SOURCE: Overhill Farms, Inc.

May 02, 2006 09:30 ET

Overhill Farms Reports Improved Second Quarter Results

$1.2 Million Net Profit for Quarter

LOS ANGELES, CA -- (MARKET WIRE) -- May 2, 2006 -- Overhill Farms, Inc. (AMEX: OFI) today reported improved results for the second quarter of fiscal 2006, which ended April 2, 2006.

Net income for the second quarter of fiscal 2006 was $1,213,000, or $0.08 per share, an increase of $151,000 or 14.2% compared to $1,062,000, or $0.07 per share, for the second quarter of fiscal 2005.

Net revenues for the second quarter of fiscal 2006, were $43,694,000, an increase of $355,000 or 0.8% from the $43,339,000 reported for the second quarter of the prior year. Highlights of the company's revenue performance are as follows:

--  Net revenues from foodservice customers rose 9.2% to $16,445,000 for
    the quarter, an increase of $1,385,000 from the $15,060,000 for the
    comparable period in fiscal year 2005.
    
--  Net revenues from customers in the retail sector were up 3.9% to
    $22,456,000 for the quarter, an increase of $843,000 from $21,613,000
    reported in the year-ago quarter.
    
--  Net revenues from airline customers decreased 28.1% to $4,793,000 for
    the quarter, a decrease of $1,873,000 from the $6,666,000 for the second
    quarter of fiscal year 2005.
    
Gross profit for the second quarter was $5,203,000, a decrease of $393,000 or 7.0% from the $5,596,000 reported in the year-ago quarter. Gross profit as a percentage of net revenues was 11.9% for the quarter, compared to 12.9% for the comparable period in fiscal year 2005. Margins decreased primarily due to the acquisition of larger national retail and foodservice accounts, and new lines of business, which bring lower gross profit margins due to competitive pressures. The company indicated that due to operating leverage, future increases in similar national account business would likely increase overall gross margins.

Selling, general and administrative (SG&A) expenses fell during the quarter to $1,742,000 or 4.0% of net revenues. This was an improvement of $272,000 or 13.5% from $2,014,000 or 4.6% of net revenues for the comparable period in 2005.

Operating income for the quarter was $3,461,000, down $121,000 or 3.4% from $3,582,000 for the year-ago quarter. The decline in operating income was more than offset by a $328,000 drop in interest and other expenses, from $1,740,000 to $1,412,000, due primarily to the $4,317,000 pay-down of debt from $48,600,000 at April 3, 2005 to $44,283,000 at April 2, 2006.

In discussing the second quarter results, James Rudis, Overhill Farms' Chairman and Chief Executive Officer, said, "We are pleased with the second quarter results on several levels. First, revenues have rebounded following some lost sales during the last quarter of fiscal 2005. Equally important, we continue to re-shape the company, decreasing our reliance on airline sales and focusing on growing the foodservice and retail market sectors."

Mr. Rudis added, "We look forward to our continuing profitability for both the near- and long-term, which should be enhanced by the closing of our new, lower cost, financing package which we anticipate to take place on or about May 17, 2006."

Net income for the first six months of fiscal year 2006 was $1,820,000 or $0.12 per share, an increase of 9.4% or $157,000 from the net income of $1,663,000 or $0.11 per share for the first six months of fiscal year 2005.

Net revenues for the first six months of fiscal year 2006, which ended April 2, 2006, were $83,282,000, a decrease of 0.3% or $275,000 from the $83,557,000 reported for the first six months of the prior fiscal year. The fiscal calendar for the first six months of the current reporting period included 26 weeks of sales versus 27 weeks last year. Highlights of the company's revenue performance are as follows:

--  Net revenues from foodservice customers rose 8.4% to $32,688,000 for
    the first six months of fiscal year 2006, an increase of $2,529,000 from
    the $30,159,000 for the comparable period in fiscal year 2005.
    
--  Net revenues from customers in the retail sector were up 3.2% to
    $39,447,000 for the first six months of fiscal year 2006, an increase of
    $1,205,000 from $38,242,000 reported in the year-ago period.
    
--  Net revenues from airline customers decreased 26.5% to $11,147,000 for
    the first six months of fiscal year 2006, a decrease of $4,009,000 from the
    $15,156,000 for the first six months of fiscal year 2005.
    
Gross profit for the first six months of fiscal year 2006 decreased by 4.1% to $9,596,000, a decrease of $414,000 from the $10,010,000 reported in the year-ago period. Gross profit as a percentage of net revenues was 11.5% for the first six months of fiscal year 2006, compared to 12.0% for the comparable period in fiscal year 2005. Margins decreased due to reduced higher-margin airline sales being replaced by relatively lower-margin sales to retail and foodservice customers. The company expects its gross margin percentage to remain consistent at current sales volumes. Due to operating leverage, future increases in sales volume would likely improve gross margins.

