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CEO says "difficult operating environment" to blame for earnings slide

Agriculture.com Staff 08/03/2006 @ 7:15am

Premium Standard Farms, Inc., a vertically integrated provider of pork products, today announced its first-quarter results for the period ended June 24, 2006.

Net sales for the quarter totaled $206.2 million, compared to $245.3 million during the first quarter of fiscal 2006. This decrease can be primarily attributed to the 9.6% decline in live hog prices and a 4.6% decline in meat prices, reduced volume in both the production and processing segments, and a decrease in results related to hog hedging futures.

Net income for the first quarter was $7.6 million, or $0.24 per diluted share, compared to net income of $15.4 million, or $0.49 per diluted share, for the first quarter of fiscal 2006. Results for fiscal 2006 included a $21.7 million charge from the early extinguishment of debt, representing an after-tax charge of $0.43 per diluted share.

"Over the last several quarters, the entire protein industry has experienced an increasingly difficult operating environment, which had a negative impact on our results. In April and May, live hog and meat prices declined rapidly as concerns of an oversupply in the entire protein complex loomed. However, these expectations have been tempered as the anticipated surplus did not materialize, which resulted in increases in both live hog and meat prices toward the end of June," said John Meyer, president and chief executive officer of Premium Standard Farms.

"While these macro-economic trends are beyond our control, we have focused our efforts on the factors where we can improve results. We have instituted a number of programs with the goal of increasing productivity and efficiency at our farms and in our processing facilities, as well as improving sales margins," he added. "We experienced a year-over-year decline in both our production and processing volume during the quarter relating primarily to animal health issues. We are already seeing signs of improvement with the health issues that caused the declines in production volume, which we expect to see reflected in our results by the end of fiscal 2007."

Premium Standard Farms, Inc., a vertically integrated provider of pork products, today announced its first-quarter results for the period ended June 24, 2006.

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