UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended May 1, 1994
Commission file number 0-2258
SMITHFIELD FOODS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-0845861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 North Church Street, Smithfield, VA 23430
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code...........(804) 357-4321
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.50 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
The aggregate market value of the shares of Registrant's Common Stock held by
non-affiliates as of July 15, 1994 was approximately $288,873,000. This
figure was calculated by multiply- ing (i) the $29.00 last sales price of
Registrant's Common Stock as reported on The Nasdaq National Market on July
15, 1994 by (ii) the number of shares of Registrant's Common Stock not held
by any officer or director of the Registrant or any person known to the
Registrant to own more than five percent of the outstanding Common Stock of
the Registrant. Such calculation does not constitute an admission or
determination that any such officer, director or holder of more than five
percent of the outstanding shares of Common Stock of the Registrant is in
fact an affiliate of the Registrant.
At July 15, 1994, 16,284,026 shares of the Registrant's Common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Annual Report to Stockholders for Fiscal Year
Ended May 1, 1994 are incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of
Stockholders to be held on August 31, 1994 are incorporated by
reference into Part III.
1-32
TABLE OF CONTENTS
Item Page
1. Business..................................................... 3
2. Properties................................................... 8
3. Legal Proceedings............................................ 9
4. Submission of Matters to a Vote of Security Holders.......... 9
4A. Executive Officers of the Company............................ 10
PART II
5. Market for Company's Common Equity and Related Stockholder Matters 10
6. Selected Financial Data...................................... 11
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 11
8. Financial Statements and Supplementary Data.................. 11
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 11
PART III
10. Directors and Executive Officers of the Company............... 11
11. Executive Compensation........................................ 11
12. Security Ownership of Certain Beneficial Owners and Management 11
13. Certain Relationships and Related Transactions................ 11
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 12
2-32
PART I
Item 1. BUSINESS
General
As a holding company, Smithfield Foods, Inc. conducts its pork
processing operations through three principal subsidiaries: Gwaltney of
Smithfield, Ltd. ("Gwaltney") and The Smithfield Packing Company,
Incorporated ("Smithfield Packing"), both based in Smithfield, Virginia, and
Patrick Cudahy Incorporated ("Patrick Cudahy"), based in Cudahy, Wisconsin.
The Company, in furthering its strategy of vertical integration, also
conducts hog production operations through its Brown's of Carolina, Inc.
subsidiary ("Brown's") and Smithfield-Carroll's, a joint hog production
arrangement between the Company and Carroll's Foods of Virginia, Inc., an
affiliate of Carroll's Foods, Inc., Warsaw, North Carolina. Both Brown's and
Smithfield-Carroll's produce hogs for the Company's pork processing plants in
Smithfield, Virginia and Bladen County, North Carolina. The Company is also
a participant in the Circle Four joint hog production arrangement with
Carroll's Foods, Inc., Murphy Farms, Inc. and Prestage Farms, Inc., all large
North Carolina hog producers, which conducts hog production operations in
Milford, Utah. The Company, through its Ed Kelly, Inc. subsidiary ("Kelly"),
operates a retail consumer electronics chain based in Winston-Salem, North
Carolina. The operations of Kelly are not significant to the Company's
business. In this report, references to "Smithfield Foods" or the "Company"
are to Smithfield Foods, Inc. together with all of its subsidiaries, unless
the context otherwise indicates.
The Company is the largest pork processor in the eastern United
States. The Company produces a wide variety of fresh pork and processed meat
products which it markets principally in the eastern United States. The
Company has also expanded to national distribution and to international sales
in Japan and Mexico.
As consumers have become more health conscious, pork producers and
processors, including the Company, have focused on providing leaner, fresh
pork products as well as lower-salt processed meats. Management believes
that pork products which are more attractive to diet-conscious Americans,
together with the industry's "Pork--The Other White Meat" campaign and other
efforts to heighten public awareness of pork as an attractive protein source,
have led to increased consumer demand for pork products. The Company,
through its NPD pig program, is developing a line of extra-lean pork products
to meet consumer demand for leaner pork.
Business Strategy
Since 1975, when current management assumed control, Smithfield
Foods has expanded both its production capacity and markets through a
combination of strong internal growth and the acquisition of regional
operations with well-recognized brand identities. In fiscal 1982, the
Company acquired Gwaltney, then Smithfield Packing's principal regional
competitor. This acquisition doubled the Company's size and added several
popular lines of branded products along with a state-of-the-art hot dog
production facility. The proximity of Gwaltney to Smithfield Packing allowed
for synergies and cost savings in manufacturing, purchasing and
transportation.
This combination set the stage for a series of acquisitions of
smaller regional processors with widely-recognized brands. In fiscal 1985,
the Company acquired Patrick Cudahy, which added a prominent line of dry
sausage products. In fiscal 1986, the Company acquired Esskay, Inc., a firm
with a broad line of delicatessen products having substantial brand loyalty
in the Baltimore-Washington, D.C. metropolitan area. In fiscal 1991, the
Company acquired the Mash's brand name and a ham processing plant in
Landover, Maryland. In fiscal 1993, the Company acquired the Valleydale and
Reelfoot brand names and a processing plant in Salem, Virginia.
3-32
The Company's business is based around four strategic initiatives:
(i) use of the leanest genetics available to enable the Company to market
highly differentiated pork products, (ii) vertical integration into state-of-
the-art hog production through company-owned hog production operations and
long-term partnerships and alliances with large and efficient hog producers,
(iii) operation of highly efficient processing facilities, and (iv)
plant locations that reduce freight expense and permit rapid delivery and
response to customers.
As a complement to the Company's hog processing operations, the
Company has vertically integrated into state-of-the-art hog production
through Brown's and Smithfield-Carroll's. In addition, the Company is
supplementing the hogs it obtains from these hog production operations with
market-indexed, multi-year agreements with several of the nation's largest
suppliers of high quality hogs strategically located in North Carolina,
including Carroll's Foods, Inc., Murphy Farms, Inc. and Prestage Farms, Inc.
In May 1991, Smithfield-Carroll's, through Smithfield-Carroll's
Farms (a partnership between the Company and an affiliate of Carroll's Foods,
Inc.), acquired from National Pig Development Company ("NPD"), a British
firm, the exclusive United States franchise rights for genetic lines of
specialized breeding stock. The NPD hogs produced by these superior genetic
lines are substantially leaner than any other breeding stock available in
commercial volume in the United States. Management expects that the leanness
and increased meat yields of these hogs will over time improve the Company's
profitability with respect to both fresh pork and processed meat products and
provide a sustainable competitive advantage over other domestic pork
processors. Smithfield-Carroll's has imported a nucleus herd of 2,000
animals which forms the top of a genetic pyramid capable of sustaining more
than 300,000 commercial sows and is in the process of replacing its breeding
stock with these superior genetic animals over the next several years.
Brown's is also in the process of infusing this breed into its herds. The
Company is conducting marketing and nutritional studies to determine how best
to maximize the benefits from the lean pork from these animals and plans a
limited rollout of NPD pork products to foodservice distributors and
restaurant chain accounts in fiscal 1995.
