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Hormel Foods Announces Record Second Quarter Results And Reaffirms Full Year Guidance


AUSTIN, Minn., May 24, 2018 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the second quarter of fiscal 2018. All comparisons are to the second quarter of fiscal 2017 unless otherwise noted.

Hormel Foods corporate logo

EXECUTIVE SUMMARY

COMMENTARY
"Our team delivered record earnings per share of $0.44 which was in line with our expectation and keeps us on track to maintain our full year earnings guidance," said Jim Snee, chairman of the board, president, and chief executive officer. "We were particularly pleased with the bottom-line performance from Refrigerated Foods as our experienced team grew our value-added profits while navigating through volatile markets. Our balanced business model helped mitigate higher freight costs and a difficult commodity environment."

"We delivered record sales led by our Refrigerated Foods and International segments. Strong top-line growth from brands such as Hormel® Natural Choice® and Hormel® Bacon 1TM and international sales of products such as Skippy® peanut butter was complemented by the strategic acquisitions of Fontanini, Columbus Craft Meats, and Ceratti," Snee said. "Our core center store portfolio of brands such as SPAM®, Dinty Moore®, and Herdez® also showed strong growth this quarter."

SEGMENT HIGHLIGHTS ? SECOND QUARTER

Refrigerated Foods

Volume and sales increases benefited from the inclusion of the Columbus and Fontanini acquisitions in addition to strong retail sales of Hormel® Natural Choice® products and foodservice sales of Hormel® pepperoni and Hormel® Bacon 1TM fully cooked bacon. Organic volume decreased due to lower hog harvest volumes.

Refrigerated Foods delivered segment profit growth of 18% despite a 25% decline in commodity profits, a double-digit increase in per-unit freight expenses, and higher advertising expenses. Strong results were delivered by our branded retail and foodservice businesses in addition to the inclusion of the Fontanini and Columbus acquisitions.

Grocery Products

Low-single-digit sales growth in our core Grocery Products portfolio, led by Wholly Guacamole® dips, the SPAM® family of products, Herdez® salsas, Dinty Moore® stew, and Hormel® chili, was more than offset by significant sales declines across the CytoSport portfolio and our contract manufacturing business. Total Grocery Products segment profit was down due to increased promotional activity and lower volumes at CytoSport and lower earnings from our contract manufacturing business.

Jennie-O Turkey Store

Sales declines were primarily due to lower whole bird pricing and volume as a result of continued oversupply of turkeys in the industry and excess meat in cold storage. Sales declines of whole birds were partially offset by increased retail sales, led by Jennie-O® lean ground turkey and Jennie-O® Oven Ready® products. Segment profit decreased as a result of lower profits from whole bird and commodity sales, double-digit increases in per-unit freight costs, and increased advertising.

International & Other

International volume and sales increases were related to strong results in China, increased export sales, and the inclusion of the Ceratti business. Earnings increased on improved profitability in China due to lower raw material costs but were partially offset by higher advertising expenses and lower branded export margins.

SELECTED FINANCIAL DETAILS

Income Statement

Cash Flow Statement

Balance Sheet

OUTLOOK
"We are reaffirming our sales and earnings outlook for fiscal 2018," Snee said. "Our balanced business model allows us to manage through volatility and deliver consistent earnings growth. We continue to execute our value-added growth strategy in Refrigerated Foods and expect our retail and foodservice branded businesses to offset higher freight costs and lower pork commodity profits. Our expectation is for strong year-over-year earnings growth for International and for Grocery Products to return to its growth trajectory. While we are starting to see early signs of a recovery in the turkey industry, we expect Jennie-O Turkey Store to continue showing earnings declines for the remainder of this year."

"We are making excellent progress on the integrations of our recent acquisitions. These efforts, in combination with continued execution of our strategic imperatives, will ensure we remain in a position to deliver strong growth in the future."


Fiscal 2018 Outlook

Net Sales Guidance (in billions)

$9.70 - $10.10

Earnings per Share Guidance

$1.81 - $1.95

PRESENTATION
A conference call will be webcast at 8:00 a.m. CT on Thursday, May 24, 2018. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 800-239-9838 and providing the access code 9118102. An audio replay is available by going to www.hormelfoods.com and clicking on Investors. The webcast replay will be available at 11:00 a.m. CT, Thursday, May 24, 2018, and will remain on the website for one year.

ABOUT HORMEL FOODS - Inspired People. Inspired Food.tm
Hormel Foods Corporation, based in Austin, Minn., is a leading global branded food company with over $9 billion in annual revenues across more than 80 countries worldwide. Its brands include Skippy®, SPAM®, Hormel® Natural Choice®, Columbus®, Applegate®, Justin's®, Wholly Guacamole®, Hormel® Black Label® and more than 30 other beloved brands. The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named one of "The 100 Best Corporate Citizens" by Corporate Responsibility Magazine for the tenth year in a row, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. In 2016, the company celebrated its 125th anniversary and announced its new vision for the future - Inspired People. Inspired Food.tm - focusing on its legacy of innovation. For more information, visit www.hormelfoods.com and http://csr.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 31 - 38 in the company's Form 10-Q for the quarter ended January 28, 2018, which can be accessed at www.hormelfoods.com under "Investors - Filings & Reports - SEC Filings."

