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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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Nine Months Ended
|
||||||||||||
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October 2,
2016 |
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September 27,
2015 |
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October 2,
2016 |
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September 27,
2015 |
||||||||
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||||||||||||
Sales
|
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$
|
3,538.6
|
|
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$
|
3,406.1
|
|
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$
|
10,337.5
|
|
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$
|
10,509.2
|
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Cost of sales
|
|
3,066.1
|
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3,021.1
|
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8,995.6
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9,299.6
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||||
Gross profit
|
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472.5
|
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385.0
|
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1,341.9
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1,209.6
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||||
Selling, general and administrative expenses
|
|
233.8
|
|
|
238.4
|
|
|
669.7
|
|
|
692.9
|
|
||||
Income from equity method investments
|
|
(7.6
|
)
|
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(7.1
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)
|
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(21.3
|
)
|
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(11.3
|
)
|
||||
Operating profit
|
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246.3
|
|
|
153.7
|
|
|
693.5
|
|
|
528.0
|
|
||||
Interest expense
|
|
32.0
|
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|
32.3
|
|
|
96.8
|
|
|
98.5
|
|
||||
Non-operating loss
|
|
—
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|
—
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|
—
|
|
|
12.1
|
|
||||
Income before income taxes
|
|
214.3
|
|
|
121.4
|
|
|
596.7
|
|
|
417.4
|
|
||||
Income tax expense
|
|
70.5
|
|
|
38.1
|
|
|
194.1
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|
|
132.9
|
|
||||
Net income
|
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$
|
143.8
|
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$
|
83.3
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|
$
|
402.6
|
|
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$
|
284.5
|
|
|
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Three Months Ended
|
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Nine Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
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|
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|
||||||||||||
Net income
|
|
$
|
143.8
|
|
|
$
|
83.3
|
|
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$
|
402.6
|
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$
|
284.5
|
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||||||||
Other comprehensive income (loss), net of tax:
|
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|
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||||||||
Foreign currency translation
|
|
19.8
|
|
|
(14.4
|
)
|
|
11.6
|
|
|
(55.2
|
)
|
||||
Pension accounting
|
|
1.3
|
|
|
—
|
|
|
3.7
|
|
|
47.7
|
|
||||
Hedge accounting
|
|
61.4
|
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|
(27.5
|
)
|
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86.6
|
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|
(36.3
|
)
|
||||
Total other comprehensive income (loss)
|
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82.5
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(41.9
|
)
|
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101.9
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(43.8
|
)
|
||||
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||||||||
Comprehensive income
|
|
$
|
226.3
|
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$
|
41.4
|
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$
|
504.5
|
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$
|
240.7
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October 2,
2016 |
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January 3,
2016 |
||||
ASSETS
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Current assets:
|
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|
||||
Cash and cash equivalents
|
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$
|
277.6
|
|
|
$
|
704.9
|
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Accounts receivable, net
|
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851.7
|