During the past four years, the Company has improved its
competitive position through an aggressive capital investment program
designed to increase production and reduce costs at its Mid-Atlantic
locations. As part of this program, the Company, in October 1992, began
operations at its new, state-of-the-art fresh pork processing plant in Bladen
County, North Carolina. The Company's principal competitors are located in
the Midwest. The Company's Mid-Atlantic and Southeastern locations provide
advantages to the Company over these competitors because of the Company's
lower freight costs to East Coast customers and longer effective shelf-life
for fresh pork products. Management believes that the benefits from its
capital investment program and its new Bladen County plant, together with
these transportation advantages, make the Company highly competitive in the
Eastern United States, particularly in the corridor from Florida to Maine.
The Company's operations are in one industry segment, meat
processing. The following table shows for the fiscal periods indicated the
percentages of the Company's revenues derived from processed meats, fresh
pork and other products.
1994 1993 1992 1991 1990
Processed Meats 49% 55% 57% 53% 53%
Fresh Pork 48% 41% 39% 44% 44%
Other Products 3% 4% 4% 3% 3%
100% 100% 100% 100% 100%
The increase in revenues derived from fresh pork in fiscal 1994 is
attributable to sales of fresh pork products produced at the Bladen County
plant. The meat processing industry is generally characterized by narrow
margins. Profit margins on processed meats are greater than profit margins
on fresh pork and on other products.
4-32
Processed Meat Products
The Company manufactures a wide variety of processed meats,
including smoked and boiled hams, bacon, sausage, hot dogs (pork, beef and
chicken), deli and luncheon meats and specialty products such as pepperoni
and dry salami. The Company markets its processed meat products under labels
that include, among others, Smithfield, Luter's, Hamilton's, Great, Gwaltney,
Esskay, Patrick Cudahy, Mash's and Valleydale.
In response to growing consumer preferences for more nutritious and
healthful meats, the Company has emphasized production of more closely-
trimmed, leaner and lower salt processed meats such as Smithfield Packing's
Hamilton's Easy-Karv Ham and Patrick Cudahy's 97% fat-free Realean Ham.
Fresh Pork Products
The Company increased its commitment to fresh pork with the opening
of its Bladen County plant. The plant, which is operated by Smithfield
Packing's Carolina Food Processors Division, led to an increase in fresh pork
output, both in absolute terms and relative to the Company's processed meats
output, in fiscal 1994. The plant, which is currently processing as many as
16,000 hogs per day on a one-shift basis, plans to process as many as 24,000
hogs per day on a two-shift basis beginning in the fourth quarter of fiscal
1995. This will lead to an additional increase in fresh pork output in
fiscal 1995. A substantial portion of the Company's fresh pork is sold to
its customers as unprocessed, trimmed cuts such as loins (including roasts
and chops), butts, picnics and ribs. The Company is putting greater emphasis
on the sale of value-added, higher-margin fresh pork products, such as
boneless loins, hams, butts and picnics. In addition to meeting a growing
consumer demand for its fresh pork, the Company's commitment to fresh pork
also provides its processing operations with raw material of much higher
quality than that generally available through market purchases.
Smithfield Packing has developed a case-ready pork program designed
to supply supermarket chains with pre-packaged, weighed, labeled and priced
fresh pork, ready for immediate sale to the consumer. Management believes
that this initiative over time should result in greater brand identification
and higher margins for the Company's fresh pork products.
Raw Materials
The Company's primary raw material is live hogs. Historically, hog
prices have been subject to substantial fluctuations. In addition, hog
prices tend to rise as hog supplies decrease during the hot summer months and
tend to decline as supplies increase during the fall. This is due to lower
farrowing performance during the winter months and slower animal growth rates
during the hot summer months. Hog supplies, and consequently prices, are
also affected by factors such as feed prices, weather and interest rates.
The Company produces its own hogs through Brown's and Smithfield-
Carroll's and purchases hogs from several of the nation's largest hog
producers strategically located in North Carolina, which include Carroll's
Foods, Inc., Murphy Farms, Inc. and Prestage Farms, Inc., as well as from
other independent hog producers and dealers located in the East, Southeast
and Midwest. In fiscal 1994, the Company obtained 11.4% of the live hogs it
processed from Brown's and Smithfield-Carroll's. The Company's raw material
cost fall when hog production at Brown's and Smithfield-Carroll's is
profitable and conversely rise when such production is unprofitable.
Management believes that hog production at Brown's and Smithfield-Carroll's
will further the Company's strategic initiative to become vertically
integrated and may reduce exposure to the fluctuations in profitability
historically experienced by the pork processing industry. The Company has
established multi-year agreements with Carroll's Foods, Murphy Farms and
Prestage Farms which provide the Company with a stable supply of high-quality
hogs at market-indexed prices. These producers supplied 50.9% of the hogs
processed by the Company in fiscal 1994.
5-32
As a result of the hogs obtained from Brown's and Smithfield-
Carroll's and from these major North Carolina producers, the percentage of
hogs obtained by the Company from Midwestern sources has declined from 34% in
fiscal 1987 to 5% in fiscal 1994. Midwestern hogs have historically been the
Company's higher-cost hogs due to such factors as higher transportation
costs, in-transit weight losses and inconsistency in size and quality. The
Company anticipates that the percentage of hogs obtained by the Company from
Midwestern sources will decline further as more hogs are produced by Brown's,
Smithfield-Carroll's and the major North Carolina producers.
The Company purchases its hogs on a daily basis at its plants in
Smithfield, Virginia and Bladen County, North Carolina, at buying stations in
Virginia, North Carolina and South Carolina and at independent dealer-
operated buying stations in the Midwest. The Company also purchases fresh
pork from other meat processors to supplement its processing requirements,
and raw beef, poultry and other meat products to add to its sausage and
luncheon meats. Such meat products and other materials and supplies,
including seasonings, smoking and curing agents, sausage casings and
packaging materials are readily available from numerous sources at
competitive prices.
Customers and Marketing
The Company has dominant market shares in the Mid-Atlantic and
Southeastern United States, and growing market shares in the Northeast,
South, Midwest and West. The Company's fundamental marketing strategy is to
sell large quantities of moderate-priced processed meat products as well as
fresh pork to national and regional supermarket chains, wholesale
distributors and the foodservice industry (fast food, restaurant and hotel
chains, hospitals and other institutional customers). Management believes
that this marketing approach reaches the largest number of value-conscious
consumers without requiring large advertising and promotional campaigns. The
Company uses both salaried salesmen and independent commission brokers to
sell its products. Except for a small number of orders for hams, the Company
does not make sales directly to consumers. In fiscal 1994, the Company made
sales to more than 3,000 customers, none of whom accounted for as much as 10%
of the Company's revenues. The Company has no significant or seasonally
variable backlog because most customers prefer to order products shortly
before shipment, and therefore, do not enter into formal long-term contracts.
Management believes that its registered trademarks have been important to the
success of its branded processed meat products.
The Company, in fiscal 1994, entered into an agreement with
Sumitomo Corporation for the exclusive distribution of a line of unique
branded fresh pork products in Japan. In addition, the Company began
exporting processed meats to Mexico in fiscal 1994. The Company anticipates
that export sales to these markets will increase substantially in fiscal
1995.