SG&A expenses declined during the first six months of fiscal year 2006 to $3,591,000 or 4.3% of net revenues. This was an improvement of $207,000 or 5.5% from $3,798,000 or 4.5% of net revenues for the comparable period in 2005.

Operating income for the first six months of fiscal year 2006 decreased 3.3% to $6,005,000, down $207,000 from $6,212,000 reported in the year-ago period. The decline in operating income was more than offset by a $473,000 drop in interest and other expenses, from $3,404,000 to $2,931,000, due primarily to the $4,317,000 pay-down of debt from $48,600,000 at April 3, 2005 to $44,283,000 at April 2, 2006.

Overhill Farms is a value-added supplier of custom high quality frozen foods to foodservice, retail and airline customers

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 and include, but are not limited to, statements concerning the timing and terms of the planned refinancing, the company's operations and financial performance and condition and statements regarding expectations of continued or increased profitability, cash flows and growth, anticipated reductions in borrowing cost and debt, decreasing reliance on airline sales and anticipated growth in the foodservice and retail market sectors. For this purpose, statements of historical fact may be deemed to be forward-looking statements. In addition, forward-looking statements include statements in which the company uses words such as "continue," "efforts," "expect," "believe," "anticipate," "confident," "intend," "strategy," "plan," "will," "estimate," "project," "goal," "target," "prospects," "optimistic" or similar expressions. 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 company's ability to satisfy conditions precedent to the refinancing transaction, including without limitation, obtaining required third party consents and waivers, the company's ability to meet its obligations under its existing and anticipated financing arrangements, 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, such as the events of September 11, 2001, or acts of war; changes in governmental laws and regulations, including income taxes; market and customer demand for new and existing products; and other factors as may be discussed in the company's Annual Report on Form 10-K for the year ended October 2, 2005, Quarterly Report on Form 10-Q for the quarter ended April 2, 2006 and other reports filed with the Securities and Exchange Commission.

                        OVERHILL FARMS, INC.
                  CONDENSED SUMMARY OF OPERATIONS

                                                    For the Three Months
                                                            Ended
                                                  -------------------------
                                                    April 2,     April 3,
                                                      2006         2005
                                                  ------------ ------------

Net revenues                                      $ 43,693,519 $ 43,338,648

Cost of sales                                       38,490,694   37,742,645
                                                  ------------ ------------

Gross profit                                         5,202,825    5,596,003

Selling, general and administrative expenses         1,742,206    2,014,349
                                                  ------------ ------------

Operating income                                     3,460,619    3,581,654

Other expenses                                       1,412,030    1,740,195
                                                  ------------ ------------

Income before income taxes                           2,048,589    1,841,459

Income tax provision                                   835,825      779,894
                                                  ------------ ------------

Net income                                        $  1,212,764 $  1,061,565
                                                  ============ ============


Net income per share - basic                      $       0.08 $       0.07
                                                  ============ ============

Net income per share - diluted                    $       0.08 $       0.07
                                                  ============ ============

Weighted average shares outstanding - basic         15,260,271   14,805,556
                                                  ============ ============

Weighted average shares outstanding - diluted       15,874,068   15,432,348
                                                  ============ ============



                        OVERHILL FARMS, INC.
                  CONDENSED SUMMARY OF OPERATIONS

                                                  For the Six Months Ended
                                                  -------------------------
                                                    April 2,     April 3,
                                                      2006         2005
                                                  ------------ ------------

Net revenues                                      $ 83,282,326 $ 83,557,483

Cost of sales                                       73,686,102   73,547,072
                                                  ------------ ------------

Gross profit                                         9,596,224   10,010,411

Selling, general and administrative expenses         3,591,423    3,798,410
                                                  ------------ ------------

Operating income                                     6,004,801    6,212,001

Other expenses                                       2,930,619    3,403,574
                                                  ------------ ------------

Income before income taxes                           3,074,182    2,808,427

Income tax provision                                 1,254,266    1,145,838
                                                  ------------ ------------

Net income                                        $  1,819,916 $  1,662,589
                                                  ============ ============


Net income per share - basic                      $       0.12 $       0.11
                                                  ============ ============

Net income per share - diluted                    $       0.11 $       0.11
                                                  ============ ============

Weighted average shares outstanding - basic         15,129,735   14,805,556
                                                  ============ ============

Weighted average shares outstanding - diluted       15,906,200   15,317,218
                                                  ============ ============

Contact Information

  • Contacts:
    James Rudis
    Chairman, President and CEO
    Overhill Farms, Inc.
    323-582-9977

    Alexander Auerbach
    Auerbach & Co. Public Relations
    1-800-871-2583
    Email Contact