What changed in this filing

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Item 1. Business

2015-03-25 compared with 2013-06-18 · 100 added, 162 removed, 202 unchanged (56% of the section changed)

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and operating efficiencies of our facilities.

We conduct our operations through four reportable segments:

Pork, Hog Production, International and Corporate, each of which is comprised of a number of subsidiaries, joint ventures and other investments.

A fifth reportable segment, the Other segment, contains the results of our former turkey production operations and our previous 49% interest in Butterball, LLC (Butterball), which were sold in December 2010 (fiscal 2011).

The Pork segment consists mainly of our three wholly-owned U.S.

fresh pork and packaged meats subsidiaries:

The Smithfield Packing Company, Inc.

(Smithfield Packing), Farmland Foods, Inc.

(Farmland Foods) and John Morrell Food Group (John Morrell).

The Hog Production segment consists of our hog production operations located in the U.S.

We conduct our operations through five reportable segments:

Fresh Pork, Packaged Meats, Hog Production, International and Corporate.

The Fresh Pork segment consists of our U.S.

fresh pork operations.

The Packaged Meats segment consists of our U.S.

packaged meats operations.

The Hog Production segment consists of our U.S.

hog production operations.

The International segment is comprised mainly of our meat processing and distribution operations in Poland, Romania and the United Kingdom, our interests in meat processing operations, mainly in Western Europe and Mexico, our hog production operations located in Poland and Romania and our interests in hog production operations in Mexico.

The Corporate segment provides management and administrative services to support our other segments.

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.

At the effective time of the Merger (the Effective Time), each share of the Company's common stock issued and outstanding immediately prior to the Effective Time, other than certain excluded shares, will be converted into the right to receive $34.00 in cash, without interest (the Merger Consideration).

In addition, upon completion of the Merger, all then-outstanding stock-based compensation awards, whether vested or unvested, will be converted into the right to receive the Merger Consideration, less the exercise price of such awards, if any.

The Company's shareholders will be asked to vote on the adoption of the Merger Agreement and the Merger at a special shareholder meeting that will be held on a date to be announced as promptly as reasonably practicable following the customary SEC clearance process.

The closing of the Merger is subject to a condition that the Merger Agreement be adopted by the affirmative vote of the holders of a majority of all of the outstanding shares of the Company's common stock entitled to vote thereon at such meeting (the Company Shareholder Approval).

Consummation of the Merger is also subject to other customary closing conditions including, among other things, the satisfaction (or, in certain cases, waiver) of certain regulatory requirements including the receipt of approval under applicable U.S.

and specified foreign antitrust and anti-competition laws and if review by the Committee on Foreign Investment in the United States (CFIUS) has concluded, the absence of any action by the President of the United States to block or prevent the consummation of the Merger .

Each party's obligation to consummate the Merger also is subject to certain additional conditions that include, among other things, the accuracy of the other party's representations and warranties, and the other party's compliance with its covenants and agreements, contained in the Merger Agreement (in each case subject to certain materiality qualifiers).

The Merger will be financed through a combination of cash provided by Shuanghu i, rollover of certain existing Company debt, as well as debt financing which has been committed by Morgan Stanley Senior Fun ding, Inc.

and a syndicate of banks.

The Merger Agreement does not contain a financing condition.

The Merger Agreement contains representations and warranties customary for transactions of this type.

The Company has agreed to various customary covenants and agreements, including, among others, agreements to conduct its business in all material respects in the ordinary course during the period between the execution of the Merger Agreement and the Effective Time and not to engage in certain kinds of transactions during this period.

Pursuant to the terms of a limited “go-shop” provision in the Merger Agreement, the Company and its subsidiaries and their respective representatives may initiate, solicit and encourage any alternative acquisition proposals from two third parties who provided acquisition proposals to the Company or its representatives during a specified period prior to the date of the Merger Agreement (the Qualified Pre-Existing Bidders), provide nonpublic information to such Qualified Pre-Existing Bidders and participate in discussions and negotiations with such Qualified Pre-Existing Bidders regarding alternative acquisition proposals.

With respect to third parties other than the Qualified Pre-Existing Bidders, the Company is subject to customary “no-shop” restrictions on the ability of the Company to solicit third-party.

