updated 3/17/2011 4:15:42 PM ET 2011-03-17T20:15:42

MOORE, Okla., March 17, 2011 (GLOBE NEWSWIRE) -- Vaughan Foods, Inc. (OTCBB: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 the 4th quarter and year ended December 31, 2010.

For the year ending December 31, 2010, Vaughan recorded a net loss of $362,000 or $0.04 per share compared to a net loss of $500,000 or $0.11 per share in 2009. Gross margin percentage increased from 9.1 percent in 2009 to 9.3 percent in 2010 on slightly lower revenues. Sales changes year-over-year resulted from, among other factors, the rationalization of unprofitable business and increased focus on the development of new products. Sales efforts were strengthened with the addition of sales and marketing staff aimed at expanding product offerings and the Company's customer base.

Vaughan recorded a net loss of $374,000 or $0.04 per share for the fourth quarter of 2010, compared to a net loss of $34,000 or $0.01 per share in the fourth quarter of 2009. Gross margin percentage decreased to 6.3 percent from 9.5 percent primarily due to increased workers compensation expense under its self-insured program and higher diesel fuel prices in its transportation division. Management has elected to discontinue its self-insured workers compensation program in favor of a fully-insured program in an effort to minimize variability in costs. The fourth quarter results included a gain realized from an insurance settlement of $0.4 million.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $2.8 million for the year ended December 31, 2010, marking an improvement of $0.8 million in comparison to 2009 when EBITDA was $2.0 million.

Herb Grimes, Chairman and CEO of Vaughan Foods, commented, "A number of the factors that resulted in our disappointing fourth quarter are fixable and are being addressed, For the full year we made solid progress in strengthening the fundamentals of our company and formulating a solid strategy for growth. Despite protracted challenging economic conditions in the United States, we have identified a number of quality new customer prospects for important new business as we prepare for our peak season," said Mr. Grimes.

"Although the Company has been able to pass on a portion of its increased transportation costs in the form of pricing adjustments, due to the restrictions of certain informal customer agreements we are not able to defray all fuel cost increases in a timely manner, particularly in periods of extreme price volatility, as experienced In the last few months. We've done a very good job of developing our backhaul business to offset transportation costs. Backhaul revenues were $208,000 higher than the year earlier quarter, an increase of 73 percent. We are running the plants more efficiently, which also helps with backhaul revenues. We expect this trend to continue through 2011," concluded Mr. Grimes.

The company noted that weather-related events in 2011 and their repercussions have warranted recent discussion within and about the fresh vegetable industry. In January, lettuce crops were weakened by freezing conditions, which resulted in shortages of iceberg and romaine lettuce throughout the month of February. In February, large portions of the United States of America became immobile following a historic blizzard, slowing down commerce in many metropolitan areas. Vaughan continues to manage its resources, serve its customers and works to minimize its financial exposure of weather and industry related events.

Investor Conference Call

Vaughan management will host an investor conference call on Friday, March 18, 2011 at 10:00 a.m. ET to discuss these results.

Interested parties should call 877-353-0040 (domestic) or 970-315-0529 (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 April 8, 2011 and can be accessed by dialing 800 642-1687 (domestic), and 706 645-9291 (international). The conference ID is 51774148.

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 Forms 10-K and 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)
     
  December 31,   December 31,
  2010 2009
 Assets    
Current assets:    
 Cash and cash equivalents   $ --  $ --
 Cash receipts subject to account control agreement  533 523
 Accounts receivable, net of allowance for    
 credit losses of $78,180 at December 31,    
 2010 and $106,375 at December 31, 2009  6,088 5,312
 Inventories  3,105 3,055
 Prepaid expenses and other assets  246 211
 Deferred tax assets  370 265
 Total current assets  10,342 9,366
     
Restricted assets:    
 Cash 937 528
 Investments  558 541
 Total restricted assets  1,495 1,069
     
Property and equipment, net  14,576 15,797
     
Other assets:    
 Loan origination fees, net of amortization  287  422
 Intangible assets  46  77
 Deferred tax assets, noncurrent  2,604 2,656
 Total assets  $29,350 $29,387
     
