Delaware | 1-2402 | 41-0319970 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
HORMEL FOODS CORPORATION | ||
(Registrant) | ||
Dated: May 24, 2018 | By | /s/ JAMES P. SNEE |
JAMES P. SNEE | ||
Chairman of the Board, President and | ||
Chief Executive Officer | ||
Dated: May 24, 2018 | By | /s/ JAMES N. SHEEHAN |
JAMES N. SHEEHAN | ||
Senior Vice President and | ||
Chief Financial Officer |
INVESTOR CONTACT: Nathan Annis (507) 437-5248 ir@hormel.com | MEDIA CONTACT: Wendy Watkins (507) 437-5345 media@hormel.com |
• | Record diluted earnings per share of $0.44, up 13% from 2017 EPS of $0.39 |
• | Fiscal 2018 earnings guidance reaffirmed at $1.81 to $1.95 per share |
• | Record net sales of $2.3 billion, up 7%; Organic net sales1 flat |
• | Volume of 1.2 billion lbs., up 3%; Organic volume1 down 1% |
• | Operating margin of 13.1% compared to 14.4% last year |
• | Effective tax rate of 20.0% compared to 33.2% last year |
• | Year-to-date cash flow from operations of $443 million, up 58% compared to last year |
• | Selling, general and administrative expenses increased due to the impact from acquisitions and higher advertising expense. |
• | Advertising expenses were $37 million compared to $30 million last year. Full year advertising expenses are expected to increase by approximately 20% over last year. |
• | Operating margin was 13.1% compared to 14.4% last year. |
• | The effective tax rate was 20.0% compared to 33.2% last year due to the passage of The Tax Cuts and Jobs Act in December 2017. The full year effective tax rate is expected to be between 17.5% and 19.5%. |
• | Capital expenditures in the second quarter were $87 million compared to $39 million last year. Full year capital expenditures are expected to total $425 million. Key projects include bacon capacity increases in our Wichita, Kans., facility, a new whole bird facility in Melrose, Minn., modernization of the Austin, Minn., plant, and projects designed to increase value-added capacity. |
• | Depreciation and amortization expense in the second quarter was $41 million compared to $32 million last year. Full year expenses are expected to be approximately $160 million. |
• | Share repurchases to date total $45 million, representing 1.3 million shares purchased. |
• | The Company repaid $70 million in short-term debt in the quarter. |
• | The Company paid its 359th consecutive quarterly dividend at the annual rate of $0.75 per share, a 10% increase over the prior year. |
• | Working capital increased to $702 million from $625 million in the first quarter, primarily related to a higher inventories from acquisitions and lower accounts payable. |
• | Cash on hand decreased to $262 million from $386 million for the first quarter as the Company continues to pay down short-term debt related to the Columbus Craft Meats acquisition. |
• | Total debt is $810 million. The debt is split between short-term borrowings of $185 million and long-term borrowings of $625 million. |
• | The Company remains in a strong financial position to fund other capital needs. |
Fiscal 2018 Outlook | |
