HRL
$39.49
Hormel Foods
($.33)
(.83%)
Earnings Details
1st Quarter January 2019
Thursday, February 21, 2019 6:30:00 AM
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Summary

Hormel Foods Beats

Hormel Foods (HRL) reported 1st Quarter January 2019 earnings of $0.44 per share on revenue of $2.4 billion. The consensus earnings estimate was $0.43 per share on revenue of $2.4 billion. The Earnings Whisper number was $0.43 per share. Revenue grew 1.2% on a year-over-year basis.

The company said it continues to expect 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 $1.84 per share on revenue of $9.90 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
$0.44
Earnings Whisper
$0.43
Consensus Estimate
$0.43
Reported Revenue
$2.36 Bil
Revenue Estimate
$2.40 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hormel Foods Reports First Quarter Results And Reaffirms Fiscal 2019 Guidance

AUSTIN, Minn., Feb. 21, 2019 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the first quarter of fiscal 2019. All comparisons are to the first quarter of fiscal 2018 unless otherwise noted.

Hormel Foods corporate logo

EXECUTIVE SUMMARY

  • Fiscal 2019 earnings guidance reaffirmed at $1.77 to $1.91 per share
  • Volume of 1.2 billion lbs., up 1%
  • Net sales of $2.4 billion, up 1%
  • Pre-tax earnings of $307 million, up 1%
  • Diluted earnings per share of $0.44, down $0.12 per share due to the impact of tax reform in 2018
  • Effective tax rate of 21.3% compared to 0.6% last year
  • Operating margin of 13.0% compared to 13.0% last year
  • Cash flow from operations of $187 million, down 38%

COMMENTARY
"We had a solid quarter with sales growth from Refrigerated Foods, Grocery Products and International," said Jim Snee, chairman of the board, president and chief executive officer. "Three of our four segments generated earnings growth, which keeps us on track to deliver our full-year guidance."

"Our new Hormel Deli Solutions division is off to a great start as the next growth engine for our company," Snee said. "In addition, many branded value-added businesses performed well this quarter, including our business in China and both Hormel and Jennie-O foodservice divisions. We also saw impressive growth from many retail brands, including SPAM®, Dinty Moore®, Herdez®, Wholly Guacamole®, Applegate®, Natural Choice® and Hormel® pepperoni."

"Again this quarter, our well-developed strategy of shifting our mix toward branded, value-added products in our domestic and international businesses more than offset significant declines in the commodity businesses," Snee said. "We continue to intentionally transition our portfolio away from commodity products and the associated earnings volatility."

CYTOSPORT DIVESTITURE
"Earlier this week we announced a definitive agreement to sell the CytoSport business to PepsiCo," Snee said. "We made strong progress with innovation and sales growth in the food, drug and mass channel. However, it became clear to us over time that PepsiCo is the right long-term owner of this business as they have deep expertise in this space. PepsiCo has been a long-standing distribution partner for CytoSport and the Muscle Milk® brand, which puts them in a strong position to grow this dynamic business."

The purchase price is $465 million in cash, subject to adjustments at closing. Total net sales in fiscal 2018 were approximately $300 million with operating margins slightly below total company operating margins.

SEGMENT HIGHLIGHTS – FIRST QUARTER

Refrigerated Foods

  • Volume down 1%
  • Net sales up 2%
  • Segment profit up 3%

Sales growth was led by the new Hormel Deli Solutions division, with strong gains coming from Columbus® branded items and Jennie-O® premium deli meats. Foodservice sales of Old Smokehouse® bacon and Hormel® Fire Braised products and retail sales of Hormel® pepperoni, Hormel® Natural Choice® and Applegate® products also showed excellent growth. Segment profit increased as value-added profits more than offset a 70% decline in commodity profits, higher freight costs and higher operational expenses.

Grocery Products

  • Volume up 3%
  • Net sales up 1%
  • Segment profit down 2%

Sales increases were led by Herdez® salsas and sauces, Wholly Guacamole® dips, the SPAM® family of products, Muscle Milk® protein beverages and Hormel® bacon toppings. These sales increases were partially offset by declines in contract manufacturing. Segment profit declined due to the effect of a non-operating tax benefit in our MegaMex joint venture in fiscal 2018, which was partially offset by a legal settlement in fiscal 2019.

Jennie-O Turkey Store

  • Volume flat
  • Net sales flat
  • Segment profit flat

Volume and sales for the quarter were flat as improved results in foodservice and commodity sales were offset by declines in retail. Volume and sales increases in foodservice were driven by many categories, including Jennie-O® raw boneless breasts and Jennie-O® cooked breasts. Segment profit was flat as lower selling, general and administrative expenses were offset by lower retail sales of lean ground turkey.

