EX-99 2 a15-18226_1ex99.htm EX-99

Exhibit 99

INVESTOR CONTACT:					MEDIA CONTACT:
Jana Haynes					Wendy Watkins
(507) 437-5248					(507) 437-5355
jlhaynes@hormel.com					media@hormel.com

HORMEL FOODS REPORTS THIRD QUARTER EARNINGS AND RAISES FULL YEAR EARNINGS GUIDANCE

AUSTIN, Minn. (August 19, 2015) – Hormel Foods Corporation (NYSE: HRL) today reported record performance for the fiscal year 2015 third quarter. All comparisons are to the third quarter of fiscal 2014.

SUMMARY

¨ Record diluted EPS of $0.54; non-GAAP1 diluted EPS of $0.56 excluding Applegate Farms, LLC (“Applegate”) transaction costs of $8.6 million or $0.02 per share.

¨ 2015 non-GAAP1 adjusted earnings guidance range increased to $2.57 to $2.63 per share2, includes neutral full year impact of Applegate acquisition.

¨ Record volume sales, up 3 percent; dollar sales of $2.2 billion, down 4 percent.

¨ Refrigerated Foods segment operating profit up 9 percent (including Applegate transaction costs of $8.6 million); volume up 2 percent; dollar sales down 11 percent.

¨ Jennie-O Turkey Store segment operating profit down 45 percent; volume down 16 percent; dollar sales down 12 percent. Decreases reflect the substantial impact of the avian influenza outbreak earlier this year.

¨ Grocery Products segment operating profit up 57 percent; volume up 10 percent; dollar sales up 8 percent. Excluding incremental net sales of MegaMex Foods products, volume and dollar sales flat.

¨ Specialty Foods segment operating profit up 79 percent; volume up 26 percent; dollar sales up 31 percent. Excluding incremental sales of CytoSport Holdings, Inc. (“CytoSport”) products, volume up 1 percent and dollar sales down 7 percent.

¨ International & Other segment operating profit up 3 percent; volume down 4 percent; dollar sales down 6 percent.

On a GAAP basis, the company reported fiscal 2015 third quarter net earnings of $146.9 million, up 6 percent from net earnings of $138.0 million a year earlier. Diluted earnings per share for the quarter were $0.54 this year compared to $0.51 per share last year.

Excluding Applegate transaction costs, the company reported fiscal 2015 third quarter non-GAAP1 net earnings of $152.5, up 11 percent from net earnings of $138.0 million a year earlier. Non-GAAP1 diluted earnings per share for the quarter were $0.56, up 10 percent compared to $0.51 per share last year.

Sales for the quarter were $2.2 billion, down 4 percent from the same period in fiscal 2014.

COMMENTARY

“Our balanced business model prevailed once again this quarter, as we were able to overcome the significant challenge of avian influenza in our Jennie-O Turkey Store segment to deliver record earnings and volume sales,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Grocery Products drove earnings growth with favorable input costs and increased sales of HORMEL® chili and SKIPPY® peanut butter. Specialty Foods also delivered

excellent results, as the team continues to increase sales of MUSCLE MILK® protein nutrition products, and improve the cost structure and synergies between our CytoSport and Century Foods businesses. Revenues were down for the quarter, impacted by lower pricing due to declining pork markets affecting our Refrigerated Foods and International segments, and the loss of sales related to avian influenza in the Jennie-O Turkey Store segment.

“I am pleased to welcome the Applegate team to Hormel Foods now that we finalized the acquisition in mid-July,” commented Ettinger. “Together we will expand our offerings in the high-growth natural and organic meat category, allowing us to reach even more consumers with the APPLEGATE® brand.”

SEGMENT OPERATING HIGHLIGHTS – THIRD QUARTER

Refrigerated Foods (48% of Net Sales, 41% of Total Segment Operating Profit)

Segment profit for Refrigerated Foods increased 9 percent, including transaction costs associated with the Applegate acquisition completed on July 13, 2015. Dollar sales were down 11 percent this quarter on 2 percent higher volume, reflecting lower pricing compared to last year’s record high pork markets. Sales growth of value-added items were led by retail sales of HORMEL® pepperoni and HORMEL® GATHERINGSTM party trays and foodservice sales of HORMEL® NATURAL CHOICE® deli meats and HORMEL® FIRE BRAISEDTM meats.

Jennie-O Turkey Store (15% of Net Sales, 15% of Total Segment Operating Profit)

Jennie-O Turkey Store segment profits declined 45 percent and sales were down 12 percent reflecting the substantial impact of the avian influenza outbreak earlier this year, as previously lost flocks created considerable volume shortfalls in plant operations and sales.

Grocery Products (18% of Net Sales, 23% of Total Segment Operating Profit)

Grocery Products segment profit increased 57 percent, benefiting from lower input costs. Sales grew 8 percent, including the additional net sales of MegaMex Foods products not reflected in the prior year. Increased sales of HORMEL® chili and SKIPPY® peanut butter, along with WHOLLY GUACAMOLE® dips in our MegaMex Foods joint venture, contributed to the gains.

