Vaughan Foods, Inc. Reports Third Quarter 2009 Operating Results


MOORE, Okla., Nov. 5, 2009 (GLOBE NEWSWIRE) -- Vaughan Foods, Inc. (Nasdaq:FOOD), a regional leader in fresh-cut vegetables and fruit products, and a broad line of refrigerated prepared salads, sauces, soups, and side dishes, today announced its operating results for its third quarter ended September 30, 2009.

Vaughan improved its gross margins to 8.2 percent or $2.0 million in the third quarter of 2009, compared to 4.0 percent or $0.9 million in the third quarter of 2008. Gross margins for the nine months ended September 30, 2009 increased to 8.9 percent or $6.6 million compared to 6.9 percent or $4.8 million in the comparable nine months ended September 30, 2008. Vaughan attributes the increase to a general stabilization of input costs and a better alignment of its pricing with its input costs, and expects to continue benefiting from this pricing structure.

Sales totaled $24.1 million in the third quarter, an increase of 1.0 percent, or $0.2 million over the comparable quarter of 2008. Sales for the nine months ended September 30, 2009 totaled $73.9 million, an increase of 6.9 percent, or $4.8 million over the comparable nine months ended September 30, 2008. The increase in sales is primarily attributable to increases in the average selling price per pound, due to (a) higher prices for products sold, and (b) sales mix, specifically, increased sales of higher priced products. Vaughan plans to continue increasing sales to new and existing customers with pricing and product mix that will complement its improved gross margins while providing value to its customers in a challenging economic environment.

Vaughan reported a net loss of $218,000, or $0.05 per share in the third quarter of 2009 compared to a net loss of $1.2 million or $0.25 per share in the comparable quarter of 2008. For the nine months ended September 30, 2009, Vaughan recorded a net loss of $466,000 or $0.10 per share compared to a net loss of $2.1 million or $0.46 per share in the comparable nine month period of 2008.

Selling, general and administrative expenses decreased to $2.1 million in the third quarter of 2009 and $6.6 million in the nine month period ended September 30, 2009, compared to $2.6 million and $7.5 million, respectively, in the comparable periods of 2008. Sales and administrative expenses were reduced by, among other things, integrating the functions of finance and sales between our facilities, and closer management of overhead costs in general.

Herb Grimes, Chairman and CEO of Vaughan Foods, commented, "We are encouraged by the quarterly improvement and the positive trend in our gross margins, as well as the decrease in administrative expenses. Most importantly, Vaughan continues to enhance its reputation for providing a safe, quality and affordable product to its customers.

"We continue to experience a general stabilization of fuel and food costs and we have committed to bring even greater focus on the efficiency of our operations to improve our performance. We believe that this focus will continue our improving margin trend and result in stronger operating results and cash flows over the near term," concluded Mr. Grimes.

Investor Conference Call

Vaughan management will host an investor conference call on Friday, November 6, 2009 at 10:00 a.m. ET to discuss these results.

Interested parties should call 877-704-5384 (domestic) or 913-981-5590 (international) at least 5 minutes before the scheduled start time (no passcode required). You may also access this call via the Internet at:



                          http://www.vaughanfoods.com

For those who are unavailable to listen to the live broadcast, a replay will be available through December 6, 2009 and can be accessed by dialing 888-203-1112 (domestic), and 719-457-0820 (international). The pass code is 1189094.

About Vaughan Foods, Inc.

Vaughan Foods is an integrated manufacturer and distributor of value-added, refrigerated foods. We are uniquely able to distribute fresh-cut produce items along with a full array of value-added refrigerated prepared foods multiple times per week. We sell to both food service and retail sectors. Our products consist of fresh-cut vegetables, fresh-cut fruits, salad kits, prepared salads, dips, spreads, soups, sauces and side dishes. Our primary manufacturing facility is in Moore, Oklahoma. Our soups and sauces are manufactured in our facility in Fort Worth, Texas.

The Vaughan Foods, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4726

Safe Harbor Statement

This press release contains forward-looking statements about the future performance of Vaughan Foods, Inc. based on Management's assumptions and beliefs in light of information currently available to it. There are a variety of factors that could cause actual and future results to differ materially from those anticipated by the statements made above. These factors are outlined in the Company's Form 10-Q and other reports filed with the Securities and Exchange Commission. Furthermore, Vaughan Foods, Inc. undertakes no obligation to update, amend or clarify forward-looking statements whether as a result of new information, future events, or otherwise.



                         Vaughan Foods, Inc.
                      Consolidated Balance Sheets
                        (dollars in thousands)

                                            September 30, December 31,
                                                2009          2008
                    Assets:
 Current assets:
   Cash and cash equivalents                $        --   $        --
   Cash receipts subject to account control
    agreement                                       833            --
   Accounts receivable, net of allowance 
    for credit losses of $131,403 at 
    September 30, 2009 and $140,870 at 
    December 31, 2008                             5,281         5,323
   Inventories                                    3,570         3,376
   Prepaid expenses and other assets                133            77
   Deferred tax assets                              311           310
 --------------------------------------------------------------------
      Total current assets                       10,128         9,086
 --------------------------------------------------------------------

 Restricted assets:
   Investments                                    1,430           562
 --------------------------------------------------------------------
      Total restricted assets                     1,430           562
 --------------------------------------------------------------------

