowings outstanding under the Credit Facility
Annual Maturities
The annual maturities of long-term debt for the five years ending September
30, 2003 are as follows (in thousands):
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
$1,114 $765 $813 $863 $918
NOTE 8. CASH FLOW AND EARNINGS PER SHARE INFORMATION
For purposes of the statement of cash flows, all highly liquid investments
with an original maturity of three months or less are considered to be cash
equivalents.
Net cash provided by operating activities reflects cash payments of interest
and income taxes.
1998 1997 1996
------- ------ ----
(IN THOUSANDS)
Cash paid during the fiscal year for:
Interest........................................... $ 883 $ 560 $950
Income tax......................................... 17,803 2,851 365
During fiscal 1997, the Company completed the Venture Milling Disposition
for cash proceeds of $180,000. Cash of $1,128,000 was included in the net
assets acquired by the third party purchaser. Additionally during Fiscal 1997,
the Company sold various other assets for cash proceeds of $177,000. The
following summarizes these transactions:
Cash received by the Company for sale of assets............ $ 177,000
Cash received by the Company for the sale of various assets
of Venture................................................ 180,000
Cash included with Venture's net assets sold............... (1,128,000)
-----------
Proceeds from the sale of assets, net...................... $ ( 771,000)
===========
28
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations (in thousands except share
and per share data).
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
1998 1997 1996
-------------------------------- -------------------------------- --------------------------------
PER- PER- PER-
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Net Income .......... $24,207 -- $10,425 -- $5,928 --
------- ------ ------- ------ ------ ------
Basic EPS
Income available to
common
stockholders....... 24,207 21,901 $1.11 10,425 19,676 $.53 5,928 19,676 $.30
===== ==== ====
Effect of Dilutive
Stock option
grants............. -- 120 -- -- -- --
------- ------ ------- ------ ------ ------
Diluted EPS
Income available to
common stockholders
plus assumed
conversions........ $24,207 22,021 $1.10 $10,425 19,676 $.53 $5,928 19,676 $.30
======= ====== ===== ======= ====== ==== ====== ====== ====
NOTE 9. INCOME TAXES
The Company's provision for income tax expense consisted of the following:
FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------
1998 1997 1996
------- ------ ------
(IN THOUSANDS)
Current:
State................................................... $ 1,080 $ 489 $ 348
U.S..................................................... 10,820 4,628 2,726
Deferred:
State................................................... 50 -- --
U.S..................................................... 1,502 743 389
------- ------ ------
$13,452 $5,860 $3,463
======= ====== ======
As of September 30, 1998, for federal income tax purposes, the Company has
approximately $588,000 of investment tax credit carryforwards expiring in 1999
through 2001, $1,033,000 in net operating losses expiring in 2006-2012, and
approximately $194,000 in alternative minimum tax credit carryforward.
The following table reconciles the income tax provisions computed using the
U.S. statutory rate of 35% to the provisions reflected in the financial
statements.
FOR THE YEAR ENDED
SEPTEMBER 30,
-----------------------
1998 1997 1996
------- ------ ------
(IN THOUSANDS)
Taxes at statutory rate.......................... $13,181 $5,700 $3,193
Foreign sales corporation exempt income.......... (906) (252) --
State taxes, net of federal benefit.............. 735 318 230
Other............................................ 442 94 40
------- ------ ------
$13,452 $5,860 $3,463
======= ====== ======
29
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities as of September
30, 1998 and 1997 are as follows:
1998 1997
------- -------
(IN THOUSANDS)
Deferred tax assets:
Asset write-downs and accruals not yet deductible.......... $ 1,148 $ 1,221
Investment tax credit carryforwards........................ 588 610
Alternative minimum tax credit carryforwards............... 194 194
Equity in loss of unconsolidated affiliates................ 306 146
Net operating loss carryforward............................ 362 351
Other...................................................... 91 16
------- -------
Total deferred tax assets................................ $ 2,689 $ 2,538
------- -------
Deferred tax liabilities:
Property and equipment..................................... (4,020) (2,738)
Pension and other retirement benefits...................... (1,024) (880)
State income tax........................................... (150) (100)
Other...................................................... (227) --
------- -------
Total deferred tax liabilities........................... $(5,421) $(3,718)
------- -------
Net deferred tax liability............................... $(2,732) $(1,180)
======= =======
NOTE 10. ACCRUED LIABILITIES
Accrued liabilities as of September 30, 1998 and 1997 are summarized as
follows:
1998 1997
------- -------
(IN THOUSANDS)
Salary and benefits...................................... $11,587 $ 8,257
Insurance ............................................... 3,102 3,618
Taxes, other than income tax............................. 1,432 841
Trade creditors.......................................... 1,375 2,707
Other.................................................... 1,387 --
------- -------
$18,883 $15,423
======= =======
NOTE 11. EMPLOYEE'S PROFIT SHARING PLAN
All qualified employees of the Company are covered under the Omega Profit -
Sharing Plan. The Company contributes matching and profit-sharing
contributions to the plan based on employee contributions and compensation.
