Vaughan Foods, Inc. Reports 4th Quarter and Full Year 2010
EBITDA and Gross Margin Percentage Improve Year over Year
MOORE, Okla., March 17, 2011 -- Vaughan Foods, Inc. (OTCBB: FOOD.OB), a regional leader in fresh-cut vegetables and fruit products, and a broad line of refrigerated prepared salads, sauces, soups, and side-dishes, today announced its operating results for the 4th quarter and year ended December 31, 2010.
For the year ending December 31, 2010, Vaughan recorded a net loss of $362,000 or $0.04 per share compared to a net loss of $500,000 or $0.11 per share in 2009. Gross margin percentage increased from 9.1 percent in 2009 to 9.3 percent in 2010 on slightly lower revenues. Sales changes year-over-year resulted from, among other factors, the rationalization of unprofitable business and increased focus on the development of new products. Sales efforts were strengthened with the addition of sales and marketing staff aimed at expanding product offerings and the Company's customer base.
Vaughan recorded a net loss of $374,000 or $0.04 per share for the fourth quarter of 2010, compared to a net loss of $34,000 or $0.01 per share in the fourth quarter of 2009. Gross margin percentage decreased to 6.3 percent from 9.5 percent primarily due to increased workers compensation expense under its self-insured program and higher diesel fuel prices in its transportation division. Management has elected to discontinue its self-insured workers compensation program in favor of a fully-insured program in an effort to minimize variability in costs. The fourth quarter results included a gain realized from an insurance settlement of $0.4 million.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $2.8 million for the year ended December 31, 2010, marking an improvement of $0.8 million in comparison to 2009 when EBITDA was $2.0 million.
Herb Grimes, Chairman and CEO of Vaughan Foods, commented, “A number of the factors that resulted in our disappointing fourth quarter are fixable and are being addressed, For the full year we made solid progress in strengthening the fundamentals of our company and formulating a solid strategy for growth. Despite protracted challenging economic conditions in the United States, we have identified a number of quality new customer prospects for important new business as we prepare for our peak season,” said Mr. Grimes.
“Although the Company has been able to pass on a portion of its increased transportation costs in the form of pricing adjustments, due to the restrictions of certain informal customer agreements we are not able to defray all fuel cost increases in a timely manner, particularly in periods of extreme price volatility, as experienced In the last few months. We've done a very good job of developing our backhaul business to offset transportation costs. Backhaul revenues were $208,000 higher than the year earlier quarter, an increase of 73 percent. We are running the plants more efficiently, which also helps with backhaul revenues. We expect this trend to continue through 2011,” concluded Mr. Grimes.
The company noted that weather-related events in 2011 and their repercussions have warranted recent discussion within and about the fresh vegetable industry. In January, lettuce crops were weakened by freezing conditions, which resulted in shortages of iceberg and romaine lettuce throughout the month of February. In February, large portions of the United States of America became immobile following a historic blizzard, slowing down commerce in many metropolitan areas. Vaughan continues to manage its resources, serve its customers and works to minimize its financial exposure of weather and industry related events.
Investor Conference Call
Vaughan management will host an investor conference call on Friday, March 18, 2011 at 10:00 a.m. ET to discuss
these results.
Interested parties should call 877-353-0040 (domestic) or 970-315-0529 (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 8, 2011 and can be accessed by dialing 800 642-1687 (domestic), and 706 645-9291 (international). The conference ID is 51774148.
About Vaughan Foods, Inc.
Vaughan Foods is an integrated manufacturer and distributor of value-added, refrigerated foods. We are uniquely able to distribute fresh-cut produce items along with a full array of value-added refrigerated prepared foods multiple times per week. We sell to both food service and retail sectors. Our products consist of fresh-cut vegetables, fresh-cut fruits, salad kits, prepared salads, dips, spreads, soups, sauces and side dishes. Our primary manufacturing facility is in Moore, Oklahoma. Our soups and sauces are manufactured in our facility in Fort Worth, Texas.
Safe Harbor Statement
This press release contains forward-looking statements about the future performance of Vaughan Foods, Inc. based on Management's assumptions and beliefs in light of information currently available to it. There are a variety of factors that could cause actual and future results to differ materially from those anticipated by the statements made above. These factors are outlined in the Company's Forms 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. Furthermore, Vaughan Foods, Inc. undertakes no obligation to update, amend or clarify forward-looking statements whether as a result of new information, future events, or otherwise.
Investor Relations Contact
Cameron Associates
Investor Contact:
Paul Henning
212-554-5462
Paul@cameronassoc.com
Vaughan Foods, Inc.