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|
760.0
|
|
||
Inventories
|
|
2,314.9
|
|
|
2,099.7
|
|
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Prepaid expenses and other current assets
|
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121.0
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|
176.4
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|
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Total current assets
|
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3,565.2
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|
3,741.0
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||
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Property, plant and equipment, net
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2,952.4
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2,867.3
|
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Goodwill
|
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1,621.7
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1,619.5
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Intangible assets, net
|
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1,363.6
|
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1,365.7
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|
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Investments
|
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142.2
|
|
|
142.5
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|
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Other assets
|
|
171.4
|
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|
158.0
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|
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Total assets
|
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$
|
9,816.5
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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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768.9
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30.3
|
|
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Accounts payable
|
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519.6
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686.1
|
|
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Accrued expenses and other current liabilities
|
|
840.5
|
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|
828.3
|
|
||
Total current liabilities
|
|
2,129.0
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1,544.7
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||
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|
||||
Long-term debt and capital lease obligations
|
|
1,557.7
|
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2,257.9
|
|
||
Other liabilities
|
|
1,117.2
|
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1,216.5
|
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||
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|
||||
Redeemable noncontrolling interests
|
|
58.9
|
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|
53.9
|
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||
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|
||||
Commitments and contingencies
|
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|
||||
Equity:
|
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|
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Shareholder's equity:
|
|
|
|
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|
||
Common stock, no par value, 1,000 shares authorized; 1,000 issued and outstanding
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
4,189.2
|
|
|
4,185.1
|
|
||
Retained earnings
|
|
1,039.8
|
|
|
1,013.1
|
|
||
Accumulated other comprehensive loss
|
|
(275.8
|
)
|
|
(377.7
|
)
|
||
Total shareholder's equity
|
|
4,953.2
|
|
|
4,820.5
|
|
||
Noncontrolling interests
|
|
0.5
|
|
|
0.5
|
|
||
Total equity
|
|
4,953.7
|
|
|
4,821.0
|
|
||
Total liabilities and equity
|
|
$
|
9,816.5
|
|
|
$
|
9,894.0
|
|
|
|
Nine Months Ended
|
||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
||||
|
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
402.6
|
|
|
$
|
284.5
|
|
Adjustments to reconcile net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
180.5
|
|
|
174.9
|
|
||
Stock-based compensation expense
|
|
6.7
|
|
|
14.7
|
|
||
Income from equity method investments
|
|
(21.3
|
)
|
|
(11.3
|
)
|
||
Changes in operating assets and liabilities and other, net
|
|
(361.2
|
)
|
|
(375.1
|
)
|
||
Net cash flows from operating activities
|
|
207.3
|
|
|
87.7
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Proceeds from sale of equity interest in Campofrio Food Group
|
|
—
|
|
|
354.0
|
|
||
Capital expenditures
|
|
(273.9
|
)
|
|
(240.3
|
)
|
||
Net expenditures from breeding stock transactions
|
|
(36.3
|
)
|
|
(41.6
|
)
|
||
Other
|
|
3.2
|
|
|
(32.3
|
)
|
||
Net cash flows from investing activities
|
|
(307.0
|
)
|
|
39.8
|
|
||
|
|
|
|
|
||||
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
