Omega Protein Announces Third Quarter 2016 Financial Results

Compared to the second quarter of 2016, third quarter gross profit decreased from $33.4 million to $33.0 million, but increased from 29.6% to 30.4% as a percentage of revenues.  The increase in gross profit as a percentage of revenues was due primarily to an improvement in the human nutrition segment.  Animal nutrition gross profit as a percentage of revenues increased from 37.4% to 37.5%.  Human nutrition gross profit as a percentage of revenues increased from 9.2% to 12.6% primarily as a result of a corresponding increase for specialty oils, due in part to shifts in product mix.

Selling, general and administrative expense, including research and development expense ("SG&A"), for the third quarter decreased to $10.4 million compared to $12.4 million in the third quarter of 2015 and $11.8 million in the second quarter of 2016.  The decreases were primarily due to reduced labor expenses and professional fees.

Plant closure expenses were $0.7 million in the third quarter of 2016 compared to $0.6 million in the third quarter of 2015 and $1.0 million in the second quarter of 2016. The third quarter of 2016 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 Batavia, Illinois oil concentration facility.

Gain on foreign currency related to Bioriginal Food & Science ("Bioriginal") was $0.2 million for the third quarter of 2016 compared to a $0.8 million loss in the third quarter of 2015 and a $0.1 million gain in the second quarter of 2016.

Net income for the third quarter of 2016 was $14.6 million ($0.64 per diluted share) compared to $10.6 million ($0.47 per diluted share) in the same period last year and $5.7 million ($0.25 per diluted share) in the second quarter of 2016. Excluding adjustments for certain items, adjusted net income for the third quarter of 2016 was $15.2 million ($0.67 per diluted share), compared to $14.8 million ($0.66 per diluted share) in the same period last year and $14.1 million ($0.62 per diluted share) for the second quarter of 2016. 

Adjusted EBITDA totaled $29.0 million for the third quarter of 2016, compared to $28.7 million for the same period last year and $28.6 million for the second quarter of 2016.

Nine Month 2016 Results

Revenues in the first nine months of 2016 increased 11% to $306.2 million compared to $277.0 million for the nine months ended September 30, 2015. The increase in revenues was due to a $42.6 million increase in animal nutrition revenues partially offset by a $13.4 million decrease in human nutrition revenues. The increase in animal nutrition revenues was primarily due to increased sales volumes of 29% and 50% for fish meal and fish oil, respectively, partially offset by decreased sales prices of 4% and 11% for fish meal and fish oil, respectively. The decrease in fish oil sales prices is due in part to a change in the product mix of higher priced refined and lower priced crude oils.  The decrease in human nutrition revenues was primarily due to a decrease in sales of specialty oils and other nutraceutical ingredients, partially offset by an increase in sales of protein products.

The Company recorded gross profit of $91.3 million, or 29.8% as a percentage of revenues, for the first nine months of 2016, versus gross profit of $75.8 million, or 27.4% as a percentage of revenues, for the first nine months of 2015. The increase in gross profit as a percentage of revenues was due to an improvement in the animal nutrition segment from 36.0% to 38.2%, and an increase in the proportion of revenues attributable to the animal nutrition segment, partially offset by a reduction in human nutrition gross profit as a percentage of revenues from 14.2% to 11.5%.

Net income for the nine months ended September 30, 2016 was $28.6 million ($1.27 per diluted share) compared to $21.0 million ($0.95 per diluted share) for the same period last year. Excluding adjustments for certain items, net income for the nine months ended September 30, 2016 was $38.3 million ($1.70 per diluted share) compared to $27.0 million ($1.21 per diluted share).

Adjusted EBITDA totaled $78.1 million for nine months ended September 30, 2016, compared to $60.7 million for the same period last year.

Balance Sheet

Total debt decreased $19.1 million from $24.1 million on December 31, 2015 to $5.0 million on September 30, 2016.  Stockholders' equity increased $36.2 million to $331.4 million as of September 30, 2016 compared to $295.2 million as of December 31, 2015.

ASMFC Decision to Increase 2017 Atlantic Menhaden Quota

In October 2016, the Atlantic States Marine Fisheries Commission (ASMFC) voted to increase the annual harvest quota by 6.45 percent for the Atlantic menhaden fish meal/oil fisheries and bait fisheries.  The decision to increase the quota is based on the continued strength of the Atlantic Menhaden stock as it expands in its range up and down the Atlantic coastline. The new harvest quota is expected to take effect for the 2017 Atlantic menhaden fishing season.

The increase brings the total annual amount of Atlantic menhaden that can be landed by Omega Protein and independent bait fisherman to 200,000 metric tons. The Company also expects that Virginia will maintain its 85 percent share of the coastwide allocation for its fish meal/oil fisheries and bait fisheries for the 2017 season.  If Virginia maintains its current allocation split between fish meal/oil fisheries and bait fisheries, then the Company believes that in 2017 the Company's Atlantic fish catch limit will be approximately 152,000 metric tons.

Conference Call Information

Omega Protein will host a conference call on its third quarter and nine month financial results at 8:30 a.m. Eastern Time on Thursday, November 3, 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 in North America 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, November 3, 2016, through November 17, 2016. Participants can dial (877) 870-5176 in North America, and international listeners may dial (858) 384-5517. The password is 13647205.

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 seven 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; (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) the resolution of the U.S. Attorney's criminal investigation with respect to the Company's waste water discharge practices and the resulting impact on the Company's 2013 plea agreement and terms of probation and the Company's business, reputation, results of operations and financial condition; (11) the resolution of a Department of Justice False Claims Act investigation and the resulting impact on the Company's business, reputation, results of operations and financial condition ; (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 and results of operations, including the amount of losses that may be incurred in connection therewith; (13) the ability of the Company to purchase shares of its common stock under the share repurchase program due to changes in stock price or other conditions; and (14) the Company's expectations regarding the ASMFC's 2017 harvest quota decision, including timing and allocations among ASMFC member states and user groups.  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.

OMEGA PROTEIN CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and par value amounts)
		September 30, 2016				December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents		$	34,235			$	661
Receivables, net			46,998				40,489
Inventories			111,868				119,994
Deferred tax asset, net			3,305				3,422
Assets held for sale			500				—
Prepaid expenses and other current assets			4,587				4,496
Total current assets			201,493				169,062
Property, plant and equipment, net			182,695				176,089
Goodwill			26,643				38,127
Other intangible assets, net			18,683				20,107
Other assets, net			5,639				3,818
Total assets		$	435,153			$	407,203
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt		$	1,497			$	1,214
Accounts payable			11,401				15,876
Accrued liabilities			50,423				33,254
Total current liabilities			63,321				50,344
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