HOTF Hot Mamas Foods Inc (GM)

• 9 Month 2013 Record Revenue of $25.7 million
• New Chicago Production Facility on Track to Open in December

Hot Mama’s Foods, Inc., (OTC:HOTF) a leading specialty food manufacturer, co-packer and private label resource for innovative organic, all-natural, and gourmet foods, has announced its financial results for the third quarter and first nine months of 2013. A Form 10-Q was filed with the Securities and Exchange Commission on November 19, 2013.

Commenting on the financial results, Matthew Morse, Chief Executive Officer stated, “I am very pleased with the results we have reported this year. Along with strong demand for hummus, new customers and new products are all contributing to our strong top-line growth. We are also expanding our customer base and increasing orders with existing customers, which will have a positive impact on our sales in the coming year.” Mr. Morse further commented, “To support future growth we have expanded the senior leadership team with individuals who bring many years of relevant food industry experience to Hot Mama’s. We are also on track to open a new, larger, state-of-the-art, production facility in Chicago. Coupled with our original facility in Massachusetts, we will have capacity for upwards of $100 million in revenue.

3Q13 Financial Overview.

For the three month period ended September 30, 2013, Hot Mama’s Foods’ revenue increased 14.2% to $9.0 million compared to $7.9 million in the same period last year. Sales continue to be driven by the Hummus product line which accounted for 71% of revenue, up from 68% in third quarter 2012. Higher volumes reflect effective marketing campaigns as well as increased customer demand for Hot Mama’s higher quality products. Looking ahead, revenue growth will be driven by additional product offerings as well as increased sales to existing customers.

Gross profit of $1.3 million was 5% below the prior year, due primarily to higher raw materials and labor costs. As a result, gross profit as a percent of sales was 14.9% in 3Q13 compared to 17.9% in the same period of the prior year. Ongoing productivity enhancements at the plant level along with the new state-of-the art production facility should contribute to an improved cost structure.

Selling General & Administrative (SG&A) costs, which includes stock-based compensation, more than doubled in the quarter. The majority of the stock-based compensation expense reflects one time grants of stock related to the company’s September 2013 merger. Excluding the stock-based compensation of $1.6 million, SG&A increased 17.8% in the quarter, with the increase primarily attributable to an increase in payroll as the company expanded its executive and leadership ranks, as well as costs associated with the September 2013 merger. The Company also incurred a restructuring charge of $29,000 in the quarter related to an operational review to improve efficiency and reduce overhead. As a result of all these actions, profitability was impacted as the company made the necessary investments to support future growth.

The Company reported a per share loss of $0.05 in 3Q13. Excluding the stock-based compensation expenses, the Company would have reported break-even earnings per share in 3Q13 compared to $0.01 in 3Q12.

9 Month 2013 Financial Overview.

Total revenue for the nine month period was $25.7 million, an increase of 17.1% over nine months 2012. Revenue growth has been driven by increased market penetration, additional product offerings as well as promotional and marketing efforts. Hummus sales, which accounted for 71% and 65% of revenue in the first nine month periods of 2013 and 2012, respectively, have also benefitted from increased consumer awareness. During the year the company introduced several new flavors of existing products and began production of frozen entrées and side dishes. New product introduction is an important driver of growth and the company expects to introduce more than two dozen new products in various categories over the coming year.

Gross profit of $3.9 million was basically flat with the same period of the prior year. Gross profit as a percent of sales was 15.0% in the first nine months of 2013 compared to 17.4% in 2012. This decrease was primarily attributable to increased revenue being offset by higher raw materials and labor costs.

Selling General & Administrative (SG&A) costs were $5.5 million for the first nine months of 2013, up from $3.1 million in 2012. Stock-based compensation expense of $1.6 million was the primary contributor to higher SG&A costs. The majority of the stock-based compensation expense reflects one time grants of stock related to the Company’s September 2013 merger. Excluding stock-based compensation, SG&A increased 23.3% in the first nine months of 2013, with the increase primarily attributable to an increase in payroll as well as costs associated with the September 2013 merger.

