FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1995
Commission file number 0-17084
THE SMITHFIELD COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1167160
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
311 County Street, Portsmouth, VA 23704
(Address of principal executive offices) (Zip Code)
(804) 399-3100
Registrant's telephone number, including area code
Not applicable
Former name, former address and former fiscal year, if changed since last
report.
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 periods 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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, no par or stated value--1,422,617 shares as of November 3, 1995
INDEX
THE SMITHFIELD COMPANIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Condensed consolidated balance sheets--September 30, 1995
and March 31, 1995
Condensed consolidated statements of income--Three months
ended September 30, 1995 and 1994; Six months ended
September 30, 1995 and 1994
Condensed consolidated statements of cash flows--Six
months ended September 30, 1995 and 1994
Notes to condensed consolidated financial statements--
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 March 31
1995 1995
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,805,436 $ 318,101
Receivables, less allowances
of $59,000 and $64,000 1,224,219 2,224,026
Inventories 3,978,919 6,065,746
Prepaid expenses and other 156,527 109,700
Deferred income taxes 165,000 165,000
----------- -----------
TOTAL CURRENT ASSETS 14,330,101 8,882,573
PROPERTY, PLANT AND EQUIPMENT 6,058,465 11,387,862
less allowances for depreciation 2,773,927 5,604,024
----------- -----------
3,284,538 5,783,838
OTHER ASSETS 728,052 2,776,805
---------- -----------
$18,342,691 $17,443,216
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 75,000 $ 100,000
Accounts payable 882,138 708,152
Other current liabilities 1,640,142 1,387,492
----------- -----------
TOTAL CURRENT LIABILITIES 2,597,280 2,195,644
LONG-TERM DEBT 1,000,000
DEFERRED INCOME TAXES 15,000
SHAREHOLDERS' EQUITY
Common stock, no par or stated
value--authorized 5,000,000 shares;
issued and outstanding 1,427,325
shares and 1,465,262 shares 5,344,833 5,752,656
Retained earnings 10,400,578 8,479,916
----------- -----------
15,745,411 14,232,572
----------- -----------
$18,342,691 $17,443,216
=========== ===========
Note: The balance sheet at March 31, 1995 has been derived
from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended Six months ended
September 30 September 30
1995 1994 1995 1994
Net sales $4,302,275 $4,242,884 $7,870,627 $7,697,670
Cost of goods sold 2,706,318 2,876,142 4,883,371 5,046,612
---------- ---------- ---------- ----------
GROSS PROFIT 1,595,957 1,366,742 2,987,256 2,651,058
Other operating revenue 2,262 50,238 8,173 59,042
---------- ---------- ---------- ----------
1,598,219 1,416,980 2,995,429 2,710,100
Selling, general and
administrative expenses 1,429,901 1,232,660 2,714,413 2,418,163
---------- ---------- ---------- ----------
OPERATING INCOME 168,318 184,320 281,016 291,937
Interest income(expense),net 87,633 (56,229) 69,126 (102,275)
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPER-
ATIONS BEFORE INCOME TAXES 255,951 128,091 350,142 189,662
Income taxes 90,000 51,000 128,000 76,000
---------- ---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 165,951 77,091 222,142 113,662
Discontinued operations
(net of income taxes):
Income from operations of
Bunker Hill 18,826 189,136 144,078 310,103
Gain on sale of Bunker Hill 1,699,155 -0- 1,699,155 -0-
--------- ---------- ---------- ----------
INCOME FROM DISCONTINUED
OPERATIONS 1,717,981 189,136 1,843,233 310,103
--------- ---------- ---------- ----------
NET INCOME $1,883,932 $ 266,227 $2,065,375 $ 423,765
========== ========== ========== ==========
Earnings per share:
Continuing operations $ .12 $ .05 $ .15 $ .08
Discontinued operations 1.20 .13 1.28 .21
---------- ---------- ---------- ----------
EARNINGS PER SHARE $ 1.32 $ .18 $ 1.43 $ .29
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 1,428,395 1,480,985 1,443,166 1,483,598
========== ========== ========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended September 30
1995 1994
OPERATING ACTIVITIES
Net income $2,065,375 $ 423,765
Income from discontinued operations (1,843,233) (310,103)
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 417,797 522,609
Gain on disposal of property
and equipment (911) (6,042)
Decrease in deferred taxes (15,000)
Change in assets and liabilities:
Trade receivables (96,705) (1,203,682)
Inventories (1,279,041) (1,758,596)
Prepaid expenses and other (75,800) (141,142)
Accounts payable and other
current liabilities 753,229 1,710,461
---------- ----------
Net cash used in continuing operations (74,289) (762,730)
Net cash from discontinued operations 144,078 310,103
---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 69,789 (452,627)
INVESTING ACTIVITIES
Proceeds from the sale of Bunker Hill 11,969,760
Expenses and income taxes related to
the sale of Bunker Hill (1,815,285)
Purchase of intangible assets (43,068) (300,000)
Purchase of property and equipment (123,325) (153,500)
Proceeds from sale of property and
equipment 7,000 6,397
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 9,995,082 (447,103)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 2,000,000 3,000,000
Principal payments on revolving line
of credit and long-term debt (3,025,000) (2,050,000)
Cash dividends paid (144,713) (118,849)
Repurchase of common stock (407,823) (71,086)
NET CASH PROVIDED BY (USED IN) ---------- ----------
FINANCING ACTIVITIES (1,577,536) 760,065
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 8,487,335 (139,665)
Cash and cash equivalents at
beginning of year 318,101 313,697
CASH AND CASH ---------- ----------
EQUIVALENTS AT END OF PERIOD $8,805,436 $ 174,032
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
and six month periods ended September 30, 1995 are not necessarily indicative
of the results that may be expected for the year ending March 31, 1996.
