SMITHFIELD FOODS, INC. | ||
(Exact name of registrant as specified in its charter) |
Virginia | 52-0845861 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 Commerce Street Smithfield, Virginia | 23430 | |
(Address of principal executive offices) | (Zip Code) |
(757) 365-3000 |
(Registrant’s telephone number, including area code) |
Title of each class | Name of each exchange on which registered | |||
Common Stock, $.50 par value per share | New York Stock Exchange |
SMITHFIELD FOODS, INC. TABLE OF CONTENTS | ||
PAGE | ||
PART I | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 1B. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II | ||
ITEM 5. | ||
ITEM 6. | ||
ITEM 7. | ||
ITEM 7A. | ||
ITEM 8. | ||
ITEM 9. | ||
ITEM 9A. | ||
ITEM 9B. | ||
PART III | ||
ITEM 10. | ||
ITEM 11. | ||
ITEM 12. | ||
ITEM 13. | ||
ITEM 14. | ||
PART IV | ||
ITEM 15. | ||
ITEM 1. | BUSINESS |
• | Increased capital investment to upgrade facilities with new machinery and equipment to improve our competitive cost structure and achieve least cost and best in class operations. We expect $300 million to $350 million in annual capital expenditures over the next several years to fund this investment in our business. |
• | Continued higher investment in marketing and advertising programs to build brand equity and grow sales. Our plan is to increase our annual marketing and advertising expenditures by double digits for the foreseeable future. Currently, marketing and advertising expense represents approximately 1% of packaged meats sales. |
• | Establish a culture of innovation to build a strong product pipeline to drive packaged meats volume and margins. Our innovation initiative will be focused in five strategic areas: packaging, health and wellness, convenience, taste and pork consumer solutions. These platforms have a strong focus on product differentiation highlighting quality and convenience, better-for-you foods, including lower sodium, lean protein, and natural ingredients, and new taste experiences. |
• | Emphasize our hog production assets as a strategic point of difference. We believe that our vertically integrated platform is a competitive advantage for the Company as it allows us to meet customer specifications. Both domestic and export customers are asking for differentiated products, from gestation pen pork to ractopamine-free meat, and we are uniquely positioned to fill this demand. As of April 28, 2013, our facilities in Clinton, North Carolina and Bladen County, North Carolina were 100% ractopamine-free. Our facility in Milan, Missouri is expected to be 100% ractopamine-free by the end of the first quarter of fiscal 2014. |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Packaged meats | 56 | % | 54 | % | 56 | % | |||
Fresh pork (1) | 44 | 46 | 44 | ||||||
100 | % | 100 | % | 100 | % |
(1) | Includes by-products and rendering. |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Internal hog sales | 76 | % | 80 | % | 78 | % | |||
External hog sales | 14 | 17 | 19 | ||||||
Other products (1) | 10 | 3 | 3 | ||||||
100 | % | 100 | % | 100 | % |
(1) | Consists primarily of grains, feed and gains (losses) on derivatives. |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Packaged meats | 48 | % | 47 | % | 47 | % | |||
Fresh meats | 43 | 43 | 42 | ||||||
Other products (1) | 9 | 10 | 11 | ||||||
100 | % | 100 | % | 100 | % |
(1) | Includes external hog sales, feed, feathers, by-products and rendering |
• | shelter that is designed, maintained, and operated to meet the animals' needs; |
• | access to adequate water and high-quality feed to meet nutritional requirements; |
• | humane treatment of animals that enhances their well-being and complies with all applicable laws and regulations; |
• | identification and appropriate treatment of animals in need of health care; and |
• | use of humane methods to euthanize sick or injured animals not responding to care and treatment. |
• | an animal welfare and humane handling manual; |
• | a comprehensive training program; and |
• | an auditing system with internal verification and third-party audits. |
Segment | Employees | Employees Covered by Collective Bargaining Agreements (1) | ||||
Pork | 31,750 | 18,300 | ||||
International | 9,950 | 2,300 | ||||
Hog Production | 5,050 | — | ||||
Corporate | 200 | — | ||||
Totals | 46,950 | 20,600 |
(1) | Includes employees that are members of labor unions. |
ITEM 1A. | RISK FACTORS |
• | the diversion of significant management time and resources towards the completion of the Merger; |
• | the impairment of our ability to attract, retain and motivate key personnel, including our senior management; |
• | difficulties maintaining relationships with customers, suppliers and other business partners; |
• | the inability to pursue alternative business opportunities or make appropriate changes to our business because of requirements in the Merger Agreement that we conduct our business in all material respects only in the ordinary course of business and not engage in certain kinds of transactions prior to the completion of the proposed Merger; |
• | the potential for litigation relating to the Merger and the costs related thereto; and |
• | higher costs of accessing funds in the debt markets. |
• | If the Merger is not completed, and there are no other parties willing and able to acquire us at a price of $34.00 per share or higher, on terms acceptable to us, our stock price will likely decline as our stock has recently traded at prices based on the proposed per share consideration for the Merger. |
• | We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, for which we will have received little or no benefit if the Merger is not completed. Many of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger. |
• | A failed Merger may result in negative publicity and a negative impression of us in the investment community. |
• | Upon termination of the Merger Agreement by the Company or Shuanghui under specified circumstances, our remedy may be limited to receipt of a reverse termination fee of $275 million from Shuanghui, and under some circumstances, we would not be entitled to receive any termination fee. |
• | Upon termination of the Merger Agreement by the Company or Shuanghui under specified circumstances, including a termination by us in order to accept a superior proposal as defined in the Merger Agreement, we would be required to pay a termination fee of up to $175 million. |
• | Our costs of accessing funds in the debt and capital markets may be higher than before execution of the Merger Agreement as a result of credit rating downgrades that could occur while the proposed Merger is pending. |
• | competing demand for corn for use in the manufacture of ethanol or other alternative fuels, |
• | environmental and conservation regulations, |
• | import and export restrictions such as trade barriers resulting from, among other things, health concerns, |
• | economic conditions, |
• | weather, including weather impacts on our water supply and the impact on the availability and pricing of grains, |
• | energy prices, including the effect of changes in energy prices on our transportation costs and the cost of feed, and |
• | crop and livestock diseases. |
• | food spoilage, |
• | food contamination, |
• | food allergens, |
• | evolving consumer preferences and nutritional and health-related concerns, |
• | consumer product liability claims, |
• | product tampering, |
• | product labeling, |
• | the possible unavailability and expense of product liability insurance, |
• | the potential cost and disruption of a product recall, and |
• | disruption to operations if government inspectors are unavailable due to furloughs. |
• | the treatment and discharge of materials into the environment, |
• | the handling and disposition of manure and solid wastes and |
• | the emission of greenhouse gases. |
• | approximately $2.5 billion of indebtedness; |
• | guarantees of $10.2 million for leases that were transferred to JBS S.A. in connection with the sale of Smithfield Beef, Inc.; and |
• | aggregate unused capacity available totaling approximately $1.3 billion under (1) our inventory based revolving credit facility up to $1.025 billion, with an option to expand up to $1.225 billion (the Inventory Revolver), (2) our accounts receivable securitization facility up to $275.0 million (the Securitization Facility) and (3) our other credit facilities, such total taking into account outstanding borrowings of $82.3 million and $82.3 million of outstanding letters of credit under the Securitization Facility. |
• | it may, together with the financial and other restrictive covenants in the agreements governing our indebtedness, limit or impair our ability in the future to obtain financing, refinance any of our indebtedness, sell assets or raise equity on commercially reasonable terms or at all, which could cause us to default on our obligations and materially impair our liquidity, |
• | a downgrade in our credit rating could restrict or impede our ability to access capital markets at attractive rates and increase the cost of future borrowings, |
• | it may reduce our flexibility to respond to changing business and economic conditions or to take advantage of business opportunities that may arise, |
• | a portion of our cash flow from operations must be dedicated to interest payments on our indebtedness and is not available for other purposes, which amount would increase if prevailing interest rates rise, |
• | substantially all of our working capital assets in the United States secure the Inventory Revolver and the Securitization Facility, all of which could limit our ability to dispose of such assets or utilize the proceeds of such dispositions and, upon an event of default under any such secured indebtedness, the lenders thereunder could foreclose upon our pledged assets, and |
• | it could make us more vulnerable to downturns in general economic or industry conditions or in our business. |
• | diversion of management attention from other business concerns, |
• | difficulty with integrating businesses, operations, personnel and financial and other systems, |
• | lack of experience in operating in the geographical market of the acquired business, |
• | increased levels of debt potentially leading to associated reduction in ratings of our debt securities and adverse impact on our various financial ratios, |
• | the requirement that we periodically review the value at which we carry our investments in joint ventures, and, in the event we determine that the value at which we carry a joint venture investment has been impaired, the requirement to record a non-cash impairment charge, which charge could substantially affect our reported earnings in the period of such charge, would negatively impact our financial ratios and could limit our ability to obtain financing in the future, |
• | potential loss of key employees and customers of the acquired business, |
• | assumption of and exposure to unknown or contingent liabilities of acquired businesses, |
• | potential disputes with the sellers, and |
• | for our investments, potential lack of common business goals and strategies with, and cooperation of, our joint venture partners. |
• | general economic and political conditions, |
• | imposition of tariffs, quotas, trade barriers and other trade protection measures imposed by foreign countries, |
• | import or export licensing requirements imposed by various foreign countries, |
• | the closing of borders by foreign countries to the import of our products due to, among other things, animal disease or other perceived health or safety issues, |
• | difficulties and costs associated with complying with, and enforcing remedies under, a wide variety of complex domestic and international laws, treaties and regulations, including the Foreign Corrupt Practices Act, |
• | different regulatory structures and unexpected changes in regulatory environments, |
• | tax rates that may exceed those in the United States and earnings that may be subject to withholding requirements and incremental taxes upon repatriation, |
• | potentially negative consequences from changes in tax laws, and |
• | distribution costs, disruptions in shipping or reduced availability of freight transportation. |
• | fluctuations in currency values, which have affected, among other things, the costs of our investments in foreign operations, |
• | translation of foreign currencies into U.S. dollars, and |
• | foreign currency exchange controls. |
• | make it more difficult or costly for us to obtain financing for our operations or investments or to refinance our debt in the future; |
• | cause our lenders to depart from prior credit industry practice and make more difficult or expensive the granting of any technical or other waivers under our credit agreements to the extent we may seek them in the future; |
• | impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts, non-performance by suppliers or counterparty failures negatively impacting our treasury operations; |
• | negatively impact global demand for protein products, which could result in a reduction of sales, operating income and cash flows; |
• | decrease the value of our investments in equity and debt securities, including our company-owned life insurance and pension plan assets, which could result in higher pension cost and statutorily mandated funding requirements; and |
• | impair the financial viability of our insurers. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
Location | Segment | Operation |
Smithfield Packing Plant Bladen County, North Carolina | Pork | Slaughtering and cutting hogs |
Smithfield Packing Plant Smithfield, Virginia | Pork | Slaughtering and cutting hogs; fresh and packaged pork products |
Smithfield Packing Plant Kinston, North Carolina | Pork | Production of boneless cooked hams, deli hams and sliced deli products |
Smithfield Packing Plant Clinton, North Carolina | Pork | Slaughtering and cutting hogs; fresh and packaged pork products |
Smithfield Packing Plant Wilson, North Carolina | Pork | Production of bacon |
John Morrell Plant Sioux Falls, South Dakota | Pork | Slaughtering and cutting hogs; fresh and packaged pork products |
John Morrell Plant Springdale, OH | Pork | Production of hot dogs and luncheon meats |
Curly’s Foods, Inc. Plant (operated by John Morrell) Sioux City, Iowa | Pork | Production of raw and cooked ribs and other BBQ items |
Armour-Eckrich Meats (operated by John Morrell) St. Charles, Illinois | Pork | Production of bulk and sliced dry sausages |
Armour-Eckrich Meats (operated by John Morrell) Omaha, Nebraska | Pork | Production of bulk and sliced dry sausages |
Armour-Eckrich Meats (operated by John Morrell) Peru, Indiana | Pork | Production of pre-cooked bacon |
Armour-Eckrich Meats (operated by John Morrell) Junction City, Kansas | Pork | Production of smoked sausage |
Armour-Eckrich Meats (operated by John Morrell) Mason City, Iowa | Pork | Production of boneless bulk and sliced ham products |
Armour-Eckrich Meats (operated by John Morrell) St. James, Minnesota | Pork | Production of sliced luncheon meats |
Location | Segment | Operation |
Farmland Plant Crete, Nebraska | Pork | Slaughtering and cutting hogs; fresh and packaged pork products |
Farmland Plant Monmouth, Illinois | Pork | Slaughtering and cutting hogs; fresh and packaged pork products |
Farmland Plant Denison, Iowa | Pork | Slaughtering and cutting hogs; fresh and packaged pork products |
Farmland Plant Milan, Missouri | Pork | Slaughtering and cutting hogs; fresh pork |
Farmland Plant Wichita, Kansas | Pork | Production of hot dogs and luncheon meats |
Cook’s Hams Plant (operated by Farmland Foods) Lincoln, Nebraska | Pork | Production of smoked hams and other smoked meats |
Cook’s Hams Plant (operated by Smithfield Packing) Grayson, Kentucky | Pork | Production of spiral hams and smoked ham products |
Cook’s Hams Plant (operated by Farmland Foods) Martin City, Missouri | Pork | Production of spiral hams |
Patrick Cudahy Plant (operated by John Morrell) Cudahy, Wisconsin | Pork | Production of bacon, dry sausage and refinery products |
Animex Plant Szczecin, Poland | International | Slaughtering and deboning hogs; production of packaged and other pork products |
Animex Plant Starachowice, Poland | International | Slaughtering and deboning hogs; production of packaged and other pork products |
Animex Plant Elk, Poland | International | Slaughtering and deboning hogs; production of packaged and other pork products |
Animex Plant Morliny, Poland | International | Production of packaged and other pork and beef products |
Animex Plant Ilawa, Poland | International | Slaughtering of turkey and geese; production of fresh and packaged poultry products |
Animex Plant Suwalki, Poland | International | Slaughtering of chicken; production of fresh and packaged poultry products |
Animex Plant Opole, Poland | International | Slaughtering of chicken; production of fresh and packaged poultry products |
Location | Segment | Operation |
Animex Plant Debica, Poland | International | Production of packaged poultry products |
Smithfield Prod Plants Timisoara, Romania | International | Deboning, slaughtering and rendering hogs |
Corporate Headquarters Smithfield, Virginia | Corporate | Management and administrative support services for other segments |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
Name and Age | Position | Business Experience During Past Five Years |
C. Larry Pope (58) | President and Chief Executive Officer | Mr. Pope was elected President and Chief Executive Officer in June 2006, effective September 1, 2006. Mr. Pope served as President and Chief Operating Officer from October 2001 to September 2006. |
Robert W. Manly, IV (60) | Executive Vice President and Chief Financial Officer and President of Murphy-Brown | Mr. Manly assumed the role of President of Murphy-Brown in July 2012. Mr. Manly was elected Executive Vice President in August 2006 and was named to the additional position of Chief Financial Officer, effective July 1, 2008. He also served as Interim Chief Financial Officer from January 2007 to June 2007. Prior to August 2006, he was President since October 1996 and Chief Operating Officer since June 2005 of PSF. |
Joseph W. Luter, IV (48) | Executive Vice President | Mr. Luter was elected Executive Vice President in April 2008 concentrating on sales and marketing. He served as President of Smithfield Packing from November 2004 to April 2008. Mr. Luter is the son of Joseph W. Luter, III, Chairman of the Board of Directors. |
Dhamu Thamodaran (58) | Executive Vice President and Chief Commodity Hedging Officer | Mr. Thamodaran was elected Executive Vice President and Chief Commodity Hedging Officer in July 2011. He was named Senior Vice President and Chief Commodity Hedging Officer in June 2008. Prior to these appointments, Mr. Thamodaran served as Vice President, Price Risk Management. |
Dennis H. Treacy (58) | Executive Vice President, Corporate Affairs, and Chief Sustainability Officer | Mr. Treacy was elected Executive Vice President, Corporate Affairs, and Chief Sustainability Officer in October 2011. He was named Senior Vice President of Corporate Affairs and Chief Sustainability Officer in February 2010. Prior to these appointments, Mr. Treacy served as Vice President, Environmental and Corporate Affairs. |
George H. Richter (68) | President and Chief Operating Officer, Pork Group | Mr. Richter was elected President and Chief Operating Officer, Pork Group in April 2008. Mr. Richter served as President of Farmland Foods from October 2003 to April 2008. |
Michael E. Brown (54) | President of Farmland Foods | Mr. Brown was elected President of Farmland Foods in October 2010. He served as President of Armour-Eckrich and Executive Vice President of John Morrell Food Group from 2006 to October 2010. |
Timothy O. Schellpeper (48) | President of Smithfield Packing | Mr. Schellpeper was elected President of Smithfield Packing in April 2008. He was Senior Vice President of Operations at Farmland Foods from August 2005 to April 2008. |
Joseph B. Sebring (66) | President of John Morrell | Mr. Sebring has served as President of John Morrell since May 1994. |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
2013 | 2012 | |||||||||||||||
High | Low | High | Low | |||||||||||||
First quarter | $ | 21.93 | $ | 17.75 | $ | 23.85 | $ | 18.81 | ||||||||
Second quarter | 21.17 | 17.55 | 23.95 | 17.79 | ||||||||||||
Third quarter | 23.86 | 20.34 | 25.12 | 21.75 | ||||||||||||
Fourth quarter | 27.33 | 21.98 | 24.23 | 20.04 |
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||
January 28, 2013 to February 27, 2013 | — | n/a | n/a | $ | 24,490,059 | |||||||||
February 28, 2013 to March 27, 2013 | 12,322 | (2) | $ | 25.96 | — | $ | 24,490,059 | |||||||
March 28, 2013 to April 28, 2013 | — | n/a | n/a | $ | 24,490,059 | |||||||||
Total | 12,322 | $ | 25.96 | — | $ | 24,490,059 |
(1) | On June 16, 2011, we announced that our board of directors had approved a share repurchase program authorizing the Company to buy up to $150,000,000 of its common stock. In September 2011, our board of directors approved a $100,000,000 increase to the authorized amount. In June 2012 and July 2012, our board of directors approved an increase in the authorized amount of $250,000,000 and $100,000,000, respectively. This share repurchase program expires on June 13, 2014. |
(2) | Purchases of 12,322 shares were made in open market transactions by Wells Fargo, as trustee, and these 12,322 shares are held in a rabbi trust for the benefit of participants in the Smithfield Foods, Inc. 2008 Incentive Compensation Plan director fee deferral program. The 2008 Incentive Compensation Plan was approved by our shareholders on August 27, 2008. |
ITEM 6. | SELECTED FINANCIAL DATA |
Fiscal Years | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||
Sales | $ | 13,221.1 | $ | 13,094.3 | $ | 12,202.7 | $ | 11,202.6 | $ | 12,487.7 | ||||||||||
Cost of sales | 11,901.4 | 11,544.9 | 10,488.6 | 10,472.5 | 11,863.1 | |||||||||||||||
Gross profit | 1,319.7 | 1,549.4 | 1,714.1 | 730.1 | 624.6 | |||||||||||||||
Selling, general and administrative expenses | 815.4 | 816.9 | 789.8 | 705.9 | 798.4 | |||||||||||||||
Gain on fire insurance recovery | — | — | (120.6 | ) | — | — | ||||||||||||||
(Income) loss from equity method investments | (15.0 | ) | 9.9 | (50.1 | ) | (38.6 | ) | 50.1 | ||||||||||||
Operating profit (loss) | 519.3 | 722.6 | 1,095.0 | 62.8 | (223.9 | ) | ||||||||||||||
Interest expense | 168.7 | 176.7 | 245.4 | 266.4 | 221.8 | |||||||||||||||
Other loss (income) | 120.7 | 12.2 | 92.5 | 11.0 | (63.5 | ) | ||||||||||||||
Income (loss) from continuing operations before income taxes | 229.9 | 533.7 | 757.1 | (214.6 | ) | (382.2 | ) | |||||||||||||
Income tax expense (benefit) | 46.1 | 172.4 | 236.1 | (113.2 | ) | (131.3 | ) | |||||||||||||
Income (loss) from continuing operations | 183.8 | 361.3 | 521.0 | (101.4 | ) | (250.9 | ) | |||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 52.5 | |||||||||||||||
Net income (loss) | $ | 183.8 | $ | 361.3 | $ | 521.0 | $ | (101.4 | ) | $ | (198.4 | ) | ||||||||
Net Income (Loss) Per Diluted Share: | ||||||||||||||||||||
Continuing operations | $ | 1.26 | $ | 2.21 | $ | 3.12 | $ | (.65 | ) | $ | (1.78 | ) | ||||||||
Discontinued operations | — | — | — | — | .37 | |||||||||||||||
Net income (loss) per diluted common share | $ | 1.26 | $ | 2.21 | $ | 3.12 | $ | (.65 | ) | $ | (1.41 | ) | ||||||||
Weighted average diluted shares outstanding | 146.4 | 163.5 | 167.2 | 157.1 | 141.1 | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Working capital | $ | 1,805.6 | $ | 2,162.7 | $ | 2,110.0 | $ | 2,128.4 | $ | 1,497.7 | ||||||||||
Total assets | 7,716.4 | 7,422.2 | 7,611.8 | 7,708.9 | 7,200.2 | |||||||||||||||
Long-term debt and capital lease obligations | 1,829.2 | 1,900.9 | 1,978.6 | 2,918.4 | 2,567.3 | |||||||||||||||
Shareholders’ equity | 3,097.0 | 3,387.3 | 3,545.5 | 2,755.6 | 2,612.4 | |||||||||||||||
Other Consolidated Operational Data: | ||||||||||||||||||||
Total hogs processed (1) | 32.0 | 30.7 | 30.4 | 32.9 | 35.2 | |||||||||||||||
Packaged meats sales (pounds) (1) | 3,260.2 | 3,119.4 | 3,159.7 | 3,238.0 | 3,450.6 | |||||||||||||||
Fresh pork sales (pounds) (1) | 4,234.3 | 4,154.6 | 4,035.0 | 4,289.9 | 4,702.0 | |||||||||||||||
Total hogs sold (2) | 18.4 | 18.1 | 18.6 | 19.3 | 20.4 |
(1) | Comprised of Pork segment and International segment. |
(2) | Comprised of Hog Production segment and International segment and includes intercompany hog sales. |
• | Includes losses of $120.7 million on debt extinguishment. |
▪ | Includes our share of charges related to the CFG Consolidation Plan, as defined in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Significant Events Affecting Results of Operations," of $38.7 million. |
▪ | Includes net charges of $22.2 million related to the litigation in Missouri that involved a number of claims alleging that hog farms owned by us or operated under hog raising contracts with third parties interfered with the plaintiffs' use and enjoyment of their properties (the Missouri Litigation). |
▪ | Includes losses of $12.2 million on debt extinguishment. |
▪ | Includes accelerated depreciation charges associated with the idling of certain Missouri hog farm assets of $8.2 million. |
▪ | Includes accelerated depreciation and other charges associated with the planned closure of our Portsmouth facility of $4.7 million. |
▪ | Includes $3.1 million of charges related to our plan to improve the cost structure and profitability of our domestic hog production operations (the Cost Savings Initiative). |
▪ | Includes an involuntary conversion gain on fire insurance recovery of $120.6 million. |
▪ | Includes losses of $92.5 million on debt extinguishment. |
▪ | Includes $28.0 million of charges related to the Cost Savings Initiative. |
▪ | Includes a net benefit of $19.1 million related to the Missouri Litigation. |
▪ | Includes net gains of $18.7 million on the sale of hog farms. |
▪ | Includes $34.1 million of impairment charges related to certain hog farms. |
▪ | Includes restructuring and impairment charges totaling $17.3 million related to our plan to consolidate and streamline the corporate structure and manufacturing operations of our Pork segment (the Restructuring Plan). |
▪ | Includes $13.1 million of impairment and severance costs primarily related to the Sioux City plant closure. |
▪ | Includes $11.0 million of charges for the write-off of amendment fees and costs associated with the U.S. Credit Facility and the Euro Credit Facility. |
▪ | Includes $9.1 million of charges related to the Cost Savings Initiative. |
▪ | Fiscal 2009 was a 53 week year. |
▪ | Includes a pre-tax write-down of assets and other restructuring charges totaling $88.2 million related to the Restructuring Plan. |
▪ | Includes a $56.0 million pre-tax gain on the sale of Groupe Smithfield. |
▪ | Includes a $54.3 million gain on the sale of Smithfield Beef, Inc., net of tax of $45.4 million (discontinued operations). |
▪ | Includes charges related to inventory write-downs totaling $25.8 million. |
ITEM 7. | 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. |
▪ | Pork segment operating profit increased $7.9 million as improvements in packaged meats profitability were largely offset by lower fresh pork profitability both being driven inversely by lower fresh meat market prices. |
▪ | Hog Production segment operating profit decreased $285.2 million primarily as a result of lower hog prices and higher feed costs. |
▪ | International segment operating profit increased $65.4 million. The prior year included certain charges recognized by CFG, of which our share was $38.7 million. Profitability improved significantly in our Eastern European operations. |
▪ | Corporate segment results improved by $8.6 million. The prior year included $6.4 million of professional fees related to the potential acquisition of a controlling interest in CFG. In June 2011, we terminated negotiations to purchase the additional interest. |
▪ | Losses on debt extinguishment were $120.7 million in the current year compared to $12.2 million in the prior year. |
• | Increased capital investment to upgrade facilities with new machinery and equipment to improve our competitive cost structure and achieve least cost and best in class operations. We expect $300 million to $350 million in annual capital expenditures over the next several years to fund this investment in our business. |
• | Continued higher investment in marketing and advertising programs to build brand equity and grow sales. Our plan is to increase our annual marketing and advertising expenditures by double digits for the foreseeable future. Currently, marketing and advertising expense represents approximately 1% of packaged meats sales. |
• | Establish a culture of innovation to build a strong product pipeline to drive packaged meats volume and margins. Our innovation initiative will be focused in five strategic areas: packaging, health and wellness, convenience, taste and pork consumer solutions. These platforms have a strong focus on product differentiation highlighting quality and convenience, better-for-you foods, including lower sodium, lean protein, and natural ingredients, and new taste experiences. |
• | Emphasize our hog production assets as a strategic point of difference. We believe that our vertically integrated platform is a competitive advantage for the Company as it allows us to meet customer specifications. Both domestic and export customers are asking for differentiated products, from gestation pen pork to ractopamine-free meat, and we are uniquely positioned to fill this demand. As of April 28, 2013, our facilities in Clinton, North Carolina and Bladen County, North Carolina were 100% ractopamine-free. Our facility in Milan, Missouri is expected to be 100% ractopamine-free by the end of the first quarter of fiscal 2014. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Sales | $ | 13,221.1 | $ | 13,094.3 | 1 | % | $ | 13,094.3 | $ | 12,202.7 | 7 | % | ||||||||||
Cost of sales | 11,901.4 | 11,544.9 | 3 | 11,544.9 | 10,488.6 | 10 | ||||||||||||||||
Gross profit | $ | 1,319.7 | $ | 1,549.4 | (15 | ) | $ | 1,549.4 | $ | 1,714.1 | (10 | ) | ||||||||||
Gross profit margin | 10 | % | 12 | % | 12 | % | 14 | % |
• | Sales in the current year were slightly higher than the prior year as higher volumes across all segments were largely offset by lower domestic fresh meat and hog market prices and the effects of foreign currency translation. |
• | The decline in gross profit margin was primarily caused by higher hog feed costs and lower pork prices in the U.S. |
• | The increase in consolidated sales was primarily driven by higher sales prices and volumes in the Pork segment. These increases were attributable to higher market prices for fresh pork, supported by export demand, and an improved sales mix in packaged meats to higher margin core brands. |
• | Gross margin declined from fiscal 2011 levels as a result of significantly higher raw material costs in all segments. Domestic live hog market prices increased approximately 15% to $65 per hundredweight from $57 per hundredweight, and domestic raising costs increased 18% to $64 per hundredweight from $54 per hundredweight as a result of higher feed prices. |
• | Cost of sales in fiscal 2011 included $28.0 million of charges associated with the Cost Savings Initiative compared to $3.1 million in fiscal 2012. Also, cost of sales in fiscal 2012 included $8.2 million and $4.7 million of accelerated depreciation and other charges related to the idling of certain of our Missouri hog farm assets and the planned closure of our Portsmouth, Virginia meat processing plant, respectively. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Selling, general and administrative expenses | $ | 815.4 | $ | 816.9 | — | % | $ | 816.9 | $ | 789.8 | 3 | % |
• | Fiscal 2012 included $22.2 million in net charges associated with the Missouri litigation. |
• | Fiscal 2012 included $6.4 million in professional fees related to the potential acquisition of a controlling interest in CFG. In June 2011 (fiscal 2012), we terminated negotiations to purchase the additional interest. |
• | Pension and other post-retirement benefit expenses increased $26.4 million. |
• | Fiscal 2012 included $22.2 million in net charges associated with the Missouri litigation compared to a $19.1 million net benefit in fiscal 2011. |
• | Fiscal 2011 included a net gain of $18.7 million on the sale of hog farms in Texas, Oklahoma and Iowa. |
• | Losses on foreign currency denominated transactions increased $7.0 million. |
• | Fiscal 2012 included $6.4 million in professional fees related to the potential acquisition of a controlling interest in CFG. In June 2011 (fiscal 2012), we terminated negotiations to purchase the additional interest. |
• | Variable compensation expense was $29.9 million lower due primarily to lower profitability levels in fiscal 2012. |
• | Expense for pension and other postretirement benefits decreased $19.6 million. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
CFG | $ | (4.8 | ) | $ | 25.0 | 119 | % | $ | 25.0 | $ | (17.0 | ) | (247 | )% | ||||||||
Mexican joint ventures | (9.3 | ) | (13.4 | ) | (31 | ) | (13.4 | ) | (29.6 | ) | (55 | ) | ||||||||||
All other equity method investments | (0.9 | ) | (1.7 | ) | (47 | ) | (1.7 | ) | (3.5 | ) | (51 | ) | ||||||||||
(Income) loss from equity method investments | $ | (15.0 | ) | $ | 9.9 | 252 | $ | 9.9 | $ | (50.1 | ) | (120 | ) |
• | CFG's results for fiscal 2012 included $38.7 million of charges related to the CFG Consolidation Plan. |
• | Results from our Mexican joint ventures declined due to higher feed costs, lower hog prices and lower meat sales volumes. |
• | CFG's results for fiscal 2012 included $38.7 million of charges related to the CFG Consolidation Plan. |
