Omega Protein Corporation
Nov 4, 2015
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Omega Protein Announces Third Quarter 2015 Financial Results

HOUSTON, Nov. 4, 2015 /PRNewswire/ -- 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.

Omega Protein Corporation Logo.

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% primarily 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 revenues increased from 30.2% to 36.0%, and human nutrition gross profit as a percentage of revenues increased from 6.6% to 14.2%.

SG&A for the nine months ended September 30, 2015 increased $8.9 million to $33.4 million compared to the nine months ended September 30, 2014, primarily as a result of the Bioriginal acquisition.

The effective tax rate was 35.2% for the nine months ended September 30, 2015 compared to 37.0% for the nine months ended September 30, 2014.

Net income for the nine months ended September 30, 2015 was $21.0 million ($0.95 per diluted share) compared to $15.3 million ($0.70 per diluted share) for the same period last year.  Excluding adjustments for certain items, adjusted net income for the nine months ended September 30, 2015 would have been $27.0 million ($1.21 per diluted share) compared to $22.1 million ($1.02 per diluted share).

Adjusted EBITDA totaled $60.7 million for the nine months ended September 30, 2015, an increase from $50.4 million for the same period last year.

Balance Sheet
The Company's September 30, 2015 cash balance decreased $0.6 million from December 31, 2014 to $0.8 million.  Total debt decreased $8.7 million from $35.2 million on December 31, 2014 to $26.5 million on September 30, 2015.  Stockholders' equity increased $28.0 million to $293.9 million as of September 30, 2015 compared to $265.9 million as of December 31, 2014

Conference Call Information
Omega Protein will host a conference call on its third quarter 2015 financial results at 8:30 a.m., Eastern Time, on Thursday, November 5, 2015. 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 (855) 327-6837 domestically or (631) 891-4304 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 5, 2015, through November 19, 2015. Participants can dial (877) 870-5176 in North America, and international listeners may dial (858) 384-5517. The password is 116801.

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 and essential fatty acids, 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 Nutegrity or Bioriginal, their 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 and Nutegrity'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.  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 SHEET

(In thousands, except par value amounts)




September 30,

2015


December 31,

2014

ASSETS







 Current assets:







          Cash and cash equivalents


$

783


$

1,430

          Receivables, net



43,271



36,621

          Inventories



121,626



97,513

          Deferred tax asset, net



2,349



1,871

          Prepaid expenses and other current assets



5,080



4,936








                Total current assets



173,109



142,371

Property, plant and equipment, net



180,068



169,932

Goodwill



38,271



42,501

Other intangible assets, net



21,198



23,002

Other assets, net



4,469



2,309

                Total assets


$

417,115


$

380,115








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







         Current maturities of long-term debt


$

3,179


$

14,741

         Accounts payable



17,682



21,047

         Accrued liabilities



45,622



23,216

                Total current liabilities



66,483



59,004

Long-term debt, net of current maturities



23,319



20,486

Deferred tax liability, net



24,090



25,949

Pension liabilities, net



4,258



5,375

Other long-term liabilities



5,097



3,419

                Total liabilities



123,247



114,233


Commitments and contingencies







Stockholders' equity:







        Preferred stock, $0.01 par value; 10,000,000 authorized shares; none

           issued



 



 

        Common Stock, $0.01 par value; 80,000,000 authorized shares;

          22,296,979 and 21,587,751 shares issued and 22,221,957 and

          21,527,319 shares outstanding at September 30, 2015 and

          December 31, 2014, respectively



 

217



 

 

210

        Capital in excess of par value



149,096



141,855

        Retained earnings



156,315



135,268

        Treasury stock, at cost  - 75,022 and 60,432 shares at September 30,

        2015 and December 31, 2014, respectively



 

(753)



(595)

        Accumulated other comprehensive loss



(11,007)



(10,856)

                Total stockholders' equity



293,868



265,882

                    Total liabilities and stockholders' equity


$

417,115


$

380,115

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2015


2014


2015


2014

Revenues

$

112,216

$

70,764

$

277,015

$

206,177

Cost of sales


77,023


56,586


201,196


151,082

Gross profit


35,193


14,178


75,819


55,095










Selling, general, and administrative expense


11,659


10,216


31,072


22,835

Research and development expense


751


608


2,295


1,636

Impairment of intangible assets


3,960



3,960


Loss related to plant closure


630


1,543


1,917


5,482

Loss on disposal of assets


949


12


1,283


245

Operating income


17,244


1,799


35,292


24,897

Interest income


2


4


6


17

Interest expense


(371)


(365)


(1,198)


(747)

Gain (loss) on foreign currency


(808)


272


(1,270)


272

Other expense, net


(137)


(39)


(341)


(213)

Income before income taxes


15,930


1,671


32,489


24,226

Provision for income taxes


5,356


1,012


11,442


8,963

Net income


10,574


659


21,047


15,263

Other comprehensive income (loss):









Foreign currency translation adjustment net of tax (expense) benefit of ($36), $243, $670 and $243, respectively


66


(449)


(1,245)


(449)