The Company's business is seasonal in that, traditionally, the
heavier periods of sales for hams are the holiday seasons such as Easter,
Thanksgiving and Christmas, and the heavier periods of sales for hot dogs and
luncheon meats are the summer months. The Company maintains large
inventories of hams in anticipation of its holiday seasons' business. Fresh
pork is shipped, generally within two to three days after slaughter, by
refrigerated trucks which are leased and operated by the Company and by
common carrier. The Company enters into commodity futures contracts to
reduce the risk of adverse price changes on the profitability of its hog
production operations and future sales commitments, such as future sales
commitments for hams for the holiday seasons.
Distribution
Because of the Mid-Atlantic and Southeastern locations of all but
one production facility, the Company offers next-day delivery to most of its
customers which affords it a competitive advantage in terms of service and
freight costs. The Company's Mid-Atlantic and
Southeastern locations allow it to supply customers in the Northeastern, Mid-
Atlantic,
6-32
Southeastern and Southern states with fresh pork products with a longer
effective shelf-life than those shipped from competing Midwestern processors.
Competition
The protein industry generally, and the pork processing industry in
particular, are highly competitive. The Company's products compete with a
large number of other protein sources, including beef, chicken, turkey and
seafood, but the Company's principal competition comes from other pork
processors.
Management believes that the principal competitive factors in the
pork processing industry are price, quality and brand loyalty. Many of the
Company's competitors are considerably larger, have correspondingly greater
financial and other resources and enjoy wider recognition for their branded
products. Some of these competitors are also more diversified than the
Company. To the extent that their other operations generate profits, such
companies may be able to subsidize their pork processing operations.
The Company believes it is one of the largest producers of smoked meats,
including hams, bacon and picnics, in the United States. The Company is the
largest producer of "Genuine Smithfield" hams. By statute of the
Commonwealth of Virginia, only hams processed within the Town of Smithfield
can be labeled "Genuine Smithfield" hams.
Regulation
Like other participants in the meat packing industry, the Company
is subject to various laws and regulations administered by federal, state and
other government entities, including the Environmental Protection Agency and
corresponding state agencies such as the Virginia State Water Control Board
("SWCB"), the North Carolina Division of Environmental Management, the United
States Department of Agriculture and the Occupational Safety and Health
Administration. Management believes that the Company complies with all such
laws and regulations in all material respects, except as set forth
immediately below, and that continued compliance with these standards will
not have a material effect on the Company's financial position.
The wastewater discharge permits for the Company's major manufacturing
plants in Smithfield, Virginia, currently impose more stringent phosphorous
and ammonia effluent limitations than the plants can currently meet. The
plants are currently being operated in compliance with less stringent
effluent limitations under an administrative consent order entered into with
the SWCB, pending reissuance of the permits, for which timely applications
have been filed. In May 1991, the Company elected to comply with the SWCB's
regulations by agreeing to connect the Company's wastewater treatment plants
to the regional sewer system operated by the Hampton Roads Sanitation
District. The Company will incur sewer charges in addition to the existing
costs of effluent treatment beginning in approximately two years. The sewer
charges that will be incurred will be accounted for as current period charges
in the year in which such costs are incurred. The Company expects to incur
approximately $2,000,000 in capital costs to upgrade the existing systems and
connect to the regional sewer system.
Employees
The Company has approximately 8,000 employees, approximately 4,250
of whom are covered by collective bargaining agreements expiring between
March 11, 1995 and December 31, 1998. The Company believes that its
relationship with its employees is good.
Working Capital
The pork processing industry is characterized by high unit sales
volume and rapid turnover of inventories and accounts receivable. Because of
the rapid turnover rate, the
7-32
Company considers its inventories and accounts receivable highly liquid and
readily convertible into cash. Borrowings under lines of credit are used to
finance increases in the levels of inventories and accounts receivable
resulting from seasonal and other market-related fluctuations in raw material
costs. The demand for seasonal borrowings usually peaks in early November
when ham inventories are at their highest levels, and borrowings are repaid
in January when the accounts receivable generated by the sales of these hams
are collected. At May 1, 1994, the Company had aggregate lines of credit of
$120.0 million. Borrowings under the lines of credit are secured by
substantially all of the Company's inventories and accounts receivable.
Weighted average borrowings under the lines were $66.6 million in fiscal
1994, $79.2 million in fiscal 1993 and $29.4 million in fiscal 1992. Maximum
borrowings were $105.1 million in fiscal 1994, $105.9 million in fiscal 1993
and $56.0 million in fiscal 1992. The outstanding balances under these lines
totalled $52.1 million and $93.0 million as of May 1, 1994 and May 2, 1993,
respectively.
Miscellaneous
With the exception of the franchise agreement between Smithfield-
Carroll's and National Pig Development Company (See Item 1. Business), the
Company has no patents, licenses, franchises or concessions which it
considers material to its business.
The Company is not involved in significant research activities.
Item 2. PROPERTIES.
The following table summarizes information concerning the principal
plants and other materially important physical properties of the Company:
APPROXIMATE
LAND AREA FLOOR SPACE
LOCATION OPERATION (ACRES) (SQ.FT.)
Smithfield Packing Plant No. 1 Slaughtering and cutting 25.5 385,000
501 North Church Street hogs; manufacture of
Smithfield, Virginia bacon products, smoked
meats, and dry salt meats;
production of hams and
picnics.
Smithfield Packing Plant No. 2 Production of bone-in and 20.0 218,000
2501 West Vernon Avenue boneless cooked and smoked
Kinston, North Carolina ham and other smoked meat
products.
Smithfield Packing Plant No. 3 Production of bone-in smoked 7.8 100,000
5801 Columbia Park Drive ham and other smoked meat
Landover, Maryland products.
Smithfield Packing Plant No. 4 Slaughtering and cutting 860.0 510,000
Carolina Food Processors hogs; production of boneless
Division (Bladen County) hams and loins.
Route #87
Tarheel, North Carolina
Gwaltney Plant No. 1 Slaughtering and cutting 56.4 474,000
601 North Church Street hogs; manufacture of bacon
Smithfield, Virginia products and sausage; produc-
tion of bone-in and boneless
cooked and smoked hams and
picnics.
8-32
Gwaltney Plant No. 2 Manufacture of hot dogs, 13.1 133,000
3515 Airline Blvd. bologna, luncheon meats
Portsmouth, Virginia and sausage products.
Gwaltney Plant No. 3 Manufacture of bacon, smoked 11.0 152,000
1013 Iowa Street sausage and boneless cooked
Salem, Virginia hams.
Patrick Cudahy Plant Manufacture of bacon, dry 60.0 1,057,000
3500 E. Barnard Ave. sausage, boneless cooked hams
Cudahy, Wisconsin and operation of a refinery.
The Company operates hog buying stations in Virginia, North
Carolina and South Carolina which have facilities for purchasing and loading
hogs for shipment to the Company's plant's in Smithfield, Virginia and Bladen
County, North Carolina.
The Company, through Brown's, owns and leases hog production
facilities in North Carolina, and through Smithfield-Carroll's, owns hog
production facilities in North Carolina and Virginia.
