SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SMITHFIELD FOODS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SMITHFIELD FOODS, INC.
SMITHFIELD, VIRGINIA 23430
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 30, 1995
As a stockholder of SMITHFIELD FOODS, INC. (the "Company"), you are
cordially invited to be present, either in person or by proxy, at the Annual
Meeting of Stockholders of the Company to be held at the Omni Waterside Hotel,
777 Waterside Drive, Norfolk, Virginia at 2:00 p.m., local time, on August 30,
1995 for the following purposes:
1. To elect a Board of 13 directors of the Company to serve until the
next Annual Meeting or until their successors are duly elected and
qualified;
2. To ratify the selection of Arthur Andersen LLP as independent
public accountants of the Company for the fiscal year ending April 28,
1996; and
3. To transact such other business as may properly come before the
meeting.
By resolution of the Board of Directors, July 14, 1995 is the record date
for the determination of stockholders entitled to vote at the meeting, and only
stockholders of record at the close of business on that date will be entitled to
vote at the meeting and any adjournments thereof.
We hope you can attend the meeting in person. However, even if you plan to
attend, we urge that you MARK, SIGN, DATE and RETURN the enclosed proxy promptly
in the enclosed self-addressed envelope, so that we may be assured of a quorum
to transact business. The proxy is revocable and will not affect your right to
vote in person in the event you are able to attend the meeting.
Your attention is directed to the attached Proxy Statement.
By Order of the Board of Directors,
Aaron D. Trub
SECRETARY
Smithfield, Virginia
July 31, 1995
<PAGE>
SMITHFIELD FOODS, INC.
EXECUTIVE OFFICES
501 NORTH CHURCH STREET
SMITHFIELD, VIRGINIA 23430
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 30, 1995
This proxy statement is furnished in connection with the solicitation of
proxies by the issuer, Smithfield Foods, Inc. (hereinafter called the
"Company"), and its Board of Directors for use at the Annual Meeting of
Stockholders to be held at 2:00 p.m., local time, on August 30, 1995, and at any
adjournments thereof (the "Meeting").
The expense of this solicitation will be borne by the Company. In addition
to the use of the mails, proxies may be solicited, personally or by telephone,
by regular employees of the Company at no additional compensation. The Company
will reimburse brokers and other persons holding stock in their names as
nominees for their expenses in obtaining authorization to execute proxies for
their principals. Corporate Communications, Inc. has been retained to aid in
such solicitation of proxies at an anticipated cost to the Company of $3,500
plus expenses.
Any proxy given pursuant to this solicitation may be revoked by the filing
with and receipt by the Secretary of the Company of a written revocation or duly
executed proxy bearing a later date and does not preclude the stockholder from
voting in person at the Meeting if he or she so desires. The persons named in
the form of proxy solicited by the Board of Directors will vote all proxies
which have been properly executed. If a stockholder specifies on such proxy a
choice with respect to the proposal to be acted upon, the proxy will be voted in
accordance with such specification. Where no choice is specified, the proxy will
be voted for the election of the nominees for director named herein and for
proposal 2.
The approximate date on which this proxy statement and the accompanying
proxy were first sent or given to stockholders was July 31, 1995.
VOTING SECURITIES
The only class of outstanding voting securities of the Company is its
Common Stock, par value $.50 per share (the "Common Stock"). Stockholders of
record at the close of business on July 14, 1995 will be entitled to vote at the
Meeting. On that date, the Company had outstanding 16,397,526 shares of Common
Stock. Each share of Common Stock is entitled to one vote at the Meeting. Voting
rights of the Common Stock are noncumulative, so that holders of a majority of
the outstanding shares represented at the Meeting can elect all of the
directors.
Presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting will
constitute a quorum. Shares for which the holder has elected to abstain or has
withheld authority to vote (including broker non-votes) on a matter will count
toward a quorum but will have different effects on the outcome of the vote on
such matter. An abstention from voting on a matter (other than the election of
directors) has the same legal effect as a vote "against" the matter, even though
the stockholder may interpret such action differently. A "broker non-vote" is a
vote withheld by a broker on a particular matter in accordance with stock
exchange regulations because the broker has not received instructions from the
customer for whose account the shares are held. Under applicable Delaware law,
broker non-votes on a matter will have no effect on the outcome of the vote.
With respect to the election of directors, the 13 nominees receiving the
greatest number of votes cast for the election of directors will be elected.
PRINCIPAL STOCKHOLDERS
The only persons known by the Company to own beneficially more than 5% of
the Company's Common Stock as of July 14, 1995 are:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS OF (NUMBER OF SHARES)(1) PERCENT
BENEFICIAL OWNER DIRECT OTHER TOTAL OF CLASS
<S> <C> <C> <C> <C>
Joseph W. Luter, III 1,661,236 825,032(2) 2,486,268(2) 14.8
Smithfield Foods, Inc.
