Hormel Foods Corporation HRL today reported record performance for the fiscal year 2014 fourth quarter and full year.
All comparisons are to the fourth quarter or full year of fiscal 2013.
SUMMARY
Fourth Quarter
- Record diluted EPS of $0.63, up 9 percent from $0.58 per share
- Segment operating profit increased 9 percent
- Record dollar sales of $2.5 billion, increased 9 percent; volume up 3 percent
- Grocery Products operating profit down 21 percent; volume down 5 percent; dollar sales down 3 percent
- Refrigerated Foods operating profit up 10 percent; volume up 1 percent; dollar sales up 9 percent
- Jennie-O Turkey Store operating profit up 45 percent; volume up 7 percent; dollar sales up 11 percent
- Specialty Foods operating profit down 14 percent; volume up 15 percent (volume down 7 percent excluding sales of CytoSport Holdings, Inc. (“CytoSport”) products); dollar sales up 31 percent (dollar sales down 4 percent excluding sales of CytoSport products); CytoSport acquisition-related charges, including transaction costs and inventory adjustment to fair market value, were approximately $9.3 million
- International & Other operating profit up 3 percent; volume up 6 percent; dollar sales up 13 percent
Fiscal Year
- Record diluted EPS of $2.23, up 14 percent from diluted EPS of $1.95
- Segment operating profit up 16 percent
- Record dollar sales of $9.3 billion, up 6 percent; volume up 1 percent
- Grocery Products operating profit down 9 percent; volume up 3 percent (volume down 3 percent excluding incremental sales of SKIPPY® products); dollar sales up 3 percent (dollar sales down 2 percent excluding incremental sales of SKIPPY® products)
- Refrigerated Foods operating profit up 45 percent; volume flat; dollar sales up 9 percent
- Jennie-O Turkey Store operating profit up 23 percent; volume flat; dollar sales up 4 percent
- Specialty Foods operating profit down 20 percent; volume down 5 percent (volume down 10 percent excluding sales of CytoSport products); dollar sales down 3 percent (dollar sales down 11 percent excluding sales of CytoSport products)
- International & Other operating profit up 19 percent; volume up 15 percent (volume up 5 percent excluding incremental sales of SKIPPY® products); dollar sales up 19 percent (dollar sales up 10 percent excluding incremental sales of SKIPPY® products)
The company reported fiscal 2014 fourth quarter net earnings of $171.3 million, up 9 percent from net earnings of $157.3 million a year earlier. Diluted earnings per share for the quarter were $0.63, up 9 percent compared to $0.58 last year. Sales for the quarter were $2.5 billion, up 9 percent from the same period in fiscal 2013.
For the year ended October 26, 2014, net earnings were a record $602.7 million, up 15 percent from net earnings of $526.2 million last year. Diluted net earnings per share were $2.23, up 14 percent from diluted net earnings per share of $1.95 last year. Sales for the year ended October 26, 2014, totaled a record $9.3 billion, up 6 percent from last year.
COMMENTARY
“We enjoyed a strong finish to the year, delivering record fourth quarter sales and earnings,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Our Refrigerated Foods and Jennie-O Turkey Store segments were able to capitalize on growth of value-added sales and higher meat commodity markets to lead the way.”
“We hit the nine billion dollar mark in annual sales for the first time in our Company's history, fueled by our branded, value-added product portfolios. We closed the year with record earnings per share of $2.23, a penny above the midpoint of our full year earnings guidance issued last November,” commented Ettinger. “Our Refrigerated Foods, Jennie-O Turkey Store, and International segments each delivered double-digit segment operating profit growth this year. High meat input costs and related pricing hampered growth of certain Grocery Products brands in the back half of the year. We have also substantially completed the integration of the MUSCLE MILK® brand in our Specialty Foods segment,” remarked Ettinger.
"This morning we announced a 25 percent increase to the dividend, or $0.20 per share, making the annual dividend $1.00 per share in 2015. This marks the 49th consecutive year in which we have increased our dividend, consistent with our objective to deliver superior total returns to our shareholders," stated Ettinger.
SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER
Grocery Products (16% of Net Sales, 19% of
Total Segment Operating Profit)
Grocery Products segment
profit decreased 21 percent and sales were down 3 percent, primarily due
to sustained, record high meat raw material costs and soft sales.
Products delivering growth this quarter include HORMEL®
bacon toppings, as well as HERDEZ® authentic
Mexican foods and WHOLLY GUACAMOLE® dips, which
are part of our MegaMex Foods joint venture.
