SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) NOVEMBER 4, 1996
Commission file number 0-2258
SMITHFIELD FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of Incorporation)
0-2258 52-0845861
(Commission File Number) (I.R.S. Employer
Identification No.)
900 Dominion Tower, 999 Waterside Drive, Norfolk, Virginia 23510
(Address of principal executive offices)
Registrant's telephone number, including area code (804) 365-3000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 4, 1996, Smithfield Foods, Inc. ("Smithfield Foods" or the
"Company") entered into a Purchase Agreement (the "Purchase Agreement") with
Lykes Bros. Inc. ("LBI"), a privately held company headquartered in Tampa,
Florida, and LBI's wholly-owned subsidiaries, Sunnyland, Inc. ("Sunnyland"),
Premium Pork, Inc. ("Premium") and LMJ Distribution Center, Inc. ("LMJ"),
pursuant to which the Company purchased substantially all of the assets of LBI,
Sunnyland, Premium and LMJ used in the business of processing, distributing and
selling pork and other meat products (hereinafter referred to collectively as
the "Lykes Meat Group"). Lykes Meat Group's principal facilities are four meat
processing plants located at Plant City, Florida; Thomasville, Georgia; Quitman,
Georgia; and Moultrie, Georgia. Lykes Meat Group also operates a distribution
center in Thomasville, Georgia. Lykes Meat Group was named Lykes Meat Group,
Inc. after the acquisition.
Lykes Meat Group markets a full line of processed meats primarily in the
Southern and Southeastern United States under a variety of brand names,
including LYKES, SUNNYLAND, and BROOKS COUNTY.
The closing of the transaction occurred on November 4, 1996. The
purchase price paid to LBI at closing was determined pursuant to arms-length
negotiations and consisted of $28.3 million in cash and the assumption of
certain liabilities. The cash purchase price is subject to post-closing
adjustments made on the November 4, 1996 closing balance sheet. The Company
expects that the purchase price adjustment will be determined on or before
February 3, 1997 and that such adjustment will not result in a material
change to the purchase price.
The Company financed the cash purchase price with borrowings under the
Company's existing $255.0 million revolving credit facility.
The meat processing plant at Moultrie, Georgia has been closed since
June 1996. The Company presently intends to operate the remaining facilities of
Lykes Meat Group as a separate operating subsidiary or subsidiaries of
Smithfield Foods.
The description of the transactions contemplated by the Purchase
Agreement is qualified entirely by reference to the Purchase Agreement, which is
attached hereto as Exhibit 2.1 and is incorporated herein by reference.
(1)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
Page
(a) Combined Financial Statements of Lykes Meat Group
Report of Independent Certified Public
Accountants 3
Combined Balance Sheets - As of September 30, 1996
and 1995 4
Combined Statements of Operations and Parent's
Accumulated Earnings (Deficit) in Division -
For the years ended September 30, 1996, 1995
and 1994 5
Combined Statements of Cash Flows - For the years
ended September 30, 1996, 1995 and 1994 6
Notes to Combined Financial Statements 7-12
(b) Pro Forma Consolidated Financial Statements
of Smithfield Foods, Inc. and
Subsidiaries (Unaudited)
Pro Forma Consolidated Balance Sheet - As of
October 27, 1996 13
Pro Forma Consolidated Statement of
Operations - For the Twenty-six Weeks Ended
October 27, 1996 14
Pro Forma Consolidated Statement of
Operations - For the Year Ended April 28, 1996 15
Notes to Pro Forma Consolidated Financial
Statements 16-17
(c) Exhibit Index 19
(2)
<PAGE>
Report of Independent Certified Public Accountants
To the Stockholders of
Smithfield Foods, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and parent's accumulated earnings (deficit) in
division, and of cash flows present fairly, in all material respects, the
combined financial position of Sunnyland, Inc., Premium Pork, Inc., LMJ
Distribution Center, Inc., and the meat processing division of Lykes Bros. Inc.
