-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AlXoP/g4M/1NofQuyxXsVTOnXXAiV9UH8a7QXNUPBq0IXFlNnEB9TYKnAsTgNmj6 hODvnXiCiaJytK4KXSg3XA== 0000916641-97-000902.txt : 19970912 0000916641-97-000902.hdr.sgml : 19970912 ACCESSION NUMBER: 0000916641-97-000902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970727 FILED AS OF DATE: 19970905 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITHFIELD FOODS INC CENTRAL INDEX KEY: 0000091388 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 520845861 STATE OF INCORPORATION: DE FISCAL YEAR END: 0427 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02258 FILM NUMBER: 97676268 BUSINESS ADDRESS: STREET 1: 900 DOMINION TOWER STREET 2: 999 WATERSIDE DRIVE CITY: NORFOLK STATE: VA ZIP: 23510 BUSINESS PHONE: 8043653000 MAIL ADDRESS: STREET 1: 900 DOMINION TOWER STREET 2: 999 WATERSIDE DRIVE CITY: NORFOLK STATE: VA ZIP: 23510 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY EQUITIES CORP DATE OF NAME CHANGE: 19710221 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY REAL ESTATE TRUST DATE OF NAME CHANGE: 19661113 10-Q 1 SMITHFIELD FOODS, INC. 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 27, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . COMMISSION FILE NUMBER 0-2258 SMITHFIELD FOODS, INC. 999 Waterside Drive, Suite 900 Norfolk, Virginia 23510 (757) 365-3000 Virginia 52-0845861 (State of Incorporation) (I.R.S. Employer Identification Number) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Shares outstanding Class at September 5, 1997 - ------------------- -------------------- Common Stock, $.50 18,763,681 par value per share 1-12 SMITHFIELD FOODS, INC. CONTENTS PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements. Consolidated Balance Sheets - July 27, 1997 and April 27, 1997 3-4 Consolidated Statements of Operations - 13 Weeks Ended July 27, 1997 and July 28, 1996 5 Consolidated Statements of Cash Flows - 13 Weeks Ended July 27, 1997 and July 28, 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8-9 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 9 Item 4. Submission of Matters to a Vote of Security Holders. 10-11 Item 6. Exhibits and Reports on Form 8-K. 11 2-12 PART I. FINANCIAL INFORMATION SMITHFIELD FOODS, INC. CONSOLIDATED BALANCE SHEETS July 27, April 27, (In thousands) 1997 1997 - -------------- --------- --------- ASSETS (Unaudited) Current assets: Cash $ 26,439 $ 25,791 Accounts receivable less allowances of $1,692 and $1,499 182,142 166,094 Inventories 272,596 253,276 Prepaid expenses and other current assets 47,276 43,217 ---------- --------- Total current assets 528,453 488,378 ---------- --------- Property, plant and equipment 634,065 614,393 Less accumulated depreciation (196,404) (187,518) ---------- --------- Net property, plant and equipment 437,661 426,875 ---------- --------- Other assets: Investments in partnerships 51,314 44,582 Other 40,296 35,419 ---------- --------- Total other assets 91,610 80,001 ---------- --------- $1,057,724 $ 995,254 ========== ========= See accompanying notes to consolidated financial statements. 3-12 SMITHFIELD FOODS, INC. CONSOLIDATED BALANCE SHEETS July 27, April 27, (In thousands) 1997 1997 - -------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) Current liabilities: Notes payable $ - $ 77,500 Current portion of long-term debt and capital lease obligations 9,547 7,800 Accounts payable 128,298 132,268 Accrued expenses and other current liabilities 117,655 106,498 ---------- -------- Total current liabilities 255,500 324,066 ---------- -------- Long-term debt and capital lease obligations 425,959 288,486 ---------- -------- Other noncurrent liabilities: Pension and postretirement benefits 52,870 55,320 Other 22,367 19,896 ---------- -------- Total other noncurrent liabilities 75,237 75,216 -------- -------- Stockholders' equity: Preferred stock, $1.00 par value, 1,000,000 authorized shares - - Common stock, $.50 par value, 25,000,000 authorized shares; 19,200,681 and 19,196,681 issued 9,600 9,598 Additional paid-in capital 113,742 113,661 Retained earnings 185,329 191,870 Treasury stock, at cost, 437,000 shares (7,643) (7,643) ---------- -------- Total stockholders' equity 301,028 307,486 ---------- -------- $1,057,724 $995,254 ========== ======== See accompanying notes to consolidated financial statements. 4-12 SMITHFIELD FOODS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 13 Weeks 13 Weeks Ended Ended (In thousands, except per share data) July 27, 1997 July 28, 1996 - ------------------------------------- ------------- ------------- Sales $914,963 $892,870 Cost of sales 839,779 834,108 -------- -------- Gross profit 75,184 58,762 Selling, general and administrative expenses 49,192 42,856 Depreciation expense 9,715 8,755 Interest expense 7,367 5,990 Nonrecurring charge 12,600 - -------- -------- Income (loss) before income taxes (3,690) 1,161 Income taxes 2,851 415 -------- -------- Net income (loss) $ (6,541) $ 746 ======== ======== Net income (loss) available to common stockholders $ (6,541) $ 408 ======== ======== Net income (loss) per common share $ (.33) $ .02 ======== ======== Average common shares outstanding 19,792 18,604 ======== ======== See accompanying notes to consolidated financial statements. 5-12 SMITHFIELD FOODS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