Refrigerated Foods (48% of Net Sales, 33% of
Total Segment Operating Profit)
Refrigerated Foods
segment profit increased 10 percent driven by strong pork operating
margins and growth of foodservice value-added products. Sales for the
quarter were up 9 percent, with the increase led by retail sales of HORMEL®
BLACK LABEL® bacon, HORMEL® side
dishes, and HORMEL® party trays, and
foodservice sales of HORMEL® FIRE BRAISEDTM
meats and HORMEL® fully cooked sausage.
Jennie-O Turkey Store (20% of Net Sales, 35% of
Total Segment Operating Profit)
Jennie-O Turkey Store
delivered excellent results this quarter, with segment profit up 45
percent, driven by the continued sales growth of value-added products
and beneficial turkey commodity prices. Sales for the quarter increased
11 percent, led by sales of JENNIE-O® lean
ground turkey and JENNIE-O® turkey bacon.
Specialty Foods (11% of Net Sales, 5% of Total
Segment Operating Profit)
Specialty Foods posted
operating profits 14 percent lower than last year. The lower results
were caused by charges relating to the acquisition of CytoSport,
including transaction costs of $4.8 million, along with an inventory
adjustment to fair market value of $4.5 million. Segment sales increased
31 percent, largely attributable to the addition of MUSCLE MILK®
protein beverage sales.
International & Other (5% of Net Sales, 8% of
Total Segment Operating Profit)
International & Other
posted segment profits 3 percent ahead of last year on 13 percent sales
growth. Results were driven by continued growth of our China businesses
and increased pork exports.
OUTLOOK
“In fiscal 2015 we expect to exceed our stated goals of 5 percent sales growth and 10 percent earnings growth by continuing to provide consumers with innovative, value-added solutions,” stated Ettinger. “We anticipate pork commodity prices and pork operating margins to normalize as the year progresses, providing input cost relief for our Grocery Products team, but leading to challenging comparisons for our Refrigerated Foods group in 2015. Jennie-O Turkey Store is entering the new fiscal year with strong sales momentum and beneficial grain markets, but will likely experience less favorable commodity meat markets. International & Other will continue to deliver growth through expansion of its China business, and Specialty Foods will benefit from the inclusion of the CytoSport franchise, consistent with our acquisition expectations,” commented Ettinger.
“We expect non-recurring charges of approximately $0.04 to $0.06 per share to be incurred early in fiscal 2015 as a result of the potential exit from our business in Vietnam and the closure of our Stockton, California Grocery Products manufacturing facility,” remarked Ettinger. “Excluding these expected non-recurring charges, we are setting our 2015 non-GAAP1 earnings per share guidance range at $2.45 to $2.55 per share2."
DIVIDENDS
Effective November 14, 2014, the company paid its 345th consecutive quarterly dividend, at the annual rate of $0.80.
CONFERENCE CALL
A conference call will be webcast at 8:30 a.m. CT on Tuesday, November 25, 2014. 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 9752232. An audio replay is available by calling 888-203-1112 and entering access code 9752232. The audio replay will be available beginning at 11:30 a.m. CT on Tuesday, November 25, 2014, through 11:30 a.m. CT on December 9, 2014. The webcast replay will be available at 11:30 a.m. CT, Tuesday, November 25, 2014, and will remain on our website for one year.
1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurements are provided to assist the investor in better understanding the Company's operating performance by excluding the impact of certain non-recurring items affecting comparability. 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 any generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
2 ADJUSTED EARNINGS PER SHARE GUIDANCE
Subtracting the excluded estimated non-recurring charges of $0.04 to $0.06 from the non-GAAP adjusted diluted earnings per share range of $2.45 to $2.55 per share results in a U.S. GAAP diluted earnings per share guidance range for fiscal year 2015 of $2.39 to $2.51 per share. Adjusted diluted earnings per share provides shareholders a more clear reflection of comparable results.
