Dec. 20, 1996
Orlando, Florida
Dear Galaxy Shareholder:
May I extend my sincere best wishes to all of you for a joyous holiday season and a happy, healthy and prosperous new year. To those of you who have been following the Company for some time - thank you for your continued support and patience. To those of you newly acquainted with Galaxy - welcome aboard. As calendar 1996 comes to a close, I am truly excited about the significant progress we have made this past year but I am more excited about the huge opportunities for major growth during calendar 1997. For our fiscal year which will end March 31, 1997, we expect to have annualized net sales of approximately $17 - $20 million compared with sales of $3.9 million for the prior fiscal year - quadrupling our business in one year! We accomplished this growth without a line of credit for the first ten months of the year. The primary reasons for these gains were the introduction of several new and innovative products to the health food stores and mainstream supermarkets throughout the U.S., a significant rise in export sales, a steady increase in business from the franchise buying group for Taco Bell, and the optimization of our individually wrapped "hot pack" slicing machine. This machine which came on line in October of 1995 has been operating at full capacity since October 1996. In January 1997, our second individually wrapped "hot pack" slicing machine, which more than triples our production capacity, will be on line. Presently, this new machine is 55% sold out and we expect it to be operating at full capacity within the first six months of 1997. We are also beginning to mature several of our other production lines (soft cheeses, grated cheeses, shredded cheeses and others) and expect to post significant growth of these products during 1997. In late spring of 1997, we expect delivery of a pullman/ribbon machine for foodservice cheese slices. At present, various significant customers have committed to give Galaxy a total of $30 million in new annual business. This machine can produce 70 million pounds of product annually and at maximum potential can generate approximately $100 million in annual sales. How will we handle this rapid growth? In November 1996, Galaxy secured a $2 million line of credit with Finova Capital. This line will enable us to easily add new customers, grow our existing business and purchase the necessary equipment to make Galaxy a major force in its category. The line is expandable as our receivables and inventory grow. As usual with fast growth, Galaxy did experience some "growing pains" incurring significant overtime expenditures while hiring and training new production crews. We also incurred an increase in marketing expenses as a direct result of increased distribution and the introduction of over a dozen new products into the retail market. These extra expenses will impact our October - December 1996 quarter and unfortunately will slightly delay our profitability. However, these "growing pains" were a necessary investment to properly position the Company for dynamic future growth. We are not expecting to incur large production overtime expenses during 1997 since our production crews are now in place and properly trained and much of the increased marketing expenses during calendar 1996 will not be necessary during calendar 1997. I feel confident that we will see major growth at Galaxy during 1997 - a growth even much more significant than the exciting growth we experienced during calendar 1996. One of our goals for calendar year end 1997 is to achieve a profit margin percentage of 17% to the bottom line - four times greater than most other cheese and cheese-related product companies. Our primary goal for calendar year '97 is to dramatically increase shareholder value and position Galaxy for future growth thus further enhancing shareholder value. On behalf of myself and every Galaxy employee, we can assure you we are working hard to make 1997 a great year for our shareholders. Sincerely, Angelo S. Morini
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