SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended October 30, 1994 Commission File Number 0-2258
SMITHFIELD FOODS, INC.
501 North Church Street
Smithfield, Virginia 23430
(804) 357-4321
Delaware 52-0845861
(State of Incorporation) (I.R.S. Employer
Identification Number)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Shares outstanding
Class at December 2, 1994
Common Stock, $.50 16,387,026
par value per share
1-11
<PAGE>
SMITHFIELD FOODS, INC.
CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - October 30, 1994 and
May 1, 1994 3-4
Consolidated Statements of Operations - 13 Weeks Ended
October 30, 1994 and October 31, 1993 and 26 Weeks
Ended October 30, 1994 and October 31, 1993 5
Consolidated Statements of Cash Flows - 26 Weeks Ended
October 30, 1994 and October 31, 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 10
2-11
<PAGE>
PART I. FINANCIAL INFORMATION
SMITHFIELD FOODS, INC.
CONSOLIDATED BALANCE SHEETS
October 30, May 1,
(In thousands) 1994 1994
ASSETS (unaudited)
Current assets:
Cash $ 11,898 $ 12,350
Accounts receivable less allowances
of $487 and $407 72,393 60,586
Inventories 143,370 119,269
Advances to joint hog production
arrangements 9,090 20,178
Prepaid expenses and other current assets 15,500 13,946
Total current assets 252,251 226,329
Property, plant and equipment 377,825 330,133
Less accumulated depreciation (132,991) (124,112)
Net property, plant and equipment 244,834 206,021
Other assets:
Cost in excess of net assets acquired
less accumulated amortization of
$1,555 and $1,411 7,449 4,385
Investments in and advances
to partnerships 24,310 10,672
Other 5,490 4,872
Total other assets 37,249 19,929
$ 534,334 $ 452,279
See accompanying notes to consolidated financial statements.
3-11
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED BALANCE SHEETS
October 30, May 1,
(In thousands) 1994 1994
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
Current liabilities:
Notes payable $ 68,291 $ 52,135
Current portion of long-term debt
and capital lease obligations 9,440 9,655
Accounts payable 55,081 48,017
Accrued expenses and other current
liabilities 36,018 31,840
Income taxes payable 1,217 3,153
Total current liabilities 170,047 144,800
Long-term debt and capital lease
obligations 165,087 118,942
Other noncurrent liabilities 22,638 23,587
Series B 6.75% cumulative convertible
redeemable preferred stock, $1.00 par
value, 1,000 shares authorized, issued
and outstanding 10,000 10,000
Stockholders' equity:
Preferred stock, $1.00 par value,
authorized 1,000,000 shares - -
Common stock, $.50 par value,
authorized 25,000,000 shares;
issued 16,824,026 and 16,713,126 shares 8,412 8,357
Additional paid-in capital 49,686 47,964
Retained earnings 116,107 106,272
Treasury stock, at cost, 437,000 shares (7,643) (7,643)
Total stockholders' equity 166,562 154,950
$ 534,334 $ 452,279
See accompanying notes to consolidated financial statements.
4-11
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
(In thousands, except per share data) Oct. 30, 1994 Oct. 31, 1993 Oct. 30, 1994 Oct. 31, 1993
<S> <C> <C> <C> <C>
Sales $ 385,387 $ 354,873 $ 728,042 $ 654,103
Costs and expenses:
Cost of sales 323,613 309,427 618,910 570,368
Selling, general and administrative 40,906 33,497 76,613 63,818
Depreciation 4,811 6,823 9,510 12,574
Interest 3,410 3,544 6,601 6,214
Income before income taxes 12,647 1,582 16,408 1,129
Income taxes 4,845 659 6,236 575
Net income $ 7,802 $ 923 $ 10,172 $ 554
Net income available to common stockholders $ 7,633 $ 754 $ 9,834 $ 216
Net income per share $ .45 $ .04 $ .58 $ .01
Weighted average common shares outstanding 17,081 16,737 17,034 16,731
</TABLE>
See accompanying notes to consolidated financial statements.
5-11
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
26 Weeks 26 Weeks
Ended Ended
(In thousands) Oct. 30, 1994 Oct. 31, 1993
Cash flows from operating activities:
Net income $ 10,172 $ 554
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 10,404 13,249
Increase in accounts receivable (12,052) (19,098)
Increase in inventories (24,101) (43,064)
Increase in prepaid expenses
and other current assets (1,310) (84)
Increase in other assets (4,575) (667)
Increase in other liabilities 8,357 13,901
Loss on sale of property, plant
and equipment 553 99
Net cash used in operating activities (12,552) (35,110)
Cash flows from investing activities:
Capital expenditures (49,864) (14,201)
Proceeds from sale of property, plant
and equipment 987 629
Investments in and advances to
partnerships, net (2,549) 6,650
Net cash used in investing activities (51,426) (6,922)
Cash flows from financing activities:
Net borrowings on notes payable 16,156 41,286
Proceeds from issuance of long-term debt
and capital lease obligations 50,000 4,373
Principal payments on long-term debt
and capital lease obligations (4,070) (3,540)
Proceeds from exercise of stock options 872 102
Tax benefit from stock options exercised 906 53
Preferred dividends (338) (338)
Net cash provided by financing activities 63,526 41,936
Net decrease in cash (452) (96)
Cash at beginning of the period 12,350 3,079
Cash at end of period $ 11,898 $ 2,983
Supplemental disclosures of cash flow information:
Cash payments during period:
Interest (net of amount capitalized) $ 6,448 $ 5,742
Income taxes $ 6,320 $ 172
See accompanying notes to consolidated financial statements.
