HRL
$46.38
Hormel Foods
($.18)
(.39%)
Earnings Details
1st Quarter January 2021
Thursday, February 18, 2021 6:30:00 AM
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Summary

Hormel Foods Misses

Hormel Foods (HRL) reported 1st Quarter January 2021 earnings of $0.41 per share on revenue of $2.5 billion. The consensus earnings estimate was $0.40 per share on revenue of $2.4 billion. The Earnings Whisper number was $0.42 per share. Revenue grew 3.2% on a year-over-year basis.

The company said it now expects fiscal 2021 earnings of $1.70 to $1.82 per share on revenue of $9.70 billion to $10.30 billion. The company's previous guidance was earnings of $1.69 to $1.83 per share on revenue of $9.50 billion to $10.30 billion and the current consensus earnings estimate is $1.73 per share on revenue of $9.89 billion for the year ending October 31, 2021.

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
$0.41
Earnings Whisper
$0.42
Consensus Estimate
$0.40
Reported Revenue
$2.46 Bil
Revenue Estimate
$2.39 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hormel Foods Reports First Quarter Results And Provides Full Year Guidance

AUSTIN, Minn., Feb. 18, 2021 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the first quarter of fiscal 2021. All comparisons are to the first quarter of fiscal 2020 unless otherwise noted. Operating free cash flow is presented as a non-GAAP metric.

EXECUTIVE SUMMARY - FIRST QUARTER

  • Volume of 1.2 billion lbs., down 1%
  • Record net sales of $2.5 billion, up 3%
  • Pretax earnings of $277 million, down 5%
  • Operating margin of 10.9%, compared to 11.8% last year
  • Effective tax rate of 19.7%, compared to 16.3% last year
  • Diluted earnings per share of $0.41, down 9% compared to last year
  • Cash flow from operations of $206 million, up 9%
  • Operating free cash flow1 of $165 million, up 27%

EXECUTIVE COMMENTARY

"We delivered record sales as all four segments generated top-line growth," said Jim Snee, chairman of the board, president and chief executive officer. "Brands such as SPAM®, SKIPPY®, Hormel® Black Label®, Applegate®, Columbus® and Jennie-O® all delivered exceptional growth. A key reason for our success was a result of the work of our One Supply Chain team members. They improved production efficiencies, integrated new capacity and leveraged strategic partnerships to increase production without compromising employee or food safety. I'm proud of the entire team as we remain on track to deliver sales and earnings growth this year in spite of challenging operating conditions."

"Our balanced business model continues to perform well," Snee said. "We delivered extraordinary earnings growth from our Grocery Products and International segments this quarter, as we continue to see elevated consumer demand for our center store retail products. Our retail businesses in Refrigerated Foods and Jennie-O Turkey Store also showed earnings growth, but declines across our foodservice businesses and incremental supply chain costs related to the pandemic negatively impacted profitability."

OUTLOOK

"I am increasingly optimistic about generating sales and earnings growth in fiscal 2021," Snee said. "As such, we are setting our full year earnings per share guidance at $1.70 to $1.82 per share, which does not include the expected impact from the acquisition of the Planters® snack nuts business. The Planters® acquisition is exciting and a perfect strategic fit for our company."

"Our retail and deli teams have momentum going into the second quarter even as some of our retail businesses, especially Grocery Products, have very difficult comparisons due to the extremely high levels of demand we experienced last year," Snee said. "The International segment is poised to have a record year led by the continued strength in our China business, branded exports and our global partnerships. The strides we have made in our global e-commerce business are also expected to continue to pay off this year and into the future. We  expect continued improvement throughout our supply chain as labor availability improves and pandemic-related expenses begin to subside."

"We expect a recovery in our foodservice business, given the acceleration in shipments during recent weeks. We are closely watching the foodservice industry trends during the recovery and preparing for rapid changes in demand," Snee said. "Jennie-O Turkey Store is proactively taking price increases across all categories in order to offset rapidly increasing grain costs. While I am confident in our pricing power and expect margins to stabilize in the back half of the year, continued escalation in grain prices will require additional actions."


Fiscal 2021 Outlook*

Net Sales Guidance (in billions)

$9.70 - $10.30

Earnings per Share Guidance

$1.70 - $1.82

*Does not include the estimated impact from the acquisition of the Planters® snack nuts business.

COVID-19 RESPONSE

"Employee safety remains our top priority as a company," Snee said. "We know that even with vaccines being distributed across the country, we must remain vigilant. As the pandemic evolves, we continue to adjust and refresh our awareness campaign, called KEEP COVID OUT!, in order to maintain relevancy with our team members."

