Norfolk, VA - Smithfield Foods, Inc. reported record third quarter earnings in fiscal 1998. Net income in the quarter ended February 1, 1998 increased to $23.7 million, or $.60 per diluted share, from $15.7 million, or $.40 per diluted share, in the same quarter a year ago.
Net income in the first nine months of fiscal 1998, excluding a nonrecurring charge, increased to $45.3 million, or $1.14 per diluted share, from $25.5 million, or $.66 per diluted share, in the nine-month period a year ago. Including the nonrecurring charge of $12.6 million ($.32 per diluted share), the Company had net income of $32.7 million, or $.82 per diluted share, in the first nine months of the current fiscal year. The nonrecurring charge reflects $12.6 million in civil penalties imposed against the Company by the U.S. District Court in a civil action brought by the U.S. Environmental Protection Agency recorded in the first quarter of the current fiscal year. The Court's judgment was appealed to the United States Circuit Court of Appeals for the Fourth Circuit in Richmond, Virginia.
Net income per share results have been adjusted to reflect a 2-for-1 split of the Company's common stock, effective on September 26, 1997.
Sales for the fiscal 1998 third quarter increased to $1.10 billion from $1.08 billion in the same quarter of the prior fiscal year. Sales for the first nine months of fiscal 1998 were $2.99 billion, up from $2.94 billion in the same nine-month period a year ago. Increased sales tonnage more than offset the effect of lower hog prices on dollar sales in the third quarter and first nine months of the current fiscal year.
The record third quarter results reflected a substantial improvement in both fresh pork and processed meat margins during the quarter. "The Company's Smithfield Lean Generation Pork(TM) program is continuing to do extremely well and played a significant role in the sharp improvement in fresh pork results in the current quarter," said Joseph W. Luter, III, chairman and chief executive officer.
"Notwithstanding the success of our Lean Generation program, the Company's longer-term goal is to derive 50% of its dollar sales from processed meats, which was the case prior to the opening of the Bladen County hog processing facility," Luter stated.
The third quarter of the current fiscal year marked the eighth successive comparative quarter-to-quarter increase in the Company's earnings despite poor industry conditions over the last two years. The successive comparative quarter-to-quarter increases exclude the effect of the nonrecurring charge which the Company recorded in the first quarter of the current fiscal year. The current quarter, however, marked the first quarter since the third quarter of fiscal 1995 that the Company's hog production group failed to make a profit. The results of the hog production group were adversely affected by sharply lower hog prices, which averaged $42 per cwt. compared to $56 per cwt. in the same quarter a year ago.
"We are quite happy with our third quarter results, notwithstanding the fact that we incurred a loss in hog production," Luter said. The same industry conditions that resulted in a loss in hog production had the opposite effect on fresh pork profitability. "That's one of the benefits of vertical integration," Luter stated.
"We expect to maintain the same positive earnings trend over the next two years that we have maintained during the last two," Luter said. He noted, however, "that due to the nature of the pork processing business, the Company may from time to time experience an occasional blip in quarter-to-quarter comparisons."
Smithfield Foods is the largest vertically integrated producer and marketer of fresh pork and processed meats in the United States. The Company's brands include Smithfield Lean Generation Pork, Smithfield Premium, Gwaltney, Patrick Cudahy, John Morrell, Lykes, Esskay, Kretschmar, Valleydale, Jamestown, Dinner Bell, Realean, Patrick's Pride, Great, Tobin's First Prize, Peyton's and others.
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