Hormel Foods Reports First Quarter Results

  Hormel Foods Reports First Quarter Results

Business Wire

AUSTIN, Minn. -- February 21, 2013

Hormel Foods Corporation (NYSE: HRL) today reported its performance for the
fiscal year 2013 first quarter. All comparisons are to first quarter of fiscal
2012.

HIGHLIGHTS

First Quarter

  * Diluted EPS of $.48, even with last year
  * Segment operating profit even with last year
  * Dollar sales of $2.1 billion, up 4 percent
  * Volume up 2 percent
  * Grocery Products operating profit up 13 percent; volume up 20 percent
    (volume up 4 percent excluding sales of Don Miguel products); dollar sales
    up 24 percent (sales up 4 percent excluding sales of Don Miguel products)
  * Refrigerated Foods operating profit even with last year; volume down 2
    percent; dollar sales down 2 percent
  * Jennie-O Turkey Store operating profit down 23 percent; volume even with
    last year; dollar sales up 3 percent
  * Specialty Foods operating profit up 43 percent; volume up 1 percent;
    dollar sales up 7 percent
  * All Other (International) operating profit up 37 percent; volume up 5
    percent; dollar sales up 4 percent

The company reported fiscal 2013 first quarter net earnings of $129.7 million,
up 1 percent from earnings of $128.4 million a year earlier. Diluted earnings
per share for the quarter were $.48 this year, even with last year. Sales
totaled $2.1 billion, which was up 4 percent from the same period in fiscal
2012.

COMMENTARY

“We continue to generate solid top-line momentum with many of our franchises,
as our broad portfolio of value-added products resonates with consumers. In
terms of operating profits, strong results by our Specialty Foods, Grocery
Products and All Other (International) segments offset weaker results by our
Jennie-O Turkey Store segment. Results in our Refrigerated Foods segment,
while even with a year ago, were hindered by poor pork processing margins.
Overall, earnings per share of $0.48 during the quarter were consistent with
our expectations for the start of fiscal 2013,” said Jeffrey M. Ettinger,
chairman of the board, president and chief executive officer.

“Our Specialty Foods team delivered impressive earnings on significant sales
growth and improved operating efficiencies. Our Grocery Products segment
turned in a fine quarter, led by sales of the SPAM® family of products,
HORMEL® chili, MARY KITCHEN® hash and HERDEZ® salsa. Our International team
achieved strong earnings growth supported by fresh pork exports and higher
profits by our operations in China,” commented Ettinger. “Although our team at
Jennie-O Turkey Store was confronted with higher grain costs and lower
commodity turkey meat prices, we are encouraged by the continued growth in
sales of our value-added turkey products, including JENNIE-O TURKEY STORE®
fresh tray pack products and turkey bacon.”

“At the beginning of our second quarter, we closed on the acquisition of the
SKIPPY® peanut butter business, excluding China. Since then, we have begun to
integrate the business into our Grocery Products and International operating
units and are actively working on information technology, logistics and other
support projects aimed at delivering synergistic benefits. Our organization is
excited about this wonderful new addition to our product portfolio and about
its growth prospects,” stated Ettinger.

SEGMENT OPERATING SUMMARIES – FIRST QUARTER

Grocery Products (16% of Net Sales, 25% of Total Segment Operating Profit)
Grocery Products operating profit increased 13 percent. Sales including Don
Miguel products grew 24 percent, led by sales of the SPAM® family of products,
HORMEL® chili, MARY KITCHEN® hash and HERDEZ® salsa. Sales growth of the
COMPLEATS® microwave meals was aided by the introduction of new Cheesy Pasta
items.

Refrigerated Foods (50% of Net Sales, 26% of Total Segment Operating Profit)
Segment profit for Refrigerated Foods was even with last year on a sales
decline of 2 percent. Improved results with our value-added products and by
the Affiliated Business Units were unable to fully offset weaker pork
operating margins and increased costs in live production operations. Improved
results in the value-added businesses were led by retail sales of HORMEL®
pepperoni, HORMEL® NATURAL CHOICE® sliced deli meats in both the retail and
foodservice channels, and by foodservice sales of HORMEL® Fire Braised meats.

Jennie-O Turkey Store (18% of Net Sales, 29% of Total Segment Operating
Profit)
Segment profit for Jennie-O Turkey Store declined 23 percent on a sales
increase of 3 percent, as higher sales of value-added products did not offset
higher grain costs and weaker commodity turkey prices. Value-added sales grew
in retail, food service and deli trade channels, led by retail sales of
JENNIE-O TURKEY STORE® fresh tray pack, turkey franks and turkey bacon.

