SOURCE: Overhill Farms, Inc.

July 28, 2005 09:30 ET

Overhill Farms Reports Seven Cents per Share for Third Quarter on 20% Increase in Net Revenues

LOS ANGELES, CA -- (MARKET WIRE) -- July 28, 2005 -- Overhill Farms, Inc. (AMEX: OFI) today reported net income of $1,077,000 or $0.07 per share for the third quarter of fiscal year 2005, an increase of more than 500% from net income of $186,000 or $0.01 per share for the third quarter of fiscal year 2004.

For the first nine months of fiscal year 2005, which ended July 3, 2005, net income was $2,740,000 or $0.18 per share compared to a net loss of $2,043,000 or ($0.14) per share for the first nine months of fiscal year 2004.

Net revenues for the third quarter increased 20% or $7,045,000 to $42,281,000 from $35,236,000 reported for the third quarter of the prior year. Highlights of the quarter's revenue performance are as follows:

--  Net revenues from customers in the retail sector were up 54.8% to
    $19,271,000 for the quarter, an increase of $6,819,000 from $12,452,000
    reported in the year-ago quarter. The increase was predominately due to
    increased sales to three national brand customers, one of which became a
    customer in the third quarter of 2004.
    
--  Net revenues from foodservice customers rose 5.9% to $15,705,000 for
    the quarter, an increase of $875,000 from $14,830,000 for the comparable
    period in fiscal year 2004.
    
--  Net revenues from airline customers decreased 8.2% to $7,305,000 for
    the quarter, a decrease of $649,000 from the $7,954,000 for the third
    quarter of fiscal year 2004. Airline industry trends have generally
    improved and sales volume to many existing customers has increased;
    however, these positive factors were offset by the effect of one airline
    customer's decision to reduce the number of flights on which meals are
    offered.
    
Gross profit for the third quarter rose by 45.2% to $5,338,000, an increase of $1,662,000 from $3,676,000 reported in the year-ago quarter. Gross profit as a percentage of net revenues was 12.6% for the quarter, compared to 10.4% for the comparable period in fiscal year 2004.

Selling, general and administrative (SG&A) expenses rose during the quarter to $2,125,000 or 5.0% of net revenues. This was an increase of $208,000 or 10.9% from $1,917,000 or 5.4% of net revenues for the comparable period in 2004. $142,100 of the increase was related to costs associated with our exploration of strategic financial alternatives to improve stockholder value. The remaining increase in SG&A was largely due to increased payroll costs.

Operating income for the quarter increased 82.7% to $3,213,000, up $1,454,000 from the $1,759,000 from the year-ago quarter. The increase was the result of revenue growth, production improvements and lower material costs.

In discussing the third quarter results, James Rudis, Overhill Farms' Chairman and Chief Executive Officer, said, "The Company continues to perform well in virtually all respects. Revenues have increased through new customers and higher sales to existing customers. Gross profit margins continue to improve and other expenses are being controlled. Our ongoing stronger financial performance has enabled us to accelerate debt repayment while maintaining adequate liquidity to finance further revenue growth." Mr. Rudis added, "We remain very optimistic about the Company's prospects for the remainder of the fiscal year and thereafter."

Net revenues for the first nine months of the current fiscal year were $125,838,000, an increase of 30.0% or $29,071,000 from the $96,767,000 reported for the first nine months of the prior fiscal year. Growth from existing customers accounted for 85% of the increase in net revenues from the year-earlier levels, while new customer accounts contributed the remaining increase in net revenues:

--  Net revenues from customers in the retail sector were up 58.6% to
    $57,509,000 for the latest nine months, an increase of $21,256,000 from
    $36,253,000 reported in the year-ago period. The increase was predominately
    due to increased sales to three national brand customers, one of which
    became a customer in the third quarter of 2004.
    
--  Net revenues from foodservice customers rose 13.2% to $45,866,000 for
    the nine months, an increase of $5,355,000 from the $40,511,000 for the
    comparable period in 2004.
    
--  Net revenues from airline customers increased 12.3% to $22,463,000 for
    the nine months, an increase of $2,460,000 from the $20,003,000 for the
    year-earlier period.
    
Gross profit for the first nine months of the current fiscal year rose by 41.8% to $15,349,000, an increase of $4,521,000 from $10,828,000 reported in the year-ago period. Gross profit as a percentage of net revenues was 12.2%, compared to 11.2% for the comparable year-ago period.

SG&A expenses declined during the nine months to $5,923,000 or 4.7% of net revenues. This was an improvement of $397,000 or 6.3% from $6,320,000 or 6.5% of net revenues for the comparable period in 2004.

