SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
March 31, 1997 0-17084
THE SMITHFIELD COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-1167160
(State or other jurisdic- (I.R.S. Employer
tion of incorporation) Identification No.)
311 County Street, Portsmouth, VA 23704
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:(757) 399-3100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par or Stated Value
(Title of Class)
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 period 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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant computed by reference to the average bid and asked prices on
June 6, 1997: $6,038,824
The number of shares outstanding of each of the Registrant's classes of
Common Stock, as of June 6, 1997 was 1,190,049 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended March 31, 1997
are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders meeting are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
General
Through its operating units, The Smithfield Companies, Inc. ("the Company")
produces and markets a wide range of branded food products to the retail
grocery and food service industries. The Company has the legal right through
two of its units (Smithfield Ham and Joyner) to label certain of its aged, dry
cured hams as genuine "Smithfield" hams, a term that can be used by only two
other companies. The use of this term is protected by the laws of the
Commonwealth of Virginia and enforced by the United States Department of
Agriculture.
The Company was incorporated in Virginia in 1981 as Pruden Foods, Inc. The
name was changed to The Smithfield Companies, Inc. in 1985.
The Company does not raise or slaughter animals or grow any vegetable
products, but instead purchases all meats and ingredients for processing and
curing. The Company purchases its meats and ingredients from a variety of
suppliers and it is not dependent on any one particular supplier for a
material portion of meats, ingredients or packaging materials.
The Smithfield Ham and Products Co., Inc.
Founded in 1917 as a specialty food producer emphasizing genuine
"Smithfield" hams, Smithfield Ham has evolved from a cured meat producer and
meat canner to become primarily a producer of frozen barbecues and chilies
for the food service and retail grocery industries. Smithfield Ham began
producing frozen barbeques in 1985 primarily for the food service industry.
On February 28, 1997, Smithfield Ham acquired the frozen barbecue and chili
product lines of Doughtie's Foods, Inc. The operations have been integrated
into the Company's plant in Smithfield, Virginia and will add approximately
$3,000,000 in annual sales. The frozen line accounted for 73% of the unit's
sales during the current year and includes pork, chicken and beef barbeques
and frozen chili. The frozen line is marketed under the "James River",
"Smitty Pig", "Virginia's Choice" and "Doughtie" brands primarily in the
Mid-Atlantic states. Management believes the frozen products have
significant growth potential.
Smithfield Ham produces and markets barbeque sauces in plastic and glass
containers and portion control packets for both the food service and retail
grocery industries. It also markets horseradish sauces, deviled meat
spreads, canned barbeques, country hams and genuine "Smithfield" hams under
the "Amber" brand. 19% of Smithfield Ham's sales is composed of cured hams,
honey glazed hams, canned meat products and meat spreads in glass containers
marketed under the following brands: "James River", "Princess Anne" and "Amber".
These products are sold in the Mid-Atlantic states to retail grocery accounts
and, jointly with Joyner, by direct mail through seasonal consumer catalogs.
The remaining 8% of the units sales relates to barbeque and horseradish
sauces sold to the fast food industry. These products are marketed primarily
in the southeast under the "James River" brand.
V. W. Joyner & Co.
Founded in 1889, V. W. Joyner & Co. is a curer and packer of genuine
"Smithfield" hams under the "Joyner" brand and a curer and packer of country
hams under the "Red Eye" brand. Joyner has expanded its business by further
processing these two main products into various sliced, cooked and pressed
variations for both the food service and retail grocery industry. The curing
procedures for genuine Smithfield and country hams have not changed appreciably
in the last 100 years, which accounts for the distinct and readily identifiable
taste associated with these hams.
Joyner's sales are concentrated in Virginia, but Joyner maintains a large
number of small accounts throughout the country. In addition, Joyner sells by
direct marketing through seasonal consumer catalogs in combination with
Smithfield Ham.
Joyner's business is highly seasonal, concentrated during the Thanks-
giving and Christmas holiday period. As a result, the third fiscal quarter
accounted for 47% of Joyner's annual sales.
Pruden Packing Co., Inc.
Established in 1917 by P. D. Pruden, Pruden's first 50 years involved
a number of activities, including curing country hams and other pork
products, ginning cotton and packing potatoes and watermelons. By the late
1960's, Pruden focused exclusively on curing and packing dry cured pork
products, including country hams, bacon and shoulders, which remain its
primary products.
Pruden markets its country meats primarily in Virginia and North Carolina
under the "Peanut City" and "Pruden" brands. It also exports hams and shoulders
to the Caribbean under its own and private label brands. Pruden's top ten
customers account for approximately 72% of its sales.
Pruden's business is highly seasonal, concentrated during the Thanks-
giving and Christmas holiday period. As a result, the third fiscal quarter
accounted for 44% of its annual sales.
Pruden was acquired in 1986 by the Company. The plant is located in
Suffolk, Virginia.
Williamsburg Foods, Inc./The Peanut Shop, Inc.
These two subsidiaries are operated as one unit of the Company and
involve a manufacturing facility which operates as Williamsburg Foods, Inc. and
four retail stores, which trade as "The Peanut Shop".
The manufacturing facility processes high quality extra large Virginia
peanuts and premium cashews, which it packs in vacuum sealed tins and other
containers for its own retail store, for sale to other retailers, and for
direct marketing to consumers through its seasonal retail catalogs. In
addition, Williamsburg also packs, under its label, other specialty products
such as pistachios, cashews and soups, and purchases for resale related
peanut products, including candy and peanut butter. All of these products
are marketed under "The Peanut Shop of Williamsburg" label to specialty
customers throughout the country.
The retail stores, currently located in the southeastern United States,
are located in tourist oriented shopping areas. Each store operates with a
separate name depicting its location (i.e. The Peanut Shop of Williamsburg).
The stores feature their own brand of peanuts and peanut products, an
extensive line of other nut products and a large selection of the Company's
cured meat products. Management will continue to look for additional
locations to open retail stores.
Williamsburg Foods, Inc. and The Peanut Shop, Inc. were acquired in
late 1986. The manufacturing facility is located near Williamsburg in James
City County, Virginia.
The New Orleans School of Cooking and Louisiana General Store
This operation, which was acquired in August, 1992, is a unique multi-
faceted specialty food retailer which combines a single-session tourist
cooking school, retail store and mail order operation.
The cooking school caters to tourists visiting New Orleans and provides
education on the Louisiana culture and the preparation of local "Cajun
cooking". A meal is prepared during the class and served to the
participants. The retail store features local food and gift items unique to
the New Orleans area.
Marketing and Customers
The Company is not dependent on any single customer or few customers,
the loss of any one or more of which would have a material adverse effect on
the Company. No customer accounts for more than 10% of the Company's
consolidated sales.
Each unit has developed a marketing strategy which emphasizes quality
products, customer service and maximum use of its regional brand awareness by
consumers. Whenever possible the "Smithfield" name is emphasized by
Smithfield Ham and Joyner to take advantage of the name's favorable image in
the food industry and with consumers. The units have wholesale accounts
throughout the United States, but the primary market area is the states of
Virginia, Maryland, North Carolina, South Carolina, West Virginia, Tennessee,
Georgia and Florida, and the District of Columbia.
At Smithfield Ham, an executive supervises four sales executives and a
network of regional brokers. Smithfield Ham utilizes volume discounts and
co-op advertising to promote its products. Products are distributed by its
fleet of three trucks but many customers use their own trucks to pick up
Smithfield Ham products. The unit does no media advertising except related
to its direct marketing (catalog) business, where direct consumer response
ads are placed in selected national and regional magazines.
At Joyner, the general manager and the sales manager are responsible
for all food service and retail grocery accounts and supervision of a small
group of brokers around the country. Located within one mile of each other,
Joyner and Smithfield Ham share the same delivery fleet of three trucks for
Virginia deliveries and generally use common carrier or customer pickup for
sales outside Virginia.
Joyner utilizes volume discounts, co-op advertising and point-of-sale
advertising to promote its products. Like Smithfield Ham, Joyner does no
media advertising except related to its direct marketing (catalog) efforts
with Smithfield Ham.
Currently, there are only four producers of genuine "Smithfield" hams.
By the laws of the Commonwealth of Virginia, a genuine Smithfield ham must be
dry cured and aged for a minimum of six months and the processing must take
place within the town limits of Smithfield, Virginia. The law is enforced by
both state and federal meat regulatory personnel. The Company's Smithfield
Ham and Joyner units are two of the four producers currently permitted to
call certain of their hams genuine "Smithfield", thus creating a unique and
protected market for their two brands of this specialty ham.