In the first quarter, the company absorbed approximately $15 million in direct incremental supply chain costs primarily related to lower production volumes and enhanced safety measures in its production facilities. The company estimates most of the incremental supply chain costs are temporary and will be minimized after the pandemic subsides.

PLANTERS® ACQUISITION

"We were very excited to announce the definitive agreement to acquire the Planters® snack nuts business last week," Snee said. "The Planters® business adds another iconic brand to our portfolio while meaningfully increasing our presence in the snacking space. This strategic acquisition is perfectly aligned to our long-term growth strategy of building strong brands, delivering insights-driven innovation and intentionally building balance in our business."

"The Planters® business also complements our existing snacking portfolio primarily focused on social snacking occasions with products such as Hormel® Gatherings® party trays, Herdez® salsas and sauces, Wholly® guacamole and Columbus® charcuterie," Snee said. "We believe there is a compelling opportunity to share insights across our existing brands and the Planters® brand to drive growth for our total company."

The company will acquire the business for an effective purchase price of $2.79 billion. The transaction provides a tax benefit valued at $560 million equating to a purchase price of $3.35 billion in cash. Adjusting for the tax benefit, the 2020 EBITDA multiple was 12.5x. The proposed transaction is expected to close in calendar Q2 2021, subject to regulatory review and approval. The acquisition includes the Planters®, NUT-rition®, Planters® Cheez Balls and Corn Nuts® brands. Net sales for the Planters® business were approximately $1 billion in calendar year 2020. See the press release dated Feb. 11, 2021, for additional details.

SEGMENT HIGHLIGHTS – FIRST QUARTER

Refrigerated Foods

  • Volume down 2%
  • Net sales up 1%
  • Segment profit down 16%

Strong retail and deli sales growth more than overcame significant declines from foodservice. Growth was led by brands such as Hormel® Black Label®, Sadlers®, Applegate®, Columbus® and Hormel® pepperoni. Segment profit declined due to lower foodservice sales, a decrease in commodity profits and incremental supply chain costs related to the COVID-19 pandemic.

Grocery Products

  • Volume up 4%
  • Net sales up 7%
  • Segment profit up 35%

Volume and sales growth were driven by strength across many center store products, including the SPAM® family of products, SKIPPY® spreads, Hormel® Compleats® meals, Hormel® chili and Herdez® salsas and sauces. Segment profit increased due to higher sales, improved mix and higher earnings from our MegaMex business.

Jennie-O Turkey Store

  • Volume down 2%
  • Net sales up 1%
  • Segment profit down 30%

Sales growth across the entire retail portfolio, led by double-digit growth of Jennie-O® lean ground and Jennie-O® Oven Ready® products, and strong holiday sales of whole birds more than offset significantly lower foodservice sales. The decline in foodservice sales, increased supply chain costs related to the COVID-19 pandemic and higher freight expenses were the primary drivers of the decline in segment profit.

International & Other

  • Volume down 5%
  • Net sales up 13%
  • Segment profit up 61%

Sales increased due to broad-based strength across branded businesses, including continued growth in China and robust sales of SPAM® luncheon meat and SKIPPY® peanut butter. The significant increase in segment profit was due to improved results for branded exports, an accelerating recovery in China and higher income from our partners in the Philippines, South Korea and Europe.

CHANNEL HIGHLIGHTS – FIRST QUARTER

In an effort to add an increased level of disclosure and clarity to the nature and timing of our revenue, net sales have been disaggregated into sales channels, which can also be found in the upcoming Form 10-Q. The ongoing COVID-19 pandemic and subsequent changes in consumer behavior continued to drive higher and sustained retail sales in each of the company's segments. Deli channel sales increased on strong demand during the holidays for branded grab-and-go items. Foodservice net sales were impacted by regional shutdowns during the quarter and remained below year-ago levels. International sales increased due to growth from branded exports and an accelerating recovery in China.

  • U.S. retail net sales up 13%
  • U.S. deli net sales up 7%
  • U.S. foodservice net sales down 17%
  • International net sales up 9%

SELECTED FINANCIAL DETAILS

Income Statement

  • Selling, general and administrative expenses were flat compared to the prior year.
  • Advertising spend was $34 million, down 3% compared to last year.
  • Interest and investment income increased during the quarter. Higher investment income partially offset the additional interest expense from the bond issuance in the prior year.
  • Operating margin was 10.9% compared to 11.8% in fiscal 2020. The decline for the quarter was due to lower sales and profitability for the company's foodservice businesses.
  • The effective tax rate was 19.7% compared to 16.3% last year. Last year's rate benefited from a large volume of stock option exercises during the quarter.

