November 6, 1997
Orlando, FL
Contact: Rebecca Barksdale
(407) 855-5500, extension 105
RECORD EARNINGS REPORTED FOR SECOND QUARTER...
The Company reported net earnings of $125,392 for the quarter ended September 30, 1997, representing an increase of 442% over earnings for the first quarter in fiscal 1998. In addition to the increase in net profits, gross margins increased to 24.85%, up 31.3% over the previous quarter. The increase in gross margin and the corresponding improvement in net income
resulted from a strategic abatement of lower margin foodservice sales and a re-balancing of product mix. In connection with this strategy, sales for the second quarter declined 14% to $5,031,997.
For the third (December 31, 1997) and fourth (March 31, 1998) quarters, we are expecting retail sales to continue their steady rise. We anticipate shipping foodservice orders from the new Pullman loaf machine during the third quarter of fiscal 1998. With the addition of these new product positions, foodservice sales should begin to dramatically climb during the quarter ended March 31, 1998. These sales are expected to yield significantly higher margins than in the past, as a result of the efficiency of the new equipment, with low overhead and labor costs.
PIZZA HUT, MAKIN’ IT
RIGHT WITH FORM�GG!!
On October 14th, a Pizza Hut store in Chicago began testing a veggie pizza made with our delicious, low-fat form�gg mozzarella. The pizza is available on the store’s regular menu and on the lunch buffet as a healthy alternative. Initial response to the product has been positive and we will be getting additional feedback from the store through consumer surveys distributed with each pizza sold.
DYNAMIC CORPORATE GOAL SET FOR
SHAREHOLDER VALUE…
At Galaxy, we are committed to a common objective: increasing shareholder value for our investors. We believe the possibilities for this company are vast with the potential to increase stock price dramatically over the next six to nine months. We have set certain corporate goals for the company to achieve improved margins, net profits and an increased stock price within the near future. These figures represent GOALS for the company, NOT FORECASTS OR PROJECTIONS.
Our goal for sales is to reach a run rate of $1 million per week by the quarter ended June 30, 1998. At this sales level, we hope to achieve a blended gross margin of 26% and to drop 17% to net income. We have set these goals based on the following facts about our industry and Galaxy’s place in it:
• We operate in one of the largest industries in the world, with approximately $100 billion in sales in the United States and $500 billion worldwide.
• We maintain a strong niche position in this market with few competitors. We have been ranked #1 for our position in the health food industry.
• The market for healthy alternatives continues to grow as 98% of consumers consider health factors when choosing a product.
• An average company in the food industry has net income of 4%-6% of sales and is awarded an average profit to earnings multiple of 18. An average company in the dairy industry has net income of only 1.5%-2% of sales.
• We have a significant amount of intangible assets, such as brand recognition, trade formulas and consumer loyalty which are not reflected on our balance sheets.
• Our existing facility has the capability to produce up to $350 million in annual sales, without major additional capital outlays.
• We consistently score higher than the industry averages for our technical ratios, including current ratio, current liabilities to net worth and total liabilities to net worth.
We have been able to grow to our current size with very little debt on our balance sheet. With the attainment of these goals, we believe we can achieve a profit to earnings multiple of 35, which would yield a stock price of approximately $5.00 per share. Standard practice dictates that a company with accelerated parameters like Galaxy, growing at a rate of 50% per year, can be awarded a multiple of 50. Based on this measure, our growth rate would only need to be 35% to be awarded a multiple of 35, which we have exceeded for each of the last two years! Again, these figures are the corporate goals for the growth of the company and do not represent projections or forecasts. They are merely a glimpse into the boundless possibilities for the future with Galaxy Foods.
STOCK WATCH…
As of September 30, 1997, the remaining convertible preferred shares issued in April 1996 to an investment fund as part of an equity financing have been converted into common shares. It is our belief that these shares are now being sold into the market which should alleviate some of the pressure on the stock price that we have been experiencing in the past several months. Management does not anticipate the need for additional equity financing in the near future.
ON THE SHELVES...
Consumer acceptance of our product brands has been "out of this world". Several of our products have proven they have long-term staying power and are experiencing impressive growth. For fiscal 1998, sales of our health-food lines, Soyco, Soymage and Rice Products have increased 44% while sales of our popular Sandwich Slices have increased 58% and sales of our Veggie Slices have increased a remarkable 144%!!!
Sales to Kroger Supermarkets continue to soar. John Jackson, our VP of Retail Sales estimates that Galaxy products are in at least 65% of all Kroger stores across the United States. The strongest area of growth has been in stores where they have launched the Vegetarian Market concept in the produce section. In fact, case sales of Veggie Slices to these stores have increased by 236% during the second quarter of fiscal 1998. Needless to say, that is quite a jump for a three month period.
HOT OFF THE PRESS...
Galaxy Foods was featured in the September 19, 1997 issue of the Cheese Market News, a weekly publication catering to the cheese and deli-dairy business. The two-page spread, based on an interview with Galaxy’s CEO and president, Angelo Morini, emphasized the company’s proprietary technology and commitment to the health of millions of consumers. For a reprint of the article, call (407) 855-5500 X307.
SWEET EXPECTATIONS …
Our foodservice division is very excited about the boundless prospects for our Lite Bakery line. This line of products includes three basic mixes: a whipped topping mix, a key lime pie mix, and an all-purpose mix that can be used to create over 50 delicious recipes. Within a few weeks of introduction, the key lime pie mix is being sold to several restaurants andwe will begin marketing all three mixes to restaurants and bakeries across the country shortly.
These mixes are fat-free, cholesterol-free, lactose-free, all natural and have fewer calories than conventional desserts. At one time, only fitness buffs demanded healthy products; however, that has changed drastically in the last several years. In fact, 88% of all consumers recently stated that increasing the nutritional value and health benefits of food products should be at the top of the food industry’s agenda. Galaxy Foods, as the Creator of Today’s Lifestyle Foods, is at the forefront of this growing trend. Now, consumers can satisfy their craving for sweets without feeling guilty.
IT’S SHOW TIME...
It was another successful showing for Galaxy’s Soyco division at the Natural Food Products Expo trade show in Baltimore last month. John Jackson, Christopher Morini, Bob Peterson, Dawn Johnson and Carol Thomas were on hand to meet and greet Soyco brokers and retail store owners and managers from around the country. We proudly introduced several new products, including our revolutionary Tofu Slices. These new slices, in four appetizing flavors: Savory, Hickory Smoked, Italian Herb and Original, are ready-when-you-are and may be used in sandwiches, to top burgers, or in any recipe using soy products. Our wonderfully creamy soft serve was also sampled at the show and attendees were impressed with the rich taste of this fat-free product.
Our soft serve was also featured in the Chamberlin’s Caf� booth at the Southern Women’s Show in Orlando. Attendees were willing to wait as long as 20 minutes to sample the ice cream! Tasters were excited about the health benefits and taste and were thrilled to know that they could purchase the product through their local Chamberlin’s Market.
QUOTE FOR THE MONTH...
"The highest reward for man’s toil is not what he gets for it but what he becomes by it." John Ruskin
