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 ¨

     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 April 1, 2005, 1,000 shares of the Registrant’s common stock were outstanding.

QUARTERLY REPORT ON FORM
February 27, 2005

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 presented 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”), the partnership formed by Swift Holdings’ equity sponsors, 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, ConAgra Foods owned approximately 45% and management of Swift Foods Company owned approximately 1%. In a related transaction, an indirect subsidiary of Swift Foods Company 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 Company 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. Included in the fees related to the Call Option is $2.9 million paid to Hicks, Muse & Co. Partners L.P., an affiliate of the Purchaser, for services performed in conjunction with the Call Option. To effect the purchase of the shares held by ConAgra Foods, the Purchaser formed Rawhide Subsidiary 1 and Rawhide Subsidiary 3 along with other holding companies. Rawhide Subsidiary 1 was later renamed Swift Foods Company (“Swift Foods”) and Rawhide Subsidiary 3 was later renamed SFC Subsidiary Holdings, Inc. (“SFC”). The former Swift Foods Company (“Former Swift Foods”), incorporated in May 2002, was merged into SFC in November 2004 and all outstanding shares and options of Former Swift Foods common stock were exchanged for shares of Swift Foods on a 1 for 1 basis. Swift Foods owns 100% of the issued and outstanding capital stock of SFC, which in turn owns 100% of the issued and outstanding capital stock of S&C Holdco 2, Inc., which in turn owns 100% of the issued and outstanding capital stock of Swift Holdings. Swift Holdings owns 100% of the issued and outstanding capital stock of Swift Operating. 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

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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.

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.

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. As of September 24, 2004, the date of disposition of this investment, this business had total assets of approximately $340 million, of which approximately $300 million represents inventory, primarily cattle.

     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 continue the cattle supply to Swift Beef until all of the remaining cattle inventory of the feedlots was finished and delivered to Swift Beef’s processing facilities, and 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 Statement of Financial Accounting Standards (“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.

     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

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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.

     In November 2004, the EITF reached a consensus on Issue No. 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report Discontinued Operations.” Paragraph 42 of FASB Statement No. 144 states that the operations of a component of an entity that has been disposed of or is classified as held for sale shall be reported in discontinued operations if both of the following criteria are met (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction and (b) the entity will not have any significant continuing involvement in the operations of the component after the disposal. The EITF determined in Issue No. 03-13 that the evaluation of whether the operations and cash flows of a disposed component have been or will be eliminated from the ongoing operations of the entity depends on whether continuing cash flows have been or are expected to be generated and, if so, whether those continuing cash flows are direct or indirect, for which it gave further guidance on how to determine whether cash flows are direct or indirect. The EITF also gave guidance on the types of continuing involvement that constitute significant involvement in the operations of the disposed component. The FASB ratified the consensus reached by the EITF on November 30, 2004 and this consensus should be applied to a component of an enterprise that is either disposed of or classified as held for sale in fiscal periods beginning after December 15, 2004. Swift Holdings applied the guidance in EIFT 03-13 in determining that FJ Walker Foods should be reported as a discontinued operation; see “Discontinued Operations” below for further discussion.

     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. The Statement eliminates the ability to account for share-based compensation transactions using Accounting Principles Board (“APB”) No. 25, and generally requires instead that such transactions be accounted for using a fair-value based method. Companies will be required to recognize an expense for compensation cost related to share-based payment arrangements including 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 March 2005, the Securities and Exchange Commission (“SEC”) issued SAB No. 107 (“SAB 107”). The guidance provided by SAB 107 clarifies certain issues related to the adoption of SFAS 123R and public companies. The bulletin provides the SEC’s views on share-based payment transactions with nonemployees, valuation methods, classification of compensation expense, non-GAAP financial measures, and disclosures for first-time adoption in an interim period. Swift Holdings will evaluate the guidance provided by SAB 107 in conjunction with the adoption of SFAS 123R in its second quarter of fiscal 2006.

     In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets an amendment of APB Opinion No. 29. SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from the fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning June 15, 2005, with earlier application permitted. Swift Holdings does not expect the adoption of SFAS No. 153 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 provides additional clarifying language on key elements of the provisions. Swift Holdings expects to

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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 phase out 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, which will result in an increase in Swift Holdings effective tax rate.