Specialty Foods (11% of Net Sales, 12% of Total Segment Operating Profit)
Specialty Foods segment profits rose an impressive 43 percent on a sales gain
of 7 percent and improved operating efficiencies. Sales growth was led by
sales of Hormel Health Labs products, private label canned meats and savory
ingredients.

All Other (5% of Net Sales, 8% of Total Segment Operating Profit)
The All Other segment, which consists primarily of Hormel Foods International,
posted segment profits that were up a strong 37 percent on sales growth of 4
percent. Results were primarily driven by higher fresh pork exports and better
results by our operations in China.

General Corporate Expense
Several factors affected general corporate expense which, in aggregate,
resulted in lower expenses. No single factor was material in relationship to
the total expenses incurred in the quarter.

OUTLOOK

“We are pleased with the growth being demonstrated by our Grocery Products,
Specialty Foods and All Other (International) segments, and anticipate
continued success going forward. Our Refrigerated Foods segment is presently
facing weaker pork operating margins and challenges in live hog production
operations, though we expect those factors to slowly improve. Our Jennie-O
Turkey Store segment will post weaker results in comparison to last year’s
record year. We expect these challenges to continue in the near term and
gradually diminish thereafter. We continue to expect modest accretion from the
SKIPPY acquisition in fiscal 2013, but note that one-time transaction and
transition costs related to the acquisition will fall primarily in our second
quarter. Taking all of these factors into account, we are raising our
full-year guidance to $1.93 to $2.03 per share from $1.90 to $2.00 per share,”
concluded Ettinger.

DIVIDENDS

Effective February 15, 2013, the Company paid its 338th consecutive quarterly
dividend, at the annual rate of $.68.

CONFERENCE CALL

A conference call will be webcast at 8:00 a.m. CT on Thursday, February 21,
2013. Access is available at http://www.hormelfoods.com. If you do not have
Internet access and want to listen to the call over the phone, the dial-in
number is 888-549-7750 and the access code is 4599951. An audio replay is
available by calling 800-406-7325 and entering access code 4599951. The audio
replay will be available beginning at 10:30 a.m. CT on Thursday, February 21,
2013, through 11:59 p.m. CT on Thursday, March 7, 2013. The webcast replay
will be available at 10:30 a.m. CT, Thursday, February 21, 2013, and will be
archived for one year.

ABOUT HORMEL FOODS CORPORATION

Hormel Foods Corporation, based in Austin, Minn., is a multinational
manufacturer and marketer of consumer-branded food and meat products, many of
which are among the best known and trusted in the food industry. The company
leverages its extensive expertise, innovation and high competencies in pork
and turkey processing and marketing to bring branded, value-added products to
the global marketplace. The company is a member of the Standard & Poor's (S&P)
500 Index, S&P Dividend Aristocrats for 2012, Maplecroft Climate Innovation
Indexes, Global 1000 Sustainable Performance Leaders and was again named one
of "The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for
the fourth year in a row. Hormel Foods debuted on the G.I. Jobs magazine list
of America’s Top 100 Military Friendly Employers in 2012. The company enjoys a
strong reputation among consumers, retail grocers, foodservice and industrial
customers for products highly regarded for quality, taste, nutrition,
convenience and value. For more information, visit http://www.hormelfoods.com.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking information based on management’s
current views and assumptions. Actual events may differ materially. Please
refer to the cautionary statement regarding Forward-Looking Statements and
Risk Factors that appear on pages 27-30 in the company’s Annual Report for the
fiscal year ended October 28, 2012, which can be accessed at
www.hormelfoods.com under “Investors-SEC Filings.

 
 
Segment Data
Fiscal 2013 First Quarter Segment Operating Results (dollars in thousands)
 
                            FIRST QUARTER – THIRTEEN WEEKS ENDED
                                                                     
NET SALES                   January 27, 2013     January 29, 2012     % Change
Grocery Products            $    334,140         $    269,479         24.0
Refrigerated Foods               1,063,401            1,083,525       (1.9   )
Jennie-O Turkey Store            390,334              377,371         3.4
Specialty Foods                  233,845              218,024         7.3
All Other                        94,521               91,040          3.8     
Total                       $    2,116,241       $    2,039,439       3.8     
                                                                       
OPERATING PROFIT
Grocery Products            $    49,913          $    44,093          13.2
Refrigerated Foods               53,790               53,749          0.1
Jennie-O Turkey Store            58,945               76,762          (23.2  )
Specialty Foods                  23,761               16,647          42.7
All Other                        17,111               12,471          37.2    
Total segment operating          203,520              203,722         (0.1   )
profit
Net interest and
investment expense               1,284                1,624           (20.9  )
(income)
General corporate                6,644                8,727           (23.9  )
expense
Noncontrolling interest          1,329                938             41.7    
Earnings before income      $    196,921         $    194,309         1.3     
taxes
                                                                              

