Exhibit 99.1
VERMONT PURE HOLDINGS, LTD. ANNOUNCES A DELAY IN FILING
ITS FORM 10-Q FOR THE QUARTER ENDED APRIL 30, 2005
COMPANY ANNOUNCES PRELIMINARY RESULTS FOR THE QUARTER
Williston, Vermont - June 21, 2005: Vermont Pure Holdings, Ltd. (AMEX:VPS)
announced today that it would not be able to complete and file its Quarterly
Report on Form 10-Q for the quarter ended April 30, 2005 by the extended due
date, June 20, 2005. The Company filed a Form 12b-25 Notification of Late Filing
on June 15, 2005.
Reasons for the Delay
In the course of a routine review of our Annual Report on Form 10-K for the year
ended October 31, 2004, the Staff of the SEC inquired about our accounting
treatment of certain advertising costs, which includes Yellow Pages advertising,
as set forth in Note 2.h. of Notes to Consolidated Financial Statements in our
Form 10-K. As explained in the Note, during the periods covered by the Form
10-K, we expensed Yellow Pages advertising over 12 months consistent with its
expected period of future benefit, based on historical responses. The Staff
requested that we explain how we meet applicable accounting criteria in
capitalizing direct response advertising. After a period of inquiry and
analysis, communication with the Staff and discussion with our audit committee
and our independent registered public accountants, we have concluded that our
treatment of Yellow Pages advertising is not in accord with applicable
accounting criteria and that we must expense such advertising as incurred.
To file our Quarterly Report on Form 10-Q for the quarter ended April 30, 2005,
we will need to restate our Consolidated Financial Statements for the fiscal
years ended October 31, 2004, 2003 and 2002 and file an amended Form 10-K for
the year ended October 31, 2004 to reflect the accounting corrections related to
Yellow Pages advertising. We also expect to file restated Consolidated Financial
Statements for the quarter ended January 31, 2005. We are in the process of
preparing these restatements. At this time, the treatment of direct response
advertising is the only matter of which we are aware that will affect the
restatement, although, as with all restatements, it is possible for other issues
to arise. We believe that the restatement for this issue will not materially
impact our results of operations or financial position for the periods reported.
We are working diligently to complete these tasks and anticipate filing a Form
10-K/A and our second quarter Form 10-Q no later than Friday, July 1, 2005.
Quarterly Results
On that basis, we are able to announce financial results for the second quarter
and first half of fiscal 2005.
Sales for the quarter increased 12% to $14.8 million, from $13.2 million for the
second quarter last year. For the first half of the year, sales increased 14% to
$28.7 million, from $25.2 million for the first half of last year. Sales, net of
acquisitions, increased 7% in the second quarter and 6% in the first half,
respectively, over the comparable periods a year ago.
"We are pleased that sales continue to grow organically as well as from the
strategic acquisitions that we have made over the last year," said Tim Fallon,
CEO of Vermont Pure. "We continue to leverage our distribution system in an
effort to maximize our profitability. For the first half of the year, net of
acquisitions, office coffee and refreshment products increased 14%, while water
sales increased 4%. Rental income increased 6% for the quarter compared to the
previous year, but was down 2% excluding acquisitions," he continued.
Gross profit, as a percentage of sales, increased to 58% in 2005 from 55% in
2004 for both the three month and six month periods. "Profitability has also
increased as a result of pricing and production efficiencies," said Peter Baker,
President of Vermont Pure.
Net income from continuing operations in the second quarter increased to
$205,000 in fiscal 2005 from $187,000 in 2004. Income from operations includes
$208,000 of expenses in the period related to refinancing of the Company's
senior debt facility in April and $65,000 for consulting related to compliance
with the Sarbanes-Oxley Act. For the first half of the year, net income from
continuing operations improved to $211,000 from a loss of $132,000 for the first
half of the year last year. "Higher administrative costs and increasing fuel and
insurance costs continue to put pressure on operating expenses," continued
Fallon.
Net income for the second quarter decreased $78,000 from the second quarter a
year ago as a result of the gain on the sale of a segment of business. The
Company sold its retail operations in the second quarter of 2004. Net income of
$283,000 for that period includes $97,000 of income related to the loss on
operations and gain on the sale of those segments. Net income in the first half
of the year increased to $211,000 from $27,000 in the first half last year. Net
income in the first half of last year includes $159,000 for the net gain on the
sale and loss on operations of the retail segments.
Vermont Pure Holdings, Ltd. is the largest independent and third largest Home
and Office distributor of its kind in the United States. The Company bottles and
distributes natural spring water under the Vermont Pure(R) trademark and
purified with minerals added bottled water under the Crystal Rock(R) brand. It
markets its bottled water brands, as well as other home and office refreshment
products, to over 105,000 customers throughout New England, New York, and New
Jersey. The Company is currently executing a growth strategy to expand its
customer base through acquisition of smaller regional home and office bottled
water and refreshment product distributors. Vermont Pure Holdings Ltd.'s common
stock trades on the American Stock Exchange under the symbol: VPS.
VERMONT PURE HOLDINGS, LTD
Results of Operations
(Unaudited) (Unaudited)
Six Months Ended: Three Months Ended:
-------------------------- --------------------------
April 30, April 30, April 30, April 30,
2005 2004 2005 2004
-------------------------- --------------------------
(000's $)
Sales $28,720 $25,180 $14,756 $13,182
Income (Loss) from continuing operations $211 ($132) $205 $187
Income from discontinued operations $0 $159 $0 $96
Net Income $211 $27 $205 $283
Add Back:
Interest $1,661 $1,930 $850 $916
Taxes $135 $18 $141 $42
Depreciation $2,506 $2,667 $1,261 $1,280
Amortization $389 $163 $194 $73
*EBITDA $4,902 $4,805 $2,651 $2,594
Basic net earnings per share $0.01 $0.00 $0.01 $0.01
Diluted net earnings per share $0.01 $0.00 $0.01 $0.01
Basic Wgt. Avg. Shares Out. (000's) 21,583 21,460 21,625 21,475
Diluted Wgt Avg. Shares Out. (000's) 21,591 21,684 21,635 21,693
*Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
EBITDA is included because management believes it is a useful tool for investors
to assess the operating performance of the business in comparison to other
businesses in the industry. In addition, EBITDA is a measure used to calculate
one of the financial covenants for compliance with the Company's senior debt
facility. Management believes that the most directly comparable GAAP financial
measure is net income.
NOTE: THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE A
NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD LOOKING STATEMENTS, INCLUDING
THE EFFECTS OF THE PENDING RESTATEMENT OF OUR CONSOLIDATED FINANCIAL STATEMENTS,
INTEGRATION OF ACQUISITIONS, ABILITY TO SUSTAIN AND MANAGE GROWTH, CHANGING
MARKET CONDITIONS, AND OTHER RISKS DETAILED IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.
CONTACT:
Tim Fallon, CEO, or Peter Baker, President, 860-945-0661 Ext. 3001
Bruce MacDonald, CFO, 802-860-1126
Eugene Malone, Corporate Investors Network, 888-377-9777, Fax: 201-670-6460