|
|
(1.7
|
)
|
|
(409.0
|
)
|
||
Proceeds from Securitization Facility
|
|
50.0
|
|
|
290.0
|
|
||
Payments on Securitization Facility
|
|
(50.0
|
)
|
|
(290.0
|
)
|
||
Net proceeds (payments) on revolving credit facilities
|
|
18.3
|
|
|
(3.7
|
)
|
||
Payment of dividends
|
|
(375.9
|
)
|
|
(30.0
|
)
|
||
Net cash flows from financing activities
|
|
(329.3
|
)
|
|
(442.7
|
)
|
||
|
|
|
|
|
||||
Effect of foreign exchange rate changes on cash
|
|
1.7
|
|
|
(3.1
|
)
|
||
Net change in cash and cash equivalents
|
|
(427.3
|
)
|
|
(318.3
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
704.9
|
|
|
433.5
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
277.6
|
|
|
$
|
115.2
|
|
NOTE 1
:
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
NOTE 2
:
|
INVENTORIES
|
|
|
October 2,
2016 |
|
January 3,
2016 |
||||
|
|
(in millions)
|
||||||
Fresh and packaged meats
|
|
$
|
1,052.5
|
|
|
$
|
885.2
|
|
Livestock
|
|
934.5
|
|
|
882.3
|
|
||
Grains
|
|
193.7
|
|
|
204.5
|
|
||
Manufacturing supplies
|
|
85.6
|
|
|
80.3
|
|
||
Other
|
|
48.6
|
|
|
47.4
|
|
||
Total inventories
|
|
$
|
2,314.9
|
|
|
$
|
2,099.7
|
|
NOTE 3
:
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
|
|
Assets
|
|
Liabilities
|
||||||||||||
|
|
October 2,
2016 |
|
January 3,
2016 |
|
October 2,
2016 |
|
January 3,
2016 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Derivatives using the "hedge accounting" method:
|
|
|
|
|
|
|
|
|
||||||||
Grain contracts
|
|
$
|
6.1
|
|
|
$
|
1.1
|
|
|
$
|
36.1
|
|
|
$
|
32.3
|
|
Livestock contracts
|
|
119.9
|
|
|
11.3
|
|
|
0.2
|
|
|
—
|
|
||||
Interest rate swaps
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
||||
Foreign exchange contracts
|
|
0.7
|
|
|
—
|
|
|
0.1
|
|
|
1.2
|
|
||||
Total
|
|
126.7
|
|
|
12.4
|
|
|
36.6
|
|
|
33.7
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Derivatives using the "mark-to-market" method:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Grain contracts
|
|
1.7
|
|
|
4.2
|
|
|
7.7
|
|
|
1.0
|
|
||||
Livestock contracts
|
|
17.3
|
|
|
8.3
|
|
|
21.2
|
|
|
0.8
|
|
||||
Energy contracts
|
|
3.4
|
|
|
—
|
|
|
2.6
|
|
|
15.7
|
|
||||
Foreign exchange contracts
|
|
0.7
|
|
|
0.4
|
|
|
—
|
|
|
0.3
|
|
||||
Total
|
|
23.1
|
|
|
12.9
|
|
|
31.5
|
|
|
17.8
|
|
||||
Total fair value of derivative instruments
|
|
$
|
149.8
|
|
|
$
|
25.3
|
|
|
$
|
68.1
|
|
|
$
|
51.5
|
|
|
|
October 2, 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
|
|
$
|
148.4
|
|
|
$
|
(59.5
|
)
|
|
$
|
88.9
|
|
|
$
|
(33.5
|
)
|
|
$
|
55.4
|
|
Foreign exchange contracts
|
|
1.4
|
|
|
(0.1
|
)
|
|
1.3
|
|
|
—
|
|
|
1.3
|
|
|||||
Total
|
|
$
|
149.8
|
|
|
$
|
(59.6
|
)
|
|
$
|
90.2
|
|
|
$
|
(33.5
|
)
|
|
$
|
56.7
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
|
|
67.8
|
|
|
(59.5
|
)
|
|
8.3
|
|
|
(0.5
|
)
|
|
7.8
|
|
|||||
Interest rate swaps
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||||
Foreign exchange contracts
|
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
68.1
|
|
|
$
|
(59.6
|
)
|
|
$
|
8.5
|
|
|
$
|
(0.5
|
)
|
|
$
|
8.0
|
|
|
|
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
|
|
34,660,000
|
|
|
93,335,000
|
|
|
Bushels
|
Soybean meal
|
|
315,600
|
|
|
1,270,200
|
|
|
Tons
|
Lean hogs
|
|
150,040,000
|
|
|
1,515,800,000
|
|
|
Pounds
|
Interest rate
|
|
17,238,832
|
|
|
18,385,250
|
|
|
U.S. Dollars
|
Foreign currency
(1)
|
|
16,516,467
|
|
|
50,654,702
|
|
|
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
|
||||||||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||||||
|
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Grain contracts
|
|
$
|
(46.8
|
)
|
|
$
|
(6.4
|
)
|
|
$
|
3.2
|
|
|
$
|
(15.7
|
)
|
|
$
|
(2.6
|
)
|
|
$
|
(0.3
|
)
|
Lean hog contracts
|
|
200.0
|
|
|
0.2
|
|
|
50.0
|
|
|
55.3
|
|
|
17.7
|
|
|
0.1
|
|
||||||
Interest rate swaps
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign exchange contracts
|
|
0.8
|
|
|
(0.5
|
)
|
|
0.5
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
153.9
|
|
|
$
|
(6.9
|
)
|
|
$
|
53.6
|
|
|
$
|
38.8
|
|
|
$
|
15.1
|
|
|
$
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Nine Months Ended
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||||||
|
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Grain contracts
|
|
$
|
(2.2
|
)
|
|
$
|
(40.2
|
)
|
|
$
|
(15.6
|
)
|
|
$
|
(60.3
|
)
|
|
$
|
0.1
|
|
|
$
|
(4.1
|
)
|
Lean hog contracts
|
|
186.7
|
|
|
145.8
|
|
|
61.2
|
|
|
225.3
|
|
|
17.6
|
|
|
2.1
|
|
||||||
Interest rate swaps
|
|
—
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign exchange contracts
|
|
2.4
|
|
|
(2.8
|
)
|
|
0.6
|
|
|
(2.4
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
186.9
|
|
|
$
|
102.9
|
|
|
$
|
46.1
|
|
|
$
|
162.6
|
|
|
$
|
17.7
|
|
|
$
|
(2.0
|
)
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Corn
|
|
1,025,000
|
|
|
11,705,000
|
|
|
Bushels
|
|
|
Gains Recognized in Earnings on Derivative
|
|
Losses Recognized in Earnings on Related Hedged Item
|
||||||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts
|
|
$
|
2.5
|
|
|
$
|
2.8
|
|
|
$
|
(2.5
|
)
|
|
$
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts
|
|
$
|
6.9
|
|
|
$
|
5.0
|
|
|
$
|
(6.8
|
)
|
|
$
|
(4.8
|
)
|
|
|
Minimum
|
|
Maximum
|
|
Metric
|
||
Commodities:
|
|
|
|
|
|
|
||
Lean hogs
|
|
200,000
|
|
|
223,240,000
|
|
|
Pounds
|
Corn
|
|
45,000
|
|
|
24,140,000
|
|
|
Bushels
|
Soybean meal
|
|
900
|
|
|
50,600
|
|
|
Tons
|
Soybeans
|
|
55,000
|
|
|
4,810,000
|
|
|
Bushels
|
Wheat
|
|
—
|
|
|
5,190,000
|
|
|
Bushels
|
Natural gas
|
|
7,790,000
|
|
|
10,720,000
|
|
|
Million BTU
|
Heating oil
|
|
630,000
|
|
|
2,100,000
|
|
|
Gallons
|
Live cattle
|
|
2,320,000
|
|
|
13,440,000
|
|
|
Pounds
|
Diesel
|
|
3,619,000
|
|
|
17,444,000
|
|
|
Gallons
|
Crude oil
|
|
9,000
|
|
|
36,000
|
|
|
Barrels
|
Foreign currency
(1)
|
|
13,206,842
|
|
|
58,507,350
|
|
|
U.S. Dollars
|
(1)
|
Amounts represent the U.S. dollar equivalent of various foreign currency contracts.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Commodity contracts
|
|
$
|
(4.8
|
)
|
|
$
|
10.4
|
|
|
$
|
7.1
|
|
|
$
|
(0.7
|
)
|
Foreign exchange contracts
|
|
0.8
|
|
|
—
|
|
|
1.1
|
|
|
(0.6
|
)
|
||||
Total
|
|
$
|
(4.0
|
)
|
|
$
|
10.4
|
|
|
$
|
8.2
|
|
|
$
|
(1.3
|
)
|
NOTE 4
:
|
DEBT
|
NOTE 5
:
|
PENSION PLANS
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Service cost
|
|
$
|
12.8
|
|
|
$
|
13.8
|
|
|
$
|
38.4
|
|
|
$
|
44.0
|
|
Interest cost
|
|
20.3
|
|
|
20.0
|
|
|
61.0
|
|
|
58.0
|
|
||||
Expected return on plan assets
|
|
(24.7
|
)
|
|
(25.5
|
)
|
|
(74.0
|
)
|
|
(69.7
|
)
|
||||
Net amortization
|
|
2.3
|
|
|
0.2
|
|
|
6.9
|
|
|
2.6
|
|
||||
Net periodic pension cost
|
|
$
|
10.7
|
|
|
$
|
8.5
|
|
|
$
|
32.3
|
|
|
$
|
34.9
|
|
NOTE 6
:
|
EQUITY
|
|
|
Three Months Ended
|
||||||||||||||||||||||
|
|
October 2, 2016
|
|
September 27, 2015
|
||||||||||||||||||||
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Translation adjustment arising during the period
|
|
$
|
19.9
|
|
|
$
|
(0.1
|
)
|
|
$
|
19.8
|
|
|
$
|
(14.4
|
)
|
|
$
|
—
|
|
|
$
|
(14.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Actuarial gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to cost of sales
|
|
1.3
|
|
|
(0.5
|
)
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to SG&A
|
|
1.0
|
|
|
(0.5
|
)
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedge accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains (losses) arising during the period
|
|
153.9
|
|
|
(59.7
|
)
|
|
94.2
|
|
|
(6.9
|
)
|
|
2.7
|
|
|
(4.2
|
)
|
||||||
Gains reclassified to sales
|
|
(50.5
|
)
|
|
19.6
|
|
|
(30.9
|
)
|
|
(55.3
|
)
|
|
21.6
|
|
|
(33.7
|
)
|
||||||
Losses (gains) reclassified to cost of sales
|
|
(3.2
|
)
|
|
1.2
|
|
|
(2.0
|
)
|
|
15.7
|
|
|
(6.1
|
)
|
|
9.6
|
|
||||||
Losses reclassified to SG&A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
||||||
Losses reclassified to interest expense
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total other comprehensive income (loss)
|
|
$
|
122.5
|
|
|
$
|
(40.0
|
)
|
|
$
|
82.5
|
|
|
$
|
(60.1
|
)
|
|
$
|
18.2
|
|
|
$
|
(41.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Nine Months Ended
|
||||||||||||||||||||||
|
|
October 2, 2016
|
|
September 27, 2015
|
||||||||||||||||||||
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
|
Before Tax
|
|
Tax
|
|
After Tax
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Translation adjustment arising during the period
|
|
$
|
12.1
|
|
|
$
|
(0.5
|
)
|
|
$
|
11.6
|
|
|
$
|
(101.7
|
)
|
|
$
|
11.0
|
|
|
$
|
(90.7
|
)
|
Translation losses reclassified to non-operating loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54.6
|
|
|
(19.1
|
)
|
|
35.5
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Actuarial gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76.1
|
|
|
(29.8
|
)
|
|
46.3
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to cost of sales
|
|
3.7
|
|
|
(1.7
|
)
|
|
2.0
|
|
|
1.7
|
|
|
(0.7
|
)
|
|
1.0
|
|
||||||
Amortization of actuarial losses and prior service credits reclassified to SG&A
|
|
3.1
|
|
|
(1.4
|
)
|
|
1.7
|
|
|
0.7
|
|
|
(0.3
|
)
|
|
0.4
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Hedge accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains arising during the period
|
|
186.9
|
|
|
(72.1
|
)
|
|
114.8
|
|
|
102.9
|
|
|
(40.5
|
)
|
|
62.4
|
|
||||||
Gains reclassified to sales
|
|
(61.8
|
)
|
|
24.0
|
|
|
(37.8
|
)
|
|
(225.3
|
)
|
|
87.7
|
|
|
(137.6
|
)
|
||||||
Losses reclassified to cost of sales
|
|
15.6
|
|
|
(6.1
|
)
|
|
9.5
|
|
|
60.3
|
|
|
(23.4
|
)
|
|
36.9
|
|
||||||
Losses reclassified to SG&A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.4
|
|
|
(0.4
|
)
|
|
2.0
|
|
||||||
Losses reclassified to interest expense
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total other comprehensive income (loss)
|
|
$
|
159.7
|
|
|
$
|
(57.8
|
)
|
|
$
|
101.9
|
|
|
$
|
(28.3
|
)
|
|
$
|
(15.5
|
)
|
|
$
|
(43.8
|
)
|
NOTE 7
:
|
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.
