Omega Protein Announces Fourth Quarter and Full Year 2015 Financial Results

HOUSTON, March 9, 2016 /PRNewswire/ -- Omega Protein Corporation (NYSE:OME), a nutritional product company and a leading integrated provider of specialty oils and specialty protein products, today reported financial results for the fourth quarter and year ended December 31, 2015.

Fourth Quarter and Full Year 2015 Highlights

• Revenues:  $82.3 million for the quarter and $359.3 million for the year
• Gross profit margin:  28.0% for the quarter and 27.5% for the year
• Net income: $2.9 million, or $6.5 million on an adjusted basis, for the quarter and $24.0 million, or $33.4 million on an adjusted basis, for the year
• Earnings per diluted share: $0.13, or $0.29 on an adjusted basis, for the quarter and $1.07, or $1.50 on an adjusted basis, for the year
• Adjusted EBITDA:  $18.9 million for the quarter and $79.6 million for the year

"2015 was a transformational year for Omega Protein as our financial results, including a record Adjusted EBITDA, reflect contributions from a robust fish harvest, continued strong demand for our products, efficient operational performance and the Bioriginal acquisition," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer.  "We continue to take strategic actions to build on these accomplishments and better position our business for future growth.  These efforts include our plan to invest an additional $18 million of growth capital to further improve the efficiency of our animal nutrition business, and our decision to refocus our human fish oil business by exiting concentrated oils manufacturing.  We remain confident about our opportunities to generate improved volumes and profitability, and in turn increase shareholder value in 2016."

Fourth Quarter 2015 Results
The Company's revenues decreased 20% from $102.5 million in the same period last year to $82.3 million.  This decrease was due to decreases in animal nutrition and human nutrition revenues of $14.9 million and $5.3 million, respectively. The decrease in animal nutrition revenues was primarily due to decreased sales volumes of 74% and 2% for the Company's fish oil and fish meal, respectively, and decreased fish meal sales prices of 3%, partially offset by 36% higher fish oil sales prices.  The increase in fish oil sales prices was primarily due to a change in the product mix of higher priced refined and lower priced crude oils, as well as higher prices on each.  The decrease in human nutrition revenues was largely due to decreased sales of specialty oils.  The composition of revenues by nutritional product line for the fourth quarter of 2015 was 54% fish meal, 35% dietary supplements, 9% fish oil, and 2% fish solubles and other. 

Fourth quarter of 2015 revenues decreased 27% from $112.2 million in the third quarter of 2015 to $82.3 million. This decrease was due to a $19.9 million decrease in animal nutrition revenues and a $10.0 million decrease in human nutrition revenues.  The decrease in animal nutrition revenues was primarily due to lower fish oil and fish meal volumes of 76% and 6%, respectively, and lower fish meal sales prices of 3%, partially offset by 40% higher fish oil sales prices.  The decrease in human nutrition revenues was largely due to decreased sales of specialty oils. 

The Company reported gross profit of $23.1 million, or 28.0% as a percentage of revenues, for the fourth quarter of 2015, versus $22.5 million, or 22.0% as a percentage of revenues, in the fourth quarter of 2014. The increase in gross profit as a percentage of revenues was due to an improvement in the animal nutrition segment, partially offset by lower human nutrition results. Animal nutrition gross profit as a percentage of revenues increased from 28.7% to 39.4%, due primarily to higher fish catch and production in 2015, which led to a decrease in the cost per unit of sales. Human nutrition gross profit as a percentage of revenues decreased from 8.6% to 7.2% due primarily to decreased gross profit as a percentage of revenues for menhaden omega-3 concentrates and tolling.   

Compared to the third quarter of 2015, fourth quarter gross profit decreased from $35.2 million, or 31.4% as a percentage of revenues, to $23.1 million, or 28.0% as a percentage of revenues, due to a reduction in the human nutrition segment.  Animal nutrition gross profit as a percentage of revenues increased slightly from 39.3% to 39.4%.  Human nutrition gross profit as a percentage of revenues decreased from 16.6% to 7.2% due largely to decreased gross profit as a percentage of revenues for specialty oils, including menhaden omega-3 concentrates and tolling, and protein products.

