KANSAS CITY, Mo. -- Premium Standard Farms Inc., a leading vertically integrated provider of pork products, has announced results for its fiscal year 2007 third quarter ended December 23, 2006.



Fiscal third quarter results



Net sales for the quarter decreased 7.7 percent to $224.3 million, compared to $242.9 million during the third quarter of fiscal 2006. Net sales for the quarter were negatively impacted by a $22.4 million decrease in total volume, which can be primarily attributed to health-related issues in the company's production segment. However, this decline was slightly offset by an improvement of $2.9 million from lean hog and wholesale pork prices, as well as a $0.9 million increase over the same period last year related to lean hog futures.

Net income for the fiscal third quarter was $2.9 million, or $0.09 per diluted share, compared with net income of $13.8 million, or $0.44 per diluted share, in the same period last year. Net income for the third quarter of fiscal 2007 includes costs related to the proposed merger with Smithfield Foods Inc. of $2.8 million, or $0.09 per diluted shares.



"Despite the strength of current live hog and wholesale pork prices, lingering health issues in our production segment and significantly higher feed costs negatively impacted our operating results," commented John Meyer, CEO and president of Premium Standard Farms. "We continue to proactively address these health concerns with the implementation of a number of programs, including the vaccinations we have discussed in previous quarters from which we have experienced positive results.



"During the third quarter, we increased the number of vaccinations to treat the Porcine Circo Virus (Circo), but will not realize the benefits of these actions in our herds until the fiscal fourth quarter of 2007. We expect to experience improvement in our herd health in the upcoming fourth quarter resulting from the increased vaccinations, but we still expect to produce lower volumes than in the fourth quarter of last year because of health issues.



"Conversely, in our processing segment, we were pleased to realize anticipated improvements in both our sales margins, as well as a 12.7-percent increase in operating income for the quarter. As we look to the future, we continue to work closely with Smithfield Foods and the appropriate regulatory agencies to complete the proposed merger."



Additional comments



The previously noted Milan, Mo., expansion continues to remain on schedule and on budget. This expansion will take the daily maximum processing capacity to 10,000 head per day and enhance plant capacity by 35 percent and total company processing capacity by 15 percent. During the third quarter of fiscal 2007, Premium Standard Farms entered into a supply agreement with a group of independent hog producers for process-verified hogs that will aid the company in reaching its new capacity levels.



On Sept. 18, 2006, Premium Standard Farms and Smithfield Foods announced their plans to merge. Under the terms of the merger, each share of Premium Standard Farms will be converted into the right to receive 0.678 of a share of Smithfield Foods' common stock plus $1.25 in cash. A special meeting of stockholders of Premium Standard Farms is being held on Feb. 23, 2007 to vote to adopt the merger agreement.



Premium Standard Farms 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. Premium Standard Farms is the nation's third 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.



A copy of the company's Form 10-Q for the third quarter of fiscal 2007 will be available on the internet at www.psfarms.com.



SOURCE: Premium Standard Farms via PR Newswire.