HRL
$45.17
Hormel Foods
$.31
.69%
Earnings Details
4th Quarter October 2018
Tuesday, November 20, 2018 6:30:00 AM
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Summary

Hormel Foods Beats

Hormel Foods (HRL) reported 4th Quarter October 2018 earnings of $0.51 per share on revenue of $2.5 billion. The consensus earnings estimate was $0.46 per share on revenue of $2.6 billion. The Earnings Whisper number was $0.46 per share. Revenue grew 1.3% on a year-over-year basis.

The company said it expects fiscal 2019 earnings of $1.77 to $1.91 per share on revenue of $9.70 billion to $10.20 billion. The current consensus earnings estimate is $1.86 per share on revenue of $9.88 billion for the year ending October 31, 2019.

Hormel Foods Corp is engaged in the production of meat and food products and the marketing of those products throughout the United States and internationally.

Results
Reported Earnings
$0.51
Earnings Whisper
$0.46
Consensus Estimate
$0.46
Reported Revenue
$2.52 Bil
Revenue Estimate
$2.56 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hormel Foods Reports Record Fourth Quarter And Fiscal 2018 Earnings; Provides Fiscal 2019 Outlook

AUSTIN, Minn., Nov. 20, 2018 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the fourth quarter of fiscal 2018. All comparisons are to the fourth quarter of fiscal 2017 unless otherwise noted.

Hormel Foods corporate logo

EXECUTIVE SUMMARY - FISCAL 2018

  • Record diluted earnings per share of $1.86, up 18% from 2017 EPS of $1.57
  • Excluding a non-cash impairment, adjusted diluted earnings per share1 of $1.89, up 20%
  • Record cash flow from operations of $1.24 billion, up 20%
  • Volume of 4.80 billion lbs., up 1%; organic volume1 down 1%
  • Record net sales of $9.55 billion, up 4%; organic net sales1 down 1%
  • Operating margin of 12.6% compared to 14.0% last year
  • Effective tax rate of 14.3% compared to 33.7% last year

EXECUTIVE SUMMARY - FOURTH QUARTER

  • Record diluted earnings per share of $0.48, up 17% from 2017 EPS of $0.41
  • Adjusted diluted earnings per share1 of $0.51, up 24%
  • Volume of 1.27 billion lbs., down 1%; organic volume1 down 3%
  • Net sales of $2.52 billion, up 1%; organic net sales1 down 3%
  • Operating margin of 12.8% compared to 13.2% last year
  • Effective tax rate of 18.7% compared to 33.8% last year

FISCAL 2019 OUTLOOK
"Fiscal 2019 is a continuation of our long-term evolution as a global branded food company," said Jim Snee, chairman of the board, president, and chief executive officer. "Our focus on building brands, delivering meaningful innovation to the marketplace, making strategic acquisitions, and creating intentional balance will ensure we are able to meet our growth goals. We are confident in our plan to deliver growth in each business segment in 2019."

"We anticipate another year of strong cash flows. We plan to reinvest to expand capacity for branded value-added products while returning cash back to shareholders through a 12 percent dividend increase," Snee said. "This coming year will require strong execution from every business unit in order to manage through commodity market volatility and global trade uncertainty. I know our team is up to the challenge."

"Growth from leading brands such as Wholly Guacamole®, Applegate®, Jennie-O®, and SPAM® will be important to our success in 2019," Snee said. "We expect continued growth from our many new innovative items such as Herdez® guacamole salsa, Hormel® Bacon 1 fully cooked bacon, Hormel® Natural Choice® products, and Hormel® Fire Braised meats."


Fiscal 2019 Outlook

Net Sales Guidance (in billions)

$9.70 - $10.20

  Earnings per Share Guidance

$1.77 - $1.91

The following items are included in the company's guidance range. The company plans to deliver $75 million in cost reductions in 2019 which excludes any planned synergies from recent acquisitions. The company will use the savings to help offset inflation, reinvest into key brands, and contribute to earnings growth. The company also expects to complete the Fremont divestiture in December 2018, incurring approximately $12 million in expenses. This transaction reduces earnings volatility and decreases the company's reliance on commodity profits.

DIVIDENDS
"This morning we announced a 12 percent increase to our annual dividend, making the new dividend $0.84 per share," Snee said. "This is the 53rd consecutive year in which we've increased our dividend and the 10th consecutive year of double-digit increases. This demonstrates the confidence we have in our business going forward."