Selling, general and administrative expense, including research and development expense ("SG&A"), for the fourth quarter increased $1.5 million to $10.8 million compared to the fourth quarter of 2014, primarily due to increases in labor and professional services expenses. SG&A decreased $1.6 million from $12.4 million in the third quarter of 2015, due to decreases in expenses related to labor and the human nutrition segment.

The Company recorded impairment and plant closure expenses of $5.3 million and $6.3 million in the fourth quarters of 2015 and 2014, respectively.  The fourth quarter of 2015 expense is primarily due to the Company's decision to focus its omega-3 oils manufacturing operations on non-concentrated oils and dispose of its oil concentration facility.

Gain on foreign currency related to Bioriginal Food & Science ("Bioriginal") was $0.1 million for the fourth quarter of 2015 compared to loss on foreign currency of $0.8 million in the third quarter of 2015.

The fourth quarter of 2015 effective tax rate was 52.0% compared to 46.5% in the fourth quarter of 2014 and 33.6% in the third quarter of 2015.  The increase from the third to fourth quarters of 2015 is due largely to the impact of a 2.7% increase in the year-to-date effective tax rate on earnings, as the tax expense impact of the higher rate on earnings from the first nine months of 2015 was recognized in the fourth quarter.

Net income for the fourth quarter of 2015 was $2.9 million ($0.13 per diluted share) compared to $3.2 million ($0.14 per diluted share) in the same period last year and $10.6 million ($0.47 per diluted share) in the third quarter of 2015. Excluding adjustments for certain items, adjusted net income for the fourth quarter of 2015 would have been $6.5 million ($0.29 per diluted share), compared to $7.8 million ($0.35 per diluted share) in the same period last year and $14.8 million ($0.66 per diluted share) for the third quarter of 2015. 

Adjusted EBITDA totaled $18.9 million for the fourth quarter of 2015, compared to $19.7 million for the same period last year and $28.7 million for the third quarter of 2015.

Full Year 2015 Results
Revenues for the year ended December 31, 2015 increased 16% to $359.3 million compared to revenues of $308.6 million for the year ended December 31, 2014. The increase in revenues was due to a $74.3 million increase in human nutrition revenues partially offset by a $23.7 million decrease in animal nutrition revenues. The increase in human nutrition revenues was primarily due to the acquisition of Bioriginal in September 2014. The decrease in animal nutrition revenues was primarily due to decreased sales volumes of 45% for the Company's fish oil, partially offset by increased sales prices of 24% and 3% for the Company's fish oil and fish meal, respectively.

The Company recorded gross profit of $98.9 million, or 27.5% as a percentage of revenues, for the year ended December 31 2015, versus gross profit of $77.6 million, or 25.1% as a percentage of revenues, for the prior year. The increase in gross profit as a percentage of revenues was due to improved results from both the animal and human nutrition segments, partially offset by a decrease in the proportion of revenues attributable to the animal nutrition segment.  Animal segment gross profit as a percentage of revenues increased from 29.8% to 36.8%, and human nutrition gross profit as a percentage of revenues increased from 7.7% to 12.8%.

SG&A for the year ended December 31, 2015 increased $10.3 million to $44.1 million compared to the prior year, largely as a result of the Bioriginal acquisition.

The effective tax rate was 37.9% for the year ended December 31, 2015 compared to 38.9% in the prior year.

Net income for the year ended December 31, 2015 was $24.0 million ($1.07 per diluted share) compared to $18.5 million ($0.85 per diluted share) for the prior year.  Excluding adjustments for certain items, adjusted net income for the year ended December 31, 2015 would have been $33.4 million ($1.50 per diluted share) compared to $29.9 million ($1.37 per diluted share) for the prior year.

Adjusted EBITDA totaled $79.6 million for the year ended December 31, 2015, an increase from $70.1 million for last year.

Balance Sheet
Total debt decreased $11.1 million from $35.2 million on December 31, 2014 to $24.1 million on December 31, 2015.  Stockholders' equity increased $29.3 million to $295.2 million as of December 31, 2015 compared to $265.9 million as of December 31, 2014. 