Pruden sells primarily to retail grocery chains and retail distributors
in eastern Virginia and eastern North Carolina. Pruden's president and its
general manager supervise all sales activities. Pruden uses volume discounts
and co-op advertising but does no other media advertising. Pruden
distributes its products on two trucks within its geographical market,
although several of Pruden's primary distributors pick up products from its
plant in Suffolk, Virginia. Pruden exports dry cured hams and other pork
products to a number of Caribbean Islands in the fall of each year.
Williamsburg sells to a wide variety of specialty retail outlets and
catalogers throughout the country. Its vice president and general manager
and the sales manager are responsible for generating these sales through
direct calls, "fancy food" trade shows and trade publications.
Williamsburg's direct consumer marketing (catalog) sales are generated from
two mass mailings per year. Wholesale distribution is largely by common
carrier. The balance of Williamsburg's sales are accounted for by its
subsidiary, The Peanut Shop, Inc., which operates four retail stores.
The New Orleans School of Cooking and Louisiana General Store obtains a
significant portion of its sales from tourists visiting the New Orleans area.
The Company has one sales person who works with the tourism industry in
generating groups to attend classes. Its general manager is responsible for
all direct consumer catalog sales and sales to various wholesale customers.
Wholesale distribution is largely by common carrier.
The New Orleans School of Cooking and Louisiana General Store is located
in the famous Jackson Brewery Shopping complex next to the Mississippi River in
New Orleans' French Quarter.
Raw Materials
One of the Company's primary raw materials consist of fresh and frozen
pork products purchased domestically or imported. Should increases in the
cost of raw materials occur, the Company may not be able to pass such
increases through to its customers. The Company has a number of suppliers
throughout the United States and Canada and has not experienced any
difficulty in obtaining adequate supplies of its raw materials.
Competition
Because of the Company's variety of products and its sales to both the
retail grocery industry and the food service industry, its competitors are
likewise varied and numerous. Smithfield Ham competes with several large and
small regional food processors. Joyner and Pruden primarily compete with a
number of small ham processors of similar size located in Virginia and North
Carolina. Williamsburg competes with a number of peanut processors of similar
size located in Virginia and North Carolina. New Orleans competes with one
other cooking school and various retail stores that sell local "Louisiana"
products. The Company believes that all of its units compete effectively with
other food processors by providing products of predictable quality and
consistency, and responsive service to its customers.
Employees
As of March 31, 1997, the Company had approximately 89 full-time employees
and 89 part-time employees. During the peak holiday period from September
through December, the Company typically has employed up to an additional 50
seasonal employees. All hourly, non-clerical employees at Pruden are
represented by Local 25/65 of the United Auto Workers Union. The collective
bargaining agreement expires on May 1, 1998. At Smithfield Ham and Joyner,
all hourly, non-clerical employees are represented by Local 1046 affiliated
with the Laborers' International Union of North America, AFL-CIO, and are in
the second year of a three year contract. All other units are non-union.
Virginia is a right-to-work state.
None of the units with collective bargaining agreements has ever
experienced a strike and the Company considers its employee relations to be
good.
Government Regulation
Food products purchased, processed and sold by the Company are subject
to various federal, state and local laws and regulations, including the
federal Meat Inspection Act and the Food and Drug Act. Smithfield Ham,
Joyner and Pruden are subject to United States Department of Agriculture
regulations regarding quality, labeling and sanitary control. Pruden has
been under the U. S. Department of Agriculture's Total Quality Control System
Program (TQC) since 1985, which enables Pruden to self-inspect its products and
production conditions and techniques. The Company is also subject to various
federal, state and local regulations regarding work place health and safety,
environmental protection, equal employment opportunity and other matters.
Trademarks
All significant brand names used by the Company are protected by actual
or pending federal trademark registration.
ITEM 2. PROPERTIES
The Smithfield Ham plant is located on seven acres in Smithfield,
Virginia. The office and manufacturing facilities have a total of 41,012
square feet. The Joyner facility with 30,714 square feet on three acres is
also located in Smithfield. Pruden occupies a 32,127 square foot facility
on three acres in Suffolk, Virginia. Williamsburg occupies a 20,000 square
foot facility on 1.5 acres in James City County, Virginia. The Company also
owns an office building with approximately 13,000 square feet of leasable
space. The Company occupies approximately 3,000 square feet and the remaining
portion is available for lease. The Company also owns equipment and vehicles
used in its operations. The Company owns all of its property free of any
liens or encumbrances. In addition to this property the Company has
operating leases for each of its retail operations. Commitments associated
with these leases are disclosed in Note I to the Company's consolidated
financial statements and is incorporated herein by reference.
All of the Company's facilities have access to municipal sewer systems.
Management believes that the sewage treatment facilities available to the
Company are and will continue to be adequate.
The Company believes its facilities and equipment are generally well
maintained and have a capacity adequate for the Company's current needs.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDERS MATTERS
Common Stock Market Prices and Dividends on the inside back cover
of the annual shareholders report for the year ended March 31, 1997
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 3 of the annual shareholders report
for the year ended March 31, 1997 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 4 and 5 of the annual shareholders
report for the year ended March 31, 1997 is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of Coopers & Lybrand L.L.P., independent auditors, and
the consolidated Financial Statements included on pages 6 through
15 of the annual shareholders report for the year ended March 31,
1997 are incorporated herein by reference.
Quarterly Results of Operations on page 16 of the annual
shareholders report for the year ended March 31, 1997 is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained on pages 3 and 4 in the Company's proxy
statement dated June 24, 1997, with respect to directors of the
Company, is incorporated herein by reference in response to this item.
The information contained on page 16 of the annual shareholders report
for the year ended March 31, 1997 with respect to executive officers,
is incorporated herein by reference in response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 6 and 7 in the Company's proxy
statement dated June 24, 1997 with respect to executive compensation
and transactions, is incorporated herein by reference in response to
this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on pages 2 and 3 in the Company's proxy
statement dated June 24, 1997 with respect to security ownership of
certain beneficial owners and management is incorporated herein by
reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on pages 4 and 5 in the Company's proxy
statement dated June 24, 1997 with respect to certain relationships
and related transactions, is incorporated herein by reference to
this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2)--the response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Exhibits:
3.1 Amended and Restated Articles of Incorporation. Filed
August 9, 1988, as Exhibit 3.1 to the Registrant's Form
S-1, and incorporated herein by reference.
3.2 Bylaws. Filed August 9, l988, as Exhibit 3.2 to the
Registrant's Form S-1, and incorporated herein by
reference.
4.1 Amended and Restated Rights Agreement, as Exhibit 4.1 to
the Registrant's Form 8-K as of July 31, 1991 and amended
on Form 8 on August 29, 1991, and incorporated herein by reference.
10.1 Stock Option Plan, adopted June 7, l988. Filed August 9,
1988, as Exhibit 10.1 to the Registrant's Form S-1, and
incorporated herein by reference.
10.2 Employment Agreements, dated June 7, 1988, with Richard
S. Fuller, Peter D. Pruden, III. Filed August 9, 1988, as
Exhibit 10.2 to the Registrant's Form S-1, and incorporated
herein by reference.
10.3 Incentive bonus practice. Filed August 9, l988, as Exhibit
10.5 to the Registrant's Form S-1, and incorporated herein
by reference.
10.4 Profit Sharing Plan. Filed June 29, 1989 as Exhibit 10.5
to the Registrant's Forms 10-K for the year ended March 31,
1989, and incorporated herein by reference.
10.5 Employee Stock Ownership Plan. Filed June 29, 1989 as
Exhibit 10.6 to the Registrant's Form 10-K for the year
ended March 31, 1989, and incorporated herein by reference.
10.6 Definitive agreement to sell the assets of the Bunker Hill
division dated June 8, 1995. Filed June 28, 1995 as
Exhibit 10.7 to the registrant's Form 10-K for the year ended
March 31, 1995, and incorporated herein by reference.
21.1 Subsidiaries of the Registrant. Filed herewith.
(b) Reports filed on Form 8-K for the quarter ended March 31, 1997--None
(c) The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) The response to this portion of Item 14 is submitted as a separate
section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE SMITHFIELD COMPANIES, INC.
