free_bee
11 years ago
OUSTON, May 7, 2014 /PRNewswire/ -- Omega Protein Corporation OME +15.62% , a nutritional product company and a leading integrated producer of omega-3 fish oil and specialty protein products, today reported financial results for the first quarter ended March 31, 2014.
First Quarter Highlights
Revenues: $63.5 million for the quarter, compared to $48.9 million in the same period a year ago
Gross profit margin: 32.3% for the quarter, compared to 24.7% in the same period a year ago
Net income: $8.0 million, or $9.0 million excluding plant closure charges and loss on disposal of assets for the quarter, compared to $2.8 million, or $3.1 million excluding the loss on disposal of assets, in the same period a year ago
Earnings per diluted share: $0.37, or $0.42 excluding plant closure charges and loss on disposal of assets for the quarter, compared to $0.14, or $0.15 excluding the loss on disposal of assets, in the same period a year ago
Adjusted EBITDA: $19.1 million for the quarter, compared to $10.0 million in the same period a year ago
"We continue to see strong momentum in both our animal and human nutrition segments. These results helped us generate yet another quarter of year-over-year margin and earnings growth," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer. "Our business continues to benefit from favorable animal nutrition supply and demand dynamics and we are increasingly pleased with our improved human nutrition results as we further execute on our strategic initiatives to expand our value-added product offerings for consumers."
First Quarter 2014 Results
The Company's revenues increased 30% from $48.9 million in the same period last year to $63.5 million. This increase was due to a $12.9 million increase in animal nutrition revenues and a $1.6 million increase in human nutrition revenues. The increase in animal nutrition revenues was primarily due to increased sales prices of 15% and 1% for the Company's fish meal and fish oil, respectively, and increased sales volumes for the Company's fish oil of 88%, partially offset by decreased sales volumes of 9% for the Company's fish meal. The increase in human nutrition revenues was primarily due to sales of protein products from Wisconsin Specialty Protein ("WSP"), a business acquired by the Company in the first quarter of 2013. The composition of revenue by nutritional product line for the first quarter of 2014 was 45% fish meal, 40% fish oil, 13% dietary supplements and food, and 2% fish solubles and other.
First quarter of 2014 revenues decreased 4% from $66.0 million in the fourth quarter of 2013 to $63.5 million. This decrease was due to a decrease in animal nutrition and human nutrition revenues of $1.4 million and $1.1 million, respectively. The decrease in animal nutrition revenues was primarily due to 29% lower fish meal sales volumes and 24% lower fish oil sales prices, partially offset by 4% higher fish meal sales prices and 94% higher fish oil sales volumes. The decrease in fish oil sales prices was due to a change in the product mix of higher priced refined and lower priced crude oils, and lower prices on those products. The decrease in human nutrition revenues was primarily due to lower revenues from other nutraceuticals and third party tolling.
The Company reported gross profit of $20.5 million, or 32.3% as a percentage of revenues, for the first quarter of 2014, versus $12.1 million, or 24.7% as a percentage of revenues, in the first quarter of 2013. The increase was primarily due to an increase in the animal nutrition segment gross profit as a percentage of revenues from 26.6% to 34.6% as a result of increased fish meal and fish oil sales prices. Human nutrition gross profit also increased as a percentage of revenues from 13.0% to 16.9%, due primarily to improved results from Omega-3 fish oil ingredients, partially offset by a decrease in gross profit as a percentage of revenue in the protein products business.
Compared to the fourth quarter of 2013, first quarter gross profit decreased from $28.0 million, or 42.4% as a percentage of revenues, to $20.5 million, or 32.3% as a percentage of revenues. The decrease in gross profit as a percentage of revenues was due to a decrease in animal nutrition gross profit as a percentage of revenues from 47.1% to 34.6%, primarily as a result of greater than anticipated fish catch in the fourth quarter, which resulted in additional profit related to prior period sales of 2013 inventory production, and the decreased fish oil sales prices in the first quarter. This decrease was partially offset by an increase in human nutrition segment gross profit as a percentage of revenues from 13.6% to 16.9% primarily due to improved gross profit as a percentage of revenues for other nutraceuticals.
