-----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, QFNiEkM3DsXToX6tVUnMqCQwDX/LB9y0vGTIIm4rVNLj9PskNzXF3jlTxEc/B8F4 0miPhFRQ7NUQw1X0LXc3Fg== 0000916641-95-000425.txt : 19951211 0000916641-95-000425.hdr.sgml : 19951211 ACCESSION NUMBER: 0000916641-95-000425 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951029 FILED AS OF DATE: 19951208 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 000-02258 FILM NUMBER: 95600451 BUSINESS ADDRESS: STREET 1: 501 N CHURCH ST CITY: SMITHFIELD STATE: VA ZIP: 23430 BUSINESS PHONE: 8043574321 MAIL ADDRESS: STREET 1: 501 N CHURCH STREET CITY: SMITHFIELD STATE: VA ZIP: 23430 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 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended October 29, 1995 Commission File Number 0-2258 SMITHFIELD FOODS, INC. 501 North Church Street Smithfield, Virginia 23430 (804) 357-4321 Delaware 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Shares outstanding Class at December 8, 1995 Common Stock, $.50 par value per share 16,437,526 1-11 SMITHFIELD FOODS, INC. CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets - October 29, 1995 and April 30, 1995 3-4 Consolidated Statements of Operations - 13 Weeks Ended October 29, 1995 and October 30, 1994 and 26 Weeks Ended October 29, 1995 and October 30, 1994 5 Consolidated Statements of Cash Flows - 26 Weeks Ended October 29, 1995 and October 30, 1994 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8-10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. 10 2-11 PART I. FINANCIAL INFORMATION SMITHFIELD FOODS, INC. CONSOLIDATED BALANCE SHEETS October 29, April 30, (In thousands) 1995 1995 ASSETS (unaudited) Current assets: Cash $ 11,800 $ 14,790 Accounts receivable less allowances of $573 and $540 94,772 66,727 Inventories 183,563 119,170 Advances to joint hog production arrangements 8,998 14,042 Prepaid expenses and other current assets 16,274 18,564 Total current assets 315,407 233,293 Property, plant and equipment 457,484 415,839 Less accumulated depreciation (151,623) (141,533) Net property, plant and equipment 305,861 274,306 Other assets: Cost in excess of net assets acquired less accumulated amortization of $1,508 and $1,429 4,271 4,835 Investments in partnerships 34,326 27,209 Other 11,585 10,582 Total other assets 50,182 42,626 $ 671,450 $ 550,225 See accompanying notes to consolidated financial statements. 3-11 SMITHFIELD FOODS, INC. CONSOLIDATED BALANCE SHEETS October 29, April 30, (In thousands) 1995 1995 LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) Current liabilities: Notes payable $ 128,600 $ 69,695 Current portion of long-term debt and capital lease obligations 10,468 9,961 Accounts payable 62,957 55,371 Accrued expenses and other current liabilities 42,417 37,355 Total current liabilities 244,442 172,382 Long-term debt and capital lease obligations 180,637 155,047 Other noncurrent liabilities 32,021 28,781 Redeemable preferred stock 30,000 10,000 Stockholders' equity: Preferred stock, $1.00 par value, authorized 1,000,000 shares -- -- Common stock, $.50 par value, authorized 25,000,000 shares; issued 16,874,526 and 16,834,026 shares 8,437 8,417 Additional paid-in capital 50,250 49,804 Retained earnings 133,306 133,437 Treasury stock, at cost, 437,000 shares (7,643) (7,643) Total stockholders' equity 184,350 184,015 $ 671,450 $ 550,225 See accompanying notes to consolidated financial statements. 4-11 SMITHFIELD FOODS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended (In thousands, except per share data) Oct. 29, 1995 Oct. 30, 1994 Oct. 29, 1995 Oct. 30, 1994 Sales $455,799 $ 373,839 $ 823,127 $ 705,599 Cost of sales 396,240 315,892 719,743 603,964 Gross profit 59,559 57,947 103,384 101,635 Selling, general and administrative expenses 41,688 36,933 79,580 68,955 Depreciation expense 5,869 4,698 11,248 9,292 Interest expense 5,249 3,206 9,541 6,221 Income from continuing operations before income taxes 6,753 13,110 3,015 17,167 Income taxes 2,138 5,030 994 6,540 Income from continuing operations 4,615 8,080 2,021 10,627 Loss from discontinued operations, net of tax -- (278) (1,800) (455) Net income $ 4,615 $ 7,802 $ 221 $ 10,172 Net income (loss) available to common stockholders $ 4,431 $ 7,633 $ (131) $ 9,834 Income (loss) per common share: Continuing operations $ .26 $ .47 $ .10 $ .61 Discontinued operations -- (.02) (.11) (.03) Net income (loss) $ .26 $ .45 $ (.01) $ .58 Weighted average common shares outstanding 16,921 17,081 16,909 17,034
See accompanying notes to consolidated financial statements 5-11 SMITHFIELD FOODS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
