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Friday, 02/08/2008 8:13:45 AM

Friday, February 08, 2008 8:13:45 AM

Post# of 828
Net Income of $295,365 Compares With Prior-Year Net Income of $726,184

ORLANDO, Fla., Feb. 8 /PRNewswire-FirstCall/ -- Galaxy Nutritional Foods, Inc. (OTC Bulletin Board: GXYF), a leading developer and marketer of cheese alternatives, organic dairy and other organic and natural food products, today reported its operating results for the third quarter and first nine months of FY2008.

In the three months ended December 31, 2006, the Company reported net income of $726,184 or $0.03 per diluted share, on net sales of approximately $6.1 million. Operating expenses during this prior year third quarter included $154,519 in costs related to disposal activities and $10,000 in non- cash stock-based compensation expense. Exclusive of these charges, the Company would have reported net income of $890,703 in the three months ended December 31, 2006.

For the three months ended December 31, 2007, the Company reported net income of $295,365, or $0.01 per diluted share, on net sales of approximately $6.4 million. This decline in net income versus the prior year third quarter is primarily due to a decrease in gross margin caused by a substantial increase in the cost of one of our primary ingredients, casein. We expect the fourth quarter of the current fiscal year to be similarly affected due to the historically high casein costs which we are now facing.

In the nine months ended December 31, 2006, the Company reported a net loss of ($54,681), or ($0.00) per diluted share, on net sales of approximately $20.7 million. Operating expenses during the first nine months of FY2007 included $1,428,000 in charges related to a reserve on a stockholder note receivable, $327,827 in costs related to disposal activities and $108,160 in non-cash stock-based compensation expense. Exclusive of these charges, the Company would have reported net income of $1,809,306 in the nine months ended December 31, 2006.

For the nine months ended December 31, 2007, the Company reported net income of $1,106,705, or $0.05 per diluted share, on net sales of approximately $18.8 million. Operating expenses during the first nine months of FY2008 included a previously disclosed non-recurring employment contract expense of $346,447. Exclusive of this charge, the Company would have reported net income of $1,453,152 in the nine months ended December 31, 2007. This decline in year to date net income versus the first three quarters of our prior fiscal year was primarily due to the aforementioned substantial increase in ingredient costs in the third quarter of the current fiscal year.

The Company generated EBITDA, as adjusted, (a non-GAAP measure), of $1,842,285 (9.8% of net sales) in the first nine months of FY2008, compared with EBITDA, as adjusted, of $2,608,181 (12.6% of net sales) in the first nine months of FY2007 (see EBITDA table at end of this release for further non-GAAP information). This decline in EBITDA, as adjusted, versus the prior year is primarily due to the lower net income in the current year as mentioned above.

'We are pleased that branded, net sales remain relatively strong and that our operating profit slightly exceeded our expectations, given the substantial increase in material costs we have absorbed.' stated Michael E. Broll, Chief Executive Officer of Galaxy Nutritional Foods, Inc.

'Higher ingredient costs will challenge us in the short term, but we are confident we have the resources to continue to support our brands,' concluded Broll.


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