AUSTIN, Minn.--(BUSINESS WIRE)--Hormel Foods Corporation (NYSE: HRL) today reported record performance for the fiscal year 2016 third quarter.
All comparisons are to the third 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 $0.36, up 33 percent from $0.27 per share.
- Record net earnings of $195.7 million, up 33 percent from net earnings of $146.9 million.
- Record dollar sales of $2.3 billion, up 5 percent; volume up 1 percent.
- Refrigerated Foods operating profit up 24 percent; volume up 3 percent; dollar sales up 9 percent.
- Jennie-O Turkey Store operating profit up 59 percent; volume up 29 percent; dollar sales up 20 percent.
- International & Other operating profit up 5 percent; volume up 10 percent; dollar sales up 5 percent.
- Grocery Products operating profit flat; volume up 1 percent; dollar sales up 3 percent.
- Specialty Foods operating profit down 13 percent; volume down 32 percent; dollar sales down 25 percent. Decreases reflect the impact from the divestiture of the Diamond Crystal Brands business.
COMMENTARY
“We are pleased to announce exceptional results this quarter with three of our five segments delivering volume, sales and earnings growth. This is also our thirteenth consecutive quarter of record earnings which is a testament to our balanced business model,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer. “Excellent results in Refrigerated Foods were driven by the addition of the Applegate business, foodservice sales of OLD SMOKEHOUSE® bacon, HORMEL® BACON 1™ fully cooked bacon, and HORMEL® FIRE BRAISED™ meats, and retail sales of HORMEL® NATURAL CHOICE® meats. Jennie-O Turkey Store also returned to growth, posting strong double-digit sales and earnings increases,” stated Ettinger.
“Iconic brands such as SPAM® and SKIPPY® drove increased sales in our Grocery Products and International segments. We enjoyed strong growth from MUSCLE MILK® protein products led by innovative new items such as MUSCLE MILK® protein smoothies, though Specialty Foods did not show growth this quarter due to the sale of Diamond Crystal Brands,” commented Ettinger.
SEGMENT OPERATING HIGHLIGHTS – THIRD QUARTER
Refrigerated Foods (50% of Net Sales, 44% of
Total Segment Operating Profit)
Refrigerated Foods
segment profit increased 24 percent aided by the inclusion of the
Applegate business, favorable market conditions, and growth in
value-added products. Results reflect a favorable comparison to the
prior year, which included Applegate transaction costs of $8.6 million.
Sales increased 9 percent on continued success in foodservice products
including OLD SMOKEHOUSE® bacon and HORMEL® FIRE BRAISED™
meats, and retail products such as HORMEL® NATURAL CHOICE® meats
and HORMEL GATHERINGS® party trays. Brands experiencing declines
in sales include retail deli products and LLOYDS® barbeque ribs.
Jennie-O Turkey Store (18% of Net Sales, 20% of
Total Segment Operating Profit)
Jennie-O Turkey Store
segment profit increased 59 percent and sales increased 20 percent
following the recovery from highly pathogenic avian influenza in fiscal
2015. JENNIE-O® value-added foodservice and deli products
contributed to sales growth during the quarter. Results reflect a $9.6
million mark-to-market loss on hedges.
International & Other (6% of Net Sales, 7% of
Total Segment Operating Profit)
International segment
profit increased 5 percent and sales increased 5 percent. Exports of
fresh pork, SKIPPY® peanut butter, and the SPAM® family of
products drove the improved results.
Grocery Products (17% of Net Sales, 19% of
Total Segment Operating Profit)
Grocery Products segment
profit was flat for the quarter due to an increase in advertising spend
and transaction costs related to the Justin’s, LLC acquisition. Sales
grew 3 percent led by the inclusion of JUSTIN’S® products in
addition to increases in the SPAM® family of products, SKIPPY®
peanut butter, and WHOLLY GUACAMOLE® dips.
