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Hormel Foods Reports Double-Digit Growth In Fourth Quarter Sales And EPS

AUSTIN, Minn. | November 23, 2010

Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2010 fourth quarter and full year.

HIGHLIGHTS

Fourth Quarter

  • Diluted EPS of $.90, up 17 percent from $.77 per share in 2009
  • Segment operating profit increased 20 percent from last year
  • Dollar sales of $2.1 billion, increased 23 percent from 2009
  • Volume up 14 percent from last year
  • Grocery Products operating profit down 6 percent; volume up 22 percent; dollar sales up 24 percent
  • Refrigerated Foods operating profit up 22 percent; volume up 9 percent; dollar sales up 26 percent
  • Jennie-O Turkey Store operating profit up 90 percent; volume up 19 percent; dollar sales up 19 percent
  • Specialty Foods operating profit down 6 percent; volume up 12 percent; dollar sales up 12 percent
  • All Other operating profit down 3 percent; volume up 27 percent; dollar sales up 33 percent

Fiscal Year

  • Diluted EPS of $2.92, up 15 percent from $2.53 per share in 2009
  • Segment operating profit up 19 percent from last year
  • Dollar sales of $7.2 billion up 11 percent from 2009
  • Volume up 5 percent from last year
  • Grocery Products operating profit down 4 percent; volume up 14 percent; dollar sales up 13 percent
  • Refrigerated Foods operating profit up 22 percent; volume up 2 percent; dollar sales up 11 percent
  • Jennie-O Turkey Store operating profit up 65 percent; volume up 5 percent; dollar sales up 7 percent
  • Specialty Foods operating profit up 18 percent; volume up 8 percent; dollar sales up 10 percent
  • All Other operating profit down 5 percent; volume up 7 percent; dollar sales up 13 percent

The company reported fiscal 2010 fourth quarter net earnings of $121.1 million, up 17 percent from earnings of $103.9 million a year earlier. Diluted earnings per share for the quarter were $0.90 this year compared to $0.77 per share last year (up 17 percent). Sales totaled $2.1 billion, which was up 23 percent from fiscal 2009. Fiscal fourth quarter 2010 includes 14 weeks versus 13 weeks in 2009.

For the twelve months ending October 31, 2010, net earnings on a U.S. GAAP basis were $395.6 million, or $2.92 per diluted share, up from $2.53 a year earlier. On an adjusted basis1, net earnings were $409.0 million or $3.02 per diluted share. Sales totaled $7.2 billion, up 11 percent from last year’s $6.5 billion.

COMMENTARY

“We are pleased to report a strong finish this year, with both earnings and sales up double-digits this quarter. Earnings growth was driven by segment profit gains in our Jennie-O Turkey Store and Refrigerated Foods segments,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. 

“Our Jennie-O Turkey Store segment led the way with robust earnings attributable to improved efficiencies across all areas of our business, aided by strong commodity turkey meat prices and lower grain costs. Our Refrigerated Foods segment also posted strong earnings,

benefiting from higher pork operating margins. Our Grocery Products segment had a difficult quarter, hampered by higher raw material input costs in comparison to very low input costs a year ago,” commented Ettinger.

“We hit the seven billion dollar mark in annual sales for the first time in our Company’s history, fueled by sales growth across all five of our segments. We were particularly gratified that sales grew across all of our branded, value-added product portfolios,” stated Ettinger.

“We continue to be pleased with the excellent progress made with our new product lines in both our MegaMex Foods business and ourCountry Crock® side dish acquisition, both of which contributed to our positive results this quarter,” remarked Ettinger.

“This morning, we announced an $.18 per share increase to our annual dividend rate (or 21.4%), making the new dividend $1.02 per share. This is the 45th consecutive year in which we’ve increased our dividend,” Ettinger concluded.

SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER

Grocery Products (14% of Net Sales, 21% of Total Segment Operating Profit)

The Grocery Products segment profit declined 6 percent due primarily to higher raw material costs. Sales grew 24 percent driven primarily by increased sales of HORMEL® chili and hash, COMPLEATS® microwave meals, and strong sales growth across much of the MegaMex Foods product portfolio. The SPAM® family of products also showed solid sales growth in the quarter.