Contributions to the plan totaled approximately $502,000, $488,000 and
$456,000 in the 1998, 1997 and 1996 Fiscal years, respectively.
NOTE 12. PENSION AND STOCK OPTION PLANS
Pension Plan
The Company has a pension plan covering substantially all U.S. employees.
Plan benefits are generally based on employees' years of service and
compensation level. The plan has adopted an excess benefit formula integrated
with covered compensation. Participants are 100% vested in the accrued benefit
after five years of service.
30
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net pension cost (credit) for 1998, 1997 and 1996 included the following
components:
1998 1997 1996
------- ------- ------
(IN THOUSANDS)
Service cost-benefits earned during the year.. $ 540 $ 612 $ 554
Interest cost on projected benefit
obligations.................................. 1,338 1,327 1,249
Actual gain on plan assets.................... (1,897) (1,707) (1,598)
Amortization of transition asset and other
deferrals.................................... (320) (191) (303)
------- ------- ------
Net pension cost (credit)................... $ (339) $ 41 $ (98)
======= ======= ======
The Company's funding policy is to make contributions as required by
applicable regulations. No contributions to the plan have been required since
1984. The plan's funded status and amounts recognized in the Company's balance
sheet at September 30, 1998 and 1997, are presented below:
1998 1997
------- -------
(IN THOUSANDS)
Fair value of plan assets................................... $20,435 $21,707
------- -------
Actuarial present value of benefit obligations
Vested benefits........................................... 17,570 16,252
Nonvested benefits........................................ 1,097 339
------- -------
Accumulated benefit obligation............................ 18,667 16,591
Additional benefits based on projected salary increases... 2,330 1,881
------- -------
Projected benefit obligations............................. 20,997 18,472
------- -------
Excess (deficit) of plan assets over projected benefit
obligations................................................ (562) 3,235
Unrecognized transition asset............................... (1,386) (1,732)
Unrecognized prior service cost............................. 34 60
Unrecognized net loss....................................... 4,841 1,025
------- -------
Prepaid pension cost........................................ $ 2,927 $ 2,588
======= =======
The unrecognized transition asset at October 1, 1987, was $5.2 million,
which is being amortized over 15 years. For 1998 and 1997, the actuarial
present value of the projected benefit obligation was based on a 4.75%
weighted-average annual increase in salary levels and a 6.75% and 7.5%
discount rate, respectively. Pension plan assets are invested in cash, common
and preferred stocks, short term investments and insurance contracts. The
projected long-term rate of return on plan assets was 9.0% in 1998 and 1997.
The unrecognized net loss of $4.8 million at September 30, 1998 is expected to
be reduced by future returns on plan assets and through decreases in future
net pension credits.
Stock Option Plans
On January 26, 1998, the 1998 Long-Term Incentive Plan of the Company (the
"1998 Incentive Plan") was approved by the Company's Board. The 1998 Incentive
Plan provides for the grant of any or all of the following types of awards:
stock options, stock appreciation rights, stock awards and cash awards. These
options generally vest ratably over three years from the date of grant and
expire ten years from the date of grant.
