UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

or

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 ¨

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

     There is no market for the Registrant’s common stock. As of January 7, 2005, 1,000 shares of the Registrant’s common stock were outstanding.

QUARTERLY REPORT ON FORM 10-Q
November 28, 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
CONSOLIDATED 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
CONSOLIDATED 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 financial 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 presentation of the financial position, results of operations, and cash flows for the periods presented.

     The results of operations for any quarter or a partial fiscal year period or for the periods presented are not necessarily indicative of the results to be expected for other periods or the full fiscal year.

     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 owned approximately 54% of Swift Foods Company (“Swift Foods”), ConAgra Foods owned approximately 45% and management of Swift Foods owned approximately 1%. 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. In a related transaction, a subsidiary of Swift Foods also acquired all of the common stock of the domestic cattle feeding operations, which are not part of the business of Swift Holdings and its subsidiaries.

     On July 30, 2004, the Purchaser gave notice of its exercise of the right to purchase all of the remaining common stock of Swift Foods held by ConAgra Foods and its affiliates. The purchase of such stock was completed on September 23, 2004 (the “Call Option”) for a purchase price of approximately $200 million including fees and direct costs of the transaction and was funded by a credit facility obtained by a subsidiary of the Purchaser. Generally Accepted Accounting Principles (“GAAP”) generally provides for the application of “push down accounting” in situations where the ownership of an entity has changed, meaning that the post-transaction financial statements of the acquired entity reflect a new basis of accounting. The accompanying financial statements of Swift Holdings do not reflect a new basis of accounting pursuant to Staff Accounting Bulletin (“SAB”) No. 54 (“SAB 54”). The guidance in SAB 54 allows the post-Call Option financial statements to continue under the historical basis of accounting because of the existence of significant outstanding public debt at the time of the Call Option.

     Swift Holdings is currently evaluating the impact of electing to file consolidated tax returns in Australia. A possible benefit of the election is a step-up in tax assets. The impact of the election will be incorporated in the financial statements when a final determination is made.

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  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 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. Actual results could differ materially from these estimates and judgments. During the thirteen weeks ended November 28, 2004 Swift Operating reduced certain labor related accruals based on Swift Operating’s second quarter performance. Workers’ compensation and medical accruals were also reduced by $5.5 million in the thirteen weeks ended November 28, 2004 based on updated actuarial trends and analysis.

  Reclassifications

     Certain prior year amounts have been reclassified to conform to the current period presentation.

  Recently Issued Accounting Pronouncements

     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 variable interest entity, 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 Swift Holdings in the fourth quarter of fiscal year 2005 for variable interest entities created before December 31, 2003. Swift Holdings believes it is reasonably possible that the domestic cattle feeding operations with which Swift Beef had a transitional live cattle supply agreement (see Note 4) could be deemed a variable interest entity under the recently revised rules. As discussed in Note 4, Swift Beef purchased at fair market value substantially all of the live cattle production of the domestic cattle feeding operations through December 31, 2004. This business has total assets of approximately $350 million, of which approximately $300 million represents inventory, primarily cattle, and has historically generated net income of less than $1.0 million.

     On September 24, 2004 the common stock of Monfort Finance Company, Inc. (“Monfort”), the entity owning the domestic cattle feeding operations was tendered to ConAgra Foods in full settlement of, and release from, all outstanding liabilities under Monfort’s term loan and revolving credit agreements, and the common stock of Monfort ceased to be an investment of Swift Foods. The settlement included an agreement to: 1) continue the cattle supply to Swift Beef until all of the remaining cattle inventory of the feedlots has finished and delivered to Swift Beef’s processing facilities and 2) provided for the continuation of certain administrative and information technology services through December 31, 2004 to enable the domestic cattle feeding operations (which occupied a portion of Swift Operating’s Greeley, Colorado corporate headquarters) to transition itself to ConAgra Foods’ computer and other support systems. Swift Beef believes that sufficient supplies of cattle at market prices exist to meet its needs in 2005 and beyond.

     In March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance on other-than-temporary impairment models for marketable debt and equity securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations, and non-marketable equity securities accounted for under the cost method. The EITF developed a basic three-step model to evaluate whether an investment is other-than-temporarily impaired. On September 30, 2004, the FASB approved the issuance of FASB Staff Position (FSP) EITF 03-1-1, which delays the effective date until additional guidance is issued for the application of the recognition and measurement provisions of EITF 03-1 to investments in securities that are impaired. Swift Holdings does not expect the adoption of EITF 03-1 to have a material effect on its results of operations or financial condition.

     On December 16, 2004, the FASB issued SFAS 123R, Share-Based Payment — An Amendment of FASB Statement No. 123 and 95. The Statement addresses the accounting for transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. Companies will be required to recognize an expense for compensation cost related to share-based payment arrangements including

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stock options and employee stock purchase plans. The new rules will be effective for periods beginning after June 15, 2005. Swift Holdings is currently evaluating option valuation methodologies and assumptions, and the transition alternatives permitted by SFAS 123R. Current estimates of option values using the Black-Scholes method may not be indicative of results from valuation methodologies upon Swift Holdings adoption of SFAS 123R in its second quarter of fiscal 2006.