     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.

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):

Goodwill and Other Intangible Assets

     Following is a rollforward of goodwill by segment for the thirty-nine weeks ended February 27, 2005 (in thousands):

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     Other identifiable intangible assets as of May 30, 2004 and February 27, 2005 are as follows (in thousands):

     For the thirteen and thirty-nine weeks ended February 22, 2004 and February 27, 2005, Swift Operating recognized $1.4 million, $4.2 million, $0.8 million and $3.5 million of amortization expense, respectively.

     Based on amortizing assets recognized in Swift Operating’s balance sheet as of February 27, 2005, amortization expense for each of the next five fiscal years is estimated as follows (in thousands):

Other Current Assets

     Other Current Assets includes notes receivable from the City of Cactus, Texas. In December 2002, Swift Operating loaned $ 2.3 million to the City of Cactus, Texas (the “City”) for use by the City to secure acreage for the construction of the City’s new wastewater treatment plant. Swift Operating owns a beef processing facility as well as a wet blue hide processing facility which will be served by the new treatment plant. The loan was for an original 2-year term and accrued interest at 6%. The loan was amended in December 2004 to extend its maturity up to one year, and an additional loan in the amount of $3.5 million was made by Swift Operating to the City in January 2005. Swift Holdings is evaluating the impact of EITF 01-08 Determining Whether an Arrangement Contains a Lease as well as EITF 97-10 The Effect of Lessee Involvement in Asset Construction in order to determine whether, once capital investment is begun by the City, Swift Operating may be required to reflect the wastewater treatment facility as a capital asset (similar to a capital leased asset) as Swift Operating will be the primary user of the wastewater facility based on projections of volume of throughput. Interest income on the notes is recognized as an offset to interest expense (See Note 3).

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 February 27, 2005, bank overdrafts included in trade accounts payable were $127.4 million and $101.2 million, respectively. As of May 30, 2004 and February 27, 2005 Swift Holdings had $0 and $16 million in borrowings, respectively, on its revolving line of credit and these overdrafts were primarily 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.

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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 $0.5 million and $(1.5) million for the thirteen weeks ended February 22, 2004 and February 27, 2005, respectively, and ($1.1) million and $(0.1) million for the thirty-nine weeks ended February 22, 2004 and February 27, 2005, respectively. The above foreign currency translation adjustments are net of tax of $0.0 million and $(0.8) million for the thirteen weeks ended February 22, 2004 and February 27, 2005, respectively, and ($0.3) million and $5.7 million for the thirty-nine weeks ended February 22, 2004 and February 27, 2005, 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.

     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. For the thirteen and thirty-nine weeks ended February 27, 2005, compensation costs of $(0.04) million and $2.4 million were recognized. Included in the compensation cost recognized for the thirteen weeks ended February 27, 2005 is an adjustment to the compensation expense recognized in the second quarter of fiscal year 2005 based on a final valuation of the common stock of Swift Foods.

     During the quarter ended February 27, 2005, the Board of Directors of Swift Foods, the ultimate parent of Swift Holdings, granted 1,475,000 options to existing management stockholders as well as certain members of the Board of Directors. Compensation expense of $0.1 million was recognized in our Statement of Earnings related to the granting of these additional options to management. In addition, the Board of Directors authorized an additional 2,000,000 options, bringing the total number of authorized options to 21.5 million. The Board of Directors of Swift Foods also approved the sale of 657,095 additional shares of common stock of Swift Foods to certain members of management at a purchase price of $1.32 per share.

     Swift Operating determined the fair value for the stock options granted during the thirteen weeks ended February 27, 2005 using the Black-Scholes option pricing model. The assumption used in the calculation of the compensation cost was a risk-free interest rate of 3.54% with an expected remaining life of 4 years. As allowed, Swift Operating also used a zero volatility factor in estimating the value of stock options.

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     As provided for under SFAS No. 148, the following table illustrates the effect on net income for the quarter and year-to-date if Swift Holdings had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for fiscal year 2004 (in thousands).