On January 26, 1998, the Non-Management Director Stock Option Plan (the
"Director Plan") was approved by the Board. The Directors Plan provides that
the initial Chairman of the Board be granted options to purchase 568,200
shares of the Common Stock and each other initial non-employee director of the
Company
31
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
will be granted options to purchase 14,200 shares of Common Stock at a price
determined by the Board. The Board granted 582,400 stock options under the
Directors Plan at $12.75 per share on January 26, 1998, of which 568,200 were
granted to the Chairman of the Board and 14,200 were granted to the other
Board member. On May 15, 1998, two new Directors were appointed to the Board
and each were granted 14,200 options at an exercise price of $16.06. These
options generally vest ratably over the three years from the date of grant and
expire ten years from the date of grant.
The Company applies APB Opinion 25 and related interpretations in accounting
for the Plan. In 1995, the FASB issued FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") which, if fully adopted by the Company,
would change the methods the Company applies in recognizing the cost of the
Plans. Adoption of the cost recognition provisions of SFAS 123 is optional and
the Company has decided not to elect these provisions of SFAS 123. However,
pro forma disclosures as if the Company adopted the cost recognition
provisions of SFAS 123 in 1995 are required by SFAS 123 and are presented
below.
Under the Plans, the Company is authorized to issue shares of Common Stock
pursuant to "Awards" granted in various forms, including incentive stock
options (intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended), non-qualified stock options, and other similar stock-based
Awards. The Company granted stock options in 1998 under the Plans in the form
of non-qualified stock options.
The Company granted stock options in 1998 to employees. The stock options
granted in 1998 have contractual terms of 10 years. All options granted to the
employees have an exercise price approximately equal to the fair market value
of the stock at grant date. The options granted in 1998 vest one-third each
year, beginning on the first anniversary of the date of grant.
In accordance with APB 25, the Company has not recognized any compensation
cost for these stock options granted in 1998.
A summary of the status of the Company's stock options granted to employees
and directors as of September 30, 1998 and the changes during the year is
presented below. Prior to January 1998, there was no stock option plan for the
Company's employees or directors.
1998
-------------------
# SHARES WEIGHTED
OF AVERAGE
UNDERLYING EXERCISE
OPTIONS PRICES
---------- --------
Outstanding at beginning of the year........................ 0 $0
Granted..................................................... 2,445,660 12.90
Exercised................................................... 0 0
Forfeited................................................... 0 0
Expired..................................................... 0 0
Outstanding at end of year.................................. 2,445,660 12.90
Exercisable at end of year.................................. 204,000 12.75
Weighted average fair value of all options granted.......... $7.49
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
ASSUMPTIONS 1998
----------- ------
Expected Term..................................................... 5.00
Expected Volatility............................................... 32.623%
Expected Dividend Yield........................................... 0.00%
Risk-Free Interest Rate........................................... 5.52%
32
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Had the compensation cost for the Company's stock-based compensation plans
been determined consistent with SFAS 123, the Company's net income and net
income per common share for Fiscal 1998 would approximate the pro forma
amounts below:
SEPTEMBER 30,
1998
----------------
AS PRO
REPORTED FORMA
-------- -------
SFAS 123 Charge............................................... $ 0 $ 5,135
Net income.................................................... 24,207 $19,072
Net income per Common Share................................... $ 1.11 $ 0.87
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and the Company anticipates making awards in the future under its stock-based
compensation plans.
The following table summarizes information about employee and director stock
options outstanding at September 30, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER EXERCISE REMAINING NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING PRICE CONTR. LIFE EXERCISABLE PRICE
- --------------- ----------- -------- ----------- ----------- --------
$12.38 to $17.25 2,445,660 $12.90 9.36 204,000 $12.75
NOTE 13. CERTAIN TRANSACTIONS AND ARRANGEMENTS BETWEEN THE COMPANY AND ZAPATA
Certain administrative services, including treasury and taxation services,
were provided to the Company by Zapata and billed at their approximate cost.
