PORK Premium Std Farms (MM)

First Half 2006 Highlights: KANSAS CITY, Mo., Nov. 8 /PRNewswire-FirstCall/ -- Premium Standard Farms, Inc. (NASDAQ:PORK) (PSF), a leading vertically integrated provider of pork products, today announced results for its fiscal year 2006 second quarter ended September 24, 2005. Fiscal Second Quarter Results Net income for the fiscal second quarter was $12.2 million, or $0.39 per diluted share, compared to net income of $11.9 million, or $0.38 per diluted share, for the fiscal second quarter of last year. Net sales for the quarter totaled $213.2 million, compared to $218.8 million during the second quarter of fiscal 2005. Net sales were negatively impacted by a decrease in live hog and pork prices. Price declines were expected, and resulted from dampened domestic demand versus last year's strong levels. Increased volumes in the processing and production segments, lower hog production costs and continuing strong export demand offset most of the price declines. "We continued to see strong demand internationally during the quarter, based on the quality and reputation of our products produced from our integrated system. Domestic demand, as expected, has tempered slightly but still remains in line with historical levels," explained John Meyer, CEO of Premium Standard Farms. "Accordingly, hog and pork prices for PSF and the industry were lower compared with the second quarter of 2005, despite being higher than historical levels." Mr. Meyer continued, "We were able to offset the majority of the declining market prices by increasing hog production volume by 7.5 percent for the second quarter and 10.4 percent for the first six months and reducing our cost basis versus last year. Reduced interest expenses and a lower effective tax rate during the quarter contributed to our net income growth." First Half Fiscal 2006 Results Net income in the first six months of fiscal 2006 was $27.6 million, or $0.88 per diluted share, compared to net income of $21.3 million, or $0.69 per diluted share, in the same period last year. Net sales for the first six months of fiscal 2006 were $458.5 million compared to $430.9 million last year. The results for the first six months of fiscal 2006 included a $21.7 million pre-tax charge from the early extinguishment of debt, representing an after-tax charge of $0.43 per diluted share. In the first quarter of fiscal 2006, the Company retired, through a tender offer, $173 million of 9.25% senior notes previously outstanding, with a combination of cash and $157 million of bank revolving loans. Subsequent to the tender offer, $125 million of revolving loans were converted into a 5.9% ten-year bank term loan. Outlook The company believes several trends in the overall industry will positively impact its performance in the second half of fiscal 2006. According to the recently published Quarterly Hogs & Pigs Report from the USDA, hog breeding inventory remains relatively flat, and export demand for pork continues to increase. Feed prices are also expected to remain low in the near future. Strong continuing demand for exports is expected to be a significant contributor to future growth and management believes the company's export sales will continue to grow at rates faster than the industry. Previous industry reports have noted that pork industry exports (in pounds) were expected to grow roughly 28 percent during our first half of fiscal 2006. During that same time period, PSF's exports grew by 54.7 percent. The company believes the quality of its products, coupled with new initiatives focused on the export segment will allow PSF to continue to outgrow the industry in the foreseeable future. Going forward, the company will focus on expanding processing operations and earnings through a combination of organic improvements and strategic acquisitions. In addition, the company is in the process of implementing a variety of sales and marketing initiatives aimed at improving margins in the domestic market. Examples include the introduction of a range of case ready products focused on the Hispanic consumer and increased penetration of the market for antibiotic free (ABF) meat. The company's healthy balance sheet and robust cash flow will provide the flexibility needed to achieve these goals. PSF 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. PSF is the nation's second largest pork producer and sixth largest pork processor, with approximately 4,100 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; outbreaks of disease in our herds; 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 second quarter of fiscal 2006 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 (Loss) 13 and 26 weeks ended September 24, 2005 and September 25, 2004 (In 000's except share and per share data) (Unaudited) 13 Weeks Ended 26 Weeks Ended September 24, September 25, September 24, September 25, 2005 2004 2005 2004 Net Sales $213,231 $218,831 $458,538 $430,966 Cost of goods sold 186,350 188,851 374,590 376,710 Gross profit 26,881 29,980 83,948 54,256 Selling, general and administrative expenses 5,686 5,319 13,119 9,112 Loss on early extinguishment of debt - - 21,707 - Other income (72) (143) (356) (662) Operating income 21,267 24,804 49,478 45,806 Interest expense (income): Interest expense 2,096 5,352 5,291 11,019 Interest income (21) (14) (152) (44) Interest expense, net 2,075 5,338 5,139 10,975 Income before income taxes 19,192 19,466 44,339 34,831 Income tax expense 6,962 7,572 16,737 13,549 Net income $12,230 $11,894 $27,602 $21,282 Unrealized gain on interest rate swap, net of tax 1,822 14 212 54 Comprehensive income $14,052 $11,908 $27,814 $21,336 Earnings per share: Basic $0.40 $0.38 $0.89 $0.69 Diluted $0.39 $0.38 $0.88 $0.69 Weighted average number of common shares outstanding: Basic 30,928,524 30,928,593 30,928,524 30,928,593 Diluted 31,332,313 31,067,134 31,236,245 31,047,288 Dividends declared per share $0.06 $- $0.12 $- DATASOURCE: Premium Standard Farms, Inc. CONTACT: Steve Lightstone, CFO of Premium Standard Farms, Inc., +1-816-472-7675 Web site: http://www.psfarms.com/

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