(collectively known as "Lykes Meat Group") at September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
management of Lykes Meat Group; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Tampa, Florida
January 6, 1997
(3)
<PAGE>
Lykes Meat Group
<TABLE>
<CAPTION>
Combined Balance Sheets
- ----------------------------------------------------------------------------------------------------------------
September 30,
1996 1995
<S> <C>
Assets
Current assets:
Cash $ 27,139 $ 2,650
Accounts receivable less allowances of $1,216,921
and $2,430,000 8,554,305 14,473,448
Other receivables 57,750 110,907
Inventories 12,034,675 14,851,259
Prepaid expenses and other current assets 324,473 285,739
Receivable from affiliates 517,035 1,114,094
--------------- ---------------
Total current assets 21,515,377 30,838,097
--------------- ---------------
Property, plant and equipment:
Land 286,975 286,975
Land improvements 1,355,206 1,279,867
Buildings and improvements 15,737,744 19,100,618
Machinery and equipment 42,253,851 41,105,249
Construction in progress - 1,014,361
--------------- ---------------
59,633,776 62,787,070
Less accumulated depreciation (39,142,735) (35,256,821)
--------------- ---------------
Net property, plant and equipment 20,491,041 27,530,249
Other assets, net 447,322 1,388,474
--------------- ---------------
$ 42,453,740 $ 59,756,820
--------------- ---------------
Liabilities and Parent's Equity
Current liabilities:
Accounts payable $ 8,569,153 $ 11,515,185
Accrued expenses and other current liabilities 3,999,967 5,279,157
Payable to affiliates 4,211,222 3,074,527
--------------- ---------------
Total current liabilities 16,780,342 19,868,869
Other noncurrent liabilities 5,602,731 7,480,866
-------------- ---------------
Total liabilities 22,383,073 27,349,735
Parent's equity:
Advances from Parent 72,929,065 59,290,672
Parent's accumulated deficit in division (52,858,398) (26,883,587)
--------------- ---------------
Total Parent's equity 20,070,667 32,407,085
--------------- ---------------
$ 42,453,740 $ 59,756,820
--------------- ---------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these financial statements.
(4)
<PAGE>
Lykes Meat Group
<TABLE>
<CAPTION>
Combined Statements of Operations and Parent's Accumulated
Earnings (Deficit) in Division
- ---------------------------------------------------------------------------------------------------------------
For the years ended September 30,
1996 1995 1994
<S> <C>
Net sales $ 223,058,722 $ 258,014,015 $ 294,275,707
Cost of sales 213,132,787 233,697,749 272,602,575
------------------ ----------------- ------------------
Gross profit 9,925,935 24,316,266 21,673,132
Selling, general and administrative 25,487,673 25,917,229 33,716,317
Depreciation 4,890,345 4,969,588 5,462,047
Restructuring charge - 1,376,926 1,436,973
Impairment loss 5,522,728 - -
------------------ ------------------ -----------------
Operating loss before income taxes (25,974,811) (7,947,477) (18,942,205)
Income taxes - - -
------------------ ------------------ ------------------
Net loss (25,974,811) (7,947,477) (18,942,205)
Parent's accumulated earnings
(deficit) in division, beginning
of year (26,883,587) (18,936,110) 6,095
------------------ ------------------ ------------------
Parent's accumulated deficit in
division, end of year $ (52,858,398) $ (26,883,587) $ (18,936,110)
----------------- ------------------ ------------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these financial statements.