During Fiscal 1997 and 1996, fees for these services totaled $30,000 and
$110,000, respectively. The Company provided to Zapata payroll and certain
administrative services billed at their approximate cost. During Fiscal 1998,
1997 and 1996, fees for these services totaled $156,000, $30,000 and $30,000,
respectively. The cost of such services were based on the estimated percentage
of time that employees spend working on the other party's matters as a percent
of total time worked. The Company's management deemed this allocation method
to be reasonable.
Upon completion of the Company's initial public offering, the Company and
Zapata entered into certain agreements that included the Separation, Sublease,
Registration Rights, Tax Indemnity and Administrative Services Agreements. The
Separation Agreement required the Company to repay $33.3 million of
indebtedness and current payables owed by the company to Zapata
contemporaneously with the consummation of the Company's initial public
offering and prohibits Zapata from competing with the Company for a period of
five years. The Sublease Agreement provides for the Company to lease its
principal corporate offices in Houston, Texas from Zapata and provides the
Company to utilize certain shared office equipment for no additional charge.
The Registration Rights Agreement sets forth the rights and responsibilities
of each party concerning certain registration filings and provides for the
sharing of fees and expenses related to such filings. The Tax Indemnity
Agreement requires the Company to be responsible for federal, state and local
income taxes from its operations and the Administrative Services Agreement
allows the Company to provide certain administrative services to Zapata at the
Company's estimated cost.
During 1997, Zapata forgave $41.9 million of intercompany debt and the
Company recorded the amount as contributed capital.
33
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following represents intercompany activity for the three year period
ended September 30, 1998:
1998 1997 1996
------- -------- -------
(IN THOUSANDS)
Beginning balance due Zapata...................... $ 5,159 $ 44,626 $41,900
Income taxes payable to Zapata.................... 7,261 5,860 3,463
Administrative services provided by Zapata to the
Company........................................... -- 30 110
Administrative services provided by the Company to
Zapata............................................ (156) (30) (30)
Loans from Zapata to the Company.................. 28,116 -- --
Payments to Zapata by the Company................. (40,081) (3,427) (817)
Capital contribution by Zapata to the Company..... -- (41,900) --
------- -------- -------
Ending balance due Zapata......................... $ 299 $ 5,159 $44,626
======= ======== =======
NOTE 14. COMMITMENTS AND CONTINGENCIES
Operating Lease Payable
Future minimum payments under non-cancelable operating lease obligations
aggregate $2,013,000, and for the five years ending September 30, 2003 are (in
thousands):
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
$638 $632 $377 $307 $59
Rental expense for operating leases was $606,000, $754,000 and $406,000 in
1998, 1997 and 1996, respectively.
Litigation
The Company is defending various claims and litigation arising from its
operations. In the opinion of management, uninsured losses, if any, resulting
from these matters will not have a material adverse effect on the Company's
results of operations, cash flows or financial position.
Environmental Matters
The Company is subject to various possible claims and lawsuits regarding
environmental matters. Management believes that costs, if any, related to
these matters will not have a material adverse effect on the results of
operations, cash flows or financial position of the Company.
NOTE 15. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates within one industry segment, menhaden fishing for the
production and sale of fish meal, fish solubles and fish oil. Export sales of
fish oil and fish meal were approximately $55.4 million, $21.5 million and
$20.9 million in Fiscal 1998, 1997 and 1996, respectively. Such sales were
made primarily to
34
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
European markets. In 1996 and 1997, no sales to any one customer exceeded 10%
of consolidated sales. In 1998, sales to one customer were approximately $17.0
million.
The following table shows the geographical distribution of revenues based on
location of customers:
1998 1997 1996
---------------- ---------------- ----------------
REVENUES PERCENT REVENUES PERCENT REVENUES PERCENT
-------- ------- -------- ------- -------- -------
U.S.......................... $ 78,106 58.5% $ 96,071 81.7% $72,711 77.7%
Europe....................... 29,101 21.8 7,274 6.2 14,578 15.6
Canada....................... 8,729 6.5 6,381 5.4 1,896 2.0
Mexico....................... 4,214 3.2 3,223 2.7 1,246 1.3
Other........................ 13,405 10.0 4,615 4.0 3,178 3.4
-------- ----- -------- ----- ------- -----
Total........................ $133,555 100.0% $117,564 100.0% $93,609 100.0%
======== ===== ======== ===== ======= =====
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
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 third and fourth quarter of each Fiscal year) due
to increased product availability, but prices during the fishing season tend
to be lower than during the off-season. As a result, the Company's quarterly
operating results have fluctuated in the past and may fluctuate in the future.
