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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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Three Months Ended
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||||||
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April 3,
2016 |
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March 29,
2015 |
||||
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||||||
Sales
|
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$
|
3,306.3
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|
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$
|
3,616.5
|
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Cost of sales
|
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2,893.9
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3,210.4
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||
Gross profit
|
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412.4
|
|
|
406.1
|
|
||
Selling, general and administrative expenses
|
|
208.1
|
|
|
221.9
|
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||
Income from equity method investments
|
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(5.8
|
)
|
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(4.0
|
)
|
||
Operating profit
|
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210.1
|
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188.2
|
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Interest expense
|
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32.0
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34.7
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Non-operating loss
|
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—
|
|
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12.8
|
|
||
Income before income taxes
|
|
178.1
|
|
|
140.7
|
|
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Income tax expense
|
|
57.1
|
|
|
43.7
|
|
||
Net income
|
|
$
|
121.0
|
|
|
$
|
97.0
|
|
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|
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Three Months Ended
|
||||||
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|
|
April 3,
2016 |
|
March 29,
2015 |
||||
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||||||
Net income
|
|
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$
|
121.0
|
|
|
$
|
97.0
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|
||||
Other comprehensive income (loss), net of tax:
|
|
|
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|
||||
Foreign currency translation
|
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33.5
|
|
|
(84.3
|
)
|
||
Pension accounting
|
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|
1.2
|
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|
0.7
|
|
||
Hedge accounting
|
|
|
13.0
|
|
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24.5
|
|
||
Total other comprehensive income (loss)
|
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|
47.7
|
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(59.1
|
)
|
||
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|
||||
Comprehensive income
|
|
|
$
|
168.7
|
|
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$
|
37.9
|
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April 3,
2016 |
|
January 3,
2016 |
||||
ASSETS
|
|
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|
||||
Current assets:
|
|
|
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|
||||
Cash and cash equivalents
|
|
$
|
260.6
|
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$
|
704.9
|
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Accounts receivable, net
|
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746.0
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760.0
|
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Inventories
|
|
2,204.2
|
|
|
2,099.7
|
|
||
Prepaid expenses and other current assets
|
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119.8
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|
|
176.4
|
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Total current assets
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3,330.6
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3,741.0
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||
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||||
Property, plant and equipment, net
|
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2,908.1
|
|
|
2,867.3
|
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Goodwill
|
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1,623.2
|
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1,619.5
|
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Intangible assets, net
|
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1,369.0
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1,365.7
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Investments
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137.1
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|
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142.5
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Other assets
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134.4
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158.0
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Total assets
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$
