SOURCE: TurboChef Technologies, Inc.

May 10, 2006 16:08 ET

TurboChef Reports Results for 2006 First Quarter

Reaches Agreements With Spain-Based Telepizza and Brazil-Based Spoleto; Receives Large Additional Order From Subway; Cites Successful Introduction of Residential Oven at Major Industry Trade Show (K/BIS)

ATLANTA, GA -- (MARKET WIRE) -- May 10, 2006 --TurboChef Technologies, Inc. (NASDAQ: OVEN) today reported financial results for the three months ended March 31, 2006.

Significant Items:

--  Total revenue for the quarter of $9.5 million included approximately
    $5.4 million in revenue from customers other than Subway. This metric is
    equal to the results for the sequential quarter but compares favorably with
    $3.9 million of such sales for the year ago quarter. Gross margins of 30%
    for the quarter mark a significant sequential improvement as the beneficial
    effects of price increases to non-contract customers began to take effect.
    Continued margin improvement is expected as price increases to contract
    customers which were implemented this quarter begin to take effect.
    
--  The Company continues to expand the commercial customer base through
    its network of manufacturer's representatives and its direct sales efforts
    targeted at major foodservice operators. Many companies have visited the
    Dallas TurboChef manufacturing location and are in various stages of tests
    on different TurboChef oven models. Other companies continue expanded
    market rollout of the TurboChef Tornado model. The Company has recently
    reached an agreement to provide Tornado ovens to international outlets of
    Telepizza, the leading Spanish home delivery food service company,
    initially for its locations in Spain and Poland. With over 800 locations
    throughout five countries, Telepizza is the leader in home delivery food
    service in Spain. The Company also announced it has reached an agreement to
    provide Tornado ovens to Spoleto, a fast, casual Italian food chain for its
    130 locations in Sao Paulo and Rio de Janeiro, Brazil by year-end 2006. The
    Company also has been informed that Subway has committed to purchase
    another 2,000 units for Wal-Mart stores over the next 12 months, which will
    bring anticipated total Subway unit sales to 4,500 to 5,500 ovens this
    year.
    
--  The Company introduced its 30" Double Wall Speedcook Oven at the 2006
    Kitchen and Bath Industry Show (K/BIS) which opened April 21st in Chicago.
    Celebrated chefs, Charlie Trotter of Chicago and Guenter Seeger of Atlanta,
    provided cooking demonstrations throughout the show. Over 80,000 kitchen
    designers, distributors, dealers, builders and consumers attended this
    event which showcased the industry's latest products. The response to the
    oven was highly favorable, and the Company expects to see news and
    information about this revolutionary product to begin appearing in the
    publications of food and wine, shelter and lifestyle media present at the
    demonstrations of the oven's capabilities. The oven features a retro-modern
    look with soft exterior lines, and the oven's brushed stainless steel
    chassis is customizable, initially through seven distinct top oven door
    colors, accommodating a variety of kitchen designs. The Company said that
    it expects the 30" Double Wall Speedcook Oven to be available in the Fall
    of 2006 through authorized dealers at a suggested retail price of $7,495.
    
--  The Company will continue to make substantial investments in its
    residential oven initiative, but, based on the growing momentum in sales to
    commercial businesses and the Company's strong balance sheet, the Company
    does not currently anticipate the need to seek external financing to
    complete the Company's launch of its residential ovens. At March 31, cash
    and cash equivalents stood at $33 million and the Company expects to finish
    2006 in a strong cash position.
    
Financial Review

For the three months ended March 31, 2006, total revenue was $9.5 million compared with $20.4 million in the year ago quarter. As a percentage of sales, cost of product sales for the first quarter was 69.6% as compared with 75.3% for the fourth quarter of 2005 and as compared with 61.2% for the year ago quarter. The positive improvement sequentially in cost of product sales statistics reflects the benefit of a general price increase of approximately 8% to non-contract customers announced in 2005 but which took effect in the current quarter. As compared with the year ago quarter, cost of product sales was impacted by price pressures on certain materials and component parts as well as increased freight and handling charges.

Selling, general and administrative expenses for the quarter were approximately $650,000 less than the fourth quarter of 2005. As compared with the sequential quarter, marketing costs increased approximately $200,000 related primarily to the launch of the residential oven, while legal fees declined substantially as a result of reduced litigation matters. In addition, cost control efforts in the commercial segment positively impacted a number of general and administrative expenses.

Net loss was $4.9 million or $0.17 per share for the first quarter of 2006 as compared with net income of $1.5 million or $0.05 per share for the year ago quarter.

