Galaxy Nutritional Foods Reports 1st Quarter Fiscal 2005 Results
Reports Substantial Growth in Net Sales ORLANDO, Fla., Aug. 12
/PRNewswire-FirstCall/ -- Galaxy Nutritional Foods, Inc.
(AMEX:GXY), a leading producer of nutritious plant-based dairy
alternatives for the retail and foodservice markets, today reported
results for its first quarter of fiscal 2005, ended June 30, 2004.
The Company reported that net sales grew substantially from
$8,695,781 in the quarter ended June 30, 2003 compared to
$11,191,678 in the quarter ended June 30, 2004, an increase of
$2,495,897 or 29%. The large increase in net sales is primarily due
to higher sales volume in contract manufacturing, Wholesome Valley
organic products and our Food Service business. The contract
manufacturing sales consist primarily of products that generate
lower margins. However, the higher sales volume helped to reduce
the fixed cost of production resulting in a gross profit decline of
only 4% while generating an additional $295,683 of gross margin for
the quarter ended June 30, 2004 versus the same period in the prior
year. The results for the first quarter of fiscal 2005 and fiscal
2004 include non-cash compensation expense of $162,374 and
$1,307,131, respectively. Excluding these non-cash compensation
charges, the Company had operating income, as adjusted, (a non-GAAP
measure) of $180,594 in the quarter ended June 30, 2004 compared to
an operating loss, as adjusted, of ($167,588) in the quarter ended
June 30, 2003. This $348,182 improvement in non-GAAP operating
income was primarily the result of the gross margin increase
mentioned above and a decrease in general and administrative
expenses. Net loss for the quarter ended June 30, 2004 was $241,596
compared to a net loss of $1,970,104 for the quarter ended June 30,
2003. Excluding the non-cash compensation charges noted above, the
Company had a net loss, as adjusted, (a non-GAAP measure) of
$79,222 for the quarter ended June 30, 2004 compared to a net loss,
as adjusted, of $662,973 for the quarter ended June 30, 2003. This
$583,751 decrease in non-GAAP net loss was primarily the result of
the increase in gross margin as mentioned above as well as the
substantial decrease in interest expense due to lower principal
balances and lower interest rates on the Company's credit
facilities after the refinancing in May 2003. After non-cash
preferred stock dividends and non-cash preferred stock accretion
for estimated redemption value, net loss available to common
shareholders was $796,163, or $0.05 per diluted share for the
quarter ended June 30, 2004 versus a net loss available to common
shareholders of $2,919,813, or $0.21 per diluted share for the
quarter ended June 30, 2003. EBITDA, as adjusted, (a non-GAAP
measure) for the quarter ended June 30, 2004 was $726,635, or 6.5%
of net sales, versus EBITDA, as adjusted, for the quarter ended
June 30, 2003 of $390,537, or 4.5% of net sales. EBITDA, as
adjusted, was calculated as net income before interest, taxes,
depreciation and amortization, and is exclusive of non-cash
compensation related to stock options and warrants. Cash flow
provided by operating activities for the quarter ended June 30,
2004 was $578,038 compared to cash flow used in operating
activities of ($138,377) for the quarter ended June 30, 2003. This
increase in operating cash flow was primarily due to the reduction
in non-GAAP net loss, as described above, versus the prior year.
