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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Smithfield Foods, Inc. | NYSE:SFD | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 33.97 | 0.00 | 01:00:00 |
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Virginia
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52-0845861
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(State of Incorporation)
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(I.R.S. Employer Identification Number)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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x
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Smaller reporting company
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o
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PAGE
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PART I-FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II-OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Successor
|
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Predecessor
|
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Successor
|
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Predecessor
|
||||||||
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
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June 29,
2014 |
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June 30,
2013 |
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June 29,
2014 |
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June 30,
2013 |
||||||||
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||||||||||||
Sales
|
|
$
|
3,814.0
|
|
|
$
|
3,337.8
|
|
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$
|
7,236.1
|
|
|
$
|
6,664.7
|
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Cost of sales
|
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3,345.5
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3,031.6
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6,370.9
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6,099.5
|
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||||
Gross profit
|
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468.5
|
|
|
306.2
|
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|
865.2
|
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|
565.2
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||||
Selling, general and administrative expenses
|
|
219.2
|
|
|
213.9
|
|
|
434.6
|
|
|
421.9
|
|
||||
(Income) loss from equity method investments
|
|
(10.9
|
)
|
|
2.5
|
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|
(26.0
|
)
|
|
(5.3
|
)
|
||||
Operating profit
|
|
260.2
|
|
|
89.8
|
|
|
456.6
|
|
|
148.6
|
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||||
Interest expense
|
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40.4
|
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|
44.9
|
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|
81.2
|
|
|
87.7
|
|
||||
Non-operating gain
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
||||
Income before income taxes
|
|
219.8
|
|
|
44.9
|
|
|
376.5
|
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|
60.9
|
|
||||
Income tax expense
|
|
76.9
|
|
|
12.5
|
|
|
128.3
|
|
|
10.3
|
|
||||
Net income
|
|
$
|
142.9
|
|
|
$
|
32.4
|
|
|
$
|
248.2
|
|
|
$
|
50.6
|
|
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Successor
|
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Predecessor
|
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Successor
|
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Predecessor
|
||||||||
|
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
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||||||||||||
Net income
|
|
$
|
142.9
|
|
|
$
|
32.4
|
|
|
$
|
248.2
|
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$
|
50.6
|
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||||||||
Other comprehensive income (loss), net of tax:
|
|
|
|
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|
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|
||||||||
Foreign currency translation
|
|
2.2
|
|
|
(14.7
|
)
|
|
1.5
|
|
|
(42.5
|
)
|
||||
Pension accounting
|
|
—
|
|
|
(49.4
|
)
|
|
—
|
|
|
(41.4
|
)
|
||||
Hedge accounting
|
|
30.5
|
|
|
(43.1
|
)
|
|
(100.8
|
)
|
|
(75.7
|
)
|
||||
Total other comprehensive income (loss)
|
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32.7
|
|
|
(107.2
|
)
|
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(99.3
|
)
|
|
(159.6
|
)
|
||||
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|
||||||||
Comprehensive income (loss)
|
|
$
|
175.6
|
|
|
$
|
(74.8
|
)
|
|
$
|
148.9
|
|
|
$
|
(109.0
|
)
|
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|
June 29,
2014 |
|
December 29,
2013 |
||||
ASSETS
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|
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|
||||
Current assets:
|
|
|
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|
||||
Cash and cash equivalents
|
|
$
|
109.4
|
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$
|
193.4
|
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Accounts receivable, net
|
|
870.9
|
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|
810.9
|
|
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Inventories
|
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2,319.5
|
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2,274.7
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|
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Prepaid expenses and other current assets
|
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204.2
|
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225.1
|
|
||
Total current assets
|
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3,504.0
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3,504.1
|
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||
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|
||||
Property, plant and equipment, net
|
|
2,728.7
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|
|
2,745.9
|
|
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Goodwill
|
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1,629.8
|
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1,622.5
|
|
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Investments
|
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522.6
|
|
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496.5
|
|
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Intangible assets, net
|
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1,401.4
|
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|
1,405.8
|
|
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Other assets
|
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158.8
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|
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180.0
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|
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Total assets
|
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$
|
9,945.3
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$
|
9,954.8
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|