Refrigerated Foods (53% of Net Sales, 42% of Total Segment Operating Profit)

Refrigerated Foods delivered another strong quarter, with segment operating profit up 22 percent, aided by strong pork operating margins. Sales grew 26 percent, led by sales of HORMEL® party trays and pepperoni, and NATURAL CHOICE® deli meats  in the Meat Products group, and by sales of CAFÉ H® ethnic meats, NATURAL CHOICE® deli meats and AUSTIN BLUES® barbecue meats in the Foodservice group.

1See explanation regarding adjusted earnings with tables on page 5 of this release.

Jennie-O Turkey Store (19% of Net Sales, 23% of Total Segment Operating Profit)

Jennie-O Turkey Store had an excellent quarter, with segment operating profit up 90 percent, driven by efficiency gains throughout the entire supply chain and in its operations. Earnings were also aided by higher commodity turkey meat prices and an incremental gain of 7.3 million dollars, attributable to open grain positions in their hedging program that affected earnings during the quarter. Sales grew 19 percent, led by sales gains in each of the value-added businesses.  

Specialty Foods (10% of Net Sales, 10% of Total Segment Operating Profit)

The Specialty Foods segment had a challenging quarter with segment profit down 6 percent, resulting from higher raw material costs in its Specialty Products business. These more than offset stronger results in the other two businesses led by sales of sugar, sugar substitutes and nutritional jars. Sales improved 12 percent, with gains across all three businesses.

All Other (4% of Net Sales, 4% of Total Segment Operating Profit)

Segment profit for the All Other segment, which consists primarily of Hormel Foods International, declined 3 percent, hindered by higher input costs associated with export sales. Sales grew 33 percent, driven primarily by higher export sales of the SPAM® family of products.

Net Interest and Investment Income

Net interest and investment income was flat with a year ago.

General Corporate Expense

General corporate expenses were higher due to an increase in the lower of cost or market inventory reserve and higher pension and insurance expenses.
OUTLOOK

“We have solid top-line momentum heading into fiscal 2011. We also expect to generate segment profit growth in all five segments. Pork operating margins and turkey fundamentals remain strong. We also face some headwinds during fiscal 2011 including continued higher raw material costs, higher commodity grain costs and a more difficult comparison with a 53 week year and the hedging gain. Taking all of these factors and others into account, we are setting our fiscal 2011 guidance range at $3.10 to $3.20 per share,” remarked Ettinger.

DIVIDENDS

Effective November 15, 2010, the Company paid its 329thconsecutive quarterly dividend. The annual rate for 2010 was $0.84.

CONFERENCE CALL

A conference call will be webcast at 8:00 a.m. CT on Tuesday, November 23, 2010. 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 877-941-2333 and you must provide the access code of 4384165.  An audio replay is available by calling 800-406-7325 and entering access code 4384165. The audio replay will be available beginning at 10:30 a.m. CT on Tuesday, November 23, 2010, through 11:59 p.m. CT on December 7, 2010. The Webcast replay will be available at 10:30 a.m. CT, Tuesday, November 23, 2010, and archived for one year.

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.

ADJUSTED EARNINGS

Adjusted net earnings excludes one-time charges in the second quarter of $6.3 million ($.05 per diluted share) relating to the closure of the Valley Fresh plant and an income tax charge of $7.1 million ($.05 per diluted share) primarily from the change in tax treatment of Medicare Part D reimbursements by the new health care laws.  Adjusted segment operating profit and Grocery Products adjusted segment operating profit for the twelve months ended October 31, 2010, exclude one-time charges relating to the Valley Fresh plant closing.  The tables below show the calculations to reconcile from adjusted earnings to U.S. GAAP earnings.

Year to Date

2009 U.S.                GAAP Earnings

2010 Adjusted

Earnings

Valley Fresh Plant Closure

Tax items primarily related to health care laws

2010 U.S. GAAP Earnings

Grocery Products

$ 162,531

$165,655 

$  (9,733)

$  155,922 

Refrigerated Foods

226,171

276,315 

276,315 

Jennie-O Turkey Store

86,909

143,644 

143,644 

Specialty Foods

68,484

80,727 

80,727 

All Other

27,631

26,126 

26,126 

Total segment operating profit

571,726

692,467 

(9,733)

682,734 

   Net interest and investment income

(8,432)

(22,024)

(22,024)

   General corporate expense               

(38,312)

(40,348)

(40,348)

Earnings before income taxes

524,982

630,095 

(9,733)

620,362 

Income taxes

(182,169)

(221,110)

3,455 

$   (7,120)

(224,775)

Net earnings attributable to

Hormel Foods Corporation

$ 342,813

$ 408,985

$  (6,278)

$   (7,120)

$  395,587 

Diluted net earnings per share

$    2.53

$     3.02 

$    (0.05)

$    (0.05)

$   2.92 

ABOUT HORMEL FOODS CORPORATION

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 500 Index, Dow Jones Sustainability Indexes, Maplecroft Climate Innovation Indexes, Global 1000 Sustainable Performance Leaders and was named one of "The 100 Most Trustworthy Companies” by Forbes in 2010. 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 32-38 in the company’s Form 10-Q for the quarter ended July 25, 2010, which was filed with the SEC on September 3, 2010, and can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

“Country Crock” is a registered trademark of the Unilever Group of Companies and is used under license. All rights reserved.

Statements Follow


# # #


 

Segment Data

Fiscal 2010 Fourth Quarter Segment Operating Results (in Thousands)

FOURTH QUARTER ENDED

NET SALES

October 31, 2010

October 25, 2009

% Change

Grocery Products

$      287,112

$      232,043

23.7

Refrigerated Foods

1,082,941

857,178

26.3

Jennie-O Turkey Store

402,048

337,544

19.1

Specialty Foods

212,017

189,051

12.1

All Other

    78,921

   59,286

   33.1

Total

$   2,063,039

$   1,675,102

   23.2

OPERATING PROFIT

Grocery Products

$       43,134 

$        46,004 

(6.2)

Refrigerated Foods

86,065 

70,440 

22.2

Jennie-O Turkey Store

47,544 

25,062 

89.7

Specialty Foods

19,886 

21,247 

(6.4)

All Other

       9,448 

    9,695 

   (2.5)

  Total segment operating profit

206,077 

172,448 

19.5

  Net interest and investment income

(4,572)

(4,481)

(2.0)

  General corporate expense

   (14,889)

   (10,294)

(44.6)

  Noncontrolling interest

         1,460 

         730 

    100.0

Earnings before income taxes

$     188,076 

$     158,403 

  18.7

YEAR TO DATE ENDED

NET SALES

October 31, 2010

October 25, 2009

% Change

Grocery Products

$      1,040,455

$      924,682

12.5

Refrigerated Foods

3,818,788

3,436,242

11.1

Jennie-O Turkey Store

1,310,412

1,227,709

6.7

Specialty Foods

782,958

708,730

10.5

All Other

   268,106

   236,308

   13.5

Total

$   7,220,719

$   6,533,671

   10.5

OPERATING PROFIT

Grocery Products

$        155,922 

$        162,531 

(4.1)

Refrigerated Foods

276,315 

226,171 

22.2

Jennie-O Turkey Store

143,644 

86,909 

65.3

Specialty Foods

80,727 

68,484 

17.9

All Other

    26,126 

    27,631 

  (5.4)

  Total segment operating profit

682,734 

571,726 

19.4

  Net interest and investment income

(22,024)

(8,432)

(161.2)

  General corporate expense

   (40,348)

   (38,312)

(5.3)

  Noncontrolling interest

     4,189 

      3,165 

   32.4

Earnings before income taxes

$     624,551 

$     528,147 

   18.3

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Quarter Ended

Year Ended

10-31-2010

10-25-2009

10-31-2010

10-25-2009

Net sales

$ 2,063,039 

$ 1,675,102 

$ 7,220,719 

$ 6,533,671 

Cost of products sold

    1,708,066 

    1,370,908 

   5,981,977 

   5,434,800 

GROSS PROFIT:

354,973 

304,194 

1,238,742 

1,098,871 

  Selling, general and administrative

166,456 

142,704 

605,293 

567,085 

  Equity in earnings of affiliates

     4,131 

     1,394 

     13,126 

     4,793 

OPERATING INCOME:

192,648 

162,884 

646,575 

536,579 

Other income & expenses:

  Interest & investment income

2,389 

2,178 

4,565 

19,563 

  Interest expense

     (6,961)

     (6,659)

     (26,589)

     (27,995)

EARNINGS BEFORE INCOME TAXES:

188,076 

158,403 

624,551 

528,147 

Provision for income taxes

65,468 

53,797 

224,775 

182,169 

  (effective tax rate)

    34.81%

    33.96%

    35.99%

    34.49%

NET EARNINGS

122,608 

104,606 

399,776 

345,978 

Less: Net earnings attributable to  

     noncontrolling interest

  

       1,460 

  

       730 

    

     4,189 

   

      3,165 

NET EARNINGS ATTRIBUTABLE TO

     HORMEL FOODS CORPORATION

$   121,148 

$    103,876 

$    395,587 

$    342,813 

NET EARNINGS PER SHARE

         Basic

$           .91 

$          .78 

$         2.97 

$         2.55 

         Diluted

$           .90 

$          .77 

$         2.92 

$         2.53 

WEIGHTED AVG SHARES OUT

         Basic

133,102 

134,003 

133,366 

134,227 

         Diluted

135,297 

135,702 

135,349 

135,489 

DIVIDENDS DECLARED

        PER SHARE

$           .21 

$          .19 

$           .84 

$           .76 

 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

October 31, 2010

October 25, 2009

(In Thousands)

ASSETS

CURRENT ASSETS

  Cash and cash equivalents

$  467,845

$  385,252

  Short-term marketable securities

50,595

0

  Accounts receivable

430,939

372,292

  Inventories

793,771

722,371

  Income taxes receivable

8,525

0

  Deferred income taxes

70,703

66,435

  Prepaid expenses

12,153

9,130

  Other current assets

    23,635

    19,253

     TOTAL CURRENT ASSETS

1,858,166

1,574,733

INTANGIBLES

770,545

761,009

OTHER ASSETS

503,104

403,600

PROPERTY, PLANT & EQUIPMENT, NET

   922,103

   952,713

     TOTAL ASSETS

$4,053,918

$3,692,055

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

TOTAL CURRENT LIABILITIES

$  1,101,213

$  685,029

LONG-TERM DEBT – LESS CURRENT MATURITIES

0

350,000

OTHER LONG-TERM LIABILITIES

546,066

532,705

SHAREHOLDERS’ INVESTMENT

2,406,639

2,124,321

    TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT

$4,053,918

$3,692,055

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended

10-31-2010

10-25-2009

(In Thousands)

OPERATING ACTIVITIES

  Net earnings

$   399,776 

$   345,978 

  Depreciation and amortization of intangibles

125,591 

127,138 

  (Increase) Decrease in working capital

(65,683)

87,033 

  Other

        25,848 

    (1,381)

NET CASH PROVIDED BY OPERATING ACTIVITIES

485,532 

558,768 

INVESTING ACTIVITIES

  Net (purchase) sale of securities

(50,000)

3,899 

  Acquisitions of businesses/intangibles

 (28,104)

 (701)

  Net purchases of property/equipment

(84,908)

(91,958)

  (Increase) Decrease in investments, equity in affiliates, and other assets

    (95,464)

      3,532 

NET CASH USED IN INVESTING ACTIVITIES

(258,476)

(85,228)

FINANCING ACTIVITIES

  Net (payments on) proceeds from debt

(100,000)

  Dividends paid on common stock

(109,374)

(101,376)

  Share repurchase

(69,574)

(38,147)

  Other

      34,485 

     (3,543)

NET CASH USED IN FINANCING ACTIVITIES

   (144,463)

 (243,066)

INCREASE IN CASH AND CASH EQUIVALENTS

 82,593 

230,474 

Cash and cash equivalents at beginning of year

    385,252 

    154,778 

CASH AND CASH EQUIVALENTS AT END OF YEAR

$  467,845 

$  385,252 


 

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