Discontinued Operations

     On February 19, 2005 Australia Meat Holdings Pty Limited, a wholly owned subsidiary of Swift Holdings entered into definitive agreements to sell its Australian meat patty manufacturing and food and related products distribution business, known as FJ Walker Foods (“FJ Walker”), in two related transactions. The purchaser of the manufacturing assets is OSI International Foods (Australia) Pty Ltd, a wholly owned subsidiary of US based OSI Group, LLC. The purchaser of the distribution assets is McKey Distribution Pty Ltd., a wholly owned subsidiary of US based Keystone Foods, Inc. The value of the combined transaction is approximately AUD $108.5 million consisting of cash and assumed liabilities, and is subject to a closing adjustment on the anticipated closing date of April 3, 2005. The agreement is also subject to various closing conditions, and Swift Operating can give no assurance that this transaction will close. FJ Walker was included in the results of operations of the Swift Australia operating segment. Swift Holdings expects the sale of FJ Walker to result in a gain on disposal.

     The following results of operations and financial position of FJ Walker are presented as discontinued operations in the consolidated financial statements pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and EITF No. 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144.

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,

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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 comprehensive income upon change in fair value.

     The fair value of derivative assets is recognized within other current assets, while the fair value of derivative liabilities is recognized within accrued liabilities. At May 30, 2004 and February 27, 2005, the fair value of derivatives recognized within other current assets was $21.1 million and $1.7 million, respectively. The fair value of derivatives recognized within accrued liabilities was $8.0 million and $4.7 million, respectively. In the first quarter of fiscal 2004, Swift Operating entered into a $100.0 million notional amount interest rate swap to change the characteristics of a portion of its senior debt from fixed rate debt to variable rate debt. This action was taken in order to achieve a fixed/floating rate debt target deemed appropriate for the business. The maturity date of the interest rate swap is October 2007 and the floating rate is calculated based on the six-month USD LIBOR set on the last day of each calculation period plus a fixed spread. The fair value of the interest rate swap can change dramatically based on a number of variables, including significant change in the shape of the yield curve and the passage of time. The interest rate swap does not qualify for hedge accounting. For the thirteen weeks ended February 22, 2004 and February 27, 2005 Swift Operating recognized, in interest expense, an increase in fair value of $1.3 million and a decrease in fair value of $0.5 million, respectively, related to the swap. For the thirty-nine weeks ended February 22, 2004 and February 27, 2005 Swift Operating recognized, in interest expense, an increase in fair value of $0.1 million and $1.0 million, respectively, related to the swap. At May 30, 2004 and February 27, 2005, the fair value of the interest rate swap recognized within accrued liabilities was $2.9 million and $1.9 million, respectively.

     During the second quarter ended November 23, 2003, Swift Operating began a policy of entering into forward contracts to hedge its exposure to gains and losses related to the currency impacts of US dollar denominated revolving intercompany borrowings with its Australian subsidiary. Changes in the fair value of these contracts are recorded in the statements of earnings as an offset to translation gains or losses on intercompany borrowings.

     As of May 30, 2004 and February 27, 2005, the balance reflected in accumulated other comprehensive income was a $0.2 million net of tax gain and a $0.1 million net of tax loss, respectively. Swift Operating anticipates losses of $0.1 million, net of tax, will be transferred out of accumulated other comprehensive income and recognized within earnings over the next 12 months.

     Swift Operating requires various raw materials in its operations, including cattle, hogs and energy, such as natural gas, electricity and diesel fuel, which are all considered commodities. Swift Operating considers these raw materials generally available from a number of different sources and believes it can obtain them to meet its requirements. These commodities are subject to price fluctuations and related price risk due to factors beyond Swift Operating’s control, such as economic and political conditions, supply and demand, weather, governmental regulation and other circumstances. Generally, Swift Operating hedges a portion of its anticipated consumption of commodity inputs for periods of up to 12 months. Swift Operating may enter into longer-term derivatives on particular commodities if deemed appropriate. As of February 27, 2005, Swift Operating executed derivative contracts for certain portions of the anticipated consumption of commodity inputs through August 2005. As of February 27, 2005, Swift Operating had derivative positions in place covering approximately less than 1% of its anticipated need for livestock and no derivative positions in place to cover natural gas consumption.