26 Weeks 26 Weeks Ended Ended (In thousands) Oct. 29, 1995 Oct. 30, 1994 Cash flows from operating activities: Net income $ 221 $ 10,172 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 12,303 10,404 Increase in accounts receivable (28,045) (12,052) Increase in inventories (64,393) (24,101) (Increase) decrease in prepaid expenses and other current assets 2,290 (1,310) Increase in other assets (1,509) (4,575) Increase in accounts payable, accrued expenses and other liabilities 15,888 8,357 Loss on sale of property, plant and equipment 702 553 Net cash used in operating activities (62,543) (12,552) Cash flows from investing activities: Capital expenditures (44,665) (49,864) Proceeds from sale of property, plant and equipment 1,175 987 Investments in partnerships (7,117) (1,138) (Increase) decrease in advances to joint hog production arrangements 5,044 (1,411) Net cash used in investing activities (45,563) (51,426) Cash flows from financing activities: Net borrowings on notes payable 58,905 16,156 Proceeds from issuance of long-term debt and capital lease obligations 31,000 50,000 Proceeds from issuance of preferred stock 20,000 -- Principal payments on long-term debt and capital lease obligations (4,903) (4,070) Exercise of stock options 466 1,778 Preferred dividends (352) (338) Net cash provided by financing activities 105,116 63,526 Net decrease in cash (2,990) (452) Cash at beginning of the period 14,790 12,350 Cash at end of period $ 11,800 $ 11,898 Supplemental disclosures of cash flow information: Cash payments during period: Interest (net of amount capitalized) $ 9,679 $ 6,448 Income taxes $ 526 $ 6,320
See accompanying notes to consolidated financial statements. 6-11 SMITHFIELD FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) The Notes to Financial Statements included in Registrant's Annual Report for the fiscal year ended April 30, 1995 should be read in conjunction with the quarterly financial statements. (2) The financial information furnished herein is unaudited. The information reflects all adjustments (which included only normal recurring adjustments) which are, in the opinion management, necessary to a fair statement of the results of operations for the interim periods included in this report. (3) Inventories consist of the following: October 29, April 30, (In thousands) 1995 1995 Fresh and processed meats $143,391 $ 82,957 Livestock and manufacturing supplies 35,476 28,596 Other 4,696 7,617 $183,563 $119,170 (4) During the second quarter, the Registrant authorized and issued 2,000 shares of Series C 6.75% cumulative convertible redeemable preferred stock in a private transaction for $20 million. These shares are convertible into 667,000 shares of the Registrant's common stock at $30.00 per share. The shares are mandatorily redeemable in October, 2005, at $10,000 per share, plus accumulated and unpaid dividends and have an equivalent liquidation preference. Redeemable preferred stock consists of the following: October 29, April 30, (In thousands) 1995 1995 Series B 6.75% cumulative convertible redeemable preferred stock, $1.00 par value, 1,000 shares authorized, issued and outstanding $10,000 $10,000 Series C 6.75% cumulative convertible redeemable preferred stock, $1.00 par value, 2,000 shares authorized, issued and outstanding 20,000 -- $30,000 $10,000 (5) As of April 30, 1995, the Registrant adopted a plan to dispose of the assets and business of Ed Kelly, Inc. ("Kelly"), its retail electronics subsidiary, which is stated separately as discontinued operations in the Registrant's consolidated statements of operations. Because of a delay in the timing of the planned disposal, operating losses that exceeded those that were estimated for the first quarter, and an unanticipated deterioration in the estimated realization value of Kelly's assets, an additional loss from discontinued operations, net of tax, of $1,800,000 was recorded in the quarter ended July 30, 1995. (6) On October 6, 1995, the Registrant entered into a letter of intent to acquire all of the common stock of John Morrell & Co. from Chiquita Brands International, Inc. for $58 million. The report on Form 8-K dated October 6, 1995 gives more details on the proposed transaction. 7-11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 13 Weeks Ended October 29, 1995 - 13 Weeks Ended October 30, 1994 Sales in the second quarter of fiscal 1996 increased $82.0 million, or 21.9%, from the same quarter a year ago. The increase was the result of an 11.5% increase in sales tonnage and a 9.3% increase in unit sales prices. The increase in sales tonnage was the result of a 24.8% increase in fresh pork tonnage offset by a 7.7% decrease in processed meats tonnage. The increase in fresh pork tonnage reflected increased slaughter levels at the Registrant's Bladen County, North Carolina plant. Cost of sales increased $80.3 million, or 25.4%, in the second quarter of fiscal 1996, reflecting the increased sales tonnage and sharply higher live hog prices. Gross profit in the second quarter of fiscal 1996 increased by $1.6 million, or 2.8%, compared with the same quarter of fiscal 1995. The gross profit reflected lower margins on sales of both fresh pork and processed meats compared with the second quarter of fiscal 1995. These margins were offset by substantially improved results at the Registrant's hog production operations, Brown's of Carolina, Inc. ("Brown's") and the Smithfield-Carroll's joint hog production arrangement. Costs associated