Net Sales Guidance (in billions) | $9.70 - $10.10 |
Earnings per Share Guidance | $1.81 - $1.95 |
2nd Quarter | FY 2018 | FY 2017 | |||||||||||||||||
VOLUME (LBS.) | Reported (GAAP) | Acquisitions | Organic (Non-GAAP) | Reported (GAAP) | Organic % change | ||||||||||||||
Grocery Products | 333,398 | — | 333,398 | 338,883 | (1.6 | ) | |||||||||||||
Refrigerated Foods | 548,319 | (38,402 | ) | 509,917 | 515,490 | (1.1 | ) | ||||||||||||
Jennie-O Turkey Store | 197,806 | — | 197,806 | 203,557 | (2.8 | ) | |||||||||||||
International & Other | 91,878 | (10,676 | ) | 81,202 | 80,312 | 1.1 | |||||||||||||
TOTAL | 1,171,401 | (49,078 | ) | 1,122,323 | 1,138,242 | (1.4 | ) | ||||||||||||
FY 2018 | FY 2017 | ||||||||||||||||||
NET SALES | Reported (GAAP) | Acquisitions | Organic (Non-GAAP) | Reported (GAAP) | Organic % change | ||||||||||||||
Grocery Products | $ | 631,550 | $ | — | $ | 631,550 | $ | 640,419 | (1.4 | ) | |||||||||
Refrigerated Foods | 1,166,967 | (134,878 | ) | 1,032,089 | 1,027,486 | 0.4 | |||||||||||||
Jennie-O Turkey Store | 371,916 | 371,916 | 388,237 | (4.2 | ) | ||||||||||||||
International & Other | 160,135 | (19,040 | ) | 141,095 | 131,167 | 7.6 | |||||||||||||
TOTAL | $ | 2,330,568 | $ | (153,918 | ) | $ | 2,176,650 | $ | 2,187,309 | (0.5 | ) |
Year to Date | FY 2018 | FY 2017 | |||||||||||||||||||||||||
VOLUME (LBS.) | Reported (GAAP) | Acquisitions | Organic (Non-GAAP) | Reported (GAAP) | Divestitures | Organic (Non-GAAP) | Organic % change | ||||||||||||||||||||
Grocery Products | 667,615 | — | 667,615 | 677,675 | — | 677,675 | (1.5 | ) | |||||||||||||||||||
Refrigerated Foods | 1,110,814 | (70,062 | ) | 1,040,752 | 1,129,915 | (80,454 | ) | 1,049,461 | (0.8 | ) | |||||||||||||||||
Jennie-O Turkey Store | 406,237 | — | 406,237 | 420,200 | — | 420,200 | (3.3 | ) | |||||||||||||||||||
International & Other | 177,327 | (23,509 | ) | 153,818 | 155,361 | — | 155,361 | (1.0 | ) | ||||||||||||||||||
TOTAL | 2,361,993 | (93,571 | ) | 2,268,422 | 2,383,151 | (80,454 | ) | 2,302,697 | (1.5 | ) | |||||||||||||||||
FY 2018 | FY 2017 | ||||||||||||||||||||||||||
NET SALES | Reported (GAAP) | Acquisitions | Organic (Non-GAAP) | Reported (GAAP) | Divestitures | Organic (Non-GAAP) | Organic % change | ||||||||||||||||||||
Grocery Products | $ | 1,245,420 | $ | — | $ | 1,245,420 | $ | 1,250,793 | $ | — | $ | 1,250,793 | (0.4 | ) | |||||||||||||
Refrigerated Foods | 2,343,423 | (245,895 | ) | 2,097,528 | 2,150,525 | (100,231 | ) | 2,050,294 | 2.3 | ||||||||||||||||||
Jennie-O Turkey Store | 762,564 | — | 762,564 | 809,226 | — | 809,226 | (5.8 | ) | |||||||||||||||||||
International & Other | 310,454 | (40,895 | ) | 269,559 | 256,992 | — | 256,992 | 4.9 | |||||||||||||||||||
TOTAL | $ | 4,661,861 | $ | (286,790 | ) | $ | 4,375,071 | $ | 4,467,536 | $ | (100,231 | ) | $ | 4,367,305 | 0.2 |
Thirteen Weeks Ended | |||||||||||
April 29, 2018 | April 30, 2017 | % Change | |||||||||
NET SALES | |||||||||||
Grocery Products | $ | 631,550 | $ | 640,419 | (1.4 | ) | |||||
Refrigerated Foods | 1,166,967 | 1,027,486 | 13.6 | ||||||||
