Fiscal 2006 Year-End Highlights: KANSAS CITY, Mo., May 31
/PRNewswire-FirstCall/ -- Premium Standard Farms, Inc.
(NASDAQ:PORK) (PSF), a leading vertically integrated provider of
pork products, today announced its fourth quarter and year-end
results for the period ended March 25, 2006. Fiscal Fourth Quarter
Results Net sales for the quarter totaled $218.1 million, compared
to $249.8 million during the fourth quarter of fiscal 2005. The
decrease is primarily attributed to a 17.4% decline in live hog
prices and an 11.2% decline in meat prices, which were partially
offset by favorable hedging gains of $11.3 million. Net income for
the fiscal fourth quarter was $11.8 million, or $0.37 per diluted
share, compared to net income of $23.4 million, or $0.75 per
diluted share, for the fiscal fourth quarter of 2005. Net income
for the fourth quarter of fiscal 2006 included favorable
adjustments arising primarily from changes in estimated benefits
from the American Jobs Creation Act and state tax rates, which
reduced our full year income tax rate to 31.4% and increased our
diluted earnings per share by $0.13. "As we had previously
discussed, pork prices have recently been trending downwards to
more historical levels. During the fourth quarter, we experienced a
sharp decline in pork price levels compared to last year, primarily
due to higher overall protein production in the USA. However, this
decline was partially offset by favorable hog hedging," commented
John Meyer, CEO of Premium Standard Farms. "Internationally, demand
remained strong during the fourth quarter of fiscal 2006 as a
result of our superior product offering. We continued to show a
level of growth that exceeds the healthy industry growth in export
sales." Mr. Meyer continued, "While we reported a 4.5% increase in
production volume and a 2.9% increase in processing volume for
fiscal 2006 over last year, we saw a decline in volume during the
fourth quarter in both segments. In addition, margins were lower
than expected in our processing segment over the same period last
year." Fiscal 2006 Year-End Results Net sales for fiscal 2006
decreased $8.1 million to $919.5 million compared to $927.6 million
last year. As expected, the decrease in sales can be attributed to
a 12.1% decline in live hog prices and a 6.6% decline in meat
prices to more historical levels from the highs in fiscal 2005. The
decline in prices of $76.1 million was partially offset by an
increase in volume coupled with a significant gain of $24 million
related to lean hog futures contracts. Net income in fiscal 2006
was $53.1 million, or $1.70 per diluted share, compared to net
income of $67.7 million, or $2.18 per diluted share, during fiscal
2005. Net income for 2006 benefited from an unusually low effective
tax rate of 31.4%, a rate which is expected to increase in fiscal
2007. The results for fiscal 2006 included a $21.7 million pre-tax
charge from the early extinguishment of debt, representing an
after-tax charge of $0.43 per diluted share. In the first quarter
of fiscal 2006, the Company retired, through a tender offer, $173
million of 9.25% senior notes previously outstanding, with a
combination of cash and $157 million of bank revolving loans.
Subsequent to the tender offer, $125 million of revolving loans
were converted into a ten- year bank term loan, with the rate fixed
at 5.9% through an interest rate swap. Outlook As a result of the
increased supply of all meat proteins in the USA, live hog and
wholesale pork prices have continued to decline toward more
historical levels during the final months of fiscal 2006 and into
fiscal 2007, which had been anticipated internally and industry
wide. PSF expects to see fiscal 2007 pork prices lower than the
levels experienced in fiscal 2006. Internationally, demand for
PSF's high quality products and increased utilization at the
Company's Clinton, NC, processing plant both contributed to strong
export volumes to countries such as Japan, Canada, and Mexico. The
Company expects export demand for its products to meet or exceed
export growth for the industry, and also plans to expand its
development efforts in Latin America and China. Domestically, pork
demand has moderated; a trend that is expected to continue in
fiscal 2007. In fiscal 2004 and 2005, the protein industry was
positively impacted by the low carb diet phenomenon, which
translated into significantly higher domestic demand for all
proteins. While this trend has subsided, PSF believes it has had a
noteworthy positive impact on the amount of protein consumers
generally include in their diet. Mr. Meyer noted, "We have always
been, and remain committed to producing high quality products and
increasing productivity in both our production and processing
operations. In fiscal 2007, we will continue to seek out growth
opportunities both organically and through acquisitions, and we
will focus on operational improvements and increasing our further
processing and value-added capabilities." Election of Robert S.