Conference Call Information
Omega Protein will host a conference call on its fourth quarter and full year 2015 financial results at 8:30 a.m., Eastern Time, on Thursday, March 10, 2016. 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 and the prepared remarks will be available beginning shortly after the conclusion of the call at www.omegaprotein.com and will be available for 30 days. A telephonic playback will be available from 11:30 a.m. ET, March 10, 2016, through March 24, 2016. Participants can dial (877) 870-5176 in North America, and international listeners may dial (858) 384-5517. The password is 13630606.

About Omega Protein Corporation
Omega Protein Corporation (NYSE: OME) is a century old nutritional product company that develops, produces and delivers healthy products throughout the world to improve the nutritional integrity of foods, dietary supplements and animal feeds. Omega Protein's mission is to help people lead healthier lives with better nutrition through sustainably sourced ingredients such as highly-refined specialty oils, specialty protein products and nutraceuticals.

The Company operates eight manufacturing facilities located in the United States, Canada and Europe. The Company also operates more than 30 vessels to harvest menhaden, a fish abundantly found in the Atlantic Ocean and Gulf of Mexico.

For More Information
Visit Omega Protein at www.omegaprotein.com, follow us on Twitter at https://twitter.com/omegaprotein, or find us on LinkedIn at https://www.linkedin.com/company/omega-protein-inc.

Forward Looking Statements
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: The statements contained in this press release that are not historical facts are forward-looking statements that involve a number of risks and uncertainties. Forward-looking information may be based on projections, predictions and estimates. Some statements in this press release may be forward-looking and use words like "may," "may not," "believes," "do not believe," "expects," "do not expect," "anticipates," "do not anticipate," "see," "do not see," "should," or other similar expressions. The actual results of future events described in any of these forward-looking statements could differ materially from those stated in the forward-looking statements. Important factors that could cause actual results to be materially different from those forward-looking statements include, among others: (1) the Company's ability to meet its raw material requirements through its annual menhaden harvest, which is subject to fluctuations due to natural conditions over which the Company has no control, such as varying fish population, fish oil yields, adverse weather conditions, natural and other disasters and disease; (2) the impact of laws and regulations that may be enacted that may restrict the Company's operations or the sale of the Company's products or increase the cost of compliance; (3) the impact of worldwide supply and demand relationships on prices for the Company's products; (4) the Company's expectations regarding demand and pricing for its products proving to be incorrect, and the effect of forward sales of products on the Company's financial results; (5) fluctuations in the Company's quarterly operating results due to the seasonality of the Company's business, estimates of standard cost for inventory and subsequent adjustments to such costs, and the Company's deferral of inventory sales based on worldwide prices for competing products; (6) the Company's ability to realize the anticipated benefits from its acquisitions in the human nutrition business, and specifically, to integrate successfully its acquisitions in the human nutrition segment; (7) the Company's expectations regarding Bioriginal, its future prospects and the dietary supplement market or the human health and wellness segment generally, proving to be incorrect; (8) increase in the price and shortage of key raw materials that could adversely affect Bioriginal's businesses; and (9) the cost of compliance or potential restrictions on sales caused by laws and regulations regarding fish meal or oil importation into foreign jurisdictions; (10) business disruptions, costs and future events related to any proxy contests initiated by any activist stockholders; (11) the impact of the announcement of the Board's review of strategic alternatives, as well as any strategic alternatives that may be pursued, on the Company's business, including its financial and operating results, or its employees, suppliers and customers; (12) the impact of the Company's decision to exit the concentrated oils manufacturing business and dispose of its oil concentration facility on the Company's business, financial condition or results of operation, including the amount of any losses that may be incurred in connection therewith and (13) the ability of the Company to identify, evaluate and complete any strategic alternative.  Other factors are described in further detail in the Company's filings with the Securities and Exchange Commission, including its reports on Form 10-K, Form 10-Q and Form 8-K.  Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking information whether as a result of new information, future events or otherwise.

The tables below present information about reported segments for the three months ended December 31, 2015 and 2014 (in thousands).  All cash and cash equivalent balances have been included in the identifiable assets of the unallocated segment.

