EX-99 3 j1476_ex99.htm EX-99

Exhibit 99

 

INVESTOR CONTACT:

 

MEDIA CONTACT:

Fred Halvin

 

Julie Craven

(507) 437-5007

 

(507) 437-5345

fdhalvin@hormel.com

 

jhcraven@hormel.com

 

HORMEL FOODS REPORTS FISCAL 2003

SECOND QUARTER RESULTS

 

AUSTIN, Minn., May 22, 2003 (BUSINESS WIRE) – Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2003 second quarter ended April 26, 2003.

 

HIGHLIGHTS

 

•                  Diluted EPS of $.24, compared to $.23 a year earlier, in line with company guidance

•                  Dollar sales of $1.0 billion increased 5 percent from prior year

•                  Grocery Products operating profit up 43 percent; volume up 10 percent

•                  Refrigerated Foods operating profit up 22 percent; volume down 8 percent due to discontinuing hog processing at Rochelle, IL

•                  Jennie-O Turkey Store, Inc. operating profit down 60 percent due to excess turkey meat in the industry; volume flat

•                  Diamond Crystal Brands integration on plan

 

Hormel Foods Corporation (NYSE: HRL-News), the multinational marketer of consumer-branded meat and food products, today reported fiscal 2003 second quarter net earnings of $33.8 million, up 3 percent from $32.7 million a year earlier.  Earnings per share were $.24 versus $.23 in the fiscal 2002 second quarter.  Fiscal 2003 second-quarter earnings included a $.02 charge for bad debt reserves associated with the bankruptcy of Fleming Companies.  Sales totaled $1.0 billion, up from $954.6 million in the same period last year.

 

For the six months ended April 26, net earnings were $80.7 million, or $.58 per share, compared to $83.1 million, or $.59 per share in prior year.  Sales totaled $2.0 billion, up from $1.9 billion in the same period last year.

 

COMMENTARY AND OUTLOOK

 

“We are pleased with the company’s continued success in building our branded, value-added product business, which has helped stabilize our performance in difficult environments,” said Joel Johnson, chairman of the board, president and chief executive officer.  “In the second quarter, the benefits from branded products balanced the negative impact of the lingering protein glut.

 

 

“The Grocery Products segment had an exceptional second quarter in terms of sales growth and profitability.  Core brands like the SPAM Family of products, HORMEL chili, DINTY MOORE stew and HORMEL bacon bits all delivered healthy volume increases and solid market shares behind aggressive marketing programs.  Profit growth reflected low raw material costs that are unlikely to be as favorable in the second half,” Johnson said.  “Even though Refrigerated Foods continued to deal with the protein oversupply, it delivered greatly improved profitability as a result of better margins from value-added products and the reduction of non-branded product sales.

 

“The Jennie-O Turkey Store segment was the most severely impacted in the second quarter as excess turkey meat pressured pricing throughout the industry,” Johnson continued.  “This continues to overwhelm the synergies we have gained from The Turkey Store Company acquisition and the aggressive, successful expansion of our value-added turkey product lines.  We remain focused on making turkey an everyday menu item leveraging our strong market position with the expectation of strengthening profits once the turkey markets return to normal levels.

 

 “We were pleased with the first full quarter of the Diamond Crystal Brands business which made a positive contribution to the bottom line,” Johnson said.  “The integration of this business is on schedule with our plan.

 

 “We expect domestic pork markets to continue their improvement and return to normal levels in the second half of fiscal 2003.  The outlook for the turkey market is the most uncertain.  After assessing industry factors and our own business plans and prospects, our earnings guidance for the third quarter is in a range of $.27 to $.33 per diluted share,” Johnson concluded.

 

OPERATING HIGHLIGHTS

 

Grocery Products (19 % of Net Sales, 55 % of Segment Operating Profit)

•                  Dollar sales for the second quarter totaled $188 million, up 8 percent.

•                  Volume improved by 10 percent.  Double-digit growth was reported by HORMEL bacon bits, HORMEL chili, DINTY MOORE canned stews and the SPAM Family of products.

•                  Operating profit for the quarter rose 43 percent to $37 million, reflecting strong product demand and favorable raw materials costs.

•                  KID’S KITCHEN all-plastic microwave cup expanded to national distribution in April.

•                  DINTY MOORE CLASSIC BAKES dinner kits achieved 81 percent national distribution.