In addition, from time to time the Company defers sales of inventory based on
worldwide prices for competing products that affect prices for the Company's
products which may affect comparable period comparisons.
The following table presents certain unaudited operating results for each of
the Company's preceding eight quarters. The results of operations for Venture
Milling are included through September 16, 1997, the date of its disposition.
The Company believes that the following information includes all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for a fair presentation, in accordance with generally accepted
accounting principles. The operating results for any interim period are not
necessarily indicative of results for any other period.
QUARTER ENDED
-------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997 1997 1997 1998 1998 1998
------------ --------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
Revenues................ $25,623 $22,964 $31,025 $37,952 $29,503 $30,041 $31,488 $42,523
Gross profit............ 4,817 4,708 8,192 6,101 10,229 12,581 12,271 9,604
Operating income........ 3,792 3,503 6,451 4,459 9,075 11,134 10,362 7,547
Net income.............. 2,225 2,185 3,713 2,302 5,312 6,574 6,669 5,652
Earnings per share--
Basic.................. 0.11 0.11 0.19 0.12 0.27 0.33 0.28 0.23
Diluted................ 0.11 0.11 0.19 0.12 0.27 0.33 0.27 0.23
35
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth certain unaudited operations data as a
percentage of revenues for each of the Company's preceding eight quarters:
QUARTER ENDED
-------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997 1997 1997 1998 1998 1998
------------ --------- -------- ------------- ------------ --------- -------- -------------
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............ 18.8 20.5 26.4 16.1 34.7 41.9 39.0 22.6
Operating income........ 14.8 15.3 20.8 11.7 30.8 37.1 32.9 17.7
Net income... 8.7 9.5 12.0 6.1 18.0 21.9 21.2 13.3
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
36
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G on Form 10-K, the information called for
by Item 10 of Part III of Form 10-K is incorporated by reference to the
information set forth in the Company' definitive proxy statement relating to
its 1999 Annual Meeting of Stockholders (the "1999 Proxy Statement") to be
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in response to Items 401 and 405 of Regulation
S-K under the Securities Act of 1933, as amended, and the Exchange Act
("Regulation S-K"). Reference is also made to the information appearing in
Item 1 of Part I of this Annual Report on Form 10-K under the caption
"Business and Properties--Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G of Form 10-K, the information called for
by Item 11 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 1999 Proxy Statement in response to Item 402 of
Regulation S-K, excluding the material concerning the report on executive
compensation and the performance graph specified by paragraphs (k) and (l) of
such Item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G of Form 10-K, the information called for
by Item 12 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 1999 Proxy Statement in response to Item 403 of
Regulation S-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G of Form 10-K, the information called for
by Item 13 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 1999 Proxy Statement in response to Item 404 of
Regulation S-K.
37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) LIST OF DOCUMENTS FILED.
