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Hormel Foods Reports First Quarter Results

AUSTIN, Minn. | February 23, 2012

Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2012 first quarter. All comparisons are to first quarter of fiscal 2011.

HIGHLIGHTS

First Quarter

- Diluted EPS of $.48, down 13 percent from $.55 per share

¨ Segment operating profit down 17 percent

¨ Dollar sales of $2.0 billion, up 6 percent

¨ Volume down 2 percent

¨ Grocery Products operating profit down 9 percent; volume down 6 percent; dollar sales down 3 percent

¨ Refrigerated Foods operating profit down 44 percent; volume flat; dollar sales up 7 percent

¨ Jennie-O Turkey Store operating profit up 4 percent; volume down 7 percent; dollar sales up 4 percent

¨ Specialty Foods operating profit down 4 percent; volume up 1 percent; dollar sales up 14 percent

¨ All Other (International) operating profit up 25 percent; volume flat; dollar sales up 17 percent

The company reported fiscal 2012 first quarter net earnings of $128.4 million, down 14 percent from earnings of $148.8 million a year earlier. Diluted earnings per share for the quarter were $.48 this year compared to $.55 per share last year. Sales totaled $2.04 billion, which was up 6 percent from fiscal 2011.

COMMENTARY

“Our first quarter earnings of 48 cents per share was the second best in our Company's history, albeit down from a year ago,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Sales grew six percent, with four of our five segments registering sales gains in the quarter.”

“I was pleased with the strong results achieved by our Jennie-O Turkey Store segment, led by increased retail value-added sales. Our International business also delivered a solid quarter, fueled by strong export sales. Results of our Refrigerated Foods segment were hindered by significantly lower pork operating margins, and our Grocery Products segment results were adversely impacted by softer sales in the center of the store,” commented Ettinger.

“We are encouraged by continued growth of our MegaMex Foods joint venture, led by increased sales of our DON MIGUEL products and our WHOLLY GUACAMOLE line. Our Foodservice group also achieved solid sales growth during the quarter,” stated Ettinger.

SEGMENT OPERATING SUMMARIES – FIRST QUARTER

Grocery Products (13% of Net Sales, 22% of Total Segment Operating Profit)

The Grocery Products segment operating profit declined 9 percent, due primarily to lower volumes and higher raw material costs. Sales fell 3 percent with overall softer results partially offset by sales growth of the MegaMex Foods joint venture.

Refrigerated Foods (53% of Net Sales, 26% of Total Segment Operating Profit)

Refrigerated Foods segment profit declined 44 percent, due primarily to lower pork operating margins. Sales grew 7 percent during the quarter, led by sales of HORMEL® pepperoni, HORMEL® COUNTRY CROCK® side dishes, and HORMEL® NATURAL CHOICE® deli meats in the Meat Products group, and by sales of our HORMEL® NATURAL CHOICE® deli meats, AUSTIN BLUES® barbecue products, and CAFÉ H® ethnic products in the Foodservice group.

Jennie-O Turkey Store (19% of Net Sales, 38% of Total Segment Operating Profit)

Jennie-O Turkey Store had an outstanding quarter, with segment operating profit up 4 percent, over a very strong quarter a year ago. Sales grew 4 percent led by sales of JENNIE-O TURKEY STORE® retail fresh tray pack items and turkey burgers.

Specialty Foods (11% of Net Sales, 8% of Total Segment Operating Profit)

Segment operating profit for Specialty Foods declined 4 percent, due primarily to higher raw material and freight costs. Sales grew 14 percent, led by sales of nutritional products, private label products, sugar, and liquid portions.

All Other (4% of Net Sales, 6% of Total Segment Operating Profit)

Segment operating profit for the All Other segment, which consists primarily of Hormel Foods International, increased 25 percent for the quarter, while sales grew 17 percent, led primarily by stronger exports of fresh pork and the SPAM® family of products.

Net Interest and Investment Income/Expense

Net interest and investment expense was lower as a result of improved investment returns and lower interest expense.

General Corporate Expense

General corporate expenses were lower than last year due to higher expenses last year associated with the vesting of options under the Universal Stock Option award granted to all employees in 2007.

OUTLOOK

“As we stated in our fourth quarter release, we anticipated a challenging operating environment this year, and for comparisons to be more difficult in the first half of the year and to become more favorable in the back half. We continue to look for slowly improving results from our Refrigerated Foods segment as pork operating margins return to more normalized levels. Sales in our Grocery Products segment and Meat Products group should also improve, as we begin to see the effects of our new advertising campaigns supporting our HORMEL and SPAM brands. Taking all of the relevant factors into account, we are maintaining our full-year earnings guidance range of $1.79 to $1.89 per share,” concluded Ettinger.

DIVIDENDS

Effective February 15, 2012, the Company paid its 334th consecutive quarterly dividend, at the annual rate of $.60.

CONFERENCE CALL

A conference call will be webcast at 8:30 a.m. CT on Thursday, February 23, 2012. 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 877-941-0843 and the access code is 4509484. An audio replay is available by calling 800-406-7325 and entering access code 4509484. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, February 23, 2012, through 11:59 p.m. CT on March 8, 2012. The webcast replay will be available at 10:30 a.m. CT, Thursday, February 23, 2012, and will be archived for one year.