 

Refrigerated Foods (47 % of Net Sales, 21 % of Segment Operating Profit)

•                  Dollar sales for the second quarter totaled $476 million, down 3 percent.  Volume decreased 8 percent.  The decreases were due to the discontinuation of hog processing at the Rochelle, IL plant.

•                  Operating profit for the second quarter improved 22 percent to $14 million, reflecting better margins from value-added branded products and the reduction of unprofitable commodity sales.

•                  Value-added volume growth in key retail categories included ALWAYS TENDER Flavored Meats, premium dinner hams, HORMEL Fully Cooked Entrees and deli products.

•                  The Di Lusso Deli Company expanded to the Midwest and Northeast after a successful launch in the Southeast.

•                  Branded volume within the Foodservice operation increased 6 percent, with overall volume even with last year.  Value-added categories including BREAD READY meats, premium bacon, AUSTIN BLUES BBQ products and premium hams reported solid growth.

 

2

 

Jennie-O Turkey Store (22 % of Net Sales, 9 % of Segment Operating Profit)

•                  Dollar sales in the second quarter increased 1 percent to $216 million with flat volume.

•                  Operating profit declined 60 percent to $6 million because of the oversupply in the turkey markets. The timing of the turkey meat inventory correction is unclear at this time.

•                  Value-added sales grew 8 percent.  Strong sales growth continues in the newer value-added products such as JENNIE-O TURKEY STORE marinated tenders and SO EASY fully cooked entrees.

•                  Foodservice volume was up 7 percent.

 

Specialty Foods (8 % of Net Sales, 7 % of Segment Operating Profit)

•                  Dollar sales in the second quarter increased 140 percent (11 percent excluding Diamond Crystal Brands).

•                  Volume in the second quarter was up 129 percent (11 percent excluding Diamond Crystal Brands).

•                  Operating profit for the second quarter improved 113 percent (39 percent excluding Diamond Crystal Brands).

•                  Hormel HealthLabs, Inc. recorded 18 percent volume growth for the second quarter.

•                  Diamond Crystal Brands integration is on schedule.

 

All Others (4 % of Net Sales, 8 % of Segment Operating Profit)

•                  Dollar sales declined 3 percent to $44 million.

•                  Volume in the second quarter was 12 percent lower than a year earlier, primarily due to weak fresh/frozen pork exports.

•                  Operating profit for the second quarter totaled $5.4 million compared with $6.0 million a year ago.

 

General Corporate Income (Expense)

•                  Second quarter expenses increased $4.8 million due to bad debts related to the Fleming Companies’ bankruptcy ($4.2 million) and higher pension costs ($3.2 million) offset by reduced corporate unallocated expenses.

•                  Expenses increased $8.5 million for the six-month period due to the bad debt related to the Fleming Companies ($4.2 million) and higher pension costs ($6.4 million) offset by reduced corporate unallocated expenses.

 

DIVIDENDS

 

Effective May 15, 2003 the company paid its 299th consecutive quarterly dividend.  The annual rate is $.42 per share.

 

CONFERENCE CALL

 

A conference call will be Webcast at 10:00 a.m. CT on Thursday, May 22, 2003.  Access is available at www.hormel.com.  If you do not have Internet access and want to listen to an audio replay, call 800-405-2236 in the United States and 303-590-3000 internationally and enter conference call ID 538245#.  The Webcast replay will be available from 12:00 (noon) CT, May 22, until 11:59 p.m. CT, June 5, 2003.  Listening to the Webcast requires speakers and Microsoft’s Windows Media Player.  If you do not have Media Player, you may download it for free at:

http://www.ccbn.com/resource_center/help/windowsmedia.html.  The audio replay will be available beginning at 12:00 (noon) CT on Thurs., May 22, 2003, through 11:59 p.m. CT on June 5, 2003.

 

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ABOUT HORMEL FOODS CORPORATION

 

Hormel Foods Corporation, based in Austin, Minn., is a multinational marketer of consumer-branded, value-added food, meat and poultry products delivered through retail and foodservice channels.  The company creates shareholder value by building emerging businesses, strengthening existing brands, launching new brands, providing outstanding customer service, maintaining careful cash and debt management and transparent accounting policies and by leveraging its strong financial position to accelerate growth worldwide.

