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Hormel Foods Announces Full Year And Fourth Quarter Results And Provides Guidance For Fiscal 2018

AUSTIN, Minn., Nov. 21, 2017 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL) today reported results for the fourth quarter of fiscal year 2017.

EXECUTIVE SUMMARY – FISCAL 2017

  • Three of five segments delivered record segment profit
  • Volume down 8%; Organic volume1 up 2%
  • Sales of $9.2 billion, down 4%; Organic net sales1 up 3%
  • Diluted earnings per share of $1.57, down 4% from 2016 EPS of $1.64
  • Second most profitable year in the company's history
  • Record operating margin of 14.0%
  • Record cash flow from operations of $1.01 billion, up 2%

EXECUTIVE SUMMARY – FOURTH QUARTER

  • Volume down 10%; Organic volume up 2%
  • Sales of $2.5 billion, down 5%; Organic net sales up 5%
  • Diluted EPS of $0.41, down 9% from 2016 EPS of $0.45
  • Operating margin of 13.2%
  • Record cash flow from operations of $499 million, up 34%

FISCAL 2018 OUTLOOK

"Fiscal 2018 represents a return to growth with the addition of three strategic acquisitions and contributions from innovative new items such as HORMEL® BACON 1TM fully cooked bacon and SKIPPY® PB BITES," said Jim Snee, chairman of the board, president and chief executive officer. "The earnings power we are creating with acquisitions, major capital investments in value-added capacity, a supply chain reorganization, the union of the Grocery Products and Specialty Products segments, and an intense focus on strategic cost management sets us up for renewed earnings growth in 2018 and beyond."

"We expect Refrigerated Foods, Grocery Products, and International to drive growth as Jennie-O Turkey Store continues to navigate difficult industry conditions," Snee said.

Net Sales Guidance (in billions)

$9.40 - $9.80

Earnings per Share Guidance

$1.60 - $1.70

Fiscal 2018 net sales and earnings per share guidance exclude the pending acquisition of Columbus Craft Meats, which is expected to close in December. Total sales are approximately $300 million and the transaction is expected to be 2-3 cents per share accretive to earnings in fiscal 2018.

DIVIDENDS

"This morning we announced a 10 percent increase to our annual dividend, making the new dividend $0.75 per share," Snee said. "This is the 52nd consecutive year in which we've increased our dividend."

Effective November 15, 2017, the company paid its 357th consecutive quarterly dividend at the annual rate of $0.68 per share.

COMMENTARY – FOURTH QUARTER

"We delivered a quarter of strong organic volume and sales growth despite the volatile commodity markets," Snee said. "I am proud of our team's ability to navigate the many unique market conditions we faced while staying focused on our key strategic initiatives."

SEGMENT HIGHLIGHTS – FOURTH QUARTER

Grocery Products

  • Volume down 4%; Organic volume up 4%
  • Net sales down 1%; Organic net sales up 7%
  • Segment profit up 7%

WHOLLY GUACAMOLE® dips, SPAM® family of products, and HERDEZ® salsas all showed strong sales growth. SKIPPY® peanut butter and HORMEL® chili experienced volume declines as price increases took effect during the quarter. Segment profit increased as reductions in manufacturing and SG&A expenses more than offset higher input costs for pork, beef, and avocados.

Refrigerated Foods

  • Volume down 17%; Organic volume up 1%
  • Net sales down 6%; Organic net sales up 8%
  • Segment profit down 13%

Volume and sales declines were related to the divestiture of the Farmer John business, which were partially offset by the acquisition of Fontanini Italian Meats and Sausages. Retail items such as HORMEL® NATURAL CHOICE® products and foodservice items such as HORMEL® BACON 1TM fully cooked bacon and HORMEL® pepperoni contributed to the organic sales growth. Segment profit declined due to the divestiture of the Farmer John business and higher input costs.

Jennie-O Turkey Store

  • Volume down 7%; Organic volume flat
  • Net sales down 10%; Organic net sales down 4%
  • Segment profit down 24%

Decreases in sales and earnings were primarily due to the continued oversupply in the turkey industry, leading to lower turkey commodity prices. JENNIE-O® OVEN READY® products and marinated tenderloins delivered excellent sales growth.

International & Other

  • Volume up 7%; Organic volume up 5%
  • Net sales up 10%; Organic net sales up 12%
  • Segment profit up 18%

International sales increased due to the inclusion of sales of CERATTI® branded products, continued growth of SKIPPY® peanut butter, and strong exports of SPAM® luncheon meat. Earnings growth was driven by improved performance in China and increased exports.