 1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurements of organic net sales and organic volume are presented to provide investors additional information to facilitate the comparison of past and present operations. The company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

Organic net sales and organic volume are defined as net sales and volume excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the acquisition of Columbus Craft Meats (November 2017), the acquisition of Fontanini Italian Meats and Sausages (August 2017), and the divestiture of Farmer John (January 2017) in Refrigerated Foods and the acquisition of Ceratti (August 2017) in International. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in the second quarter and second quarter year-to-date of fiscal 2018 and fiscal 2017.

NON-GAAP1 VOLUME AND SALES DATA

(Unaudited) (In thousands)


2nd Quarter


FY 2018


FY 2017


VOLUME (LBS.)


Reported

(GAAP)


Acquisitions


Organic

(Non-GAAP)


Reported

(GAAP)


Organic

% change

Grocery Products


333,398



?



333,398



338,883



(1.6)


Refrigerated Foods


548,319



(38,402)



509,917



515,490



(1.1)


Jennie-O Turkey Store


197,806



?



197,806



203,557



(2.8)


International & Other


91,878



(10,676)



81,202



80,312



1.1


TOTAL


1,171,401



(49,078)



1,122,323



1,138,242



(1.4)


























FY 2018


FY 2017


NET SALES


Reported

(GAAP)


Acquisitions


Organic

(Non-GAAP)


Reported

(GAAP)


Organic

% change

Grocery Products


$

631,550



$

?



$

631,550



$

640,419



(1.4)


Refrigerated Foods


1,166,967



(134,878)



1,032,089



1,027,486



0.4


Jennie-O Turkey Store


371,916





371,916



388,237



(4.2)


International & Other


160,135



(19,040)



141,095



131,167



7.6


TOTAL


$

2,330,568



$

(153,918)



$

2,176,650



$

2,187,309



(0.5)


 

Year to Date


FY 2018


FY 2017



VOLUME (LBS.)


Reported

(GAAP)


Acquisitions


Organic

(Non-GAAP)


Reported

(GAAP)


Divestitures


Organic

(Non-GAAP)


Organic

% change

Grocery Products


667,615



?



667,615



677,675



?



677,675



(1.5)


Refrigerated Foods


1,110,814



(70,062)



1,040,752



1,129,915



(80,454)



1,049,461



(0.8)


Jennie-O Turkey Store


406,237



?



406,237



420,200



?



420,200



(3.3)


International & Other


177,327



(23,509)



153,818



155,361



?



155,361



(1.0)


TOTAL


2,361,993



(93,571)



2,268,422



2,383,151



(80,454)



2,302,697



(1.5)


































FY 2018


FY 2017



NET SALES


Reported

(GAAP)


Acquisitions


Organic

(Non-GAAP)


Reported

(GAAP)


Divestitures


Organic

(Non-GAAP)


Organic

% change

Grocery Products


$

1,245,420



$

?



$

1,245,420



$

1,250,793



$

?



$

1,250,793



(0.4)


Refrigerated Foods


2,343,423



(245,895)



2,097,528



2,150,525



(100,231)



2,050,294



2.3


Jennie-O Turkey Store


762,564



?



762,564



809,226



?



809,226



(5.8)


International & Other


310,454



(40,895)



269,559



256,992



?



256,992



4.9


TOTAL


$

4,661,861



$

(286,790)



$

4,375,071



$

4,467,536



$

(100,231)



$

4,367,305



0.2


Statements Follow

HORMEL FOODS CORPORATION

SEGMENT DATA

(Unaudited) (In thousands)








Thirteen Weeks Ended



April 29,
2018


April 30,
2017


% Change

NET SALES







Grocery Products


$

631,550



$

640,419



(1.4)


Refrigerated Foods


1,166,967



1,027,486



13.6


Jennie-O Turkey Store


371,916



388,237



(4.2)


International & Other


160,135



131,167



22.1


TOTAL


$

2,330,568



$

2,187,309



6.5
















OPERATING PROFIT







Grocery Products


$

95,651



$

108,297



(11.7)


Refrigerated Foods


154,192



130,194



18.4


Jennie-O Turkey Store


42,356



63,786



(33.6)


International & Other


20,850



19,617



6.3


TOTAL SEGMENT OPERATING PROFIT


313,049



321,894



(2.7)


Net interest and investment expense (income)


9,490



205



4,529.3


General corporate expense


6,814



5,822



17.0


Noncontrolling interest


138



(40)



445.0


EARNINGS BEFORE INCOME TAX


$

296,883



$

315,827



(6.0)









Twenty-Six Weeks Ended



April 29,
2018


April 30,
2017


% Change

NET SALES







Grocery Products


$

1,245,420



$

1,250,793



(0.4)


Refrigerated Foods


2,343,423



2,150,525



9.0


Jennie-O Turkey Store


762,564



809,226



(5.8)


