PORK Premium Std Farms (MM)

KANSAS CITY, Mo., Aug. 3 /PRNewswire-FirstCall/ -- Premium Standard Farms, Inc. (NASDAQ:PORK), a leading vertically integrated provider of pork products, today announced its first quarter results for the period ended June 24, 2006. Fiscal First Quarter Results 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," commented 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." Mr. Meyer continued, "We experienced a year-over-year decline in both our production and processing volume during the quarter relating primarily to animal health issues. We continue to make enhancements to our processes and further improve animal health at our hog production facilities. 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." Outlook The Company recently announced several organizational changes that will intensify its focus on operational excellence, sales and margin growth, and business development. We believe these ongoing changes position Premium Standard Farms for long-term success. In addition to the appointments of Calvin Held to Vice President of Process Improvement and Blake Day to Vice President of Business Development, Premium Standard Farms has added and filled a number of key positions in both the food service and retail sales segments designed to improve upon the company's sales process and margins. The company's export business was softer in the first quarter of 2007 than in previous quarters, particularly compared to the first quarter of last year when export sales increased 72%. The softness Premium Standard Farms experienced was in the first two months of the quarter, as June showed a marked improvement. While the company does not expect to produce export growth levels similar to those in fiscal 2006, the Company does expect solid export growth for the year. Domestically, demand was steady in the first quarter. Mr. Meyer concluded, "In addition to striving for operational excellence, we remain committed to positioning Premium Standard Farms for long-term growth. We continue to identify and pursue both external and organic growth opportunities that will complement our Milan, MO plant expansion, which is progressing as planned." About Premium Standard Farms 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 second 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. This news release contains "forward-looking statements" within the meaning of the federal securities laws. Naturally, all forward-looking statements involve risk and uncertainty and actual results or events could be materially different. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our goals will be achieved. Important factors that could cause actual results to differ include: economic conditions generally and in our principal markets; competitive practices and consolidation in the pork production and processing industries; the impact of current and future laws, government regulations and fiscal policies affecting our industry and operations, including environmental laws and regulations, trade embargoes and tariffs; domestic and international transportation disruptions; food safety; the availability of additional capital to fund future commitments and expansion and the cost and terms of financing; the extent to which we are able to manage animal health issues; feed ingredient costs; fluctuations in live hog and wholesale pork prices; customer demands and preferences; and the occurrence of natural disasters and other occurrences beyond our control. In light of these risks, uncertainties and assumptions, the forward-looking events discussed might not occur. A copy of the Company's Form 10-Q for the first quarter of fiscal 2007 will be available on the internet at http://www.psfarms.com/ . Premium Standard Farms, Inc. and Subsidiaries Condensed Consolidated Statements of Operations and Comprehensive Income 13 weeks ended June 24, 2006 and June 25, 2005 (in 000's except share and per share data) (Unaudited) 13 Weeks Ended June 24, June 25, 2006 2005 Net sales $206,158 $245,307 Cost of goods sold 187,277 188,240 Gross profit 18,881 57,067 Selling, general and administrative expenses 6,573 7,433 Loss on early extinguishment of debt - 21,707 Other income (215) (283) Operating income 12,523 28,210 Interest expense (income): Interest expense 1,945 3,194 Interest income (387) (130) Interest expense, net 1,558 3,064 Income before income taxes 10,965 25,146 Income tax expense 3,376 9,774 Net income $7,589 $15,372 Unrealized gain (loss) on interest rate swap, net of tax 2,705 (1,610) Comprehensive income $10,294 $13,762 Earnings per share: Basic $0.24 $0.50 Diluted $0.24 $0.49 Weighted average number of common shares outstanding: Basic 31,592,646 30,928,524 Diluted 31,817,998 31,078,513 Dividends declared per share $0.06 $0.06 DATASOURCE: Premium Standard Farms, Inc. CONTACT: Investor contact, Steve Lightstone, CFO of Premium Standard Farms, Inc., +1-816-472-7675 Web site: http://www.psfarms.com/

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