Prior to obtaining the Company Shareholder Approval, under specified circumstances our board of directors may change its recommendation in connection with an intervening event that was not known (or the consequences of which were not reasonably foreseen) as of the date of the Merger Agreement, or in connection with an alternative proposal that does not result from a breach of the “no shop” restrictions and that our board of directors determines in good faith would, if consummated, constitute a superior proposal (in which latter case the Company may also terminate the Merger Agreement to enter into such superior proposal).

Before our board of directors may change its recommendation in connection with a superior proposal or intervening event, or terminate the Merger Agreement to accept a superior proposal, the Company must provide Shuanghui with customary match rights.

The Merger Agreement contains certain termination rights for the Company and Shuanghui including, subject to certain limitations, the right of either party to terminate the Merger Agreement if the Merger is not consummated by November 29, 2013.

Upon termination of the Merger Agreement under specified customary circumstances, the Company will be required to pay Shuanghui a termination fee.

The Merger Agreement also provides that Shuanghui will be required to pay the Company a reverse termination fee in certain circumstances if the Merger Agreement is terminated.

Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Additional Matters Affecting Liquidity—Definitive Merger Agreement” of this Annual Report on Form 10-K for additional information regarding termination rights under the Merger Agreement.

Additional information about the Merger Agreement is set forth in our Current Report on Form 8-K filed with the SEC on May 29, 2013.

Strategies for Growth

We are focused on top and bottom line growth and transforming the Company into a more value-added consumer packaged meats company.

Our strategy includes growing our base business, further improving our cost structure and targeting branded and value-added acquisitions.

The fundamental tenets of our organic growth plan include:

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.

In addition to our organic growth strategy, we intend to apply a disciplined approach in acquiring branded and value-added companies while maintaining a conservative balance sheet.

Our strategy is to target modest-sized companies that can be easily integrated into our existing business.

We would expect to finance such acquisitions with a combination of cash generated from our existing businesses and debt.

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.

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 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 our access to 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.

Debt Refinancing

In August 2012 (fiscal 2013), we issued $1.0 billion aggregate principal amount of ten year, 6.625% senior unsecured notes (2022 Notes) at a price equal to 99.5% of their face value.

We used the net proceeds to repurchase $649.4 million of outstanding senior notes coming due in May 2013 and July 2014.

As a result of these repurchases, we recognized losses on debt extinguishment of $120.7 million in the second quarter of fiscal 2013.

We also extended the maturity date of our $200.0 million Rabobank Term Loan (the Rabobank Term Loan) from June 2016 (fiscal 2017) to May 2018 (fiscal 2019).

These activities have significantly improved our debt maturity profile, removed the early maturity trigger on our inventory-based revolving credit facility (the Inventory Revolver), and released the encumbrances on our real estate and fixed assets.

In the fourth quarter of fiscal 2013, we partially exercised the accordion feature of our Second Amended and Restated Credit Agreement and increased the borrowing capacity of the Inventory Revolver from a total of $925.0 million to a total of $1.025 billion .

All other terms and conditions of the Inventory Revolver remain unchanged, including the limitation on the actual amount of credit that is available from time to time under the Inventory Revolver as a result of borrowing base valuations of our inventory, accounts receivable and certain cash balances.

We also executed a new $200.0 million term loan with a scheduled maturity date of February 4, 2014 (the Bank of America Term Loan).

The Bank of America Term Loan bears interest at a rate of LIBOR plus 3.25% per annum or, at our election, a base rate plus 2.25% per annum.

These two financing activities increased our liquidity and provided capital funding at a lower interest rate, which will assist us in retiring upcoming debt maturities in the first quarter of fiscal 2014.

Financial Statements and Supplementary Data-Note 15 — Reportable Segments " for additional information about changes to our reportable segments during the current year.

On September 26, 2013 (the Merger Date), pursuant to the Agreement and Plan of Merger dated May 28, 2013 (the Merger Agreement) with WH Group Limited, formerly Shuanghui International Holdings Limited, a corporation formed under the laws of the Cayman Islands hereinafter referred to as WH Group, the Company merged with Sun Merger Sub, Inc., a Virginia corporation and wholly owned subsidiary of WH Group (Merger Sub), in a transaction hereinafter referred to as the Merger.

As a result of the Merger, the Company survived as a wholly owned subsidiary of WH Group.

The Merger has enabled Smithfield to continue to execute on its strategic priorities while maintaining brand excellence and its commitment to environmental stewardship and animal welfare.

We have established Smithfield as the world's leading vertically integrated pork processor and hog producer with best-in-class operations and outstanding food safety practices.