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 2014, was named the 2013 Sustainable Supply Chain of the Year by Refrigerated & Frozen Foods magazine, and was again named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the sixth year in a row. Hormel Foods was recognized on the G.I. Jobs magazine list of America's Top 100 Military Friendly Employers in 2013 and 2014, and named one of the 2014 40 Best Companies for Leaders by Chief Executive 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 31-37 in the company's Form 10-Q for the quarter ended July 27, 2014, which was filed with the SEC on September 5, 2014, and can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”
| Segment Data | ||||||||||||
|
Fiscal 2014 Fourth Quarter Segment Operating Results (dollars in thousands) |
||||||||||||
|
FOURTH QUARTER – 13 WEEKS ENDED |
||||||||||||
|
NET SALES |
October 26, 2014 |
October 27, 2013 |
% Change |
|||||||||
| Grocery Products | $ | 405,166 | $ | 419,615 | (3.4 | ) | ||||||
| Refrigerated Foods | 1,211,890 | 1,108,157 | 9.4 | |||||||||
| Jennie-O Turkey Store | 509,980 | 459,670 | 10.9 | |||||||||
| Specialty Foods | 277,559 | 212,485 | 30.6 | |||||||||
| International & Other | 139,176 | 123,275 | 12.9 | |||||||||
| Total | $ | 2,543,771 | $ | 2,323,202 | 9.5 | |||||||
|
OPERATING PROFIT |
||||||||||||
| Grocery Products | $ | 50,051 | $ | 63,476 | (21.1 | ) | ||||||
| Refrigerated Foods | 87,296 | 79,453 | 9.9 | |||||||||
| Jennie-O Turkey Store | 95,253 | 65,550 | 45.3 | |||||||||
| Specialty Foods | 13,747 | 15,975 | (13.9 | ) | ||||||||
| International & Other | 22,629 | 22,069 | 2.5 | |||||||||
| Total segment operating profit | 268,976 | 246,523 | 9.1 | |||||||||
| Net interest and investment expense (income) | 2,626 | 595 | 341.3 | |||||||||
| General corporate expense | 6,192 | 7,466 | (17.1 | ) | ||||||||
| Noncontrolling interest | 584 | 1,145 | (49.0 | ) | ||||||||
| Earnings before income taxes | $ | 260,742 | $ | 239,607 | 8.8 | |||||||
|
YEAR TO DATE – 52 WEEKS ENDED |
||||||||||||
|
NET SALES |
October 26, 2014 |
October 27, 2013 |
% Change |
|||||||||
| Grocery Products | $ | 1,558,265 | $ | 1,517,557 | 2.7 | |||||||
| Refrigerated Foods | 4,644,179 | 4,251,515 | 9.2 | |||||||||
| Jennie-O Turkey Store | 1,672,452 | 1,601,868 | 4.4 | |||||||||
| Specialty Foods | 907,120 | 932,533 | (2.7 | ) | ||||||||
| International & Other | 534,240 | 448,181 | 19.2 | |||||||||
| Total | $ | 9,316,256 | $ | 8,751,654 | 6.5 | |||||||
|
OPERATING PROFIT |
||||||||||||
| Grocery Products | $ | 195,064 | $ | 213,646 | (8.7 | ) | ||||||
| Refrigerated Foods | 338,020 | 232,692 | 45.3 | |||||||||
| Jennie-O Turkey Store | 272,362 | 222,117 | 22.6 | |||||||||
| Specialty Foods | 71,514 | 88,873 | (19.5 | ) | ||||||||
| International & Other | 84,745 | 71,490 | 18.5 | |||||||||
| Total segment operating profit | 961,705 | 828,818 | 16.0 | |||||||||
| Net interest and investment expense (income) | 9,468 | 7,482 | 26.5 | |||||||||
| General corporate expense | 33,434 | 26,694 | 25.2 | |||||||||
| Noncontrolling interest | 3,349 | 3,865 | (13.4 | ) | ||||||||
| Earnings before income taxes | $ | 922,152 | $ | 798,507 | 15.5 | |||||||
| HORMEL FOODS CORPORATION | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
|
Thirteen Weeks Ended |
Fifty-Two Weeks Ended |
|||||||||||||||||||
|
October 26, |
October 27, |
October 26, |
October 27, |
|||||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||||||
| Net sales | $ | 2,543,771 | $ | 2,323,202 | $ | 9,316,256 | $ | 8,751,654 | ||||||||||||
| Cost of products sold | 2,120,187 | 1,937,686 | 7,751,273 | 7,338,838 | ||||||||||||||||
| GROSS PROFIT: | 423,584 | 385,516 | 1,564,983 | 1,412,816 | ||||||||||||||||
| Selling, general and administrative | 165,939 | 147,444 | 650,948 | 627,340 | ||||||||||||||||
| Equity in earnings of affiliates | 5,723 | 2,130 | 17,585 | 20,513 | ||||||||||||||||
| OPERATING INCOME: | 263,368 | 240,202 | 931,620 | 805,989 | ||||||||||||||||
| Other income & expenses: | ||||||||||||||||||||
| Interest & investment income | 766 | 2,500 | 3,236 | 4,971 | ||||||||||||||||
