FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended: June 30, 1997
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--1,185,549 shares as of August 1, 1997
INDEX
THE SMITHFIELD COMPANIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 1997
and March 31, 1997
Condensed consolidated statements of income--Three months
ended June 30, 1997 and 1996
Condensed consolidated statements of cash flows--Three months
ended June 30, 1997 and 1996
Notes to condensed consolidated financial statements--
June 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 March 31
1997 1997
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,566,786 $ 6,660,759
Receivables, less allowances
of $64,000 and $61,000 1,501,936 1,551,383
Inventories 4,041,177 2,940,805
Prepaid expenses and other 87,770 71,382
Deferred income taxes 130,000 130,000
----------- -----------
TOTAL CURRENT ASSETS 11,327,669 11,354,329
PROPERTY, PLANT AND EQUIPMENT 6,564,010 6,651,308
less allowances for depreciation 3,208,008 3,137,314
----------- -----------
3,356,002 3,513,994
OTHER ASSETS 1,043,071 1,040,332
----------- -----------
$15,726,742 $15,908,655
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 756,410 $ 676,059
Other current liabilities 883,383 923,018
----------- -----------
TOTAL CURRENT LIABILITIES 1,639,793 1,599,077
SHAREHOLDERS' EQUITY
Common stock, no par or stated
value--authorized 5,000,000 shares;
issued and outstanding 1,185,549
shares and 1,217,549 shares 2,659,611 3,007,611
Retained earnings 11,427,338 11,301,967
----------- -----------
14,086,949 14,309,578
----------- -----------
$15,726,742 $15,908,655
=========== ===========
Note: The balance sheet at March 31, 1997 has been derived
from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended June 30
1997 1996
Net sales $4,486,831 $3,446,998
Cost of goods sold 2,951,986 2,109,205
---------- ----------
GROSS PROFIT 1,534,845 1,337,793
Other operating revenue 18,149 13,252
---------- ----------
1,552,994 1,351,045
Selling, general and
administrative expenses 1,335,887 1,192,955
---------- ----------
OPERATING INCOME 217,107 158,090
Interest income, net 62,566 88,162
---------- ----------
INCOME BEFORE
INCOME TAXES 279,673 246,252
Income taxes 82,000 64,000
---------- ----------
NET INCOME $ 197,673 $ 182,252
========== ==========
EARNINGS PER SHARE $ .16 $ .13
========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 1,203,236 1,383,942
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended June 30
1997 1996
OPERATING ACTIVITIES
Net income $ 197,673 $ 182,252
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 121,117 109,274
Change in assets and liabilities:
Trade receivables 49,447 34,753
Inventories (972,620) (916,514)
Prepaid expenses and other (16,388) (14,758)
Accounts payable and other
current liabilities 25,287 412,212
---------- ----------
NET CASH USED IN
OPERATING ACTIVITIES (595,484) (192,781)
INVESTING ACTIVITIES
Acquisition:
Intangible assets (22,235)
Inventories (127,752)
Equipment (50,050)
Purchase of property and equipment (95,067) (57,256)
Proceeds from sale of property and
equipment 216,917
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (78,187) (57,256)
FINANCING ACTIVITIES
Cash dividends paid (72,302) (69,808)
Repurchase of common stock (348,000) (1,507,888)
---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES (420,302) (1,577,696)
---------- ----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (1,093,973) (1,827,733)
Cash and cash equivalents at
beginning of period 6,660,759 9,934,130
---------- ----------
CASH AND CASH
EQUIVALENTS AT END OF PERIOD $5,566,786 $8,106,397
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended June 30, 1997 is not necessarily indicative of the results
that may be expected for the year ending March 31, 1998. 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, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (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.
NOTE B--INVENTORIES
The components of inventory consist of the following:
June 30, 1997 March 31, 1997
Finished Goods $2,019,943 $1,393,147
Production Materials:
Meats 1,388,871 1,073,585
Other Ingredients 196,650 138,437
Packing Materials 435,713 335,636
---------- ----------
$4,041,177 $2,940,805
========== ==========
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-
(continued)
June 30, 1997
NOTE C--ACQUISITION
On May 21, 1997 the Company purchased the Summer Garden brand of salad
dressings and Kitchen del Sol brand of specialty rices and grains from
Chanterelle Foods, Inc. These high quality product lines are marketed and
sold to the fancy food trade nationally. The purchase price for the brand
names, equipment and inventories was approximately $200,000.
