Hormel Foods Corporation (NYSE: HRL) today reported record performance for the fiscal year 2016 second quarter.
All comparisons are to the second quarter of fiscal 2015. All earnings per share measures have been adjusted to reflect the two-for-one stock split distributed on February 9, 2016.
SUMMARY
- Record diluted earnings per share of $0.40, up 21 percent from $0.33 per share.
- Dollar sales of $2.3 billion, up 1 percent; volume down 1 percent.
- Grocery Products operating profit up 21 percent; volume down 1 percent; dollar sales up 1 percent.
- Refrigerated Foods operating profit up 13 percent; volume up 3 percent; dollar sales up 7 percent.
- Jennie-O Turkey Store operating profit up 20 percent; volume down 5 percent; dollar sales down 4 percent.
- Specialty Foods operating profit up 74 percent; volume down 2 percent; dollar sales down 5 percent.
- International & Other operating profit down 33 percent; volume down 13 percent; dollar sales down 17 percent.
The company reported fiscal 2016 second quarter record net earnings of $215.4 million, up 20 percent from net earnings of $180.2 million last year. Diluted earnings per share for the quarter were $0.40, up 21 percent from $0.33 last year. Sales for the quarter were $2.3 billion, up 1 percent from last year.
COMMENTARY
“Hormel Foods delivered strong results this quarter, our twelfth consecutive quarter of record earnings, with four of five segments achieving double-digit increases in operating profits,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer. “Excellent results in Refrigerated Foods and Grocery Products were driven by favorable pork operating margins and solid growth posted by value-added products such as HORMEL® NATURAL CHOICE® meats, HORMEL® pepperoni, HORMEL GATHERINGS® party trays, SKIPPY® peanut butter, HORMEL® chili and WHOLLY GUACAMOLE® dips. Specialty Foods has significantly enhanced its margin delivery through efficiency gains and increased branded sales, and continues to focus on innovation, highlighted by the recent launch of MUSCLE MILK® protein smoothies. Specialty Foods also finalized the sale of Diamond Crystal Brands in May,” commented Ettinger. “Jennie-O Turkey Store generated an impressive earnings performance despite lingering effects of turkey supply constraints, while International was challenged by weak exports and high pork costs in China.”
SEGMENT OPERATING HIGHLIGHTS – SECOND QUARTER
Grocery Products (17% of Net Sales, 20% of
Total Segment Operating Profit)
Grocery Products segment
profit increased 21 percent on favorable raw material costs and improved
plant efficiencies. Sales increased 1 percent with growth from SKIPPY®
peanut butter and HORMEL® chili offsetting decreases in our chunk
meats business.
Refrigerated Foods (48% of Net Sales, 38% of
Total Segment Operating Profit)
Segment profit for
Refrigerated Foods increased 13 percent driven by strong pork operating
margins, the addition of the Applegate business, and growth in many of
our value-added products. Including Applegate, sales were up 7 percent
led by foodservice sales of OLD SMOKEHOUSE® bacon and HORMEL®
FIRE BRAISED™ meats and increased retail sales of HORMEL® NATURAL
CHOICE® meats and HORMEL® pepperoni.
Jennie-O Turkey Store (18% of Net Sales, 27% of
Total Segment Operating Profit)
Jennie-O Turkey Store
segment profit increased 20 percent on improved product mix and
favorable input costs. Sales decreased 4 percent reflecting volume
shortfalls from the impact of highly pathogenic avian influenza in
fiscal 2015.
Specialty Foods (12% of Net Sales, 11% of Total
Segment Operating Profit)
Specialty Foods delivered a 74
percent increase in segment profit. Results were driven by lower input
costs, a favorable comparison to the plant closure in the prior year,
and operational synergies captured within the CytoSport and Century
Foods supply chain. Dollar sales decreased 5 percent as increased sales
of MUSCLE MILK® protein products were not able to offset reduced
contract packaging sales.
International & Other (5% of Net Sales, 4% of
Total Segment Operating Profit)
International segment
profit declined 33 percent and sales declined 17 percent. Results were
impacted by high pork input costs in China and soft demand for our U.S.
export products.