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9,502.4
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$
|
9,894.0
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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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49.7
|
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|
30.3
|
|
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Accounts payable
|
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379.5
|
|
|
686.1
|
|
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Accrued expenses and other current liabilities
|
|
742.8
|
|
|
828.3
|
|
||
Total current liabilities
|
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1,172.0
|
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|
1,544.7
|
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||
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|
||||
Long-term debt and capital lease obligations
|
|
2,276.4
|
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|
2,257.9
|
|
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Other liabilities
|
|
1,079.8
|
|
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1,216.5
|
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Redeemable noncontrolling interests
|
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55.7
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53.9
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Commitments and contingencies
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Equity:
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Shareholder's equity:
|
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|
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Common stock, no par value, 1,000 shares authorized; 1,000 issued and outstanding
|
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—
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—
|
|
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Additional paid-in capital
|
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4,187.4
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4,185.1
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Retained earnings
|
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1,060.5
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1,013.1
|
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Accumulated other comprehensive loss
|
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(330.0
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)
|
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(377.7
|
)
|
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Total shareholder's equity
|
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4,917.9
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4,820.5
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Noncontrolling interests
|
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0.6
|
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0.5
|
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Total equity
|
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4,918.5
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4,821.0
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Total liabilities and equity
|
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$
|
9,502.4
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$
|
9,894.0
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Three Months Ended
|
||||||
|
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April 3,
2016 |
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March 29,
2015 |
||||
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Cash flows from operating activities:
|
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|
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Net income
|
|
$
|
121.0
|
|
|
$
|
97.0
|
|
Adjustments to reconcile net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
58.6
|
|
|
58.0
|
|
||
Income from equity method investments
|
|
(5.8
|
)
|
|
(4.0
|
)
|
||
Changes in operating assets and liabilities and other, net
|
|
(493.0
|
)
|
|
(155.5
|
)
|
||
Net cash flows from operating activities
|
|
(319.2
|
)
|
|
(4.5
|
)
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Capital expenditures
|
|
(76.8
|
)
|
|
(67.7
|
)
|
||
Net expenditures from breeding stock transactions
|
|
(14.9
|
)
|
|
(13.2
|
)
|
||
Proceeds from the sale of property, plant and equipment
|
|
0.3
|
|
|
1.1
|
|
||
Other
|
|
(0.2
|
)
|
|
—
|
|
||
Net cash flows from investing activities
|
|
(91.6
|
)
|
|
(79.8
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Proceeds from the issuance of long-term debt
|
|
30.0
|
|
|
—
|
|
||
Principal payments on long-term debt and capital lease obligations
|
|
(0.2
|
)
|
|
(408.6
|
)
|
||
Proceeds from Securitization Facility
|
|
—
|
|
|
230.0
|
|
||
Payments on Securitization Facility
|
|
—
|
|
|
(85.0
|
)
|
||
Net proceeds (payments) on revolving credit facilities
|
|
8.4
|
|
|
(14.6
|
)
|
||
Payment of dividends
|
|
(73.6
|
)
|
|
—
|
|
||
Net cash flows from financing activities
|
|
(35.4
|
)
|
|
(278.2
|
)
|
||
|
|
|
|
|
||||
Effect of foreign exchange rate changes on cash
|
|
1.9
|
|
|
(4.1
|
)
|
||
Net change in cash and cash equivalents
|
|
(444.3
|
)
|
|
(366.6
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
704.9
|
|
|
433.5
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
260.6
|
|
|
$
|
66.9
|
|
NOTE 1
:
