Exhibit 99.1
LUCILLE FARMS, INC. ANNOUNCES RESULTS
FOR THE QUARTER ENDED DECEMBER 31, 2004
MONTVILLE, NJ--FEBRUARY 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 its fiscal year ended December 31, 2004 and
the nine months of its fiscal year ended December 31, 2004.
Three Months Ended Nine Months Ended
December 31 December 31
(UNAUDITED) (UNAUDITED)
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $11,628,000 $10,850,000 $36,344,000 $30,199,000
Net (loss) Income ($597,000) ($317,000) ($422,000) $23,000
Basic: ($0.18) ($0.10) ($0.13) $0.01
Diluted: ($0.18) ($0.10) ($0.13) $0.01
Weighted Average Shares
Basic: 3,353,937 3,137,937 3,277,748 3,138,862
Diluted: 3,353,937 3,137,937 3,277,748 3,138,862
Net loss for the quarter ended December 31, 2004 was $597,000 compared to a net
loss of $317,000 for the comparable quarter last year. The loss for the third
quarter primarily is due to the precipitous decline in December in the price of
block cheddar cheese on the Chicago Mercantile Exchange (CME), off of which the
Company bases its selling price, from a high of $1.88 per lb. to a low of $1.48
per lb. and the lag of a downward adjustment in the cost of milk. This is a
repeat of last quarter where a precipitous decline in July of the price of block
cheddar resulted in a $382,000 loss for that month, but only $300,000 for the
quarter.
While the Company has made great strides over the past two years in reducing its
operating expenses and, through efficiencies, bringing down its cost of
producing a pound of cheese, consistent profitability for the Company is
dependent upon stability in the price of block cheddar on the CME and the price
of milk (the principal ingredient and cost factor in the manufacture of cheese).
Generally, the price of milk, which is determined at the end of any particular
month, is computed by reference to the average price of milk components (butter,
block cheddar cheese, barrel cheddar cheese, non-fat dry milk and whey) during
the month on the applicable commodity market. Thus, everything else being equal,
and there being stability in the price of cheese, the price of milk will follow
the price of cheese in an orderly manner, and there will be stability in the
Company's gross profit margin. However, when there is a precipitous increase or
decrease in the price of cheese on the CME, there is a disconnect between
average price of cheese during the month and the price to which the cheese
precipitously rises or falls. In such a case, the price of milk, being dependent
upon the average price of the milk components during the month, does not
increase or decrease as fast as the price of cheese, and the Company's gross
profit margin is affected accordingly (sometimes, the case of a precipitous
decrease in the price of cheese, resulting in a negative gross profit margin as
was the case in December). This type of imbalance happened at least three times
during the first nine months of fiscal 2005, once to the Company's advantage,
during the month of April, and twice to the Company's disadvantage, during the
months of July and December. These precipitous fluctuations in the price of
block cheese (as well as orderly changes in the price of cheese) on the CME are
outside of the Company's control, and cannot be predicted with any certainty.
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Management's challenge is to increase gross profit margins so as to negate the
effect of any precipitous decreases in the price of cheese on the CME.
Management is convinced that its strategy to change the mix of the products the
company sells toward higher margin products and to reduce the cost of
manufacturing products is correct. This strategy, however, takes time to
implement. As part of this strategy, the Company has developed "Lucille Select,"
our pizza cheese. Sales of this product continue to increase and customer
acceptance is growing. It now constitutes approximately 16% of our sales. Also,
the company continues to develop its premium products and seek opportunities to
sell products to customers at higher margins. In addition, during the 2005
fiscal year, the Company entered into its first fixed price contract for the
sale of its Lucille Select product, and hedged the contract to insure its
profitability by buying milk in the futures market. We continue to seek
customers interested in these types of transactions. Also, Management is intent
on starting and completing a capital program that is designed to further reduce
operating costs and improve productivity (which has the effect of reducing our
cost per pound of cheese). This program, which will take time to complete,
includes automating a portion of our cheese making line, adding refrigerated and
frozen storage capacity to the plant (which will eliminate outside storage), and
increasing the productivity of our whey manufacturing facility. In this regard,
Management is continuing to work on refinancing the Company's long term
mortgage, the proceeds of which will allow the Company to move forward on its
capital program.
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
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