International & Other

  • Volume up 1%
  • Net sales up 2%
  • Segment profit up 1%

International volume, sales and profit increases were led by double-digit growth in exports of SPAM® luncheon meat and strong results from our China business. China results were positively impacted by strong sales of SPAM® and SKIPPY® branded products and lower pork input costs. Fresh pork export volume, sales and profitability declined in the quarter due to the continued impact of tariffs in key markets.

SELECTED FINANCIAL DETAILS

Income Statement

  • Results were negatively impacted by two cents EPS related to the sale of the Fremont facility. Expenses included the cost to move value-added equipment out of the facility and various pension-related items.
  • Selling, general and administrative expenses decreased, primarily due to a one-time benefit of two cents EPS resulting from a legal settlement. This settlement includes compensation for lost profits and was primarily reflected in net unallocated expense and the Grocery Products segment.
  • Advertising investments were $39 million compared to $40 million last year. Advertising investments for the full year are expected to be flat compared to the prior year.
  • Operating margin was 13.0% compared to 13.0% last year.
  • The effective tax rate was 21.3% compared to 0.6% last year. The increase was primarily due to deferred tax remeasurements in fiscal 2018 as a result of The Tax Cuts and Jobs Act. The full-year effective tax rate for fiscal 2019 is expected to be between 20.5% and 23.0%.

Cash Flow Statement

  • Capital expenditures in the first quarter were $39 million compared to $54 million last year. Capital expenditures for the full year are expected to total approximately $350 million. Key projects for the full year include an expansion of our Burke pizza toppings facility in Nevada, Iowa, an expansion at our Fontanini facility in McCook, Ill., and multiple other projects designed to increase value-added capacity.
  • Depreciation and amortization expense in the first quarter was $40 million compared to $39 million last year. Expenses for the full year are expected to be approximately $160 million.
  • Share repurchases for the quarter totaled $45 million, representing 1.1 million shares purchased.
  • The Company paid its 362nd consecutive quarterly dividend at the annual rate of $0.84 per share, a 12% increase over the prior year.

Balance Sheet

  • Working capital decreased to $665 million from $911 million at the beginning of the year, primarily related to higher levels of current debt.
  • Cash on hand increased to $513 million from $459 million at the beginning of the year.
  • Total debt is $625 million. The debt is split between current maturities of long-term borrowings of $375 million and long-term borrowings of $250 million.
  • The company remains in a strong financial position to fund other capital needs.

OUTLOOK
"We are reaffirming our sales and earnings guidance for fiscal 2019," Snee said. "We remain encouraged by the growth prospects in Refrigerated Foods, Grocery Products and International. The results we are seeing in our deli, foodservice and China businesses are exceeding expectations. While the fundamentals in the turkey industry are improving, Jennie-O Turkey Store will likely fall below our full-year expectations due to a lower retail sales outlook. While global trade uncertainty remains, we continue to execute on our well-defined strategy that focuses on building world-class brands, leading with innovation and insights, making smart investment decisions and building intentional balance into our business."


Fiscal 2019 Outlook

Net Sales Guidance (in billions)

$9.70 - $10.20

Earnings per Share Guidance

$1.77 - $1.91

PRESENTATION
A conference call will be webcast at 8 a.m. CT on Thursday, February 21, 2019. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-254-3590 and providing the access code 1445918. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at 11 a.m. CT, Thursday, February 21, 2019, 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 10th 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/.

REPORTING SEGMENTS
At the beginning of fiscal 2019, the Hormel Deli Solutions division combined all deli businesses, including the Jennie-O Turkey Store deli division, into one division within the Refrigerated Foods segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. Fiscal 2018 first quarter segment net sales and segment profit reflect the new operating segments. These segment changes have no effect on previously reported consolidated net sales, operating profit, net earnings or earnings per share.

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 7-9 and 28-30 in the company's Form 10-K for the year ended October 28, 2018, which can be accessed at hormelfoods.com in the "Investors" section.

INVESTOR CONTACT:


MEDIA CONTACT:

Nathan Annis


Wendy Watkins

(507) 437-5248


(507) 437-5345

ir@hormel.com


media@hormel.com

 

HORMEL FOODS CORPORATION

SEGMENT DATA

(Unaudited) (In thousands)



Thirteen Weeks Ended


January 27,
2019


January 28,
2018*


% Change

NET SALES






Grocery Products

$

606,825



$

603,577



0.5


Refrigerated Foods

1,278,747



1,254,637



1.9


Jennie-O Turkey Store

321,234



322,760



(0.5)


International & Other

153,549



150,319



2.1


TOTAL

$

2,360,355



$

2,331,293



1.2














OPERATING PROFIT






Grocery Products

$

95,297



$

97,545



(2.3)


Refrigerated Foods

162,593



157,531



3.2


Jennie-O Turkey Store

37,904



37,724



0.5


International & Other

24,978



24,655



1.3


TOTAL SEGMENT PROFIT

320,772



317,455



1.0


Net unallocated expense

13,891



12,394



12.1


Noncontrolling interest

94



104



(9.6)


EARNINGS BEFORE INCOME TAX

$

306,975



$

305,165



0.6



* FY18 segment results have been adjusted to reflect the changes in the Grocery Products, Refrigerated Foods and Jennie-O Turkey Store segments.

