SOURCE: Overhill Farms, Inc.

November 30, 2006 14:09 ET

Overhill Farms Reports Record Earnings and Revenues for Fiscal Year 2006

Net Income Is 34 Cents per Share or $5,102,000 on Revenues of $168,310,000

LOS ANGELES, CA -- (MARKET WIRE) -- November 30, 2006 --Overhill Farms, Inc. (AMEX: OFI) today reported record profits of $5,102,000 or 34 cents per basic share (32 cents fully diluted) for the fiscal year ended October 1, 2006, on revenues for the fiscal year of $168,310,000. This represents a 38.0% increase in net income from the $3,696,000 or 25 cents per basic share (24 cents fully diluted) for the prior fiscal year, and a 3.5% increase in revenues from the $162,566,000 reported a year earlier.

"We are pleased to inform our shareholders of our performance, especially because it demonstrates improvements in a number of important areas," said James Rudis, chairman and chief executive officer of Overhill Farms.

The year's operations, as will be reported in the Company's Form 10-K for fiscal year 2006 filed with the Securities and Exchange Commission, are as follows:

--  Net revenues from customers in the retail sector were up 13.6% or
    $9,703,000 for the year, to $80,979,000 from the $71,276,000 reported in
    the prior year, largely due to increased sales to Jenny Craig, Inc.
--  Net revenues from foodservice customers rose 8.2% or $4,989,000 to
    $65,761,000 for the year, from the $60,772,000 reported for fiscal year
    2005. The gain was primarily due to increased sales to an existing
    customer, partially offset by decreased revenue from the loss of a product
    for an existing foodservice customer.
--  Net revenues from airline customers fell by 29.3% or $8,948,000 to
    $21,570,000 for the year, from $30,518,000 for the previous fiscal year.
    The decline in airline sales resulted from the decision by American
    Airlines in February 2005 to remove meals from the coach cabins on its
    domestic flights, and from significantly reduced sales to Delta Airlines
    subsequent to its bankruptcy filing. Year-over-year comparisons will
    reflect the loss of sales to Delta Airlines through the first quarter of
    fiscal year 2007.
Mr. Rudis said, "Overhill Farms expects sales in fiscal year 2007 to be as strong as, if not better than, sales in fiscal year 2006, with anticipated sales growth from new customers in both the retail and foodservice areas."

In discussing projected sales for fiscal 2007, Mr. Rudis said, "We anticipate that one of our major foodservice customers will move approximately $20 million of its orders to another supplier early in the second fiscal quarter of 2007, simply to diversify its sources of product. However, we are in the final stages of pricing and contract negotiations with, and have scheduled test production runs for, a major prospective customer that we anticipate will provide us with orders that will more than replace any lost revenues from our existing major customer, beginning in the second fiscal quarter of 2007."

"In addition, our increased sales initiative focusing on the private label sector has resulted in new or expanded relationships with major grocery chains, which we anticipate will result in a series of private label product launches for these customers during 2007," he said.

Mr. Rudis noted that "Overhill Farms accomplished several significant achievements during fiscal year 2006. We completed a refinancing that provides us with greater flexibility and lower interest rates. In operations, we increased revenues and gross profit margin while reducing expenses, enabling us to reduce our debt by $4 million over the last twelve months. All of these improvements, combined with existing and expected commitments from current and new customers, lead us to anticipate continued profitability in fiscal year 2007."

Gross profit for fiscal year 2006 rose by 8.8% to $21,485,000, an increase of $1,732,000 from the $19,753,000 reported last year. Gross profit as a percentage of net revenues was 12.8% for fiscal year 2006, up from 12.2% for fiscal year 2005. This margin improvement resulted from operating leverage attributable to higher sales volume and better pricing of raw materials.

Selling, general and administrative expenses declined to $7,196,000 or 4.3% of net revenues during fiscal year 2006. This was a decrease of $654,000 or 8.3% from $7,850,000 or 4.8% of net revenues in 2005. The decrease in expenses resulted from a $417,000 reduction in professional, legal and consulting fees, a $152,000 decline in brokerage and royalty expenses due to reduced club store sales, and a $59,000 reduction in corporate expenses. In addition, bad debt expense was reduced in the current year as no additional allowances were added to the reserve for doubtful accounts as compared to the addition of $170,000 in the prior year. These reductions were partially offset by increases in expenses for sales promotional activities, payroll and insurance.

Operating income increased by 20.0% or $2,386,000 to $14,289,000 for fiscal year 2006, from $11,903,000 for the prior fiscal year.

Interest expense declined by 8.8% from $6,134,005 to $5,595,631 due to the reduction of $4,079,000 in the face amount of debt in the past twelve months through voluntary principal payments and lower interest rates as a result of the 2006 refinancing. Interest expense for fiscal year 2006 included a pretax debt extinguishment charge of approximately $176,000 in connection with the termination of the Company's previous financing arrangements.

Overhill Farms (AMEX: OFI), based in Vernon, California, is a value-added supplier of custom high quality frozen foods to foodservice, retail and airline customers. For more information see

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, profitability, cash flows and growth, continued flexibility of and lower interest rates on the company's debt, decreasing airline sales and anticipated growth in the company's customer base and business in the foodservice and retail market sectors, including without limitation the private label sector. 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 meet its obligations under its 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 1, 2006 and the company's other filings with the Securities and Exchange Commission.

                        OVERHILL FARMS, INC.

                                           For the Years Ended
                                 October 1,     October 2,   September 26,
                                   2006            2005           2004
                               -------------- -------------- -------------

Net revenues                   $  168,309,591 $  162,565,512 $ 133,957,475
Cost of sales                     146,824,919    142,813,053   119,676,464
                               -------------- -------------- -------------
Gross profit                       21,484,672     19,752,459    14,281,011
Selling, general and
 administrative expenses            7,196,309      7,849,537     8,035,676
Operating income                   14,288,363     11,902,922     6,245,335
Other expenses                      5,730,678      6,371,326     9,755,015
                               -------------- -------------- -------------
Income (loss) before income
 taxes                              8,557,685      5,531,596    (3,509,680)
Income tax provision (benefit)      3,455,700      1,835,431    (1,368,024)
Net income (loss)              $    5,101,985 $    3,696,165 $  (2,141,656)
                               ============== ============== =============

Net income (loss) per share –
 basic                         $         0.34 $         0.25 $       (0.14)
                               ============== ============== =============

Net income (loss) per share –
 diluted                       $         0.32 $         0.24 $       (0.14)
                               ============== ============== =============

Weighted average shares
 outstanding – basic               15,204,424     14,863,716    14,805,556
                               ============== ============== =============

Weighted average shares
 outstanding – diluted             15,880,507     15,575,459    14,805,556
                               ============== ============== =============

Contact Information

  • Contacts:

    James Rudis
    Chairman, President and CEO
    Overhill Farms, Inc.

    Alexander Auerbach
    Auerbach & Co. Public Relations
    Email Contact