By S/ Richard S. Fuller
Richard S. Fuller, President
and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and dates indicated.
Name Capacity Date
S/ James L. Cresimore Chairman of the Board June 24, 1997
James L. Cresimore
S/ Richard S. Fuller President and Chief June 24, 1997
Richard S. Fuller Executive Officer
(Principal Executive
Officer)
S/ Peter D. Pruden, III Executive Vice June 24, 1997
Peter D. Pruden, III President, Secretary
and Director
S/ Mark D. Bedard Treasurer and Chief June 24, 1997
Mark D. Bedard Financial Officer
(Principal Financial
Officer and Principal
Accounting Officer)
S/ Bernard C. Baldwin,III Director June 24, 1997
Bernard C. Baldwin, III
S/ Edward Acree Director June 24, 1997
Edward Acree
S/ Frank H. Buhler Director June 24, 1997
Frank H. Buhler
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1) AND (2), (c) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED MARCH 31, 1997
THE SMITHFIELD COMPANIES, INC.
PORTSMOUTH, VIRGINIA
FORM 10-K--ITEM 14 (a) (1) AND (2)
THE SMITHFIELD COMPANIES, INC.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of The Smithfield Companies,
Inc. and subsidiaries, included in the annual report of the Registrant to its
shareholders for the year ended March 31, 1997, are incorporated by reference
in Item 8:
Consolidated balance sheets--March 31, 1997 and 1996
Consolidated statements of income--Years ended
March 31, 1997, 1996 and 1995
Consolidated statements of cash flows--Years ended March 31,
1997, 1996 and 1995
Notes to consolidated financial statements--March 31, 1997
The following consolidated financial statement schedule of The Smithfield
Companies, Inc. and subsidiaries is included in Item 14 (d):
Schedule II--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THE SMITHFIELD COMPANIES, INC.
COL. A COL.B COL.C COL.D COL.E
___________ ___________ __________ ________ ____________ _________
Balance at ADDITIONS Balance
Description Beginning Charged Charges Deductions at end of
of Period to Costs to Other Describe (1) Period
& Expenses Accounts
Describe
___________ ___________ __________ ________ ____________ _________
Year ended March 31, 1997:
Deducted from
asset accounts:
Allowance for
doubtful accounts $64,000 $35,400 $38,400 $61,000
======= ======= ======= =======
Year ended March 31, 1996:
Deducted from
asset accounts:
Allowance for
doubtful accounts $64,000 $27,300 $27,300 $64,000
======= ======= ======= =======
Year ended March 31, 1995:
Deducted from
asset accounts:
Allowance for
doubtful accounts $66,000 $51,400 $53,400 $64,000
======= ======= ======= =======
(1) Uncollectible accounts written off, net of recoveries.
REPORT OF INDEPENDENT ACCOUNTANTS
Shareholders and Board of Directors
The Smithfield Companies, Inc.
Our report on the consolidated financial statements of The Smithfield
Companies, Inc. and subsidiaries has been incorporated by reference in this
Form 10-K from page 15 of the 1997 Annual Report to Shareholders of The
Smithfield Companies, Inc. and subsidiaries. In connection with our audits
of such financial statements, we have also audited the related financial
statement schedule listed in item 14 (a)(1) & (2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information
required to be included therein.
s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Virginia Beach, Virginia
May 23, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
The Smithfield Companies, Inc.
We have audited the accompanying consolidated statement of income and cash
flows for the year ended March 31, 1995 of The Smithfield Companies, Inc.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain a reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated statement of income and cash flows referred
to above presents fairly, in all material respects, the financial position of
The Smithfield Companies, Inc. for the year ended March 31, 1995, in
conformity with generally accepted accounting principles.
s/Ernst & Young LLP
ERNST & YOUNG LLP
Vienna, Virginia
May 24, 1995
[LOGO]
THE SMITHFIELD COMPANIES
THE SMITHFIELD COMPANIES, INC. IS A DIVERSIFIED
PRODUCER OF SPECIALTY FOOD PRODUCTS. THE COMPANY
MARKETS ITS PRODUCTS PRIMARILY TO THE RETAIL
GROCERY, FOOD SERVICE AND GOURMET FOOD INDUSTRIES AS
WELL AS THROUGH ITS OWN RETAIL OUTLETS AND CONSUMER
CATALOGS. ITS FIVE OPERATING UNITS ARE THE
SMITHFIELD HAM AND PRODUCTS CO., V.W. JOYNER & CO.,
PRUDEN PACKING CO., WILLIAMSBURG FOODS AND THE NEW
ORLEANS SCHOOL OF COOKING.
CONTENTS
Letter to Shareholders 1
Selected Financial Data 3
Management's Discussion and
Analysis 4
Consolidated Financial Statements 6
Report on Independent Auditors 15
Quarterly Results of Operations 16
Directors, Executive Officers
and Management 16
Corporate Information Inside Back Cover
----------------------------------------------------
ABOUT OUR COVER
The cover of this report was chosen as a special
tribute to America's delicatessens. It is a
reproduction of an original painting by noted New
York artist William Low entitled THE NEW YORK DELI.
The Smithfield Companies is the nation's largest
supplier of country hams to delicatessens.
<PAGE>
TO OUR FELLOW SHAREHOLDERS
It was another year of solid performance and the most encouraging news is
that we believe the best is yet to come.
Over the past two years we have taken a number of steps toward enriching
our shareholders with the objective of growing earnings, strengthening our
balance sheet and positioning our Company for double digit sales growth into the
future. We have set a strategy of investing in and marketing specialty food
product lines that enjoy value added margins and will deliver consistent and
predictable cash flows. I am pleased to report that your Company took additional
steps toward these goals in fiscal 1997.
The combination of strong controls, aggressive marketing programs, tight
fiscal constraints and a dedicated work force enabled the Company to record
another excellent year.
Net sales for the year ended March 31, 1997 grew 7.2% to a record $19.5
million compared to $18.2 million a year earlier. Income from continuing
operations also reached a record $911,016, a 12.7% increase over $808,526 earned
in fiscal 1996. Net income for the year ended March 31, 1996 was $2,651,759
which reflected an after tax gain of $1,699,155 related to the sale of assets of
the Company's Bunker Hill division. Earnings per share from continuing
operations for the year ended March 31, 1997 increased 27% from $.56 to $.71 per
share, another record.
Smithfield's solid financial performance was achieved even though certain
raw material costs climbed dramatically during the year which lowered gross
profit margins. Despite the pressures of a high cost environment, we have
remained committed to our mission of continuing to build our business for the
long term. Our response to rising costs has been to manage operating expenses
and increase prices. Further, we have been able to grow our sales volume through
creative sales and marketing programs.
As a result of your Company's performance in fiscal 1997, our financial
condition remains solid. Total assets were $15.9 million of which $6.7 was cash
and cash equivalents. Current assets exceeded current liabilities by a ratio of
7.1 to 1. Our debt to equity remains low at 11%. Shareholder's equity was $14.3
million, while book value of our stock was a record $11.75 per share. The
Company is in a strong financial position to fund both internal and external
growth opportunities.
On February 28, 1997, we purchased certain product lines of Doughtie's
Foods, Inc. of Portsmouth, Virginia along with equipment and other assets used
to manufacture, market and sell these products. The operations have been
integrated into the Company's plant in Smithfield, Virginia and will add
approximately $3,000,000 in annual sales. The products acquired consist of
frozen barbecues and chilis which are sold primarily to food service
distributors in the mid Atlantic region. This acquisition will significantly
strengthen your Company's frozen specialty business in what is a growth
category.
On May 21, 1997 we purchased the Summer Garden brand of salad dressings and
Kitchen Del Sol brand of specialty rices and grains from Chanterelle Foods, Inc.
of Chicago, Illinois. These high quality product lines are marketed and sold to
the fancy food trade nationally and fit well with our growing Williamsburg Foods
gourmet food business.
In a response to what we believe is an undervalued market price in our
stock, we decided to continue our open market purchases of Smithfield Companies'
shares. During the just completed year we acquired 198,611 shares. We have
repurchased approximately 462,000 shares since early 1990 at an average cost of
$8.94 per share. Although the Company has no definitive policy to purchase
additional shares, it may do so when it is deemed to be in the best interest of
the Company and its shareholders.
