Exhibit D

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l0-K405
1
000l.txt
FORM l0-K405

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K


[  X  ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2000
 
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to                        
 
 
Commission file number: 0-2258
SMITHFIELD FOODS, INC.
(Exact name of registrant as specified in its charter)
 
Virginia
(State or other jurisdiction
of incorporation or organization)
52-0845861
(I.R.S. Employer
Identification No.)
 
200 Commerce Street Smithfield, Virginia
(Address of principal executive offices)
23430
(Zip Code)
 
(757) 365-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 


Title of each class

Common Stock, $.50 par value per share


Name of each exchange on which registered

New York Stock Exchange

 
Securities registered pursuant to Section 12(g) of the Act:
None

(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [  X  ] No [_]

The aggregate market value of the shares of Registrant's Common Stock held by non-affiliates as of July 12, 2000 was approximately $1,123,815,666. This figure was calculated by multiplying (i) the $27.19 last sales price of Registrant's Common Stock as reported on the New York Stock Exchange on July 12,


Part III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Part IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

SIGNATURES

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


PART I

Item 1. Business

General

Smithfield Foods, Inc. is the world's largest pork processor and hog producer. As a holding company, Smithfield Foods conducts its business through two groups, the Meat Processing Group and the Hog Production Group, each comprised of a number of subsidiaries. In this discussion, the terms "Smithfield Foods" and "the Company" include subsidiaries, unless otherwise indicated.

Meat Processing Group

The Meat Processing Group produces domestically and internationally a wide variety of fresh pork and processed meat products and markets them nationwide and to over 25 foreign markets, including Canada, Poland, France, Japan and Mexico. The Meat Processing Group consists primarily of six domestic processing subsidiaries and four international pork processing entities. All these subsidiaries are wholly-owned except as indicated below. Collectively, these subsidiaries currently operate 48 slaughtering and further processing plants.

Meat Processing Group



Subsidiary

Headquarters

Fiscal 2000 Sales

John Morrell & Co.Cincinnati, Ohio$1.5 billion
The Smithfield Packing Company, IncorporatedSmithfield, Virginia$1.5 billion
Schneider Corporation (63%-owned)Kitchener, Ontario, Canada$640 million
Gwaltney of Smithfield, Ltd.Smithfield, Virginia$540 million
Animex (85%-owned)Warsaw, Poland$345 million
Lykes Meat Group, Inc.Plant City, Florida$183 million
Patrick Cudahy IncorporatedCudahy, Wisconsin$179 million
Societe Bretonne de SalaisonsLampaul Guimiliau, France$87 million
North Side Foods Corp.Arnold, Pennsylvania$71 million
Societe Financiere de Gestion et de ParticipationQuimper and Lyon, France$70 million*


*Estimated annualized sales

Hog Production Group

To complement its processing operations, the Company has vertically integrated into hog production through its Hog Production Group, which currently provides the Meat Processing Group with approximately 50% of its live hog requirements. The Hog Production Group operates numerous production facilities through three wholly-owned subsidiaries headquartered in North Carolina as indicated below.

Hog Production Group


Subsidiary

Principal Locations

Number of Sows

Annualized Market Hog
Production

Carroll's Foods, Inc.North Carolina and Virginia180,0002.9 million
Brown's of Carolina,
Inc.*
North Carolina, Utah, Colorado and
South Carolina
170,0002.7 million
Murphy Farms, Inc.North Carolina, Missouri, Oklahoma,
Illinois, South Dakota and Texas
345,0006.0 million

*Numbers include 100% of the sows and market hogs produced by Circle Four Farms, LLC, a wholly-owned subsidiary of Smithfield Foods.
1

The discussion below of the Company's business first summarizes the Company's strategic initiatives and its historical expansion through a combination of internal growth and acquisitions. We will next discuss the Meat Processing Group's United States processing operations and international processing operations, then the Hog Production Group.

Business Strategy

The Company's business is based around four strategic initiatives:

  • vertical integration into hog production through Company-owned hog production operations and long-term partnerships and alliances with other large and efficient hog producers;
  • use of genetics which produce hogs that are among the leanest commercially available to enable the Company to market highly differentiated pork products;
  • continued growth through opportunistic strategic acquisitions, both domestically and internationally; and
  • balancing fresh pork and processed meats to maximize the value from all fresh pork cuts.

