Michael Foods, Inc. (Nasdaq: MIKL – news) today announced record net sales, net earnings, and diluted net earnings per share for the second quarter and first half ended June 30, 2000.

Diluted net earnings per share for the three months ended June 30, 2000 were $0.64 compared to $0.57 per share in 1999’s second quarter, an increase of 12%. Net earnings for the second quarter of 2000 increased 5% to $12.3 million compared to $11.7 million in 1999’s second quarter. Net sales for the three months ended June 30, 2000 were $266.6 million compared to $258.0 million, an increase of 3%.

Diluted net earnings per share for the six months ended June 30, 2000 were $1.10 compared to $0.96 per share in 1999’s first half, an increase of 15%. Net earnings for the first half of 2000 increased 8% to $21.8 million compared to $20.2 million in 1999’s first half. Net sales for the six months ended June 30, 2000 were $518.5 million compared to $511.4 million, an increase of 1%.

Commenting on the record second quarter financial results, Chairman and Chief Executive Officer Gregg A. Ostrander said, “As was the case in the first quarter, notable deflation year-over-year in certain egg and dairy-related products constrained sales growth. Unit sales increased for all divisions, except Dairy Products, and were robust for the Refrigerated Distribution Division. The real sales growth for Refrigerated Distribution, driven by strong growth of the Crystal Farms® cheese brand, resulted in excellent operating earnings for the division for the quarter. Potato Products earnings were also strong, reflecting good sales growth, particularly for the Simply Potatoes® retail brand, and excellent plant operations.”

Ostrander added, “Egg Products weathered one of the most difficult pricing environments the industry has seen in the past eight years with only a slight earnings decline. Beyond pricing and volume pressures on industrial products, the Egg Products Division was affected by a lack of promotional activity by a major quick-service restaurant chain and delays in a new product roll-out by another foodservice chain. Lastly, Dairy Products results remained disappointing, with sales and earnings declines resulting from 1999 customer losses, coupled with high overhead and operating costs. However, the outlook for Dairy Products is better than it has been in the past year and one-half, with the new management team taking aggressive steps to address operating costs and with an intense focus on building new volume opportunities.”

Ostrander concluded, “Our value-added product lines performed well in the first half of the year and should carry Michael Foods to record net earnings and diluted net earnings per share levels for the year. We continue to generate strong cash flow and will look to utilize this cash by funding high return capital projects, acquisition and joint venture opportunities, and share repurchases.”

    Unaudited segment data follows (in thousands):

External Net Sales Operating Profit
Three Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
Egg Products $156,835 $150,488 $18,971 $19,712
Refrigerated Dist. 55,189 51,427 3,828 2,534
Dairy Products 39,903 42,091 1,128 2,057
Potato Products 14,689 14,025 1,685 1,367
Corporate N/A N/A (1,683) (2,963)

External Net Sales Operating Profit
Six Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Egg Products $310,388 $302,638 $34,092 $34,694
Refrigerated Dist. 111,437 110,549 8,133 4,584
Dairy Products 67,932 70,753 942 2,953
Potato Products 28,785 27,469 2,986 2,559
Corporate N/A N/A (3,325) (4,996)

Michael Foods, Inc. is a diversified food processor and distributor with particular interests in egg products, refrigerated grocery products, specialty dairy products and refrigerated potato products. Principal subsidiaries include Papetti’s Hygrade Egg Products, Inc., M. G. Waldbaum Company, Crystal Farms Refrigerated Distribution Company, Kohler Mix Specialties, Inc. and Northern Star Co.

Certain items in this release are forward-looking statements, which are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous risks and uncertainties, including changes in domestic and international economic conditions. Additional risks and uncertainties include variances in the demand for the Company’s products due to customer developments and industry developments, as well as variances in the costs to produce such products, including normal volatility in egg costs and feed costs. As a result, the Company’s actual financial results could differ materially from the results estimated by, forecasted by, or implied by the Company in such forward-looking statements.

    Consolidated statements of earnings follow.

Michael Foods, Inc.
Consolidated Statements of Earnings
(000’s)

Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999

Net sales $266,616 $258,031 $518,542 $511,409

Cost of sales 216,981 207,892 422,052 419,139

Gross profit 49,635 50,139 96,490 92,270

Selling, general
& administrative 25,706 27,432 53,662 52,476

Operating profit 23,929 22,707 42,828 39,794

Interest expense, net 3,304 2,801 6,254 5,621

Earnings before
income taxes 20,625 19,906 36,574 34,173

Income tax expense 8,350 8,160 14,810 14,010

NET EARNINGS $12,275 $11,746 $21,764 $20,163

Earnings per share
Basic $0.64 $0.57 $1.11 $0.97
Diluted $0.64 $0.57 $1.10 $0.96

Weighted average common
shares outstanding
Basic 19,083 20,463 19,619 20,736
Diluted 19,299 20,702 19,834 20,966