- --------------------------------------------------------------------------------
1997 Annual Report 1
<PAGE>
At March 31, 1997 approximately 41% of our asset base was placed in safe
but low yielding investments. We averaged over $7.7 million invested in tax free
industrial revenue bonds which was backed by the good faith of debtors and a
letter of credit from a major bank. The Company is not exposed to principal
gains or losses and the investments offer liquidity by allowing weekly investing
or withdrawals. The average taxable yield for the fiscal year was 5.73%. The
acquisition of the Doughtie's product lines shifted some of these funds into
what will be a higher yielding investment.
Due to your Company's financial strength, your Board increased the regular
quarterly dividend 20% in November marking the fifth consecutive year that
regular annual dividends paid have increased. The current annualized dividend is
$.24 per share. The Company's policy is to continue to pay cash dividends. The
amount of such dividends will depend on earnings of the Company, cash
requirements and other factors considered relevant by the Board of Directors.
We enter fiscal 1998 with enthusiasm. As good as these past few years have
been, we do believe the best is yet to come. We are committed to sound
management objectives, a clear strategic focus and a dedication to outperforming
the market in our areas of expertise, all directed toward our goal of maximizing
the return for our shareholders.
This is an exciting time for your Company and I am grateful to our
employees, directors and shareholders for being partners in Smithfield's
success.
/s/ RICHARD S. FULLER
RICHARD S. FULLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
JUNE 5, 1997
[GRAPH]
Income from Continuing Operations
IN THOUSANDS
97 911
96 809
95 542
94 294
93 507
[GRAPH]
Net Sales
IN THOUSANDS
97 19,481
96 18,180
95 17,854
94 17,738
93 16,466
[GRAPH]
Book Value Per Share
IN THOUSANDS
97 11.75
96 11.22
95 9.71
94 8.91
93 8.41
[GRAPH]
Regular Dividends
97 0.22
96 0.20
95 0.18
94 0.16
93 0.13
- --------------------------------------------------------------------------------
2 The Smithfield Companies, Inc.
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
---------------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Income Statement Data:
Net sales $ 19,481 $ 18,180 $ 17,854 $ 17,738 $ 16,466
Cost of goods sold 12,999 11,527 11,335 11,814 10,947
- -------------------------------------------------------------------------------------------------------------------
Gross profit 6,482 6,653 6,519 5,924 5,519
Other operating revenue 87 54 59 21 15
Selling, general and administrative expenses 5,519 5,750 5,524 5,321 4,584
- -------------------------------------------------------------------------------------------------------------------
Operating income 1,050 957 1,054 624 950
Interest income (expense), net 281 247 (151) (137) (111)
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 1,331 1,204 903 487 839
Income taxes 420 395 361 193 332
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations 911 809 542 294 507
Income from discontinued operations -- 1,843 851 645 880
- -------------------------------------------------------------------------------------------------------------------
Net income $ 911 $ 2,652 $ 1,393 $ 939 $ 1,387
===================================================================================================================
Earnings per share:
Continuing operations $ 0.71 $ 0.56 $ 0.37 $ 0.20 $ 0.32
Discontinued operations -- 1.29 0.58 0.43 0.56
- -------------------------------------------------------------------------------------------------------------------
Earnings per share $ 0.71 $ 1.85 $ 0.94 $ 0.62 $ 0.89
===================================================================================================================
Dividends per share of common stock $ 0.22 $ 0.32 $ 0.18 $ 0.16 $ 0.13
===================================================================================================================
Balance Sheet Data (at period end):
Working capital $ 9,755 $ 11,980 $ 6,687 $ 7,004 $ 6,217
Total assets 15,909 17,679 17,443 17,667 17,211
Long-term debt -- -- 1,000 2,425 1,625
Stockholders' equity 14,310 15,894 14,233 13,262 13,020
</TABLE>
- --------------------------------------------------------------------------------
1997 Annual Report 3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company produces and markets branded foods 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
The following table shows, for the periods indicated, items included in
Selected Financial Data as a percentage of sales and the percentage changes in
the dollar amounts of such items compared to the prior period.
<TABLE>
<CAPTION>
PERIOD TO PERIOD
PERCENTAGE OF SALES CHANGE
FISCAL YEARS FISCAL YEARS
------------------------------------------------------------
ENDED MARCH 31
ENDED MARCH 31 1997 VS 1996 VS
1997 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 7.2% 1.8%
Cost of goods sold 66.7 63.4 63.5 12.8 1.7
--------------------------------
Gross profit 33.3 36.6 36.5 (2.6) 2.1
Other operating revenue 0.4 0.3 0.3 62.8 (9.9)
Selling, general and administrative expenses 28.3 31.6 30.9 (4.0) 4.1
--------------------------------
Operating income 5.4 5.3 5.9 10.0 (9.3)
Interest expense (0.0) (0.2) (0.9) (90.7) (75.2)
Other income 1.5 1.5 0.0 0.4 NM
--------------------------------
Income from continuing operations
before income taxes 6.9 6.6 5.0 10.6 33.3
Income taxes 2.2 2.2 2.0 6.3 9.4
--------------------------------
Income from continuing operations 4.7% 4.4% 3.0% 12.7 49.3
--------------------------------
</TABLE>
NM-NOT MEANINGFUL
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales in 1997 were $19.5 million compared to $18.2 million in 1996. The
increase in sales was primarily in the Company's wholesale operations to the
retail food trade. Cost of sales increased as a percentage of net sales to 66.7%
for the year ended March 31, 1997 from 63.4% for the year ended March 31, 1996.
The lower margins were due to higher raw material costs, primarily relating to
increased pork prices.
Selling expenses decreased as a percentage of net sales to 12.2% for the
year ended March 31, 1997 from 13.8% for the year ended March 31, 1996. 1996
selling expenses were higher due to marketing and promotional expenses needed to
maintain market share due to competitive pressures. 1997 selling expenses are
comparible to 1995 selling expenses.
General and administrative expenses decreased as a percentage of net sales
to 16.1% for the year ended March 31, 1997 from 17.9% for the year ended March
31, 1996. The decrease was primarily due to the Company's continuing effort to
cut costs in all of its operating units.
Net interest income increased to $280,770 for the year ended March 31, 1997
from $246,983 for the year ended March 31, 1996 as a result of investing
proceeds from the sale of Bunker Hill in August 1995. Invested balances at March
31, 1997 are lower than the prior year due to the significant amount of
repurchased stock during fiscal 1997 and the acquisition of the frozen barbecue
and chili product lines from Doughtie's Foods, Inc. on February 28, 1997.
Income tax expense as a percentage of income before income taxes was
consistent for the years ended March 31, 1997 and 1996. Income tax rates are
lower than statutory rates because of interest income from tax-exempt municipal
bond funds.
Income from continuing operations increased to $911,016 or $.71 per share
in 1997 compared to $808,526 or $.56 per share in 1996. The weighted average
shares of common stock outstanding was 1,284,392 in 1997 and 1,432,724 in 1996.
The difference in weighted average shares is due to the repurchase of 198,611
shares in 1997 and 49,102 shares in 1996.
- --------------------------------------------------------------------------------
4 The Smithfield Companies, Inc.
<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales in 1996 were $18.2 million compared to $17.9 million in 1995.
Sales in most categories remained relatively constant as compared to the prior
year. Cost of sales decreased as a percentage of net sales to 63.4% for the year
ended March 31, 1996 from 63.5% for the year ended March 31, 1995.
Selling expenses increased as a percentage of net sales to 13.8% for the
year ended March 31, 1996 from 12.2% for the year ended March 31, 1995. Most of
the increase is due to higher marketing and promotional expenses needed to
maintain market share due to competitive pressures and to procure new business.
General and administrative expenses decreased as a percentage of net sales
to 17.9% for the year ended March 31, 1996 from 18.7% for the year ended March
31, 1995. The decrease was primarily due to a cost cutting effort in the
Company's specialty foods division.
The significant change in net interest, from expense of $151,538 during
1995 to income of $246,983 during 1996 is the result of extinguishing the
Company's revolving credit loan and investing the remaining proceeds from the
sale of Bunker Hill into highly liquid debt instruments.
Income tax expense from continuing operations as a percentage of income
from continuing operations before income taxes was 32.8% for the year ended
March 31, 1996 compared to 40.0% for the year ended March 31, 1995. The decrease
is the result of $215,000 in interest income from tax-exempt munincipal bond
funds.