NOTE 3. LONG-TERM DEBT AND LOAN AGREEMENTS

     The major components of debt are as follows (in thousands):

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     As of February 27, 2005, Swift Operating had approximately $211.5 million of secured debt outstanding, approximately $32.0 million of outstanding letters of credit, and approximately $259.3 million of availability under its revolving credit facility. The remaining $42.7 million under the revolving credit facility was not immediately available for borrowings due to borrowing base limitations.

     A summary of the components of interest expense is presented below (in thousands):

     Financial Covenants - Swift Operating’s senior credit facilities contain financial covenants that limit its ability to incur additional indebtedness, sell or dispose of assets, pay certain dividends and prepay or amend certain indebtedness among other matters.

     On September 13, 2004, Swift Operating amended the agreement for its senior credit facilities. This amendment resulted in a 0.75% reduction to the interest rate of the term loan borrowings.

     On November 17, 2004, Swift Operating amended the agreement for its senior credit facilities. This amendment resulted in a change to the calculation of the fixed charge ratio and other technical changes resulting from the Call Option discussed in Note 1.

     On March 4, 2005, Swift Operating amended the agreement for its senior credit facilities. This amendment permits Swift Holdings to issue up to $180 million of additional indebtedness. It also increased the aggregate amount of consideration that Swift Holdings can receive from asset sales and eliminated prepayment requirements from asset sales if aggregate revolving credit equals or exceeds $150 million.

     In conjunction with the amendments discussed above, Swift Holdings paid $1.0 million in bank fees. See Note 8, “Subsequent Events” for further discussion.

NOTE 4. RELATED PARTY TRANSACTIONS

     Purchases and Sales with ConAgra Foods - In connection with the Transaction, Swift Operating entered into a preferred supplier agreement with ConAgra Foods. Sales to ConAgra Foods, which are included in net sales in the statements of earnings, were $171.0 million and $547.2 million for the thirteen and thirty-nine weeks ended February 22, 2004, respectively. As of September 23, 2004 ConAgra Foods ceased to be a related party with Swift Operating due to the Call Option (see Note 1 for further discussion of this

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transaction). Sales to ConAgra Foods included in net sales on the statement of earnings for the period prior to September 23, 2004 were $250.0 million for the thirty-nine weeks ended February 27, 2005. Purchases from affiliates of ConAgra Foods, which are included in cost of goods sold in the statements of earnings, were $235.8 million and $770.4 million for the thirteen and thirty-nine weeks ended February 22, 2004, respectively. For the period prior to September 23, 2004, purchases totaling $233.2 million were included in cost of goods sold in the statements of earnings for the thirty-nine weeks ended February 27, 2005. These amounts include purchases made under the Cattle Supply Agreement referred to below. Within Swift Operating’s May 30, 2004 balance sheet are balances due to ConAgra Foods affiliates of $11.9 million and balances due from ConAgra Foods affiliates of $33.5 million. These balances include any payable or receivable related to the Cattle Supply Agreement, the By-Products Marketing Agreement and the Indemnity Side Letter.

     Monitoring and Oversight Agreement - In connection with the Transaction, Swift Operating and certain of its direct and indirect parents and subsidiaries entered into a ten-year agreement with an affiliate of Hicks Muse (“Hicks Muse Partners”) pursuant to which Swift Operating will pay Hicks Muse Partners an annual fee for ongoing oversight and monitoring services provided to it. The annual fee will be adjusted at the beginning of each fiscal year to an amount equal to the greater of (a) $2 million or (b) 1% of the budgeted consolidated annual EBITDA of Swift Foods and its subsidiaries. The annual fee will also be adjusted in the event that Swift Foods or any of its subsidiaries acquires another entity or business during the term of the agreement. This expense is paid in advance quarterly. Selling, general and administrative expenses for the thirteen and thirty-nine weeks ended February 22, 2004 and February 27, 2005 include $0.6 million, $1.8 million, $0.7 million and $2.2 million, respectively, related to this agreement. Included in the fees related to the Call Option, discussed in Note 1, is $2.9 million paid to Hick Muse Partners for services performed in conjunction with the Call Option.

