Skip to content
Press Release

Hormel Foods Announces Second Quarter Results And Continued Margin Expansion

Unfavorable market conditions in the turkey industry continue to pressure Jennie-O Turkey Store earnings

Company Release - 5/25/2017 6:30 AM ET

AUSTIN, Minn., May 25, 2017 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL) today reported results for the second quarter of fiscal year 2017. All comparisons are to the second 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 is excluded in the presentation of the non-GAAP adjusted measures below.

Hormel Foods corporate logo

SUMMARY

Second Quarter

  • Diluted earnings per share of $0.39, down 2.5 percent from 2016 EPS of $0.40
  • Net earnings of $211 million, down 2 percent compared to 2016 net earnings of $215 million
  • Sales of $2.2 billion, down 5 percent; Non-GAAP1 adjusted sales2 up 2 percent
  • Volume down 11 percent; Non-GAAP1 adjusted volume2 up 1 percent
  • Grocery Products operating profit up 15 percent; volume up 2 percent; Non-GAAP1 adjusted volume2 flat; sales up 8 percent; Non-GAAP1 adjusted sales2 up 2 percent
  • International & Other operating profit up 38 percent; volume up 17 percent; sales up 19 percent
  • Refrigerated Foods operating profit flat; volume down 14 percent; Non-GAAP1 adjusted volume2 up 1 percent; sales down 6 percent; Non-GAAP1 adjusted sales2 up 5 percent
  • Specialty Foods operating profit down 16 percent; volume down 33 percent; Non-GAAP1 adjusted volume2 up 3 percent; sales down 24 percent; Non-GAAP1 adjusted sales2 flat
  • Jennie-O Turkey Store operating profit down 29 percent; volume down 6 percent; sales down 8 percent

COMMENTARY

"Despite ongoing challenges in the turkey industry, our balanced model allowed us to deliver earnings within two percent of last year's results," said Jim Snee, president and chief executive officer. "Three segments delivered earnings growth, margin expansion, and adjusted volume and sales growth this quarter."

"Growth in many of our key brands drove excellent results in the Grocery Products and International segments. The divestitures of Farmer John and Diamond Crystal Brands allowed Refrigerated Foods and Specialty Foods to enhance their operating margins," Snee said. "Unfavorable market conditions in the turkey industry caused by an oversupply of turkey continued to pressure Jennie-O Turkey Store sales and earnings."

SEGMENT OPERATING HIGHLIGHTS – SECOND QUARTER

Grocery Products (20% of Net Sales, 24% of Total Segment Operating Profit)
Grocery Products sales increased 8 percent and segment profit increased 15 percent. These results are due to the addition of JUSTIN'S® specialty nut butters as well as the strong performance of WHOLLY GUACAMOLE® dips and SPAM® luncheon meat.

Refrigerated Foods (47% of Net Sales, 40% of Total Segment Operating Profit)
Refrigerated Foods segment profit was flat and sales declined 6 percent, primarily related to the divestiture of the Farmer John business. Retail products such as HORMEL® BLACK LABEL® bacon and HORMEL® NATURAL CHOICE® meats and foodservice products such as HORMEL® BACON 1TM fully cooked bacon and HORMEL® pepperoni posted excellent results this quarter.

Jennie-O Turkey Store (18% of Net Sales, 20% of Total Segment Operating Profit)
Jennie-O Turkey Store volume declined 6 percent, sales declined 8 percent, and segment profit declined 29 percent. These decreases are primarily due to lower turkey commodity prices, pricing pressure from competing proteins, and increased operating expenses.

Specialty Foods (9% of Net Sales, 10% of Total Segment Operating Profit)
Specialty Foods sales declined 24 percent and segment profit declined 16 percent, primarily related to the divestiture of Diamond Crystal Brands in May 2016 and reduced contract packaging sales.

International & Other (6% of Net Sales, 6% of Total Segment Operating Profit)
International sales increased 19 percent and segment profit increased 38 percent. Strong exports of fresh pork and SPAM® luncheon meats contributed to the growth.