||||
LIABILITIES AND EQUITY
|
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|
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Current liabilities:
|
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|
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Current portion of long-term debt and capital lease obligations
|
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$
|
85.0
|
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|
$
|
48.5
|
|
Accounts payable
|
|
453.7
|
|
|
614.4
|
|
||
Accrued expenses and other current liabilities
|
|
680.1
|
|
|
632.7
|
|
||
Total current liabilities
|
|
1,218.8
|
|
|
1,295.6
|
|
||
|
|
|
|
|
||||
Long-term debt and capital lease obligations
|
|
3,034.4
|
|
|
2,997.4
|
|
||
Other liabilities
|
|
1,263.6
|
|
|
1,381.4
|
|
||
|
|
|
|
|
||||
Redeemable noncontrolling interests
|
|
48.2
|
|
|
48.6
|
|
||
|
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|
||||
Commitments and contingencies
|
|
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|
||
|
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|
||||
Equity:
|
|
|
|
|
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|
||
Shareholder's equity:
|
|
|
|
|
|
|
||
Common stock, no par value, 1,000 shares authorized; 1,000 issued and outstanding
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
4,156.9
|
|
|
4,157.4
|
|
||
Retained earnings
|
|
282.9
|
|
|
34.7
|
|
||
Accumulated other comprehensive income (loss)
|
|
(60.3
|
)
|
|
39.0
|
|
||
Total shareholder's equity
|
|
4,379.5
|
|
|
4,231.1
|
|
||
Noncontrolling interests
|
|
0.8
|
|
|
0.7
|
|
||
Total equity
|
|
4,380.3
|
|
|
4,231.8
|
|
||
Total liabilities and equity
|
|
$
|
9,945.3
|
|
|
$
|
9,954.8
|
|
|
|
Successor
|
|
Predecessor
|
||||
|
|
Six Months Ended
|
||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
||||
|
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
248.2
|
|
|
$
|
50.6
|
|
Adjustments to reconcile net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
113.8
|
|
|
125.5
|
|
||
Income from equity method investments
|
|
(26.0
|
)
|
|
(5.3
|
)
|
||
Changes in operating assets and liabilities and other, net
|
|
(410.2
|
)
|
|
(262.9
|
)
|
||
Net cash flows from operating activities
|
|
(74.2
|
)
|
|
(92.1
|
)
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Capital expenditures
|
|
(98.5
|
)
|
|
(149.9
|
)
|
||
Business acquisitions
|
|
(11.0
|
)
|
|
(32.7
|
)
|
||
Net proceeds (expenditures) from breeding stock transactions
|
|
9.7
|
|
|
(11.2
|
)
|
||
Proceeds from the sale of property, plant and equipment
|
|
2.3
|
|
|
3.4
|
|
||
Other
|
|
3.4
|
|
|
(0.3
|
)
|
||
Net cash flows from investing activities
|
|
(94.1
|
)
|
|
(190.7
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Proceeds from the issuance of long-term debt
|
|
13.0
|
|
|
200.0
|
|
||
Principal payments on long-term debt and capital lease obligations
|
|
(27.7
|
)
|
|
(59.7
|
)
|
||
Proceeds from Securitization Facility
|
|
185.0
|
|
|
200.0
|
|
||
Payments on Securitization Facility
|
|
(135.0
|
)
|
|
(30.0
|
)
|
||
Net proceeds on revolving credit facilities
|
|
48.3
|
|
|
204.3
|
|
||
Other
|
|
(0.5
|
)
|
|
2.1
|
|
||
Net cash flows from financing activities
|
|
83.1
|
|
|
516.7
|
|
||
|
|
|
|
|
||||
Effect of foreign exchange rate changes on cash
|
|
1.2
|
|
|
(1.6
|
)
|
||
Net change in cash and cash equivalents
|
|
(84.0
|
)
|
|
232.3
|
|
||
Cash and cash equivalents at beginning of period
|
|
193.4
|
|
|
322.2
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
109.4
|
|
|
$
|
554.5
|
|
NOTE 1
:
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
NOTE 2
:
|
INVENTORIES
|
|
|
June 29,
2014 |
|
December 29,
2013 |
||||
|
|
(in millions)
|
||||||
Fresh and packaged meats
|
|
$
|
1,114.9
|
|
|
$
|
956.7
|
|
Livestock
|
|
932.6
|
|
|
1,054.8
|
|
||
Grains
|
|
149.4
|
|
|
134.5
|
|
||
Manufacturing supplies
|
|
77.1
|
|
|
69.3
|
|
||
Other
|
|
45.5
|
|
|
59.4
|
|
||
Total inventories
|
|
$
|
2,319.5
|
|
|
$
|
2,274.7
|
|
NOTE 3
:
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
|
|
Assets
|
|
Liabilities
|
||||||||||||
|
|
June 29,
2014 |
|
December 29,
2013 |
|
June 29,
2014 |
|
December 29,
2013 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Derivatives using the "hedge accounting" method:
|
|
|
|
|
|
|
|
|
||||||||
Grain contracts
|
|
$
|
24.2
|
|
|
$
|
5.5
|
|
|
$
|
20.0
|
|
|
$
|
16.2
|
|
Livestock contracts
|
|
3.4
|
|
|
0.7
|
|
|
198.4
|
|
|
1.1
|
|
||||
Foreign exchange contracts
|
|
0.4
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
28.0
|
|
|
6.8
|
|
|
218.4
|
|
|
17.3
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Derivatives using the "mark-to-market" method:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Grain contracts
|
|
1.7
|
|
|
0.6
|
|
|
1.2
|
|
|
1.1
|
|
||||
Livestock contracts
|
|
7.8
|
|
|
2.8
|
|
|
14.9
|
|
|
9.5
|
|
||||
Energy contracts
|
|
2.1
|
|
|
2.9
|
|
|
—
|
|
|
—
|
|
||||
Foreign exchange contracts
|
|
0.1
|
|
|
0.6
|
|
|
0.1
|
|
|
0.2
|
|
||||
Total
|
|
11.7
|
|
|
6.9
|
|
|
16.2
|
|
|
10.8
|
|
||||
Total fair value of derivative instruments
|
|
$
|
39.7
|
|
|
$
|
13.7
|
|
|
$
|
234.6
|
|
|
$
|
28.1
|
|
|
|
June 29, 2014
|
||||||||||||||||||
|
|
Gross Amount of Derivative Assets/ Liabilities
|
|
Netting of Derivative Assets/ Liabilities
|
|
Net Derivative Assets/Liabilities
|
|
Cash Collateral
|
|
Net Amount Presented in the Condensed Consolidated Balance Sheet
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
$
|
39.2
|
|
|
$
|
(33.7
|
)
|
|
$
|
5.5
|
|
|
$
|
64.5
|
|
|
$
|
70.0
|
|
Foreign exchange contracts
|
|
0.5
|
|
|
(0.2
|
)
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|||||
Total
|
|
$
|
39.7
|
|
|
$
|
(33.9
|
)
|
|
$
|
5.8
|
|
|
$
|
64.5
|
|
|
$
|
70.3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
$
|
234.4
|
|
|
$
|
(33.7
|
)
|
|
$
|
200.7
|
|
|
$
|
(187.7
|
)
|
|
$
|
13.0
|
|
Foreign exchange contracts
|
|
0.2
|
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
234.6
|
|
|
$
|
(33.9
|
)
|
|
$
|
200.7
|
|
|
$
|
(187.7
|
)
|
|
$
|
13.0
|
|
|
|
December 29, 2013
|
||||||||||||||||||
|
|
Gross Amount of Derivative Assets/ Liabilities
|
|
Netting of Derivative Assets/ Liabilities
|
|
Net Amount Presented in the Condensed Consolidated Balance Sheet
|
|
Cash Collateral
|
|
Net Amount
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
$
|
12.5
|
|
|
$
|
(7.4
|
)
|
|
$
|
5.1
|
|
|
$
|
—
|
|
|
$
|
5.1
|
|
Foreign exchange contracts
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|||||
Total
|
|
$
|
13.7
|
|
|
$
|
(7.4
|
)
|
|
$
|
6.3
|
|
|
$
|
—
|
|
|
$
|
6.3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
$
|
27.9
|
|
|
$
|
(7.4
|
)
|
|
$
|
20.5
|
|
|
$
|
(15.6
|
)
|
|
$
|
4.9
|
|
Foreign exchange contracts
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||||
Total
|
|
$
|
28.1
|
|
|
$
|
(7.4
|
)
|
|
$
|
20.7
|
|
|
$
|
(15.6
|
)
|
|
$
|
5.1
|
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Corn
|
|
42,575,000
|
|
|
87,375,000
|
|
|
Bushels
|
Soybean meal
|
|
346,500
|
|
|
827,300
|
|
|
Tons
|
Lean hogs
|
|
103,280,000
|
|
|
1,847,680,000
|
|
|
Pounds
|
Foreign currency
(1)
|
|
15,144,435
|
|
|
33,405,406
|
|
|
U.S. Dollars
|
(1)
|
Amounts represent the U.S. dollar equivalent of various foreign currency contracts.