Richard Perlman, Chairman of TurboChef, said, "We believe we have made an excellent start to the 2006 year. We see growing momentum in our commercial business and as we commented in our 2005 fourth quarter release, we did begin to see improvement in our gross margin in the first quarter as it improved sequentially from the 2005 fourth quarter. We expect this trend to continue as price increases take effect and as the Company continues to focus on initiatives to lower its manufacturing costs."

Jim Price, Chief Executive Officer of TurboChef, added, "The K/BIS show was an extraordinary event in the history of TurboChef. The oven's cooking characteristics were on full display and reviews from attendees at the show were extremely complimentary on the taste and quality of the food items that were cooked in a fraction of normal times."

About TurboChef

TurboChef Technologies, Inc. is a leading provider of equipment, technology and services focused on the high-speed preparation of food products for the worldwide commercial primary cooking equipment market and is developing equipment for residential markets through the application of its high-speed cooking technologies. TurboChef's user-friendly speed cook ovens employ proprietary combinations of heating technologies to cook a variety of food products at speeds faster than, and to quality standards that it believes are comparable or superior to, that of conventional heating methods. A partial list of commercial customers include Compass Group, Disney, Hilton, HMS Host, Holiday Inn Express, Hot Stuff Foods, Hyatt, Lowes Cineplex Entertainment, Spoleto, Starbucks, Starwood, Subway and Telepizza. The address of TurboChef's principal executive offices is Six Concourse Parkway, Suite 1900, Atlanta, GA 30328. Visit TurboChef at www.turbochef.com.

TurboChef will be hosting a conference call to discuss its results on Wednesday May 10, 2006, at 4:45 p.m. EDT. To join the conference call, please dial (800) 374-0113 (access code: 7936547) or access the audio feed through a webcast link on our website at www.turbochef.com. Included with the webcast will be a video showcasing highlights of the Company's residential oven introduction at the recent Kitchen and Bath Industry show (K/BIS) in Chicago. International callers, please dial: 706-758-9607 (access code: 7936547). A replay of the conference call will be available through our website or by calling 800-642-1687 or 706-645-9291 and using the same access code 7936547.

Forward-Looking Statements

Certain statements in this release, and other written or oral statements made by or on behalf of TurboChef, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding future events and developments and TurboChef's future performance, as well as management's expectations, beliefs, plans, guidance, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: the uncertainty of market acceptance and demand for TurboChef's products, the ability to obtain additional financing necessary to expand operations, the uncertainty of consumer acceptance of new products or technologies that may be offered by TurboChef, the dependence on a limited number of customers, relationships with and dependence on third-party equipment manufacturers and suppliers, impact of competitive products and pricing and other risks detailed in TurboChef's filings with the Securities and Exchange Commission. The words "looking forward," "believe," "expect," "likely," "should" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only for the date the statement was made. TurboChef Technologies, Inc. undertakes no obligation to publicly update any forward-looking statements, whether as a result of future events, new information or otherwise.

                       TURBOCHEF TECHNOLOGIES, INC.
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


                                                  Three Months Ended March
                                                            31,
                                                  ------------------------
                                                      2006         2005
                                                  -----------  -----------

Revenues:
    Product sales                                 $     9,107  $    19,720
    Royalties and services                                429          683
                                                  -----------  -----------
Total revenues                                          9,536       20,403

Costs and expenses:
    Cost of product sales                               6,637       12,491
    Research and development expenses                   1,159        1,049
    Selling, general and administrative expenses        6,079        5,083
    Restructuring charges                                 (41)           -
    Depreciation and amortization                         892          501
                                                  -----------  -----------
Total costs and expenses                               14,726       19,124
                                                  -----------  -----------

Operating (loss) income                                (5,190)       1,279

Other income (expense):
    Interest income                                       369          263
    Interest expense and other                           (111)         (21)
                                                  -----------  -----------
                                                          258          242
                                                  -----------  -----------

Net (loss) income                                 $    (4,932) $     1,521
                                                  ===========  ===========


Per share data:
  Net (loss) income per share:
  Basic and diluted:
    Basic                                         $     (0.17) $      0.06
                                                  ===========  ===========
    Diluted                                             (0.17)        0.05
                                                  ===========  ===========

  Weighted average number of common shares
   outstanding
    Basic                                          28,665,275   26,589,785
                                                  ===========  ===========
    Diluted                                        28,665,275   28,989,040
                                                  ===========  ===========



                       TURBOCHEF TECHNOLOGIES, INC.
                  UNAUDITED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT SHARE DATA)

                                                March 31,    December 31,
                                                  2006           2005
                                              -------------  -------------