Smithfield Packing Plants No. 1 and No. 2, including all real
property, machinery and equipment, are pledged as security for Smithfield
Packing's 9.8% Secured Notes, due August 2003, and 10.75% Secured Notes, due
August 2005, held by John Hancock Mutual Life Insurance Company. The
machinery and equipment in Smithfield Packing Plant No. 3 is pledged as
security for Smithfield Packing's Secured Notes, due October 1997, held by
MetLife Capital Corporation. Smithfield Packing Plant No. 4, including all
real property, machinery and equipment, is pledged as security for Smithfield
Packing's 8.41% Secured Notes, due February 2013, held by John Hancock Mutual
Life Insurance Company, Massachusetts Mutual Life Insurance Company and MML
Pension Insurance Company, and Smithfield Foods, Inc.'s 6.48% Notes, due
September 1998, held by NationsBank of Virginia, Inc. Gwaltney Plants No.
1 and No. 2, including all real property, machinery and equipment, are
pledged as security for Gwaltney's 6.24% Secured Notes, due November 1998,
and 9.85% Secured Notes, due November 2006, held by John Hancock Mutual Life
Insurance Company.
Based on standard hourly rates of production, converted to annual
capacities based on a 40-hour work week, Smithfield Plant No. 1 has an annual
slaughter capacity of 2,080,000 head and Gwaltney Plant No. 1 has an annual
slaughter capacity of 2,080,000 head. Based on standard hourly rates of
production, converted to an annual capacity based on a 40-hour work week,
Smithfield Plant No. 4 has an annual slaughter capacity on a one-shift basis
of 4,160,000 head. The plant is designed to operate on a two-shift basis.
Subject to applicable environmental and other regulations, production at all
the Company's plants can be increased without physically expanding existing
facilities by increasing the number of production hours.
Item 3. LEGAL PROCEEDINGS.
Smithfield Foods and its subsidiaries are defendants in various
lawsuits arising in the ordinary course of business. In the opinion of
management, any ultimate liability with respect to these matters will not
have a material effect on the Company's financial statements.
Reference is made to "Item 1.--Business--Regulation."
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
9-32
Item 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The executive officers of the Company as of July 15, 1994 are as
follows:
Officer
Name Age Office Since
Joseph W. Luter, III 55 Chairman of the Board, President 1975
and Chief Executive Officer of
the Company
Roger R. Kapella 52 President and Chief Operating 1985
Officer of Patrick Cudahy
Lewis R. Little 50 President and Chief Operating 1993
Officer of Gwaltney
Robert W. Manly 41 President and Chief Operating 1986
Officer of Smithfield Packing
Aaron D. Trub 59 Vice President, Secretary and 1970
Treasurer of the Company
C. Larry Pope 39 Controller of the Company 1981
Mr. Luter is Chairman of the Board, President and Chief Executive
Officer of the Company.
Mr. Kapella is President and Chief Operating Officer of Patrick
Cudahy.
Mr. Little has been President and Chief Operating Officer of
Gwaltney since May 1993. He was Executive Vice President of Gwaltney prior
to May 1993.
Mr. Manly was appointed President and Chief Operating Officer of
Smithfield Packing in June 1994. He was Executive Vice President of the
Company prior to June 1994.
Mr. Trub is Vice President, Secretary and Treasurer of the Company.
Mr. Pope is Controller of the Company.
There is no family relationship among any officers.
The officers of Smithfield Foods, Inc. and its subsidiaries are
elected annually by the Board of Directors of the respective company of which
they are an officer. Each officer holds the office to which he was elected
at the discretion of the Board of his company for the ensuing year or until
removed or replaced.
PART II
Item 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
For information required by this item, see the information in
Exhibit 13-Annual Report to Stockholders (i) on page 28 adjacent to the
caption "Common Stockholders of Record" and (ii) under the caption "Common
Stock Data" on page 47, which information is incorporated herein by
reference.
10-32
Item 6. SELECTED FINANCIAL DATA.
For selected financial data required by this item, see the data in
Exhibit 13-Annual Report to Stockholders under the caption "Financial
Summary" on pages 28 and 29, which data are incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
For information required by this item, see information in Exhibit
13-Annual Report to Stockholders under the caption "Financial Discussion" on
pages 23 through 27, which information is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements required by this item are on
pages 30 through 45 of Exhibit 13-Annual Report to Stockholders and are
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
For information concerning the directors and nominees for
directorship, see the information under the captions "Election of Directors"
on pages 3 and 4 and "Board of Directors and Committees" on pages 5 and 6 in
the Company's Proxy Statement for Annual Meeting of Stockholders to be held
on August 31, 1994, which information is incorporated herein by reference.
For information concerning executive officers of the Company,
reference is made to "Item 4A. Executive Officers of the Company."
Item 11. EXECUTIVE COMPENSATION.
For information required by this item, see the information under
the captions "Executive Compensation" on pages 7 through 13 and "Board of
Directors and Committees" on pages 5 and 6 in the Company's Proxy Statement
for Annual Meeting of Stockholders to be held on August 31, 1994, which
information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
For information required by this item, see the information under
the captions "Principal Stockholders" on pages 2 and 3 and "Common Stock
Ownership of Executive Officers and Directors" on pages 4 and 5 in the
Company's Proxy Statement for Annual Meeting of Stockholders to be held on
August 31, 1994, which information is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information required by this item, see the information under
the caption "Other Transactions" on pages 13 through 15 in the Company's
Proxy Statement for Annual Meeting of Stockholders to be held on August 31,
1994, which information is incorporated herein by reference.
11-32
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Reference
Annual Report
to Stockholders Form 10-K
Page Page
(a)(1) Financial Statements
The following consolidated financial
statements of Smithfield Foods, Inc.
and its consolidated subsidiaries are
incorporated by reference in Item 8:
Consolidated statements of income -
52 weeks ended May 1, 1994,
52 weeks ended May 2, 1993,
53 weeks ended May 3, 1992. 32
Consolidated balance sheets -
May 1, 1994 and May 2, 1993 30, 31
Consolidated statements of cash flows -
52 weeks ended May 1, 1994,
52 Weeks ended May 2, 1993,
53 weeks ended May 3, 1992. 33
Consolidated statements of stockholders'
equity
52 weeks ended May 1, 1994,
52 weeks ended May 2, 1993,
53 weeks ended May 3, 1992. 34
Notes to consolidated financial
statements 35-43
Report of Management 44
Report of Independent Public
Accountants 45
(a)(2) Financial Statement Schedules
II. Amounts Receivable from Related
Parties and Underwriters, Promoters
and Employees Other than Related
Parties 21-23
III. Condensed Financial Information
of Registrant 24-27
V. Property, Plant and Equipment 28-30
VI. Accumulated Depreciation of
Property, Plant and Equipment 31-33
12-32
Schedules other than those listed above have been omitted since they
are either not required or not applicable, or the information called for is
shown in the financial statements or in the notes thereto.
