990846 WLR Foods Reports Quarter and Year ResultsAugust 19, 1999Broadway, VA - WLR Foods Inc. reported results for the fourth quarter and fiscal year ended July 3, 1999. For the fiscal 1999 fourth quarter, the Company reported net earnings from continuing operations of $3.9 million, or $0.23 per diluted share, compared with a net loss from continuing operations of $2.6 million, or a loss of $0.16 per diluted share, in the fourth quarter of fiscal 1998. Including $1.8 million relating to the final settlement of the gain recognized on the sale of WLR's Cassco Ice & Cold Storage subsidiary, which was sold in the first fiscal quarter of 1999, the Company reported net income in the fourth quarter of $5.7 million, or $0.34 per diluted share. The fourth quarter of 1998 included net income from Cassco, which was being treated as a discontinued operation for the period, of $0.8 million, bringing the prior year fourth quarter net loss to $1.8 million, or a loss of $0.11 per diluted share. Net sales in the fiscal 1999 fourth quarter were $228.0 million, compared with net sales of $243.3 million in the same quarter last year. Even though the fiscal year 1999 fourth quarter contained an extra week, the decrease in net sales year over year primarily reflects the Company's discontinuation of its Franconia, Pennsylvania distribution operation in the fiscal 1999 first quarter and cut-backs in turkey production resulting from the conversion of the Company's Marshville, North Carolina complex to chicken production. For the full fiscal year 1999, net earnings from continuing operations before unusual items were $18.9 million, or $1.12 per diluted share, compared with a net loss from continuing operations of $28.2 million, or a loss of $1.72 per diluted share, for fiscal 1998. Unusual items during the current fiscal year included an after-tax gain on the sale of the Goldsboro, North Carolina complex of $4.9 million and an after-tax non-cash charge of $0.9 million, primarily related to the sale of the Monroe, North Carolina plant, both of which were recognized during the first fiscal quarter. Additionally, there was an unusual after-tax charge of $0.2 million in the third fiscal quarter relating to the outsourcing of logistics and from the settlement of the loss on the sale of the Monroe plant. Including these items, total net income from continuing operations for the fiscal year ended July 3, 1999 was $22.7 million, or $1.34 per diluted share. Sales for fiscal 1999 were $888.1 million, compared with $946.0 million in fiscal year 1998. The decline primarily reflects the discontinuation of the Company's Pennsylvania-based distribution operation and reduced turkey production, as noted above. Net income for fiscal 1999 was $38.8 million, or $2.29 per diluted share, and included after-tax income of $0.7 million, or $0.04 per diluted share from the Company's Cassco Ice & Cold Storage subsidiary, which was sold in the first quarter of fiscal 1999 and is treated as a discontinued operation; an after-tax gain of $17.9 million, or $1.06 per diluted share, on the sale of Cassco; and an after-tax, non-cash write-off totaling $2.6 million, or a loss of $0.15 per diluted share, on the early extinguishment of debt. The net loss for fiscal 1998 of $25.4 million, or a loss of $1.55 per diluted share, includes $2.9 million of net income from Cassco, which was treated as a discontinued operation. The increases in the Company's fourth quarter 1999 operating income and net earnings primarily reflect benefits of the initiatives taken by the Company over the past two fiscal years to improve its operations and reduce indebtedness. Operating performance was also affected by decreased prices for chicken products, which were substantially offset by lower grain costs and by more favorable turkey pricing. Comparing the fourth quarter to the same quarter last year, James L. Keeler, President and Chief Executive Officer of WLR Foods said, "Even though the net impact of product prices and grain costs was slightly negative, gross profits increased $8.1 million, from 11.0% of sales last year to 15.3% of sales this year. Important contributors to those increased profits were substantial improvements in our live performance and feed conversions, and productivity improvements from the consolidation of our production facilities. Our results also reflect a turning point in the performance of our Marshville facility, which achieved profitability in June following its conversion from turkey to chicken production." Mr. Keeler continued, "Operating income more than doubled from the same quarter last year, although selling, general and administrative expenses did increase during the quarter. We realized substantial savings in interest costs, with expense for the quarter decreasing by over 75%, or $5.4 million, from last year's levels. After adjusting for income taxes, our income from continuing operations increased approximately $6.5 million." Mr. Keeler concluded, "As we enter fiscal 2000, we are feeling very positive about the efficiencies and cost reductions we have achieved and remain focused on building on our achievements that were so evident in the fourth quarter. We believe that we have our business running more efficiently, but we are quite disappointed in the recent decline in chicken pricing. July is typically one of the best months of the year in terms of chicken pricing, but unfortunately, pricing this year for breast meat was approximately 25% below the average prices for the last 10 years and approximately 16% below the pricing averaged in the fourth fiscal quarter just ended. We have recently seen pricing rebound off the July levels, but the industry must reduce its supply of product into the marketplace for further sustained improvement to occur. In light of current industry conditions, our efforts to increase the productivity of our operations become even more important. We continue to expect additional cost savings over the next 12 to 24 months approaching $20 million from increased productivity at Marshville, the outsourcing of logistics, and improved productivity in our turkey operations." WLR Foods is a fully integrated provider of high quality turkey and chicken products primarily under the Wampler Foods(r) brand. It is nationally ranked as the seventh largest poultry processor by sales volume and is an international leader in poultry exports. WLR Foods has processing operations in Virginia, North Carolina, West Virginia, and Pennsylvania.
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