Income from continuing operations increased to $808,526 or $.56 per share
in 1996 compared to $541,676 or $.37 per share in 1995. The weighted average
shares of common stock outstanding was 1,432,724 in 1996 and 1,474,948 in 1995.
The difference in weighted average shares is due to the repurchase of 49,102
shares in 1996 and 22,846 shares in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had approximately $6.5 million invested in
short-term highly liquid debt instruments. This amount is significantly less
than the $9.7 million invested at March 31, 1996. During the year, the Company
purchased 198,611 shares of its Common Stock at a cost of $2,212,834. The
Company also used some of its cash investments to fund the acquisition of the
frozen barbecue and chili product lines from Doughtie's Foods, Inc. This
transaction will add approximately $3,000,000 in annual sales.
Because of the termination of our retail lease and a declining tourism
economy in New Orleans, as well as other factors, The Company has decided to
sell the operations of The New Orleans School of Cooking. The Company expects to
complete a transaction by the third quarter of the current year. No significant
gain or loss is expected from this transaction. The sale of this operation is
not expected to have a material impact on the overall operations of the Company.
Net sales, total assets and operating income of the New Orleans operations are
all less than 10% of their respective consolidated amounts.
The Company believes its liquidity and capital resources to be excellent.
Current cash flow and available funds are sufficient to satisfy existing cash
requirements. At March 31, 1997 and 1996, the Company's only debt consisted of
accounts payable and accrued expenses.
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 credit
line, the Company believes it is in excellent position to invest in assets which
will increase shareholder value over time.
The Company's debt financing at March 31, 1997 consists of a $10,000,000
revolving credit line from a bank bearing interest at the lower of the Wall
Street Journal's quoted prime rate, the secondary market rate for certificates
of deposit, adjusted for reserves, plus .75%, or the LIBOR market rate plus .75%
and expires on August 31, 1998. As of March 31, 1997, the Company had no
outstanding balance on this credit line.
Management believes the Company's capital resources are sufficient to meet
all of its working capital requirements into the foreseeable future.
IMPACT OF INFLATION
Over the past three years, the effects of inflation on the Company's
operations have been minimal. If inflation rises substantially, competitive
pressures may make it difficult for the Company to pass the increases to the
consumer.
- --------------------------------------------------------------------------------
1997 Annual Report 5
<PAGE>
CONSOLIDATED BALANCE SHEETS
THE SMITHFIELD COMPANIES, INC.
<TABLE>
<CAPTION>
MARCH 31
---------------------------------
1997 1996
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,660,759 $ 9,934,130
Trade receivables, less allowance for doubtful
accounts of $61,000 in 1997 and $64,000 in 1996 1,551,383 990,968
Inventories 2,940,805 2,639,458
Prepaid expenses 71,382 65,009
Deferred income taxes 130,000 135,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 11,354,329 13,764,565
PROPERTY AND EQUIPMENT
Land 396,342 396,342
Buildings 3,653,657 3,453,660
Machinery and equipment 1,702,574 1,297,104
Delivery equipment 169,800 160,444
Office furniture and equipment 728,935 715,800
- --------------------------------------------------------------------------------------------------------------------
6,651,308 6,023,350
Less accumulated depreciation 3,137,314 2,923,577
- --------------------------------------------------------------------------------------------------------------------
3,513,994 3,099,773
OTHER ASSETS
Trademarks, net of accumulated amortization 233,011 256,799
Other intangibles, primarily customer lists,
net of accumulated amortization 516,974 239,595
Deferred income taxes 170,000 115,000
Other 120,347 202,995
- --------------------------------------------------------------------------------------------------------------------
1,040,332 814,389
- --------------------------------------------------------------------------------------------------------------------
$ 15,908,655 $ 17,678,727
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 676,059 $ 447,043
Accrued compensation 219,328 218,876
Accrued expenses 460,430 876,181
Income taxes payable 243,260 242,173
- --------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,599,077 1,784,273
STOCKHOLDERS' EQUITY
Preferred stock, $100 par value-authorized
250,000 shares; none issued
Common stock, no par value, authorized
5,000,000 shares; outstanding 1,217,549 shares in 1997
and 1,416,160 shares in 1996 3,007,611 5,220,445
Retained earnings 11,301,967 10,674,009
- --------------------------------------------------------------------------------------------------------------------
14,309,578 15,894,454
- --------------------------------------------------------------------------------------------------------------------
$ 15,908,655 $ 17,678,727
====================================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6 The Smithfield Companies, Inc.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
THE SMITHFIELD COMPANIES, INC.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
-----------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Net sales $ 19,481,357 $ 18,180,219 $ 17,854,209
Cost of goods sold 12,999,407 11,527,127 11,335,437
- ----------------------------------------------------------------------------------------------------------------
Gross profit 6,481,950 6,653,092 6,518,772
Other operating revenue 87,101 53,498 59,383
- ----------------------------------------------------------------------------------------------------------------
6,569,051 6,706,590 6,578,155
Operating expenses:
Selling 2,376,012 2,501,208 2,178,859
General and administrative 3,142,793 3,248,839 3,345,082
- ----------------------------------------------------------------------------------------------------------------
5,518,805 5,750,047 5,523,941
- ----------------------------------------------------------------------------------------------------------------
Operating income 1,050,246 956,543 1,054,214
Nonoperating income (expense):
Other income, primarily interest 284,362 285,580 4,205
Interest expense (3,592) (38,597) (155,743)
- ----------------------------------------------------------------------------------------------------------------
280,770 246,983 (151,538)
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations before income
taxes 1,331,016 1,203,526 902,676
Federal and state income taxes 420,000 395,000 361,000
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations 911,016 808,526 541,676
Discontinued operations:
Income from operations of Bunker Hill less income
taxes of $95,000 in 1996 and
$567,000 in 1995 -- 144,078 850,833
Gain on sale of Bunker Hill less
income taxes of $1,040,000 -- 1,699,155 --
- ----------------------------------------------------------------------------------------------------------------
Income from discontinued operations -- 1,843,233 850,833
- ----------------------------------------------------------------------------------------------------------------
Net income $ 911,016 $ 2,651,759 $ 1,392,509
================================================================================================================
Earnings per share:
Continuing operations $ 0.71 $ 0.56 $ 0.37
Discontinued operations -- 1.29 0.58
- ----------------------------------------------------------------------------------------------------------------
Earnings per share $ 0.71 $ 1.85 $ 0.94
===============================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1997 Annual Report 7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE SMITHFIELD COMPANIES, INC.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
-----------------------------------------------
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 911,016 $ 2,651,759 $ 1,392,509
Income from discontinued operations (1,843,233) (850,833)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 427,860 466,229 475,175
(Gain) loss on disposal of property
and equipment 18,768 34,085 (6,042)
Provision for deferred income taxes (50,000) (100,000) (200,000)
Changes in assets and liabilities:
Trade receivables (560,415) (334,447) 168,896
Inventories (87,922) 139,745 (198,441)
Prepaid expenses (6,373) (23,618) 37,259
Accounts payable and accrued
compensation and expenses (186,283) 247,048 257,140
Income taxes payable 1,087 (97,412) 240,022
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 467,738 1,140,156 1,315,685
Operating income from discontinued operations -- 621,849 1,853,974
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 467,738 1,762,005 3,169,659
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)
Acquisition:
Intangible assets (311,254) (43,068) (311,503)
Inventories (213,425) (650,000)
Equipment (323,000)
Purchase of property and equipment (488,923) (182,106) (374,229)
Proceeds from sale of long-term assets 91,385 14,600 17,875
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,245,217) 9,943,901 (1,317,857)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 2,000,000 4,500,000
Principal payments on revolving line of credit and
long-term debt (3,100,000) (5,925,000)
Cash dividends paid (283,058) (457,666) (265,375)
Repurchase of common stock (2,212,834) (532,211) (157,023)
- --------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (2,495,892) (2,089,877) (1,847,398)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,273,371) 9,616,029 4,404
Cash and cash equivalents at beginning of year 9,934,130 318,101 313,697
- --------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,660,759 $ 9,934,130 $ 318,101
====================================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8 The Smithfield Companies, Inc.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1997
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of The Smithfield Companies, Inc. and its subsidiaries. All
significant intercompany balances and transactions have been eliminated.
