CHICAGO, April 17 /PRNewswire-FirstCall/ -- For the fourth quarter
ended December 31, 2006, Vita Food Products, Inc. (AMEX:VSF) today
announced a consolidated net loss of $1,738,000, or $(0.35) per
share, compared to a net loss of $426,000 or $(0.11) per share in
the fourth quarter of 2005. The net loss for the quarter is largely
the result of a corporate level, non-cash long-term asset
impairment charge of $1,446,000, and a $444,000 charge for a
previously reported product recall resulting from labeling issues.
Both of these charges are related to the Company's Vita Specialty
Foods business segment. The impairment charge is composed of a
goodwill impairment of approximately $1,126,000 and an
approximately $320,000 pre-tax impact resulting from the Company's
decision to terminate its Berryville, Virginia facility lease in
April 2007. The Berryville charge is the result of the impairment
of certain long term assets that cannot be relocated to the
Company's other facility in Martinsburg, West Virginia.
Consolidated net sales for the fourth quarter of 2006 were
approximately $13.9 million, compared with $14.2 million in the
fourth quarter of 2005. Net sales for the Vita Seafood segment in
the fourth quarter of 2006 were $9.1 million compared to $9.8
million from the prior year quarter, representing a 7% decrease.
Net sales for the Vita Specialty Foods segment in the fourth
quarter were $4.8 million compared to $4.4 million from the prior
year quarter, representing a 10% increase. The increase was
primarily a result of an increase in honey and sauce product sales.
Gross margin for the fourth quarter decreased to 22.2% from 28.8%
in the prior year fourth quarter as the increased manufacturing
costs incurred by the Vita Specialty Foods segment due to new
product production issues had an unfavorable impact on margins.
Full-Year Results For the twelve months ended December 31, 2006,
the Company had a consolidated net loss of $2,391,000 or $(0.51)
per share, compared to net loss of $889,000, or $(0.23) per share
for 2005, largely as a result of a $1,126,000 adjustment to
recognize goodwill impairment. The Vita Seafood segment experienced
a net loss of $179,000 compared to net loss of $1,174,000 in 2005.
The Vita Specialty Foods segment net loss was $1,086,000 for 2006,
including a $193,000 net of tax charge for the Berryville
impairment, compared to net income of $285,000 in 2005. The Company
was not in compliance with its debt covenants at December 31, 2006
and obtained a permanent waiver from its bank with respect to such
non-compliance. Consolidated net sales for the year increased 9% to
approximately $51.0 million from approximately $46.6 million in
2005. Vita Seafood's net sales increased 9% to approximately $28.9
million in 2006 from approximately $26.3 million in 2005. Vita
Specialty Foods' net sales for the year increased 9% to
approximately $22.1 million from $20.2 million in 2005. Gross
margin for the year decreased to 25.1% from 29.9% in the prior
year. Both business segments contributed to the decline in margins.
"The Specialty Foods segment incurred significant one-time costs
during 2006. In the third quarter we experienced startup costs
associated with the introduction of new items of $680,000 and
related to the fourth quarter a $444,000 charge for a product
recall that was a result of a full review of our product labeling
where we discovered some mis-labeled products. The accumulation of
these charges and the Company's decision to terminate its
Berryville lease led to the decline in value of the Company's
subsidiary in the amount of $1,446,000," said Clifford Bolen, the
Company's President and Chief Executive Officer. "We have made
significant changes in our processes, training and testing to help
prevent such occurrences in the future. Our Seafood division
operations decreased the size of its prior year loss significantly
by increasing sales and cutting costs that resulted in an operating
income improvement of $1.8 million." Loan Amendment The Company has
entered into a tenth amendment to its loan agreement with LaSalle
Bank National Association. Pursuant to the amendment, the Bank has
issued a new one-year $1,000,000 term loan to the Company under the
Loan and Security Agreement dated as of September 5, 2003, as
amended (the "Loan Agreement"). In addition, the amendment modifies
the Company's financial covenants under the Loan Agreement.
