<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 333-36841
A. Full title of the plan and the address of the plan,
if different from that of the issuer named below:
THE WORTHINGTON FOODS TAX SAVINGS AND PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office:
WORTHINGTON FOODS, INC.
900 PROPRIETORS ROAD
WORTHINGTON, OH 43085
Index to Exhibits appears on Page 15
Page 1 of 16 pages
<PAGE> 2
REQUIRED INFORMATION
--------------------
The following financial statements and schedules for The Worthington Foods Tax
Savings and Profit Sharing Plan are being filed herewith:
<TABLE>
<CAPTION>
Description Page No.
----------- --------
<S> <C>
Signature 3
Report of Independent Auditors 4
Financial Statements:
Statements of Net Assets Available for Benefits,
With Fund Information as of December 31,
1998 and 1997 5 - 6
Statements of Changes in Net Assets Available for
Benefits, With Fund Information for the year
ended December 31, 1998 7
Notes to the Financial Statements 8 - 12
Supplemental Schedules:
Line 27(a) - Schedule of Assets Held for Investment
Purposes as of December 31, 1998 13
Line 27(d) - Schedule of Reportable Transactions
for the year ended December 31, 1998 14
Note: Supplemental schedules required by the Employee Retirement Income
Security Act of 1974 that have not been included here are not
applicable to The Worthington Foods Tax Savings and Profit Sharing
Plan.
Index to Exhibits 15
Exhibit 1 - Consent of Ernst & Young LLP, Independent Auditors 16
</TABLE>
Page 2
<PAGE> 3
SIGNATURES
----------
The Plan, pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
THE WORTHINGTON FOODS TAX SAVINGS AND
PROFIT SHARING PLAN
Date: June 28, 1999 /s/ Dale E. Twomley
----------------- ----------------------------------------
Chairman, President and Chief Executive
Officer
Page 3
<PAGE> 4
Report of Independent Auditors
Board of Directors
The Worthington Foods Tax Savings
and Profit Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of The Worthington Foods Tax Savings and Profit Sharing Plan as of December 31,
1998 and 1997, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1998. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998 and reportable transactions
for the year then ended, are presented for purposes additional analysis and are
not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
May 27, 1999
Page 4
<PAGE> 5
<TABLE>
The Worthington Foods Tax Savings and Profit Sharing Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1998
<CAPTION>
GROWTH AND RETIREMENT
MAGELLAN BALANCED INCOME MONEY INTERMEDIATE BLUE CHIP
TOTAL FUND FUND FUND MARKET FUND BOND FUND FUND
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value as
determined by quoted market price:
Mutual funds $9,192,219 $1,850,607 $1,065,189 $2,544,562 $619,108 $259,303 $2,853,450
Worthington Foods, Inc.
common stock -- -- -- -- -- -- --
Loans to participants -- -- -- -- -- -- --
------------------------------------------------------------------------------------------
Total investments 9,192,219 1,850,607 1,065,189 2,544,562 619,108 259,303 2,853,450
Receivables:
Contribution--employer 301,452 44,408 36,647 68,662 80,598 6,988 64,149
Contribution--employee 58,756 11,080 7,702 16,413 6,263 1,564 15,734
------------------------------------------------------------------------------------------
Net assets available for benefits $9,552,427 $1,906,095 $1,109,538 $2,629,637 $705,969 $267,855 $2,933,333
==========================================================================================
<CAPTION>
OVERSEAS LOW-PRICED AGGRESSIVE WORTHINGTON LOAN
FUND STOCK FUND GROWTH FUND FOODS FUND FUND
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value as
determined by quoted market price:
Mutual funds $6,133 $11,756 $146,052 $ -- $ --
Worthington Foods, Inc.
common stock -- -- -- 322,576 --
Loans to participants -- -- -- -- 205,822
--------------------------------------------------------------------------
Total investments 6,133 11,756 146,052 322,576 205,822
Receivables:
Contribution--employer 560 393 3,029 12,743 --
Contribution--employee 426 488 1,529 3,569 --
--------------------------------------------------------------------------
Net assets available for benefits $7,119 $12,637 $150,610 $338,888 $205,822
==========================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE> 6
<TABLE>
The Worthington Foods Tax Savings and Profit Sharing Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1997
<CAPTION>
GROWTH AND RETIREMENT
MAGELLAN BALANCED INCOME MONEY INTERMEDIATE BLUE CHIP
TOTAL FUND FUND FUND MARKET FUND BOND FUND FUND
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value as
determined by quoted market price:
Mutual funds $7,074,771 $1,509,319 $829,046 $2,004,475 $478,052 $20,353 $2,184,164
Worthington Foods, Inc.