Specialty Foods (9% of Net Sales, 10% of Total
Segment Operating Profit)
Specialty Foods segment profit
decreased 13 percent and sales decreased 25 percent. Continued growth in MUSCLE
MILK® protein products did not offset reduced contract packaging
sales and the divestiture of Diamond Crystal Brands.
PROVISION FOR INCOME TAXES
Income
taxes for the quarter benefited from a $14 million reduction due to
discrete tax events primarily related to an international entity
restructuring.
OUTLOOK
“We expect a strong finish to fiscal 2016, led by valued-added sales in Refrigerated Foods, Jennie-O Turkey Store and International,” remarked James P. Snee, president and chief operating officer. “Franchises such as SKIPPY® peanut butter products, WHOLLY GUACAMOLE® dips, and MUSCLE MILK® protein products are positioned to drive sales growth for the fourth quarter,” stated Snee.
“As a result of another excellent quarter we are increasing our 2016 annual guidance to $1.60 to $1.64 per share from $1.56 to $1.60 per share,” commented Snee. “We expect to show sales and earnings growth in fiscal 2017 and will provide a more definitive guidance range on our fourth quarter conference call in November,” added Snee.
DIVIDENDS
Effective August 15, 2016, the company paid its 352nd consecutive quarterly dividend, at the annual rate of $0.58.
CONFERENCE CALL
A conference call will be webcast at 8:00 a.m. CT on Thursday, August 18, 2016. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 800- 533-7619 and providing the access code 6233484. An audio replay is available by going to https://jsp.premiereglobal.com/webrsvp and entering the access code 6233484. The webcast replay will be available at 11:00 a.m. CT, Thursday, August 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, is celebrating 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://2015csr.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 which appear on pages 32 - 39 in the company’s Form 10-Q for the fiscal quarter ended April 24, 2016, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”
Segment Data
Fiscal 2016 Third Quarter Segment Operating Results (dollars in thousands)
|
THIRD QUARTER – 13 WEEKS ENDED |
||||||||||||
|
NET SALES |
July 24, 2016 |
July 26, 2015 |
% Change |
|||||||||
| Grocery Products | $ | 399,342 | $ | 388,094 | 2.9 | |||||||
| Refrigerated Foods | 1,155,297 | 1,056,125 | 9.4 | |||||||||
| Jennie-O Turkey Store | 403,953 | 336,533 | 20.0 | |||||||||
| Specialty Foods | 212,197 | 282,774 | (25.0 | ) | ||||||||
| International & Other | 131,587 | 125,061 | 5.2 | |||||||||
| Total | $ | 2,302,376 | $ | 2,188,587 | 5.2 | |||||||
|
OPERATING PROFIT |
||||||||||||
| Grocery Products | $ | 53,344 | $ | 53,108 | 0.4 | |||||||
| Refrigerated Foods | 120,702 | 97,692 | 23.6 | |||||||||
| Jennie-O Turkey Store | 56,147 | 35,374 | 58.7 | |||||||||
| Specialty Foods | 27,089 | 31,190 | (13.1 | ) | ||||||||
| International & Other | 20,308 | 19,251 | 5.5 | |||||||||
| Total segment operating profit | 277,590 | 236,615 | 17.3 | |||||||||
| Net interest and investment expense (income) | 673 | 2,941 | (77.1 | ) | ||||||||
| General corporate expense | 2,922 | 5,473 | (46.6 | ) | ||||||||
| Noncontrolling interest | 122 | 18 | 577.8 | |||||||||