(5)
<PAGE>
Lykes Meat Group
<TABLE>
<CAPTION>
Combined Statements of Cash Flows
- -----------------------------------------------------------------------------------------------------------------
For the years ended September 30,
1996 1995 1994
<S> <C>
Cash flows from operating activities:
Net loss $ (25,974,811) $ (7,947,477) $ (18,942,205)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation 4,890,345 4,969,588 5,462,047
Impairment loss 5,522,728 - -
(Gain) loss on sale of assets (1,319) 5,468 (27,488)
(Increase) decrease in:
Accounts receivable 5,919,143 (2,014,349) 8,256,790
Other receivables 53,157 (597) 2,523
Inventories 2,816,584 (1,391,454) 905,482
Prepaid expenses and other current assets (38,734) (129,679) 86,936
Receivable from affiliates 597,059 (1,105,032) 564,672
Other assets 850,105 (242,535) (313,884)
Increase (decrease) in:
Accounts payable (2,946,032) 1,961,584 (2,376,593)
Accrued expenses and other current liabilities (1,279,190) 677,458 (955,614)
Payable to affiliates 1,136,695 669,518 248,936
Other noncurrent liabilities (1,878,135) (918,786) 960,609
------------------ ------------------ ------------------
Net cash used in operating activities (10,332,405) (5,466,293) (6,127,789)
------------------ ------------------ ------------------
Cash flows from investing activities:
Capital expenditures (3,351,538) (2,217,803) (4,676,139)
Proceeds from sale of property, plant
and equipment 70,039 295,130 277,630
------------------ ------------------ ------------------
Net cash used in investing activities (3,281,499) (1,922,673) (4,398,509)
------------------ ------------------ ------------------
Cash flows from financing activities:
Advances from Parent 13,638,393 7,129,571 10,484,035
------------------ ------------------ ------------------
Net cash provided by financing
activities 13,638,393 7,129,571 10,484,035
------------------ ------------------ ------------------
Net increase (decrease) in cash 24,489 (259,395) (42,263)
Cash at beginning of year 2,650 262,045 304,308
------------------ ------------------ ------------------
Cash at end of year $ 27,139 $ 2,650 $ 262,045
------------------ ------------------ ------------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these financial statements.
(6)
<PAGE>
Lykes Meat Group
Notes to Combined Financial Statements
September 30, 1996
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies:
Basis of Presentation
Pursuant to a Purchase Agreement dated November 4, 1996, LMG, Inc., a
wholly owned subsidiary of Smithfield Foods, Inc. ("Smithfield"), acquired
the operations and substantially all the assets of Lykes Bros. Inc.'s
("LBI" or "Parent") business of processing, distributing and selling pork
and other meat products in exchange for $28,278,685 in cash and the
assumption of certain liabilities. The final purchase price to be paid is
contingent upon any purchase price adjustments made on the November 4,
1996 closing balance sheet, which is anticipated to be completed in early
1997. The assets acquired consist of the meat processing division of LBI
and all the stock of Sunnyland, Inc. ("SLI"), Premium Pork, Inc. ("PPI")
and LMJ Distribution Center, Inc. ("LMJ") (collectively known as "Lykes
Meat Group"). Lykes Meat Group's principal facilities consist of four meat
processing plants located in Plant City, Florida; Thomasville, Georgia;
Quitman, Georgia; and Moultrie, Georgia. Lykes Meat Group also operates a
distribution center in Thomasville, Georgia. LMG, Inc. changed its name to
Lykes Meat Group, Inc. after the acquisition.
Prior to the acquisition, certain accounts of Lykes Meat Group were
included in the accounts of LBI and were not presented as those of a
separate reporting entity. The accompanying combined financial statements
present the financial position, results of operations and cash flows of
Lykes Meat Group on a carved out basis as if Lykes Meat Group had been an
independent reporting entity for all periods presented.
The combined statements of operations include all revenues and costs
directly attributable to Lykes Meat Group and certain corporate expenses
of approximately $7.6 million, $6.9 million and $8.1 million in fiscal
years 1996, 1995 and 1994, respectively. Corporate expenses have
historically been allocated to Lykes Meat Group based on the nature of the
expense. The accompanying combined financial statements include additional
expenses that have been allocated, principally on the basis of Lykes Meat
Group's sales and Parent's equity in relation to LBI's sales and
investments in its other subsidiaries and divisions. Allocated expenses
include direct and indirect administrative services provided by LBI and
certain of its subsidiaries and divisions, such as employee benefits,
human resources, labor relations, corporate taxes, legal services, data
processing, customer service, training and other similar overhead costs.
All of the allocations and estimates in the combined statements of
operations are based on assumptions that Lykes Meat Group management
believes are reasonable under the circumstances. However, these
allocations and estimates are not necessarily indicative of the costs and
expenses that would have resulted if Lykes Meat Group had operated as a
separate entity.
(7)
<PAGE>
Lykes Meat Group
Notes to Combined Financial Statements
September 30, 1996
- --------------------------------------------------------------------------------
Use of Estimates
Lykes Meat Group prepares its financial statements in conformity with
generally accepted accounting principles. These principles require
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclose contingent assets and
liabilities at the date of the financial statements and report amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Principles of Combination
The combined financial statements include the accounts of SLI, PPI, LMJ
and the meat processing division of LBI. All significant intercompany
accounts and transactions have been eliminated.