(a)(3) Exhibits
Exhibit 3.1 - Composite Certificate of Incorporation of the Company,
as amended to date (incorporated by reference to
Exhibit 3.1 to the Company's Form 10-K Annual Report
for the fiscal year ended April 28, 1991).
Exhibit 3.1(a) - Certificate of Designations of Series B 6-3/4%
Cumulative Convertible Preferred Stock, par value $1.00
per share, of the Company (incorporated by reference to
Exhibit 3.1(a) to the Company's Form 10-K Annual Report
for the fiscal year ended May 2, 1993).
Exhibit 3.2 - By-laws of the Company, as amended to date
(incorporated by reference to Exhibit 3.2 to the
Company's Form 10-K Annual Report for the fiscal year
ended April 28, 1991).
Exhibit 4.1 - Composite Certificate of Incorporation - See Exhibit
3.1.
Exhibit 4.2 - Form of Certificate representing the Company's Common
Stock, par value $.50 per share (including Rights
legend) (incorporated by reference to Exhibit 4.2 to
the Company's Form 10-K Annual Report for the fiscal
year ended April 28, 1991).
Exhibit 4.3 - Form of Certificate representing the Company's Series B
6-3/4% Cumulative Convertible Preferred Stock, par
value $1.00 per share (including Rights legend)
(incorporated by reference to Exhibit 4.3 to the
Company's Form 10-K Annual Report for the fiscal year
ended May 2, 1993).
Exhibit 4.4 - Form of Certificate representing Rights (incorporated
by reference to Exhibit 4 to the Company's Amendment
No. 1 to Registration Statement on Form 8-A dated May
23, 1991 (the "Amended Form 8-A").
Exhibit 4.5 - Rights Agreement, dated as of May 8, 1991, as amended
by Amendment No. 1 dated as of January 31, 1994, by and
between Smithfield Foods, Inc. and First Union National
Bank of North Carolina, Rights Agent.
Exhibit 4.6 - Second Amended, Restated and Continued Revolving Credit
Agreement dated March 1, 1994, among Gwaltney of
Smithfield, Ltd. The Smithfield Packing Company,
Incorporated, Patrick Cudahy Incorporated, Esskay,
Inc., Brown's of Carolina, Inc., Carolina Food
Processors, Inc. and Cooperative Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland",
New York Branch, as agent and each bank a party
thereto.
13-32
Exhibit 4.6(a) - First Amendment to Credit Agreement and First Amendment
to Security Agreement dated March 1, 1994 of The
Smithfield Packing Company, Incorporated.
Exhibit 4.6(b) - Second Amended, Restated and Continued Guaranty, dated
March 1, 1994 made by Smithfield Foods, Inc. in favor
of Rabobank Nederland.
Exhibit 4.7 - Note Agreement dated July 29, 1988, between The
Smithfield Packing Company, Incorporated and John
Hancock Mutual Life Insurance Company, covering
$15,000,000 9.8% Secured Notes due August 1, 2003
(incorporated by reference to Exhibit 4.11 to the
Company's Form 10-K Annual Report for the fiscal year
ended April 30, 1989).
Exhibit 4.7(a) - Guaranty and Agreement by Smithfield Foods, Inc. dated
July 29, 1988 (incorporated by reference to Exhibit
4.11(a) to the Company's Form 10-K Annual Report for
the fiscal year ended April 30, 1989).
Exhibit 4.8 - Note Agreement dated August 6, 1990, between The
Smithfield Packing Company, Incorporated and John
Hancock Mutual Life Insurance Company, covering
$15,000,000 10.75% Secured Notes due August 1, 2005
(incorporated by reference to Exhibit 4.10 to the
Company's Form 10-K Annual Report for the fiscal year
ended April 28, 1991).
Exhibit 4.8(a) - Form of Guaranty and Agreement by Smithfield Foods,
Inc. dated August 6, 1990 (incorporated by reference to
Exhibit 4.10(a) to the Company's Form 10-K Annual
Report for the fiscal year ended April 28, 1991).
Exhibit 4.9 - Note Agreement dated October 31, 1991, between Gwaltney
of Smithfield, Ltd. and John Hancock Mutual Life
Insurance Company, covering $20,000,000 9.85% Secured
Notes due November 1, 2006 (incorporated by reference
to Exhibit 4.9 to the Company's Form 10-K Annual Report
for fiscal year ended May 3, 1992).
Exhibit 4.9(a) - Guaranty and Agreement by Smithfield Foods, Inc. dated
October 31, 1991 (incorporated by reference to Exhibit
4.9(a) to the Company's Form 10-K Annual Report for
fiscal year ended May 3, 1992).
Exhibit 4.10 - Note Purchase Agreement dated January 15, 1993 by and
among Carolina Food Processors, Inc. and Smithfield
Foods, Inc. and John Hancock Mutual Life Insurance
Company, Massachusetts Mutual Life Insurance Company
and MML Pension Insurance Company, covering $25,000,000
8.41% Senior Secured Notes due February 1, 2013,
guaranteed by Smithfield Foods, Inc. (incorporated by
reference to Exhibit 4.11 to the Company's Form 10-K
Annual Report for fiscal year ended May 2, 1993).
Exhibit 4.10(a)- Omnibus Amendment Agreement dated December 1, 1993 by
and among Smithfield Foods, Inc., Carolina Foods
Processors, Inc., John Hancock Mutual Life Insurance
Company, Massachusetts
14-32
Mutual Life Insurance Company and MML Pension Insurance
Company.
Exhibit 4.10(b)- Assumption, Waiver and Amendment Agreement dated May 1,
1994 by and among The Smithfield Packing Company,
Incorporated. Smithfield Foods, Inc., John Hancock
Mutual Life Insurance Company, Massachusetts Mutual
Life Insurance Company and MML Pension Insurance
Company.
Exhibit 4.11 - Master Lease Agreement dated May 14, 1993 between
General Electric Capital Corporation and Brown's of
Carolina, Inc. (incorporated by reference to Exhibit
4.12 to the Company's Form 10-K Annual Report for
fiscal year ended May 2, 1993).
Exhibit 4.11(a)- Corporate Guaranty by Smithfield Foods, Inc. dated May
14, 1993 (incorporated by reference to Exhibit 4.12(a)
to the Company's Form 10-K Annual Report for fiscal
year ended May 2, 1993).
Exhibit 4.12 - Amended and Restated Credit Agreement dated June 28,
1993 between Smithfield Foods, Inc. and NationsBank of
Virginia, N.A., covering $25,000,000 6.48% Notes due
September 30, 1998 (incorporated by reference to
Exhibit 4.13 to the Company's Form 10-K Annual Report
for fiscal year ended May 2, 1993).
Exhibit 4.12(a) -Loan Modification Agreement dated April 30, 1994 among
Smithfield Foods, Inc., Carolina Food Processors, Inc.,
The Smithfield Packing Company, Incorporated and
NationsBank of Virginia, N.A.
Exhibit 10.1 - Subscription Agreement dated September 3, 1992 between
Smithfield Foods, Inc. and Carroll's Foods, Inc.,
covering 1,000,000 shares of Smithfield Foods, Inc.
Common Stock (incorporated by reference to Exhibit 10.1
of the Company's Form 10-K Annual Report for fiscal
year ended May 2, 1993).
