The Hormel HealthLabs sales tonnage for the fourth quarter increased 5.2 percent compared to the prior year, while sales ton- nage for the fiscal year increased 1.4 percent compared to fiscal 2003. Product lines showing growth during the quarter include shelf-stable supplements (up 179,000 lbs., or 10.2 percent), thick- ened beverages (up 658,000 lbs., or 8.3 percent), and pureed side dishes (up 104,000 lbs., or 30.6 percent). This growth has been mitigated throughout fiscal 2004 due to additional competition, increased promotional expenses, and rising production costs, including freight, packaging, and milk prices, resulting in decreased operating profits. Advances have been made in new product development and strategies to secure new customer contracts, which should improve results during the second half of fiscal 2005. Additionally, the Hormel HealthLabs business will be consol- idated into DCB effective November 1, 2004, which will further increase operating efficiencies within this segment.  Following the DCB and CFI acquisitions, realignment of personnel and product lines within the Specialty Foods segment has enabled the company to more efficiently manage and market the segment’s portfolio of products to customers. DCB’s sugar substitute cate- gory showed strong sales growth in the fourth quarter, up 203.0 percent over the comparable quarter of fiscal 2003. Strong results from dessert and hot drink mixes also benefited the segment. The CFI business faced a challenging fourth quarter, including the loss of significant contract business and increased whey protein prices. These factors, combined with record high dairy markets, resulted in decreased operating profits during fiscal 2004. Efforts are being made to diversify the customer base for CFI during fiscal 2005, which should improve the results of this business. All Other: All Other net sales decreased 7.7 percent for the quar- ter and increased 7.7 percent for the year compared to the com- parable fiscal 2003 periods. Operating profit decreased 54.7 and 9.6 percent for the quarter and year, respectively, compared to  last year. Comparisons for both the quarter and twelve months are impacted by the divestiture of Vista International Packaging, Inc. (Vista) during the third quarter of fiscal 2004.  Hormel Foods International (HFI) experienced strong international demand for commodity pork items throughout fiscal 2004, with export tonnage increasing to 80,100,000 lbs., or up 22.8 percent, over fiscal 2003. Volume gains were also seen on the  SPAM family of products (up 475,000 lbs., or 2.8 percent) and  Stagg chili (up 436,000 lbs., or 8.4 percent) compared to the prior year. Higher raw material prices offset the benefits of these volume gains, resulting in decreased operating profits. HFI opened a second plant in the Philippines in the fourth quarter and continues to pur- sue international growth opportunities. During the second quarter of fiscal 2004, the company completed the sale of its investment in Campofrio Alimentacion, S.A. The $6,222 pre-tax gain recorded on the sale is excluded from All Other operating profits and is included in “net interest and investment income.” General corporate expense for the fourth quarter and year was $8,374 and $20,400, respectively, compared to $10,315 and $30,363 for the prior year quarter and twelve months. Twelve month results include a pre-tax gain of $18,063 recorded on the sale of Vista International Packaging, Inc. during the third quarter of fiscal 2004. Fiscal 2004 also includes reductions in postretirement benefits of $1,504 and $3,903 for the quarter and year, respec- tively, related to the Medicare Prescription Drug, Improvement  and Modernization Act of 2003. (See Note F “Pension and Other Postretirement Health Care Benefits.”) These decreases offset higher pension and medical costs of approximately $1,700 and $10,100 for the quarter and year, respectively, compared to fiscal 2003. In the fourth quarter of fiscal 2003, the company adopted the fair value method of accounting for employee stock options and recognized $1,887 in stock option expense related to the entire 2003 fiscal year. The company has now been expensing options throughout fiscal 2004, resulting in stock option expense decreasing approximately $1,300 for the fourth quarter and increasing approximately $900 for the year compared to the prior year. Other factors significantly impacting fiscal 2004 were a decrease in bad debt expenses of $5,244, increased inventory valuation adjustments of $3,507, and an increase in expenses of $6,132 related to the sales reorganization.  Net interest and investment income for the fourth quarter and  year was a net expense of $5,198 and $12,779, respectively, compared to $6,645 and $21,079 for the comparable periods of fiscal 2003. The twelve month decrease in expense compared to fiscal 2003 primarily represents the $6,222 pre-tax gain on the sale of the company’s investment in Campofrio Alimentacion, S.A. (Campofrio) during the second quarter. Other decreases in fiscal 2004 included reductions in interest expense due to lower debt levels and increased investment income from market gains on the company’s rabbi trust for supplemental executive retirement plans and deferred income plans. The twelve month comparison is also impacted by a $2,314 dividend received from Campofrio during the third quarter of fiscal 2003. Unallocated Income and Expenses: The company does not allocate investment income, interest expense, and interest income to its segments when measuring performance. The company also retains various other income and unallocated expenses at corpo- rate. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes. As previously noted, the company finalized the sale of Vista during the third quarter of fiscal 2004. The $18,063 pre-tax gain recorded on the sale is excluded from All Other operating profits and is included in “general corporate expense.” Dan’s Prize, Inc., the company’s marketer and seller of beef  products, experienced another strong year with sales tonnage up 1,348,000 lbs., or 7.8 percent, over fiscal 2003. Increased mar- gins resulting from favorable pricing strategies also increased the operating profits of this segment during fiscal 2004. 22 Hormel Foods Corporation