SOURCE: Overhill Farms, Inc.

January 29, 2007 09:30 ET

Overhill Farms Reports Record First Quarter Earnings, Projects $200 Million Annual Revenue Run Rate

Net Income Is 10 Cents per Share or $1,556,000 on Net Revenues of $40,538,000

LOS ANGELES, CA -- (MARKET WIRE) -- January 29, 2007 -- Overhill Farms, Inc. (AMEX: OFI) today reported record net income of $1,556,000 or 10 cents per share (basic and diluted) for the first quarter ended December 31, 2006, on revenues for the quarter of $40,538,000. This represents a 156.3% increase in net income from the $607,000 or 4 cents per share for the first quarter of last year, and a 2.4% increase in net revenues from the $39,589,000 reported a year earlier.

Results for the first quarter of fiscal 2007 are as follows:

--  Net revenues from customers in the retail sector were up 16.2% or
    $2,753,000 to $19,747,000, from the $16,994,000 reported in the prior year.
    The gain was due to increased sales to Jenny Craig, Inc. and other existing
    customers, and to the addition of new customers.
    
--  Net revenues from foodservice customers declined slightly by 0.4% or
    $62,000 to $16,180,000, from the $16,242,000 reported for the prior year.
    
--  Net revenues from airline customers fell by 27.4% or $1,742,000 to
    $4,611,000 for the quarter, from $6,353,000 for last year. The decline in
    airline sales resulted from customers reducing the number of meals provided
    on domestic flights. Year-over-year comparisons also reflected the loss of
    sales to Delta Airlines subsequent to their bankruptcy filing.
    
James Rudis, Chairman and Chief Executive Officer of Overhill Farms, said, "These record results for the quarter reflect our strengths in a number of key areas, including sales, product development, production, quality control and close attention to operating margins. These strengths also enabled us to obtain significant new business which we believe will result in an annual revenue run rate of $200 million by the third quarter of this year."

As previously announced, Overhill Farms recently signed a three-year agreement to produce meals for a major national food brand which is expected to generate sales of approximately $43 million during the first year. In addition, it is scheduled to begin production late in the second quarter of 24 new private label food items being introduced by a major West Coast grocery chain. The company also recently announced that it has been awarded contracts for private label products by two other retail customers. The company indicated that results for the first fiscal quarter of 2007 do not include any sales from the new three-year agreement mentioned above.

Mr. Rudis said, "We are extremely pleased that Overhill Farms continues to deliver record results. Based on these new business successes, our continuing pursuit of new accounts, and our focus on maintaining effective cost controls, we anticipate continued growth in operating profit and net income."

Gross profit for the first quarter increased by 25.4% or $1,114,000 to $5,507,000, from $4,393,000 for the prior year. The majority of this increase was attributable to the improvement in gross profit as a percentage of net revenues to 13.6% for the quarter from 11.1% for the first quarter of last year, and to the $949,000 increase in net revenues. Margin improvement was attributable to better operating leverage resulting from higher sales volume and better pricing of raw materials.

Selling, general and administrative expenses decreased by 3.9% or $72,000 to $1,777,000 (4.4% of net revenues) for the latest quarter from $1,849,000 (4.7% of net revenues) for the prior year. Operating income increased by 46.6% or $1,185,000 to $3,729,000 for the first quarter of fiscal year 2007 from $2,544,000 from the prior year.

Total interest expense for the first quarter, which consisted of various financing-related charges, decreased $406,000 (26.7%) to $1,114,000 from $1,520,000 for the year-earlier quarter. The decrease was primarily attributable to a decline of 30.3% in interest expense from $1,465,000 to $1,021,000 due to the reduction of $5,005,000 in the face amount of debt in the past twelve months through voluntary principal payments and lower interest rates as a result of refinancing. On January 2, 2007, the company pre-paid $2.85 million of its debt that carries the highest interest rate, using a combination of cash and lower-cost debt. The first quarter decline in interest expense was partially offset by an increase in amortization of deferred financing costs.

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 www.OverhillFarms.com.

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 and revenue run rates, cash flows and growth in operating profit and net income, 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 customers' production expectations, 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; customers' ability and willingness to pay for products and meet their own contractual obligations under their agreements with the Company; customers' decisions regarding the timing and volume of shifts in production volume to other vendors, the occurrence of acts of terrorism 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, Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 and other reports filed with the Securities and Exchange Commission.


                             OVERHILL FARMS, INC.

                       CONDENSED SUMMARY OF OPERATIONS


                                           For the Three Months Ended
                                          December 31,       January 1,
                                             2006              2006
                                        --------------    --------------

Net revenues                            $   40,538,492    $   39,588,808
Cost of sales                               35,031,990        35,195,411
                                        --------------    --------------
Gross profit                                 5,506,502         4,393,397
Selling, general and administrative
 expenses                                    1,777,217         1,849,218
                                        --------------    --------------
Operating income                             3,729,285         2,544,179
Total interest expense                       1,114,359         1,520,231
Other (expenses) income                        (18,099)            1,642
                                        --------------    --------------
Income before income taxes                   2,596,827         1,025,590
Income tax expense                           1,041,068           418,441
                                        --------------    --------------
Net income                              $    1,555,759    $      607,149
                                        ==============    ==============

Net income per share - basic            $         0.10    $         0.04
                                        ==============    ==============
Net income per share - diluted          $         0.10    $         0.04
                                        ==============    ==============

Weighted average shares outstanding
 - basic                                    15,267,271        14,981,018
Weighted average shares outstanding
 - diluted                                  15,672,313        15,938,331

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