Assets:

Current assets:

 Cash and cash equivalents                    $      33,227  $      40,098
 Accounts receivable, net of allowance of
  $221 and $177, respectively                         6,186          7,314
 Other receivables                                    1,972          2,003
 Inventory, net                                      10,356         10,994
 Prepaid expenses                                       830            724
                                              -------------  -------------

Total current assets                                 52,571         61,133

Property and equipment, net                           7,088          6,482

Developed technology, net                             6,568          6,770
Goodwill                                              5,934          5,934
Covenants not-to-compete, net                         5,294          5,434
Other assets                                            276            314
                                              -------------  -------------

Total assets                                  $      77,731  $      86,067
                                              =============  =============

Liabilities and Stockholders' Equity:

Current liabilities:
 Accounts payable                             $       4,420  $       6,166
 Other payables                                       1,445          1,445
 Accrued expenses                                     2,550          3,484
 Future installments due on covenants
  not-to-compete                                      1,302          1,286
 Deferred revenue                                     1,834          2,278
 Accrued warranty and upgrade costs                   1,815          2,482
 Deferred rent                                          247            247
                                              -------------  -------------

Total current liabilities                            13,613         17,388

Future installments due on covenants
 not-to-compete, non-current                          2,395          2,363
Deferred rent, non-current                            1,402          1,463
Other liabilities                                        85             81
                                              -------------  -------------

Total liabilities                                    17,495         21,295

Commitments and contingencies

Stockholders' equity:

 Preferred membership units exchangeable for
  TurboChef common stock                                510            967
 Common stock, $.01 par value, authorized
  100,000,000 shares, issued 28,744,515 and
  28,624,247 shares at March 31, 2006 and
  December 31, 2005, respectively                       287            286
 Additional paid-in capital                         144,802        143,950
 Accumulated deficit                                (85,363)       (80,431)
                                              -------------  -------------

Total stockholders' equity                           60,236         64,772
                                              -------------  -------------

Total liabilities and stockholders' equity    $      77,731  $      86,067
                                              =============  =============



                       TURBOCHEF TECHNOLOGIES, INC.
              UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (IN THOUSANDS)

                                                        Three Months Ended
                                                            March 31,
                                                        ------------------
                                                          2006      2005
                                                        --------  --------

Cash flows from operating activities:
  Net  (loss) income                                    $ (4,932) $  1,521
  Adjustments to reconcile net (loss) income to net
   cash used in operating activities:
    Depreciation and amortization                            892       501
    Amortization of deferred rent                            (61)        -
    Amortization of deferred loan costs and notes
     payable                                                  87        16
    Non-cash compensation expense                              -        19
    Provision for doubtful accounts                           45        38
    Other                                                      8         -
    Changes in operating assets and liabilities, net of
     effects of acquisition:
      Restricted cash                                          -       385
      Accounts receivable                                  1,083     1,161
      Inventories                                            418    (1,160)
      Prepaid expenses and other assets                      (63)   (1,786)
      Accounts payable                                    (1,753)   (1,146)
      Accrued expenses and warranty                       (1,599)     (126)
      Deferred revenue                                      (444)     (968)
                                                        --------  --------
    Net cash used in operating activities                 (6,319)   (1,545)
                                                        --------  --------

Cash flows from investing activities:
  Acquisition of business, net of cash acquired                -      (170)
  Property and equipment expenditures                       (923)   (1,091)
  Other                                                        -       119
                                                        --------  --------

    Net cash used in investing activities                   (923)   (1,142)
                                                        --------  --------

Cash flows from financing activities:
  Issuance of common stock, net                                -    54,840
  Proceeds from notes receivable for stock issuances           -        46
  Payment of deferred loan costs                             (25)     (156)
  Proceeds from the exercise of stock options and
   warrants                                                  396       880
  Other                                                        -        (2)
                                                        --------  --------
    Net cash provided by financing activities                371    55,608
                                                        --------  --------

Net change in cash and cash equivalents                   (6,871)   52,921
Cash and cash equivalents at beginning of period          40,098    12,942
                                                        --------  --------
Cash and cash equivalents at end of period              $ 33,227  $ 65,863
                                                        ========  ========

NON CASH INVESTING AND FINANCING ACTIVITIES:

Noncash financing activity - conversion of Enersyst
 preferred membership units                             $    457  $  5,379
                                                        ========  ========

Contact Information

  • For more information, contact:
    James A. Cochran
    Chief Financial Officer
    TurboChef Technologies, Inc.
    Six Concourse Parkway
    Suite 1900
    Atlanta, Georgia 30328
    (678) 987-1700