• | Results from our Mexican joint ventures were negatively impacted by higher feed costs and unfavorable changes in foreign exchange rates. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Interest expense | $ | 168.7 | $ | 176.7 | (5 | )% | $ | 176.7 | $ | 245.4 | (28 | )% |
• | Interest expense decreased due to lower average interest rates resulting from the refinancing of our 10% senior secured notes due July 2014 (2014 Notes) and our 7.75% senior unsecured notes due May 2013 (2013 Notes) as described under "Liquidity and Capital Resources" below. |
• | Interest expense decreased in fiscal 2012 as a result of our Project 100 initiative, under which we redeemed more than $1 billion of debt since the first quarter of fiscal 2011, including $600 million of our 7% senior unsecured notes due August 2011, $260.6 million of our 2014 Notes and $190 million of our 2013 Notes. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Loss on debt extinguishment | $ | 120.7 | $ | 12.2 | 889 | % | $ | 12.2 | $ | 92.5 | (87 | )% |
• | We recognized losses of $120.7 million during fiscal 2013 on the repurchase of $589.4 million of our 2014 Notes and $105.0 million of our 2013 Notes. |
• | We recognized losses of $11.0 million during fiscal 2012 on the repurchase of $59.7 million of our 2014 Notes. |
• | We recognized a loss on debt extinguishment of $1.2 million in the first quarter of fiscal 2012 associated with the refinancing of our working capital facilities in June 2011 (fiscal 2012). |
• | We recognized losses of $92.5 million during fiscal 2011 on the repurchase of $522.2 million of our 7% senior unsecured notes due August 2011, $200.9 million of our 2014 Notes and $190.0 million of our 2013 Notes. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Income tax expense (in millions) | $ | 46.1 | $ | 172.4 | $ | 236.1 | ||||||
Effective tax rate | 20 | % | 32 | % | 31 | % |
• | Tax credits increased due in part to the passage of the American Taxpayer Relief Act of 2012 that retroactively reinstated the Research and Development, Work Opportunity and Welfare to Work tax credits. |
• | We released $11.1 million in deferred tax asset valuation allowances in the current year, primarily related to the utilization of tax losses in foreign jurisdictions. |
• | The mix of earnings from foreign operations, which are taxed at lower rates, was higher in the current year. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Sales: | ||||||||||||||||||||||
Fresh pork (1) | $ | 4,924.1 | $ | 5,089.4 | (3 | )% | $ | 5,089.4 | $ | 4,542.7 | 12 | % | ||||||||||
Packaged meats | 6,152.0 | 6,003.6 | 2 | 6,003.6 | 5,721.2 | 5 | ||||||||||||||||
Total | $ | 11,076.1 | $ | 11,093.0 | — | $ | 11,093.0 | $ | 10,263.9 | 8 | ||||||||||||
Operating profit: (2) | ||||||||||||||||||||||
Fresh pork (1) | $ | 161.6 | $ | 222.0 | (27 | )% | $ | 222.0 | $ | 406.5 | (45 | )% | ||||||||||
Packaged meats | 470.0 | 401.7 | 17 | 401.7 | 346.9 | 16 | ||||||||||||||||
Total | $ | 631.6 | $ | 623.7 | 1 | $ | 623.7 | $ | 753.4 | (17 | ) | |||||||||||
Sales volume: | ||||||||||||||||||||||
Fresh pork | 3 | % | 4 | % | ||||||||||||||||||
Packaged meats | 4 | — | ||||||||||||||||||||
Total | 4 | 2 | ||||||||||||||||||||
Average unit selling price: | ||||||||||||||||||||||
Fresh pork | (6 | )% | 8 | % | ||||||||||||||||||
Packaged meats | (1 | ) | 5 | |||||||||||||||||||
Total | (4 | ) | 6 | |||||||||||||||||||
Hogs processed | 3 | % | 1 | % | ||||||||||||||||||
Average domestic live hog prices (per hundredweight) (3) | $ | 60.86 | $ | 65.05 | (6 | )% | $ | 65.05 | $ | 56.57 | 15 | % |
(1) | Includes by-products and rendering. |
(2) | Fresh pork and packaged meats operating profits represent management's estimated allocation of total Pork segment operating profit. |
(3) | Represents the average live hog market price as quoted by the Iowa-Southern Minnesota hog market. |
• | Pork segment sales declined slightly as high pork supplies contributed to lower average fresh pork sales prices. |
• | Fresh pork sales volumes increased as a result of higher slaughter levels and hog weights. |
• | Packaged meats sales volumes increased across all trade channels. Lower average unit selling prices of private label products were largely offset by higher sales prices in our core brands. |
• | Fresh pork operating profit decreased to $6 per head from $8 per head due primarily to lower sales prices. |
• | Packaged meats operating profit increased to $.17 per pound from $.15 per pound, benefitting from lower raw material costs. |
• | Sales and operating profit were positively impacted by higher average unit selling prices for both fresh pork and packaged meats driven by strong export demand, an improved mix in packaged meats to more core brand product sales, and strong pricing discipline. |
• | Fresh pork volumes increased primarily as a result of stronger export demand. |
• | Fresh pork operating profit decreased to $8 per head from a record $15 per head as live hog prices increased significantly more than fresh meat prices. |
• | Packaged meats operating profit increased to $.15 per pound from $.13 per pound as a result of strong pricing discipline, an improved product mix to more high margin core brands and lower variable compensation and pension related expenses, which more than offset the impact of higher raw material costs. |
• | Operating profit for packaged meats in fiscal 2012 included $4.7 million in charges associated with the anticipated closure of our Portsmouth plant. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Sales | $ | 3,135.1 | $ | 3,052.6 | 3 | % | $ | 3,052.6 | $ | 2,705.1 | 13 | % | ||||||||||
Operating (loss) profit | (119.1 | ) | 166.1 | (172 | ) | 166.1 | 224.4 | (26 | ) | |||||||||||||
Head sold | 15.97 | 15.77 | 1 | % | 15.77 | 16.43 | (4 | )% | ||||||||||||||
Average domestic live hog prices (per hundredweight) (1) | $ | 60.86 | $ | 65.05 | (6 | )% | $ | 65.05 | $ | 56.57 | 15 | % | ||||||||||
Raising costs (per hundredweight) (2) | $ | 67.82 | $ | 63.93 | 6 | % | $ | 63.93 | $ | 54.14 | 18 | % |
(1) | Represents the average live hog market price as quoted by the Iowa-Southern Minnesota hog market. These prices do not reflect premiums we receive or the impact of hedging on our actual sales price. |
(2) | Includes the effects of grain derivative contracts designated in hedging relationships. |
• | Sales increased due to higher volumes, which more than offset the impact of lower market hog prices. |
• | Fiscal 2013 operating profit was negatively impacted by higher hog supplies, resulting in a 6% decrease in live hog prices, and increased raising costs, primarily as a result of higher priced feed. |
• | Fiscal 2013 operating profit included gains of $91.2 million compared to $58.6 million in fiscal 2012 on derivative contracts that are not reflected in the average live hog prices and raising costs presented in the table above; these are primarily lean hog derivative contracts, and grain derivative contracts that are not designated in hedging relationships for accounting purposes. |
• | Fiscal 2012 operating profit included $22.2 million in net charges associated with the Missouri litigation. |
• | Fiscal 2012 operating profit included accelerated depreciation charges of $8.2 million as a result of our decision to permanently idle certain farm assets in Missouri. |
• | Sales and operating profit were positively impacted by significantly higher live hog market prices. |
• | Volume declined due to temporary disruptions from the Cost Savings Initiative and the sale of our Oklahoma hog farms at the end of the third quarter of fiscal 2011. |
• | Raising costs increased primarily as a result of higher feed costs. |
• | Fiscal 2012 operating profit included $22.2 million in net charges associated with the Missouri litigation compared to a $19.1 million net benefit in fiscal 2011. |
• | Operating profit in fiscal 2011 included a net gain of $18.7 million on the sale of hog farms in Oklahoma, Iowa and Texas. |
• | Fiscal 2012 operating profit included accelerated depreciation charges of $8.2 million as a result of our decision to permanently idle certain farm assets in Missouri. |
• | Fiscal 2012 operating profit included $3.1 million in charges associated with the Cost Savings Initiative compared to $28.0 million in fiscal 2011. |
• | Fiscal 2012 operating profit included gains of $58.6 million compared to $22.2 million in fiscal 2011 on derivative contracts that are not reflected in the average live hog prices and raising costs presented in the table above; these are primarily lean hog derivative contracts, and grain derivative contracts that are not designated in hedging relationships for accounting purposes. |
Fiscal Years | Fiscal Years | |||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||
Sales: | ||||||||||||||||||||||
Poland | $ | 1,180.7 | $ | 1,186.3 | — | % | $ | 1,186.3 | $ | 1,096.9 | 8 | % | ||||||||||
Romania | 252.3 | 245.8 | 3 | 245.8 | 199.1 | 23 | ||||||||||||||||
United Kingdom | 87.4 | 92.6 | (6 | ) | 92.6 | 101.6 | (9 | ) | ||||||||||||||
Eliminations | (51.9 | ) | (58.0 | ) | (11 | ) | (58.0 | ) | (56.9 | ) | 2 | |||||||||||
Total | $ | 1,468.5 | $ | 1,466.7 | — | $ | 1,466.7 | $ | 1,340.7 | 9 | ||||||||||||
Operating profit (loss): | ||||||||||||||||||||||
Poland | $ | 60.3 | $ | 49.7 | 21 | % | $ | 49.7 | $ | 64.0 | (22 | )% | ||||||||||
Romania | 41.4 | 7.9 | 424 | 7.9 | 9.2 | (14 | ) | |||||||||||||||
Other (1) | 6.5 | (14.8 | ) | 144 | (14.8 | ) | 42.7 | (135 | ) | |||||||||||||
Total | $ | 108.2 | $ | 42.8 | 153 | $ | 42.8 | $ | 115.9 | (63 | ) | |||||||||||
Poland: (2) | ||||||||||||||||||||||
Sales volume (pounds) | 11 | % | (4 | )% | ||||||||||||||||||
Average unit selling price (3) | (4 | ) | 13 | |||||||||||||||||||
Hogs processed | 19 | (6 | ) | |||||||||||||||||||
Raising costs (per hundredweight) | 8 | 16 | ||||||||||||||||||||
Romania: (2) | ||||||||||||||||||||||
Sales volume (pounds) | 3 | % | 10 | % | ||||||||||||||||||
Average unit selling price (3) | 13 | 7 | ||||||||||||||||||||
Hogs processed | 9 | 8 | ||||||||||||||||||||
Raising costs (per hundredweight) | (1 | ) | 11 |
(1) | Includes the results from our equity method investments in Mexico and our investment in CFG. |
(2) | Percentages computed based on local currency amounts. |
(3) | Excludes the sale of live hogs. |
• | Fluctuation in foreign exchange rates and their effect on foreign currency translation decreased sales by $116.1 million, or 7.9%. |
• | Fluctuation in foreign exchange rates and their effect on foreign currency translation decreased operating profit by $11.5 million. |
• | Sales and operating profit benefited from significantly higher volumes in our Polish operations due to a 19% increase in the number of hogs processed. Unit sales prices in our Polish operations increased in several key product categories; however, higher volumes of lower value by-products that resulted from more processed hogs effectively diminished the overall average unit selling price compared to the prior year. |
• | Sales and operating profit in our Romanian operations improved on significantly higher average unit selling prices and sales volumes, which benefitted from the approval to export pork products to European Union member countries beginning in the fourth quarter of fiscal 2012. Sales and hog slaughter volumes benefited from an expansion in our hog production operations in the second quarter of fiscal 2012. Operating profit also improved as a result of a $5.4 million reduction in foreign exchange transaction losses and a $3.9 million increase in government farm subsidies received. |
• | Fiscal 2012 operating profit included $38.7 million of charges related to the CFG Consolidation Plan. |
• | Equity income from our Mexican joint ventures decreased by $4.1 million due to higher feed costs and unfavorable changes in foreign exchange rates. |
• | Sales and operating profit in Poland were positively impacted by higher average unit selling prices primarily due to a shift in product mix to more packaged meats and our ability to pass along higher raw material costs, particularly in the second half of fiscal 2012. |
• | Operating profit in Poland declined primarily as a result of higher raw material costs in our meat processing operations. Improvements in Polish hog production fundamentals partially offset the decline in profit. |
• | Sales and operating profit in our Romania fresh pork operation were positively impacted by our approval to export pork products out of Romania to European Union member countries beginning in the fourth quarter of fiscal 2012. As a result, average unit selling prices increased 7%. |
• | Our Romanian fresh pork and hog production operations both saw improvements in operating results. However, these improvements were more than offset by increased losses in our distribution operations and an unfavorable $8.4 million impact from foreign currency exposure. |
• | Fiscal 2012 operating profit included $38.7 million of charges related to the CFG Consolidation Plan. |
• | Equity income from our Mexican joint ventures decreased $16.2 million, primarily due to higher feed costs and unfavorable changes in foreign exchange rates. |
Fiscal Years | Fiscal Years | ||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | ||||||||||||||||
(in millions) | (in millions) | ||||||||||||||||||||
Sales | $ | — | $ | — | NM | $ | — | $ | 74.7 | (100 | )% | ||||||||||
Operating loss | — | — | NM | — | (2.4 | ) | (100 | ) |
Fiscal Years | Fiscal Years | ||||||||||||||||||||
2013 | 2012 | % Change | 2012 | 2011 | % Change | ||||||||||||||||
(in millions) | (in millions) | ||||||||||||||||||||
Operating (loss) profit | $ | (101.4 | ) | $ | (110.0 | ) | 8 | % | $ | (110.0 | ) | $ | 3.7 | NM |
• | Fiscal 2012 included $6.4 million of professional fees related to the potential acquisition of a controlling interest in CFG. In June 2011, we terminated negotiations to purchase the additional interest. |
• | Fiscal 2011 included a gain of $120.6 million on the final settlement with our insurance carriers of our claim related to the fire that occurred at our Cudahy, Wisconsin facility in fiscal 2010. |
• | Fiscal 2012 included $6.4 million of professional fees related to the potential acquisition of a controlling interest in CFG. In June 2011, we terminated negotiations to purchase the additional interest. |
• | Variable compensation cost declined $9.0 million due to lower consolidated profit levels in fiscal 2012. |
• | Expense for pension and other post-retirement benefits decreased $4.1 million. |
April 28, 2013 | ||||||||||||||||||||
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 | — | (82.3 | ) | — | 192.7 | ||||||||||||||
International facilities | 143.1 | — | — | (82.3 | ) | 60.8 | ||||||||||||||
Total credit facilities | $ | 1,443.1 | $ | — | $ | (82.3 | ) | $ | (82.3 | ) | $ | 1,278.5 |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Net cash flows from operating activities | $ | 172.7 | $ | 570.1 | $ | 616.4 |
• | Cash paid for grain and other feed ingredients purchased by the Hog Production segment increased approximately $372 million. |
• | Cash received for the settlement of commodity derivative contracts and for margin requirements decreased $103.4 million in fiscal 2013. |
• | Cash received from customers decreased primarily as a result of lower domestic selling prices. |
• | We paid cash to settle the Missouri litigation in fiscal 2013. |
• | Expenditures for advertising increased as part of our strategy to build brand equity and grow sales. |
• | Cash paid to outside hog suppliers was lower due to a 6% decrease in average domestic live hog market prices. |
• | Income tax payments decreased $222.0 million as a result of significant tax refunds during the first quarter of fiscal 2013 and lower domestic taxable income. |
• | We contributed $17.7 million to our qualified and non-qualified pension plans in fiscal 2013 compared to $142.8 million in fiscal 2012. |
• | Cash paid to outside hog suppliers was higher due to a 15% increase in average live hog market prices. |
• | Fiscal 2012 included net tax payments of $225.7 million compared to net refunds of $34.8 million in the prior year. |
• | Cash paid for grain and other feed ingredients purchased by the Hog Production segment increased approximately $262 million. |
• | Variable compensation paid in fiscal 2012 related to the prior year's performance was higher than the corresponding amount paid in fiscal 2011. |
• | We contributed $142.8 million to our qualified and non-qualified pension plans in fiscal 2012 compared to $128.5 million in fiscal 2011. |
• | Cash received from customers increased primarily as a result of higher selling prices. |
• | Cash received for the settlement of commodity derivative contracts and for margin requirements increased $82.0 million. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Capital expenditures | $ | (278.0 | ) | $ | (290.7 | ) | $ | (176.8 | ) | |||
Business acquisition, net of cash acquired | (24.0 | ) | — | — | ||||||||
Dispositions | — | — | 261.5 | |||||||||
Insurance proceeds | — | — | 120.6 | |||||||||
Net (expenditures) proceeds from breeding stock transactions | (18.4 | ) | (2.3 | ) | 26.2 | |||||||
Proceeds from sale of property, plant and equipment | 16.9 | 6.4 | 22.8 | |||||||||
Other | (0.2 | ) | — | — | ||||||||
Net cash flows from investing activities | $ | (303.7 | ) | $ | (286.6 | ) | $ | 254.3 |
• | Capital expenditures included $45.9 million related to our Kinston, North Carolina plant expansion project. The remaining capital expenditures primarily related to plant and hog farm improvement projects, including the replacement of gestation stalls with group pens, which is more fully explained under "Additional Matters Affecting Liquidity" below. |
• | We paid $24.0 million, net of cash acquired, for a 70% interest in American Skin Food Group, LLC. |
• | Capital expenditures included $32.8 million related to our Kinston, North Carolina plant expansion project and $30.9 million related to the Cost Savings Initiative. The remaining capital expenditures primarily related to plant and hog farm improvement projects. |
• | Capital expenditures primarily related to plant and hog farm improvement projects, including approximately $44.0 million related to the Cost Savings Initiative. |
• | Dispositions included proceeds from the sale of our investment in Butterball, LLC and our related turkey production assets and proceeds from the sale of hog operations in Texas, Oklahoma and Iowa. |
• | The insurance proceeds represent the gain on involuntary conversion of property, plant and equipment due to the Patrick Cudahy fire upon the final settlement of claims with our insurance carriers in the third quarter of fiscal 2011. |
• | Proceeds from the sale of property, plant and equipment includes $9.1 million from the sale of farm land in Texas. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Proceeds from the issuance of long-term debt | $ | 1,219.2 | $ | — | $ | — | ||||||
Principal payments on long-term debt and capital lease obligations | (716.5 | ) | (152.7 | ) | (944.5 | ) | ||||||
Net borrowings (repayments) on revolving credit facilities and notes payables | 13.9 | (0.3 | ) | 21.6 | ||||||||
Repurchase of common stock | (386.4 | ) | (189.5 | ) | — | |||||||
Net proceeds from the issuance of common stock and stock option exercises | 3.1 | 1.3 | 1.2 | |||||||||
Change in cash collateral | — | 23.9 | (23.9 | ) | ||||||||
Debt issuance costs and other | (17.6 | ) | (11.1 | ) | — | |||||||
Net cash flows from financing activities | $ | 115.7 | $ | (328.4 | ) | $ | (945.6 | ) |
• | In August 2012, we issued $1.0 billion of our 2022 Notes at a price equal to 99.5% of their face value. We used $804.9 million of the $981.2 million in net proceeds from the debt offering to repurchase the remaining $589.4 million of our 2014 Notes and $105.0 million of our 2013 Notes. |
• | We repurchased 19,068,079 shares of our common stock for $386.4 million as part of the Share Repurchase Program. |
• | We incurred $18.0 million in transaction fees in connection with the issuance of the 2022 Notes, which are being amortized over their ten-year life. |
• | We redeemed the remaining $77.8 million of our 7% senior unsecured notes due August 2011 and repurchased $59.7 million of our 2014 Notes. |
• | We repurchased 9,176,704 shares of our common stock for $189.5 million as part of the Share Repurchase Program. |
• | We received $20.0 million of cash previously held in a deposit account to serve as collateral for overdrafts on certain of our bank accounts and $3.9 million of cash from the counterparty of our interest rate swap contract which expired in August 2011. |
• | We paid $11.0 million of debt issuance costs in connection with the refinancing of the ABL Credit Facility. |
• | We repurchased $522.2 million of our 7% senior unsecured notes due August 2011 through open market purchases as well as a tender offer. Also, we repurchased $190.0 million and $200.9 million of our 2013 Notes and our 2014 Notes, respectively, as a result of a tender offer that expired on February 9, 2011. |
• | We repaid $16.2 million in outstanding notes payable and received $40.4 million from draws on credit facilities in the International segment. |
• | We repaid $30.1 million on outstanding loans in the International segment. |
• | We transferred $20.0 million of cash into a deposit account to serve as collateral for overdrafts on certain of our bank accounts in place of letters of credit previously used under our banking agreement and $3.9 million of cash to the counterparty of our interest rate swap contract to serve as collateral and replace letters of credit previously provided under the contract. |
April 28, 2013 | April 29, 2012 | |||||
(in millions) | ||||||
6.625% senior unsecured notes, due August 2022, including unamortized discounts of $4.7 million | 995.3 | — | ||||
10% senior secured notes, due July 2014, including unamortized discounts of $7.0 million | — | 357.4 | ||||
10% senior secured notes, due July 2014, including unamortized premiums of $4.4 million | — | 229.4 | ||||
7.75% senior unsecured notes, due July 2017 | 500.0 | 500.0 | ||||
4% senior unsecured Convertible Notes, due June 2013, including unamortized discounts of $4.1 million and $26.8 million | 395.9 | 373.2 | ||||
7.75% senior unsecured notes, due May 2013 | 55.0 | 160.0 | ||||
Floating rate senior unsecured term loan, due May 2018 | 200.0 | 200.0 | ||||
Floating rate senior unsecured term loan, due February 2014 | 200.0 | — | ||||
Various, interest rates from 0.0% to 7.22%, due May 2013 through June 2017 | 132.9 | 117.3 | ||||
Total debt | 2,479.1 | 1,937.3 | ||||
Current portion | (675.1 | ) | (62.5 | ) | ||
Total long-term debt | 1,804.0 | 1,874.8 | ||||
Total shareholders’ equity | 3,097.0 | 3,387.3 |
Payments Due By Period | ||||||||||||||||||||
Total | < 1 Year | 1-3 Years | 3-5 Years | > 5 Years | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Long-term debt | $ | 2,479.1 | $ | 675.1 | $ | 111.1 | $ | 522.5 | $ | 1,170.4 | ||||||||||
Interest | 871.8 | 134.2 | 230.7 | 208.1 | 298.8 | |||||||||||||||
Capital lease obligations, including interest | 26.6 | 1.0 | 2.2 | 1.5 | 21.9 | |||||||||||||||
Operating leases | 166.6 | 41.9 | 54.8 | 32.4 | 37.5 | |||||||||||||||
Capital expenditure commitments | 53.9 | 53.9 | — | — | — | |||||||||||||||
Purchase obligations: | ||||||||||||||||||||
Hog procurement (1) | 6,191.3 | 1,449.0 | 2,115.9 | 1,658.9 | 967.5 | |||||||||||||||
Contract hog growers (2) | 1,044.0 | 380.0 | 291.6 | 181.9 | 190.5 | |||||||||||||||
Grain procurement (3) | 480.3 | 480.3 | — | — | — | |||||||||||||||
Other (4) | 290.5 | 15.4 | 26.2 | 27.8 | 221.1 | |||||||||||||||
Total | $ | 11,604.1 | $ | 3,230.8 | $ | 2,832.5 | $ | 2,633.1 | $ | 2,907.7 |
(1) | Through the Pork and International segments, we have purchase agreements with certain hog producers. Some of these arrangements obligate us to purchase all of the hogs produced by these producers. Other arrangements obligate us to purchase a fixed amount of hogs. Due to the uncertainty of the number of hogs that we are obligated to purchase and the uncertainty of market prices at the time of hog purchases, we have estimated our obligations under these arrangements. Future payments were estimated using current live hog market prices, available futures contract prices and internal projections adjusted for historical quality premiums. |
(2) | Through the Hog Production segment, we use independent farmers and their facilities to raise hogs produced from our breeding stock. Under multi-year contracts, the farmers provide the initial facility investment, labor and front line management in exchange for a performance-based service fee payable upon delivery. We are obligated to pay this service fee for all hogs delivered. We have estimated our obligation based on expected hogs delivered from these farmers. |
(3) | Includes fixed price forward grain purchase contracts totaling $192.9 million. Also includes unpriced forward grain purchase contracts which, if valued as of April 28, 2013 market prices, would be $287.4 million. These forward grain contracts are accounted for as normal purchases. As a result, they are not recorded in the balance sheet. |
(4) | Includes guaranteed royalty payments totaling $250.0 million to Nathan's Famous Inc. (Nathan's) over an 18 year contractual term commencing in March 2014 (fiscal 2014). In December 2012 (fiscal 2013), John Morrell signed an agreement with Nathan's to become Nathan's exclusive licensee to manufacture and sell branded hot dog, sausage and corn beef products in the retail market. Under the terms of the agreement, guaranteed minimum royalty payments are $10.0 million for the first year and increase at a compounded average annual rate of 3.2% over the contract term. |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Grains | $ | (78.0 | ) | $ | 33.8 | |||
Livestock | 14.7 | 23.1 | ||||||
Energy | 2.5 | (12.2 | ) | |||||
Foreign currency | 0.4 | 3.6 |
(1) | Negative amounts represent net liabilities |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Grains | $ | 38.1 | $ | 49.4 | ||||
Livestock | 12.7 | 18.0 | ||||||
Energy | 5.4 | 3.3 | ||||||
Foreign currency | 5.0 | 11.9 |
Cash Flow Hedges | ||||||||||||||||||||||||||||||||||||
Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative (Effective Portion) | Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion) | Gain (Loss) Recognized in Earnings on Derivative (Ineffective Portion) | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Commodity contracts: | ||||||||||||||||||||||||||||||||||||
Grain contracts | $ | 39.1 | $ | 5.5 | $ | 232.9 | $ | 108.4 | $ | 75.1 | $ | 80.7 | $ | — | $ | (0.2 | ) | $ | 1.9 | |||||||||||||||||
Lean hog contracts | 13.6 | 102.8 | (82.8 | ) | 54.9 | 32.3 | (44.5 | ) | 0.4 | (0.5 | ) | (1.0 | ) | |||||||||||||||||||||||
Interest rate contracts | — | — | (1.2 | ) | — | (2.4 | ) | (7.0 | ) | — | — | — | ||||||||||||||||||||||||
Foreign exchange contracts | 0.4 | (2.5 | ) | (4.1 | ) | 2.1 | (4.1 | ) | (2.6 | ) | — | — | — | |||||||||||||||||||||||
Total | $ | 53.1 | $ | 105.8 | $ | 144.8 | $ | 165.4 | $ | 100.9 | $ | 26.6 | $ | 0.4 | $ | (0.7 | ) | $ | 0.9 |
Fair Value Hedges | ||||||||||||||||||||||||
Gain (Loss) Recognized in Earnings on Derivative | Gain (Loss) Recognized in Earnings on Related Hedged Item | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Commodity contracts | $ | (12.8 | ) | $ | 21.9 | $ | (4.2 | ) | $ | 5.0 | $ | (16.7 | ) | $ | 5.4 |
Mark-to-Market Method | ||||||||||||
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Commodity contracts | $ | 42.6 | $ | 6.4 | $ | 63.4 | ||||||
Foreign exchange contracts | 3.7 | 7.7 | (9.0 | ) | ||||||||
Total | $ | 46.3 | $ | 14.1 | $ | 54.4 |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Contingent liabilities | ||
We are subject to lawsuits, investigations and other claims related to the operation of our farms, labor, livestock procurement, securities, environmental, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses and fees. A determination of the amount of reserves and disclosures required, if any, for these contingencies are made after considerable analysis of each individual issue. We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. We disclose contingent liabilities when the risk of loss is reasonably possible or probable. | Our contingent liabilities contain uncertainties because the eventual outcome will result from future events, and determination of current reserves requires estimates and judgments related to future changes in facts and circumstances, differing interpretations of the law and assessments of the amount of damages or fees, and the effectiveness of strategies or other factors beyond our control. | We have not made any material changes in the accounting methodology used to establish our contingent liabilities during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our contingent liabilities. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Marketing and advertising costs | ||
We incur advertising, customer incentive and consumer incentive costs to promote products through marketing programs. These programs include cooperative advertising, volume discounts, in-store display incentives, coupons and other programs. Advertising costs are charged in the period incurred except for certain production costs, which are expensed upon the first airing of the advertisement. We accrue customer and consumer incentive costs based on the estimated performance, historical utilization and redemption of each program. Except for certain amounts related to cooperative advertising arrangements, cash consideration given to customers is considered a reduction in the price of our products, thus recorded as a reduction to sales. The remainder of marketing and advertising costs is recorded as a selling, general and administrative expense. | Recognition of the costs related to these programs contains uncertainties due to judgment required in estimating the potential performance and redemption of each program.These estimates are based on many factors, including experience of similar promotional programs. | We have not made any material changes in the accounting methodology used to establish our marketing accruals during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our marketing accruals. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Impairment Considerations of Equity Method Investments | ||
Each quarter, we review the carrying value of our investments and consider whether indicators of impairment exist. Examples of impairment indicators include a history or expectation of future operating losses and declines in a quoted share price, among other factors. If an impairment indicator exists, we must evaluate the fair value of our investment to determine if a loss in value, which is other than temporary, has occurred. If we consider any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), then a write-down of the investment to its estimated fair value would be recorded. | In assessing the fair value of an investment, we consider a variety of information, including, when available, independent third party valuation reports, which incorporate generally accepted valuation techniques, and quoted market prices for our investment adjusted for any influence premium that should be applied to the market price based on our ability to exert significant influence over the operational and strategic decisions of the company. We also consider the history of our investment's cash flows, expectations about future cash flows and market multiples for comparable businesses. | We have not made any material changes in the accounting methodology used to evaluate impairment of equity method investments during the last three years. As of April 28, 2013, the carrying value of our investment in CFG exceeded the quoted market price on the Bolsa de Madrid Exchange (Madrid Exchange), indicating a possible impairment of our investment. However, CFG's share price is just one of several factors we consider in evaluating the fair value of our investment in CFG. Based on our evaluation, we concluded the fair value of our investment in CFG as of April 28, 2013, exceeded its carrying amount. However, our estimate of fair value has declined over the last 24 months, significantly eroding the gap between fair value and carrying value. The fair value decline is primarily attributable to persistent recessionary conditions in Western Europe, which have dampened CFG's current operating performance. In addition, rising interest rates associated with European sovereign debt crises have forced discount rates higher, diminishing the values calculated using our discounted cash flow techniques. Finally, CFG's share price on the Madrid Exchange has declined and, notwithstanding our reservations about the Madrid Exchange price, we nonetheless utilize it as a component of our valuation work and believe such declines must be considered as part of our fair value estimate. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
While we do not believe our investment is impaired as of April 28, 2013, the confluence of these and other factors has decreased our estimate of CFG's fair value and increased the risk of impairment. If the trends contributing to our lower estimate of CFG's fair value continue, the investment would become impaired. Specifically, if the most sensitive factors affecting our fair value calculations (i.e., estimates of future cash flows, interest rates and share price) continue to deteriorate, it is reasonably possible that our estimate of fair value could fall below carrying value. If that occurs, and we determine that the decline is other than temporary, we would record a charge to income for the difference between the estimate of fair value and the carrying amount of our investment. | ||
Accrued self insurance | ||
