Hormel Foods Reports Second Quarter Results and Maintains Guidance

Hormel Foods Reports Second Quarter Results and Maintains Guidance

AUSTIN, Minn.--(BUSINESS WIRE)-- Hormel Foods Corporation (NYS: HRL) today reported its performance for the fiscal year 2013 second quarter. All comparisons are to second quarter or first half of fiscal 2012.

HIGHLIGHTS


Second Quarter

  • Full year guidance range of $1.93 to $2.03 maintained
  • Diluted EPS of $.46, down 4 percent
  • Non-recurring costs related to the SKIPPY® peanut butter acquisition were approximately $9 million
  • Segment operating profit down 2 percent
  • Dollar sales of $2.2 billion, up 7 percent
  • Volume up 4 percent
  • Grocery Products operating profit up 10 percent; volume up 47 percent (volume up 3 percent excluding sales of Don Miguel products and SKIPPY® peanut butter); dollar sales up 49 percent (sales up 4 percent excluding sales of Don Miguel products and SKIPPY® peanut butter)
  • Refrigerated Foods operating profit up 3 percent; volume down 4 percent; dollar sales down 2 percent
  • Jennie-O Turkey Store operating profit down 26 percent; volume down 4 percent; dollar sales down 2 percent
  • Specialty Foods operating profit up 24 percent; volume up 4 percent; dollar sales up 7 percent
  • International & Other (formerly All Other) operating profit up 21 percent; volume up 11 percent (volume down 2 percent excluding sales of SKIPPY® peanut butter); dollar sales up 21 percent (sales up 4 percent excluding sales of SKIPPY® peanut butter)

The company reported fiscal 2013 second quarter net earnings of $125.5 million, down 2 percent from net earnings of $127.9 million a year earlier. For the six months ended April 28, 2013, net earnings were $255.2 million, essentially even with net earnings of $256.3 million for the same period last year. Diluted net earnings per share for the six months ended April 28, 2013 were $.95, equal to diluted net earnings per share of $.95 last year.

Sales for the quarter were $2.2 billion, up 7 percent from fiscal 2012. For the six months ended April 28, 2013, sales totaled $4.3 billion, up 5 percent from the same period last year.

COMMENTARY

"We were pleased to deliver sales and volume growth, despite harvest reductions in both our Refrigerated Foods and Jennie-O Turkey Store operations. In terms of operating profits, improved results by our Specialty Foods, Grocery Products, and International & Other segments did not fully offset weaker results by our Jennie-O Turkey Store segment. Our earnings were also impacted by non-recurring costs related to our acquisition of the SKIPPY® peanut butter business in the amount of $9 million. Overall, earnings per share of $0.46 during the quarter keep us on track to maintain our full year guidance," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

"Our Specialty Foods team delivered impressive earnings on significant sales growth. The Grocery Products segment turned in a strong sales quarter, led by HERDEZ® and CHI-CHI'S® Mexican products, HORMEL® COMPLEATS® microwave meals, and DINTY MOORE® stew. Our International team achieved excellent results led by higher sales of the SPAM® family of products," commented Ettinger. "Although the 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. We are also excited about the launch of our new HORMEL® REV® snack wraps by our Refrigerated Foods team, which are arriving on-shelf at retailers nationally."

"The integration of the domestic SKIPPY® peanut butter business into our Grocery Products segment was completed during the quarter, ahead of schedule. The closing of the acquisition of the China business is on track to be completed by the end of the fiscal year," stated Ettinger.

SEGMENT OPERATING SUMMARIES - SECOND QUARTER

Grocery Products (18% of Net Sales, 24% of Total Segment Operating Profit)
Grocery Products operating profit increased 10 percent. Sales including Don Miguel products and SKIPPY® peanut butter grew 49 percent, led by sales of HERDEZ® and CHI-CHI'S® Mexican products, the SPAM® family of products, DINTY MOORE® stew, and MARY KITCHEN® hash. Sales growth of HORMEL® COMPLEATS® microwave meals was aided by introduction of new cheesy pasta items.

Refrigerated Foods (47% of Net Sales, 28% of Total Segment Operating Profit)
Segment profit for Refrigerated Foods was 3 percent above last year on a sales decline of 2 percent. Increased grain costs in our live production operations held down the overall performance of this segment, offset by improved results in the other parts of the business. Results in the value-added businesses were led by retail sales of HORMEL® party trays, HORMEL® convenience bacon, LLOYD'S® ribs, and by foodservice sales of HORMEL® FIRE BRAISED™ meats and HORMEL® Pecanwood bacon.

Jennie-O Turkey Store (18% of Net Sales, 27% of Total Segment Operating Profit)
Segment profit for Jennie-O Turkey Store declined 26 percent on a sales decrease of 2 percent, as increased sales of value-added products were insufficient to offset higher grain costs and weaker commodity turkey prices. Value-added sales grew in retail and foodservice trade channels, led by retail sales of JENNIE-O TURKEY STORE® fresh tray pack and turkey bacon.

Specialty Foods (11% of Net Sales, 13% of Total Segment Operating Profit)
Specialty Foods segment profit rose 24 percent on a sales gain of 7 percent. Growth was led by sales of ingredients, ready-to-drink beverages, nutritional products, and sugar. The agreement allowing Diamond Crystal Brands to sell SPLENDA® sweetener into foodservice trade channels will expire effective June 30, 2013.