Operationally, we have become part of an enterprise that shares our belief in global opportunities and our commitment to the highest standards of product safety and quality.

With our shared expertise and leadership, we expect to continue to work on accelerating a global expansion strategy as part of WH Group.

On January 16, 2014, the Company elected to change its fiscal year end from the 52 or 53 week period which previously ended on the Sunday nearest to April 30 to the 52 or 53 week period which ends on the Sunday nearest to December 31.

The change became effective at the end of the period ended December 29, 2013.

Unless otherwise noted, all references to “2014” in this report are to the twelve months ended December 28, 2014 .

DESCRIPTION OF SEGMENTS

The Pork segment consists mainly of three wholly-owned U.S.

fresh pork and packaged meats subsidiaries:

Smithfield Packing, Farmland Foods and John Morrell.

The Pork segment produces a wide variety of fresh pork and packaged meats products in the U.S.

Fresh Pork Segment

The Fresh Pork segment consists of our U.S.

fresh pork operations.

The Fresh Pork segment produces a wide variety of fresh pork products in the U.S.

and markets them nationwide and to numerous foreign markets, including China, Japan, Mexico, Russia and Canada.

The Pork segment currently operates approximately 40 processing plants.

We process hogs at eight plants (five in the Midwest and three in the Southeast), with an aggregate slaughter capacity of approximately 113,000 hogs per day.

In fiscal 2013 , the Pork segment processed approximately 28.5 million hogs.

The Pork segment sold approximately 3.8 billion pounds of fresh pork in fiscal 2013 .

We process hogs at nine plants (six in the Midwest and three in the Southeast), with an aggregate slaughter capacity of approximately 116,200 hogs per day.

In 2014 , the Fresh Pork segment processed 27.9 million hogs.

The Fresh Pork segment sold approximately 3.9 billion pounds of fresh pork in 2014 .

A substantial portion of our fresh pork is sold to retail customers as unprocessed, trimmed cuts such as butts, loins (including roasts and chops), picnics and ribs.

The Pork segment also sold approximately 2.8 billion pounds of packaged meats products in fiscal 2013 .

Our product lines also include leaner fresh pork products.

In 2014 , export sales comprised approximately 23% of the Fresh Pork segment’s volumes and approximately 27% of the segment’s revenues.

Packaged Meats Segment

The Packaged Meats segment consists of our U.S.

packaged meats operations.

The Packaged Meats segment produces a wide variety of packaged meat products in the U.S.

and markets them primarily in the U.S.

The Packaged Meats segment currently operates approximately 33 processing plants.

The Packaged Meats segment sold approximately 2.8 billion pounds of packaged meats products in 2014 .

We produce a wide variety of packaged meats, including smoked and boiled hams, bacon, sausage, hot dogs (pork, beef and chicken), deli and luncheon meats, specialty products such as pepperoni, dry meat products, and ready-to-eat, prepared foods such as pre-cooked entrees and pre-cooked bacon and sausage.

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We also sell a substantial quantity of packaged meats as private-label products.

Our product lines also include leaner fresh pork products as well as lower-fat and lower-salt packaged meats.

Our product lines also include lower-fat and lower-salt packaged meats.

We also market a line of lower-fat, value-priced luncheon meats, smoked sausage and hot dogs, as well as fat-free deli hams and 40% lower-fat bacon.

The following table shows the percentages of Pork segment revenues derived from packaged meats products and fresh pork for the fiscal years indicated.

Packaged meats

Fresh pork (1)

——————————————

Includes by-products and rendering.

In fiscal 2013 , export sales comprised approximately 16% of the Pork segment’s volumes and approximately 14% of the segment’s revenues.

In 2014 , export sales comprised approximately 2.6% of the Packaged Meats segment’s volumes and approximately 3.2% of the segment’s revenues.

Hog Production Segment

As a complement to our Pork segment, we have vertically integrated into hog production and are the world’s largest hog producer.

As a complement to our Fresh Pork and Packaged Meats segments, we are the world’s largest hog producer.

The Hog Production segment consists of our hog production operations located in the U.S.

The Hog Production segment operates numerous hog production facilities with approximately 853,000 sows producing about 16.0 million market hogs annually.

The Hog Production segment operates numerous hog production facilities with approximately 894,000 sows, which produced 14.7 million market hogs in 2014.

