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 June 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--1,428,994 shares as of August 4, 1995
INDEX
THE SMITHFIELD COMPANIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 1995
and March 31, 1995
Condensed consolidated statements of income--Three months
ended June 30, 1995 and 1994
Condensed consolidated statements of cash flows--Three
months ended June 30, 1995 and 1994
Notes to condensed consolidated financial statements--
June 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
June 30 March 31
1995 1995
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 292,222 $ 318,101
Receivables, less allowances
of $68,000 and $64,000 2,441,901 2,224,026
Inventories 6,903,575 6,065,746
Prepaid expenses and other 169,017 109,700
Deferred income taxes 165,000 165,000
----------- -----------
TOTAL CURRENT ASSETS 9,971,715 8,882,573
PROPERTY, PLANT AND EQUIPMENT 10,147,151 11,387,862
Less allowances for depreciation 4,514,160 5,604,024
----------- -----------
5,632,991 5,783,838
OTHER ASSETS 2,760,512 2,776,805
----------- -----------
$18,365,218 $17,443,216
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 100,000 $ 100,000
Accounts payable 670,632 708,152
Other current liabilities 1,328,715 1,387,492
----------- -----------
TOTAL CURRENT LIABILITIES 2,099,347 2,195,644
LONG-TERM DEBT 2,300,000 1,000,000
DEFERRED INCOME TAXES 15,000 15,000
SHAREHOLDERS' EQUITY
Common stock, no par or stated
value--authorized 5,000,000 shares;
issued and outstanding 1,428,994
shares and 1,465,262 shares 5,362,775 5,752,656
Retained earnings 8,588,096 8,479,916
----------- -----------
13,950,871 14,232,572
----------- -----------
$18,365,218 $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 June 30
1995 1994
Net sales $8,216,599 $7,775,774
Cost of goods sold 5,067,103 5,084,482
---------- ----------
GROSS PROFIT 3,149,496 2,691,292
Other operating revenue 21,572 58,762
---------- ----------
3,171,068 2,750,054
Selling, general and
administrative expenses 2,850,118 2,442,470
---------- ----------
OPERATING INCOME 320,950 307,584
Interest expense, net 18,507 46,046
---------- ----------
INCOME BEFORE INCOME TAXES 302,443 261,538
Income taxes 121,000 104,000
---------- ----------
NET INCOME $ 181,443 $ 157,538
========== ==========
EARNINGS PER SHARE $ .12 $ .11
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,458,099 1,486,240
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended June 30
1995 1994
OPERATING ACTIVITIES
Net income $ 181,443 $ 157,538
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 260,165 262,539
Gain on disposal of property
and equipment (1,312)
Change in assets and liabilities
Trade receivables (217,875) 92,868
Inventories (837,829) (1,801,210)
Prepaid expenses and other (59,317) (99,493)
Accounts payable and other
current liabilities (96,297) 384,606
---------- ----------
NET CASH USED IN OPERATING
ACTIVITIES (771,022) (1,003,152)
INVESTING ACTIVITIES
Purchase of intangible assets (43,068) (300,000)
Purchase of property and equipment (55,645) (67,108)
Proceeds from sale of property and equipment 7,000
---------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (91,713) (367,108)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 2,000,000 2,200,000
Principal payments on revolving line
of credit and long-term debt (700,000) (825,000)
Cash dividends paid (73,263) (59,525)
Repurchase of common stock (389,881) (34,375)
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 836,856 1,281,100
---------- ----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (25,879) (89,160)
Cash and cash equivalents at
beginning of year 318,101 313,697
---------- ----------
CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 292,222 $ 224,537
========== ==========
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 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
month perior ended June 30, 1995 is not necessarily indicative of the results
that may be expected for the year ending March 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in 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:
June 30 March 31
1995 1995
Finished Good $4,604,585 $3,641,963
Production Materials:
Meats 1,372,304 1,421,858
Other Ingredients 333,237 419,262
Packing Materials 593,449 582,663
---------- ----------
$6,903,575 $6,065,746
========== ==========
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Continued
June 30, 1995
NOTE C--SALE OF THE ASSETS OF BUNKER HILL
On June 8, 1995, the company entered into a definitive purchase agreement to
sell the assets of its Bunker Hill division for $12,925,000 payable in cash
subject to certain adjustments. The Company will recognize an after-tax
gain of approximately $1,700,000 upon the completion of the sale which is
expected to take place on or about August 18, 1995.