Michael E. Broll, Galaxy's CEO, stated, "The 29% increase in net
sales for the first quarter has been a very positive achievement
for the company. In fact, our overall financial performance for the
first quarter of Fiscal 2005 is a genuinely significant improvement
over the prior year. Our focus going forward in addition to growing
net sales, will be to minimize the higher operational costs we
experienced during the ramp up and continue our efforts toward
improving our gross margin percentage." Mr. Broll went on to say,
"We remain committed to strengthening our Brands and are refining a
number of projects related to product improvement, new products and
consumer marketing programs, a number of which we hope to execute
later this fiscal year." Footnote on non-GAAP Measures Presented
Above Management utilizes certain non-GAAP measures such as
operating income, as adjusted, net income, as adjusted and EBITDA,
as adjusted, because it provides useful information to management
and investors in order to accurately review the Company's current
on-going operations and business trends related to its financial
condition and results of operations. Additionally, these measures
are key factors upon which the Company prepares its budgets,
forecasts and evaluates loan covenants. In its determination of
non-GAAP measures, management excludes the non-cash compensation
related to options and warrants as well as the employment contract
expense from its analysis of operating income because it believes
that these items do not accurately reflect the Company's current
on-going operations. With respect to non-cash compensation, it is
calculated based on fluctuations in the Company's stock price which
are outside the Company's control and typically do not reflect the
Company's operations. These non-GAAP measures are not in accordance
with, or an alternative for, generally accepted accounting
principles and may be different from non-GAAP measures reported by
other companies. CONFERENCE CALL AND WEBCAST INFORMATION There will
be a teleconference and web-cast of the Company's 1st Quarter
Fiscal 2005 Earnings Results at 10:00 a.m. EDT on Friday, August
13, 2004. The conference call invites all shareholders and
interested parties to call in on a toll-free line to ask questions
about the Company's results and discuss future plans. The toll-free
number for U.S. and Canada callers is 1-888-202-2422. All other
international callers should dial: 1-913-981-5592. The conference
call pass code for all participants is 996704. The call will be
simultaneously web cast at the following link:
http://www.vcall.com/ClientPage.asp?ID=89041 The call will be
posted to our website the following Monday, August 16, 2004 at:
http://www.galaxyfoods.com/corporate.html About Galaxy Nutritional
Foods, Inc. Galaxy Nutritional Foods is the leading producer of
great-tasting, health- promoting plant-based dairy and
dairy-related alternatives for the retail and foodservice markets.
These phytonutrient-enriched products, made from nature's best
grains -- soy, rice and oats -- are low and no fat (no saturated
fat and no trans-fatty acids), have no cholesterol, no lactose, are
growth hormone and antibiotic free and have more calcium, vitamins
and minerals than conventional dairy products. Because they are
made with plant proteins, they are more environmentally friendly
and economically efficient than dairy products derived solely from
animal proteins. Galaxy's products are part of the nutritional or
functional foods category, the fastest growing segment of the
retail food market. Galaxy brand names include: Galaxy Nutritional
Foods(R), Veggie(R), Veggie Nature's Alternative to Milk(R), Veggie
Slices(R), Soyco(R), Soymage(R), Wholesome Valley(R), form�gg(R),
and Lite Bakery(R). For more information, please visit Galaxy's
website at http://www.galaxyfoods.com/. This press release contains
"forward-looking" statements within the meaning of the private
securities litigation reform act of 1995. Such forward- looking
statements involve known and unknown risks, uncertainties, or other
factors which may cause actual results, performance or achievements
of the company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Readers are cautioned not to place
undue reliance on those forward-looking statements, which speak
only as of the date hereof. The company undertakes no obligation to
release publicly any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to
reflect unanticipated events or developments. GALAXY NUTRITIONAL
FOODS, INC. Balance Sheets JUNE 30, MARCH 31, 2004 2004 (Unaudited)
ASSETS CURRENT ASSETS: Cash $766,779 $449,679 Trade receivables,
