Poore Brothers, Inc. (Nasdaq: SNAK) today reported financial
results for the third quarter (fourteen weeks) and nine months
ended October 1, 2005. Net revenues for the third quarter of fiscal
2005 were $18.5 million, 8% above last year's third quarter net
revenues of $17.2 million. The net loss of $(0.4) million, or
$(0.02) per share, this year compared to net income of $1.0
million, or $0.05 per basic and diluted share last year. The
reduced profitability was the result of $2.5 million in trade
spending programs initiated to aggressively drive revenue growth in
T.G.I. Friday's(R), Boulder Canyon Natural Foods(TM) and
Cinnabon(R) brands. The Company's third-quarter gross revenue
shipments, before deductions for trade spending, grew 24% versus
last year. Mr. Thomas W. Freeze, President and Chief Executive
Officer, commented, "We are encouraged by our shipment growth, but
not satisfied with our financial performance this past quarter. We
invested significantly in the Cinnabon(R) brand market test and in
a big promotional event for the re-launch of the Boulder Canyon
Natural Foods(TM) brand potato chips. We simultaneously experienced
lower than expected results from our trade spending programs for
the T.G.I. Friday's(R) brand across several channels. While the
programs generated higher revenue, the additional volume was not
sufficient to offset their costs. Despite recent financial
performance, we remain excited about the future for all of our
licensed brands. In addition, we separately have announced the
signing of a nonbinding letter of intent to acquire the Mrs.
Fields(R) brand licenses from Shadewell Grove to produce and sell
ready-to-eat cookies, baking chips, brownies and toppings into many
of the same distribution channels we presently sell." In the third
quarter T.G.I. Friday's(R) brand salted snacks net revenue grew 1%
to $12.4 million as the previously mentioned higher trade spending
programs in grocery, convenience store and mass merchandiser
channels offset the 12% gross revenue growth, but did not generate
sufficient volume to offset their costs. Overall, the T.G.I.
Friday's(R) brand represented 67% of total net revenue in the third
quarter. The Cinnabon(R) brand cookie market test continued in the
third quarter and generated $1.3 million in gross revenue from a
variety of new customers in the grocery and convenience store
channels. The Company overestimated sell through consumption in
connection with the large initial promotional order from a mass
merchandiser which resulted in a charge of $0.7 million to
mark-down and dispose of estimated excess inventory. The Company
remains committed to the Cinnabon(R) brand's success and to
developing and testing new products and promotional strategies. The
Company's potato chip brands' net revenues grew 13% due to strong
promotional activity, particularly on the Boulder Canyon Natural
Foods(TM) brand. Distributed products net revenue also grew 73%
over the prior year due to increased product lines. Continuing with
third quarter results, gross profit in this quarter was $2.6
million, or 13.8% of net revenue, compared to $4.3 million, or
25.1% of net revenue, in the same quarter of 2004. The decline in
this year's gross profit dollars and percentage was attributable to
the higher trade spending previously described and significantly
higher freight costs, partially offset by modest improvement in
manufacturing efficiencies. Selling, General and Administrative
expenses increased to $3.3 million in the third quarter of 2005 as
compared to $2.7 million in 2004, or 17.6% versus 15.7% of net
revenue, respectively. The higher level of spending in 2005 was due
to increases in marketing costs for new products, consumer testing
programs, as well as commission expenses associated with higher
revenues. The operating loss for the third quarter of 2005 was
$(0.7) million compared to an operating income of $1.6 million in
2004 as a result of the variances described above. For the nine
months ended October 1, 2005, net revenue increased 12% to a record
$58.4 million, compared with revenue of $52.3 million in the first
nine months of last year. Net income was $1.3 million, or $0.07 per
basic and diluted share, in the first nine months of 2005 as
compared to $1.5 million, or $0.08 per basic and diluted share, in
the same period last year. As of October 1, 2005, the Company
remained in a strong financial position with cash of $11.0 million,
working capital of $11.7 million and a debt-to-equity ratio of
0.11. Mr. Richard M. Finkbeiner, Senior Vice President and Chief
Financial Officer, added, "As a result of our third quarter
performance, we believe that we will be nearer the lower end of our
previously provided guidance for the full year of $75-$85 million
in net revenue, but we will not meet our earnings per share target
of $0.18-$0.23 per share. We now feel that our earnings per share
for the full year will be between $0.08-$0.10 per share." Mr.
