Omega Protein Corporation Sends Letter To Stockholders Highlighting Strong Performance Under Current Strategy

HOUSTON, May 9, 2016 /PRNewswire/ -- Omega Protein Corporation (NYSE: OME) (the "Company" or "Omega"), today issued a letter from the Company's Board of Directors ("Board") to its stockholders highlighting the Company's significant progress on its strategic plan to deliver maximum value to stockholders.  The Board also announced that it has nominated David H. Clarke, one of the candidates proposed by Wynnefield Capital Management, LLC, for election at this year's annual meeting, despite Wynnefield's refusal to negotiate a settlement with customary terms. The letter reiterates the Board's commitment to sound corporate governance policies and practices.

The letter from the Board to stockholders reads as follows:

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Dear Fellow Stockholders:

At Omega's upcoming annual meeting of stockholders, you will face an important decision about the future of our Company and the value of your investment.  You will be asked to choose between your Board director candidates and nominees handpicked by Wynnefield Capital Management, LLC, an activist hedge fund.  Wynnefield has refused to agree to a settlement on customary terms that would avoid a costly proxy contest.  Instead, Wynnefield has been inconsistent in its demands and insists on an approach that we believe would unwind much of the Company's recent progress.

STOCKHOLDERS HAVE BEEN REWARDED BY OMEGA'S CURRENT STRATEGY

Your Board has overseen a strategy to expand sales, increase profitability and position the Company to capitalize on favorable macroeconomic trends, drive long-term growth and strengthen our product portfolio. Your Board has also presided over significant growth in Omega's market value and total revenue.

The Company has generated exceptional returns in the four years since Bret Scholtes was appointed Chief Executive Officer. From Mr. Scholtes' appointment on December 30, 2011 to May 6, 2016, Omega's stock price has increased 176% as compared to 50% for the Russell 2000 and 64% for the S&P 500.  The following table further demonstrates the Company's outstanding performance during Mr. Scholtes' tenure as CEO (dollars in thousands except per share amounts):

We have diversified our business and believe we have positioned the Company for long-term growth. We now are confident that we have all the pieces in place and are poised to recognize the opportunities presented by Omega's new platform. Now is not the time to exit the Human Nutrition business, as called for by Wynnefield, when consumer and market trends so greatly favor this business line.

Your vote FOR our director nominees will help ensure that you, as an Omega stockholder, have a Board of Directors focused on sustaining the Company's positive momentum and creating lasting value for all stockholders.

BOARD ACTIONS DEMONSTRATE COMMITMENT TO STRONG GOVERNANCE, OPENNESS TO ALL IDEAS FOR VALUE CREATION

While we believe Omega's performance demonstrates the success of the Company's strategic plan, the Board recently conducted a comprehensive evaluation of strategic alternatives in consultation with its financial advisor to ensure that it was carefully considering all opportunities for value creation. The review concluded that the continued execution of the Company's strategy to leverage its core nutritional capabilities to supply customers in the feed, food and supplement sectors, combined with a focus on growth and efficiency initiatives, represents the best path forward to maximize value for all stockholders. In addition, the Board authorized a share repurchase program that demonstrates the Board's confidence in continuing to execute on its strategic plan. On the first trading day after we announced the results of the strategic review, Omega's stock price rose in heavy trading volume.

Other recent actions similarly reveal your Board's commitment to sound corporate governance policies and practices and openness to all ideas for value creation:

• One of the Board's nominees for election at this year's annual meeting is Mr. David H. Clarke, who was one of the director candidates proposed by Wynnefield Capital. The Board values independent ideas and believes Mr. Clarke's qualifications make him a good candidate. The Corporate Governance and Nominating Committee of the Board spent many hours interviewing and carefully considering each of Wynnefield's director candidates and believes that Mr. Clarke's experience and skills would be both complementary and additive to the Board. 
• The Board will be submitting to its stockholders a management proposal to implement a majority voting standard in uncontested director elections. Your Board believes that requiring directors to be elected by a majority of votes cast both ensures that only director nominees with broad acceptability among our stockholders will be elected and enhances the accountability of each elected director to our stockholders.

WYNNEFIELD HAS REFUSED OUR SETTLEMENT OFFER AND IS ON WHAT WE BELIEVE IS A DESTRUCTIVE PATH

Your Board remains committed to engaging in constructive dialogue with all of the Company's stockholders, including Wynnefield.  Unfortunately, Wynnefield has chosen to proceed with its proxy contest even though its actions could stymie the Company's long-term business plan and despite the conclusion of the Board's extensive strategic review that the actions called for by Wynnefield would not represent the best path to value creation for stockholders.

Consistent with our commitment to stockholder engagement, your Board has attempted to negotiate with Wynnefield to reach an agreement.  In late February, Wynnefield indicated that it would withdraw the proxy contest if the Company appointed two of Wynnefield's nominees.  In March, your Board made an offer to settle with Wynnefield in which, among other things, the Board would agree to immediately appoint Mr. Clarke to the Board of Directors in exchange for Wynnefield agreeing to withdraw its proxy contest and other customary settlement terms, including a standstill.  Unfortunately, in April, Wynnefield rejected our settlement offer and instead demanded the appointment of all three of its nominees even though Wynnefield's initial settlement proposal demanded only two board seats.  Wynnefield has refused to agree to any form of standstill.

Although Wynnefield has been unwilling to agree to a settlement on customary terms, the Board has decided to nominate Wynnefield's nominee, Mr. Clarke, for election to the Board.  After carefully evaluating and interviewing all of Wynnefield's nominees, the Board concluded that none of the other Wynnefield candidates offers the experience or capabilities to help lead the Company through the next phase of growth.  Moreover, the Board believes that giving Wynnefield more than one board seat would result in board representation that is highly disproportionate to Wynnefield's holdings.

Wynnefield has stated to the Company that it seeks to eventually acquire control of the Company and the Board so that it can jettison the Company's strategic plan by selling the Company or at least its Human Nutrition business without offering a long-term strategic plan of its own.  Paradoxically, Wynnefield has called for Omega to exit the Human Nutrition business at a time when we believe the Company is positioned to realize significant long-term value from it.  We have repeatedly asked Wynnefield to produce a tangible long-term strategic plan for our consideration, but Wynnefield to this date has failed to do that.

YOUR VOTE IS A VOTE TO ENSURE OUR STRATEGIC PROGRESS.  YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN MAKE YOUR VOICE HEARD

Omega is seeking your vote FOR what it believes are the THREE highly qualified and experienced director nominees:  Bret D. Scholtes, Gary J. Ermers and David H. Clarke. We are confident that these nominees, including Mr. Clarke who was recommended by Wynnefield, have the right mix of experience to help lead Omega into the future.  Your vote is critical to ensure Omega can continue its strategic transformation, with the goals of creating near-term value and driving even higher returns over the long-term for all stockholders.  

We invite you to share in this exciting opportunity to further our mission of providing healthy products for a healthy world and to watch our progress during the year ahead.  We appreciate your support.

Sincerely,

Board of Directors

Omega Protein Corporation

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 twelve months ended March 31, 2016 and the year ended December 31, 2011:

Adjusted EBITDA represents net income before interest expense, income tax, depreciation and amortization, Gulf Coast Claims Facility ("GCCF") and 2005 hurricane litigation settlement, impairment of goodwill and intangible assets, loss related to plant closure, acquisition post-closing consideration, acquisition costs and inventory adjustment, charge related to U.S. Attorney investigation and (gain) 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.

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