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, 1996
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)
(757) 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--1,280,960 shares as of July 26, 1996
INDEX
THE SMITHFIELD COMPANIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 1996
and March 31, 1996
Condensed consolidated statements of income--Three months
ended June 30, 1996 and 1995
Condensed consolidated statements of cash flows--Three months
ended June 30, 1996 and 1995
Notes to condensed consolidated financial statements--
June 30, 1996
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
1996 1996
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,106,397 $ 9,934,130
Receivables, less allowances
of $63,000 and $64,000 956,215 990,968
Inventories 3,555,972 2,639,458
Prepaid expenses and other 79,767 65,009
Deferred income taxes 135,000 135,000
----------- -----------
TOTAL CURRENT ASSETS 12,833,351 13,764,565
PROPERTY, PLANT AND EQUIPMENT 6,080,606 6,023,350
less allowances for depreciation 3,018,520 2,923,577
----------- -----------
3,062,086 3,099,773
OTHER ASSETS 800,058 814,389
----------- -----------
$16,695,495 $17,678,727
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,274,781 $ 447,043
Other current liabilities 921,704 1,337,230
----------- -----------
TOTAL CURRENT LIABILITIES 2,196,485 1,784,273
SHAREHOLDERS' EQUITY
Common stock, no par or stated
value--authorized 5,000,000 shares;
issued and outstanding 1,280,960
shares and 1,416,160 shares 3,712,557 5,220,445
Retained earnings 10,786,453 10,674,009
----------- -----------
14,499,010 15,894,454
----------- -----------
$16,695,495 $17,678,727
=========== ===========
Note: The balance sheet at March 31, 1996 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
1996 1995
Net sales $3,446,998 $3,568,352
Cost of goods sold 2,109,205 2,177,053
---------- ----------
GROSS PROFIT 1,337,793 1,391,299
Other operating revenue 13,252 5,911
---------- ----------
1,351,045 1,397,210
Selling, general and
administrative expenses 1,192,955 1,284,512
---------- ----------
OPERATING INCOME 158,090 112,698
Interest income(expense), net 88,162 (18,507)
---------- ----------
INCOME FROM CONTINUING OPER-
ATIONS BEFORE INCOME TAXES 246,252 94,191
Income taxes 64,000 37,000
---------- ----------
INCOME FROM CONTINUING
OPERATIONS 182,252 57,191
Discontinued operations:
Income from operations of Bunker
Hill less income taxes of $84,000 124,252
---------- ----------
NET INCOME $ 182,252 $ 181,443
========== ==========
Earnings per share:
Continuing operations $ .13 $ .04
Discontinued operations - .08
---------- ----------
EARNINGS PER SHARE $ .13 $ .12
========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 1,383,942 1,458,099
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended June 30
1996 1995
OPERATING ACTIVITIES
Net income $ 182,252 $ 181,443
Income from discontinued operations (124,252)
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 109,274 123,837
Loss on disposal of property
and equipment (1,312)
Change in assets and liabilities:
Trade receivables 34,753 (333,354)
Inventories (916,514) (435,477)
Prepaid expenses and other (14,758) (56,056)
Accounts payable and other
current liabilities 412,212 (370,790)
---------- ----------
Net cash used in continuing operations (192,781) (1,035,961)
Net cash provided by discontinued
operations 264,939
---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES (192,781) (771,022)
INVESTING ACTIVITIES
Purchase of intangible assets (43,068)
Purchase of property and equipment (57,256) (55,645)
Proceeds from sale of property and
equipment 7,000
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (57,256) (91,713)
FINANCING ACTIVITIES
Proceeds from line of credit loan 2,000,000
Principal payments on line of
credit loan and long-term debt (700,000)
Cash dividends paid (69,808) (73,263)
Repurchase of common stock (1,507,888) (389,881)
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,577,696) 836,856
---------- ----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (1,827,733) (25,879)
Cash and cash equivalents at
beginning of year 9,934,130 318,101
---------- ----------
CASH AND CASH
EQUIVALENTS AT END OF PERIOD $8,106,397 $ 292,222
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1996
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 period ended June 30, 1996 is not necessarily indicative of the results
that may be expected for the year ending March 31, 1997. 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, 1996.
NOTE B--INVENTORIES
The components of inventory consist of the following:
June 30, 1996 March 31, 1996
Finished Goods $1,791,645 $1,244,061
Production Materials:
Meats 1,310,523 986,548
Other Ingredients 97,226 92,350
Packing Materials 356,578 316,499
---------- ----------
$3,555,972 $2,639,458
========== ==========
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. 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 three months ended June 30, 1996 the Company purchased and retired
135,200 shares of its Common Stock at a cost of $1,507,888.
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, food service and gourmet food industries.
The Company also markets its products through direct mail and its own retail
outlets. The Company's business is somewhat seasonal with its direct mail
and gourmet food operations having disproportionate sales during the Christmas
season. This traditionally makes the Company's third quarter sales and income
the highest of the fiscal year.
Results of Continuing Operations
Net sales for the three months ended June 30, 1996 were $3,446,998 compared to
$3,568,352 for the three months ended June 30, 1995. Gross profit for the
three months ended June 30, 1996 remained relatively constant at 38.8%
compared to 38.7% for the three months ended June 30, 1995.
Selling, general and administrative expenses decreased 7.1% during the three
months ended June 30, 1996 to $1,192,955 from $1,284,512 for the three months
ended June 30, 1995. The reduction in these expenses, as well as slightly
lower sales during the current quarter, are due to tighter expense controls
and the decision to forego some sales that carried higher than normal selling
expenses.
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. After the
payment of expenses and income taxes the Company received net proceeds of
approximately $10,150,000. The Company repaid its outstanding line of credit
loan and invested much of the remaining proceeds in short-term highly liquid
debt instruments. On June 30, 1996 approximately $8.1 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.
Until a meaningful acquisition is completed which would shift our assets into
higher yielding investments, lower interest rates on the Company's short-term
securities could have a negative impact on quarterly income.
As of June 30, 1996, the Company had all of its $10 million line of 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 is financing the increase in inventory through
its operating cash flow and the use of some of its short-term securities.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a.) 27. Financial Data Schedule
b.) The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
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 2, 1996 /s/ Richard S. Fuller
______________________________
Richard S. Fuller
President and Chief Executive
Officer
DATE: August 2, 1996 /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 June 30, 1996, and is qualified in its
entirety by reference to such Unaudited Consolidated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 8,106,397
<SECURITIES> 0
<RECEIVABLES> 1,019,215
<ALLOWANCES> 63,000
<INVENTORY> 3,555,972
<CURRENT-ASSETS> 12,833,351
<PP&E> 6,080,606
<DEPRECIATION> 3,018,520
<TOTAL-ASSETS> 16,695,495
<CURRENT-LIABILITIES> 2,196,485
<BONDS> 0
0
0
<COMMON> 3,712,557
<OTHER-SE> 10,786,453
<TOTAL-LIABILITY-AND-EQUITY> 16,695,495
<SALES> 3,446,998
<TOTAL-REVENUES> 3,460,250
<CGS> 2,109,205
<TOTAL-COSTS> 3,302,160
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 246,252
<INCOME-TAX> 64,000
<INCOME-CONTINUING> 182,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 182,252
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
