Delaware | 1-2402 | 41-0319970 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
HORMEL FOODS CORPORATION | ||
(Registrant) | ||
Dated: February 21, 2019 | By | /s/ JAMES P. SNEE |
JAMES P. SNEE | ||
Chairman of the Board, President and | ||
Chief Executive Officer | ||
Dated: February 21, 2019 | By | /s/ JAMES N. SHEEHAN |
JAMES N. SHEEHAN | ||
Executive 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 |
• | 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% |
• | 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%. |
• | 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. |
• | 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. |
Fiscal 2019 Outlook | |
Net Sales Guidance (in billions) | $9.70 - $10.20 |
Earnings per Share Guidance | $1.77 - $1.91 |
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. |
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). |
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 |
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 |