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RESULTS OF OPERATIONS
2001 compared to 2000
Sales in fiscal year 2001 (52 weeks) remained essentially flat when
compared to sales of the prior year (53 weeks). Average weekly sales
increased approximately 2% in fiscal 2001 compared to the prior 53-week
year. The sales increase is primarily a result of increased selling
prices and changes in product mix. Cost of products sold remained essentially
flat when compared to the prior year. The gross margin was approximately
38% in 2001, 39% in 2000 and 42% in 1999. Commodity costs over the course
of the 2001 fiscal year were generally comparable to fiscal year 2000
and higher than the historical lows experienced during 1999. Selling,
general and administrative expenses increased $2,867 (6.7%) when compared
to the prior 53-week year. Weekly average costs increased 8.7% compared
to a weekly average sales increase of only 2%. Higher costs related
to advertising and product promotions, fuel and insurance were the primary
contributors to these increases. Interest income also declined significantly
which adversely impacted these costs. The Company’s capital expansion
projects remained at levels consistent with the prior year. 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%.
2000 compared to 1999
Sales in fiscal year 2000 increased $17,506 (12.6%) when compared to
sales of the prior year, primarily as a result of increased unit sales
volume. Cost of products sold increased by $14,751 (18.3%) when compared
to the prior year. The gross margin was approximately 39% in 2000, 42%
in 1999, and 40% in 1998. Costs for pork commodity products increased
in 2000 compared to the historical lows experienced during 1999. Flour
costs continued to be favorable in 2000, 1999 and 1998.
Selling, general and administrative expenses increased $4,303 (11.1%)
when compared to the prior year. This increase was generally consistent
with the overall increase in sales. The Company’s capital expansion
projects remained at levels consistent with the prior year. 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%.
1999 compared to 1998
Sales in fiscal year 1999 increased $3,970 (2.9%) when compared to sales
of the prior year, primarily as a result of increased sales volume.
Cost of products sold decreased by $332 when compared to the prior year.
The gross margin was approximately 42% in 1999 and 40% in 1998. Costs
for pork commodity products remained at historically low levels and
flour costs continued to be favorable in 1999 and 1998.
Selling, general and administrative expenses increased $1,844 (5.0%)
when compared to the prior year. This increase was generally consistent
with the overall increase in sales. Selling expenses slightly outpaced
sales growth due to an increased sales force and higher performance
bonuses due to record profitability.
The Company’s capital expansion projects increased compared to
recent years. 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%.
LIQUIDITY AND CAPITAL RESOURCES
(in thousands)
Favorable operating results over the past several years have continued
to provide significant liquidity to the Company. Net cash provided by
operating activities was $4,308 in the 2001 fiscal year and $8,348 in
2000. Accounts receivable balances increased $915 in 2001 due to slower
collections. Inventories increased $974 in 2001 and $2,042 in 2000 due
to higher unit quantities and values. Accounts payable and accrued expenses
decreased $1,089 in 2001 due to lower capital project levels and lower
accruals due to lower earnings. Accounts payable and accrued expenses
increased $1,901 in 2000 due to higher purchasing activity to support
strong fourth quarter sales.
The Company’s capital improvement expenditures remained consistent
in 2001 compared to the prior year. Significant projects in process
at November 2, 2001 included $1.2 million for an updated management
information system, which will be fully activated in the first half
of fiscal 2002. Cash and cash equivalents decreased $5,327 in 2001 and
$6,720 in 2000 (26.9%). The decreases were primarily a result of capital
expenditures in the amounts of $4,590 and $5,124; common stock repurchases
of $2,151 and $7,643, and higher inventory and refundable income tax
balances. The Company also funded its defined benefit pension plan in
the amounts of $756 and $3,000 during fiscal years 2001 and 2000, respectively.
Cash and cash equivalents increased $2,749 in 1999 (12.3%). The increase
was lower than in prior years due to higher tax payments, increased
capital expenditures and higher accounts receivable and inventory balances.
The Company has remained free of interest-bearing debt for fifteen consecutive
years. Working capital decreased $5,291 (12.1%) in 2000. The overall
change in working capital in fiscal 2001 was insignificant. The decrease
in working capital in 2000 primarily resulted from the common stock
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