13 Weeks 13 Weeks Ended Ended (In thousands) July 27, 1997 July 28, 1996 - -------------- ------------- ------------- Cash flows from operating activities: Net income (loss) $ (6,541) $ 746 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,471 9,528 Increase in accounts receivable (13,080) (23,892) Increase in inventories (13,250) (12,680) Increase in prepaid expenses and other current assets (2,579) (6,582) Decrease (increase) in other assets 1,565 (1,174) (Decrease) increase in other liabilities (2,057) 7,902 (Gain) loss on sale of property, plant and equipment (460) 4 -------- -------- Net cash used in operating activities (25,931) (26,148) -------- -------- Cash flows from investing activities: Capital expenditures (18,518) (17,076) Business acquisition, net of cash (10,123) - Proceeds from sale of property, plant and equipment 148 - Investments in partnerships (6,731) (7,890) Other - (30) -------- -------- Net cash used in investing activities (35,224) (24,996) -------- -------- Cash flows from financing activities: Net repayments on notes payable (75,000) (32,363) Proceeds from issuance of long-term debt - 146,250 Proceeds from long-term credit facility 215,000 - Principal repayments on long-term debt and capital lease obligations (78,280) (68,272) Dividends on preferred stock - (338) Exercise of common stock options 83 - -------- -------- Net cash provided by financing activities 61,803 45,277 -------- -------- Net increase (decrease) in cash 648 (5,867) Cash at beginning of period 25,791 28,529 -------- -------- Cash at end of period $ 26,439 $ 22,662 ======== ======== Supplemental disclosures of cash flow information: Cash payments during period: Interest paid (net of amount capitalized) $ 7,298 $ 5,386 ======== ======== Income taxes paid, net $ 1,409 $ 2,744 ======== ========
See accompanying notes to consolidated financial statements. 6-12 SMITHFIELD FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) These statements should be read in conjunction with the Consolidated Financial Statements and related notes which are included in the Registrant's Annual Report for the fiscal year ended April 27, 1997. (2) The interim financial information furnished herein is unaudited. The information reflects all adjustments (which include only normal recurring adjustments) which are, in the opinion of management, necessary to a fair statement of the financial position and the results of operations for the periods included in this report. (3) Inventories consist of the following: July 27, April 27, (In thousands) 1997 1997 -------------- ----------- --------- Fresh and processed meats $196,659 $183,480 Hogs on farms 49,235 44,563 Manufacturing supplies 16,838 15,732 Other 9,864 9,501 ------- -------- $272,596 $253,276 ======== ======== (4) On August 8, 1997, the U.S. District Court for the Eastern District of Virginia imposed $12.6 million in civil penalties against the Registrant in a civil action brought by the U.S. Environmental Protection Agency. This amount is reflected as a nonrecurring charge in the current period. The Registrant will appeal the Court's judgment to the U.S. Court of Appeals for the Fourth Circuit. (5) On July 15, 1997, the Registrant entered into loan agreements providing for $350 million of senior secured revolving credit facilities with a bank group which replaced its existing $300 million credit facilities. The new facilities consist of a 5-year $300 million revolving credit facility and a 364-day $50 million revolving credit facility. As of July 27, 1997, all borrowings were under the long-term facility and are reflected as long-term debt in the consolidated balance sheets. (6) In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is effective for the third quarter of fiscal 1998. The Registrant expects the adoption of this statement will not materially impact computed results or comparative presentation of net income per common share. 