Effective November 15, 2018, the company paid its 361st consecutive quarterly dividend at the annual rate of $0.75 per share.

COMMENTARY - FOURTH QUARTER
"Our team delivered a record quarter of earnings," Snee said. "Refrigerated Foods had a particularly solid quarter led by value-added growth in retail, deli, and foodservice channels which offset a continued decline in commodity profits."

"We reached many milestones this quarter including the startup of two new lines to support growth of Hormel® Fire Braised products and Hormel® Bacon 1 fully cooked bacon," Snee said. "We also announced expansions at our Burke manufacturing facility in Nevada, Iowa, and our Fontanini plant in McCook, Ill. These expansions will allow us to continue growing our pizza toppings business as well as our line of authentic premium Italian meats and sausages. These strategic investments reinforce the strength we are seeing in our value-added businesses."

SEGMENT HIGHLIGHTS – FOURTH QUARTER

Refrigerated Foods

  • Volume up 2%; organic volume1 down 2%
  • Net sales up 6%; organic net sales1 down 3%
  • Segment profit up 25%

Sales increases were driven by branded products such as Hormel® pepperoni, Hormel® Natural Choice® products, Applegate® natural and organic products, and Austin Blues® authentic barbeque products in addition to the benefit from the Columbus and Fontanini acquisitions. Organic volume and sales decreased due to lower hog harvest levels. Segment profit increased 25% in spite of a 31% decline in commodity profits and a double-digit increase in freight expenses.

Grocery Products

  • Volume down 4%
  • Net sales down 4%
  • Segment profit down 22%; adjusted segment profit1 down 6%

Volume and sales growth of Herdez® salsa and Wholly Guacamole® dips did not offset declines in our contract manufacturing business. Adjusted segment profit1 decreased due to a decline in sales and higher freight expenses. Additionally, a non-cash impairment of $17 million was incurred in the fourth quarter associated with the CytoSport business.

Jennie-O Turkey Store

  • Volume down 4%
  • Net sales down 4%
  • Segment profit down 31%

Volume and sales decreases were due to lower whole bird volume and sales as shipments were shifted into the prior quarter to minimize cold storage expenses. Jennie-O® premium deli products and Jennie-O® foodservice products delivered sales gains. Segment profit decreased as a result of lower whole bird sales, higher feed costs, and increased freight expenses.

International & Other

  • Volume up 5%; organic volume1 down 6%
  • Net sales up 7%; organic net sales1 down 2%
  • Segment profit up 7%

Volume and sales increased as higher exports of SPAM® luncheon meat and Skippy® peanut butter and the addition of the Ceratti business were partially offset by lower fresh pork exports. Global trade uncertainty continued to negatively impact fresh pork export volume, sales, and profitability. Segment profit increases were driven by the addition of the Ceratti business and lower selling, general, and administrative expenses.

SELECTED FINANCIAL DETAILS

Income Statement

  • Selling, general and administrative expenses for the full year increased due to acquisitions and higher advertising investments.
  • Advertising investments for the full year were $152 million compared to $136 million last year.
  • Operating margin for the full year was 12.6% compared to 14.0%. The decline was primarily related to lower whole bird profitability.
  • The full year effective tax rate was 14.3% compared to 33.7% last year. The decline was due to The Tax Cuts and Jobs Act passed in December 2017. The effective tax rate for fiscal 2019 is expected to be between 20.5% and 23.0%.

Cash Flow Statement

  • Cash flow from operations for the full year was $1.24 billion, up 20% compared to last year. The increase was primarily due to by a lower tax rate and improvements in working capital.
  • Share repurchases for the full year total $47 million, representing 1.4 million shares purchased.
  • The company repaid $375 million in short-term debt in the full year.
  • The company paid its 361st consecutive quarterly dividend at the annual rate of $0.75 per share, a 10% increase over the prior year.
  • Capital expenditures for the full year were $390 million. Capital expenditures for fiscal 2019 are expected to be approximately $350 million. Large projects in 2019 include the Burke pizza toppings plant expansion, a Fontanini manufacturing line, and many other projects to support growth of branded value-added products.
  • Depreciation and amortization expense for the full year was $162 million. Depreciation and amortization expense for fiscal 2019 is expected to be approximately $175 million.