CASH EQUIVALENTS: The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
SEGMENT INFORMATION: The Smithfield Companies, Inc. and its subsidiaries
are engaged principally in a single business segment designated as "food
processing". As a federally inspected food processor, the Company is engaged in
the processing and/or distribution of cured meats, smoked meats and other food
products. No single customer accounts for more than 10% of net sales.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the periods presented. Actual results could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially
subject the Company to credit risk consist primarily of cash equivalents and
trade receivables. All of the Company's cash equivalents are in highly liquid
short-term municipal bond funds. The carrying amount of these cash equivalents
approximate fair value because of their short maturities and fluctuating
interest rates. Credit risk with respect to trade receivables is limited because
the Company has a large number of diverse customers, thus spreading the trade
credit risk.
NEW ACCOUNTING STANDARDS: The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
As provided for by SFAS No. 123, the Company has decided to continue to apply
Accounting Principles Board No. 25 "Accounting for Stock Issued to Employees,"
for recognition and measurement purposes within the financial statements.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings Per Share." This standard is effective for financial statements
issued for periods ending after December 15, 1997. The Company does not expect
that SFAS No. 128 will have a material impact on the earnings per share
computation.
INVENTORIES: Inventories are valued at lower of cost (determined on the
first-in, first-out method) or market.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the assets using the
straight-line and accelerated methods (buildings 10-40 years; machinery and
equipment 7-10 years; delivery equipment 3-10 years; office furniture and
equipment 5-10 years). Accelerated methods are used for income tax purposes.
AMORTIZATION OF INTANGIBLES: Intangibles include goodwill, trademarks,
brand names and customer lists. Goodwill is being amortized over twenty years
using the straight-line method. Trademarks, brand names and customer lists are
being amortized over their estimated useful lives of four to twenty years using
the straight-line method. Accumulated amortization of intangibles is $503,000
and $446,000 at March 31, 1997 and 1996, respectively.
INCOME TAXES: Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
EARNINGS PER SHARE: Earnings per share are calculated by dividing net
income by the weighted average number of shares of Common Stock outstanding
(1,284,392 in 1997; 1,432,724 in 1996; 1,474,948 in 1995). Outstanding stock
options have not been included as they have an insignificant effect on the
computation.
- --------------------------------------------------------------------------------
1997 Annual Report 9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1997
NOTE B - INVENTORIES
Inventories at March 31, 1997 and 1996 consisted of the following:
1997 1996
- -----------------------------------------------------------------
Finished goods $ 1,393,147 $ 1,244,061
Production materials:
Meats 1,073,585 986,548
Other ingredients 138,437 92,350
Packing ingredients 335,636 316,499
- -----------------------------------------------------------------
$ 2,940,805 $ 2,639,458
=================================================================
NOTE C - LINE OF CREDIT
The Company has a line of credit agreement with a bank. The agreement
provides the Company with a $10 million line of credit loan which can be used
for all working capital needs and for acquisitions of companies in the food
business. The loan bears interest at the lower of The Wall Street Journal's
quoted prime rate, the secondary market rate for certificates of deposit,
adjusted for reserves, plus .75%, or the LIBOR market rate plus .75% and is
subject to renewal on August 31, 1998.
The total amount borrowed under this agreement cannot exceed the sum of the
Company's consolidated accounts receivable and consolidated inventories. Amounts
borrowed are collateralized by all of the Company's trade receivables,
inventories and intangible assets.
Under the terms of this agreement, the Company, among other things, agrees
to (1) maintain a minimum fixed charge coverage ratio, as defined, of 2:1 and
(2) maintain a maximum debt to tangible net worth ratio, as defined, of 1.25:1.
The loan agreement defines tangible net worth as net worth less intangible
assets.
The Company paid interest on all indebtedness amounting to $3,592 in 1997,
$45,225 in 1996 and $166,913 in 1995.
NOTE D - STOCKHOLDERS' EQUITY
CAPITAL STOCK
The Company is authorized to issue up to 5,250,000 shares of stock of all
classes, of which 5,000,000 shares are to be designated Common Stock and 250,000
shares are to be designated Preferred Stock. The Company's Common Stock has no
par value. The Company's Preferred Stock (none outstanding) has a par value of
$100 per share.
The Company's Preferred Stock may be issued in one or more series, with
each series to have distinctive serial designations and such preferences,
limitations, and relative rights as shall be permitted by law and established by
resolution of the Board of Directors providing for the issue of such Preferred
Stock. Each series of Preferred Stock may have the number of shares, voting
powers, redemption provisions, dividend rights, liquidation preferences,
convertibility features, and sinking fund entitlements as shall be set forth in
such Board resolution.
On July 31, 1991, the Board of Directors authorized 100,000 shares of
voting Series A Junior Participating Cumulative ($300 per share semi-annually)
Preferred Stock pursuant to the Shareholder Rights Plan discussed below.
The issuance of Preferred Stock may have the effect of delaying, deferring,
or preventing a change in control of the Company without any further action by
holders of the Company's Common Stock and may adversely affect the rights of
existing stockholders.
- --------------------------------------------------------------------------------
10 The Smithfield Companies, Inc.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1997
STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options. In electing to account for its stock options under APB
25, the Company is required by SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide pro forma information regarding net income and earnings
per share as if compensation costs for the Company's Stock Option Plan had been
determined consistent with fair market value provisions of SFAS No. 123. The
fair market value provisions of SFAS No. 123 had an immaterial effect on income
and earnings per share for both the years ended March 31, 1997 and 1996 and are
therefore not included.
Under the Company's Stock Option Plan selected employees of the Company may
be granted options to purchase Common Stock. Such options may be designated
Incentive Stock Options, as defined under the Internal Revenue Code, or
Nonstatutory Stock Options at the time the option is granted. The exercise price
of the options may not be less than 100% of the fair market value of the
Company's Common Stock on the date of grant of such options, and the options
must be exercised within ten years. Other terms of the options will be
determined at the date of grant. A maximum of 200,000 shares of Common Stock may
be granted under this Plan. The options are exercisable two years from the date
of grant. At March 31, 1997, the weighted average remaining contractual life of
the options is 6.3 years. The Company had 19,000, 53,500 and 77,500 shares which
were exercisable at March 31, 1997, 1996 and 1995, respectively. At March 31,
1997, the weighted average exercise price of those shares is $6.80.
During January 1997, the Company offered cash compensation to holders of
stock options with an expiration date of no later than May 16, 1999. The Company
offered the difference between $11.50 and the option price for the shares.
37,500 shares were surrendered in connection with this offering at a cost of
$101,250. This expense is included in general and administrative expenses during
the year ended March 31, 1997.
The following is a summary of transactions for the Stock Option Plan:
<TABLE>
<CAPTION>
NUMBER OF PER SHARE WEIGHTED AVERAGE
SHARES RANGE EXERCISE PRICE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Options outstanding at April 1, 1994 79,500 $ 5.00 - 9.50 $ 7.95
Granted 4,000 $ 6.75 $ 6.75
- -------------------------------------------------------------------------------------------------------------------------
Options outstanding at March 31, 1995 83,500 $ 5.00 - 9.50 $ 7.89
Canceled (27,000) $ 5.00 - 8.75 $ 7.39
- -------------------------------------------------------------------------------------------------------------------------
Options outstanding at March 31, 1996 56,500 $ 6.75 - 8.75 $ 8.13
Granted 5,000 $ 10.75 - 11.00 $10.90
Canceled (37,500) $ 8.75 - 9.50 $ 8.80
- -------------------------------------------------------------------------------------------------------------------------
Options outstanding at March 31, 1997 22,000 $ 6.75 - 11.00 $ 7.66
=========================================================================================================================
</TABLE>
SHAREHOLDER RIGHTS PLAN
On July 31, 1991, the Board of Directors adopted a Shareholder Rights Plan
("Rights Plan") and declared a dividend of one Right for each outstanding share
of Common Stock. Under the terms of the Rights Plan, the Rights will be
exercisable only if a person, group or other entity that was not a 10%
shareholder as of July 1, 1991, becomes a 15% or more shareholder. Each Right
will entitle the holder, upon payment of the exercise price of $29.50, to
acquire one ten-thousandths of a share (a "unit") of Series A Junior
Participating Cumulative Preferred Stock. Each unit has the same voting rights
as one share of Common Stock. At the discretion of the Board of Directors, the
Company will be entitled to redeem the Rights for $.01 per Right at any time
before announcement that a 15% position has been acquired, and for 10 days after
the announcement.
