For Immediate Release: Contact:
April 26, 2006 Dawn M. Robert, Investor Relations
Galaxy Nutritional Foods, Inc.
(407) 854-0433
GALAXY NUTRITIONAL FOODS TO REMAIN INDEPENDENT AND EXPECT PROFITABLE FY2007
SHARES TO BE DELISTED FROM AMERICAN STOCK EXCHANGE
ORLANDO, Florida (April 26, 2006) Galaxy Nutritional Foods, Inc. (AMEX:GXY), a
leading manufacturer and marketer of healthy cheese alternative and
dairy-related products, today announced an update to its previously announced
pursuit of various strategic alternatives.
Several months ago, Galaxy Nutritional Foods announced that it was exploring a
variety of strategic alternatives, including the potential sale of the Company.
The Company's efforts to pursue these strategic alternatives were unsuccessful
and the Board of Directors today announced an end to that process and,
therefore, that the Company was going to remain independent.
In accordance with this decision, the Company will pursue a business strategy
that is designed to enhance shareholder value by focusing on the following
initiatives:
o Increasing gross margin by optimizing cost of goods in concert with
its outsource manufacturing partner. Efforts to date have allowed
gross margin to improve above the 30% range in February and March
2006, compared with a gross margin of 23% in the nine months ended
December 31, 2005.
o Reducing and/or eliminating SKUs that represent low-margin or
unprofitable products. The Company will focus exclusively upon its
popular core brands. While management expects this to result in a
reduction in total revenues, this change is also expected to result
in an increase in profitability and operating cash flow during
FY2007.
o A restructuring of overhead costs to a level consistent with
profitability at lower annualized revenues in FY2007.
o A refinancing of the Company's outstanding short-term debt, which
was significantly reduced in the second half of FY2006.
"Galaxy's core brands are very relevant to today's health-conscious consumer and
continue to enjoy strong support in the market," noted Mike Broll, Chief
Executive Officer of Galaxy Nutritional Foods, Inc. "We have regained a
laser-like focus on growing the sales of these brands, while eliminating a
number of private-label and non-core products that generate little or no
profits. Initial results from this strategy are already evident, as illustrated
by the fact that our Company was cash-flow-positive and generated an operating
profit (excluding non-recurring and non-cash items) in February and March. Based
upon information currently available to management, we expect Galaxy to be
profitable and cash-flow-positive for the fiscal year that started April 1,
2006."
"No longer burdened with the high fixed costs of a manufacturing facility, and
with the price of our primary raw material (casein) beginning to ease in recent
months, I am confident that Galaxy will regain credibility with investors,
customers and employees as we execute our operating plan during Fiscal 2007,"
concluded Broll.
The Company also announced that on April 20, 2006, it received a letter from the
American Stock Exchange ("AMEX"), notifying the Company that it was not in
compliance with AMEX's continued listing requirements and that AMEX intends to
proceed with the filing of an application with the Securities and Exchange
Commission ("SEC") to strike the common stock from listing and registration on
AMEX. The Company does not intend to appeal this decision by AMEX.
The AMEX letter dated April 20, 2006, states, in part:
"By letters dated September 29, 2005 and October 12, 2005, AMEX advised Galaxy
that the Company was not in compliance with: (i) Section 1003(a)(i) of the
Company Guide with shareholders' equity of less than $2 million and losses from
continuing operations and/or net losses in two out of its three most recent
fiscal years; (ii) Section 1003(a)(ii) of the Company Guide with shareholders'
equity of less than $4 million and/or net losses in three out of four most
recent fiscal years; (iii) Section 1003(a)(iv) of the Company Guide in that
Galaxy has sustained losses which are so substantial in relation to its overall
operations or its existing financial resources, or its financial condition has
become so impaired that it appears questionable, in the opinion of the Exchange,
as to whether the Company will be able to continue operations and/or meet its
obligations as they mature. On October 28, 2005, pursuant to Section 1009 of the
Company Guide, the Company submitted its plan of compliance to the Exchange (the
"Plan"). On December 16, 2005, the Exchange notified the Company that it
accepted the Plan and granted the Company an extension until March 29, 2007 to
regain compliance with the continued listing standards (the "Plan Period"). The
letter also advised the Company that the Exchange Staff would initiate delisting
proceedings if the Company failed to make progress consistent with the Plan
during the Plan Period.
A review of the Company's most recent financials and other pertinent
information, as well as discussions with Galaxy representatives, indicates that
the Company has not shown progress consistent with the Plan. In addition, the
Company is also not in compliance with Section 1003(f)(iv) of the Company Guide,
which states that the Exchange will normally consider suspending dealings in or
removing from the list, a company that fails, or refuses to pay, when due, any
applicable listing fees established by the Exchange. In this regard, Staff notes
that the Company has an outstanding payable to the Exchange of $40,448.26
related to a Listing of Additional Shares Application dated July 12, 2005, as
amended September 20, 2005 and approved by the Exchange on September 22, 2005.
Based upon the foregoing, the Exchange Staff has concluded that it is
appropriate to initiate immediate delisting proceedings at this time."
The letter states that the determination by AMEX will become final on April 27,
2006. AMEX will then suspend trading in the Company's common stock and will
submit an application to the Securities and Exchange Commission to strike the
Company's common stock from listing and registration on AMEX. Based upon
information provided by AMEX, it is currently anticipated that the Company's
shares will be delisted from AMEX effective on or prior to May 4, 2006. Upon the
delisting of the Company's shares from AMEX, management believes, based upon
information provided by AMEX, that the Company's common stock will be quoted on
the OTC Bulletin Board.
About Galaxy Nutritional Foods, Inc
Galaxy Nutritional Foods is the leading producer of health-promoting plant-based
dairy and dairy-related alternatives for the retail and foodservice markets. An
exclusive, new and technologically advanced, safer "hot process" is used to
produce these phytonutrient-enriched products, made from nature's best grains -
soy, rice and oats. Veggie products are low fat and fat free (saturated fat and
trans-fatty acid free), cholesterol and lactose free, are growth hormone and
antibiotic free, and have more calcium, vitamins and other minerals than
conventional dairy products. Because they are made with plant proteins, the
products are more environmentally friendly and economically efficient than dairy
products derived solely from animal proteins. Galaxy's products are part of the
healthy and natural foods category, the fastest growing segment of the retail
food market. Galaxy brand names include: Galaxy Nutritional Foods; Veggie;
Veggie Nature's Alternative; Veggie Slices; Soyco; Soymage; Wholesome Valley;
Lite Bakery; and Galaxy Nutritional Foods Smart Choice Cheese Products. For more
information, please visit Galaxy's website at: www.galaxyfoods.com.
Galaxy Nutritional Foods, Inc. is headquartered in Orlando, Florida, and its
common stock is listed on the American Stock Exchange under the ticker symbol
"GXY".
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