Centennial Specialty Foods Reports 2004 Results DENVER, March 30
/PRNewswire-FirstCall/ -- Centennial Specialty Foods Corporation
(Nasdaq: CHLE; Boston: CSJ) reported a net loss of $798,643 for the
year ended December 31, 2004 compared to net income of $38,035 for
the prior year. Much of this net loss was due to significant
slotting fees, promotional and marketing spending associated with
the Company's expansion efforts into the California market, where
sales results have been disappointing. Net sales before slotting
fees decreased $123,906 between years, even though new distribution
was obtained in retail grocery stores in California. This decrease
was due entirely to the decline in sales of Ellis products, which
compete in the commodity product arena and have been de-emphasized
by the Company. Sales of premium Stokes Green Chile Sauces
increased 21.1% between years, reflecting the initial customer
orders in the new markets. However, very limited reorders of
products by customers in the California market have occurred. An
aggressive promotional program was implemented during the fourth
quarter of 2004 in the California market to try to capture sales
for Centennial's products. Even with this aggressive and expensive
program, sales of products in the new market have been very slow.
Slotting fees totaling $516,611 were paid during 2004 to obtain
shelf space in new retail grocery stores. Such fees were deducted
against net sales, which further increased the net loss in 2004.
Selling, general and administrative costs also increased 18.9%, or
$397,909, between years. A significant component of this increase
was attributable to increased selling and marketing spending of
approximately $200,000 associated with our attempted expansion into
new markets. Further, directors and officers insurance, shareholder
relations and accounting and legal fees increased approximately
$400,000 as a result of additional costs associated with being a
public company and disputed matters with the Company's tenant and
sole supplier. These increases were offset by a decrease of
$200,000 in consulting fees. Finally, other income decreased 74.5%,
or $253,775, between years. This was primarily due to reduced
production facility income, which included rent and EBITDA sharing
income, which were reduced by production shortfall fees with our
sole supplier. Production facility income decreased $490,093 for
the year ended December 31, 2004 compared to 2003 as a result of
recording $332,652 in production shortfall fees during 2004 and the
tenant and sole supplier not generating any EBITDA sharing income
during 2004. We recorded $170,000 of EBITDA sharing income during
2003. Savings on interest expense of $236,318 offset part of the
reduction in production facility income. Loss per share, after
preferred stock dividends (which for the last three quarters have
not been declared or paid, but are cumulative), was $0.36 for 2004.
All of 2004 was spent on Centennial's expansion efforts into new
markets, including retail grocery stores in Northern California and
Southern California, along with supercenter stores and club stores
in Wal-Mart and Sam's Club. Overall, the Company was successful in
obtaining placement on grocery shelves in over 1,700 new retail
grocery stores, supercenters and club stores. As noted above, the
slotting costs associated with these store placements were
significant, costing in excess of $500,000. Centennial utilized a
variety of different marketing approaches, including trade
advertisements, coupons, product demonstrations and low
introductory pricing, to attract attention to its products in the
new markets. Despite good shelf placement and displays at many of
the new retail grocery stores, the sales volumes in the Northern
California and Southern California markets have been very slow. The
Company was recently notified by two supermarket customers in the
California markets with approximately 500 locations that the
Company's products are being discontinued due to slow sales volume.
"The competition for consumer purchases in the California markets
has been very strong within the Mexican foods section," stated Bob
Beckwith, Centennial's Chief Marketing Officer, adding, "It has
been very difficult for us to capture market share with our premium
Stokes Green Chile Sauces." Due to continuing slow sales in the
California markets, Centennial does not expect any significant
revenue to be generated from these markets in the foreseeable
future. Centennial's Board of Directors has authorized management
to undertake an exploration of strategic alternatives to maximize
value for its shareholders. Given the slow performance in the
California expansion market, the Company is evaluating its business
plan and reviewing other alternatives, which may include other
financing arrangements, mergers, acquisitions, and joint ventures.
While the Company believes it has sufficient liquidity resources to
continue its current operations, management recognizes that any
further significant expansion would require greater capital
resources than are currently available to the Company. In addition,
the costs of maintaining a public company in today's environment
(including complying with Sarbanes-Oxley requirements) are very
significant and result in a large burden for a small company like
Centennial. Accordingly, Centennial has begun preliminary
discussions with various groups to review other alternatives
targeted at growing or enhancing its operations; however, no
definitive plans or agreements have been reached. Centennial
continues to have disputes with its tenant and sole supplier. In
February 2005 the tenant and sole supplier filed suit in Adams
Country Colorado District Court against the Company's wholly owned
subsidiary, Stokes Canning Company ("Stokes"), seeking to recover
costs paid by tenant for construction of a wastewater treatment
system at the plant owned by Stokes. Additionally, the tenant
contends that certain future improvements for the facility should
be paid for by Stokes. The Company contends that the costs for the
wastewater treatment project as well as future improvements for the
facility are the responsibility of the tenant and disputes the
tenant's claims. In March 2005, the Company filed its answer
disputing tenant's claims and asserted counterclaims for various
breaches of contract. The litigation may be lengthy and will most
likely require significant management time and financial resources.