The profitability of hog production is directly related to the market price of live hogs and the cost of feed grains such as corn and soybean meal.

The Hog Production segment generates higher profits when hog prices are high and feed grain prices are low, and lower profits (or losses) when hog prices are low and feed grain prices are high.

We believe that the Hog Production segment furthers our strategic initiative of vertical integration and reduces our exposure to fluctuations in profitability historically experienced by the pork processing industry.

In addition, with the importance of food safety to the consumer, our vertically integrated system provides increased traceability from conception of livestock to consumption of the pork product.

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.

The following table shows the percentages of Hog Production segment revenues derived from hogs sold internally and externally and other products for the periods indicated:

Twelve Months Ended

The Transition Period

Twelve Months Ended

December 28, 2014

April 29 - December 29, 2013

April 28, 2013

April 29, 2012

Internal hog sales

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Consists primarily of grains, feed and gains (losses) on derivatives.

We own certain genetic lines of specialized breeding stock which are marketed using the name Smithfield Premium Genetics (SPG).

We own certain genetic lines of breeding stock, under the name Smithfield Premium Genetics (SPG).

The Hog Production segment makes extensive use of these genetic lines, with approximately 894,000 SPG breeding sows.

In addition, we have sublicensed some of these rights to some of our strategic hog production partners.

We believe that the hogs produced by these genetic lines enable us to market highly differentiated pork products.

We believe that the leanness and increased meat yields of these hogs enhance our profitability with respect to both fresh pork and packaged meats.

In fiscal 2013 , we produced approximately 16.0 million hogs from SPG breeding stock.

Hog production operations

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Under multi-year contracts, a farmer provides the initial facility investment, labor and front line management in exchange for a service fee.

In fiscal 2013 , approximately 74% of our market hogs were finished on contract farms.

In 2014 , approximately 76% of our market hogs were finished on contract farms.

International Segment

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Our international meat processing operations produce a wide variety of fresh pork, beef, poultry and packaged meats products, including cooked hams, sausages, hot dogs, bacon and canned meats.

Our noncontrolling interests in international meat processing operations include a 37% interest in the common stock of Campofrío Food Group (CFG), a leading European packaged meats company headquartered in Madrid, Spain, and one of the largest worldwide with annual sales of approximately $2.5 billion .

The following table shows the percentages of International segment revenues derived from packaged meats, fresh meats and other products for the fiscal years indicated.

Our interests in international meat processing operations include a 37% stake in Campofrío Food Group (CFG), a leading European packaged meats company headquartered in Madrid, Spain, and one of the largest worldwide with annual sales of approximately $2.6 billion .

The following table shows the percentages of International segment revenues derived from packaged meats, fresh meats and hog production for the periods indicated:

Twelve Months Ended

The Transition Period

Twelve Months Ended

December 28, 2014

April 29 - December 29, 2013

April 28, 2013

April 29, 2012

Packaged meats

Other products (1)

Fresh meats (1)

Hog production (2)

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Includes external hog sales, feed, feathers, by-products and rendering

Includes feathers, by-products and rendering

Includes external hog and feed sales

The International segment has sales denominated in foreign currencies and, as a result, is subject to certain currency exchange risk.

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We generally purchase corn and soybean meal through forward purchase contracts.

Historically, grain prices have been subject to fluctuations and have escalated in recent years due to increased worldwide demand.

Live hogs are the primary raw materials of the Pork segment and our meat processing operations in the International segment.

Historically, grain prices have been subject to significant fluctuations, particularly in recent years.

Live hogs are the primary raw materials of the Fresh Pork segment.

Historically, hog prices have been subject to substantial fluctuations.

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This tendency is due to lower farrowing performance during the winter months and slower animal growth rates during the hot summer months.

The Pork segment purchased approximately 53% of its U.S.

live hog requirements from the Hog Production segment in fiscal 2013 .

In addition, we have established multi-year agreements with Maxwell Foods, Inc.

and Prestage Farms, Inc., which provide us with a stable supply of high-quality hogs at market-indexed prices.

These producers supplied approximately 12% of hogs processed by the Pork segment in fiscal 2013 .

The Fresh Pork segment purchased approximately 47% of its U.S.

live hog requirements from the Hog Production segment in 2014 .

In addition, we have established multi-year agreements with several suppliers, which provide us with a stable supply of high-quality hogs at market-indexed prices.