 Liabilities and Stockholders' Equity    
Current liabilities:    
 Accounts payable  $6,981 $8,432
 Disbursements in transit  729 1,270
 Line of credit  2,688 2,322
 Note payable to former owners of Allison's Gourmet Kitchens, LP  30 876
 Accrued liabilities  1,945 1,393
 Current portion of long-term debt  1,155 1,138
 Current portion of capital lease obligation   --  94
 Total current liabilities  13,528 15,525
     
Long term liabilities:    
 Long-term debt, net of current portion  6,695 6,944
 Note payable to former owners of Allison's     
 Gourmet Kitchens, LP, net of current portion 811  --
 Deferred gain on sale of assets  8 43
 Total long-term liabilities  7,514 6,987
Total stockholders' equity  8,308 6,875
 Total liabilities and stockholders' equity  $29,350 $29,387
 
 Vaughan Foods, Inc.
 Consolidated Statements of Operations
 (dollars in thousands)
         
   Three Months Ended   Year Ended
   December 31,   December 31,
  2010 2009 2010 2009
         
Net sales  $22,630 $22,668 $93,839 $96,561
Cost of sales  21,210 20,509 85,134 87,820
Gross profit  1,420 2,159 8,705 8,741
Selling, general and administrative  2,133 1,902 8,677 8,454
Operating income  (713) 257 28 287
Interest expense  (174) (298) (864) (1,120)
Other income, net  392 8 421 23
Income (loss) before income taxes  (495) (33) (415) (810)
Income tax expense (benefit)  (121) 1 (53) (310)
Net income (loss)   $ (374)  $ (34)  $ (362)  $ (500)
Weighted average shares outstanding      
Basic and diluted 9,380,577 4,623,077 8,676,728 4,623,077
         
Net income (loss) per share        
 Basic and diluted   $ (0.04)  $ (0.01)  $ (0.04)  $ (0.11)
 
Vaughan Foods, Inc.
 Consolidated Statements of Cash Flows
 For the Years Ended December 31, 2010 and 2009
 (dollars in thousands)
     
  2010 2009
Cash flows from operating activities:    
 Net (loss)   $ (362)  $ (500)
 Adjustments to reconcile net (loss) to    
 net cash provided by operating activities:    
 Depreciation and amortization  2,504 1,997
 Provision for credit losses  (28) (34)
 (Gain) on involuntary disposal of asset (383)  -- 
 (Gain) loss on sale of asset  (39) (23)
 Stock based compensation expense  90 88
 Deferred income taxes  (53) (310)
 Changes in operating assets and liabilities:    
 Accounts receivable  (748) 46
 Inventories  (50) 321
 Disbursements in transit  (540) 34
 Prepaid expenses and other assets  (35) (134)
 Accounts payable  (1,062) 471
 Accrued liabilities  552 (458)
 Net cash provided by operating activities  (154) 1,498
Cash flows from investing activities:    
 Purchases of property and equipment  (935) (435)
 Proceeds from insurance settlement 611  --
 Investments in Restricted assets  (425) 21
 Purchases of letters of credit  --  (528)
 Proceeds from sale of assets  19 5
 Net cash (used in) investing activities  (730) (937)
Cash flows from financing activities:    
 Payments of loan origination fees  (58) (267)
 Proceeds from line of credit  366 1,322
 Proceeds from equity issue 1,706  --
 Cash receipts subject to account control agreement (10) (524)
 Proceeds from issuance of long-term debt 22  --
 Repayment of long-term debt and capital leases  (1,107) (1,165)
 Repayment of notes payable to former owners of Allison's Gourmet Kitchens, LP (35) (7)
 Proceeds of notes payable to former owners of Allison's Gourmet Kitchens, LP  --   80
 Net cash (used in) financing activities  884 (561)
     
Net increase (decrease) in cash and cash equivalents   --   --
Cash and cash equivalents at beginning of period   --   --
Cash and cash equivalents at end of period   $ --   $ --
CONTACT: Investor Relations Contact
         Cameron Associates
         Investor Contact:
         Paul Henning
         212-554-5462
         Paul@cameronassoc.com

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