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
NOTE 2
:
|
INVENTORIES
|
|
|
April 3,
2016 |
|
January 3,
2016 |
||||
|
|
(in millions)
|
||||||
Fresh and packaged meats
|
|
$
|
1,034.5
|
|
|
$
|
885.2
|
|
Livestock
|
|
872.9
|
|
|
882.3
|
|
||
Grains
|
|
164.4
|
|
|
204.5
|
|
||
Manufacturing supplies
|
|
87.0
|
|
|
80.3
|
|
||
Other
|
|
45.4
|
|
|
47.4
|
|
||
Total inventories
|
|
$
|
2,204.2
|
|
|
$
|
2,099.7
|
|
NOTE 3
:
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
|
|
Assets
|
|
Liabilities
|
||||||||||||
|
|
April 3,
2016 |
|
January 3,
2016 |
|
April 3,
2016 |
|
January 3,
2016 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Derivatives using the "hedge accounting" method:
|
|
|
|
|
|
|
|
|
||||||||
Grain contracts
|
|
$
|
0.9
|
|
|
$
|
1.1
|
|
|
$
|
22.8
|
|
|
$
|
32.3
|
|
Livestock contracts
|
|
20.1
|
|
|
11.3
|
|
|
0.7
|
|
|
—
|
|
||||
Interest rate swaps
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
||||
Foreign exchange contracts
|
|
1.0
|
|
|
—
|
|
|
0.2
|
|
|
1.2
|
|
||||
Total
|
|
22.0
|
|
|
12.4
|
|
|
23.9
|
|
|
33.7
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Derivatives using the "mark-to-market" method:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Grain contracts
|
|
3.9
|
|
|
4.2
|
|
|
1.4
|
|
|
1.0
|
|
||||
Livestock contracts
|
|
3.9
|
|
|
8.3
|
|
|
0.5
|
|
|
0.8
|
|
||||
Energy contracts
|
|
0.4
|
|
|
—
|
|
|
13.3
|
|
|
15.7
|
|
||||
Foreign exchange contracts
|
|
0.1
|
|
|
0.4
|
|
|
1.5
|
|
|
0.3
|
|
||||
Total
|
|
8.3
|
|
|
12.9
|
|
|
16.7
|
|
|
17.8
|
|
||||
Total fair value of derivative instruments
|
|
$
|
30.3
|
|
|
$
|
25.3
|
|
|
$
|
40.6
|
|
|
$
|
51.5
|
|
|
|
April 3, 2016
|
||||||||||||||||||
|
|
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
|
|
$
|
29.2
|
|
|
$
|
(11.2
|
)
|
|
$
|
18.0
|
|
|
$
|
27.7
|
|
|
$
|
45.7
|
|
Foreign exchange contracts
|
|
1.1
|
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
30.3
|
|
|
$
|
(12.3
|
)
|
|
$
|
18.0
|
|
|
$
|
27.7
|
|
|
$
|
45.7
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
38.7
|
|
|
(11.2
|
)
|
|
27.5
|
|
|
(21.1
|
)
|
|
6.4
|
|
|||||
Interest rate swaps
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||||
Foreign exchange contracts
|
|
1.7
|
|
|
(1.1
|
)
|
|
0.6
|
|
|
0.1
|
|
|
0.7
|
|
|||||
Total
|
|
$
|
40.6
|
|
|
$
|
(12.3
|
)
|
|
$
|
28.3
|
|
|
$
|
(21.0
|
)
|
|
$
|
7.3
|
|
|
|
January 3, 2016
|
||||||||||||||||||
|
|
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
|
|
$
|
24.9
|
|
|
$
|
(14.1
|
)
|
|
$
|
10.8
|
|
|
$
|
16.1
|
|
|
$
|
26.9
|
|
Foreign exchange contracts
|
|
0.4
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
25.3
|
|
|
$
|
(14.5
|
)
|
|
$
|
10.8
|
|
|
$
|
16.1
|
|
|
$
|
26.9
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
49.8
|
|
|
(14.1
|
)
|
|
35.7
|
|
|
(26.9
|
)
|
|
8.8
|
|
|||||
Interest rate swaps
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||||
Foreign exchange contracts
|
|
1.5
|
|
|
(0.4
|
)
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
|||||
Total
|
|
$
|
51.5
|
|
|
$
|
(14.5
|
)
|
|
$
|
37.0
|
|
|
$
|
(26.9
|
)
|
|
$
|
10.1
|
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Corn
|
|
64,945,000
|
|
|
85,585,000
|
|
|
Bushels
|
Soybean meal
|
|
508,300
|
|
|
715,300
|
|
|
Tons
|
Lean hogs
|
|
150,040,000
|
|
|
831,040,000
|
|
|
Pounds
|
Interest rate
|
|
17,238,832
|
|
|
17,756,583
|
|
|
U.S. Dollars
|
Foreign currency
(1)
|
|
30,923,843
|
|
|
41,977,646
|
|
|
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)
|
||||||||||||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||
|
|
April 3,
2016 |
|
March 29,
2015 |
|
April 3,
2016 |
|
March 29,
2015 |
|
April 3,
2016 |
|
March 29,
2015 |
||||||||||||
|
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Grain contracts
|
|
$
|
(2.3
|
)
|
|
$
|
(31.0
|
)
|
|
$
|
(11.7
|
)
|
|
$
|
(23.8
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(3.4
|
)
|
Lean hog contracts
|
|
13.6
|
|
|
132.3
|
|
|
4.7
|
|
|
83.0
|
|
|
0.6
|
|
|
1.5
|
|
||||||
Interest rate swaps
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign exchange contracts
|
|
1.5
|
|
|
(1.7
|
)
|
|
(0.4
|
)
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
12.8
|
|
|
$
|
99.5
|
|
|
$
|
(7.4
|
)
|
|
$
|
58.6
|
|
|
$
|
0.3
|
|
|
$
|
(1.9
|
)
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Corn
|
|
1,025,000
|
|
|
4,950,000
|
|
|
Bushels
|
|
|
Gains Recognized in Earnings on Derivative
|
|
Losses Recognized in Earnings on Related Hedged Item
|
||||||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
|
April 3,
2016 |
|
March 29,
2015 |
|
April 3,
2016 |
|
March 29,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts
|
|
$
|
0.4
|
|
|
$
|
2.0
|
|
|
$
|
(0.4
|
)
|
|
$
|
(1.9
|
)
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Lean hogs
|
|
200,000
|
|
|
78,360,000
|
|
|
Pounds
|
Corn
|
|
8,980,000
|
|
|
15,555,000
|
|
|
Bushels
|
Soybean meal
|
|
1,400
|
|
|
50,600
|
|
|
Tons
|
Soybeans
|
|
610,000
|
|
|
3,060,000
|
|
|
Bushels
|
Wheat
|
|
3,680,000
|
|
|
5,190,000
|
|
|
Bushels
|
Natural gas
|
|
7,790,000
|
|
|
10,190,000
|
|
|
Million BTU
|
Heating oil
|
|
1,470,000
|
|
|
2,100,000
|
|
|
Gallons
|
Live cattle
|
|
8,600,000
|
|
|
13,440,000
|
|
|
Pounds
|
Diesel
|
|
3,619,000
|
|
|
12,362,000
|
|
|
Gallons
|
Crude oil
|
|
27,000
|
|
|
36,000
|
|
|
Barrels
|
Foreign currency
(1)
|
|
20,189,882
|
|
|
42,763,669
|
|
|
U.S. Dollars
|
(1)
|
Amounts represent the U.S. dollar equivalent of various foreign currency contracts.