We also purchase hogs on a daily basis at our Southeastern and Midwestern processing plants and our company-owned buying stations in the Southeast and Midwest.

Like the Pork segment, live hogs are the primary raw materials of our meat processing operations in the International segment with the primary source of hogs being our hog production operations located in Poland and Romania.

Our meat processing operations in the International segment purchased approximately 68% of its live hog requirements from our hog production operations located in Poland and Romania in fiscal 2013 .

Like the Fresh Pork segment, live hogs are the primary raw material of our meat processing operations in the International segment with the primary source of hogs being our hog production operations located in Poland and Romania.

Our meat processing operations in the International segment purchased approximately 62% of its live hog requirements from our hog production operations located in Poland and Romania in 2014 .

A substantial portion of the fresh meat processed by the Packaged Meats segment is transferred from the Fresh Pork segment.

We also purchase fresh pork from other meat processors to supplement our processing requirements.

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Customers and Marketing

Our fundamental marketing strategy is to provide quality and value to the ultimate consumers of our fresh pork, packaged meats and other meat products.

Our fundamental marketing strategy is to provide quality and value to the ultimate consumers of meat products.

We have a variety of consumer advertising and trade promotion programs designed to build awareness and increase sales distribution and penetration.

We also provide sales incentives for our customers through rebates based on achievement of specified volume and/or growth in volume levels.

We have significant market presence, both domestically and internationally, where we sell our fresh pork, packaged meats and other meat products to national and regional supermarket chains, wholesale distributors, the foodservice industry (fast food, restaurant and hotel chains, hospitals and other institutional customers), export markets and other further processors.

We have significant market presence, both domestically and internationally, where we sell our meat products to national and regional supermarket chains, wholesale distributors, the foodservice industry (fast food, restaurant and hotel chains, hospitals and other institutional customers), export markets and other further processors.

We use both in-house salespersons as well as independent commission brokers to sell our products.

In fiscal 2013 , we sold our products to more than 3,200 customers, none of whom accounted for as much as 10% of consolidated revenues.

In 2014 , we sold our products to more than 3,200 customers, none of whom accounted for as much as 10% of consolidated revenues.

We have no significant or seasonally variable backlog because most customers prefer to order products shortly before shipment and, therefore, do not enter into formal long-term contracts.

Methods of Distribution

We use a combination of private fleets of leased tractor trailers and independent common carriers and owner operators to distribute live hogs, fresh pork, packaged meats and other meat products to our customers, as well as to move raw materials between plants for further processing.

We use a combination of private fleets of leased tractor trailers and independent common carriers and owner operators to distribute live hogs and meat products to our customers, as well as to move raw materials between plants for further processing.

We coordinate deliveries and use backhauling to reduce overall transportation costs.

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The meat processing business is somewhat seasonal in that, traditionally, the periods of higher sales for hams are the holiday seasons such as Christmas, Easter and Thanksgiving, and the periods of higher sales for smoked sausages, hot dogs and luncheon meats are the summer months.

The Pork segment typically builds substantial inventories of hams in anticipation of its seasonal holiday business.

We typically build substantial inventories of hams in anticipation of our seasonal holiday business.

In addition, the Hog Production segment experiences lower farrowing performance during the winter months and slower animal growth rates during the hot summer months resulting in a decrease in hog supplies in the summer and an increase in hog supplies in the fall.

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We conduct continuous research and development activities to develop new products and to improve existing products and processes.

We incurred expenses on company-sponsored research and development activities of $80.9 million , $75.9 million and $47.0 million in fiscal 2013 , 2012 and 2011 , respectively.

We incurred expenses on company-sponsored research and development activities of $75.3 million , $55.1 million , $80.9 million and $75.9 million in 2014 , the eight months ended December 29, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

FINANCIAL INFORMATION ABOUT SEGMENTS

Financial information for each reportable segment, including revenues, operating profit and total assets, is disclosed in Note 15 — Reporting Segments in “Item 8.

Financial information for each reportable segment, including revenues and operating profit, is disclosed in Note 15 — Reportable Segments in “Item 8.

Financial Statements and Supplementary Data.”

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Monitoring under the study began in the spring 2007 and ended in the winter 2010.

EPA made the data available to the public in January 2011 and also issued a Call for Information seeking additional emissions data to ensure it considers the broadest range of available scientific data as it develops improved methodologies for estimating emissions.