Jennie-O Turkey Store | 371,916 | 388,237 | (4.2 | ) | |||||||
International & Other | 160,135 | 131,167 | 22.1 | ||||||||
TOTAL | $ | 2,330,568 | $ | 2,187,309 | 6.5 | ||||||
OPERATING PROFIT | |||||||||||
Grocery Products | $ | 95,651 | $ | 108,297 | (11.7 | ) | |||||
Refrigerated Foods | 154,192 | 130,194 | 18.4 | ||||||||
Jennie-O Turkey Store | 42,356 | 63,786 | (33.6 | ) | |||||||
International & Other | 20,850 | 19,617 | 6.3 | ||||||||
TOTAL SEGMENT OPERATING PROFIT | 313,049 | 321,894 | (2.7 | ) | |||||||
Net interest and investment expense (income) | 9,490 | 205 | 4,529.3 | ||||||||
General corporate expense | 6,814 | 5,822 | 17.0 | ||||||||
Noncontrolling interest | 138 | (40 | ) | 445.0 | |||||||
EARNINGS BEFORE INCOME TAX | $ | 296,883 | $ | 315,827 | (6.0 | ) |
Twenty-Six Weeks Ended | |||||||||||
April 29, 2018 | April 30, 2017 | % Change | |||||||||
NET SALES | |||||||||||
Grocery Products | $ | 1,245,420 | $ | 1,250,793 | (0.4 | ) | |||||
Refrigerated Foods | 2,343,423 | 2,150,525 | 9.0 | ||||||||
Jennie-O Turkey Store | 762,564 | 809,226 | (5.8 | ) | |||||||
International & Other | 310,454 | 256,992 | 20.8 | ||||||||
TOTAL | $ | 4,661,861 | $ | 4,467,536 | 4.3 | ||||||
OPERATING PROFIT | |||||||||||
Grocery Products | $ | 195,628 | $ | 200,673 | (2.5 | ) | |||||
Refrigerated Foods | 297,141 | 304,002 | (2.3 | ) | |||||||
Jennie-O Turkey Store | 92,230 | 131,966 | (30.1 | ) | |||||||
International & Other | 45,505 | 45,080 | 0.9 | ||||||||
TOTAL SEGMENT OPERATING PROFIT | 630,504 | 681,721 | (7.5 | ) | |||||||
Net interest and investment expense (income) | 10,913 | 782 | 1,295.5 | ||||||||
General corporate expense | 17,785 | 10,443 | 70.3 | ||||||||
Noncontrolling interest | 242 | 116 | 108.6 | ||||||||
EARNINGS BEFORE INCOME TAX | $ | 602,048 | $ | 670,612 | (10.2 | ) |
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
April 29, 2018 | April 30, 2017 | April 29, 2018 | April 30, 2017 | |||||||||||||
Net sales | $ | 2,330,568 | $ | 2,187,309 | $ | 4,661,861 | $ | 4,467,536 | ||||||||
Cost of products sold | 1,833,882 | 1,700,389 | 3,662,996 | 3,428,336 | ||||||||||||
GROSS PROFIT | 496,686 | 486,920 | 998,865 | 1,039,200 | ||||||||||||
Selling, general and administrative | 203,799 | 181,009 | 422,921 | 391,226 | ||||||||||||
Equity in earnings of affiliates | 13,486 | 10,121 | 37,017 | 23,420 | ||||||||||||
OPERATING INCOME | 306,373 | 316,032 | 612,961 | 671,394 | ||||||||||||
Interest & investment (expense) income | (2,489 | ) | 2,818 | 817 | 5,267 | |||||||||||
Interest expense | (7,001 | ) | (3,023 | ) | (11,730 | ) | (6,049 | ) | ||||||||
EARNINGS BEFORE INCOME TAXES | 296,883 | 315,827 | 602,048 | 670,612 | ||||||||||||
Provision for income taxes | 59,361 | 104,941 | 61,315 | 224,423 | ||||||||||||
(effective tax rate) | 20.0 | % | 33.2 | % | 10.2 | % | 33.5 | % | ||||||||
NET EARNINGS | 237,522 | 210,886 | 540,733 | 446,189 | ||||||||||||
Less: net earnings attributable to noncontrolling interest | 138 | (40 | ) | 242 | 116 | |||||||||||
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION | $ | 237,384 | $ | 210,926 | $ | 540,491 | $ | 446,073 | ||||||||