Operating income for the nine months increased 109.1% to $9,425,000, up $4,917,000 from $4,508,000 reported a year ago. The increase was the result of revenue growth, improvements in production and material costs and lower SG&A expenses.

Overhill Farms is a value-added supplier of custom high quality frozen foods to retail, foodservice, 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 Company's operations, financial performance, condition and prospects, and statements regarding anticipated improvements in sales volume, gross margins and airline industry trends, the potential for new and existing customers to generate similar or increased sales volume in the future, and the Company's ability to control expenses, prepay its debt, maintain adequate liquidity to finance further revenue growth, and achieve positive financial performance for the remainder of fiscal year 2005 and thereafter. For this purpose, statements of historical fact may be deemed to be forward-looking statements. All statements regarding the Company's expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, projected costs or cost savings, capital expenditures, competitive positions, continuation or expansion of governmental programs, growth opportunities for existing products or products under development, benefits from new technology, plans and objectives of management for future operations and markets for stock, and statements regarding future opportunities, acquisitions or business combinations are forward-looking statements. In addition, forward-looking statements include statements in which we use words such as "expect," "believe," "anticipate," "confident," "intend," "strategy," "plan," "will," "estimate," "project," "goal," "target," "prospects," "optimistic" or similar expressions. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, we cannot assure you that these expectations will prove to have been correct, and actual results may differ materially from those reflected in the forward-looking statements.

The Company cautions 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 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 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 September 26, 2004, and other reports filed with the Securities and Exchange Commission.


                          OVERHILL FARMS, INC.
                      CONDENSED SUMMARY OF OPERATIONS
                               (UNAUDITED)

                                         For the Three Months Ended
                                         July 3,            June 27,
                                          2005               2004
                                     -------------      -------------
Net revenues                         $  42,280,698      $  35,235,833

Cost of sales                           36,942,392         31,559,376
                                     -------------      -------------

Gross profit                             5,338,306          3,676,457

Selling, general and
 administrative expenses                 2,124,812          1,917,153
                                     -------------      -------------

Operating income                         3,213,494          1,759,304

Other expenses                           1,496,524          1,460,542
                                     -------------      -------------
Income before income taxes               1,716,970            298,762

Income tax expense                         639,858            113,230
                                     -------------      -------------

Net income                           $   1,077,112      $     185,532
                                     =============      =============

Net income per share:
   Basic                             $        0.07      $        0.01
                                     =============      =============
   Diluted                           $        0.07      $        0.01
                                     =============      =============

Weighted average shares outstanding:
   Basic                                14,889,197         14,805,556
   Diluted                              15,743,573         15,208,982


                          OVERHILL FARMS, INC.
                      CONDENSED SUMMARY OF OPERATIONS
                               (UNAUDITED)

                                         For the Nine Months Ended
                                         July 3,            June 27,
                                          2005               2004
                                     -------------      -------------

Net revenues                         $ 125,838,181      $  96,767,349

Cost of sales                          110,489,465         85,939,228
                                     -------------      -------------

Gross profit                            15,348,716         10,828,121

Selling, general and
 administrative expenses                 5,923,222          6,320,252
                                     -------------      -------------

Operating income                         9,425,494          4,507,869

Other expenses                           4,900,098          7,796,741
                                     -------------      -------------

Income (loss) before income taxes        4,525,396         (3,288,872)

Income tax expense (benefit)             1,785,696         (1,246,094)
                                     -------------      -------------

Net income (loss)                    $   2,739,700      $  (2,042,778)
                                     =============      =============

Net income (loss) per share:
   Basic                             $        0.18      $       (0.14)
                                     =============      =============
   Diluted                           $        0.18      $       (0.14)
                                     =============      =============

Weighted average shares outstanding:
   Basic                                14,832,732         14,805,556
   Diluted                              15,459,337         14,805,556



                          OVERHILL FARMS, INC.
                      CONDENSED BALANCE SHEET DATA


                                        July 3,          September 26,
                                         2005                2004
                                     -------------      -------------
                                      (Unaudited)

Current assets                       $  29,261,950      $  27,775,800
Property and equipment, net             12,099,092         12,618,281

Other assets                            16,910,986         19,155,488
                                     -------------      -------------

   Total assets                      $  58,272,028      $  59,549,569
                                     =============      =============

Current liabilities                  $  11,228,522      $  14,255,200
Other liabilities                       46,661,969         47,775,484

Shareholders' equity (deficit)             381,537         (2,481,115)
                                     -------------      -------------

   Total liabilities and
    shareholders' equity (deficit)   $  58,272,028      $  59,549,569
                                     =============      =============

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