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 December 31, 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--1,217,549 shares as of February 5, 1997
INDEX
THE SMITHFIELD COMPANIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Condensed consolidated balance sheets--December 31, 1996
and March 31, 1996
Condensed consolidated statements of income--Three months
ended December 31, 1996 and 1995; Nine months ended
December 31, 1996 and 1995
Condensed consolidated statements of cash flows--Nine
months ended December 31, 1996 and 1995
Notes to condensed consolidated financial statements--
December 31, 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
December 31 March 31
1996 1996
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,004,317 $ 9,934,130
Receivables, less allowances
of $69,000 and $64,000 2,730,807 990,968
Inventories 1,946,917 2,639,458
Prepaid expenses and other 98,650 65,009
Deferred income taxes 135,000 135,000
----------- -----------
TOTAL CURRENT ASSETS 12,915,691 13,764,565
PROPERTY, PLANT AND EQUIPMENT 6,262,871 6,023,350
less allowances for depreciation 3,179,235 2,923,577
----------- -----------
3,083,636 3,099,773
OTHER ASSETS 756,526 814,389
---------- -----------
$16,755,853 $17,678,727
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,197,378 $ 447,043
Other current liabilities 1,261,386 1,337,230
----------- -----------
TOTAL CURRENT LIABILITIES 2,458,764 1,784,273
SHAREHOLDERS' EQUITY
Common stock, no par or stated
value--authorized 5,000,000 shares;
issued and outstanding 1,217,549
shares and 1,416,160 shares 3,007,611 5,220,445
Retained earnings 11,289,478 10,674,009
----------- -----------
14,297,089 15,894,454
----------- -----------
$16,755,853 $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 Nine months ended
December 31 December 31
1996 1995 1996 1995
Net sales $7,880,430 $7,441,206 $15,908,172 $15,311,833
Cost of goods sold 5,281,419 4,758,742 10,603,569 9,642,113
---------- ---------- ---------- -----------
GROSS PROFIT 2,599,011 2,682,464 5,304,603 5,669,720
Other operating revenue 31,872 24,581 82,536 32,754
---------- ---------- ---------- -----------
2,630,883 2,707,045 5,387,139 5,702,474
Selling, general and
administrative expenses 1,955,337 2,002,914 4,372,525 4,717,327
---------- ---------- ---------- -----------
OPERATING INCOME 675,546 704,131 1,014,614 985,147
Interest income, net 63,558 89,706 216,860 158,832
---------- ---------- ---------- -----------
INCOME FROM CONTINUING OPER-
ATIONS BEFORE INCOME TAXES 739,104 793,837 1,231,474 1,143,979
Income taxes 269,000 279,000 406,000 407,000
---------- ---------- ---------- -----------
INCOME FROM CONTINUING
OPERATIONS 470,104 514,837 825,474 736,979
Discontinued operations
(net of income taxes):
Income from operations of
Bunker Hill - - - 144,078
Gain on sale of Bunker Hill - - - 1,699,155
--------- ---------- ---------- -----------
INCOME FROM DISCONTINUED
OPERATIONS - - - 1,843,233
--------- ---------- ---------- -----------
NET INCOME $ 470,104 $ 514,837 $ 825,474 $ 2,580,212
========== ========== ========== ===========
Earnings per share:
Continuing operations $ .37 $ .36 $ .63 $ .51
Discontinued operations - - - 1.28
---------- ---------- ---------- -----------
EARNINGS PER SHARE $ .37 $ .36 $ .63 $ 1.80
========== ========== ========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 1,257,366 1,423,753 1,306,268 1,436,672
========== ========== ========== ===========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended December 31
1996 1995
OPERATING ACTIVITIES
Net income $ 825,474 $2,580,212
Income from discontinued operations (1,843,233)
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 318,898 352,815
(Gain)loss on disposal of
property and equipment (5,240) 35,309
Decrease in deferred taxes (15,000)
Change in assets and liabilities:
Trade receivables (1,739,839) (2,109,481)
Inventories 692,541 667,118
Prepaid expenses and other (33,641) (62,365)
Accounts payable and other
current liabilities 674,491 912,526
Other Assets 14,868
---------- ----------
Net cash provided by continuing operations 747,552 517,901
Net cash provided by discontinued operations 621,849
---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 747,552 1,139,750
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)
Purchase of property and equipment (274,226) (149,485)
Proceeds from sale of property and
equipment 19,700 7,000
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (254,526) 9,968,922
FINANCING ACTIVITIES
Proceeds from revolving line of credit 2,000,000
Principal payments on revolving line
of credit and long-term debt (3,050,000)
Cash dividends paid (210,005) (215,844)
Repurchase of common stock (2,212,834) (458,934)
---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES (2,422,839) (1,724,778)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,929,813) 9,383,894
Cash and cash equivalents at
beginning of year 9,934,130 318,101
CASH AND CASH ---------- ----------
EQUIVALENTS AT END OF PERIOD $8,004,317 $9,701,995
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 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
and nine month periods ended December 31, 1996 are 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:
December 31, 1996 March 31, 1996
Finished Goods $1,177,692 $1,244,061
Production Materials:
Meats 357,160 986,548
Other Ingredients 105,213 92,350
Packing Materials 306,852 316,499
---------- ----------
$1,946,917 $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 nine months ended December 31, 1996 the Company purchased and
retired 198,611 shares of its Common Stock at a cost of $2,212,834.
