Galaxy Nutritional Foods Releases 2Q05 Results

Galaxy Nutritional Foods Releases 2Q05 Results

ORLANDO, Fla.--Galaxy Nutritional Foods Inc. (AMEX:GXY) reported its financial results for the second quarter of fiscal 2005 ended Sept. 30, 2004 (2Q05).

For 2Q05, net sales were $11.9 million, a 28 percent increase over net sales of $9.3 million in the second quarter of fiscal 2004 (2Q04). The company attributed the increase in net sales primarily to higher contract manufacturing revenues, increased sales of Wholesome Valley organic products, and an increase in the its Food Service business.

Substantial increase in the cost of food ingredients and raw materials caused 2Q05s gross margin to decline $419,346 from gross margin in 2Q04. A portion of these increased costs will affect customers as price increases in the second half of the fiscal year.

The company reported a net loss of $839,762 in 2Q05, versus a net loss of $228,145 in 2Q04.

"Our sales efforts, including more efficient trade and consumer advertising initiatives, continued to result in strong top line growth during the most recent quarter," said Michael Broll, chief executive officer. "We have enhanced our category market share and grown our Wholesome Valley organic cheese brand into the number 2 brand position at retail. While our short-term operating performance suffered due to higher raw materials costs, we are pleased with the progress being made towards our longer-term strategic goals, from both an operational and financial perspective. Shortly after the end of our second fiscal quarter, we announced the redemption of all outstanding convertible preferred stock. This eliminated a great uncertainty surrounding future dilution of our common shareholders, and our earnings will not be penalized by non-cash preferred stock dividends and related accretion expense in the future. We believe the redemption of the preferred will make our common stock more attractive to investors as we move forward to restore profitability and realize Galaxy's potential as a leading manufacturer and developer of healthy food products for the consumer, which are rapidly growing categories in excess of $20 billion."