|
|
|
|
Three Months Ended
|
||||||
|
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
|
(in millions)
|
||||||
Commodity contracts
|
|
|
$
|
3.2
|
|
|
$
|
(28.3
|
)
|
Foreign exchange contracts
|
|
|
(1.1
|
)
|
|
(1.2
|
)
|
||
Total
|
|
|
$
|
2.1
|
|
|
$
|
(29.5
|
)
|
NOTE 4
:
|
INVESTMENTS
|
Equity Investment
|
|
% Owned
|
|
April 3,
2016 |
|
January 3,
2016 |
||||
|
|
|
|
(in millions)
|
||||||
Mexican joint ventures
|
|
50%
|
|
110.8
|
|
|
116.6
|
|
||
Other
|
|
Various
|
|
26.3
|
|
|
25.9
|
|
||
Total investments
|
|
|
|
$
|
137.1
|
|
|
$
|
142.5
|
|
|
|
|
|
Three Months Ended
|
||||||
Equity Investment
|
|
Segment
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
|
|
(in millions)
|
||||||
Mexican joint ventures
|
|
International
|
|
$
|
(4.8
|
)
|
|
$
|
(7.2
|
)
|
Campofrío Food Group (CFG)
|
|
International
|
|
—
|
|
|
3.1
|
|
||
All other equity method investments
|
|
Various
|
|
(1.0
|
)
|
|
0.1
|
|
||
Income from equity method investments
|
|
|
|
$
|
(5.8
|
)
|
|
$
|
(4.0
|
)
|
NOTE 5
:
|
DEBT
|
NOTE 6
:
|
GUARANTEES
|
NOTE 7
:
|
PENSION PLANS
|
|
|
|
Three Months Ended
|
||||||
|
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
|
(in millions)
|
||||||
Service cost
|
|
|
$
|
12.8
|
|
|
$
|
15.1
|
|
Interest cost
|
|
|
20.4
|
|
|
19.0
|
|
||
Expected return on plan assets
|
|
|
(24.7
|
)
|
|
(22.1
|
)
|
||
Net amortization
|
|
|
2.3
|
|
|
1.2
|
|
||
Net periodic pension cost
|
|
|
$
|
10.8
|
|
|
$
|
13.2
|
|
NOTE 8
:
|
EQUITY
|
|
|
Three Months Ended
|
||||||||||||||||||||||
|
|
April 3, 2016
|
|
March 29, 2015
|
||||||||||||||||||||
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Translation adjustment arising during the period
|
|
$
|
33.7
|
|
|
$
|
(0.2
|
)
|
|
$
|
33.5
|
|
|
$
|
(95.0
|
)
|
|
$
|
10.7
|
|
|
$
|
(84.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amortization of actuarial losses and prior service credits reclassified to cost of sales
|
|
1.2
|
|
|
(0.6
|
)
|
|
0.6
|
|
|
1.0
|
|
|
(0.4
|
)
|
|
0.6
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to SG&A
|
|
1.1
|
|
|
(0.5
|
)
|
|
0.6
|
|
|
0.2
|
|
|
(0.1
|
)
|
|
0.1
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedge accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains arising during the period
|
|
12.8
|
|
|
(4.6
|
)
|
|
8.2
|
|
|
99.5
|
|
|
(39.1
|
)
|
|
60.4
|
|
||||||
Gains reclassified to sales
|
|
(4.3
|
)
|
|
1.8
|
|
|
(2.5
|
)
|
|
(82.4
|
)
|
|
32.1
|
|
|
(50.3
|
)
|
||||||
Losses reclassified to cost of sales
|
|
11.7
|
|
|
(4.4
|
)
|
|
7.3
|
|
|
23.8
|
|
|
(9.4
|
)
|
|
14.4
|
|
||||||
Total other comprehensive income (loss)
|
|
$
|
56.2
|
|
|
$
|
(8.5
|
)
|
|
$
|
47.7
|
|
|
$
|
(52.9
|
)
|
|
$
|
(6.2
|
)
|
|
$
|
(59.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 9
:
|
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.
