Smithfield Foods, Inc. (NYSE: SFD) today reported record net income of $44.6 million, or $.81 per diluted share, for the first quarter of fiscal 2001. These results compare with $6.9 million, or $.15 per diluted share in the same quarter of fiscal 2000. Earnings for the current year represented a more than six-fold increase in net income and a more than five-fold increase in net income per share. The per share amount reflects the impact of 11.1 million shares issued in connection with the Murphy Farms acquisition which was somewhat offset by 3.2 million shares repurchased during the past year under the Company’s existing share repurchase program.
Said Joseph W. Luter, III, chairman, president and chief executive officer of the Company: “We are extremely pleased with the first quarter results, particularly given the difficult environment for fresh pork for most of the quarter. In addition, these results were achieved in what is generally the weakest quarter of our fiscal year. Once again this demonstrates the continuing value of our vertical integration strategy.”
Results in the first quarter of fiscal 2001 reflected a strong performance in the Company’s Hog Production Group (HPG) which more than offset a modest loss in the Meat Processing Group (MPG). The combination of twice as many hogs raised, the result of the Murphy Farms acquisition this past January, and a 41% increase in live hog prices provided the environment for this strong performance by the HPG.
Sales for the first quarter of fiscal 2001 totaled $1.4 billion compared to $1.1 billion in the same quarter of fiscal 2000. The increase in sales primarily reflected a 24% increase in unit selling prices for the Company’s meat products. Sales tonnage declined slightly during the current quarter as a result of decreased fresh pork tonnage resulting from a cutback in the number of hogs slaughtered in reaction to a reduction in the number of hogs coming to market.
Luter noted that even though hog prices have fallen recently, which implies a decline in profitability at the HPG, fresh pork margins have improved substantially at the MPG as hog prices have declined. “We expect fresh pork margins to continue to be favorable as we move into the fall and holiday seasons. This is generally the best time of the year for both fresh pork and processed meats. Given our first quarter results and the inherent counter-balancing benefits of hog production and meat processing, we are very optimistic that fiscal 2001 will be another record year for Smithfield Foods,” Mr. Luter said.
Smithfield Foods provided the highest total return to shareholders among food stocks in the last ten years, according to Fortune magazine’s Fortune 500 rankings. With annual sales of $5.2 billion, the Company is the largest vertically integrated producer and marketer of fresh pork and processed meats in the United States. Brands include Smithfield Lean Generation Pork(TM), Smithfield Premium, Gwaltney, John Morrell, Patrick Cudahy, Schneiders, Krakus, Lykes, Esskay, Kretschmar, Valleydale, Jamestown, Dinner Bell, Sunnyland, ReaLean, Patrick’s Pride, Great, Tobin’s First Prize, Peyton’s, Rodeo, IQM, Curly’s, Ember Farms and others.
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The Company also has operating subsidiaries in Canada, France and Poland and participates in joint ventures in Canada, Brazil and Mexico. The foreign subsidiaries have slaughter operations and sell fresh pork, processed meats and other related food products. The joint ventures are involved in all aspects of the pork business, including hog production and slaughter, as well as the sale of fresh and processed meats.
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. The risks and uncertainties include availability and prices of live hogs and raw materials, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital 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 30, August 1,
Sales $ 1,421,326 $ 1,142,415
Cost of sales 1,191,926 994,919
Gross profit 229,400 147,496
Selling, general and administrative expenses 103,845 94,550
Depreciation expense 30,655 24,858
Interest expense 23,388 14,533
Minority interest (246) 2,761
Income before income taxes 71,758 10,794
Income taxes 27,189 3,864
Net income $ 44,569 $ 6,930
Net income per common share:
Basic $ 0.82 $ 0.15
Diluted $ 0.81 $ 0.15
Average common shares outstanding:
Basic 54,660 45,859
Diluted 55,343 47,088