|
|
|
Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Derivative (Effective Portion)
|
|
Gains (Losses) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)
|
|
Gains (Losses) Recognized in Earnings on Derivative (Ineffective Portion)
|
||||||||||||||||||
|
|
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
||||||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||||||
|
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Grain contracts
|
|
$
|
(20.8
|
)
|
|
$
|
(17.6
|
)
|
|
$
|
7.7
|
|
|
$
|
34.3
|
|
|
$
|
(2.7
|
)
|
|
$
|
1.7
|
|
Lean hog contracts
|
|
(12.5
|
)
|
|
(18.0
|
)
|
|
(90.9
|
)
|
|
(0.6
|
)
|
|
(2.3
|
)
|
|
(1.0
|
)
|
||||||
Foreign exchange contracts
|
|
0.2
|
|
|
(0.7
|
)
|
|
0.2
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
(33.1
|
)
|
|
$
|
(36.3
|
)
|
|
$
|
(83.0
|
)
|
|
$
|
34.4
|
|
|
$
|
(5.0
|
)
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Six Months Ended
|
|
Six Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||||||
|
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Grain contracts
|
|
$
|
37.5
|
|
|
$
|
(57.6
|
)
|
|
$
|
6.3
|
|
|
$
|
80.5
|
|
|
$
|
(0.3
|
)
|
|
$
|
(0.5
|
)
|
Lean hog contracts
|
|
(310.1
|
)
|
|
21.2
|
|
|
(116.6
|
)
|
|
4.5
|
|
|
(17.8
|
)
|
|
(0.8
|
)
|
||||||
Foreign exchange contracts
|
|
0.5
|
|
|
(0.1
|
)
|
|
3.2
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
(272.1
|
)
|
|
$
|
(36.5
|
)
|
|
$
|
(107.1
|
)
|
|
$
|
87.1
|
|
|
$
|
(18.1
|
)
|
|
$
|
(1.3
|
)
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Corn
|
|
450,000
|
|
|
8,200,000
|
|
|
Bushels
|
|
|
Gains Recognized in Earnings on Derivative
|
|
Losses Recognized in Earnings on Related Hedged Item
|
||||||||||||
|
|
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts
|
|
$
|
2.9
|
|
|
$
|
1.3
|
|
|
$
|
(2.7
|
)
|
|
$
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Six Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts
|
|
$
|
2.0
|
|
|
$
|
3.3
|
|
|
$
|
(1.7
|
)
|
|
$
|
(3.4
|
)
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Lean hogs
|
|
720,000
|
|
|
414,600,000
|
|
|
Pounds
|
Corn
|
|
490,000
|
|
|
5,880,000
|
|
|
Bushels
|
Soybean meal
|
|
—
|
|
|
5,500
|
|
|
Tons
|
Soybeans
|
|
75,000
|
|
|
1,835,000
|
|
|
Bushels
|
Wheat
|
|
—
|
|
|
25,000
|
|
|
Bushels
|
Natural gas
|
|
8,260,000
|
|
|
11,040,000
|
|
|
Million BTU
|
Live cattle
|
|
—
|
|
|
40,000
|
|
|
Pounds
|
Diesel
|
|
—
|
|
|
1,008,000
|
|
|
Gallons
|
Foreign currency
(1)
|
|
6,377,390
|
|
|
34,772,967
|
|
|
U.S. Dollars
|
(1)
|
Amounts represent the U.S. dollar equivalent of various foreign currency contracts.
|
|
|
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts (sales)
|
|
$
|
6.7
|
|
|
$
|
29.7
|
|
|
$
|
12.1
|
|
|
$
|
29.9
|
|
Commodity contracts (cost of sales)
|
|
0.7
|
|
|
(4.0
|
)
|
|
2.5
|
|
|
(0.9
|
)
|
||||
Foreign exchange contracts
|
|
(0.2
|
)
|
|
0.5
|
|
|
(0.1
|
)
|
|
0.8
|
|
||||
Total
|
|
$
|
7.2
|
|
|
$
|
26.2
|
|
|
$
|
14.5
|
|
|
$
|
29.8
|
|
NOTE 4
:
|
INVESTMENTS
|
Equity Investment
|
|
% Owned
|
|
June 29,
2014 |
|
December 29,
2013 |
||||
|
|
|
|
(in millions)
|
||||||
Campofrío Food Group (CFG)
(1)
|
|
37%
|
|
$
|
353.8
|
|
|
$
|
351.4
|
|
Mexican joint ventures
|
|
50%
|
|
140.2
|
|
|
118.0
|
|
||
Other
|
|
Various
|
|
28.6
|
|
|
27.1
|
|
||
Total investments
|
|
|
|
$
|
522.6
|
|
|
$
|
496.5
|
|
(1)
|
Beginning in June 2014, our investment in CFG is through our interest in Sigma & WH Europe, as defined below.