|
|
|
April 3, 2016
|
|
January 3, 2016
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commodity contracts
|
|
$
|
16.6
|
|
|
$
|
1.4
|
|
|
$
|
—
|
|
|
$
|
18.0
|
|
|
$
|
10.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10.8
|
|
Insurance contracts
|
|
—
|
|
|
68.9
|
|
|
—
|
|
|
68.9
|
|
|
—
|
|
|
70.0
|
|
|
—
|
|
|
70.0
|
|
||||||||
Total
|
|
$
|
16.6
|
|
|
$
|
70.3
|
|
|
$
|
—
|
|
|
$
|
86.9
|
|
|
$
|
10.8
|
|
|
$
|
70.0
|
|
|
$
|
—
|
|
|
$
|
80.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commodity contracts
|
|
17.0
|
|
|
10.5
|
|
|
—
|
|
|
27.5
|
|
|
18.6
|
|
|
17.1
|
|
|
—
|
|
|
35.7
|
|
||||||||
Interest rate swaps
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
||||||||
Foreign exchange contracts
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
||||||||
Total
|
|
$
|
17.0
|
|
|
$
|
11.3
|
|
|
$
|
—
|
|
|
$
|
28.3
|
|
|
$
|
18.6
|
|
|
$
|
18.4
|
|
|
$
|
—
|
|
|
$
|
37.0
|
|
▪
|
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.
|
▪
|
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.
|
|
|
April 3, 2016
|
|
January 3, 2016
|
||||||||||||
|
|
Fair
Value |
|
Carrying Value
|
|
Fair
Value |
|
Carrying Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
Long-term debt, including current portion
|
|
$
|
2,390.2
|
|
|
$
|
2,301.3
|
|
|
$
|
2,336.8
|
|
|
$
|
2,263.7
|
|
NOTE 10
:
|
CONTINGENCIES
|
|
|
Three Months Ended
|
||||||
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
(in millions)
|
||||||
Sales:
|
|
|
|
|
||||
Segment sales—
|
|
|
|
|
||||
Fresh Pork
|
|
$
|
1,118.2
|
|
|
$
|
1,334.1
|
|
Packaged Meats
|
|
1,745.3
|
|
|
1,709.6
|
|
||
Hog Production
|
|
620.3
|
|
|
806.4
|
|
||
International
|
|
316.8
|
|
|
330.2
|
|
||
Total segment sales
|
|
3,800.6
|
|
|
4,180.3
|
|
||
Intersegment sales—
|
|
|
|
|
||||
Fresh Pork
|
|
(15.2
|
)
|
|
(14.7
|
)
|
||
Hog Production
|
|
(468.1
|
)
|
|
(538.8
|
)
|
||
International
|
|
(11.0
|
)
|
|
(10.3
|
)
|
||
Total intersegment sales
|
|
(494.3
|
)
|
|
(563.8
|
)
|
||
Consolidated sales
|
|
$
|
3,306.3
|
|
|
$
|
3,616.5
|
|
|
|
|
|
|
||||
Operating profit (loss):
|
|
|
|
|
||||
Fresh Pork
|
|
99.9
|
|
|
33.2
|
|
||
Packaged Meats
|
|
207.1
|
|
|
172.5
|
|
||
Hog Production
|
|
(83.5
|
)
|
|
(6.4
|
)
|
||
International
|
|
14.2
|
|
|
15.9
|
|
||
Corporate
|
|
(27.6
|
)
|
|
(27.0
|
)
|
||
Consolidated operating profit
|
|
$
|
210.1
|
|
|
$
|
188.2
|
|
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
$66.7 million
primarily as a result of lower raw material costs.
