Smallcaps Worth Watching: Overhill Farms, Rochester Medical, Smith Micro

As you may know, small-caps have outperformed large caps for seven years running. This in spite of the market gurus continually saying it’s time to rotate. And although small-caps as a whole are showing some weakness after an incredible run, there will ALWAYS be opportunities in select small-cap stocks.

With that in mind, we would like to introduce you to thee individual stocks that are worth watching.

Overhill Farms (OFI) operates as a custom manufacturer of frozen food products in the United States. Its products include entrees, plated meals, meal components, soups, sauces, poultry, and meat and fish specialties. The company offers its products to foodservice, retail, and airline customers through its internal sales force and outside food brokers.

Announced a planned $7 million expansion of the manufacturing capacity of its main Vernon, California plant. Overhill Farms plans to use the new machinery and systems to meet anticipated growth and improve operating efficiency.

James Rudis, Chairman and CEO said the new equipment and infrastructure improvements are expected to increase Overhill Farms' production capacity to permit annual sales of approximately $250 million. In January, Mr. Rudis said the company expects to be at an annual revenue run rate of $200 million by the third quarter of fiscal 2007. Overhill Farms reported revenues of $168.3 million in fiscal 2006.

Reported record net income of $1,556,000 or 10 cents per share (basic and diluted) for the first quarter ended December 31, 2006, on revenues for the quarter of $40,538,000. This represents a 156.3% increase in net income from the $607,000 or 4 cents per share for the first quarter of last year.

Announced 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.

OFI 1-yr chart

Rochester Medical (ROCM) develops, manufactures, and markets innovative urinary continence and urine drainage care products for the extended care and acute care markets in the United States and internationally. Its extended care products include a line of male external catheters for managing male urinary incontinence and a line of intermittent catheters for managing both male and female urinary retention.

Reported record sales of $7,512,000 for the quarter ending 12/31/06 compared to $4,607,000 for the first quarter of last year. It also reported net income of $31,467,000 or $2.59 per diluted share compared to a net income of $311,000 or $.03 per diluted share for the first quarter of last year.

Quarterly results include $38,605,000 of income resulting from the previously announced lawsuit settlements.

The 63% increase in sales revenues for the current quarter compared to last year's first quarter resulted from increased Rochester Medical Brand sales, primarily attributable to increased international sales of Rochester Medical Brand products resulting from the previously announced acquisition in the United Kingdom, and also from increased Private Label sales.

"This has certainly been an eventful quarter," said Company CEO and President

Anthony J. Conway. "We were awarded a National Group Purchasing Contract by Premier Purchasing Partners, L.P.; we renewed our Private Label sales agreement with Hollister, Inc.; we secured two lawsuit settlements in our anti-trust litigation; and we realized strong sales and earnings. We are pleased with the Company's progress, and we look forward to a good year."

Announced that it has signed a new Private Label Agreement for supply of Male External Catheters (MECs) to Hollister Incorporated and also announced that the parties have amended their 2003 OEM/Private Label Agreement.The MEC Agreement has a five year term commencing on January 1, 2007. Under the Agreement Rochester Medical will continue to supply Hollister with its requirements of non-latex Male External Catheters for sale under the Hollister brand worldwide, excluding the United Kingdom.

Announced that group purchasing organization, Premier Purchasing Partners, L.P. ("Premier") has awarded the Company a national contract for supplying Premier's participating members with urological products, including Rochester Medical's line of infection control catheters. Premier is one of the largest Group Purchasing Organizations in the United States with over $27 billion in contract purchases per year. Its members include more than 1,500 hospital facilities and hundreds of other care sites. The contract has a 27 month term from the effective date of March 1, 2007. Initial marketing efforts are expected to commence prior to that date.

ROCM 1-yr chart

Smith Micro Software (SMSI) develops innovative communications software for the wireless industry. Leading-edge mobility products simplify communications access over both Wireless Wide Area Networks (WWANs) and Wireless Local Area Networks (WLANs), and compression technologies such as StuffIt have been established as industry standards.

Announced a planned $7 million expansion of the manufacturing capacity of its main Vernon, California plant. Overhill Farms plans to use the new machinery and systems to meet anticipated growth and improve operating efficiency.

James Rudis, Chairman and CEO said the new equipment and infrastructure improvements are expected to increase Overhill Farms' production capacity to permit annual sales of approximately $250 million. In January, Mr. Rudis said the company expects to be at an annual revenue run rate of $200 million by the third quarter of fiscal 2007. Overhill Farms reported revenues of $168.3 million in fiscal 2006.

Reported record net income of $1,556,000 or 10 cents per share (basic and diluted) for the first quarter ended December 31, 2006, on revenues for the quarter of $40,538,000. This represents a 156.3% increase in net income from the $607,000 or 4 cents per share for the first quarter of last year.

Announced 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.

SMSI 1-yr chart

Disclosure: Author has no position in the above-mentioned companies.