The Company reported a per share loss of $0.06 in the first nine months of 2013. Excluding the stock-based compensation expenses, the Company would have reported break-even earnings per share compared to $0.02 in 2012.

ABOUT HOT MAMA’S FOODS

Hot Mama's Foods is a leading specialty food manufacturer, co-packer and private label resource for innovative organic, all-natural, and gourmet foods. The Company has proven expertise in developing and manufacturing top quality salsas, sauces, pesto, hummus, salads, dips, prepared deli salads, and many other gourmet foods. Hot Mama’s Foods is one of the largest producers of hummus and salsa in the United States. The Company’s products are USDA Certified, Certified Organic, and independently audited. Hot Mama’s provides versatile, highly time-sensitive services to discerning food retailers, foodservice customers and food brokers nationwide. Hot Mama’s Foods also develops, produces and sells fresh salsas, hummus and other fresh food products under its own label – Hot Mama’s Foods. The Company has state-of-the-art production facilities in Springfield, MA and Elk Grove Village, IL.

Hot Mama’s Foods was formed in Wendell, Massachusetts, in 1984 as a maker of a variety of fresh salsa recipes, distributed directly to small local retailers by its owner-operator. In 1991, the Company was purchased from its founder by Matthew Morse and maintained as a sole-proprietorship until its incorporation on January 29, 1999 under the name Lansal, Inc. under the laws of the Commonwealth of Massachusetts.

The Company has experienced rapid growth in recent years. Since 2008, revenue has increased slightly over 100%. In 2012 revenue increased 35.8% to $28.9 million. Growth has been driven by increased market penetration, additional product offerings, and, in part, by promotional and marketing efforts increasing awareness of the hummus category in particular. Additional information about the Company can be found at www.hotmamasfoods.com, and at the SEC’s web site www.sec.gov.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this press release are forward-looking statements. These statements relate to future events or to the Company’s future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. Such risks, uncertainties and other factors, which could impact the Company and the forward-looking statements contained herein, are included in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

HOT MAMA’S FOODS, INC.Condensed Consolidated Statements of Operations (Unaudited)(Amounts in thousands, except per share amounts)

        Three Months Ended     Nine Months Ended

Sept. 30, 2013

    Sept. 30, 2012 Sept. 30, 2013     Sept. 30, 2012   Net revenues $ 8,978 $ 7,863 $ 25,668 $ 21,915   Cost of goods sold   7,640     6,455     21,813     18,098     Gross profit   1,338     1,408     3,855     3,817     Operating expenses:

Selling, general and administrative expenses

(including share based compensation of $1,626

for the three and nine months ended September 30, 2013) 2,869 1,055 5,474 3,121 Restructuring charge   29     -     79     -     Total operating expenses   2,898     1,055     5,553     3,121     Income (loss) from operations   (1,560 )   353     (1,698 )   696     Other income (expense): Interest expense (40 ) (32 ) (119 ) (101 ) Gain on sale of fixed assets   -     -     19     -   Total other expense   (40 )   (32 )   (100 )   (101 )   Income (loss) before income taxes (1,600 ) 321 (1,798 ) 595   Provision (benefit) for income taxes   (564 )   127     (633 )   235     Net income (loss)   (1,036 )   194     (1,165 )   360     Net income (loss) attributable to non-controlling interest   (11 )   2     (33 )   7     Net income (loss) attributable to Hot Mama’s Foods, Inc. $ (1,025 ) $ 192   $ (1,132 ) $ 353     Basic income (loss) per common share $ (0.05 ) $ 0.01 $ (0.06 ) $ 0.02 Diluted income (loss) per common share $ (0.05 ) $ 0.01 $ (0.06 ) $ 0.02   Weighted Average Shares: Basic 20,812 18,512 19,287 18,512 Diluted         20,812         18,512         19,287         18,512    

Hot Mama’s Foods, Inc.Matthew Morse, 413-737-6572Chairman & CEOorSTRATEGIC ADVISOR:Strategic Universal Advisors, LLCStan Altschuler, 212-838-1510President