Specialty Foods

  • Volume down 8%; Organic volume down 1%
  • Net sales down 9%; Organic net sales down 2%
  • Segment profit down 21%

Sales and earnings declines were mainly related to lower results from MUSCLE MILK® ready-to-drink protein products in the convenience store channel.

CONFERENCE CALL

A conference call will be webcast at 8:30 a.m. CT on Tuesday, November 21, 2017. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 888-394-8218 and providing the access code 5906948. An audio replay is available by going to www.hormelfoods.com and clicking on Investors. The webcast replay will be available at 11:30 a.m. CT, Tuesday, November 21, 2017, 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 revenues across more than 80 countries worldwide. Its brands include Skippy®, SPAM®, Hormel® Natural Choice®, 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 ninth 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 which appear on pages 32 - 39 in the company's Form 10-Q for the quarter ended July 30, 2017, which can be accessed at www.hormelfoods.com under "Investors-SEC Filings."

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

The non-GAAP adjusted financial measurements of organic net sales and organic volume 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, divestitures and the impact of the 53rd reporting week in 2016. Organic net sales and organic volume exclude the impacts of the acquisition of Justin's (May 2016) in Grocery Products, the acquisition of Fontanini Italian Meats and Sausages (August 2017) and the divestiture of Farmer John (January 2017) in Refrigerated foods, the divestiture of Diamond Crystal Brands (May 2016) from Specialty Products, and the acquisition of Ceratti (August 2017) in International. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in the fourth quarter and the full year of fiscal 2016 and fiscal 2017.

INVESTOR CONTACT:

MEDIA CONTACT:

Nathan Annis

Wendy Watkins

(507) 437-5248

(507) 437-5345

ir@hormel.com

media@hormel.com

4th Quarter










Volume (lbs.)

FY 2017

FY 2016


(in thousands)

Reported
(GAAP)

Acquisitions

Divestitures

Organic
(Non-GAAP)

Reported
(GAAP)

Acquisitions

Divestitures

53rd
Week

Organic
(Non-GAAP)

Organic
% change

Grocery Products

249,141

-

-

249,141

258,386

-

-

(18,456)

239,930

3.8%

Refrigerated Foods

547,196

(16,727)

-

530,469

658,506

-

(95,246)

(40,233)

523,027

1.4%

Jennie-O Turkey Store

270,175

-

-

270,175

291,587

-

-

(20,828)

270,759

(0.2%)

Specialty Foods

117,344

-

-

117,344

127,053

-

-

(9,075)

117,978

(0.5%)

International & Other

91,414

(7,884)

-

83,530

85,454

-

-

(6,104)

79,350

5.3%

Total Volume

1,275,270

(24,611)

-

1,250,659

1,420,986

-

(95,246)

(94,696)

1,231,044

1.6%












Net Sales

FY 2017

FY 2016


(in thousands)

Reported
(GAAP)

Acquisitions

Divestitures

Organic
(Non-GAAP)

Reported
(GAAP)

Acquisitions

Divestitures

53rd
Week

Organic
(Non-GAAP)

Organic
% change

Grocery Products

$ 489,169

$ -

$ -

$ 489,169

$ 491,724

$ -

$ -

$ (35,123)

$ 456,601

7.1%

Refrigerated Foods

1,166,661

(44,450)

-

1,122,211

1,237,276

-

(123,256)

(79,573)

1,034,447

8.5%

Jennie-O Turkey Store

484,856

-

-

484,856

541,409

-

-

(38,672)

502,737

(3.6%)

Specialty Foods

196,792

-

-

196,792

216,674

-

-

(15,477)

201,197

(2.2%)

International & Other

155,130

(9,152)

-

145,978

140,858

-

-

(10,061)

130,797

11.6%

Total Net Sales

$ 2,492,608

$ (53,602)

$ -

$ 2,439,006

$ 2,627,941

$ -

$ (123,256)

$ (178,906)

$ 2,325,779

4.9%












Full Year










Volume (lbs.)

