updated 5/12/2011 4:17:54 PM ET 2011-05-12T20:17:54

MOORE, Okla., May 12, 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 first quarter ended March 31, 2011.

Revenues increased by $1.9 million or 8.7 percent in the first quarter compared to the year-earlier quarter, driven primarily by enhanced pricing and shifts in product mix from lower margin items to higher margin items. The Company expects this shift in product mix to continue throughout 2011, as management resumes its focus on the top line. Vaughan has a robust sales pipeline and will continue to increase its emphasis on top line growth during 2011.

Vaughan recorded a net loss of $0.2 million, or $0.02 per share, compared to net earnings of $0.1 million or $0.02 per share in the comparable quarter of 2010. Gross profit was 9.3 percent in the first quarter, compared with 12.7 percent in the first quarter of 2010.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $0.4 million in the 2011 first quarter, compared with $1.1 million in the first quarter of 2010.

Revenues improved during the first quarter, reversing a moderately negative trend. However, the quarter was also affected by several external factors, including (a) weather-related quality and supply issues in produce, leading to higher costs, lower quality, lower yields and increased plant labor, (b) two major blizzards in the Midwestern United States, and (c) spiking fuel costs.

In January 2011, our industry experienced a significant loss of crop acres and yields due to a fungal disease called Airborne Sclerotinia, which is caused by cold and wet conditions. The fungal disease has had an adverse effect on the quality of Iceberg and romaine lettuce. The loss in crop yields caused significant shortages of product for an extended period of time, resulting in high prices for raw materials. As noted in its full year 2010 earnings announcement in March, Vaughan experienced challenges during the first quarter of 2011 due to the raw material shortages and elevated costs. However, we were able to maintain our gross margin at the full year 2010 level due to an accompanying increase in revenue as noted above.

In late January and early February, a historic blizzard shut down the Oklahoma City metropolitan area for three business days, including the company's primary production plant in Moore, Oklahoma, resulting in lost sales and spoiled inventory. One week later, another major snowstorm affected businesses for 2 days. These snowstorms hampered Vaughan's ability to receive raw materials, deploy production labor, and schedule and move transportation equipment.

Fuel costs alone increased by $284,000 in the first quarter of 2011, compared with the year-earlier quarter.

Although Vaughan was able to partially mitigate the effects of higher product and transportation costs through pricing adjustments, the net effect of all of these factors was a reduction in gross profit of $585,000 for the quarter.

"Even though we reversed the top line trend, our operating results were not as strong as we would have liked, primarily reflecting the effects of a number of external factors," said Herb Grimes, Chairman and CEO of Vaughan Foods. "However, the company has worked to reposition its product mix with higher margin products and has put in place sales and marketing programs targeting both current and potential customers. We are now coming into our peak season, and expect to see growth in the top line this year. We also expect margins and earnings to return to a more normal range, as costs stabilize," concluded Mr. Grimes.

Investor Conference Call

Vaughan management will host an investor conference call on Friday, May 13, 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: 


For those who are unavailable to listen to the live broadcast, a replay will be available through June 3, 2011 and can be accessed by dialing 800 642-1687 (domestic), and 706 645-9291 (international). The conference ID is 66664894.

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
March 31, 2011 and December 31, 2010
(dollars in thousands)
  March 31,

December 31, 

Current assets:    
Cash and cash equivalents  $ 221  -- 
Cash receipts subject to account control agreement 889 534
Accounts receivable, net of allowance for credit losses of