Cash Management System
Lykes Meat Group historically participated in LBI's cash management system
which provides for reimbursement of certain bank disbursement accounts on
a daily basis. As a result, checks issued but not yet presented for
payment in the amount of $4,859,437 and $7,013,902 at September 30, 1996
and 1995, respectively, are classified as accounts payable.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by an average cost method and includes all direct and indirect
manufacturing costs attributable to production, such as raw materials,
labor and overhead. Inventories consist of the following:
September 30,
1996 1995
Finished goods $ 5,084,273 $ 6,356,653
Work in progress 918,429 1,533,537
Raw materials and supplies 6,031,973 6,961,069
--------------- ---------------
$ 12,034,675 $ 14,851,259
--------------- ---------------
Property, Plant and Equipment
Property, plant and equipment is recorded at cost and is depreciated over
their useful lives; 10-15 years for land improvements, 10-31 years for
buildings and improvements and 2-7 years for machinery and equipment,
using the straight-line method. When an asset is sold or otherwise
retired, the asset and related accumulated depreciation are removed from
the accounts and a gain or loss is recorded on its disposition.
(8)
<PAGE>
Lykes Meat Group
Notes to Combined Financial Statements
September 30, 1996
- --------------------------------------------------------------------------------
Expenditures for maintenance and repairs are charged to operations as
incurred; renewals and improvements are capitalized.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets are recorded at cost and include amounts
paid for insurance, non-direct response marketing programs and cash
surrender value in life insurance policies. The non-direct response
marketing programs are prepaid costs for advertisement flyers in retail
outlets and a sweepstakes contest, both of which took place in October
1996.
Earnings Per Share
Due to the acquisition of Lykes Meat Group by LMG, Inc. and Lykes Meat
Group's historical capital structure, earnings per share are not
considered meaningful. As a result, no earnings per share amounts are
included in these financial statements.
Income Taxes
Lykes Meat Group is included in the consolidated federal income tax return
filed by its parent. Federal and state income tax provisions are computed
as though Lykes Meat Group filed a separate income tax return. Lykes Meat
Group recognizes deferred tax assets and liabilities for the expected
future tax consequences of the differences between the tax bases of assets
and liabilities and their financial reporting amounts at currently enacted
tax rates. For the combined statements of cash flows, supplemental
disclosures related to cash paid for income taxes are not presented as the
amounts paid by Lykes Meat Group cannot be specifically identified.
2. Impairment of Operating Facilities:
In conjunction with the sale of Lykes Meat Group to LMG, Inc., Lykes Meat
Group recorded a $5,522,728 loss during fiscal 1996 which was attributed
to the Plant City and PPI operating facilities. It was determined that the
cash flows associated with these facilities were less than the carrying
value.
3. Accrued Expenses and Other Current Liabilities:
September 30,
1996 1995
Accrued severance and vacation $ 1,681,922 $ 1,033,677
Restructuring costs - 1,499,500
Other 2,318,045 2,745,980
--------------- ---------------
$ 3,999,967 $ 5,279,157
--------------- ---------------
(9)
<PAGE>
Lykes Meat Group
Notes to Combined Financial Statements
September 30, 1996
- --------------------------------------------------------------------------------
4. Other Noncurrent Liabilities:
September 30,
1996 1995
Accrued workers' compensation $ 2,390,875 $ 2,286,586
Management Security Plan 1,844,779 2,234,103
Other 1,367,077 2,960,177
--------------- ---------------
$ 5,602,731 $ 7,480,866
--------------- ---------------
5. Income Taxes:
Income taxes consist of the following components:
<TABLE>
<CAPTION>
For the years ended September 30,
1996 1995 1994
<S> <C>
Deferred
Federal $ 8,738,795 $ 2,692,657 $ 6,411,627
State 899,227 277,076 659,760
----------------- ------------------ ------------------
9,638,022 2,969,733 7,071,387
Change in valuation allowance (9,638,022) (2,969,733) (7,071,387)
------------------ ------------------ ------------------
$ - $ - $ -
------------------ ------------------ ------------------
</TABLE>
Lykes Meat Group's effective tax rate approximates the statutory federal
and state rates for all three years. For all periods presented, no tax
benefit for future deductible amounts and carryforwards has been recorded
