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Hormel Foods Reports Fourth Quarter Results

AUSTIN, Minn. | November 22, 2011

Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2011 fourth quarter and full year.

All comparisons are to the fourth quarter or full year of fiscal 2010. All per share results reported here have been adjusted to give effect to the two-for-one stock split, which was effective February 1, 2011.

HIGHLIGHTS

Fourth Quarter

¨      All quarterly comparisons are based on a 13 week quarter in fiscal 2011, compared to a 14 week quarter in fiscal 2010

¨      Diluted EPS of $.43, down 4 percent from $.45 per share

¨      Segment operating profit decreased 5 percent

¨      Dollar sales of $2.1 billion, increased 2 percent; volume down 7 percent

¨      Grocery Products operating profit up 3 percent; volume down 6 percent; dollar sales down 2 percent

¨      Refrigerated Foods operating profit down 19 percent; volume down 8 percent; dollar sales up 1 percent

¨      Jennie-O Turkey Store operating profit up 4 percent; volume down 11 percent; dollar sales up 2 percent

¨      Specialty Foods operating profit up 12 percent; volume down 1 percent; dollar sales up 10 percent

¨      All Other operating profit up 3 percent; volume up 2 percent; dollar sales up 12 percent

Fiscal Year

¨      All annual comparisons are based on a 52 week fiscal year in 2011, compared to a 53 week fiscal year in 2010

¨      Record diluted EPS of $1.74, up 19 percent from diluted EPS of $1.46

¨      Segment operating profit up 13 percent

¨      Record dollar sales of $7.9 billion, up 9 percent; volume up 1 percent

¨      Grocery Products operating profit up 4 percent; volume flat; dollar sales up 2 percent

¨      Refrigerated Foods operating profit up 6 percent; volume down 1 percent; dollar sales up 10 percent

¨      Jennie-O Turkey Store operating profit up 43 percent; volume up 1 percent; dollar sales up 12 percent

¨      Specialty Foods operating profit down 5 percent; volume up 3 percent; dollar sales up 7 percent

¨      All Other operating profit up 39 percent; volume up 13 percent; dollar sales up 26 percent

 The company reported fiscal 2011 fourth quarter net earnings of $117.3 million, down 3 percent from earnings of $121.1 million a year earlier. Diluted earnings per share for the quarter were $0.43, down 4 percent compared to $0.45 last year.  Sales for the quarter were $2.1 billion, up 2 percent from the same period in fiscal 2010.

For the year ended October 30, 2011, net earnings were $474.2 million, up 16 percent from adjusted1 net earnings of $409.0 million last year, and up 20 percent from U.S. GAAP net earnings of $395.6 million.  Diluted net earnings per share were $1.74, up 15 percent from diluted adjusted1 net earnings per share of $1.51 last year and up 19 percent from U.S. GAAP diluted earnings per share of $1.46. Sales for the year ended October 30, 2011, totaled $7.9 billion, up 9 percent from last year.

COMMENTARY

“I am proud of the team for finishing an outstanding year with a fourth quarter that met our expectations. For the quarter, we are pleased to have generated segment profit increases in four out of five segments and an overall net sales increase. Our tonnage was down in comparison with the 14 week quarter last year, but we held our own on volumes in the face of significant pricing actions,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

"In looking at the full year, we delivered significant sales growth of 9 percent, ending the year at a record $7.9 billion, with all five segments registering increases. We also grew earnings per share by an excellent 19 percent, finishing at record earnings of $1.74 per share. We enjoyed a particularly strong performance by the Jennie-O Turkey Store team, and both our All Other (International) and Refrigerated Foods segments also generated nice profit increases for the year. We enhanced our support of our key HORMEL and JENNIE-O TURKEY STORE brands in fiscal 2011 with effective advertising campaigns, and added to the portfolio of our fast-growing MegaMex Foods joint venture through the acquisition of the WHOLLY GUACAMOLE line and other related products," commented Ettinger.

"This morning we announced a $.09 per share increase to the annual dividend (or 17.6 percent), making the new dividend $.60 per share. This marks the 46th consecutive year in which we have increased our dividend, and further evidences our intention to deliver superior total returns to our shareholders," stated Ettinger.

SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER

Grocery Products (13% of Net Sales, 23% of Total Segment Operating Profit)

The Grocery Products segment profit increased 3 percent, due in part to improved results by the MegaMex Foods joint venture.  Sales overall for the quarter were down 2 percent.  The SPAM® family of products and HORMEL® Bacon Toppings showed solid sales growth in the quarter. 

See explanation regarding adjusted earnings with table on page 4 of this release.

Refrigerated Foods (52% of Net Sales, 36% of Total Segment Operating Profit)

Refrigerated Foods segment profit declined 19 percent, as lower pork operating margins and higher commodity input costs negatively impacted results.  Net sales for the quarter were up 1 percent, led byHORMEL® convenience bacon and HORMEL® CURE 81® hams in the Meat Products group and HORMEL® NATURAL CHOICE® deli meats and pizza toppings in the Foodservice group.

Jennie-O Turkey Store (20% of Net Sales, 25% of Total Segment Operating Profit)

Jennie-O Turkey Store had a solid quarter, with segment profit up 4 percent and sales up 2 percent.  The continued sales growth of value-added products and improved efficiencies throughout the supply chain and operations offset higher feed costs during the quarter. 

Specialty Foods (11% of Net Sales, 11% of Total Segment Operating Profit)

The Specialty Foods segment posted operating profits 12 percent higher than last year on a 10 percent increase in sales.  Sales mix improvements on bulk and nutritional items and higher sales of private label canned meats contributed to the improved results.

All Other (4% of Net Sales, 5% of Total Segment Operating Profit)

The All Other segment, which consists primarily of Hormel Foods International, posted segment profits that were 3 percent ahead of last year, and sales grew 12 percent. Results were primarily driven by stronger fresh pork exports.

General Corporate Expense

General corporate expenses were lower, driven principally by a reduction in the lower of cost or market inventory reserve.

OUTLOOK

"We expect to deliver sales and earnings growth in fiscal 2012, even amidst some difficult comparisons and less-than-favorable macro conditions. In particular, we are looking for our Grocery Products, Specialty Foods and All Other (International) units to drive profit growth in fiscal 2012, as our Refrigerated Foods and Jennie-O Turkey Store segments maintain their position against historically high results. We also anticipate the comparisons to be more difficult in the first half of the year, becoming more favorable later in the year.  Taking all of the relevant factors into account, we are setting our 2012 guidance range at $1.79 to $1.89 per share," remarked Ettinger.

DIVIDENDS

Effective November 15, 2011, the Company paid its 333rd consecutive quarterly dividend, at the annual rate of $.51, marking the beginning of its 84th consecutive year of dividends paid.

CONFERENCE CALL

A conference call will be webcast at 8:00 a.m. CT on Tuesday, November 22, 2011. 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 the access code is 4482517.  An audio replay is available by calling 800-406-7325 and entering access code 4482517.  The audio replay will be available beginning at 10:30 a.m. CT on Tuesday, November 22, 2011, through 11:59 p.m. CT on December 6, 2011.  The Webcast replay will be available at 10:30 a.m. CT, Tuesday, November 22, 2011, 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 for 2010 (a non-GAAP financial measurement) exclude one-time charges of $6.3 million ($0.02 per diluted share) relating to the closure of the Valley Fresh plant and an income tax charge of $7.1 million ($0.03 per diluted share) primarily due to the change in tax treatment of Medicare Part D reimbursements by health care laws enacted in the prior year.  The table below shows the calculations to reconcile from adjusted earnings to U.S. GAAP earnings for 2010.

