Overhill Farms Reports 2003 Operating Results
LOS ANGELES, Dec. 31 /PRNewswire-FirstCall/ -- Overhill Farms, Inc. , a value
added supplier of high quality frozen foods to foodservice, retail, airline, and
weight loss product customers, today announced operating results for our fiscal
year ended September 28, 2003.
For the fiscal year ended September 28, 2003, our net revenues decreased
$1,951,000 (1.4%) to $136,950,000 from $138,901,000 for the fiscal year ended
September 29, 2002. This net revenue decrease is represented by a decrease in
airline sales of $5,879,000 (16.7%) to $29,364,000 and in retail and other sales
of $3,472,000 (11.1%) to $27,783,000. These decreases were substantially offset
by increases of $7,400,000 (10.2%) to $79,803,000 from other industries served.
Gross profit for the fiscal year ended September 28, 2003 decreased $2,077,000
(10.7%) to $17,371,000 from $19,448,000 for the fiscal year ended September 29,
2002. Gross profit as a percentage of net revenues for the fiscal year ended
September 28, 2003 was 12.7% compared to 14.0% in the prior fiscal year. The
decrease in gross profit as a percentage of net revenues is due largely to
manufacturing-related inefficiencies encountered in connection with the start-up
of our new plant and the cost of moving and consolidating our manufacturing
operations into the new facility in fiscal year 2003. Improvements in gross
profit margins are anticipated as we further realize the cost benefits of the
plant consolidation.
Selling, general and administrative expenses for the fiscal year ended September
28, 2003 increased $3,365,000 to $15,515,000 (11.3% of net revenues) from
$12,150,000 (8.7% of net revenues) for the fiscal year ended September 29, 2002. Contributing factors to this increase in SG&A were increases in professional
fees, including accounting, audit and one time consulting fees related to the
April 2003 refinancing, compensation and related costs, bad debt expense due to
the bankruptcy of United Airlines and certain minor customers and new product
demonstration costs for our Chicago Brothers brand products for retail
customers.
Our consolidation of certain home office, manufacturing, warehousing, product
development, marketing and quality control functions into a single 170,000
square foot operating facility located in Vernon, California has now been
completed. We now maintain only two plants, the new site, and an existing
49,000 square foot cooking facility also located in Vernon, California. We also
lease, on a month-to-month basis, 11,400 square feet of dry goods storage space
in Inglewood, California. Our management believes that we should expect, as a
result of this consolidation, to achieve significant operating efficiencies as
well as a reduction of our dependence on outside cold storage facilities. We
have recently begun to realize cost savings attributable to the consolidation,
resulting from reduced cold storage and refrigerant costs, a lower overall
facility lease expense, together with manpower and efficiency savings.
Other expenses for the fiscal year ended September 28, 2003 were $11,631,000 as
compared to $5,599,000 in the fiscal year ended September 29, 2002, an increase
of $6,032,000 (107.7%). This increase consisted primarily of a $2,360,000
increase in interest expense to $7,011,000, due to an increase in borrowings and
borrowing rates during the year primarily related to the April 2003 refinancing,
and a $2,890,000 increase in amortization of deferred financing costs to
$3,539,000, related to the financing costs incurred in the prior fiscal year and
the bridge financing and the refinancing of the bank debt during the current
fiscal year. Of the $2,360,000 increase in interest expense, $1,171,000 was
non-cash interest related to the amortization of the original issue discount
associated with the April 2003 financing. Another significant component of
other expenses was the $662,000 cost of refurbishing our vacated San Diego
facility upon the expiration of the lease.
For the fiscal year ended September 28, 2003 we recorded a tax benefit of
$3,353,000 as compared to a tax provision of $668,000 for the fiscal year ended
September 29, 2002, representing 34.3% and 39.4% of income (loss) before income
taxes, respectively. Due to operating losses for the fiscal year ended
September 28, 2003, we have recorded a tax benefit and a deferred tax asset,
classified as other assets on our balance sheet, of $3,256,000. We have not
recorded a valuation allowance against any of our deferred tax assets, since we
believe that such assets are more likely than not to be recoverable through
estimated future profitable operations. If we fail to improve margins, grow
revenues and/or reduce future interest costs, and return to profitable operating
results in the near term, we will not realize some or all of our deferred tax
assets and we may be required to record a valuation allowance against some or
all of our deferred tax assets, which could adversely affect our financial
position and results of operations.