We are self insured for certain losses related to health and welfare, workers’ compensation, auto liability and general liability claims. We use an independent third-party actuary to assist in the determination of certain of our self-insurance liabilities. We and the actuary consider a number of factors when estimating our self-insurance liability, including claims experience, demographic factors, severity factors and other actuarial assumptions. We periodically review our estimates and assumptions with our third-party actuary to assist us in determining the adequacy of our self-insurance liability. | Our self-insurance liabilities contain uncertainties due to assumptions required and judgment used. Costs to settle our obligations, including legal and healthcare costs, could increase or decrease causing estimates of our self-insurance liabilities to change. Incident rates, including frequency and severity, could increase or decrease causing estimates in our self-insurance liabilities to change. | We have not made any material changes in the accounting methodology used to establish our self-insurance liabilities during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our self-insurance liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. A 10% increase in the estimates as of April 28, 2013, would result in an increase in the amount we recorded for our insurance liabilities of approximately $9.9 million. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Impairment of long-lived assets | ||
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Examples include a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, a significant adverse change in the extent or manner in which we use a long-lived asset or a change in its physical condition. When evaluating long-lived assets for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows. Impairment is recorded if the estimated future cash flows are less than the carrying value of the asset. The impairment is the excess of the carrying value over the fair value of the long-lived asset. We recorded impairment charges related to long-lived assets of $4.2 million, $2.9 and $9.2 million in fiscal 2013, 2012 and 2011, respectively. | Our impairment analysis contains uncertainties due to judgment in assumptions and estimates surrounding undiscounted future cash flows of the long-lived asset, including forecasting useful lives of assets and selecting the discount rate that reflects the risk inherent in future cash flows. | We have not made any material changes in the accounting methodology used to evaluate the impairment of long-lived assets during the last three years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate impairments of long- lived assets. However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to future impairment losses that could be material. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Impairment of goodwill and other non-amortized intangible assets | ||
Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise. In the evaluation of goodwill for impairment, we may perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is not, no further analysis is required. If it is, a prescribed two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any. The first step in the two-step impairment test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to have a potential impairment and the second step of the impairment test is not necessary. However, if the carrying amount of a reporting unit exceeds its fair value, the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss to recognize, if any. The second step compares the implied fair value of goodwill with the carrying amount of goodwill. If the implied fair value of goodwill exceeds the carrying amount, goodwill is not considered impaired. However, if the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. | We estimate the fair value of our reporting units by applying valuation multiples and/or estimating future discounted cash flows. The selection of multiples and cash flows is dependent upon assumptions regarding future levels of operating performance as well as business trends and prospects, and industry, market and economic conditions. A discounted cash flow analysis requires us to make various judgmental assumptions about sales, operating margins, growth rates and discount rates. When estimating future discounted cash flows, we consider the assumptions that hypothetical marketplace participants would use in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on our cost of capital or location-specific economic factors. The fair values of trademarks have been calculated using a royalty rate method. Assumptions about royalty rates are based on the rates at which similar brands and trademarks are licensed in the marketplace. Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions. | We have not made any material changes in the accounting methodology used to evaluate impairment of goodwill and other intangible assets during the last three years. As of April 28, 2013, we had $782.4 million of goodwill and $345.7 million of other non-amortized intangible assets. Our goodwill is included in the following segments: • $231.8 million – Pork • $130.6 million – International • $420.0 million – Hog Production As a result of the first step of our 2013 goodwill impairment analysis, the fair value of each reporting unit exceeded its carrying value. Therefore, the second step was not necessary. A hypothetical 10% decrease in the estimated fair value of our reporting units would not result in an impairment. Our fiscal 2013 other non-amortized intangible asset impairment analysis did not result in an impairment charge. A hypothetical 10% decrease in the estimated fair value of our intangible assets would not result in a material impairment. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (i.e., the fair value of the reporting unit is allocated to all the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit). For our other non-amortized intangible assets, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We have elected to make the first day of the fourth quarter the annual impairment assessment date for goodwill and other intangible assets. However, we could be required to evaluate the recoverability of goodwill and other intangible assets prior to the required annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of the business or a decline in market capitalization. | ||
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Income taxes | ||
We estimate total income tax expense based on statutory tax rates and tax planning opportunities available to us in various jurisdictions in which we earn income. Federal income taxes include an estimate for taxes on earnings of foreign subsidiaries expected to be remitted to the United States and be taxable, but not for earnings considered indefinitely invested in the foreign subsidiary. Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are recorded when it is likely a tax benefit will not be realized for a deferred tax asset. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. This analysis is performed in accordance with the applicable accounting guidance. | Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. Changes in projected future earnings could affect the recorded valuation allowances in the future. Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in the application of complex tax regulations across the tax jurisdictions where we operate. Our analysis of unrecognized tax benefits contain uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds. | We do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. However, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our recorded liabilities, our effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement may require use of our cash and result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement could be recognized as a reduction in our effective tax rate in the period of resolution. |
Description | Judgments and Uncertainties | Effect if Actual Results Differ From Assumptions |
Pension Accounting | ||
We provide the majority of our U.S. employees with pension benefits. We account for our pension plans in accordance with the applicable accounting guidance, which requires us to recognize the funded status of our pension plans in our consolidated balance sheets and to recognize, as a component of other comprehensive income (loss), the gains or losses and prior service costs or credits that arise during the period, but are not recognized in net periodic benefit cost. We use an independent third-party actuary to assist in the determination of our pension obligation and related costs. We generally contribute the minimum amount required under government regulations to our qualified pension plans. We funded $17.7 million, $142.8 million and $95.1 million to our qualified pension plans during fiscal 2013, 2012 and 2011, respectively. We expect to fund at least $51.6 million in fiscal 2014. | The measurement of our pension obligation and costs is dependent on a variety of assumptions regarding future events. The key assumptions we use include discount rates, salary growth, retirement ages/mortality rates and the expected return on plan assets. These assumptions may have an effect on the amount and timing of future contributions. The discount rate assumption is based on investment yields available at year-end on corporate bonds rated AA and above with a maturity to match our expected benefit payment stream. The salary growth assumption reflects our long-term actual experience, the near-term outlook and assumed inflation. Retirement rates are based primarily on actual plan experience. Mortality rates are based on mandated mortality tables, which have flexibility to consider industry specific groups, such as blue collar or white collar. The expected return on plan assets reflects asset allocations, investment strategy and historical returns of the asset categories. The effects of actual results differing from these assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense in such future periods. The following weighted average assumptions were used to determine our benefit obligation and net benefit cost for fiscal 2013: • 4.75% – Discount rate to determine net benefit cost • 4.45% – Discount rate to determine pension benefit obligation • 7.75% – Expected return on plan assets • 4.00% – Salary growth | If actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. For example, the discount rate used to measure our projected benefit obligation decreased from 4.75% as of April 29, 2012 to 4.45% as of April 28, 2013, which is the primary cause for a $115.5 million decline in funded status and an expected increase in net pension cost of $11.9 million in fiscal 2014. An additional 0.50% decrease in the discount rate used to measure our projected benefit obligation would have further reduced the funded status by $136.8 million as of April 28, 2013, and would have resulted in an additional $16.8 million in net pension cost for fiscal 2013. A 0.50% decrease in expected return on plan assets would have resulted in an additional $5.5 million in net pension cost for fiscal 2013. In addition to higher net pension cost, a significant decrease in the funded status of our pension plans caused by either a devaluation of plan assets or a decline in the discount rate would result in higher pension funding requirements. |
Derivatives Accounting | ||
See “Derivative Financial Instruments” above for a discussion of our derivative accounting policy. | ||
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
PAGE | |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Sales | $ | 13,221.1 | $ | 13,094.3 | $ | 12,202.7 | ||||||
Cost of sales | 11,901.4 | 11,544.9 | 10,488.6 | |||||||||
Gross profit | 1,319.7 | 1,549.4 | 1,714.1 | |||||||||
Selling, general and administrative expenses | 815.4 | 816.9 | 789.8 | |||||||||
Gain on fire insurance recovery | — | — | (120.6 | ) | ||||||||
(Income) loss from equity method investments | (15.0 | ) | 9.9 | (50.1 | ) | |||||||
Operating profit | 519.3 | 722.6 | 1,095.0 | |||||||||
Interest expense | 168.7 | 176.7 | 245.4 | |||||||||
Loss on debt extinguishment | 120.7 | 12.2 | 92.5 | |||||||||
Income before income taxes | 229.9 | 533.7 | 757.1 | |||||||||
Income tax expense | 46.1 | 172.4 | 236.1 | |||||||||
Net income | $ | 183.8 | $ | 361.3 | $ | 521.0 | ||||||
Net income per share: | ||||||||||||
Basic | $ | 1.26 | $ | 2.23 | $ | 3.14 | ||||||
Diluted | $ | 1.26 | $ | 2.21 | $ | 3.12 | ||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 145.5 | 162.3 | 166.0 | |||||||||
Effect of dilutive shares | 0.9 | 1.2 | 1.2 | |||||||||
Diluted | 146.4 | 163.5 | 167.2 |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Net income | $ | 183.8 | $ | 361.3 | $ | 521.0 | ||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation: | ||||||||||||
Translation adjustment | (12.5 | ) | (185.7 | ) | 120.2 | |||||||
Tax benefit | 1.4 | 25.9 | 2.9 | |||||||||
Pension accounting: | ||||||||||||
Net actuarial (losses) gains | (93.9 | ) | (326.1 | ) | 60.8 | |||||||
Reclassification of losses into net income | 52.8 | 23.5 | 38.9 | |||||||||
Tax benefit (expense) | 15.9 | 117.6 | (37.1 | ) | ||||||||
Hedge accounting: | ||||||||||||
Net derivative gains | 53.3 | 105.6 | 144.9 | |||||||||
Reclassification of gains into net income | (165.4 | ) | (100.9 | ) | (26.6 | ) | ||||||
Tax benefit (expense) | 43.1 | (1.6 | ) | (45.7 | ) | |||||||
Total other comprehensive income (loss) | (105.3 | ) | (341.7 | ) | 258.3 | |||||||
Total comprehensive income | $ | 78.5 | $ | 19.6 | $ | 779.3 |
April 28, 2013 | April 29, 2012 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 310.6 | $ | 324.3 | ||||
Accounts receivable, net | 663.2 | 624.7 | ||||||
Inventories | 2,348.3 | 2,072.4 | ||||||
Prepaid expenses and other current assets | 229.7 | 277.6 | ||||||
Total current assets | 3,551.8 | 3,299.0 | ||||||
Property, plant and equipment, net | 2,298.4 | 2,277.2 | ||||||
Goodwill | 782.4 | 768.2 | ||||||
Investments | 532.4 | 522.6 | ||||||
Intangible assets, net | 390.4 | 381.8 | ||||||
Other assets | 161.0 | 173.4 | ||||||
Total assets | $ | 7,716.4 | $ | 7,422.2 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt and capital lease obligations | 676.1 | 63.5 | ||||||
Accounts payable | 429.1 | 415.8 | ||||||
Accrued expenses and other current liabilities | 641.0 | 657.0 | ||||||
Total current liabilities | 1,746.2 | 1,136.3 | ||||||
Long-term debt and capital lease obligations | 1,829.2 | 1,900.9 | ||||||
Net long-term pension liability | 697.0 | 581.9 | ||||||
Other liabilities | 333.6 | 413.1 | ||||||
Redeemable noncontrolling interests | 12.7 | 2.0 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Shareholders' equity: | ||||||||
Preferred stock, $1.00 par value, 1,000,000 authorized shares | — | — | ||||||
Common stock, $.50 par value, 500,000,000 authorized shares; 138,919,056 and 157,408,077 issued and outstanding | 69.5 | 78.7 | ||||||
Additional paid-in capital | 1,389.9 | 1,561.0 | ||||||
Stock held in trust | (68.8 | ) | (67.9 | ) | ||||
Retained earnings | 2,322.6 | 2,326.4 | ||||||
Accumulated other comprehensive loss | (616.2 | ) | (510.9 | ) | ||||
Total shareholders’ equity | 3,097.0 | 3,387.3 | ||||||
Noncontrolling interests | 0.7 | 0.7 | ||||||
Total equity | 3,097.7 | 3,388.0 | ||||||
Total liabilities and shareholders' equity | $ | 7,716.4 | $ | 7,422.2 |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 183.8 | $ | 361.3 | $ | 521.0 | ||||||
Adjustments to reconcile net cash flows from operating activities: | ||||||||||||
(Income) loss from equity method investments | (15.0 | ) | 9.9 | (50.1 | ) | |||||||
Depreciation and amortization | 239.9 | 242.8 | 231.9 | |||||||||
Gain on fire insurance recovery | — | — | (120.6 | ) | ||||||||
Deferred income taxes | (5.3 | ) | 90.2 | 158.2 | ||||||||
Impairment of assets | 4.2 | 2.9 | 9.2 | |||||||||
Pension expense | 96.1 | 57.2 | 82.0 | |||||||||
Pension contributions | (17.7 | ) | (142.8 | ) | (128.5 | ) | ||||||
Changes in operating assets and liabilities and other, net: | ||||||||||||
Accounts receivable | (39.9 | ) | 47.8 | (63.8 | ) | |||||||
Inventories | (273.9 | ) | (89.8 | ) | (178.4 | ) | ||||||
Prepaid expenses and other current assets | 52.0 | (68.1 | ) | 132.2 | ||||||||
Accounts payable | 14.7 | 2.5 | 36.6 | |||||||||
Accrued expenses and other current liabilities | (15.9 | ) | 12.6 | (72.6 | ) | |||||||
Other | (50.3 | ) | 43.6 | 59.3 | ||||||||
Net cash flows from operating activities | 172.7 | 570.1 | 616.4 | |||||||||
Cash flows from investing activities: | ||||||||||||
Capital expenditures | (278.0 | ) | (290.7 | ) | (176.8 | ) | ||||||
Business acquisition, net of cash acquired | (24.0 | ) | — | — | ||||||||
Dispositions | — | — | 261.5 | |||||||||
Insurance proceeds | — | — | 120.6 | |||||||||
Net (expenditures) proceeds from breeding stock transactions | (18.4 | ) | (2.3 | ) | 26.2 | |||||||
Proceeds from sale of property, plant and equipment | 16.9 | 6.4 | 22.8 | |||||||||
Other | (0.2 | ) | — | — | ||||||||
Net cash flows from investing activities | (303.7 | ) | (286.6 | ) | 254.3 | |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from the issuance of long-term debt | 1,219.2 | — | — | |||||||||
Principal payments on long-term debt and capital lease obligations | (716.5 | ) | (152.7 | ) | (944.5 | ) | ||||||
Net borrowings (repayments) on revolving credit facilities and notes payables | 13.9 | (0.3 | ) | 21.6 | ||||||||
Repurchase of common stock | (386.4 | ) | (189.5 | ) | — | |||||||
Net proceeds from the issuance of common stock and stock option exercises | 3.1 | 1.3 | 1.2 | |||||||||
Change in cash collateral | — | 23.9 | (23.9 | ) | ||||||||
Debt issuance costs and other | (17.6 | ) | (11.1 | ) | — | |||||||
Net cash flows from financing activities | 115.7 | (328.4 | ) | (945.6 | ) | |||||||
Effect of foreign exchange rate changes on cash | 1.6 | (5.5 | ) | (1.6 | ) | |||||||
Net change in cash and cash equivalents | (13.7 | ) | (50.4 | ) | (76.5 | ) | ||||||
Cash and cash equivalents at beginning of period | 324.3 | 374.7 | 451.2 | |||||||||
Cash and cash equivalents at end of period | $ | 310.6 | $ | 324.3 | $ | 374.7 |
Common Stock (Shares) | Common Stock (Amount) | Additional Paid-in Capital | Stock Held in Trust | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||
Balance, May 2, 2010 | 166.0 | $ | 83.0 | $ | 1,626.9 | $ | (65.5 | ) | $ | 1,538.7 | $ | (427.5 | ) | $ | 2,755.6 | $ | 2.6 | $ | 2,758.2 | ||||||||||||||||
Issuance of common stock | 0.1 | — | 1.2 | — | — | — | 1.2 | — | 1.2 | ||||||||||||||||||||||||||
Stock compensation expense | — | — | 11.3 | — | — | — | 11.3 | — | 11.3 | ||||||||||||||||||||||||||
Purchase of stock for trust | — | — | — | (1.2 | ) | — | — | (1.2 | ) | — | (1.2 | ) | |||||||||||||||||||||||
Other | — | — | (0.7 | ) | — | — | — | (0.7 | ) | 0.4 | (0.3 | ) | |||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | 521.0 | — | 521.0 | (1.9 | ) | 519.1 | |||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | 258.3 | 258.3 | — | 258.3 | ||||||||||||||||||||||||||
Balance, May 1, 2011 | 166.1 | 83.0 | 1,638.7 | (66.7 | ) | 2,059.7 | (169.2 | ) | 3,545.5 | 1.1 | 3,546.6 | ||||||||||||||||||||||||
Common stock repurchased | (9.2 | ) | (4.6 | ) | (90.3 | ) | — | (94.6 | ) | — | (189.5 | ) | — | (189.5 | ) | ||||||||||||||||||||
Issuance of common stock | 0.5 | 0.3 | (5.0 | ) | — | — | — | (4.7 | ) | — | (4.7 | ) | |||||||||||||||||||||||
Stock compensation expense | — | — | 14.4 | — | — | — | 14.4 | — | 14.4 | ||||||||||||||||||||||||||
Purchase of stock for trust | — | — | — | (1.6 | ) | — | — | (1.6 | ) | — | (1.6 | ) | |||||||||||||||||||||||
Other | — | — | 3.2 | 0.4 | — | — | 3.6 | 0.4 | 4.0 | ||||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | 361.3 | — | 361.3 | (0.8 | ) | 360.5 | |||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | (341.7 | ) | (341.7 | ) | — | (341.7 | ) | |||||||||||||||||||||||
Balance, April 29, 2012 | 157.4 | 78.7 | 1,561.0 | (67.9 | ) | 2,326.4 | (510.9 | ) | 3,387.3 | 0.7 | 3,388.0 | ||||||||||||||||||||||||
Common stock repurchased | (19.1 | ) | (9.5 | ) | (189.3 | ) | — | (187.6 | ) | — | (386.4 | ) | — | (386.4 | ) | ||||||||||||||||||||
Issuance of common stock | 0.6 | 0.3 | (1.1 | ) | — | — | — | (0.8 | ) | — | (0.8 | ) | |||||||||||||||||||||||
Stock compensation expense | — | — | 19.1 | — | — | — | 19.1 | — | 19.1 | ||||||||||||||||||||||||||
Purchase of stock for trust | — | — | — | (1.8 | ) | — | — | (1.8 | ) | — | (1.8 | ) | |||||||||||||||||||||||
Other | — | — | 0.2 | 0.9 | — | — | 1.1 | (0.4 | ) | 0.7 | |||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 183.8 | — | 183.8 | 0.4 | 184.2 | ||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | (105.3 | ) | (105.3 | ) | — | (105.3 | ) | |||||||||||||||||||||||
Balance, April 28, 2013 | 138.9 | $ | 69.5 | $ | 1,389.9 | $ | (68.8 | ) | $ | 2,322.6 | $ | (616.2 | ) | $ | 3,097.0 | $ | 0.7 | $ | 3,097.7 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Livestock | $ | 1,113.5 | $ | 962.8 | ||||
Fresh and packaged meats | 960.8 | 912.1 | ||||||
Grains | 162.0 | 90.4 | ||||||
Manufacturing supplies | 57.7 | 59.1 | ||||||
Other | 54.3 | 48.0 | ||||||
Total inventories | $ | 2,348.3 | $ | 2,072.4 |
Useful Life | April 28, 2013 | April 29, 2012 | ||||||||
(in Years) | (in millions) | |||||||||
Land and improvements | 0-20 | $ | 276.1 | $ | 268.9 | |||||
Buildings and improvements | 20-40 | 1,788.6 | 1,690.6 | |||||||
Machinery and equipment | 5-25 | 1,862.7 | 1,780.6 | |||||||
Breeding stock | 2 | 186.7 | 182.1 | |||||||
Computer hardware and software | 3-5 | 156.1 | 148.4 | |||||||
Other | 3-10 | 94.4 | 89.1 | |||||||
Construction in progress | 105.5 | 110.2 | ||||||||
4,470.1 | 4,269.9 | |||||||||
Accumulated depreciation | (2,171.7 | ) | (1,992.7 | ) | ||||||
Property, plant and equipment, net | $ | 2,298.4 | $ | 2,277.2 |
Useful Life | April 28, 2013 | April 29, 2012 | ||||||||
(in Years) | (in millions) | |||||||||
Amortized intangible assets: | ||||||||||
Customer relations assets | 15-16 | $ | 23.0 | $ | 13.3 | |||||
Patents, rights and leasehold interests | 5-25 | 14.3 | 11.8 | |||||||
Contractual relationships | 22 | 33.1 | 33.1 | |||||||
Accumulated amortization | (25.7 | ) | (22.6 | ) | ||||||
Amortized intangible assets, net | 44.7 | 35.6 | ||||||||
Non-amortized intangible assets: | ||||||||||
Trademarks | Indefinite | 339.6 | 340.1 | |||||||
Permits | Indefinite | 6.1 | 6.1 | |||||||
Intangible assets, net | $ | 390.4 | $ | 381.8 |
NOTE 2: | ACQUISITIONS |
(in millions) | ||||
Cash and cash equivalents | $ | 0.2 | ||
Accounts receivable, net | 2.0 | |||
Inventories | 0.7 | |||
Property, plant and equipment, net | 3.4 | |||
Intangible assets, net | 12.4 | |||
Goodwill | 16.4 | |||
Assets acquired | 35.1 | |||
Accounts payable | 0.5 | |||
Liabilities assumed | 0.5 | |||
Noncontrolling interests | 10.4 | |||
Purchase price | $ | 24.2 |
Assets | Liabilities | |||||||||||||||
April 28, 2013 | April 29, 2012 | April 28, 2013 | April 29, 2012 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Derivatives using the "hedge accounting" method: | ||||||||||||||||
Grain contracts | $ | 2.5 | $ | 35.3 | $ | 73.0 | $ | 9.6 | ||||||||
Livestock contracts | 4.1 | 22.9 | 1.1 | — | ||||||||||||
Foreign exchange contracts | 0.2 | 1.9 | 0.1 | — | ||||||||||||
Total | 6.8 | 60.1 | 74.2 | 9.6 | ||||||||||||
Derivatives using the "mark-to-market" method: | ||||||||||||||||
Grain contracts | 6.2 | 9.1 | 13.7 | 1.0 | ||||||||||||
Livestock contracts | 12.4 | 7.4 | 0.7 | 7.2 | ||||||||||||
Energy contracts | 3.1 | — | 0.6 | 12.2 | ||||||||||||
Foreign exchange contracts | 0.6 | 2.4 | 0.3 | 0.7 | ||||||||||||
Total | 22.3 | 18.9 | 15.3 | 21.1 | ||||||||||||
Total fair value of derivative instruments | $ | 29.1 | $ | 79.0 | $ | 89.5 | $ | 30.7 |
Minimum | Maximum | Metric | ||||||
Commodities: | ||||||||
Corn | 30,885,000 | 114,525,000 | Bushels | |||||
Soybean meal | 273,496 | 755,444 | Tons | |||||
Lean Hogs | — | 569,920,000 | Pounds | |||||
Foreign currency (1) | 11,687,888 | 71,979,138 | U.S. Dollars |
(1) | Amounts represent the U.S. dollar equivalent of various foreign currency contracts. |
Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative (Effective Portion) | Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion) | Gain (Loss) Recognized in Earnings on Derivative (Ineffective Portion) | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Commodity contracts: | ||||||||||||||||||||||||||||||||||||
Grain contracts | $ | 39.1 | $ | 5.5 | $ | 232.9 | $ | 108.4 | $ | 75.1 | $ | 80.7 | $ | — | $ | (0.2 | ) | $ | 1.9 | |||||||||||||||||
Lean hog contracts | 13.6 | 102.8 | (82.8 | ) | 54.9 | 32.3 | (44.5 | ) | 0.4 | (0.5 | ) | (1.0 | ) | |||||||||||||||||||||||
Interest rate contracts | — | — | (1.2 | ) | — | (2.4 | ) | (7.0 | ) | — | — | — | ||||||||||||||||||||||||
Foreign exchange contracts | 0.4 | (2.5 | ) | (4.1 | ) | 2.1 | (4.1 | ) | (2.6 | ) | — | — | — | |||||||||||||||||||||||
Total | $ | 53.1 | $ | 105.8 | $ | 144.8 | $ | 165.4 | $ | 100.9 | $ | 26.6 | $ | 0.4 | $ | (0.7 | ) | $ | 0.9 |
Minimum | Maximum | Metric | ||||||
Commodities: | ||||||||
Lean hogs | — | 286,800,000 | Pounds | |||||
Corn | 2,745,000 | 16,960,000 | Bushels |
Gain (Loss) Recognized in Earnings on Derivative | Gain (Loss) Recognized in Earnings on Related Hedged Item | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Commodity contracts | $ | (12.8 | ) | $ | 21.9 | $ | (4.2 | ) | $ | 5.0 | $ | (16.7 | ) | $ | 5.4 |
Minimum | Maximum | Metric | ||||||
Commodities: | ||||||||
Lean hogs | 320,000 | 542,440,000 | Pounds | |||||
Corn | 1,080,000 | 22,960,000 | Bushels | |||||
Soybean meal | 33,945 | 109,065 | Tons | |||||
Soybeans | 155,000 | 935,000 | Bushels | |||||
Wheat | — | 2,000,000 | Bushels | |||||
Natural gas | 9,370,000 | 11,030,000 | Million BTU | |||||
Diesel | — | 3,528,000 | Gallons | |||||
Crude oil | — | 144,000 | Barrels | |||||
Foreign currency (1) | 21,823,992 | 131,845,204 | U.S. Dollars |
(1) | Amounts represent the U.S. dollar equivalent of various foreign currency contracts. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Commodity contracts (cost of sales) | $ | 12.9 | $ | 6.4 | $ | 63.4 | ||||||
Commodity contracts (sales) | 29.7 | — | — | |||||||||
Foreign exchange contracts | 3.7 | 7.7 | (9.0 | ) | ||||||||
Total | $ | 46.3 | $ | 14.1 | $ | 54.4 |
Equity Investment | Segment | % Owned | April 28, 2013 | April 29, 2012 | ||||||||
(in millions) | ||||||||||||
Campofrío Food Group (CFG) | International | 37% | $ | 376.2 | $ | 385.2 | ||||||
Mexican joint ventures | International | 50% | 129.6 | 111.2 | ||||||||
All other equity method investments | Various | Various | 26.6 | 26.2 | ||||||||
Total investments | $ | 532.4 | $ | 522.6 |
• | the minority shares traded on the Madrid Exchange confer no special rights or privileges to buyers. In contrast, the shares comprising our 37% stake in CFG contractually entitle us to two seats on CFG's 9-person board of directors, giving us the ability to exert significant influence over the strategic and operational decisions of our investee. |
• | the stock is very thinly traded. CFG is a closely held company, with the three largest shareholders owning approximately 76% of the outstanding shares. We are CFG's largest shareholder, with a 37% stake. |
• | The average daily trading volume during the last 24 months represents less than three hundredths of one percent of the total outstanding shares. The lack of an active market can cause significant fluctuations and volatility in the stock price that are not commensurate with fundamental changes in the underlying business and the fair value of our holding in CFG. Shares trading on the Madrid Exchange have ranged from a high of €9.28 ($13.74) to a low of €4.12 ($5.39) per share during the last 24 months, with upward and downward fluctuations in between. |
Date | Share Price | Carrying Value | ||||||
May 5, 2011 | € | 9.27 | € | 7.93 | ||||
February 17, 2012 | € | 7.20 | € | 7.54 | ||||
April 29, 2012 (1) | € | 6.30 | € | 7.70 | ||||
April 28, 2013 (1) (2) | € | 4.99 | € | 7.64 |
(1) | Share prices on quarter end date reflect the last trading day in the quarter. |
(2) | Subsequent to the end of fiscal 2013, CFG's share price traded as high as €5.88 per share on May 30, 2013. |
Fiscal Years | ||||||||||||||
Equity Investment | Segment | 2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||||
CFG (1) | International | $ | (4.8 | ) | $ | 25.0 | $ | (17.0 | ) | |||||
Mexican joint ventures | International | (9.3 | ) | (13.4 | ) | (29.6 | ) | |||||||
All other equity method investments | Various | (0.9 | ) | (1.7 | ) | (3.5 | ) | |||||||
Loss (income) from equity method investments | $ | (15.0 | ) | $ | 9.9 | $ | (50.1 | ) |
(1) | CFG prepares its financial statements in accordance with International Financial Reporting Standards. Our share of CFG’s results reflects U.S. GAAP adjustments and thus, there may be differences between the amounts we report for CFG and the amounts reported by CFG. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Income statement information: | ||||||||||||
Sales | $ | 2,464.6 | $ | 2,536.1 | $ | 2,433.3 | ||||||
Gross profit | 564.4 | 583.0 | 423.0 | |||||||||
Net income (loss) | 13.0 | (71.2 | ) | 46.1 | ||||||||
April 28, 2013 | April 29, 2012 | |||||||||||
(in millions) | ||||||||||||
Balance sheet information: | ||||||||||||
Current assets | $ | 909.9 | $ | 944.5 | ||||||||
Long-term assets | 1,926.8 | 1,930.4 | ||||||||||
Current liabilities | 993.6 | 941.9 | ||||||||||
Long-term liabilities | 1,094.2 | 1,168.1 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Payroll and related benefits | $ | 246.8 | $ | 233.5 | ||||
Customer incentives | 88.6 | 81.7 | ||||||
Derivative instruments and broker deposits | 71.0 | 23.0 | ||||||
Insurance reserves | 60.9 | 63.3 | ||||||
Accrued interest | 34.9 | 41.9 | ||||||
Other | 138.8 | 213.6 | ||||||
Total accrued expenses and other current liabilities | $ | 641.0 | $ | 657.0 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
6.625% senior unsecured notes, due August 2022, including unamortized discounts of $4.7 million | $ | 995.3 | $ | — | ||||
10% senior secured notes, due July 2014, including unamortized discounts of $7.0 million | — | 357.4 | ||||||
10% senior secured notes, due July 2014, including unamortized premiums of $4.4 million | — | 229.4 | ||||||
7.75% senior unsecured notes, due July 2017 | 500.0 | 500.0 | ||||||
4% senior unsecured Convertible Notes, due June 2013, including unamortized discounts of $4.1 million and $26.8 million | 395.9 | 373.2 | ||||||
7.75% senior unsecured notes, due May 2013 | 55.0 | 160.0 | ||||||
Floating rate senior unsecured term loan, due May 2018 | 200.0 | 200.0 | ||||||
Floating rate senior unsecured term loan, due February 2014 | 200.0 | — | ||||||
Various, interest rates from 0.0% to 7.22%, due May 2013 through June 2017 | 132.9 | 117.3 | ||||||
Total debt | 2,479.1 | 1,937.3 | ||||||
Current portion | (675.1 | ) | (62.5 | ) | ||||
Total long-term debt | $ | 1,804.0 | $ | 1,874.8 |
Fiscal Year | (in millions) | |||
2014 | $ | 675.1 | ||
2015 | 70.6 | |||
2016 | 40.5 | |||
2017 | 3.8 | |||
2018 | 518.7 | |||
Thereafter | 1,170.4 | |||
Total debt | $ | 2,479.1 |
Fiscal Year | (in millions) | |||
2014 | $ | 41.9 | ||
2015 | 30.5 | |||
2016 | 24.3 | |||
2017 | 17.0 | |||
2018 | 15.4 | |||
Thereafter | 37.5 | |||
Total | $ | 166.6 |
Fiscal Year | (in millions) | |||
2014 | $ | 1,829.0 | ||
2015 | 1,325.8 | |||
2016 | 1,081.7 | |||
2017 | 929.4 | |||
2018 | 911.4 |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Current income tax expense: | ||||||||||||
Federal | $ | 39.8 | $ | 72.7 | $ | 57.6 | ||||||
State | 6.1 | 8.4 | 17.2 | |||||||||
Foreign | 5.5 | 1.1 | 3.1 | |||||||||
51.4 | 82.2 | 77.9 | ||||||||||
Deferred income tax expense (benefit): | ||||||||||||
Federal | (2.6 | ) | 82.1 | 128.3 | ||||||||
State | (10.5 | ) | 11.2 | 24.2 | ||||||||
Foreign | 7.8 | (3.1 | ) | 5.7 | ||||||||
(5.3 | ) | 90.2 | 158.2 | |||||||||
Total income tax expense | $ | 46.1 | $ | 172.4 | $ | 236.1 |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Federal income taxes at statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
State income taxes, net of federal tax benefit | (0.2 | ) | 2.1 | 3.4 | |||||
Foreign income taxes | (1.7 | ) | (0.2 | ) | (1.2 | ) | |||
Unremitted earnings | — | 2.6 | — | ||||||
Net change in uncertain tax positions | 0.6 | (2.4 | ) | (0.3 | ) | ||||
Net change in valuation allowance | (4.8 | ) | (0.9 | ) | (3.4 | ) | |||
Tax credits | (5.7 | ) | (1.0 | ) | (1.1 | ) | |||
Manufacturer's deduction | (1.5 | ) | (1.7 | ) | (1.8 | ) | |||
Adjustment to goodwill | — | — | 2.0 | ||||||
Other | (1.6 | ) | (1.2 | ) | (1.4 | ) | |||
Effective tax rate | 20.1 | % | 32.3 | % | 31.2 | % |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Deferred tax assets: | ||||||||
Pension and other retirement liabilities | $ | 272.4 | $ | 256.4 | ||||
Tax credits, carryforwards and net operating losses | 77.3 | 85.6 | ||||||
Accrued expenses and other current liabilities | 32.2 | 53.2 | ||||||
Employee benefits | 17.3 | — | ||||||
Other | 10.2 | 30.8 | ||||||
409.4 | 426.0 | |||||||
Valuation allowance | (43.5 | ) | (54.6 | ) | ||||
Total deferred tax assets | $ | 365.9 | $ | 371.4 | ||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | $ | 371.9 | $ | 385.6 | ||||
Intangible assets | 134.3 | 125.8 | ||||||
Derivatives | 1.5 | 31.9 | ||||||
Employee benefits | — | 13.7 | ||||||
Investments in subsidiaries | 44.1 | 44.6 | ||||||
Total deferred tax liabilities | $ | 551.8 | $ | 601.6 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Prepaids and other current assets | $ | 19.9 | $ | 57.4 | ||||
Other assets | — | 3.2 | ||||||
Other liabilities | 205.8 | 290.8 |
(in millions) | ||||
Balance, May 1, 2011 | $ | 33.6 | ||
Additions for tax positions taken in the current year | 2.4 | |||
Additions for tax positions taken in prior years | (10.8 | ) | ||
Settlements with taxing authorities | (9.3 | ) | ||