common stock -- -- -- -- -- -- --
Loans to participants -- -- -- -- -- -- --
----------------------------------------------------------------------------------------
Total investments 7,074,771 1,509,319 829,046 2,004,475 478,052 20,353 2,184,164
Receivables:
Contribution--employer 301,510 52,345 39,709 79,408 49,613 5,574 74,861
Contribution--employee 51,684 8,916 6,916 15,993 4,186 830 14,843
----------------------------------------------------------------------------------------
Net assets available for benefits $7,378,603 $1,570,580 $875,671 $2,099,876 $531,851 $26,757 $2,273,868
========================================================================================
<CAPTION>
OVERSEAS LOW-PRICED EMERGING WORTHINGTON LOAN
FUND STOCK FUND GROWTH FUND FOODS FUND FUND
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value as
determined by quoted market price:
Mutual funds $991 $19,012 $29,359 $ -- $ --
Worthington Foods, Inc.
common stock -- -- -- 151,222 --
Loans to participants -- -- -- -- 133,462
--------------------------------------------------------------------
Total investments 991 19,012 29,359 151,222 133,462
Receivables:
Contribution--employer -- 1,021 470 9,589 --
Contribution--employee -- 293 169 812 --
--------------------------------------------------------------------
Net assets available for benefits $991 $20,326 $29,998 $161,623 $133,462
====================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6
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<TABLE>
The Worthington Foods Tax Savings and Profit Sharing Plan
Statement of Changes in Net Assets Available
for Benefits, With Fund Information
Year ended December 31, 1998
<CAPTION>
RETIREMENT
GROWTH AND MONEY INTERMEDIATE
MAGELLAN BALANCED INCOME MARKET BOND
TOTAL FUND FUND FUND FUND FUND
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS
Contributions:
Employee $ 518,257 $ 131,354 $ 94,767 $ 211,236 $ 62,988 $ 17,912
Employer 356,650 73,550 58,535 112,675 100,933 10,957
Rollovers 42,970 3,671 27,715 -- 11,584 --
--------------------------------------------------------------------------------
917,877 208,575 181,017 323,911 175,505 28,869
Investment income 358,705 87,825 101,363 134,422 29,541 5,554
DEDUCTIONS
Benefits paid to participants (610,703) (202,699) (90,977) (280,076) (36,588) (363)
Net appreciation (depreciation)
in fair value of investments 913,434 393,153 74,224 447,055 -- (998)
Fund transfers (64,954) (151,339) (31,760) (95,551) 5,660 208,036
--------------------------------------------------------------------------------
Net increase 1,514,359 335,515 233,867 529,761 174,118 241,098
Net assets available for benefits:
Beginning of year 5,104,735 1,570,580 875,671 2,099,876 531,851 26,757
--------------------------------------------------------------------------------
End of Year $6,619,094 $1,906,095 $1,109,538 $2,629,637 $705,969 $267,855
================================================================================
<CAPTION>
BLUE
CHIP OVERSEAS LOW-PRICED EMERGING WORTHINGTON LOAN
FUND FUND STOCK FUND GROWTH FUND FOODS FUND FUND
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS
Contributions:
Employee $ 196,975 $3,521 $ 7,331 $ 13,344 $ 32,931 $ --
Employer 107,812 1,405 1,964 5,571 20,303 --
Rollovers 3,671 -- 536 -- 536 --
------------------------------------------------------------------------
308,458 4,926 9,831 18,915 53,770 --
Investment income 118,939 119 980 8,712 1,700 5,892
DEDUCTIONS
Benefits paid to participants (265,306) -- (21,589) -- (6,774) --
Net appreciation (depreciation)
in fair value of investments 638,656 (238) (345) 16,361 70,180 --
Fund transfers (141,282) 1,321 3,434 76,624 58,389 66,468
------------------------------------------------------------------------
Net increase 659,465 6,128 (7,689) 120,612 177,265 72,360
Net assets available for benefits:
Beginning of year 2,273,868 991 20,326 29,998 161,623 133,462
------------------------------------------------------------------------
End of Year $2,933,333 $7,119 $ 12,637 $150,610 $338,888 $205,822
========================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 7
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THE WORTHINGTON FOODS TAX SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. DESCRIPTION OF THE PLAN
The following description of the Worthington Foods Tax Savings and Profit
Sharing Plan (the Plan) provides only general information. Participants should
refer to The Worthington Foods Tax Savings and Profit Sharing Summary Plan
Description for a more complete description of the Plan's provisions.