by Lykes Meat Group. It was determined that the tax benefit for income
taxes currently refundable could not be realized by Lykes Meat Group if
Lykes Meat Group had been a separate taxpayer. Deferred income taxes
primarily relate to the following:
September 30,
1996 1995
Net operating loss carryforwards $ 21,172,191 $ 12,646,424
Accrued expenses 3,071,067 4,038,546
Loss on impairment of assets 2,071,023 -
Bad debt reserves 448,845 911,250
Depreciation (1,374,628) (1,770,181)
Other (119,825) (195,388)
--------------- ---------------
25,268,673 15,630,651
Deferred asset valuation allowance (25,268,673) (15,630,651)
--------------- ---------------
$ - $ -
--------------- ---------------
As of September 30, 1996 and 1995, Lykes Meat Group has net operating loss
carryforwards of approximately $56.5 million and $33.7 million,
respectively, which are available to offset future taxable income through
2011. A deferred asset valuation was
(10)
<PAGE>
Lykes Meat Group
Notes to Combined Financial Statements
September 30, 1996
- --------------------------------------------------------------------------------
provided as of September 30, 1996 and 1995 since the utilization of the
net operating loss carryforwards could not be assured in the future.
Since LMG, Inc. purchased the assets of the meat processing division of
LBI, any net operating loss carryforwards attributable to the meat
processing division will remain with LBI. The amount of net operating loss
carryforwards attributable to SLI, PPI and LMJ will be subject to an
annual limitation in accordance with Section 382 of the Internal Revenue
Code.
6. Pension and Other Retirement Plans:
Benefit Plans
Lykes Meat Group employees participated in various benefit plans provided
by LBI, including health and life insurance, retirement savings, and a
non-contributory defined benefit plan that cover most full-time employees.
Additionally, a non-qualified contributory plan (Management Security Plan)
was provided for certain insurable key managers. The cost of these plans
was allocated to Lykes Meat Group, principally on the basis of Lykes Meat
Group's sales and Parent's equity in relation to LBI's sales and
investments in its other subsidiaries and divisions. Lykes Meat Group
management believes this allocation is reasonable; however, the costs
allocated to Lykes Meat Group are not necessarily indicative of the
benefit plan costs that would have been incurred if Lykes Meat Group had
operated as a separate entity.
LBI makes payments on behalf of Lykes Meat Group under a labor contract
into a multi-employer pension plan trust established for its union
employees at the Plant City facility. Under ERISA, as amended by the
Multi-Employer Pension Plan Amendments Act of 1980, an employer is liable
for a proportionate share of the plan's unfunded vested benefits. As of
the most recent Annual Return filing on Form 5500 for the period July 1,
1994 through June 30, 1995, the plan reported a current value of plan
assets in excess of the actuarial present value of accumulated benefits.
The relative position of each employer with respect to actuarial present
value of accumulated benefits and net assets available for benefits,
however, is not available to Lykes Meat Group. As a result of the sale of
Lykes Meat Group, LBI no longer participates in this plan. LMG, Inc. has
assumed liability for funding the plan on a prospective basis.
Postretirement Benefits
LBI provides medical, dental and life insurance benefits to retirees of
Lykes Meat Group and their survivors. Benefits under these plans were
allocated to Lykes Meat Group, principally on the basis of Lykes Meat
Group's sales and Parent's equity in relation to LBI's sales and
investments in its other subsidiaries and divisions. Lykes Meat Group
management believes this allocation is reasonable; however, the costs
allocated are not necessarily indicative of the postretirement benefit
costs that would have been incurred if Lykes Meat Group had operated as a
separate entity.
(11)
<PAGE>
Lykes Meat Group
Notes to Combined Financial Statements
September 30, 1996
- --------------------------------------------------------------------------------
7. Related Party Transactions:
Lykes Meat Group, through the normal course of business, is charged
various administrative services such as employee benefits, human
resources, labor relations, corporate taxes, legal services, data
processing, customer service, training, insurance coverage, selling and
delivery costs by LBI and certain of its subsidiaries and divisions. Such
related party services were $15,468,330, $16,398,165 and $17,075,064 for
the years ended September 30, 1996, 1995, and 1994, respectively.