|
|
|
October 2, 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
|
|
$
|
80.5
|
|
|
$
|
8.4
|
|
|
$
|
—
|
|
|
$
|
88.9
|
|
|
$
|
10.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10.8
|
|
Foreign exchange contracts
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
||||||||||||
Insurance contracts
|
|
—
|
|
|
74.7
|
|
|
—
|
|
|
74.7
|
|
|
—
|
|
|
70.0
|
|
|
—
|
|
|
70.0
|
|
||||||||
Total
|
|
$
|
80.5
|
|
|
$
|
84.4
|
|
|
$
|
—
|
|
|
$
|
164.9
|
|
|
$
|
10.8
|
|
|
$
|
70.0
|
|
|
$
|
—
|
|
|
$
|
80.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commodity contracts
|
|
—
|
|
|
8.3
|
|
|
—
|
|
|
8.3
|
|
|
18.6
|
|
|
17.1
|
|
|
—
|
|
|
35.7
|
|
||||||||
Interest rate swaps
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
||||||||
Foreign exchange contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
||||||||
Total
|
|
$
|
—
|
|
|
$
|
8.5
|
|
|
$
|
—
|
|
|
$
|
8.5
|
|
|
$
|
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 which is based on the quoted market price of the underlying securities and classified within Level 2.
|
|
|
October 2, 2016
|
|
January 3, 2016
|
||||||||||||
|
|
Fair
Value |
|
Carrying Value
|
|
Fair
Value |
|
Carrying Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
Long-term debt, including current portion
|
|
$
|
2,383.0
|
|
|
$
|
2,302.0
|
|
|
$
|
2,336.8
|
|
|
$
|
2,263.7
|
|
NOTE 8
:
|
CONTINGENCIES
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Sales:
|
|
|
|
|
|
|
|
|
||||||||
Segment sales—
|
|
|
|
|
|
|
|
|
||||||||
Fresh Pork
|
|
$
|
1,286.2
|
|
|
$
|
1,210.8
|
|
|
$
|
3,756.6
|
|
|
$
|
3,909.4
|
|
Packaged Meats
|
|
1,682.9
|
|
|
1,630.6
|
|
|
5,084.9
|
|
|
4,885.8
|
|
||||
Hog Production
|
|
711.4
|
|
|
759.8
|
|
|
2,008.1
|
|
|
2,350.8
|
|
||||
International
|
|
387.0
|
|
|
365.0
|
|
|
1,075.2
|
|
|
1,047.7
|
|
||||
Total segment sales
|
|
4,067.5
|
|
|
3,966.2
|
|
|
11,924.8
|
|
|
12,193.7
|
|
||||
Intersegment sales—
|
|
|
|
|
|
|
|
|
||||||||
Fresh Pork
|
|
(17.5
|
)
|
|
(15.2
|
)
|
|
(51.6
|
)
|
|
(44.0
|
)
|
||||
Packaged Meats
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
||||
Hog Production
|
|
(500.4
|
)
|
|
(534.0
|
)
|
|
(1,503.2
|
)
|
|
(1,606.5
|
)
|
||||
International
|
|
(11.0
|
)
|
|
(10.9
|
)
|
|
(32.4
|
)
|
|
(33.9
|
)
|
||||
Total intersegment sales
|
|
(528.9
|
)
|
|
(560.1
|
)
|
|
(1,587.3
|
)
|
|
(1,684.5
|
)
|
||||
Consolidated sales
|
|
$
|
3,538.6
|
|
|
$
|
3,406.1
|
|
|
$
|
10,337.5
|
|
|
$
|
10,509.2
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating profit (loss):
|
|
|
|
|
|
|
|
|
||||||||
Fresh Pork
|
|
76.7
|
|
|
14.1
|
|
|
234.5
|
|
|
32.2
|
|
||||
Packaged Meats
|
|
136.8
|
|
|
112.3
|
|
|
516.8
|
|
|
461.1
|
|
||||
Hog Production
|
|
34.5
|
|
|
47.1
|
|
|
(33.8
|
)
|
|
79.8
|
|
||||
International
|
|
28.1
|
|
|
15.3
|
|
|
61.5
|
|
|
46.0
|
|
||||
Corporate
|
|
(29.8
|
)
|
|
(35.1
|
)
|
|
(85.5
|
)
|
|
(91.1
|
)
|
||||
Consolidated operating profit
|
|
$
|
246.3
|
|
|
$
|
153.7
|
|
|
$
|
693.5
|
|
|
$
|
528.0
|
|
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
$62.6 million
primarily due to lower live hog market prices resulting from higher hog supplies in the U.S.
|
▪
|
Packaged Meats operating profit increased by $
24.5 million
primarily as a result of higher selling prices and volumes.
|
▪
|
Hog Production operating results decreased by
$12.6 million
primarily as a result of lower live hog market prices, partially offset by lower feed costs.