| Interest expense | (3,392 | ) | (3,095 | ) | (12,704 | ) | (12,453 | ) | ||||||||||||
| EARNINGS BEFORE INCOME TAXES: | 260,742 | 239,607 | 922,152 | 798,507 | ||||||||||||||||
| Provision for income taxes | 88,894 | 81,122 | 316,126 | 268,431 | ||||||||||||||||
| (effective tax rate) | 34.09 | % | 33.86 | % | 34.28 | % | 33.62 | % | ||||||||||||
| NET EARNINGS | 171,848 | 158,485 | 606,026 | 530,076 | ||||||||||||||||
|
Less: net earnings attributable to noncontrolling interest |
584 |
1,145 |
3,349 |
3,865 |
||||||||||||||||
|
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION |
$ |
171,264 |
$ |
157,340 |
$ |
602,677 |
$ |
526,211 |
||||||||||||
| NET EARNINGS PER SHARE | ||||||||||||||||||||
| Basic | $ | 0.65 | $ | 0.60 | $ | 2.28 | $ | 1.99 | ||||||||||||
| Diluted | $ | 0.63 | $ | 0.58 | $ | 2.23 | $ | 1.95 | ||||||||||||
| WEIGHTED AVG SHARES O/S | ||||||||||||||||||||
| Basic | 263,588 | 263,853 | 263,812 | 264,317 | ||||||||||||||||
| Diluted | 269,828 | 270,208 | 270,216 | 270,224 | ||||||||||||||||
| DIVIDENDS DECLARED | ||||||||||||||||||||
| PER SHARE | $ | 0.20 | $ | 0.17 | $ | 0.80 | $ | 0.68 | ||||||||||||
| HORMEL FOODS CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||
|
October 26, 2014 |
October 27, 2013 |
|||||||
| (in thousands) | ||||||||
|
ASSETS |
||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 334,174 | $ | 434,014 | ||||
| Accounts receivable | 609,526 | 551,500 | ||||||
| Inventories | 1,054,552 | 967,977 | ||||||
| Income taxes receivable | 25,678 | - | ||||||
| Deferred income taxes | 86,853 | 73,543 | ||||||
| Prepaid expenses | 15,250 | 13,000 | ||||||
| Other current assets | 6,738 | 7,379 | ||||||
| TOTAL CURRENT ASSETS | 2,132,771 | 2,047,413 | ||||||
| INTANGIBLES | 1,781,296 | 1,312,565 | ||||||
| OTHER ASSETS | 539,785 | 600,569 | ||||||
| PROPERTY, PLANT & EQUIPMENT, NET | 1,001,767 | 955,333 | ||||||
| TOTAL ASSETS | $ | 5,455,619 | $ | 4,915,880 | ||||
|
LIABILITIES AND SHAREHOLDERS' INVESTMENT |
||||||||
| TOTAL CURRENT LIABILITIES | $ | 954,692 | $ | 784,009 | ||||
| LONG-TERM DEBT – LESS CURRENT MATURITIES | 250,000 | 250,000 | ||||||
| OTHER LONG-TERM LIABILITIES | 638,871 | 565,292 | ||||||
| SHAREHOLDERS' INVESTMENT | 3,612,056 | 3,316,579 | ||||||
| TOTAL LIAB. & SHAREHOLDERS' INVESTMENT | $ | 5,455,619 | $ | 4,915,880 | ||||
| HORMEL FOODS CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
|
Fifty-Two Weeks Ended |
||||||||||
|
October 26, 2014 |
October 27, 2013 |
|||||||||
| (in thousands) | ||||||||||
| OPERATING ACTIVITIES | ||||||||||
| Net earnings | $ | 606,026 | $ | 530,076 | ||||||
| Depreciation and amortization of intangibles | 130,044 | 124,850 | ||||||||
| Decrease (increase) in working capital | 9,124 | (22,016 | ) | |||||||
| Other | 1,685 | 4,895 | ||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 746,879 | 637,805 | ||||||||
| INVESTING ACTIVITIES | ||||||||||
| Net sale of securities | - | 77,558 | ||||||||
| Acquisitions of businesses/intangibles | (466,204 | ) | (665,415 | ) | ||||||
| Net purchases of property / equipment | (148,853 | ) | (96,598 | ) | ||||||
| Increase in investments, equity in affiliates, and other assets | (1,718 | ) | (6,619 | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | (616,775 | ) | (691,074 | ) | ||||||
| FINANCING ACTIVITIES | ||||||||||
| Dividends paid on common stock | (203,156 | ) | (174,320 | ) | ||||||
| Share repurchase | (58,937 | ) | (70,819 | ) | ||||||
| Other | 32,723 | 49,618 | ||||||||
| NET CASH USED IN FINANCING ACTIVITIES | (229,370 | ) | (195,521 | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (574 | ) | 416 | |||||||
| DECREASE IN CASH AND CASH EQUIVALENTS | (99,840 | ) | (248,374 | ) | ||||||
| Cash and cash equivalents at beginning of year | 434,014 | 682,388 | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 334,174 | $ | 434,014 | ||||||
Hormel Foods Corporation
INVESTOR CONTACT:
Jana Haynes,
507-437-5248
jlhaynes@hormel.com
or
MEDIA
CONTACT:
Julie Craven, 507-437-5345
media@hormel.com
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