7-12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- 13 Weeks Ended July 27, 1997 - 13 Weeks Ended July 28, 1996 - ---------------------------- In November 1996, the Registrant acquired the assets and business of the Lykes Meat Group, Inc. ("Lykes") from Lykes Bros. Inc. In February 1997, as a result of a shortage of market hogs and excess industry slaughter capacity, the Registrant temporarily shut down the second shift at its Sioux City, Iowa plant. Accordingly, the impact of these two events are reflected in sales, cost of sales, gross profit, selling, general and administrative expenses, depreciation expense and interest expense in the first quarter of fiscal 1998. Sales in the first quarter of fiscal 1998 increased $22.1 million, or 2.5%, from the same quarter a year ago. The increase in sales reflected an 18.5% increase in processed meats tonnage offset by a 4.3% decrease in fresh pork tonnage. Cost of sales increased $5.7 million, or 0.7%, in the first quarter of fiscal 1998. Gross profit in the first quarter of fiscal 1998 increased $16.4 million, or 27.9%. The increase in gross profit reflected improved margins on higher sales tonnage of processed meats which were somewhat offset by lower margins on lower sales tonnage of fresh pork compared to the first quarter of fiscal 1997. Gross profit also benefited from a reduction in cost of sales related to profits at the Registrant's hog production group totaling $10.4 million in the first quarter of fiscal 1998 compared to $6.5 million in the same quarter a year ago. Selling, general and administrative expenses increased $6.3 million, or 14.8%, in the first quarter of fiscal 1998. The increase was primarily due to the inclusion of the operations of Lykes and higher selling and marketing costs associated with the increase in processed meats tonnage. Depreciation expense increased $1.0 million, or 11.0%, in the first quarter of fiscal 1998 from the same quarter a year ago. The increase was related to the inclusion of the operations of Lykes and completed capital projects at the Bladen County, North Carolina plant. Interest expense increased $1.4 million, or 23.0%, in the first quarter of fiscal 1998, reflecting borrowings to finance the acquisition of Lykes and increased carrying costs on higher levels of inventories and accounts receivable. The nonrecurring charge reflects the imposition of $12.6 million in civil penalties against the Registrant by the U.S. District Court for the Eastern District of Virginia in a civil action brought by the U.S. Environmental Protection Agency. The Registrant will appeal the Court's judgment to the U.S. Court of Appeals for the Fourth Circuit. The effective income tax rate for the first quarter of fiscal 1998, excluding the nonrecurring charge, decreased to 32.0% from 35.7% in the corresponding period a year ago, reflecting a lower tax rate on foreign sales and tax benefits related to certain insurance contracts. 8-12 Excluding the nonrecurring charge, net income was $6.1 million, or $.31 per share for the first quarter of fiscal 1998. Including the nonrecurring charge, the net loss in the first quarter of fiscal 1998 was $6.5 million compared to net income of $0.7 million in the same quarter of the prior fiscal year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- In the first quarter of fiscal 1998, the Registrant's cash used in operations was $25.9 million, largely used to finance an increase in the level of accounts receivable and inventories. The Registrant expended $18.5 million in the first quarter of fiscal 1998 on capital projects, primarily for hog production facilities at Brown's of Carolina, Inc. and for plant renovation and expansion projects at certain of its processing plants. In June 1997, the Registrant acquired substantially all of the assets and business of Curly's Foods, Inc. ("Curly's") for $10.8 million in cash plus $7.6 million of assumed liabilities. The cash used in operations, the capital expenditures, and the acquisition of Curly's were funded with net borrowings under the Registrant's bank credit facilities. On July 15, 1997, the Registrant privately entered into loan agreements providing for $350 million of senior secured revolving credit facilities with a bank group which replaced credit facilities totaling $300 million. The new facilities consist of a 5-year $300 million revolving credit facility and a 364-day $50 million revolving credit facility. This refinancing resulted in the repayment of borrowings under the old credit facilities with proceeds from the new 5-year revolving credit facility. All borrowings outstanding at July 27, 1997 were borrowed under the 5-year credit facility and are reflected as long-term on the accompanying consolidated balance sheets. As of July 27, 1997, the Registrant had definitive commitments of $30.1 million for capital expenditures for the remainder of fiscal 1998, related primarily to plant renovations and expansion projects at certain of its processing facilities. PART II - OTHER INFORMATION Item 1. Legal Proceedings Reference is made to the disclosure appearing in Part I, Item 1 of the Registrant's Annual Report on Form 10-K for the fiscal year ended April 27, 1997, under the caption "BUSINESS - Regulation." As previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission on August 11, 1997, the U.S. District Court for the Eastern District of Virginia, on August 8, 1997, imposed $12.6 million in civil penalties on the Registrant and two of its operating subsidiaries, The Smithfield Packing Company, Incorporated ("Smithfield Packing") and Gwaltney of Smithfield, Ltd. ("Gwaltney"), in a case brought by