OUTLOOK
“We are raising our fiscal 2016 earnings guidance range from $1.50 to $1.56 per share to $1.56 to $1.60 per share based on strong second quarter results and continued expectations for growth in the back half of the year,” stated James P. Snee, president and chief operating officer.
“We look for Refrigerated Foods and Grocery Products to continue driving earnings increases through growth in value-added products combined with favorable input costs,” stated Snee. “Jennie-O Turkey Store is well-positioned to drive sales and earnings growth as turkey production has returned to normalized levels.”
“Specialty Foods will continue to deliver increased sales of MUSCLE MILK® protein products but may not show year-over-year increases in segment sales and earnings as a result of the divestiture of Diamond Crystal Brands,” added Snee. “We expect International to return to growth in the back half of fiscal 2016 led by export sales of our SPAM® family of products and SKIPPY® peanut butter.”
“Today we announced that we have entered into a definitive agreement to acquire Justin’s, LLC, owner of the JUSTIN’S® brand and a pioneer in nut butter-based snacking,” stated Snee. “We are excited to work together with the Justin’s team to bring these great natural and organic products to even more consumers, leveraging key Hormel Foods resources to drive continued innovation and growth to this on-trend category.”
DIVIDENDS
Effective May 16, 2016, the company paid its 351st consecutive quarterly dividend, at the annual rate of $0.58.
CONFERENCE CALL
A conference call will be webcast at 7:00 a.m. CT on Wednesday, May 18, 2016. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 800-346-0976 and providing the access code 2194984. An audio replay is available by going to https://jsp.premiereglobal.com/webrsvp and entering the access code 2194984. The webcast replay will be available at 10:00 a.m. CT, Wednesday, May 18, 2016, and will remain on our website 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. Hormel Foods, which 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, will celebrate its 125th anniversary in 2016. The company is a member of the Standard & Poor's (S&P) 500 Index, S&P 500 Dividend Aristocrats, and was named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the eighth year in a row. Hormel Foods also received a perfect score on the 2016 Human Rights Campaign Foundation’s Corporate Equality Index, was recognized on the 2016 Best for Vets Employers List by Military Times, and was named one of the 2016 Best Companies for Leaders by Chief Executive magazine. 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 and http://2014csr.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 30 - 35 in the company’s Form 10-Q for the fiscal quarter ended January 24, 2016, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”
Segment Data Fiscal 2016 Second Quarter Segment Operating Results (dollars in thousands | ||||||||||||||
SECOND QUARTER – 13 WEEKS ENDED | ||||||||||||||
NET SALES | April 24, 2016 | April 26, 2015 | % Change | |||||||||||
| Grocery Products | $ | 401,472 | $ | 397,265 | 1.1 | |||||||||
| Refrigerated Foods | 1,092,479 | 1,022,511 | 6.8 | |||||||||||
| Jennie-O Turkey Store | 423,540 | 438,912 | (3.5 | ) | ||||||||||
| Specialty Foods | 272,484 | 287,424 | (5.2 | ) | ||||||||||
| International & Other | 110,260 | 133,233 | (17.2 | ) | ||||||||||
| Total | $ | 2,300,235 | $ | 2,279,345 | 0.9 | |||||||||
OPERATING PROFIT | ||||||||||||||
| Grocery Products | $ | 67,110 | $ | 55,327 | 21.3 | |||||||||