Selling, general and administrative expenses for the first quarter decreased $0.4 million to $6.1 million compared to the first quarter of 2013, primarily as a result of lower acquisition-related professional expenses. Selling, general and administrative expenses increased $0.2 million from $5.9 million for the fourth quarter of 2013.
In the fourth quarter of 2013, the Company closed its menhaden fish processing plant located in Cameron, Louisiana and re-deployed certain vessels from that facility to the Company's other Gulf Coast facilities located in Abbeville, Louisiana and Moss Point, Mississippi, as previously announced. In conjunction with the closure, the Company incurred charges of $1.3 million in the first quarter of 2014 and $6.6 million in the fourth quarter of 2013.
The first quarter of 2014 effective tax rate was 33.9% compared to 33.2% in the first quarter of 2013 and 31.9% in the fourth quarter of 2013.
Net income for the first quarter of 2014 was $8.0 million ($0.37 per diluted share) compared to $2.8 million ($0.14 per diluted share) in the same period last year and $9.7 million ($0.45 per diluted share) for the fourth quarter of 2013. Excluding plant closure charges and gain/loss on disposal of assets, net income for the first quarter of 2014 would have been $9.0 million ($0.42 per diluted share), compared to $3.1 million ($0.15 per diluted share) in the same period last year and $14.2 million ($0.66 per diluted share) for the fourth quarter of 2013.
Adjusted EBITDA totaled $19.1 million for the first quarter of 2014, compared to $10.0 million for the same period last year and $26.7 million for the fourth quarter of 2013.
Balance Sheet
The Company's March 31, 2014 cash balance increased $7.1 million from December 31, 2013 to $41.2 million. Total debt decreased $1.2 million from December 31, 2013 to $23.0 million on March 31, 2014. Stockholders' equity increased $8.5 million to $255.7 million as of March 31, 2014 compared to $247.2 million as of December 31, 2013.
Conference Call Information
Omega Protein will host a conference call on its first quarter 2014 financial results at 8:30 a.m., Eastern Time, on Thursday, May 8, 2014. The Company's senior management team will be available to discuss recent financial results and current business trends as well as respond to questions.
Please dial (877) 407-3982 domestically or (201) 493-6780 internationally to join the call. Interested parties may also listen to the webcast live over the Internet at www.omegaprotein.com .
A webcast replay of the conference call will be available beginning shortly after the conclusion of the call at www.omegaprotein.com and will be available for 30 days. A telephonic replay of the conference call will be available through May 22, 2014. Domestic listeners can dial (877) 870-5176, and international listeners may dial (858) 384-5517. The replay access code is 13580483.
About Omega Protein
Omega Protein Corporation OME +15.62% is a century old nutritional company that develops, produces and delivers healthy products throughout the world to improve the nutritional integrity of functional foods, dietary supplements and animal feeds. Omega Protein's mission is to help people lead healthier lives with better nutrition through sustainably sourced ingredients such as highly-refined omega-3 rich fish oil, specialty proteins and nutraceuticals.
http://www.marketwatch.com/story/omega-protein-announces-first-quarter-2014-financial-results-2014-05-07?reflink=MW_news_stmp
free_bee
11 years ago
Form 10-K for OMEGA PROTEIN CORP
10-Mar-2014
Annual Report
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 of this Report. Certain amounts applicable to the prior periods have been reclassified to conform to the classifications currently followed.
For the years ended December 31, 2012 and 2011, the Company reclassified $0.2 million and $0.5 million, respectively, of cash flows from operating activities to cash flows from investing activities related to accrued capital expenditures. These revisions were not considered to be material, individually or in the aggregate, to previously issued financial statements. These revisions had no effect on the results of operations (net or comprehensive income) or financial condition (stockholders' equity).
Company Overview
Business. The Company operates in two primary industry segments: animal nutrition and human nutrition.