 Property and equipment, net                     16,149        17,059

 Other assets:
   Loan origination fees, net of 
    amortization                                    469           368
   Intangible assets                                 85           108
   Deferred tax assets, noncurrent                2,611         2,301
 --------------------------------------------------------------------
      Total assets                          $    30,872   $    29,484
 ====================================================================

    Liabilities and Stockholders'  Equity
 Current liabilities:
   Accounts payable                         $     8,221   $     7,961
   Disbursements in transit                       1,666         1,236
   Line of credit                                 2,336         1,000
   Note payable to former owners of
    Allison's Gourmet Kitchens, LP                  876           802
   Accrued liabilities                            2,082         1,851
   Current portion of long-term debt              1,107         1,094
   Current portion of capital lease 
    obligation                                      147           204
 --------------------------------------------------------------------
      Total current liabilities                  16,435        14,148
 --------------------------------------------------------------------

 Long term liabilities:
   Long-term debt, net of current portion         7,498         7,950
   Capital lease obligation, net of current
    portion                                          --            95
   Deferred gain on sale of assets                   53            79
 --------------------------------------------------------------------
      Total long-term liabilities                 7,551         8,124
 --------------------------------------------------------------------

 Total stockholders' equity                       6,886         7,212

 --------------------------------------------------------------------
      Total liabilities and stockholders'
       equity                               $    30,872   $    29,484
 ====================================================================


                          Vaughan Foods, Inc.
                   Consolidated Statements of Operations
              For the three and nine month periods ended
                       September 30, 2009 and 2008
                          (dollars in thousands)

                       Three Months Ended         Nine Months Ended
                         September 30,              September 30,
                      2009          2008          2009          2008


 Net sales      $   24,107    $    23,875   $    73,892   $    69,128
 Cost of sales      22,123         22,929        67,310        64,339
 --------------------------------------------------------------------
 Gross profit        1,984            946         6,582         4,789
 --------------------------------------------------------------------

 Selling,
  general and
  administrative     2,067          2,573         6,552         7,475
 --------------------------------------------------------------------

 Operating
  income               (83)        (1,627)           30        (2,686)

 Interest
  expense             (306)         (200)          (822)         (604)
 Other income,
  net                    9           (89)            15           (41)
 --------------------------------------------------------------------
 Income (loss)
  before income
  taxes               (380)        (1,916)         (777)       (3,331)
 Income tax
  expense
  (benefit)           (162)          (758)         (311)       (1,208)
 --------------------------------------------------------------------
 Net income
  (loss)        $     (218)   $   (1,158)   $      (466)  $    (2,123)
 ====================================================================
 Weighted
  average
  shares
  outstanding
   Basic and
   diluted       4,623,077     4,623,077      4,623,077     4,623,077

 Net income
  (loss) per
  share
  Basic and
  diluted       $    (0.05)   $    (0.25)   $     (0.10)  $     (0.46)

 =====================================================================



                            Vaughan Foods, Inc.
                  Consolidated Statements of Cash Flows
                          (dollars in thousands)

                                                  Nine Months Ended
                                                    September 30,
                                                ---------------------
                                                  2009          2008
                                                -------       -------
 Cash flows from operating activities:
   Net (loss)                                   $ (466)       $(2,123)
   Adjustments to reconcile net (loss) to
    net cash provided by operating
    activities:
      Depreciation and amortization              1,477          1,322
      Provision for credit losses                   (9)           (52)
      (Gain) loss on sale of asset                 (15)            76
      Stock based compensation expense              66             --
      Deferred income taxes                       (310)        (1,208)
      Changes in operating assets and
       liabilities:
        Accounts receivable                          51          (110)
        Inventories                                (194)         (730)
        Disbursements in transit                    430            --
        Prepaid expenses and other assets           (56)           (9)
        Accounts payable                            259         2,879
        Accrued liabilities                         231           327
 --------------------------------------------------------------------
          Net cash provided by operating
           activities                             1,464           372
 --------------------------------------------------------------------
 Cash flows from investing activities:
   Purchases of property and equipment             (366)       (2,451)
   Investments in Restricted assets                (868)         (211)
   Proceeds from sale of assets                       5           698
   Deconsolidation of variable interest
    entity                                           --           (80)
 --------------------------------------------------------------------
          Net cash (used in) investing
           activities                             (1,229)      (2,044)
 --------------------------------------------------------------------
 Cash flows from financing activities:
   Payments of loan origination fees                (221)          (5)
   Proceeds from line of credit                    1,336          900
   Cash receipts subject to account control
    agreement                                       (833)          --
   Repayment of long-term debt and capital
    leases                                          (590)        (588)
   Repayment of notes payable to former owners
    of Allison's Gourmet Kitchens, LP                 (7)        (198)
   Proceeds of notes payable to former owners of
    Allison's Gourmet Kitchens, LP                    80           --
   Cash paid to former owners of Wild About Food      --          (45)
   Repayments of short-term borrowings                --       (1,000)
 --------------------------------------------------------------------
          Net cash (used in) financing
           activities                               (235)        (936)
 --------------------------------------------------------------------

 Net increase (decrease) in cash and cash
  equivalents                                         --       (2,608)
 Cash and cash equivalents at beginning of
  period                                              --        2,698
 --------------------------------------------------------------------
 Cash and cash equivalents at end of period      $    --      $    90
 ====================================================================


            

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