Kopriva as Chairman of the Board The company also announced today
that its Board of Directors has appointed Robert S. Kopriva as
Chairman of the Board. Mr. Kopriva, who has served as a director of
PSF since December 2005, will succeed Michael J. Zimmerman, who
will remain a director. Mr. Zimmerman has relinquished the Chairman
role as a result of his increasing responsibilities as an executive
of ContiGroup and the growing time demands as the Chairman of PSF.
Mr. Meyer remarked, "Michael has done a tremendous job serving as
our Chairman over the last eight years, and on behalf of the Board
and management, we would like to thank him for his significant
contributions. We are pleased that we will continue to benefit from
his vast knowledge and understanding of the protein industry as an
ongoing member of our Board." Mr. Kopriva will assume the Chairman
role as a non-executive and will continue as a member of the
Compensation Committee. Prior to his retirement in June 2005, Mr.
Kopriva was a Senior Vice President of Sara Lee Corporation and
CEO-Sara Lee Foods. He also held a variety of management positions
including President and CEO of Sara Lee's Jimmy Dean Food's
division and President of Sara Lee Foods U.S. - Supply Chain. "We
are pleased that Bob will be expanding his role at the company by
becoming Chairman," concluded Mr. Meyer. "Based on his years of
experience in the food industry, we look forward to benefiting from
his guidance when implementing our future growth strategies. During
the last six months, he has already become an invaluable resource
to PSF, which will undoubtedly increase as he takes a more active
role with the company." About PSF PSF is one of the largest
vertically integrated providers of pork products in the United
States, producing consistent, high quality pork products for the
retail, wholesale, foodservice, export, and further processor
markets. PSF is the nation's second largest pork producer and sixth
largest pork processor, with approximately 4,300 employees working
at farms and processing facilities in Missouri, North Carolina, and
Texas. This news release contains "forward-looking statements"
within the meaning of the federal securities laws. Naturally, all
forward-looking statements involve risk and uncertainty and actual
results or events could be materially different. Although we
believe that our expectations are based on reasonable assumptions,
we can give no assurance that our goals will be achieved. Important
factors that could cause actual results to differ include: economic
conditions generally and in our principal markets; competitive
practices and consolidation in the pork production and processing
industries; the impact of current and future laws, government
regulations and fiscal policies affecting our industry and
operations, including environmental laws and regulations, trade
embargoes and tariffs; domestic and international transportation
disruptions; food safety; the availability of additional capital to
fund future commitments and expansion and the cost and terms of
financing; outbreaks of disease in our herds; feed ingredient
costs; fluctuations in live hog and wholesale pork prices; customer
demands and preferences; and the occurrence of natural disasters
and other occurrences beyond our control. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed
might not occur. A copy of the Company's Form 10-K for fiscal 2006
will be available on the internet at http://www.psfarms.com/ .
Premium Standard Farms, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations and Comprehensive Income
(Loss) 13 weeks and fiscal years ended March 25, 2006 and March 26,
2005 (in 000's except share and per share data) (Unaudited) 13
Weeks Ended Fiscal Year Ended March 25, March 26, March 25, March
26, 2006 2005 2006 2005 Net sales $218,103 $249,845 $919,540
$927,571 Cost of goods sold 198,828 199,643 785,724 774,512 Gross
profit 19,275 50,202 133,816 153,059 Selling, general and
administrative expenses 6,223 10,632 26,674 26,068 Loss on early
extinguishment of debt - - 21,707 - Other income (286) 49 (839)
(826) Operating income 13,338 39,521 86,274 127,817 Interest
expense (income): Interest expense 2,042 4,406 9,421 20,314
Interest income (278) (79) (521) (159) Interest expense, net 1,764
4,327 8,900 20,155 Income before income taxes 11,574 35,194 77,374
107,662 Income tax expense (benefit) (180) 11,815 24,264 40,004 Net
income $11,754 $23,379 $53,110 $67,658 Unrealized gain on interest
rate swap, net of tax 1,335 - 2,748 54 Comprehensive income $13,089
$23,379 $55,858 $67,712 Earnings per share: Basic $0.38 $0.76 $1.71
$2.19 Diluted $0.37 $0.75 $1.70 $2.18 Weighted average number of
common shares outstanding: Basic 31,227,554 30,928,593 31,038,044
30,928,593 Diluted 31,485,398 31,142,884 31,324,679 31,088,489
Dividends declared per share $0.06 $- $0.24 $- DATASOURCE: Premium
Standard Farms, Inc. CONTACT: Investor, Steve Lightstone, CFO of
Premium Standard Farms, Inc., +1-816-472-7675 Web site:
http://www.psfarms.com/
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