In conjunction with LBI's cash management system, Lykes Meat Group obtains
funds from LBI to assist in funding its operations. Such advances are
recorded in Lykes Meat Group's combined financial records as advances from
parent. Certain assets and liabilities related to pension and other
retirement plans (Note 6) have been reclassified from advances from parent
to properly present the associated asset or liability in these stand alone
financial statements. During the fiscal years ended September 30, 1996,
1995 and 1994, the average advances from LBI were $66,109,869, $55,725,887
and $46,919,084, respectively. Interest expense related to these advances
is not reflected in the financial statements as LBI does not charge its
subsidiaries interest for proceeds advanced to them.
8. Restructuring of Operations:
On August 3, 1994, Lykes Meat Group adopted a plan to restructure its
Plant City and Thomasville operations including the following: significant
realignment and downsizing of operations, refurbishment of the Thomasville
operations, elimination of low margin and unprofitable product lines and a
partial shut-down of the Plant City operating facility. The scope of this
initial plan was expanded on July 17, 1995 to further consolidate and
down-size operations. The restructuring resulted in the termination of
approximately 340 hourly and salaried employees over the two-year period.
In connection with these restructuring plans, Lykes Meat Group recorded
charges to earnings of $1,376,926 and $1,436,973 in fiscal years ended
September 30, 1995 and 1994, respectively. The charges provided for
severance costs of approximately $1,370,000 and $730,000 in 1995 and 1994,
respectively, and the write off of obsolete equipment and inventory of
approximately $700,000 in fiscal 1994.
(12)
<PAGE>
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
Historical
----------
Smithfield Lykes Meat
(In thousands) Foods Group Pro Forma
Oct. 27, Sept. 30, Adjustments Pro Forma
1996 1996 (Note 2) Combined
----------- ---------- ------------ ---------
<S> <C>
ASSETS
Current assets:
Cash $ 21,733 $ 27 $ (25)(a) $ 21,735
Accounts receivable, net 181,529 9,129 (12)(a) 190,646
Inventories 279,670 12,035 (46)(a) 291,659
Advances to joint hog production
arrangements 7,632 - - 7,632
Other current assets 36,076 324 (3)(a) 36,397
-------- --------- --------- ----------
Total current assets 526,640 21,515 (86) 548,069
Net property, plant and equipment 389,539 20,491 12,193 (b) 407,021
(15,202)(c)
Other assets 82,407 448 2,800 (d) 88,967
(432)(e)
7,000 (f)
(3,256)(c)
-------- -------- -------- ---------
$998,586 $ 42,454 $ 3,017 $1,044,057
======== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $122,500 $ - $ 31,973 (g) $ 154,473
Current portion of long-term debt and capital
lease obligations 10,757 - - 10,757
Accounts payable 154,679 12,780 (36)(a) 163,729
(3,694)(g)
Accrued liabilities 102,705 4,000 263 (a) 107,153
185 (h)
-------- -------- -------- --------
Total current liabilities 390,641 16,780 28,691 436,112
Long-term debt and capital lease obligations 266,856 - 266,856
Other noncurrent liabilities:
Pension and post-retirement benefits 53,509 - - 53,509
Other 15,961 5,603 (5,603)(e) 15,961
-------- -------- -------- ----------
Total other non-current liabilities 69,470 5,603 (5,603) 69,470
-------- -------- -------- ----------
Preferred stock 20,000 - - 20,000
Common stockholders' equity 251,619 20,071 (20,071)(i) 251,619
-------- -------- -------- ----------
$998,586 $ 42,454 $ 3,017 $1,044,057
======== ======== ======== ==========
</TABLE>
See the accompanying Notes to Pro Forma Consolidated Financial Statements.
