Overhill Farms, Inc. Signs New Key National Account
Thursday, January 25, 2007 5:54 PM CST
LOS ANGELES (AP MARKET WIRE) — Overhill Farms, Inc. (AMEX: OFI) announced today that it has signed a three-year agreement to produce meals for a major national food brand. The agreement is expected to generate sales of approximately $43 million during the first year. Production began in January and is scheduled to build steadily over the coming months.
“With this new agreement, and other new business and customer initiatives,”said Chairman and CEO James Rudis, “Overhill Farms is on track to reach an annual revenue run rate of over $200 million by the third quarter of this fiscal year.” The company reported revenues of $168.3 million for the fiscal year ended October 1, 2006.
Overhill Farms also announced that it plans to produce 24 new private-label food items being introduced by a major West Coast grocery chain that is a current Overhill Farms customer. Production is scheduled to begin in February. This is the largest launch, in terms of number of products, ever undertaken by Overhill Farms for a single customer.
In addition, two new retail customers have awarded Overhill Farms contracts for private label products, the company said. Manufacturing has already begun. The company believes these new customers may develop into strong mid-sized accounts.
Overhill Farms also provided a more positive estimate of the impact of a previously announced plan by an existing customer to diversify its sources of supply by transferring $20 million in production volume to another vendor. Overhill Farms has been informed that the transition of production to the new vendor has not proceeded as anticipated. As a result, Overhill Farms does not anticipate any revenue reduction from this customer until after April 30, 2007. If the transition occurs on April 30, the result would be an estimated decrease in sales to this customer of approximately $10 million during this fiscal year, rather than the estimated $20 million previously announced. Should the transition occur after April 30, the reduction in revenues would be commensurately smaller.
Commenting on the new production agreements awarded to Overhill Farms, Mr. Rudis said, “Once again we have obtained significant new business by combining competitive pricing with our strong capabilities in product development, volume production, and quality control. We are proud that these customers, after careful review, selected Overhill Farms as their supplier rather than selecting any of our competitors.” Under terms of the agreements, he noted, Overhill Farms cannot disclose the names of the new customers.
Mr. Rudis added, “While the pricing on some of the new products is very competitive, we expect significant improvement in operating profit and net income as this new business develops. We also continue to pursue new accounts, particularly in the retail and food service segments, and we maintain our focus on cost control.”
Overhill Farms (AMEX: OFI), based in Vernon, California, is a value-added supplier of custom high quality frozen foods to foodservice, retail and airline customers. For more information, see www.OverhillFarms.com.
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