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Equity Investment
|
|
Segment
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
|
|
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
CFG
(1)
|
|
International
|
|
$
|
(0.1
|
)
|
|
$
|
1.1
|
|
|
$
|
(3.2
|
)
|
|
$
|
(2.5
|
)
|
Mexican joint ventures
|
|
International
|
|
(8.7
|
)
|
|
2.9
|
|
|
(20.5
|
)
|
|
(1.1
|
)
|
||||
All other equity method investments
|
|
Various
|
|
(2.1
|
)
|
|
(1.5
|
)
|
|
(2.3
|
)
|
|
(1.7
|
)
|
||||
(Income) loss from equity method investments
|
|
|
|
$
|
(10.9
|
)
|
|
$
|
2.5
|
|
|
$
|
(26.0
|
)
|
|
$
|
(5.3
|
)
|
(1)
|
CFG prepares its financial statements in accordance with International Financial Reporting Standards. Our share of CFG’s results reflects U.S. GAAP adjustments and thus, there may be differences between the amounts we report for CFG and the amounts reported by CFG.
|
NOTE 5
:
|
DEBT
|
NOTE 6
:
|
GUARANTEES
|
NOTE 7
:
|
INCOME TAXES
|
NOTE 8
:
|
PENSION PLANS
|
|
|
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Service cost
|
|
$
|
11.7
|
|
|
$
|
13.0
|
|
|
$
|
23.5
|
|
|
$
|
24.8
|
|
Interest cost
|
|
21.0
|
|
|
19.5
|
|
|
42.1
|
|
|
38.2
|
|
||||
Expected return on plan assets
|
|
(22.1
|
)
|
|
(20.8
|
)
|
|
(42.9
|
)
|
|
(40.5
|
)
|
||||
Net amortization
|
|
—
|
|
|
14.4
|
|
|
—
|
|
|
27.6
|
|
||||
Net periodic pension cost
|
|
$
|
10.6
|
|
|
$
|
26.1
|
|
|
$
|
22.7
|
|
|
$
|
50.1
|
|
NOTE 9
:
|
EQUITY
|
|
|
Successor
|
|
Predecessor
|
||||||||||||||||||||
|
|
Three Months Ended
|
||||||||||||||||||||||
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||||||||||||||
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Translation adjustment arising during the period
|
|
$
|
0.3
|
|
|
$
|
1.9
|
|
|
$
|
2.2
|
|
|
$
|
(15.6
|
)
|
|
$
|
0.9
|
|
|
$
|
(14.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Actuarial loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93.9
|
)
|
|
36.5
|
|
|
(57.4
|
)
|
||||||
Amortization of actuarial losses and prior service credits reclassified to cost of sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.6
|
|
|
(1.4
|
)
|
|
2.2
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to SG&A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.5
|
|
|
(3.7
|
)
|
|
5.8
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedge accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Losses arising during the period
|
|
(33.1
|
)
|
|
12.9
|
|
|
(20.2
|
)
|
|
(36.3
|
)
|
|
14.2
|
|
|
(22.1
|
)
|
||||||
Losses reclassified to sales
|
|
90.9
|
|
|
(35.3
|
)
|
|
55.6
|
|
|
0.6
|
|
|
(0.1
|
)
|
|
0.5
|
|
||||||
Gains reclassified to cost of sales
|
|
(7.7
|
)
|
|
3.1
|
|
|
(4.6
|
)
|
|
(34.3
|
)
|
|
13.3
|
|
|
(21.0
|
)
|
||||||
Gains reclassified to SG&A
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.3
|
)
|
|
(0.7
|
)
|
|
0.2
|
|
|
(0.5
|
)
|
||||||
Total other comprehensive income (loss)
|
|
$
|
50.2
|
|
|
$
|
(17.5
|
)
|
|
$
|
32.7
|
|
|
$
|
(167.1
|
)
|
|
$
|
59.9
|
|
|
$
|
(107.2
|
)
|
|
|
Successor
|
|
Predecessor
|
||||||||||||||||||||
|
|
Six Months Ended
|
||||||||||||||||||||||
|
|
June 29, 2014
|
|
June 30, 2013
|
||||||||||||||||||||
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Translation adjustment arising during the period
|
|
$
|
1.4
|
|
|
$
|
0.1
|
|
|
$
|
1.5
|
|
|
$
|
(40.3
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
(42.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Actuarial loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93.9
|
)
|
|
36.5
|
|
|
(57.4
|
)
|
||||||
Amortization of actuarial losses and prior service credits reclassified to cost of sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.5
|
|
|
(2.9
|
)
|
|
4.6
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to SG&A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18.7
|
|
|
(7.3
|
)
|
|
11.4
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedge accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Losses arising during the period
|
|
(272.1
|
)
|
|
106.0
|
|
|
(166.1
|
)
|
|
(36.5
|
)
|
|
14.3
|
|
|
(22.2
|
)
|
||||||
(Gains) losses reclassified to sales
|
|
116.6
|
|
|
(45.2
|
)
|
|
71.4
|
|
|
(4.5
|
)
|
|
1.8
|
|
|
(2.7
|
)
|
||||||
Gains reclassified to cost of sales
|
|
(6.3
|
)
|
|
2.7
|
|
|
(3.6
|
)
|
|
(80.5
|
)
|
|
31.3
|
|
|
(49.2
|
)
|
||||||
Gains reclassified to SG&A
|
|
(3.2
|
)
|
|
0.7
|
|
|
(2.5
|
)
|
|
(2.1
|
)
|
|
0.5
|
|
|
(1.6
|
)
|
||||||
Total other comprehensive loss
|
|
$
|
(163.6
|
)
|
|
$
|
64.3
|
|
|
$
|
(99.3
|
)
|
|
$
|
(231.6
|
)
|
|
$
|
72.0
|
|
|
$
|
(159.6
|
)
|
NOTE 10
:
|
FAIR VALUE MEASUREMENTS
|
▪
|
Level 1—quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.
