SOURCE: Overhill Farms, Inc.

Overhill Farms, Inc.

May 13, 2011 09:00 ET

Overhill Farms Reports Net Income of Nine Cents per Share on Revenues of $40.5 Million for Second Quarter

Company Retains Advisor for Potential Acquisition

LOS ANGELES, CA--(Marketwire - May 13, 2011) - Overhill Farms, Inc. (NYSE Amex: OFI) today reported net income of $1.52 million, or $0.10 per basic and $0.09 per diluted common share, on net revenues of $40.5 million for the second quarter of fiscal 2011, which ended April 3, 2011. This compares to net income of $2.36 million, or $0.15 per basic and diluted common share, on net revenues of $50.5 million for the second quarter of fiscal 2010, which ended March 28, 2010.

James Rudis, Chairman and Chief Executive Officer of Overhill Farms, said, "Thanks to the hard work of our people, we continue to perform relatively well under economic and market conditions that remain challenging. Our second fiscal quarter results reflect ongoing softness in customer demand, and strong price competition, particularly in our retail segment."

Mr. Rudis also announced that the Company is in discussions regarding a significant potential acquisition, and has retained BofA Merrill Lynch to advise the Company. Mr. Rudis said the discussions are progressing, but there is no certainty that this transaction, or others that the Company is exploring, will be completed.

Returning to current operations, Mr. Rudis said, "As we have indicated in past reports, we are anticipating that new business from the Boston Market frozen meal line, and from our other new major national retail account, along with new lines and products to existing accounts, will return us to growth in revenues and net income."

He noted that the Company has begun production and distribution for 16 new items for the national retailer, and that production of Boston Market products is scheduled to begin in June of this year.

Regarding the products for the national retailer, which for competitive reasons has asked that its name not be disclosed, Mr. Rudis added, "Our customer is very excited about the prospects for the new meals, as are we. The quality, variety and packaging presentation of these items are excellent, and we look forward to the response of consumers as these products appear in our customer's stores, and promotions begin, in late May of this year."

Mr. Rudis said that response among retailers to sales contacts regarding the Boston Market line "have been very positive." He added that "Boston Market holds a special place in the retail market, and we look forward to growing the brand."

Net revenues for the second quarter of fiscal 2011 decreased by $10.0 million or 19.8%, from year-earlier second quarter levels as the result of declines in retail, foodservice and airline net revenues.

By customer category, retail net revenues for the second quarter of fiscal year 2011 decreased by $7.2 million (21.3%) to $26.6 million from $33.8 million for the year-earlier second quarter.

The decrease was due to reduced sales to two major retail customers attributable to the slow economic recovery, the inventory management plans of these customers, and increased price promotions by national brands, which appear to be abating. It also reflects the previously disclosed decision by H.J. Heinz Co. to self-manufacture products that the Company had been producing for Heinz. The decreases were partially offset by a $909,000 increase in sales to existing retail customers.

Foodservice net revenues for the second quarter of fiscal 2011 decreased by 17.8%, or $2.6 million, to $12.0 million from the $14.6 million for the year-earlier second quarter. The Company attributed the decrease to reduced sales to one foodservice customer. Based on its current run rates, the Company anticipates that sales to that customer will recover during calendar 2011 to a level similar to those of calendar 2010.

Airline net revenues decreased by $62,000, or 3.1%, to $1.9 million for the second quarter of fiscal 2011 from the $2.0 million for the year-earlier second quarter.

Gross profit for the second quarter of fiscal year 2011 decreased by $2.3 million, or 33.8%, to $4.5 million from $6.8 million for the second quarter of fiscal year 2010. Gross profit as a percentage of net revenues decreased to 11.1% for the second quarter of fiscal year 2011 from 13.5% for the second quarter of fiscal year 2010. This was largely due to higher overhead costs as a percentage of net revenues on lower sales volumes, a less favorable sales mix resulting from lower retail sales, reduced efficiencies resulted from smaller production runs to manage inventories, brokerage expenses, and increases in some commodity prices.

Operating income for the second quarter of fiscal 2011 was $2.5 million, or 6.2% of net revenues, compared to $4.1 million, or 8.1% of net revenues for the prior year second quarter period.

For the six months ended April 3, 2011 (a 27-week period), the Company reported net income of $3.1 million, or $0.20 per basic and diluted common share, on revenues of $85.3 million. This compares to net income of $5.4 million or $0.34 per basic and diluted common share, on revenues of $106.7 million for the six months ended March 28, 2010, which was a 26-week period.

Operating income for the first six months of fiscal 2011 was $5.2 million, or 6.1% of net revenues, compared to operating income of $9.5 million, or 8.9% of net revenues, for the year-earlier period.

The Company also announced that Tracy Quinn, formerly Interim Chief Financial Officer, has been named Chief Financial Officer.

