SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 23, 1998
SMITHFIELD FOODS, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-2258 52-0845861
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
200 COMMERCE STREET
SMITHFIELD, VIRGINIA 23430
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (757) 365-3000
<PAGE>
Item 5. Other Events
Smithfield Foods today reported record second quarter earnings in fiscal
1999. Net income in the quarter ended November 1, 1998 increased to US$18.5
million, or US$.47 per diluted share, from US$15.5 million, or US$.39 per
diluted share, in the same quarter a year ago.
Net income in the first six months of fiscal 1999 increased to US$13.2
million, or US$.33 per diluted share, from net income of US$9.0 million, or
US$.23 per diluted share, in the six month period a year ago. The net income in
the first half of fiscal 1998 included a non-recurring charge of US$12.6
million (US$.32 per diluted share), which reflected penalties imposed against
Smithfield Foods in a case brought by the U.S. Environmental Protection Agency.
The judgment has been appealed. Excluding the non-recurring charge,
Smithfield Foods had net income of US$21.6 million, or US$.55 per diluted
share, in the first half of fiscal 1998.
Sales for the second quarter of fiscal 1999 were US$874.4 million, down
from US$982.7 million in the same quarter of fiscal 1998. Sales for the first
six months of fiscal 1999 were US$1.7 billion, down from US$1.9 billion in the
same six-month period a year ago. The decrease in sales in both periods was due
to lower unit selling prices for Smithfield's products, reflecting
substantially lower hog and raw material prices, which were not entirely offset
by increased unit sales volume in each period.
The record fiscal 1999 second quarter net income reflected substantially
improved operating results at Smithfield's Meat Processing Group which more
than compensated for losses at Smithfield's Hog Production Group.
The Meat Processing Group experienced sharply higher margins, especially
on sales of fresh pork, in this fiscal year's second quarter. While margins on
sales of processed meats were up, overall results in the processed meats area
of the Group's business were adversely affected by a sharp drop in exports of
hot dogs to Russia.
The Hog Production Group experienced a sharp reversal in profitability in
the current year's second quarter due to the lowest hog prices since 1971. The
Hog Production Group incurred a net loss of US$.22 per diluted share in this
year's second quarter compared to net income of US$.08 per diluted share in the
same quarter of fiscal 1998.
"Our second quarter results reinforce our belief that being vertically
integrated to the extent that we are takes the peaks and valleys out of our
earnings and, in effect, makes them more stable as well as predictable," Luter
stated.
"The brisk rate of business in the first three weeks of November further
confirms our expectation that fiscal 1999 third quarter earnings should set a
record," Luter said.
This filing contains "forward-looking" information within the
meaning of United States federal securities laws. The forward-looking
information may include, among other information, statements concerning
Smithfield Foods' outlook for the future. There may also be other statements of
beliefs, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. The
forward-looking information and statements in this filing are subject to
known and unknown risks and uncertainties, including availability and prices of
raw materials, product pricing, competitive environment and related market
conditions, operating efficiencies, access to capital, integration of
acquisitions and changes in, or the failure or inability to comply with,
governmental regulation, including without limitation environmental and health
regulations, that could cause actual results to differ materially from those
expressed in or implied by the information or statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
(ALL FIGURES ARE IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
13 WEEKS ENDED 13 WEEKS ENDED 26 WEEKS ENDED 26 WEEKS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) NOVEMBER 1, 1998 OCTOBER 26, 1997 NOVEMBER 1, 1998 OCTOBER 26, 1997
- --------------------------------------- ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Sales ................................. $ 874,378 $ 982,699 $ 1,740,201 $ 1,897,662
Cost of sales ......................... 756,914 888,729 1,549,960 1,728,508
--------- --------- ----------- -----------
Gross profit .......................... 117,464 93,970 190,241 169,154
Selling, general and administrative
expenses ............................. 65,974 53,177 123,971 102,369
Depreciation expense .................. 14,015 10,353 26,954 20,068
Interest expense ...................... 10,916 8,036 20,622 15,403
Nonrecurring charge(1)................. -- -- -- 12,600
--------- --------- ----------- -----------
Income before income taxes(1).......... 26,559 22,404 18,694 18,714
Income taxes .......................... 8,078 6,856 5,538 9,707
--------- --------- ----------- -----------
Net income(1).......................... $ 18,481 $ 15,548 $ 13,156 $ 9,007
========= ========= =========== ===========
Net income per common share:
Basic(1) .............................. $ .48 $ .41 $ .35 $ .24
Diluted(1)............................ .47 .39 .33 .23
--------- --------- ----------- -----------
Average common shares outstanding:
Basic ................................ 38,273 37,527 37,905 37,527
Diluted .............................. 39,599 39,666 39,807 39,639
--------- --------- ----------- -----------
</TABLE>
(1) Reflects a nonrecurring charge of $12.6 million ($.32 per diluted share) for
the 26 weeks ended October 26, 1997 related to civil penalties in an
environmental case.
<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.
By: /s/ Aaron D. Trub
Aaron D. Trub
Vice President, Chief Financial
Officer and Secretary
Dated: November 23, 1998