Lapse of statute of limitations | (0.6 | ) | ||
Balance, April 29, 2012 | 15.3 | |||
Additions for tax positions taken in the current year | 3.9 | |||
Reduction for tax positions taken in prior years | (1.8 | ) | ||
Settlements with taxing authorities | (1.0 | ) | ||
Lapse of statute of limitations | (0.7 | ) | ||
Balance, April 28, 2013 | $ | 15.7 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Change in benefit obligation: | ||||||||
Benefit obligation at beginning of year | $ | 1,610.6 | $ | 1,329.9 | ||||
Service cost | 47.2 | 37.4 | ||||||
Interest cost | 74.8 | 75.9 | ||||||
Benefits paid | (65.9 | ) | (63.2 | ) | ||||
Actuarial loss | 146.1 | 229.1 | ||||||
Other | 0.4 | 1.5 | ||||||
Benefit obligation at end of year | 1,813.2 | 1,610.6 | ||||||
Change in plan assets: (1) | ||||||||
Fair value of plan assets at beginning of year | 1,023.5 | 956.4 | ||||||
Actual return on plan assets | 131.5 | (16.0 | ) | |||||
Employer contributions | 17.7 | 142.8 | ||||||
Benefits paid | (62.0 | ) | (59.7 | ) | ||||
Other | (0.1 | ) | — | |||||
Fair value of plan assets at end of year | 1,110.6 | 1,023.5 | ||||||
Funded status | $ | (702.6 | ) | $ | (587.1 | ) | ||
Amounts recognized in the consolidated balance sheet: | ||||||||
Net long-term pension liability | $ | (697.0 | ) | $ | (581.9 | ) | ||
Accrued expenses and other current liabilities | (5.6 | ) | (5.2 | ) | ||||
Net amount recognized at end of year | $ | (702.6 | ) | $ | (587.1 | ) |
(1) | Excludes the assets and related activity of our non-qualified defined benefit pension plans. The fair value of assets related to our non-qualified plans was $121.0 million and $107.1 million as of April 28, 2013 and April 29, 2012, respectively. We made no contributions to our non-qualified plans in fiscal 2013 and fiscal 2012. Benefits paid for our non-qualified plans were $3.9 million and $3.5 million for fiscal 2013 and fiscal 2012, respectively. |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Unrecognized actuarial loss | $ | (704.9 | ) | $ | (665.4 | ) | ||
Unrecognized prior service credit | 3.2 | 4.7 |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Service cost | $ | 47.2 | $ | 37.4 | $ | 37.0 | ||||||
Interest cost | 74.8 | 75.9 | 74.9 | |||||||||
Expected return on plan assets | (78.8 | ) | (79.6 | ) | (63.9 | ) | ||||||
Net amortization | 52.9 | 23.5 | 34.0 | |||||||||
Net periodic pension cost | $ | 96.1 | $ | 57.2 | $ | 82.0 |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Discount rate to determine net periodic benefit cost | 4.75 | % | 5.85 | % | 6.00 | % | |||
Discount rate to determine benefit obligation | 4.45 | 4.75 | 5.85 | ||||||
Expected long-term rate of return on plan assets | 7.75 | 7.75 | 8.00 | ||||||
Rate of compensation increase | 4.00 | 4.00 | 4.00 |
April 28, 2013 | April 29, 2012 | Target Range | ||||||||
Asset category: | (in millions) | |||||||||
Cash and cash equivalents, net of unsettled transactions | $ | 45.3 | $ | 24.7 | 0-4% | |||||
Equity securities | 411.3 | 427.0 | 30-50% | |||||||
Debt securities | 555.6 | 495.2 | 35-55% | |||||||
Alternative assets | 98.4 | 76.6 | 5-20% | |||||||
Total | $ | 1,110.6 | $ | 1,023.5 |
Fiscal Year | (in millions) | |||
2014 | $ | 73.0 | ||
2015 | 77.2 | |||
2016 | 81.6 | |||
2017 | 86.1 | |||
2018 | 91.0 | |||
2019-2023 | 520.8 |
▪ | Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. |
▪ | If a participating employer ceases to contribute to a multiemployer plan, the unfunded obligation of the plan may be borne by the remaining participating employers. |
▪ | If we were to withdraw from a multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of the plan and on the history of our participation in the plan prior to withdrawal. This is referred to as a withdrawal liability. |
▪ | "Red” Zone—Plan has been determined to be in “critical status” and is generally less than 65% funded. A rehabilitation plan, as required under the IRC, must be adopted by plans in the "red" zone. Plan participants may be responsible for the payment of surcharges, in addition to the contribution rate specified in the applicable collective bargaining agreement, for a plan in “critical status,” in accordance with the requirements of the IRC. |
▪ | "Yellow” Zone—Plan has been determined to be in “endangered status” and is generally less than 80% funded. A funding improvement plan, as required under the IRC, must be adopted. |
▪ | "Green” Zone—Plan has been determined to be neither in “critical status” nor in “endangered status,” and is generally at least 80% funded. |
Fiscal Years | ||||||||||||||||
Plan | EIN / PN (2) | 2013 | 2012 | 2011 | Expiration Dates of Collective Bargaining Agreements | |||||||||||
(in millions) | ||||||||||||||||
United Food and Commercial Workers International Union Industry Pension Fund | 51-6055922 / 001 | $ | 1.2 | $ | 1.1 | $ | 1.4 | Multiple (3) | ||||||||
Central Pension Fund of the International Union of Operating Engineers and Participating Employers | 36-6052390 / 001 | 0.2 | 0.2 | 0.2 | October 2013 | |||||||||||
IAM National Pension Fund National Pension Plan | 51-6031295 / 002 | 0.1 | 0.1 | 0.1 | February 2014 | |||||||||||
Total contributions to multiemployer plans | $ | 1.5 | $ | 1.4 | $ | 1.7 |
(1) | Contributions represent the amounts we contributed to the plans during the fiscal periods ending in the specified year. Our contributions to each plan did not exceed 5% of total plan contributions for any plan year presented. |
(2) | Represents the Employer Identification Number and the three-digit plan number assigned to a plan by the Internal Revenue Service. |
(3) | We have multiple collective bargaining agreements associated with the United Food and Commercial Workers International Union Industry Pension Fund. These agreements are currently scheduled to expire in December 2013, January 2014, October 2015 and May 2016. |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Expected annual volatility | 57 | % | 55 | % | 54 | % | |||
Dividend yield | — | % | — | % | — | % | |||
Risk free interest rate | 0.52 | % | 1.11 | % | 1.62 | % | |||
Expected option life (years) | 4 | 4 | 4 |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) | ||||||||||
Outstanding as of April 29, 2012 | 2,826,616 | $ | 21.82 | ||||||||||
Granted | 370,000 | $ | 20.67 | ||||||||||
Exercised | (279,578 | ) | $ | 15.29 | |||||||||
Forfeited | (18,885 | ) | $ | 19.83 | |||||||||
Expired | (40,000 | ) | $ | 21.00 | |||||||||
Outstanding as of April 28, 2013 | 2,858,153 | $ | 22.34 | 4.3 | $ | 14.4 | |||||||
Exercisable as of April 28, 2013 | 1,621,324 | $ | 23.58 | 3.5 | $ | 8.0 |
Number of Share Units | |||
Outstanding as of April 29, 2012 | 908,000 | ||
Granted | 920,000 | ||
Vested and issued | (564,433 | ) | |
Forfeited | (51,000 | ) | |
Outstanding as of April 28, 2013 | 1,212,567 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Foreign currency translation | $ | (170.5 | ) | $ | (159.4 | ) | ||
Pension accounting | (427.9 | ) | (402.7 | ) | ||||
Hedge accounting | (17.8 | ) | 51.2 | |||||
Accumulated other comprehensive loss | $ | (616.2 | ) | $ | (510.9 | ) |
▪ | 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 28, 2013 | April 29, 2012 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Derivatives: | ||||||||||||||||||||||||||||||||
Commodity contracts | $ | 6.8 | $ | — | $ | — | $ | 6.8 | $ | 52.0 | $ | 1.3 | $ | — | $ | 53.3 | ||||||||||||||||
Foreign exchange contracts | — | 0.8 | — | 0.8 | — | 4.3 | — | 4.3 | ||||||||||||||||||||||||
Open-ended mutual funds | 6.4 | — | — | 6.4 | 12.2 | — | — | 12.2 | ||||||||||||||||||||||||
Insurance contracts | — | 60.0 | — | 60.0 | — | 51.3 | — | 51.3 | ||||||||||||||||||||||||
Total | $ | 13.2 | $ | 60.8 | $ | — | $ | 74.0 | $ | 64.2 | $ | 56.9 | $ | — | $ | 121.1 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Derivatives: | ||||||||||||||||||||||||||||||||
Commodity contracts | $ | 30.5 | $ | 37.1 | $ | — | $ | 67.6 | $ | — | $ | 8.6 | $ | — | $ | 8.6 | ||||||||||||||||
Foreign exchange contracts | — | 0.4 | — | 0.4 | — | 0.7 | — | 0.7 | ||||||||||||||||||||||||
Total | $ | 30.5 | $ | 37.5 | $ | — | $ | 68.0 | $ | — | $ | 9.3 | $ | — | $ | 9.3 |
▪ | 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 pricing models based on 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. |
▪ | Open-ended mutual funds—Open-ended mutual funds are valued at their net asset value (NAV), which approximates fair value, and classified as Level 1. |
▪ | 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 28, 2013 | April 29, 2012 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 40.0 | $ | — | $ | — | $ | 40.0 | $ | 22.4 | $ | — | $ | — | $ | 22.4 | ||||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
Preferred stock | — | 0.6 | — | 0.6 | — | 0.5 | — | 0.5 | ||||||||||||||||||||||||
U.S. common stock: | ||||||||||||||||||||||||||||||||
Health care | 23.3 | — | — | 23.3 | 22.7 | — | — | 22.7 | ||||||||||||||||||||||||
Financial services | 25.1 | — | — | 25.1 | 21.8 | — | — | 21.8 | ||||||||||||||||||||||||
Retail and consumer products | 90.7 | — | — | 90.7 | 117.9 | — | — | 117.9 | ||||||||||||||||||||||||
Energy | 8.9 | — | — | 8.9 | 11.4 | — | — | 11.4 | ||||||||||||||||||||||||
Information technology | 22.0 | — | — | 22.0 | 30.8 | — | — | 30.8 | ||||||||||||||||||||||||
Manufacturing and industrials | 18.0 | — | — | 18.0 | 18.6 | — | — | 18.6 | ||||||||||||||||||||||||
Telecommunications | 6.7 | — | — | 6.7 | 9.5 | — | — | 9.5 | ||||||||||||||||||||||||
International common stock | 104.4 | — | — | 104.4 | 103.6 | — | — | 103.6 | ||||||||||||||||||||||||
Mutual funds: | ||||||||||||||||||||||||||||||||
International | — | 82.8 | — | 82.8 | — | 30.1 | — | 30.1 | ||||||||||||||||||||||||
Domestic small cap | — | 23.2 | — | 23.2 | — | 19.8 | — | 19.8 | ||||||||||||||||||||||||
Domestic large cap | — | 2.2 | — | 2.2 | — | 2.5 | — | 2.5 | ||||||||||||||||||||||||
Balanced | — | 3.4 | — | 3.4 | — | 37.8 | — | 37.8 | ||||||||||||||||||||||||
Fixed income: | ||||||||||||||||||||||||||||||||
Mutual funds | — | 26.0 | — | 26.0 | — | 11.3 | — | 11.3 | ||||||||||||||||||||||||
Asset-backed securities | — | 16.0 | — | 16.0 | — | 92.0 | — | 92.0 | ||||||||||||||||||||||||
Emerging markets securities | — | 16.2 | — | 16.2 | — | — | — | — | ||||||||||||||||||||||||
Corporate debt securities | — | 366.6 | — | 366.6 | — | 285.5 | — | 285.5 | ||||||||||||||||||||||||
Government debt securities | — | 130.8 | — | 130.8 | — | 106.4 | — | 106.4 | ||||||||||||||||||||||||
Alternative investments: | ||||||||||||||||||||||||||||||||
Diversified investment funds | — | 51.2 | — | 51.2 | — | — | — | — | ||||||||||||||||||||||||
Domestic options contracts | — | 4.7 | — | 4.7 | — | — | — | — | ||||||||||||||||||||||||
Futures contracts | — | 1.2 | — | 1.2 | — | — | — | — | ||||||||||||||||||||||||
Limited partnerships | — | — | 40.1 | 40.1 | — | — | 75.0 | 75.0 | ||||||||||||||||||||||||
Insurance contracts | — | — | 1.2 | 1.2 | — | — | 1.6 | 1.6 | ||||||||||||||||||||||||
Total fair value | $ | 339.1 | $ | 724.9 | $ | 41.3 | 1,105.3 | $ | 358.7 | $ | 585.9 | $ | 76.6 | 1,021.2 | ||||||||||||||||||
Unsettled transactions, net | 5.3 | 2.3 | ||||||||||||||||||||||||||||||
Total plan assets | $ | 1,110.6 | $ | 1,023.5 |
▪ | Cash and cash equivalents—Cash equivalents include highly liquid investments with original maturities of three months or less. Due to their short-term nature, the carrying amount of these instruments approximates the estimated fair value. Actively traded money market funds are measured at their NAV, which approximates fair value, and classified as Level 1. The fair value of certain money market funds for which quoted prices are available but traded less frequently have been classified as Level 2. |
▪ | Equity securities—When available, the fair value of equity securities are based on quoted prices in active markets and classified as Level 1. Level 1 financial instruments include highly liquid instruments with quoted prices, such as equities and mutual funds traded in active markets. |
▪ | Fixed income—The fair values of fixed income instruments are obtained from pricing services, broker quotes or other model-based valuation techniques with observable inputs and classified as Level 2. The nature of these fixed income instruments include instruments for which quoted prices are available but traded less frequently, instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data and securities that are valued using other financial instruments, the parameters of which can be directly observed. Level 2 fixed income instruments include mutual funds, asset-backed securities, corporate debt securities and government debt securities. |
• | Alternative Investments—The fair values of alternative investments are obtained from pricing services, broker quotes or other model-based valuation techniques with observable inputs and classified as Level 2. The nature of these alternative investments include instruments for which quoted prices are available but traded less frequently, instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data and securities that are valued using other financial instruments, the parameters of which can be directly observed. Level 2 alternative investments include diversified investment funds, domestic options contracts and futures contracts. |
▪ | Limited partnerships—The valuation of limited partnership investments requires the use of significant unobservable inputs due to the absence of quoted market prices, inherent lack of liquidity and long-term nature of such assets and are classified as Level 3. These investments are initially valued at cost with quarterly valuations performed utilizing available market data to determine the fair value of these investments. Such market data consists primarily of the observations of trading multiples of public companies considered comparable to the investments with adjustments for investment-specific issues, the lack of liquidity and other items. |
▪ | Insurance contracts—The valuation of these guaranteed annuity insurance contracts is primarily based on quoted prices in active markets with adjustments for unobservable inputs caused by the unique nature of applying investment earnings as part of the participation guarantee. Due to these unobservable inputs and the long-term nature of these investments, the contracts are classified as Level 3. |
Insurance Contracts | Limited Partnerships | |||||||
(in millions) | ||||||||
Balance, May 1, 2011 | $ | 1.8 | $ | 33.6 | ||||
Actual return on plan assets: | ||||||||
Related to assets held at the reporting date | — | (2.7 | ) | |||||
Related to assets sold during the period | — | 1.6 | ||||||
Purchases, sales and settlements, net | (0.2 | ) | 42.5 | |||||
Balance, April 29, 2012 | 1.6 | 75.0 | ||||||
Actual return on plan assets: | ||||||||
Related to assets held at the reporting date | — | (10.9 | ) | |||||
Related to assets sold during the period | — | 2.4 | ||||||
Purchases, sales and settlements, net | (0.4 | ) | (26.4 | ) | ||||
Balance, April 28, 2013 | $ | 1.2 | $ | 40.1 |
April 28, 2013 | April 29, 2012 | |||||||||||||||
Fair Value | Carrying Value | Fair Value | Carrying Value | |||||||||||||
(in millions) | ||||||||||||||||
Total Debt | $ | 2,732.9 | $ | 2,479.1 | $ | 2,176.5 | $ | 1,937.3 |
April 28, 2013 | April 29, 2012 | |||||||
(in millions) | ||||||||
Current receivables from related parties | $ | 5.9 | $ | 6.6 | ||||
Long-term receivables from related parties | — | — | ||||||
Total receivables from related parties | $ | 5.9 | $ | 6.6 | ||||
Current payables to related parties | $ | 9.0 | $ | 7.1 | ||||
Long-term payables to related parties | — | — | ||||||
Total payables to related parties | $ | 9.0 | $ | 7.1 |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Packaged meats | 56 | % | 54 | % | 56 | % | |||
Fresh pork (1) | 44 | 46 | 44 | ||||||
100 | % | 100 | % | 100 | % |
(1) | Includes by-products and rendering. |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Internal hog sales | 76 | % | 80 | % | 78 | % | |||
External hog sales | 14 | 17 | 19 | ||||||
Other products (1) | 10 | 3 | 3 | ||||||
100 | % | 100 | % | 100 | % |
(1) | Consists primarily of grains, feed and gains (losses) on derivatives. |
Fiscal Years | |||||||||
2013 | 2012 | 2011 | |||||||
Packaged meats | 48 | % | 47 | % | 47 | % | |||
Fresh meats | 43 | 43 | 42 | ||||||
Other products (1) | 9 | 10 | 11 | ||||||
100 | % | 100 | % | 100 | % |
(1) | Includes external hog sales, feed, feathers, by-products and rendering. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Segment Profit Information | ||||||||||||
Sales: | ||||||||||||
Segment sales— | ||||||||||||
Pork | $ | 11,076.1 | $ | 11,093.0 | $ | 10,263.9 | ||||||
Hog Production | 3,135.1 | 3,052.6 | 2,705.1 | |||||||||
International | 1,468.5 | 1,466.7 | 1,340.7 | |||||||||
Other | — | — | 74.7 | |||||||||
Total segment sales | 15,679.7 | 15,612.3 | 14,384.4 | |||||||||
Intersegment sales— | ||||||||||||
Pork | (41.4 | ) | (37.1 | ) | (30.5 | ) | ||||||
Hog Production | (2,380.1 | ) | (2,444.6 | ) | (2,113.0 | ) | ||||||
International | (37.1 | ) | (36.3 | ) | (38.2 | ) | ||||||
Total intersegment sales | (2,458.6 | ) | (2,518.0 | ) | (2,181.7 | ) | ||||||
Consolidated sales | $ | 13,221.1 | $ | 13,094.3 | $ | 12,202.7 | ||||||
Depreciation and amortization: | ||||||||||||
Pork | $ | 136.1 | $ | 127.8 | $ | 125.5 | ||||||
Hog Production | 63.8 | 71.9 | 65.7 | |||||||||
International | 35.8 | 39.9 | 38.1 | |||||||||
Other | — | — | 0.1 | |||||||||
Corporate | 4.2 | 3.2 | 2.5 | |||||||||
Consolidated depreciation and amortization | $ | 239.9 | $ | 242.8 | $ | 231.9 | ||||||
Interest expense (income): | ||||||||||||
Pork | $ | (5.5 | ) | $ | 28.7 | $ | 42.4 | |||||
Hog Production | 167.0 | 131.8 | 124.5 | |||||||||
International | 28.2 | 29.8 | 28.2 | |||||||||
Other | — | — | 4.2 | |||||||||
Corporate | (21.0 | ) | (13.6 | ) | 46.1 | |||||||
Consolidated interest expense | $ | 168.7 | $ | 176.7 | $ | 245.4 | ||||||
(Income) Loss from equity method investments | ||||||||||||
Pork | $ | (1.5 | ) | $ | (2.7 | ) | $ | (2.0 | ) | |||
Hog Production | 0.1 | 0.3 | (0.4 | ) | ||||||||
International | (13.6 | ) | 12.3 | (46.5 | ) | |||||||
Other | — | — | (1.2 | ) | ||||||||
Consolidated (income) loss from equity method investments | $ | (15.0 | ) | $ | 9.9 | $ | (50.1 | ) | ||||
Operating profit: | ||||||||||||
Pork | $ | 631.6 | $ | 623.7 | $ | 753.4 | ||||||
Hog Production | (119.1 | ) | 166.1 | 224.4 | ||||||||
International | 108.2 | 42.8 | 115.9 | |||||||||
Other | — | — | (2.4 | ) | ||||||||
Corporate | (101.4 | ) | (110.0 | ) | 3.7 | |||||||
Consolidated operating profit | $ | 519.3 | $ | 722.6 | $ | 1,095.0 |
April 28, 2013 | April 29, 2012 | May 1, 2011 | ||||||||||
(in millions) | ||||||||||||
Segment Asset Information | ||||||||||||
Total assets: | ||||||||||||
Pork | $ | 2,291.3 | $ | 2,245.6 | $ | 2,620.2 | ||||||
Hog Production | 2,299.2 | 2,145.4 | 2,074.2 | |||||||||
International | 1,703.1 | 1,651.4 | 1,902.3 | |||||||||
Corporate | 1,422.8 | 1,379.8 | 1,015.1 | |||||||||
Consolidated total assets | $ | 7,716.4 | $ | 7,422.2 | $ | 7,611.8 | ||||||
Investments: | ||||||||||||
Pork | $ | 18.9 | $ | 18.6 | $ | 17.4 | ||||||
Hog Production | 3.1 | 2.6 | 2.7 | |||||||||
International | 510.2 | 501.2 | 562.1 | |||||||||
Corporate | 0.2 | 0.2 | 0.3 | |||||||||
Consolidated investments | $ | 532.4 | $ | 522.6 | $ | 582.5 | ||||||
Capital expenditures: | ||||||||||||
Pork | $ | 156.9 | $ | 143.5 | $ | 81.3 | ||||||
Hog Production | 90.0 | 89.4 | 68.6 | |||||||||
International | 24.8 | 26.5 | 26.8 | |||||||||
Corporate | 6.3 | 31.3 | 0.1 | |||||||||
Consolidated capital expenditures | $ | 278.0 | $ | 290.7 | $ | 176.8 |
Pork | International | Hog Production | Total | |||||||||||||
(in millions) | ||||||||||||||||
Balance, May 1, 2011 | $ | 216.1 | $ | 157.2 | $ | 420.0 | $ | 793.3 | ||||||||
Other goodwill adjustments (1) | (0.4 | ) | (24.7 | ) | — | (25.1 | ) | |||||||||
Balance, April 29, 2012 | 215.7 | 132.5 | 420.0 | 768.2 | ||||||||||||
Acquisition (2) | 16.4 | — | — | 16.4 | ||||||||||||
Other goodwill adjustments (1) | (0.3 | ) | (1.9 | ) | — | (2.2 | ) | |||||||||
Balance, April 28, 2013 | $ | 231.8 | $ | 130.6 | $ | 420.0 | $ | 782.4 |
(1) | Other goodwill adjustments primarily include the effects of foreign currency translation. |
(2) | See Note 2—Acquisitions for discussion of acquisition. |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(in millions) | ||||||||||||
Sales: | ||||||||||||
U.S. | $ | 11,789.7 | $ | 11,663.9 | $ | 10,900.2 | ||||||
International | 1,431.4 | 1,430.4 | 1,302.5 | |||||||||
Total sales | $ | 13,221.1 | $ | 13,094.3 | $ | 12,202.7 | ||||||
April 28, 2013 | April 29, 2012 | May 1, 2011 | ||||||||||
(in millions) | ||||||||||||
Long-lived assets: | ||||||||||||
U.S. | $ | 3,032.9 | $ | 2,969.1 | $ | 2,905.7 | ||||||
International | 1,131.7 | 1,154.1 | 1,368.2 | |||||||||
Total long-lived assets | $ | 4,164.6 | $ | 4,123.2 | $ | 4,273.9 |
Fiscal Years | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Supplemental disclosures of cash flow information: | (in millions) | |||||||||||
Interest paid, including capitalized interest | $ | (147.9 | ) | $ | (149.6 | ) | $ | (223.3 | ) | |||
Income taxes (paid) refunded, net | (3.7 | ) | (225.7 | ) | 34.8 |
First | Second | Third | Fourth | Fiscal Year | ||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||
Fiscal 2013 | ||||||||||||||||||||
Sales | $ | 3,091.3 | $ | 3,225.8 | $ | 3,583.3 | $ | 3,320.7 | $ | 13,221.1 | ||||||||||
Gross profit | 332.2 | 377.3 | 328.8 | 281.4 | 1,319.7 | |||||||||||||||
Operating profit | 131.8 | 178.3 | 136.3 | 72.9 | 519.3 | |||||||||||||||
Net income | 61.7 | 10.9 | 81.5 | 29.7 | 183.8 | |||||||||||||||
Net income per share:(1) | ||||||||||||||||||||
Basic | $ | .40 | $ | .07 | $ | .58 | $ | .21 | $ | 1.26 | ||||||||||
Diluted | $ | .40 | $ | .07 | $ | .58 | $ | .21 | $ | 1.26 | ||||||||||
Fiscal 2012 | ||||||||||||||||||||
Sales | $ | 3,094.2 | $ | 3,312.6 | $ | 3,478.3 | $ | 3,209.2 | $ | 13,094.3 | ||||||||||
Gross profit | 407.1 | 419.6 | 379.8 | 342.9 | 1,549.4 | |||||||||||||||
Operating profit | 173.2 | 224.7 | 170.5 | 154.2 | 722.6 | |||||||||||||||
Net income | 82.1 | 120.7 | 79.0 | 79.5 | 361.3 | |||||||||||||||
Net income per share:(1) | ||||||||||||||||||||
Basic | $ | .50 | $ | .74 | $ | .49 | $ | .50 | $ | 2.23 | ||||||||||
Diluted | $ | .49 | $ | .74 | $ | .49 | $ | .49 | $ | 2.21 |
(1) | Per common share amounts for the quarters and full years have each been calculated separately. Accordingly, quarterly amounts may not add to the annual amounts because of differences in the weighted average common shares outstanding during each period. |
▪ | Net income in the second quarter included loss on debt extinguishment of $120.7 million. |
▪ | Net income in the first, second and third quarters included losses on debt extinguishment of $1.2 million, $6.4 million and $4.6 million, respectively. |
▪ | Operating profit in the first and fourth quarters included charges of $39.0 million and a net benefit of $16.8 million, respectively, related to the Missouri litigation. |
▪ | Gross profit in the first, second and third quarters included accelerated depreciation charges associated with the idling of certain Missouri hog farm assets of $4.3 million, $3.2 million, and $0.7 million, respectively. |
▪ | Operating profit in the second, third and fourth quarters included charges associated with the planned closure of our Portsmouth facility of $1.8 million, $1.7 million, and $1.2 million, respectively. |
▪ | Operating profit in the first and second quarters included professional fees related to the potential acquisition of a controlling interest in CFG of $5.7 million and $0.7 million, respectively. In June 2011 (fiscal 2012), we terminated negotiations to purchase the additional interest. |
▪ | Operating profit in the third quarter included our share of charges related to the CFG Consolidation Plan of $38.7 million. |
Column A | Column B | Column C Additions | Column D | Column E | ||||||||||||||||
Description | Balance at Beginning of Year | Charged to costs and expenses | Charged to other accounts (1) | Deductions | Balance at End of Year | |||||||||||||||
Reserve for uncollectible accounts receivable: | ||||||||||||||||||||
Fiscal year ended April 28, 2013 | $ | 16.0 | $ | 2.7 | $ | (0.3 | ) | $ | (3.8 | ) | $ | 14.6 | ||||||||
Fiscal year ended April 29, 2012 | 17.6 | 2.4 | (2.5 | ) | (1.5 | ) | 16.0 | |||||||||||||
Fiscal year ended May 1, 2011 | 19.0 | 3.7 | (1.2 | ) | (3.9 | ) | 17.6 | |||||||||||||
Reserve for obsolete inventory: | ||||||||||||||||||||
Fiscal year ended April 28, 2013 | $ | 15.5 | $ | 5.4 | $ | (0.1 | ) | $ | (3.7 | ) | $ | 17.1 | ||||||||
Fiscal year ended April 29, 2012 | 14.8 | 3.2 | (0.6 | ) | (1.9 | ) | 15.5 | |||||||||||||
Fiscal year ended May 1, 2011 | 17.4 | 1.9 | 0.1 | (4.6 | ) | 14.8 | ||||||||||||||
Deferred tax valuation allowance: | ||||||||||||||||||||
Fiscal year ended April 28, 2013 | $ | 54.6 | $ | 7.2 | $ | (0.4 | ) | $ | (17.9 | ) | $ | 43.5 | ||||||||
Fiscal year ended April 29, 2012 | 66.8 | 7.8 | (7.4 | ) | (12.6 | ) | 54.6 | |||||||||||||
Fiscal year ended May 1, 2011 | 91.5 | 1.4 | 4.7 | (30.8 | ) | 66.8 |
(1) | Activity primarily includes the reserves recorded in connection with the creation of the opening balance sheets of entities acquired and currency translation adjustments. |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
▪ | Consolidated Statements of Income for the Fiscal Years 2013, 2012 and 2011 |
▪ | Consolidated Statements of Comprehensive Income for the Fiscal Years 2013, 2012 and 2011 |
▪ | Consolidated Balance Sheets as of April 28, 2013 and April 29, 2012 |
▪ | Consolidated Statements of Cash Flows for the Fiscal Years 2013, 2012 and 2011 |
▪ | Consolidated Statements of Shareholders’ Equity for the Fiscal Years 2013, 2012 and 2011 |
▪ | Notes to Consolidated Financial Statements |
▪ | Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting |
▪ | Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements |
Exhibit 2.1 | — | Agreement and Plan of Merger, dated as of May 28, 2013, by and among Shuanghui International Holdings Limited, Sun Merger Sub, Inc. and the Company. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2013). |
Exhibit 3.1 | — | Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on December 6, 2012). |
Exhibit 3.2 | — | Bylaws of the Company, as amended, effective June 16, 2010 (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed with the SEC on June 18, 2010). |
Exhibit 4.1 | — | Indenture between the Company and SunTrust Bank, as trustee, dated May 21, 2003 regarding the issuance by the Company of $350,000,000 senior notes (incorporated by reference to Exhibit 4.11(a) to the Company’s Annual Report on Form 10-K filed with the SEC on July 23, 2003). |
Exhibit 4.2(a) | — | Registration Rights Agreement, dated May 7, 2007, among the Company and ContiGroup Companies, Inc. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 7, 2007). |
Exhibit 4.2(b) | — | Amendment No. 1, dated as of October 23, 2008, to the Registration Rights Agreement, dated as of May 7, 2007, by and between Smithfield Foods, Inc. and Continental Grain Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2008). |
Exhibit 4.3(a) | — | Indenture—Senior Debt Securities, dated June 1, 2007, between the Company and U.S. Bank National Association as trustee (incorporated by reference to Exhibit 4.10(a) to the Company’s Annual Report on Form 10-K filed with the SEC on June 28, 2007). |
Exhibit 4.3(b) | — | First Supplemental Indenture to the Indenture—Senior Debt Securities between the Company and U.S. Bank National Association, as trustee, dated as of June 22, 2007 regarding the issuance by the Company of the 2007 7.750% Senior Notes due 2017 (incorporated by reference to Exhibit 4.10(b) to the Company’s Annual Report on Form 10-K filed with the SEC on June 28, 2007). |
Exhibit 4.3(c) | — | Second Supplemental Indenture to the Indenture—Senior Debt Securities between the Company and U.S. Bank National Association, as trustee, dated as of July 8, 2008 regarding the issuance by the Company of the 2008 4.00% Convertible Senior Notes due 2013 (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 5, 2008). |
Exhibit 4.3(d) | — | Third Supplemental Indenture to the Indenture—Senior Debt Securities between the Company and U.S. Bank National Association, as trustee, dated as of August 1, 2012 regarding the issuance by the Company of the2012 6.625% Senior Notes due 2022 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on August 1, 2012). |
Exhibit 4.3(e) | — | Form of 6.625% Senior Note Due 2022 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 1, 2012). |
Exhibit 4.4 | — | Form of Subordinated Indenture between the Company and U.S. Bank National Association, as trustee, as supplemented from time to time (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-3 filed with the SEC on June 25, 2010). |
Registrant hereby agrees to furnish the SEC, upon request, other instruments defining the rights of holders of long-term debt of the Registrant. | ||
Exhibit 10.1(a)** | — | Smithfield Foods, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K Annual Report filed with the SEC on July 30, 1998). |
Exhibit 10.1(b)** | — | Amendment No. 1 to the Smithfield Foods, Inc. 1998 Stock Incentive Plan dated August 29, 2000 (incorporated by reference to Exhibit 10.6(b) of the Company’s Annual Report on Form 10-K filed with the SEC on July 29, 2002). |
Exhibit 10.1(c)** | — | Amendment No. 2 to the Smithfield Foods, Inc. 1998 Stock Incentive Plan dated August 29, 2001 (incorporated by reference to Exhibit 10.6(c) of the Company’s Annual Report on Form 10-K filed with the SEC on July 29, 2002). |
Exhibit 10.1(d)** | — | Form of Nonstatutory Stock Option Agreement for the Smithfield Foods, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.3(d) to the Company’s Annual Report on Form 10-K filed with the SEC on July 11, 2005). |
Exhibit 10.2** | — | Smithfield Foods, Inc. 2005 Non-Employee Directors Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2005). |
Exhibit 10.3(a) | — | Master Terms and Conditions for Convertible Bond Hedging Transactions, dated as of July 1, 2008, between Citibank, N.A. and Smithfield Foods, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(b) | — | Master Terms and Conditions for Convertible Bond Hedging Transactions, dated as of July 1, 2008, between Goldman, Sachs & Co. and Smithfield Foods, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(c) | — | Master Terms and Conditions for Convertible Bond Hedging Transactions, dated as of July 1, 2008, between JPMorgan Chase Bank, National Association, London Branch and Smithfield Foods, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(d) | — | Confirmation for Convertible Bond Hedging Transaction, dated July 1, 2008, between Citibank, N.A. and Smithfield Foods, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(e) | — | Confirmation for Convertible Bond Hedging Transaction, dated July 1, 2008, between Goldman, Sachs & Co. and Smithfield Foods, Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(f) | — | Confirmation for Convertible Bond Hedging Transaction, dated July 1, 2008, between JPMorgan Chase Bank, National Association, London Branch and Smithfield Foods, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(g) | — | Master Terms and Conditions for Warrants Issued by Smithfield Foods, Inc. to Citibank, N.A., dated as of July 1, 2008 (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(h) | — | Master Terms and Conditions for Warrants Issued by Smithfield Foods, Inc. to Goldman, Sachs & Co., dated as of July 1, 2008 (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(i) | — | Master Terms and Conditions for Warrants Issued by Smithfield Foods, Inc. to JPMorgan Chase Bank, National Association, London Branch, dated as of July 1, 2008 (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(j) | — | Confirmation for Warrants Issued by Smithfield Foods, Inc. to Citibank, N.A., dated July 1, 2008 (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008 |
Exhibit 10.3(k) | — | Confirmation for Warrants Issued by Smithfield Foods, Inc. to Goldman, Sachs & Co., dated July 1, 2008 (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.3(l) | — | Confirmation for Warrants Issued by Smithfield Foods, Inc. to JPMorgan Chase Bank, National Association, London Branch, dated July 1, 2008 (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2008). |
Exhibit 10.4(a)** | — | Smithfield Foods, Inc. Amended and Restated 2008 Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 11, 2009). |
Exhibit 10.4(b)** | — | Form of Smithfield Foods, Inc. 2008 Incentive Compensation Plan Performance Share Unit Award (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2008). |
Exhibit 10.4(c)** | — | Form of Smithfield Foods, Inc. 2008 Incentive Compensation Plan Stock Option Award (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 10, 2009). |
Exhibit 10.4(d)** | — | Form of Smithfield Foods, Inc. 2008 Incentive Compensation Plan Performance Share Unit Award to Executive Officers in the Pork Group granted on June 15, 2010 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 9, 2010). |
Exhibit 10.4(e)** | — | Form of Smithfield Foods, Inc. 2008 Incentive Compensation Plan Performance Share Unit Award to certain Executive Officers granted June 2012 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 6, 2012). |
Exhibit 10.5** | — | Certain Compensation for Named Executive Officers for fiscal 2013 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 6, 2012). |
Exhibit 10.6(a)** | — | Smithfield Foods, Inc. Change in Control Executive Severance Plan (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on September 8, 2010). |
Exhibit 10.6(b)** | — | Amendment No. 1 to Smithfield Foods, Inc. Change in Control Executive Severance Plan, dated May 28, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 4, 2013). |