6-11
<PAGE>
SMITHFIELD FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The Notes to Financial Statements included in Registrant's Annual Report
for the fiscal year ended May 1, 1994 should be read in conjunction with
the quarterly financial statements.
(2) The financial information furnished herein is unaudited. The information
reflects all adjustments (which included only normal recurring
adjustments) which are, in the opinion management, necessary to a fair
statement of the results of operations for the interim periods included
in this report.
(3) Inventories consist of the following:
October 30, May 1,
(In thousands) 1994 1994
Fresh and processed meats $ 109,425 $ 90,219
Livestock and manufacturing supplies 23,758 19,809
Other 10,187 9,241
$ 143,370 $ 119,269
(4) In the third quarter of fiscal 1994, the Registrant revised the estimated
useful lives of certain assets. This change in accounting estimate
reduced depreciation charges and increased net income by $1,934,000 and
$1,180,000 ($.07 per share), respectively, in the second quarter of
fiscal 1995, and reduced depreciation charges and increased net income by
$3,868,000 and $2,398,000 ($.14 per share), respectively, in the first
six months of fiscal 1995.
7-11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
13 Weeks Ended October 30, 1994 -
13 Weeks Ended October 31, 1993
Sales in the second quarter of fiscal 1995 increased $30.5 million, or 8.6%,
from the same quarter a year ago. The increase resulted from an 18.7%
increase in sales tonnage offset by a 4.2% decrease in unit selling prices due
to sharply lower live hog costs. The increase in sales tonnage was the result
of an 18.9% increase in fresh pork tonnage combined with a 14.7% increase in
processed meats tonnage.
Cost of sales increased $14.2 million, or 4.6%, in the second quarter of
fiscal 1995, reflecting increased sales tonnage offset by decreased raw
material costs due to significantly lower live hog prices. Gross profit
(sales less cost of sales) in the second quarter of fiscal 1995 increased by
$16.3 million, or 35.9%, compared to the same quarter of fiscal 1994. This
increase in gross profit resulted from higher margins on increased sales
tonnage of both fresh pork and processed meats. Gross profit was adversely
impacted by operations at Brown's of Carolina, Inc. ("Brown's") and
Smithfield-Carroll's, the Registrant's hog production operations. Brown's and
Smithfield-Carroll's generated an aggregate operating loss in the second
quarter of fiscal 1995.
Selling, general and administrative expenses increased $7.4 million, or
22.1%, in the second quarter of fiscal 1995. The increase reflected higher
distribution and sales and marketing costs associated with the increased sales
tonnage, higher storage costs associated with substantially increased
inventories of hams for the fall holiday season, and increased compensation
and administrative costs related to a build-up of support staff related to
current and anticipated future growth of overall business activity.
Depreciation expense decreased $2.0 million, or 29.5%, in the second
quarter of fiscal 1995 from the corresponding period a year ago. The decrease
reflected a revision in the estimated useful lives of certain assets offset by
increased depreciation charges related to expansion at the Registrant's Bladen
County plant and Brown's. The change in accounting estimate reduced
depreciation charges and increased net income in the second quarter by $1.9
million and $1.2 million, respectively.
Reflecting the factors discussed above, net income increased to $7.8
million in the second quarter of fiscal 1995 compared to net income of $.9
million in the same quarter of the prior fiscal year.
8-11
<PAGE>
26 Weeks Ended October 30, 1994 -
26 Weeks Ended October 31, 1993
Sales in the first six months of fiscal 1995 increased $73.9 million, or
11.3%, from the same quarter a year ago. The increase resulted from a 17.2%
increase in sales tonnage offset by a 4.7% decrease in unit selling prices due
to sharply lower live hog costs. The increase in sales tonnage was the result
of a 21.2% increase in fresh pork tonnage combined with a 9.9% increase in
processed meats tonnage.
Cost of sales increased $48.5 million, or 8.5%, in the first six months
of fiscal 1995, reflecting increased sales tonnage offset by decreased raw
material costs due to lower live hog prices. Gross profit (sales less cost of
sales) in the first two quarters of fiscal 1995 increased by $25.4 million, or
30.3%, compared to the same period of fiscal 1994. This increase in gross
profit resulted from higher margins on increased sales tonnage of both fresh
pork and processed meats. Gross profit was adversely impacted by sharply
lower profits at Brown's and Smithfield-Carroll's, the Registrant's hog
production operations.