with the start-up of a second shift in the slaughter operations at the Bladen County plant also adversely affected gross profit in the fiscal 1996 quarter. Selling, general and administrative expenses increased $4.8 million, or 12.9%, in the second quarter of fiscal 1996. The increase reflected higher warehousing and transportation costs as well as higher selling and marketing costs associated with the 11.5% increase in sales tonnage. Depreciation expense increased $1.2 million, or 24.9%, in the second quarter of fiscal 1996 from the same quarter a year ago. The increase is related to continued expansion at the Bladen County plant and additional hog production facilities at Brown's. Interest expense increased $2.0 million, or 63.7%, in the second quarter of fiscal 1996, reflecting higher long-term debt related to the funding of capital projects at the Bladen County plant and Brown's, and higher short- and long-term interest rates. The effective income tax rate for the second quarter of fiscal 1996 decreased to 31.7% from 38.4% in the corresponding period a year ago, reflecting a lower tax rate on foreign sales and benefits related to certain insurance contracts. The income from continuing operations of $4.6 million in the second quarter of fiscal 1996 compared with income from continuing operations of $8.1 million a year ago reflects the factors discussed above. As of April 30, 1995, the Registrant adopted a plan to dispose of the assets and business of Ed Kelly, Inc., its retail electronics subsidiary, which is reported separately as discontinued operations in the Registrant's consolidated statements of operations. There were no losses accrued in the second quarter of fiscal 1996, compared with a small loss in the same period of fiscal 1995. Reflecting the factors discussed above, net income for the second quarter of fiscal 1996 was $4.6 million compared with net income of $7.8 million in the same quarter of the prior fiscal year. 8-11 26 Weeks Ended October 29, 1995 - 26 Weeks Ended October 30, 1994 Sales in the first six months of fiscal 1996 increased $117.5 million, or 16.7%, from the same period a year ago. The increase resulted from a 13.1% increase in sales tonnage and a 3.1% increase in unit selling prices. The increase in sales tonnage was the result of a 24.7% increase in fresh pork tonnage offset by a 4.7% decrease in processed meats tonnage. The increase in fresh pork tonnage reflected increased slaughter levels at the Registrant's Bladen County, North Carolina plant. Cost of sales increased $115.8 million, or 19.2%, in the first six months of fiscal 1996, reflecting increased sales tonnage and increased raw material costs due to higher live hog prices. Gross profit in the first half of fiscal 1996 increased by $1.7 million, or 1.7%, compared to the same period of fiscal 1995. The gross profit reflected lower margins on sales of both fresh pork and processed meats compared with the first six months of fiscal 1995. These margins were offset with improved results at Brown's and Smithfield-Carroll's. Costs associated with the start-up of a second shift in the slaughter operations and labor inefficiencies in the new conversion operations at the Bladen County plant also adversely affected gross profit in the fiscal 1996 period. Selling, general and administrative expenses increased $10.6 million, or 15.4%, in the first six months of fiscal 1996. The increase reflected higher warehousing and transportation costs as well as higher selling and marketing costs associated with the increased sales tonnage. Depreciation expense increased $2.0 million, or 21.1%, in the first half of fiscal 1996 from the corresponding period a year ago. The increase is related to continued expansion at the Bladen County plant and additional hog production facilities at Brown's. Interest expense increased $3.2 million, or 51.9%, in the first six months of fiscal 1996, reflecting higher long-term debt related to the funding of capital projects at the Bladen County plant and Brown's, and higher short- and long-term interest rates. The effective income tax rate for the first six months of fiscal 1996 decreased to 33.0% from 38.1% in the corresponding period a year ago, reflecting a lower tax rate on foreign sales and benefits related to certain insurance contracts. The income from continuing operations of $2.0 million in the first six months of fiscal 1996 compared with income from continuing operations of $10.6 million a year ago reflects the factors discussed above. As of April 30, 1995, the Registrant adopted a plan to dispose of the assets and business of Ed Kelly, Inc., its retail electronics subsidiary, which is reported separately as discontinued operations in the Registrant's consolidated statements of operations. As a result of the delay in the timing of the planned disposal, operating losses that exceeded those that were anticipated for the quarter, and an unanticipated deterioration in the estimated realization value of Kelly's assets, an additional loss from discontinued operations, net