Exhibit 99.1
LUCILLE FARMS, INC. ANNOUNCES RESULTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
MONTVILLE, NJ--NOVEMBER 15, 2004 -- LUCILLE FARMS, INC. (NASDAQ-LUCY) a
manufacturer and marketer of low moisture mozzarella cheese, reduced fat and
non-fat low moisture mozzarella cheese and pizza cheese today announced its
results for the second quarter of fiscal 2005.
Three Months Ended Six Months Ended
September 30, 2004 September 30, 2004
(UNAUDITED) (UNAUDITED)
------------------------ ---------------------
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $11,752,000 $10,839,000 $24,716,000 $19,349,000
Net (loss) Income ($300,000) $319,000 $175,000 $341,000
Basic: ($0.09) $0.10 $.05 $.11
Diluted: ($0.09) $0.10 $.05 $.11
Weighted Average Shares
Basic: 3,338,817 3,137,937 3,239,457 3,186,394
Diluted: 3,338,817 3,137,937 3,245,143 3,186,394
Net loss for the quarter ended September 30, 2004 was $300,000 compared to net
income of $319,000 for the comparable quarter last year. The net loss for the
quarter was attributable to a loss of $382,000 for the month of July, during
which month the price of cheese tumbled to an average of $1.45 per pound (a low
of $1.36 per pound) from an average price in June of $1.76 per pound, and there
was a lag of the downward adjustment in the cost of milk.
Generally, the price of milk (which is determined at the end of any particular
month), is computed by reference to the price of milk components (butter, block
cheddar cheese, barrel cheddar cheese, non-fat dry milk and whey) on the
applicable commodity market. Thus, everything else being equal (which is not
always the case) the price of milk will follow the price of cheese (which is an
integral part of the pricing formula for milk). When this happens there is
stability in the Company's gross profit margin. When an imbalance occurs and the
price of milk does not increase or decrease as fast as the price of cheese, the
Company's gross profit margin is affected accordingly.
During August and September, the CME Block Cheddar Cheese price adjusted to the
mid $1.50s and the cost of milk stabilized so there was a more normal spread in
the margins between cheese prices and milk prices, and the Company earned money
in such months despite substantially increased energy and trucking costs,
attributable to record high oil and gas prices, and banking costs. These
normalized margins have continued through October and into November.
Comparing the current quarter to the same quarter last year, the opposite effect
took place. During July of 2003, the CME Block Cheddar Cheese price rose from a
low of $1.14 per pound in June 2003 to $1.50 per pound in July 2003, and there
was a lag in the upward adjustment in the cost of milk. This resulted in a
profit of $163,000 for the month of July, and, after the price of milk
stabilized, a profit of $319,000 for the quarter.
Management is unable to predict with any certainty future increases or decreases
in the CME Block Cheddar Market price or the price for milk, as such prices are
subject to fluctuations based on factors outside of its control. Management is
aware that an imbalance between the price of cheese and the price of milk will
occur from time to time, and is addressing this situation by continuing to work
to improve productivity and change the mix of products it sells to include
higher margin items. In this respect, two new products the Company recently
introduced, "Lucille Select" a real pizza cheese designed for the value
conscious buyer continues to get a good customer response, and "Lucille Premium
Reduced Fat Mozzarella Cheese" continues to get a good acceptance from school
purchasing agents as they seek food products to combat the problem of obesity.
Both of these products have greater gross profit margins than the Company's
commodity mozzarella cheese.
To further counteract the unpredictability of prices in the cheese and milk
markets and ensure profitability, the Company has undertaken a program to sell
cheese under long-term contracts on a fixed price basis and to hedge the
transaction by buying milk futures. This has the effect of locking in a fixed
profit to the Company, since any increase in the price the Company actually pays
for milk (which would decrease its gross profit margin) will be offset by the
profit it will earn on the futures contract by virtue of the increase in the
price of the milk and any loss the Company incurs on the futures contract by
virtue of a decrease in the price of milk would be offset by the increased gross
profit margin the Company would realize through the lower price it actually pays
for milk. The Company has entered into one such arrangement to sell a
substantial amount of its "Lucille Select" pizza cheese at a fixed price for an
eight month period, and has bought futures to lock in a profit on such
transaction.
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements include, but are not
limited to improving trends, market acceptance of new products and future
profitability. Such forward-looking statements involve risks and uncertainties
that may cause the actual results or objectives to be materially different from
those expressed or implied by such forward-looking statements.
Contact: Jay Rosengarten, CEO, (973) 334-6030