     Transition Services Agreement - At the closing of the Transaction, Swift Operating, certain of its direct and indirect parents and subsidiaries, and the entities that acquired and operate the domestic cattle feeding operations of ConAgra Foods entered into a one-year transition services agreement (“Transition Services Agreement”) with ConAgra Foods pursuant to which, among other things, ConAgra Foods provided certain transition services, including information technology, accounting, risk management, market research and product brokerage services to Swift Operating, and Swift Operating provided certain transition services, including information technology, purchasing and human resources services to ConAgra Foods. The parties agreed, during the term, to use their commercially reasonable efforts to locate third party service providers to replace the services provided under the Transition Services Agreement. Such amounts, if paid, are included in cost of goods sold and selling, general and administrative expenses in the accompanying statements of earnings. Payments received from ConAgra Foods for services Swift Operating provided under this agreement for the thirteen and thirty-nine weeks ended February 22, 2004 were $0.1 million and $0.3 million, respectively. For these same periods, Swift Operating paid $0.1 million and $1.1 million, respectively, to ConAgra Foods for services provided to it under this agreement. This agreement terminated on September 20, 2003 and no payments have been made in the thirteen and thirty-nine weeks ended February 27, 2005.

     Live Cattle Supply Agreement - At the closing of the Transaction, Swift Beef and Monfort, the entity that operates the domestic cattle feeding operations, entered into a live cattle supply agreement (“Cattle Supply Agreement”) pursuant to which Swift Beef agreed to purchase all of the cattle produced by the domestic cattle feeding operations from such entity for processing at facilities owned by Swift Beef. The Cattle Supply Agreement terminated on September 19, 2004, the maturity date of the term loan and revolving credit facility between the domestic cattle feeding operations and ConAgra Foods. For the thirteen and thirty-nine weeks ended February 22, 2004, Swift Beef incurred $225.6 million and $739.6 million, respectively, under this agreement, which amount is included in cost of goods sold in the statements of earnings. For the period prior to September 19, 2004, Swift Beef incurred $211.9 million under this agreement, this amount is included in cost of goods sold in the statements of earnings for the thirty-nine weeks ended February 27, 2005.

     On September 24, 2004, the common stock of Monfort was tendered to ConAgra Foods in full settlement of, and release from, all outstanding obligations under Monfort’s credit facility. The settlement included an agreement to continue the cattle supply to Swift Beef until all of the remaining cattle inventory of the feedlots was finished and delivered to Swift Beef’s processing facilities, or December 31, 2004, whichever was earlier. As the former ConAgra feedlots supplied approximately 40% of the Greeley plant’s processing needs, while the remaining 60% is provided by unrelated third parties, Swift Beef believes that sufficient supplies of cattle at market prices exist to meet its needs in 2005 and beyond.

     By-Products Marketing Agreement - On October 8, 2003, Swift Operating entered into a by-products marketing agreement (the “Marketing Agreement”) with ConAgra Trade Group, Inc. (“CTG”) pursuant to which Swift Operating sells to CTG certain by-products resulting from its processing of cattle and hogs in its US operations at prices in accordance with the agreement. The term of the agreement commenced May 26, 2003 and has been amended to extend the termination date to May 31, 2009. The parties split the

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pre-tax profits or losses resulting from CTG’s marketing of the by-products purchased based on a sliding scale. As of September 23, 2004, CTG ceased to be a related party with Swift Operating due to the Call Option (see Note 1 for further discussion of this transaction). The May 30, 2004 balance sheet included approximately $1.4 million in receivables from CTG. The consolidated statement of earnings for the thirteen and thirty-nine weeks ended February 22, 2004 include $0.2 million and $2.5 million, respectively, of income related to this agreement. For the period prior to September 23, 2004, the consolidated statement of earnings for the thirty-nine weeks ended February 27, 2005 include $0.7 million of income related to this agreement.