Energy swap adjustment, net of tax (expense) benefit of $45, $204, ($274) and $224, respectively


(84)


(379)


509


(416)

Pension benefits adjustment, net of tax expense of $105, $80, $315 and $240, respectively


195


149


585


446

Comprehensive income (loss)

$

10,751

$

(20)

$

20,896

$

14,844

Basic earnings per share

$

0.48

$

0.03

$

0.97

$

0.73

Weighted average common shares outstanding


21,399


20,637


21,173


20,474

Diluted earnings per share

$

0.47

$

0.03

$

0.95

$

0.70

Weighted average common shares and potential common share equivalents outstanding


21,797


21,258


21,626


21,122

 

OMEGA PROTEIN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)




Nine Months Ended



September 30,



2015


2014

Cash flows from operating activities:





       Net income

$

21,047

$

15,263

       Adjustments to reconcile net income to net

          cash provided by operating activities:





        Depreciation and amortization


18,125


16,072

        Loss related to plant closure


  ―


2,055

        Loss (gain) on disposal of assets


1,283


245

        Impairment of intangible assets


3,960


 ―

        Provisions for losses on receivables


36


36

        Share based compensation


1,722


1,688

        Deferred income taxes


(1,508)


(936)

Unrealized loss on foreign currency fluctuations,   net


1,270


 

(272)

        Changes in assets and liabilities:





                 Receivables


(7,359)


(9,861)

                   Inventories


(24,446)


6,331

                 Prepaid expenses and other current assets


(528)


(602)

                 Other assets


(2,265)


1,454

                 Accounts payable


(3,805)


(1,880)

                 Accrued liabilities


23,673


9,030

                 Pension liability, net


(532)


(1,063)

                 Other long term liabilities


1,863


(21)

                         Net cash provided by operating

                             activities


 

32,536


 

37,539

Cash flows from investing activities:





        Proceeds from disposition of assets


55


257

        Acquisition of Bioriginal, net of cash acquired


              ―


(46,388)

        Capital expenditures


(29,086)


(36,254)

                         Net cash used in investing activities


(29,031)


(82,385)

Cash flows from financing activities:





        Principal payments of long-term debt


(41,701)


(14,776)

        Proceeds from long-term debt


33,151


24,000

        Debt issuance costs


(970)


              ―

        Purchase treasury stock at cost


(158)


(119)

        Proceeds from stock options exercised


4,463


2,245

        Excess tax benefit of stock options exercised


1,063


1,151

                         Net cash (used in) provided by financing

                             activities


(4,152)


12,501

Net decrease in cash and cash equivalents


(647)


(32,345)

Cash and cash equivalents at beginning of year


1,430


34,059

Cash and cash equivalents at end of period

$

783

$

1,714

The tables below present information about reported segments for the three months ended September 30, 2015 and 2014 (in thousands).  All cash and cash equivalent balances have been included in the identifiable assets of the unallocated segment. 

2015


Animal Nutrition


Human Nutrition


Unallocated


Total

Revenue (1)


$  73,169


$  39,047


  $        ―


$ 112,216

Cost of sales


44,449


32,574


            ―


77,023

Gross profit


28,720


6,473


            ―


35,193

Selling, general and administrative expense

  (including research and development)


767


5,170


6,473


12,410

Impairment of intangible assets


             ―


3,960


            ―


3,960

Loss related to plant closure


630


          ―


            ―


630

(Gain) loss on disposal of assets


(19)


968


            ―


949

Operating income (loss)


$  27,342


$     (3,625)


$   (6,473)


$   17,244

Depreciation and amortization


$     4,575


$     1,510


$        129


$     6,214

Identifiable assets


$ 244,791


$ 170,801


$     1,523


$ 417,115

Capital expenditures


$     5,846


$     1,218


$        992


$     8,056



(1)

Excludes revenue from internal customers of $0.8 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

2014


Animal Nutrition


Human Nutrition


Unallocated


Total

Revenue (2)


$  55,123


$   15,641


  $        ―


$  70,764

Cost of sales


40,920


15,666


            ―


56,586

Gross profit (loss)


14,203


(25)


            ―


14,178

Selling, general and administrative expense

  (including research and development)


540


2,985


7,299


10,824

Loss related to plant closure


1,543


          ―


            ―


1,543

Loss on disposal of assets


12


          ―


             ―


12

Operating income (loss)


$  12,108


$  (3,010)


$   (7,299)


$    1,799

Depreciation and amortization


$     4,332


$     1,136


$         269


$    5,737

Identifiable assets


$ 233,239


$ 167,838


$      2,579


$ 403,656

Capital expenditures


$     4,179


$     7,884


$         923


$   12,986



(2)

Excludes revenue from internal customers of $0.4 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

The tables below present information about reported segments for the nine months ended September 30, 2015 and 2014 (in thousands).

