UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission file number 333-100717-06

S&C Holdco 3, Inc.

(970) 506-8000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     There is no market for the Registrant’s common stock. As of April 1, 2004, 1,000 shares of the Registrant’s common stock were outstanding.

QUARTERLY REPORT ON FORM 10-Q
February 22, 2004

TABLE OF CONTENTS

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S&C HOLDCO 3, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

The accompanying notes are an integral part of these financial statements.

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S&C HOLDCO 3, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
(in thousands)
(unaudited)

The accompanying notes are an integral part of these financial statements.

4

S&C HOLDCO 3, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

The accompanying notes are an integral part of these financial statements.

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S&C HOLDCO 3, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

     S&C Holdco 3, Inc. (“Swift Holdings”), is a Delaware corporation which owns 100% of the issued and outstanding capital stock of Swift & Company (“Swift Operating”). The operations of Swift Operating and its subsidiaries constitute the operations of Swift Holdings under accounting principles generally accepted in the United States of America.

     Swift Operating is one of the leading beef and pork processing companies in the world. Swift Operating processes, prepares, packages and delivers fresh, further processed and value-added beef and pork products for sale to customers in the United States and international markets. Swift Operating also provides services to its customers designed to help them develop more sophisticated and profitable sales programs. Swift Operating sells its meat products to customers in the foodservice, international, further processor and retail distribution channels. Swift Operating also produces and sells by-products that are derived from its meat processing operations and variety meats to customers in various industries.

     Swift Operating conducts its domestic beef and pork processing businesses through Swift Beef Company (“Swift Beef”) and Swift Pork Company (“Swift Pork”) and its Australian beef business through Australia Meat Holdings Pty. Ltd. (“Swift Australia”). Swift Operating operates six beef processing facilities, three pork processing facilities, one lamb processing facility and one value-added facility in the United States and four beef processing facilities and four feed lots in Australia. Swift Operating’s facilities are strategically located to access raw materials in a cost-effective manner and to service our global customer base.

     These statements should be read in conjunction with the audited consolidated financial statements and related notes, which are included in the Swift Holdings Annual Report on Form 10-K. The interim consolidated financial information furnished herein is unaudited and reflects all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations, and cash flows for the periods presented.

     On September 19, 2002, HMTF Rawhide, L.P. (the “Purchaser”) acquired a 54% interest in the United States beef, pork and lamb processing business and the Australian beef business of ConAgra Foods Inc. (the “Transaction”) excluding (i) ConAgra Beef Company’s cattle feeding operations (the “domestic cattle feeding operations”) and (ii) Weld Insurance Company, Inc., Monfort Finance Company, Inc., and Monfort Construction Company. Subsequent to the Transaction, the Purchaser retained approximately 54%, ConAgra Foods owns approximately 45%, and management of Swift Foods owns approximately 1% of Swift Foods Company. Swift Foods Company (“Swift Foods”) owns 100% of the outstanding capital stock of S&C Holdco 2, Inc., which in turn owns 100% of the outstanding common stock of Swift Holdings, which in turn owns 100% of the outstanding common stock of Swift Operating. The entities that were historically operated by ConAgra Foods as an integrated business, which include the domestic cattle feeding operations and other assets and insignificant businesses that were not acquired and liabilities that were not assumed in the Transaction, are referred to as the “ConAgra Red Meat Business” or the “Predecessor Entity”. Those entities and operations within the ConAgra Red Meat Business that were actually acquired in the Transaction and which are being operated by Swift Operating and its subsidiaries are referred to as the “Acquired Business” or “Successor.”

     Accounting principles generally accepted in the United States of America require the ConAgra Red Meat Business’ operating results prior to the Transaction to be reported as the results of the Predecessor Entity for periods prior to September 19, 2002 in the historical financial statements. Swift Operating’s operating results subsequent to the Transaction are presented as the Successor’s results in the financial statements and include the thirteen weeks and 158 days ended February 23, 2003 and the thirteen and thirty-nine weeks ended February 22, 2004.

     The results of operations for any quarter or a partial fiscal year period or for the periods presented for the Predecessor Entity or Successor are not necessarily indicative of the results to be expected for other periods or the full fiscal year. Certain prior year amounts have been reclassified in order to conform to the current year presentation.