the U.S. Environmental Protection Agency for violations of the federal Clean Water Act at Smithfield Packing's and Gwaltney's plants in Isle of Wight County, Virginia. As discussed in previous filings, most of the violations for which the Court imposed the civil penalties were based upon permit exceedences by Smithfield Packing and Gwaltney which the Registrant asserts were expressly excused for both state and federal purposes by an administrative consent order issued in 1991 by the Virginia State Water Control Board. The Registrant will appeal the Court's decision promptly to the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia. 9-12 Item 4. Submission of Matters to a Vote of Security Holders. (a) Annual Meeting of Stockholders held August 28, 1997. (b) Not applicable. (c) There were 18,763,681 shares of Registrant's Common Stock outstanding as of July 11, 1997, the record date for the 1997 Annual Meeting of Stockholders. A total of 17,185,847 shares were voted. All of management's nominees for directors of the corporation were elected with the following vote: Votes Broker Director Nominee Votes For Withheld Non-Votes ---------------- --------- -------- --------- Robert L. Burrus, Jr. 16,621,617 564,230 0 F. J. Faison, Jr. 16,997,247 188,600 0 Joel W. Greenberg 16,995,257 190,590 0 Cecil W. Gwaltney 16,999,585 186,262 0 George E. Hamilton, Jr. 16,999,735 186,112 0 Richard J. Holland 16,999,419 186,428 0 Roger R. Kapella 17,005,649 180,198 0 Lewis R. Little 17,005,637 180,210 0 Joseph W. Luter, III 17,002,327 183,520 0 H. Gordon Maxwell, III 16,688,607 497,240 0 Wendell H. Murphy 16,999,057 186,790 0 William H. Prestage 16,998,997 186,850 0 Joseph B. Sebring 16,691,565 494,282 0 Aaron D. Trub 16,995,667 190,180 0 A proposal to approve the 1998 Incentive Bonus Plan applicable to the Registrant's Chief Operating Officer was approved by the stockholders with the following vote: Broker Votes For Votes Against Abstentions Non-Votes --------- ------------- ----------- --------- 15,763,321 508,155 28,136 886,235 A proposal to approve an amendment to the corporation's certificate of incorporation to increase the number of shares of common stock which the corporation is authorized to issue to 100 million was approved by the stockholders with the following vote: Broker Votes For Votes Against Abstentions Non-Votes --------- ------------- ----------- --------- 12,832,586 4,330,897 22,364 0 10-12 A proposal to approve an Agreement and Plan of Reincorporation and Merger dated as of July 28, 1997, pursuant to which the Registrant's state of incorporation would change from Delaware to Virginia, was approved by the stockholders with the following vote: Broker Votes For Votes Against Abstentions Non-Votes --------- ------------- ----------- --------- 10,533,229 4,116,092 29,235 2,507,291 The appointment of Arthur Andersen LLP as independent public accountants to audit and report on the Registrant's financial statements for the fiscal year ending May 3, 1998 was ratified by the stockholders with the following vote: Broker Votes For Votes Against Abstentions Non-Votes --------- ------------- ----------- --------- 17,155,012 20,628 10,207 0 (d) Not applicable. Item 6. Exhibits and Reports on Form 8-K. A. Exhibits Exhibit 11 - Computation of Net Income (Loss) Per Share Exhibit 27 - Financial Data Schedule B. Reports on Form 8-K. The Registrant filed no reports on Form 8-K during the quarter for which this report is filed. 11-12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SMITHFIELD FOODS, INC. /s/ Aaron D. Trub -------------------------------- Aaron D. Trub Vice President, Secretary and Treasurer /s/ C. Larry Pope -------------------------------- C. Larry Pope Vice President and Controller Date: September 5, 1997 12-12 EX-11 2 EXHIBIT 11 SMITHFIELD FOODS, INC. EXHIBIT 11 COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE Net income (loss) and the number of shares and common equivalent shares used to present net income (loss) per common share were computed as follows: 13 Weeks 13 Weeks Ended Ended Income (loss) (in thousands) July 27, 1997 July 28, 1996 - ---------------------------- ------------- ------------- Net income (loss) $ (6,541) $ 746 Dividends for Series C preferred stock - (338) -------- -------- Net income (loss) available to common stockholders $ (6,541) $ 408 ======== ======== Shares (in thousands) - --------------------- Weighted average common shares: Outstanding 18,764 18,016 Net effect of stock options 1,028 588 -------- -------- Common shares for computation 19,792 18,604 ======== ======== Net income (loss) per common share $ (.33) $ .02 ======== ======== EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAY-03-1998 JUL-27-1997 26,439 0 183,834 1,692 272,596 528,453 634,065 196,404 1,057,724 255,500 425,959 0 0 9,600 291,428 1,057,724 914,963 914,963 839,779 839,779 0 0 7,367 (3,690) 2,851 (6,541) 0 0 0 (6,541) (0.33) 0
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