Historical Expansion and Acquisitions

Since 1975, when current management assumed control, Smithfield Foods has expanded both its production capacity and its markets through a combination of strong internal growth and the acquisition of regional and multi-regional companies with well-recognized brand identities. Beginning in fiscal 1999, the


and business experience during the past five years of each of the executive officers of the Company. The Board of Directors elects executive officers to hold office until the next annual meeting of the Board of Directors or until their successors are elected, or until their resignation or removal.


Name and Age

Position with the Company

Business Experience During Past Five Years

Joseph W. Luter, III (61) Chairman of the Board, President
and Chief Executive Officer of the
Company

Mr. Luter has served as Chairman of the Board and Chief Executive Officer since 1975. Prior to May 1995, and since June, 2000, he has also served as President of the Company.

Lewis R. Little (56) President and Chief Operating
Officer of Smithfield Packing and
Lykes
Mr. Little was elected President and Chief Operating Officer of the Company and Smithfield Packing in November 1996 and President and Chief Operating Officer of Lykes in June 1998. Mr. Little served as Chief Operating Officer of the Company until June, 2000. From May 1993 until November 1996, he was President and Chief Operating Officer of Gwaltney.

Joseph B. Sebring (53) President and Chief Operating
Officer of John Morrell
Mr. Sebring has served as President and Chief Operating Officer of John Morrell since May 1994.

C. Larry Pope (45) Vice President and Chief Financial
Officer
Mr. Pope served as Vice President, Finance of the Company from July 1998 until September 1999. He served as Vice President and Controller from August 1995 to July 1998, and prior to that time as Controller.

Richard J. M. Poulson (61) Vice President, General Counsel
and Senior Advisor to the Chairman
Mr. Poulson joined the Company as Vice President and Senior Advisor to the Chairman in July 1998. Between 1994 and 1998, he was a senior managing director of the Appian Group, a private merchant bank with offices in Washington, D.C. and Paris. Prior to 1994, Mr. Poulson was a senior corporate partner with the law firm Hogan & Hartson in Washington, D.C. and London.


11
PART II

Item 5. Market for Company's Common Equity and Related Stockholder Matters

Market Information

The Common Stock of the Company has traded on The New York Stock Exchange under the symbol "SFD" since September 28, 1999. Prior to that the Common Stock traded on The Nasdaq National Market under the symbol "SFDS." The following table shows the high and low sales price of the Common Stock of the Company for each quarter of fiscal 2000 and 1999.


 

Range of Sales Price


  High

  Low

Fiscal year ended May 2, 1999
   First quarter31.0022.62
   Second quarter27.0014.69
   Third quarter36.1219.62
   Fourth quarter30.0020.00
 
Fiscal year ended April 30, 2000
   First quarter34.0623.50
   Second quarter31.8821.38
   Third quarter26.0016.69
   Fourth quarter22.7514.88

Holders

As of July 12, 2000, there were 1,253 record holders of the Common Stock. In addition, there were on such date 244 record holders of the Exchangeable Shares issued by Smithfield Foods' subsidiary Smithfield Canada Limited, an Ontario corporation. The terms of such Exchangeable Shares are incorporated by reference as an exhibit to this Annual Report on Form 10-K.

Dividends

The Company has never paid a cash dividend on its Common Stock and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. In addition, the terms of certain of the Company's debt agreements prohibit the payment of cash dividends on the Common Stock. The payment of cash dividends, if any, would be made only from assets legally available for that purpose and would depend on the Company's financial condition, results of operations, current and anticipated capital requirements, restrictions under then existing debt instruments and other factors then deemed relevant by the board of directors.

Item 6. Selected Financial Data

The selected consolidated financial data set forth below for the fiscal years indicated were derived from the Company's audited consolidated financial statements. The information should be read in conjunction with the Company's consolidated financial statements (including the notes thereto) and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in, or incorporated by reference into this report.

