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Q3 2013 Earnings Call Transcript

Transcript Call Date 03/07/2013

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Smithfield Foods Fiscal 2013 Third Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session with instructions being given at that time. As a reminder, today's conference is being recorded.

I would now like to turn the conference over to your host Ms. Keira Lombardo. Please go ahead.

Keira L. Lombardo - VP, IR: Good morning. Welcome to the Smithfield Foods conference call for the third quarter fiscal 2013. We would like to caution you that in today's call, there may be forward-looking statements within the meaning of federal securities laws. In light of the risks and uncertainties involved, we encourage you to read the forward-looking information section of the Company's 10-K for fiscal year 2012. You can access the 10-K and our press release on our website at smithfieldfoods.com. In addition, non-GAAP amounts maybe discussed on today's call. A non-GAAP reconciliation is available on our website in the Investor section.

On our call today are Larry Pope, President and CEO and Bo Manly, CFO. This is Keira Lombardo, Vice President of IR. Larry will begin our call with a review of our operating results, then Bo will review our financial results. Larry?

C. Larry Pope - President and CEO: Thank you, Keira. Good morning, everyone. We are pleased to report solid results for the third quarter of fiscal 2013 with earnings up $0.58 per share. Our performance in the third quarter underscores success we are continuing to see in Packaged Meats as we continue to execute our plan to transform Smithfield into a more value-added consumer Packaged Meats company. This transformation is providing us with increasingly high quality and more consistent earnings. Fiscal 2013 third quarter earnings were driven by both top and bottom line growth in Packaged Meats and solid contributions from our international operations. This helped to offset lower year-over-year Fresh Pork earnings and losses in our hog production business.

Headlining the quarter is the progress we continue to make in growing our Packaged Meats business. Packaged Meats operating profit increased $8.5 million or 7% year-over-year and volume was up over 5%. Our core brands grew more than 6%.

Year-to-date, profitability in our Packaged Meats business is up over $62 million or 21%. Margins have increased to $0.17 per pound from $0.14 per pound last year. At the same time, volume grew by 4% with broad based gains across the number of key product categories or brands in all key trade channels. In addition, volumes have improved on a year-over-year basis for four consecutive quarters.

In the third quarter we achieved volume both in 9 of our 12 core brands with our Smithfield, Eckrich, Farmland, and Margherita brands up double digits. Packaged Meats sales dollars and volume grew across all the trade channels.

By category, Packaged Meats growth was fuelled by bacon. Our Smithfield bacon, Eckrich dinner sausage and Armour dry sausage all achieved double-digit growth. We achieved market share gains in the bacon, dinner sausage, dry sausage and ham steak categories. We were also very successful in broadening distribution of our core brands in a number of key product categories. These categories include bacon, dinner sausage, deli meats, dry sausage and ham steaks.

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