Galaxy Foods (AMEX:GXY)
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Galaxy Nutritional Foods Reports FY2005 Operating Results
ORLANDO, Fla., July 14 /PRNewswire-FirstCall/ -- Galaxy Nutritional Foods,
Inc. (AMEX:GXY), a leading producer and marketer of nutritious plant-based
dairy alternatives for the retail and foodservice markets, today reported its
operating results for FY2005.
For the twelve months ended March 31, 2005, net sales increased 23% to
approximately $44.5 million, compared with approximately $36.2 million in
FY2004. The increase in net sales primarily reflects higher contract
manufacturing (private label) revenues and an increase in sales of Wholesome
Valley(R) organic products. Gross profit margin decreased to 22% of sales in
FY2005, from 31% in the previous fiscal year, due primarily to higher raw
material costs and lower margins on private label business. The average price
of casein, a key ingredient in most of the Company's products, increased an
average of 32% in FY2005, which cost increase resulted in an increase of
approximately $2.7 million in cost of goods sold.
Loss from operations totaled ($3,236,572) in FY2005, versus a loss from
operations of ($1,600,567) in FY2004. Operating results for FY2005 included a
bad debt provision and inventory write-off of approximately $1.8 million
related to a single customer for which Galaxy manufactured private label
products. The Company no longer does business with this customer, and in the
future Galaxy will instead sell the same or similar products directly to the
major mass merchandiser that was the ultimate purchaser of the products
previously sold to the private label customer.
The Company reported a net loss to common stockholders of ($4,652,726), or
($0.27) per share, in FY2005, versus a net loss to common stockholders of
($4,504,907), or ($0.30) per share, in FY2004.
"Although our fiscal 2005 operating results suffered due to sharply higher raw
materials costs and a large bad debt expense, I believe we have made tremendous
progress in terms of positioning Galaxy for a return to profitability and a
resumption in growth consistent with our market opportunity," commented Michael
E. Broll, Chief Executive Officer of Galaxy Nutritional Foods, Inc. "Our
accomplishments during the past twelve months include the elimination of a
highly dilutive convertible preferred stock, operating cost reductions, and the
recent announcement of an outsourcing agreement with Schreiber Foods that
should result in additional cost savings of several million dollars annually."
"We look forward to fiscal 2006 with great optimism," continued Broll. "While
the outsourcing of our manufacturing and distribution activities to Schreiber
Foods will require some non-recurring expenses in the near term, I am
optimistic that an earnings turnaround will be evident during the second half
of fiscal 2006 and in future years. Without the cost burden associated with
our current production facilities and with a much-strengthened balance sheet,
we can focus upon marketing and other activities that can leverage Galaxy's
strong brands in the healthy foods marketplace. The recent decision by a major
mass merchandiser to purchase our alternative cheese products directly from our
Company illustrates the power of our brands, and we intend to greatly expand
our visibility within the growing universe of health- conscious consumers in
future years."
Results for FY2005 included non-cash compensation expense of $834,746, whereas
results for the previous year included non-cash compensation expense of
$651,273. Additionally, FY2005 and FY2004 results included employment contract
expense of $444,883 and $1,830,329, respectively. Excluding these non-cash
compensation and employment contract items, the Company's operating loss, as
adjusted (a non-GAAP measure), totaled ($1,956,943) in FY2005, compared with
operating income, as adjusted, of $881,035 in FY2004. The decrease in non-GAAP
operating income was primarily the result of the reduction in gross margin
primarily due to the $2.7 million casein effect mentioned above
EBITDA, as adjusted (a non-GAAP measure), approximated $215,623 in FY2005,
compared with EBITDA, as adjusted, of approximately $3.1 million in FY2004.
EBITDA, as adjusted, is comprised of net income before interest, taxes,
depreciation and amortization, and is exclusive of employment contract expense
as well as non-cash compensation related to stock options and warrants.