501 North Church Street
Smithfield, VA 23430
Carroll's Swine 1,678,000 -- 1,678,000(3) 10.2
Investment Partnership
P.O. Drawer 856
Warsaw, NC 28398
The Clark Estates, Inc. 1,352,995 -- 1,352,995(4) 8.2
30 Wall Street
New York, NY 10005
</TABLE>
(1) Pursuant to current regulations of the Securities and Exchange
Commission, securities must be listed as "beneficially owned" by a person who
directly or indirectly has or shares the power to vote ("voting power") or the
power to dispose of ("dispositive power") the securities, whether or not the
person has any economic interest in the securities. In addition, a person is
deemed a beneficial owner if he has the right to acquire beneficial ownership
within 60 days, whether upon the exercise of a stock option or warrant,
conversion of a convertible security or otherwise. Shares of Common Stock listed
under the "Direct" column are those which are owned and held as outstanding
shares and over which such person, except as noted below, has sole voting power
and sole dispositive power. Shares shown under the "Other" column are those
subject to other forms of deemed "beneficial ownership" pursuant to the
aforesaid regulations, as described in the indicated footnotes.
(2) Includes 325,032 shares owned by a corporation of which Mr. Luter is an
officer, director and the owner of 81% of its capital stock, and 500,000 shares
which Mr. Luter has the right to acquire pursuant to the exercise of presently
exercisable stock options. Mr. Luter has sole voting power and sole dispositive
power with respect to the 325,032 shares owned by the corporation. Mr. Luter may
be deemed a control person of the Company.
(3) Carroll's Swine Investment Partnership is a North Carolina partnership
between Carroll's Foods, Inc. and Carroll's Foods of Virginia, Inc. F. J.
Faison, Jr., a director of the Company, is an officer and director of Carroll's
Foods, Inc. and Carroll's Foods of Virginia, Inc., but is not a stockholder of
either corporation. Mr. Faison disclaims beneficial ownership of the shares
owned by Carroll's Swine Investment Partnership.
(4) The Clark Estates, Inc. provides administrative assistance to numerous
trust and fiduciary accounts which beneficially own an aggregate 1,352,995
shares of the Company's Common Stock. The Clark Estates, Inc. has or, in certain
instances, shares, voting power and/or dispositive power with respect to such
shares. The Clark Estates, Inc. has no remainder or other economic interest in
such trust or fiduciary accounts.
PROPOSAL 1
ELECTION OF DIRECTORS
All of the nominees for election to the Board of Directors but John O.
Nielson are currently directors and were elected at the last Annual Meeting of
Stockholders. The persons elected will hold office as directors of the Company
until the next Annual Meeting of Stockholders and until their successors are
elected and qualified. It is expected that each of the nominees will be able to
serve, but in the event that any such nominee is unable to serve for any reason,
the shares represented by properly executed proxies may be voted at the
discretion of the persons named therein for a substitute nominee or nominees.
The following table sets forth the names, ages, principal occupations of
the nominees and other information with respect to them as of July 14, 1995:
<TABLE>
<CAPTION>
NAME -- AGE -- PRINCIPAL OCCUPATION -- OTHER INFORMATION DIRECTOR SINCE
<S> <C>
Joseph W. Luter, III (56) 1975
Chairman of the Board and Chief Executive Officer of the Company since May 1995;
Chairman of the Board, President and Chief Executive Officer of the Company prior to May
1995
F. J. Faison, Jr. (61) 1991
President of Carroll's Foods, Inc., Warsaw, North Carolina, a hog and turkey producer
Joel W. Greenberg (57) 1987
Commodity Analyst, Alaron Trading Corp., Chicago, Illinois, commodities brokerage firm;
Director, Incomnet, Inc.
Cecil W. Gwaltney (84) 1971
Chairman of the Board, Gwaltney Motor Company, Smithfield, Virginia
George E. Hamilton, Jr. (79) 1970
Retired; President and Chief Operating Officer of The Smithfield Packing Company,
Incorporated ("Smithfield Packing"), a wholly-owned subsidiary of the Company, prior to
June 1994
Richard J. Holland (69) 1978
Chairman of the Board of The Farmers Bank, Windsor, Virginia
Roger R. Kapella (53) 1992
President and Chief Operating Officer of Patrick Cudahy Incorporated ("Patrick Cudahy"),
a wholly-owned subsidiary of the Company
Lewis R. Little (51) 1993
President and Chief Operating Officer of Gwaltney of Smithfield, Ltd. ("Gwaltney"), a
wholly-owned subsidiary of the Company, since May 1993; Executive Vice President of
Gwaltney prior to May 1993
Robert W. Manly, IV (42) 1991
Executive Vice President of the Company since June 1995 and prior to June 1994;
President and Chief Operating Officer of Smithfield Packing from June 1994 to June 1995
Wendell H. Murphy (56) 1991
Chairman of the Board and Chief Executive Officer of Murphy Farms, Inc., Rose Hill,
North Carolina, a hog producer
John O. Nielson (64) --
President and Chief Operating Officer of the Company since May 1995; consultant and
private investor from June 1989 to May 1995; President and Chief Operating Officer of
John Morrell & Co. prior to June 1989
William H. Prestage (60) 1994
Chairman of the Board, President and Chief Executive Officer of Prestage Farms, Inc.,
Clinton, North Carolina, a hog and turkey producer; Director, North Carolina Natural Gas
Corporation
Aaron D. Trub (60) 1986
Vice President, Secretary and Treasurer of the Company
</TABLE>
No family relationship exists between any of the nominees for election as
directors of the Company.
