MOORE, Okla., March 13, 2008 (PRIME NEWSWIRE) -- Vaughan Foods, Inc. (Nasdaq:FOOD), a regional leader in fresh-cut vegetables and fruit products, and a broad line of refrigerated prepared salads, sauces, soups, and side-dishes, announced its operating results for the year ended December 31, 2007.
Net sales increased by 31.0 percent to $67.2 million for 2007, compared to $51.3 million in 2006. Gross profit increased to $6.7 million, or 9.9 percent of net sales in 2007, from $3.7 million, or 7.3 percent of net sales, in 2006. Operating income increased by $754,000 to $469,000 compared to an operating loss of $285,000 in 2006. The net loss was $906,000, or $0.26 per share, compared to a net loss of $1.2 million, or $0.52 per share, in 2006.
The acquisition of Allison's Gourmet Kitchens, on June 30, 2007, accounted for the majority of the increase in both sales and gross profit, but other changes in product mix and production efficiencies in labor and raw material usage also contributed. Excluding the effect of the acquisition of Allison's, our sales increased by $4.0 million, or 7.7%, while legacy gross profit increased from 7.2% to 8.7%.
Selling, general and administrative expenses amounted to $6.2 million or 9.2 percent of net sales in 2007 compared to $4.0 million or 7.8 percent of net sales in 2006. The acquisition of Allison's added $1.4 million in expenses, and costs related to operating as a public company were approximately $1.0 million, partially offset by certain reductions.
Fourth quarter earnings before taxes were adversely affected to the extent of $402,000 by unstable conditions in the lettuce market, recruiting costs for a new Chief Financial Officer and a new General Manager of Fresh Cut Produce, and the effects of rising energy costs.
Herb Grimes, Chairman and CEO of Vaughan Foods, commented, "2007 was a year of transformation, change and progress. Our actions have strengthened us financially, operationally and in our human resource assets, better positioning us for 2008 and beyond. We completed an initial public offering, acquired Allison's and its subsidiary, Wild About Food, put a new revolving credit facility in place, and strengthened our management team. We've also been able to manage through the challenges of higher input costs at all levels.
The implementation of a new Enterprise Resource Planning system is a major initiative in 2008. Among other things, the new ERP system will simplify our back-end operations, provide greater and more timely visibility into our business operations, enable customer e-commerce capabilities and further align our divisions. We are also focused on improving our sourcing processes, to minimize waste, reduce our in-bound shipping costs, assure a more steady supply and price of product, and improve our raw material quality. Overall, we are energized about our prospects in 2008, and we look forward to reporting our progress to you in future quarters," concluded Mr. Grimes.
Guidance
Vaughan's Investor Relations policy prohibits management from making specific public earnings forecasts or outlook indications, or commenting on external earnings estimates. However, the Company may provide "macro" guidance from time to time.
Management expects continued revenue growth in 2008, in the 7-10 percent range. Our growth rate will be higher in the prepared foods business, where margins are generally higher than in the fresh-cut produce business. However, overall margins will be under some pressure due to higher costs of labor, packaging and ingredient materials, and fuel. Management expects to see some mitigation of total labor costs later this year and into 2009, as it invests heavily in new equipment to reduce its long-term exposure to a challenging labor market. Overall, we expect gross margins for 2008 to be in the range of 10 to 12 percent for the consolidated business. Capital expenditures will be in the $2.5 million range in 2008, including $800,000 to be invested in a new enterprise resource planning system and several other improvements and upgrades to Vaughan's plant and equipment.
Vaughan estimates that its costs related to operating as a publicly-traded company is in the range of $1.0 million per year.
Conference Call Information
Vaughan management will host an investor conference call on Friday, March 14, 2008 at 10:00 a.m. ET to discuss these results.
Interested parties should call 877-548-7905 (domestic) or 719-325-4901 (international) at least 5 minutes before the scheduled start time (no passcode required). You may also access this call via the Internet at:
http://www.vaughanfoods.com
For those who are unavailable to listen to the live broadcast, a replay will be available through April 14, 2008 and can be accessed by dialing 888-203-1112 (domestic), and 719-457-0820 (international). The pass code is 4980881.
About Vaughan Foods, Inc.
Vaughan Foods and its subsidiaries prepare refrigerated salads, soups and sauces, as well as fresh-cut produce (salad and salad mixes), which it distributes to its customers in the Midwest, Southeast, and Southwest. Among its customers are restaurants, grocery store delis and food service businesses.
The Vaughan Foods, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4726
Forward-Looking Statement
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in the Company's Form 10-K, Form 8-K and Form 10-Q reports. The Company undertakes no obligation to update or revise any forward-looking statement.
