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Hormel Foods Reports Second Quarter Results

AUSTIN, Minn.--(BUSINESS WIRE)--May. 21, 2009-- Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2009 second quarter.

HIGHLIGHTS

  • Diluted EPS of $.59, up 5 percent from $.56 per share in 2008
  • Segment operating profit up 2 percent from last year
  • Dollar sales of $1.6 billion, even with 2008
  • Volume down 2 percent from 2008 (down 3 percent excluding acquisitions)
  • Grocery Products operating profit up 5 percent; volume up 2 percent; dollar sales up 4 percent
  • Refrigerated Foods operating profit down 7 percent; volume down 2 percent; dollar sales even with last year
  • Jennie-O Turkey Store operating profit up 42 percent; volume down 4 percent; dollar sales down 1 percent
  • Specialty Foods operating profit down 1 percent; volume down 7 percent (down 11 percent excluding acquisitions); dollar sales down 5 percent (down 8 percent excluding acquisitions)
  • All Other operating profit down 14 percent; volume up 9 percent; dollar sales up 3 percent

The company reported fiscal 2009 second quarter net earnings of $80.4 million, up 4 percent from earnings of $77.6 million a year earlier. Diluted earnings per share for the quarter were $.59 this year compared to $.56 per share last year and sales totaled $1.6 billion, even with fiscal 2008. For the six months ended April 26, 2009, net earnings were $161.8 million, or $1.20 per diluted share, the latter of which was even with last year. Sales totaled $3.3 billion, up 2 percent, from $3.2 billion in the same period last year.

COMMENTARY

“We are pleased to report record earnings for the quarter. Our Grocery Products segment again delivered increases in sales and segment profit, with strong sales of canned meats and Mexican products. Our Jennie-O Turkey Store segment continues to rebound, despite difficult market conditions, as they were faced with even lower commodity meat prices than in the first quarter,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

“Our Refrigerated Foods segment experienced another difficult quarter, as continued weak cut-out margins led to losses in our pork operations. The overall weakness in this segment masked a very strong performance by our Meat Products group, which achieved high single-digit sales increases of its branded portfolio of products. Our Specialty Foods segment was essentially flat, while our All Other segment had weaker results,” remarked Ettinger.

“We have seen a continuation of some of the same trends we saw in the first quarter, as consumers seek value in retail channels while foodservice sales remain soft. Unlike the first quarter, however, we have seen improvement in sales of some of our convenience items, including our refrigerated entrees and our COMPLEATS microwave meals,” commented Ettinger.

SEGMENT OPERATING HIGHLIGHTS – SECOND QUARTER

Grocery Products (15% of Net Sales, 33% of Total Segment Operating Profit)

The Grocery Products segment completed a strong quarter with sales up 4 percent and segment operating profit up 5 percent compared to last year. Sales were strong for the SPAM family of products, DINTY MOORE stews and Mexican products. These products created strong consumer demand because of their great value proposition.

Refrigerated Foods (52% of Net Sales, 39% of Total Segment Operating Profit)

Segment operating profit was down 7 percent compared to a year ago, due to the difficult spreads between hog costs and primal values. The Meat Products business unit performed well, with sales of NATURAL CHOICE lunch meats, HORMEL Party Trays and the Di Lusso Deli Company products all up double digits, among others. Foodservice sales were soft for the quarter, reflecting the continued softness in the economy as a whole.

Jennie-O Turkey Store (18% of Net Sales, 13% of Total Segment Operating Profit)

Jennie-O Turkey Store achieved an outstanding 42 percent increase in segment operating profit. Lower feed expenditures due to a planned reduction of turkey production, as well as a reduced cost per ton, were the primary drivers of the improved profitability. The reduced production has helped offset the challenge of lower commodity meat prices, by minimizing our exposure to those markets.

Specialty Foods (11% of Net Sales, 11% of Total Segment Operating Profit)

Segment operating profit for Specialty Foods was down 1 percent, reflecting mixed results within the segment. Diamond Crystal Brands finished a strong quarter with increased sales of sugar substitutes and liquid portion products. Hormel Specialty Products realized solid growth in private label canned products. However, sales by these businesses were unable to completely offset decreased sales of nutritional and ready-to-drink products at Century Foods International.