   Use of Estimates

     The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, using management’s best estimates and judgments where appropriate. These estimates and judgments affect

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the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. During the thirteen weeks ended February 22, 2004, the Company reduced its year-to-date management incentive accrual based on the Company’s third quarter performance. Actual results could differ materially from these estimates and judgments.

   Reclassifications

     Certain prior year amounts have been reclassified to conform to current year presentations.

   Recently Issued Accounting Pronouncements

     In May 2003, the Emerging Issues Task Force (“EITF”) published EITF Issue No. 01-08, Determining Whether an Arrangement Is a Lease. EITF Issue No. 01-08 addresses how to determine whether an arrangement contains a lease that is within the scope of Statement of Financial Accounting Standards (“SFAS”) No. 13, Accounting for Leases. EITF Issue No. 01-08 should be applied to (a) arrangements agreed to or committed to, if earlier, after the beginning of an entity’s next reporting period beginning after May 28, 2003, (b) arrangements modified after the beginning of an entity’s next reporting period beginning after May 28, 2003, and (c) arrangements acquired in business combinations initiated after the beginning of an entity’s next reporting period beginning after May 28, 2003. This issue did not have a material impact on Swift Operating’s consolidated financial statements or disclosures.

     In March 2003, the EITF published Issue No. 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor. EITF Issue No. 02-16 addresses the accounting by a vendor for consideration given to a customer, including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller. The Issue provides accounting guidance on how a vendor should characterize consideration given to a customer, and when to recognize and how to measure that consideration in its income statement. Swift Operating has adopted the guidance in this Issue as it applies to its vendor relationships. In November 2003, the EITF published Issue No. 03-10, Application of Issue No. 02-16 by Resellers to Sales Incentives Offered Consumers by Manufacturers, which further clarifies Issue No. 02-16. The application of this Issue did not have a material impact on Swift Operating’s consolidated financial statements or disclosures.

     In January 2003, FIN No. 46, Consolidation of Variable Interest Entities, (FIN 46) was issued. The interpretation provides guidance on consolidating variable interest entities. In November 2003, the Financial Accounting Standards Board (“FASB”) approved a partial deferral of FIN 46 and proposed various other amendments to FIN 46. In December 2003, the FASB issued a revision of the Interpretation (“the Revised Interpretation 46”). Revised Interpretation 46 codifies both the proposed modifications and other decisions previously issued through certain FASB Staff Positions and supercedes the original Interpretation to include: (1) deferring the effective date of the Interpretation’s provisions for certain variable interests, (2) providing additional scope exceptions for certain other variable interests, (3) clarifying the impact of troubled debt restructurings on the requirement to reconsider whether an entity is a VIE, and (4) revising Appendix B of the original Interpretation to provide additional guidance on what constitutes a variable interest. The revised guidelines of the interpretation apply immediately to variable interests in variable interest entities created after December 31, 2003 and will become applicable for the Company in the fourth quarter of fiscal year 2005 for variable interest entities created before December 31, 2003. The Company believes it is reasonably possible that the domestic cattle feeding business with which the Company has a Live Cattle Supply Agreement (see Note 4), could be deemed a variable interest entity under the recently revised rules. As discussed in Note 4, the Company acquires all of the live cattle production of the domestic cattle feeding business. This business has total assets of approximately $325 million, of which approximately $250 million represents inventory, primarily cattle and historically generates net income of less than $1.0 million. These activities are financed with a revolving credit agreement between the domestic cattle feeding business and ConAgra Foods. The Company’s maximum exposure to loss, if any, is not expected to be material. The Company believes its full adoption in fiscal year 2005 will not have a material impact on its financial position or results of operations.

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   Inventories

     The components of inventories, net of reserves, are as follows (in thousands):

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   Property, Plant and Equipment

     Property, plant and equipment are comprised of the following (in thousands):

   Goodwill and Other Intangible Assets

     Following is a rollforward of goodwill by segment for the thirty-nine weeks ended February 22, 2004 (in thousands):

     Other identifiable intangible assets as of May 25, 2003 and February 22, 2004 are as follows (in thousands):

For the 115 days ended September 18, 2002, the 158 days ended February 23, 2003 and the thirteen and thirty-nine weeks ended February 22, 2004, Swift Operating recognized $0.2 million, $0.2 million, $1.4 million and $4.2 million of amortization expense, respectively.