|
▪
|
Level 2—observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
▪
|
Level 3—unobservable for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.
|
|
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commodity contracts
|
|
$
|
2.6
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
$
|
5.4
|
|
|
$
|
0.2
|
|
|
$
|
4.9
|
|
|
$
|
—
|
|
|
$
|
5.1
|
|
Foreign exchange contracts
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
||||||||
Bond securities
|
|
19.5
|
|
|
—
|
|
|
—
|
|
|
19.5
|
|
|
19.8
|
|
|
—
|
|
|
—
|
|
|
19.8
|
|
||||||||
Insurance contracts
|
|
—
|
|
|
68.4
|
|
|
—
|
|
|
68.4
|
|
|
—
|
|
|
65.8
|
|
|
—
|
|
|
65.8
|
|
||||||||
Total
|
|
$
|
22.1
|
|
|
$
|
71.7
|
|
|
$
|
—
|
|
|
$
|
93.8
|
|
|
$
|
20.0
|
|
|
$
|
71.9
|
|
|
$
|
—
|
|
|
$
|
91.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commodity contracts
|
|
$
|
150.6
|
|
|
$
|
50.1
|
|
|
$
|
—
|
|
|
$
|
200.7
|
|
|
$
|
15.1
|
|
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
20.5
|
|
Foreign exchange contracts
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
||||||||
Total
|
|
$
|
150.6
|
|
|
$
|
50.2
|
|
|
$
|
—
|
|
|
$
|
200.8
|
|
|
$
|
15.1
|
|
|
$
|
5.6
|
|
|
$
|
—
|
|
|
$
|
20.7
|
|
▪
|
Derivatives—
Derivatives classified within Level 1 are valued using quoted market prices. In some cases where quoted market prices are not available, we value the derivatives using market based pricing models that utilize the net present value of estimated future cash flows to calculate fair value, in which case the measurements are classified within Level 2. These valuation models make use of market-based observable inputs, including exchange traded prices and rates, yield curves, credit curves, and measures of volatility.
|
▪
|
Bond securities
—Bond securities are valued at quoted market prices and are classified within Level 1.
|
▪
|
Insurance contracts—
Insurance contracts are valued at their cash surrender value using the daily asset unit value (AUV) which is based on the quoted market price of the underlying securities and classified within Level 2.
|
|
|
June 29, 2014
|
|
December 29, 2013
|
||||||||||||
|
|
Fair
Value |
|
Carrying Value
|
|
Fair
Value |
|
Carrying Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
Long-term debt, including current portion
|
|
$
|
3,245.5
|
|
|
$
|
3,093.9
|
|
|
$
|
3,120.2
|
|
|
$
|
3,020.1
|
|
NOTE 11
:
|
CONTINGENCIES
|
NOTE 12
:
|
REPORTABLE SEGMENTS
|
|
|
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
|
June 29,
2014 |
|
June 30,
2013 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Sales:
|
|
|
|
|
|
|
|
|
||||||||
Segment sales—
|
|
|
|
|
|
|
|
|
||||||||
Fresh Pork
|
|
$
|
1,605.8
|
|
|
$
|
1,324.4
|
|
|
$
|
2,992.9
|
|
|
$
|
2,511.6
|
|
Packaged Meats
|
|
1,728.2
|
|
|
1,450.5
|
|
|
3,276.7
|
|
|
3,045.0
|
|
||||
Hog Production
|
|
857.0
|
|
|
857.4
|
|
|
1,706.5
|
|
|
1,691.4
|
|
||||
International
|
|
426.0
|
|
|
382.8
|
|
|
800.7
|
|
|
733.1
|
|
||||
Total segment sales
|
|
4,617.0
|
|
|
4,015.1
|
|
|
8,776.8
|
|
|
7,981.1
|
|
||||
Intersegment sales—
|
|
|
|
|
|
|
|
|
||||||||
Fresh Pork
|
|
(14.8
|
)
|
|
(10.7
|
)
|
|
(29.2
|
)
|
|
(20.8
|
)
|
||||
Packaged Meats
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.9
|
)
|
||||
Hog Production
|
|
(777.8
|
)
|
|
(656.5
|
)
|
|
(1,491.2
|
)
|
|
(1,274.7
|
)
|
||||
International
|
|
(10.3
|
)
|
|
(9.9
|
)
|
|
(20.2
|
)
|
|
(20.0
|
)
|
||||
Total intersegment sales
|
|
(803.0
|
)
|
|
(677.3
|
)
|
|
(1,540.7
|
)
|
|
(1,316.4
|
)
|
||||
Consolidated sales
|
|
$
|
3,814.0
|
|
|
$
|
3,337.8
|
|
|
$
|
7,236.1
|
|
|
$
|
6,664.7
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating profit (loss):
|
|
|
|
|
|
|
|
|
||||||||
Fresh Pork
|
|
$
|
29.7
|
|
|
$
|
(18.9
|
)
|
|
$
|
88.6
|
|
|
$
|
2.9
|
|
Packaged Meats
|
|
97.5
|
|
|
111.8
|
|
|
218.8
|
|
|
218.8
|
|
||||
Hog Production
|
|
129.0
|
|
|
30.6
|
|
|
138.5
|
|
|
(29.8
|
)
|
||||
International
|
|
33.9
|
|
|
3.5
|
|
|
70.8
|
|
|
17.8
|
|
||||
Corporate
|
|
(29.9
|
)
|
|
(37.2
|
)
|
|
(60.1
|
)
|
|
(61.1
|
)
|
||||
Consolidated operating profit
|
|
$
|
260.2
|
|
|
$
|
89.8
|
|
|
$
|
456.6
|
|
|
$
|
148.6
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
▪
|
maintain and expand market share, particularly in packaged meats,
|
▪
|
develop and maintain strong customer relationships,
|
▪
|
continually innovate and differentiate our products,
|
▪
|
manage risk in volatile commodities markets, and
|
▪
|
maintain our position as a low cost producer of live hogs, fresh pork and packaged meats.