OUTLOOK

"We are maintaining our fiscal 2017 guidance range of $1.65 to $1.71 per share but expect the results at Jennie-O Turkey Store to push our full-year earnings toward the lower end of this range," Snee said. "We expect the pressure on Jennie-O Turkey Store to continue for the remainder of the fiscal year given the oversupply in the turkey industry."

"Even in this challenging commodity environment, our team is working hard to generate earnings growth by providing customers, consumers, and operators with on-trend, innovative value-added products," Snee said.

DIVIDENDS

Effective May 15, 2017, the company paid its 355th 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 the second quarter and second quarter year-to-date of fiscal 2016 and fiscal 2017.

2nd Quarter









Net Sales









(in thousands)

2017
Net Sales

Justin's
Acquisition

2017 Non-
GAAP Net
Sales 

2016
Net Sales

DCB
Divestiture

 Farmer
John
Divestiture

2016
Non-GAAP
Net Sales 

Non-GAAP
% Change

Grocery Products

$    432,205

$    (21,132)

$    411,073

$    401,472

$             -

$              -

$    401,472

2.4%

Refrigerated Foods

1,027,486


1,027,486

1,092,479


(116,397)

976,082

5.3%

Jennie-O Turkey Store

388,237


388,237

423,540



423,540

(8.3%)

Specialty Foods

208,214


208,214

272,484

(63,996)


208,488

(0.1%)

International & Other

131,167


131,167

110,260



110,260

19.0%

  Total Net Sales

$ 2,187,309

$    (21,132)

$ 2,166,177

$ 2,300,235

$    (63,996)

$   (116,397)

$ 2,119,842

2.2%










Tonnage (lbs.)






(in thousands)

2017
Tonnage

Justin's
Acquisition

2017 Non-
GAAP
Tonnage

2016
Tonnage

DCB
Divestiture

 Farmer
John
Divestiture

2016 Non-
GAAP
Tonnage

Non-GAAP
% Change

Grocery Products

222,451

(3,020)

219,431

218,674



218,674

0.3%

Refrigerated Foods

515,490


515,490

602,811


(91,733)

511,078

0.9%

Jennie-O Turkey Store

203,557


203,557

216,764



216,764

(6.1%)

Specialty Foods

116,432


116,432

174,282

(61,002)


113,280

2.8%

International & Other

80,312


80,312

68,920



68,920

16.5%

  Total Tonnage

1,138,242

(3,020)

1,135,222

1,281,451

(61,002)

(91,733)

1,128,716

0.6%

 

Year to Date










Net Sales










(in thousands)

2017
Net Sales

Justin's
Acquisition

 Farmer John
Divestiture

2017
Non-GAAP
Net Sales 

2016
Net Sales

DCB
Divestiture

 Farmer John
Divestiture

2016
Non-GAAP
Net Sales 

Non-GAAP
% Change

Grocery Products

$    849,950

$     (34,467)

$                 -

$    815,483

$   793,690

$             -

$                -

$    793,690

2.7%

Refrigerated Foods

2,150,525


(100,231)

2,050,294

2,254,600


(249,297)

2,005,303

2.2%

Jennie-O Turkey Store

809,226



809,226

795,606



795,606

1.7%

Specialty Foods

400,843



400,843

510,263

(126,913)


383,350

4.6%

International & Other

256,992



256,992

238,748



238,748

7.6%

  Total Net Sales

$ 4,467,536

$     (34,467)

$     (100,231)

$ 4,332,838

$4,592,907

$  (126,913)

$     (249,297)

$ 4,216,697

2.8%











Tonnage (lbs.)







(in thousands)

2017
Tonnage

Justin's
Acquisition

 Farmer John
Divestiture

2017
Non-GAAP

Tonnage

2016
Tonnage

DCB
Divestiture

 Farmer John
Divestiture

2016
Non-GAAP
Tonnage

Non-GAAP
% Change

Grocery Products

448,414

(5,316)


443,098

436,939



436,939

1.4%

Refrigerated Foods

1,129,915


(80,454)

1,049,461

1,238,463


(192,507)

1,045,956

0.3%

Jennie-O Turkey Store

420,200



420,200

395,039



395,039

6.4%

Specialty Foods

229,261



229,261

335,727

(122,036)


213,691

7.3%

International & Other

155,361



155,361

144,438



144,438

7.6%

  Total Tonnage

2,383,151

(5,316)

(80,454)

2,297,381

2,550,606

(122,036)

(192,507)

2,236,063

2.7%

CONFERENCE CALL

A conference call will be webcast at 8:00 a.m. CT on Thursday, May 25, 2017. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 877-681-3367 and providing the access code 2874950. 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 25, 2017, and will remain on the website for one year.

About Hormel Foods – Inspired People. Inspired Food.™

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 ninth 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.™ - 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 30 - 37 in the company's Form 10-Q for the quarter ended January 29, 2017, which can be accessed at www.hormelfoods.com under "Investors-SEC Filings."

Statements Follow

HORMEL FOODS CORPORATION

SEGMENT DATA

(Unaudited) (In thousands)



SECOND QUARTER – 13 WEEKS ENDED





NET SALES

April 30, 2017

April 24, 2016

% Change

Grocery Products

$      432,205

$      401,472

7.7

Refrigerated Foods

1,027,486

1,092,479

(5.9)

Jennie-O Turkey Store

388,237

423,540

(8.3)

Specialty Foods

208,214

272,484

(23.6)

International & Other

131,167

110,260

19.0

  Total

$   2,187,309

$   2,300,235

(4.9)




OPERATING PROFIT




Grocery Products

$        77,487

$        67,110

15.5

Refrigerated Foods

130,194

130,002

0.1

Jennie-O Turkey Store

63,786

89,678

(28.9)

Specialty Foods

30,810

36,853

(16.4)

International & Other

19,617

14,244

37.7

  Total segment operating profit

321,894

337,887

(4.7)

  Net interest and investment expense (income)

205

(380)

153.9

  General corporate expense

5,822

14,057

(58.6)

  Less:  Noncontrolling interest

(40)

(13)

(207.7)

Earnings before income taxes

$      315,827

$      324,197

(2.6)










YEAR TO DATE – 26 WEEKS ENDED





NET SALES

April 30, 2017

April 24, 2016

% Change

Grocery Products

$      849,950

$      793,690

7.1

Refrigerated Foods

2,150,525

2,254,600

(4.6)

Jennie-O Turkey Store

809,226

795,606

1.7

Specialty Foods

400,843

510,263

(21.4)

International & Other

256,992

238,748

7.6

  Total

$   4,467,536

$   4,592,907

(2.7)





OPERATING PROFIT




Grocery Products

$      143,114

$        132,383

8.1

Refrigerated Foods

304,002

296,910

2.4

Jennie-O Turkey Store

131,966

180,981

(27.1)

Specialty Foods

57,559

63,646

(9.6)

International & Other

45,080

38,531

17.0

  Total segment operating profit

681,721

712,451

(4.3)

  Net interest and investment expense (income)

782

4,990

(84.3)

  General corporate expense

10,443

29,189

(64.2)

  Less:  Noncontrolling interest

116

93

24.7

Earnings before income taxes

$      670,612

$      678,365

(1.1)





 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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






Thirteen Weeks Ended

Twenty-Six Weeks Ended


April 30, 2017

April 24, 2016

April 30, 2017

April 24, 2016






Net sales

$ 2,187,309

$ 2,300,235

$ 4,467,536

$ 4,592,907






Cost of products sold

1,700,389

1,773,876

3,428,336

3,508,537






GROSS PROFIT

486,920

526,359

1,039,200

1,084,370






  Selling, general and administrative

181,009

211,144

391,226

421,092

  Goodwill impairment charge

-

991

-

991

  Equity in earnings of affiliates

10,121

9,593

23,420

21,068






OPERATING INCOME

316,032

323,817

671,394

683,355






Other income & expenses:





  Interest & investment income (expense)

2,818

3,409

5,267

1,446

  Interest expense

(3,023)

(3,029)

(6,049)

(6,436)






EARNINGS BEFORE INCOME TAXES

315,827

324,197

670,612

678,365






Provision for income taxes

104,941

108,813

224,423

227,814

  (effective tax rate)

33.23%

33.56%

33.47%

33.58%






NET EARNINGS

210,886

215,384

446,189

450,551

Less: net (loss) earnings attributable to   

     noncontrolling interest

 

(40)

 

(13)

 

116

 

93

NET EARNINGS ATTRIBUTABLE TO

     HORMEL FOODS CORPORATION

 

$    210,926

$    215,397

 

$    446,073

 

$    450,458






NET EARNINGS PER SHARE





         Basic

$          0.40

$          0.41

$          0.84

$          0.85

         Diluted

$          0.39

$          0.40

$          0.83

$          0.83






WEIGHTED AVG. SHARES OUTSTANDING




         Basic

528,712

529,898

528,649

529,380

         Diluted

539,635

543,769

539,850

543,253






DIVIDENDS DECLARED





        PER SHARE

$       0.170

$       0.145

$          0.34

$          0.29






 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited) (In thousands)





April 30, 2017

October 30, 2016

ASSETS




CURRENT ASSETS



  Cash and cash equivalents

$     548,901

$     415,143

  Accounts receivable

525,322

591,310

  Inventories

988,408

985,683

  Income taxes receivable

42,026

18,282

  Prepaid expenses

15,892

13,775

  Other current assets

5,242

5,719




     TOTAL CURRENT ASSETS

2,125,791

2,029,912




DEFERRED INCOME TAXES

-

6,223




INTANGIBLES

2,707,410

2,737,755




OTHER ASSETS

508,940

490,728




PROPERTY, PLANT & EQUIPMENT, NET

1,043,566

1,105,449




     TOTAL ASSETS

$  6,385,707

$  6,370,067










LIABILITIES AND SHAREHOLDERS' INVESTMENT


CURRENT LIABILITIES

$     824,587

$  1,053,196




LONG-TERM DEBT – LESS CURRENT MATURITIES

250,000

250,000




DEFERRED INCOME TAXES

7,520

-




OTHER LONG-TERM LIABILITIES

617,172

615,465




SHAREHOLDERS' INVESTMENT

4,686,428

4,451,406




    TOTAL LIAB. & SHAREHOLDERS' INVESTMENT

$  6,385,707

$  6,370,067

 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)




Twenty-Six Weeks Ended


April 30, 2017

April 24, 2016



OPERATING ACTIVITIES



  Net earnings

$  446,189

$  450,551

  Depreciation and amortization of intangibles

63,328

63,908

  Goodwill impairment charge

-

991

  Increase in working capital

(238,623)

(74,829)

  Other

(9,738)

(31,486)

NET CASH PROVIDED BY OPERATING ACTIVITIES

261,156

409,135




INVESTING ACTIVITIES



  Proceeds from sale of business

135,944

-

  Net purchases of property/equipment

(75,818)

(97,143)

  Decrease in investments, equity in affiliates, and other assets

2,669

12,178

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

62,795

(84,965)




FINANCING ACTIVITIES



  Principal payments on short-term debt

-

(185,000)

  Dividends paid on common stock

(166,507)

(142,878)

  Share repurchase

(49,583)

(6,358)

  Other

29,583

44,826

NET CASH USED IN FINANCING ACTIVITIES

(186,507)

(289,410)

Effect of exchange rate changes on cash

(3,686)

(2,118)

INCREASE IN CASH AND CASH EQUIVALENTS

133,758

32,642

Cash and cash equivalents at beginning of year

415,143

347,239

CASH AND CASH EQUIVALENTS AT END OF QUARTER

$  548,901

$  379,881




 

INVESTOR CONTACT:

MEDIA CONTACT:

Nathan Annis

Wendy Watkins

(507) 437-5248

(507) 437-5345

ir@hormel.com

media@hormel.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hormel-foods-announces-second-quarter-results-and-continued-margin-expansion-300463625.html

SOURCE Hormel Foods Corporation