NET EARNINGS PER SHARE | ||||||||||||||||
Basic | $ | 0.45 | $ | 0.40 | $ | 1.02 | $ | 0.84 | ||||||||
Diluted | $ | 0.44 | $ | 0.39 | $ | 1.00 | $ | 0.83 | ||||||||
WEIGHTED AVG. SHARES OUTSTANDING | ||||||||||||||||
Basic | 529,799 | 528,712 | 529,626 | 528,649 | ||||||||||||
Diluted | 542,811 | 539,635 | 543,146 | 539,850 | ||||||||||||
Dividends declared per share | $ | 0.1875 | $ | 0.1700 | $ | 0.3750 | $ | 0.3400 |
April 29, 2018 | October 29, 2017 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 261,571 | $ | 444,122 | ||||
Accounts receivable | 551,392 | 618,351 | ||||||
Inventories | 1,011,215 | 921,022 | ||||||
Income taxes receivable | 2,930 | 22,346 | ||||||
Prepaid expenses | 18,534 | 16,144 | ||||||
Other current assets | 5,138 | 4,538 | ||||||
TOTAL CURRENT ASSETS | 1,850,780 | 2,026,523 | ||||||
Intangibles | 3,983,252 | 3,146,827 | ||||||
Other Assets | 641,864 | 599,307 | ||||||
Property, Plant & Equipment, Net | 1,353,853 | 1,203,251 | ||||||
TOTAL ASSETS | $ | 7,829,749 | $ | 6,975,908 | ||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||||
Short-term debt | $ | 185,000 | $ | — | ||||
Current liabilities excluding debt | 963,461 | 1,058,212 | ||||||
TOTAL CURRENT LIABILITIES | 1,148,461 | 1,058,212 | ||||||
Long-term debt - Less current maturities | 624,763 | 250,000 | ||||||
Deferred income taxes | 125,425 | 98,410 | ||||||
Other long-term liabilities | 639,467 | 629,589 | ||||||
Shareholders' Investment | 5,291,633 | 4,939,697 | ||||||
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT | $ | 7,829,749 | $ | 6,975,908 |
Twenty-Six Weeks Ended | ||||||||
April 29, 2018 | April 30, 2017 | |||||||
OPERATING ACTIVITIES | ||||||||
Net earnings | $ | 540,733 | $ | 446,189 | ||||
Depreciation and amortization of intangibles | 80,316 | 63,328 | ||||||
Increase in working capital | (77,785 | ) | (239,931 | ) | ||||
Other | (99,923 | ) | 10,966 | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 443,341 | 280,552 | ||||||
INVESTING ACTIVITIES | ||||||||
Proceeds from sale of business | — | 135,944 | ||||||
Acquisitions of businesses/intangibles | (857,673 | ) | — | |||||
Net purchases of property/equipment | (134,721 | ) | (75,818 | ) | ||||
Decrease in investments, equity in affiliates, and other assets | 5,934 | 3,977 | ||||||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | (986,460 | ) | 64,103 | |||||
FINANCING ACTIVITIES | ||||||||
Net proceeds (payments) from short-term debt | 185,000 | — | ||||||
Net proceeds (payments) from long-term debt | 374,763 | — | ||||||
Dividends paid on common stock | (189,139 | ) | (166,507 | ) | ||||
Share repurchase | (44,741 | ) | (49,583 | ) | ||||
Other | 29,978 | 8,879 | ||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 355,861 | (207,211 | ) | |||||
Effect of exchange rate changes on cash | 4,707 | (3,686 | ) | |||||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (182,551 | ) | 133,758 | |||||
Cash and cash equivalents at beginning of year | 444,122 | 415,143 | ||||||
CASH AND CASH EQUIVALENTS AT END OF QUARTER | $ | 261,571 | $ | 548,901 |