|
▪
|
International operating profit increased by
$12.8 million
primarily due to higher sales volume and prices, and lower feed costs in our European operations.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
October 2,
2016 |
|
September 27,
2015 |
||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||
Net income
|
|
$
|
143.8
|
|
|
$
|
83.3
|
|
|
$
|
402.6
|
|
|
$
|
284.5
|
|
Interest expense
|
|
32.0
|
|
|
32.3
|
|
|
96.8
|
|
|
98.5
|
|
||||
Income tax expense
|
|
70.5
|
|
|
38.1
|
|
|
194.1
|
|
|
132.9
|
|
||||
Depreciation and amortization
|
|
61.6
|
|
|
58.5
|
|
|
180.5
|
|
|
174.9
|
|
||||
EBITDA
|
|
307.9
|
|
|
212.2
|
|
|
874.0
|
|
|
690.8
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Non-operating loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12.1
|
|
||||
Adjusted EBITDA
|
|
$
|
307.9
|
|
|
$
|
212.2
|
|
|
$
|
874.0
|
|
|
$
|
702.9
|
|
•
|
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.
|
|
|
Three Months Ended
|
|
|
|||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales
|
|
$
|
3,538.6
|
|
|
$
|
3,406.1
|
|
|
4
|
%
|
Cost of sales
|
|
3,066.1
|
|
|
3,021.1
|
|
|
1
|
%
|
||
Gross profit
|
|
472.5
|
|
|
385.0
|
|
|
23
|
%
|
||
Selling, general and administrative expenses
|
|
233.8
|
|
|
238.4
|
|
|
(2
|
)%
|
||
Income from equity method investments
|
|
(7.6
|
)
|
|
(7.1
|
)
|
|
7
|
%
|
||
Operating profit
|
|
246.3
|
|
|
153.7
|
|
|
60
|
%
|
||
Interest expense
|
|
32.0
|
|
|
32.3
|
|
|
(1
|
)%
|
||
|
|
214.3
|
|
|
121.4
|
|
|
77
|
%
|
||
Income tax expense
|
|
70.5
|
|
|
38.1
|
|
|
85
|
%
|
||
Net income
|
|
$
|
143.8
|
|
|
$
|
83.3
|
|
|
73
|
%
|
|
|
|
|
|
|
|
▪
|
Sales increased
4%
primarily due to higher domestic and international meat volumes and selling prices.
|
▪
|
Gross profit increased
23%
primarily as a result of higher sales, lower domestic pork processing raw material costs and lower hog feed costs in the U.S. and Europe.
|
|
|
Nine Months Ended
|
|
|
|||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales
|
|
$
|
10,337.5
|
|
|
$
|
10,509.2
|
|
|
(2
|
)%
|
Cost of sales
|
|
8,995.6
|
|
|
9,299.6
|
|
|
(3
|
)%
|
||
Gross profit
|
|
1,341.9
|
|
|
1,209.6
|
|
|
11
|
%
|
||
Selling, general and administrative expenses
|
|
669.7
|
|
|
692.9
|
|
|
(3
|
)%
|
||
Income from equity method investments
|
|
(21.3
|
)
|
|
(11.3
|
)
|
|
88
|
%
|
||
Operating profit
|
|
693.5
|
|
|
528.0
|
|
|
31
|
%
|
||
Interest expense
|
|
96.8
|
|
|
98.5
|
|
|
(2
|
)%
|
||
Non-operating loss
|
|
—
|
|
|
12.1
|
|
|
(100
|
)%
|
||
|
|
596.7
|
|
|
417.4
|
|
|
43
|
%
|
||
Income tax expense
|
|
194.1
|
|
|
132.9
|
|
|
46
|
%
|
||
Net income
|
|
$
|
402.6
|
|
|
$
|
284.5
|
|
|
42
|
%
|
|
|
|
|
|
|
|
▪
|
Sales decreased
2%
primarily as a result of more favorable hedging results in the prior year, lower average selling prices of domestic fresh pork and the impact of foreign currency translation. These declines were partially offset by higher average selling prices of domestic packaged meats products and higher sales volume in Europe.
|
▪
|
Gross profit increased
11%
primarily as a result of lower domestic pork processing raw material costs and lower hog feed costs in the U.S. and Europe.
|
▪
|
Selling, general and administrative expenses decreased 3% primarily due to an increase in the cash surrender value of company-owned life insurance policies, the reimbursement of expenses associated with a legal settlement and a reduction in advertising expenses.
|
▪
|
Equity income in the prior year was negatively impacted by our former investment in CFG. Equity income also increased due to improved results in our Mexican joint ventures.
|
▪
|
The non-operating loss in the prior year is primarily related to a loss on debt extinguishment of $12.8 million as a result of the Tender Offer.