Based solely on its review of the forms required by Section 16(a) of the
Securities Exchange Act of 1934 that have been received by the Company or
written representations from certain reporting persons that no annual statements
on Form 5 were required, the Company believes that all filing requirements
applicable to its officers, directors and beneficial owners of greater than 10%
of its Common Stock have been complied with, except that Mr. Murphy filed late a
required monthly report of two transactions.
COMMON STOCK OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS
The following information with respect to beneficial ownership, as of July
14, 1995, of shares of Common Stock is furnished with respect to each nominee
for election to the Board of Directors and with respect to all executive
officers and directors as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES)(1) PERCENT
NAME DIRECT OTHER TOTAL OF CLASS
<S> <C> <C> <C> <C>
F. J. Faison, Jr. -- 1,678,000(2) 1,678,000(2) 10.2
Joel W. Greenberg 2,000 1,000(3) 3,000(3) *
Cecil W. Gwaltney 33,475 -- 33,475 *
George E. Hamilton, Jr. 161,500 1,000(4) 162,500(4) *
Richard J. Holland 32,000 -- 32,000 *
Roger R. Kapella 4,000 56,000(5) 60,000(5) *
Lewis R. Little -- 10,000(6) 10,000(6) *
Joseph W. Luter, III 1,661,236 825,032(7) 2,486,268(7) 14.8
Robert W. Manly, IV 26,000 40,000(8) 66,000(8) *
Wendell H. Murphy -- 483,500(9) 483,500(9) 2.9
John O. Nielson -- -- -- --
William H. Prestage -- 60,000(10) 60,000(10) *
Aaron D. Trub 42,682 107,000(11) 149,682(11) *
All executive officers and
directors as a group
(14 persons) 1,993,893 3,281,532(12) 5,275,425(12) 30.9
</TABLE>
* Less than 1% of class
(1) Pursuant to current regulations of the Securities and Exchange
Commission, securities must be listed as "beneficially owned" by a person who
directly or indirectly has or shares the power to vote ("voting power") or the
power to dispose of ("dispositive power") the securities, whether or not the
person has any economic interest in the securities. In addition, a person is
deemed a beneficial owner if he has the right to acquire beneficial ownership
within 60 days, whether upon the exercise of a stock option or warrant,
conversion of a convertible security or otherwise. Shares of Common Stock listed
under the "Direct" column are those which are owned and held as outstanding
shares by each director and over which each such director, except as noted
below, has sole voting power and sole dispositive power. Shares shown under the
"Other" column include other forms of "beneficial ownership" pursuant to the
aforesaid regulations, as described in the indicated footnotes.
(2) Reflects 1,678,000 shares owned by Carroll's Swine Investment
Partnership, a North Carolina partnership between Carroll's Foods, Inc. and
Carroll's Foods of Virginia, Inc. Mr. Faison is an officer and director of
Carroll's Foods, Inc. and Carroll's Foods of Virginia, Inc., but is not a
stockholder of either corporation. Carroll's Swine Investment Partnership has
sole voting power and sole dispositive power with respect to such shares. Mr.
Faison disclaims beneficial ownership of such shares.
(3) Includes 1,000 shares owned by Mr. Greenberg's spouse with respect to
which Mr. Greenberg disclaims beneficial ownership.
(4) Includes 1,000 shares owned by Mr. Hamilton's son with respect to which
Mr. Hamilton disclaims beneficial ownership.
(5) Includes 56,000 shares subject to presently exercisable stock options.
(6) Reflects 10,000 shares subject to presently exercisable stock options.
(7) Includes 325,032 shares owned by a corporation of which Mr. Luter is an
officer, director and the owner of 81% of its capital stock, and 500,000 shares
which Mr. Luter has the right to acquire pursuant to the exercise of presently
exercisable stock options. Mr. Luter has sole voting power and sole dispositive
power with respect to the 325,032 shares owned by the corporation. Mr. Luter may
be deemed a control person of the Company.
(8) Includes 40,000 shares subject to presently exercisable stock options.
(9) Reflects 483,500 shares owned by Murphy Farms, Inc., of which Mr.
Murphy is an officer, director and the principal stockholder. Murphy Farms, Inc.
has sole voting power and sole dispositive power with respect to such shares.
