Galaxy Nutritional Foods has reported a rise in its second quarter net income despite a fall in sales brought about as the company eliminated some non-branded product lines.

For the three-month period, the organic dairy group reported net income of US$660,341, on net sales of close to $6.4m. In the prior-year quarter, the company reported net income of $561,564, on net sales of approximately $6.7m.

"We are pleased to report a slight improvement in net income in the second quarter of fiscal 2008 versus the same prior year quarter. As well, our gross profit % in the second quarter remained relatively stable with prior year results at slightly above 41%," said Michael E. Broll, chief executive officer of Galaxy Nutritional Foods, Inc.

"The reductions in current period net sales versus the prior period net sales primarily reflect our elimination of unprofitable non-branded product lines. The quarterly decline in net sales versus the prior year periods should level out in the second half of the current fiscal year, as most of the unprofitable sales were eliminated in the first half of the prior year. As well, we are beginning to see stabilization and moderate sales growth in our primary branded product lines versus the prior year. Going forward, we will continue to focus on driving brand oriented sales as well as exploring new product opportunities that fall under the 'healthy foods' umbrella," added Broll.

For the first six months, the company said it achieved net income of $811,340, on net sales of $12.3m.

Operating expenses during the period included a previously disclosed non-recurring employment contract expense of $346,447. Exclusive of this charge, the company would have reported net income of $1,157,787 in the six months.

This compared to a net loss of $780,865 on net sales of approximately $14.6m in the same period last year.

Operating expenses in the first half of last year included $1,428,000 in charges related to a reserve on a stockholder note receivable, $173,308 in costs related to disposal activities and $98,160 in non-cash stock-based compensation expense. Exclusive of these charges, the company would have reported net income of $918,603 in the first half of last year.