|
▪
|
Fresh Pork operating profit increased by
$48.6 million
primarily as a result of higher fresh pork market prices.
|
▪
|
Packaged Meats operating profit decreased by $
14.3 million
as raw material costs increased significantly and could not fully be passed on to customers.
|
▪
|
Hog Production operating profit increased
$98.4 million
primarily as a result of significantly higher live hog market prices and lower feed costs.
|
▪
|
International operating profit increased by
$30.4 million
due to higher sales and lower raw material costs in our European operations as well as an increase in equity income from our joint ventures in Mexico.
|
|
|
Successor
|
|
Predecessor
|
|
|
|||||
|
|
Three Months Ended
|
|
|
|||||||
|
|
June 29, 2014
|
|
June 30, 2013
|
|
%
Change
|
|||||
|
|
(in millions)
|
|
|
|||||||
Sales
|
|
$
|
3,814.0
|
|
|
$
|
3,337.8
|
|
|
14
|
%
|
Cost of sales
|
|
3,345.5
|
|
|
3,031.6
|
|
|
10
|
%
|
||
Gross profit
|
|
468.5
|
|
|
306.2
|
|
|
53
|
%
|
||
Selling, general and administrative expenses
|
|
219.2
|
|
|
213.9
|
|
|
2
|
%
|
||
(Income) loss from equity method investments
|
|
(10.9
|
)
|
|
2.5
|
|
|
(536
|
)%
|
||
Operating profit
|
|
260.2
|
|
|
89.8
|
|
|
190
|
%
|
||
Interest expense
|
|
40.4
|
|
|
44.9
|
|
|
(10
|
)%
|
||
Income before income taxes
|
|
219.8
|
|
|
44.9
|
|
|
390
|
%
|
||
Income tax expense
|
|
76.9
|
|
|
12.5
|
|
|
515
|
%
|
||
Net income
|
|
$
|
142.9
|
|
|
$
|
32.4
|
|
|
341
|
%
|
▪
|
Sales increased primarily as a result of higher domestic pork market prices.
|
▪
|
Gross profit increased primarily as a result of higher sales and lower hog raising costs, which more than offset the increase in pork processing raw material costs.
|
▪
|
The increase in SG&A is primarily attributable to higher variable compensation expenses stemming from higher year-over-year operating results and an increase in professional fees. These increases in SG&A were partially offset by lower pension expense.
|
▪
|
The increase in profitability in the current year is primarily driven by higher hog prices in Mexico.
|
▪
|
Our effective tax rate was
35%
and
28%
for the
three
months ended
June 29, 2014
and
June 30, 2013
, respectively. For the three months ended June 29, 2014, taxable income relative to permanent items, the mix of income between jurisdictions, and the expiration of certain federal tax credits as of December 31, 2013 impacted the effective tax rate. The three months ended June 30, 2013 were impacted by income relative to permanent items, the mix of income between jurisdictions, state income tax credits and federal legislation during that period that reinstated certain federal tax credits retroactively to January 1, 2012.
|
|
|
Successor
|
|
Predecessor
|
|
|
|||||
|
|
Six Months Ended
|
|
|
|||||||
|
|
June 29, 2014
|
|
June 30, 2013
|
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales
|
|
$
|
7,236.1
|
|
|
$
|
6,664.7
|
|
|
9
|
%
|
Cost of sales
|
|
6,370.9
|
|
|
6,099.5
|
|
|
4
|
%
|
||
Gross profit
|
|
865.2
|
|
|
565.2
|
|
|
53
|
%
|
||
Selling, general and administrative expenses
|
|
434.6
|
|
|
421.9
|
|
|
3
|
%
|
||
Income from equity method investments
|
|
(26.0
|
)
|
|
(5.3
|
)
|
|
(391
|
)%
|
||
Operating profit
|
|
456.6
|
|
|
148.6
|
|
|
207
|
%
|
||
Interest expense
|
|
81.2
|
|
|
87.7
|
|
|
(7
|
)%
|
||
Non-operating gain
|
|
(1.1
|
)
|
|
—
|
|
|
NM
|
|
||
Income before income taxes
|
|
376.5
|
|
|
60.9
|
|
|
518
|
%
|
||
Income tax expense
|
|
128.3
|
|
|
10.3
|
|
|
NM
|
|
||
Net income
|
|
$
|
248.2
|
|
|
$
|
50.6
|
|
|
391
|
%
|
▪
|
Sales increased primarily as a result of higher domestic pork market prices.
|
▪
|
Gross profit increased primarily as a result of higher sales and lower hog raising costs, which more than offset the increase in pork processing raw material costs.
|
▪
|
The increase in SG&A is primarily attributable to higher variable compensation expenses stemming from higher year-over-year operating results and an increase in professional fees. These increases in SG&A were partially offset by lower pension expense.
|
▪
|
The increase in profitability in the current year is primarily driven by higher hog prices in Mexico.
|
▪
|
Our effective tax rate was
34%
and
17%
for the
six
months ended
June 29, 2014
and
June 30, 2013
, respectively. For the six months ended June 29, 2014, taxable income relative to permanent items, the mix of income between jurisdictions, and the expiration of certain federal tax credits as of December 31, 2013 impacted the effective tax rate. The six months ended June 30, 2013 were impacted by income relative to permanent items, the mix of income between jurisdictions, state income tax credits and federal legislation during that period that reinstated certain federal tax credits retroactively to January 1, 2012.