The tables below present information about reported segments for 2015 and 2014 (in thousands).  All cash and cash equivalent balances have been included in the identifiable assets of the unallocated segment.

Adjusted EBITDA to Net Income Reconciliation
The following tables (in thousands) provides a reconciliation of Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014 and the years ended December 31, 2015 and 2014:

Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, impairment of goodwill and intangible assets, loss related to plant closure, acquisition post-closing consideration, acquisition costs and inventory adjustment and loss on disposal of assets. The Company has reported Adjusted EBITDA because it believes Adjusted EBITDA is a measure commonly reported and widely used by investors as an indicator of a Company's operating performance. The Company believes Adjusted EBITDA assists such investors in comparing a company's performance on a consistent basis. Adjusted EBITDA is not a calculation based on GAAP and should not be considered an alternative to net income in measuring our performance or used as an exclusive measure of cash flow because it does not consider the impact of working capital changes, capital expenditures, debt principal reductions and other sources and uses of cash which are disclosed in our consolidated statements of cash flows. Investors should carefully consider the specific items included in our computation of Adjusted EBITDA. While Adjusted EBITDA has been disclosed herein to permit a more complete comparative analysis of our operating performance relative to other companies, investors should be cautioned that Adjusted EBITDA as reported by us may not be comparable in all instances to Adjusted EBITDA as reported by us or by other companies. Adjusted EBITDA amounts may not be fully available for management's discretionary use, due to certain requirements to conserve funds for capital expenditures, debt service and other commitments, and therefore management relies primarily on our GAAP results. Adjusted EBITDA is not intended to represent net income as defined by GAAP and such information should not be considered as an alternative to net income, cash flow from operations or any other measure of performance prescribed by GAAP in the United States.

Adjusted Net Income and Diluted Earnings Per Share to Net Income Reconciliation
The following tables (in thousands, except per share amounts) provides a reconciliation of Adjusted Net Income and Diluted Earnings Per Share, non-GAAP (Generally Accepted Accounting Principles) financial measures, to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended December 31, 2015 September 30, 2015 and December 31, 2014 and the years ended December 31, 2015 and 2014:

                                                                                                                                                  

Adjusted net income and Adjusted diluted earnings per share represent net income and diluted earnings per share without impairment of goodwill and intangible assets, loss related to plant closure, acquisition post-closing consideration, acquisition costs and inventory adjustment and loss on disposal of assets and taxes associated with these items. The Company has reported Adjusted net income and Adjusted diluted earnings per share because it believes these measures are widely used by investors as an indicator of a Company's operating performance. The Company believes Adjusted net income and Adjusted diluted earnings per share assist investors in comparing a company's performance on a consistent basis.  Adjusted net income and Adjusted diluted earnings per share are not calculations based on GAAP and should not be considered alternatives to net income or diluted earnings per share in measuring our performance. Investors should carefully consider the specific items included in our computation of Adjusted net income and Adjusted diluted earnings per share. While Adjusted net income and Adjusted diluted earnings per share have been disclosed herein to permit a more complete comparative analysis of our operating performance across time periods and relative to other companies, investors should be cautioned that these measures as reported by us may not be comparable in all instances to Adjusted net income and Adjusted diluted earnings per share as reported by us or by other companies. Adjusted net income and Adjusted diluted earnings per share are not intended to represent net income or diluted earnings per share as defined by GAAP and such information should not be considered as an alternative to net income, diluted earnings per share or any other measure of performance prescribed by GAAP in the United States.

Human Nutrition Segment Financial Information Reconciliation
The following table (in thousands) provides a breakdown of the total Human Nutrition Segment revenue, cost of sales and gross profit among concentrated menhaden oil products and tolling, dairy protein products and other products for the three months ended December 31, 2015 and the year ended December 31, 2015.

The Company has provided a breakdown of total Human Nutrition Segment revenue, cost of sales and gross profit among concentrated menhaden oil products, dairy protein products and other human nutrition products because it believes such a breakdown will provide investors with additional useful detail on the performance of the Human Nutrition Segment. 

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SOURCE Omega Protein Corporation