FISCAL YEAR ENDED

  April 30,
2000
  May 2,
1999
  May 3,
1998
  April 27,
1997
  April 28
1996
 




(In thousands, except per share data)
INCOME STATEMENT DATA:
   Sales$5,150,469$3,774,989$3,867,442 $3,870,611 $2,383,893
   Costs of sales4,456,4033,235,414 3,479,6293,546,8162,202,112
 ========================================
   Gross profit694,066539,575387,813323,795181,781
   Selling, general and administrative expenses390,634295,610219,861191,225103,095
   Depreciation expense109,89363,52442,30035,82525,979
   Interest expense71,94440,52131,89126,21120,942
   Minority interests1,608(3,518)1992,8571,514
   Nonrecurring charge--12,600--
 --------------------------------------------------
   Income from continuing operations before income taxes119,987143,43880,96267,67730,251
   Income taxes44,87548,55427,56222,74010,465
 --------------------------------------------------
   Income from continuing operations75,11294,88453,40044,93719,786
 --------------------------------------------------
   Income (loss) from discontinued operations----(3,900)
 --------------------------------------------------
   Net Income$ 75,112$ 94,884$ 53,40044,93715,886
 ========================================
DILUTED INCOME (LOSS) PER SHARE:
   Continuing operations$ 1.52$ 2.32$ 1.34$ 1.17$ 0.53
   Discontinued operations ---(0.11)
 --------------------------------------------------
   Net income$ 1.52$ 2.32$ 1.34$ 1.17$ 0.42
 --------------------------------------------------
   Average diluted shares outstanding49,38640,96239,73238,55835,000

BALANCE SHEET DATA:
   Working capital$ 609,857$ 215,865$ 259,188164,31288,026
   Total assets3,129,6131,771,6141,083,645995,254857,619
   Low term debt and capital lease obligations1,187,770594,241407,272288,486188,618
   Shareholders' equity902,909542,246361,010307,486242,514

OPERATING DATA:
   Fresh pork sales (pounds)2,786,4002,687,4122,539,2212,320,4771,635,300
   Processed meats sales (pounds)2,192,1001,606,0211,370,2321,218,835839,341
   Total hogs purchased19,35819,09317,95216,86912,211

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

12

This discussion of management's views on the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements appearing elsewhere in this Form 10-K.

Introduction

Smithfield Foods, Inc. (the "Company") is comprised of a Meat Processing Group ("MPG") and a Hog Production Group ("HPGl'). The MPG consists primarily of six wholly owned domestic pork processing subsidiaries and four international pork processing entities. The HPG consists primarily of three hog production operations located in the United States and certain joint venture investments outside the United States.

Acquisitions

Several acquisitions affect the comparability of the results of operations for fiscal year 2000, 1999 and 1998 including the following:

In January of fiscal 2000, the Company completed the acquisition of Murphy Farms, Inc. ("MFI") and its affiliated companies for 11.1 million shares of the Company's common stock (subject to post-closing adjustments) and the assumption of approximately $203.0 million in debt, plus other liabilities. MFI is a hog


Investments in and net advances to subsidiaries, at cost plus equity in undistributed earnings 1,457,414   885,291
 --------------------
Other assets:
   Investment in partnerships54531,139
   Property, plant and equipment, net20,41221,422
   Other47,69142,447
 --------------------
      Total other assets68,64894,008
 --------------------
$1,604,437$1,037,525
 ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt$ 18,133$ 5,633
   Accounts payable6,9965,086
   Accrued expenses53,36861,254
 --------------------
      Total current liabilites78,49771,973
 --------------------
Long-term debt571,237385,470
Deferred income taxes and other noncurrent liabilites51,79437,936
 --------------------
Shareholders' equity902,909542.246
 --------------------
$1,604,437$1,037,525
 ================
The accompanying notes are an integral part of these statements


F-25
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SMITHFIELD FOODS, INC.

PARENT COMPANY STATEMENTS OF INCOME





  52 Weeks Ended
April 30, 2000
  52 Weeks Ended
May 2, 1999
  53 Weeks Ended
May 3, 1998



(In thousands)
Sales$        -$        -$        -
Cost of Sales(8,379)5,0739,589
 ---------------------------
Gross Profit8,379(5,073)(9,589)
 ---------------------------
General and administrative expenses, net of allocation to subsidiaries24,6968,3664,686
Depreciation expense2,2051,252843
Interest expense31,75624,93024,578
Nonrecurring charge--12,600
 ---------------------------
Loss before income tax benefit and equity in earnings of subsidiaries(50,278)(39,621)(52,296)
Income tax benefit(21,795)(16,677)(19,130)
 ---------------------------
Loss before equity in earnings of subsidiaries(28,483)(22,944)(33,166)
 ---------------------------
Equity in earnings of subsidiaries103,595117,82886,566
 ---------------------------
Net income$75,112$94,884$53,400
 =====================
The accompanying notes are an integral part of these statements

F-26


SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SMITHFIELD FOODS, INC.