FY 2017

FY 2016


(in thousands)

Reported
(GAAP)

Acquisitions

Divestitures

Organic
(Non-GAAP)

Reported
(GAAP)

Acquisitions

Divestitures

53rd
Week

Organic
(Non-GAAP)

Organic
% change

Grocery Products

916,643

(6,430)

-

910,213

906,202

-

-

(18,456)

887,746

2.5%

Refrigerated Foods

2,180,407

(16,727)

(80,454)

2,083,226

2,493,358

-

(375,017)

(40,233)

2,078,108

0.2%

Jennie-O Turkey Store

890,518

-

-

890,518

902,073

-

-

(20,828)

881,245

1.1%

Specialty Foods

458,022

-

-

458,022

583,267

-

(133,733)

(9,075)

440,459

4.0%

International & Other

324,895

(7,884)

-

317,011

307,127

-

-

(6,104)

301,023

5.3%

Total Volume

4,770,485

(31,041)

(80,454)

4,658,990

5,192,027

-

(508,750)

(94,696)

4,588,581

1.5%












Net Sales

FY 2017

FY 2016


(in thousands)

Reported
(GAAP)

Acquisitions

Divestitures

Organic
(Non-GAAP)

Reported
(GAAP)

Acquisitions

Divestitures

53rd
Week

Organic
(Non-GAAP)

Organic
% change

Grocery Products

$ 1,761,105

$ (43,146)

$ -

$ 1,717,959

$ 1,684,756

$ -

$ -

$ (35,123)

$ 1,649,633

4.1%

Refrigerated Foods

4,403,732

(44,450)

(100,231)

4,259,051

4,647,173

-

(493,618)

(79,573)

4,073,982

4.5%

Jennie-O Turkey Store

1,663,160

-

-

1,663,160

1,740,968

-

-

(38,672)

1,702,296

(2.3%)

Specialty Foods

794,508

-

-

794,508

939,134

-

(140,084)

(15,477)

783,573

1.4%

International & Other

545,014

(9,152)

-

535,862

511,193

-

-

(10,061)

501,132

6.9%

Total Net Sales

$ 9,167,519

$ (96,748)

$ (100,231)

$ 8,970,540

$ 9,523,224

$ -

$ (633,702)

$ (178,906)

$ 8,710,616

3.0%

Statements Follow

HORMEL FOODS CORPORATION

SEGMENT DATA

(Unaudited) (In thousands)



FOURTH QUARTER



13 WEEKS ENDED

14 WEEKS ENDED






NET SALES

October 29, 2017

October 30, 2016

% Change

Grocery Products

$ 489,169

$ 491,724

(0.5)

Refrigerated Foods

1,166,661

1,237,276

(5.7)

Jennie-O Turkey Store

484,856

541,409

(10.4)

Specialty Foods

196,792

216,674

(9.2)

International & Other

155,130

140,858

10.1

Total

$ 2,492,608

$ 2,627,941

(5.1)

OPERATING PROFIT




Grocery Products

$ 88,915

$ 82,734

7.5

Refrigerated Foods

145,613

168,040

(13.3)

Jennie-O Turkey Store

70,370

92,299

(23.8)

Specialty Foods

15,933

20,182

(21.1)

International & Other

23,113

19,570

18.1

Total segment operating profit

343,944

382,825

(10.2)

Net interest and investment (income) expense

(639)

1,017

(162.8)

General corporate expense

14,783

17,325

(14.7)

Less: Noncontrolling interest

209

250

(16.4)

Earnings before income taxes

$ 330,009

$ 364,733

(9.5)





YEAR TO DATE



52 WEEKS ENDED

53 WEEKS ENDED






NET SALES

October 29, 2017

October 30, 2016

% Change

Grocery Products

$ 1,761,105

$ 1,684,756

4.5

Refrigerated Foods

4,403,732

4,647,173

(5.2)

Jennie-O Turkey Store

1,663,160

1,740,968

(4.5)

Specialty Foods

794,508

939,134

(15.4)

International & Other

545,014

511,193

6.6

Total

$ 9,167,519

$ 9,523,224

(3.7)

OPERATING PROFIT



Grocery Products

$ 290,809

$ 268,461

8.3

Refrigerated Foods

587,929

585,652

0.4

Jennie-O Turkey Store

247,322

329,427

(24.9)

Specialty Foods

96,828

110,917

(12.7)

International & Other

85,304

78,409

8.8

Total segment operating profit

1,308,192

1,372,866

(4.7)

Net interest and investment expense (income)

1,824

6,680

(72.7)

General corporate expense

28,091

49,436

(43.2)

Less: Noncontrolling interest

368

465

(20.9)

Earnings before income taxes

$ 1,278,645

$ 1,317,215

(2.9)

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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