Specialty Foods (13% of Net Sales, 13% of Total Segment Operating Profit)

Specialty Foods delivered a 79 percent increase in segment profits, with a sales increase of 31 percent. Results were primarily driven by the addition of MUSCLE MILK® protein nutrition products and synergies captured within the CytoSport and Century Foods supply chain.

International & Other (6% of Net Sales, 8% of Total Segment Operating Profit)

International & Other segment profit increased 3 percent, driven by higher royalties and strong performance by our China businesses. Sales were down 6 percent. Increased sales of SKIPPY® peanut butter did not fully offset the declines in pork exports which were hampered by soft demand in several key markets.

OUTLOOK

“Looking forward to the fourth quarter, we expect a strong finish to the year from our Specialty Foods segment with the fast-paced growth and improved cost structure of our MUSCLE MILK® protein nutrition products,” remarked Ettinger. “While Jennie-O Turkey Store will continue to show year-over-year declines due to the impact of avian influenza, we are pleased

with our team’s ability to navigate this difficult challenge. Our International segment will face headwinds in the pork export markets over the near term. We look for Refrigerated Foods and Grocery Products to continue to drive earnings increases with input cost tailwinds and growth in key value-added products.”

“We are raising our 2015 non-GAAP1 earnings guidance range to $2.57 to $2.63 per share2, up from our previously stated non-GAAP1 guidance range of $2.50 to $2.60 per share. The updated guidance represents a 15 to 18 percent earnings increase over a record performance in fiscal 2014,” stated Ettinger.

DIVIDENDS

Effective August 17, 2015, the company paid its 348th consecutive quarterly dividend at the annual rate of $1.00.

CONFERENCE CALL

A conference call will be webcast at 8:00 a.m. CT on Wednesday, August 19, 2015. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 888-417-8465 and providing the access code 1732023. An audio replay is available by calling 888-203-1112 and entering access code 1732023. The audio replay will be available beginning at 11:00 a.m. CT on Wednesday, August 19, 2015, through 11:00 a.m. CT on Wednesday, September 2, 2015. The webcast replay will be available at 11:00 a.m. CT, Wednesday, August 19, 2015, and will remain on our website for one year.

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

The non-GAAP adjusted financial measurements are presented to provide investors additional information to facilitate the comparison of past and present operations. The non-GAAP adjusted financial measurements are used for internal purposes to evaluate the results of operations and to measure a component of certain employee incentive plans in fiscal year 2015. 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.

2 ADJUSTED EARNINGS PER SHARE GUIDANCE

Full year fiscal 2015 non-GAAP adjusted diluted net earnings per share excludes first quarter fiscal 2015 nonrecurring charges of $0.05 relating to the closure of the Stockton, California, manufacturing facility and the exit from international joint venture businesses. There is no adjustment on a full year basis for the Applegate acquisition. Subtracting the excluded nonrecurring charges relating to the closure of the Stockton, California, manufacturing facility and the exit from international joint venture businesses from the non-GAAP adjusted diluted earnings per share guidance range of $2.57 to $2.63 per share results in a U.S. GAAP diluted earnings per share guidance range for fiscal year 2015 of $2.52 to $2.58 per share. Adjusted diluted earnings per share provides shareholders a more clear view of comparable results.

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 (S&P) 500 Index, S&P 500 Dividend Aristocrats for 2014, was named the 2013 Sustainable Supply Chain of the Year by Refrigerated & Frozen Foods magazine, and was again named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the seventh year in a row. Hormel Foods was also recognized as a 2015 Military Friendly Employer by G.I. Jobs magazine, on the 2015 Best for Vets Employers List by Military Times, and was named one of the 2015 40 Best Companies for Leaders by Chief Executive magazine. 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 http://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 on pages 34 - 40 in the company’s Form 10-Q for the fiscal quarter ended April 26, 2015, which includes information about the risk of outbreaks of disease among livestock and poultry flocks to the company’s revenues and operating margins. The company’s Form 10-Q can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

Segment Data

Fiscal 2015 Third Quarter Segment Operating Results (dollars in thousands)

	THIRD QUARTER – 13 WEEKS ENDED

NET SALES	July 26, 2015			July 27, 2014			% Change
Grocery Products		$	388,094		$	359,549		7.9
Refrigerated Foods			1,056,125			1,192,624		(11.4)
Jennie-O Turkey Store			336,533			382,647		(12.1)
Specialty Foods			282,774			216,406		30.7
International & Other			125,061			133,721		(6.5)
Total		$	2,188,587		$	2,284,947		(4.2)


OPERATING PROFIT
Grocery Products		$	53,108		$	33,781		57.2
Refrigerated Foods			97,692			90,028		8.5
Jennie-O Turkey Store			35,374			64,756		(45.4)
Specialty Foods			31,190			17,378		79.5
International & Other			19,251			18,696		3.0
Total segment operating profit			236,615			224,639		5.3
Net interest and investment expense (income)			2,941			1,522		93.2
General corporate expense			5,473			11,174		(51.0)
Noncontrolling interest			18			1,039		(98.3)
Earnings before income taxes		$	228,219		$	212,982		7.2