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 Best Corporate Citizens” by Corporate Responsibility Magazine in 2011. 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 27-30 in the company’s Annual Report for the fiscal year ended Oct. 30, 2011, which 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 2012 First Quarter Segment Operating Results (dollars in thousands)

 

FIRST QUARTER – 13 WEEKS ENDED

NET SALES

29-Jan-12

30-Jan-11

% Change

Grocery Products

$269,479

$276,899

          (2.7)

Refrigerated Foods

1,083,525

1,010,702

 7.2 

Jennie-O Turkey Store

377,371

364,517

 3.5 

Specialty Foods

218,024

191,345

 13.9 

All Other

91,040

78,095

 16.6 

Total

$2,039,439

$1,921,558

 6.1 

OPERATING PROFIT

Grocery Products

$44,093 

$48,562 

          (9.2)

Refrigerated Foods

53,749 

96,134 

         (44.1)

Jennie-O Turkey Store

76,762 

73,825 

 4.0 

Specialty Foods

16,647 

17,278 

          (3.7)

All Other

12,471 

9,993 

 24.8 

Total segment operating profit

203,722

245,792 

         (17.1)

Net interest and investment expense (income)

1,624 

6,138 

         (73.5)

General corporate expense

8,727 

11,252 

         (22.4)

Noncontrolling interest

938 

1,209 

         (22.4)

Earnings before income taxes

$194,309 

$229,611 

         (15.4)

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Thirteen Weeks Ended

1/29/2012

1/30/2011

Net sales

$ 2,039,439 

$ 1,921,558 

Cost of products sold

 1,702,030 

 1,547,553 

GROSS PROFIT:

337,409 

374,005 

Selling, general and administrative

152,477 

145,161 

Equity in earnings of affiliates

 11,001 

 6,905 

OPERATING INCOME:

195,933 

235,749 

Other income & expenses:

Interest & investment income

1,590 

441 

Interest expense

       (3,214)

       (6,579)

EARNINGS BEFORE INCOME TAXES:

194,309 

229,611 

Provision for income taxes

64,976 

79,576 

(effective tax rate)

33.44%

34.66%

NET EARNINGS

129,333 

150,035 

Less: net earnings attributable to noncontrolling interest

 938 

 1,209 

NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION

$128,395 

$148,826 

NET EARNINGS PER SHARE

Basic

$0.49 

$0.56 

Diluted

$0.48 

$0.55 

WEIGHTED AVG SHARES OUT

Basic

263,946 

266,560 

Diluted

269,608 

271,740 

DIVIDENDS DECLARED

PER SHARE

$0.1500 

$0.1275 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

1/29/2012

11/30/2011

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$548,618

$463,130

Short-term marketable securities

76,383

76,077

Accounts receivable

422,505

461,110

Inventories

882,828

885,823

Income taxes receivable

0

24,423

Deferred income taxes

69,485

69,203

Prepaid expenses

12,952

10,048

Other current assets

8,960

8,417

TOTAL CURRENT ASSETS

2,021,731

1,998,231

INTANGIBLES

760,495

762,930

OTHER ASSETS

579,786

576,140

PROPERTY, PLANT & EQUIPMENT, NET

908,282

907,090

TOTAL ASSETS

$4,270,294

$4,244,391

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

TOTAL CURRENT LIABILITIES

$724,586

$778,186

LONG-TERM DEBT – LESS CURRENT MATURITIES

250,000

250,000

OTHER LONG-TERM LIABILITIES

556,602

556,389

SHAREHOLDERS’ INVESTMENT

2,739,106

2,659,816

TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT

$4,270,294

$4,244,391

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen Weeks Ended

     1-29-2012    

  1-30-2011

(in thousands)

OPERATING ACTIVITIES

Net earnings

$   129,333 

$   150,035 

Depreciation and amortization of intangibles

30,815 

31,197 

Increase in working capital

         (11,040)

      (21,177)

Other

3,052 

5,277 

NET CASH PROVIDED BY OPERATING ACTIVITIES

152,160 

165,332 

INVESTING ACTIVITIES

Acquisitions of businesses/intangibles

 (168)

 (7,207)

Net purchases of property / equipment

         (29,403)

      (15,457)

Decrease in investments, equity in affiliates, and other assets

998 

4,143 

NET CASH USED IN INVESTING ACTIVITIES

         (28,573)

      (18,521)

FINANCING ACTIVITIES

Dividends paid on common stock

         (33,600)

      (27,904)

Share repurchase

         (11,117)

      (13,731)

Other

5,814 

24,762 

NET CASH USED IN FINANCING ACTIVITIES

         (38,903)

      (16,873)

EFFECT OF EXCHANGE RATE ON CASH

804

1,030 

INCREASE IN CASH AND CASH EQUIVALENTS

85,488 

130,968 

Cash and cash equivalents at beginning of year

463,130 

467,845 

CASH AND CASH EQUIVALENTS AT END OF QUARTER

$548,618 

$598,813 


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