|
|
|
Three Months Ended
|
|
|
|||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales:
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
1,286.2
|
|
|
$
|
1,210.8
|
|
|
6
|
%
|
Packaged Meats
|
|
1,682.9
|
|
|
1,630.6
|
|
|
3
|
%
|
||
Hog Production
|
|
711.4
|
|
|
759.8
|
|
|
(6
|
)%
|
||
International
|
|
387.0
|
|
|
365.0
|
|
|
6
|
%
|
||
Total segment sales
|
|
4,067.5
|
|
|
3,966.2
|
|
|
3
|
%
|
||
Intersegment sales
|
|
(528.9
|
)
|
|
(560.1
|
)
|
|
(6
|
)%
|
||
Consolidated sales
|
|
$
|
3,538.6
|
|
|
$
|
3,406.1
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|||||
Operating profit (loss):
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
76.7
|
|
|
14.1
|
|
|
444
|
%
|
||
Packaged Meats
|
|
136.8
|
|
|
112.3
|
|
|
22
|
%
|
||
Hog Production
|
|
34.5
|
|
|
47.1
|
|
|
(27
|
)%
|
||
International
|
|
28.1
|
|
|
15.3
|
|
|
84
|
%
|
||
Corporate
|
|
(29.8
|
)
|
|
(35.1
|
)
|
|
15
|
%
|
||
Consolidated operating profit
|
|
$
|
246.3
|
|
|
$
|
153.7
|
|
|
60
|
%
|
|
|
|
|
|
|
|
▪
|
Sales increased
6%
due to a 5% increase in volume and a 1% increase in average selling prices.
|
▪
|
Operating profit increased primarily due to lower live hog market prices relative to fresh pork market prices.
|
▪
|
The number of hogs processed increased 9%.
|
▪
|
Sales increased
3%
due to a
2%
increase in average selling prices and a 1% increase in volume.
|
▪
|
Operating profit increased primarily due to higher sales while raw material costs were relatively unchanged.
|
▪
|
Sales decreased
6%
due to lower live hog market prices, partially offset by a higher volume. The number of market hogs sold increased 4% while average hog weights were down 2%.
|
▪
|
Operating profit decreased due to lower live hog market prices, partially offset by lower feed costs. Operating results benefited from favorable hedging activities in both years.
|
▪
|
Sales increased
6%
primarily due to a
5%
increase in volume and a 5% increase in average selling prices in our European operations, partially offset by the impact of foreign currency translation.
|
▪
|
Operating profit increased due to higher sales and lower feed costs in our European operations.
|
|
|
Nine Months Ended
|
|
|
|||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
|
%
Change |
|||||
|
|
(in millions)
|
|
|
|||||||
Sales:
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
$
|
3,756.6
|
|
|
$
|
3,909.4
|
|
|
(4
|
)%
|
Packaged Meats
|
|
5,084.9
|
|
|
4,885.8
|
|
|
4
|
%
|
||
Hog Production
|
|
2,008.1
|
|
|
2,350.8
|
|
|
(15
|
)%
|
||
International
|
|
1,075.2
|
|
|
1,047.7
|
|
|
3
|
%
|
||
Total segment sales
|
|
11,924.8
|
|
|
12,193.7
|
|
|
(2
|
)%
|
||
Intersegment sales
|
|
(1,587.3
|
)
|
|
(1,684.5
|
)
|
|
(6
|
)%
|
||
Consolidated sales
|
|
$
|
10,337.5
|
|
|
$
|
10,509.2
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|||||
Operating profit (loss):
|
|
|
|
|
|
|
|||||
Fresh Pork
|
|
234.5
|
|
|
32.2
|
|
|
628
|
%
|
||
Packaged Meats
|
|
516.8
|
|
|
461.1
|
|
|
12
|
%
|
||
Hog Production
|
|
(33.8
|
)
|
|
79.8
|
|
|
(142
|
)%
|
||
International
|
|
61.5
|
|
|
46.0
|
|
|
34
|
%
|
||
Corporate
|
|
(85.5
|
)
|
|
(91.1
|
)
|
|
6
|
%
|
||
Consolidated operating profit
|
|
$
|
693.5
|
|
|
$
|
528.0
|
|
|
31
|
%
|
▪
|
Sales decreased
4%
primarily due to lower average selling prices.
|
▪
|
Operating profit increased primarily due to lower live hog market prices and slightly higher fresh pork market prices.
|
▪
|
The number of hogs processed increased 3%.
|
▪
|
Sales increased
4%
primarily due to an increase in average selling prices.
|
▪
|
Operating profit improved as a result of higher sales prices, which more than offset higher raw material costs.
|
▪
|
Sales decreased
15%
primarily due to significantly lower live hog market prices and more favorable hedging activities in the prior year.
|
▪
|
Operating results decreased primarily due to lower sales, partially offset by lower feed costs.
|
▪
|
Sales increased
3%
due to an 8% increase in volume in our European operations, partially offset by the impact of foreign currency translation.
|
▪
|
Operating profit increased primarily due to higher sales and lower feed costs in our European operations and improved results from our Mexican joint ventures. Equity income in the prior year was negatively impacted by $4.9 million in losses from our former investment in CFG.
