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Hormel Foods Reports Record Second Quarter Results

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May 23, 2012

Austin, Minn.

Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2012 second quarter.

All comparisons are to the second quarter or first half of fiscal 2011.

HIGHLIGHTS

Second Quarter

– Diluted EPS of $.48, up 20 percent from diluted EPS of $.40

– Segment operating profit up 9 percent

– Dollar sales of $2 billion, up 3 percent

– Volume down 2 percent

– Jennie-O Turkey Store operating profit up 50 percent; volume down 2 percent; dollar sales up 7 percent

– Refrigerated Foods operating profit down 25 percent; volume down 4 percent; dollar sales down 1 percent

– Grocery Products operating profit up 10 percent; volume down 3 percent; dollar sales up 1 percent

– Specialty Foods operating profit up 9 percent; volume up 2 percent; dollar sales up 12 percent

– All Other (primarily Hormel Foods International) operating profit up 52 percent; volume up 10 percent; dollar sales up 11 percent

The company reported fiscal 2012 second quarter net earnings of $127.9 million, up 17 percent from net earnings of $109.6 million a year earlier. For the six months ended April 29, 2012, net earnings were $256.3 million, down 1 percent from net earnings of $258.4 million the same period last year. Diluted net earnings per share for the six months ended April 29, 2012 were $.95, equal to diluted net earnings per share of $.95 last year.

Sales for the quarter were $2 billion, up 3 percent from fiscal 2011. For the six months ended April 29, 2012, sales totaled $4.1 billion, up 4 percent from the same period last year.

COMMENTARY

“We are pleased to report record earnings and sales for the second quarter. This is a good example of our balanced business model in action, as we were able to increase earnings in four out of five segments.” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer, “Sales grew three percent, again with four of our five segments registering gains.”

“Our Jennie-O Turkey Store segment delivered another outstanding quarter, driven by value-added sales growth. Our International business also achieved impressive results, led by strong export sales. Both our Grocery Products and Specialty Foods segments returned to earnings growth during the quarter. Results of our Refrigerated Foods segment were significantly pressured by lower pork operating margins,” Ettinger remarked.

“We are particularly encouraged by the continued growth of our Jennie-O Turkey Store value-added sales and our MegaMex Foods joint venture,” Ettinger stated.

SEGMENT OPERATING HIGHLIGHTS – SECOND QUARTER

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

The Grocery Products segment operating profit increased 10 percent, aided by lower pork and beef input costs. Net sales exceeded last year by 1 percent. Strong results by our SPAM® family of products and our MegaMex Foods products offset soft sales of our microwave products and DINTY MOORE® stew.

Refrigerated Foods (51% of Net Sales, 27% of Total Segment Operating Profit)

Refrigerated Foods segment profit declined 25 percent, due primarily to lower pork operating margins during the quarter. Net sales for the quarter declined 1 percent, with lower commodity pork sales offsetting strong sales of HORMEL® NATURAL CHOICE® deli meats, HORMEL® party trays, HORMEL® pepperoni and DILUSSO® deliproducts. Foodservice value-added sales also grew during the quarter.

Jennie-O Turkey Store (20% of Net Sales, 35% of Total Segment Operating Profit)

Jennie-O Turkey Store had another excellent quarter, with segment operating profit up 50 percent from a year ago, driven by value-added sales. Net sales for the quarter rose 7 percent, led by sales of JENNIE-O TURKEY STORE®retail tray pack and turkey burgers.

Specialty Foods (11% of Net Sales, 10% of Total Segment Operating Profit)

The Specialty Foods segment operating profit increased 9 percent, as pricing actions taken earlier helped offset higher raw material costs. Net sales grew 12 percent, led by sales of private label canned meats, ingredients, bulk and nutritional items.

All Other (5% of Net Sales, 6% of Total Segment Operating Profit)

The All Other segment, which consists primarily of Hormel Foods International, grew segment profit 52 percent, and grew net sales by 11 percent, driven by stronger exports of fresh pork and the SPAM® family of products.

General Corporate Expense

General corporate expenses were lower than last year due primarily to lower pension and insurance costs.

OUTLOOK

“Our second quarter results provide positive momentum heading into the back half of the year. We believe continued weaker pork operating margins will be more than offset by stronger results from our other segments. We expect sales in the center of the store to slowly improve as we continue our advertising support of 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,” Ettinger concluded.

DIVIDENDS

Effective May 15, 2012, the Company paid its 335th consecutive quarterly dividend, at the annual rate of $.60.

CONFERENCE CALL

A conference call will be Webcast at 8:30 a.m. CT (9:30 a.m. ET) on Wednesday, May 23, 2012. Access is available at https://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 877-941-0844 and you must provide the access code of 4535051. An audio replay is available by calling 800-406-7325 and entering access code 4535051. The audio replay will be available beginning at 10:30 a.m. CT on Wednesday, May 23, 2012, through 11:59 p.m. CT on Wednesday, June 6, 2012. The Webcast replay will be available at 10:30 a.m. CT, Wednesday, May 23, 2012, and archived for one year.

