SOURCE: Swift & Company

January 04, 2007 11:19 ET

Swift & Company Reports Improved Second-Quarter Financial Results

Net Sales Up 7 Percent to $2.5 Billion; EBITDA Increased to $32 Million From $2 Million on Improved Australia and US Beef Segments

GREELEY, CO -- (MARKET WIRE) -- January 4, 2007 -- Swift & Company, the world's second-largest processor of fresh beef and pork products, today reported net sales of $2.47 billion for its fiscal second quarter ended November 26, 2006, up 6.9 percent from net sales of $2.31 billion in the comparable prior-year period. The Company's net sales increase reflects a 6.3 percent net sales increase in Swift Beef, a 15.9 percent net sales increase in Swift Australia, and a 0.6 percent net sales increase in Swift Pork. Swift Australia net sales benefited from a 1.0 percent increase in the US dollar to Australian dollar exchange rate compared to the prior-year period.

The Company's second-quarter EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $32 million, up from $2 million in the prior-year period. EBITDA improvements in Swift Australia and Swift Beef accounted for the year-over-year increase.

At the end of the second quarter, Swift & Company's borrowing capacity under its $550 million revolving credit facility stood at $266 million. The Company ended the second quarter with $67 million of cash on hand and $818 million of total debt outstanding.

"Our operational initiatives are delivering the kinds of improvements we had planned," said Sam Rovit, Swift & Company's president and chief executive officer. "Our Australian management team was able to capitalize on both improved cattle supplies and continued strong international customer demand. Swift Pork's performance continued in line with historical norms and met our profitability expectations. Finally, we improved the operational and financial performance of Swift Beef versus last year despite challenging market conditions in the fall."

Rovit added, "Operational excellence and financial fitness remain top priorities for the entire Swift team. Multiple initiatives are currently underway to improve our operational effectiveness and cost competitiveness. These initiatives will further assist in our recovery from recent business disruptions caused by the widely reported government raids on our production facilities at the beginning of our third quarter."

Swift Beef

Swift Beef's second-quarter net sales increased 6.3 percent to $1.43 billion compared to $1.34 billion in the prior-year period. Selling price increases of 5.2 percent were accompanied by volume increases of 1.1 percent.

Swift Beef's second-quarter EBITDA improved to a loss of $18 million from a loss of $30 million in the prior-year period. The EBITDA improvement resulted from a net sales increase reflecting the selling price and volume increases noted above, which more than offset higher raw material costs. EBITDA in the current year was also affected by increases in freight and packaging costs that were more than offset by reductions in workers compensation and employee medical costs based on receipt of updated actuarial reports, as well as reductions in management incentive accruals and lower utility costs. Selling, general, and administrative costs were lower year-over-year, principally reflecting reduced professional fees and the previously mentioned reduction in management incentive accruals.

Swift Pork

Swift Pork's second-quarter net sales increased 0.6 percent to $544 million compared to $541 million in the prior-year period. Average selling prices increased 1.4 percent while sales volumes declined by 0.8 percent.

Swift Pork's second-quarter EBITDA remained relatively flat at $26 million compared to the prior-year period. EBITDA results reflect decreased sales volume coupled with increases in transportation and packaging costs that more than offset reductions in workers compensation and employee medical costs based on receipt of updated actuarial reports, as well as reductions in management incentive accruals and lower utility costs. Selling, general, and administrative costs were lower year-over-year, principally reflecting the previously mentioned reduced management incentive accruals that more than offset higher certain one-time professional and consulting fees.

Swift Australia

Swift Australia's second-quarter net sales increased 15.9 percent to $511 million compared to $441 million in the prior-year period. Average selling prices remained nominally flat and sales volumes increased 15.5 percent. Sales prices benefited from a 1.0% increase in the US dollar to Australian dollar exchange rate compared to the prior-year period. Sales volumes increased in both the grass-fed and grain-fed businesses due to increased cattle availability and customer demand, respectively.

Swift Australia's second-quarter EBITDA increased to $25 million from $6 million in the comparable prior-year period. The EBITDA increase primarily resulted from improved gross margins, principally in the grass-fed business, reflecting greater cattle availability at favorable prices coupled with higher sales volumes and nominally flat sales prices.

Supplemental Information

On December 12, 2006, as previously reported in our Form 8-K filed with the Securities and Exchange Commission on December 13, 2006, agents from the US Department of Homeland Security's Immigration and Customs Enforcement ("ICE") division and other law enforcement agencies conducted on-site employee interviews at all of Swift & Company's domestic production facilities except Louisville, Kentucky and Santa Fe Springs, California in connection with an investigation of the immigration status of an unspecified number of Swift's workers. Approximately 1,300 individuals were detained by ICE and removed from Swift's domestic labor force. No civil or criminal charges have been filed by the government against Swift & Company or any of its current or former management employees.

On December 12, 2006, after a six to seven hour suspension of operations due to the employee interview process, Swift resumed production at all facilities but at reduced output levels. Output levels are expected to be below historical levels over the near term. While the Company is still evaluating the financial impact, the preliminary estimate of the one-time impact on Swift's full year ended May 27, 2007 is expected to be approximately $20 million resulting primarily from lost operating efficiency as new employees are retrained, plus up to an additional expected total of $10 million for employee retention and hiring incentives required to restaff the facilities with production employees. The Company does not believe there will be a continuing effect on its business, financial condition, results of operations, and cash flows beyond the current fiscal year.

Conference Call

Swift & Company will hold a conference call to discuss its financial results for the second quarter of FY07 at 9 a.m. MT (11 a.m. ET) on Friday, January 5, 2007. Callers should dial 1-800-479-9001 and enter the passcode 1568641. International callers should dial +1-719-457-2618 and enter the same passcode. Participants should dial in 5 to 10 minutes prior to the scheduled start time.

A replay of the call will be available from 12 noon MT on January 5, 2007, through 12 midnight MT on January 12, 2007. Callers should dial 1-888-203-1112 and enter passcode 1222914. International callers should dial +1-719-457-0820 and enter the same passcode.

About Swift & Company

With more than $9 billion in annual sales, Swift & Company is the world's second-largest processor of fresh beef and pork. Founded in 1855 and headquartered in Greeley, Colorado, Swift processes, prepares, packages, markets and delivers fresh, further-processed and value-added beef and pork products to customers in the United States and international markets. For more information, please visit www.swiftbrands.com.

Information Concerning Forward-Looking Statements

This press release contains certain statements, projections and forecasts regarding Swift & Company's future business plans, financial results, products and performance that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of such words as "may," "will," "should," "expects," "plans," "anticipates" and "believes." There are a number of risks and uncertainties that could cause the actual results to differ materially. Some of these risks and uncertainties include product liability claims and recalls, livestock disease, fluctuating raw material costs and selling prices, changes in consumer preferences, compliance with environmental regulations and labor relations, operating in a competitive environment, and other general economic conditions and other risks described in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the SEC's website. Statements in this press release are based on the information available to the Company as of the date of the release. The Company undertakes no obligation to update the information contained in the press release.

Swift & Company's Form 10-Q, filed with the Securities and Exchange Commission on January 4, 2007, is filed under the parent's name of S&C Holdco 3, Inc., and may be seen at: http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001199114&owner=include

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