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, 2000 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
2, 2000: $5,808,878
The number of shares outstanding of each of the Registrant's classes of
Common Stock, as of June 2, 2000 was 2,150,744 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended March 31, 2000
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 Smithfiedl 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 barbecues 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. The frozen line accounted
for 88% of the unit's sales during the current year and includes pork,
e been integrated into the Company's plant in Smithfield, Virginia. The
frozen line accounted for 88% of the unit's sales during the current year and
includes pork, chicken and beef barbecues 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. The significant
increase in the frozen line during the past three years is due to the
acquisition of the Doughtie's product lines. Management believes the frozen
products have significant growth potential.
Smithfield Ham produces and markets barbecue sauces in plastic and glass
containers and portion control packets for both the food service and retail
grocery industries. It also markets deviled meat spreads, canned barbecues,
country hams and genuine "Smithfield" hams under the "Amber" brand. 7% 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 5% of the unit's sales relates to barbecue 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. On April 22, 1998, V. W. Joyner acquired The
E. M. Todd Company. Founded in Smithfield, Virginia prior to 1779, Todd is
America's oldest meat packer and the original curer of the Smithfield Ham.
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 Thanksgiving
and Christmas holiday period. As a result, the third fiscal quarter
accounted for 44% 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 81% of its sales.
Pruden's business is highly seasonal, concentrated during the Thanksgiving
and Christmas holiday period. As a result, the third fiscal quarter
accounted for 52% of its annual sales.
The Company acquired Pruden in 1986. 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 stores, 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 of the four retail stores
operate 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.
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.
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, 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 four 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 four 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 two sales personnel are responsible for generating 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.
Raw Materials
One of the Company's primary raw materials consists of fresh and frozen pork
products purchased domestically or imported. Another significant raw
material is raw peanuts purchased primarily from Virginia and North Carolina.
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. 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, 2000, the Company had approximately 94 full-time employees
and 79 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 7, 2002. 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. Effective
March 1, 2000, the Company entered into a new union contract that will be in
effect until February 28, 2005. 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 60,012
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
currently under 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 page 16 of the annual
shareholders report for the year ended March 31, 2000 is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 4 of the annual shareholders
report for the year ended March 31, 2000 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 5 and 6 of the annual
shareholders report for the year ended March 31, 2000 is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of PricewaterhouseCoopers LLP, independent accountants,
and the Consolidated Financial Statements included on pages 7
through 15 of the annual shareholders report for the year ended
March 31, 2000 are incorporated herein by reference.
Quarterly Results of Operations on page 15 of the annual
shareholders report for the year ended March 31, 2000 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 23, 2000, 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, 2000 with respect
to executive officers, is incorporated herein by reference in
response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 5 and 6 in the Company's proxy
statement dated June 23, 2000 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 23, 2000 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 23, 2000 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, executed June 4, l999. Filed June 25,
1999, as EXHIBIT A to the Registrant's proxy statement, and
is 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.
21.1 Subsidiaries of the Registrant. Filed herewith.
(b) Reports filed on Form 8-K for the quarter ended March 31, 2000--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 23, 2000
James L. Cresimore
S/ Richard S. Fuller President and Chief June 23, 2000
Richard S. Fuller Executive Officer
(Principal Executive
Officer)
S/ Peter D. Pruden, III Executive Vice June 23, 2000
Peter D. Pruden, III President, Secretary
and Director
S/ Mark D. Bedard Treasurer and Chief June 23, 2000
Mark D. Bedard Financial Officer
(Principal Financial
Officer and Principal
Accounting Officer)
S/ Bernard C. Baldwin,III Director June 23, 2000
Bernard C. Baldwin, III
S/ Frank H. Buhler Director June 23, 2000
Frank H. Buhler
S/ R. Scott Morgan Director June 23, 2000
R. Scott Morgan
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, 2000
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, 2000, are incorporated by reference
in Item 8:
Consolidated balance sheets--March 31, 2000 and 1999
Consolidated statements of income--Years ended
March 31, 2000, 1999 and 1998
Consolidated statements of cash flows--Years ended March 31,
2000, 1999 and 1998
Notes to consolidated financial statements--March 31, 2000
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, 2000:
Deducted from
asset accounts:
Allowance for
doubtful accounts $79,000 $ 2,000 $11,000 $70,000
======= ======= ======= =======
Year ended March 31, 1999:
Deducted from
asset accounts:
Allowance for
doubtful accounts $71,000 $24,000 $16,000 $79,000
======= ======= ======= =======
Year ended March 31, 1998:
Deducted from
asset accounts:
Allowance for
doubtful accounts $61,000 $34,000 $24,000 $71,000
======= ======= ======= =======
(1) Uncollectible accounts written off, net of recoveries.
REPORT OF INDEPENDENT ACCOUNTANTS
Shareholders and Board of Directors
The Smithfield Companies, Inc.
Our audits of the consolidated financial statements referred to in our report
dated May 24, 2000, appearing in the March 31, 2000 Annual Report of
Shareholders of The Smithfield Companies, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K), also included an audit of the financial statement schedule listed
in item 14 (a)(1)&(2) of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Virginia Beach, Virginia
May 24, 2000