     On October 8, 2003, Swift Operating entered into a separate agreement for by-products marketing of its Australian operations with CTG pursuant to which Swift Operating sells certain by-products resulting from its processing of cattle at prices in accordance with the agreement. In addition, Swift Operating received the right to continue utilizing the existing business name “CTG Rendered Products” for by-products in Australia and New Zealand. The term of the agreement commenced May 26, 2003 and has been amended to extend the termination date to May 31, 2009. As of September 23, 2004 CTG ceased to be a related party with Swift Operating due to the Call Option (see Note 1 for further discussion of this transaction). Swift Australia had approximately $0.6 million on its balance sheet payable to CTG at May 30, 2004. The consolidated statement of earnings for the thirteen and thirty-nine weeks ended February 22, 2004 include $0.4 million and $0.6 million, respectively, of expense related to this agreement. For the period prior to September 23, 2004, the consolidated statement of earnings for the thirty-nine weeks ended February 27, 2005 include $0.5 million of expense related to this agreement.

     Indemnity Side Letter - In connection with the closing of the Transaction, ConAgra Foods agreed to reimburse Swift Operating to the extent recall costs incurred after the Transaction exceed the accrual made for estimated recall costs pursuant to the purchase agreement relating to the Transaction, and Swift Operating agreed to reimburse ConAgra Foods to the extent the accrual exceeds the recall costs. ConAgra Foods has further agreed to indemnify Swift Operating for liabilities, costs and expenses that it may incur with respect to third parties in connection with product liability claims or personal injury causes of action arising from the consumption of the products subject to the recall. The May 30, 2004 and February 27, 2005 balance sheets include a $1.6 million receivable from ConAgra Foods for reimbursement of amounts in excess of the accrual which represents additional claims from customers seeking reimbursement for recall related costs.

     Dividend to Parent Company - During the first quarter of fiscal 2005, the Board of Directors declared a cash dividend of $121.4 million, payable to Former Swift Foods, which resulted in a reduction of retained earnings of $107.6 million and a reduction in additional paid in capital of $13.8 million. The dividend was paid on September 13, 2004.

     Share Purchase - During the third quarter of fiscal 2005, 25,000 shares of Swift Foods stock was purchased by a member of the Board of Directors at a price of $2.11 per share.

NOTE 5. LEGAL PROCEEDINGS

     On May 10, 2002, a lawsuit was filed against ConAgra Foods and ConAgra Beef Company (which was renamed Swift Beef Company) in the United States District Court for the District of Nebraska seeking certification of a class of all persons who have sold fed cattle to ConAgra Foods for cash, or on a basis affected by the cash price for fed cattle, during the period in which claims may be maintained pursuant to the applicable statute of limitations. The case was originally filed by two named plaintiffs on behalf of a putative nationwide class that plaintiffs estimate exceeds 15,000. The complaint alleges that ConAgra Foods, in violation of the Packers and Stockyards Act of 1921, has used its market power and alleged use of captive supplies of fed cattle to reduce the prices paid to cattle producers in the cash market. The plaintiffs seek declaratory relief, unspecified compensatory damages, attorneys’ fees and expenses, and injunctive relief. On December 4, 2002, the complaint was amended to substitute two corporate entities for one of the individual plaintiffs. On December 16, 2002, the plaintiffs moved for class certification. ConAgra Foods has answered the amended complaint and filed a brief in opposition to the plaintiff’s motion for class certification. The court has not ruled on plaintiffs’ motion for class certification. On April 21, 2004, the court stayed all proceedings in this case pending the outcome of an appeal in a separate case, in which neither ConAgra Foods nor Swift Operating is a party, that is pending in the United States Court of Appeals for the Eleventh Circuit. ConAgra Foods will indemnify Swift Operating against any judgments for monetary damages or settlements arising out of this litigation or any future litigation filed against ConAgra Foods, the entities and operations acquired in the Transaction (the “Acquired Business”), Swift Operating or certain of its affiliates that is based primarily on the substantive facts of this litigation to the extent that the litigation seeks damages resulting from the activities of ConAgra Foods or the Acquired Business prior to the acquisition of these entities. Swift Operating believes that the defendants have acted properly and lawfully in their dealings with cattle producers. Management is currently unable to determine the outcome of this matter or to estimate the amount of potential loss, if any. In accordance with SFAS No. 5, Accounting for Contingencies, Swift Operating has not established a loss accrual associated with this claim.