|
▪
|
Packaged Meats operating profit increased by $
34.6 million
as a result of higher sales volume and lower raw material costs.
|
▪
|
Hog Production operating results decreased by
$77.1 million
primarily as a result of favorable hedging results in the prior year and lower live hog market prices in the current year.
|
▪
|
International operating profit decreased by
$1.7 million
primarily due to unfavorable foreign currency translation.
|
|
|
Three Months Ended
|
|
||||||
|
|
April 3, 2016
|
|
March 29, 2015
|
|
||||
|
|
(in millions)
|
|
||||||
Net income
|
|
$
|
121.0
|
|
|
$
|
97.0
|
|
|
Interest expense
|
|
32.0
|
|
|
34.7
|
|
|
||
Income tax expense
|
|
57.1
|
|
|
43.7
|
|
|
||
Depreciation and amortization
|
|
58.6
|
|
|
58.0
|
|
|
||
EBITDA
|
|
$
|
268.7
|
|
|
$
|
233.4
|
|
|
|
|
|
|
|
|
||||
Non-operating loss
|
|
—
|
|
|
12.8
|
|
|
||
Adjusted EBITDA
|
|
$
|
268.7
|
|
|
$
|
246.2
|
|
|
•
|
Leveraging Smithfield's size and scope in pork industry;
|
•
|
Maximizing our manufacturing platform and distribution system;
|
•
|
Approaching the market more efficiently and effectively;
|
•
|
Best utilizing management talent across company;
|
•
|
Aligning our operations to provide better customer service;
|
•
|
Optimizing operations in areas like brand management, manufacturing, sales, and marketing; and
|
•
|
Strengthening marketing, brand building and innovation across all brands.
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|
Three Months Ended
|
|
|
|||||||
|
|
April 3, 2016
|
|
March 29, 2015
|
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales
|
|
$
|
3,306.3
|
|
|
$
|
3,616.5
|
|
|
(9
|
)%
|
Cost of sales
|
|
2,893.9
|
|
|
3,210.4
|
|
|
(10
|
)%
|
||
Gross profit
|
|
412.4
|
|
|
406.1
|
|
|
2
|
%
|
||
Selling, general and administrative expenses
|
|
208.1
|
|
|
221.9
|
|
|
(5
|
)%
|
||
Income from equity method investments
|
|
(5.8
|
)
|
|
(4.0
|
)
|
|
44
|
%
|
||
Operating profit
|
|
210.1
|
|
|
188.2
|
|
|
12
|
%
|
||
Interest expense
|
|
32.0
|
|
|
34.7
|
|
|
(8
|
)%
|
||
Non-operating loss
|
|
—
|
|
|
12.8
|
|
|
100
|
%
|
||
Income before income taxes
|
|
178.1
|
|
|
140.7
|
|
|
27
|
%
|
||
Income tax expense
|
|
57.1
|
|
|
43.7
|
|
|
31
|
%
|
||
Net income
|
|
$
|
121.0
|
|
|
$
|
97.0
|
|
|
25
|
%
|
|
|
|
|
|
|
|
▪
|
Sales decreased primarily as a result of lower average selling prices of domestic fresh pork products and lower domestic live hog market prices.
|
▪
|
Gross profit increased primarily as a result of lower pork processing raw material costs and lower hog raising costs.
|
▪
|
The decrease in SG&A is primarily attributed to lower marketing and advertising costs.
|
▪
|
Equity income in the prior year was negatively impacted by our former investment in CFG. Current year equity income was negatively impacted by lower hog prices in Mexico.
|
▪
|
The decrease in interest expense is primarily due to lower debt balances in the current year as a result of various debt repayment activities in the prior year.