Exhibit 10.7*,** | — | Compensation for Non-Employee Directors as of November 2012. |
Exhibit 10.8(a) | — | Amended and Restated Term Loan Agreement, dated as of August 31, 2012, among the Company, certain subsidiaries of the Company that may from time to time be party thereto, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on September 6, 2012). |
Exhibit 10.8(b)* | — | First Amendment to Amended and Restated Term Loan Agreement, dated as of January 31, 2013, among the Company, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as the Lender and the Administrative Agent. |
Exhibit 10.9 | — | Term Loan Agreement, dated as of February 4, 2013, among the Company and Bank of America, N.A.(incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on September 6, 2012). |
Exhibit 10.10(a) | — | Amended and Restated Intercreditor Agreement, dated as June 9, 2011, among Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.“Rabobank Nederland”, New York Branch, as administrative agent for the ABL Parties, U.S. Bank National Association, as collateral agentfor the Term Debt Secured Parties, Smithfield Receivables Funding LLC, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.“Rabobank Nederland”, New York Branch, as Administrative Agent under the Credit and Security Agreement and each of the Loan Parties party thereto (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed with the SEC on June 18, 2012). |
Exhibit 10.10(b)* | — | First Amendment to Amended and Restated Intercreditor Agreement, dated as of January 31, 2013, among Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.“Rabobank Nederland”, New York Branch, as administrative agent for the ABL Parties, Smithfield Receivables Funding LLC, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.“Rabobank Nederland”, New York Branch, as Administrative Agent under the Credit and Security Agreement and each of the Loan Parties party thereto |
Exhibit 10.11(a) | — | Second Amended and Restated Credit Agreement, dated as of June 9, 2011, among the Company, the subsidiaries of the Company party thereto, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent, the lenders party thereto, and the other agents and arrangers party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on June 16, 2011). |
Exhibit 10.11(b)* | — | First Amendment to Second Amended and Restated Credit Agreement, dated as of January 31, 2013, among the Company, the subsidiaries of the Company party thereto, the banks and other lending institutions party thereto and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent. |
Exhibit 10.11(c) | — | Second Amended and Restated Pledge and Security Agreement, dated as of June 9, 2011, among the Company, the subsidiaries of the Company party thereto and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on June 16, 2011). |
Exhibit 10.11(d) | — | Increased Commitment Supplement, dated January 31, 2013, among the Company, certain lenders party thereto and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent, relating to the Company's Second Amended and Restated Credit Agreement, dated June 9, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on March 8, 2013). |
Exhibit 10.12(a)* | — | Amended and Restated Receivables Sale Agreement, dated as of January 31, 2013, among the Company, SFFC, Inc., Farmland Foods, Inc., The Smithfield Packing Company, Incorporated, , Premium Pet Health, LLC, Patrick Cudahy, LLC, John Morrell & Co., Smithfield Global Products, Inc., Armour-Eckrich Meats LLC, Smithfield of Canada, Ltd. and Smithfield Receivables Funding LLC. |
Exhibit 10.12(b)* | — | Amendment No. 1 to Amended and Restated Receivables Sales Agreement, dated as of March 20, 2013, among the Company, SFFC, Inc., Farmland Foods, Inc., Smithfield of Canada, Ltd., The Smithfield Packing Company, Incorporated, Premium Pet Health, LLC, Patrick Cudahy, LLC, John Morrell & Co., Smithfield Global Products, Inc., Armour-Eckrich Meats, LLC and Smithfield Receivables Funding LLC. |
Exhibit 10.12(c)* | — | Amendment No. 2 to Amended and Restated Receivables Sales Agreement, dated as of May 31, 2013, among the Company, SFFC, Inc., Farmland Foods, Inc., Smithfield of Canada, Ltd., The Smithfield Packing Company, Incorporated, Premium Pet Health, LLC, Patrick Cudahy, LLC, John Morrell & Co., Smithfield Global Products, Inc., Armour-Eckrich Meats LLC, Smithfield Specialty Foods Group, LLC, American Skin Food Group, LLC and Smithfield Receivables Funding LLC. |
Exhibit 10.13(a)* | — | Amended and Restated Credit and Security Agreement, dated as of January 31, 2013, among Smithfield Receivables Funding LLC, the Company, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as the Administrative Agent and Letter of Credit Issuer, and the Lenders and Co-Agents from time to time party thereto. |
Exhibit 10.13(b)* | — | Amendment No. 1 to Amended and Restated Credit and Security Agreement, dated as of May 31, 2013, among Smithfield Receivables Funding LLC, the Company, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as the Administrative Agent and Letter of Credit Issuer, and the Lenders and Co-Agents from time to time party to the Amended and Restated Credit and Security Agreement. |
Exhibit 10.14** | — | Smithfield Foods, Inc. Executive Stock Purchase Plan (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed with the SEC on June 18, 2012). |
Exhibit 10.15 | — | Escrow Agreement, dated as of May 28, 2013, by and among Shuanghui International Holdings Limited, Rotary Vortex Limited, Smithfield Foods, Inc. and Bank of China, New York Branch (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2013). |
Exhibit 21* | — | Subsidiaries of the Company. |
Exhibit 23.1* | — | Consent of Independent Registered Public Accounting Firm. |
Exhibit 31.1* | — | Certification of C. Larry Pope, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 31.2* | — | Certification of Robert W. Manly, IV, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.1* | — | Certification of C. Larry Pope, President and Chief Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2* | — | Certification of Robert W. Manly, IV, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 101* | — | The following financial statements from Smithfield Foods, Inc.'s Annual Report on Form 10-K for the year ended April 28, 2013, formatted in XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements. |
* | Filed herewith. |
** | Management contract or compensatory plan or arrangement of the Company required to be filed as an exhibit. |
REGISTRANT: SMITHFIELD FOODS, INC. | ||
By: | /s/ C. LARRY POPE | |
C. Larry Pope President and Chief Executive Officer |
Signature | Title | Date |
/s/ JOSEPH W. LUTER, III | Chairman of the Board and Director | June 18, 2013 |
Joseph W. Luter, III | ||
/s/ C. LARRY POPE | President, Chief Executive Officer and Director | June 18, 2013 |
C. Larry Pope | ||
/s/ ROBERT W. MANLY, IV | Executive Vice President and Chief Financial Officer | June 18, 2013 |
Robert W. Manly, IV | (Principal Financial Officer) | |
/s/ KENNETH M. SULLIVAN | Senior Vice President, Finance and Chief Accounting Officer | June 18, 2013 |
Kenneth M. Sullivan | (Principal Accounting Officer) | |
/s/ CAROL T. CRAWFORD | Director | June 18, 2013 |
Carol T. Crawford | ||
/s/ RICHARD T. CROWDER | Director | June 18, 2013 |
Richard T. Crowder | ||
/s/ MARGARET G. LEWIS | Director | June 18, 2013 |
Margaret G. Lewis | ||
/s/ WENDELL H. MURPHY | Director | June 18, 2013 |
Wendell H. Murphy | ||
/s/ DAVID C. NELSON | Director | June 18, 2013 |
David C. Nelson | ||
/s/ FRANK S. ROYAL, M.D. | Director | June 18, 2013 |
Frank S. Royal, M.D. | ||
/s/ JOHN T. SCHWIETERS | Director | June 18, 2013 |
John T. Schwieters | ||
/s/ PAUL S. TRIBLE, JR. | Director | June 18, 2013 |
Paul S. Trible, Jr. |
• | an annual retainer of $75,000, |
• | an additional annual retainer of $25,000 for the lead director, |
• | an additional annual retainer of $15,000 for the chair of the Audit Committee, |
• | an additional annual retainer of $10,000 for the chair of any other committees, and |
• | $2,000 for each Board or committee meeting attended. |
By: | Murphy-Brown, LLC, as a general partner of each |
By: | Murphy-Brown, LLC, as a general partner of each |
Lender | Required Lender Percentage Held | Lenders Agreeing to Consent Letter(insert % from prior column if Lender signs Consent Letter then total % in this column) | ||
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland", New York Branch | 8.0000000000 | % | 8.0000000000 | % |
Barclays Bank PLC | 6.4864864900 | % | ||
AgFirst Farm Credit Bank | 11.8918918900 | % | ||
Goldman Sachs Bank USA | 4.8648648600 | % | ||
Bank of Montreal | 4.8648648600 | % | ||
Morgan Stanley Bank, N.A. | 3.2432432400 | % | ||
CoBank, ACB | 4.8648648600 | % | ||
JPMorgan Chase Bank, N. A. | 4.8648648600 | % | ||
Societe Generale | 4.3243243200 | % | ||
U.S. Bank National Association | 3.7837837800 | % | ||
AgStar Financial Services, PCA | 3.4594594600 | % | ||
Northwest Farm Credit Services, PCA | 3.4594594600 | % | ||
Bank of America, N.A. | 3.2432432400 | % | ||
United FCS, PCA d/b/a FCS Commercial Finance Group | 2.7027027000 | % | ||
Farm Credit Services of Mid-America, PCA | 2.7027027000 | % | ||
Sovereign Bank | 2.7027027000 | % | ||
ING Capital LLC | 2.3783783800 | % | ||
Credit Agricole Corporate and Investment Bank | 2.3783783800 | % | ||
Compass Bank | 2.3783783800 | % | ||
Farm Credit Services of America, PCA | 2.3783783800 | % | ||
Credit Suisse AG, Cayman Islands Branch | 2.1621621600 | % | ||
American AgCredit, PC | 2.1621621600 | % | ||
1st Farm Credit Services, PCA | 1.9459459500 | % | ||
GreenStone Farm Credit Services, ACA/FLCA | 1.9459459500 | % | ||
Farm Credit West, PCA | 1.9459459500 | % | ||
CoBank, FCB (successor to U.S. AgBank FCB) | 1.6216216200 | % | ||
FCS Financial, PCA | 1.6216216200 | % | ||
General Electric Capital Corporation | 1.6216216200 | % | ||
TOTAL | 100.00 | % |
By: | Murphy-Brown, LLC, as a general partner of each |
ARTICLE I | AMOUNTS AND TERMS OF THE PURCHASE…………………...2 |
Section 1.1 | Commencement Date; Initial Transfer and Contribution of Receivables……………………………………………………2 |
Section 1.2 | Purchase of Receivables............................................................3 |
Section 1.3 | Payment of Purchase Price........................................................5 |
Section 1.4 | Settlement Date; Adjustments...................................................6 |
Section 1.5 | Payments and Computations, Etc..............................................7 |
Section 1.6 | License of Software...................................................................7 |
Section 1.7 | Characterization.........................................................................8 |
ARTICLE II | REPRESENTATIONS AND WARRANTIES.......................................8 |
Section 2.1 | Representations and Warranties.................................................8 |
ARTICLE III | CONDITIONS OF PURCHASE.........................................................12 |
Section 3.1 | Conditions Precedent to Purchase ....................................................12 |
Section 3.2 | Conditions Precedent to Subsequent Payments.......................12 |
ARTICLE IV | COVENANTS.....................................................................................13 |
Section 4.1 | Affirmative Covenants of Transferors.....................................13 |
Section 4.2 | Negative Covenants of Transferors.........................................17 |
ARTICLE V | TERMINATION EVENTS.................................................................18 |
Section 5.1 | Termination Events.................................................................18 |
Section 5.2 | Remedies.................................................................................21 |
ARTICLE VI | INDEMNIFICATION.........................................................................21 |
Section 6.1 | Indemnities by Transferors.....................................................21 |
Section 6.2 | Other Costs and Expenses .................................................................24 |
ARTICLE VII | MISCELLANEOUS...........................................................................24 |
Section 7.1 | Waivers and Amendments .................................................................24 |
Section 7.2 | Notices....................................................................................24 |
Section 7.3 | Protection of Ownership Interests of Buyer...........................24 |
Section 7.4 | Confidentiality........................................................................26 |
Section 7.5 | Bankruptcy Petition................................................................26 |
Section 7.6 | Limitation of Liability............................................................26 |
Section 7.7 | CHOICE OF LAW.................................................................27 |
Section 7.8 | CONSENT TO JURISDICTION...........................................27 |
Section 7.9 | WAIVER OF JURY TRIAL.................................................27 |
Section 7.10 | Integration; Binding Effect; Survival of Terms....................27 |
Section 7.11 | Counterparts; Severability; Section References...................28 |
Exhibit I | - | Definitions |
Exhibit II | - | Principal Place of Business; Location(s) of Records; Federal Employer Identification Number; Other Names |
Exhibit III | - | Lock-Boxes; Collection Accounts; Collection Banks |
Exhibit IV | - | Form of Compliance Certificate |
Exhibit V | - | Credit and Collection Policy |
Exhibit VI | - | Form of Subordinated Note |
Exhibit VII | - | Form of Purchase Report |
Schedule A | - | Documents to Be Delivered to Buyer On or Prior to the Date of this Agreement |
Address: | Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | c/o Smithfield Foods, Inc. |
Address: | 3411 Silverside Rd, 103 Baynard Bldg |
Lock-Box | Related Collection Account |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
______________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
Date | Amount of Subordinated Loan | Amount of Principal Paid | Unpaid Principal Balance | Notation Made by (initials) |
Aggregate Outstanding Balance of all Receivables sold during the Period: | $_____________ | A | |
Less: Purchase Price discount during the Period: | ($____________) | (B) | |
Equals: Gross Purchase Price Payable during the period (A – B): | $____________ | =C | |
Less: Total Purchase Price Credits arising during the Period: | ($____________) | (D) | |
Equals: Net Purchase Price payable during the Period (C - D): | $____________ | =E | |
Purchase Price paid to through cash collections during the Period: | $_____________ | F | |
Purchase Price paid through advances under Credit and Security Agreement: | $_____________ | G | |
Purchase Price paid through issuance of Letters of Credit: | $_____________ | H | |
Purchase Price paid through proceeds of Subordinated Loan: | $_____________ | I | |
Capital Contributions by Originator: | $_____________ | J | |
Equals: Total Purchase Price paid during the Period (F + G + H + I + J): | $____________ | =K | |
Excess Purchase Price paid during period (K-E): | $____________ | L | |
Amount of excess payment applied to reduce principal amount of Subordinated Note: | $____________ | M | |
Amount of excess payment payable to Buyer: | $____________ | N | |
Aggregate Outstanding Balance of all Eligible Receivables sold during the period: | $___________ | =O |
1. | Executed copies of the Agreement, duly executed by the parties thereto |
2. | Copy of the Credit and Collection Policy of each of the Originators attached as Exhibit V |
3. | A certificate of each Transferor’s Secretary or Assistant Secretary certifying: |
4. | Pre-filing state and federal tax lien, judgment lien and UCC lien searches against each Transferor (but if reasonably determined by the Administrative Agent against Smithfield and each Originator), from the appropriate filing offices in each such entity’s jurisdiction of organization, and with respect to the Canadian Originator lien searches under the PPSA each applicable jurisdiction where registration may be required to perfect and have priority over the assets subject to transfer under this Agreement. |
5. | Financing statements, in form suitable for filing under the UCC and the PPSA on or before the closing date, in each Originator’s and, if reasonably determined by the Administrative Agent to be necessary or advisable, each other Originator’s jurisdiction of organization |
6. | A favorable opinion of legal counsel for the Transferors licensed to give opinions under Delaware law (or in the case of the Canadian Originator, under Ontario law) reasonably acceptable to Buyer (and the Administrative Agent) as to the following: |
7. | As of the Commencement Date with respect to the Canadian Originator and as of the date hereof with respect to each other Transferor, a “true sale/absolute assignment” opinion of counsel for the Transferors with respect to the transactions contemplated by the Agreement (including in the case of the Canadian Originator, under Ontario law) |
8. | A “substantive consolidation” opinion of counsel for the Transferors (other than the Canadian Originator) with respect to the transactions contemplated by the Agreement |
9. | A Certificate of a Financial Officer of Smithfield certifying that, as of the closing date, no Termination Event or Unmatured Termination Event exists and is continuing |
10. | Executed copies of (i) all consents from and authorizations by any Persons and (ii) all waivers and amendments to existing credit facilities, that are necessary in connection with the Agreement |
11. | Executed Subordinated Note by Buyer in favor of each Originator |
12. | If applicable, a direction letter executed by each Transferor authorizing Buyer (and the Administrative Agent) and directing warehousemen to allow Buyer (and the Administrative Agent) to inspect and make copies from such Transferor’s books and |
(a) | the definition of “Originator” in the Original Agreement shall be hereby amended to include Specialty Foods and American Skin, with the result that each of Specialty Foods and American Skin shall be deemed to be an Originator for all purposes under the Amended and Restated Receivables Sale Agreement and the other Transaction Documents; |
(b) | Section 1.3(b) of the Original Agreement shall be hereby amended by deleting clause (ii) thereof in its entirety and replacing it with the following: |
(c) | Section 1.7 of the Original Agreement shall be hereby amended by deleting each reference to “US Originator” therein, and replacing it with “Originator (other than the Canadian Originator)”; |
(d) | Section 2.1(o) of the Original Agreement shall be hereby amended by inserting the words “(other than American Skin Food Group, LLC)” immediately following each reference to “Originator” therein; |
(e) | Exhibit I to the Original Agreement shall be hereby amended by deleting the definition of “Commencement Date” in its entirety and replacing it with the following: |
(f) | Exhibit I to the Original Agreement shall be hereby amended by deleting the definition of “Commencement Date Notice” in its entirety; |
(g) | Exhibit I to the Original Agreement shall be hereby amended by deleting the definition of “US Originator” in its entirety and replacing it with the following: |
(h) | Exhibit II to the Original Agreement shall be hereby amended by deleting such Exhibit II in its entirety and replacing it with Exhibit A hereto; and |
(i) | Exhibit III to the Original Agreement shall be hereby amended by deleting such Exhibit III in its entirety and replacing it with Exhibit B hereto. |
Lock-Box | Related Collection Account |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
____________________________ | Account No. _________________ ____________________________ ABA No. ____________________ |
ARTICLE I. | THE ADVANCES......................................................................3 |
Section 1.1. | Credit Facility.................................................................3 |
Section 1.2. | Increases.........................................................................4 |
Section 1.3. | Decreases.......................................................................5 |
Section 1.4. | Deemed Collections; Borrowing Limit..........................5 |
Section 1.5. | Payment Requirements..................................................6 |
Section 1.6. | Advances; Ratable Loans; Funding Mechanics; Liquidity Fundings.........................................................6 |
Section 1.7. | Letters of Credit.............................................................6 |
Section 1.8. | Letters of Credit Fees.....................................................6 |
ARTICLE II. | PAYMENTS AND COLLECTIONS.........................................7 |
Section 2.1. | Payments........................................................................7 |
Section 2.2. | Collections Prior to an Event of Default........................7 |
Section 2.3. | Collections Following an Event of Default...................8 |
Section 2.4. | Payment Rescission.......................................................9 |
ARTICLE III. | CONDUIT FUNDING...............................................................9 |
Section 3.1. | CP Costs.........................................................................9 |
Section 3.2. | Calculation of CP Costs.................................................9 |
Section 3.3. | CP Costs Payments........................................................9 |
Section 3.4. | Default Rate...................................................................9 |
ARTICLE IV. | COMMITTED LENDER FUNDING.......................................9 |
Section 4.1. | Committed Lender Funding..........................................9 |
Section 4.2. | Interest Payments.........................................................10 |
Section 4.3. | Selection and Continuation of Interest Periods............10 |
Section 4.4. | Committed Lender Interest Rates................................10 |
Section 4.5. | Suspension of the Adjusted Federal Funds Rate and LIBO Rate....................................................................11 |
Section 4.6. | Default Rate.................................................................11 |
ARTICLE V. | REPRESENTATIONS AND WARRANTIES.........................11 |
Section 5.1. | Representations and Warranties of the Loan Parties....11 |
i |
Section 5.2. | Certain Committed Lender Representations and Warranties....................................................................16 |
ARTICLE VI. | CONDITIONS OF ADVANCES.............................................16 |
Section 6.1. | Conditions Precedent to Initial Advance......................16 |
Section 6.2. | Conditions Precedent to All Advances and L/C Credit Extensions....................................................................17 |
ARTICLE VII. | COVENANTS.........................................................................17 |
Section 7.1. | Affirmative Covenants of the Loan Parties.................17 |
Section 7.2. | Negative Covenants of the Loan Parties......................27 |
ARTICLE VIII. | ADMINISTRATION AND COLLECTION............................28 |
Section 8.1. | Designation of Servicer................................................28 |
Section 8.2. | Duties of Servicer.........................................................29 |
Section 8.3. | Collection Notices........................................................30 |
Section 8.4. | Responsibilities of Borrower........................................31 |
Section 8.5. | Monthly Reports..........................................................31 |
Section 8.6. | Servicing Fee...............................................................31 |
Section 9.1. | Events of Default.........................................................31 |
Section 9.2. | Remedies......................................................................34 |
ARTICLE X. | INDEMNIFICATION..............................................................34 |
Section 10.1. | Indemnities by the Loan Parties...................................34 |
Section 10.2. | Increased Cost and Reduced Return............................38 |
Section 10.3. | Other Costs and Expenses............................................39 |
ARTICLE XI. | THE AGENTS.........................................................................39 |
Section 11.1. | Authorization and Action.............................................39 |
Section 11.2. | Delegation of Duties....................................................40 |
Section 11.3. | Exculpatory Provisions................................................40 |
Section 11.4. | Reliance by Agents......................................................41 |
Section 11.5. | Non-Reliance on Other Agents and Other Lenders.....41 |
Section 11.6. | Reimbursement and Indemnification...........................42 |
Section 11.7. | Agents in their Individual Capacities...........................42 |
ii |
Section 11.8. | Conflict Waivers..........................................................42 |
Section 11.9. | UCC Filings.................................................................42 |
Section 11.10. | Successor Administrative Agent and Letter of Credit Issuer............................................................................43 |
ARTICLE XII. | ASSIGNMENTS; PARTICIPATIONS....................................43 |
Section 12.1. | Assignments.................................................................43 |
Section 12.2. | Participations................................................................44 |
Section 12.3. | Register........................................................................45 |
Section 12.4 | Federal Reserve............................................................45 |
ARTICLE XIII. | SECURITY INTEREST...........................................................45 |
Section 13.1. | Grant of Security Interest.............................................45 |
Section 13.2. | Termination after Final Payout Date............................45 |
ARTICLE XIV. | MISCELLANEOUS................................................................46 |
Section 14.1. | Waivers and Amendments............................................46 |
Section 14.2. | Notices.........................................................................47 |
Section 14.3. | Ratable Payments.........................................................47 |
Section 14.4. | Protection of Administrative Agent’s Security Interest..........................................................................48 |
Section 14.5. | Confidentiality..............................................................48 |
Section 14.6. | Bankruptcy Petition.....................................................49 |
Section 14.7. | Limitation of Liability..................................................49 |
Section 14.8. | CHOICE OF LAW.......................................................50 |
Section 14.9. | CONSENT TO JURISDICTION.................................50 |
Section 14.10. | WAIVER OF JURY TRIAL........................................50 |
Section 14.11. | Integration; Binding Effect; Survival of Terms...........51 |
Section 14.12. | Counterparts; Severability; Section References...........51 |
Section 14.13. | Intercreditor Agreement...............................................51 |
iii |
Exhibit I | Definitions |
Exhibit II-A | Form of Borrowing Notice |
Exhibit II-B | Form of Reduction Notice |
Exhibit III | Places of Business of the Loan Parties and the Performance Guarantor; Locations of Records; Federal Employer Identification Number(s) |
Exhibit IV | Form of Compliance Certificate |
Exhibit V | Form of Assignment Agreement |
Exhibit VI | Form of Monthly Report |
Exhibit VII | Form of Performance Undertaking |
Schedule A | Commitments |
Schedule B | Closing Documents |
Schedule C | Lender Supplement |
i |
Address: | 3411 Silverside Rd, 103 Baynard Bldg |
Address: | Smithfield Foods, Inc. |
Address: | Securitization - Transaction Management Rabobank International 245 Park Avenue New York, NY 10167 Phone: (212) 808-6806 Fax: (914) 304-9324 |
Short Term Rating (S&P/Moody’s) | Long Term Rating (S&P/Moody’s) | Maximum Allowable % of Eligible Receivables |
A-1/P-1 or higher | AA- to A+/ Aa3 to A1 or higher | 13.00% |
A-2/P-2 | A to BBB / A2 to Baa2 | 6.50% |
A-3 or lower / P-3 or lower (Non-Investment Grade) | BBB- or lower / Baa3 or lower (Non-Investment Grade) | 3.00% |
(i) | [Conduit Group]’s Percentage of Advance: $[___________________] |
(ii) | [Unaffiliated Committed Lender]’s Percentage of Advance: $[___________________] |
(i) | [Conduit Group]: [Apply $________ to payment of principal and interest of existing Loans due on the Borrowing Date]. [Apply $______ to payment of fees due on the Borrowing Date]. [Wire transfer $________ to account no. ________ at ___________ Bank, in [city, state], ABA No. __________, Reference: ________]. |
(ii) | [Unaffiliated Committed Lender]: [Apply $________ to payment of principal and interest of existing Loans due on the Borrowing Date]. [Apply $______ to payment of fees due on the Borrowing Date]. [Wire transfer $________ to account no. ________ at ___________ Bank, in [city, state], ABA No. __________, Reference: ________]. |
To: | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent |
A-1 | A-2 | B-1 | B-2 | C-1 | C-2 | |
Assignor | Commitment (prior to giving effect to the Assignment Agreement) | Commitment (after giving effect to the Assignment Agreement) | Outstanding principal (if any) | Ratable Share of Outstanding principal | Liquidity Commitment (prior to giving effect to the Assignment Agreement) | Liquidity Commitment (after giving effect to the Assignment Agreement) |
A-1 | A-2 | B-1 | B-2 | C-1 | C-2 | |
Assignee | Commitment (prior to giving effect to the Assignment Agreement) | Commitment (after giving effect to the Assignment Agreement) | Outstanding principal (if any) | Ratable Share of Outstanding principal | Liquidity Commitment (prior to giving effect to the Assignment Agreement) | Liquidity Commitment (after giving effect to the Assignment Agreement) |
TO: | , Assignor |
TO: | , Assignor |
Address: | Smithfield Foods, Inc. |
COMMITTED LENDER | COMMITMENT |
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch | $275,000,000 |
Lender Group: | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch | |
Co-Agent | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch | |
Address for Notices: | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch c/o Securitization - Transaction Management Rabobank International 245 Park Avenue New York, NY 10167 Phone: (212) 808-6806 Fax: (914) 304-9324 | |
Conduit(s): | Nieuw Amsterdam Receivables Corporation | |
Address for Notices and Investing Office: | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch c/o Securitization - Transaction Management Rabobank International 245 Park Avenue New York, NY 10167 Phone: (212) 808-6806 Fax: (914) 304-9324 With a copy to: Nieuw Amsterdam Receivables Corp. c/o Global Securitization Services, LLC 68 South Service Road, Suite 120 Melville, NY 11747 Attention: Bill Pierce Phone: (631) 930-7226 Fax: (212) 302-8767 Email: nieuwam@gssnyc.com | |
Committed Lender: | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch | |
Percentage: | 100 | % |
Address for Notices and Investing Office: | Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch c/o Securitization - Transaction Management Rabobank International 245 Park Avenue New York, NY 10167 Phone: (212) 808-6806 Fax: (914) 304-9324 | |
Address for correspondence to the Letter of Credit Issuer: | c/o Rambo Support Services Inc. 10 Exchange Place 16th Floor Jersey City, NY 07302 Attn: Bibi Mohammed | |
Payment Account Wire Information: | Nieuw Amsterdam Receivables Corporation Fed ABA Fed Bank Account No. Attention: REF: Structuring Fee Wiring Instructions: Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch Fed ABA Swift Code: Fed Bank Account No. FAO: Attention: REF: | |
Letter of Credit Issuer Payment Instructions: | Fed ABA Fed Bank Account No. Account Name For Further Credit to: Attention: REF: |
(a) | the last sentence of Section 1.7(a)(i) of the Original Agreement shall be hereby amended by deleting the reference to “US Originators” therein, and replacing it with “Originators (other than the Canadian Originator)”; and |
(b) | the definition of “Scheduled Termination Date” in Exhibit I to the Original Agreement shall be hereby amended by deleting the reference to “June 9, 2014” therein, and replacing it with “May 1, 2016”. |
Address: | 3411 Silverside Rd, 103 Baynard Bldg |
Address: | Smithfield Foods, Inc. |
Address: | Securitization - Transaction Management Rabobank International 245 Park Avenue New York, NY 10167 Phone: (212) 808-6816 Fax: (914) 304-9324 |
NAME OF SUBSIDIARY | JURISDICTION OF ORGANIZATION |
AgProtein, Inc. | North Carolina |
Agri AI Sp. z.o.o. | Poland |
AGRI PLUS Sp. z.o.o. | Poland |
AGRI PLUS WIELKOPOLSKA S.A. | Poland |
Agri Vet Sp. z.o.o. | Poland |
Agroalim Distribution S.R.L. | Romania |
Agroalim Logistic S.A. | Romania |
American Skin Food Group LLC | North Carolina |
Animex Foods, Sp. z.o.o. | Poland |
Animex Foods Sp. z.o.o. S.K.A. | Poland |
ANIMEX Holding Sp. z o.o. | Poland |
Animex Netherlands BV | Netherlands |
Animex SF, Sp. z.o.o. | Poland |
Animex SF, Sp. z o.o Agro S.K.A. | Poland |
Animex SF, Sp. z o.o Euro Comfort Ltd. S.K.A. | Poland |
Animex SF, Sp. z o.o GP S.K.A. | Poland |
Animex SF, Sp. z o.o Paszowa S.K.A. | Poland |
Animex Sp. z o.o. | Poland |
Animpol S.A. | Poland |
Armour-Eckrich Meats LLC | Delaware |
Beef Liquidation Corp. | Delaware |
Best Solutions LLC | Delaware |
Brown’s Realty Partnership | North Carolina |
Carroll’s Realty Partnership | North Carolina |
Cattle Inventory, LLC | Delaware |