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     On July 1, 2002, a lawsuit was filed against ConAgra Beef Company (which was renamed Swift Beef Company), Tyson Foods, Inc., Excel Company and Farmland National Beef Packing Company, L.P. in the United States District Court of South Dakota seeking certification of a class of all persons who sold cattle to the defendants for cash, or on a basis affected by the cash price for cattle, during the period from April 2, 2001 through May 11, 2001 and for some period up to two weeks thereafter. The case was filed by three named plaintiffs on behalf of a putative nationwide class that plaintiffs estimate is comprised of hundreds or thousands of members. The complaint alleges that the defendants, in violation of the Packers and Stockyards Act of 1921, knowingly used, without correction or disclosure, incorrect and misleading boxed beef price information generated by the United States Department of Agriculture to purchase cattle offered for sale by the plaintiffs at a price substantially lower than was justified by the actual and correct price of boxed beef during this period. The plaintiffs seek unspecified damages, or alternatively, restitution based on equitable principles of unjust enrichment. The plaintiffs also seek attorneys’ fees and expenses. On June 4, 2004, the district court granted plaintiffs’ motion for class certification. By an order dated July 7, 2004, the United States Court of Appeals for the Eighth Circuit declined to accept an interlocutory appeal of the order granting class certification. The district court has set the case for trial in December of 2005, and it has set interim deadlines by which the plaintiffs must send notice to all class members and by which the parties must complete fact and expert discovery and submit pretrial motions and materials to the court. ConAgra Foods will indemnify Swift Operating against any judgments for monetary damages or settlements arising out of this litigation or any future litigation filed against ConAgra Foods, the Acquired Business, Swift Operating or certain of its affiliates that is based primarily on the substantive facts of this litigation to the extent that the litigation seeks damages resulting from the activities of ConAgra Foods or the Acquired Business prior to the acquisition of these entities to the extent such damages together with any other indemnifiable claims under the acquisition agreement entered into to effect the Transaction exceed a minimum threshold of $7.5 million. Swift Operating believes that Swift Beef Company has acted properly and lawfully in its dealings with cattle producers. Management is currently unable to evaluate the outcome of this matter or to estimate the amount of potential loss, if any. In accordance with SFAS No. 5, Accounting for Contingencies, Swift Operating has not established a loss accrual associated with this claim.

     Swift Operating is also a party to a number of other lawsuits and claims arising out of the operation of its businesses. Management believes the ultimate resolution of such matters should not have a material adverse effect on Swift Operating’s financial condition, results of operations or liquidity. Attorney fees are expensed as incurred.

NOTE 6. BUSINESS SEGMENTS

     Swift Operating is organized into three reportable segments, Swift Beef, Swift Pork and Swift Australia. Segment operating performance is evaluated by the Chief Operating Decision Maker (“CODM”) based on Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). Certain reclassifications have been made to the prior periods’ reporting segment presentation to conform to the way in which the CODM currently views Swift Operating in evaluating the financial performance of its operating segments.

     Swift Beef - The majority of Swift Beef’s revenues are generated from the sale of fresh meat, which includes chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef and other products. In addition, Swift Beef also sells beef by-products to the variety meat, feed processing, fertilizer and pet food industries.

     Swift Pork - A significant portion of Swift Pork’s revenues are generated from the sale of fresh pork products, including trimmed cuts such as loins, roasts, chops, butts, picnics and ribs. Other pork products, including hams, bellies and trimmings, are predominantly sold to further processors who, in turn, manufacture bacon, sausage and deli and luncheon meats. The remaining sales are derived from by-products.

     Swift Australia - The majority of Swift Australia’s revenues are generated from the sale of fresh meat, which includes chuck cuts, rib cuts, loin cuts, round cuts, thin meats and other products. Approximately 85% of the beef product sold by Swift Australia is derived from grass-fed animals. The remainder of Swift Australia’s beef products are derived from grain-fed animals that are sold primarily to Japan. Other sales are derived from our foods division, which produces value-added meat products including pizza toppings for Pizza Hut and meat patties for McDonalds. FJ Walker, a portion of the foods division that supplies McDonalds, is currently reported as discontinued operations as discussed in Note 1. Accordingly, the segment amounts for Swift Australia presented below have been adjusted to exclude the results of FJ Walker for all periods presented. The remaining sales are derived from our wholesale business which sells and distributes boxed meat products to brokers who in turn resell those products to end customers.

