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Omega Protein Announces Third Quarter 2015 Financial Results

The following excerpt is from the company's SEC filing.

HOUSTON, TX – November 4, 2015 – Omega Protein Corporation (NYSE:OME), a nutritional product company and a leading integrated provider of specialty oils, essential fatty acids and specialty protein products, today reported financial results for the third quarter ended September 30, 2015.

Third Quarter Highlights

Revenues:

$112.2 million for the quarter, compared to $70.8 million in the same period a year ago

Gross profit margin:

31.4% for the quarter, compared to 20.0% in the same period a year ago

Net income:

$10.6 million, or $14.8 million on an adjusted basis for the quarter, compared to $0.7 million, or $4.8 million on an adjusted

basis, in the same period a year ago

Earnings per diluted share:

$0.47, or $0.66 on an adjusted basis for the quarter, compared to $0.03, or $0.22 on an adjusted basis, in the same period a year ago

Adjusted EBITDA:

$28.7 million for the quarter, compared to $13.1 million in the same period a year ago

“We are pleased to report the highest quarterly revenues and Adjusted EBITDA in the Company’s history,” commented Bret Scholtes, Omega Protein’s President and Chief Executive Officer. “Our solid animal nutrition profitability was fueled by strong season-to-date fish catch and pricing for fish meal and fish oil that remains well above levels seen a few years ago. In addition, our ongoing efforts to improve results in the human nutrition business resulted in growth in both revenues and gross margin. Our team remains committed to creating additional value for shareholders through further integration and the disciplined pursuit of organic growth opportunities.”

Third Quarter 2015 Results

The Company's revenues increased 59% from $70.8 million in the same period last year to $112.2 million. This increase was due to growth in human nutrition revenues of $23.4 million and an $18.0 million increase in animal nutrition revenues. The increase in human nutrition revenues was largely due to the addition of Bioriginal Food & Science Corp. (“Bioriginal”), which was acquired in September 2014. The increase in animal nutrition revenues was primarily due to increased sales volumes of 38% and 17% for the Company’s fish meal and fish oil, respectively, and increased sales prices of 2% and 1% for the Company’s fish meal and fish oil, respectively. The composition of revenues by nutritional product line for the third quarter of 2015 was 44% fish meal, 35% dietary supplements, 20% fish oil, and 1% fish solubles and other.

Third quarter of 2015 revenues increased 20% from $93.2 million in the second quarter of 2015 to $112.2 million. This increase was due to a $16.3 million increase in animal nutrition revenues and a $2.7 million increase in human nutrition revenues. The increase in animal nutrition revenues was primarily due to higher fish meal and fish oil volumes of 66% and 14%, respectively, partially offset by lower fish meal and fish oil sales prices of 8% and 15%, respectively.

The Company reported gross profit of $35.2 million, or 31.4% as a percentage of revenues, for the third quarter of 2015, versus $14.2 million, or 20.0% as a percentage of revenues, in the third quarter of 2014. The increase in gross profit as a percentage of revenues was due to improved results from both the animal and human nutrition segments. Animal nutrition gross profit as a percentage of revenues increased from 25.8% to 39.3%, 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 (loss) as a percentage of revenues increased from (0.1%) to 16.6% due primarily to the addition of Bioriginal as well as improved results from protein products and other Omega-3 fish oil ingredients.

Compared to the second quarter of 2015, third quarter gross profit increased from $25.8 million, or 27.7% as a percentage of revenues, to $35.2 million, or 31.4% as a percentage of revenues, due to increases in both segments. Animal nutrition gross profit as a percentage of revenues increased from 36.7% to 39.3% p

rimarily as a result of decreased cost per unit of sales. Human nutrition segment gross profit as a percentage of revenues increased from

13.7% to 16.6% due to improved results from Bioriginal, protein products, and other Omega-3 and nutraceutical ingredients.

Selling, general and administrative expense, including research and development expense (“SG&A”), for the third quarter increased $1.6 million to $12.4 million compared to the third quarter of 2014, primarily as a result of the Bioriginal acquisition. SG&A increased $1.6 million from $10.8 million in the second quarter of 2015, due primarily to increased labor, professional services and other business expenses.

The Company recorded impairment expenses in the third quarter of 2015 of $4.0 million related to the goodwill and certain other intangible assets of the InCon and Cyvex reporting unit in the human nutrition segment. There were no impairment charges recognized in the third quarter of 2014.

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. In conjunction with the closure, the Company incurred charges of $0.6 million and $1.5 million in the third quarters of 2015 and 2014, respectively.

Loss on foreign currency related to Bioriginal was $0.8 million for the third quarter of 2015 compared to gain on foreign currency of $0.3 million in the third quarter of 2014 and a gain of foreign currency of $0.1 million in the second quarter of 2015.

The third quarter of 2015 effective tax rate was 33.6% compared to 60.6% in the third quarter of 2014 and 36.7% in the second quarter of 2015. The third quarter of 2014 effective tax rate reflected non-deductible expenses related to the acquisition of Bioriginal.

Net income for the third quarter of 2015 was $10.6 million ($0.47 per diluted share) compared to $0.7 million ($0.03 per diluted share) in the same period last year and $8.8 million ($0.40 per diluted share) in the second quarter of 2015. Excluding adjustments for certain items, adjusted net income for the third quarter of 2015 would have been $14.8 million ($0.66 per diluted share), compared to $4.8 million ($0.22 per diluted share) in the same period last year and $9.6 million ($0.43 per diluted share) for the second quarter of 2015.

Adjusted EBITDA totaled $28.7 million for the third quarter of 2015, compared to $13.1 million for the same period last year and $21.6 million for the second quarter of 2015.

Nine Month 2015 Results

Revenues in the first nine months of 2015 increased 34% to $277.0 million compared to revenue of $206.2 million for the nine months ended September 30, 2014. The increase in revenues was due to a $79.6 million increase in human nutrition revenues partially offset by an $8.8 million decrease in animal nutrition revenues. The increase in human nutrition revenues was primarily due to the addition of Bioriginal. The decrease in animal nutrition revenues was primarily due to decreased sales volumes of 38% for the Company’s fish oil, partially offset by increased sales prices of 25% and 6% for the Company’s fish oil and fish meal, respectively.

The Company recorded gross profit of $75.8 million, or 27.4% as a percentage of revenues, for the first nine months of 2015, versus gross profit of $55.1 million, or 26.7% as a percentage of revenues, for the first nine months of 2014. 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...


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