Exhibit 10.2 - Subscription Agreement dated as of October 21, 1992
between Smithfield Foods, Inc. and Wake Forest
University, covering $10,000,000 Series B 6-3/4%
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 10.2 of the Company's Form 10-K
Annual Report for fiscal year ended May 2, 1993).
Exhibit 10.3 - Smithfield Foods, Inc. Stock Option Plan (1984), as
amended (incorporated by reference to Exhibit 10.1 to
the Company's Form 10-K Annual Report for fiscal year
ended April 28, 1991).
Exhibit 10.4 - Smithfield Foods, Inc. 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to the
Company's Form 10-K Annual Report for fiscal year ended
May 2, 1993).
Exhibit 10.5 - Master Lease Agreement (Smithfield 91-1) dated December
9, 1991, between State Street Bank and Trust Company of
Connecticut, National Association, as Lessor, and The
Smithfield Packing Company, Incorporated, as Lessee
(Trailers and Yard Equipment) (incorporated by
reference to Exhibit 10.2 to the
15-32
Company's Form 10-K Annual Report for fiscal year
ended May 3, 1992).
Exhibit 10.5(a)- Master Lease Agreement (Smithfield 91-2) dated December
9, 1991, between State Street Bank and Trust Company of
Connecticut, National Association, as Lessor, and The
Smithfield Packing Company, Incorporated, as Lessee
(Tractors) (incorporated by reference to Exhibit
10.2(a) to the Company's Form 10-K Annual Report for
fiscal year ended May 3, 1992).
Exhibit 10.5(b)- Master Lease Agreement (Smithfield 91-3) dated December
9, 1991, between State Street Bank and Trust Company of
Connecticut, National Association, as Lessor, and
Gwaltney of Smithfield, Ltd., as Lessee (Trailers and
Yard Equipment) (incorporated by reference to Exhibit
10.2(b) to the Company's Form 10-K Annual Report for
fiscal year ended May 3, 1992).
Exhibit 10.5(c)- Master Lease Agreement (Smithfield 91-4) dated December
9, 1991, between State Street Bank and Trust Company of
Connecticut, National Association, as Lessor, and
Gwaltney of Smithfield, Ltd., as Lessee (Tractors)
(incorporated by reference to Exhibit 10.2(c) to the
Company's Form 10-K Annual Report for fiscal year ended
May 3, 1992).
Exhibit 10.6 - Storage Agreement dated September 4, 1987, by and
between RCS-Smithfield, Inc. and Smithfield Foods, Inc.
(incorporated by reference to Exhibit 10.9 to the
Company's Form 10-K Annual Report for the fiscal year
ended May 1, 1988).
Exhibit 10.7 - Storage Agreement dated September 18, 1991, by and
between Carolina Cold Storage Limited Partnership and
Smithfield Foods, Inc. (incorporated by reference to
Exhibit 10.5 of the Company's Form 10-K Annual Report
for fiscal year ended May 3, 1992).
Exhibit 11 - Computation of Net Income Per Share.
Exhibit 13 - 1994 Annual Report to Stockholders (With the exception
of the data incorporated by reference in Items 5, 6, 7
and 8, no other data appearing in the accompanying 1994
Annual Report to Stockholders is to be deemed filed as
part of this Form 10-K Annual Report).
Exhibit 21 - List of Subsidiaries of Smithfield Foods, Inc.
Exhibit 23 - Consent of Independent Public Accountants (see page
immediately following the signature pages of this Form
10-K Annual Report).
(b) Reports on Form 8-K
None.
16-32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SMITHFIELD FOODS, INC.
By /s/ Joseph W. Luter, III
Joseph W. Luter, III
Chairman of the Board,
President and Chief
Executive Officer
Date 7/19/94
17-32
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities indicated.
By /s/ Joseph W. Luter, III By /s/ Roger R. Kapella
Joseph W. Luter, III Roger R. Kapella
Chairman of the Board, President President and Chief Operating
and Chief Executive Officer Officer of Patrick Cudahy
Director Incorporated and Director
Date 7/19/94 Date 7/14/94
By /s/ Lewis R. Little By /s/ Robert W. Manly
Lewis R. Little Robert W. Manly
President and Chief Operating Officer President and Chief
of Gwaltney of Smithfield, Ltd. and Operating Officer of The
Director Smithfield Packing
Company, Incorporated and
Director
Date 7/18/94 Date 7/14/94
By /s/ Aaron D. Trub By /s/ C. Larry Pope
Aaron D. Trub C. Larry Pope
Vice President, Secretary and Controller
Treasurer and Director
Date 7/14/94 Date 7/18/94
By /s/ F. J. Faison, Jr. By /s/ Joel W. Greenberg
F. J. Faison, Jr. Joel W. Greenberg
Director Director
Date 7/18/94 Date 7/13/94
By /s/ Cecil W. Gwaltney By /s/ George E. Hamilton, Jr.
Cecil W. Gwaltney George E. Hamilton, Jr.
Director Director
Date 7/14/94 Date 7/14/94
By /s/ Richard J. Holland By /s/ Wendell H. Murphy
Richard J. Holland Wendell H. Murphy
Director Director
Date 7/14/94 Date 7/19/94
18-32
SMITHFIELD FOODS, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Smithfield Foods, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Smithfield Foods, Inc.'s 1994 annual report
to stockholders incorporated by reference in this Form 10-K, and have issued
our report thereon dated June 7, 1994. Our report on the financial
statements includes an explanatory paragraph with respect to the change in
the method of accounting for income taxes as discussed in Notes 1 and 4 to
the financial statements. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedules listed in the
index under Item 14(a)(2) are the responsibility of the Company's management
and are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Richmond, Virginia,
June 7, 1994.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included (or incorporated by reference) in this Form 10-K, into
the Company's previously filed Registration Statements File No. 33-14219, No.
33-14220 and No. 33-53024.
ARTHUR ANDERSEN & CO.
Richmond, Virginia,
July 26, 1994.
19-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
THAN RELATED PARTIES
FOR THE FIFTY-TWO WEEKS ENDED MAY 1, 1994
Balance Balance
Name of Debtor May 2, 1993 Additions Deductions May 1, 1994
Smithfield-Carroll's $19,830,000 $18,640,000 $19,830,000 $18,640,000 (A)
Circle Four - 194,000 - 194,000 (B)
B & G - 1,344,000 - 1,344,000 (C)
$19,830,000 $20,178,000 $19,830,000 $20,178,000
(A) Amount represents unsecured short-term loans to Smithfield-Carroll's for
working capital and construction of hog production facilities. The loans bear
interest at prime rate and are expected to be repaid during fiscal 1995.
(B) Amount represents unsecured short-term advances to Circle Four for costs
related to hog production facilities. These advances are expected to be repaid
during fiscal 1995.
(C) Amount represents unsecured short-term loans of $1,100,000 and unsecured
short-term advances of $244,000 to B & G for working capital and construction of
hog production facilities. The loans bear interest at prime rate. The loans
and advances are expected to be repaid during fiscal 1995 with the proceeds of
long-term debt financings by B & G.