NOTE D--SHAREHOLDERS' EQUITY
During the three months ended June 30, 1997 the Company purchased and retired
32,000 shares of its Common Stock at a cost of $348,000.
NOTE E--SUBSEQUENT EVENT
Because of the termination of its retail lease and the fact that the business
was no longer compatible with our strategy as a manufacturer and marketer of
specialty food products, the Company sold the operations of The New Orleans
School of Cooking on July 22, 1997. This sale will not have a material
impact on the overall operations of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company produces and markets a wide range of branded food products
primarily to the retail grocery, food service and gourmet food industries.
The Company also markets its products through direct mail and its own retail
outlets. The Company's business is somewhat seasonal with its direct mail
and gourmet food operations having disproportionate sales during the
Christmas season. This traditionally makes the Company's third quarter sales
and income the highest of the fiscal year.
Results of Operations
Net sales for the three months ended June 30, 1997 were $4,486,831 compared
to $3,446,998 for the three months ended June 30, 1996. The sharp
improvement in sales is due primarily due to the acquisition of certain
product lines acquired from Doughtie's Foods, Inc. Gross profit for the three
months ended June 30, 1997 decreased to 34.2% compared to 38.8% for the three
months ended June 30, 1996. The lower margin is due to product mix as a
result of the Doughtie's acquisition.
Selling, general and administrative expenses increased 12.0% during the three
months ended June 30, 1997 to $1,335,887 from $1,192,955 for the three months
ended June 30, 1996. The increase was in selling expenses as a result of the
increased sales.
The decrease in interest income is the result of the use of cash in the
Doughtie's' acquisition and the purchase and retirement of 32,000 shares of
the Company's Common Stock.
Income tax rates are lower than statutory rates because of interest income
from tax-exempt municipal bond funds.
Liquidity and Capital Resources
At June 30, 1997, the Company had approximately $5.5 million invested in
short-term highly liquid debt instruments compared to approximately $6.5
million at June 30, 1996. The decrease is primarily the result of increased
inventories which is typical during this time of year. Other significant
uses of cash during the quarter was the purchase of 32,000 shares of the
Company's Common Stock and the acquisition of the Summer Garden and Kitchen
del Sol specialty food brands.
Because of the termination of our retail lease and the fact that the business
was no longer compatible with the Company's strategy as a manufacturer and
marketer of specialty food products, the decision was made to sell the
operations of The New Orleans School of Cooking. The sale was completed on
July 22, 1997. No significant gain or loss will occur from this transaction.
The proceeds from the sale, as well as the impact on future operations, will
not have a material impact on the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
The Company believes its liquidity and capital resources to be excellent.
Current cash flows and available funds are sufficient to satisfy existing
cash requirements. At June 30, 1997, 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 line of
credit, the Company believes it is in an excellent position to invest in
assets which will increase shareholder value over time.
As of June 30, 1997, the Company had all of its $10 million line of credit
loan available.
The Company traditionally increases inventory during the first six months of
its fiscal year to meet the increased demand for its products during the
Christmas season. The Company is financing the increase in inventory through
its operating cash flow and the use of some of its short-term securities.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a.) 27. Financial Data Schedule
b.) The Company did not file any reports on Form 8-K during the three
months ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SMITHFIELD COMPANIES, INC.
(registrant)
DATE: August 8, 1997 /s/ Richard S. Fuller
______________________________
Richard S. Fuller
President and Chief Executive
Officer
DATE: August 8, 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 three months ended June 30, 1997, and is qualified in its
entirety by reference to such Unaudited Consolidated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 5,566,786
<SECURITIES> 0
<RECEIVABLES> 1,565,936
<ALLOWANCES> 64,000
<INVENTORY> 4,041,177
<CURRENT-ASSETS> 11,327,669
<PP&E> 6,564,010
<DEPRECIATION> 3,208,008
<TOTAL-ASSETS> 15,726,742
<CURRENT-LIABILITIES> 1,639,793
<BONDS> 0
0
0
<COMMON> 2,659,611
<OTHER-SE> 11,427,338
<TOTAL-LIABILITY-AND-EQUITY> 15,726,742
<SALES> 4,486,831
<TOTAL-REVENUES> 4,504,980
<CGS> 2,951,986
<TOTAL-COSTS> 4,287,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 279,673
<INCOME-TAX> 82,000
<INCOME-CONTINUING> 197,673
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197,673
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
