Hormel Foods Reports Third Quarter Results and Maintains Guidance

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Hormel Foods Reports Third Quarter Results and Maintains Guidance

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

HIGHLIGHTS


Third Quarter

  • Full year guidance range of $1.88 to $1.96 maintained
  • Diluted EPS of $.42 up 2 percent from diluted EPS of $.41
  • Segment operating profit up 5 percent
  • Dollar sales of $2.2 billion, up 8 percent
  • Volume up 3 percent
  • Grocery Products operating profit up 32 percent; volume up 27 percent (volume down 1 percent excluding sales of SKIPPY® products); dollar sales up 25 percent (dollar sales flat excluding sales of SKIPPY® products)
  • Jennie-O Turkey Store operating profit up 17 percent; volume up 1 percent; dollar sales up 4 percent
  • Refrigerated Foods operating profit down 26 percent; volume down 3 percent; dollar sales up 2 percent
  • Specialty Foods operating profit up 8 percent; volume down 5 percent; dollar sales up 5 percent
  • International & Other operating profit up 34 percent; volume up 28 percent (volume up 10 percent excluding sales of SKIPPY® products); dollar sales up 31 percent (dollars sales up 11 percent excluding sales of SKIPPY® products)

The company reported fiscal 2013 third quarter net earnings of $113.6 million, up 2 percent from net earnings of $111.2 million a year earlier. For the nine months ended July 28, 2013, net earnings were $368.9 million, as compared to net earnings of $367.4 million the same period last year. Diluted net earnings per share for the nine months ended July 28, 2013 were $1.37, equal to a year ago.

Sales for the quarter were $2.2 billion, up 8 percent from the same period in fiscal 2012. For the nine months ended July 28, 2013, sales totaled $6.4 billion, up 6 percent from the same period last year.

COMMENTARY

"We had a solid quarter, with all five segments reporting increased sales over last year," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. "We also generated improved earnings, with four of five segments posting increased operating profits. Earnings per share of $0.42 for the third quarter was in line with our expectations and keeps us on pace with our full year adjusted guidance range."

"Our Grocery Products segment benefitted from good performance by our new SKIPPY® business. Our Jennie-O Turkey Store segment delivered a strong quarter, despite higher grain costs and lower commodity meat prices. Our International business continues to achieve impressive results, led by strong export sales of our SPAM® family of products and fresh pork, as well as the addition of the SKIPPY® business. Higher pork input costs squeezed margins for our retail value-added products, particularly bacon, decreasing our Refrigerated Foods segment results during the quarter," Ettinger remarked.

"We are excited about the recent roll-out of our HORMEL® REV® snack wraps during the quarter, which is supported by a national advertising campaign that began in late July. I am also pleased with the progress our team has made in integrating and growing sales of SKIPPY® products, both in the U.S. and internationally," commented Ettinger.

SEGMENT OPERATING HIGHLIGHTS - THIRD QUARTER

Grocery Products (17% of Net Sales, 29% of Total Segment Operating Profit)
Grocery Products segment profit increased by 32 percent. Net sales, including SKIPPY® products, increased over last year's results by 25 percent. Excluding SKIPPY® products, segment sales were flat as compared to last year. Net sales of DINTY MOORE® stew, HORMEL® MARY KITCHEN® hash, and HORMEL® bacon toppings increased over last year.

Refrigerated Foods (50% of Net Sales, 24% of Total Segment Operating Profit)
Refrigerated Foods segment profit declined 26 percent, as elevated raw material costs squeezed margins in certain retail categories, with bacon impacted the most. Sales increased 2 percent, led by retail sales of HORMEL® party trays, HORMEL® NATURAL CHOICE® deli meats, and HORMEL® CURE 81® hams, and foodservice sales of HORMEL® FIRE BRAISED meats and HORMEL® PECANWOOD bacon.

Jennie-O Turkey Store (17% of Net Sales, 25% of Total Segment Operating Profit)
Jennie-O Turkey Store delivered a solid performance this quarter despite high feed costs, with segment operating profit up 17 percent from a year ago. Increased value-added sales and an improved product mix offset higher feed costs and lower commodity meat prices. Net sales for the quarter rose 4 percent, driven by growth in sales of JENNIE-O TURKEY STORE® ground turkey chubs and turkey bacon.

Specialty Foods (11% of Net Sales, 13% of Total Segment Operating Profit)
Specialty Foods segment profit increased 8 percent and net sales grew 5 percent, led by sales of sweetener, nutritional products, ready to drink beverages, and ingredients. The agreement allowing Diamond Crystal Brands to sell SPLENDA® sweetener into foodservice trade channels was extended one month to July 31, 2013.

International & Other (5% of Net Sales, 9% of Total Segment Operating Profit)
The International & Other segment grew segment profit by 34 percent and net sales by 31 percent, driven principally by stronger exports of our SPAM® family of products and fresh pork, improved performance by our operations in China, and the addition of the SKIPPY® export business.