20-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN
RELATED PARTIES
FOR THE FIFTY-TWO WEEKS ENDED MAY 2, 1993
Balance Balance
Name of Debtor May 3, 1992 Additions Deductions May 2, 1993
Smithfield-Carroll's $23,330,000 $19,830,000 $23,330,000 $19,830,000 (A)
P. Edward Schenk, Jr., Former
Director Former President and
Chief Operating Officer of
Gwaltney of Smithfield, Ltd. 141,000 - 141,000 -
Carolina Cold Storage
Limited Partnership 5,160,000 - 5,160,000 -
Total $28,631,000 $19,830,000 $28,631,000 $19,830,000
(A) Amount represents unsecured short-term loans to Smithfield-Carroll's for
working capital and construction of hog production facilities. The loans bear
interest at prime rate and were repaid during fiscal 1994.
21-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
THAN RELATED PARTIES
FOR THE FIFTY-THREE WEEKS ENDED MAY 3, 1992
Balance Balance
Name of Debtor April 28,1991 Additions Deductions May 3, 1992
Joseph W. Luter, III, Chairman $4,022,000 (A) $ - $ 4,022,000 $ -
President and Chief Executive
Officer
John L. Gibson, II, Former
Director Richard J. Holland,
Director John B. Bernhardt 2,400,000 (B) - 2,400,000 -
Smithfield-Carroll's - 52,150,000 28,820,000 23,330,000 (C)
P. Edward Schenk, Jr., Former
Director Former President and
Chief Operating Officer of
Gwaltney of Smithfield, Ltd. - 141,000 - 141,000 (D)
Carolina Cold Storage
Limited Partnership - 5,160,000 - 5,160,000 (E)
Total $ 6,422,000 $57,451,000 $35,242,000 $28,631,000
(A) Amount represents a secured demand note. This loan bore interest at 1%
above the Registrant's short-term borrowing rate. This loan was repaid in
May 1991.
(B) Amount represents secured demand notes. The loans bore interest at rates
of 2% ($1,000,000) and 3% ($1,400,000) above the prime rate. These loans
were repaid in May 1991.
(C) Amount represents unsecured short-term loans to Smithfield-Carroll's for
working capital and construction of hog raising facilities. The loans bear
interest at prime rate and were repaid during fiscal 1993 with the proceeds
of short and long-term debt financings by Smithfield-Carroll's.
(D) Amount represents unsecured demand notes. The notes bear interest at 1%
above the prime rate and were repaid during fiscal 1993.
(E) Amount represents a secured construction loan. The loan bears interest at
1% above the prime rate and was repaid in May 1992.
22-32
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SMITHFIELD FOODS, INC.
PARENT COMPANY BALANCE SHEETS
AS OF MAY 1, 1994 AND MAY 2, 1993
ASSETS
1994 1993
Current assets:
Cash $ 331,000 $ 679,000
Accounts receivable 120,000 223,000
Receivables from related parties 18,834,000 19,830,000
Refundable income taxes - 1,303,000
Deferred income taxes 8,470,000 4,533,000
Other 517,000 288,000
Total current assets 28,272,000 26,856,000
Investments in and net advances to
subsidiaries, at cost plus equity
in undistributed earnings 184,324,000 125,654,000
Other assets:
Investments in partnerships 9,403,000 8,415,000
Property, plant and equipment, net 2,518,000 3,076,000
Other 2,128,000 1,913,000
Total other assets 14,049,000 13,404,000
$226,645,000 $165,914,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,938,000 $ 409,000
Accounts payable 2,211,000 84,000
Accrued expenses 15,071,000 10,197,000
Income taxes payable 3,154,000 -
Total current liabilities 22,374,000 10,690,000
Long-term debt 25,360,000 3,198,000
Deferred income taxes and other noncurrent
liabilities 13,961,000 6,256,000
Series B 6.75% cumulative convertible
redeemable preferred stock 10,000,000 10,000,000
Stockholders' equity 154,950,000 135,770,000
$226,645,000 $165,914,000
The accompanying notes are an integral part of these balance sheets.
23-32
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SMITHFIELD FOODS, INC
PARENT COMPANY STATEMENTS OF INCOME
52 Weeks 52 Weeks 53 Weeks
Ended Ended Ended
May 1, 1994 May 2, 1993 May 3, 1992
Sales $ - $ - $ -
Expenses:
Cost of sales - - -
General and administrative,
net of allocation to
subsidiaries 928,000 1,773,000 226,000
Depreciation 452,000 540,000 416,000
Interest 2,046,000 274,000 (337,000)
3,426,000 2,587,000 305,000
Income (loss) before income taxes,
cumulative effect of change in
accounting for income tax and
equity in earnings of
subsidiaries (3,426,000) (2,587,000) (305,000)
Income taxes credit (600,000) (627,000) (423,000)
Income (loss) before cumulative
effect of change in accounting
for income taxes and equity in
earnings of subsidiaries (2,826,000) (1,960,000) 118,000
Cumulative effect of change in
accounting for income taxes - (1,138,000) -
Net income (loss) before equity in
earnings of subsidiaries (2,826,000) (822,000) 118,000
Equity in earnings of
subsidiaries 22,528,000 4,811,000 21,517,000
Net income $19,702,000 $ 3,989,000 $21,635,000
The accompanying notes are an integral part of these statements.
24-32
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SMITHFIELD FOODS, INC.
PARENT COMPANY STATEMENTS OF CASH FLOWS
52 Weeks 52 Weeks 53 Weeks
Ended Ended Ended
May 1, 1994 May 2, 1993 May 3, 1992
Cash flows from operating activities:
Net income $ 19,702,000 $ 3,989,000 $ 21,635,000
Adjustments to reconcile net income to
net cash used in operating
activities:
Depreciation and amortization 452,000 540,000 416,000
Gain on sale of property and
equipment - (1,000) (1,000)
Cumulative effect of change in
accounting for income taxes - (1,138,000) -
(Increase) decrease in deferred
income taxes and other
long-term liabilities 3,768,000 (2,618,000) (937,000)
(Increase) decrease in accounts
receivable 103,000 (2,000) 74,000
(Increase) decrease in receivables
from related parties 996,000 8,801,000 (22,209,000)
Increase in investments in and
advances to subsidiaries (58,670,000) (44,407,000) (14,161,000)
Increase in other current assets (229,000) (211,000) (54,000)
Increase in accounts payable
and accrued expenses 7,001,000 3,926,000 1,813,000
(Increase) decrease in refundable
income taxes 1,303,000 (1,303,000) _
Increase (decrease) in taxes
payable 3,154,000 (540,000) (831,000)
Increase in other assets (215,000) (498,000) (132,000)
Net cash used in operating
activities (22,635,000) (33,462,000) (14,387,000)
Cash flows from investing activities:
Capital expenditures (1,394,000) 673,000 (4,451,000)
Proceeds from sale of property,
plant and equipment 1,500,000 6,000 1,000
Investment in partnerships (988,000) 138,000 (750,000)
Net cash provided by (used in)
investing activities (882,000) 817,000 (5,200,000)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 25,000,000 3,800,000 -
Principal payments on long-term debt (1,309,000) (193,000) -
Proceeds from sale of common stock - 16,750,000 24,999,000
Proceeds from exercise of options and
warrants 153,000 1,642,000 3,682,000
Issuance of preferred stock - 10,000,000 -
Purchase of treasury stock - - (7,643,000)
Preferred dividends (675,000) (365,000) -
Net cash provided by financing
activities 23,169,000 31,634,000 21,038,000
Net increase (decrease) in cash (348,000) (1,011,000) 1,451,000
Cash at beginning of year 679,000 1,690,000 239,000
Cash at end of year $ 331,000 $ 679,000 $ 1,690,000
The accompanying notes are an integral part of these statements.