For further information, refer to the Company's annual report on Form 10-K
for the year ended March 31, 1995.
NOTE B--INVENTORIES
The components of inventory consist of the following:
September 30, 1995 March 31, 1995
Finished Goods $2,328,637 $3,641,963
Production Materials:
Meats 1,165,892 1,421,858
Other Ingredients 117,407 419,262
Packing Materials 366,983 582,663
---------- ----------
$3,978,919 $6,065,746
========== ==========
NOTE C--SALE OF THE ASSETS OF BUNKER HILL
On August 23, 1995, the Company sold most of the assets of its Bunker Hill
division to Castleberry/Snow's Brands, Inc. The gain on the sale was
$1.7 million after income tax expense of $1.0 million. All results of
operations for periods prior to the sale have been restated to present the
Company's former Bunker Hill division as a discontinued operation.
NOTE D--SHAREHOLDERS' EQUITY
During the six months ended September 30, 1995 the Company purchased and
retired 37,937 shares of its Common Stock at a cost of $407,823. Subsequent
to September 30, 1995 the Company purchased and retired an additional
4,708 shares of its Common Stock at a cost of $51,111.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company produces and markets a wide range of branded food products
primarily to the retail grocery and food service industries. The Company
also markets its products through direct mail and its own retail outlets.
Management does not consider the Company's business to be highly seasonal
due to its diverse lines of products; however, three of its units record
disproportionate pre-Christmas sales, making the Company's third quarter
sales and income the highest of the fiscal year.
Results of Operations
Net sales from continuing operations for the three months ended September
30, 1995 increased 1.3% to $4,302,275 compared to $4,242,884 for the three
months ended September 30, 1994. Net sales from continuing operations for
the six months ended September 30, 1995 increased 2.2% to $7,870,627 compared
to $7,697,670 for the six months ended September 30, 1994.
Gross profit increased during both the three and six months ended September
30, 1995 compared to the prior year. The improvement is due to the continued
effect of favorable raw material prices.
Other operating revenue was lower during the three and six months ended
September 30, 1995 compared to 1994. The prior year included an insurance
settlement of approximately $40,000.
Selling, general and administrative expenses increased 16.0% and 12.2% during
the three and six months ended September 30, 1995 respectively, compared to
the prior year. The increase in selling expenses was the result of increased
marketing and promotional expenses needed to maintain market share due to
competitive pressures as a result of lower raw material costs. The increase
in general and administrative expenses was less than 6% during both the three
and six month periods ended September 30, 1995, compared to 1994.
The significant change in interest is the result of extinguishing the
Company's revolving credit loan and investing the remaining proceeds of the
sale of Bunker Hill into highly liquid debt instruments.
Liquidity and Capital Resources
On August 23, 1995 the Company sold its Bunker Hill division to
Castleberry/Snow's Brands, Inc. After the payment of expenses and income
taxes the Company received net proceeds of approximately $10,150,000.
The Company repaid its outstanding revolving credit loan and invested much
of the remaining proceeds in short-term highly liquid debt instruments.
On September 30, 1995, approximately $9 million was invested.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Capital Resources--Continued
The Company will continue its strategy of looking for growth through
acquisitions in higher margin segments of the food industry. Having a
significant amount of cash on hand as well as available funds on its line of
credit, the Company believes it is in an excellent position to invest in
assets which will increase shareholder value over time.
The Company believes the sale of Bunker Hill will have a negative impact on
quarterly income in the short-term, but believes it will have a positive
effect as the Company transfers assets into higher growth segments of the
food industry through acquisitions.
As of September 30, 1995, the Company had all of its $10 million revolving
credit loan available.
The Company traditionally increases inventory during the first six months of
its fiscal year to meet the increased demand for its products during the
Christmas season. The Company finances the increase in inventory through
its operating cash flow and its line of credit. The Company believes it
has sufficient resources to meet all of its increased demand associated
with the Christmas season.
PART II. OTHER INFORMATION
The Company did not file any reports on Form 8-K during the three months ended
September 30, 1995.
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.
THE SMITHFIELD COMPANIES, INC.
(registrant)
DATE: November 10, 1995 /s/ Richard S. Fuller
______________________________
Richard S. Fuller
President and Chief Executive
Officer
DATE: November 10, 1995 /s/ Mark D. Bedard
______________________________
Mark D. Bedard
Treasurer and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Unaudited Consolidated Financial Statements of The Smithfield Companies,
Inc. for the three months ended September 30, 1995, and is qualified in its
entirety by reference to such Unaudited Consolidated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 8,805,436
<SECURITIES> 0
<RECEIVABLES> 1,283,219
<ALLOWANCES> 59,000
<INVENTORY> 3,978,919
<CURRENT-ASSETS> 14,330,101
<PP&E> 6,058,465
<DEPRECIATION> 2,773,927
<TOTAL-ASSETS> 18,342,691
<CURRENT-LIABILITIES> 2,597,280
<BONDS> 0
<COMMON> 5,344,833
0
0
<OTHER-SE> 10,400,578
<TOTAL-LIABILITY-AND-EQUITY> 18,342,691
<SALES> 7,870,627
<TOTAL-REVENUES> 7,878,800
<CGS> 4,883,371
<TOTAL-COSTS> 7,597,784
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 350,142
<INCOME-TAX> 128,000
<INCOME-CONTINUING> 222,142
<DISCONTINUED> 1,843,233
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,065,375
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