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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



Thirteen Weeks Ended


January 27,
2019


January 28,
2018*

Net sales

$

2,360,355



$

2,331,293


Cost of products sold

1,872,021



1,832,997


GROSS PROFIT

488,334



498,296


Selling, general and administrative

193,544



219,872


Equity in earnings of affiliates

11,458



23,531


OPERATING INCOME

306,248



301,955


Interest & investment income (expense)

6,874



7,939


Interest expense

(6,147)



(4,729)


EARNINGS BEFORE INCOME TAXES

306,975



305,165


Provision for income taxes

65,456



1,954


(effective tax rate)

21.3

%


0.6

%

NET EARNINGS

241,519



303,211


Less: net earnings attributable to noncontrolling interest

94



104


NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION

$

241,425



$

303,107






NET EARNINGS PER SHARE




Basic

$

0.45



$

0.57


Diluted

$

0.44



$

0.56






WEIGHTED-AVERAGE SHARES OUTSTANDING






Basic

534,495



529,453


Diluted

547,118



543,482






Dividends declared per share

$

0.2100



$

0.1875



*Restated per ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715).

 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited) (In thousands)



January 27,
2019


October 28,
2018

ASSETS








Cash and cash equivalents

$

512,689



$

459,136


Accounts receivable

565,060



600,438


Inventories

994,428



963,527


Income taxes receivable

147



3,995


Prepaid expenses

23,601



16,342


Other current assets

4,761



6,662


TOTAL CURRENT ASSETS

2,100,686



2,050,100






Goodwill

2,716,750



2,714,116


Other intangibles

1,204,991



1,207,219


Pension assets

200,448



195,153


Investments in and receivables from affiliates

277,837



273,153


Other assets

171,005



189,951


Property, plant & equipment, net

1,483,681



1,512,600


TOTAL ASSETS

$

8,155,398



$

8,142,292










LIABILITIES AND SHAREHOLDERS' INVESTMENT












Accounts payable

$

505,617



$

618,830


Accrued expenses

50,361



48,298


Accrued worker's compensation

25,215



24,594


Accrued marketing

139,338



118,887


Employee-related expenses

160,242



224,736


Taxes payable

63,791



2,490


Interest and dividends payable

116,370



101,079


Current maturities of long-term debt

374,878




TOTAL CURRENT LIABILITIES

1,435,812



1,138,914






Long-term debt, less current maturities

250,000



624,840


Pension and post-retirement benefits

484,004



477,557


Other long-term liabilities

100,134



99,070


Deferred income taxes

179,669



197,093


Accumulated other comprehensive loss

(292,342)



(243,498)


Other shareholder's investment

5,998,121



5,848,316


TOTAL LIABILITIES & SHAREHOLDERS' INVESTMENT

$

8,155,398



$

8,142,292


 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)



Thirteen Weeks Ended


January 27,
2019


January 28,
2018

OPERATING ACTIVITIES




Net earnings

$

241,519



$

303,211


Depreciation and amortization of intangibles

40,018



39,123


(Increase) decrease in working capital

(81,659)



58,879


Other

(12,453)



(97,036)


NET CASH PROVIDED BY OPERATING ACTIVITIES

187,425



304,177






INVESTING ACTIVITIES




Acquisitions of businesses/intangibles



(858,102)


Net purchases of property/equipment

(9,125)



(52,943)


Decrease in investments, equity in affiliates, and other assets

7,446



5,746


NET CASH USED IN INVESTING ACTIVITIES

(1,679)



(905,299)






FINANCING ACTIVITIES




Net proceeds (payments) from short-term debt



255,000


Net proceeds (payments) from long-term debt

38



374,726


Dividends paid on common stock

(100,125)



(89,814)


Share repurchase

(44,809)



(25,199)


Other

15,997



23,455


NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(128,899)



538,168


Effect of exchange rate changes on cash

(3,294)



4,607


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

53,553



(58,347)


Cash and cash equivalents at beginning of year

459,136



444,122


CASH AND CASH EQUIVALENTS AT END OF QUARTER

$

512,689



$

385,775


 

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SOURCE Hormel Foods Corporation