	YEAR TO DATE – 39 WEEKS ENDED

NET SALES	July 26, 2015			July 27, 2014			% Change
Grocery Products		$	1,195,110		$	1,153,099		3.6
Refrigerated Foods			3,222,851			3,432,289		(6.1)
Jennie-O Turkey Store			1,215,464			1,162,472		4.6
Specialty Foods			833,472			629,561		32.4
International & Other			396,108			395,064		0.3
Total		$	6,863,005		$	6,772,485		1.3


OPERATING PROFIT
Grocery Products		$	149,810		$	145,013		3.3
Refrigerated Foods			313,681			250,724		25.1
Jennie-O Turkey Store			202,990			177,109		14.6
Specialty Foods			70,910			57,767		22.8
International & Other			55,018			62,116		(11.4)
Total segment operating profit			792,409			692,729		14.4
Net interest and investment expense (income)			6,836			6,842		(0.01)
General corporate expense			18,550			27,242		(31.9)
Noncontrolling interest			964			2,765		(65.1)
Earnings before income taxes		$	767,987		$	661,410		16.1

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	July 26, 2015			July 27, 2014			July 26, 2015			July 27, 2014

Net sales		$	2,188,587		$	2,284,947		$	6,863,005	$		6,772,485

Cost of products sold			1,779,197			1,920,948			5,549,454		5,631,086

GROSS PROFIT		409,390			363,999			1,313,551		1,141,399

Selling, general and administrative		184,627			153,035			554,659		485,009

Equity in earnings of affiliates			6,396			3,540			15,930		11,862

OPERATING INCOME		231,159			214,504			774,822		668,252

Other income & expenses:
Interest & investment income (expense)		189			1,603			2,455		2,470
Interest expense			(3,129)			(3,125)			(9,290)		(9,312)

EARNINGS BEFORE INCOME TAXES		228,219			212,982			767,987		661,410

Provision for income taxes		81,263			73,968			268,166		227,232
(effective tax rate)			35.61%			34.73%			34.92%		34.36%

NET EARNINGS		146,956			139,014			499,821		434,178
Less: net earnings attributable to noncontrolling interest			18			1,039			964		2,765
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION		$	146,938		$	137,975		$	498,857	$	431,413

NET EARNINGS PER SHARE
Basic		$	0.56		$	0.52		$	1.89	$	1.63
Diluted		$	0.54		$	0.51		$	1.85	$	1.60

WEIGHTED AVG. SHARES OUTSTANDING
Basic		264,258			263,983			263,987		263,887
Diluted		270,602			270,400			270,369		270,345

DIVIDENDS DECLARED
PER SHARE		$	0.25		$	0.20		$	0.75	$	0.60

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands)

	July 26, 2015				October 26, 2014
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents		$		349,169		$	334,174
Accounts receivable		549,056				609,526
Inventories		984,452				1,054,552
Income taxes receivable		15,466				25,678
Deferred income taxes		81,407				86,853
Prepaid expenses		17,376				15,250
Other current assets		6,850				6,738

TOTAL CURRENT ASSETS		2,003,776				2,132,771

INTANGIBLES		2,527,874				1,781,296

OTHER ASSETS		557,621				539,785

PROPERTY, PLANT & EQUIPMENT, NET		1,001,810				1,001,767

TOTAL ASSETS		$		6,091,081		$	5,455,619



LIABILITIES AND SHAREHOLDERS’ INVESTMENT

TOTAL CURRENT LIABILITIES			$	1,245,107		$	954,692

LONG-TERM DEBT – LESS CURRENT MATURITIES			250,000			250,000

OTHER LONG-TERM LIABILITIES			659,962			638,871

SHAREHOLDERS’ INVESTMENT			3,936,012			3,612,056

TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT			$	6,091,081		$	5,455,619

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

	Thirty-Nine Weeks Ended
	July 26, 2015			July 27, 2014

OPERATING ACTIVITIES
Net earnings		$	499,821		$	434,178
Depreciation and amortization of intangibles		99,027			97,134
Decrease (increase) in working capital		66,769			(138,370)
Other		24,628			1,424
NET CASH PROVIDED BY OPERATING ACTIVITIES		690,245			394,366

INVESTING ACTIVITIES
Acquisitions of businesses/intangibles		(768,339)			(41,876)
Net purchases of property/equipment		(81,778)			(103,259)
Decrease in investments, equity in affiliates, and other assets		3,424			905
NET CASH USED IN INVESTING ACTIVITIES		(846,693)			(144,230)

FINANCING ACTIVITIES
Proceeds from short-term debt		350,000			-
Dividends paid on common stock		(184,761)			(150,360)
Share repurchase		-			(28,068)
Other		8,693			26,310
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		173,932			(152,118)
Effect of exchange rate changes on cash		(2,489)			(1,055)
INCREASE IN CASH AND CASH EQUIVALENTS		14,995			96,963
Cash and cash equivalents at beginning of year		334,174			434,014
CASH AND CASH EQUIVALENTS AT END OF QUARTER		$	349,169		$	530,977