OUTLOOK

"Earnings reported in the third quarter keep us on track to achieve results consistent with our adjusted annual guidance range of $1.88 to $1.96 per share," said Ettinger. "Toward the end of the third quarter we were able to adjust for higher raw material costs in key product categories such as bacon. We anticipate Jennie-O Turkey Store will continue to rebound from headwinds faced earlier in the year, which should benefit results through the rest of fiscal 2013. We expect four of five segments to outperform in the fourth quarter, with only Specialty Foods expected to experience a down quarter."

"We are excited about the new products that we are introducing to the marketplace this year, such as our HORMEL® REV® snack wraps and HORMEL® FIRE BRAISED meats," concluded Ettinger. "We have solid marketing and promotional plans in place to drive sales of our value-added products in the fourth quarter."

DIVIDENDS

Effective August 15, 2013, the Company paid its 340th consecutive quarterly dividend, at the annual rate of $.68.

CONFERENCE CALL

A conference call will be Webcast at 8:00 a.m. CT (9:00 a.m. ET) on Thursday, August 22, 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 877-941-8609 and you must provide the access code of 4632577. An audio replay is available by calling 800-406-7325and entering access code 4632577. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, August 22, 2013, through 11:59 p.m. CT on Thursday, September 5, 2013. The Webcast replay will be available at 10:30 a.m. CT, Thursday, August 22, 2013, and 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 31-38 in the company's Form 10-Q for the quarter ended April 28, 2013, which was filed with the SEC on June 7, 2013, and can be accessed at www.hormelfoods.com under "Investors-SEC Filings."

Statements Follow

Segment Data

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

 

THIRD QUARTER - 13 WEEKS ENDED

  

NET SALES

July 28, 2013

July 29, 2012

% Change

Grocery Products$370,297$297,17724.6
Refrigerated Foods1,068,5871,043,3112.4
Jennie-O Turkey Store367,125351,6044.4
Specialty Foods240,512230,0724.5
International & Other 113,004 86,02431.4 
Total$2,159,525$2,008,1887.5 
 

OPERATING PROFIT

Grocery Products$52,962$40,05232.2
Refrigerated Foods44,76960,757(26.3)
Jennie-O Turkey Store45,62339,10616.7
Specialty Foods23,17021,4907.8
International & Other 16,692 12,43734.2 
Total segment operating profit183,216173,8425.4
Net interest and investment expense (income)3,5772,36351.4
General corporate expense2,8333,225(12.2)
Noncontrolling interest 270 1,240(78.2)
Earnings before income taxes$177,076$169,4944.5 
 
 

YEAR TO DATE - 39 WEEKS ENDED

 

NET SALES

July 28, 2013

July 29, 2012

% Change

Grocery Products$1,097,942$830,64932.2
Refrigerated Foods3,143,3583,158,811(0.5)
Jennie-O Turkey Store1,142,1981,120,0282.0
Specialty Foods720,048677,0436.4
International & Other 324,906 273,95518.6 
Total$6,428,452$6,060,4866.1 
 

OPERATING PROFIT

Grocery Products$150,170$127,00318.2
Refrigerated Foods153,239167,515(8.5)
Jennie-O Turkey Store156,567186,066(15.9)
Specialty Foods72,89858,99623.6
International & Other 49,421 37,76330.9 
Total segment operating profit582,295577,3430.9
Net interest and investment expense (income)6,8874,93239.6
General corporate expense19,22818,0406.6
Noncontrolling interest 2,720 3,226(15.7)
Earnings before income taxes$558,900$557,5970.2 
 
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
   

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

July 28, 2013

July 29, 2012

July 28, 2013

 

July 29, 2012

 
Net sales$2,159,525$2,008,188$6,428,452$6,060,486
 
Cost of products sold 1,829,219  1,701,132  5,401,152  5,080,414 
 
GROSS PROFIT:330,306307,0561,027,300980,072
 
Selling, general and administrative150,999145,022479,896446,183
 
Equity in earnings of affiliates 1,346  9,823  18,383  28,640 
 
OPERATING INCOME:180,653171,857565,787562,529
 
Other income & expenses:
Interest & investment (expense) income(455)8442,4714,772
Interest expense (3,122) (3,207) (9,358) (9,704)
 
EARNINGS BEFORE INCOME TAXES:177,076169,494558,900557,597
 
Provision for income taxes63,17157,087187,309186,922
(effective tax rate) 35.67% 33.68% 33.51% 33.52%
 
NET EARNINGS113,905112,407371,591370,675

Less: net earnings attributable to noncontrolling interest

 

270

  

1,240

  

2,720

  

3,226

 

NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION

$

113,635

 

$

111,167

 

$

368,871

 

$

367,449

 
 
NET EARNINGS PER SHARE
Basic$.43 $.42 $1.39 $1.39 
Diluted$.42 $.41 $1.37 $1.37 
 
WEIGHTED AVG SHARES O/S
Basic264,605263,359264,472263,638
Diluted270,769268,746270,230269,138
 
DIVIDENDS DECLARED
PER SHARE$.17 $.15 $.51 $ Read Full Story

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