Thirteen
Weeks Ended

Fourteen
Weeks Ended

Fifty-Two
Weeks Ended

Fifty-Three
Weeks Ended


October 29,
2017

October 30,
2016

October 29,
2017

October 30,
2016






Net sales

$ 2,492,608

$ 2,627,941

$ 9,167,519

$ 9,523,224






Cost of products sold

1,981,054

2,029,421

7,164,356

7,365,049






GROSS PROFIT

511,554

598,520

2,003,163

2,158,175






Selling, general and administrative

194,218

244,006

762,104

871,974

Goodwill/intangible impairment

180

-

180

991

Equity in earnings of affiliates

12,214

11,236

39,590

38,685






OPERATING INCOME

329,370

365,750

1,280,469

1,323,895






Other income & expenses:





Interest & investment income

4,216

2,271

10,859

6,191

Interest expense

(3,577)

(3,288)

(12,683)

(12,871)






EARNINGS BEFORE INCOME TAXES

330,009

364,733

1,278,645

1,317,215






Provision for income taxes

111,646

120,543

431,542

426,698

(effective tax rate)

33.83%

33.05%

33.75%

32.39%






NET EARNINGS

218,363

244,190

847,103

890,517

Less: net earnings attributable to

noncontrolling interest

209

250

368

465

NET EARNINGS ATTRIBUTABLE TO

HORMEL FOODS CORPORATION

$ 218,154

$ 243,940

$ 846,735

$ 890,052






NET EARNINGS PER SHARE





Basic

$ 0.41

$ 0.46

$ 1.60

$ 1.68

Diluted

$ 0.41

$ 0.45

$ 1.57

$ 1.64






WEIGHTED AVG. SHARES OUTSTANDING




Basic

527,990

528,778

528,363

529,290

Diluted

537,952

541,312

539,116

542,473






DIVIDENDS DECLARED





PER SHARE

$ 0.170

$ 0.145

$ 0.68

$ 0.58











HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited) (In thousands)





October 29, 2017

October 30, 2016




ASSETS




CURRENT ASSETS



Cash and cash equivalents

$ 444,122

$ 415,143

Accounts receivable

618,351

591,310

Inventories

921,022

985,683

Income taxes receivable

22,346

18,282

Prepaid expenses

16,144

13,775

Other current assets

4,538

5,719




TOTAL CURRENT ASSETS

2,026,523

2,029,912




DEFERRED INCOME TAXES

-

6,223




INTANGIBLES

3,146,827

2,737,755




OTHER ASSETS

599,307

490,728




PROPERTY, PLANT & EQUIPMENT, NET

1,203,251

1,105,449




TOTAL ASSETS

$ 6,975,908

$ 6,370,067




LIABILITIES AND SHAREHOLDERS' INVESTMENT





CURRENT LIABILITIES

$ 1,058,212

$ 1,053,196




LONG-TERM DEBT – LESS CURRENT MATURITIES

250,000

250,000




DEFERRED INCOME TAXES

98,410

-




OTHER LONG-TERM LIABILITIES

629,589

615,465




SHAREHOLDERS' INVESTMENT

4,939,697

4,451,406




TOTAL LIAB. & SHAREHOLDERS' INVESTMENT

$ 6,975,908

$ 6,370,067


HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)




Fifty-Two

Weeks Ended

Fifty-Three
Weeks Ended


October 29, 2017

October 30, 2016



OPERATING ACTIVITIES



Net earnings

$ 847,103

$ 890,517

Depreciation and amortization of intangibles

130,977

131,968

Goodwill/intangible impairment

180

991

Decrease (increase) in working capital

303

(51,425)

Other

31,633

20,797

NET CASH PROVIDED BY OPERATING ACTIVITIES

1,010,196

992,848




INVESTING ACTIVITIES



Proceeds from sale of business

135,944

110,149

Acquisitions of businesses/intangibles

(520,463)

(280,889)

Net purchases of property/equipment

(217,276)

(249,297)

Decrease (increase) in investments, equity in affiliates, and other assets

8,792

11,078

NET CASH USED IN INVESTING ACTIVITIES

(593,003)

(408,959)




FINANCING ACTIVITIES



Net (payments) proceeds from short-term debt

-

(185,000)

Dividends paid on common stock

(346,010)

(296,493)

Share repurchase

(94,487)

(87,885)

Other

51,239

59,732

NET CASH USED IN FINANCING ACTIVITIES

(389,258)

(509,646)

Effect of exchange rate changes on cash

1,044

(6,339)

INCREASE IN CASH AND CASH EQUIVALENTS

28,979

67,904

Cash and cash equivalents at beginning of year

415,143

347,239

CASH AND CASH EQUIVALENTS AT END OF YEAR

$ 444,122

$ 415,143

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SOURCE Hormel Foods Corporation