Hormel Foods Reports Record First Quarter Results Business Wire AUSTIN, Minn. -- February 20, 2014 Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2014 first quarter. All comparisons are to the first quarter of fiscal 2013. HIGHLIGHTS First Quarter *Record diluted EPS of $0.57, up 19 percent from $0.48 per share *Segment operating profit increased 20 percent *Record dollar sales of $2.2 billion, increased 6 percent; volume up 2 percent *Grocery Products operating profit up 13 percent; volume up 24 percent (volume down 3 percent excluding sales of SKIPPY^® products); dollar sales up 20 percent (dollar sales down 2 percent excluding sales of SKIPPY^® products) *Refrigerated Foods operating profit up 59 percent; volume down 1 percent; dollar sales up 6 percent *Jennie-O Turkey Store operating profit up 1 percent; volume flat; dollar sales up 2 percent *Specialty Foods operating profit down 11 percent; volume down 10 percent; dollar sales down 16 percent *International & Other operating profit up 32 percent; volume up 19 percent (volume up 6 percent excluding sales of SKIPPY^® products); dollar sales up 24 percent (dollar sales up 12 percent excluding sales of SKIPPY^® products) The company reported fiscal 2014 first quarter net earnings of $153.3 million, up 18 percent from net earnings of $129.7 million a year earlier. Diluted earnings per share for the quarter were $0.57, up 19 percent compared to $0.48 last year. Sales for the quarter were $2.2 billion, up 6 percent from the same period in fiscal 2013. COMMENTARY “We achieved excellent results in the first quarter, posting an earnings per share increase of 19 percent over last year, with sales up 6 percent. Four of our five segments generated growth in sales and operating profits as we continue to deliver quality products with trusted brands to our customers and consumers,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Our recently acquired SKIPPY^® peanut butter business was a strong contributor to our Grocery Products segment results this quarter. Our Refrigerated Foods segment benefited from strong demand for our products and positive pork operating margins,” commented Ettinger. “While our Jennie-O Turkey Store segment experienced more favorable feed costs this quarter, the savings were offset by weaker live production performance driven by extreme, sustained cold weather. Our International & Other segment registered excellent sales and earnings growth led by export sales of our SPAM^® family of products and SKIPPY^® peanut butter products. As anticipated, our Specialty Foods team was unable to post increases this quarter as it rebuilds its product portfolio.” SEGMENT OPERATING HIGHLIGHTS – FIRST QUARTER Grocery Products (18% of Net Sales, 23% of Total Segment Operating Profit) Despite higher beef and pork input costs compressing the margins of many core products, Grocery Products segment profit increased 13 percent. Sales were up 20 percent this quarter, aided by the addition of the SKIPPY^® peanut butter line of products and increases in HORMEL^® bacon toppings, HORMEL^® chili and the HERDEZ^® line of products within our MegaMex Foods joint venture. Sales of our SPAM^® family of products and HORMEL^® COMPLEATS^® microwave meals were soft this quarter. Refrigerated Foods (50% of Net Sales, 35% of Total Segment Operating Profit) Refrigerated Foods delivered excellent results this quarter, with segment profit up 59 percent, driven by higher pork operating margins, continued strong demand for our bacon products, and growth in our foodservice business. Sales for the quarter were up 6 percent, led by retail sales of BLACK LABEL^® bacon items, HORMEL^® REV^® snack wraps, and LLOYDS^® ribs along with foodservice sales of HORMEL^® FIRE BRAISED^TM meats and OLD SMOKEHOUSE^® Pecanwood Smoked Bacon. Jennie-O Turkey Store (18% of Net Sales, 24% of Total Segment Operating Profit) The Jennie-O Turkey Store segment made additional investments in its brand this quarter, kicking off a new MAKE THE SWITCH^® media campaign in January featuring lean ground turkey. Sales for the quarter increased 2 percent, led by sales of JENNIE-O TURKEY STORE^® fresh lean ground turkey tray packs and chubs and turkey bacon. Jennie-O Turkey Store segment profit increased 1 percent, with the benefit of lower feed costs offset by lower live production performance due to sustained, extreme cold weather. Specialty Foods (9% of Net Sales, 9% of Total Segment Operating Profit) The Specialty Foods segment posted operating profits 11 percent lower than last year with a 16 percent decrease in sales. Lower segment results were due to the July 2013 expiration of the agreement allowing Diamond Crystal Brands to sell certain sugar substitutes into foodservice trade channels. International & Other (5% of Net Sales, 9% of Total Segment Operating Profit) The International & Other segment reported strong segment profits 32 percent ahead of last year, on a sales increase of 24 percent. Results were driven by robust export sales of our SPAM^® and SKIPPY^® product lines. OUTLOOK “Our Refrigerated Foods segment has momentum heading into the second quarter as macro conditions remain favorable,” said Ettinger. “Our team continues to deliver growth in our value-added businesses. We’ve achieved distribution gains with our new SKIPPY^® peanut butter business over the past year, both in domestic and international markets, and we continue to generate growth with innovative products such as HORMEL^® REV^® snack wraps and HORMEL^® FIRE BRAISED^TM meats." “We are anticipating tighter pork raw material supplies over the next few months, but the overall impact to our industry remains to be seen,” said Ettinger. “Unusually cold weather and higher fuel costs will continue to inflate cost of goods in our Jennie-O Turkey Store segment in the second and third quarters,” commented Ettinger. “We are pleased with the strong first quarter results achieved by our team, and expect to continue to deliver sales and earnings growth through the year. Taking all factors into consideration, we are maintaining our 2014 earnings per share guidance range of $2.17 to $2.27,” concluded Ettinger. DIVIDENDS Effective February 14, 2014, the company paid its 342nd consecutive quarterly dividend, at the annual rate of $0.80. CONFERENCE CALL A conference call will be webcast at 8:00 a.m. CT on Thursday, February 20, 2014. Access is available at www.hormelfoods.com. The call will also be accessible via telephone by dialing 877-941-8609 and providing the access code 4664913. An audio replay is available by calling 800-406-7325 and entering access code 4664913. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, February 20, 2014, through 11:59 p.m. CT on March 6, 2014. The Webcast replay will be available at 10:30 a.m. CT, Thursday, February 20, 2014, and archived for one year. About Hormel Foods 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 2013, Maplecroft Climate Innovation Indexes, Global 1000 Sustainable Performance Leaders and in 2013 was again named one of "The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the fifth year in a row. Hormel Foods has been recognized on the G.I. Jobs magazine list of America’s Top 100 Military Friendly Employers in 2012 and 2013. 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 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 on pages 26 - 30 in the company’s Annual Report for the fiscal year ended October 27, 2013, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.” Segment Data Fiscal 2014 First Quarter Segment Operating Results (dollars in thousands) FIRST QUARTER – 13 WEEKS ENDED NET SALES January 26, 2014 January 27, 2013 % Change Grocery Products $ 401,520 $ 334,140 20.2 Refrigerated Foods 1,128,421 1,063,401 6.1 Jennie-O Turkey Store 399,400 390,334 2.3 Specialty Foods 195,979 233,845 (16.2 ) International & Other 117,352 94,521 24.2 Total $ 2,242,672 $ 2,116,241 6.0 OPERATING PROFIT Grocery Products $ 56,342 $ 49,913 12.9 Refrigerated Foods 85,299 53,790 58.6 Jennie-O Turkey Store 59,545 58,945 1.0 Specialty Foods 21,255 23,761 (10.5 ) International & Other 22,557 17,111 31.8 Total segment operating 244,998 203,520 20.4 profit Net interest and investment expense 1,921 1,284 49.6 (income) General corporate 8,916 6,644 34.2 expense Noncontrolling interest 1,110 1,329 (16.5 ) Earnings before income $ 235,271 $ 196,921 19.5 taxes HORMEL FOODS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Thirteen Weeks Ended January 26, January 27, 2014 2013 Net sales $ 2,242,672 $ 2,116,241 Cost of products sold 1,844,030 1,772,048 GROSS PROFIT: 398,642 344,193 Selling, general and administrative 166,189 155,831 Equity in earnings of affiliates 4,739 9,843 OPERATING INCOME: 237,192 198,205 Other income & expenses: Interest & investment income 1,173 1,810 Interest expense (3,094 ) (3,094 ) EARNINGS BEFORE INCOME TAXES: 235,271 196,921 Provision for income taxes 80,813 65,876 (effective tax rate) 34.35 % 33.45 % NET EARNINGS 154,458 131,045 Less: net earnings attributable to 1,110 1,329 noncontrolling interest NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS $ 153,348 $ 129,716 CORPORATION NET EARNINGS PER SHARE Basic $ 0.58 $ 0.49 Diluted $ 0.57 $ 0.48 WEIGHTED AVG SHARES OUT Basic 263,752 263,944 Diluted 270,224 269,140 DIVIDENDS DECLARED PER SHARE $ 0.20 $ 0.17 HORMEL FOODS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands) January 26, October 27, 2014 2013 ASSETS CURRENT ASSETS Cash and cash equivalents $ 639,844 $ 434,014 Accounts receivable 505,024 551,500 Inventories 924,500 967,977 Deferred income taxes 73,543 73,543 Prepaid expenses 13,888 13,000 Other current assets 10,034 7,379 TOTAL CURRENT ASSETS 2,166,833 2,047,413 INTANGIBLES 1,340,463 1,312,565 OTHER ASSETS 592,353 600,569 PROPERTY, PLANT & EQUIPMENT, NET 967,521 955,333 TOTAL ASSETS $ 5,067,170 $ 4,915,880 LIABILITIES AND SHAREHOLDERS’ INVESTMENT TOTAL CURRENT LIABILITIES $ 824,525 $ 784,009 LONG-TERM DEBT – LESS CURRENT MATURITIES 250,000 250,000 OTHER LONG-TERM LIABILITIES 568,214 565,292 SHAREHOLDERS’ INVESTMENT 3,424,431 3,316,579 TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT $ 5,067,170 $ 4,915,880 HORMEL FOODS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Thirteen Weeks Ended January 26, January 27, 2014 2013 OPERATING ACTIVITIES Net earnings $ 154,458 $ 131,045 Depreciation and amortization of intangibles 31,760 29,844 Decrease (increase) in working capital 122,019 (7,776 ) Other 6,055 (11,300 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 314,292 141,813 INVESTING ACTIVITIES Sale of trading securities - 77,558 Acquisitions of businesses/intangibles (41,401 ) - Net purchases of property/equipment (32,760 ) (19,134 ) Decrease in investments, equity in affiliates, 4,028 7,919 and other assets NET CASH (USED IN) PROVIDED BY INVESTING (70,133 ) 66,343 ACTIVITIES FINANCING ACTIVITIES Dividends paid on common stock (44,833 ) (39,438 ) Other 7,548 36,483 NET CASH USED IN FINANCING ACTIVITIES (37,285 ) (2,955 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,044 ) 88 INCREASE IN CASH AND CASH EQUIVALENTS 205,830 205,289 Cash and cash equivalents at beginning of year 434,014 682,388 CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 639,844 $ 887,677 Contact: Hormel Foods Corporation Investor Contact: Jana Haynes , 507-437-5248 firstname.lastname@example.org or Media Contact: Julie Craven, 507-437-5345 email@example.com
Hormel Foods Reports Record First Quarter Results
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