All Other (4% of Net Sales, 4% of Total Segment Operating Profit)

The All Other segment, which includes Hormel Foods International, experienced a 14 percent decline in segment profit. Export sales of the SPAM family of products and fresh pork continued their strong momentum from the first quarter, but were unable to completely offset currency headwinds and weak results experienced by our joint ventures.

Net Interest and Investment Income

Net interest and investment income was higher than last year due to the favorable returns on the rabbi trust investments and a $3.6 million gain on the dissolution of the Carapelli joint venture.

General Corporate Expense

General corporate expenses increased from last year due to increased medical expenses.

OUTLOOK

"As a result of our better-than-expected first half, we now anticipate full year results in the upper end of our previously announced guidance range of $2.15 to $2.25 per share. Despite potential on-going challenges, which could include continued negative cutout margins, export market issues and commodity cost pressures, we believe our strong portfolio of branded products, with many good value offerings, and the strength of our management team, will lead to a solid performance this year,” concluded Ettinger.

DIVIDENDS

Effective May 15, 2009, the Company paid its 323rd consecutive quarterly dividend. The annual rate is $.76.

CONFERENCE CALL

A conference call will be Webcast at 8:30 a.m. CT on Thursday, May 21, 2009. 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 800-762-8779 and you must provide the access code of 4063374. An audio replay is available by calling 800-406-7325 and entering access code 4063374. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, May 21, 2009, through 11:59 p.m. CT on Thursday, June 4, 2009. The Webcast replay will be available at 10:30 a.m. CT, Thursday, May 21, 2009, and archived for one year.

ABOUT HORMEL FOODS CORPORATION

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 quality, value-added brands to the global marketplace. The company is a member of the Standard & Poor's 500 Index, and in each of the past ten years, Hormel Foods was named one of “The 400 Best Big Companies in America” by Forbes 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.

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 25 - 30 in the company’s 10-Q for the fiscal quarter ended Jan. 25, 2009, which can be accessed at http://www.hormelfoods.com under “Investors-SEC Filings.”

Segment Data

Fiscal 2009 Second Quarter Segment Operating Results (in Thousands)

      SECOND QUARTER – 13 WEEKS ENDED
       

NET SALES

April 26, 2009 April 27, 2008 % Change
Grocery Products $ 241,684 $ 233,464 3.5
Refrigerated Foods 834,062 831,821 0.3
Jennie-O Turkey Store 289,745 291,889 (0.7 )
Specialty Foods 173,586 182,534 (4.9 )
All Other   55,966     54,376   2.9  
Total $ 1,595,043 $ 1,594,084 0.1
 

OPERATING PROFIT

Grocery Products $ 43,677 $ 41,611 5.0
Refrigerated Foods 51,695 55,625 (7.1 )
Jennie-O Turkey Store 16,678 11,708 42.4
Specialty Foods 15,432 15,513 (0.5 )
All Other   5,027     5,843   (14.0 )
Total segment operating profit 132,509 130,300 1.7
Net interest and investment income 1,666 (3,176 ) 152.5
General corporate expense   (9,547 )   (5,747 ) (66.1 )
Earnings before income taxes $ 124,628 $ 121,377 2.7
 
 
YEAR TO DATE – 26 WEEKS ENDED

 

NET SALES

April 26, 2009 April 27, 2008 % Change
Grocery Products $ 483,627 $ 460,879 4.9
Refrigerated Foods 1,731,486 1,689,281 2.5
Jennie-O Turkey Store 594,784 583,338 2.0
Specialty Foods 352,476 371,321 (5.1 )
All Other   121,756     110,430   10.3  
Total $ 3,284,129 $ 3,215,249 2.1
 

OPERATING PROFIT

Grocery Products $ 83,312 $ 77,980 6.8
Refrigerated Foods 97,440 118,431 (17.7 )
Jennie-O Turkey Store 45,927 46,512 (1.3 )
Specialty Foods 30,749 33,806 (9.0 )
All Other   13,272     14,868   (10.7 )
Total segment operating profit 270,700 291,597 (7.2 )
Net interest and investment income (3,398 ) (14,834 ) 77.1
General corporate expense   (18,044 )   (16,075 ) (12.2 )
Earnings before income taxes $ 249,258 $ 260,688 (4.4 )
 
 
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
                   
Thirteen Weeks Ended Twenty-Six Weeks Ended
4-26-2009 4-27-2008* 4-26-2009 4-27-2008*
 