NOTE E--SUBSEQUENT EVENT
On February 4, 1997, the Company signed a definitive agreement to purchase
the frozen barbeque and chili product lines from Doughtie's Foods, Inc.
These product lines are marketed primarily to the foodservice trade. The
operations will be moved to the Company's plant in Smithfield, Virginia and
will add approximately $3,000,000 in sales. The purchase of the related
assets will be funded by the Company's short-term investments and will not
have a material effect on the Company's financial position. The transaction
id expected to be consummated prior to March 31, 1997.
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, foodservice 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 from continuing operations for the three months ended December 31,
1996 increased 5.9% to $7,880,430 compared to $7,441,206 for the three months
ended December 31, 1995. Net sales from continuing operations for the nine
months ended December 31, 1996 increased 3.9% to $15,908,172 compared to
$15,311,833 for the nine months ended December 31, 1995.
Gross profit margins for the three and nine months ended December 31, 1996
decreased compared to the prior year. The lower margins are due to increased
pork prices.
Selling, general and administrative expenses decreased 2.4% and 7.3% during
the three and nine months ended December 31, 1996, respectively, compared to
the prior year. A planned reduction in selling expenses and tighter expense
controls helped contribute to these lower expenses.
The reduction in net interest income during the three months ended December
31, 1996 is due to the use of funds to purchase approximately 200,000 shares
of the Company's stock. The increase in net interest income during the nine
months ended December 31, 1996 compared to the prior year 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 December
31, 1996, approximately $7.8 million was invested.
On February 4, 1997, the Company signed a definitive agreement to purchase
the frozen barbeque and chili product lines from Doughties's Foods, Inc. The
purchase will be completely funded with a portion of the Company's short-term
debt instruments. The overall purchase price will not have a material effect
on the Company's financial position.
As of December 31, 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 finances the increase in inventory through its
operating cash flow and the use of some of its short-term investments.
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 December 31, 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: February 7, 1997 /s/ Richard S. Fuller
______________________________
Richard S. Fuller
President and Chief Executive
Officer
DATE: February 7, 1997 /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 nine months ended December 31, 1996, and is qualified in its
entirety by reference to such Unaudited Consolidated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 8,004,317
<SECURITIES> 0
<RECEIVABLES> 2,799,807
<ALLOWANCES> 69,000
<INVENTORY> 1,946,917
<CURRENT-ASSETS> 12,915,691
<PP&E> 6,262,871
<DEPRECIATION> 3,179,235
<TOTAL-ASSETS> 16,755,853
<CURRENT-LIABILITIES> 2,458,764
<BONDS> 0
0
0
<COMMON> 3,007,611
<OTHER-SE> 11,289,478
<TOTAL-LIABILITY-AND-EQUITY> 16,755,853
<SALES> 15,908,172
<TOTAL-REVENUES> 15,990,708
<CGS> 10,603,569
<TOTAL-COSTS> 14,976,094
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,231,474
<INCOME-TAX> 406,000
<INCOME-CONTINUING> 825,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 825,474
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