|
|
|
Successor
|
|
Predecessor
|
|
|
|||||
|
|
Three Months Ended
|
|
|
|||||||
|
|
June 29, 2014
|
|
June 30, 2013
|
|
%
Change
|
|||||
|
|
(in millions)
|
|
|
|||||||
Sales:
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
1,605.8
|
|
|
$
|
1,324.4
|
|
|
21
|
%
|
Packaged Meats
|
|
1,728.2
|
|
|
1,450.5
|
|
|
19
|
%
|
||
Hog Production
|
|
857.0
|
|
|
857.4
|
|
|
—
|
|
||
International
|
|
426.0
|
|
|
382.8
|
|
|
11
|
%
|
||
Total segment sales
|
|
4,617.0
|
|
|
4,015.1
|
|
|
15
|
%
|
||
Intersegment sales
|
|
(803.0
|
)
|
|
(677.3
|
)
|
|
19
|
%
|
||
Consolidated sales
|
|
$
|
3,814.0
|
|
|
$
|
3,337.8
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|||||
Operating profit (loss):
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
29.7
|
|
|
$
|
(18.9
|
)
|
|
257
|
%
|
Packaged Meats
|
|
97.5
|
|
|
111.8
|
|
|
(13
|
)%
|
||
Hog Production
|
|
129.0
|
|
|
30.6
|
|
|
322
|
%
|
||
International
|
|
33.9
|
|
|
3.5
|
|
|
869
|
%
|
||
Corporate
|
|
(29.9
|
)
|
|
(37.2
|
)
|
|
20
|
%
|
||
Consolidated operating profit
|
|
$
|
260.2
|
|
|
$
|
89.8
|
|
|
190
|
%
|
▪
|
Current year sales and operating profit increased due to higher fresh pork market prices which more than offset higher raw material costs.
|
▪
|
Current year sales increased
19
% due to a
13%
increase in average selling prices and a
6%
increase in volume, primarily attributable to the timing of Easter.
|
▪
|
Operating profit in the current year decreased as raw material costs increased significantly and could not fully be passed on to customers.
|
▪
|
Sales were relatively unchanged from the prior year as the impact of higher domestic live hog market prices was offset by lower sales volumes. PEDv was a significant factor in the volume decline and significantly impacted the market prices.
|
▪
|
Current year operating profit benefited from a
30%
increase in domestic live hog market prices and lower feed costs.
|
▪
|
Sales were positively impacted by a
12%
increase in volume which was partially offset by a
6%
decrease in local currency average selling prices. These changes were driven primarily by a
17%
increase in hogs processed in Poland. The effects of foreign currency translation also positively impacted sales by approximately $21 million.
|
▪
|
Current year operating profit was positively impacted by higher sales and lower feed costs in Europe along with higher equity income from our Mexican joint ventures.
|
▪
|
Operating results in the Corporate segment were improved from last year, which included acquisition related expenses associated with the WH Group and Kansas City Sausage transactions.
|
|
|
Successor
|
|
Predecessor
|
|
|
|||||
|
|
Six Months Ended
|
|
|
|||||||
|
|
June 29, 2014
|
|
June 30, 2013
|
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales:
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
2,992.9
|
|
|
$
|
2,511.6
|
|
|
19
|
%
|
Packaged Meats
|
|
3,276.7
|
|
|
3,045.0
|
|
|
8
|
%
|
||
Hog Production
|
|
1,706.5
|
|
|
1,691.4
|
|
|
1
|
%
|
||
International
|
|
800.7
|
|
|
733.1
|
|
|
9
|
%
|
||
Total segment sales
|
|
8,776.8
|
|
|
7,981.1
|
|
|
10
|
%
|
||
Intersegment sales
|
|
(1,540.7
|
)
|
|
(1,316.4
|
)
|
|
17
|
%
|
||
Consolidated sales
|
|
$
|
7,236.1
|
|
|
$
|
6,664.7
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|||||
Operating profit (loss):
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
88.6
|
|
|
$
|
2.9
|
|
|
NM
|
|
Packaged Meats
|
|
218.8
|
|
|
218.8
|
|
|
—
|
|
||
Hog Production
|
|
138.5
|
|
|
(29.8
|
)
|
|
565
|
%
|
||
International
|
|
70.8
|
|
|
17.8
|
|
|
298
|
%
|
||
Corporate
|
|
(60.1
|
)
|
|
(61.1
|
)
|
|
2
|
%
|
||
Consolidated operating profit
|
|
$
|
456.6
|
|
|
$
|
148.6
|
|
|
207
|
%
|
▪
|
Current year sales and operating profit increased due to higher fresh pork market prices which more than offset higher raw material costs.
|
▪
|
Current year sales increased
8%
due to a
10%
increase in average selling prices and
2%
lower volumes.
|
▪
|
Operating profit in the current year was unchanged as we were able to pass higher raw material costs to customers.
|
▪
|
Sales were relatively unchanged from the prior year as the impact of higher domestic live hog market prices was offset by lower sales volumes. PEDv was a significant factor in the volume decline and significantly impacted the market prices.
|
▪
|
Current year operating profit benefited from a
23%
increase in domestic live hog market prices and lower feed costs.
|
▪
|
Sales were positively impacted by a
19%
increase in volume which was partially offset by an
11%
decrease in average selling prices. These changes were driven largely by a
17%
increase in hogs processed in Poland. The effects of foreign currency translation also positively impacted sales by approximately $24 million.
|
▪
|
Current year operating profit was positively impacted by higher sales and lower feed costs in Europe along with higher equity income from our Mexican joint ventures.
|
|
|
Successor
|
|||||||||||||||
|
|
June 29, 2014
|
|||||||||||||||
Facility
|
|
Capacity
|
|
|
Outstanding Letters of Credit
|
|
Outstanding Borrowings
|
|
Amount Available
|
||||||||
|
|
(in millions)
|
|||||||||||||||
Inventory Revolver
|
|
$
|
1,025.0
|
|
|
|
$
|
—
|
|
|
$
|
(200.0
|
)
|
|
$
|
825.0
|
|
Securitization Facility
|
|
275.0
|
|
|
|
(98.8
|
)
|
|
(155.0
|
)
|
|
21.2
|
|
||||
International facilities
|
|
140.8
|
|
|
|
—
|
|
|
(57.0
|
)
|
|
83.8
|
|
||||
Total credit facilities
|
|
$
|
1,440.8
|
|
|
|
$
|
(98.8
|
)
|
|
$
|
(412.0
|
)
|
|
$
|
930.0
|
|
|
|
Successor
|
|
Predecessor
|
||||
|
|
Six Months Ended
|
||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
||||
|
|
(in millions)
|
||||||
Net cash flows from operating activities
|
|
$
|
(74.2
|
)
|
|
$
|
(92.1
|
)
|
▪
|
Cash received from customers increased due to higher domestic fresh pork market prices.