The animal nutrition segment is comprised primarily of two subsidiaries: Omega Protein, Inc. and Omega Shipyard, Inc. Omega Protein, Inc. ("Omega Protein"), the Company's principal operating subsidiary, is predominantly dedicated to the production of animal nutrition products and operates in the menhaden harvesting and processing business and is the successor to a business conducted since 1913. Prior to December 2013, Omega Protein operated four menhaden processing plants:
two in Louisiana, one in Mississippi and one in Virginia. In December 2013, the Company closed its Cameron, Louisiana menhaden processing plant and is re-deploying some of its harvesting and processing assets to the three remaining menhaden processing plants. The Company also operates a Health and Science Center in Reedville, Virginia, which provides 100-metric tons per day fish oil input capacity for the Company's food, industrial and feed grade oils. A portion of Omega Protein's production is transferred to its human nutrition segment where it is further processed and sold. Omega Shipyard, Inc. ("Omega Shipyard") owns and operates a drydock facility in Moss Point, Mississippi that is used to provide shoreside maintenance for Omega Protein's fishing fleet and, subject to outside demand and excess capacity, occasionally for third-party vessels.
The human nutrition segment, which operates under the name Nutegrity, is comprised primarily of three subsidiaries: Cyvex, InCon and WSP. Cyvex, acquired by the Company in December 2010, is located in Irvine, California and is an ingredient provider in the nutraceutical industry. InCon, acquired by the Company in September 2011, is located in Batavia, Illinois and is a specialty processor that utilizes molecular distillation technology to concentrate Omega-3 fish oils and, subject to outside demand and excess capacity, a variety of other compound products for third-party tolling customers. WSP, acquired by the Company on February 27, 2013, is a manufacturer and marketer of specialty dairy and other protein products headquartered in Madison, Wisconsin and operates a production facility in Reedsburg, Wisconsin. For additional information related to the Company's acquisition of WSP, see Note 2 - Acquisition of Wisconsin Specialty Protein, L.L.C to our consolidated financial statements included in Item 8. The Company also has a technical center in Houston, Texas, the Omega Protein Technology and Innovation Center, which has food science application labs as well as analytical, sensory, lipids research and pilot plant capabilities. For financial information about our industry segments for years 2013, 2012 and 2011, see Note 20 to our consolidated financial statements included in Item 8.
Fishing and Production. Omega Protein is the largest U.S. producer of protein-rich meal and oil derived from marine sources. Omega Protein's products are produced from menhaden (a herring-like fish found in commercial quantities), and include regular grade and value-added specialty fish meals, crude and refined fish oils and fish solubles. Omega Protein's fish meal products are used as nutritional feed additives by animal feed manufacturers and by commercial livestock producers. Omega Protein's crude fish oil is sold to food producers and feed manufacturers, and its refined fish oil products are used in food production, feed production, certain industrial applications as well as dietary supplements. Fish solubles are sold as attractants for animal feeds and baits and as fertilizers.
Omega Protein's harvesting season generally extends from early May through December on the mid-Atlantic coast and from mid-April through October on the Gulf coast. During the off-season and the first few months of each fishing season, Omega Protein fills purchase orders from the inventory it has accumulated during the previous fishing season or in some cases, by re-selling meal and oil purchased from other suppliers.
In 2011, Omega Protein experienced its highest fish catch since 2002 and its highest overall production since 2003. The increased level of production contributed to the highest revenues and overall cost of production in the Company's history. Low fish oil yields, which were 28.7% below the Company's five year oil yield average, offset some of the positive fish catch impact, resulting in higher per unit product costs. 2011 per unit product costs increased 3.4% and 2.2% as compared to 2010 and 2009 per unit product costs, respectively. The higher unit product cost inventories from the 2011 fishing season were largely sold by June 30, 2012.
The Company's 2012 oil yield results were the poorest in its recent history. For illustrative purposes, the Company's oil yields for 2012 were lower by 20.4% compared to 2011 and were lower by 40.6% compared to the Company's five year oil yield average. Total yields in 2012 decreased by 1.7% compared to those in 2011 and were lower by 8.7% compared to the Company's five year total yield average, due primarily to the lower fish oil yields. The Company believes that fish yields are influenced by multiple factors, including but not limited to, fish diet, weather, water temperature, fish population and age of fish, but such possible relationships and inter-relationships are not generally well understood. The impact of these poor oil yields resulted in higher per unit inventory cost and fewer volumes available for sale. These higher unit costs and fewer volumes available for sale adversely impacted financial results through the second quarter of 2013.