EPA will review the data to develop emissions estimating methodologies where site-specific information is unavailable.

In March 2012, EPA made available draft emission estimation methodologies for broilers and swine and dairy feedings operations for public comment.

EPA has not announced when it expects to finalize the methodologies.

In March 2012, EPA made available draft emission estimation methodologies for broilers and swine and dairy feeding operations for public comment.

Soon thereafter, EPA also submitted the draft emission estimation methodologies to EPA’s Science Advisory Board (“SAB”) for review and comment.

In its April 19, 2013 report to EPA, the SAB found significant problems with data used in the study and the EPA’s approach to developing the draft methodologies and recommended that EPA develop a process-based modeling approach to predict air emissions from broiler confinement facilities and swine and dairy lagoons and basins.

EPA has not announced when or how it will respond to the SAB’s findings and recommendations or when it expects to finalize the methodologies.

New regulations governing air emissions from animal agriculture operations are likely to emerge from the monitoring program undertaken pursuant to the consent agreement and order.

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The EPA finalized regulations in calendar year 2010 under the Clean Air Act, which may trigger new source review and permitting requirements for certain sources of GHG emissions.

These rulemakings are all subject to judicial appeals.

There may also be changes in applicable state law pertaining to the regulation of GHGs.

Several states have taken steps to require the reduction of GHGs by certain companies and public utilities, primarily through the planned development of GHG inventories and/or regional GHG cap and trade programs and targeted enforcement.

Beginning in early 2011, when GHG emissions standards for light-duty vehicles took effect, permits issued under the Clean Air Act permitting programs for large stationary sources of air pollution - the Prevention of Significant Deterioration (PSD) and the Title V Operating Permit Programs - must address GHGs.

In April 2012, EPA issued the GHG Tailoring Rule to ensure that only the largest sources of GHGs, those responsible for 70 percent of the GHG pollution from stationary sources, would require air permits.

As in virtually every industry, GHG emissions occur at several points across our operations, including production, transportation and processing.

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There can be no assurance that GHG regulation will not have a material adverse effect on our financial position or results of operations.

In October 2010, the EPA granted a “partial waiver” to a statutory bar under the Clean Air Act prohibiting fuel manufacturers from introducing fuel additives that are not “substantially similar” to those already approved and in use for vehicles of model year (MY) 1975 or later.

The EPA's decision allows fuel manufacturers to increase the ethanol content of gasoline to 15 percent (E15) for use in MY 2007 and newer light-duty motor vehicles, including passenger cars, light-duty trucks, and medium-duty passenger vehicles.

In January 2011, the EPA granted another partial waiver authorizing E15 use in MY 2001-2006 light-duty motor vehicles.

Prior to EPA's decisions, the ethanol content of gasoline in the United States was limited to 10 percent.

Judicial challenges to these rulemakings by a coalition of industry groups were dismissed by the U.S.

Court of Appeals for the D.C.

Circuit on standing grounds.

That ruling is now the subject of a petition to the U.S.

Supreme Court which is currently pending.

These agency actions, along with subsequent evaluations by the EPA, allow the introduction of E15 into commerce and the marketplace by manufacturers.

Although the long-term impact of E15 is currently unknown, studies have shown that expanded corn-based ethanol production has driven up the price of livestock feed and led to commodity-price volatility.

We cannot presently assess the full economic impact of past and future waivers on the meat processing industry or on our operations.

Regulatory and Other Proceedings

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In some instances, litigation ensues.

In March 2006 (fiscal 2006), we entered into a consent decree that settled two citizen lawsuits alleging among other things violations of certain environmental laws.

In March 2006, we entered into a consent decree that settled two citizen lawsuits alleging among other things violations of certain environmental laws.

The consent decree provides, among other things, that our subsidiary, Murphy-Brown LLC, will undertake a series of measures designed to enhance the performance of the swine waste management systems on approximately 244 company-owned farms in North Carolina and thereby reduce the potential for surface water or ground water contamination from these farms.

Murphy-Brown has successfully completed a number of the measures called for in the consent decree and expects to fulfill its remaining consent degree obligations over the next 12 to 24 months, at which time it will move for termination of the decree.

Murphy-Brown has successfully completed a number of the measures called for in the consent decree and expects to fulfill its remaining consent decree obligations over the next 12 to 24 months, at which time it will move for termination of the decree.

Prior to our acquisition of PSF, it had entered into a consent judgment with the State of Missouri and a consent decree with the federal government and a citizens group.