| Earnings before income taxes | $ | 274,117 | $ | 228,219 | 20.1 | |||||||
|
YEAR TO DATE – 39 WEEKS ENDED |
||||||||||||
|
NET SALES |
July 24, 2016 |
July 26, 2015 |
% Change |
|||||||||
| Grocery Products | $ | 1,193,032 | $ | 1,195,110 | (0.2 | ) | ||||||
| Refrigerated Foods | 3,409,897 | 3,222,851 | 5.8 | |||||||||
| Jennie-O Turkey Store | 1,199,559 | 1,215,464 | (1.3 | ) | ||||||||
| Specialty Foods | 722,460 | 833,472 | (13.3 | ) | ||||||||
| International & Other | 370,335 | 396,108 | (6.5 | ) | ||||||||
| Total | $ | 6,895,283 | $ | 6,863,005 | 0.5 | |||||||
|
OPERATING PROFIT |
||||||||||||
| Grocery Products | $ | 185,727 | $ | 149,810 | 24.0 | |||||||
| Refrigerated Foods | 417,612 | 313,681 | 33.1 | |||||||||
| Jennie-O Turkey Store | 237,128 | 202,990 | 16.8 | |||||||||
| Specialty Foods | 90,735 | 70,910 | 28.0 | |||||||||
| International & Other | 58,839 | 55,018 | 6.9 | |||||||||
| Total segment operating profit | 990,041 | 792,409 | 24.9 | |||||||||
| Net interest and investment expense (income) | 5,663 | 6,836 | (17.2 | ) | ||||||||
| General corporate expense | 32,111 | 18,550 | 73.1 | |||||||||
| Noncontrolling interest | 215 | 964 | (77.7 | ) | ||||||||
| Earnings before income taxes | $ | 952,482 | $ | 767,987 | 24.0 | |||||||
| HORMEL FOODS CORPORATION | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||||||
|
Thirteen Weeks Ended |
Thirty-Nine Weeks Ended |
|||||||||||||||||||
|
July 24, 2016 |
July 26, 2015* |
July 24, 2016 |
July 26, 2015* |
|||||||||||||||||
| Net sales | $ | 2,302,376 | $ | 2,188,587 | $ | 6,895,283 | $ | 6,863,005 | ||||||||||||
| Cost of products sold | 1,827,091 | 1,779,197 | 5,335,628 | 5,549,454 | ||||||||||||||||
| GROSS PROFIT | 475,285 | 409,390 | 1,559,655 | 1,313,551 | ||||||||||||||||
| Selling, general and administrative | 206,876 | 184,627 | 627,968 | 554,659 | ||||||||||||||||
| Goodwill impairment charge | - | - | 991 | - | ||||||||||||||||
| Equity in earnings of affiliates | 6,381 | 6,396 | 27,449 | 15,930 | ||||||||||||||||
| OPERATING INCOME | 274,790 | 231,159 | 958,145 | 774,822 | ||||||||||||||||
| Other income & expenses: | ||||||||||||||||||||
| Interest & investment income (expense) | 2,474 | 189 | 3,920 | 2,455 | ||||||||||||||||
| Interest expense | (3,147 | ) | (3,129 | ) | (9,583 | ) | (9,290 | ) | ||||||||||||
| EARNINGS BEFORE INCOME TAXES | 274,117 | 228,219 | 952,482 | 767,987 | ||||||||||||||||
| Provision for income taxes | 78,341 | 81,263 | 306,155 | 268,166 | ||||||||||||||||
| (effective tax rate) | 28.58 | % | 35.61 | % | 32.14 | % | 34.92 | % | ||||||||||||
| NET EARNINGS | 195,776 | 146,956 | 646,327 | 499,821 | ||||||||||||||||
|
Less: net earnings attributable to noncontrolling interest |
122 |
18 |
215 |
964 |
||||||||||||||||
|
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION |
$ |
195,654 |
$ |
146,938 |
$ |
646,112 |
$ |
498,857 |
||||||||||||
| NET EARNINGS PER SHARE | ||||||||||||||||||||
| Basic | $ | 0.37 | $ | 0.28 | $ | 1.22 | $ | 0.94 | ||||||||||||
| Diluted | $ | 0.36 | $ | 0.27 | $ | 1.19 | $ | 0.92 | ||||||||||||
| WEIGHTED AVG. SHARES OUTSTANDING | ||||||||||||||||||||
| Basic | 529,660 | 528,516 | 529,473 | 527,975 | ||||||||||||||||