(10) Reflects 60,000 shares owned by Prestage Farms, Inc., of which Mr.
Prestage is an officer, director and the principal stockholder. Prestage Farms,
Inc. has sole voting power and sole dispositive power with respect to such
shares.
(11) Includes 50,000 shares subject to presently exercisable stock options.
Also includes 41,000 shares owned by Mr. Trub's spouse and 16,000 shares owned
by Mr. Trub's children, with respect to which Mr. Trub disclaims beneficial
ownership.
(12) Includes 676,000 shares subject to presently exercisable stock
options.
BOARD OF DIRECTORS AND COMMITTEES
The Company has an Executive Committee, an Audit Committee and a
Compensation Committee of the Board of Directors. The Company does not have a
Nominating Committee.
The Executive Committee is composed of Messrs. Hamilton, Holland and Luter
and, with certain limitations, exercises the power of the Board of Directors
between board meetings. The Executive Committee did not hold any meetings in
fiscal 1995.
The Audit Committee is composed of Messrs. Faison and Murphy. The principal
functions of the Audit Committee are the recommendation to the Board of
Directors of a firm to be engaged by the Company as its independent public
accountants, conferring with the independent public accountants selected
regarding the scope of the audit and services to be performed and reviewing the
results of the independent public accountants' examination and recommendations
with respect to accounting practices and procedures and internal control. The
committee held one meeting in fiscal 1995.
The Compensation Committee is composed of Messrs. Greenberg and Holland.
The principal functions of the Compensation Committee are to administer the
Company's stock option and certain other benefit plans, to review
recommendations submitted to it by the Company's management with respect to the
compensation of the officers of the Company and its subsidiaries and the
directors of the Company, and to make such recommendations to the Board of
Directors of the Company as its review indicates. The committee held two
meetings in fiscal 1995.
The Board of Directors held nine meetings during fiscal 1995. All directors
attended 75% or more of these meetings, including regularly scheduled and
special meetings, and the meetings of all committees of the Board on which they
served that were held in the past fiscal year during the periods in which they
were directors or served on such committees.
Directors who are not employees of the Company or any of its subsidiaries
received in fiscal 1995 an annual retainer of $3,000, $500 for each board
meeting attended, $500 for each committee meeting attended if the committee
meeting was not held in connection with, or on the same day as, a board meeting,
plus reimbursement of travel expenses incurred in connection with such
attendance. The Board of Directors holds three regular meetings each year.
The Company has agreed to compensate George E. Hamilton, Jr., a director of
the Company and the retired President and Chief Operating Officer of Smithfield
Packing, for any consulting services he may provide to the Company during the
next fiscal year at a rate of approximately $4800 per week. The Company paid Mr.
Hamilton $221,154 for consulting services provided under such agreement during
fiscal 1995.
EXECUTIVE COMPENSATION
The table below sets forth, for the fiscal years ended April 30, 1995, May
1, 1994 and May 2, 1993, the annual and long-term compensation for services in
all capacities to the Company and its subsidiaries of those persons who at April
30, 1995 were the Company's Chief Executive Officer and the next four highest
compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
FISCAL ANNUAL COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS/SARS (#)
<S> <C> <C> <C> <C>
Joseph W. Luter, III 1995 420,000 807,298 0
Chairman of the Board 1994 432,923 595,893 100,000
and Chief Executive 1993 407,077 74,208 0
Officer of the Company
Robert W. Manly, IV (2) 1995 256,154 280,397 0
Executive Vice President 1994 152,308 100,000 65,000
of the Company 1993 147,692 50,000 0
Lewis R. Little 1995 270,000 234,424 0
President and Chief 1994 274,317 58,777 65,000
Operating Officer of 1993 129,048 10,943 0
Gwaltney
Roger R. Kapella 1995 157,500 256,466 0
President and Chief 1994 157,500 292,120 35,000
Operating Officer of 1993 157,500 223,314 0
Patrick Cudahy
Aaron D. Trub 1995 185,000 140,000 0
Vice President, Secretary 1994 190,692 90,000 35,000
and Treasurer of the 1993 179,308 50,000 0
Company
</TABLE>
(1) Bonus payments shown for fiscal 1993 were for services rendered in the
twelve-month period ended December 31, 1992, while bonus payments for fiscal
1995 and 1994 were for services rendered in fiscal 1995 and 1994, respectively,
reflecting the Company's change from a calendar year basis to a fiscal year
basis for determining bonuses. Messrs. Kapella and Trub received bonuses for
services rendered during the period January 1, 1993 through May 2, 1993 in the
amounts of $26,740 and $25,000, respectively.
(2) Mr. Manly served as President and Chief Operating Officer of Smithfield
Packing from June 1994 to June 1995.