Balance Sheet

  • After the acquisition of Columbus Craft Meats, the largest in the company's history at $857 million, the company remains in a strong financial position with its low level of debt and consistent cash flows.
  • Cash on hand increased to $459 million from $444 million at the beginning of the year.
  • Total long-term debt is $625 million compared to $250 million at the beginning of the year.
  • Working capital decreased to $911 million from $968 million at the beginning of the year, primarily related higher accounts payable and lower accounts receivable.

PRESENTATION
A conference call will be webcast at 8:00 a.m. CT on Tuesday, November 20, 2018. Access is available at www.hormelfoods.com and clicking on "Investors." The call will also be available via telephone by dialing 888-254-3590 and providing the access code 9962477. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at 11:00 a.m. CT, Tuesday, November 20, 2018, and will remain on the website for one year.

ABOUT HORMEL FOODS - Inspired People. Inspired Food.™
Hormel Foods Corporation, based in Austin, Minn., is a leading global branded food company with over $9 billion in annual revenues across more than 80 countries worldwide. Its brands include Skippy®, SPAM®, Hormel® Natural Choice®, Columbus®, Applegate®, Justin's®, Wholly Guacamole®, Hormel® Black Label® and more than 30 other beloved brands. The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named one of "The 100 Best Corporate Citizens" by Corporate Responsibility Magazine for the tenth year in a row, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. In 2016, the company celebrated its 125th anniversary and announced its new vision for the future - Inspired People. Inspired Food.™ - focusing on its legacy of innovation. For more information, visit www.hormelfoods.com and http://csr.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 appears on pages 35-41 in the company's Form 10-Q for the quarter ended July 29, 2018, which can be accessed at www.hormelfoods.com under "Investors."

 1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurements of organic net sales, organic volume, adjusted earnings per share, and adjusted segment profit are presented to provide investors additional information to facilitate the comparison of past and present operations. The company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. 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 generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

Organic net sales and organic volume are defined as net sales and volume excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the acquisition of Columbus Craft Meats (November 2017), the acquisition of Fontanini Italian Meats and Sausages (August 2017), and the divestiture of Farmer John (January 2017) in Refrigerated Foods and the acquisition of Ceratti (August 2017) in International.

Adjusted segment profit and adjusted earnings per share exclude the impact of a non-cash impairment charge associated with the CytoSport business which was recognized in the Grocery Products segment. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in the fourth quarter and fourth quarter and full year of fiscal 2018. The effective tax rate was used to determine the tax effect of the impairment.

NON-GAAP1 VOLUME AND SALES DATA

(Unaudited) (In thousands)


4th Quarter

FY 2018


FY 2017



VOLUME (LBS.)

Reported

(GAAP)


Acquisitions


Organic

(Non-
GAAP)


Reported

(GAAP)


Organic

% change

Grocery Products

350,399





350,399



366,485



(4.4)


Refrigerated Foods

558,843



(22,757)



536,086



547,196



(2.0)


Jennie-O Turkey Store

260,450





260,450



270,175



(3.6)


International & Other

95,600



(9,807)



85,793



91,414



(6.1)


TOTAL

1,265,292



(32,564)



1,232,728



1,275,270



(3.3)













FY 2018


FY 2017



NET SALES

Reported

(GAAP)


Acquisitions


Organic

(Non-
GAAP)


Reported

(GAAP)


Organic

% change

Grocery Products

$

658,845



$



$

658,845



$

685,961



(4.0)


Refrigerated Foods

1,232,650



(102,262)



1,130,388



1,166,661



(3.1)


Jennie-O Turkey Store

466,811





466,811



484,856



(3.7)


International & Other

166,391



(15,030)



151,361



155,130



(2.4)


TOTAL

$

2,524,697



$

(117,292)



$

2,407,405



$

2,492,608



(3.4)


 

Full Year

FY 2018


FY 2017



VOLUME (LBS.)