Selling, general and administrative expenses increased $12.8 million, or
20.0%, in the first six months of fiscal 1995. The increase reflected higher
distribution and sales and marketing costs associated with the increased sales
tonnage, higher storage costs associated with substantially increased
inventories of hams for the fall holiday season, and increased compensation
and administrative costs related to a build-up of support staff related to
current and anticipated future growth of overall business activity.
Depreciation expense decreased $3.1 million, or 24.4%, in the first two
quarters of fiscal 1995 from the corresponding period a year ago. The
decrease reflected a revision in the estimated useful lives of certain assets
offset by increased depreciation charges related to expansion at the
Registrant's Bladen County plant and Brown's. The change in accounting
estimate reduced depreciation charges and increased net income in the first
six months by $3.9 million and $2.4 million, respectively.
Reflecting the factors discussed above, net income increased to $10.2
million in the first six months of fiscal 1995 compared to net income of $.6
million in the same period of the prior fiscal year.
9-11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal 1995, the Registrant's cash used in
operating activities was $11.0 million, the result of seasonal increases in
the level of inventories and accounts receivable associated with the fall
holiday season. Traditionally, the Registrant builds large inventories of
hams in the spring and summer months which are sold during the fall holiday
season.
Capital expenditures in the first six months totaled $49.9 million,
consisting primarily of $34.5 million related to the construction of a rapid
carcass chilling system, a new ham and loin conversion operation and
additional hog coolers at the Bladen County plant, and $9.1 million related to
additional hog production facilities at Brown's.
The significant increases in the levels of accounts receivable and
inventories were funded with $16.2 million in borrowings under existing lines
of credit. During the period, the Registrant placed $50.0 million of three-
year notes with a bank, secured by the Bladen County plant. The notes bear
interest at a rate ranging from prime to three-quarters of a percentage point
above prime. The note agreement requires that the Registrant prepay the loan
with the proceeds of any new long-term financings. The proceeds from the
private placement, which were received after the close of the quarter, were
used to repay short-term borrowings under the Registrant's lines of credit
and, accordingly, $50.0 million of notes payable were classified on the
Registrant's balance sheet as long-term debt as of October 30, 1994.
As of October 30, 1994, the Registrant had definitive commitments of
approximately $25.3 million for the remainder of fiscal 1995, primarily
related to improvements at the Bladen County plant and the construction of new
hog production facilities at Brown's.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
Exhibit 11 - Computation of Net Income Per Share
Exhibit 27 - Financial Data Schedule (electronically submitted)
B. Reports on Form 8-K.
None
10-11
<PAGE>
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.
SMITHFIELD FOODS, INC.
/s/ Aaron D. Trub
Aaron D. Trub
Vice President, Secretary & Treasurer
/s/ C. Larry Pope
C. Larry Pope
Controller
Date: December 2, 1994
11-11
SMITHFIELD FOODS, INC.
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
Net income and the number of shares and common equivalent shares used in the computation of net income per
share were computed as follows:
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
Oct. 30, 1994 Oct. 31, 1993 Oct. 30, 1994 Oct. 31, 1993
Income (in thousands)
<S> <C> <C> <C> <C>
Net income $ 7,802 $ 923 $ 10,172 $ 554
Dividends accumulated for Series B
preferred stock (169) (169) (338) $ (338)
Net income available to
common stockholders $ 7,633 $ 754 $ 9,834 $ 216
Shares (in thousands)
Weighted average shares:
Outstanding 16,343 16,275 16,311 16,275
Net effect of dilutive stock options 738 462 723 456
Shares for computation 17,081 16,737 17,034 16,731
Net income per share $ .45 $ .04 $ .58 $ .01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> OCT-30-1994
<CASH> 11,898
<SECURITIES> 0
<RECEIVABLES> 72,880
<ALLOWANCES> 487
<INVENTORY> 143,370
<CURRENT-ASSETS> 252,251
<PP&E> 377,825
<DEPRECIATION> 132,991
<TOTAL-ASSETS> 534,334
<CURRENT-LIABILITIES> 170,047
<BONDS> 165,087
<COMMON> 8,412
10,000
0
<OTHER-SE> 158,150
<TOTAL-LIABILITY-AND-EQUITY> 534,334
<SALES> 385,387
<TOTAL-REVENUES> 385,387
<CGS> 323,613
<TOTAL-COSTS> 323,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 3,410
<INCOME-PRETAX> 12,647
<INCOME-TAX> 4,845
<INCOME-CONTINUING> 7,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,802
<EPS-PRIMARY> .45
<EPS-DILUTED> 0
</TABLE>