The table below sets forth information with respect to option exercises
during fiscal 1995 and the number and value of options held at April 30, 1995 by
each of the executive officers for whom information is given in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED SHARES IN-THE-
SHARES VALUE UNDERLYING OPTIONS/SARS AT MONEY OPTIONS/SARS AT
ACQUIRED ON REALIZED 4-30-95 (#) 4-30-95(1) ($)
NAME EXERCISE (#) (2)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Luter, III 0 -- 500,000 100,000 7,312,500 --
Robert W. Manly, IV 0 -- 40,000 65,000 652,480 --
Lewis R. Little 10,000 231,250 10,000 65,000 146,250 --
Roger R. Kapella 0 -- 56,000 35,000 913,500 --
Aaron D. Trub 0 -- 50,000 35,000 731,250 --
</TABLE>
(1) Based on the last sales price of the Common Stock of $22.75 on April
28, 1995.
(2) Difference between the fair market value and the exercise price on the
date of exercise.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Compensation Committee (the "Committee") believes strongly that
corporate performance and, in turn, stockholder value depend to a significant
extent on the establishment of a close alignment between the financial interests
of stockholders and those of the Company's employees, including its senior
managers. Accordingly, the Committee and the Company adhere both in principle
and in practice to the concept of pay-for-performance. The Company relies
heavily on incentive compensation programs to motivate employees. These programs
are variable and closely tied to corporate, business unit and/or individual
performance, and place "at risk" a major portion of executive compensation in a
manner that encourages a sharp and continuing focus on building stockholder
value. The Company encourages executives to hold significant amounts of Company
stock, and in part the compensation programs are designed to accomplish that
objective.
COMPONENTS OF THE COMPENSATION PROGRAM
Senior management compensation at the Company includes two components:
first, a base salary, and second, long- and short-term incentive compensation
programs, both cash and non-cash, that are tied to the financial performance of
the Company or certain of its subsidiaries.
Base salaries are generally established at the minimum levels believed by
the Committee to be necessary to attract and retain a highly efficient
management group when considered along with the performance-based components of
the program. Except in the case of executive officers who assumed significant
new responsibilities, the base salaries of the executive officers have remained,
in effect, unchanged since fiscal 1992. Upon the recommendation of management,
the base salaries of some executive officers were actually reduced for part of
fiscal 1993; these amounts were subsequently repaid to the executive officers in
fiscal 1994 because of the significant improvement in the Company's financial
performance.
A cash bonus is the principal short-term incentive. Bonus awards for most
executive officers are calculated pursuant to formulas based on pre-tax income,
either on a consolidated basis or for a particular subsidiary, as the Committee
finds most appropriate, and are subject to adjustment based on the officer's
individual performance. Bonus awards for the remaining executive officers are
based primarily on individual performance, as evaluated by the Chief Executive
Officer and reviewed by the Committee, with consideration given to the Company's
financial performance measured principally in terms of its pre-tax income.
Consistent with the Committee's policy that a major portion of executive
compensation be "at risk," bonus awards for executive officers in recent years
have ranged from 8% to 66% of an executive officer's total cash compensation
depending on Company and individual performance. Mostly as a result of the
Company's increased pre-tax income in fiscal 1995, bonus awards for fiscal 1995
averaged approximately 54% of the executive officers' total cash compensation.
Long-term incentives are provided by stock options, awarded from time to
time, whose ultimate value to the employee is tied to the market price of the
Company's Common Stock. The Company's stock option program ties the employee's
economic interests directly to those of the stockholders. In recommending the
recipients and size of stock option awards, the Committee considers the level of
incentive already provided by the size and status of prior grants as well as a
subjective evaluation of the employee's potential contribution to the Company's
future success. Stock options were awarded to approximately 50 employees during
fiscal 1994, including most of the executive officers. These were the first
stock option awards since 1989 and were granted with an exercise price of 150%
of the fair market value of the Common Stock.
CEO COMPENSATION
The Committee determined the compensation of Joseph W. Luter, III, the
Chairman of the Board and Chief Executive Officer of the Company, for fiscal
1995 in accordance with the guidelines described above. Consistent with the
Committee's policy that a major part of each executive officer's compensation be
performance-based, and therefore at risk, Mr. Luter's base salary has remained,
in effect, unchanged since fiscal 1992. Mr. Luter was among those executive
officers who received a reduction in base salary for part of fiscal 1993, as
recommended by management, with the amount foregone being repaid in fiscal 1994
when the Company's financial performance improved significantly. Mr. Luter's
bonus award for fiscal 1995 was determined pursuant to the Incentive Bonus Plan
previously approved by shareholders under which he was entitled to 1% of a
specified tier of the Company's pre-tax income for fiscal 1995 and 2% of the
excess of such income over the first tier. As a result of the Company's
increased pre-tax income, Mr. Luter's bonus represented approximately 66% of his
total cash compensation.