PARENT COMPANY STATEMENTS OF CASH FLOWS



  52 Weeks Ended
April 30, 2000
  52 Weeks Ended
May 2, 1999
  53 Weeks Ended
May 3, 1998
 


(In thousands)
Cashflows from operating activities:
   Net Income$75,112$94,884$53,400
   Adjustments to reconcile net income to net cash provided by operating activities:
      Depreciation and amortization4,1192,7581,461
      (Gain) loss on sale of property, plant and equipment-  30-  
      Changes in operating assets and liabilities:
         Deferred income taxes and other noncurrent liabilities19,21423,14513,966
         Accounts receivable3,621(14,813)3,351
         Receivables from related parties4,051(4,051)1,414
         Other current assets(33,647)(84)(10,784)
         Accounts payable and accrued expenses(5,976)18,31314,243
         Refundable income taxes(529)842(4,089)
         Other assets(7,158)(17,600)(10,495)
 ------------------------------
   Net cash provided by operating activities53,807103,42462,467
 ------------------------------
Cashflows from investing activities:
   Capital expenditures(1,196)(4,377)(9,332)
Increase in investment in and net advances to subsidiaries
(217,547)(131,827)(235,117)
   Investments in partnerships30,59415,827(5,212)
 ------------------------------
      Net cash used in investing activities:(188,149)(120,377)(249,662)
Cash flows from financing activities:
   Proceeds from issuance of long-term debt225,000-  447,150
   Principal payments on long-term debt(26,633)(2,977)(252,317)
   Repurchase and retirement of common stock(73,145)-  -  
   Proceeds from exercise of stock options4,12112,154124
 ------------------------------
      Net cash provided by financing activities:129,3439,177194,957
 ------------------------------
Net (decrease) increase in cash and cash equivalents1(7,776)7,762
Cash and cash equivalents at beginning of year247,80038
 ------------------------------
Cash and cash equivalents at end of year$ 25$ 25$ 7,800
 =====================
The accompanying notes are an integral part of these st

F-27


Schedule I-Condensed Financial Information of Registrant

Smithfield Foods, Inc.

Notes to Parent Company Financial Statements

(Dollars In Thousands)

April 30, 2000 and May 2, 1999

  1. The Notes to Parent Company Financial Statements should be read in conjunction with the Registrant's Notes to Consolidated Financial Statements included herein.
  2. Restricted assets of Registrant: Existing loan convenants contain provisions which limit the amount of funds available for transfer from the subsidiaries to Smithfield Foods, Inc. without the consent of certain lenders.
  3. Accrued expenses as of April 30, 2000 and May 2, 1999 are as follows:

      2000   1999


    Self-insurance reserves$22,006$20,216
    Interest10,6268,957
    Other20,73632,081
     ------------------
    $53,368$61,254
    ==============

    1. Long-term Debt:

      In fiscal 2000, the Company increased the revolving credit facility borrowing from $300,000 to $650,000. The borrowings are prepayable and bear interest, at the Company's option, at various rates based on margins over the federal funds rate or Eurodollar rate and expires in July 2002.

      In fiscal 2000, the Company placed $225,000 ten-year senior secured notes. The $225,000 million in senior secured notes include $75,000 in variable rate debt, $100,000 of notes at 7.89% and $50,000 of notes at 8.44%. A substantial portion of the proceeds from the notes were advanced to the Registrant's subsidiaries.

      As of April 30, 2000, the Registrant guaranteed $18,171 of capital lease obligations of its subsidiaries.

      Scheduled maturities of the Registrant's long-term debt consists of the following:


      Fiscal Year  

       
       
      2001$ 18,133
      200218,084
      200325,473
      200464,886
      200526,414
      Thereafter436,380
      ---------
      $589,370
      =======

    1. The amount of dividends received from subsidiaries in fiscal 2000 and 1999 was $37,800 and $76,700 million, respectively.
    F-28
    1. In fiscal 1998, the Registrant's shareholders approved the reincorporation of the Registrant in Virginia from Delaware. The purpose of the reincorporation was to reduce annual franchise taxes and does not affect the Registrant's capitalization or the manner in which it operates.
    2. Supplemental disclosures of cash flow information:

      2000   1999   1998
    ---------------------------
         
    Interest paid, net of amount capitalized$ 39,107$28,180$20,901
    ---------------------------
    Income taxes paid$ 24,458$15,306$10,179
    ---------------------------
    Noncash investing and financing activities:
       Common stock issued for acquisitions$369,407$73,049     $   -   
    Updated August 14, 2015

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