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 July 31, 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 September 2, 1994
Common Stock, $.50
value per share 16,284,026
1-11
<PAGE>
SMITHFIELD FOODS, INC.
CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - July 31, 1994 and
May 1, 1994 3-4
Consolidated Statements of Operations - 13 Weeks Ended
July 31, 1994 and August 1, 1993 5
Consolidated Statements of Cash Flows - 13 Weeks Ended
July 31, 1994 and August 1, 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 9-10
Item 6. Exhibits and Reports on Form 8-K. 10
2-11
<PAGE>
PART I. FINANCIAL INFORMATION
SMITHFIELD FOODS, INC.
CONSOLIDATED BALANCE SHEETS
July 31, May 1,
(In thousands) 1994 1994
ASSETS (unaudited)
Current assets:
Cash $ 8,310 $ 12,350
Accounts receivable less allowances
of $484 and $458 63,634 60,586
Inventories 136,900 119,269
Advances to joint hog production
arrangements 22,003 20,178
Prepaid expenses and other current
assets 15,326 13,946
Total current assets 246,173 226,329
Property, plant and equipment 356,380 330,133
Less accumulated depreciation (128,515) (124,112)
Net property, plant and equipment 227,865 206,021
Other assets:
Cost in excess of net assets acquired
less accumulated amortization of
$1,499 and $1,456 7,507 4,385
Investments in partnerships 10,613 10,672
Other 5,022 4,872
Total other assets 23,142 19,929
$ 497,180 $ 452,279
See accompanying notes to consolidated financial statements.
3-11
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED BALANCE SHEETS
July 31, May 2,
(In thousands) 1994 1994
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
Current liabilities:
Notes payable $ 49,030 $ 52,135
Current portion of long-term debt
and capital lease obligations 9,243 9,655
Accounts payable 49,705 48,017
Accrued expenses and other current
liabilities 32,297 31,840
Income taxes payable 320 3,153
Total current liabilities 140,595 144,800
Long-term debt and capital lease
obligations 167,828 118,942
Other noncurrent liabilities:
Deferred income taxes 11,630 11,767
Pension and post-retirement benefits 4,855 5,220
Minority interest 2,148 3,836
Other 2,866 2,764
Total other noncurrent liabilities 21,499 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 16,721,026 and 16,713,126
shares 8,361 8,357
Additional paid-in capital 48,066 47,964
Retained earnings 108,474 106,272
Treasury stock, at cost, 437,000 shares (7,643) (7,643)
Total stockholders' equity 157,258 154,950
$ 497,180 $ 452,279
See accompanying notes to consolidated financial statements.
4-11
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<TABLE>
SMITHFIELD FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
13 Weeks 13 Weeks
Ended Ended
(In thousands, except per share data) July 31, 1994 August 1, 1993
<S> <C> <C>
Sales $ 342,655 $ 299,230
Costs and expenses:
Cost of sales 295,297 260,941
Selling, general and administrative 35,707 30,321
Depreciation 4,700 5,751
Interest 3,190 2,670
338,894 299,683
Income (loss) before income taxes 3,761 (453)
Income taxes (credit) 1,391 (84)
Net income (loss) $ 2,370 $ (369)
Net income (loss) available for common stockholders $ 2,201 $ (538)
Net income (loss) per share $ .13 $ (.03)
Weighted average shares outstanding 16,987 16,724
</TABLE>
See accompanying notes to consolidated financial statements.