If the Rights have not been redeemed, and any person, group or entity
becomes a 20% or more shareholder, each Right will entitle the holder, except
the acquiring person, group, or entity, upon payment of the exercise price, to
acquire Preferred Stock or Common Stock at the option of the Company, each
- --------------------------------------------------------------------------------
1997 Annual Report 11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1997
having a value equal to twice the Right's exercise price. Also, if the Company
were acquired in a merger or other business combination by such persons, group
or entity, or if 50% of its earning power or assets were sold in one transaction
or series of transactions, each Right would entitle the holder, except the
acquiring person, group or entity, to purchase securities of the surviving
company having a market value equal to twice the Right's exercise price. The
Rights will expire on July 31, 2001 unless previously exercised or redeemed by
the Board of Directors.
An analysis of changes in Common Stock and Retained Earnings follow:
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Balance at April 1, 1994 $ 5,909,679 $ 7,352,782
Net Income 1,392,509
Dividends ($.18 per share) (265,375)
Repurchase of 22,846 shares of Common Stock (157,023)
- --------------------------------------------------------------------------------------------------------
Balance at March 31, 1995 5,752,656 8,479,916
Net Income 2,651,759
Dividends ($.32 per share) (457,666)
Repurchase of 49,102 shares of Common Stock (532,211)
- --------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 5,220,445 10,674,009
Net Income 911,016
Dividends ($.22 per share) (283,058)
Repurchase of 198,611 shares of Common Stock (2,212,834)
- --------------------------------------------------------------------------------------------------------
Balance at March 31, 1997 $ 3,007,611 $ 11,301,967
========================================================================================================
</TABLE>
NOTE E - ACQUISITION
On February 28, 1997, the Company purchased certain assets related to the
frozen barbecue and chili product lines from Doughtie's Foods, Inc. The
production of these product lines was moved to the Company's plant in
Smithfield, Virginia. These product lines are marketed primarily to the food
service trade. This transaction was accounted for using the purchase method of
accounting. The purchase of these assets was funded from the Company's
short-term investments.
NOTE F - SALE OF THE ASSETS OF BUNKER HILL
On August 23, 1995, the Company sold most of the assets and transferred
its trade accounts payable of $327,000 of its Bunker Hill division. The Company
received proceeds of approximately $12,000,000 from the sale and recorded a gain
of $1,699,155 after recording income taxes of $1,040,000. All results of
operations being reported for periods prior to the sale have been classified to
present the Company's former Bunker Hill division as a discontinued operation.
Included in discontinued operations were net sales of $6,079,751 and $23,054,703
for the years ended March 31, 1996 and 1995, respectively.
NOTE G - EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company's profit sharing plan is a voluntary, defined contribution plan
which covers virtually all employees. The Company may contribute annually up to
a certain percentage of employee compensation to the plan. The Company
contributed $95,000, $90,000 and $100,000 in 1997, 1996 and 1995, respectively,
into this profit sharing plan.
Effective January 1, 1997 the Company added a 401(k) feature to its profit
sharing plan. The Company makes contributions to the plan based on 50% of the
participants' contributions, which can range from 1% to 6% of their total
compensation subject to certain limitations. The Company can also make
discretionary
- --------------------------------------------------------------------------------
12 The Smithfield Companies, Inc.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1997
contributions to the plan. Company contributions to the 401(k) plan were $12,380
for the year ended March 31, 1997.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company's Employee Stock Ownership Plan "the Plan" covers all employees
who have attained the required minimum age and length of service, except those
covered by a collective bargaining agreement. Contributions to the Plan, which
will be invested in the Company's Common Stock, are made as determined by the
Board of Directors and are limited to certain percentages of the eligible
employees' compensation. The Company contributed $40,000, $110,000 and $75,000
into the Plan for the years ended March 31, 1997, 1996 and 1995, respectively.
NOTE H - INCOME TAXES
Significant components of the Company's deferred tax assets as of March 31,
1997 and 1996 are as follows:
1997 1996
- --------------------------------------------------------------------
Deferred tax assets:
Accrued liabilities $ 97,000 $ 101,000
Inventory cost 14,000 13,000
Accounts receivable allowance 20,000 21,000
Book over tax depreciation 162,000 109,000
Book over tax amortization 7,000 6,000
- --------------------------------------------------------------------
Total deferred tax assets $ 300,000 $ 250,000
====================================================================
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Continuing operations:
Currently payable:
Federal $ 407,000 $ 405,000 $ 381,000
State 63,000 60,000 58,000
- -------------------------------------------------------------------------------------------------------------------
470,000 465,000 439,000
Deferred:
Federal (43,000) (60,000) (68,000)
State (7,000) (10,000) (10,000)
- -------------------------------------------------------------------------------------------------------------------
(50,000) (70,000) (78,000)
- -------------------------------------------------------------------------------------------------------------------
420,000 395,000 361,000
Discontinued operations:
Currently payable:
Federal 1,009,000 599,000
State 156,000 90,000
- -------------------------------------------------------------------------------------------------------------------
-- 1,165,000 689,000
Deferred:
Federal (26,000) (106,000)
State (4,000) (16,000)
- -------------------------------------------------------------------------------------------------------------------
-- (30,000) (122,000)
- -------------------------------------------------------------------------------------------------------------------
420,000 1,135,000 567,000
- -------------------------------------------------------------------------------------------------------------------
$ 420,000 $ 1,530,000 $ 928,000
===================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
1997 Annual Report 13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1997
The provision for income taxes varies from that computed using federal
statutory rates of 34%, as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
<S> <C> <C> <C>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Federal taxes at statutory rate $454,000 $1,422,000 $789,000
State taxes net of federal benefit 42,000 134,000 98,000
Trademark and goodwill amortization 7,000 7,000 28,000
Tax-exempt interest (95,000) (73,000)
Other 12,000 40,000 13,000
- ------------------------------------------------------------------------------------------------------------------------------
$420,000 $1,530,000 $928,000
==============================================================================================================================
</TABLE>
The Company made income tax payments of $468,913 in 1997, $1,727,412 in
1996 and $887,978 in 1995.
NOTE I - OTHER FINANCIAL INFORMATION
COMMITMENTS AND CONTINGENCIES
Employment agreements have been established with certain officers of the
Company. These agreements include clauses relating to salary and severance. The
Company also has incentive arrangements with certain officers of the Company.
LEASES
The Company's operating leases consist primarily of retail facilities, some
of which contain escalation clauses and renewal options for up to five years.
Aggregate minimum rental commitments under non-cancelable operating leases
having remaining terms of more than one year were $338,000 and are payable as
follows: 1998, $102,000; 1999, $100,000; 2000, $69,000; 2001, $63,000; 2002,
$4,000.
Contingent rentals relate to retail sales space based on gross sales. Rent
expense is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31
<S> <C> <C> <C>
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
Minimum rentals $ 222,018 $ 254,343 $ 253,068
Contingent rentals 59,403 74,258 71,792
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL $ 281,421 $ 328,601 $ 324,860
=============================================================================================================================
</TABLE>
RELATED PARTY TRANSACTIONS
A member of the Board of Directors is an attorney with the Company's law
firm. The Company paid $20,601 to the law firm in 1997 and $61,333 in 1996 of
which $59,161 related to the sale of the assets of Bunker Hill. Another member
of the Board of Directors is president of a company to which the Company paid
fees of $12,000 in 1997, 1996 and 1995, respectively. The chairman of the
Company's Board of Directors is also the board chairman of a food broker to
which the Company paid sales commissions of $68,377 and $184,228 in 1996 and
1995, respectively, all of which is included in discontinued operations. A
fourth board member is president of a company which supplied packaging materials
to the Company in the amount of $7,674, $7,289 and $37,518 in 1997, 1996 and
1995 respectively, of which $30,315 in 1995 is included in discontinued
operations.
- --------------------------------------------------------------------------------
14 The Smithfield Companies, Inc.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF DIRECTORS
THE SMITHFIELD COMPANIES, INC.