Conference Call

Overhill Farms will host a conference call on May 13, 2011, at 10:00 a.m. PDT (1:00 p.m. EDT). Shareholders and investment professionals can participate by dialing 877-407-9210. A webcast of accompanying slides will be at www.investorcalendar.com/IC/CEPage.asp?ID=164533.

About Overhill Farms

Overhill Farms is a leading value-added supplier of custom high quality prepared frozen foods for branded retail, private label, foodservice and airline customers. Its product line includes entrées, plated meals, bulk-packed meal components, pastas, soups, sauces, poultry, meat and fish specialties, as well as organic and vegetarian offerings. The Company's capabilities give its customers a one-stop solution for new product development, precise replication of existing recipes, product manufacturing and packaging. Its customers include prominent nationally recognized names such as Jenny Craig, Inc., Safeway Inc., Panda Restaurant Group, Inc., H. J. Heinz Company, Pinnacle Foods Group LLC and American Airlines, Inc.

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 about the Company's operations and financial performance and condition and statements regarding expectations of continued or increased sales volumes and revenues, margins, profitability, production efficiencies and expansions, cash flows and growth, anticipated amounts and timing of growth in the Company's customer base and business in the foodservice and retail market sectors, revenue growth from new customers, expectations concerning our Boston Market and new national retailer opportunities, continuing or future price promotions by our customers or their competitors, contemplated or potential acquisitions or similar transactions and general economic pressures. For this purpose, statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as "continue," "efforts," "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "strategy," "will," "goal," "target," "prospects," "optimistic," "confident," "likely," "probable," "hope," "should," "growth," "opportunities" or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), on-going business strategies or prospects, and possible future company actions, which may be provided by management, are also forward-looking statements. We caution 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 Company's and other parties' ability to satisfy conditions precedent to proposed acquisitions or similar transactions, including, without limitation, obtaining any applicable regulatory and stockholder approvals, the impact of competitive products and pricing; fulfillment by suppliers of existing raw material contracts; market conditions that may affect the costs and/or availability of raw materials and the Company's ability to obtain favorable long-term purchase commitments for raw materials, and of fuels, energy, logistics and labor as well as the market for the Company's products, including customers' ability to pay and consumer demand; changes in business environment, including actions of competitors and changes in customer preferences, as well as disruptions to customers' businesses; certifications obtained by competitors; seasonality in the retail category; loss of key customers due to competitive environment or production being moved in-house by customers; natural disasters that can impact, among other things, costs of fuel and raw materials; the occurrence of acts of terrorism, such as the events of September 11, 2001, or acts of war; changes in governmental laws and regulations; change in control due to takeover or other significant changes in ownership; financial viability and resulting effect on revenues and collectability of accounts receivable of customers during deep recessionary periods; ability to obtain additional financing as and when needed, and rising costs of credit that may be associated with new borrowings; voluntary or government-mandated food recalls; and other factors as may be discussed in the Company's Annual Report on Form 10-K for the year ended September 26, 2010, Quarterly Report on Form 10-Q for the quarter ended April 3, 2011, and other reports filed with the Securities and Exchange Commission.

OVERHILL FARMS, INC.
CONDENSED SUMMARY OF OPERATIONS
(Unaudited)
For the Quarter Ended
April 3,March 28,
20112010
Net revenues$40,539,552$50,459,303
Cost of sales36,008,72243,640,235
Gross profit4,530,8306,819,068
Selling, general and administrative expenses2,039,0322,691,512
Operating income2,491,7984,127,556
Total interest expense(80,024)(345,713)
Income before income tax expense2,411,7743,781,843
Income tax expense889,9451,421,217
Net income$1,521,829$2,360,626
Net income per common share - basic$0.10$0.15
Net income per common share - diluted$0.09$0.15
Shares used in computing net income per common share, basic15,823,27115,823,271
Weighted average common shares outstanding16,061,13316,046,275
OVERHILL FARMS, INC.
CONDENSED SUMMARY OF OPERATIONS
(Unaudited)
For the Six Months Ended
April 3,March 28,
20112010
Net revenues$85,301,010$106,691,840
Cost of sales75,799,75691,986,643
Gross profit9,501,25414,705,197
Selling, general and administrative expenses4,313,9215,253,293
Operating income5,187,3339,451,904
Total interest expense(171,834)(778,331)
Other expenses-(1,000)
Income before income tax expense5,015,4998,672,573
Income tax expense1,884,5673,259,153
Net income$3,130,932$5,413,420
Net income per common share - basic$0.20$0.34
Net income per common share - diluted$0.20$0.34
Shares used in computing net income per common share, basic15,823,27115,823,271
Weighted average common shares outstanding16,053,62916,048,947

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