Statements Follow

# # #

Segment Data

Fiscal 2012 Second Quarter Segment Operating Results (dollars in thousands)

SECOND QUARTER – 13 WEEKS ENDED
NET SALES
4/29/ 2012 5/1/ 2011 % Change
Grocery Products $ 263,993 $ 260,273 1.4
Refrigerated Foods 1,031,975 1,040,624 (0.8)
Jennie-O Turkey Store 391,053 365,953 6.9
Specialty Foods 228,947 205,001 11.7
All Other 96,891 87,190 11.1
Total $ 2,012,859 $ 1,959,041 2.7

OPERATING PROFIT

Grocery Products $ 42,858 $ 39,048 9.8
Refrigerated Foods 53,009 70,250 (24.5)
Jennie-O Turkey Store 70,198 46,703 50.3
Specialty Foods 20,859 19,164 8.8
All Other 12,855 8,444 52.2
Total segment operating profit 199,779 183,609 8.8
Net interest and investment expense 945 5,215 (81.9)
General corporate expense 6,088 11,969 (49.1)
Noncontrolling interest 1,048 1,123 (6.7)
Earnings before income taxes $ 193,794 $ 167,548 15.7
YEAR TO DATE – 26 WEEKS ENDED
NET SALES
4/29/ 2012 5/1/ 2011 % Change
Grocery Products $ 533,472 $ 537,172 (0.7)
Refrigerated Foods 2,115,500 2,051,326 3.1
Jennie-O Turkey Store 768,424 730,470 5.2
Specialty Foods 446,971 396,346 12.8
All Other 187,931 165,285 13.7
Total $ 4,052,298 $ 3,880,599 4.4

OPERATING PROFIT

Grocery Products $ 86,951 $ 87,610 (0.8)
Refrigerated Foods 106,758 166,384 (35.8)
Jennie-O Turkey Store 146,960 120,528 21.9
Specialty Foods 37,506 36,442 2.9
All Other 25,326 18,437 37.4
Total segment operating profit 403,501 429,401 (6.0)
Net interest and investment expense (income) 2,569 11,353 (77.4)
General corporate expense 14,815 23,221 (36.2)
Noncontrolling interest 1,986 2,332 (14.8)
Earnings before income taxes $ 388,103 $ 397,159 (2.3)
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
13 Weeks Ended 26 Weeks Ended
4-29-2012 5-1-2011 4-29-2012 5-1-2011
Net sales $2,012,859 $1,959,041 $4,052,298 $3,880,599
Cost of products sold 1,677,252 1,632,814 3,379,282 3,180,367
GROSS PROFIT: 335,607 326,227 673,016 700,232
Selling, general and administrative 148,684 160,136 301,161 305,297
Equity in earnings of affiliates 7,816 6,672 18,817 13,577
OPERATING INCOME: 194,739 172,763 390,672 408,512
Other income & expenses:
Interest & investment income 2,338 1,972 3,928 2,413
Interest expense (3,283) (7,187) (6,497) (13,766)
EARNINGS BEFORE INCOME TAXES: 193,794 167,548 388,103 397,159
Provision for income taxes 64,859 56,846 129,835 136,422
(effective tax rate) 33.47% 33.93% 33.45% 34.35%
NET EARNINGS 128,935 110,702 258,268 260,737
Less: net earnings attributable to

noncontrolling interest

1,048 1,123 1,986 2,332
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION $127,887 $109,579 $256,282 $258,405
NET EARNINGS PER SHARE
Basic $ .49 $ .41 $ .97 $ .97
Diluted $ .48 $ .40 $ .95 $ .95
WEIGHTED AVG SHARES O/S
Basic 263,610 267,207 263,778 266,868
Diluted 269,061 272,847 269,334 272,293
DIVIDENDS DECLARED
PER SHARE $ .1500 $ .1275 $ .3000 $ .2550
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
4/29/ 2012 10/30/ 2011
(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 524,779 $ 463,130
Short-term marketable securities 76,811 76,077
Accounts receivable 439,348 461,110
Inventories 912,672 885,823
Income taxes receivable 16,649 24,423
Deferred income taxes 69,485 69,203
Prepaid expenses 11,986 10,048
Other current assets 8,345 8,417
TOTAL CURRENT ASSETS 2,060,075 1,998,231
INTANGIBLES 758,468 762,930
OTHER ASSETS 587,591 576,140
PROPERTY, PLANT & EQUIPMENT, NET 908,529 907,090
TOTAL ASSETS $ 4,314,663 $ 4,244,391
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
TOTAL CURRENT LIABILITIES $ 699,968 $ 778,186
LONG-TERM DEBT – LESS CURRENT MATURITIES 250,000 250,000
OTHER LONG-TERM LIABILITIES 558,872 556,389
SHAREHOLDERS’ INVESTMENT 2,805,823 2,659,816
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT $ 4,314,663 $ 4,244,391
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
26 Weeks Ended
4/29/2012 5/1/2011
(in thousands)
OPERATING ACTIVITIES
Net earnings $ 258,268 $ 260,737
Depreciation and amortization of intangibles 59,707 62,281
Increase in working capital (100,401) (35,822)
Other (4,543) (11,277)
NET CASH PROVIDED BY OPERATING ACTIVITIES 213,031 275,919
INVESTING ACTIVITIES
Net sale of securities 5,000
Acquisitions of businesses/intangibles (168) (7,207)
Net purchases of property / equipment (56,414) (33,721)
Decrease in investments, equity in affiliates, and other assets 4,746 3,465
NET CASH USED IN INVESTING ACTIVITIES (51,836) (32,463)
FINANCING ACTIVITIES
Proceeds from long-term debt, net 247,657
Dividends paid on common stock (73,186) (61,925)
Share repurchase (42,088) (34,718)
Other 14,662 49,871
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (100,612) 200,885
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,066 1,518
INCREASE IN CASH AND CASH EQUIVALENTS 61,649 445,859
Cash and cash equivalents at beginning of year 463,130 467,845
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 524,779 $ 913,704
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, and was named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the fourth year in a row in 2012. 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 https://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 28-35 in the company’s Form 10-Q for the quarter ended January 29, 2012, which was filed with the SEC on March 9, 2012, and can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”