The following table shows the results for 2007, compared with the
results for 2006 (dollars in thousands, except per share data):
Year-Ended Ended December 31,
2007 2006
Net sales $ 67,173 $ 51,277
Cost of sales 60,491 47,557
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Gross profit 6,682 3,720
Selling, general and
administrative expenses 6,213 4,005
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Operating income 469 (285)
Interest expense (2,072) (1,617)
Other income, net 490 390
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Income (loss) before income taxes (1,113) (1,512)
Income tax expense (benefit) (207) (307)
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Net income (loss) $ (906) $ (1,205)
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EBITDA $ 2,442 $ 1,138
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Weighted average shares outstanding 3,461,539 2,300,000
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Net income (loss) per share
- basic and diluted $ (0.26) $ (0.52)
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The following table shows the results in the fourth quarter of 2007,
compared with the results in the year-earlier quarter (dollars in
thousands, except per share data):
Three Months Ended
December 31,
2007 2006
Net sales $ 20,220 $ 12,001
Cost of sales 18,609 10,750
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Gross profit 1,611 1,251
Selling, general and
administrative expenses 2,235 869
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Operating income (624) 382
Interest expense (345) (444)
Other income, net 203 150
----------- -----------
Income (loss) before income taxes (766) 88
Income tax expense (benefit) (322) 254
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Net income (loss) $ (444) $ (166)
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Weighted average shares outstanding 4,623,077 2,300,000
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Net income (loss) per share
- basic and diluted $ (0.10) $ (0.07)
=========== ===========
The following table shows the pro-forma results for the full-year
2007, compared with the pro-forma results for the full-year 2006. The
pro-forma consolidated results include the assumption that Allison's
was acquired on or before January 1, 2006 (dollars in thousands,
except per share data):
Year-Ended Ended
December 31,
Pro-Forma
2007 2006
Net sales $ 79,421 $ 69,344
Cost of sales 70,129 61,695
----------- -----------
Gross profit 9,292 7,649
Selling, general and
administrative expenses 7,691 6,372
----------- -----------
Operating income 1,601 1,277
Interest expense (2,198) (1,801)
Other income, net 270 50
----------- -----------
Income (loss) before income taxes (327) (474)
Income tax expense (benefit) (124) (180)
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Net income (loss) $ (203) $ (294)
=========== ===========
EBITDA $ 2,640 $ 1,290
=========== ===========
Weighted average shares outstanding 3,461,539 2,300,000
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Net income (loss) per share
- basic and diluted $ (0.06) $ (0.13)
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Vaughan Foods, Inc
Consolidated Balance Sheet
As of December 31, 2007
(dollars in thousands)
Assets
Current assets:
Cash and cash equivalents $ 2,698
Accounts receivable, net 5,981
Inventories 2,846
Prepaid expenses 119
Deferred tax assets 40
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Total current assets 11,684
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Restricted assets:
Investments 708
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Total restricted assets 709
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Property and equipment, net 16,569
Other assets:
Loan origination 377
Intangible asset 715
Deferred tax assets, noncurrent 393
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Total assets 30,447
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 4,941
Short-term borrowings 1,000
Note payable to former owners of Allison's 1,000
Accrued liabilities 1,889
Current portion of long-term debt 865
Current portion of capital lease obligation 189
Amounts payable to former owners of Wild About Food 222
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Total current liabilities 10,106
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Long-term debt, net of current portion 9,146
Capital lease obligation, net of current portion 297
Amounts payable to former owners of Wild About Food,
net of current portion 250
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Total long-term liabilities 9,693
Total stockholders' equity 10,648
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Total liabilities and stockholders' equity $30,447
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Vaughan Foods, Inc
Consolidated Statement of Cash Flows
For the Year Ended December 31, 2007
(dollars in thousands)
Cash flows from operating activities:
Net income (loss) $ (906)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,267
Provision for bad debts 109
Gain on sale of assets (102)
Deferred income taxes (207)
Changes in operating assets and liabilities,
net of amounts acquired in acquisition of
Allison's Gourmet Kitchens, LP:
Accounts receivable (265)
Accounts receivable - related party 181
Inventories (489)
Prepaid expenses and other assets (14)
Accounts payable (1,695)
Accounts payable, related party (424)
Accrued liabilities 345
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Net cash (used in) operating activities (1,200)
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Cash flows from investing activities:
Cash paid for property and equipment (1,691)
Cash paid for acquisition of Allison's Gourmet Kitchens,
LP, net of cash acquired (1,278)
Proceeds from sale of assets 318
Distributions from restricted assets 250
Restricted assets (111)
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Net cash (used in) investing activities (2,512)
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Cash flows from financing activities:
Cash paid for loan origination (5)
Proceeds from initial public offering 11,594
Proceeds from line of credit 1,150
Repayments on line of credit (3,876)
Repayments on short-term borrowings (2,000)
Increase in amounts payable to former owners of
Wild About Food (37)
Cash paid to former owners of Wild About Food (118)
Repayment of long-term debt and capital leases (1,166)
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Net cash provided by financing activities 5,542
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Net increase (decrease) in cash and cash equivalents 1,830
Cash and cash equivalents at beginning of period 868
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Cash and cash equivalents at end of period $ 2,698
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