2011 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

$ 162,556

$  165,655

$  (9,733)

$  155,922

Refrigerated Foods

292,624

276,315

276,315

Jennie-O Turkey Store

204,940

143,644

143,644

Specialty Foods

76,905

80,727

80,727

All Other

36,250

26,126

26,126

Total segment operating profit

773,275

692,467

(9,733)

682,734

   Net interest and investment expense (income)

23,448

22,024

22,024

   General corporate expense

35,992

40,348

40,348

EBIT Attributable to Hormel Foods

713,835

630,095

(9,733)

620,362

   Income taxes

239,640

221,110

(3,455)

$    7,120 

224,775

Net earnings attributable to

   Hormel Foods Corporation

$ 474,195

$ 408,985

$  (6,278)

$  (7,120)

$  395,587

Diluted net earnings per share

$    1.74

$     1.51

$    (0.02)

$    (0.03)

$     1.46

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 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, visithttp://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 33-39 in the company’s Form 10-Q for the quarter ended July 31, 2011, which was filed with the SEC on September 9, 2011, and can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

Statements Follow

###

Segment Data

Fiscal 2011 Fourth Quarter Segment Operating Results (in Thousands)

 

 

FOURTH QUARTER ENDED

 

 

 

 

NET SALES

October 30, 2011

October 31, 2010

% Change

Grocery Products

$      282,018

$      287,112

(1.8)

Refrigerated Foods

1,092,024

1,082,941

0.8

Jennie-O Turkey Store

408,943

402,048

1.7

Specialty Foods

232,213

212,017

9.5

All Other

    88,700

    78,921

  12.4

Total

$   2,103,898

$   2,063,039

    2.0

 

 

OPERATING PROFIT

 

 

 

Grocery Products

$       44,518

$       43,134

3.2

Refrigerated Foods

69,420

86,065

(19.3)

Jennie-O Turkey Store

49,561

47,544

4.2

Specialty Foods

22,322

19,886

12.2

All Other

       9,770

       9,448

   3.4

  Total segment operating profit

195,591

206,077

(5.1)

  Net interest and investment expense (income)

6,611

4,572

44.6

  General corporate expense

   9,827

   14,889

(34.0)

  Noncontrolling interest

       1,186

         1,460

  (18.8)

Earnings before income taxes

$     180,339

$     188,076

   (4.1)

 

 

YEAR TO DATE ENDED

 

 

 

 

NET SALES

October 30, 2011

October 31, 2010

% Change

Grocery Products

$    1,064,558

$    1,040,455

2.3

Refrigerated Foods

4,189,224

3,818,788

9.7

Jennie-O Turkey Store

1,467,222

1,310,412

12.0

Specialty Foods

835,584

782,958

6.7

All Other

   338,501

   268,106

   26.3

Total

$   7,895,089

$   7,220,719

   9.3

 

 

OPERATING PROFIT

 

 

 

Grocery Products

$      162,556

$      155,922

4.3

Refrigerated Foods

292,624

276,315

5.9

Jennie-O Turkey Store

204,940

143,644

42.7

Specialty Foods

76,905

80,727

(4.7)

All Other

    36,250

    26,126

  38.8

  Total segment operating profit

773,275

682,734

13.3

  Net interest and investment expense (income)

23,448

22,024

6.5

  General corporate expense

35,992

40,348

(10.8)

  Noncontrolling interest

     5,001

     4,189

   19.4

Earnings before income taxes

$     718,836

$     624,551

   15.1

 

 

                                                                                             

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

 

 

 

 

Quarter Ended

Year Ended

 

10-30-2011

10-31-2010*

10-30-2011

10-31-2010*

 

 

 

 

 

Net sales

$ 2,103,898 

$ 2,063,039 

$ 7,895,089 

$ 7,220,719 

 

 

 

 

 

Cost of products sold

    1,767,872 

    1,708,066 

   6,560,976 

   5,981,977 

 

 

 

 

 

GROSS PROFIT:

336,026 

354,973 

1,334,113 

1,238,742 

 

 

 

 

 

  Selling, general and administrative

156,694 

166,456 

618,586 

605,293 

 

 

 

 

 

  Equity in earnings of affiliates

     7,618 

     4,131 

     26,757 

     13,126 

 

 

 

 

 

OPERATING INCOME:

186,950 

192,648 

742,284 

646,575 

 

 

 

 

 

Other income & expenses:

 

 

 

 

  Interest & investment (loss) income

(3,338)

2,389 

(786) 

4,565 

  Interest expense

     (3,273)

     (6,961)

     (22,662)

     (26,589)

 

 

 

 

 

EARNINGS BEFORE INCOME TAXES:

180,339 

188,076 

718,836 

624,551 

 

 

 

 

 