Agreement in Principle The Company also has reached an agreement in
principle with Howard Bedford, a member of the Company's Board of
Directors, pursuant to which Mr. Bedford would invest $3,000,000 in
the Company. In consideration for his investment, Mr. Bedford would
receive 2,400,000 shares of the Company's common stock; two year
warrants to purchase 500,000 shares of common stock at an exercise
price of $1.25 per share; three-year warrants to purchase 500,000
shares of common stock at an exercise price of $1.50 per share;
four-year warrants to purchase 500,000 shares of common stock at an
exercise price of $1.50 per share; and five-year warrants to
purchase 500,000 shares of common stock at an exercise price of
$1.75 per share. The transactions would be subject to the Board of
Directors' receipt of a fairness opinion from an investment banker
or other acceptable party, to shareholder approval and to approval
by the American Stock Exchange. Commenting on the investment and
loan amendment, Clifford Bolen, the Company's President and Chief
Executive Officer stated, "We are very pleased that Howard Bedford
has elected to invest further in the Company. In addition, LaSalle
Bank has shown a commitment toward our future by amending the loan
agreement to include a $1,000,000 term loan and revising the
covenants that fall within management's 2007 expectations. We
intend to use these funds for working capital needs." Vita Seafood
is a U.S. leader in the herring and retail packaged salmon markets,
and is engaged in several other food segments, including cream
cheese, cocktail sauce, tartar sauce and horseradish. More than 95%
of Vita's sales are in kosher foods. Vita Specialty Foods, Inc.,
the Company's wholly owned subsidiary, markets and sells honey,
salad dressings, meat enhancements and salsas. The Company markets
and sells these items under the Virginia Brand(R), Oak Hill
Farms(R), Scorned Woman(R), Jim Beam(R) and Budweiser(TM) brands.
The Company's common stock is currently traded on the American
Stock Exchange and Chicago Stock Exchange under the ticker symbol
VSF. This release contains forward-looking statements about the
Company's future growth, profitability, introduction of new
products, competitive position and an equity investment. Any such
statements are subject to risks and uncertainties, including
changes in economic and market conditions, industry competition,
raw material prices, the success of new product introductions,
management of growth, the possibility that the agreement in
principle will not be executed and other risks noted in the
Company's filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's analysis
only as of the date hereof. VITA FOOD PRODUCTS, INC. Condensed
Consolidated Statement of Operations (in thousands, except per
share data) (unaudited) Three Months Twelve Months Ended Ended Dec
31, Dec 31, Dec 31, Dec 31, 2006 2005 Change 2006 2005 Change Net
sales $13,887 $14,147 (2%) $50,954 $46,572 9% Cost of goods sold
10,808 10,066 7% 38,167 32,633 17% Gross margin 3,079 4,081 (25%)
12,787 13,939 (8%) Selling and administrative expenses Selling,
marketing & distribution 2,384 2,642 (10%) 9,201 9,209 0%
Administrative 994 1,265 (21%) 4,002 4,586 (13%) Employment
Contract - 502 (100%) - 502 (100%) Impairment of long term assets
1,446 - N/A 1,446 - N/A Total 4,824 4,409 9% 14,649 14,297 2%
Operating loss (1,745) (328) (432%) (1,862) (358) (420%) Interest
expense 343 341 1% 1,314 1,083 21% Income before income taxes
(2,088) (669) (212%) (3,176) (1,441) (120%) Income tax expense
(350) (243) (44%) (785) (552) (42%) Net income $(1,738) $(426)
(308%) $(2,391) $(889) (169%) Earnings per common share: Basic
$(0.35) $(0.11) (218%) $(0.51) $(0.23) (122%) Diluted $(0.35)
$(0.11) (218%) $(0.51) $(0.23) (122%) Weighted average shares
outstanding: Basic 4,916 3,866 4,679 3,862 Diluted 4,916 3,866
4,679 3,862 DATASOURCE: Vita Specialty Foods, Inc. CONTACT:
Clifford Bolen, President and Chief Executive Officer of Vita
Specialty Foods, Inc., +1-312-738-4500,
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Vita FD Products (AMEX:VSF)
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