Reported

(GAAP)


Acquisitions


Organic

(Non-
GAAP)


Reported

(GAAP)


Divestitures


Organic

(Non-
GAAP)


Organic

% change

Grocery Products

1,345,904





1,345,904



1,374,665





1,374,665



(2.1)


Refrigerated Foods

2,199,994



(130,301)



2,069,693



2,180,407



(80,454)



2,099,953



(1.4)


Jennie-O Turkey Store

894,590





894,590



890,518





890,518



0.5


International & Other

357,690



(45,707)



311,983



324,895





324,895



(4.0)


TOTAL

4,798,178



(176,008)



4,622,170



4,770,485



(80,454)



4,690,031



(1.4)

















FY 2018


FY 2017



NET SALES

Reported

(GAAP)


Acquisitions


Organic

(Non-
GAAP)


Reported

(GAAP)


Divestitures


Organic

(Non-
GAAP)


Organic

% change

Grocery Products

$

2,521,992



$



$

2,521,992



$

2,555,613



$



$

2,555,613



(1.3)


Refrigerated Foods

4,771,836



(485,960)



4,285,876



4,403,732



(100,231)



4,303,501



(0.4)


Jennie-O Turkey Store

1,627,433





1,627,433



1,663,160





1,663,160



(2.1)


International & Other

624,439



(74,899)



549,540



545,014





545,014



0.8


TOTAL

$

9,545,700



$

(560,859)



$

8,984,841



$

9,167,519



$

(100,231)



$

9,067,288



(0.9)


 

NON-GAAP1 SEGMENT PROFIT AND EARNINGS PER SHARE DATA

(Unaudited) (In thousands)



FY 2018


Grocery Products


4th Quarter

Full Year

Non-GAAP Adjusted Segment Profit

98,861

380,029

CytoSport Impairment

(17,279)

(17,279)

GAAP Segment Profit

81,582

362,750



Total Company


4th Quarter

Full Year

Non-GAAP Adjusted Diluted EPS

0.51

1.89

CytoSport Impairment

(0.03)

(0.03)

GAAP Diluted EPS

0.48

1.86

Statements Follow

HORMEL FOODS CORPORATION

SEGMENT DATA

(Unaudited) (In thousands)



Thirteen Weeks Ended


October 28,
2018


October 29,
2017


% Change

NET SALES






Grocery Products

$

658,845



$

685,961



(4.0)


Refrigerated Foods

1,232,650



1,166,661



5.7


Jennie-O Turkey Store

466,811



484,856



(3.7)


International & Other

166,391



155,130



7.3


TOTAL

$

2,524,697



$

2,492,608



1.3














OPERATING PROFIT






Grocery Products

$

81,582



$

104,848



(22.2)


Refrigerated Foods

181,988



145,613



25.0


Jennie-O Turkey Store

48,829



70,370



(30.6)


International & Other

24,802



23,113



7.3


TOTAL SEGMENT OPERATING PROFIT

337,201



343,944



(2.0)


Net interest and investment expense (income)

2,890



(639)



(552.3)


General corporate expense

12,897



14,783



(12.8)


Noncontrolling interest

90



209



(56.9)


EARNINGS BEFORE INCOME TAX

$

321,504



$

330,009



(2.6)







Fifty-Two Weeks Ended


October 28,
2018


October 29,
2017


% Change

NET SALES






Grocery Products

$

2,521,992



$

2,555,613



(1.3)


Refrigerated Foods

4,771,836



4,403,732



8.4


Jennie-O Turkey Store

1,627,433



1,663,160



(2.1)


International & Other

624,439



545,014



14.6


TOTAL

$

9,545,700



$

9,167,519



4.1














OPERATING PROFIT






Grocery Products

$

362,750



$

387,637



(6.4)


Refrigerated Foods

617,626



587,929



5.1


Jennie-O Turkey Store

175,684



247,322



(29.0)


International & Other

88,953



85,304



4.3


TOTAL SEGMENT OPERATING PROFIT

1,245,013



1,308,192



(4.8)


Net interest and investment expense (income)

17,637



1,824



866.9


General corporate expense

46,534



28,091



65.7


Noncontrolling interest

442



368



20.1


EARNINGS BEFORE INCOME TAX

$

1,181,284



$

1,278,645



(7.6)


 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except per share amounts)



Thirteen Weeks Ended


Fifty-Two Weeks Ended


October 28,
2018


October 29,
2017


October 28,
2018


October 29,
2017

Net sales

$

2,524,697



$

2,492,608



$

9,545,700



$

9,167,519


Cost of products sold

1,987,301



1,981,054



7,550,267



7,164,356


GROSS PROFIT

537,396



511,554



1,995,433



2,003,163


Selling, general and administrative

204,537



194,218



838,205



762,104


Goodwill/intangible impairment

17,279



180



17,279



180


Equity in earnings of affiliates

8,814



12,214



58,972



39,590


OPERATING INCOME

324,394



329,370



1,198,921



1,280,469


Interest & investment income (expense)