5-11
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
13 Weeks 13 Weeks
Ended Ended
(Dollars in thousands) July 31, 1994 August 1, 1993
Cash flows from operating activities:
Net income (loss) $ 2,370 $ (369)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 5,100 6,113
Gain on sale of property and equipment 222 15
Increase in accounts receivable (3,048) (4,545)
Increase in inventories (17,631) (27,462)
(Increase) decrease in prepaid expenses
and other current assets (1,380) 243
Increase in other assets (3,672) (207)
Increase (decrease) in other liabilities (951) 4,830
Increase (decrease) in deferred
income taxes (137) 366
Net cash used in operating activities (19,127) (21,016)
Cash flows from investing activities:
Capital expenditures (27,381) (7,820)
Proceeds from sale of property, plant
and equipment 615 326
Decrease in investment in partnerships 58 -
(Increase) decrease in advances to joint
hog production arrangements (1,825) 4,500
Other - (10)
Net cash used in investing activities (28,533) (3,004)
Cash flows from financing activities:
Net borrowings on notes payable to banks (3,105) 26,265
Increase in long-term debt 50,000 2,967
Principal payments on long-term debt
and capital lease obligations (1,525) (1,453)
Dividends on preferred stock (169) (169)
Proceeds from exercise of stock options 107 102
Increase (decrease) in minority interest (1,688) 224
Net cash provided by financing activities 43,620 27,936
Net increase (decrease) in cash (4,040) 3,916
Cash at beginning of quarter 12,350 3,079
Cash at end of quarter $ 8,310 $ 6,995
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest (net of amount capitalized) $ 2,444 $ 3,328
Income taxes $ 5,071 $ 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 of 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:
July 31, May 1,
(In thousands) 1994 1994
Fresh and processed meats $ 106,914 $ 90,219
Livestock and manufacturing supplies 21,401 19,809
Other 8,585 9,241
$ 136,900 $ 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 by $1,934,000 and increased net income and net income
per share by $1,218,000 and $.07, respectively, in the first quarter of
fiscal 1995.
7-11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
13 Weeks Ended July 31, 1994 -
13 Weeks Ended August 1, 1993
Sales in the first quarter of fiscal 1995 increased $43.4 million, or 14.5%,
from the same quarter a year ago. The increase was the result of a 15.5%
increase in sales tonnage offset by a 1.5% decrease in unit sales prices.
The increase in sales tonnage was the result of a 24.0% increase in fresh
pork tonnage combined with a 4.4% increase in processed meats tonnage. The
increase in fresh pork tonnage reflected the Registrant's commitment to
expand its sales of fresh pork.
Cost of sales increased $34.3 million, or 13.2%, in the first quarter of
fiscal 1995, due primarily to 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 quarter of fiscal 1995 increased by $9.1 million, or
23.5%, compared to the same quarter of fiscal 1994. This increase in gross
profit primarily resulted from higher margins on sales of fresh pork and
processed meats and substantially increased sales tonnage of fresh pork.
Gross profit also reflected sharply improved results at Brown's of Carolina,
Inc. ("Brown's"), the Registrant's hog production operation.
Selling, general and administrative expenses increased $5.4 million, or
17.8%, in the first quarter of fiscal 1995. The increase reflected higher
distribution and sales and marketing costs associated with the increased
sales tonnage and higher storage costs associated with increased inventories
of hams for the fall holiday season.
Depreciation expense decreased $1.1 million, or 18.3%, in the first
quarter of fiscal 1995 from the same quarter 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 Brown's. This
change in accounting estimate reduced depreciation charges and increased net
income in the first quarter by $1.9 million and $1.2 million, respectively.
Interest expense increased $.5 million, or 19.5%, in the first quarter
of fiscal 1995, reflecting significantly higher long-term debt related to the
funding of capital projects, including improvements at the Bladen County
plant and additional hog production facilities at Brown's.
Reflecting the factors discussed above, net income increased to $2.4
million in the first quarter of 1995 compared to a net loss of $.4 million in
the same quarter of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 1995, the Registrant's cash used by
operations was $19.1 million, largely the result of a significant increase in
the levels of inventories associated with the build up of freezer stocks for
the fall holiday season. Traditionally, the Registrant builds large
inventories of hams in the spring and summer months which are sold during the
heavy fall selling season.
8-11
<PAGE>
Capital expenditures in the first quarter of fiscal 1995 totaled $27.4
million, consisting primarily of $22.0 million related to capital
improvements at the Bladen County plant, including a rapid carcass chilling
system designed to improve fresh pork quality, additional refrigeration that
will accommodate the start-up of a second shift, and a conversion room that
will sharply increase production capacity for boneless, value-added fresh
pork products. In addition, the Registrant expended $3.5 million related to
hog production facilities at Brown's.
The significant increases in the levels of inventories and capital
expenditures were funded with $46.9 million in borrowings under existing
lines of credit. In August, 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 point above
prime. The note agreement requires that the Registrant prepay the loan with
the proceeds of any new long-term financings. As a result of the placement
of these notes, the Registrant presented $50.0 million of notes payable as
long-term debt as of July 31, 1994.