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PSF has successfully completed the measures called for in the state judgment and the state court terminated the judgment in the fall of 2012.

PSF has also completed a number of the measures called for in the federal consent decree, but is unable to predict at this time when it will complete the remaining consent degree obligations or when the consent decree will be terminated.

PSF has also completed a number of the measures called for in the federal consent decree, but is unable to predict at this time when it will complete the remaining consent decree obligations or when the consent decree will be terminated.

Environmental Stewardship

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One of the features of the Agreement reflects our commitment to preserving and enhancing the environment of eastern North Carolina by providing a total of $50.0 million to assist in the preservation of wetlands and other natural areas in eastern North Carolina and to promote similar environmental enhancement activities.

To fulfill our commitment, we made annual contributions of $2.0 million beginning in fiscal 2001 through fiscal 2010.

Due to the losses we were experiencing in our Hog Production segment in fiscal 2010, we entered into an agreement with the Attorney General of North Carolina to defer our annual payments in fiscal 2011 and fiscal 2012.

This agreement does not reduce our $50.0 million commitment.

We re-started our annual $2.0 million payment in fiscal 2013.

We began annual contributions of $2.0 million in fiscal 2001, deferred annual payments in fiscal 2011 and fiscal 2012 and re-started our annual $2.0 million payment in fiscal 2013.

More than a decade ago, Smithfield developed and implemented a comprehensive, systematic animal care management program to monitor and measure the well-being of pigs on company-owned and contract farms.

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Our PVP programs monitor aspects of traceability, country of origin, PQA Plus® adherence on farms, and Transport Quality Assurance status of drivers.

In January 2007 (fiscal 2007), we announced a voluntary, ten-year program to phase out individual gestation stalls at our company-owned sow farms and replace the gestation stalls with group pens.

In January 2007, we announced a voluntary, ten-year program to phase out individual gestation stalls at our company-owned sow farms and replace the gestation stalls with group pens.

We currently estimate the total cost of our transition to group pens to be approximately $360.0 million, including associated maintenance and repairs.

This program represents a significant financial commitment and reflects our desire to be more animal friendly, as well as to address the concerns and needs of our customers.

As of the end of calendar year 2012, we had completed conversions to group housing for over 38% of our sows on company-owned farms.

We will continue the conversion as planned with the objective of completing conversions for all sows on company-owned farms by the end of 2017.

The following table shows the approximate number of our employees and the approximate number of employees covered by collective bargaining agreements or that are members of labor unions in each segment, as of April 28, 2013 :

As of the end of 2014, we had completed conversions to group housing for over 71% of our sows on company-owned farms.

We remain on track to finish conversion to group housing for all sows on company-owned farms by the end of 2017.

Our hog production operations in Poland and Romania completed their conversions to group housing facilities a number of years ago.

In January 2014, we announced the recommendation that all of our contract sow growers join with us in converting their facilities to group housing systems for pregnant sows.

We asked contract sow growers to convert by 2022 and offered a sliding scale of incentives to accelerate that timetable.

Growers who commit to convert to group housing will receive contract extensions upon completion of the conversion.

Employees Covered by Collective Bargaining Agreements (1)

Fresh Pork and Packaged Meats (2)

International

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Includes employees that are members of labor unions.

Approximately 8,570 employees are covered by collective bargaining agreements that expire in fiscal 2014 .

Employees are shared across both segments.

Approximately 1,300 employees are covered by collective bargaining agreements that expire in 2015 .

Collective bargaining agreements covering other employees expire over periods throughout the next several years.

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FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

See Note 15 — Reporting Segments in “Item 8.

See Note 15 — Reportable Segments in “Item 8.

Financial Statements and Supplementary Data” for financial information about geographic areas.

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The information on our website is not part of this annual report.

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are available free of charge through our website as soon as reasonably practicable after filing or furnishing the material to the SEC.

Our annual report on Form 10-K, transition report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are available free of charge through our website as soon as reasonably practicable after filing or furnishing the material to the SEC.

You may read and copy documents we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C.

Please call the SEC at 1-800-SEC-0330 for information on the public reference room.

The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including us) file electronically with the SEC.

The SEC maintains a website that contains transition, annual, quarterly and current reports and other information that issuers and voluntary reporting companies, like us, file electronically with the SEC.

The SEC’s website is www.sec.gov.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business