The Company's 2013 fish catch was 5.9% below the recent five year average but the related fish meal, oil and solubles production was 2.4% above the recent five year average due to improved oil yields. This reduction in fish catch is due in part to the Company's decision to delay the start of its 2013 Atlantic fishing season and utilize one less vessel due to the limit on fish caught along the Atlantic enacted by the ASMFC in 2013. For illustrative purposes, the Company's oil yields for 2013 were higher by 103.4% compared to 2012 and 34.0% compared to the Company's five year oil yield average.
The following table summarizes the Omega Protein's fishing and production for the indicated periods:
Years Ended December 31,
2013 2012 2011
Fish catch (short tons) 485,626 578,392 602,062
Production:
Fish Meal (short tons) 123,740 151,796 155,074
Oil (metric tons)
Crude 45,155 21,902 32,675
Refined 11,168 11,237 10,104
Solubles (short tons) 10,083 9,262 9,910
Total Production 190,146 194,197 207,763
Omega Protein's harvesting and processing business is seasonal and fluctuates from year to year and month to month due to natural conditions over which Omega Protein has no control. Poor fish catch and total yields have at times materially impacted the amount of products that Omega Protein has been able to produce.
Markets. Pricing for Omega Protein's products has been volatile in the past several years and is attributable mainly to the international availability, or the perceived international availability, of fish meal and fish oil inventories. In an effort to reduce price volatility and to generate higher, more consistent profit margins, Omega Protein has implemented a quality control program designed to increase its capability of producing higher quality fish meal products and, in conjunction therewith, enhanced its sales efforts to penetrate premium product markets. Additionally, the Company continues to market its refined fish oil to food manufactures and other related industries through the human nutrition segment. The Company has made sales of its refined fish oil, trademarked OmegaPure?, to food manufacturers in the United States and Canada at prices that provide substantially improved margins over the margins that can typically be obtained from selling non-refined crude fish oil. The Company has also made sales of OmegaActiv? to human supplement manufacturers.
Omega Protein generally sells most of its products on up to a twelve-month forward contract basis with the balance sold on a spot basis through purchase orders or under long-term forward contracts. Omega Protein's sales contracts generally contain force majeure and other production allocation provisions. Historically, fish meal and fish oil sold on a forward contract basis has fluctuated from year to year based upon perceived market availability and forward price expectations. As of December 31, 2013, Omega Protein had sold forward on a contract basis approximately 54,000 short tons of fish meal and 15,000 metric tons of fish oil for 2014, contingent on 2014 production and product availability. Of these 2014 forward sales, the majority was contracted during 2013. As a basis of comparison, as of December 31, 2012, Omega Protein had sold forward on a contract basis approximately 72,000 short tons of fish meal and 22,000 metric tons of fish oil for 2013.
Omega Protein's annual revenues are highly dependent on pricing, annual fish catch, production yields and inventories. Inventory is generally carried over from one year to the next year and Omega Protein determines the level of inventory to be carried over based on existing contracts, 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 year and sales volumes will fluctuate from quarter to quarter. Omega Protein's fish meal products have a useable life of approximately one year from date of production. Practically, however, Omega Protein attempts to empty its warehouses of the previous season's products by the second or third month of the new fishing season. Omega Protein's crude fish oil products do not lose efficacy unless exposed to oxygen and, therefore, their storage life typically is longer than that of fish meal.
Acquisition of Wisconsin Specialty Protein, L.L.C. On February 27, 2013, the Company acquired 100% of the outstanding equity interest of WSP, a Wisconsin limited liability company, in a cash transaction pursuant to the terms of an agreement and plan of merger. WSP is now a wholly owned subsidiary of the Company and is operated as part of Nutegrity within the human nutrition segment.
WSP produces and markets a variety of value-added whey protein ingredients for the food and nutritional supplement industries, including organic and other specialty protein products, using processes applicable to a variety of nutritional dairy ingredients. The Company believes the acquisition of WSP enhances its presence in the specialty proteins markets and advances its goal of providing sustainable, value-added nutrition ingredients.
