000460 WLR Foods Reports Third Quarter Results

Broadway, VA - WLR Foods, Inc. reported results for its fiscal third quarter and nine-month period ended April 1, 2000.

For the third quarter of fiscal 2000, the Company reported a net loss of $5.0 million, or $0.30 per diluted share, versus net earnings before unusual items from continuing operations of $0.1 million, or $0.01 per diluted share, in the third quarter of fiscal 1999. The Company reported net sales in the third quarter of fiscal 2000 of $199.2 million, compared with net sales of $192.9 million in the same period a year ago. Increased sales during the current year quarter reflect higher sales volumes resulting from improved capacity utilization at the Company's Marshville, North Carolina chicken complex and increased volumes and a more favorable mix of value-added products within the Company's turkey operations.

In the third quarter of fiscal 1999, the Company reported a net loss from continuing operations of $0.1 million, or $0.01 per diluted share, which included after-tax reserves totaling $0.2 million to write down the Company's Monroe, North Carolina plant, which was sold subsequent to the end of the quarter, and to reserve for the outsourcing of the Company's logistics operations.

Including an additional prior-year third quarter after-tax gain of $0.6 million on the sale of the Company's Cassco Ice & Cold Storage subsidiary, which was sold in the first quarter of fiscal 1999 and treated as a discontinued operation, net income for the fiscal 1999 third quarter was $0.5 million, or $0.03 per diluted share.

Commenting on the Company's quarterly results, James L. Keeler, President and Chief Executive Officer of WLR Foods, stated, “The unprecedented soft conditions we have seen in the chicken markets throughout our fiscal year continued to affect our results in the third quarter, with whole breast pricing decreasing almost 19% versus the third quarter of fiscal 1999. In the third quarter, weak pricing in the chicken markets impacted our revenues by approximately $8 million when compared to the same quarter last year. Somewhat offsetting this, however, were improvements within our turkey operations, in which the actions we have taken to reduce operating costs and shift our sales mix away from commodity products resulted in improvements of approximately $2 million in pre-tax profitability over year-ago levels. Our results also benefited from steps we have taken to continue to de-leverage our balance sheet, as we were able to reduce interest expense by approximately 18% in the quarter and by approximately 61% for the nine-month period.”

Mr. Keeler continued, “Despite the current conditions within the chicken market, we remain positive on long-term prospects for chicken, which is the most highly-consumed meat in the U.S. on a per capita basis and continues to grow each year. While it is still too early to tell if chicken pricing will improve substantially from its current levels in the coming months, we have seen some indication of upward pricing improvement as we move into a seasonally stronger period. Furthermore, we will continue to benefit from our position in the turkey industry, and expect conditions in this market to remain positive into next year.”

Mr. Keeler concluded, “In light of current market conditions, following through on our strategic plan becomes even more important. We will continue to focus our efforts on executing the key pieces of this strategy, which will result in a higher-valued sales mix and improved profitability for our shareholders. With a debt to total capital ratio of 28%, one of the best in the industry, we are in a solid position to adapt to our markets and achieve our goals.”

For the first nine months of fiscal 2000, net income was $2.4 million, or $0.14 per diluted share, compared with net earnings before unusual items from continuing operations for the same period last year of $15.1 million, or $0.90 per diluted share. Net sales for the fiscal 2000 nine-month period totaled $620.0 million, compared with $660.1 million in the same period a year ago. The decrease in sales year over year is primarily attributable to lower chicken pricing.

For the fiscal 1999 nine-month period, net earnings from continuing operations were $18.8 million, or $1.11 per diluted share, and included: the aforementioned $0.2 million reserves in the third quarter, as well as a one-time after-tax gain in the first quarter of $4.8 million, or $0.28 per diluted share, on the sale of the Company's Goldsboro, North Carolina chicken complex and a reserve, also in the first quarter, of $0.9 million after tax, or $0.05 per diluted share, primarily related to the sale of the Company's Monroe, North Carolina plant.

Net income for the fiscal 1999 nine-month period was $33.1 million, or $1.95 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 $16.1 million, or $0.95 per diluted share, on the sale of Cassco; and an after-tax, non-cash write-off totaling $2.6 million, or $0.15 per diluted share, on the early extinguishment of debt.

The Company also noted that it continued to actively pursue its stock repurchase program during the quarter, buying back approximately 310,000 shares in the period for a total consideration of approximately $1.8 million. Through last week, the Company had repurchased approximately 460,000 shares of stock for a total consideration of approximately $2.7 million. As previously announced, the Company is authorized to repurchase up to $10 million in stock.

WLR Foods is a fully integrated provider of high quality, value-added turkey and chicken products primarily under the Wampler Foods(r) brand. It is nationally ranked as the seventh largest poultry food 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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