|
▪
|
During 2015, we recognized a loss on debt extinguishment of $12.8 million as a result of the 2015 Tender Offer.
|
▪
|
Our effective tax rate was
32%
and
31%
for the first quarters of 2016 and 2015, respectively. Both the current and prior year effective tax rates were impacted by taxable income relative to permanent items and the mix of income between jurisdictions. Additionally, the prior year effective tax rate was impacted by the expiration of certain federal tax credits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|||||||
|
|
April 3, 2016
|
|
March 29, 2015
|
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales:
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
1,118.2
|
|
|
$
|
1,334.1
|
|
|
(16
|
)%
|
Packaged Meats
|
|
1,745.3
|
|
|
1,709.6
|
|
|
2
|
%
|
||
Hog Production
|
|
620.3
|
|
|
806.4
|
|
|
(23
|
)%
|
||
International
|
|
316.8
|
|
|
330.2
|
|
|
(4
|
)%
|
||
Total segment sales
|
|
3,800.6
|
|
|
4,180.3
|
|
|
(9
|
)%
|
||
Intersegment sales
|
|
(494.3
|
)
|
|
(563.8
|
)
|
|
(12
|
)%
|
||
Consolidated sales
|
|
$
|
3,306.3
|
|
|
$
|
3,616.5
|
|
|
(9
|
)%
|
|
|
|
|
|
|
|
|||||
Operating profit (loss):
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
99.9
|
|
|
$
|
33.2
|
|
|
200
|
%
|
Packaged Meats
|
|
207.1
|
|
|
172.5
|
|
|
20
|
%
|
||
Hog Production
|
|
(83.5
|
)
|
|
(6.4
|
)
|
|
(1,209
|
)%
|
||
International
|
|
14.2
|
|
|
15.9
|
|
|
(11
|
)%
|
||
Corporate
|
|
(27.6
|
)
|
|
(27.0
|
)
|
|
(2
|
)%
|
||
Consolidated operating profit
|
|
$
|
210.1
|
|
|
$
|
188.2
|
|
|
12
|
%
|
▪
|
Sales decreased
16%
due to a
13%
decrease in average selling prices and a
4%
decrease in volume.
|
▪
|
Operating profit increased to
$13
per head from
$4
per head due to lower raw material costs.
|
▪
|
We processed
7.7 million
hogs in 2016, relatively unchanged from the prior year.
|
▪
|
Sales increased
2%
due to a
2%
increase in volume. Average selling prices remained relatively unchanged from the prior year. Current year sales volume totaled
742.8 million
pounds.
|
▪
|
Operating profit increased to
$0.28
per pound from
$0.24
per pound due to lower raw material costs.
|
▪
|
Sales decreased
23%
due to favorable hedging results in the prior year, lower domestic live hog market prices and a
2%
decrease in head sold. Head sold during the year amounted to
3.9 million
.
|
▪
|
Operating results decreased to a
$21
loss per head from a
$2
loss per head due to lower sales, partially offset by lower feed costs.
|
▪
|
Sales decreased
4%
due primarily to changes in foreign exchange rates, which negatively impacted sales by
$29.9 million
, or
9%
. On a constant currency basis, sales increased
5%
due to a
11%
increase in volume to
382.8 million
pounds, driven largely by a
14%
increase in hogs processed and a
14%
increase in poultry processed in Europe, partially offset by a
5%
decrease in average selling prices. We processed
1.2 million
hogs in 2016.
|
▪
|
Operating profit was negatively impacted by foreign currency translation of
$1.7 million
due to a stronger U.S. Dollar. On a constant currency basis, operating profit was relatively unchanged from the prior year.
|
|
|
April 3, 2016
|
||||||||||||||||||
Facility
|
|
Capacity
|
|
Borrowing Base Adjustment
|
|
Outstanding Letters of Credit
|
|
Outstanding Borrowings
|
|
Amount Available
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Inventory Revolver
|
|
$
|
1,025.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,025.0
|
|
Securitization Facility
|
|
325.0
|
|
|
(36.8
|
)
|
|
(87.9
|
)
|
|
—
|
|
|
200.3
|
|
|||||
International facilities
|
|
176.1
|
|
|
(3.4
|
)
|
|
(0.2
|
)
|
|
(49.2
|
)
|
|
123.3
|
|
|||||
Total credit facilities
|
|
$
|
1,526.1
|
|
|
$
|
(40.2
|
)
|
|
$
|
(88.1
|
)
|
|
$
|
(49.2
|
)
|
|
$
|
1,348.6
|
|
|
|
Three Months Ended
|
||||||
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
(in millions)
|
||||||
Net cash flows from operating activities
|
|
$
|
(319.2
|
)
|
|
$
|
(4.5
|
)
|
▪
|
In the current year, we contributed
$125.0 million
to our qualified pension plans.