PAGE
----
(1) Consolidated financial statements, Omega Protein Corporation and
subsidiary companies
Report of PricewaterhouseCoopers LLP, Independent Accountants........ 14
Consolidated balance sheet September 30, 1998 and 1997 15
Consolidated statement of operations for the years Ended September
30, 1998, 1997 and 1996............................................. 16
Consolidated statement of cash flows for the years Ended September
30, 1998, 1997 and 1996............................................. 17
Consolidated statement of stockholders' equity for the Years ended
September 30, 1998, 1997 and 1996................................... 18
Notes to consolidated financial statements........................... 19
(2) Exhibits
2.1* --Agreement and Plan of Merger between Marine Genetics, Inc., a
Delaware corporation and Omega Protein Corporation, a Nevada
corporation (Exhibit 2.1 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
3.1* --Articles of Incorporation (Exhibit 3.1 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
3.2* --By-Laws (Exhibit 3.2 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
4.1* --Form of Common Stock Certificate (Citizen) (Exhibit 4.1 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
4.2* --Form of Common Stock Certificate (Non-Citizen) (Exhibit 4.2 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.1 --Employment Agreement of Joseph L. von Rosenberg dated April 12,
1998+ (Exhibit 10.1 to Omega Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)
10.2 --Employment Agreement Robert W. Stockton dated April 12,
1998+ (Exhibit 10.2 to Omega Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)
10.3 --Employment Agreement Kelsey D. Short Jr. dated April 12,
1998+ (Exhibit 10.3 to Omega Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)
10.4 --Employment Agreement Clyde R. Gilbert dated April 12, 1998+ (Exhibit
10.4 to Omega Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998)
10.5 --Employment Agreement Eric T. Furey dated April 12, 1998+ (Exhibit
10.5 to Omega Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998)
10.6 --Separation Agreement with Zapata Corporation dated April 12, 1998
(Exhibit 10.6 to Omega Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998)+
10.7 --Tax Indemnity Agreement with Zapata Corporation dated April 12, 1998
(Exhibit 10.7 to Omega Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998)+
10.8 --Registration Rights Agreement with Zapata Corporation dated April 12,
1998 (Exhibit 10.8 to Omega Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)+
10.9 --Sublease Agreement with Zapata Corporation dated April 12, 1998
(Exhibit 10.9 to Omega Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998)+
10.10 --Administrative Services Agreement with Zapata Corporation dated April
12, 1998 (Exhibit 10.10 to Omega Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)+
10.11* --Lease Agreement dated April 1985 with General Jackson Partnership
(Exhibit 10.11 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
10.12* --Lease dated July 1, 1992 with Ardoin Limited Partnership (Exhibit
10.12 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])
38
10.13* --Lease Agreement dated November 25, 1997 with O.W. Burton Jr.,
individually and as trustee of the Trust of Anna Burton (Exhibit 10.13
to Omega Registration Statement on Form S-1 [Registration No. 333-
44967])
10.14* --Lease Agreement dated November 16, 1984 with Andre Cessac (Exhibit
10.14 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])
10.15* --Commercial Lease Agreement dated January 1, 1971 with Purvis Theall
and Ethlyn Cessac (Exhibit 10.15 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.16* --Lease Agreement dated January 4, 1994 with City of Abbeville,
Louisiana (Exhibit 10.16 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
10.17* --Loan Agreement dated August 29, 1997 with Hibernia National Bank,
Lender and Zapata Protein, Inc., Guarantor (Exhibit 10.17 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.18* --Security Agreement dated August 29, 1997 in favor of Hibernia
National Bank (Exhibit 10.18 to Omega Registration Statement on Form
S-1 [Registration No. 333-44967])
10.19* --Guarantee Agreement dated August 29, 1997 in favor of Hibernia
National Bank (Exhibit 10.19 to Omega Registration Statement on Form
S-1 [Registration No. 333-44967])
10.20* --United States Guaranteed Promissory Note dated March 31, 1993 in
favor of Bear, Stearns Securities Corporation (Exhibit 10.20 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.21* --Amendment No. 1 to Promissory Note dated March 31, 1993 to the United
States of America pursuant to the provisions of Title XI of the Marine
Act of 1936 in favor of Bear, Stearns Securities Corporation (Exhibit
10.21 to Omega Registration Statement on Form S-1 [Registration
No. 333-44967])
10.22* --Amendment No. 1 to First Preferred Ship Mortgage dated March 31, 1993
to the United States of America (Exhibit 10.22 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.23* --Supplement No. 5 to First Preferred Fleet Mortgage dated March 31,
1993 in favor of the Chemical Bank, as Trustee (Exhibit 10.23 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.24* --Amendment No. 1 to Guaranty Deed of Trust dated March 31, 1993 for
the benefit of the United States of America (Exhibit 10.24 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.25* --Supplement No. 2 to Security Agreement dated March 31, 1993 in favor
of the United States of America (Exhibit 10.25 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.26* --Indemnity Agreement Regarding Hazardous Materials dated March 31,
1993 in favor of the United States of America (Exhibit 10.26 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.27* --United States Guaranteed Promissory Note dated September 27, 1994 in