As of July 31, 1994, the Registrant had definitive commitments of $23.6
million for capital improvements for the remainder of fiscal 1995, primarily
related to the improvements at the Bladen County plant and the construction
of new hog production facilities at Brown's.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Annual Meeting of Stockholders held August 31, 1994.
(b) and (c) There were 16,284,026 shares of Registrant's Common
stock outstanding as of July 15, 1994, the record date for
the 1994 Annual Meeting of Stockholders. A total of 12,192,846
shares were voted at the meeting.
(b) All of management's nominees for directors of the Registrant
were elected with the following vote:
Votes Broker
Director Nominee Votes For Withheld Non-Votes
F. J. Faison, Jr. 11,953,689 239,157 0
Joel W. Greenberg 11,952,689 240,157 0
Cecil W. Gwaltney 11,953,489 239,357 0
George E. Hamilton, Jr. 11,953,489 239,357 0
Richard J. Holland 11,953,689 239,157 0
Roger R. Kapella 11,953,689 239,157 0
Lewis R. Little 11,953,689 239,157 0
Joseph W. Luter, III 11,953,689 239,157 0
Robert W. Manly 11,953,689 239,157 0
Wendell H. Murphy 11,953,689 239,157 0
William H. Prestage 11,953,689 239,157 0
Aaron D. Trub 11,953,689 239,157 0
9-11
<PAGE>
(c) All of the Registrant's proposals were approved or ratified with
the following votes:
<TABLE>
Votes Votes Broker
Votes For Against Abstaining Non-Votes
<S> <C> <C> <C> <C>
(1) Proposal to approve 10,398,569 503,597 894,356 396,324
the amendment and
restatement of the
Registrant's 1992
Stock Incentive Plan.
(2) Proposal to approve an 10,672,755 225,975 897,792 396,324
amendment to the Registrant's
1984 Stock Option Plan.
(3) Proposal to approve the 10,533,002 358,383 892,927 408,534
Registrant's Incentive
Bonus Plan.
(4) Proposal to ratify the 11,328,454 62,734 801,658 0
selection of Arthur Andersen
& Co. as independent public
accountants of the Registrant
for the fiscal year ending
April 30, 1995.
(d) Not applicable.
</TABLE>
Item 5. Other Information.
In an election held on August 25, 1994, the employees at the
Registrant's plant in Bladen County, North Carolina, rejected efforts
by the United Food and Commercial Workers Union to represent them as
their bargaining agent.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
Exhibit 11 - Computation of Net Income (Loss) Per Share
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: September 2, 1994
11-11
SMITHFIELD FOODS, INC.
EXHIBIT 11
COMPUTATION OF NET INCOME (LOSS) PER SHARE
Net income (loss) and the number of shares and common equivalent shares used
in the computation of net income (loss) per share were computed as follows:
13 Weeks 13 Weeks
Ended Ended
Income (loss) (in thousands) July 31, 1994 Aug. 1, 1993
Net income (loss) $ 2,370 $ (369)
Dividends accumulated for Series B
preferred stock (169) (169)
Net income (loss) available for
common stockholders $ 2,201 $ (538)
Shares
Weighted average shares:
Outstanding 16,279 16,275
Net effect of dilutive stock
options 708 449
Shares for computation 16,987 16,724
Net income (loss) per share $ .13 $ (.03)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> JUL-31-1994
<CASH> 8310
<SECURITIES> 0
<RECEIVABLES> 64118
<ALLOWANCES> 484
<INVENTORY> 136900
<CURRENT-ASSETS> 246173
<PP&E> 356380
<DEPRECIATION> 128515
<TOTAL-ASSETS> 497180
<CURRENT-LIABILITIES> 140595
<BONDS> 167828
<COMMON> 8361
10000
0
<OTHER-SE> 148897
<TOTAL-LIABILITY-AND-EQUITY> 497180
<SALES> 342655
<TOTAL-REVENUES> 342655
<CGS> 295297
<TOTAL-COSTS> 295297
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 00
<INTEREST-EXPENSE> 3190
<INCOME-PRETAX> 3761
<INCOME-TAX> 1391
<INCOME-CONTINUING> 2370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2370
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