3,439



4,216



8,857



10,859


Interest expense

(6,329)



(3,577)



(26,494)



(12,683)


EARNINGS BEFORE INCOME TAXES

321,504



330,009



1,181,284



1,278,645


Provision for income taxes

60,008



111,646



168,702



431,542


(effective tax rate)

18.7

%


33.8

%


14.3

%


33.7

%

NET EARNINGS

261,496



218,363



1,012,582



847,103


Less: net earnings attributable to noncontrolling interest

90



209



442



368


NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION

$

261,406



$

218,154



$

1,012,140



$

846,735










NET EARNINGS PER SHARE








Basic

$

0.49



$

0.41



$

1.91



$

1.60


Diluted

$

0.48



$

0.41



$

1.86



$

1.57










WEIGHTED AVG. SHARES OUTSTANDING







Basic

533,110



527,990



530,742



528,363


Diluted

545,421



537,952



543,869



539,116










Dividends declared per share

$

0.1875



$

0.1700



$

0.7500



$

0.6800


 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited) (In thousands)



October 28,
2018


October 29,
2017

ASSETS








Cash and cash equivalents

$

459,136



$

444,122


Accounts receivable

600,438



618,351


Inventories

963,527



921,022


Income taxes receivable

3,995



22,346


Prepaid expenses

16,342



16,144


Other current assets

6,662



4,538


TOTAL CURRENT ASSETS

2,050,100



2,026,523






Goodwill

2,714,116



2,119,813


Other intangibles

1,207,219



1,027,014


Pension assets

195,153



171,990


Investments in and receivables from affiliates

273,153



242,369


Other assets

189,951



184,948


Property, plant & equipment, net

1,512,600



1,203,251


TOTAL ASSETS

$

8,142,292



$

6,975,908










LIABILITIES AND SHAREHOLDERS' INVESTMENT












Accounts payable

$

618,830



$

552,714


Accrued expenses

48,298



76,966


Accrued worker's compensation

24,594



26,585


Accrued marketing

118,887



101,573


Employee-related expenses

224,736



209,562


Taxes payable

2,490



525


Interest and dividends payable

101,079



90,287


TOTAL CURRENT LIABILITIES

1,138,914



1,058,212






Long-term debt, less current maturities

624,840



250,000


Pension and post-retirement benefits

477,557



530,249


Other long-term liabilities

99,070



99,340


Deferred income taxes

197,093



98,410


Accumulated other comprehensive loss

(243,498)



(248,075)


Other shareholder's investment

5,848,316



5,187,772


TOTAL LIAB. & SHAREHOLDERS' INVESTMENT

$

8,142,292



$

6,975,908


 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)



Fifty-Two Weeks Ended


October 28,
2018


October 29,
2017

OPERATING ACTIVITIES




Net earnings

$

1,012,582



$

847,103


Depreciation and amortization of intangibles

161,858



130,977


Goodwill/intangible impairment

17,279



180


Decrease (increase) in working capital

76,580



(1,607)


Other

(26,570)



57,232


NET CASH PROVIDED BY OPERATING ACTIVITIES

1,241,729



1,033,885






INVESTING ACTIVITIES




Proceeds from sale of business



135,944


Acquisitions of businesses/intangibles

(857,668)



(520,463)


Net purchases of property/equipment

(379,858)



(217,532)


Decrease in investments, equity in affiliates, and other assets

2,158



14,872


NET CASH USED IN INVESTING ACTIVITIES

(1,235,368)



(587,179)






FINANCING ACTIVITIES




Net proceeds (payments) from long-term debt

374,840




Dividends paid on common stock

(388,107)



(346,010)


Share repurchase

(46,898)



(94,487)


Other

71,803



21,726


NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

11,638



(418,771)


Effect of exchange rate changes on cash

(2,985)



1,044


INCREASE IN CASH AND CASH EQUIVALENTS

15,014



28,979


Cash and cash equivalents at beginning of year

444,122



415,143


CASH AND CASH EQUIVALENTS AT END OF QUARTER

$

459,136



$

444,122


 

INVESTOR CONTACT:

Nathan Annis

(507) 437-5248

ir@hormel.com


MEDIA CONTACT:

Wendy Watkins

(507) 437-5345

media@hormel.com

 

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SOURCE Hormel Foods Corporation