Cash flow provided by operating activities during FY2005 totaled $779,746,
compared with cash flow provided by operating activities of $2,236,350 in
FY2004. The decrease in operating cash flow versus the prior-year period was
primarily due to higher raw material costs and increased accounts receivables
related to higher sales volumes.
In the fourth quarter of FY2005, the Company's sales increased 27% to
approximately $10.8 million, compared with approximately $8.5 million in the
fourth quarter of the previous fiscal year.
Loss from operations, excluding non-cash compensation and employment contract
expense (a non-GAAP measure) totaled ($1,795,835) in the fourth quarter of
FY2005, versus operating income, excluding non-cash compensation and employment
contract expense, of $428,241 in the corresponding period of the previous
fiscal year. The largest factors in the decrease in operating profitability in
the fourth quarter of FY2005, when compared with the fourth quarter of FY2004,
are the above-mentioned $1.8 million bad debt expense and inventory write-off
as well as the higher casein costs in the current fiscal year.
The Company reported a net loss to common stockholders of ($2,545,790), or
($0.14) per share, in the fourth quarter of FY2005, versus net income available
to common stockholders of $906,277, or $0.06 per share, in the fourth quarter
of FY2004.
Business Outlook for FY2006
The following statements are forward-looking in nature, and actual results may
differ materially. Please refer to Galaxy's quarterly and annual reports as
filed with the Securities and Exchange Commission (SEC) for a more complete
description of risks.
Given no change in the current business or economic environment, the Company
expects:
* Double-digit percentage growth in sales in FY2006, primarily through
additional branded sales derived from an expansion in distribution to
specifically identified markets.
* To report positive operating profits, as adjusted (a non-GAAP measure)
for the fiscal year ending March 31, 2006.
* EBITDA, as adjusted, (a non-GAAP measure) to remain at positive levels
throughout FY2006.
* To report positive cash flow from operating activities for FY2006.
Footnote on non-GAAP Measures Presented Above
Management utilizes certain non-GAAP measures such as operating income, as
adjusted, and EBITDA, as adjusted, because it provides useful information to
management and investors in order to accurately review the Company's current
on-going operations and business trends related to its financial condition and
results of operations. Additionally, these measures are key factors upon which
the Company prepares its budgets, forecasts and evaluates loan covenants. In
its determination of non-GAAP measures, management excludes the non-cash
compensation related to stock-based compensation as well as the employment
contract expense from its analysis of operating income because it believes that
these items do not accurately reflect the Company's current on- going
operations. With respect to non-cash compensation, it is calculated based on
fluctuations in the Company's stock price which are outside the Company's
control and typically do not reflect the Company's operations. These non-GAAP
measures are not in accordance with, or an alternative for, generally accepted
accounting principles and may be different from non-GAAP measures reported by
other companies.
CONFERENCE CALL AND WEBCAST INFORMATION
The Company will host an investor conference call today at 11:00 a.m. EDT;
shareholders and other interested parties may participate in the conference
call by dialing 800-322-0079 (international/local participants dial
973-409-9258), a few minutes before 11:00 am EDT on July 14, 2005. The call
will also be broadcast live on the Internet at
http://phx.corporate-ir.net/playerlink.zhtml?c=102653&s=wm&e=1099448. The call
will be archived on the Internet through October 14, 2005 at
http://phx.corporate-ir.net/playerlink.zhtml?c=102653&s=wm&e=1099448.
About Galaxy Nutritional Foods, Inc.
Galaxy Nutritional Foods(R) is the leading producer of health-promoting
plant-based dairy and dairy-related alternatives for the retail and foodservice
markets. An exclusive, new and technologically advanced, safer "hot process"
is used to produce these phytonutrient-enriched products, made from nature's
best grains -- soy, rice and oats. Veggie products are low fat and fat free
(saturated fat and trans-fatty acid free), cholesterol and lactose free, are
growth hormone and antibiotic free, and have more calcium, vitamins and other
minerals than conventional dairy products. Because they are made with plant
proteins, the products are more environmentally friendly and economically
efficient than dairy products derived solely from animal proteins. Galaxy's
products are part of the healthy and natural foods category, the fastest
growing segment of the retail food market. Galaxy brand names include: Galaxy
Nutritional Foods(R); Veggie(R); Veggie Nature's Alternative(TM); Veggie
Slices(R); Soyco(R); Soymage(R); Wholesome Valley(R); Lite Bakery(R); and
Galaxy Nutritional Foods Smart Choice Cheese Products(R). For more information,
please visit Galaxy's website at: http://www.galaxyfoods.com/.