(13)
<PAGE>
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Historical
----------
Smithfield Lykes Meat
Foods Group
26 Weeks 6 Months
Ended Ended Pro Forma
Oct. 27, Sept. 30, Adjustments Pro Forma
(In thousands) 1996 1996 (Note 3) Combined
---------- ---------- ----------- ---------
<S> <C>
Sales $1,862,096 $ 91,163 $ (3,867)(j) $1,949,392
Cost of sales 1,729,757 87,092 (3,867)(j) 1,812,982
---------- ---------- ---------- ----------
Gross profit 132,339 4,071 - 136,410
Selling, general and administrative expenses 86,873 14,713 94 (k) 98,729
(2,951)(l)
Depreciation expense 17,105 2,511 (536)(m) 19,080
Interest expense 13,100 - 1,048 (n) 14,148
Impairment loss - 5,523 (5,523)(o) -
---------- ---------- ---------- ---------
Income (loss) before taxes 15,261 (18,676) 7,868 4,453
3,061 (p)
Income taxes 5,498 - (7,265)(q) 1,294
---------- ---------- ---------- ----------
Net income (loss) $ 9,763 $ (18,676) $ 12,072 $ 3,159
========== ========== ========== ==========
Net income available to common stockholders $ 9,088 $ 2,484
========== ==========
Net income per common share $ 0.49 $ 0.13
========== ==========
Weighted average common shares outstanding 18,643 18,643
========== ==========
</TABLE>
See the accompanying Notes to Pro Forma Consolidated Financial Statements.
(14)
<PAGE>
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Historical
------------------------
Smithfield Lykes Meat
Foods Group
Year 12 Months
Ended Ended Pro Forma
April 28, March 31, Adjustments Pro Forma
(In thousands) 1996 1996 (Note 3) Combined
---------- ---------- ----------- ---------
<S> <C>
Sales $2,383,893 $ 256,958 $ (10,820)(j) $2,630,031
Cost of sales 2,203,626 243,717 (10,820)(j) 2,436,523
---------- ---------- ---------- ----------
Gross profit 180,267 13,241 - 193,508
Selling, general and administrative expenses 103,095 23,261 187 (k) 120,640
(5,903)(l)
Depreciation expense 25,979 4,769 (1,074)(m) 29,674
Interest expense 20,942 - 2,201 (n) 23,143
Restructuring charge - 1,418 - 1,418
---------- ---------- ---------- ----------
Income (loss) from continuing operations
before taxes 30,251 (16,207) 4,589 18,633
1,785 (p)
Income taxes 10,465 - (6,305)(q) 5,945
---------- ---------- ---------- ----------
Income (loss) from continuing operations $ 19,786 $ (16,207) $ 9,109 $ 12,688
========== ========== ========== ==========
Income from continuing operations available
to common stockholders $ 18,634 $ 11,536
========== ==========
Income from continuing operations
per common share $ 1.06 $ 0.66
========== ==========
Weighted average common shares outstanding 17,530 17,530
========== ==========
</TABLE>
See the accompanying Notes to Pro Forma Consolidated Financial Statements.
(15)
<PAGE>
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Reporting
The unaudited Pro Forma Consolidated Financial Statements of Smithfield Foods,
Inc. and subsidiaries (the "Company") are provided to give effect to the
acquisition on November 4, 1996, of the operations and substantially all of the
assets of Lykes Bros. Inc.'s ("LBI") business of processing, distributing and
selling pork and other meat products in exchange for $28.3 million in cash and
the assumption of certain liabilities. The cash purchase price is subject to
post-closing adjustments made on the November 4, 1996 closing balance sheet. The
Company expects that the purchase price adjustment will be determined on or
before February 3, 1997 and that such adjustment will not result in a material
change to the purchase price. The assets acquired consist of the meat
processing division of LBI and all of the stock of Sunnyland, Inc., Premium
Pork, Inc. and LMJ Distribution Center, Inc. (collectively the "Lykes Meat
Group").
The pro forma information is based on the historical financial statements of the
Company and Lykes Meat Group giving effect to the acquisition under the purchase
method of accounting. The pro forma information does not purport to be
indicative of the combined historical or future results of operations or
financial position that would have been or will be reported had the assumptions
and adjustments been transacted as described below.