|
▪
|
Cash paid for grain purchased by the Hog Production segment decreased approximately
$459.3 million
from the prior year.
|
▪
|
In the current year, we paid $
204.6 million
for the settlement of derivative contracts and for margin requirements compared to $
51.2 million
in the prior year.
|
▪
|
Cash paid to outside hog supplier increased due to a
23%
increase in average domestic live hog prices.
|
▪
|
The current year included net tax payments of $
82.2 million
for domestic income taxes as compared to net refunds of $
2.8 million
in the prior year.
|
▪
|
Cash interest payments increased approximately $
12.0 million
.
|
|
|
Successor
|
|
Predecessor
|
||||
|
|
Six Months Ended
|
||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
||||
|
|
(in millions)
|
||||||
Capital expenditures
|
|
$
|
(98.5
|
)
|
|
$
|
(149.9
|
)
|
Business acquisitions
|
|
(11.0
|
)
|
|
(32.7
|
)
|
||
Net proceeds (expenditures) from breeding stock transactions
|
|
9.7
|
|
|
(11.2
|
)
|
||
Proceeds from the sale of property, plant and equipment
|
|
2.3
|
|
|
3.4
|
|
||
Other
|
|
3.4
|
|
|
(0.3
|
)
|
||
Net cash flows from investing activities
|
|
$
|
(94.1
|
)
|
|
$
|
(190.7
|
)
|
▪
|
Capital expenditures during both years primarily related to plant and hog farm improvement projects, including the replacement of gestation stalls with group pens, which is more fully explained under "Additional Matters Affecting Liquidity" below.
|
▪
|
In May 2013, we paid $32.7 million, net of cash acquired, for a 50% interest in Kansas City Sausage Company, LLC (KCS).
|
▪
|
In April 2014, KCS bought a meat processing business for $11.0 million.
|
|
|
Successor
|
|
Predecessor
|
||||
|
|
Six Months Ended
|
||||||
|
|
June 29,
2014 |
|
June 30,
2013 |
||||
|
|
(in millions)
|
||||||
Proceeds from the issuance of long-term debt
|
|
$
|
13.0
|
|
|
$
|
200.0
|
|
Principal payments on long-term debt and capital lease obligations
|
|
(27.7
|
)
|
|
(59.7
|
)
|
||
Proceeds from Securitization Facility
|
|
185.0
|
|
|
200.0
|
|
||
Payments on Securitization Facility
|
|
(135.0
|
)
|
|
(30.0
|
)
|
||
Net proceeds (payments) on revolving credit facilities
|
|
48.3
|
|
|
204.3
|
|
||
Other
|
|
(0.5
|
)
|
|
2.1
|
|
||
Net cash flows from financing activities
|
|
$
|
83.1
|
|
|
$
|
516.7
|
|
▪
|
In the current year, we drew $55.0 million on our Inventory Revolver and $50.0 million, net of repayments, on our Securitization Facility, primarily to cover margin requirements on our commodity derivative contracts.
|
▪
|
In May 2013, we repaid the remaining outstanding principal amount on our 7.75% senior unsecured notes totaling $55.0 million.
|
▪
|
In the prior year, we drew $225.0 million on our Inventory Revolver and $170.0 million, net of repayments, on our Securitization Facility as well as issued $200.0 million in long-term debt to repay the aforementioned notes and for working capital needs.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
June 29,
2014 |
|
December 29,
2013 |
||||
|
|
(in millions)
|
||||||
Grains
|
|
$
|
50.9
|
|
|
$
|
29.9
|
|
Livestock
|
|
168.7
|
|
|
27.9
|
|
||
Energy
|
|
3.5
|
|
|
5.2
|
|
||
Foreign currency
|
|
3.6
|
|
|
5.8
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Exhibit 3.1
|
—
|
Amended and Restated Articles of Incorporation of Smithfield Foods, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2013).
|
Exhibit 3.2
|
—
|
Amended and Restated Bylaws of Smithfield Foods, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2013).
|
Exhibit 10.1
|
—
|
Second Amended and Restated Receivables Sale Agreement, dated as of April 28, 2014, among the Company, SFFC, Inc., Smithfield of Canada, Ltd., Smithfield Farmland Sales Corp., Patrick Cudahy, LLC, Premium Pet Health, LLC, John Morrell & Co., Smithfield Global Products, Inc., Smithfield Specialty Foods Group, LLC, Armour-Eckrich Meats LLC and Smithfield Receivables Funding LLC (filed herewith).
|
Exhibit 10.2
|
—
|
Second Amended and Restated Credit and Security Agreement, dated as of April 28, 2014, among Smithfield Receivables Funding LLC, the Company, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as the Administrative Agent and Letter of Credit Issuer, and the Lenders and Co-Agents from time to time party thereto (filed herewith).
|
Exhibit 31.1
|
—
|
Certification of C. Larry Pope, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
Exhibit 31.2
|
—
|
Certification of Kenneth M. Sullivan, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
Exhibit 101
|
—
|
The following financial statements from Smithfield Foods, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 29, 2014, formatted in XBRL: (i) Consolidated Condensed Statements of Income, (ii) Consolidated Condensed Statements of Comprehensive Income, (iii) Consolidated Condensed Balance Sheets, (iv) Consolidated Condensed Statements of Cash Flows, and (v) the Notes to Consolidated Condensed Financial Statements (filed herewith).
|
|
Smithfield Foods, Inc.
|
|
|
|
|
|
/s/ KENNETH M. SULLIVAN
|
|
|
Kenneth M. Sullivan
Chief Financial Officer
|
|
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