ADMINISTRATION OF COMPENSATION PROGRAMS
Messrs. Greenberg and Holland, neither of whom has been or is an officer or
employee of the Company, are the members of the Committee. The Committee
principally formulates compensation policies and reviews recommendations
submitted to it by management with respect to the cash and non-cash compensation
of the officers of the Company and its subsidiaries, as well as of Company
directors. The Committee then makes specific recommendations on an annual basis
to the Board of Directors. The Board of Directors has never modified or rejected
in any material way any recommendation of the Committee.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), which was enacted in 1993, imposes a $1 million limit
on the amount of annual compensation that will be deductible by the Company with
respect to each of the Chief Executive Officer and the four other most highly
compensated executive officers. Performance-based compensation that meets
certain requirements will not be subject to this deductibility limit. It is
currently the Company's policy to seek to qualify the performance-based
components of its compensation program for this exclusion from the section
162(m) limitation as necessary to maximize the deductibility of executive
compensation.
COMPENSATION COMMITTEE
Joel W. Greenberg
Richard J. Holland
<PAGE>
PERFORMANCE GRAPH
The graph below presents a comparison of the Company's five-year cumulative
total return on its Common Stock with the Meat Packing Index (SIC Code 2011) and
the NASDAQ Market Value Index, each prepared by Media General Financial
Services, Inc., assuming that investments of $100 were made on April 27, 1990
and that dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, PUBLISHED INDUSTRY INDEX AND BROAD MARKET INDEX
[PERFORMANCE GRAPH]
<TABLE>
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1990 1991 1992 1993 1994 1995
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SMITHFIELD FOODS, INC. 100 372.62 307.14 273.81 457.14 433.33
MEAT PACKING INDEX 100 157.51 138.40 142.16 164.23 203.87
NASDAQ MARKET VALUE INDEX 100 111.17 114.03 136.25 152.93 166.98
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PENSION PLAN
The Company, Gwaltney, Patrick Cudahy, Smithfield Packing, Esskay, Inc. and
Brown's of Carolina, Inc. maintain a qualified non-contributory pension plan
covering their salaried and non-union-eligible hourly employees.
The qualified pension plan provides for retirement benefits which are a
function of each participant's average earnings during his highest five calendar
years of employment and his aggregate years of service with any company in the
Company's controlled group. Subject to the qualified plan limits in the Internal
Revenue Code, all compensation paid to a participant within a calendar year is
included in determining average earnings used to calculate pension benefits.
These benefits are calculated by applying a certain percentage to the average
earnings up to a given level (based on the participant's year of birth) and a
higher percentage to the average earnings above this level and then multiplying
the sum by the years of service. This method of calculation has the effect of
coordinating the benefits provided by the qualified pension plan with those
provided by Social Security.
The following table indicates the estimated annual benefits payable upon
retirement at age 65 in 1995 to participants in the Company's qualified pension
plan, based on the specific remuneration and years of service classifications
set forth below.
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AVERAGE EARNINGS
DURING PARTICIPANT'S SELECTED YEARS OF SERVICE WITH COMPANIES
HIGHEST FIVE CALENDAR IN THE COMPANY'S CONTROLLED GROUP
YEARS (1)-(4) 15 20 25 30 35
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$120,000 $27,101 $36,134 $45,168 $54,202 $ 63,235
160,000 34,339 45,785 57,231 68,677 80,123
200,000 36,662 50,763 64,864 78,965 93,065
240,000 44,382 61,452 78,522 95,591 112,661
280,000 45,773 63,378 80,983 98,588 115,641
320,000 45,773 63,378 80,983 98,588 115,641
360,000 45,773 63,378 80,983 98,588 115,641
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(1) The maximum annual retirement benefit is $120,000 for benefits
commencing in 1995 at age 65. The maximum amount is subject to annual
cost-of-living adjustments.
(2) The remuneration covered by the plan is the remuneration paid during
the calendar year, whereas the remuneration reported in the summary compensation
table is the remuneration paid for the fiscal year ended April 30, 1995.
(3) In accordance with changes in federal pension law which became
effective January 1, 1994, annual compensation in excess of $150,000 cannot be
considered when calculating a qualified pension benefit. However, benefits
accrued through December 31, 1993, which may have been based on higher
compensation, are not reduced.
(4) A new benefit formula became effective January 1, 1995. However,
benefits accrued through December 31, 1994 under the old benefit formula are not
reduced.
As of April 30, 1995, Messrs. Luter, Manly, Little, Kapella and Trub are
credited with 27, 9, 32, 10 and 25 years of service, respectively, under the
pension plan. The benefits shown in the table are not subject to any reduction
for benefits paid from other sources, including Social Security.