PRO-FORMA CONDENSED BALANCE SHEET
JUNE 30, 1995
The accompanying pro-forma condensed balance sheet gives effect to the sale
of the Bunker Hill division as if it had occurred as of June 30, 1995. The
pro-forma adjustments eliminate the assets and liabilities sold or assumed
and long-term debt paid down with the proceeds of the sale. (All amounts in
thousands)
Pro-Forma
Historical Adjustments Pro-Forma
Cash $ 292 $ 8,184 $ 8,476
Accounts receivable 2,442 (1,452) 990
Inventories 6,904 (3,669) 3,235
Other Current Assets 334 (72) 262
------- -------- -------
Total Current Assets 9,972 2,991 12,963
Property and Equipment 5,633 (2,302) 3,331
Other Assets 2,760 (2,025) 735
------- -------- -------
$18,365 $ (1,336) $17,029
======= ======== =======
Current Liabilities $ 2,099 $ (736) $ 1,363
Long-Term Debt 2,300 (2,300) -0-
Deferred Taxes 15 -0- 15
Stockholders' Equity 13,951 1,700 15,651
------- -------- -------
$18,365 $ (1,336) $17,029
======= ======== =======
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
NOTE C--SALE OF THE ASSETS OF BUNKER HILL--Continued
PRO-FORMA CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1995
The accompanying pro-forma condensed income statement gives effect to the
sale of the Bunker Hill division as if it had occurred as of April 1, 1995.
The pro-forma adjustments eliminate the revenue and expenses of the Bunker
Hill division for the three months ended June 30, 1995. The adjustments
also reflect the effect of reinvesting the net proceeds from the sale, after
repaying the Company's revolving credit line at 5.6% which was the 3 month
Treasury Bill rate on June 30, 1995. (All amounts in thousands)
Pro-Forma
Historical Adjustments Pro-Forma
Net Sales $8,217 $(4,648) $3,569
Cost of goods sold 5,067 (2,890) 2,177
------ ------- ------
Gross profits 3,150 (1,758) 1,392
Other operating revenue 21 (16) 5
------ ------ ------
3,171 (1,774) 1,397
Selling, general and
administrative expenses 2,850 (1,566) 1,284
------ ------- ------
321 (208) 113
Interest income -0- 133 133
Interest expense (19) 17 (2)
------ ------- ------
Interest before income tax 302 (58) 244
Income taxes 121 (23) 98
------ ------- ------
Net Income $ 181 $ (35) $ 146
====== ======= ======
Earnings per share $ .12 $ (.02) $ .10
====== ======= ======
THE SMITHFIELD COMPANIES, INC.
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 for the three months ended June 30, 1995 were $8,216,599 compared
to $7,775,774 for the three months ended June 30, 1994. The increase in
sales is attributed to an increase in demand of many branded products sold
to the retail grocery trade. This increase in demand was due to an increase
in marketing and promotional expenditures as a result of improved margins.
Gross profit increased to 38.3% for the three months ended June 30, 1995
compared to 34.6% for the three months ended June 30, 1994. The higher
margins were due to favorable beef and pork prices compared to the prior year.
Selling, general and administrative expenses increased 16.7% during the
three months ended June 30, 1995 compared to the prior year. Selling
expenses as a percentage of net sales were 21.6% for the three months ended
June 30, 1995 compared to 18.0% for the same period during 1994. As
mentioned above, the increase in marketing and promotional expenditures
was to help increase sales and expand market share. The increase in
general and administrative expenses was less than 3% during 1995 compared to
1994.
The decrease in net interest expense from $46,046 for the three months ended
June 30, 1994 to $18,507 for the three months ended June 30, 1995 was due to
a decrease in average debt outstanding from approximately $3 million in 1994
to slightly above $1 million in 1995. The decrease was somewhat offset by
increased interest rates in 1995. The Company's average interest rate during
the three months ended June 30, 1995 was slightly below 7.0% compared to
5.5% during 1994.
THE SMITHFIELD COMPANIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Capital Resources
On June 8, 1995, the Company signed a definitive agreement to sell the
assets of its Bunker Hill division for approximately $12,925,000. The
Company will recognize an after-tax gain of approximately $1,700,000 upon
the completion of the sale which is expected to be completed during the
second quarter. The Company is expecting its net proceeds to be
approximately $10.6 million. After repaying its outstanding revolving
credit loan the Company is expecting to have approximately $9.0 million
in available funds.
If the assets of Bunker Hill are sold, the Company intends to invest its
available funds in short-term securities. 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 does believe 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.
The Company's current cash flow and available funds on its credit line
are sufficient to satisfy its existing cash requirements.
The Company's revolving credit loan had an outstanding balance of
$2,300,000 at June 30, 1995 and $1,000,000 at March 31, 1995. As of
June 30, 1995, the Company still had $7.7 million available on its
revolving credit loan.
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 believes it has sufficient resources to meet
all of its increased demand associated with the Christmas season.
PART II. OTHER INFORMATION
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 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: August 10, 1995 /s/ Richard S. Fuller
______________________________
Richard S. Fuller
President and Chief Executive
Officer
DATE: August 10, 1995 /s/ Mark D. Bedard
______________________________
Mark D. Bedard
Treasurer and Chief Financial
Officer