International & Other (6% of Net Sales, 8% of Total Segment Operating Profit)
The International & Other segment, formerly known as the All Other segment, posted segment profits that were up a strong 21 percent on sales growth of 21 percent. Results were primarily driven by higher sales of the SPAM® family of products, improved profitability of our fresh pork exports, and better results by our operations in China.

General Corporate Expense
General corporate expense increased, primarily related to higher employee costs.

OUTLOOK

"We are pleased with the growth being demonstrated by our Grocery Products and International & Other segments, and anticipate continued success for those segments going forward. In addition to continued organic growth, those two segments' results will benefit from the SKIPPY® peanut butter acquisition. Our Specialty Foods segment will be challenged by the loss of the SPLENDA® sweetener sales in the back half of the year. Our Refrigerated Foods segment is presently facing weaker pork operating margins and challenges in live hog production operations, though we expect those factors to improve in the back half of the year. We expect results in our Jennie-O Turkey Store segment will turn the corner as pressures from higher commodity grain prices and weaker turkey commodity meat prices begin to moderate in the back half of the year. Taking all of these factors into account, we are maintaining our full-year guidance of $1.93 to $2.03 per share," concluded Ettinger.

DIVIDENDS

Effective May 15, 2013, the Company paid its 339th 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, May 23, 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 866-225-8754 and the access code is 4617224. An audio replay is available by calling 800-406-7325 and entering access code 4617224. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, May 23, 2013, through 11:59 p.m. CT on Thursday, June 6, 2013. The webcast replay will be available at 10:30 a.m. CT, Thursday, May 23, 2013, and will be 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 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 fifth 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 28-35 in the company's Form 10-Q for the quarter ended January 27, 2013, which can be accessed at www.hormelfoods.com under "Investors-SEC Filings."

 
 
Segment Data

Fiscal 2013 Second Quarter Segment Operating Results (dollars in thousands)

 
   

SECOND QUARTER - THIRTEEN WEEKS ENDED

       

NET SALES

April 28, 2013 April 29, 2012 % Change
Grocery Products $ 393,505 $ 263,993 49.1
Refrigerated Foods 1,011,370 1,031,975 (2.0 )
Jennie-O Turkey Store 384,739 391,053 (1.6 )
Specialty Foods 245,691 228,947 7.3
International & Other   117,381   96,891 21.1  
Total $ 2,152,686 $ 2,012,859 6.9  
 

OPERATING PROFIT

Grocery Products $ 47,295 $ 42,858 10.4
Refrigerated Foods 54,680 53,009 3.2
Jennie-O Turkey Store 51,999 70,198 (25.9 )
Specialty Foods 25,967 20,859 24.5
International & Other   15,618   12,855 21.5  
Total segment operating profit 195,559 199,779 (2.1 )
Net interest and investment expense (income) 2,026 945 114.4
General corporate expense 9,751 6,088 60.2
Noncontrolling interest   1,121   1,048 7.0  
Earnings before income taxes $ 184,903 $ 193,794 (4.6 )
 
 

YEAR TO DATE - TWENTY-SIX WEEKS ENDED

 

NET SALES

April 28, 2013 April 29, 2012 % Change
Grocery Products $ 727,645 $ 533,472 36.4
Refrigerated Foods 2,074,771 2,115,500 (1.9 )
Jennie-O Turkey Store 775,073 768,424 0.9
Specialty Foods 479,536 446,971 7.3
International & Other   211,902   187,931 12.8  
Total $ 4,268,927 $ 4,052,298 5.3  
 

OPERATING PROFIT

Grocery Products $ 97,208 $ 86,951 11.8
Refrigerated Foods 108,470 106,758 1.6
Jennie-O Turkey Store 110,944 146,960 (24.5 )
Specialty Foods 49,728 37,506 32.6
International & Other   32,729   25,326 29.2  
Total segment operating profit 399,079 403,501 (1.1 )
Net interest and investment expense (income) 3,310 2,569 28.8
General corporate expense 16,395 14,815 10.7
Noncontrolling interest   2,450   1,986 23.4  
Earnings before income taxes $ 381,824 $ 388,103 (1.6 )
 

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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
           

Thirteen Weeks Ended

Twenty-Six Weeks Ended

April 28,

April 29,

April 28,

   

April 29,

2013

2012

2013

2012

 
Net sales $ 2,152,686 $ 2,012,859 $ 4,268,927 $ 4,052,298
 
Cost of products sold   1,799,885     1,677,252     3,571,933     3,379,282  
 
GROSS PROFIT: 352,801 335,607 696,994 673,016
 
Selling, general and administrative 173,066 148,684 328,897 301,161
 
Equity in earnings of affiliates   7,194     7,816     17,037     18,817  
 
OPERATING INCOME: 186,929 194,739 385,134 390,672
 
Other income & expenses:
Interest & investment income 1,116 2,338 2,926 3,928
Interest expense   (3,142 )   (3,283 )   (6,236 )   (6,497 )
 
EARNINGS BEFORE INCOME TAXES: 184,903 193,794 381,824 388,103
 
Provision for income taxes 58,262 64,859 124,138 129,835
(effective tax rate)   31.51 %   33.47 %   32.51 %   33.45 %
 
NET EARNINGS 126,641 128,935 257,686 258,268

Less: net earnings attributable to noncontrolling interest

 

1,121

   

1,048

   

2,450

   

1,986

 

NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION

$

125,520

 

$

127,887

 

$

255,236

 

$

256,282

 
 
NET EARNINGS PER SHARE
Basic $ .47   $
TWX +0.66 65.15

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