     Corporate and Other - This line item includes certain revenues and expenses not directly attributable to the primary segments, as well as eliminations resulting from the consolidation process.

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     The following table presents segment results for the thirteen and thirty-nine weeks ended February 22, 2004 and February 27, 2005 (in thousands):

     Total assets by segment are as follows (in thousands):

NOTE 7. SUPPLEMENTAL GUARANTOR INFORMATION

     A significant amount of Swift Operating’s income and cash flow is generated by its subsidiaries. As a result, funds necessary to meet Swift Operating’s debt service obligations including its obligations under the senior notes and the senior subordinated notes are provided in large part by distributions or advances from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as Swift Operating’s financial condition and operating requirements and those of certain domestic subsidiaries, could limit Swift Operating’s ability to obtain cash for the purpose of meeting its debt service obligation including the payment of principal and interest on the senior notes and the senior subordinated notes.

     The following condensed consolidating financial statements set forth Swift Operating’s balance sheets as of May 30, 2004 and February 27, 2005, Swift Operating’s statements of earnings for the thirteen and thirty-nine weeks ended February 22, 2004 and February 27, 2005 and Swift Operating’s statements of cash flows for the thirty-nine weeks ended February 22, 2004 and February 27, 2005. Effective with the date of the Transaction, the senior notes and the senior subordinated notes have been guaranteed by Swift Holdings (the “Parent Guarantor”) and each of Swift Operating’s domestic subsidiaries (the “Subsidiary Guarantors”). The financial information is presented under the following column headings: Parent Guarantor, Issuer, Subsidiary Guarantors and Subsidiary Non-Guarantors. “Subsidiary Non-Guarantors” includes only the foreign subsidiaries of Swift Operating, which include Swift Refrigerated Foods S.A. de C.V., Kabushiki Kaisha SAC Japan and Australia Meat Holdings Pty. Ltd. Investments in Swift Operating’s subsidiaries are accounted for on the equity method. Accordingly, entries necessary to consolidate the Parent Guarantor, Swift Operating, and all of its subsidiaries are reflected in the elimination column. Separate complete financial statements of Swift

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Operating and the Subsidiary Guarantors would not provide additional material information that would be useful in assessing the financial composition of Swift Operating or the Subsidiary Guarantors.

     All of the Subsidiary Guarantors are wholly-owned subsidiaries of Swift Operating and their guarantees are full and unconditional and joint and several. There are no provisions in the indentures governing the senior notes or the senior subordinated notes or other existing agreements that would prevent holders of guaranteed obligations from taking immediate action against the Parent Guarantor or any Subsidiary Guarantor in the event of default. The ability of the Subsidiary Guarantors to pay dividends or make loans or other payments to Swift Operating depends on their earnings, capital requirements and general financial condition. The senior credit facilities and the indentures governing the senior notes and the senior subordinated notes limit the ability of Swift Operating and its subsidiaries to restrict the ability of the Subsidiary Guarantors to pay dividends or make loans or other advances to Swift Operating, subject to applicable laws and regulations and future agreements to which the Subsidiary Guarantors may be a party. The Parent Guarantor is a holding company with no operations of its own, and its only asset is the capital stock of Swift Operating. Consequently, its ability to pay amounts under its guarantee depends on the earnings and cash flows of Swift Operating and its subsidiaries and the ability of these entities to pay dividends or advance funds to the Parent Guarantor.

     As a portion of the financing related to the acquisition of the Australian operations in conjunction with the Transaction, for the thirteen weeks ended February 22, 2004 and February 27, 2005, amounts of $3.4 million and $2.7 million, respectively, and for the thirty-nine weeks ended February 22, 2004 and February 27, 2005 $9.8 million and $8.8 million, respectively, were reflected as interest expense of the Subsidiary Non-Guarantors and interest income of Swift Operating in the accompanying statements of earnings.

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S&C HOLDCO 3, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
MAY 30, 2004
(in thousands)

20

S&C HOLDCO 3, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
February 27, 2005
(in thousands)

21

S&C HOLDCO 3, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS