HORMEL FOODS CORPORATION AUSTIN, Minn., Feb. 23, 2017 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL) today reported results for the first quarter of fiscal year 2017. All comparisons are to the first quarter of fiscal year 2016. Results reflect the divestiture of the Diamond Crystal Brands business, the divestiture of the Farmer John business, and the acquisition of Justin's, LLC. The impact of these transactions are excluded in the presentation of the non-GAAP adjusted measures below.
SUMMARY
First Quarter
-- Record diluted earnings per share of $0.44, up 2 percent from 2016 EPS
of $0.43
-- Net earnings of $235 million, flat compared to 2016 net earnings of $235
million
-- Sales of $2.3 billion, down 1 percent; Non-GAAP(1) adjusted sales(2)
increased 3 percent
-- Volume down 2 percent; Non-GAAP(1) adjusted volume(2) up 5 percent
-- Refrigerated Foods operating profit up 4 percent; volume down 3 percent;
Non-GAAP(1) adjusted volume(2) flat; sales down 3 percent; Non-GAAP(1)
adjusted sales(2) down 1 percent
-- International & Other operating profit up 5 percent; volume down 1
percent; sales down 2 percent
-- Grocery Products operating profit up 1 percent; volume up 4 percent;
Non-GAAP(1) adjusted volume(2) up 2 percent; sales up 7 percent;
Non-GAAP(1) adjusted sales(2) up 3 percent
-- Specialty Foods operating profit flat; volume down 30 percent;
Non-GAAP(1) adjusted volume(2) up 12 percent; sales down 19 percent;
Non-GAAP(1) adjusted sales(2) up 10 percent
-- Jennie-O Turkey Store operating profit down 25 percent; volume up 22
percent; sales up 13 percent
COMMENTARY
"I'm proud of our team's ability to drive earnings growth for the 15(th) consecutive quarter," said Jim Snee, president and chief executive officer. "Our adjusted sales and volume performance for the quarter was solid with sales up 3 percent and volume up 5 percent."
"Earnings at Jennie-O Turkey Store declined compared to last year as turkey commodity prices were lower than we expected. However, demand for JENNIE-O® branded products continues to be strong," Snee said. "Refrigerated Foods was able to grow earnings four percent on excellent value-added sales growth despite the divestiture of the Farmer John business. Our International segment also delivered earnings growth fueled by strong pork exports."
SEGMENT OPERATING HIGHLIGHTS - FIRST QUARTER
Grocery Products (18% of Net Sales, 18% of Total Segment Operating Profit)
Grocery Products sales increased 7 percent on the addition of JUSTIN'S® specialty nut butters along with strong sales of WHOLLY GUACAMOLE® dips, SKIPPY® peanut butter products, and HERDEZ® salsa. Non-GAAP(1) adjusted sales(2) increased 3 percent. Segment profit was up 1 percent. Grocery Products increased advertising to support key brands such as WHOLLY GUACAMOLE® dips and HERDEZ® salsa.
Refrigerated Foods (49% of Net Sales, 48% of Total Segment Operating Profit)
Refrigerated Foods segment profit increased 4 percent driven by solid value-added product growth in our foodservice and retail channels. Sales declined 3 percent, primarily related to the divestiture of the Farmer John business in January 2017. Non-GAAP(1) adjusted sales(2) decreased 1 percent. Foodservice products such as HORMEL® pepperoni and HORMEL® BACON 1(TM) fully cooked bacon, and retail products such as HORMEL GATHERINGS® party trays and HORMEL® NATURAL CHOICE® meats had excellent sales growth this quarter.
Jennie-O Turkey Store (19% of Net Sales, 19% of Total Segment Operating Profit)
Jennie-O Turkey Store sales increased 13 percent and volume increased 22 percent while segment profit decreased 25 percent. Despite volume and sales increases of value-added products, segment profit declined primarily due to lower turkey commodity prices and increased operating expenses. Pricing pressure from competing proteins in the foodservice, deli and retail channels also affected the quarterly results.
Specialty Foods (8% of Net Sales, 8% of Total Segment Operating Profit)
Specialty Foods segment profit was flat and sales declined 19 percent, primarily due to the divestiture of Diamond Crystal Brands in May 2016. Non-GAAP(1) adjusted sales(2) increased 10 percent.
International & Other (6% of Net Sales, 7% of Total Segment Operating Profit)
International segment profit increased 5 percent while sales decreased 2 percent. Strong fresh pork exports offset declines in branded exports. High pork raw material costs continued to impact the profitability of our China meat business.
OUTLOOK
"We are tempering our full year outlook for the Jennie-O Turkey Store segment given the shortfalls in the first quarter and the expected continuation of pricing pressure due to low commodity turkey prices. Improvements in our other segments are expected to offset some of the earnings headwinds from Jennie-O Turkey Store," Snee said.
The Company is lowering its fiscal 2017 guidance to $1.65 to $1.71 per share due to challenging market conditions in the turkey industry. "The balanced model we have intentionally built in our business will allow us to overcome the challenges at Jennie-O Turkey Store. I remain confident in our team's ability to deliver sales and earnings growth by supporting our brands, innovating, and making strategic investments," Snee said.
DIVIDENDS
Effective February 15, 2016, the company paid its 354(th) consecutive quarterly dividend at the annual rate of $0.68.
(1 )COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurements are presented to provide investors additional information to facilitate the comparison of past and present operations. The company believes these non-GAAP adjusted 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.
(2) ADJUSTED FINANCIAL MEASURES
Adjusted net sales and volume excludes the impact from the Justin's, LLC acquisition in May 2016, and the divestitures of the Diamond Crystal Brands business in May 2016, and the Farmer John business in January 2017. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in first quarter of fiscal 2016 and the first quarter of fiscal 2017.
Net Sales
2017 2016
2017 Justin's Farmer John Non-GAAP 2016 DCB Farmer John Non-GAAP Non-GAAP
(in thousands) Net Sales Acquisition Divestiture Net Sales Net Sales Divestiture Divestiture Net Sales % Change
------------- --------- ----------- ----------- --------- --------- ----------- ----------- --------- --------
Grocery Products $417,745 ($13,335) $404,410 $392,218 $392,218 3.1%
Refrigerated
Foods 1,123,039 ($100,231) 1,022,808 1,162,121 ($132,901) 1,029,220 (0.6%)
Jennie-O Turkey
Store 420,989 420,989 372,066 372,066 13.1%
Specialty Foods 192,629 192,629 237,779 ($62,917) 174,862 10.2%
International &
Other 125,825 125,825 128,488 128,488 (2.1%)
--------------- ------- ------- ------- ------- -----
Total Net Sales $2,280,227 ($13,335) ($100,231) $2,166,661 $2,292,672 ($62,917) ($132,901) $2,096,854 3.3%
Tonnage (lbs.)
2017 2016
2017 Justin's Farmer John Non-GAAP 2016 DCB Farmer John Non-GAAP Non-GAAP
(in thousands) Tonnage Acquisition Divestiture Tonnage Tonnage Divestiture Divestiture Tonnage % Change
------------- ------- ----------- ----------- ------- ------- ----------- ----------- ------- --------
Grocery Products 225,963 (2,296) 223,667 218,265 218,265 2.5%
Refrigerated
Foods 614,425 (80,454) 533,971 635,652 (100,774) 534,878 (0.2%)
Jennie-O Turkey
Store 216,643 216,643 178,275 178,275 21.5%
Specialty Foods 112,829 112,829 161,445 (61,034) 100,411 12.4%
International &
Other 75,049 75,049 75,518 75,518 (0.6%)
--------------- ------ ------ ------ ------ -----
Total Tonnage 1,244,909 (2,296) (80,454) 1,162,159 1,269,155 (61,034) (100,774) 1,107,347 4.9%
------------- --------- ------ ------- --------- --------- ------- -------- --------- ---
CONFERENCE CALL
A conference call will be webcast at 8:00 a.m. CT on Thursday, February 23, 2017. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 888-468-2440 and providing the access code 5626388. An audio replay is available by going to https://jsp.premiereglobal.com/webrsvp and entering the access code 5626388. The webcast replay will be available at 11:00 a.m. CT, Thursday, February 23, 2017, 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 global branded food company with over $9 billion in annual revenues across 75 countries worldwide. Its brands include SKIPPY®, SPAM®, Hormel® Natural Choice®, 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 eighth 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://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 31 - 35 in the company's annual stockholders' report for the year ended October 30, 2016, which can be accessed at www.hormelfoods.com under "Investors-SEC Filings."
Statements Follow
HORMEL FOODS CORPORATION
SEGMENT DATA
(Unaudited) (In thousands)
FIRST QUARTER - 13 WEEKS ENDED
------------------------------
NET SALES January 29, 2017 January 24, 2016 % Change
--------- ---------------- ---------------- --------
Grocery Products $417,745 $392,218 6.5
Refrigerated Foods 1,123,039 1,162,121 (3.4)
Jennie-O Turkey
Store 420,989 372,066 13.1
Specialty Foods 192,629 237,779 (19.0)
International &
Other 125,825 128,488 (2.1)
------- ------- ----
Total $2,280,227 $2,292,672 (0.5)
---------- ---------- ----
OPERATING PROFIT
----------------
Grocery Products $65,627 $65,273 0.5
Refrigerated Foods 173,808 166,908 4.1
Jennie-O Turkey
Store 68,180 91,303 (25.3)
Specialty Foods 26,749 26,793 (0.2)
International &
Other 25,463 24,287 4.8
------ ------ ---
Total segment
operating profit 359,827 374,564 (3.9)
Net interest and
investment expense
(income) 577 5,370 (89.3)
General corporate
expense 4,621 15,132 (69.5)
Less:
Noncontrolling
interest 156 106 47.2
--- --- ----
Earnings before
income taxes $354,785 $354,168 0.2
-------- -------- ---
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except per share amounts)
Thirteen Weeks Ended
--------------------
January 29, January 24,
2017 2016
---- ----
Net sales $2,280,227 $2,292,672
Cost of products sold 1,727,947 1,734,661
--------- ---------
GROSS PROFIT 552,280 558,011
Selling, general and
administrative 210,217 209,948
Equity in earnings of
affiliates 13,299 11,475
------ ------
OPERATING INCOME 355,362 359,538
Other income & expenses:
Interest & investment
income (expense) 2,449 (1,963)
Interest expense (3,026) (3,407)
------ ------
EARNINGS BEFORE INCOME
TAXES 354,785 354,168
Provision for income
taxes 119,482 119,001
(effective tax rate) 33.68% 33.60%
----- -----
NET EARNINGS 235,303 235,167
Less: Net earnings
attributable to
noncontrolling interest 156 106
--- ---
NET EARNINGS ATTRIBUTABLE TO
HORMEL FOODS CORPORATION $235,147 $235,061
-------- --------
NET EARNINGS PER SHARE
Basic $0.44 $0.44
----- -----
Diluted $0.44 $0.43
----- -----
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 528,585 528,862
Diluted 540,064 542,737
DIVIDENDS DECLARED PER
SHARE $0.170 $0.145
------ ------
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited) (In thousands)
January 29, 2017 October 30, 2016
---------------- ----------------
ASSETS
------
CURRENT ASSETS
Cash
and
cash
equivalents $609,821 $415,143
Accounts
receivable 530,851 591,310
Inventories 958,130 985,683
Income
taxes
receivable - 18,282
Prepaid
expenses 15,356 13,775
Other
current
assets 5,428 5,719
----- -----
TOTAL
CURRENT
ASSETS 2,119,586 2,029,912
DEFERRED
INCOME
TAXES - 6,223
INTANGIBLES 2,709,468 2,737,755
OTHER
ASSETS 502,069 490,728
PROPERTY,
PLANT
&
EQUIPMENT,
NET 1,035,275 1,105,449
--------- ---------
TOTAL
ASSETS $6,366,398 $6,370,067
---------- ----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES $919,762 $1,053,196
LONG-TERM DEBT - LESS
CURRENT MATURITIES 250,000 250,000
DEFERRED INCOME TAXES 6,236 -
OTHER LONG-TERM
LIABILITIES 615,103 615,465
SHAREHOLDERS'
INVESTMENT 4,575,297 4,451,406
--------- ---------
TOTAL LIAB. &
SHAREHOLDERS'
INVESTMENT $6,366,398 $6,370,067
---------- ----------
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Thirteen Weeks Ended
--------------------
January 29, January 24,
2017 2016
---- ----
OPERATING ACTIVITIES
Net earnings $235,303 $235,167
Depreciation and amortization
of intangibles 31,319 31,804
(Increase) decrease in working
capital (76,887) 30,795
Other (12,116) (19,075)
------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 177,619 278,691
INVESTING ACTIVITIES
Proceeds from sale of business 135,944 -
Net purchases of property/
equipment (33,969) (32,069)
Decrease in investments,
equity in affiliates, and
other assets 3,596 11,088
----- ------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 105,571 (20,981)
FINANCING ACTIVITIES
Net payments on short-term
debt - (185,000)
Dividends paid on common stock (76,629) (66,137)
Share repurchase (30,588) -
Other 25,028 23,663
------ ------
NET CASH USED IN FINANCING
ACTIVITIES (82,189) (227,474)
Effect of exchange rate
changes on cash (6,323) (2,260)
------ ------
INCREASE IN CASH AND CASH
EQUIVALENTS 194,678 27,976
Cash and cash equivalents at
beginning of year 415,143 347,239
------- -------
CASH AND CASH EQUIVALENTS AT
END OF QUARTER $609,821 $375,215
-------- --------
INVESTOR CONTACT: MEDIA CONTACT:
Nathan Annis Wendy Watkins
(507) 437- 5248 (507) 437-5345
ir@hormel.com media@hormel.com
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SOURCE Hormel Foods Corporation
