RESULTS OF OPERTAIONS

1996 (52 weeks) compared to 1995 (53 weeks)

Sales in fiscal year 1996 increased $5,819,000 (5.2%) when compared to sales of the prior year. After considering the 53 week year, sales volume increased approximately 7.2% when compared to the prior year.

Cost of products sold increased by $4,020,000 (5.6%) when compared to the prior year. The gross margin was approximately 36% in 1996 and 1995 compared to 35% for 1994. Costs for commodity products were less favorable in 1996 compared to prior years. However, a changing sales mix and increased selling prices helped mitigate the impact of these increased costs.

Selling, general and administrative expenses increased $2,784,000 (9.9%) when compared to the prior year. This increase was generally consistent with the overall increase in sales. Advertising expenses outpaced the increase in sales as a result of aggressive promotional allowances to promote the Company’s products and to maintain current distribution channels.

Depreciation expense increased $530,000 (27%) when compared to the prior year. The Company completed significant expansion projects to existing facilities located in Texas and a flood processing facility in North Carolina. First year (half-year convention) depreciation from these projects totaled approximately $490,000. The Company expects to continue the growth and modernization of facilities and equipment used in the business. The effective tax rate remained consistent with prior year at 38%.

1995 Compared to 1994 (53 versus 52 weeks)

Sales in fiscal year 1995 increased $3,614,000 (3%) when compared to sales of the prior year. After considering the 53 week year, sales volume increased slightly more than 1% when compared to the prior year.

Cost of products sold increased by $1,274,000 (2%) when compared to the prior year. The gross margin increased to 36% in 1995 compared to 35% for 1994 and 1993. Commodity costs for meat products were made more favorable in 1995 compared to prior years and this trend helped improve margins in 1995 despite channels.

Selling, general and administrative expenses increased $1,125,000 (6%) when compared to the prior year. This increases was generally consistent with the overall increase in sales. Increased advertising expenses slightly outpaced the increase in sales as a result of efforts to more heavily promote the Company’s products and to continue to expand distribution channels.

Depreciation expense increased $93,000 (5%) when compared to the prior year. The Company continued to expand its vehicle fleet in 1995 and this contributed to the increase. Several projects which were in process in the prior year were placed in service during 1995 which also contributed to the overall increase in depreciation. The Company expects to continue the growth and modernization of facilities and equipment used in the business. The effective tax rate remained consistent with the prior year at 38%.

1994 compared to 1993

Sales in fiscal year 1994 increased $3,737,000 (4%) when compared to sales of the prior year. Added unit sales volume was the principal reason for the increase while price increases had minor influence on the overall sales gain. The closing of Bridgford Meat Company, the Company’s San Diego based fresh meat business, offset the increase by $2,665,000 in 1994.

Cost of products sold increased by $1,816,000 (3%) as compared to the prior fiscal year due higher unit sales volume. The gross profit margin remained consistent at 35% for 1994 and 1995.

Selling, General and administrative expenses increased $987,000 (4%) during fiscal 1994. The bulk of the increase was concentrated in the Company’s advertising programs. Advertising expenditures increased by approximately $700,000 during 1994 as compared to the prior year. Increases salaries and wages also contributed to higher costs.

Depreciation expense increased $36,000 (2%) in 1994 compared 1993. The continued expansion of the Company’s business requires the addition and replacement of facilities and equipment related to manufacturing and sales activities. The effective tax rate was 38% for 1994 and 1993.

Effective for fiscal year 1994, the Company adopted Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” Adoption of this statement did not materially impact the Company’s consolidated financial statements.