CC32 Fundusz Inwestycyjnny Zamknietcy | Poland |
Chief Milling Partners, Inc. | North Carolina |
Cold Field Investments, LLC | Delaware |
Crystal Peak Environmental LLC | Delaware |
Duplin Marketing Company, LLC | North Carolina |
Farmland Foods, Inc. | Delaware |
Ferma Kraplewice Sp. z o.o. | Poland |
Hofstede Beheer BV | Netherlands |
Iowa Quality Meats, Ltd. | Iowa |
John Morrell & Co. | Delaware |
Jonmor Investments, Inc. | Delaware |
Kansas City Sausage Company, LLC | Delaware |
KC2 Real Estate LLC | Delaware |
MF Energy, LLC | Delaware |
Morena Expert S.R.L. | Romania |
Murphy-Brown LLC | Delaware |
Murphy-Brown of Missouri LLC | Delaware |
NAME OF SUBSIDIARY | JURISDICTION OF ORGANIZATION |
Murphy Farms of Texahoma, Inc. | Oklahoma |
North Side Investments, Inc. | Delaware |
NPD Investments, Inc. | Delaware |
Patcud Investments, Inc. | Delaware |
Patelina SL | Spain |
Patrick Cudahy, LLC | Delaware |
PEK (London) Ltd. | United Kingdom |
Pirin Agri S.R.L. | Romania |
Premium Pet Health, LLC | Delaware |
Premium Standard Farms, LLC | Delaware |
Prima Farms Sp. z o.o. | Poland |
QTF Liquidation Corp. | Delaware |
RMHF Liquidation, LLC | Delaware |
Semilem S.R.L. | Romania |
SF Holding Sp. z o.o. | Poland |
SF Investments, Inc. | Delaware |
SF Marketing Sub, Inc. | Delaware |
SFDS Global Holdings B.V. | Netherlands |
SFFC, Inc. | Delaware |
SFRMH Liquidation, Inc. | Delaware |
Simoni Investments, LLC | Delaware |
Smithfield Asia Holdings, Limited | British Virgin Islands |
Smithfield Bioenergy LLC | Delaware |
Smithfield Canada Ltd. | Canada |
Smithfield Capital Europe, B.V. | Netherlands |
Smithfield Capital Trust I | Delaware |
Smithfield-Carroll’s Farms | Virginia |
Smithfield Culinary Foods Group, LLC | Delaware |
Smithfield Deli Group, Inc. | Delaware |
Smithfield Ferme S.R.L. | Romania |
Smithfield Foods de Mexico, S. de R.L. de C.V. | Mexico |
Smithfield Foods Group Ltd. | United Kingdom |
Smithfield Foods Ltd. | United Kingdom |
Smithfield Global Products, Inc. | Delaware |
Smithfield Innovations Group, LLC | Delaware |
Smithfield Insurance Co. Ltd. | Bermuda |
Smithfield International Group de Mexico, S. de R.L de C.V. | Mexico |
Smithfield International Investments, Inc. | Delaware |
Smithfield-Kinston LLC | Delaware |
Smithfield Processare S.R.L. | Romania |
Smithfield Prod S.R.L. | Romania |
Smithfield Purchase Corporation | North Carolina |
Smithfield Receivables Funding, LLC | Delaware |
Smithfield Romania S.R.L. | Romania |
Smithfield Specialty Foods Group, LLC | Delaware |
Smithfield Strategic Sourcing & Service Co., Inc. | Delaware |
Smithfield Trading Company, Inc. | Delaware |
Smithfield Transportation Co., Inc. | Delaware |
NAME OF SUBSIDIARY | JURISDICTION OF ORGANIZATION |
Stefano Foods, Inc. | North Carolina |
Tar Heel Turkey Hatchery, Inc. | North Carolina |
Teclinal SL | Spain |
Texas County Land, LLC | Delaware |
The Smithfield Inn Corporation | Virginia |
The Smithfield Packing Company, Incorporated | Delaware |
Titan Global LLC | North Carolina |
Wilmington Bulk, LLC | North Carolina |
1. | I have reviewed this annual report on Form 10-K of Smithfield Foods, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ C. LARRY POPE | |
C. Larry Pope | |
President and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Smithfield Foods, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ ROBERT W. MANLY, IV | |
Robert W. Manly, IV | |
Executive Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ C. LARRY POPE | |
C. Larry Pope President and Chief Executive Officer | |
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ ROBERT W. MANLY, IV | |
Robert W. Manly, IV Executive Vice President and Chief Financial Officer | |
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INCOME TAXES Schedule of Deferred Tax Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified |
Apr. 28, 2013
|
Apr. 29, 2012
|
---|---|---|
Deferred tax assets: | ||
Pension liabilities | $ 272.4 | $ 256.4 |
Tax credits, carryforwards and net operating losses | 77.3 | 85.6 |
Accrued expenses | 32.2 | 53.2 |
Employee benefits | 17.3 | 0 |
Other | 10.2 | 30.8 |
Deferred Tax Assets, Gross | 409.4 | 426.0 |
Valuation allowance | (43.5) | (54.6) |
Total deferred tax assets | 365.9 | 371.4 |
Deferred tax liabilities: | ||
Property, plant and equipment | 371.9 | 385.6 |
Intangible assets | 134.3 | 125.8 |
Derivatives | 1.5 | 31.9 |
Employee benefits | 0 | 13.7 |
Deferred Tax Liabilities, Investment in Subsidiaries | 44.1 | 44.6 |
Total deferred tax liabilities | $ 551.8 | $ 601.6 |
INCOME TAXES Schedule of Unrecognized Tax Benefits (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Apr. 28, 2013
|
Apr. 29, 2012
|
May 01, 2011
|
|
Income Tax Contingency [Line Items] | |||
Unrecognized Tax Benefits | $ 15.7 | $ 15.3 | $ 33.6 |
Unrecognized Tax Benefits, Increases Resulting from Current Period Tax Positions | 3.9 | 2.4 | |
Unrecognized Tax Benefits, Decreases Resulting from Prior Period Tax Positions | (1.8) | ||
Unrecognized Tax Benefits, Increases Resulting from Prior Period Tax Positions | (10.8) | ||
Unrecognized Tax Benefits, Decreases Resulting from Settlements with Taxing Authorities | (1.0) | (9.3) | |
Unrecognized Tax Benefits, Reductions Resulting from Lapse of Applicable Statute of Limitations | $ (0.7) | $ (0.6) |
REPORTING SEGMENTS Operations by Geographic Area (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 28, 2013
|
Jan. 27, 2013
|
Oct. 28, 2012
|
Jul. 29, 2012
|
Apr. 29, 2012
|
Jan. 29, 2012
|
Oct. 30, 2011
|
Jul. 31, 2011
|
Apr. 28, 2013
|
Apr. 29, 2012
|
May 01, 2011
|
|
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Sales | $ 3,320.7 | $ 3,583.3 | $ 3,225.8 | $ 3,091.3 | $ 3,209.2 | $ 3,478.3 | $ 3,312.6 | $ 3,094.2 | $ 13,221.1 | $ 13,094.3 | $ 12,202.7 |
Long-lived assets | 4,164.6 | 4,123.2 | 4,164.6 | 4,123.2 | 4,273.9 | ||||||
U.S. [Member]
|
|||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Sales | 11,789.7 | 11,663.9 | 10,900.2 | ||||||||
Long-lived assets | 3,032.9 | 2,969.1 | 3,032.9 | 2,969.1 | 2,905.7 | ||||||
International [Member]
|
|||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Sales | 1,431.4 | 1,430.4 | 1,302.5 | ||||||||
Long-lived assets | $ 1,131.7 | $ 1,154.1 | $ 1,131.7 | $ 1,154.1 | $ 1,368.2 |
EQUITY Schedule of Nonvested Performance Share Units (Details) (Incentive Compensation Plan [Member], Performance Shares [Member])
|
12 Months Ended | |
---|---|---|
Apr. 28, 2013
|
Apr. 29, 2012
|
|
Incentive Compensation Plan [Member] | Performance Shares [Member]
|
||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 1,212,567 | 908,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 920,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period | (564,433) | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | (51,000) |
FAIR VALUE MEASUREMENTS Schedule of Fair Value and Carrying Value of Debt (Details) (USD $)
In Millions, unless otherwise specified |
Apr. 28, 2013
|
Apr. 29, 2012
|
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term Debt, Fair Value | $ 2,732.9 | $ 2,176.5 |
Total debt | $ 2,479.1 | $ 1,937.3 |
PENSION AND OTHER RETIREMENT PLANS
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 28, 2013
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Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PENSION AND OTHER RETIREMENT PLANS | PENSION AND OTHER RETIREMENT BENEFIT PLANS Company Sponsored Defined Benefit Pension Plans We provide the majority of our U.S. employees with pension benefits. Salaried employees are provided benefits based on years of service and average salary levels. Hourly employees are provided benefits of stated amounts for each year of service. The following table presents a reconciliation of the pension benefit obligation, plan assets and the funded status of these pension plans.
——————————————
The accumulated benefit obligation for all defined benefit pension plans was $1.7 billion and $1.5 billion as of April 28, 2013 and April 29, 2012, respectively. The accumulated benefit obligation for all of our defined benefit pension plans exceeded the fair value of plan assets for both periods presented. The following table shows the pre-tax unrecognized items included as components of accumulated other comprehensive loss related to our defined benefit pension plans as of the dates indicated.
We expect to recognize $59.8 million of the actuarial loss and prior service cost as net periodic pension cost in fiscal 2014. The following table presents the components of the net periodic pension costs for the periods indicated:
The following table shows our weighted average assumptions for the periods indicated.
We use an independent third-party actuary to assist in the determination of assumptions used and the measurement of our pension obligation and related costs. We review and select the discount rate to be used in connection with our pension obligation annually. In determining the discount rate, we use the yield on corporate bonds (rated AA or better) that coincides with the cash flows of the plans’ estimated benefit payouts. The model uses a yield curve approach to discount each cash flow of the liability stream at an interest rate specifically applicable to the timing of each respective cash flow. Using imputed interest rates, the model sums the present value of each cash flow stream to calculate an equivalent weighted average discount rate. We use this resulting weighted average discount rate to determine our final discount rate. To determine the expected long-term return on plan assets, we consider the current and anticipated asset allocations, as well as historical and estimated returns on various categories of plan assets. Long-term trends are evaluated relative to market factors such as inflation, interest rates and fiscal and monetary polices in order to assess the capital market assumptions. Over the 5-year period ended April 28, 2013 and April 29, 2012, the average rate of return on plan assets was approximately 4.01% and 1.40% percent, respectively. Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, affect expense in future periods. Pension plan assets may be invested in cash and cash equivalents, equities, debt securities, insurance contracts and real estate. Our investment policy for the pension plans is to balance risk and return through a diversified portfolio of high-quality equity and fixed income securities. Equity targets for the pension plans are as indicated in the following table. Maturity for fixed income securities is managed such that sufficient liquidity exists to meet near-term benefit payment obligations. The plans retain outside investment advisors to manage plan investments within parameters established by our plan trustees. The following table presents the fair value of our qualified pension plan assets by major asset category as of April 28, 2013 and April 29, 2012. The allocation of our pension plan assets is based on the target range presented in the following table.
See Note 12—Fair Value Measurements for additional information about the fair value of our pension assets. As of April 28, 2013 and April 29, 2012, the amount of our common stock included in plan assets was 2,054,344 and 4,154,344 shares, respectively, with market values of $53.3 million and $88.2 million, respectively. We generally contribute the minimum amount required under government regulations to our qualified pension plans, plus amounts necessary to maintain an 80% funded status in order to avoid benefit restrictions under the Pension Protection Act. Minimum employer contributions to our qualified pension plans are expected to be $51.6 million for fiscal 2014. Expected future benefit payments for our defined benefit pension plans are as follows:
Multiemployer Defined Benefit Pension Plans In addition to our Company sponsored defined benefit pension plans, we contribute to several multiemployer defined benefit pension plans under collective bargaining agreements that cover certain of our union-represented employees. The risks of participating in such plans are different from the risks of single-employer plans, in the following respects:
Each multiemployer plan in which we participate has a certified zone status as currently defined by the Pension Protection Act of 2006. The zone status is based on information provided to us and other participating employers by each plan and is certified by the plan's actuary. The following are descriptions of the zone status types based on criteria established under the Internal Revenue Code (IRC):
All plans in which we participate were in the "green" zone for the two most recent benefit plan years that have been certified. The following table summarizes our contributions to multiemployer plans (1).
Other Employee Benefit Plans We sponsor defined contribution pension plans (401(k) plans) covering substantially all U.S. employees. Our contributions vary depending on the plan but are based primarily on each participant’s level of contribution and cannot exceed the maximum allowable for tax purposes. Total contributions were $15.0 million, $13.9 million and $13.9 million in fiscal 2013, fiscal 2012 and fiscal 2011, respectively. We also provide health care and life insurance benefits for certain retired employees. These plans are unfunded and generally pay covered costs reduced by retiree premium contributions, co-payments and deductibles. We retain the right to modify or eliminate these benefits. We consider disclosures related to these plans immaterial to the consolidated financial statements and related notes. |
DERIVATIVES FINANCIAL INSTRUMENTS Notional Amonts (Details) (USD $)
|
12 Months Ended |
---|---|
Apr. 28, 2013
gal
|
|
Diesel, in Gallons [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 3,528,000 |
Minimum Notional Volumes, Other Units | 0 |
Corn, in Bushels [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 22,960,000 |
Minimum Notional Volumes, Other Units | 1,080,000 |
Corn, in Bushels [Member] | Fair Value Hedging [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 16,960,000 |
Minimum Notional Volumes, Other Units | 2,745,000 |
Corn, in Bushels [Member] | Cash Flow Hedging [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 114,525,000 |
Minimum Notional Volumes, Other Units | 30,885,000 |
Lean Hogs, in Pounds [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Mass | 542,440,000 |
Minimum Notional Volumes, Mass | 320,000 |
Lean Hogs, in Pounds [Member] | Fair Value Hedging [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Mass | 286,800,000 |
Minimum Notional Volumes, Mass | 0 |
Lean Hogs, in Pounds [Member] | Cash Flow Hedging [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Mass | 569,920,000 |
Minimum Notional Volumes, Mass | 0 |
Wheat, in Bushels [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 2,000,000 |
Minimum Notional Volumes, Other Units | 0 |
Soybeans, in Bushels [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 935,000 |
Minimum Notional Volumes, Other Units | 155,000 |
Soybean Meal, in Tons [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Mass | 109,065 |
Minimum Notional Volumes, Mass | 33,945 |
Soybean Meal, in Tons [Member] | Cash Flow Hedging [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Mass | 755,444 |
Minimum Notional Volumes, Mass | 273,496 |
Natural Gas, in Million BTU [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 11,030,000 |
Minimum Notional Volumes, Other Units | 9,370,000 |
Crude Oil [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Other Units | 144,000 |
Minimum Notional Volumes, Other Units | 0 |
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Monetary | 131,845,204 |
Minimum Notional Volumes, Monetary | 21,823,992 |
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member]
|
|
Derivative [Line Items] | |
Maximum Notional Volumes, Monetary | 71,979,138 |
Minimum Notional Volumes, Monetary | 11,687,888 |
DISPOSAL OF LONG-LIVED ASSETS
|
12 Months Ended |
---|---|
Apr. 28, 2013
|
|
Impairment or Disposal of Tangible Assets Disclosure [Abstract] | |
DISPOSAL OF LONG-LIVED ASSETS | DISPOSAL OF LONG-LIVED ASSETS Portsmouth, Virginia Plant In November 2011 (fiscal 2012), we announced that we would shift the production of hot dogs and lunchmeat from The Smithfield Packing Company, Inc.'s (Smithfield Packing) Portsmouth, Virginia plant to our Kinston, North Carolina plant and permanently close the Portsmouth facility. The Kinston facility will be expanded to handle the additional production and will incorporate state of the art technology and equipment, which is expected to produce significant production efficiencies and cost reductions. The Kinston expansion will require an estimated $85 million in capital expenditures, substantially all of which had been incurred by the end of fiscal 2013.. The expansion of the Kinston facility and the closure of the Portsmouth facility are expected to be completed in the first half of fiscal 2014. As a result of this decision, we performed an impairment analysis of the related assets at the Portsmouth facility in the second quarter of fiscal 2012 and determined that the net cash flows expected to be generated over the anticipated remaining useful life of the plant are sufficient to recover its book value. As such, no impairment existed. However, we revised depreciation estimates to reflect the use of the related assets at the Portsmouth facility over their shortened useful lives. As a result, we recognized accelerated depreciation charges of $4.4 million and $3.3 million in cost of sales during fiscal 2013 and fiscal 2012, respectively. Also, in connection with this decision, we wrote-down inventory by $0.8 million in cost of sales and accrued $0.6 million for employee severance in selling, general and administrative expenses in the second quarter of fiscal 2012. All of these charges are reflected in the Pork segment. Hog Farms Texas In January 2011 (fiscal 2011), we sold a portion of our Dalhart, Texas hog production assets to a crop farmer for net proceeds of $9.1 million and recognized a loss on the sale of $1.8 million in selling, general and administrative expenses in our Hog Production segment in the third quarter of fiscal 2011. In April 2011 (fiscal 2011), we completed the sale of the remaining assets of our Dalhart, Texas operation and received net proceeds of $32.5 million. As a result of the sale, we recognized a gain of $13.6 million, after allocating $8.5 million in goodwill to the asset group, in selling, general and administrative expenses in our Hog Production segment in the fourth quarter of fiscal 2011. Goodwill was allocated to this business based on its fair value relative to the estimated fair value of our domestic hog production reporting unit. The operating results and cash flows from these asset groups were not considered material for separate disclosure. Oklahoma and Iowa In January 2011 (fiscal 2011), we completed the sale of certain hog production assets located in Oklahoma and Iowa. As a result of these sales, we received total net proceeds of $70.4 million and recognized gains totaling $6.9 million, after allocating $17.0 million of goodwill to these asset groups. Goodwill was allocated to this business based on its fair value relative to the estimated fair value of our domestic hog production reporting unit. The gains were recorded in selling, general and administrative expenses in our Hog Production segment in the third quarter of fiscal 2011. The operating results and cash flows from these asset groups were not considered material for separate disclosure. Missouri In the first half of fiscal 2011, we began reducing the hog population on certain hog farms in Missouri in order to comply with an amended consent decree. The amended consent decree allows us to return the farms to full capacity upon the installation of an approved "next generation" technology that would reduce the level of odor produced by the farms. The reduced hog raising capacity at these farms was replaced with third party contract farmers in Iowa. In the first quarter of fiscal 2011, in connection with the anticipated reduction in finishing capacity, we performed an impairment analysis of these hog farms and determined that the book value of the assets was recoverable and thus, no impairment existed. Based on the favorable hog raising performance experienced with these third party contract farmers and the amount of capital required to install "next generation" technology at our Missouri farms, we made the decision in the first quarter of fiscal 2012 to permanently idle certain of the assets on these farms. Depreciation estimates were revised to reflect the shortened useful lives of the assets. As a result, we recognized accelerated depreciation charges of $8.2 million in fiscal 2012. These charges are reflected in the Hog Production segment. Butterball, LLC (Butterball) In June 2010 (fiscal 2011), we announced that we had made an offer to purchase our joint venture partner’s 51% ownership interest in Butterball and our partner’s related turkey production assets. In accordance with Butterball’s operating agreement, our partner had to either accept the offer to sell or be required to purchase our 49% interest and our related turkey production assets, which we refer to below as our turkey operations. In September 2010 (fiscal 2011), we were notified of our joint venture partner’s decision to purchase our 49% interest in Butterball and our related turkey production assets. In December 2010 (fiscal 2011), we completed the sale of these assets for $167.0 million and recognized a gain of $0.2 million. The gain was calculated as the cash selling price, net of costs to sell, less the carrying amount of the asset disposal group. The operating results and cash flows from our turkey operations were not considered material for separate disclosure. |
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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
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Apr. 28, 2013
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
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The following significant infrequent or unusual items impacted our quarterly results in fiscal 2013 and fiscal 2012: Fiscal 2013
Fiscal 2012
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SUBSEQUENT EVENTS Kansas City Sausage, LLC (Details) (Subsequent Event [Member], Kansas City Sausage [Member], USD $)
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12 Months Ended |
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Apr. 28, 2013
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Subsequent Event [Member] | Kansas City Sausage [Member]
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Subsequent Event [Line Items] | |
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% |
Business Acquisition, Cost of Acquired Entity, Purchase Price | $ 35,000,000 |
Business Acquisiton, Advance to Seller | 10,000,000 |
Business Acqusition, Revolving Loan with Acquisition | 20,000,000 |
Company's Percentage of U.S Sow Population | 15.00% |
Total Annual U.S. Industry Sales, Breakfast and Dinner Sausage | $ 4,000,000,000 |
DEBT Working Capital Facilities (Details) (USD $)
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3 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | ||||||||
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Oct. 28, 2012
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Jan. 29, 2012
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Oct. 30, 2011
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Jul. 31, 2011
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Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Apr. 29, 2012
ABL Credit Facility [Member]
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Jun. 30, 2011
ABL Credit Facility [Member]
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Apr. 28, 2013
Inventory Revolver [Member]
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Jan. 31, 2013
Inventory Revolver [Member]
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Apr. 28, 2013
Securitization Facility [Member]
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Line of Credit Facility [Line Items] | ||||||||||||
Line of Credit Facility, Maximum Borrowing Capacity, Prior to Refinancing | $ 1,000,000,000 | $ 925,000,000 | ||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | 1,400,000,000 | 1,025,000,000 | 275,000,000 | |||||||||
Line of Credit Facility, Option to Increase Maximum Borrowing Capacity | 1,225,000,000 | |||||||||||
Loss on debt extinguishment | 120,700,000 | 4,600,000 | 6,400,000 | 1,200,000 | 120,700,000 | 12,200,000 | 92,500,000 | 1,200,000 | ||||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.50% | 0.50% | ||||||||||
Line of Credit Facility, Interest Rate Description | LIBOR plus 3% | 0.2% plus 1.75% | ||||||||||
Line of Credit Facility, Covenant Terms | The ratio of our funded debt to capitalization (as defined in the Second Amended and Restated Credit Agreement) may not exceed 0.5 to 1.0, and our EBITDA to interest expense ratio (as defined in the Second Amended and Restated Credit Agreement) may not be less than 2.5 to 1.0. | |||||||||||
Deferred Finance Costs, Gross | 9,700,000 | 1,300,000 | ||||||||||
Accounts Receivable Held By SPV | 411,100,000 | |||||||||||
Line of Credit Facility, Amount Outstanding | 82,300,000 | 64,900,000 | 0 | |||||||||
Line of Credit Facility, Remaining Borrowing Capacity | 1,300,000,000 | |||||||||||
Line of Credit Facility, Average Outstanding Amount | 105,400,000 | 99,800,000 | 81,600,000 | |||||||||
Line of Credit Facility, Interest Rate During Period | 5.20% | 4.90% | 4.80% | |||||||||
Line of Credit Facility, Maximum Amount Outstanding During Period | $ 229,900,000 | $ 245,300,000 | $ 256,900,000 | |||||||||
Line of Credit Facility, Interest Rate at Period End | 4.40% | 5.70% |
DERIVATIVES FINANCIAL INSTRUMENTS (Gains) Losses Recognized in Earnings on Mark-to-Market Contracts (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
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Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Derivative Instruments, Gain (Loss) [Line Items] | |||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | $ 46.3 | $ 14.1 | $ 54.4 |
Commodity Contract [Member] | Cost of Sales [Member] | Not Designated as Hedging Instrument [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | |||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | 12.9 | 6.4 | 63.4 |
Commodity Contract [Member] | Sales [Member] | Not Designated as Hedging Instrument [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | |||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | 29.7 | 0 | 0 |
Foreign Exchange Contract [Member] | Operating Expense [Member] | Not Designated as Hedging Instrument [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | |||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | $ 3.7 | $ 7.7 | $ (9.0) |
EQUITY
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Apr. 28, 2013
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY | EQUITY Share Repurchase Program In June 2012 (fiscal 2013), we announced that our board of directors had approved a new share repurchase program authorizing us to buy up to $250.0 million of our common stock over the subsequent 24 months in addition to the $250.0 million authorized during fiscal 2012 (Share Repurchase Program). In July 2012 (fiscal 2013), our board of directors approved an increase of $100.0 million to the authorized amount under the Share Repurchase Program. Share repurchases may be made on the open market or in privately negotiated transactions. The number of shares repurchased, and the timing of any buybacks, will depend on our corporate cash balances, business and economic conditions, and other factors, including investment opportunities. The program may be discontinued at any time. The Merger Agreement, as defined in "Note 18—Subsequent Events, generally prohibits the Company from repurchasing any of its shares prior to the completion of the Merger During fiscal 2013, we repurchased 19,068,079 shares of our common stock for $386.4 million, including related fees. The price of the repurchased shares has been allocated among common stock, additional paid-in capital and retained earnings in our consolidated condensed balance sheet in accordance with applicable accounting guidance. Since the inception of the Share Repurchase Program in June 2011 (fiscal 2012) and through April 28, 2013, we have repurchased 28,244,783 shares of our common stock for $575.9 million, including related commissions, at an average price of $20.38. Preferred Stock We have 1,000,000 shares of $1.00 par value preferred stock authorized, none of which are issued. The board of directors is authorized to issue preferred stock in series and to fix, by resolution, the designation, dividend rate, redemption provisions, liquidation rights, sinking fund provisions, conversion rights and voting rights of each series of preferred stock. Stock-Based Compensation Under the terms of the merger agreement with Shuanghui, which is further described in Note 18—Subsequent Events, immediately prior to the merger, the maximum number of shares underlying all then-outstanding stock-based compensation awards, whether vested or unvested, will be surrendered in exchange for the right to receive cash of $34.00 per share, less the exercise price of such awards, if any. The disclosures that follow surrounding stock-based compensation are provided without regard to the possibility of such merger occurring. During fiscal 2009, we adopted the 2008 Incentive Compensation Plan (the Incentive Plan), which replaced the 1998 Stock Incentive Plan and provides for the issuance of non-statutory stock options and other awards to employees, non-employee directors and consultants. There are 12,583,397 shares reserved under the Incentive Plan. As of April 28, 2013, there were 7,140,603 shares available for grant under this plan. Stock Options Under the Incentive Plan, we grant options for periods not exceeding 10 years, which either cliff vest five years after the date of grant or vest ratably over a three-year period with an exercise price of not less than 100% of the fair market value of the common stock on the date of grant. Compensation expense for stock options was $4.9 million, $6.1 million and $3.8 million for fiscal 2013, 2012 and 2011, respectively. The related income tax benefits recognized were $1.8 million, $2.4 million and $1.5 million, for fiscal 2013, 2012 and 2011, respectively. There was no compensation expense capitalized as part of inventory or fixed assets during fiscal 2013, 2012 and 2011. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The expected annual volatility is based on the historical volatility of our stock and other factors. We use historical data to estimate option exercises and employee termination within the pricing model. The expected term of options granted represents the period of time that options are expected to be outstanding. The following table summarizes the assumptions made in determining the fair value of stock options granted in the fiscal years indicated:
The options granted in fiscal 2013, 2012 and 2011 were valued in separate tranches according to the expected life of each tranche. The above table reflects the weighted average risk free interest rate and expected option life of each tranche. The expected dividend yield was the same for all options granted in fiscal 2013, 2012 and 2011. We have never paid a cash dividend on our common stock. The following table summarizes stock option activity under the Incentive Plan as of April 28, 2013, and changes during the fiscal year then ended:
The weighted average grant-date fair value of options granted during fiscal 2013, 2012 and 2011 was $8.92, $9.36 and $6.61, respectively. The total intrinsic value of options exercised during fiscal 2013, 2012 and 2011 was $2.4 million, $0.9 million and $0.4 million, respectively. As of April 28, 2013, there was $2.9 million of total unrecognized compensation cost related to nonvested stock options granted under the Incentive Plan. That cost is expected to be recognized over a weighted average period of 1.3 years. The total fair value of stock options vested during fiscal 2013, 2012 and 2011 was $7.5 million, $5.7 million and $1.9 million, respectively. Performance Share Units The Incentive Plan also provides for the issuance of performance share units (PSU) to reward employees for the achievement of performance goals. We grant PSUs that contain performance conditions, which require the achievement of specified financial and/or operational performance metrics. We also grant PSUs that contain market conditions, which require the achievement of certain stock price targets or the achievement of specified levels of shareholder return relative to other companies in our industry. PSUs generally vest over a required employee service period, which typically ranges from one to five years and closely matches the performance period. Each performance share unit represents and has a value equal to one share of our common stock. Payment of vested performance share units is generally in our common stock. PSUs containing performance conditions are generally measured at fair value as if they were vested and issued on the grant date. The fair value of PSUs containing market conditions is estimated using a Monte Carlo simulation model, which simulates a range of possible future stock prices after incorporating assumptions about risk free rates, volatility and other relevant assumptions pertinent to the specific awards. The grant date fair value of performance share units is recognized as compensation expense over the requisite employee service period. The following table summarizes performance share unit activity under the Incentive Plan as of April 28, 2013, and changes during the fiscal year then ended. The number of awards granted and outstanding reflects the maximum number of share units that may vest under the awards.