| Refrigerated Foods | 130,002 | 114,837 | 13.2 | |||||||||||
| Jennie-O Turkey Store | 89,678 | 74,596 | 20.2 | |||||||||||
| Specialty Foods | 36,853 | 21,144 | 74.3 | |||||||||||
| International & Other | 14,244 | 21,383 | (33.4 | ) | ||||||||||
| Total segment operating profit | 337,887 | 287,287 | 17.6 | |||||||||||
| Net interest and investment (income) expense | (380 | ) | 1,966 | (119.3 | ) | |||||||||
| General corporate expense | 14,057 | 9,824 | 43.1 | |||||||||||
| Noncontrolling interest | (13 | ) | 234 | (105.6 | ) | |||||||||
| Earnings before income taxes | $ | 324,197 | $ | 275,731 | 17.6 | |||||||||
YEAR TO DATE – 26 WEEKS ENDED | ||||||||||||||
NET SALES | April 24, 2016 | April 26, 2015 | % Change | |||||||||||
| Grocery Products | $ | 793,690 | $ | 807,016 | (1.7 | ) | ||||||||
| Refrigerated Foods | 2,254,600 | 2,166,726 | 4.1 | |||||||||||
| Jennie-O Turkey Store | 795,606 | 878,931 | (9.5 | ) | ||||||||||
| Specialty Foods | 510,263 | 550,698 | (7.3 | ) | ||||||||||
| International & Other | 238,748 | 271,047 | (11.9 | ) | ||||||||||
| Total | $ | 4,592,907 | $ | 4,674,418 | (1.7 | ) | ||||||||
OPERATING PROFIT | ||||||||||||||
| Grocery Products | $ | 132,383 | $ | 96,702 | 36.9 | |||||||||
| Refrigerated Foods | 296,910 | 215,989 | 37.5 | |||||||||||
| Jennie-O Turkey Store | 180,981 | 167,616 | 8.0 | |||||||||||
| Specialty Foods | 63,646 | 39,720 | 60.2 | |||||||||||
| International & Other | 38,531 | 35,767 | 7.7 | |||||||||||
| Total segment operating profit | 712,451 | 555,794 | 28.2 | |||||||||||
| Net interest and investment expense (income) | 4,990 | 3,895 | 28.1 | |||||||||||
| General corporate expense | 29,189 | 13,077 | 123.2 | |||||||||||
| Noncontrolling interest | 93 | 946 | (90.2 | ) | ||||||||||
| Earnings before income taxes | $ | 678,365 | $ | 539,768 | 25.7 | |||||||||
HORMEL FOODS CORPORATION | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
April 24, 2016 | April 26, 2015* | April 24, 2016 | April 26, 2015* | |||||||||||||
| Net sales | $ | 2,300,235 | $ 2,279,345 | $ | 4,592,907 | $ | 4,674,418 | |||||||||
| Cost of products sold | 1,773,876 | 1,819,789 | 3,508,537 | 3,770,257 | ||||||||||||
| GROSS PROFIT | 526,359 | 459,556 | 1,084,370 | 904,161 | ||||||||||||
| Selling, general and administrative | 211,144 | 189,733 | 421,092 | 370,032 | ||||||||||||
| Goodwill impairment charge | 991 | - | 991 | - | ||||||||||||
| Equity in earnings of affiliates | 9,593 | 7,874 | 21,068 | 9,534 | ||||||||||||
| OPERATING INCOME | 323,817 | 277,697 | 683,355 | 543,663 | ||||||||||||
| Other income & expenses: | ||||||||||||||||
| Interest & investment income (expense) | 3,409 | 1,117 | 1,446 | 2,266 | ||||||||||||
| Interest expense | (3,029) | (3,083) | (6,436) | (6,161) | ||||||||||||
| EARNINGS BEFORE INCOME TAXES | 324,197 | 275,731 | 678,365 | 539,768 | ||||||||||||
| Provision for income taxes | 108,813 | 95,296 | 227,814 | 186,903 | ||||||||||||
| (effective tax rate) | 33.56% | 34.56% | 33.58% | 34.63% | ||||||||||||
| NET EARNINGS | 215,384 | 180,435 | 450,551 | 352,865 | ||||||||||||
|
Less: net (loss) earnings attributable to
noncontrolling interest | (13) | 234 | 93 | 946 | ||||||||||||
| NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION | $ | 215,397 | $ 180,201 | $ | 450,458 | $ | 351,919 | |||||||||
| NET EARNINGS PER SHARE | ||||||||||||||||
| Basic | $ | 0.41 | $ 0.34 | $ | 0.85 | $ | 0.67 | |||||||||
| Diluted | $ | 0.40 | $ 0.33 | $ | 0.83 | $ | 0.65 | |||||||||
| WEIGHTED AVG. SHARES OUTSTANDING | ||||||||||||||||