favor of Sun Bank of Tampa Bay (Exhibit 10.27 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.28* --Promissory Note to the United States of America dated September 27,
1994 pursuant to the provisions of Title XI of the Marine Act of 1936
in favor of Sun Bank of Tampa Bay (Exhibit 10.28 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.29* --First Preferred Ship Mortgage dated September 27, 1994 to the United
States of America (Exhibit 10.29 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.30* --Collateral Mortgage and Collateral Assignment of Lease dated
September 27, 1994 in favor of the United States of America (Exhibit
10.30 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])
10.31* --Collateral Mortgage Note dated September 27, 1994 in favor of the
United States of America (Exhibit 10.31 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.32* --Collateral Pledge Agreement dated September 27, 1994 in favor of the
United States of America (Exhibit 10.32 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.33* --Guaranty Agreement dated September 27, 1994 in favor of the United
States of America (Exhibit 10.33 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
39
10.34* --Title XI Financial Agreement dated September 27, 1994 with the United
States of America (Exhibit 10.34 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.35* --Security Agreement dated September 27, 1994 in favor of the United
States of America (Exhibit 10.35 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.36* --United States Guaranteed Promissory Note dated October 30, 1996 in
favor of Coastal Securities (Exhibit 10.36 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.37* --Promissory Note dated October 30, 1996 to the United States of
America pursuant to the provisions of Title XI of the Marine Act of
1936 in favor of Coastal Securities (Exhibit 10.37 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.38* --Guaranty Agreement dated October 30, 1996 in favor of the United
States of America (Exhibit 10.38 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.39* --Title XI Financial Agreement dated October 30, 1996 with the United
States of America (Exhibit 10.39 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.40* --Certification and Indemnification Agreement Regarding Environmental
Matters dated October 30, 1996 in favor of the United States of
America (Exhibit 10.40 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
10.41* --Deed of Trust dated October 30, 1996 for the benefit of the United
States of America (Exhibit 10.41 to Omega Registration Statement on
Form S-1 [Registration No. 333-44967])
10.42* --1998 Long-Term Incentive Plan (Exhibit 10.42 to Omega Registration
Statement on Form S-1 [Registration No. 333-44967])
10.43* --Non-Management Director Stock Options Plan (Exhibit 10.43 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.44* --Asset Purchase Agreement dated as of September 16, 1997, among Zapata
Protein, Inc., Venture Milling Company and Perdue Farms Incorporated
(Exhibit 10.44 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
10.45* --Asset Purchase Agreement dated as of November 3, 1997 among Protein
(USA) Company, American Proteins, Inc. and Chesapeake Bay Fishing Co.,
L.C. (Exhibit 10.45 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
10.46* --Asset Purchase Agreement dated as of November 25, 1997 among Protein
Securities Company and Gulf Protein, Inc. (Exhibit 10.46 to Omega
Registration Statement on Form S-1 [Registration No. 333-44967])
10.47* --Form of Indemnification Agreement with Directors and Executive
Officers (Exhibit 10.47 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])
10.48 --Form of the United States Guaranteed Promissory Note dated May 12,
1998 in favor of Hibernia National Bank (Exhibit 10.1 to Omega
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
[File No. 001-14003])
10.49 --Form of Promissory Note dated May 12, 1998 to the United States of
America pursuant to the provisions of Title XI of the Marine Act of
1936 in favor of Coastal Securities (Exhibit 10.2 to Omega Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 [File No. 001-
14003])
10.50 --Form of Guaranty Agreement dated May 12, 1998 in favor of the United
States of America (Exhibit 10.3 to Omega Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 [File No. 001-14003])
10.51 --Form of 1998, Certification and Indemnification Agreement Regarding
Environmental Matters, dated May 12, 1998, in favor of the United
States of America (Exhibit 10.4 to Omega Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 [File No. 001-14003])
10.52 --Form of Title XI Financial Agreement dated May 12, 1998 with the
United States of America (Exhibit 10.5 to Omega Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 [File No. 001-14003])
10.53 --Form of Security Agreement dated May 12, 1998 in favor of the United
States of America (Exhibit 10.6 to Omega Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 [File No. 001-14003])
40
10.54 --Form of First Preferred Ship Mortgage dated May 12, 1998 to the United
States of America (Exhibit 10.7 to Omega Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 [File No. 001-14003])
10.55 --Deed of Trust dated May 12, 1998, for the benefit of the United States
of America (Exhibit 10.8 to Omega Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 [File No. 001-14003])
10.56 --Revolving Credit Agreement dated August 11, 1998 with SunTrust Bank,
South Florida, National Association, Lender and Omega Protein
Corporation and Omega Protein, Inc., Borrowers (Exhibit 10.9 to Omega
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 [File
No. 001-14003])
10.57 --Security Agreement dated August 11, 1998 in favor of SunTrust Bank,
South Florida, National Association (Exhibit 10.10 to Omega Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 [File No.