$78,180 at March 31, 2011 and December 31, 2010
7,279 6,088
Inventories 3,662 3,105
Prepaid expenses and other assets 621 246
Deferred tax assets 384 370
Total current assets 13,056 10,343
Restricted assets:    
Cash 585 937
Investments 729 558
Total restricted assets 1,314 1,495
Property and equipment, net 14,383 14,576
Other assets:    
Loan origination fees, net of amortization 265 287
Intangible assets 39 46
Deferred tax assets, noncurrent 2,735 2,604
Total other assets 3,039 2,937
Total assets $31,792 $29,351
Liabilities and Stockholders' Equity
Current liabilities:    
Accounts payable 9,858 6,981
Disbursements in transit --  729
Line of credit 3,265 2,688
Note payable to related party 30 30
Accrued liabilities 2,003 1,945
Current portion of long-term debt 1,133 1,155
Total current liabilities 16,289 13,528
Long term liabilities:    
Long-term debt, net of current portion 6,568 6,695
Note Payable to related party , net of current portion  810 812
Deferred gain on sale of assets 7 8
Total long-term liabilities 7,385 7,515
Stockholders' equity:    
Common stock, $0.001 par value; authorized 50,000,000 shares;

9,380,577 shares issued and outstanding at March 31, 2011

and December 31, 2010
9 9
Preferred stock, $0.001 par value; authorized 5,000,000 shares;

0 shares issued and outstanding at March 31, 2011 and 

December 31, 2010
--  -- 
Paid in Capital  14,548  14,525
Retained Earnings (deficit)  (6,439)  (6,226)
Total stockholders' equity  8,118  8,308
Total liabilities and stockholders' equity $31,792  $ 29,351
Vaughan Foods, Inc.
Consolidated Statements of Operations
For the Three Months Ended March 31, 2011 and 2010
(dollars in thousands)
  Three Months Ended March 31,
  2011 2010
Net sales $23,579 $21,696
Cost of sales 21,401 18,934
Gross profit 2,178 2,762
Selling, general and administrative expenses  2,314  2,270
Operating income (loss)  (136)  492
Interest expense  (223)  (269)
Gain (loss) on sale of assets  1  9
Other income and expense, net  (222)  (260)
Net income (loss) before income taxes  (358)  232
Income tax expense (benefit)  (145)  115
Net income (loss)  $ (213) $117
Weighted average shares outstanding - basic and diluted 9,380,577 6,526,077
Net income (loss) per share - basic and diluted  $ (0.02)  $ 0.02
Vaughan Foods, Inc.
Consolidated Statements Cash Flows
For the Three Months Ended March 31, 2011 and 2010
(dollars in thousands)
  Three Months Ended March 31,
  2011 2010
Cash flows from operating activities:    
Net income (loss)  $ (213)  $ 117
Adjustments to reconcile net (loss) to net cash

provided by (used in) operating activities:
Depreciation and amortization  577  727
Provision for credit losses  --   51
Loss (gain) on sale of assets  (1)  (9)
Stock option expense  22  22
Deferred income taxes  (145)  115
Changes in operating assets and liabilities:    
Accounts receivable  (1,191)  (783)
Inventories  (557)  85
Prepaid expenses and other assets  (375)  (6)
Accounts payable  2,877  (1,538)
Disbursements in transit  (729)  122
Accrued liabilities  58  552
Net cash provided (used by) by operating activities  323  (545)
Cash flows from investing activities:    
Purchases of property and equipment  (354)   (516)
Distributions of insurance proceeds from restricted assets  353  -- 
Investments in Restricted assets  (172)  (182)
Net cash (used by) investing activities  (173)  (698)
Cash flows from financing activities:    
Proceeds from stock issue  --   1,706
Proceeds from line of credit  576  -- 
Repayments of line of credit  --   (338)
Cash receipts subject to account control agreement  (356)  90
Repayments on notes payable to related party  --   (3)
Repayment of long-term debt and capital leases  (150)  (212)
Net cash provided by financing activities  70  1,243
Net increase (decrease) in cash and cash equivalents  220  -- 
Cash and cash equivalents at beginning of period  --   -- 
Cash and cash equivalents at end of period  $ 220  $ -- 
Supplemental disclosures of cash flow information:    
Cash paid during the period for:    
Interest paid, net of capitalized interest   $ 145  $ 181
Software development costs, financed through note payable  96  -- 
Issuance of warrants to placement agent in connection with private

placement transaction
 --   220
CONTACT: Investor Relations Contact
         Cameron Associates
         Investor Contact:
         Paul Henning

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