|
▪
|
In the current year, we paid $
5.5 million
for the settlement of derivative contracts and for margin requirements compared to $
101.7 million
received in the prior year.
|
▪
|
The current year included net tax payments of $
51.0 million
for domestic income taxes as compared to net
|
▪
|
In the prior year we received a cash dividend of
$14.3 million
from one of our Mexican joint ventures.
|
▪
|
Cash paid for grain and other ingredients purchased by the Hog Production segment decreased approximately
$29.0 million
from the prior year.
|
|
|
Three Months Ended
|
||||||
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
(in millions)
|
||||||
Capital expenditures
|
|
$
|
(76.8
|
)
|
|
$
|
(67.7
|
)
|
Net expenditures from breeding stock transactions
|
|
(14.9
|
)
|
|
(13.2
|
)
|
||
Proceeds from the sale of property, plant and equipment
|
|
0.3
|
|
|
1.1
|
|
||
Other
|
|
(0.2
|
)
|
|
—
|
|
||
Net cash flows from investing activities
|
|
$
|
(91.6
|
)
|
|
$
|
(79.8
|
)
|
▪
|
Capital expenditures during both years primarily related to plant and hog farm improvement and expansion projects, including the replacement of gestation stalls with group pens, which is more fully explained under "Additional Matters Affecting Liquidity" below.
|
|
|
Three Months Ended
|
||||||
|
|
April 3,
2016 |
|
March 29,
2015 |
||||
|
|
(in millions)
|
||||||
Proceeds from the issuance of long-term debt
|
|
$
|
30.0
|
|
|
$
|
—
|
|
Principal payments on long-term debt and capital lease obligations
|
|
(0.2
|
)
|
|
(408.6
|
)
|
||
Proceeds from Securitization Facility
|
|
—
|
|
|
230.0
|
|
||
Payments on Securitization Facility
|
|
—
|
|
|
(85.0
|
)
|
||
Net proceeds (payments) on revolving credit facilities
|
|
8.4
|
|
|
(14.6
|
)
|
||
Payment of dividends
|
|
(73.6
|
)
|
|
—
|
|
||
Net cash flows from financing activities
|
|
$
|
(35.4
|
)
|
|
$
|
(278.2
|
)
|
▪
|
In the current year, we received proceeds of
$30.0 million
to finance certain activities in Romania.
|
▪
|
In the current year, we paid a
$73.6 million
dividend to our parent company.
|
▪
|
In the prior year, we paid $258.1 million of principal payments as a result of the 2015 Tender Offer as well as $150.0 million on our Rabobank term loan.
|
▪
|
In the prior year, we drew $145.0 million, net of repayments, on our Securitization Facility, primarily to repay other long-term debt, as noted above.
|
▪
|
Accounts payable decreased by
$306.6 million
mainly due to the timing of payments.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
April 3,
2016 |
|
January 3,
2016 |
||||
|
|
(in millions)
|
||||||
Grains
|
|
$
|
11.1
|
|
|
$
|
18.9
|
|
Livestock
|
|
53.2
|
|
|
1.4
|
|
||
Energy
|
|
5.5
|
|
|
3.3
|
|
||
Foreign currency
|
|
6.2
|
|
|
7.4
|
|
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 31.1
|
—
|
Certification of Kenneth M. Sullivan, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
Exhibit 31.2
|
—
|
Certification of Glenn T. Nunziata, Executive Vice President and 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 April 3, 2016, 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/ GLENN T. NUNZIATA
|
|
|
Glenn T. Nunziata
On behalf of the registrant and as
Executive Vice President and Chief Financial Officer
|
|
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