GENERAL
The Plan is a contributory defined contribution plan covering substantially all
employees except those covered by a collective bargaining agreement retirement
plan. Full time employees 21 years of age or older are eligible to participate
on the first day of the calendar quarter following their date of employment. The
Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
CONTRIBUTIONS
Each year, participants may contribute up to 15% of pretax annual compensation
but not more that the limit set by the Internal Revenue Service. Worthington
Foods, Inc. (the Sponsor) contributes 50% of the first 4% of base compensation
that a participant contributes to the plan. Upon the discretion of Worthington
Foods, Inc., all eligible employees may also receive a discretionary
profit-sharing contribution at the option of the Sponsor.
Upon enrollment, a participant may direct their contributions to various
Fidelity Management Trust Company investment funds, including the Worthington
Foods fund, a unitized employer stock fund which invests primarily in the stock
of Worthington Foods, Inc. The matching contributions and discretionary profit
sharing contributions are allocated to the various funds in the same proportion
as the participant contributions.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions and
allocations of the Company's contributions and Plan earnings. Allocations are
based on the ratio of the participant's account balance in the respective fund
to the total fund balance as of the valuation date. Allocation of profit-sharing
contributions are based on the ratio of the compensation with respect to total
compensation for all participants. Forfeited balances of terminated
participants' nonvested accounts are used to reduce future company contributions
and for the year ended December 31, 1998 were $11,431.
Page 8
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THE WORTHINGTON FOODS TAX SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF THE PLAN (CONTINUED)
VESTING
Employee and employer matching contributions are 100% vested. Employer
discretionary profit sharing contributions are 100% vested if the employee was
employed by the Sponsor prior to October 1, 1995. If the employee was hired
after October 1, 1995, his vested interest in the employer discretionary
contributions are 100% vested attributable to profit-sharing contributions made
prior to October 1, 1997. Vesting for contributions made after October 1, 1997
are in accordance to the following vesting schedule:
<TABLE>
<CAPTION>
PERCENTAGE VESTED
YEARS OF SERVICE AND NONFORFEITABLE
- --------------------------------------------------------------------------------
<S> <C>
Less the 3 years 0%
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 or more years 100%
</TABLE>
PAYMENT OF BENEFITS
Upon retirement, death, disability or termination of service, or plan
termination, a participant will receive a lump-sum amount equal to the vested
value of his or her account.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Loan transactions are treated as a transfer from the investment fund to the loan
investment fund. Loan terms range from 1-5 years up to 10 years for the purchase
of a primary residence. The loans are secured by the balance in the
participant's account and bear interest at a rate commensurate with local
prevailing rates as determined by persons in the business of lending money.
Principle and interest is paid ratably through monthly payroll deductions.
Page 9
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THE WORTHINGTON FOODS TAX SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN TERMINATION
Although it has not expressed an intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination
participants will become 100% vested in their accounts.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounts of the Plan are maintained on the accrual basis of accounting.
Investments are held by Fidelity Management Trust company and are accounted for
at market value based on the closing market price for investments on the last
day of the year. Realized gains or losses on investments is the difference
between the proceeds received and the average cost of investments sold.
Unrealized appreciation in fair value of investments is the net change in the
difference between fair value and the cost of investments and is reflected in
the statement of changes in assets available for benefits as realized and
unrealized appreciation in fair value of investments. Purchases and sales of
securities are recorded on a trade-date basis. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-divided date. The
participant loans are valued at their outstanding balances, which approximate
fair value.
All administrative expenses are borne by Worthington Foods, Inc.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Page 10
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THE WORTHINGTON FOODS TAX SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. DIFFERENCES BETWEEN FINANCIAL STATEMENTS AND FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-------------------------
<S> <C> <C>
Net assets available for benefits
per the financial statements $10,267,503 $7,725,003
Amounts allocated to withdrawn
Participants -- (10,494)
-------------------------
Net assets available for benefits
per the Form 5500 $10,267,503 $7,714,509
=========================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1998:
<TABLE>
<S> <C>
Benefits paid to participants per the financial statements $904,372
Add: Amounts allocated on Form 5500 to withdrawn
participants at December 31, 1998 --
Less: Amounts allocated on Form 5500 to withdrawn
participants at December 31, 1997 (10,494)
--------
Benefits paid to participants per the Form 5500 $893,878
========
</TABLE>
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
4. TRANSACTIONS WITH PARTIES-IN-INTEREST
At December 31, 1998 and 1997, the Plan owned 28,309 and 17,482 units in the
Worthington Foods, Inc. unitized employer stock fund. The market value of the
employer stock fund at December 31, 1998 and 1997 was based on quoted market
values. At December 31, 1998 and 1997, the unit value was approximately $11.40
and $8.65 per share.