     In November 2004, the FASB issued SFAS No. 151, Inventory Costs — an Amendment of ARB No. 43. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and spoilage, and requires that these items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005, with earlier application permitted. Swift Holdings does not expect the adoption of SFAS No. 151 to have a material impact on its financial position, results of operations or cash flows.

  Income Taxes

     On October 22, 2004, the American Jobs Creation Act (“AJCA”) was signed into law. The AJCA includes three provisions that may impact Swift Holdings’ effective tax rate. The first provision provides a deduction for 85% of certain foreign earnings that are repatriated, as defined in the AJCA, at an effective tax cost of 5.25% on any such repatriated foreign earnings. The second provision allows manufacturing concerns to take a new deduction; subject to limitation, equal to a portion of its manufacturing gross receipts. This deduction will not be available to Swift Holdings until its fiscal year 2006. Swift Holdings has begun an evaluation of these provisions; however, it is not expected to be able to complete a full evaluation of the effect of these provisions until after Congress or the Treasury Department provide additional clarifying language on key elements of the provisions. Swift Holdings expects to complete its evaluation of the effects of the repatriation provision and manufacturing deduction provision within a reasonable period of time following the publication of the additional clarifying language.

          The third provision included in the AJCA is the phased out repeal of the extraterritorial income exclusion. Beginning on January 1, 2005, the tax benefit that has been utilized by Swift Holdings for export sales will gradually begin to phase out. Swift Holdings will take these new provisions into account in its tax provision as they become effective.

  Inventories

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

  Property, Plant and Equipment

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

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  Goodwill and Other Intangible Assets

     Following is a rollforward of goodwill by segment for the twenty-six weeks ended November 28, 2004 (in thousands):

     Other identifiable intangible assets as of May 30, 2004 and November 28, 2004 are as follows (in thousands):

     For the thirteen and twenty-six weeks ended November 23, 2003 and November 28, 2004, Swift Operating recognized $1.4 million, $2.8 million, $1.2 million and $2.7 million of amortization expense, respectively.

     Based on amortizing assets recognized in Swift Operating’s balance sheet as of November 28, 2004, amortization expense for each of the next five fiscal years is estimated as follows (in thousands):

  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. As of May 30, 2004 and November 28, 2004, bank overdrafts included in trade accounts payable were $127.4 million and $127.2 million, respectively. As of May 30, 2004 and November 28, 2004 Swift Holdings 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

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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.

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 $0.0 million and $1.5 million for the thirteen weeks ended November 23, 2003 and November 28, 2004, respectively and ($1.6) million and $1.4 million for the twenty-six weeks ended November 23, 2003 and November 28, 2004, respectively. The above foreign currency translation adjustments are net of tax of ($0.2) million and $6.9 million for the thirteen weeks ended November 23, 2003 and November 28, 2004, respectively, and ($0.2) million and $6.6 million for the twenty-six weeks ended November 23, 2003 and November 28, 2004, respectively.

  Stock-Based Compensation

     Prior to fiscal year 2005, Swift Operating accounted for the Swift Foods stock-based compensation plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based compensation cost related to stock options was reflected in net income, as all options granted had an exercise price equal to or above the market value of the underlying common stock of Swift Foods on the date of grant. See note 8, “Subsequent Events” for discussion of additional shares granted.

     During the second quarter 2005 Swift Operating adopted the fair value based method of accounting for stock options as presented in Statement of Financial Accounting Standards No. 123 (“SFAS No. 123”), Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, effective as of the beginning of fiscal year 2005. Swift Operating used the “modified prospective method” transition, as defined in SFAS No. 123, where employee stock-based compensation cost was recognized from May 31, 2004 as if the fair value based accounting method in SFAS No. 123 had been used to account for all employee awards granted, modified, or settled in fiscal years beginning after December 15, 1994. As a result, compensation costs of $2.0 million and $2.1 million were recognized for the thirteen and twenty-six weeks ended November 28, 2004 respectively. The charge for the thirteen weeks ended November 28, 2004 includes expense of $1.8 million relating to the modification of stock awards previously granted due to the exercise of the call option (see Note 1).

     Swift Operating determined fair value for the stock options using the Black-Scholes option pricing model. The assumption used in the calculation of the compensation cost was a risk-free interest rate of 2.53% with an expected remaining life of 2 years. As allowed, Swift Operating also used a zero volatility factor in estimating the value of their stock options.

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     The adoption of SFAS No. 123 requires Swift Operating to restate previously presented results for the thirteen weeks ended August 29, 2004. The restatement has no effect on cash flows for the period. The effect of the adoption of SFAS No. 123 on results previously reported for the thirteen weeks ended August 29, 2004 is summarized in the table below:

For the thirteen weeks ended August 29, 2004
(in thousands)