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, 2000
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--2,136,744 shares as of August 4, 2000
INDEX
THE SMITHFIELD COMPANIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 2000
and March 31, 2000
Condensed consolidated statements of income--Three months
ended June 30, 2000 and 1999
Condensed consolidated statements of cash flows--Three months
ended June 30, 2000 and 1999
Notes to condensed consolidated financial statements--
June 30, 2000
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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
2000 2000
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,985,769 $ 6,844,346
Certificate of deposit 1,051,569 1,038,529
Trade receivables, less allowances
of $74,000 and $70,000 1,522,429 1,157,744
Inventories 3,448,925 3,228,829
Prepaid expenses and other 116,557 59,225
Deferred income taxes 100,000 100,000
----------- -----------
TOTAL CURRENT ASSETS 12,225,249 12,428,673
PROPERTY, PLANT AND EQUIPMENT 9,529,269 9,494,855
less allowances for depreciation 4,118,305 3,977,784
----------- -----------
5,410,964 5,517,071
OTHER ASSETS 1,139,453 1,156,411
----------- -----------
$18,775,666 $19,102,155
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 592,134 $ 627,174
Other current liabilities 609,703 698,422
----------- -----------
TOTAL CURRENT LIABILITIES 1,201,837 1,325,596
LONG-TERM DEBT 2,800,000 2,800,000
SHAREHOLDERS' EQUITY
Common stock, no par or stated
value--authorized 5,000,000 shares;
issued and outstanding 2,136,744
shares and 2,172,744 shares 1,004,195 1,238,570
Retained earnings 13,769,634 13,737,989
----------- -----------
14,773,829 14,976,559
----------- -----------
$18,775,666 $19,102,155
=========== ===========
Note: The balance sheet at March 31, 2000 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
2000 1999
Net sales $4,238,398 $4,055,972
Cost of goods sold 2,849,773 2,616,205
---------- ----------
GROSS PROFIT 1,388,625 1,439,767
Other operating revenue 12,270 18,800
---------- ----------
1,400,895 1,458,567
Selling, general and
administrative expenses 1,337,644 1,233,071
---------- ----------
OPERATING INCOME 63,251 225,496
Interest income 104,392 84,854
Interest expense (40,407) (32,240)
---------- ----------
INCOME BEFORE
INCOME TAXES 127,236 278,110
Income taxes 20,000 78,000
---------- ----------
NET INCOME $ 107,236 $ 200,110
========== ==========
BASIC EARNINGS PER SHARE $ .05 $ .09
========== ==========
DILUTED EARNINGS PER SHARE $ .05 $ .09
========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING--BASIC 2,157,195 2,265,928
========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING--DILUTED 2,184,542 2,286,772
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended June 30
2000 1999
OPERATING ACTIVITIES
Net income $ 107,236 $ 200,110
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 160,979 159,454
Gain on disposal of property
and equipment (5,701)
Change in assets and liabilities:
Trade receivables (364,685) (142,192)
Inventories (220,096) (734,607)
Prepaid expenses and other (57,332) (69,176)
Accounts payable and other
current liabilities (123,759) 225,913
---------- ----------
NET CASH USED IN
OPERATING ACTIVITIES (497,657) (366,199)
INVESTING ACTIVITIES
Purchase of certificate of deposit (13,040) (1,000,000)
Purchase of property and equipment (34,414) (412,477)
Proceeds from sale of property and
equipment 17,000
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (47,454) (1,395,477)
FINANCING ACTIVITIES
Bond issuance costs paid (3,500)
Cash dividends paid (75,591) (190,803)
Repurchase of common stock (234,375) (707,802)
---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES (313,466) (898,605)
---------- ----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (858,577) (2,660,281)
Cash and cash equivalents at
beginning of period 6,844,346 9,728,710
---------- ----------
CASH AND CASH
EQUIVALENTS AT END OF PERIOD $5,985,769 $7,068,429
========== ==========
See notes to condensed consolidated financial statements.