Cash Flow Statement

  • Cash flow from operations was $206 million, up 9%.
  • Operating free cash flow1 was $165 million, up 27%.
  • The company paid its 370th consecutive quarterly dividend on Feb. 16, 2021, at the annual rate of $0.98 per share, a 5% increase over the prior year.
  • Capital expenditures in the first quarter were $40 million compared to $58 million last year. The company's target for capital expenditures in fiscal 2021 is $260 million. Large projects include a new dry sausage facility in Nebraska, Project Orion and other projects to support growth of branded products.
  • Share repurchases for the quarter totaled $9 million, representing 0.2 million shares purchased.
  • Depreciation and amortization expense in the first quarter was $51 million, compared to $49 million last year. The full-year expense is expected to be approximately $210 million.

Balance Sheet

  • The company announced the acquisition of the Planters® snack nut business last week, with an expected close in calendar Q2, 2021, subject to regulatory review and approval. The company expects this acquisition will responsibly leverage its balance sheet without compromising its disciplined capital allocation policy. The acquisition is expected to be financed through a combination of cash on hand, short-term debt and long-term debt.
  • Cash on hand increased to $1.8 billion from $1.7 billion at the beginning of the year.
  • Total debt is $1.3 billion.
  • Working capital increased to $2.2 billion from $2.1 billion at the beginning of the year.

PRESENTATION

A conference call will be webcast at 8 a.m. CST on Feb. 18, 2021. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-317-6003 and providing the access code 9922621. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at noon CST, Feb. 18, 2021, 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 global branded food company with over $9 billion in annual revenue across more than 80 countries worldwide. Its brands include SKIPPY®, SPAM®, Hormel® Natural Choice®, Applegate®, Justin's®, Wholly®, Hormel® Black Label®, Columbus® 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 on the "Global 2000 World's Best Employers" list by Forbes magazine for three straight years, is one of Fortune magazine's most admired companies, has appeared on Corporate Responsibility Magazine's "The 100 Best Corporate Citizens" list for 12 years in a row, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. The company lives by its purpose statement - Inspired People. Inspired Food.™ - to bring some of the world's most trusted and iconic brands to tables across the globe. For more information, visit 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 statements regarding "Forward-Looking Statements" and "Risk Factors" that appear on pages 5-9 in the company's Form 10-K for the fiscal year ended Oct. 25, 2020, which can be accessed at hormelfoods.com in the "Investors" section.

Note: Due to rounding, numbers presented throughout this news release may not sum precisely to the totals provided, and percentages may not precisely reflect the absolute figures.

1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENT

The company defines the non-GAAP adjusted financial measurement of operating free cash flow as cash provided by or used in operating activities from continuing operations (a GAAP measure) less capital expenditures. The company views operating free cash flow as an important measure, because it is one factor in evaluating the amount of cash available for discretionary investments.

The company believes this non-GAAP financial measurement is useful to investors as it provides insight into the company's liquidity position. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. This non-GAAP measurement is not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

The tables below show the calculations to reconcile from the GAAP measure to the non-GAAP adjusted measure.

 

RECONCILIATION OF NON-GAAP MEASURE







OPERATING FREE CASH FLOW (NON-GAAP)

In thousands


Thirteen Weeks Ended


January 24,
2021


January 26,
2020


% Change

Net Cash Provided by (Used in) Operating Activities

$

205,686



$

188,418




Purchases of Property and Equipment

(40,363)



(58,211)




Operating Free Cash Flow

$

165,323



$

130,207



27.0


 


HORMEL FOODS CORPORATION

SEGMENT DATA

Unaudited

In thousands








Thirteen Weeks Ended



January 24,
2021


January 26,
2020


% Change

Net Sales







Grocery Products


$

577,599



$

540,626



6.8


Refrigerated Foods


1,367,077



1,351,790



1.1


Jennie-O Turkey Store


333,321



330,128



1.0


International & Other


183,150



161,890



13.1


Total


$

2,461,147



$

2,384,434



3.2
















Segment Profit







Grocery Products


$

92,202



$

68,435



34.7


Refrigerated Foods


141,171



167,343



(15.6)


Jennie-O Turkey Store


26,940



38,551



(30.1)


International & Other


32,204



19,952



61.4


Total Segment Profit


292,517



294,280



(0.6)


Net Unallocated Expense


15,547



4,199



270.3


Noncontrolling Interest


112



81



38.8


Earnings Before Income Taxes


$

277,082



$

290,162



(4.5)