OTHER TRANSACTIONS
Joseph W. Luter, III, the Chairman of the Board and Chief Executive Officer
of the Company, is an officer, director and the owner of 81% of the capital
stock of Luter Packing Company, a wholesale distributor of meat and other food
products. The Company sold $328,000 of its fresh pork and processed meat
products to Luter Packing Company in fiscal 1995. The sales to Luter Packing
Company were made by the Company in the ordinary course of its business, and in
the opinion of the Company's management, the terms of those transactions were as
favorable to the Company as those made to unaffiliated parties. In addition,
Gwaltney purchased $7,535,000 of comminuted chicken meat for use in its frank
and bologna products from a company 48% of the capital stock of which is owned
by Mr. Luter's three adult children. The Company believes that the terms under
which Gwaltney made such purchases were as advantageous to Gwaltney as those
Gwaltney would have received from any other comminuted chicken meat producer.
Mr. Luter's daughter and son-in-law are the sole members of Fishing Creek
Farms LLC ("Fishing Creek"). Brown's of Carolina, Inc. ("Brown's"), an 86%-owned
subsidiary of the Company, has arrangements with B&G Farms LLC ("B&G"), a
limited liability company in which Brown's and Fishing Creek each have a 50%
interest, for the production of hogs for the Company's pork processing plants.
The arrangements involve, inter alia, (i) loans of $1,100,000 by each of Brown's
and Fishing Creek to B&G which loans were repaid in fiscal 1995, (ii) the lease
of certain hog production facilities by B&G to Brown's until December 31, 2009
at an annual rent of approximately $465,000 per year and (iii) advances by B&G
to Brown's of cash for working capital, including $428,000 advanced in fiscal
1995. All profits and losses from the hog production operations are shared
equally by Brown's and Fishing Creek. All loans and advances made pursuant to
the arrangements accrue interest at a rate equal to the prime rate charged by
one of the Company's lending banks. The Company purchased $3,048,000 of live
hogs from B&G in fiscal 1995 and anticipates an equal or greater volume of
business in fiscal 1996. The Company believes that the terms of the foregoing
arrangements are no less favorable to the Company than if entered into with
unaffiliated parties.
George E. Hamilton, Jr., a director of the Company, and Roger R. Kapella,
Aaron D. Trub and other officers of the Company, Gwaltney and Smithfield
Packing, were members of a group which owned 18% of the capital stock of
RCS-Smithfield, Inc. ("RCSS"). All of the capital stock of RCSS was purchased by
Carolina Cold Storage Limited Partnership ("CCS") effective December 31, 1994 at
a price approximating the book value of RCSS. The Company is a 50% general
partner in CCS. Messrs. Hamilton, Kapella and Trub received $117,000, $29,250
and $29,250, respectively, for their interests in RCSS. The Company has an
agreement with RCSS to use a cold storage warehouse facility owned and operated
by RCSS near Smithfield, Virginia, as its primary outside cold storage warehouse
for its plants in Smithfield, Virginia. Under the agreement, the Company pays
RCSS for the use of the facility at prevailing competitive rates for such
services and guarantees a minimum annual usage fee of $1,200,000 which is
presently renegotiable. The Company paid RCSS $1,776,000 in fees for use of the
facility through December 31, 1994. The Company believes that the terms,
conditions and rates under which it has agreed to use the RCSS facility and the
terms on which CCS purchased the capital stock of RCSS were no less favorable to
the Company than if entered into with unaffiliated parties.
F. J. Faison, Jr., a director of the Company, is the president and a
director of Carroll's Foods, Inc. ("CFI") and its affiliates, Carroll's Farms of
Virginia, Inc. ("CFAV") and Carroll's Foods of Virginia, Inc. ("CFOV"). The
Company has arrangements with CFI and its affiliates for production of hogs for
the Company's meat processing plants. The arrangements involve, inter alia, (i)
Smithfield-Carroll's Farms, a partnership consisting of Smithfield Hog Farms,
Inc., a wholly-owned subsidiary of the Company, and CFAV, which partnership owns
hog raising facilities and leases them to CFOV, and (ii) contracts between the
Company and CFOV and CFI which obligate the Company to purchase hogs produced by
CFOV and CFI. Substantially all revenues of the Smithfield-Carroll's Farms
partnership consist of CFOV's lease payments, which cover debt service,
depreciation charges and other operating expenses. Such revenues were $9,479,000
in fiscal 1995 and are expected to equal or exceed that amount in fiscal 1996.
Pursuant to the purchase agreements, the Company purchased $54,081,000 and
$134,937,000 of live hogs from CFOV and CFI, respectively, in fiscal 1995 and
anticipates a greater volume of business under these agreements in fiscal 1996.
The Company believes that the prices paid under the purchase agreement with CFI
are equivalent to market. The purchase agreement with CFOV results in decreased
raw material costs to the Company during periods when hog production is
profitable and, conversely, an increase in such costs when such production is
unprofitable. The agreement with CFOV resulted in increased costs to the Company
of $2,615,000 in fiscal 1995 compared to decreased costs of $2,223,000 in fiscal
1994.
Wendell H. Murphy, a director of the Company, is the chairman of the board
and chief executive officer and the principal stockholder of Murphy Farms, Inc.