THIS PRESS RELEASE CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD- LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, OR OTHER FACTORS
WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THOSE FORWARD-LOOKING STATEMENTS, WHICH SPEAK
ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT UNANTICIPATED EVENTS OR
DEVELOPMENTS.
GALAXY NUTRITIONAL FOODS, INC.
Balance Sheets
MARCH 31, MARCH 31,
2005 2004
ASSETS
CURRENT ASSETS:
Cash $561,782 $449,679
Trade receivables, net of allowance for
doubtful accounts of $2,299,000
and $633,000 4,644,364 3,964,198
Inventories 3,811,470 4,632,843
Prepaid expenses and other 219,592 266,301
Total current assets 9,237,208 9,313,021
PROPERTY AND EQUIPMENT, NET 18,246,445 20,232,089
OTHER ASSETS 286,013 416,706
TOTAL $27,769,666 $29,961,816
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $5,458,479 $4,605,277
Accounts payable 3,057,266 1,266,346
Accrued and other current liabilities 2,130,286 2,452,300
Current portion of accrued employment
contract 586,523 366,305
Current portion of term notes payable 1,320,000 1,140,000
Current portion of obligations under
capital leases 194,042 231,432
Total current liabilities 12,746,516 10,061,660
ACCRUED EMPLOYMENT CONTRACT, less current
portion 993,305 1,293,142
TERM NOTES PAYABLE, less current portion 6,921,985 8,241,985
OBLIGATIONS UNDER CAPITAL LEASES, less
current portion 85,337 204,967
Total liabilities 20,747,143 19,801,754
COMMITMENTS AND CONTINGENCIES -- --
REDEEMABLE CONVERTIBLE PREFERRED STOCK -- 2,573,581
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized
85,000,000 shares; 18,411,474 and
15,657,321 shares issued 184,115 156,573
Additional paid-in capital 67,655,133 63,880,084
Accumulated deficit (47,924,064) (43,557,515)
19,915,184 20,479,142
Less: Notes receivable arising from the
exercise of stock options and sale
of common stock (12,772,200) (12,772,200)
Treasury stock, 30,443 shares,
at cost (120,461) (120,461)
Total stockholders' equity 7,022,523 7,586,481
TOTAL $27,769,666 $29,961,816
GALAXY NUTRITIONAL FOODS, INC.
Statements of Operations
Years ended March 31, 2005 2004 2003
NET SALES $44,510,487 $36,176,961 $40,008,769
COST OF GOODS SOLD 34,736,594 24,864,289 28,080,188
Gross margin 9,773,893 11,312,672 11,928,581
OPERATING EXPENSES:
Selling 5,148,426 4,981,996 4,958,272
Delivery 2,307,166 1,877,682 2,008,638
Non-cash compensation
related to stock-based
transactions-general
and administrative 834,746 651,273 (2,906,762)
Employment contract
expense-general and
administrative 444,883 1,830,329 --
General and administrative 3,970,690 3,303,030 3,570,889
(Gain) Loss on asset disposals (4,500) 8,519 47,649
Research and development 309,054 260,410 232,552
Total operating expenses 13,010,465 12,913,239 7,911,238
INCOME (LOSS) FROM
OPERATIONS (3,236,572) (1,600,567) 4,017,343
OTHER INCOME (EXPENSE):
Interest expense (1,129,977) (1,361,606) (2,923,215)
Other expense -- -- (60,000)
(1,129,977) (1,361,606) (2,983,215)
NET INCOME (LOSS) $(4,366,549) $(2,962,173) $1,034,128
Less:
Preferred Stock Dividends 82,572 201,791 264,314
Preferred Stock Accretion
to Redemption Value 203,605 1,340,943 1,370,891
NET LOSS TO COMMON
STOCKHOLDERS $(4,652,726) $(4,504,907) $(601,077)
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $(0.27) $(0.30) $(0.05)
GALAXY NUTRITIONAL FOODS, INC.