THE SMITHFIELD COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
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, 2000 is not necessarily indicative of the results
that may be expected for the year ending March 31, 2001. 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, 2000.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This standard, as amended by SFAS No.
137, is effective for financial statements issued for all fiscal quarters for
fiscal years beginning after June 15, 2000. The Company does not expect that
SFAS No. 133 will have a material effect on its financial condition or
results of operations.
Securities & Exchange Commission Staff Accounting Bulletin 101 (SAB 101),
"Revenue Recognition in Financial Statements", as amended by SAB 101B, is
effective no later than fiscal quarter ended December 31, 2000. Adoption of
SAB 101 is not expected to have a material effect on the recognition,
presentation, and disclosure of revenue.
NOTE B--INVENTORIES
The components of inventory consist of the following:
June 30, 2000 March 31, 2000
Finished Goods $1,862,265 $1,295,332
Production Materials:
Meats 923,106 1,245,700
Other Ingredients 187,871 197,833
Packing Materials 475,683 489,964
---------- ----------
$3,448,925 $3,228,829
========== ==========
NOTE C-SHAREHOLDERS' EQUITY
During the three months ended June 30, 2000 the company purchased and retired
36,000 shares of its Common Stock at a cost of $234,375.
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, 2000 were $4,238,398 compared
to $4,055,972 for the three months ended June 30, 1999. This increase in
sales was the result of increased demand in all major product lines. Gross
profit for the three months ended June 30, 2000 decreased to 32.8% compared
to 35.5% for the three months ended June 30, 1999. The lower margins were
due to higher pork related raw material costs.
Selling, general and administrative expenses (SG&A) increased 8.5% during the
three months ended June 30, 2000 to $1,337,644 from $1,233,071 for the three
months ended June 30, 1999. Selling expenses accounted for all of the
increase. This increase was a conscious effort to increase our frozen food
business due to our increased plant capacity. General and administrative
expenses actually decreased marginally during the current year compared to
the prior year.
Net interest income increased to $63,895 for the three months ended June 30,
2000 compared to $52,614 for the three months ended June 30, 1999. Lower
invested balances during the current year were more than offset by higher
interest rates.
Income tax rates are lower than statutory rates primarily because of interest
income from tax-exempt municipal bond funds.
Liquidity and Capital Resources
At June 30, 2000 the Company had an Industrial Development Revenue Bond in
the amount of $2,800,000 outstanding. The Bond matures in the year 2014 and
has principle payments of $500,000 due in 2004 and 2009.
At June 30, 2000, the Company had approximately $6.0 million invested in
short-term highly liquid debt instruments and $1.1 million in a certificate
of deposit that matures in October 2000. In addition, the Company has an
unused $10 million line of credit loan with a bank bearing interest at the
LIBOR market plus .50% which expires on July 31, 2001.
Management believes its liquidity and capital resources to be excellent and
current cash flows and available funds are sufficient to satisfy existing
cash requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
The Company will continue its strategy of looking for growth through
acquisitions in higher margin segments of the food industry. Having a
significant amount of cash on hand as well as available funds on its credit
line, the Company believes it is in an excellent position to invest in
assets, which will increase shareholder value over time.
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 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on July 27, 2000,
the following proposals were submitted to a vote of the holders of the
Company's common stock voting as indicated:
1. Approval of a proposal to elect the following individuals as directors of
the Company:
DIRECTOR FOR WITHHELD
James L. Cresimore 1,630,592 3,700
Richard S. Fuller 1,629,992 4,300
2. Approval of a proposal to ratify the appointment of PricewaterhouseCoopers
LLP as independent auditors for 2001:
FOR AGAINST ABSTAI
1,634,292 0 0
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, 2000.
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 11, 2000 /s/ Richard S. Fuller
______________________________
Richard S. Fuller
President and Chief Executive
Officer
DATE: August 11, 2000 /s/ Mark D. Bedard
______________________________
Mark D. Bedard
Treasurer and Chief Financial
Officer