We have audited the accompanying consolidated balance sheets of The
Smithfield Companies, Inc. as of March 31, 1997 and 1996, and the related
consolidated statements of income and cash flows for each of the two years in
the period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
statements of income and cash flows for the year ended March 31, 1995, were
audited by other auditors whose report, dated May 24, 1995, except for Note H
which the date was June 8, 1995, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1997 and 1996 consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of The Smithfield Companies, Inc. at March 31, 1997 and 1996
and the consolidated results of their operations and their cash flows for each
of the two years in the period ended March 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Virginia Beach, Virginia
May 23, 1997
- --------------------------------------------------------------------------------
1997 Annual Report 15
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table presents quarterly results of operations for the years
ended March 31,1997 and 1996.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996
------------------------------------------- -------------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------- -------------------------------------------
Net sales $3,447 $4,581 $7,880 $3,573 $3,568 $4,302 $7,441 $2,868
Cost of goods sold 2,109 3,213 5,281 2,396 2,177 2,706 4,759 1,885
- --------------------------------------------------------------------------------- -------------------------------------------
Gross profit 1,338 1,368 2,599 1,177 1,391 1,596 2,682 983
Other operating revenue 13 37 32 5 6 2 25 21
- --------------------------------------------------------------------------------- -------------------------------------------
1,351 1,405 2,631 1,182 1,397 1,598 2,707 1,004
Selling, general and
administrative expenses 1,193 1,224 1,955 1,146 1,284 1,430 2,003 1,033
- --------------------------------------------------------------------------------- -------------------------------------------
Operating income (loss) 158 181 676 36 113 168 704 (29)
Interest, net 88 65 63 64 (19) 88 90 89
- --------------------------------------------------------------------------------- -------------------------------------------
Income from continuing oper-
ations before income taxes 246 246 739 100 94 256 794 60
Income taxes 64 73 269 14 38 90 279 (12)
- --------------------------------------------------------------------------------- -------------------------------------------
Income from continuing operations 182 173 470 86 56 166 515 72
Income from discontinued
operations -- -- -- -- 125 1,718 -- --
- --------------------------------------------------------------------------------- -------------------------------------------
Net income $ 182 $ 173 $ 470 $ 86 $ 181 $1,884 $ 515 $ 72
================================================================================= ===========================================
Earnings per share:
Continuing operations $ 0.13 $ 0.14 $ 0.37 $ 0.07 $ 0.04 $ 0.12 $ 0.36 $ 0.05
Discontinued operations -- -- -- -- 0.09 1.20 -- --
- --------------------------------------------------------------------------------- -------------------------------------------
Earnings per share $ 0.13 $ 0.14 $ 0.37 $ 0.07 $ 0.12 $ 1.32 $ 0.36 $ 0.05
================================================================================= ===========================================
</TABLE>
DIRECTORS
Edward Acree
PRESIDENT
EDWARD ACREE & ASSOCIATES
Bernard C. Baldwin, III
PARTNER
EDMUNDS & WILLIAMS
Frank H. Buhler
CHAIRMAN
OLD DOMINION BOX COMPANY
James L. Cresimore
CHAIRMAN
THE SMITHFIELD COMPANIES, INC.
CHAIRMAN
ALLEGIANCE BROKERAGE COMPANY
Richard S. Fuller
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Peter D. Pruden, III
EXECUTIVE VICE PRESIDENT
AND SECRETARY
EXECUTIVE OFFICERS
Richard S. Fuller
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Peter D. Pruden, III
EXECUTIVE VICE PRESIDENT
AND SECRETARY
Mark D. Bedard
CHIEF FINANCIAL OFFICER
AND TREASURER
MANAGEMENT
Alton H. Gwaltney
EXECUTIVE VICE PRESIDENT
THE SMITHFIELD HAM
& PRODUCTS CO.
Lawrence J. Dauterive
VICE PRESIDENT AND
GENERAL MANAGER
THE NEW ORLEANS
SCHOOL OF COOKING
F. Belton Joyner, III
VICE PRESIDENT AND
GENERAL MANAGER
WILLIAMSBURG FOODS
Larry R. Santure
VICE PRESIDENT AND
GENERAL MANAGER
V.W. JOYNER & CO.
James S. Groves
VICE PRESIDENT OF RETAIL SALES
THE SMITHFIELD HAM
& PRODUCTS CO.
Robert J. Koch, Jr.
VICE PRESIDENT OF
FOODSERVICE SALES
THE SMITHFIELD HAM
& PRODUCTS CO.
R. Steven Jordan
CORPORATE CONTROLLER
Kevin A. Jones
GENERAL MANAGER
PRUDEN PACKING CO.
- --------------------------------------------------------------------------------
16 The Smithfield Companies, Inc.
<PAGE>
CORPORATE INFORMATION
EXECUTIVE OFFICES
The Smithfield Building
311 County Street, Suite 203
Portsmouth, Virginia 23704
TRANSFER AGENT
Wachovia Bank of North Carolina, N.A.
NASDAQ SYMBOL
HAMS
COUNSEL
Edmunds & Williams
800 Main Street
Lynchburg, Virginia 24505
AUDITORS
Coopers & Lybrand L.L.P.
400 One Columbus Center
Virginia Beach, Virginia 23462
ANNUAL MEETING
The Annual Meeting of Stockholders
will be held on Wednesday, July 30,
1997 at 9:00 a.m. at The Max,
426 Water Street, Portsmouth, VA
FORM 10-K REPORT
Copies of the Company's Annual Report
on Form 10-K are available without
charge, upon written request to:
The Smithfield Companies, Inc.
The Smithfield Building
311 County Street, Suite 203
Portsmouth, VA 23704
MARKET FOR SMITHFIELD COMMON STOCK
The Company's common stock is traded in the
NASDAQ National Market Systems under the
symbol HAMS. The following table sets forth
the quarterly high and low market prices for
each quarter of fiscal 1997 and 1996.
FISCAL 1997 HIGH LOW
- -----------------------------------------------------------
First Quarter 11 3/4 10 23/32
Second Quarter 11 3/4 11
Third Quarter 11 1/2 10 3/4
Fourth Quarter 11 1/4 10 3/4
FISCAL 1996 HIGH LOW
- -----------------------------------------------------------
First Quarter 11 3/8 8 3/4
Second Quarter 11 1/2 10 3/4
Third Quarter 11 3/4 10 3/4
Fourth Quarter 12 11 1/4
DIVIDENDS 1997 1996
- -----------------------------------------------------------
First Quarter $ 0.05 $ 0.05
Second Quarter $ 0.05 $ 0.05
Third Quarter $ 0.06 $ 0.05
Fourth Quarter $ 0.06 $ 0.17
- -----------------------------------------------------------
$ 0.22 $ 0.32
===========================================================
On May 30, 1997 there were 160 holder's of record of the company's common
stock. In addition over 500 beneficial shareholders are estimated.
MAIL ORDER CATALOGS
Your Company publishes two unique full color consumer catalogs each
fall. We hope that you will consider these when planning your personal or
corporate giving as well as your own fine dining and entertaining needs. For
your catalog(s), call us TOLL FREE.
The Smithfield Collection 1-800-628-2242
The Peanut Shop of Williamsburg 1-800-637-3268
You can also visit the Company's catalogs on the Internet at:
www.smithfield-companies.com
EXHIBIT 21
SUBSIDIARIES OF THE SMITHFIELD COMPANIES, INC.
STATE OF
NAME INCORPORATION
The Smithfield Ham and Products., Inc. . . . . . . . . . . . Virginia
Pruden Packing Co., Inc.. . . . . . . . . . . . . . . . . . . Virginia
Williamsburg Foods, Inc.. . . . . . . . . . . . . . . . . . . Virginia
The Peanut Shop, Inc. . . . . . . . . . . . . . . . . . . . . Virginia
Louisiana General Store, Inc. . . . . . . . . . . . . . . . Virginia
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Financial Statements of The Smithfield Companies, Inc. for
the year ended March 31, 1997, and is qualified in its entirety by
reference to such Consolidated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,660,759
<SECURITIES> 0
<RECEIVABLES> 1,612,383
<ALLOWANCES> 61,000
<INVENTORY> 2,940,805
<CURRENT-ASSETS> 11,354,329
<PP&E> 6,651,308
<DEPRECIATION> 3,137,314
<TOTAL-ASSETS> 15,908,655
<CURRENT-LIABILITIES> 1,599,077
<BONDS> 0
0
0
<COMMON> 3,007,611
<OTHER-SE> 11,301,967
<TOTAL-LIABILITY-AND-EQUITY> 15,908,655
<SALES> 19,481,357
<TOTAL-REVENUES> 19,568,458
<CGS> 12,999,407
<TOTAL-COSTS> 18,518,212
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,592
<INCOME-PRETAX> 1,331,016
<INCOME-TAX> 420,000
<INCOME-CONTINUING> 911,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 911,016
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