Statements of Cash Flows
Years Ended March 31, 2005 2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(4,366,549) $(2,962,173) $1,034,128
Adjustments to reconcile
net income (loss) to
net cash from (used in)
operating activities:
Depreciation and
amortization 2,172,566 2,205,053 2,273,349
Amortization of debt
discount and
financing costs 116,522 236,321 1,264,273
Provision for losses
on trade receivables 1,666,000 (221) (177,245)
Non-cash compensation
related to stock-based
transactions 834,746 651,273 (2,906,762)
(Gain) Loss on disposal
of assets (4,500) 8,519 47,649
(Increase) decrease in:
Trade receivables (2,346,166) 999,049 364,907
Inventories 821,373 661,657 454,152
Prepaid expenses and
other 46,709 189,012 (67,369)
Increase (decrease) in:
Accounts payable 1,790,920 (1,426,143) (1,520,021)
Accrued liabilities 48,125 1,674,003 408,814
NET CASH FROM (USED IN)
OPERATING ACTIVITIES 779,746 2,236,350 1,175,875
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (104,339) (221,585) (214,003)
Proceeds from sale of
equipment 4,500 -- --
(Increase) decrease in
other assets 34,837 (10,193) 113,977
NET CASH FROM (USED IN)
INVESTING ACTIVITIES (65,002) (231,778) (100,026)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Decrease in book overdrafts -- (1,151,276) (41,580)
Net borrowings (payments)
on line of credit 853,202 (334,617) (583,981)
Borrowings on term notes
payable -- 2,000,000 500,000
Repayments on term notes
payable (1,140,000) (1,572,760) (1,763,265)
Repayments on
subordinated note
payable -- (4,000,000) --
Financing costs for long
term debt (37,500) (288,230) (239,539)
Principal payments on
capital lease obligations (239,603) (365,635) (431,937)
Proceeds from exercise of
common stock options 18,856 16,217 4,250
Proceeds from exercise
of common stock warrants,
net of costs -- 360,000 --
Proceeds from issuance of
common stock under employee
stock purchase plan 24,002 28,527 19,663
Proceeds from issuance of
common stock, net of
offering costs 2,198,090 3,751,283 1,461,970
Redemption of preferred
stock (2,279,688) -- --
NET CASH FROM (USED IN)
FINANCING ACTIVITIES (602,641) (1,556,491) (1,074,419)
NET INCREASE (DECREASE)
IN CASH 112,103 448,081 1,430
CASH, BEGINNING OF YEAR 449,679 1,598 168
CASH, END OF YEAR $561,782 $449,679 $1,598
GALAXY NUTRITIONAL FOODS, INC.
EBITDA, as adjusted, (a non-GAAP measure) Reconciliation
(Unaudited)
Years ended March 31, 2005 2004 2003
NET SALES $44,510,487 $36,176,961 $40,008,769
NET INCOME (LOSS) $(4,366,549) $(2,962,173) $1,034,128
Plus:
Non-cash compensation
expense (income) 834,746 651,273 (2,906,762)
Employment contract expense 444,883 1,830,329 --
Interest expense 1,129,977 1,361,606 2,923,215
Depreciation and amortization
expense 2,172,566 2,205,053 2,273,349
EBITDA, as adjusted $215,623 $3,086,088 $3,323,930
As a % of Net Sales 0.5% 8.5% 8.3%
DATASOURCE: Galaxy Nutritional Foods, Inc.
CONTACT: Dawn M. Robert, Investor Relations of Galaxy Nutritional Foods,
Inc., +1-407-854-0433
Web site: http://www.galaxyfoods.com/