001-14003])
10.58 --Revolving Credit Note dated August 11, 1998 in favor of SunTrust Bank,
South Florida, National Association (Exhibit 10.11 to Omega Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 [File No.
001-14003])
21 --Schedule of Subsidiaries
24 --Powers of Attorney
27 --Financial Data Schedule
- --------
--Report of Independent Accountants on Financial Statement Schedule
--Financial Statement Schedule of valuation and qualifying accounts
* Incorporated by reference
+ Management Contract or Compensatory Plan or arrangement required to be
filed as an exhibit pursuant to the requirements of Item 14 (1) of Form
10-K
(B)REPORTS ON FORM 8-K.
None.
(C)FINANCIAL STATEMENT SCHEDULE.
Filed herewith as a financial statement schedule is the schedule supporting
Omega's consolidated financial statements listed under paragraph (a) of this
Item, and the Report of Independent Accountants' with respect thereto.
41
SCHEDULE II
OMEGA PROTEIN CORPORATION
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
---------------------
BALANCE BALANCE
AT CHARGED TO CHARGED TO AT END
BEGINNING COSTS AND OTHER OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(A) PERIOD
----------- --------- ---------- ---------- ------------- --------
September 30, 1996:
Allowance for doubtful
accounts............. $163,812 $ 8,759 -- $(11,690) $160,881
Inventory reserve..... 102,000 -- -- -- 102,000
September 30, 1997:
Allowance for doubtful
accounts............. $160,881 $50,000 -- $(35,164) $175,717
Inventory reserve..... 102,000 -- -- -- 102,000
September 30, 1998:
Allowance for doubtful
accounts............. $175,717 $27,500 -- $(11,167) $192,050
Inventory reserve..... 102,000 -- -- -- 102,000
- --------
(A)Allowance for Doubtful Accounts--uncollectible accounts written off
42
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Omega Protein Corporation:
Our audits on the consolidated financial statements of Omega Protein
Corporation referred to in our report dated November 18, 1998 are included in
Item 8 of this Form 10-K also included an audit of the financial statement
schedule listed in Item 14(c) of Part IV of this Form 10-K. In our opinion,
this financial statement schedule, presents fairly, in all material respects,
the information required to be included therein when read in conjunction with
the related consolidated financial statements.
PricewaterhouseCoopers LLP
New Orleans, Louisiana
November 18, 1998
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Eric T. Furey
----------------------------------
(ERIC T. FUREY
VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY)
December 14, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Joseph L. von Rosenberg President and Chief
- ----------------------------------- Executive Officer
(JOSEPH L. VON ROSENBERG) and Director
/s/ Robert W. Stockton Executive Vice
- ----------------------------------- President and Chief
(ROBERT W. STOCKTON) Financial Officer
(Principal
Financial and
Accounting Officer)
/s/ Avram A. Glazer Chairman
- -----------------------------------
(AVRAM A. GLAZER)
/s/ Malcolm I. Glazer Director
- -----------------------------------
(MALCOLM I. GLAZER)
/s/ Gary L. Allee Director
- -----------------------------------
(GARY L. ALLEE)
/s/ William Lands Director
- -----------------------------------
(WILLIAM LANDS)
December 14, 1998
*By: /s/ Eric T. Furey
- -----------------------------------
(ERIC T. FUREY
ATTORNEY-IN-FACT)
44