United States-Smithfield Foods third quarter results full report.
UNITED STATES-$103 MILLION LOSS IN THREE MONTHS.
Smithfield Foods Announces Third Quarter Results
Source: Smithfield Foods \ March 12, 2009
SMITHFIELD, Va., March 12 /PRNewswire-FirstCall/ --Smithfield Foods, Inc. (NYSE: SFD) today announced third quarter results and commented on its improved balance sheet.
Third Quarter Highlights
Net loss was $103.1 million ($.72 per diluted share), including non-recurring items and charges
Non-GAAP loss from continuing operations, after adjusting for non-recurring items and mark to market charges, was $21.4 million ($.15 per diluted share)
The company favorably negotiated covenant amendments to its revolvers
Smithfield ended the quarter with $960 million in available liquidity
Debt was reduced by over $300 million, lowering debt to capitalization to 53%
Year-to-date capital expenditures were 55% lower than last year’s period
Packaged meats achieved record margins before restructuring charges
Hog production suffered substantial losses due to record high feed costs
Export demand remains historically strong
Results include a $84.8 million ($.38 per diluted share) Pork restructuring charge
The restructuring plan is expected to improve pre-tax results by $55 million in fiscal 2010 and $125 million in fiscal 2011
Groupe Smithfield merged with Campofrio; ownership stake raised to 37 percent
Smithfield’s U.S. sow herd liquidation reached 10 percent over the last 12 months
Following are the company’s sales and operating profit (loss) from continuing operations by segment:
Three Months Ended Nine Months Ended
February January February January
1, 27, 1, 27,
2009 2008 2009 2008
Sales: (in millions) (in millions)
Segment sales-
Pork $2,826.6 $2,605.3 $7,995.9 $7,177.0
International 333.2 358.8 1,141.0 879.7
Hog Production 660.5 558.0 2,135.1 1,778.4
Other 96.0 38.8 187.0 112.3
Total segment sales 3,916.3 3,560.9 11,459.0 9,947.4
Intersegment (568.1) (441.8) (1,821.9) (1,464.6)
Consolidated
sales $3,348.2 $3,119.1 $9,637.1 $8,482.8
Operating profit (loss):
Pork 129.4 $221.5 $284.5 $310.9
International 14.5 22.3 31.4 46.4
Hog Production (253.6) (80.7) (350.4) 30.9
Other (9.5) 7.0 (28.3) 30.6
Corporate (16.3) (16.0) (69.2) (51.3)
Consolidated operating
Profit (loss) $(135.5) $154.1 $(132.0) $367.5
The company reported a loss from continuing operations, including non-recurring charges and items, for the third quarter of fiscal 2009 of $105.5 million, or $.73 per diluted share. The loss from continuing operations on a non-GAAP basis, excluding the non-recurring items and charges, was $21.4 million, or $.15 per diluted share.
Sales were $3.3 billion versus $3.1 billion a year ago. The current quarter included 14 weeks compared to 13 weeks in last year’s third quarter.
The current quarterly results were affected by a number of non-recurring items and mark to market adjustments on derivative instruments. The table below presents the three months ended February 1, 2009, adjusting the reported loss from continuing operations, before and after tax, and the loss per diluted share adjusted for the impact of significant items.
Impact of Significant Items on Loss from Continuing Operations
For the Three Months Ending February 1, 2009
(in millions)
Per
Before After Diluted
Taxes Taxes Share
Reported GAAP measure $(130.0) $(105.5) $(.73)
Add back of significant items:
Restructuring charges in Pork segment 84.8 54.0 .38
Gain on sale of Groupe Smithfield
investment (56.0) (31.4) (.22)
Tax rate impact of Campofrio/Groupe
Smithfield merger - 20.1 .14
Cattle inventory write downs 18.8 12.0 .08
Gain on early extinguishment of debt (7.5) (4.8) (.03)
Mark to market adjustment on hedges 56..0 34.2 .23
Adjusted Non-GAAP measure $(33.9) $(21.4) $(.15)
Commentary
"Our results indicate that, despite the difficult environment and losses we have sustained in swine production, many parts of Smithfield are performing extremely well. Our focus on improving packaged meats results is paying off. We earned record margins in this business in the quarter. Once our restructuring plan takes hold, these margins are expected to widen even further," said C. Larry Pope, president and chief executive officer. "The pork results were more than offset by the restructuring charge and highly unfavorable conditions in the hog production segment. Our cost structure continued to reflect high-priced grain purchased last summer, which kept our raising costs at near-record levels while hog prices remained low. We expect that the recent decline in grain will begin to work its way through our cost structure, thereby providing us with better performance in our hog production operations. Our international businesses began to reflect the very weak European economy," he said. "I am also pleased that we continued to make significant progress on improving our balance sheet, reducing debt and increasing liquidity."
Current Liquidity High; Balance Sheet Improves
At the end of the third quarter Smithfield had $960 million in available liquidity. The company reduced overall indebtedness by over $700 million since the fourth quarter of fiscal 2008, including over $300 million in the third quarter. Debt to total capitalization has been reduced to 53 percent.
New Covenant Amendments
In February, Smithfield Foods entered into new covenant amendments to its U.S. and European credit facilities. The amendments provide, among other things, for a reduction of the applicable interest coverage ratio through the third quarter of fiscal 2010.
Pork
Record packaged meats results were offset in the pork segment by $84.8 million ($.38 per diluted share) of restructuring charges and weaker fresh pork margins. Fresh pork volume was flat on a comparable basis to last year.
Total packaged meats margins expanded substantially despite a modest volume decrease of four percent compared to a year ago due to price discipline and continued emphasis on operating efficiencies.
Export demand in several markets was significantly stronger than a year ago. Third-quarter exports last year included sales of 70 million pounds of pork carcasses to China, representing 22 percent of total exports. Even though there were no similar sales this quarter, export sales were down only two percent from the record levels of last year. Excluding the incremental carcass sales last year, export sales rose 26 percent. Smithfield’s top five importing countries, China/Hong Kong, Japan, Mexico, Korea and Russia, represent over 80 percent of total exports. With the exception of Russia, exports to these countries increased between 11 percent and 75