 
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
                                              
                                               Thirteen Weeks Ended
                                               January 27,       January 29,
                                               2013              2012
                                                                  
Net sales                                      $ 2,116,241       $ 2,039,439
                                                                  
Cost of products sold                            1,772,048         1,702,030  
                                                                  
GROSS PROFIT:                                    344,193           337,409
                                                                  
Selling, general and administrative              155,831           152,477
                                                                  
Equity in earnings of affiliates                 9,843             11,001     
                                                                  
OPERATING INCOME:                                198,205           195,933
                                                                  
Other income & expenses:
Interest & investment income                     1,810             1,590
Interest expense                                 (3,094    )       (3,214    )
                                                                  
EARNINGS BEFORE INCOME TAXES:                    196,921           194,309
                                                                  
Provision for income taxes                       65,876            64,976
(effective tax rate)                             33.45     %       33.44     %
                                                                  
NET EARNINGS                                     131,045           129,333
Less: net earnings attributable to               1,329             938        
noncontrolling interest
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS      $ 129,716         $ 128,395    
CORPORATION
                                                                  
NET EARNINGS PER SHARE
Basic                                          $ .49             $ .49        
Diluted                                        $ .48             $ .48        
                                                                  
WEIGHTED AVG SHARES OUT
Basic                                            263,944           263,946
Diluted                                          269,140           269,608
 
DIVIDENDS DECLARED PER SHARE                   $ .17             $ .15        
                                                                              

 
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
                                                             
                                         January 27, 2013     October 28, 2012
ASSETS
                                                               
CURRENT ASSETS
Cash and cash equivalents                $    887,677         $    682,388
Short-term marketable securities              -                    77,387
Accounts receivable                           466,536              507,041
Inventories                                   953,682              950,521
Income taxes receivable                       -                    16,460
Deferred income taxes                         70,402               68,560
Prepaid expenses                              13,276               12,772
Other current assets                          8,272                5,555
                                                               
TOTAL CURRENT ASSETS                          2,399,845            2,320,684
                                                               
INTANGIBLES                                   751,757              753,947
                                                               
OTHER ASSETS                                  555,034              564,855
                                                               
PROPERTY, PLANT & EQUIPMENT, NET              916,194              924,480
                                                               
TOTAL ASSETS                             $    4,622,830       $    4,563,966
                                                               
 
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
                                                               
TOTAL CURRENT LIABILITIES                $    737,386         $    786,300
                                                               
LONG-TERM DEBT – LESS CURRENT                 250,000              250,000
MATURITIES
                                                               
OTHER LONG-TERM LIABILITIES                   701,492              702,741
                                                               
SHAREHOLDERS’ INVESTMENT                      2,933,952            2,824,925
                                                               
TOTAL LIAB. & SHAREHOLDERS’              $    4,622,830       $    4,563,966
INVESTMENT
                                                                    

 
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                  
                                                   Thirteen Weeks Ended
                                                   January 27,     January 29,
                                                   2013            2012
OPERATING ACTIVITIES
Net earnings                                       $ 131,045       $ 129,333
Depreciation and amortization of intangibles         29,844          30,815
Increase in working capital                          (7,776  )       (11,040 )
Other                                                (11,300 )       3,052    
NET CASH PROVIDED BY OPERATING ACTIVITIES            141,813         152,160
                                                                    
INVESTING ACTIVITIES
Sale of trading securities                           77,558          -
Acquisitions of businesses/intangibles               -               (168    )
Net purchases of property/equipment                  (19,134 )       (29,403 )
Decrease in investments, equity in affiliates,       7,919           998      
and other assets
NET CASH PROVIDED BY (USED IN) INVESTING             66,343          (28,573 )
ACTIVITIES
                                                                    
FINANCING ACTIVITIES
Dividends paid on common stock                       (39,438 )       (33,600 )
Share repurchase                                     -               (11,117 )
Other                                                36,483          5,814    
NET CASH USED IN FINANCING ACTIVITIES                (2,955  )       (38,903 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH              88              804      
INCREASE IN CASH AND CASH EQUIVALENTS                205,289         85,488
Cash and cash equivalents at beginning of year       682,388         463,130  
CASH AND CASH EQUIVALENTS AT END OF QUARTER        $ 887,677       $ 548,618  

Contact:

Hormel Foods Corporation
Investor Contact:
Kevin Jones, 507-437-5248
kcjones@hormel.com
or
Media Contact:
Julie Craven, 507-437-5345
media@hormel.com