The weighted average grant date fair value for PSUs granted in fiscal 2013, 2012 and 2011 was $21.03, $20.63 and $17.57 per share unit, respectively. The total intrinsic value of PSUs converted into shares of our common stock and issued in fiscal 2013 and fiscal 2012 was $10.9 million and $15.2 million, respectively. No PSUs were converted into shares of our common stock in fiscal 2011. Compensation expense for performance share units was $8.1 million, $8.3 million and $7.5 million in fiscal 2013, 2012 and 2011, respectively. The related income tax benefits recognized were $3.0 million, $3.2 million and $2.9 million for fiscal 2013, 2012 and 2011, respectively. As of April 28, 2013, there was approximately $6.8 million of total unrecognized compensation cost related to the performance share units, which is expected to be recognized over a weighted average period of 1.5 years. Executive Stock Purchase Plan (ESPP) As part of the Incentive Plan, we maintain a nonqualified deferred compensation plan that permits executive officers to voluntarily defer up to 25% of the payouts under their annual cash incentive awards in exchange for a performance award payable in the form of Company stock at such time in the future as elected by the officers, but not less than three years from the end of the performance period. The Company will provide a 100% match to the officers' deferral in the form of restricted stock under the Incentive Plan. The match is subject to three-year cliff vesting and will be forfeited if the officer voluntarily terminates employment before vesting. The fair value of these restricted stock awards is generally measured as if they were vested and issued on the grant date. We granted a total of 450,793 restricted stock units in fiscal 2013, including the company match, of which 250,575 are fully vested. All of these units were outstanding as of April 28, 2013. There were no restricted stock units outstanding as of April 29, 2012. We recognized compensation expense of $3.5 million and $4.9 million in fiscal 2013 and 2012, respectively, related to restricted stock awards under the ESPP. For awards granted under the ESPP through the date of this filing, we expect to recognize an additional $5.0 million of compensation expense over a weighted average period of 1.8 years. Call Spread Transactions In connection with the issuance of the Convertible Notes (see Note 7—Debt), we entered into separate convertible note hedge transactions with respect to our common stock to minimize the impact of potential economic dilution upon conversion of the Convertible Notes, and separate warrant transactions. We purchased call options in private transactions that permit us to acquire up to approximately 17.6 million shares of our common stock at an initial strike price of $22.68 per share, subject to adjustment, for $88.2 million. In general, the call options allow us to acquire a number of shares of our common stock initially equal to the number of shares of common stock issuable to the holders of the Convertible Notes upon conversion. These call options will terminate upon the maturity of the Convertible Notes. We also sold warrants in private transactions for total proceeds of approximately $36.7 million. The warrants permit the purchasers to acquire up to approximately 17.6 million shares of our common stock at an initial exercise price of $30.54 per share, subject to adjustment. The warrants expire on various dates from October 2013 (fiscal 2014) to December 2013 (fiscal 2014). The Call Spread Transactions, in effect, increase the initial conversion price of the Convertible Notes from $22.68 per share to $30.54 per share, thus reducing the potential future economic dilution associated with conversion of the notes. The Convertible Notes and the warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeds the respective exercise prices of those instruments. The call options are excluded from the calculation of diluted earnings per share as their impact is anti-dilutive. We have analyzed the Call Spread Transactions and determined that they meet the criteria for classification as equity instruments. As a result, we recorded the purchase of the call options as a reduction to additional paid-in capital and the proceeds of the warrants as an increase to additional paid-in capital. Subsequent changes in fair value of those instruments are not recognized in the financial statements as long as the instruments continue to meet the criteria for equity classification. Stock Held in Trust We maintain a non-qualified defined Supplemental Pension Plan (the Supplemental Plan) the purpose of which is to provide supplemental retirement income benefits for those eligible employees whose benefits under the tax-qualified plans are subject to statutory limitations. A grantor trust has been established for the purpose of satisfying the obligations under the plan. As of April 28, 2013, the Supplemental Plan held 2,616,687 shares of our common stock at an average cost of $23.75. As part of the Incentive Plan director fee deferral program, we purchase shares of our common stock on the open market for the benefit of the plan's participants. These shares are held in a rabbi trust until they are transferred to the participants. As of April 28, 2013, the rabbi trust held 330,180 shares of our common stock at an average cost of $20.17. Accumulated Other Comprehensive (Loss) Income Accumulated other comprehensive (loss) income consists of the following:
|
EQUITY Share Repurchase Program (Details) (USD $)
In Millions, except Share data, unless otherwise specified |
12 Months Ended | 1 Months Ended | 12 Months Ended | 23 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Apr. 28, 2013
|
Apr. 29, 2012
|
May 01, 2011
|
Jul. 31, 2012
Smithfield Foods Share Repurchase Program [Member]
|
Jun. 30, 2012
Smithfield Foods Share Repurchase Program [Member]
|
Apr. 28, 2013
Smithfield Foods Share Repurchase Program [Member]
|
Apr. 29, 2012
Smithfield Foods Share Repurchase Program [Member]
|
Apr. 28, 2013
Smithfield Foods Share Repurchase Program [Member]
|
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Equity, Class of Treasury Stock [Line Items] | ||||||||
Stock Repurchase Program, Authorized Amount | $ 250.0 | $ 250.0 | ||||||
Stock Repurchase Program, Period in Force | 24 months | |||||||
Stock Repurchase Program, Increase to Authorized Amount | 100.0 | |||||||
Common stock repurchased, shares | 19,068,079 | 28,244,783 | ||||||
Repurchase of common stock | $ (386.4) | $ (189.5) | $ 0 | $ (386.4) | $ (575.9) | |||
Stock Repurchased During Period, Average Price Per Share | $ 20.38 |
PENSION AND OTHER RETIREMENT PLANS Schedule of Pension Benefit Obligation, Plan Assets and Funded Status (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Apr. 28, 2013
|
Apr. 29, 2012
|
May 01, 2011
|
|
Defined Benefit Plan Disclosure [Line Items] | |||
Benefit obligation | $ 1,813.2 | $ 1,610.6 | $ 1,329.9 |
Service cost | 47.2 | 37.4 | 37.0 |
Interest cost | 74.8 | 75.9 | 74.9 |
Benefits paid | (65.9) | (63.2) | |
Actuarial loss | 146.1 | 229.1 | |
Other | 0.4 | 1.5 | |
Fair value of plan assets | 1,110.6 | 1,023.5 | |
Funded status | (702.6) | (587.1) | |
Amounts recognized in the consolidated balance sheet: | |||
Net long-term pension liability | (697.0) | (581.9) | |
Accrued expenses and other current liabilities | (5.6) | (5.2) | |
Net amount recognized at end of year | (702.6) | (587.1) | |
Supplemental Employee Retirement Plans, Defined Benefit [Member]
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Defined Benefit Plan Disclosure [Line Items] | |||
Benefits paid | (3.9) | (3.5) | |
Fair value of plan assets | 121.0 | 107.1 | |
Employer contributions | 0 | 0 | |
Pension Plans, Defined Benefit [Member]
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Defined Benefit Plan Disclosure [Line Items] | |||
Benefits paid | (62.0) | (59.7) | |
Fair value of plan assets | 1,110.6 | 1,023.5 | 956.4 |
Actual return on plan assets | 131.5 | (16.0) | |
Employer contributions | 17.7 | 142.8 | |
Other | $ (0.1) | $ 0 |
FAIR VALUE MEASUREMENTS Fair Value Measurements (Tables)
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Apr. 28, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | The following tables set forth, by level within the fair value hierarchy, our non-pension financial assets and liabilities that were measured at fair value on a recurring basis as of April 28, 2013 and April 29, 2012:
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Schedule of Fair Value, Pension Plan Asset [Table Text Block] | The following table summarizes our pension plan assets measured at fair value on a recurring basis (at least annually) as of April 28, 2013 and April 29, 2012:
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Schedule of Level Three Defined Benefit Plan Assets Roll Forward [Table Text Block] | The following table summarizes the changes in our Level 3 pension plan assets for the year-ended April 28, 2013 and April 29, 2012:
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Fair Value and Carrying Value of Debt [Table Text Block] | The following table presents the fair value and carrying value of long-term debt, including the current portion of long-term debt as of April 28, 2013 and April 29, 2012.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies (Policies)
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Apr. 28, 2013
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Consolidation, Policy [Policy Text Block] | Principles of Consolidation The consolidated financial statements include the accounts of all wholly-owned subsidiaries, as well as all majority-owned subsidiaries and other entities for which we have a controlling interest. Entities that are 50% owned or less are accounted for under the equity method when we have the ability to exercise significant influence. We use the cost method of accounting for investments in which our ability to exercise significant influence is limited. All intercompany transactions and accounts have been eliminated. Consolidating the results of operations and financial position of variable interest entities for which we are the primary beneficiary does not have a material effect on sales, net income, or net income per diluted share, or on our financial position for the fiscal periods presented. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations and cash flows in foreign currencies are translated into U.S. dollars using the average exchange rate over the course of the fiscal year. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss and included in other comprehensive income for each period. Gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in selling, general and administrative expenses as incurred. We recorded net gains on foreign currency transactions of $1.1 million in fiscal 2013 and net losses of $7.4 million and $0.4 million in fiscal 2012 and fiscal 2011, respectively. Our Polish operations have different fiscal period end dates. As such, we have elected to consolidate the results of these operations on a one-month lag. We do not believe the impact of reporting the results of these entities on a one-month lag is material to the consolidated financial statements. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S., which require us to make estimates and use assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Our fiscal year consists of 52 or 53 weeks and ends on the Sunday nearest April 30. All fiscal years included consisted of 52 weeks. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents. The majority of our cash is concentrated in demand deposit accounts or money market funds. The carrying value of cash equivalents approximates market value. |
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Trade and Other Accounts Receivable, Policy [Policy Text Block] | Accounts Receivable Accounts receivable are recorded net of the allowance for doubtful accounts. We regularly evaluate the collectibility of our accounts receivable based on a variety of factors, including the length of time the receivables are past due, the financial health of the customer and historical experience. Based on our evaluation, we record reserves to reduce the related receivables to amounts we reasonably believe are collectible. Our reserve for uncollectible accounts receivable was $14.6 million and $16.0 million as of April 28, 2013 and April 29, 2012, respectively. |
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Inventory, Policy [Policy Text Block] | Inventories Inventories consist of the following:
Livestock are generally valued at the lower of first-in, first-out cost or market, adjusted for changes in the fair value of livestock that are hedged. Costs include purchase costs, feed, medications, contract grower fees and other production expenses. Fresh and packaged meats are valued based on USDA and other market prices and adjusted for the cost of further processing. Costs for fresh and packaged meats include meat, labor, supplies and overhead. Average costing is primarily utilized to account for fresh and packaged meats and grains. Manufacturing supplies principally consist of ingredients and packaging materials. |
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Property, Plant and Equipment, Policy [Policy Text Block] | Property, Plant and Equipment, Net Property, plant and equipment is generally stated at historical cost, which includes the then fair values of assets acquired in business combinations, and depreciated on a straight-line basis over the estimated useful lives of the assets. Assets held under capital leases are classified in property, plant and equipment, net and amortized over the lease term. The amortization of assets held under capital leases is included in depreciation expense. The cost of assets held under capital leases was $34.0 million and $34.0 million at April 28, 2013 and April 29, 2012, respectively. The assets held under capital leases had accumulated amortization of $3.1 million and $1.7 million at April 28, 2013 and April 29, 2012, respectively. Depreciation expense is included in either cost of sales or selling, general and administrative expenses, as appropriate. Depreciation expense totaled $235.3 million, $238.6 million and $227.4 million in fiscal 2013, 2012 and 2011, respectively. Interest is capitalized on property, plant and equipment over the construction period. Total interest capitalized was $4.8 million, $2.8 million and $1.6 million in fiscal 2013, 2012 and 2011, respectively. Property, plant and equipment, net, consists of the following:
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Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise. In the evaluation of goodwill for impairment, we may perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is not, no further analysis is required. If it is, a prescribed two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any. The first step in the two-step impairment test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The fair value of a reporting unit is estimated by applying valuation multiples and/or estimating future discounted cash flows. The selection of multiples is dependent upon assumptions regarding future levels of operating performance as well as business trends and prospects, and industry, market and economic conditions. When estimating future discounted cash flows, we consider the assumptions that hypothetical marketplace participants would use in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on an industry-wide average cost of capital or location-specific economic factors. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to have a potential impairment and the second step of the impairment test is not necessary. However, if the carrying amount of a reporting unit exceeds its fair value, the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss to recognize, if any. The second step compares the implied fair value of goodwill with the carrying amount of goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (i.e., the fair value of the reporting unit is allocated to all the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit). If the implied fair value of goodwill exceeds the carrying amount, goodwill is not considered impaired. However, if the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. Based on the results of our annual goodwill impairment tests, as of our testing date, no impairment indicators were noted for all the periods presented. The carrying amount of goodwill includes cumulative impairment losses of $6.0 million as of April 28, 2013 and April 29, 2012. Intangible assets consist of the following:
The fair values of trademarks are calculated using a royalty rate method. Assumptions about royalty rates are based on the rates at which similar brands and trademarks are licensed in the marketplace. If the carrying value of our indefinite-lived intangible assets exceeds their fair value, an impairment loss is recognized in an amount equal to that excess. Intangible assets with finite lives are reviewed for recoverability when indicators of impairment are present using estimated future undiscounted cash flows related to those assets. We have determined that no impairments of our intangible assets existed for any of the periods presented. Amortization expense for intangible assets was $3.1 million, $3.0 million and $3.2 million in fiscal 2013, 2012 and 2011, respectively. As of April 28, 2013, the estimated amortization expense associated with our intangible assets for each of the next five fiscal years is expected to be $3.4 million. |
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Debt, Policy [Policy Text Block] | Debt Issuance Costs, Premiums and Discounts Debt issuance costs, premiums and discounts are amortized into interest expense over the terms of the related loan agreements using the effective interest method or other methods which approximate the effective interest method. |
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Income Tax, Policy [Policy Text Block] | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts more likely than not to be realized. The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. We accrue interest and penalties related to unrecognized tax benefits in other liabilities and recognize the related expense in income tax expense. |
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Pension and Other Postretirement Plans, Pensions, Policy [Policy Text Block] | Pension Accounting We recognize the funded status of our defined benefit pension plans in the consolidated balance sheets. We also recognize in other comprehensive income, the net of tax results of the gains or losses and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost. These amounts are adjusted out of accumulated other comprehensive loss as they are subsequently recognized as components of net periodic benefit cost. We measure our pension and other postretirement benefit plan obligations and related plan assets as of the last day of our fiscal year. The measurement of our pension obligations and related costs is dependent on the use of assumptions and estimates. These assumptions include discount rates, salary growth, mortality rates and expected returns on plan assets. Changes in assumptions and future investment returns could potentially have a material impact on our expenses and related funding requirements. |
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Self-Insurance Policy [Policy Text Block] | Self-Insurance Programs We are self-insured for certain levels of general and vehicle liability, property, workers’ compensation, product recall and health care coverage. The cost of these self-insurance programs is accrued based upon estimated settlements for known and anticipated claims. Any resulting adjustments to previously recorded reserves are reflected in current period earnings. |
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Commitments and Contingencies, Policy [Policy Text Block] | Contingent Liabilities We are subject to lawsuits, investigations and other claims related to the operation of our farms, labor, livestock procurement, securities, environmental, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses and fees. A determination of the amount of accruals and disclosures required, if any, for these contingencies is made after considerable analysis of each individual issue. We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. We disclose contingent liabilities when the risk of loss is at least reasonably possible or probable. Our contingent liabilities contain uncertainties because the eventual outcome will result from future events. Our determination of accruals and any reasonably possible losses in excess of those accruals require estimates and judgments related to future changes in facts and circumstances, interpretations of the law, the amount of damages or fees, and the effectiveness of strategies or other factors beyond our control. If actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. |
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Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition We recognize revenues from product sales upon delivery to customers or when title passes. Revenue is recorded at the invoice price for each product net of estimated returns and sales incentives provided to customers. Sales incentives include various rebate and trade allowance programs with our customers, primarily discounts and rebates based on achievement of specified volume or growth in volume levels. |
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Advertising Costs, Policy [Policy Text Block] | Advertising and Promotional Costs Advertising and promotional costs are expensed as incurred except for certain production costs, which are expensed upon the first airing of the advertisement. Promotional sponsorship costs are expensed as the promotional events occur. Advertising costs totaled $143.1 million, $122.9 million and $120.1 million in fiscal 2013, 2012 and 2011, respectively, and are included in selling, general and administrative expenses. |
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Shipping and Handling Cost, Policy [Policy Text Block] | Shipping and Handling Costs Shipping and handling costs are reported as a component of cost of sales. |
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Research and Development Expense, Policy [Policy Text Block] | Research and Development Costs Research and development costs are expensed as incurred. Research and development costs totaled $80.9 million, $75.9 million and $47.0 million in fiscal 2013, 2012 and 2011, respectively. |
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Earnings Per Share, Policy [Policy Text Block] | Net Income per Share We present dual computations of net income per share. The basic computation is based on weighted average common shares outstanding during the period. The diluted computation reflects the potentially dilutive effect of common stock equivalents, such as stock options and convertible notes, during the period. We excluded stock based awards for approximately 2.1 million, 1.7 million and 1.8 million shares in fiscal 2013, 2012 and 2011, respectively, from the diluted computation because their effect would have been anti-dilutive. |
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Derivatives, Policy [Policy Text Block] | DERIVATIVE FINANCIAL INSTRUMENTS Our meat processing and hog production operations use various raw materials, primarily live hogs, corn and soybean meal, which are actively traded on commodity exchanges. We hedge these commodities when we determine conditions are appropriate to mitigate price risk. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also tends to reduce the risk of loss from adverse changes in raw material prices. We attempt to closely match the commodity contract terms with the hedged item. We also periodically enter into interest rate swaps to hedge exposure to changes in interest rates on certain financial instruments and foreign exchange forward contracts to hedge certain exposures to fluctuating foreign currency rates. We record all derivatives in the balance sheet as either assets or liabilities at fair value. Accounting for changes in the fair value of a derivative depends on whether it qualifies and has been designated as part of a hedging relationship. For derivatives that qualify and have been designated as hedges for accounting purposes, changes in fair value have no net impact on earnings, to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings (commonly referred to as the “hedge accounting” method). For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in current period earnings (commonly referred to as the “mark-to-market” method). We may elect either method of accounting for our derivative portfolio, assuming all the necessary requirements are met. We have in the past availed ourselves of either acceptable method and expect to do so in the future. We believe all of our derivative instruments represent economic hedges against changes in prices and rates, regardless of their designation for accounting purposes. |
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Equity Method Investments, Policy [Policy Text Block] | We record our share of earnings and losses from our equity method investments in (income) loss from equity method investments. Some of these results are reported on a one-month lag which, in our opinion, does not materially impact our consolidated financial statements. Each quarter, we review the carrying value of our investments and consider whether indicators of impairment exist. Examples of impairment indicators include a history or expectation of future operating losses and declines in a quoted share price, among other factors. If an impairment indicator exists, we must evaluate the fair value of our investment to determine if a loss in value, which is other than temporary, has occurred. If we consider any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), then a write-down of the investment to its estimated fair value would be recorded. We have determined that no write-down was necessary for all periods presented. |
VALUATION AND QUALIFYING ACCOUNTS
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VALUATION AND QUALIFYING ACCOUNTS | Schedule II SMITHFIELD FOODS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED APRIL 28, 2013 (in millions)
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property, Plant and Equipment (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | ||||||||||||||||||||||
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Apr. 28, 2013
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Apr. 29, 2012
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Apr. 28, 2013
Land and Land Improvements [Member]
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Apr. 29, 2012
Land and Land Improvements [Member]
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Apr. 28, 2013
Land and Land Improvements [Member]
Minimum [Member]
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Apr. 28, 2013
Land and Land Improvements [Member]
Maximum [Member]
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Apr. 28, 2013
Building and Building Improvements [Member]
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Apr. 29, 2012
Building and Building Improvements [Member]
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Apr. 28, 2013
Building and Building Improvements [Member]
Minimum [Member]
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Apr. 28, 2013
Building and Building Improvements [Member]
Maximum [Member]
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Apr. 28, 2013
Machinery and Equipment [Member]
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Apr. 29, 2012
Machinery and Equipment [Member]
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Apr. 28, 2013
Machinery and Equipment [Member]
Minimum [Member]
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Apr. 28, 2013
Machinery and Equipment [Member]
Maximum [Member]
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Apr. 28, 2013
Breeding and Production Animals [Member]
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Apr. 29, 2012
Breeding and Production Animals [Member]
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Apr. 28, 2013
Breeding and Production Animals [Member]
Minimum [Member]
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Apr. 28, 2013
Breeding and Production Animals [Member]
Maximum [Member]
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Apr. 28, 2013
Computer Equipment [Member]
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Apr. 29, 2012
Computer Equipment [Member]
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Apr. 28, 2013
Computer Equipment [Member]
Minimum [Member]
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Apr. 28, 2013
Computer Equipment [Member]
Maximum [Member]
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Apr. 28, 2013
Property, Plant and Equipment, Other Types [Member]
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Apr. 29, 2012
Property, Plant and Equipment, Other Types [Member]
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Apr. 28, 2013
Property, Plant and Equipment, Other Types [Member]
Minimum [Member]
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Apr. 28, 2013
Property, Plant and Equipment, Other Types [Member]
Maximum [Member]
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Apr. 28, 2013
Construction in Progress [Member]
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Apr. 29, 2012
Construction in Progress [Member]
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Property, Plant and Equipment [Line Items] | ||||||||||||||||||||||||||||
Useful life | 0 years | 20 years | 20 years | 40 years | 5 years | 25 years | 2 years | 2 years | 3 years | 5 years | 3 years | 10 years | ||||||||||||||||
Property, plant and equipment, gross | $ 4,470.1 | $ 4,269.9 | $ 276.1 | $ 268.9 | $ 1,788.6 | $ 1,690.6 | $ 1,862.7 | $ 1,780.6 | $ 186.7 | $ 182.1 | $ 156.1 | $ 148.4 | $ 94.4 | $ 89.1 | $ 105.5 | $ 110.2 | ||||||||||||
Accumulated depreciation | (2,171.7) | (1,992.7) | ||||||||||||||||||||||||||
Property, plant and equipment, net | $ 2,298.4 | $ 2,277.2 |
LEASE OBLIGATIONS, COMMITMENTS AND GUARANTEES Lease Obligations, Commitments and Guarantees (Tables)
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Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | Future rental commitments under non-cancelable operating leases as of April 28, 2013 are as follows:
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Schedule of Future Hog Procurement and Contract Hog Growers Obligations [Table Text Block] | We have purchase commitments with certain livestock producers that obligate us to purchase all the livestock that these producers deliver. Other arrangements obligate us to purchase a fixed amount of livestock. We also use independent farmers and their facilities to raise hogs produced from our breeding stock in exchange for a performance-based service fee payable upon delivery. We estimate the future obligations under these commitments based on available commodity livestock futures prices and internal projections about future hog prices, expected quantities delivered and anticipated performance. Our estimated future obligations under these commitments are as follows:
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REPORTING SEGMENTS Reporting Segments (Tables)
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Segment Reporting Information [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment [Table Text Block] | The following tables present information about the results of operations and the assets of our reportable segments for the fiscal years presented. The information contains certain allocations of expenses that we deem reasonable and appropriate for the evaluation of results of operations. We do not allocate income taxes to segments. Segment assets exclude intersegment account balances as we believe their inclusion would be misleading or not meaningful. We believe all intersegment sales are at prices that approximate market.
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Schedule of Goodwill [Table Text Block] | The following table shows the change in the carrying amount of goodwill by reportable segment:
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Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block] | The following table presents our consolidated sales and long-lived assets attributed to operations by geographic area for the fiscal years ended April 28, 2013, April 29, 2012 and May 1, 2011:
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Pork Segment [Member]
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Segment Reporting Information [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Revenue by Product [Table Text Block] | The following table shows the percentages of Pork segment revenues derived from packaged meats and fresh pork for the fiscal years indicated.
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Hog Production Segment [Member]
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Segment Reporting Information [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Revenue by Product [Table Text Block] | The following table shows the percentages of Hog Production segment revenues derived from hogs sold internally and externally, and other products for the fiscal years indicated.
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International Segment [Member]
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Segment Reporting Information [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Revenue by Product [Table Text Block] | The following table shows the percentages of International segment revenues derived from packaged meats, fresh meats and other products for the fiscal years indicated.
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ACQUISITIONS Assets Acquired (Details) (American Skin Food Group, LLC [Member], USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
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American Skin Food Group, LLC [Member]
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Business Acquisition [Line Items] | |
Cash and cash equivalents | $ 0.2 |
Accounts receivable, net | 2.0 |
Inventories | 0.7 |
Property, plant and equipment, net | 3.4 |
Intangible assets, net | 12.4 |
Goodwill | 16.4 |
Assets acquired | 35.1 |
Accounts payable | 0.5 |
Liabilities assumed | 0.5 |
Noncontrolling interests | 10.4 |
Purchase price | $ 24.2 |
INVESTMENTS Investments (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 28, 2013
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Schedule of Equity Method Investments [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Equity Method Investments [Table Text Block] | Investments consist of the following:
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Per Share Price for Equtiy Method Investment [Table Text Block] | The table below shows CFG's intra-day high share price and Smithfield's carrying value, expressed in euro per share, on various dates relevant to our disclosures during the last 24 months.
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Schedule of (Income) Loss from Equity Method Investments [Table Text Block] | (Income) loss from equity method investments consists of the following:
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Campofrio Food Group [Member]
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Schedule of Equity Method Investments [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Summarized Financial Information for Equity Method Investment [Table Text Block] | The following summarized financial information for CFG is based on CFG's financial statements and translated into U.S. Dollars:
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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Narrative (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | ||||||||||||
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Oct. 28, 2012
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Jan. 29, 2012
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Oct. 30, 2011
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Jul. 31, 2011
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Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Jan. 29, 2012
Missouri Hog Farms [Member]
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Oct. 30, 2011
Missouri Hog Farms [Member]
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Jul. 31, 2011
Missouri Hog Farms [Member]
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Apr. 29, 2012
Portsmouth, Virginia Plant [Member]
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Jan. 29, 2012
Portsmouth, Virginia Plant [Member]
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Oct. 30, 2011
Portsmouth, Virginia Plant [Member]
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Jan. 29, 2012
Campofrio Food Group [Member]
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Apr. 29, 2012
Campofrio Food Group [Member]
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Apr. 29, 2012
Missouri Litigation [Member]
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Jul. 31, 2011
Missouri Litigation [Member]
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Loss on debt extinguishment | $ 120.7 | $ 4.6 | $ 6.4 | $ 1.2 | $ 120.7 | $ 12.2 | $ 92.5 | ||||||||||
Loss Contingency, Loss in Period | (16.8) | 39.0 | |||||||||||||||
Accelerated Depreciation | 0.7 | 3.2 | 4.3 | ||||||||||||||
Restructuring Charges | 1.2 | 1.7 | 1.8 | ||||||||||||||
Professional Fees, Terminated Potential Acquisition | 0.7 | 5.7 | |||||||||||||||
Entity Portion of Equity Method Investment Restructuring Charges | $ 38.7 | $ 38.7 |
DEBT Schedule of Debt Maturities (Details) (USD $)
In Millions, unless otherwise specified |
Apr. 28, 2013
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Apr. 29, 2012
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Debt Instrument [Line Items] | ||
2014 | $ 675.1 | |
2015 | 70.6 | |
2016 | 40.5 | |
2017 | 3.8 | |
2018 | 518.7 | |
Thereafter | 1,170.4 | |
Total debt | $ 2,479.1 | $ 1,937.3 |
SUPPLEMENTAL CASH FLOW INFORMATION Supplemental Cash Flow Information (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Supplemental disclosures of cash flow information: | |||
Interest paid | $ (147.9) | $ (149.6) | $ (223.3) |
Income taxes (paid) refunded, net | $ (3.7) | $ (225.7) | $ 34.8 |
LEASE OBLIGATIONS, COMMITMENTS AND GUARANTEES Schedule of Hog Procurement and Contract Growers Commitments (Details) (Hog Procurement and Contract Grower Payments [Member], USD $)
In Millions, unless otherwise specified |
Apr. 28, 2013
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Hog Procurement and Contract Grower Payments [Member]
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Unrecorded Unconditional Purchase Obligation [Line Items] | |
2014 | $ 1,829.0 |
2015 | 1,325.8 |
2016 | 1,081.7 |
2017 | 929.4 |
2018 | $ 911.4 |
DEBT Schedule of Debt (Details) (USD $)
In Millions, unless otherwise specified |
Apr. 28, 2013
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Apr. 29, 2012
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Debt Instrument [Line Items] | ||
Total debt | $ 2,479.1 | $ 1,937.3 |
Current portion | (675.1) | (62.5) |
Total long-term debt | 1,804.0 | 1,874.8 |
Senior Unsecured Notes, Six Point Six Two Five Percent, Due August 2022 [Member]
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Debt Instrument [Line Items] | ||
Debt Instrument, Unamortized Discount (Premium), Net | (4.7) | 0 |
Total debt | 995.3 | 0 |
Senior Secured Notes, Ten Percent, Due July 2014, Including Discounts [Member]
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Debt Instrument [Line Items] | ||
Debt Instrument, Unamortized Discount (Premium), Net | 0 | (7.0) |
Total debt | 0 | 357.4 |
Senior Secured Notes, Ten Percent, Due July 2014, Including Premiums [Member]
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Debt Instrument [Line Items] | ||
Debt Instrument, Unamortized Discount (Premium), Net | 0 | 4.4 |
Total debt | 0 | 229.4 |
Senior Unsecured Notes, Seven Point Seven Five Percent, Due July 2017 [Member]
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Debt Instrument [Line Items] | ||
Total debt | 500.0 | 500.0 |
Senior Unsecured Convertible Notes, Four Percent, Due June 2013 [Member]
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Debt Instrument [Line Items] | ||
Debt Instrument, Unamortized Discount (Premium), Net | (4.1) | (26.8) |
Total debt | 395.9 | 373.2 |
Senior Unsecured Notes, Seven Point Seven Five Percent, Due May 2013 [Member]
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Debt Instrument [Line Items] | ||
Total debt | 55.0 | 160.0 |
Rabobank Term Loan [Member]
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Debt Instrument [Line Items] | ||
Total debt | 200.0 | 200.0 |
Bank of America Term Loan [Member]
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Debt Instrument [Line Items] | ||
Total debt | 200.0 | 0 |
Various Other Debt [Member]
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Debt Instrument [Line Items] | ||
Total debt | $ 132.9 | $ 117.3 |
VALUATION AND QUALIFYING ACCOUNTS Valuation and Qualifying Accounts (Tables)
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Apr. 28, 2013
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Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Valuation and Qualifying Accounts [Table Text Block] |
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DEBT Convertible Notes (Details) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified |
12 Months Ended | |
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Apr. 28, 2013
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Jul. 31, 2008
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Debt Instrument [Line Items] | ||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 17.6 | |
Senior Unsecured Convertible Notes, Four Percent, Due June 2013 [Member]
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Debt Instrument [Line Items] | ||
Debt Instrument, Face Amount | $ 400,000,000 | |
Debt Instrument, Convertible, Conversion Ratio | 44.082 | |
Debt Instrument, Convertible, Principal Convertable | 1,000 | |
Debt Instrument, Convertible, Conversion Price | $ 22.68 | |
Debt Instrument, Convertible, Nonconvertible Debt Borrowing Rate | 10.20% | |
Debt Instrument, Convertible, Carrying Amount of Equity Component | $ 95,800,000 | |
Purchased Call Option [Member]
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Debt Instrument [Line Items] | ||
Option Indexed to Issuer's Equity, Indexed Shares | 17.6 |
EQUITY Call Spread Transactions (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
1 Months Ended |
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Jul. 31, 2008
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Class of Warrant or Right, Exercise Price of Warrants or Rights | 30.54 |
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 17.6 |
Proceeds from Issuance of Warrants | $ 36.7 |
Purchased Call Option [Member]
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Option Indexed to Issuer's Equity, Indexed Shares | 17.6 |
Option Indexed to Issuer's Equity, Strike Price | 22.68 |
Purchase of Call Options | $ 88.2 |
Senior Unsecured Convertible Notes, Four Percent, Due June 2013 [Member]
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Debt Instrument, Convertible, Conversion Price | $ 22.68 |
EQUITY Stock Held in Trust (Details) (USD $)
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Apr. 28, 2013
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Supplemental Pension Plan [Member]
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Common Stock, Shares Held in Employee Trust, Shares | 2,616,687 |
Common Stock, Shares Held in Employee Trust, Per Share | $ 23.75 |
Director Fee Deferral Program [Member]
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Common Stock, Shares Held in Employee Trust, Shares | 330,180 |
Common Stock, Shares Held in Employee Trust, Per Share | $ 20.17 |
SUBSEQUENT EVENTS
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12 Months Ended |
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Apr. 28, 2013
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Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENTS Definitive Merger Agreement On May 28, 2013, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Shuanghui International Holdings Limited, a corporation formed under the laws of the Cayman Islands (Shuanghui) and Sun Merger Sub, Inc., a Virginia corporation and wholly owned subsidiary of Shuanghui (Merger Sub and, together with Shuanghui, the Parent Parties), pursuant to which Merger Sub will merge with and into the Company (the Merger), with the Company surviving the Merger as a wholly owned subsidiary of Shuanghui. Shuanghui is the majority shareholder of Henan Shuanghui Investment & Development Co., which is China's largest meat processing enterprise and China's largest publicly traded meat products company as measured by market capitalization. Under the terms of the Merger Agreement, which has been unanimously approved by the boards of directors of both companies, Shuanghui will acquire all of the outstanding shares of Smithfield for $34.00 per share in cash. Upon completion of the Merger, all then-outstanding stock-based compensation awards, whether vested or unvested, will be converted into the right to receive cash of $34.00 per share (without interest), less the exercise price of such awards, if any. The Merger Agreement contains certain termination rights for the Company and Shuanghui. Upon termination of the Merger Agreement under specified customary circumstances, the Company will be required to pay Shuanghui a termination fee. If the Merger Agreement is terminated in connection with the Company entering into an alternative acquisition agreement in respect of a superior proposal or making a change of recommendation, or in certain other customary circumstances, the termination fee payable by the Company to Shuanghui will be $175.0 million. Under specified circumstances, if the Company enters into a definitive agreement with a Qualified Pre-Existing Bidder with respect to an alternative acquisition proposal on or before June 27, 2013, the amount of the termination fee will instead be reduced to $75.0 million. The Merger Agreement also provides that Shuanghui will be required to pay the Company a reverse termination fee of $275.0 million (which is not exclusive in the case of a willful breach) if the Merger Agreement is terminated under certain circumstances in connection with a willful breach by Shuanghui, termination primarily caused by the failure to obtain required U.S. or foreign antitrust or other regulatory approvals (other than CFIUS), or termination as a result of the failure by Shuanghui to receive the proceeds of its committed debt financing and consummate the Merger. The Merger will be financed through a combination of cash provided by Shuanghui, rollover of certain existing Company debt, as well as debt financing which has been committed by Morgan Stanley Senior Funding, Inc. and a syndicate of banks. The Merger Agreement does not contain a financing condition. The closing of the Merger is subject to certain conditions, including, among others, approval by our shareholders, the receipt of approval under applicable U.S. and specified foreign antitrust and anti-competition laws, and if review by CFIUS has concluded, the absence of any action by the President of the United States to block or prevent the consummation of the Merger and other customary closing conditions. The Merger is expected to close in the second half of calendar 2013. Kansas City Sausage, LLC In May 2013 (fiscal 2014), we acquired a 50% interest in Kansas City Sausage Company, LLC (KCS), for $35.0 million in cash, subject to a customary post-closing adjustment for differences between working capital at closing and an agreed-upon target. Upon closing, in addition to the cash purchase price, we advanced $10.0 million to the seller in exchange for a promissory note, which is secured by the remaining membership interests in KCS held by the seller. Additionally, we entered into a revolving loan agreement with KCS, under which we agreed to make loans from time to time up to an aggregate principal amount of $20.0 million. The aggregate amount of any obligations incurred under the revolving loan agreement is secured by a first priority security interest in all of the assets of KCS. KCS is a leading U.S.sausage producer and sow processor. We intend to merge KCS's low-cost, efficient operations and high-quality products with our strong brands and sales and marketing team to continue to grow our packaged meats business. The venture will operate in Des Moines, Iowa and Kansas City, Missouri. In Des Moines, the venture will produce premium raw materials for sausage, as well as value-added products, including boneless hams and hides. The Kansas City plant is a modern sausage processing facility in the U.S. and is designed for optimum efficiency to provide retail and foodservice customers with high quality products. With our strong ongoing focus on building our packaged meats business, and with 15% of the U.S. sow population, this joint venture is a logical fit for the Company. It will provide a growth platform in two key packaged meats categories — breakfast sausage and dinner sausage — and will allow us to expand our product offerings to our customers. These categories represent over $4.0 billion in retail and foodservice sales annually. |
REPORTING SEGMENTS Goodwill by Segment (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
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Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Goodwill [Line Items] | |||
Goodwill | $ 782.4 | $ 768.2 | $ 793.3 |
Goodwill, Acquired During Period | 16.4 | ||
Goodwill, Other Changes | (2.2) | (25.1) | |
Pork Segment [Member]
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|||
Goodwill [Line Items] | |||
Goodwill | 231.8 | 215.7 | 216.1 |
Goodwill, Acquired During Period | 16.4 | ||
Goodwill, Other Changes | (0.3) | (0.4) | |
International Segment [Member]
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|||
Goodwill [Line Items] | |||
Goodwill | 130.6 | 132.5 | 157.2 |
Goodwill, Acquired During Period | 0 | ||
Goodwill, Other Changes | (1.9) | (24.7) | |
Hog Production Segment [Member]
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|||
Goodwill [Line Items] | |||
Goodwill | 420.0 | 420.0 | 420.0 |
Goodwill, Acquired During Period | 0 | ||
Goodwill, Other Changes | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Apr. 28, 2013
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated, amounts presented in these notes to our consolidated financial statements are for all fiscal periods included. Certain prior year amounts have been reclassified to conform to current year presentation. Principles of Consolidation The consolidated financial statements include the accounts of all wholly-owned subsidiaries, as well as all majority-owned subsidiaries and other entities for which we have a controlling interest. Entities that are 50% owned or less are accounted for under the equity method when we have the ability to exercise significant influence. We use the cost method of accounting for investments in which our ability to exercise significant influence is limited. All intercompany transactions and accounts have been eliminated. Consolidating the results of operations and financial position of variable interest entities for which we are the primary beneficiary does not have a material effect on sales, net income, or net income per diluted share, or on our financial position for the fiscal periods presented. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations and cash flows in foreign currencies are translated into U.S. dollars using the average exchange rate over the course of the fiscal year. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss and included in other comprehensive income for each period. Gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in selling, general and administrative expenses as incurred. We recorded net gains on foreign currency transactions of $1.1 million in fiscal 2013 and net losses of $7.4 million and $0.4 million in fiscal 2012 and fiscal 2011, respectively. Our Polish operations have different fiscal period end dates. As such, we have elected to consolidate the results of these operations on a one-month lag. We do not believe the impact of reporting the results of these entities on a one-month lag is material to the consolidated financial statements. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S., which require us to make estimates and use assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Our fiscal year consists of 52 or 53 weeks and ends on the Sunday nearest April 30. All fiscal years included consisted of 52 weeks. Cash and Cash Equivalents We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents. The majority of our cash is concentrated in demand deposit accounts or money market funds. The carrying value of cash equivalents approximates market value. Accounts Receivable Accounts receivable are recorded net of the allowance for doubtful accounts. We regularly evaluate the collectibility of our accounts receivable based on a variety of factors, including the length of time the receivables are past due, the financial health of the customer and historical experience. Based on our evaluation, we record reserves to reduce the related receivables to amounts we reasonably believe are collectible. Our reserve for uncollectible accounts receivable was $14.6 million and $16.0 million as of April 28, 2013 and April 29, 2012, respectively. Inventories Inventories consist of the following:
Livestock are generally valued at the lower of first-in, first-out cost or market, adjusted for changes in the fair value of livestock that are hedged. Costs include purchase costs, feed, medications, contract grower fees and other production expenses. Fresh and packaged meats are valued based on USDA and other market prices and adjusted for the cost of further processing. Costs for fresh and packaged meats include meat, labor, supplies and overhead. Average costing is primarily utilized to account for fresh and packaged meats and grains. Manufacturing supplies principally consist of ingredients and packaging materials. Derivative Financial Instruments and Hedging Activities See Note 4—Derivative Financial Instruments for our policy. Property, Plant and Equipment, Net Property, plant and equipment is generally stated at historical cost, which includes the then fair values of assets acquired in business combinations, and depreciated on a straight-line basis over the estimated useful lives of the assets. Assets held under capital leases are classified in property, plant and equipment, net and amortized over the lease term. The amortization of assets held under capital leases is included in depreciation expense. The cost of assets held under capital leases was $34.0 million and $34.0 million at April 28, 2013 and April 29, 2012, respectively. The assets held under capital leases had accumulated amortization of $3.1 million and $1.7 million at April 28, 2013 and April 29, 2012, respectively. Depreciation expense is included in either cost of sales or selling, general and administrative expenses, as appropriate. Depreciation expense totaled $235.3 million, $238.6 million and $227.4 million in fiscal 2013, 2012 and 2011, respectively. Interest is capitalized on property, plant and equipment over the construction period. Total interest capitalized was $4.8 million, $2.8 million and $1.6 million in fiscal 2013, 2012 and 2011, respectively. Property, plant and equipment, net, consists of the following:
Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise. In the evaluation of goodwill for impairment, we may perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is not, no further analysis is required. If it is, a prescribed two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any. The first step in the two-step impairment test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The fair value of a reporting unit is estimated by applying valuation multiples and/or estimating future discounted cash flows. The selection of multiples is dependent upon assumptions regarding future levels of operating performance as well as business trends and prospects, and industry, market and economic conditions. When estimating future discounted cash flows, we consider the assumptions that hypothetical marketplace participants would use in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on an industry-wide average cost of capital or location-specific economic factors. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to have a potential impairment and the second step of the impairment test is not necessary. However, if the carrying amount of a reporting unit exceeds its fair value, the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss to recognize, if any. The second step compares the implied fair value of goodwill with the carrying amount of goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (i.e., the fair value of the reporting unit is allocated to all the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit). If the implied fair value of goodwill exceeds the carrying amount, goodwill is not considered impaired. However, if the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. Based on the results of our annual goodwill impairment tests, as of our testing date, no impairment indicators were noted for all the periods presented. The carrying amount of goodwill includes cumulative impairment losses of $6.0 million as of April 28, 2013 and April 29, 2012. Intangible assets consist of the following:
The fair values of trademarks are calculated using a royalty rate method. Assumptions about royalty rates are based on the rates at which similar brands and trademarks are licensed in the marketplace. If the carrying value of our indefinite-lived intangible assets exceeds their fair value, an impairment loss is recognized in an amount equal to that excess. Intangible assets with finite lives are reviewed for recoverability when indicators of impairment are present using estimated future undiscounted cash flows related to those assets. We have determined that no impairments of our intangible assets existed for any of the periods presented. Amortization expense for intangible assets was $3.1 million, $3.0 million and $3.2 million in fiscal 2013, 2012 and 2011, respectively. As of April 28, 2013, the estimated amortization expense associated with our intangible assets for each of the next five fiscal years is expected to be $3.4 million. Debt Issuance Costs, Premiums and Discounts Debt issuance costs, premiums and discounts are amortized into interest expense over the terms of the related loan agreements using the effective interest method or other methods which approximate the effective interest method. Investments See Note 5—Investments for our policy. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts more likely than not to be realized. The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. We accrue interest and penalties related to unrecognized tax benefits in other liabilities and recognize the related expense in income tax expense. Pension Accounting We recognize the funded status of our defined benefit pension plans in the consolidated balance sheets. We also recognize in other comprehensive income, the net of tax results of the gains or losses and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost. These amounts are adjusted out of accumulated other comprehensive loss as they are subsequently recognized as components of net periodic benefit cost. We measure our pension and other postretirement benefit plan obligations and related plan assets as of the last day of our fiscal year. The measurement of our pension obligations and related costs is dependent on the use of assumptions and estimates. These assumptions include discount rates, salary growth, mortality rates and expected returns on plan assets. Changes in assumptions and future investment returns could potentially have a material impact on our expenses and related funding requirements. Self-Insurance Programs We are self-insured for certain levels of general and vehicle liability, property, workers’ compensation, product recall and health care coverage. The cost of these self-insurance programs is accrued based upon estimated settlements for known and anticipated claims. Any resulting adjustments to previously recorded reserves are reflected in current period earnings. Contingent Liabilities We are subject to lawsuits, investigations and other claims related to the operation of our farms, labor, livestock procurement, securities, environmental, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses and fees. A determination of the amount of accruals and disclosures required, if any, for these contingencies is made after considerable analysis of each individual issue. We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. We disclose contingent liabilities when the risk of loss is at least reasonably possible or probable. Our contingent liabilities contain uncertainties because the eventual outcome will result from future events. Our determination of accruals and any reasonably possible losses in excess of those accruals require estimates and judgments related to future changes in facts and circumstances, interpretations of the law, the amount of damages or fees, and the effectiveness of strategies or other factors beyond our control. If actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. Revenue Recognition We recognize revenues from product sales upon delivery to customers or when title passes. Revenue is recorded at the invoice price for each product net of estimated returns and sales incentives provided to customers. Sales incentives include various rebate and trade allowance programs with our customers, primarily discounts and rebates based on achievement of specified volume or growth in volume levels. Advertising and Promotional Costs Advertising and promotional costs are expensed as incurred except for certain production costs, which are expensed upon the first airing of the advertisement. Promotional sponsorship costs are expensed as the promotional events occur. Advertising costs totaled $143.1 million, $122.9 million and $120.1 million in fiscal 2013, 2012 and 2011, respectively, and are included in selling, general and administrative expenses. Shipping and Handling Costs Shipping and handling costs are reported as a component of cost of sales. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs totaled $80.9 million, $75.9 million and $47.0 million in fiscal 2013, 2012 and 2011, respectively. Net Income per Share We present dual computations of net income per share. The basic computation is based on weighted average common shares outstanding during the period. The diluted computation reflects the potentially dilutive effect of common stock equivalents, such as stock options and convertible notes, during the period. We excluded stock based awards for approximately 2.1 million, 1.7 million and 1.8 million shares in fiscal 2013, 2012 and 2011, respectively, from the diluted computation because their effect would have been anti-dilutive. |
DERIVATIVES FINANCIAL INSTRUMENTS
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVES FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS Our meat processing and hog production operations use various raw materials, primarily live hogs, corn and soybean meal, which are actively traded on commodity exchanges. We hedge these commodities when we determine conditions are appropriate to mitigate price risk. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also tends to reduce the risk of loss from adverse changes in raw material prices. We attempt to closely match the commodity contract terms with the hedged item. We also periodically enter into interest rate swaps to hedge exposure to changes in interest rates on certain financial instruments and foreign exchange forward contracts to hedge certain exposures to fluctuating foreign currency rates. We record all derivatives in the balance sheet as either assets or liabilities at fair value. Accounting for changes in the fair value of a derivative depends on whether it qualifies and has been designated as part of a hedging relationship. For derivatives that qualify and have been designated as hedges for accounting purposes, changes in fair value have no net impact on earnings, to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings (commonly referred to as the “hedge accounting” method). For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in current period earnings (commonly referred to as the “mark-to-market” method). We may elect either method of accounting for our derivative portfolio, assuming all the necessary requirements are met. We have in the past availed ourselves of either acceptable method and expect to do so in the future. We believe all of our derivative instruments represent economic hedges against changes in prices and rates, regardless of their designation for accounting purposes. We do not offset the fair value of derivative instruments with cash collateral held with or received from the same counterparty under a master netting arrangement. As of April 28, 2013, prepaid expenses and other current assets included $75.0 million representing cash on deposit with brokers to cover losses on our open derivative instruments and accrued expenses and other current liabilities included $3.6 million representing cash deposits received from brokers to cover gains on our open derivative instruments. Changes in commodity prices could have a significant impact on cash deposit requirements under our broker and counterparty agreements. Additionally, certain of our derivative contracts contain credit risk related contingent features, which would require us to post additional cash collateral to cover net losses on open derivative instruments if our credit rating was downgraded. As of April 28, 2013, the net liability position of our open derivative instruments that are subject to credit risk related contingent features was not material. We are exposed to losses in the event of nonperformance or nonpayment by counterparties under financial instruments. Although our counterparties primarily consist of financial institutions that are investment grade, there is still a possibility that one or more of these companies could default. However, a majority of our financial instruments are exchange traded futures contracts held with brokers and counterparties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives. Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition. As of April 28, 2013, we had credit exposure of $11.4 million on non-exchange traded derivative contracts, excluding the effects of netting arrangements. As a result of netting arrangements, we had no significant credit exposure as of April 28, 2013. No significant concentrations of credit risk existed as of April 28, 2013. The size and mix of our derivative portfolio varies from time to time based upon our analysis of current and future market conditions. All derivative contracts are recorded in prepaid expenses and other current assets or accrued expenses and other current liabilities within the consolidated balance sheets, as appropriate. The following table presents the fair values of our open derivative financial instruments in the consolidated balance sheets on a gross basis.
Hedge Accounting Method Cash Flow Hedges We enter into derivative instruments, such as futures, swaps and options contracts, to manage our exposure to the variability in expected future cash flows attributable to commodity price risk associated with the forecasted sale of live hogs and fresh pork, and the forecasted purchase of corn, wheat and soybean meal. In addition, we enter into interest rate swaps to manage our exposure to changes in interest rates associated with our variable interest rate debt, and we enter into foreign exchange contracts to manage our exposure to the variability in expected future cash flows attributable to changes in foreign exchange rates associated with the forecasted purchase or sale of assets denominated in foreign currencies. As of April 28, 2013, we had no cash flow hedges for forecasted transactions beyond April 2014. When cash flow hedge accounting is applied, derivative gains or losses are recognized as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Derivative gains and losses, when reclassified into earnings, are recorded in cost of sales for grain contracts, sales for lean hog contracts, interest expense for interest rate contracts and selling, general and administrative expenses for foreign exchange contracts. Gains and losses on derivatives designed to hedge price risk associated with fresh pork sales are recorded in the Hog Production segment. During fiscal 2013, the range of notional volumes associated with open derivative instruments designated in cash flow hedging relationships was as follows:
The following table presents the effects on our consolidated financial statements of pre-tax gains and losses on derivative instruments designated in cash flow hedging relationships for the fiscal years indicated:
For the fiscal periods presented, foreign exchange contracts were determined to be highly effective. We have excluded from the assessment of effectiveness differences between spot and forward rates, which we have determined to be immaterial. During fiscal 2012 and 2011, we discontinued cash flow hedge accounting on certain grain contracts as it became probable that the original forecasted transactions would not transpire. As a result of this change, the table above for fiscal 2012 includes gains of $12.0 million on grain contracts de-designated from hedging relationships that were reclassified from accumulated other comprehensive loss into earnings in fiscal 2012. The related impact of discontinued cash flow hedges in fiscal 2011 was immaterial. As of April 28, 2013, there were deferred net losses of $17.8 million, net of tax of $11.3 million, in accumulated other comprehensive loss. We expect to reclassify $39.0 million ($23.8 million net of tax) of the deferred net gains on closed commodity contracts into earnings in fiscal 2014. We are unable to estimate the unrealized gains or losses to be reclassified into earnings in fiscal 2014 related to open contracts as their values are subject to change. Fair Value Hedges We enter into derivative instruments (primarily futures contracts) that are designed to hedge changes in the fair value of live hog inventories and firm commitments to buy grains. When fair value hedge accounting is applied, derivative gains and losses are recognized in earnings currently along with the change in fair value of the hedged item attributable to the risk being hedged. The gains or losses on the derivative instruments and the offsetting losses or gains on the related hedged items are recorded in cost of sales for commodity contracts. During fiscal 2013, the range of notional volumes associated with open derivative instruments designated in fair value hedging relationships was as follows:
The following table presents the effects on our consolidated statements of income of gains and losses on derivative instruments designated in fair value hedging relationships and the related hedged items for the fiscal years indicated:
We recognized losses of $2.5 million in fiscal 2013, gains of $6.0 million in fiscal 2012 and losses of $24.9 million in fiscal 2011, respectively, on closed commodity derivative contracts as the underlying cash transactions affected earnings. For fair value hedges of hog inventory, we elect to exclude from the assessment of effectiveness differences between the spot and futures prices. These differences are recorded directly into earnings as they occur. These differences resulted in losses of $7.5 million in fiscal 2013 and gains of $5.1 million and $0.2 million in fiscal 2012 and fiscal 2011, respectively. Mark-to-Market Method Derivative instruments that are not designated as a hedge, have been de-designated from a hedging relationship, or do not meet the criteria for hedge accounting are marked-to-market with the unrealized gains and losses together with actual realized gains and losses from closed contracts being recognized in current period earnings. Under the mark-to-market method, gains and losses are recorded in either sales or cost of sales for commodity contracts, and selling, general and administrative expenses for foreign exchange contracts. During fiscal 2013, the range of notional volumes associated with open derivative instruments using the “mark-to-market” method was as follows:
The following table presents the amount of gains (losses) recognized in the consolidated statements of income on derivative instruments using the “mark-to-market” method by type of derivative contract for the fiscal years indicated:
The table above reflects gains and losses from both open and closed contracts including, among other things, gains and losses related to contracts designed to hedge price movements that occur entirely within a fiscal year. The table includes amounts for both realized and unrealized gains and losses. The table is not, therefore, a simple representation of unrealized gains and losses recognized in the income statement during any period presented. |
INCOME TAXES Schedule of Components of Income Tax Expense (Benefit) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
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Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Current income tax expense (benefit): | |||
Federal | $ 39.8 | $ 72.7 | $ 57.6 |
State | 6.1 | 8.4 | 17.2 |
Foreign | 5.5 | 1.1 | 3.1 |
Current Income Tax Expense (Benefit) | 51.4 | 82.2 | 77.9 |
Deferred income tax expense (benefit): | |||
Federal | (2.6) | 82.1 | 128.3 |
State | (10.5) | 11.2 | 24.2 |
Foreign | 7.8 | (3.1) | 5.7 |
Deferred Income Tax Expense (Benefit) | (5.3) | 90.2 | 158.2 |
Total income tax expense (benefit) | $ 46.1 | $ 172.4 | $ 236.1 |
ACQUISITIONS ACQUITIONS
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS | ACQUISITIONS American Skin Food Group, LLC In September 2012 (fiscal 2013), we acquired a 70% controlling interest in American Skin Food Group, LLC (American Skin) for $24.2 million in cash, including post-closing adjustments for differences in American Skin's calendar 2012 earnings and working capital at closing from agreed-upon targets. Located in Burgaw, North Carolina, American Skin manufactures and supplies pork rinds to the snack food industry. By leveraging our coordinated sales and marketing team, we believe American Skin can expand into new markets both domestically and internationally, which could substantially increase current sales of approximately $25 million and net income of approximately $3 million annually over the next five to seven years with minimal additional plant investment. The acquisition of American Skin was accounted for in the Pork segment using the acquisition method of accounting, which requires, among other things, that assets acquired, liabilities assumed and noncontrolling interests in the acquiree be recognized at their fair values as of the acquisition date. The following table summarizes the fair values of the assets acquired, liabilities assumed and noncontrolling interests recognized as of the date of acquisition for American Skin:
Intangible assets acquired include customer relationship assets, contractual rights and trademarks with fair values of $9.7 million, $2.6 million and $0.1 million, respectively. The customer relationship assets and contractual rights will be amortized over useful lives of 15 years and 12 years, respectively. The trademarks are not subject to amortization. Goodwill was recognized to reflect the amount of the enterprise fair value that exceeded the fair value of the identifiable assets acquired and liabilities assumed. The amount of goodwill that is expected to be deductible for tax purposes is $10.5 million. The fair value of the noncontrolling interests was measured based on market multiples for similar public companies and consideration of the terms of the acquisition, which provide the noncontrolling interest holders the right to exercise a put option, which would obligate us to redeem their interests. The redemption amount is based on a fixed multiple of earnings, which is consistent with the formula utilized in determining the purchase price for our 70% interest. |
SUPPLEMENTAL CASH FLOW INFORMATION Supplemental Cash Flow Information (Tables)
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Schedule of Cash Flow, Supplemental Disclosures [Table Text Block] |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies (Tables)
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current [Table Text Block] | Inventories consist of the following:
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Property, Plant and Equipment [Table Text Block] | Property, plant and equipment, net, consists of the following:
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Schedule of Finite-Lived and Indefinite-Lived Intangible Assets [Table Text Block] | Intangible assets consist of the following:
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued Expenses and Other Current Liabilities (Tables)
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Schedule of Accrued Liabilities [Table Text Block] | Accrued expenses and other current liabilities consist of the following:
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LEASE OBLIGATIONS, COMMITMENTS AND GUARANTEES Schedule of Rental Commitments (Details) (USD $)
In Millions, unless otherwise specified |
Apr. 28, 2013
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Operating Leased Assets [Line Items] | |
2014 | $ 41.9 |
2015 | 30.5 |
2016 | 24.3 |
2017 | 17.0 |
2018 | 15.4 |
Thereafter | 37.5 |
Total | $ 166.6 |
RELATED PARTY TRANSACTIONS Narrative (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
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Apr. 28, 2013
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Apr. 29, 2012
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May 01, 2011
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Murphy Family Businesses [Member]
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Related Party Transaction [Line Items] | |||
Related Party Transaction, Purchases from Related Party | $ 51.6 | $ 52.2 | $ 70.4 |
JCT, LLC [Member]
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Related Party Transaction [Line Items] | |||
Related Party Transaction, Purchases from Related Party | 6.2 | 7.9 | 7.8 |
Related Party Transaction, Reimbursements Received | 2.6 | 3.1 | 3.3 |
Hog Production Segment Vice Presidents [Member]
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Related Party Transaction [Line Items] | |||
Related Party Transaction, Purchases from Related Party | 1.5 | 1.7 | 1.9 |
Related Party Transaction, Reimbursements Received | $ 0.2 | $ 0.4 | $ 0.5 |
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