The Company paid an aggregate cash purchase price for the equity of WSP of $26.5 million plus $0.6 million representing WSP's excess working capital on the closing date and reimbursable capital expenditures, utilizing cash on hand. See Note 2 - Acquisition of Wisconsin Specialty Protein, L.L.C to our consolidated financial statements included in Item 8.
Acquisition of InCon Processing, L.L.C. In September 2011, the Company acquired InCon, a specialty toll processor that designs, pilots, synthesizes and purifies specialty chemical compounds utilizing molecular distillation technology to concentrate a variety of compound products, including Omega-3 fish oils. InCon is operated as part of Nutegrity and the Company believes that its concentration technology allows it to provide its customers with an enhanced range of Omega-3 fish oils in concentrated forms such as ethyl esters and triglycerides. The concentrated fish oils manufactured by InCon are marketed and sold under the Company's OmegaActiv?.
As consideration for the acquisition of InCon, the Company paid cash of $8.7 million, utilizing cash on hand, plus an additional $0.6 million representing InCon's estimated working capital on the closing date. As part of the equity purchase agreement, the sellers may earn additional amounts based on the annual earnings before interest, taxes, depreciation, and amortization, of InCon's toll processing and specialty product business during calendar years 2012 through 2016. See Note 3 - Acquisition of InCon Processing, L.L.C to our consolidated financial statements included in Item 8.
Acquisition of Cyvex Nutrition, Inc. In December 2010, the Company completed the acquisition of 100% of the outstanding common stock of Cyvex Nutrition, Inc. ("Cyvex"), a California corporation, in a cash transaction pursuant to the terms of a Stock Purchase Agreement with the founder and sole shareholder of Cyvex. Cyvex now is a wholly owned subsidiary of the Company and is operated as part of Nutegrity.
Cyvex was a nutraceutical supplier to dietary supplement manufacturers that focus on human health and wellness. It has enabled Nutegrity to expand the Company's presence in the human health and wellness market and provides access to the top supplement manufacturers who purchase a variety of ingredients, including fish oil.
As total consideration for the acquisition of Cyvex, the Company paid cash of $13.2 million, utilizing cash on hand, with no contingent consideration. This amount includes final post-closing cash payments of $2.2 million made to Cyvex's former owner during 2011, of which $2.0 million was included in accrued liabilities at December 31, 2010.
Results of Operations
The following discussion segregates the financial results of our two industry segments: animal nutrition and human nutrition. For a discussion of our segments, see Note 20 to our consolidated financial statements included in Item 8.
Animal Nutrition - 2013 compared to 2012
Years Ended December 31,
Increase
2013 2012 (Decrease)
(in millions)
Revenues $ 213.2 $ 213.6 $ (0.4 )
Cost of sales 136.1 176.6 (40.5 )
Gross profit 77.1 37.0 40.1
Selling, general and
administrative expenses (including
research and development) 2.8 2.5 0.3
Loss related to plant closure 6.6 - 6.6
Charges related to U.S. Attorney
investigation - 8.0 (8.0 )
Other (gains) and losses 0.1 (2.6 ) 2.7
Operating income $ 67.6 $ 29.1 $ 38.5
Revenues. Animal nutrition revenues decreased $0.4 million, or 0.2%, from $213.6 million in 2012 to $213.2 in 2013. The decrease in animal nutrition related revenues was primarily due to a $2.4 million decrease in Omega Shipyard revenues and decreased sales volumes of 27.7% for the Company's fish meal offset by increased sales prices of 22.7% for the Company's fish meal and increased sales volumes and prices of 2.3% and 43.2%, respectively, for the Company's fish oil. Considering fish meal, fish oil and fish solubles sales activities in total, the Company experienced a $50.0 million increase in revenues due to the increase in sales prices, partially offset by a decrease in revenue due to decreased sales volumes, when comparing 2013 and 2012. The decreases in fish meal sales volumes for 2013 are primarily due to the timing of contracts and reduced available fish meal inventory due to decreased fish catch from the 2012 to 2013 fishing season. The increase in fish meal sales prices for 2013 is primarily due to sales made pursuant to contracts entered into during 2012 and early 2013 when fish meal prices were higher due to a decreased global supply of fish meal available for sale, particularly from South America, as compared to 2012, when sales were made pursuant to contracts entered into during 2011 and early 2012. The increase in fish oil sales prices is due primarily to the limited global supply and increased demand primarily from the aquaculture and human supplement industries. Omega Shipyard's third party revenues were $2.4 million for 2012 due to a barge construction contract. There were no shipyard third party revenues for 2013.
