Smithfield Foods, Inc. (NYSE: SFD) today reported that net income for the first quarter of fiscal 2002 rose 28 percent to $56.9 million, or $1.06 per diluted share, compared to $44.6 million, or $.81 per diluted share a year ago.
Results for the quarter reflected improved profitability in the Meat Processing Group (MPG) and the Hog Processing Group (HPG) as a result of better margins in fresh pork and processed meats, as well as the favorable impact of higher live hog prices in the HPG.
As previously announced, Smithfield Foods recently has completed the acquisition of the following companies:
* Moyer Packing Company, a beef processor with annual sales of $600
* Smithfield Companies, a producer of hams and other specialty products
with annual sales of $20 million
* Gorges/Quik-to-Fix Foods, a leading producer, marketer and distributor
of value-added beef, pork and poultry products for the retail and food
service industry, with annual sales of $140 million
* A 50 percent interest in Pinnacle Foods, Inc., a provider of case-ready
pork, beef, lamb and veal to retail supermarkets in the Northeast, with
annual sales of $30 million.
Sales of newly-acquired companies, combined with higher unit selling prices, contributed to a 15 percent increase in sales to $1.6 billion from $1.4 billion in the prior year. MPG operating earnings improved dramatically from a loss of $7.8 million in the prior year to a loss of $.5 million in the current year. Traditionally, the first fiscal quarter is, by far, the weakest of the year in the MPG.
Including the newly-acquired beef operations, total MPG sales tonnage, excluding by-products, rose eight percent, including a nine percent increase in fresh meat volume and a seven percent increase in processed meats. Excluding the impact of newly-acquired operations and the sale of a Canadian fresh pork plant last fiscal year, fresh pork volume rose 11 percent while processed meats volume declined two percent, as the company continued to focus on branded, value-added products and elimination of unprofitable product lines.
Hog Production Group operating profit rose eight percent to $119.7 million versus $111.2 million last year. Improved earnings in the current year reflected the impact of higher live hog prices, seven percent higher than in the first quarter of fiscal 2001 and improved production, three percent above a year ago.
Smithfield Foods’ international operations continued its turnaround and reported another profitable quarter. Earnings of the company’s French operations were well above last year while Animex, based in Poland, reduced losses substantially.
“I am delighted with the first quarter results,” said Joseph W. Luter, III, chairman, president and chief executive officer. “While most of our competition cited high hog prices for lower margins in the quarter, our vertical integration strategy maximized earnings and produced stability. Our Hog Production Group continued to deliver productivity improvements to capitalize on favorable hog prices. Meanwhile, the Meat Processing Group continued to pursue value-added initiatives to improve both fresh pork and processed meats margins.”
Mr. Luter said that conditions for sustained earnings growth for Smithfield Foods remain highly favorable. “The hog production industry appears rational and resistant to expansion. Additionally, consumer demand and retail pricing for pork products are quite healthy,” he said. “Given the current favorable conditions for both hog production and meat processing, the current outlook for our fiscal second quarter (August-October) is quite good and should compare very favorably with the same period last year.”
Smithfield Foods has delivered a 28 percent average annual compounded rate of return to investors since 1975. In the last 15 years, the company’s share price has outperformed the S&P 500 Index by more than 350 percent. With annual sales of $6 billion, Smithfield Foods is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs. For more information, please visit http://www.smithfieldfoods.com .
This news release may contain “forward-looking” information within the meaning of the federal securities laws. The forward-looking information may include statements concerning the Company’s outlook for the future, as well as other statements of beliefs, future plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. The forward-looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. These risks and uncertainties include availability and prices of live hogs, raw materials and supplies, live hog production costs, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards, adverse results from ongoing litigation and actions of domestic and foreign governments.
CONSOLIDATED STATEMENTS OF INCOME
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
13 Weeks Ended 13 Weeks Ended
(In thousands, except per share data) July 29, 2001 July 30, 2000
Sales $1,636,412 $1,421,326
Cost of sales 1,380,994 1,191,926
Gross profit 255,418 229,400
Selling, general and administrative
expenses 116,219 103,845
Depreciation expense 31,707 30,655
Interest expense 19,636 23,388
Minority interests 1,578 (246)
Gain on sale of IBP common stock (7,008) –
Income before income taxes 93,286 71,758
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Income taxes 36,382 27,189
Net income $56,904 $44,569
Net income per common share:
Basic $1.08 $.82
Diluted $1.06 $.81
Average common shares outstanding:
Basic 52,467 54,660
Diluted 53,451 55,343
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