Page 11
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THE WORTHINGTON FOODS TAX SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
(IRS) dated March 27, 1995 that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan sponsor
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore believes that the Plan is qualified and
the related trust is tax exempt. The Plan sponsor has requested a determination
letter from the IRS to rule on the October 1, 1997 amendment and restatement of
the Plan.
6. YEAR 2000 ISSUE (UNAUDITED)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a two phase approach. The first
phase addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Plan Sponsor anticipates substantially
completing this phase of the project June 1999. Costs associated with modifying
software and equipment are not estimated to be significant and will be paid by
the Plan Sponsor.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determined that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third party service providers have indicated that
they will be year 2000 compliant by early 1999 If modifications of data
processing systems of either the Plan, the Plan Sponsor, or its service
providers are not completed timely, the year 2000 problem could have a material
impact on the operations of the Plan. Plan management has not developed a
contingency plan, because they are confident that all systems will be year 2000
ready.
Page 12
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<TABLE>
The Worthington Foods Tax Savings and Profit Sharing Plan
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<CAPTION>
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT CURRENT
LESSOR OR SIMILAR PARTY COST VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Management Trust Company,
Boston, Massachusetts Magellan Fund
15,317 shares $1,252,534 $ 1,850,607
Balanced Fund
65,109 shares 913,924 1,065,189
Growth and Income Fund
55,510 shares 1,601,251 2,544,562
Retirement Money Market Fund
619,108 shares 619,109 619,108
Intermediate Bond Fund
25,249 shares 260,084 259,303
Blue Chip Fund
56,627 shares 1,755,065 2,853,450
Overseas Fund
170 shares 5,973 6,133
Low-Priced Stock Fund
514 shares 13,327 11,756
Aggressive Growth Fund
4,597 shares 133,932 146,052
Worthington Foods Fund
28,309 shares 271,695 322,576
Loans to participants Interest rates ranging from
8% to 12.95% -- 205,822
-----------------------------
$6,826,894 $9,884,558
=============================
</TABLE>
Page 13
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<TABLE>
Worthington Foods, Inc. Tax Savings and Profit Sharing Plan
Line 27d--Schedule of Reportable Transactions
Year ended December 31, 1998
<CAPTION>
CURRENT VALUE
OF ASSET ON NET
DESCRIPTION OF PURCHASE SELLING COST OF TRANSACTION GAIN
IDENTITY OF PARTY INVOLVED ASSET PRICE PRICE ASSET DATE (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Category (iii)--Series of transactions in excess of 5% of plan assets.
- ----------------------------------------------------------------------
Fidelity Management Trust Co., Magellan Fund $325,707 $ -- $325,707 $325,707 $ --
Boston, Massachusetts -- 377,572 291,774 377,572 85,798
Growth and Income Fund 558,339 -- 558,339 558,339 --
-- 465,308 332,527 465,308 132,781
Blue Chip Fund 507,848 -- 507,848 507,848 --
-- 477,219 349,290 477,219 127,929
There were no category (i), (ii) or (iv) reportable transactions during 1998.
- -----------------------------------------------------------------------------
</TABLE>
Page 14
<PAGE> 15
THE WORTHINGTON FOODS
TAX SAVINGS AND PROFIT SHARING PLAN
ANNUAL REPORT ON FORM 11-K
For fiscal year ended December 31, 1998
INDEX TO THE EXHIBITS
---------------------
Exhibit Number Description Page Number
- -------------- ----------- -----------
1 Consent of Ernst & Young LLP, Independent Auditors 16
Page 15
<PAGE> 1
Exhibit 1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-36841) pertaining to The Worthington Foods Tax Savings and Profit
Sharing Plan and in the related Prospectus of our report dated May 27, 1999,
with respect to the financial statements and schedules of The Worthington Foods
Tax Savings and Profit Sharing Plan included in this Annual Report (Form 11-K)
for the year ended December 31, 1998.
ERNST & YOUNG LLP
Columbus, Ohio
June 24, 1999
Page 16