Consolidated Balance Sheets
(dollars in thousands)
| December 31, | December 31, | ||||||
| Assets | 2010 | 2009 | |||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | — | $ | — | |||
| Cash receipts subject to account control agreement | 533 | 523 | |||||
| Accounts receivable, net of allowance for credit losses of | |||||||
| $78,180 at December 31, 2010 and $106,375 at December 31, 2009 | 6,088 | 5,312 | |||||
| Inventories | 3,105 | 3,055 | |||||
| Prepaid expenses and other assets | 246 | 211 | |||||
| Deferred tax assets | 370 | 265 | |||||
| Total current assets | 10,342 | 9,366 | |||||
| Restricted assets: | |||||||
| Cash | 937 | 528 | |||||
| Investments | 558 | 541 | |||||
| Total restricted assets | 1,495 | 1,069 | |||||
| Property and equipment, net | 14,576 | 15,797 | |||||
| Other assets: | |||||||
| Loan origination fees, net of amortization | 287 | 422 | |||||
| Intangible assets | 46 | 77 | |||||
| Deferred tax assets, noncurrent | 2,604 | 2,656 | |||||
| Total assets | $ | 29,350 | $ | 29,387 | |||
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 6,981 | $ | 8,432 | |||
| Disbursements in transit | 729 | 1,270 | |||||
| Line of credit | 2,688 | 2,322 | |||||
| Note payable to former owners of Allisons Gourmet Kitchens, LP | 30 | 876 | |||||
| Accrued liabilities | 1,945 | 1,393 | |||||
| Current portion of long-term debt | 1,155 | 1,138 | |||||
| Current portion of capital lease obligation | — | 94 | |||||
| Total current liabilities | 13,528 | 15,525 | |||||
| Long term liabilities: | |||||||
| Long-term debt, net of current portion | 6,695 | 6,944 | |||||
| Note payable to former owners of Allisons | |||||||
| Gourmet Kitchens, LP, net of current portion | 811 | — | |||||
| Deferred gain on sale of assets | 8 | 43 | |||||
| Total long-term liabilities | 7,514 | 6,987 | |||||
| Total stockholders' equity | 8,308 | 6,875 | |||||
| Total liabilities and stockholders' equity | 29,350 | 29,387 | |||||
Vaughan Foods, Inc.
Consolidated Statements of Operations
(dollars in thousands)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net sales | $ | 22,630 | $ | 22,668 | $ | 93,839 | $ | 96,561 | ||||||||
| Cost of sales | 21,210 | 20,509 | 85,134 | 87,820 | ||||||||||||
| Gross profit | 1,420 | 2,159 | 8,705 | 8,741 | ||||||||||||
| Selling, general and administrative | 2,133 | 1,902 | 8,677 | 8,454 | ||||||||||||
| Operating income | (713 | ) | 257 | 28 | 287 | |||||||||||
| Interest expense | (174 | ) | (298 | ) | (864 | ) | (1,120 | ) | ||||||||
| Other income, net | 392 | 8 | 421 | 23 | ||||||||||||
| Income (loss) before income taxes | (495 | ) | (33 | ) | (415 | ) | (810 | ) | ||||||||
| Income tax expense (benefit) | (121 | ) | 1 | (53 | ) | (310 | ) | |||||||||
| Net income (loss) | $ | (374 | ) | $ | (34 | ) | $ | (362 | ) | $ | (500 | ) | ||||
| Weighted average shares outstanding - basic | 9,380,577 | 4,623,077 | 8,676,728 | 4,623,077 | ||||||||||||
| Net income (loss) per share - basic | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.11 | ) | ||||
Vaughan Foods, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2010 and 2009
(dollars in thousands)
| 2010 | 2009 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | (362 | ) | $ | (500 | ) | ||
| Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 2,504 | 1,997 | ||||||
| Provision for credit losses | (28 | ) | (34 | ) | ||||
| (Gain) on involuntary disposal of asset | (383 | ) | — | |||||
| (Gain) loss on sale of asset | (39 | ) | (23 | ) | ||||
| Stock based compensation expense | 90 | 88 | ||||||
| Deferred income taxes | (53 | ) | (310 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (748 | ) | 46 | |||||
| Inventories | (50 | ) | 321 | |||||
| Disbursements in transit | (540 | ) | 34 | |||||
| Prepaid expenses and other assets | (35 | ) | (134 | ) | ||||
| Accounts payable | (1,062 | ) | 471 | |||||
| Accrued liabilities | 552 | (458 | ) | |||||
| Net cash provided by operating activities | (154 | ) | 1,498 | |||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (935 | ) | (435 | ) | ||||
| Proceeds from insurance settlement | 611 | — | ||||||
| Investments in restricted assets | (425 | ) | 21 | |||||
| Purchases of letters of credit | — | (528 | ) | |||||
| Proceeds from sale of assets | 19 | 5 | ||||||
| Net cash (used by) investing activities | (730 | ) | (937 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments of loan origination fees | (58 | ) | (267 | ) | ||||
| Proceeds from line of credit | 366 | 1,322 | ||||||
| Proceeds from equity issue | 1,706 | — | ||||||
| Cash receipts subject to account control agreement | (10 | ) | (524 | ) | ||||
| Proceeds from issuance of long-term debt | 22 | — | ||||||
| Repayment of long-term debt and capital leases | (1,107 | ) | (1,165 | ) | ||||
| Repayment of notes payable to former owners of Allison’s Gourmet Kitchens, LP | (35 | ) | (7 | ) | ||||
| Proceeds from notes issued to former owners of Allison’s Gourmet Kitchens, LP | — | 80 | ||||||
| Net cash (used in) financing activities | 884 | (561 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | — | — | ||||||
| Cash and cash equivalents at beginning of period | — | — | ||||||
| Cash and cash equivalents at end of period | $ | — | $ | — | ||||
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