| Diluted | 542,163 | 541,204 | 542,890 | 540,738 | ||||||||||||||||
| DIVIDENDS DECLARED | ||||||||||||||||||||
| PER SHARE | $ | 0.145 | $ | 0.125 | $ | 0.435 | $ | 0.375 | ||||||||||||
| * 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) | ||||||||
|
July 24, 2016 |
October 25, 2015 |
|||||||
|
(Unaudited) |
||||||||
|
ASSETS |
||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 379,597 | $ | 347,239 | ||||
| Accounts receivable | 564,922 | 605,689 | ||||||
| Inventories | 1,034,307 | 993,265 | ||||||
| Income taxes receivable | 7,015 | 6,132 | ||||||
| Deferred income taxes | - | 86,902 | ||||||
| Prepaid expenses | 15,832 | 14,383 | ||||||
| Other current assets | 8,432 | 9,422 | ||||||
| TOTAL CURRENT ASSETS | 2,010,105 | 2,063,032 | ||||||
| DEFERRED INCOME TAXES | 13,875 | - | ||||||
| INTANGIBLES | 2,737,207 | 2,526,703 | ||||||
| OTHER ASSETS | 574,192 | 538,357 | ||||||
| PROPERTY, PLANT & EQUIPMENT, NET | 1,052,918 | 1,011,739 | ||||||
| TOTAL ASSETS | $ | 6,388,297 | $ | 6,139,831 | ||||
|
LIABILITIES AND SHAREHOLDERS’ INVESTMENT |
||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term debt | $ | 145,000 | $ | 185,000 | ||||
| Current liabilities excluding debt | 983,727 | 1,029,025 | ||||||
| TOTAL CURRENT LIABILITIES | 1,128,727 | 1,214,025 | ||||||
| LONG-TERM DEBT – LESS CURRENT MATURITIES | 250,000 | 250,000 | ||||||
| OTHER LONG-TERM LIABILITIES | 615,623 | 674,413 | ||||||
| SHAREHOLDERS’ INVESTMENT | 4,393,947 | 4,001,393 | ||||||
| TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT | $ | 6,388,297 | $ | 6,139,831 | ||||
| HORMEL FOODS CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (Unaudited) (In thousands) | ||||||||||
|
Thirty-Nine Weeks Ended |
||||||||||
|
July 24, 2016 |
July 26, 2015 |
|||||||||
| OPERATING ACTIVITIES | ||||||||||
| Net earnings | $ | 646,327 | $ | 499,821 | ||||||
| Depreciation and amortization of intangibles | 96,520 | 99,027 | ||||||||
| Goodwill impairment charge | 991 | - | ||||||||
| (Increase) decrease in working capital | (99,467 | ) | 66,769 | |||||||
| Other | (22,685 | ) | 24,628 | |||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 621,686 | 690,245 | ||||||||
| INVESTING ACTIVITIES | ||||||||||
| Proceeds from sale of business | 110,149 | - | ||||||||
| Acquisitions of businesses/intangibles | (281,655 | ) | (768,339 | ) | ||||||
| Net purchases of property/equipment | (163,238 | ) | (81,778 | ) | ||||||
| Decrease in investments, equity in affiliates, and other assets | 6,865 | 3,424 | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (327,879 | ) | (846,693 | ) | ||||||
| FINANCING ACTIVITIES | ||||||||||
| Net (payments) proceeds from short-term debt | (40,000 | ) | 350,000 | |||||||
| Dividends paid on common stock | (219,744 | ) | (184,761 | ) | ||||||
| Share repurchase | (44,976 | ) | - | |||||||
| Other | 48,423 | 8,693 | ||||||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (256,297 | ) | 173,932 | |||||||
| Effect of exchange rate changes on cash | (5,152 | ) | (2,489 | ) | ||||||
| INCREASE IN CASH AND CASH EQUIVALENTS | 32,358 | 14,995 | ||||||||
| Cash and cash equivalents at beginning of year | 347,239 | 334,174 | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF QUARTER | $ | 379,597 | $ | 349,169 | ||||||