| Basic | 529,898 | 528,056 | 529,380 | 527,704 | ||||||||||||
| Diluted | 543,769 | 540,888 | 543,253 | 540,505 | ||||||||||||
| DIVIDENDS DECLARED | ||||||||||||||||
| PER SHARE | $ | 0.145 | $ 0.125 | $ | 0.29 | $ | 0.25 | |||||||||
| * Shares and per share figures have been restated to give effect to the two-for-one stock split distributed on February 9, 2016. | ||||||||||||||||
| HORMEL FOODS CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||
| (In thousands) | ||||||||
April 24, 2016 | October 25, 2015 | |||||||
| (Unaudited) | ||||||||
ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 379,881 | $ | 347,239 | ||||
| Accounts receivable | 548,497 | 605,689 | ||||||
| Inventories | 1,027,440 | 993,265 | ||||||
| Income taxes receivable | - | 6,132 | ||||||
| Deferred income taxes | - | 86,902 | ||||||
| Prepaid expenses | 13,908 | 14,383 | ||||||
| Other current assets | 5,356 | 9,422 | ||||||
| TOTAL CURRENT ASSETS | 1,975,082 | 2,063,032 | ||||||
| DEFERRED INCOME TAXES | 23,164 | - | ||||||
| INTANGIBLES | 2,521,500 | 2,526,703 | ||||||
| OTHER ASSETS | 541,669 | 538,357 | ||||||
| PROPERTY, PLANT & EQUIPMENT, NET | 1,048,930 | 1,011,739 | ||||||
| TOTAL ASSETS | $ | 6,110,345 | $ | 6,139,831 | ||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term debt | $ | - | $ | 185,000 | ||||
| Current liabilities excluding debt | 937,384 | 1,029,025 | ||||||
| TOTAL CURRENT LIABILITIES | 937,384 | 1,214,025 | ||||||
| LONG-TERM DEBT – LESS CURRENT MATURITIES | 250,000 | 250,000 | ||||||
| OTHER LONG-TERM LIABILITIES | 613,322 | 674,413 | ||||||
| SHAREHOLDERS’ INVESTMENT | 4,309,639 | 4,001,393 | ||||||
| TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT | $ | 6,110,345 | $ | 6,139,831 | ||||
| HORMEL FOODS CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (Unaudited) (In thousands) | ||||||||||
Twenty-Six Weeks Ended | ||||||||||
April 24, 2016 | April 26, 2015 | |||||||||
| OPERATING ACTIVITIES | ||||||||||
| Net earnings | $ | 450,551 | $ | 352,865 | ||||||
| Depreciation and amortization of intangibles | 63,908 | 65,727 | ||||||||
| Goodwill impairment charge | 991 | - | ||||||||
| (Increase) decrease in working capital | (74,829 | ) | 17,477 | |||||||
| Other | (31,486 | ) | 9,668 | |||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 409,135 | 445,737 | ||||||||
| INVESTING ACTIVITIES | ||||||||||
| Net purchases of property/equipment | (97,143 | ) | (43,934 | ) | ||||||
| Decrease in investments, equity in affiliates, and other assets | 12,178 | 5,379 | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (84,965 | ) | (38,555 | ) | ||||||
| FINANCING ACTIVITIES | ||||||||||
| Principal payments on short-term debt | (185,000 | ) | - | |||||||
| Dividends paid on common stock | (142,878 | ) | (118,715 | ) | ||||||
| Share repurchase | (6,358 | ) | - | |||||||
| Other | 44,826 | 3,476 | ||||||||
| NET CASH USED IN FINANCING ACTIVITIES | (289,410 | ) | (115,239 | ) | ||||||
| Effect of exchange rate changes on cash | (2,118 | ) | (1,722 | ) | ||||||
| INCREASE IN CASH AND CASH EQUIVALENTS | 32,642 | 290,221 | ||||||||
| Cash and cash equivalents at beginning of year | 347,239 | 334,174 | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF QUARTER | $ | 379,881 | $ | 624,395 | ||||||
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Contacts:
Investor Contact:
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Annis, 507-437-5248
npannis@hormel.com
Or
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Contact:
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