The pro forma combined balance sheet as of October 27, 1996 (September 30, 1996
for Lykes Meat Group) presents the financial position of the Company assuming
the acquisition had been completed as of that date. The pro forma combined
statements of operations for the year ended April 28, 1996 (for the twelve
months ended March 31, 1996 for Lykes Meat Group) and for the twenty-six weeks
ended October 27, 1996 (for the six months ended September 30, 1996 for Lykes
Meat Group) present the results of operations of the combined entities assuming
that the acquisition had been completed as of the beginning of the respective
periods.
The Pro Forma Consolidated Financial Statements should be read in conjunction
with the Company's Annual Report for the fiscal year ended April 28, 1996, the
Company's unaudited financial statements for the twenty-six weeks ended October
27, 1996, and the accompanying historical financial statements and notes of
Lykes Meat Group for the year ended September 30, 1996.
(2) Consolidated Balance Sheet Pro Forma Adjustments
The Pro Forma Consolidated Balance Sheet gives effect to the adjustments
described below.
(a) To adjust assets acquired and liabilities assumed in accordance
with the Purchase Agreement.
(b) To adjust the carrying value of property, plant and equipment to an
independently appraised fair market value.
(16)
<PAGE>
(c) To appropriately reduce the value of noncurrent assets to reflect
the net purchase price in accordance with the purchase method of
accounting.
(d) To record deferred tax assets at fair value in accordance with APB
16.
(e) To eliminate carved out items on the Combined Balance Sheets which
were not assets acquired or liabilities assumed in accordance with
the Purchase Agreement. These items are primarily certain employee
benefit accruals that will remain on LBI's books.
(f) To adjust the carrying value of tradenames and trademarks to
estimated fair value.
(g) To record the borrowing under the Company's revolving credit
facility to pay the $28.3 million cash portion of the purchase
price and the payment of $3.7 million of liabilities funded at
closing.
(h) To reflect, at fair value, certain other liabilities consistent
with the Company's accounting policies.
(i) To eliminate the equity of Lykes Meat Group.
(3) Consolidated Statements of Operations Pro Forma Adjustments
The Pro Forma Consolidated Statements of Operations give effect to the
adjustments described below.
(j) To eliminate estimated intercompany sales.
(k) To adjust for changes in amortization expense for the related periods
associated with the change in value of trademarks and tradenames as a
result of applying the purchase method of accounting.
(l) To adjust for the estimated difference between the allocation of
expenses for services provided by LBI and the expected cost that would
have been incurred had Lykes Meat Group and the Company provided the
same services.
(m) To adjust for changes in depreciation expense for the related periods
associated with the change in values for property, plant and equipment
as a result of applying the purchase method of accounting.
(n) To record the interest cost related to the $28.3 million cash portion
of the purchase price and the payment of $3.7 million of liabilities
funded at closing, borrowed under the Company's revolving credit
facility. The weighted average interest rate is 6.6% and 6.9% for the
twenty-six weeks ended October 27, 1996 and the year ended April 28,
1996, respectively, reflecting the Company's actual borrowing rates
during those periods.
(o) To eliminate the impairment loss which would have been reflected in
the beginning balance sheet in accordance with the purchase method of
accounting.
(p) To record the tax effect of the pro forma adjustments at the marginal
tax rate of 38.9%.
(q) To reflect the marginal tax rate of 38.9% on Lykes Meat Group's
historical loss which would have been realized as part of the
consolidated group.
(17)
<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 hereunto duly authorized.
SMITHFIELD FOODS, INC.
Aaron D. Trub
Vice President, Secretary
and Treasurer
Date: January 17, 1997
(18)
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith in accordance with the
provisions of Item 601 of Regulation S-K.
EXHIBIT PAGE
2.1 Purchase Agreement dated as of November 4, 1996, among Lykes
Bros. Inc., Sunnyland, Inc., Premium Pork, Inc., LMJ Distribution
Center, Inc., and Smithfield Foods, Inc. *
23.1 Consent of Independent Certified Public Accountants 20
* Exhibit 2.1 was previously submitted with the filing dated November 18, 1996.
(19)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-53024 and 33-14219) of Smithfield Foods, Inc.,
of our report dated January 6, 1997, with respect to the financial statements of
Lykes Meat Group included in this Form 8-K/A.
PRICE WATERHOUSE LLP
Tampa, Florida
January 17, 1997
(20)