25-32
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SMITHFIELD FOODS, INC.
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
MAY 1, 1994 AND MAY 2, 1993
1. The Notes to Parent Company Financial Statements should be read in
conjunction with the Notes to Registrant's Annual Report to Stockholders for
the years then ended.
2. Restricted assets of Registrant:
Existing loan covenants contain provisions which substantially limit the
amount of funds available for transfer from the subsidiaries to Smithfield
Foods, Inc. without the consent of certain lenders.
3. Accrued expenses as of May 1, 1994 and May 2, 1993 are as follows:
1994 1993
Self-insurance reserves $10,489,000 $ 8,237,000
Payroll and related benefits 2,056,000 742,000
Pension costs 52,000 152,000
Professional fees 438,000 415,000
Other 2,036,000 651,000
$15,071,000 $10,197,000
4. Long-Term Debt:
As of May 1, 1994, the Registrant is guaranteeing $91,649,000 of long-term
debt and capital lease obligations of its subsidiaries and lines of credit
aggregating $120,000,000 (of which $52,135,000 is outstanding) which the
Registrant and its subsidiaries have with banks.
Scheduled maturities of the Registrant's long-term debt consists of the
following:
FISCAL YEAR
1995 $ 1,938,000
1996 2,370,000
1997 3,254,000
1998 5,536,000
1999 14,200,000
$27,298,000
5. The amount of dividends received from subsidiaries in fiscal 1994 and 1992
was $12,000,000 and $8,000,000, respectively. No dividends were received in
fiscal 1993.
6. Income Taxes:
During fiscal 1993, the Registrant adopted SFAS No. 109, "Accounting for
Income Taxes," which requires the use of the liability method in accounting
for income taxes. The cumulative effect of adopting this change totaled
$1,138,000 and has been reflected in the statements of income.
7. Supplemental disclosures of cash flow information:
Cash paid during year for: 1994 1993 1992
Interest $ 1,007,000 $ 306,000 $ 37,000
Income taxes $ 5,574,000 $ 5,018,000 $10,823,000
26-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE FIFTY-TWO WEEKS ENDED MAY 1, 1994
Balance Additions Retirements Balance
May 2, 1993 at Cost (A) or Sales Other May 1, 1994
Classification:
Land $ 8,501,000 $ 654,000 $ (1,116,000) $ - $ 8,039,000
Buildings and improvements 96,180,000 2,469,000 (1,694,000) 11,946,000 108,901,000
Machinery and equipment 192,637,000 7,533,000 (2,965,000) 6,238,000 203,443,000
Construction in progress 10,248,000 17,583,000 - (18,081,000) 9,750,000
$307,566,000 $ 28,239,000 $(5,775,000) $ 103,000 $330,133,000
(A) Includes land, buildings, refrigeration and manufacturing equipment at
various pork processing plants and hog production facilities.
27-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE FIFTY-TWO WEEKS ENDED MAY 2, 1993
Balance Additions Retirements Balance
Classification: May 3, 1992 at Cost (A) or Sales Other (B) May 2, 1993
Land $ 5,143,000 $ 1,787,000 $ (477,000) $ 2,048,000 $ 8,501,000
Buildings and improvements 44,389,000 10,178,000 - 41,613,000 96,180,000
Machinery and equipment 118,035,000 20,508,000 (1,460,000) 55,554,000 192,637,000
Construction in progress 58,030,000 55,519,000 - (103,301,000) 10,248,000
$225,597,000 $ 87,992,000 $ (1,937,000) $ (4,086,000) $307,566,000
(A) Includes land, buildings, refrigeration and manufacturing equipment at
various pork processing plants and hog production facilities.
(B) Includes transfer and write-off of assets related to Esskay plant shutdown.
28-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE FIFTY-THREE WEEKS ENDED MAY 3, 1992
Balance Additions Retirements Balance
Classification: Apr. 28,1991 at Cost (A) or Sales Other May 3, 1992
Land $ 2,879,000 $ 2,323,000 $ (59,000) $ - $ 5,143,000
Buildings and improvements 28,560,000 2,096,000 (90,000) 13,823,000 44,389,000
Machinery and equipment 93,753,000 10,038,000 (2,988,000) 17,232,000 118,035,000
Construction in progress 27,918,000 61,236,000 - (31,124,000) 58,030,000
$153,110,000 $ 75,693,000 $ (3,137,000) $ (69,000) $225,597,000
(A) Includes land, buildings, refrigeration and manufacturing equipment at
various pork processing plants and hog production facilities.
29-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE FIFTY-TWO WEEKS ENDED MAY 1, 1994
Balance Charged to Retirements Balance
Classification: May 2, 1993 Expense (A) or Sales Other May 1, 1994
Buildings and improvements $ (21,402,000) $ (5,433,000) $ - $ - $ (26,835,000)
Machinery and equipment (81,725,000) (16,275,000) 723,000 - (97,277,000)
$(103,127,000) $ (21,708,000) $ 723,000 $ - $(124,112,000)
(A) Buildings and improvements are depreciated over periods from 10 to 40
years. Machinery and equipment are being depreciated over periods from 3
to 25 years.
30-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE FIFTY-TWO WEEKS ENDED MAY 2, 1993
Balance Charged to Retirements Balance
Classification: May 3, 1992 Expense (A) or Sales Other (B) May 2, 1993
Buildings and improvements $(17,612,000) $ (4,324,000) $ - $ 534,000 $(21,402,000)
Machinery and equipment (70,605,000) (14,328,000) 464,000 2,744,000 (81,725,000)
$(88,217,000) $(18,652,000) $ 464,000 $ 3,278,000 $(103,127,000)
(A) Buildings and improvements are depreciated over periods from 10 to 40
years. Machinery and equipment are being depreciated over periods from 3
to 12 years.
(B) Includes transfer and write-off of assets related to Esskay plant shutdown.
31-32
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE FIFTY-THREE WEEKS ENDED MAY 3, 1992
Balance Charged to Retirements Balance
Classification: Apr. 28,1991 Expense (A) or Sales Other May 3, 1992
Buildings and improvements $(14,557,000) $ (3,101,000) $ 46,000 $ - $(17,612,000)
Machinery and equipment (62,712,000) (9,658,000) 1,752,000 13,000 (70,605,000)
$(77,269,000) $(12,759,000) $ 1,798,000 $ 13,000 $(88,217,000)
(A) Buildings and improvements are depreciated over periods from 10 to 40
years. Machinery and equipment are being depreciated over periods from 3
to 12 years.
32-32