WORTHINGTON - Worthington Foods, Inc. reported results for the thirteen and thirty-nine weeks ended October 2, 1998.
Net sales increased 21% to $34,838,000 for the third quarter versus $28,805,000 a year ago. Increased sales and marketing programs were implemented during the summer months to strengthen the Company's leading position in the meatless category. Net income was $2,319,000, or $0.19 per diluted share, compared with $2,359,000, or $0.19 per diluted share, for the same period in 1997. The per share amounts reflect a four-for-three share split distributed on December 5, 1997.
For the 1998 year-to-date period, net sales improved 18% to $102,186,000 from $86,692,000 a year ago. Net income rose to $7,346,000, or $0.61 per diluted share, versus $6,749,000, or $0.56 per diluted share, last year.
Supermarket sales for meat alternative products were up 34% for the third quarter, reflecting category growth and successes of the increased advertising and promotional programs during the past 6 months. The Company's market share has improved during each of the past 4 weekly reporting periods and was 41 percent for the week ended October 3, 1998, compared with a 28 percent market share for Gardenburger, according to A.C. Nielsen Scantrak data.
Foodservice sales were up 34% for the third quarter of this year compared to the same period in 1997 and increased 37% for the first nine months of the year. Sales to Subway, Chili's, Blimpies and Hard Rock Cafe were key contributors to the increase. A new Director of Foodservice was recently appointed and his employment will begin next month. He is a seasoned foodservice professional with 16 years of foodservice and management experience.
Specialty Sales were 4% lower for the third quarter of 1998 versus the prior year, primarily due to less than projected international orders. Year- to-date sales for the Specialty Markets increased 2.5%, with the Seventh-day Adventist business flat, Health Food markets up 11% and International sales declining 5%.
Morningstar Farms' (MSF) burger sales, which represent only 40 percent of MSF meat substitute business, are up over 13 percent this year. The other 60 percent of the Company's meat alternative business increased nearly 40 percent during the past 3 quarters. This increase includes the core breakfast items which were up 22%, chicken products that increased by over 50%, and a $3 million increase in the Veggie Dog segment over last year.
Two new Morningstar Farms products are currently being introduced into supermarkets across the U.S. Meatfree Buffalo Wings and Hard Rock Cafe All Natural Veggie Burgers have received virtually unanimous acceptance by the retail trade and will begin shipping to supermarkets in mid-November. The Buffalo Wings have all the spicy flavor of chicken meat hot wings with 50% less saturated fat and no cholesterol. Shipments of the Hard Rock Cafe All Natural Veggie Burgers will begin in late October and is expected to be another exciting addition to the product line, particularly focused on the younger generation of consumers. The Hard Rock Cafe logo, one of the best recognized icons in the world, will be identified with a retail food product for the first time.
Gross profit improved to $15,365,000, or 44.1% of net sales, for the third quarter versus $12,546,000, or 43.6% of net sales, a year ago. Additional manufacturing cost reductions were realized from specific programs initiated earlier this year. Material costs were slightly higher for the third quarter of 1998 compared to last year. Gross profit for the first nine months of 1998 rose to $44,935,000, or 44.0% of net sales, compared with $36,931,000, or 42.6% of net sales, last year.
Selling and Distribution expenses increased approximately $2.5 million during the third quarter, or 36 percent, compared to last year. This increase is the direct result of increased advertising and promotional spending necessary to strengthen the Company's leadership position in the meat alternative category. Sales and marketing expenditures are expected to continue at a similar level during the fourth quarter of 1998.
On October 16, 1998, Worthington Foods, Inc. closed on the purchase of the Harvest Burger brand of meat alternative products from Archer Daniels-Midland Company. The purchase price of $9.3 million was paid with 488,750 shares of common stock. Harvest Burger(R) sales for the past 12 months were approximately $15 million.
Dale E. Twomley, President and Chief Executive Officer, commented “We are pleased with the solid increase in supermarket and foodservice sales during the 1998 third quarter and year-to-date periods. The addition of Harvest Burgers(R) to our growing line of products is expected to provide additional brand recognition and leverage our product offerings of veggie burgers. New product introductions and marketing strategies continue to be implemented to achieve sustainable, profitable growth and further strengthen our market leadership position in the meatless category.”
A new five-year labor agreement was successfully completed earlier this month. It includes improved retirement benefits and annual wage increases in line with other labor agreements being signed. This agreement enables both the employees and the Company to pursue the future with greater confidence.
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
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