("MFI"). The Company has a contract with MFI which obligates the Company to
purchase hogs finished by MFI in the Southeast. Pursuant to the purchase
agreement, the Company purchased $168,105,000 of live hogs from MFI in fiscal
1995 and anticipates a greater volume of business under this agreement in fiscal
1996. The Company believes that the prices paid under the purchase agreement
with MFI are equivalent to market.
Smithfield of Utah, Inc., a wholly-owned subsidiary of the Company, has
entered into a joint hog production arrangement with three companies to produce
hogs in the state of Utah. The other companies participating in the joint hog
production arrangement are (i) Carroll's Foods of Utah, Inc. (an affiliate of
Carroll's Foods, Inc.), of which F. J. Faison, Jr., a director of the Company,
is the president and a director, (ii) West Isle Partners, Inc., of which Wendell
H. Murphy, a director of the Company, is the president and a director and
members of Mr. Murphy's family are the sole stockholders, and (iii) Prestage
Farms of Utah, Inc., of which William H. Prestage, a director of the Company, is
the president and a director and Mr. Prestage and his wife are the sole
stockholders. During fiscal 1995, Smithfield of Utah, Inc. contributed
$4,050,000 to the arrangement. Smithfield of Utah, Inc. has a 31.5% interest in
the profits or losses of the arrangement. The Company believes that the terms of
the joint arrangement are no less favorable to the Company than if entered into
with unaffiliated parties.
Cecil W. Gwaltney, a director of the Company, is chairman of the board of
Gwaltney Motor Company ("GMC"), which was paid $489,000 by the Company in fiscal
1995 for automotive equipment and parts, and maintenance and leasing services.
The Company leases substantially all of its automobiles under three-year leases
arranged by GMC. As of April 30, 1995, the Company was obligated to make a total
of $914,000 in future lease payments under such leases in effect on that date.
The Company's management believes that the terms of all of its purchase
transactions with GMC and the terms of the leases arranged by GMC are comparable
to those available from other suppliers.
PROPOSAL 2
RATIFICATION OF
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Arthur Andersen LLP as independent public accountants to examine and
report upon the financial statements of the Company and its consolidated
subsidiaries for the year ending April 28, 1996, and is submitting this matter
to the stockholders for their ratification. Arthur Andersen LLP has served as
the Company's independent public accountants since 1981. One or more
representatives of Arthur Andersen LLP will be present at the Annual Meeting of
Stockholders to make a statement if they desire to do so and to be available to
respond to appropriate questions that may be asked by stockholders.
The Board of Directors of the Company recommends that you vote FOR the
ratification of the selection of Arthur Andersen LLP as independent public
accountants to examine and report upon the financial statements of the Company
and its consolidated subsidiaries for the year ending April 28, 1996.
OTHER MATTERS
The Board of Directors does not know of any matter to be brought before the
Meeting, other than the matters described in the Notice of Meeting. If any
matters not set forth in the Notice of Meeting accompanying this proxy statement
are properly brought before the Meeting, the persons named in the enclosed proxy
will vote thereon in accordance with their best judgment.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1996
Annual Meeting of Stockholders must be received by the Secretary of the Company
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting by April 2, 1996. Any such proposal must meet the applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED APRIL 30, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, CAN
BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY, 501 NORTH CHURCH
STREET, SMITHFIELD, VIRGINIA 23430, ATTENTION: AARON D. TRUB, SECRETARY.
By Order of the Board of Directors,
Aaron D. Trub
SECRETARY
July 31, 1995
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SMITHFIELD FOODS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph W. Luter, III, Richard J. Holland,
Aaron D. Trub, and each of them, proxies with full power of substitution, to
vote the shares of Common Stock in Smithfield Foods, Inc. which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held on August 30, 1995 or any adjournments
thereof.
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1. ELECTION OF DIRECTORS ( ) FOR all nominees listed below ( ) WITHHOLD AUTHORITY to
(except as indicated to the contrary below) vote for all nominees listed below
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Joseph W. Luter, III F. J. Faison, Jr. Joel W. Greenberg Cecil W. Gwaltney George E. Hamilton, Jr.
Richard J. Holland Roger R. Kapella Lewis R. Little Robert W. Manly, IV Wendell H. Murphy
John O. Nielson William H. Prestage Aaron D. Trub
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(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
2. PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING APRIL 28, 1996
( ) FOR ( ) AGAINST ( ) ABSTAIN
<PAGE>
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED IN PROPOSAL 1 AND
"FOR" PROPOSAL 2.
The undersigned acknowledges receipt of the Notice of said Annual Meeting
and of the Proxy Statement attached thereto.
Dated , 1995
PLEASE SIGN EXACTLY AS NAME
APPEARS AT LEFT. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, ETC., GIVE FULL
TITLE AS SUCH.
Please mark, sign, date and
return the proxy card using
the enclosed envelope.