net 4,834,191 3,964,198 Inventories, net 4,713,641 4,632,843
Prepaid expenses and other 547,987 266,301 Total current assets
10,862,598 9,313,021 PROPERTY AND EQUIPMENT, NET 19,760,573
20,232,089 OTHER ASSETS 379,149 416,706 TOTAL $31,002,320
$29,961,816 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Line of credit $4,658,851 $4,605,277 Accounts payable
2,563,368 1,266,346 Accrued liabilities 1,934,352 1,812,300 Current
portion of accrued employment contract 366,305 366,305 Current
portion of term notes payable 1,320,000 1,140,000 Current portion
of obligations under capital leases 206,841 231,432 Total current
liabilities 11,049,717 9,421,660 ACCRUED EMPLOYMENT CONTRACT, less
current portion 1,201,529 1,293,142 TERM NOTES PAYABLE, less
current portion 7,911,985 8,241,985 OBLIGATIONS UNDER CAPITAL
LEASES, less current portion 162,071 204,967 Total liabilities
20,325,302 19,161,754 COMMITMENTS AND CONTINGENCIES -- --
REDEEMABLE CONVERTIBLE PREFERRED STOCK 2,950,488 2,573,581
STOCKHOLDERS' EQUITY: Common stock 157,241 156,573 Additional
paid-in capital 64,261,061 64,520,084 Accumulated deficit
(43,799,111) (43,557,515) 20,619,191 21,119,142 Less: Notes
receivable arising from the exercise of stock options and sale of
common stock (12,772,200) (12,772,200) Treasury stock (120,461)
(120,461) Total stockholders' equity 7,726,530 8,226,481 TOTAL
$31,002,320 $29,961,816 GALAXY NUTRITIONAL FOODS, INC. Statements
of Operations (UNAUDITED) Three Months Ended June 30, 2004 2003 NET
SALES $11,191,678 $8,695,781 COST OF GOODS SOLD 8,251,330 6,051,116
Gross margin 2,940,348 2,644,665 OPERATING EXPENSES: Selling
1,460,400 1,313,873 Delivery 593,326 451,817 Non-cash compensation
related to options and warrants 162,374 1,307,131 General and
administrative 633,342 983,479 Research and development 72,686
63,084 Total operating expenses 2,922,128 4,119,384 INCOME (LOSS)
FROM OPERATIONS 18,220 (1,474,719) Interest expense 259,816 495,385
NET LOSS $(241,596) $(1,970,104) Preferred Stock Dividends 42,392
54,780 Preferred Stock Accretion to Redemption Value 512,175
894,929 NET LOSS TO COMMON SHAREHOLDERS $(796,163) $(2,919,813)
BASIC & DILUTED NET LOSS PER COMMON SHARE $(0.05) $(0.21)
GALAXY NUTRITIONAL FOODS, INC. Statements of Cash Flows (UNAUDITED)
Three Months Ended June 30, 2004 2003 CASH FLOWS FROM OPERATING
ACTIVITIES: Net Loss $(241,596) $(1,970,104) Adjustments to
reconcile net loss to net cash from (used in) operating activities:
Depreciation and amortization 546,041 558,125 Amortization of debt
discount and financing costs 33,349 99,440 Provision for losses on
trade receivables 107,000 (91,000) Non-cash compensation related to
options and warrants 162,374 1,307,131 (Increase) decrease in:
Trade receivables (976,993) 991,452 Inventories (80,798) 133,003
Prepaid expenses and other (281,686) (14,354) Increase (decrease)
in: Accounts payable 1,297,022 (824,061) Accrued liabilities 13,325
(328,009) NET CASH FROM (USED IN) OPERATING ACTIVITIES 578,038
(138,377) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of
property and equipment (74,525) (91,388) Decrease in other assets
-- 1,807 NET CASH FROM (USED IN) INVESTING ACTIVITIES (74,525)
(89,581) CASH FLOWS FROM FINANCING ACTIVITIES: Book overdrafts --
(957,396) Net borrowings (payments) on lines of credit 53,574
(249,676) Repayments on subordinated note payable -- (4,000,000)
Borrowings on term note payable -- 2,000,000 Repayments on term
notes payable (150,000) (437,393) Principal payments on capital
lease obligations (67,487) (93,934) Financing costs for long term
debt -- (188,361) Proceeds from issuance of common stock, net of
offering costs (22,500) 3,793,120 Proceeds from exercise of common
stock warrants -- 360,000 NET CASH FROM (USED IN) FINANCING
ACTIVITIES (186,413) 226,360 NET INCREASE (DECREASE) IN CASH
317,100 (1,598) CASH, BEGINNING OF PERIOD 449,679 1,598 CASH, END
OF PERIOD $766,779 $-- GALAXY NUTRITIONAL FOODS, INC. EBITDA, as
adjusted, (a non-GAAP measure) Reconciliation (Unaudited) Three
months ended June 30, 2004 2003 NET SALES $11,191,678 $8,695,781
NET LOSS $(241,596) $(1,970,104) Plus: Non-cash compensation
expense 162,374 1,307,131 Interest expense 259,816 495,385
Depreciation and amortization expense 546,041 558,125 EBITDA, as
adjusted $726,635 $390,537 As a % of Net Sales 6.5% 4.5%
http://www.vcall.com/ClientPage.asp?ID=89041DATASOURCE: Galaxy
Nutritional Foods, Inc. CONTACT: Dawn M. Robert, Investor
Relations, Galaxy Nutritional Foods, Inc., +1-407-854-0433 Web
site: http://www.galaxyfoods.com/
http://www.galaxyfoods.com/corporate.html
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