We reported a net loss for the fiscal year ended September 28, 2003 of
$6,422,000 ($0.53 per share) as compared to net income of $1,030,000 ($0.09 per
share, diluted) for the fiscal year ended September 29, 2002.
In discussing the reported results, James Rudis, Overhill's Chairman and Chief
Executive Officer stated, "We have come through a very challenging year. We
struggled with an aggressive plant consolidation plan on an accelerated
schedule, we continue to see erosion in airline sales and we have faced some
unique California-related problems, including increased workers' compensation
insurance costs and a prolonged grocery chain strike." Rudis added, "On the
positive side, we have refinanced our debt which, should result in savings of
approximately $1.5 million for fiscal year 2004. The plant consolidation is
virtually complete, and we are seeing anticipated savings and increases in gross
profits. In addition, after the first quarter of fiscal year 2004, the charges
related to the refinancing, including consulting and professional fees, which
comprised a significant portion of our 2003 loss, will be reduced or eliminated. Fiscal year 2004 should be far better than fiscal year 2003." This news release contains disclosures that are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs. All statements regarding the Company's expected future financial position,
results of operations, cash flows, dividends, financing plans, business
strategy, budgets, projected costs or cost savings, capital expenditures,
competitive positions, continuation or expansion of governmental programs,
growth opportunities for existing products or products under development,
benefits from new technology, plans and objectives of management for future
operations and markets for stock are forward-looking statements. In addition,
forward-looking statements include statements in which the Company uses words
such as "expect," "believe," "anticipate," "intend," "strategy," "plan," "will,"
"estimate," "project," "goal," "target" or similar expressions. Although the
Company believes the expectations reflected in such forward- looking statements
are based on reasonable assumptions, the Company does not make assurances that
these expectations will prove to have been correct, and actual results may
differ materially from those reflected in the forward- looking statements.
The Company cautions that these statements by their nature involve risks and
uncertainties, and actual results may differ materially depending on a variety
of important factors, including, among others, the impact of competitive
products and pricing; market conditions and weather patterns that may affect the
cost of raw material as well as the market for the Company's products; changes
in the Company's business environment, including actions of competitors and
changes in customer preferences; the occurrence of acts of terrorism or acts of
war; circumstances affecting the Company's customers, including the prolonged
grocery store chain strike; changes in governmental laws and regulations,
including income taxes and workers' compensation insurance requirements; market
demand for new and existing products; the Company's ability to comply with
certain financial and other covenants under borrowing arrangements with its two
senior lenders; and other factors as may be discussed in the Company's annual
report on Form 10-K for the fiscal year ended September 28, 2003, and other
reports and statements filed with the Securities and Exchange Commission.
OVERHILL FARMS, INC. CONDENSED SUMMARY OF OPERATIONS For the Year Ended
September 28, September 29, September 30,
2003 2002 2001 Net revenues $136,950,410 $138,900,642 $162,274,943
Gross profit 17,370,520 19,447,826 25,326,855
Selling, general and
administrative expenses 15,514,654 12,150,100 15,844,073
Operating income 1,855,866 7,297,726 9,482,782
Other expenses (11,630,793) (5,599,426) (6,073,428)
Income (loss) before
income taxes (9,774,927) 1,698,300 3,409,354
Income tax provision
(benefit) (3,352,629) 668,413 1,167,809
Net income (loss) $(6,422,298) $1,029,887 $2,241,545
Per share data:
Weighted average
shares outstanding:
Basic 12,032,331 9,400,828 9,377,558
Diluted 12,032,331 11,617,713 11,394,968 Net income (loss) per
common share:
Net income (loss) per
share - basic $(0.53) $0.11 $0.24
Net income (loss) per
share - diluted $(0.53) $0.09 $0.20
OVERHILL FARMS, INC. CONDENSED BALANCE SHEET DATA September 28, September 29,
2003 2002 Current assets $23,412,238 $33,652,434
Property and equipment 13,251,330 9,170,516
Other assets 19,518,559 16,194,632
Total assets $56,182,127 $59,017,582
Current liabilities $11,571,148 $17,158,930
Long term liabilities 44,950,438 36,507,041
Shareholders' equity (339,459) 5,351,611
Total liabilities and
shareholders' equity $56,182,127 $59,017,582
DATASOURCE: Overhill Farms, Inc.
CONTACT: James Rudis of Overhill Farms, Inc., +1-323-582-9977
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