Centennial Specialty Foods Announces Update

Centennial Specialty Foods Announces Update 


DENVER, Dec. 21  /PRNewswire-FirstCall/ -- Centennial Specialty Foods
Corporation (Nasdaq: CHLE; Boston Stock Exchange: CJS) had previously entered
into a Memorandum of Understanding ("MOU") with its lessee and sole supplier
seeking to settle all outstanding claims and make certain amendments to the
existing Co-Pack Agreement and Lease Agreement between the parties. Centennial
announced that it and its supplier have been unable to reach definitive
agreements with regard to this MOU and therefore have not been able to reach
global resolution.  The supplier has notified Centennial that all further
correspondence related to certain claims asserted by the supplier should be
handled through legal counsel, and must be addressed by January 13, 2005, to
avoid litigation.  These claims relate to $400,000 of costs associated with a
waste water treatment project relating to production operations and certain
alleged misrepresentations by Centennial's outside legal counsel related to
modifications of lease terms earlier this year. Centennial believes such claims
are without merit, and accordingly, it will vigorously defend against them. 
Centennial also believes it has meritorious counterclaims against the supplier.
 Centennial has adequate inventories of its core products for the foreseeable
future and is confident its products can be produced by other suppliers if
necessary.

In addition, the supplier has informed Centennial that it does not expect to
have significant positive EBITDA (earnings before interest, taxes depreciation
and amortization) for its fiscal year ended June 30, 2005.  As any positive
EBITDA earned by the supplier is to be shared with Centennial as additional
revenue, the absence of significant positive EBITDA will have a negative impact
on Centennial's revenues.  Also, the lessee has informed Centennial that the
Company's $57,000 share of EBITDA previously reported by the supplier to
Centennial related to the supplier's fiscal year ended June 30, 2004 was
inaccurate.  The supplier is now reporting to Centennial that there is no
EBITDA for that time period, which will result in a reversal of revenue of
$57,000 by Centennial during the fourth quarter of 2004.  The supplier has not
provided current financial information to Centennial despite requests. 
Centennial intends to review the EBITDA results pursuant to the EBITDA
Committee Agreement and dispute matters as appropriate.  Additionally,
Centennial also expects to assert various rights against the supplier under the
EBITDA Sharing Agreement relative to financial disclosure and projected future
EBITDA.

Centennial has informed its lending bank of the changes in projected EBITDA of
the supplier and the negative impact as a result of such changes. In addition,
Centennial has informed its bank that Centennial will be recording an estimated
shortfall penalty to the supplier related to reduced production levels. 
Centennial had previously built up Stokes Green Chile Sauce inventory levels
for expansion into new markets and to mitigate the risk of an interruption of
supply due to financial and legal uncertainties with its supplier. 
Additionally, the supplier has significantly increased product prices to
Centennial on certain Ellis branded products making such products uncompetitive
in the retail market, thereby reducing Centennial's need for production on such
products.  Due to the previous higher production levels, significantly slower
than expected initial product sales during this quarter in the California
market and reduced Ellis production requirements, Centennial is forecasting
lower production requirements over the next few months, which will likely
result in a production shortfall penalty being imposed by its supplier at June
30, 2005.  Centennial estimates that the total shortfall penalty could
approximate $200,000, but intends to audit the pricing and challenge the
penalty related to the Ellis products.

The impact of low initial sales in California, the reversal of the EBITDA
previously reported to Centennial by the supplier and the accrued projected
shortfall penalties will cause Centennial to incur a net loss for the quarter
ending December 31, 2004.  As a result of this net loss, Centennial expects to
be in violation of the net worth covenant of $7,000,000 in its lending
agreement with its bank.  Centennial's management has contacted the bank and is
working closely with the bank to seek to obtain a waiver or amend the existing
loan agreement covenant, and the outcome is not certain.  If such waiver or
amendment is not obtained, Centennial would be in violation of the lending
agreement, which could have a material adverse impact on its liquidity and
capital resources.

As stated above, initial sales in Centennial's California market are
significantly less than expected.  As previously announced, Centennial has
launched its "consumer trial program" throughout this market.  Under this
program, Centennial is promoting its products at the shelf in order to expand
consumer trial of its products.  Centennial has only received limited reorders
of all products in this expansion market, despite positive feedback from
customers and consumers regarding the product quality and taste.  Centennial
expects to continue to pursue traditional marketing options available in
seeking to stimulate consumer purchases.  In addition, Centennial is reviewing
certain non-traditional marketing options.  Centennial is also evaluating
contracting the services of an additional advertising and marketing company to
research various non-traditional marketing options.

Centennial Specialty Foods Corporation is a distributor of ethnic Southwestern
food products.  Its products are sold under the Stokes and Ellis labels, two
well-known Southwestern brands that date back almost 100 years. Principal
channels of distribution for Centennial's products are grocery retailers,
superstores and club stores in Colorado, Arizona, California and, to a lesser
extent, several major metropolitan markets in adjoining states. More
information about Centennial can be found on its website at
http://www.centennialspecialtyfoods.com/.

Note Regarding Forward Looking Statements:

Certain matters discussed in this press release could contain forward- looking
information that involves risks and uncertainties that could cause actual
results to differ materially from current trends or expected results. We
identify forward looking statements through our use of words such as "expect,"
"believe," "project," "anticipate," and similar expressions.  These risks that
may affect our ability to achieve forward-looking statements are discussed in
our final prospectus in the section entitled "Risk Factors" and other documents
that are on file with the Securities and Exchange Commission.

For further information, please contact Jeffrey Nieder, CEO or Douglas Evans,
CFO at [phone].

Stokes and Ellis are registered trademarks of Centennial Specialty Foods
Corporation. 

DATASOURCE: Centennial Specialty Foods Corporation



CONTACT:  Jeffrey Nieder, CEO, or Douglas Evans, CFO, both of Centennial

Specialty Foods Corporation, [phone]



Web site:  http://www.centennialspecialtyfoods.com/ 

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