|
|
|
October 2, 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
|
|
275.0
|
|
|
—
|
|
|
(82.6
|
)
|
|
—
|
|
|
192.4
|
|
|||||
International facilities
|
|
169.5
|
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
(57.4
|
)
|
|
111.4
|
|
|||||
Total credit facilities
|
|
$
|
1,469.5
|
|
|
$
|
(0.5
|
)
|
|
$
|
(82.8
|
)
|
|
$
|
(57.4
|
)
|
|
$
|
1,328.8
|
|
|
|
Nine Months Ended
|
||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
||||
|
|
(in millions)
|
||||||
Net cash flows from operating activities
|
|
$
|
207.3
|
|
|
$
|
87.7
|
|
▪
|
Cash paid to outside hog suppliers decreased due to a 5% decline in live hog market prices.
|
▪
|
The current year included net tax receipts of
$16.5 million
for domestic income taxes compared to
$91.3 million
paid in the prior year.
|
▪
|
In the current year, we received $
187.1 million
for the settlement of derivative contracts and for margin requirements compared to $
132.3 million
in the prior year.
|
▪
|
Cash paid for grain and other ingredients purchased by the Hog Production segment increased approximately
$37.0 million
from the prior year.
|
▪
|
In the current year, we contributed
$225.0 million
to our qualified pension plans compared to
$200.0 million
in the prior year.
|
▪
|
In the prior year we received a cash dividend of
$14.3 million
from one of our Mexican joint ventures.
|
|
|
Nine Months Ended
|
||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
||||
|
|
(in millions)
|
||||||
Proceeds from sale of equity interest in CFG
|
|
$
|
—
|
|
|
$
|
354.0
|
|
Capital expenditures
|
|
(273.9
|
)
|
|
$
|
(240.3
|
)
|
|
Net expenditures from breeding stock transactions
|
|
(36.3
|
)
|
|
(41.6
|
)
|
||
Other
|
|
3.2
|
|
|
(32.3
|
)
|
||
Net cash flows from investing activities
|
|
$
|
(307.0
|
)
|
|
$
|
39.8
|
|
▪
|
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. Current year expenditures include costs related to a new domestic enterprise resource planning system.
|
▪
|
In June 2015, we sold our entire equity interest in CFG for
$354.0 million
in cash.
|
▪
|
In the prior year, we incurred costs for the construction of a distribution center that was a pending sale-leaseback, as shown in other investing activities above.
|
|
|
Nine Months Ended
|
||||||
|
|
October 2,
2016 |
|
September 27,
2015 |
||||
|
|
(in millions)
|
||||||
Proceeds from the issuance of long-term debt
|
|
$
|
30.0
|
|
|
$
|
—
|
|
Principal payments on long-term debt and capital lease obligations
|
|
(1.7
|
)
|
|
(409.0
|
)
|
||
Proceeds from Securitization Facility
|
|
50.0
|
|
|
290.0
|
|
||
Payments on Securitization Facility
|
|
(50.0
|
)
|
|
(290.0
|
)
|
||
Net proceeds (payments) on revolving credit facilities
|
|
18.3
|
|
|
(3.7
|
)
|
||
Payment of dividends
|
|
(375.9
|
)
|
|
(30.0
|
)
|
||
Net cash flows from financing activities
|
|
$
|
(329.3
|
)
|
|
$
|
(442.7
|
)
|
▪
|
In the current year, we received proceeds of
$30.0 million
from a long-term, local currency financing in Romania.
|
▪
|
In the prior year, we paid $258.1 million of principal payments as a result of the Tender Offer as well as $150.0 million on our Rabobank term loan.
|
▪
|
Accounts payable decreased by
$166.5 million
mainly due to the timing of payments.
|
▪
|
Inventory increased by
$215.2 million
attributable to an increase in seasonal ham inventory as we prepare for the holiday season.
|
▪
|
The Company has $426.2 million of senior unsecured public notes maturing on July 1, 2017. Accordingly, this debt was classified as a current liability as of October 2, 2016. While we may choose to use other sources of capital to fund this upcoming maturity, adequate liquidity resources are available to address this maturity in its entirety.
|
▪
|
In September 2016, the Company issued a notice to bondholders to call $250.0 million principal of our bonds maturing August 1, 2018, at 101%. Accordingly, this debt was classified as a current liability as of October 2, 2016. The bonds were redeemed on October 21, 2016. We expect to recognize a loss on debt extinguishment of $4.6 million in the fourth quarter of 2016 as a result of the redemption.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
October 2,
2016 |
|
January 3,
2016 |
||||
|
|
(in millions)
|
||||||
Grains
|
|
$
|
42.6
|
|
|
$
|
18.9
|
|
Livestock
|
|
11.6
|
|
|
1.4
|
|
||
Energy
|
|
8.6
|
|
|
3.3
|
|
||
Foreign currency
|
|
5.8
|
|
|
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 October 2, 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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