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Fiscal Year Ended October 29, 2004 Compared to Fiscal Year Ended October 31, 2003
Sales
Sales in fiscal 2004 increased $1,614 (1.2%) when compared to the prior year. Sales in the Company’s frozen food segment declined 3.3%, as a result of lower unit volume partially offset by increased average unit selling prices. Promotional spending as a percentage of sales increased to 8.6% compared to 7.2% in the prior year contributing to the sales decline in the frozen food division. Sales in the Company’s refrigerated and snack food products segment increased 3.5% primarily as a result of higher unit selling prices on level unit volumes.
Gross Margin
The gross margin declined to 34.5% compared the prior year at 36.7%. Increased meat ingredient costs were the principal reason for this decline. When combining all divisions, net-selling prices increased approximately 5% on a unit volume decline of approximately 1.1 % compared to the prior fiscal year.
Selling, General, and Administrative
Selling, general and administrative expenses decreased $48 (0.1%) when compared to the prior year. Rising payroll, workers’ compensation insurance, fuel and finished goods storage costs were offset by a significant reduction in the provision for doubtful accounts receivable and the combined impact of aggressive cost control programs instituted by management. The Company recorded an asset impairment reserve against the net book value of machinery and equipment of $54 in fiscal year 2004 and no asset impairment reserve in the prior year.
Income Taxes
The effective income tax rate was 38% in 2004, consistent with the prior year.
Gain on Sale of Equity Securities
The Company sold 14,014 shares of stock received as a result of the bankruptcy of a significant customer on July 26, 2004. This transaction resulted in a pre-tax gain of $553.
Fiscal Year ended October 31, 2003 compared to Fiscal Year Ended November 1, 2002
Sales
Sales in fiscal 2003 declined $2,951 (2.1%) when compared to the prior year. Sales in the Company’s frozen food segment declined 6.9%, as a result of continued weak demand and aggressive competition. Sales in the Company’s refrigerated and snack food products segment increased 0.5% primarily as a result of higher unit volumes.
Gross Margin
The gross margin remained relatively consistent with the prior year at 36.7%. Increased ingredient costs during the year were offset by lower unit overhead due to improved volume on items processed by the Company. Overall, net selling prices remained relatively consistent with the prior fiscal year.
Selling, General, and Administrative
Selling, general and administrative expenses decreased $487 (1.1%). A reduction in the provision for doubtful accounts receivable from fiscal years 2002 to 2003 contributed to this decrease. Rising costs for employee healthcare, workers’ compensation, property and liability insurance, transportation costs, product displays and pension expense mitigated the effect of the reduction in the provision for doubtful accounts receivable.
Income Taxes
The Company benefited from an effective income tax rate of 38% in 2003 compared to 49.9% in 2002. The rate in the prior year was abnormally high due to the revaluation of deferred tax assets due to a lower than expected state tax rate.
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