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Tofutti Brands Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 15, 2012 05:30PM
Tofutti Brands Inc (TOF) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:Basic earnings per common share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per common share for the periods ended March 31, 2012 and April 2, 2011 have been computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, which include options outstanding during the same period. Not included in the calculation for each period were 41,000 and 51,000 non-qualified options granted to directors, respectively, that were antidilutive because of the net loss in the thirteen week periods ended March 31, 2012 and April 2, 2011, respectively.
Net sales for the thirteen weeks ended March 31, 2012 were $3,290,000, a decrease of $715,000, or 18%, from the sales level realized for the thirteen weeks ended April 2, 2011. The reduction in sales was primarily due to the determination of Trader Joes, formerly our largest customer, to cease selling branded goods. During the first quarter of 2012, there were no sales to Trader Joes as compared to $761,000 in sales in the first quarter of 2011. We believe that we will begin to recover some portion of these sales as our retail customers switch to other retail sources to purchase our products. We also believe that our sales will improve during the remainder of fiscal 2012 due to the introduction of new products and price increases instituted in the first and second quarters of the year, which will become effective at various times in the second and third quarters of this year. These increases will range from 5% to 10%, depending on the product category.
Our gross profit decreased to $813,000 in the period ended March 31, 2012 from $1,083,000 in the period ended April 2, 2011 due to the significant reduction in sales. Our gross profit percentage was 25% for the period ending March 31, 2012 compared to 27% for the period ending April 2, 2011. The reduction in our gross profit percentage was due primarily to significant promotional activity on behalf of our new products. We expect such promotional activity to continue for the remainder of 2012 and continue to have a negative impact on our gross profit percentage. Additionally, increased costs for packaging and ingredients reduced our margin as well. Freight out expense, a significant part of our cost of sales, increased by $12,000, or 5%, to $241,000 for the thirteen weeks ended March 31, 2012 compared with $229,000 for the thirteen weeks ended April 2, 2011. As a percentage of sales, freight out expense increased to 7% in the 2012 thirteen week period compared to 6% for the 2011 thirteen week period. We expect freight out expense to continue at a higher level in 2012 due to the increased cost of oil, which will also negatively impact our packaging costs.