of tax, of $1.8 million was recorded in the first quarter of fiscal 1996. This compares with a small loss in the first six months of fiscal 1995. Reflecting the factors discussed above, net income for the first six months of fiscal 1996 was $.2 million compared with net income of $10.2 million in the same period of the prior fiscal year. 9-11 LIQUIDITY AND CAPITAL RESOURCES During the first six months of fiscal 1996, the Registrant's cash used in operations was $62.5 million, largely the result of a significant increase in the levels of inventories and accounts receivable associated with a build-up of freezer stocks for the fall holiday season, and an increased level of business related to the continued increase in slaughter level at the Bladen County plant. Traditionally, the Registrant builds large inventories of hams in the spring and summer months which are sold during the heavy fall selling season. These sales are converted to cash and used to reduce short-term bank debt in the Registrant's fiscal third quarter. Capital expenditures in the first six months of fiscal 1996 totaled $44.7 million, consisting primarily of $19.3 million to increase storage and distribution capacities at the Bladen County plant, and $16.1 million for hog production facilities at Brown's. The significant increases in the levels of inventories and accounts receivable, and the capital expenditures were funded with $89.9 million in borrowings under the Registrant's bank revolving credit facility and $20.0 million in cash from the private sale in October of the Registrant's Series C 6.75% cumulative convertible redeemable preferred stock to Sumitomo Corporation of America. The preferred stock is convertible into 667,000 shares of the Registrant's common stock at $30.00 per share. On July 31, 1995, the Registrant increased its revolving credit facility to $200 million from $110 million. The amended revolving facility, which was provided by a group of six banks, consists of a 364-day, $150 million revolving credit facility and a two-year, $50 million revolving credit facility. The short-term facility is being used for seasonal inventory and receivable needs and the long-term facility is being used for working capital and capital expenditures. As of October 29, 1995, the Registrant had definitive commitments of $39.3 million for capital expenditures for the remainder of fiscal 1996, related to capital projects at certain of its meat processing facilities and construction of new hog production facilities at Brown's. On October 6, 1995, the Registrant entered into a letter of intent to acquire all of the common stock of John Morrell & Co. from Chiquita Brands International, Inc. for $58 million, consisting of $33 million of Registrant's common stock and $25 million in cash, which will be borrowed under Registrant's revolving credit facility. The Registrant will also assume all of John Morrell's liabilities. John Morrell is a large fresh pork and processed meats processor headquartered in Cincinnati, Ohio, with plants in Sioux Falls, South Dakota, Sioux City, Iowa, Great Bend, Kansas, Cincinnati, Ohio and Chicago, Illinois. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. A. Exhibits. Exhibit 11 - Computation of Net Income Per Share Exhibit 27 - Financial Data Schedule (electronically submitted) B. Reports on Form 8-K. The following reports on Form 8-K were filed during quarter ended October 29, 1995: Report on Form 8-K dated October 6, 1995 reporting Item 5. Other Events. Report on Form 8-K dated October 26, 1995 reporting Item 5. Other Events. 10-11 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. Aaron D. Trub Vice President, Secretary & Treasurer C. Larry Pope Controller Date: December 8, 1995 11-11 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 & Treasurer /s/ C. LARRY POPE C. Larry Pope Controller Date: December 8, 1995 11-11 EX-11 2 EXHIBIT 11 SMITHFIELD FOODS, INC. EXHIBIT 11 COMPUTATION OF NET INCOME (LOSS) PER SHARE Net income (loss) and the number of common shares and common equivalent shares used to present net income (loss) per common share were computed as follows:
13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended Oct. 29, 1995 Oct. 30, 1994 Oct. 29, 1995 Oct. 30, 1994 Income (loss) (in thousands) Net income $ 4,615 $ 7,802 $ 221 $ 10,172 Dividends accumulated for Series B and C preferred stock (184) (169) (352) (338) Net income (loss) available to common stockholders $ 4,431 $ 7,633 $ (131) $ 9,834 Common shares (in thousands) Weighted average common shares: Outstanding 16,421 16,343 16,409 16,311 Incremental common shares for outstanding stock options 500 738 500 723 Common shares for computation 16,921 17,081 16,909 17,034 Net income (loss) per common share $ .26 $ .45 $ (.01) $ .58
EX-27 3 FDS --
5 1,000 3-MOS APR-28-1996 OCT-29-1995 11,800 0 95,345 573 183,563 315,407 457,484 151,623 671,450 244,442 180,637 8,437 30,000 0 175,913 671,450 455,799 455,799 396,240 396,240 0 20 5,249 6,753 2,138 4,615 0 0 0 4,615 .26 0
-----END PRIVACY-ENHANCED MESSAGE-----