     Based on amortizing assets recognized in Swift Operating’s balance sheet as of February 22, 2004, amortization expense for each of the next five fiscal years is estimated as follows (in thousands):

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   SFAS 141 Pro Forma Information

     The unaudited pro forma information presented below (in thousands) assumes the Transaction took place at the beginning of the period presented and includes the effect of amortization of identified intangibles and Transaction costs from that date. The period presented is comprised of the financial results of the Predecessor Entity after deducting the results of the businesses not acquired for the 115 day period from May 27, 2002 through September 18, 2002 plus the financial results of the Acquired Business for the 158 day period from September 19, 2002 through February 23, 2003. This information is presented under the provisions of SFAS No. 141, Business Combinations, for informational purposes only and is not necessarily indicative of the results of future operations or results that would have been achieved had the Transaction taken place at the beginning of the period presented.

   Overdraft Balances

     The majority of Swift Holding’s bank accounts are zero balance accounts where cash needs are funded as checks are presented for payment by the holder. Checks issued pending clearance that result in overdraft balances for accounting purposes are included in the trade accounts payable balance, and the change in the related balance is reflected in financing activities on the statements of cash flows, if material. As of May 25, 2003 and February 22, 2004, bank overdrafts included in trade accounts payable were $120.0 million and $97.0 million, respectively. As of May 25, 2003 and February 22, 2004 the Company had zero borrowings on its revolving line of credit and these checks were funded with normal operating cash flows.

   Foreign Currency Translation

     For foreign operations, the local currency is the functional currency. Translation into U.S. dollars is performed for assets and liabilities at the exchange rates as of the balance sheet date. Income and expense accounts are translated at average exchange rates for the period. Adjustments resulting from the translation are reflected as a separate component of other comprehensive income. Translation gains and losses on U.S. dollar denominated revolving intercompany borrowings between the Australian subsidiaries and the U.S. parent are recorded in earnings. Translation gains and losses on U.S. dollar denominated intercompany borrowings between the Australian subsidiary and the U.S. parent, which are deemed to be part of the investment in the subsidiary, are recorded in other comprehensive income.

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   Comprehensive Income

     The components of comprehensive income for the periods indicated below are as follows (in thousands):

     The above derivative adjustments are net of tax of $0 million, $0 million, $0.5 million and $1.0 million for the thirteen weeks and 158 days ended February 23, 2003 and the thirteen and thirty-nine weeks ended February 22, 2004, respectively. The above foreign currency translation adjustments are net of tax of $0 million, $0 million, $0 million and $0.3 million for the thirteen weeks and 158 days ended February 23, 2003 and the thirteen and thirty-nine weeks ended February 22, 2004, respectively.

   Stock-Based Compensation

     Swift Operating accounts for the Swift Foods stock-based compensation plan under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based compensation cost related to stock options is reflected in net income, as all options granted have an exercise price equal to or above the market value of the underlying common stock of Swift Foods on the date of grant. If Swift Operating had elected to recognize compensation cost based on the fair value of the stock options at grant date as allowed by SFAS No. 123, Accounting for Stock-Based Compensation, compensation expense, net of income tax, of approximately $76 thousand and $144 thousand would have been recorded for the thirteen and thirty-nine weeks ended February 22, 2004, respectively.

     Had compensation expense been recorded in accordance with SFAS No. 123, net income would have been as follows (in thousands):

NOTE 2. DERIVATIVE FINANCIAL INSTRUMENTS

     Swift Operating is exposed to market risk, such as changes in commodity prices, foreign currency exchange rates and interest rate risk. To manage volatility associated with these exposures, Swift Operating may enter into various derivative transactions pursuant to established policies. Derivatives that qualify and are designated for hedge accounting under the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, are measured at fair value and reported as a component of other comprehensive income and reclassified into earnings in the same period in which the hedged transaction affects earnings. Hedges that do not qualify, or are not designated for hedge accounting, are measured at fair value and the gain or loss is recognized currently into earnings. Gains and losses from energy and livestock derivatives are recognized in the statement of earnings as a component of cost of goods sold or as a component of other comprehensive income upon change in fair value. Gains and losses from foreign currency derivatives are recognized in the statement of earnings as a component of net sales or as a component of other c