Worthington, OH - Worthington Foods, Inc. reported record second quarter net sales, net income and earnings per share for the thirteen weeks ended July 3, 1998.
Net sales increased 14.8% to $36,038,000 for the second quarter compared with $31,398,000 for the same period last year. Net income rose to $2,870,000, or $0.24 per diluted share, for the second quarter of 1998 from $2,535,000, or $0.21 per diluted share, a year ago.
For the first six months of 1998, net sales were $67,348,000 versus $57,887,000, in 1997, an increase of 16.3%. Net income totaled $5,027,000, or $0.42 per diluted share, for the first half of 1998 compared with $4,390,000, or $0.37 per diluted share, for the same period last year.
Sales of meat alternative products in the retail and foodservice categories rose 23.5% and 47.0%, respectively, versus the same period last year. The record results were achieved despite a 2.3% decline in specialty market sales compared to last year, and further reductions in frozen egg substitute sales, which were 9.8% lower during the second quarter compared with the same period in 1997. Meat alternative product sales in the retail and foodservice categories increased 23.9% and 39.7%, respectively, for the first six months of 1998 versus 1997.
The Company continues to maintain its leading market share position for meat alternative products based on industry data released earlier this week. For the latest four-week reporting period, Morningstar Farms' market share was forty%; for the last two one-week periods, Morningstar Farms' market share was thirty- nine% of category sales. The week ending July 5, 1998, was the single largest week of retail sales in the Company's 59 year history. Targeted marketing programs implemented during the second quarter included three, high-value, free- standing insert coupons, which appeared in newspapers nationally during April, May, and June. The Company has increased its advertising and promotional budget for the second half of 1998. Details of this will be made public at a later date.
Demand for Morningstar Farms ("MSF") products has been especially strong during the first half of 1998. Two recently introduced MSF products have been received enthusiastically by customers. America's Original Veggie Dog has achieved approximately 40% distribution in the nation's supermarkets. Weekly sales for the latest one-week period ending July 5, 1998, more than doubled from the volume two weeks prior. Initial shipments of the Meat Free Corn Dog began during the second quarter and is also experiencing impressive consumer acceptance.
The 47.0% increase in foodservice sales for the second quarter of 1998 was primarily due to higher penetration within several key accounts. Expanded product relationships are being pursued and are expected to contribute to growth in future sales. The company's VegiMax is being featured by SUBWAY during July as their "Sub of the Month."
Initiatives to expand the International category are progressing on schedule. Direct contact has been made, particularly in Europe, with a number of prospective customers. The Company is actively pursuing opportunities to begin selling MSF products in Canada by the end of 1998.
Dale Twomley, President and Chief Executive Officer, stated, "The strong performance of meat alternative sales in the retail category and foodservice was achieved in conjunction with record earnings for the second quarter of 1998. This positive trend has continued during the first three weeks of this month in response to additional category growth and solid movement of products in the supermarkets. We are positioned to realize additional benefits during the second half of this year from our growth strategy which focuses on increasing sales and profitability."
Ongoing efforts to enhance gross profit continue to produce positive results. Gross margin improved 2.2%age points to 45.0% of net sales for the second quarter of 1998 versus 42.8% for the comparable period a year ago. The 3% price increase implemented April 1, 1998 and relatively stable material prices have contributed to improved margins. Specific programs were implemented during the second quarter to achieve further reductions in manufacturing costs. Initial savings were realized during the thirteen weeks ended July 3, 1998, and additional manufacturing cost reductions are anticipated during the remainder of 1998. Gross margin rose to 43.9% of net sales for the first six months of 1998 from 42.1% of net sales a year ago.
Selling, general and administrative expenses rose to 30.3% of net sales for the second quarter of 1998 versus 28.0% for the comparable period last year due to increased selling and distribution costs. Additional support was provided for the national rollout of recently introduced MSF products as well as programs to continue raising awareness of the Company's products among targeted consumer groups. Selling, general and administrative expenses for the first half of 1998 were 29.9% versus 28.0% for the same period in 1997.
Progress continues to be achieved regarding MSF products in the refrigerated meat case. Our three newly hired regional managers are focused on increased distribution of the five chilled meat alternative products for the fresh meat sections of supermarkets.
New MSF products continue to focus on items that offer superior meatless qualities as well as convenience for consumers. During the third quarter of 1998 frozen Meat Free Buffalo Wings will be introduced. This product will contain the expected spicy taste and texture associated with this popular snack item.
Research and technology is an integral part of the company's successful and growing line of meat alternative products. Recently, two scientists with extensive professional backgrounds in food science were hired to further expand product development efforts.
Statements made in this release which state the Company's or management's intentions, hopes, beliefs, expectations, or predictions of the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are contained in the Company's SEC filings, including but not limited to the Company's report on Form 10-K and Annual Report for the year ended December 31, 1997. Copies of these filings may be obtained by contacting the Company or the SEC.
Worthington Foods, Inc. is the world's largest company solely dedicated to producing and marketing meatless and other healthful products.
Meat Industry Insights News Service
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Phone: 631-757-4010
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