It remains the Company's desire to reach a global resolution of
these matters with the tenant and sole supplier; however, to date,
settlement discussions have not yet produced a mutually acceptable
resolution of the issues. As previously disclosed in a Form 8-K
filed with the Securities and Exchange Commission on March 1, 2005,
the Company received a notice from The Nasdaq Stock Market
("Nasdaq") stating that the bid price for the Company's common
stock had closed below the minimum $1.00 per share requirement for
continued inclusion pursuant to Marketplace Rule 4310(c)(4) (the
"Rule"). In accordance with the Rule, Nasdaq informed the Company
that it will have until August 29, 2005 to regain compliance with
the Rule. In order to regain compliance with the Rule, the bid
price for the Company's common stock must close at, or above, $1.00
per share for at least 10 consecutive business days. If compliance
with the Rule is not demonstrated by August 29, 2005, the Company
may be provided an additional 180 calendar days by Nasdaq to regain
compliance if it meets the initial listing requirements as set
forth in Marketplace Rule 4310(c), except for bid price. If the
Company is not eligible for an additional compliance period, the
Nasdaq staff will provide written notification that the Company's
securities will be delisted. At that time the Company may appeal
the Nasdaq staff's determination to delist its securities to a
Listing Qualifications Panel. Centennial Specialty Foods
Corporation is a distributor of ethnic Southwestern food products.
Its products are sold under the Stokes and Ellis labels, two
well-known Southwestern brands that date back almost 100 years.
Principal channels of distribution for Centennial's products are
grocery retailers, superstores and club stores in Colorado,
Arizona, California and, to a lesser extent, several major
metropolitan markets in adjoining states. More information about
Centennial can be found on its website at
http://www.centennialspecialtyfoods.com/ Note Regarding Forward
Looking Statements: Certain matters discussed in this press release
could contain forward-looking information that involves risks and
uncertainties that could cause actual results to differ materially
from current trends or expected results. We identify forward
looking statements through our use of words such as "expect,"
"believe," "project," "anticipate," and similar expressions. These
risks that may affect our ability to achieve forward-looking
statements are discussed in our final prospectus in the section
entitled "Risk Factors" and other documents that are on file with
the Securities and Exchange Commission. For further information,
please contact Jeffrey Nieder, CEO, or Douglas Evans, CFO, at (303)
292-4018. Stokes and Ellis are registered trademarks of Centennial
Specialty Foods Corporation. CENTENNIAL SPECIALTY FOODS CORPORATION
AND SUBSIDIARY Consolidated Statements of Operations For the Years
Ended December 31, 2004 2003 Net sales $4,415,857 $5,032,557 Cost
of goods sold 3,266,756 3,211,905 Gross profit 1,149,101 1,820,652
Selling, general and administrative expenses 2,504,237 2,106,328
Loss from operations (1,355,136) (285,676) Other income (expense)
Interest expense (226,983) (463,301) Production facility income
314,230 804,323 Total other income 87,247 341,022 Income (loss)
before income taxes (1,267,889) 55,346 Income tax benefit (expense)
- current 14,478 (21,482) Income tax benefit - deferred 454,768
4,171 Total income tax benefit (expense) 469,246 (17,311) Net
income (loss) $(798,643) $38,035 Net income (loss) before preferred
stock dividend $(798,643) $38,035 Preferred stock dividends - paid
(250,000) (172,603) Preferred stock dividends - in arrears
(750,000) -- Total preferred stock dividends (1,000,000) (172,603)
Net loss available to common shareholders (1,798,643) (134,568)
Basic and diluted net loss per common share $(0.36) $(0.04) Basic
and diluted weighted average common shares outstanding 5,050,000
3,629,452 CENTENNIAL SPECIALTY FOODS CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet December 31, 2004 Assets Current assets
Cash and cash equivalents $415,597 Accounts receivable, net of
allowance for doubtful accounts of $25,483 341,671 Income taxes
receivable 14,478 Inventory, net 1,894,927 Prepaid expenses 153,219
Total current assets 2,819,892 Non-current assets Property, plant
and equipment, net 5,914,186 Goodwill, net 1,634,079 Other assets
56,488 Total non-current assets 7,604,753 Total assets $10,424,645
Liabilities and Stockholders' Equity Current liabilities Accounts
payable - trade $394,830 Accrued liabilities 800,473 Total current
liabilities 1,195,303 Long-term debt 2,436,387 Deferred tax
liability 77,015 Total long-term liabilities 2,513,402 Total
liabilities 3,708,705 Commitments and contingencies Stockholders'
equity Preferred stock (liquidation preference $10,750,000),
3,000,000 shares authorized, 2,000,000 shares issued and
outstanding, $5 stated value, 10% dividend 2,334,785 Common stock,
$0.0001 par value, 20,000,000 shares authorized, 5,050,000 shares
issued and outstanding 505 Additional paid-in capital 5,794,036
Accumulated deficit (1,413,386) Total stockholders' equity
6,715,940 Total liabilities and stockholders' equity $10,424,645
DATASOURCE: Centennial Specialty Foods Corporation CONTACT: Jeffrey
Nieder, CEO, or Douglas Evans, CFO, both of Centennial Specialty
Foods Corporation +1-303-292-4018 Web site:
http://www.centennialspecialtyfoods.com/
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