International & Other


310,454



256,992



20.8


TOTAL


$

4,661,861



$

4,467,536



4.3
















OPERATING PROFIT







Grocery Products


$

195,628



$

200,673



(2.5)


Refrigerated Foods


297,141



304,002



(2.3)


Jennie-O Turkey Store


92,230



131,966



(30.1)


International & Other


45,505



45,080



0.9


TOTAL SEGMENT OPERATING PROFIT


630,504



681,721



(7.5)


Net interest and investment expense (income)


10,913



782



1,295.5


General corporate expense


17,785



10,443



70.3


Noncontrolling interest


242



116



108.6


EARNINGS BEFORE INCOME TAX


$

602,048



$

670,612



(10.2)


 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except per share amounts)




Thirteen Weeks Ended


Twenty-Six Weeks Ended



April 29,
2018


April 30,
2017


April 29,
2018


April 30,
2017

Net sales


$

2,330,568



$

2,187,309



$

4,661,861



$

4,467,536


Cost of products sold


1,833,882



1,700,389



3,662,996



3,428,336


GROSS PROFIT


496,686



486,920



998,865



1,039,200


Selling, general and administrative


203,799



181,009



422,921



391,226


Equity in earnings of affiliates


13,486



10,121



37,017



23,420


OPERATING INCOME


306,373



316,032



612,961



671,394


Interest & investment (expense) income


(2,489)



2,818



817



5,267


Interest expense


(7,001)



(3,023)



(11,730)



(6,049)


EARNINGS BEFORE INCOME TAXES


296,883



315,827



602,048



670,612


Provision for income taxes


59,361



104,941



61,315



224,423


(effective tax rate)


20.0

%


33.2

%


10.2

%


33.5

%

NET EARNINGS


237,522



210,886



540,733



446,189


Less: net earnings attributable to noncontrolling interest


138



(40)



242



116


NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION


$

237,384



$

210,926



$

540,491



$

446,073











NET EARNINGS PER SHARE









Basic


$

0.45



$

0.40



$

1.02



$

0.84


Diluted


$

0.44



$

0.39



$

1.00



$

0.83











WEIGHTED AVG. SHARES OUTSTANDING









Basic


529,799



528,712



529,626



528,649


Diluted


542,811



539,635



543,146



539,850











Dividends declared per share


$

0.1875



$

0.1700



$

0.3750



$

0.3400


 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited) (In thousands)




April 29,
2018


October 29,
2017

ASSETS

Cash and cash equivalents


$

261,571



$

444,122


Accounts receivable


551,392



618,351


Inventories


1,011,215



921,022


Income taxes receivable


2,930



22,346


Prepaid expenses


18,534



16,144


Other current assets


5,138



4,538


TOTAL CURRENT ASSETS


1,850,780



2,026,523


Intangibles


3,983,252



3,146,827


Other Assets


641,864



599,307


Property, Plant & Equipment, Net


1,353,853



1,203,251


TOTAL ASSETS


$

7,829,749



$

6,975,908












LIABILITIES AND SHAREHOLDERS' INVESTMENT

Short-term debt


$

185,000



$

?


Current liabilities excluding debt


963,461



1,058,212


TOTAL CURRENT LIABILITIES


1,148,461



1,058,212


Long-term debt - Less current maturities


624,763



250,000


Deferred income taxes


125,425



98,410


Other long-term liabilities


639,467



629,589


Shareholders' Investment


5,291,633



4,939,697


TOTAL LIAB. & SHAREHOLDERS' INVESTMENT


$

7,829,749



$

6,975,908


 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)




Twenty-Six Weeks Ended



April 29,
2018


April 30,
2017

OPERATING ACTIVITIES





Net earnings


$

540,733



$

446,189


Depreciation and amortization of intangibles


80,316



63,328


Increase in working capital


(77,785)



(239,931)


Other


(99,923)



10,966


NET CASH PROVIDED BY OPERATING ACTIVITIES


443,341



280,552







INVESTING ACTIVITIES





Proceeds from sale of business


?



135,944


Acquisitions of businesses/intangibles


(857,673)



?


Net purchases of property/equipment


(134,721)



(75,818)


Decrease in investments, equity in affiliates, and other assets


5,934



3,977


NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES


(986,460)



64,103







FINANCING ACTIVITIES





Net proceeds (payments) from short-term debt


185,000



?


Net proceeds (payments) from long-term debt


374,763



?


Dividends paid on common stock


(189,139)



(166,507)


Share repurchase


(44,741)



(49,583)


Other


29,978



8,879


NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES


355,861



(207,211)


Effect of exchange rate changes on cash


4,707



(3,686)


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(182,551)



133,758


Cash and cash equivalents at beginning of year


444,122



415,143


CASH AND CASH EQUIVALENTS AT END OF QUARTER


$

261,571



$

548,901


 

INVESTOR CONTACT:

Nathan Annis

(507) 437-5248

[email protected]


MEDIA CONTACT:

Wendy Watkins

(507) 437-5345

[email protected]

 

SOURCE Hormel Foods Corporation


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