Cost of sales. Animal nutrition cost of sales, including depreciation and amortization, for 2013 was $136.1 million, a decrease of $40.5 million, or 22.9%, as compared to 2012. Cost of sales as a percentage of revenues was 63.8% for 2013 as compared to 82.7% for 2012. The decrease in cost of sales as a percentage of revenues was primarily the result of increased revenue per unit of 29.9%, partially offset by increased cost per unit of sales of 0.8% during 2013 as compared to 2012. The increase in revenue per unit is primarily due to increased fish meal and fish oil sales prices as discussed above. Omega Shipyard's third party cost of sales was $2.9 million for 2012 and a gain of $0.2 million for 2013 as a result of the expiration of a previously recognized warranty reserve.
Gross profit. Animal nutrition gross profit increased $40.1 million, or 108.2%, from $37.0 million for 2012 to $77.1 million for 2013. Gross profit as a percentage of revenue was 36.2% for 2013 as compared to 17.3% for 2012. The increase in gross profit as a percentage of revenue was primarily due to the increase in revenue per unit as discussed above. Omega Shipyard's gross loss was $0.5 million in 2012 compared to gross profit of $0.2 million for 2013.
Selling, general and administrative expenses. Animal nutrition selling, general and administrative expenses increased $0.3 million, or 7.0%, from $2.5 million in 2012 to $2.8 million in 2013. The increase in selling, general and administrative expenses is primarily due to increased professional services costs.
Loss related to plant closure. As a result of the closing the Cameron, Louisiana fish processing plant, the Company recognized a loss on closure of approximately $6.6 million related to the impairment of harvesting and processing assets, employee severances and other ongoing closure costs not related to future inventory production. The Company did not recognize losses related to this matter during 2012.
Charges related to U.S. Attorney investigation. During 2012, the Company recognized charges of $8.0 million related to an investigation by the U.S. Attorney's Office in the Eastern District of Virginia. These charges related to fines and penalties as well as legal fees, some of which were paid in 2013. The Company did not recognize expenses related to this matter during 2013.
Other (gains) and losses. The Company recorded animal nutrition losses for 2013 of $0.1 million primarily relating to a $0.3 million reduction in an insurance receivable associated with the 2011 F/V Sandy Point incident, partially offset by the receipt of other insurance proceeds related to fully depreciated assets. Animal nutrition related other gains for 2012 of $2.6 million primarily relate to net gain for the Morgan City, Louisiana facility that was sold during June 2012 and insurance proceeds for property that was damaged and inventory that was lost in 2011, partially offset by the net loss on disposal of certain assets including three fishing vessels.
Human Nutrition - 2013 compared to 2012
Years Ended December 31,
Increase
2013 2012 (Decrease)
(in millions)
Revenues $ 31.1 $ 22.0 $ 9.1
Cost of sales 25.4 17.0 8.4
Gross profit 5.7 5.0 0.7
Selling, general and
administrative expenses (including
research and development) 7.0 3.8 3.2
Other (gains) and losses 0.3 0.1 0.2
Operating income $ (1.6 ) $ 1.1 $ (2.7 )
Revenues. Human nutrition revenues increased $9.1 million, or 41.1%, from $22.0 million during 2012 to $31.1 million during 2013. Protein products from WSP, acquired by the Company on February 27, 2013, contributed $9.8 million of revenue during 2013. Other nutraceutical ingredients provided $15.5 million of revenue during 2013 as compared to $17.1 million for 2012. Omega-3 fish oil ingredients and tolling supplied $5.8 million of revenue (including $2.3 million from tolling) during 2013 as compared to $4.9 million (including $3.0 million from tolling) for 2012.
