Orlando-based cheese and dairy products company Galaxy Nutritional Foods yesterday (14 August) revealed that in its first quarter of FY2007 the company managed to restore operating profitability when non-recurring charges are excluded.
For the three-months ended 30 June, Galaxy Nutritional reported an operating loss of $999,287 and a net loss of $1,342,429, or $0.07 per share, on net sales of around $7.8m.
Operating expenses during the first quarter of FY2007 included a non-recurring, non-cash reserve on a stockholder note receivable in the amount of $1,428,000. The company also incurred $101,744 in costs related to asset disposal activities and $5,830 in non-cash stock-based compensation expense.
Exclusive of these items, Galaxy Nutritional would have reported income from operations of $536,287, up from a loss of $9,144,114 on net sales of approximately $9.9m posted for the comparable quarter of the previous year.
The company generated EBITDA, as adjusted, a non-GAAP measure, of $694,622 (8.9% of net sales) in the quarter ended June 30, 2006, which represented a 61% improvement when compared with the prior-year.
“We are very pleased to report a return to profitability in the first quarter of our new fiscal year, exclusive of these expenses that were primarily non-cash in nature,” stated Michael E. Broll, chief executive officer. “This represents the achievement of a major milestone in the company’s turnaround strategy and primarily reflects the elimination of significant costs through the outsourcing of our manufacturing and distribution activities. This was evident in the improvement in our gross margin to 35.2% of sales in the most recent quarter, compared with 23.0% in the prior-year period, along with a 50% reduction in delivery expenses as a percentage of net sales from year-earlier levels.
“As anticipated, net sales declined in the first quarter as we eliminated unprofitable or marginally profitable accounts and non-core product lines. Our strategy is to increase the effectiveness of our price-based promotions to generate higher sales of our more profitable branded products, but the elimination of marginally profitable private label and other products will result in lower net sales during the balance of Fiscal 2007, when compared with prior-year periods. Looking forward, management intends to pursue sales and marketing opportunities that have the ability to realize Galaxy’s potential as a strong brand leader in the cheese alternative niche of the ‘healthy’ foods marketplace,” concluded Broll.