 


HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

In thousands, except per share amounts








Thirteen Weeks Ended



January 24,
2021


January 26,
2020

Net Sales


$

2,461,147



$

2,384,434


Cost of Products Sold


2,010,977



1,916,014


Gross Profit


450,170



468,421


Selling, General and Administrative


196,380



195,521


Equity in Earnings of Affiliates


14,228



7,588


Operating Income


268,018



280,488


Interest and Investment Income (Expense)


17,291



13,251


Interest Expense


(8,227)



(3,577)


Earnings Before Income Taxes


277,082



290,162


Provision for Income Taxes


54,687



47,209


Effective Tax Rate


19.7

%


16.3

%

Net Earnings


222,395



242,953


Less: Net Earnings (Loss) Attributable to Noncontrolling Interest


112



81


Net Earnings Attributable to Hormel Foods Corporation


$

222,283



$

242,872







Net Earnings Per Share





Basic


$

0.41



$

0.45


Diluted


$

0.41



$

0.45







Weighted-average Shares Outstanding



Basic


539,913



535,075


Diluted


547,444



544,815







Dividends Declared per Share


$

0.2450



$

0.2325


 


HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Unaudited

In thousands








January 24,
2021


October 25,
2020

Assets

Cash and Cash Equivalents


$

1,751,541



$

1,714,309


Short-term Marketable Securities


17,520



17,338


Accounts Receivable


706,654



702,419


Inventories


1,086,660



1,072,762


Income Taxes Receivable


8,997



41,449


Prepaid Expenses


21,356



18,349


Other Current Assets


8,935



12,438


Total Current Assets


3,601,663



3,579,063







Goodwill


2,617,589



2,612,727


Other Intangibles


1,073,455



1,076,285


Pension Assets


189,852



183,232


Investments In and Receivables From Affiliates


304,867



308,372


Other Assets


272,239



250,382


Net Property, Plant and Equipment


1,898,265



1,898,222


Total Assets


$

9,957,932



$

9,908,282












Liabilities and Shareholders' Investment

Accounts Payable


$

558,523



$

644,609


Accrued Expenses


50,901



59,136


Accrued Workers Compensation


28,643



25,070


Accrued Marketing Expenses


133,042



108,502


Employee Related Expenses


204,191



252,845


Taxes Payable


45,897



22,480


Interest and Dividends Payable


137,583



132,632


Current Maturities of Long-term Debt


258,690



258,691


Total Current Liabilities


1,417,469



1,503,965







Long-term Debt - Less Current Maturities


1,043,050



1,044,936


Pension and Post-retirement Benefits


555,220



552,878


Other Long-term Liabilities


161,988



157,399


Deferred Income Taxes


224,477



218,779


Accumulated Other Comprehensive Loss


(360,869)



(395,250)


Other Shareholders' Investment


6,916,596



6,825,576


Total Liabilities and Shareholders' Investment


$

9,957,932



$

9,908,282


 


HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

In thousands




Thirteen Weeks Ended



January 24,
2021


January 26,
2020

Operating Activities





Net Earnings


$

222,395



$

242,953


Depreciation and Amortization


51,043



49,329


Decrease (Increase) in Working Capital


(62,585)



(102,839)


Other


(5,167)



(1,025)


Net Cash Provided by (Used in) Operating Activities


205,686



188,418







Investing Activities





Net (Purchase) Sale of Securities


(206)



(16)


Purchases of Property and Equipment


(40,363)



(58,211)


Proceeds From Sales of Property and Equipment


1,461



1,114


Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets


(193)



(3,391)


Net Cash Provided by (Used in) Investing Activities


(39,301)



(60,504)







Financing Activities





Repayments of Long-term Debt and Finance Leases


(2,165)



(2,019)


Dividends Paid on Common Stock


(125,516)



(112,249)


Share Repurchase


(8,837)




Other


1,765



36,353


Net Cash Provided by (Used in) Financing Activities


(134,754)



(77,915)


Effect of Exchange Rate Changes on Cash


5,600



1,519


Increase (Decrease) in Cash and Cash Equivalents


37,232



51,518


Cash and Cash Equivalents at Beginning of Year


1,714,309



672,901


Cash and Cash Equivalents at End of Quarter


$

1,751,541



$

724,419


 

INVESTOR CONTACT:
Nathan Annis
(507) 437-5248
ir@hormel.com


MEDIA CONTACT:        
Media Relations       
(507) 437-5345        
media@hormel.com      

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SOURCE Hormel Foods Corporation