Cost of sales. Human nutrition cost of sales, including depreciation and amortization, for 2013 was $25.4 million, an $8.4 million increase, or 49.4%, as compared to 2012. Human nutrition cost of sales as a percentage of revenue increased from 77.2% for 2012 to 81.8% for 2013. Protein products cost of sales was $7.4 million for 2013. Other nutraceutical ingredients cost of sales was $9.5 million during 2013 as compared to $9.9 million 2012. Omega-3 fish oil ingredients and tolling's cost of sales was $8.5 million during 2013 as compared to $7.1 million for 2012 due to increased sales volumes and activity.
Gross profit. Human nutrition gross profit increased $0.7 million, or 12.7%, from $5.0 million for 2012 to $5.7 million for 2013. Gross profit as a percentage of revenue was 18.2% for 2013 as compared to 22.8% for 2012. The decrease in gross profit as a percentage of revenue was primarily due to lower other nutraceutical sales and gross profit as a percentage of sales and transition costs associated with the post-acquisition conversion of an Omega-3 fish oil processing plant. In addition, gross profit as a percentage of revenue for 2013 was negatively impacted by the one time inventory write-up to fair value that was made in conjunction with the WSP acquisition in February 2013.
Selling, general and administrative expenses. Human nutrition related selling, general and administrative expenses increased $3.2 million, or 83.4%, from $3.8 million in 2012 to $7.0 million in 2013. The increase in selling, general and administrative expenses is primarily due to the acquisition of WSP on February 27, 2013 as well as increased employee compensation related and marketing costs.
Other (gains) and losses. Human nutrition related other losses increased $0.2 million to $0.3 million for 2013. Human nutrition related other losses for 2013 and 2012 mainly result from impairment expenses of $0.3 million and $0.1 million, respectively, related to the excess of carrying value over fair value for certain indefinite lived intangible assets.
Unallocated - 2013 compared to 2012
Years Ended December 31,
Increase
2013 2012 (Decrease)
(in millions)
Selling, general and administrative expenses
(including research and development) $ 18.0 $ 17.6 0.4
Operating income $ (18.0 ) $ (17.6 ) $ (0.4 )
Selling, general and administrative expenses (including research and development). Unallocated selling, general and administrative expenses increased $0.4 million, or 2.3%, from $17.6 million in 2012 to $18.0 million in 2013. The increase in selling, general and administrative expenses is primarily due to professional services expenses including costs related to the acquisition of WSP on February 27, 2013, partially offset by decreased employee compensation related costs.
Other non-segmented results of operation - 2013 compared to 2012
Interest expense. Interest expense increased $0.3 million from $1.3 million for 2012 to $1.6 million for 2013. Capitalized interest, which offsets interest expense, was $0.3 million and $0.8 million for 2013 and 2012, respectively.
Provision for income taxes. The Company recorded a $15.5 million provision for income taxes for 2013 representing an effective tax rate of 33.6% for income taxes compared to 62.9% for 2012. The decrease in the effective tax rate is primarily a result of a predominately non-deductible charge related to the U.S. Attorney's Office investigation recognized during 2012. The statutory tax rate of 35% for U.S. federal taxes was in effect for 2013 and 2012.
Animal Nutrition - 2012 compared to 2011
Years Ended December 31,
Increase
2012 2011 (Decrease)
(in millions)
Revenues $ 213.6 $ 236.5 $ (22.9 )
Cost of sales 176.6 187.1 (10.5 )
Gross profit 37.0 49.4 (12.4 )
Selling, general and administrative expenses
(including research and development) 2.5 2.8 (0.3 )
Charges related to U.S. Attorney investigation 8.0 0.5 7.5
Other (gains) and losses (2.6 ) (24.8 ) 22.2
Operating income $ 29.1 $ 70.9 $ (41.8 )
Revenues. Animal nutrition related revenues decreased $22.9 million, or 9.7%, from $236.5 million in 2011 to $213.6 in 2012. The decrease in animal nutrition related revenues was primarily due to decreased sales volumes of 6.1% and 25.7% for the Company's fish meal and fish oil, respectively, and decreased sales prices for the Company's fish meal of 2.5%, partially offset by increased sales prices of 10.6% for the Company's fish oil. Considering fish meal, fish oil and fish solubles sales activities in total, the Company experienced a $23.6 million . . .
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