Freeze concluded, "While we are disappointed about our short-term
financial performance, we are optimistic that our broad array of
growth initiatives, including (i) Cinnabon(R) cookies and other
items, (ii) Boulder Canyon Natural Foods(TM) new products, such as
organic tortilla chips, soy crisps, and soy tortilla chips, (iii)
acquisitions, (iv) Panda Express(R) snack concepts, and (v) other
licensing opportunities, provides a broad platform upon which to
reach our long-term goal of building a $200 million profitable food
company. Our innovation capability with brands and products, while
not always successful in the marketplace, remains the cornerstone
to our future success." About Poore Brothers, Inc. With facilities
in Indiana and Arizona, Poore Brothers is a marketer and
manufacturer of Intensely Different(TM) snack foods under a variety
of owned or licensed brand names, including T.G.I. Friday's(R),
Cinnabon(R), Tato Skins(R), Poore Brothers(R), Bob's Texas
Style(R), and Boulder Canyon Natural Foods(TM). For further
information about Poore Brothers or this release, please contact
Richard M. Finkbeiner, Senior Vice President and Chief Financial
Officer, at (623) 932-6255, or logon to
http://www.poorebrothers.com. Statements contained in this press
release that are not historical facts are forward looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Because such statements include
risks and uncertainties, actual results may differ materially from
those expressed or implied by such forward-looking statements.
Factors that may cause actual results to differ from the
forward-looking statements contained in this press release and that
may affect the Company's prospects in general include, but are not
limited to, the potential need for additional financing,
acquisition-related risks, significant competition, customer
acceptance of new products, dependence upon major customers,
dependence upon existing and future license agreements, general
risks related to the food products industry, and such other factors
as are described in the Company's filings with the Securities and
Exchange Commission. -0- *T POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME Quarter Ended Nine Months Ended
------------------------- ------------------------- October 1,
Sept. 25, October 1, Sept. 25, 2005 2004 2005 2004 ------------
------------ ------------ ------------ (unaudited) (unaudited)
(unaudited) (unaudited) Net revenue $18,544,985 $17,176,201
$58,433,381 $52,335,763 Cost of revenue 16,180,051 12,871,232
46,619,491 40,348,800 (Gain) on sale of Equipment/Brand
discontinuance costs (194,359) -- (194,359) 1,414,759 ------------
------------ ------------ ------------ Gross profit 2,559,293
4,304,969 12,008,249 10,572,204 Selling, general &
administrative expenses 3,261,688 2,695,000 9,909,626 7,993,475
------------ ------------ ------------ ------------ Operating
income (loss) (702,395) 1,609,969 2,098,623 2,578,729 Interest
income (expense), net 68,998 (49,758) 94,728 (145,704) ------------
------------ ------------ ------------ Income (loss) before income
tax benefit (provision) (633,397) 1,560,211 2,193,351 2,433,025
Income tax benefit (provision) 246,790 (604,000) (851,060)
(942,000) ------------ ------------ ------------ ------------ Net
income (loss) $(386,607) $956,211 $1,342,291 $1,491,025
============ ============ ============ ============ Earnings (loss)
per common share: ----------------- Basic $(0.02) $0.05 $0.07 $0.08
============ ============ ============ ============ Diluted $(0.02)
$0.05 $0.07 $0.08 ============ ============ ============
============ Weighted average number of common shares:
----------------- Basic 19,842,862 18,831,954 19,728,863 18,685,191
============ ============ ============ ============ Diluted
19,842,862 19,202,074 20,018,528 19,321,246 ============
============ ============ ============ *T -0- *T POORE BROTHERS,
INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS October
1, Dec. 25, 2005 2004 ------------ ------------ (unaudited)
(unaudited) Current assets $21,598,650 $19,013,368 Property and
equipment, net 10,271,553 10,815,963 Other assets, net 10,283,579
10,287,956 ------------ ------------ Total assets $42,153,782
$40,117,287 ============ ============ Current liabilities
$7,910,611 $7,299,274 Long-term debt 1,693,763 1,729,134 Other
long-term liabilities 1,964,518 2,280,793 ------------ ------------
Total liabilities 11,568,892 11,309,201 Shareholders' equity
30,584,890 28,808,086 ------------ ------------ Total liabilities
and shareholders' equity $42,153,782 $40,117,287 ============
============ *T -0- *T POORE BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended
------------------------- October 1, Sept. 25, 2005 2004
------------ ----------- (unaudited) (unaudited) Net cash flows
from operating activities $1,806,649 $6,260,899 Net cash flows from
investing activities (92,586) (447,526) Net cash flows from
financing activities (342,554) (452,020) ------------ -----------
Net increase in cash 1,371,509 5,361,353 Cash and cash equivalents
at beginning of period 9,675,490 3,239,570 ------------ -----------
Cash and cash equivalents at end of period $11,046,999 $8,600,923
============ =========== *T
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