Provision for income taxes

61,844 

65,468 

239,640 

224,775 

  (effective tax rate)

    34.29%

    34.81%

    33.34%

    35.99%

 

 

 

 

 

NET EARNINGS

118,495 

122,608 

479,196 

399,776 

Less: Net earnings attributable to  

     noncontrolling interest

  

       1,186 

  

       1,460 

    

     5,001 

    

     4,189 

NET EARNINGS ATTRIBUTABLE TO

     HORMEL FOODS CORPORATION

 

$    117,309 

 

$   121,148 

 

$    474,195 

 

$    395,587 

 

 

 

 

 

NET EARNINGS PER SHARE

 

 

 

 

         Basic

$          .44 

$           .46 

$         1.78 

$         1.48 

         Diluted

$          .43 

$           .45 

$         1.74 

$         1.46 

 

 

 

 

 

WEIGHTED AVG SHARES O/S

 

 

 

 

         Basic

264,913 

266,204 

266,394 

266,732 

         Diluted

270,314 

270,594 

271,915 

270,698 

 

 

 

 

 

DIVIDENDS DECLARED

 

 

 

 

        PER SHARE

$     .1275 

$         .1050 

$       .5100 

$         .4200 

 

 

 

 

 

* Shares and per share figures have been restated to reflect the two-for-one stock split effected February 1, 2011.

 

                                                               

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

 

 

 

 

 

October 30, 2011

October 31, 2010

 

(In Thousands)

ASSETS

 

 

 

CURRENT ASSETS

 

 

  Cash and cash equivalents

$    463,130

$     467,845

  Short-term marketable securities

76,077

50,595

  Accounts receivable

461,110

430,939

  Inventories

885,823

793,771

  Income taxes receivable

24,423

8,525

  Deferred income taxes

69,203

70,703

  Prepaid expenses

10,048

12,153

  Other current assets

    8,417

    23,635

 

 

 

     TOTAL CURRENT ASSETS

1,998,231

1,858,166

 

 

 

INTANGIBLES

762,930

770,545

 

 

 

OTHER ASSETS

576,140

503,104

 

 

 

PROPERTY, PLANT & EQUIPMENT, NET

   907,090

   922,103

 

 

 

     TOTAL ASSETS

 4,244,391

 4,053,918

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

 

 

 

TOTAL CURRENT LIABILITIES

$    778,186

$  1,101,213

 

 

 

LONG-TERM DEBT – LESS CURRENT MATURITIES

250,000

0

 

 

 

OTHER LONG-TERM LIABILITIES

556,389

546,066

 

 

 

SHAREHOLDERS’ INVESTMENT

2,659,816

2,406,639

 

 

 

    TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT

 4,244,391

 4,053,918

 

 

 

 

 

 

                                                               

 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Year Ended

 

10-30-2011

10-31-2010

 

(In Thousands)

OPERATING ACTIVITIES

 

  Net earnings

$   479,196 

$   399,776 

  Depreciation and amortization of intangibles

124,165 

125,591 

  Increase in working capital

(102,781)

(65,683)

  Other

        (10,101)

        25,848 

NET CASH PROVIDED BY OPERATING ACTIVITIES

490,479 

485,532 

 

 

 

INVESTING ACTIVITIES

 

 

  Net purchase of securities

(20,000)

(50,000)

  Acquisitions of businesses/intangibles

 (7,207)

 (28,104)

  Net purchases of property / equipment

(92,525)

(84,908)

  Increase in investments, equity in affiliates, and other assets

    (51,253)

    (95,464)

NET CASH USED IN INVESTING ACTIVITIES

(170,985)

(258,476)

 

 

 

FINANCING ACTIVITIES

 

 

  (Payments on) Proceeds from long-term debt, net

(102,436)

  Dividends paid on common stock

(129,975)

(109,374)

  Share repurchase

(152,930)

(69,574)

  Other

      61,132 

      34,485 

NET CASH USED IN FINANCING ACTIVITIES

   (324,209)

   (144,463)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(4,715)

82,593 

Cash and cash equivalents at beginning of year

    467,845 

    385,252 

CASH AND CASH EQUIVALENTS AT END OF YEAR

$   463,130 

$   467,845 

 

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