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The gross margin increased to 36.6% compared the prior year at 34.7%. This improvement resulted from higher unit
selling prices and lower commodity costs. Meat ingredient costs declined significantly in the fiscal year helping to increase
the gross margin. Flour commodities increased significantly in 2006 partially off-setting the meat commodity cost declines.
When combining all divisions, net-selling prices increased approximately 5.4% on a unit volume decline of approximately
Selling, general and administrative expenses increased $464 (1.1%) when compared to the prior year. After considering the additional week in 2006, a 53 week year, average weekly expenses were slightly lower as compared to the prior year. Within this category costs for fuel, vehicle repairs, consulting and travel expenses outpaced sales growth. Off-setting these increases were higher interest income on investments and lower pension, advertising and telephone expenses.
The Company sold 5,028 shares of stock received as a result of the bankruptcy of a significant customer on February 22, 2006. This transaction resulted in a pre-tax gain of $106.
The effective income tax rate was 17.2% and (58.2)% in fiscal years 2005 and 2006, respectively. In fiscal year 2005,
the effective income tax rate differed from the applicable mixed statutory rate of approximately 38.0% primarily due to the
Company's current year claim for research and development tax credits related to prior year activities. In fiscal year 2006,
the effective income tax rate differed from the applicable mixed statutory rate of approximately 38.0% primarily due to a In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). This Statement addresses uncertainty in tax positions recognized in a company’s financial statements and stipulates a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will apply to the Company’s fiscal year beginning November 3, 2007, with earlier adoption permitted. The Company does not expect this interpretation will have a material impact on the Company’s results of operations or financial position. Fiscal Year Ended October 28, 2005 Compared to Fiscal Year Ended October 29, 2004
Sales in fiscal 2005 decreased $7,020 (5.1%) when compared to the prior year. Sales in the Company’s frozen food segment increased 6.6%, as a result of increased average unit selling prices offset by slightly lower unit volume. Promotional spending as a percentage of sales decreased to 8.0% compared to 8.6% in the prior year contributing to the sales increase in the frozen food division. Sales in the Company’s refrigerated and snack food products segment decreased 10.1% primarily as result of lower unit sales volume.
The gross margin increased to 34.7% compared the prior year at 34.5%. Continued high meat ingredient costs were offset by higher unit selling prices resulting in a consistent gross margin percentage. When combining all divisions, netselling prices increased approximately 4.8% on a unit volume decline of approximately 12.7 % compared to the prior fiscal year.
Selling, general and administrative expenses decreased $335 (0.8%) when compared to the prior year. Costs for marketing programs, product display racks and fuel increased significantly. Offsetting these increases were a significant reduction in the provision for doubtful accounts receivable, gains related to increased cash surrender values on life insurance policies and higher investment income. Cost control programs instituted by management also helped control this expense category. |
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