2015


Animal Nutrition


Human Nutrition


Unallocated


Total

Revenue (3)


$  166,869


$ 110,146


  $        ―


$ 277,015

Cost of sales


106,739


94,457


            ―


201,196

Gross profit


60,130


15,689


            ―


75,819

Selling, general and administrative expense

  (including research and development)


1,860


15,286


16,221


33,367

Impairment of intangible assets


            ―


3,960


               ―


3,960

Loss related to plant closure


1,917


            ―


            ―


1,917

Loss on disposal of assets


315


968


            ―


1,283

Operating income (loss)


$  56,038


$   (4,525)


$  (16,221)


$   35,292

Depreciation and amortization


$   13,224


$    4,537


$        364


$   18,125

Identifiable assets


$ 244,791


$ 170,801


$     1,523


$ 417,115

Capital expenditures


$   23,335


$    3,551


$     2,200


$   29,086



(3)

Excludes revenue from internal customers of $1.8 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

 

2014


Animal Nutrition


Human Nutrition


Unallocated


Total

Revenue (4)


$ 175,657


$  30,520


  $        ―


$ 206,177

Cost of sales


122,588


28,494


            ―


151,082

Gross profit


53,069


2,026


            ―


55,095

Selling, general and administrative expense

  (including research and development)


1,729


6,973


15,769


24,471

Loss related to plant closure


5,482


            ―


            ―


5,482

Loss on disposal of assets


54


191


            ―


245

Operating income (loss)


$  45,804


$  (5,138)


$ (15,769)


$   24,897

Depreciation and amortization


$   13,074


$    2,536


$        462


$   16,072

Identifiable assets


$ 233,239


$167,838


$     2,579


$ 403,656

Capital expenditures


$   14,537


$  20,785


$        932


$   36,254



(4)

Excludes revenue from internal customers of $1.8 million for fish oil that was transferred from the animal nutrition segment to the human nutrition segment at cost.

Adjusted EBITDA to Net Income Reconciliation

The following table (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 September 30, 2015, June 30, 2015 and September 30, 2014 and the nine months ended September 30, 2015 and 2014:



Three Months Ended



September 30,

 2015


June 30,

 2015


September 30,

 2014

Net Income

$

10,574

$

8,804

$

659

Reconciling items:







   Interest expense


265


434


334

   Income tax provision


5,356


5,108


1,012

   Depreciation and amortization (1)


6,214


6,033


5,737

   Impairment of intangible assets (2)


3,960


            ―


            ―

   Loss related to plant closure (3)


630


649


1,543

   Acquisition post-closing consideration (2)


759


577


203

   Acquisition costs and inventory adjustment (4)


            ―


            ―


3,558

   Loss on disposal of assets (1)


949


27


12

Adjusted EBITDA

$

28,707

$

21,632

$

13,058

                                                                                                                                      



Nine Months Ended



September 30,

 2015


September 30,

 2014

Net Income

$

21,047

$

15,263

Reconciling items:





   Interest expense


1,031


655

   Income tax provision


11,442


8,963

   Depreciation and amortization (1)


18,125


16,072

   Impairment of intangible assets (2)


3,960


           ―

   Loss related to plant closure (3)


1,917


5,482

   Acquisition post-closing consideration (2)


1,910


203

   Acquisition costs and inventory adjustment (4)


            ―


3,558

   Loss on disposal of assets (1)


1,283


245

Adjusted EBITDA

$

60,715

$

50,441



(1)

See segment disclosures for allocation among segments.

(2)

Relates to human nutrition segment.

(3)

Relates to animal nutrition segment.

(4)

$830 relates to human nutrition segment and $2,728 relates to unallocated.

Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, impairment of 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 table (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 September 30, 2015 June 30, 2015 and September 30, 2014 and the nine months ended September 30, 2015 and 2014:



Three Months Ended



September 30,

 2015


June 30,

 2015


September 30,

 2014

Net Income

$

10,574

$

8,804

$

659

Reconciling items:







     Income tax provision prior to adjustments


5,356


5,108


1,012

     Impairment of intangible assets


3,960


              ―


               ―

     Loss related to plant closure


630


649


1,543

     Acquisition post-closing consideration


759


577


203

     Acquisition costs and inventory adjustment


              ―


              ―


3,558

     Loss on disposal of assets


949


27


12

Adjusted income before income taxes


22,228


15,165


6,987

     Provision for income taxes after adjustments


7,474


5,568


2,176

Adjusted net income

$

14,754

$

9,597

$

4,811

Adjusted diluted earnings per share

$

0.66

$

0.43

$

0.22

                                                                                                                                       




Nine Months Ended




September 30,

 2015


September 30,

 2014

Net Income


$

21,047

$

15,263

Reconciling items:






     Income tax provision prior to adjustments



11,442


8,963

     Impairment of intangible assets



3,960


               ―

     Loss related to plant closure



1,917


5,482

     Acquisition post-closing consideration



1,910


203

     Acquisition costs and inventory adjustment



               ―


3,558

     Loss on disposal of assets



1,283


245

Adjusted income before income taxes



41,559


33,714

     Provision for income taxes after adjustments



14,581


11,617

Adjusted net income


$

26,978

$

22,097

Adjusted diluted earnings per share


$

1.21

$

1.02

Adjusted net income and Adjusted diluted earnings per share represent net income and diluted earnings per share without impairment of 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.

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SOURCE Omega Protein Corporation

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