Net sales $ 1,595,043 $ 1,594,084 $ 3,284,129 $ 3,215,249
 
Cost of products sold   1,333,005     1,330,132     2,749,776     2,658,606  
 
GROSS PROFIT: 262,038 263,952 534,353 556,643
 
Selling, general and administrative 139,846 140,220 282,371 284,311
 
Equity in earnings of affiliates   770     821     674     3,190  
 
OPERATING INCOME: 122,962 124,553 252,656 275,522
 
Other income & expenses:
Interest & investment income (loss) 8,584 3,253 10,975 (1,685 )
 
Interest expense   (6,918 )   (6,429 )   (14,373 )   (13,149 )
 
EARNINGS BEFORE
INCOME TAXES: 124,628 121,377 249,258 260,688
 
Provision for income taxes 44,243 43,816 87,490 94,946
(effective tax rate)   35.50 %   36.10 %   35.10 %   36.42 %
 
NET EARNINGS $ 80,385   $ 77,561   $ 161,768   $ 165,742  
 
NET EARNINGS PER SHARE
Basic $ .60   $ .57   $ 1.20   $ 1.22  
Diluted $ .59   $ .56   $ 1.20   $ 1.20  
 
WEIGHTED AVG SHARES OUT
Basic 134,272 135,652 134,325 135,679
Diluted 135,373 137,620 135,268 137,643
 
DIVIDENDS DECLARED
PER SHARE $ .190   $ .185   $ .380   $ .370  
 

* Includes retrospective reclassification of shipping and handling expenses to cost of products sold from selling, general and administrative.

 
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
           
 
April 26, 2009 October 26, 2008
(In Thousands)

ASSETS

 
CURRENT ASSETS
Cash and cash equivalents $ 312,331 $ 154,778
Accounts receivable 344,925 411,010
Inventories 748,178 784,542
Deferred income taxes 47,565 45,948
Prepaid expenses & other current assets   33,297   41,900
 
TOTAL CURRENT ASSETS 1,486,296 1,438,178
 
INTANGIBLES 765,752 770,544
 
OTHER ASSETS 417,741 430,092
 
PROPERTY, PLANT & EQUIPMENT, NET   963,979   977,657
 
TOTAL ASSETS $ 3,633,768 $ 3,616,471
 
 

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

 
TOTAL CURRENT LIABILITIES $ 695,660 $ 781,233
 
LONG-TERM DEBT – LESS CURRENT MATURITIES 350,000 350,000
 
OTHER LONG-TERM LIABILITIES 482,592 477,666
 
SHAREHOLDERS’ INVESTMENT   2,105,516   2,007,572
 
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT $ 3,633,768 $ 3,616,471
 
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
       
Twenty-Six Weeks Ended
4-26-2009     4-27-2008
OPERATING ACTIVITIES (In Thousands)
Net earnings $ 161,768     $ 165,742
Depreciation and amortization of intangibles 62,494 63,971
Decrease (Increase) in working capital 42,982 (103,079 )
Other   (8,292 )   (6,859 )
NET CASH PROVIDED BY OPERATING ACTIVITIES 258,952 119,775
 
INVESTING ACTIVITIES
Net sale (purchase) of available-for-sale securities 3,899 (8,899 )
Acquisitions of businesses/intangibles (580 ) (3,920 )
Net purchases of property / equipment (43,804 ) (66,337 )
(Increase) Decrease in investments, equity in affiliates,

and other assets

 

(1,581

)

 

7,700

 
NET CASH USED IN INVESTING ACTIVITIES (42,066 ) (71,456 )
 
FINANCING ACTIVITIES
Net payments on debt 0 (45,054 )
Dividends paid on common stock (50,376 ) (45,469 )
Share repurchase (10,375 ) (21,927 )
Other   1,418     21,538  
NET CASH USED IN FINANCING ACTIVITIES   (59,333 )   (90,912 )
INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS

157,553

(42,593

)

Cash and cash equivalents at beginning of year   154,778     149,749  
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 312,331   $ 107,156  

Source: Hormel Foods Corporation

Hormel Foods Corporation
Investor Contact:
Kevin Jones, 507-437-5248
kcjones@hormel.com
or
Media Contact:
Julie Craven, 507-437-5345
media@hormel.com