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Hormel Foods Reports Record First Quarter Results

  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
jlhaynes@hormel.com
or
Media Contact:
Julie Craven, 507-437-5345
media@hormel.com
 
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