 

FORWARD-LOOKING STATEMENTS

 

This news release contains forward-looking information based on management’s current views and assumptions.  Actual events may differ.  Please refer to the Cautionary Statement Relevant to Forward-Looking Statements and Information that appears on Exhibit 99 of the company’s Annual Report on Form 10-K for the fiscal year ended October 26, 2002, which can be accessed at http://www.hormel.com

 

Statements Follow

 

 

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4

 

Segment Data

 

Fiscal 2003 Second Quarter Segment Operating Results (in Thousands)

 

 

 

SECOND QUARTER  -  13 WEEKS ENDED

 

 

 

April 26, 2003

 

April 27, 2002

 

% Change

 

SALES

 

 

 

 

 

 

 

Grocery Products

 

$

187,601

 

$

173,025

 

8.4

 

Refrigerated Foods

 

476,328

 

490,326

 

(2.9

)

Jennie-O Turkey Store

 

216,173

 

213,648

 

1.2

 

Specialty Foods

 

78,971

 

32,932

 

139.8

 

All Others

 

43,529

 

44,696

 

(2.6

)

Total

 

$

1,002,602

 

$

954,627

 

5.0

 

 

 

 

 

 

 

 

 

 

 

OPERATING PROFIT

 

 

 

 

 

 

 

Grocery Products

 

$

37,167

 

$

25,958

 

43.2

 

Refrigerated Foods

 

13,922

 

11,445

 

21.6

 

Jennie-O Turkey Store

 

6,302

 

15,659

 

(59.8

)

Specialty Foods

 

4,770

 

2,244

 

112.6

 

All Others

 

5,350

 

5,988

 

(10.7

)

Total segment operating profit

 

67,511

 

61,294

 

10.1

 

Other income and net interest

 

(7,403

)

(6,666

)

(11.1

)

Gen. corporate income (expense)

 

(7,827

)

(3,066

)

(155.3

)

Income before tax

 

$

52,281

 

$

51,562

 

1.4

 

 

 

 

YEAR TO DATE  -  26 WEEKS ENDED

 

 

 

April 26, 2003

 

April 27, 2002

 

% Change

 

SALES

 

 

 

 

 

 

 

Grocery Products

 

$

381,589

 

$

356,359

 

7.1

 

Refrigerated Foods

 

983,138

 

1,001,085

 

(1.8

)

Jennie-O Turkey Store

 

431,932

 

415,966

 

3.8

 

Specialty Foods

 

128,003

 

65,791

 

94.6

 

All Others

 

96,390

 

98,440

 

(2.1

)

Total

 

$

2,021,052

 

$

1,937,641

 

4.3

 

 

 

 

 

 

 

 

 

OPERATING PROFIT

 

 

 

 

 

 

 

Grocery Products

 

$

82,476

 

$

61,770

 

33.5

 

Refrigerated Foods

 

24,623

 

36,362

 

(32.3

)

Jennie-O Turkey Store

 

24,181

 

33,205

 

(27.2

)

Specialty Foods

 

8,101

 

5,299

 

52.9

 

All Others

 

10,519

 

12,121

 

(13.2

)

Total segment operating  profit

 

149,900

 

148,757

 

0.8

 

Other income and net interest

 

(12,589

)

(13,218

)

4.8

 

Gen. corporate income (expense)

 

(13,145

)

(4,691

)

(180.2

)

Income before tax

 

$

124,166

 

$

130,848

 

(5.1

)

 

5

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

 

 

4-26-2003

 

4-27-2002

 

4-26-2003

 

4-27-2002

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,002,602

 

$

954,627

 

$

2,021,052

 

$

1,937,641

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

764,154

 

730,570

 

1,530,439

 

1,467,332

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT:

 

238,448

 

224,057

 

490,613

 

470,309

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Selling and delivery

 

120,031

 

114,157

 

239,845

 

225,297

 

 

 

 

 

 

 

 

 

 

 

Marketing

 

27,650

 

31,376

 

55,721

 

58,905

 

 

 

 

 

 

 

 

 

 

 

Administrative & general

 

32,712

 

23,021

 

60,802

 

46,040

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES:

 

180,393

 

168,554

 

356,368

 

330,242

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of affiliates

 

1,629

 

2,725

 

2,510

 

3,999

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME:

 

59,684

 

58,228

 

136,755

 

144,066

 

 

 

 

 

 

 

 

 

 

 

Other income & expenses:

 

 

 

 

 

 

 

 

 

Interest & investment income

 

694

 

1,457

 

2,555

 

3,196

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(8,097

)

(8,123

)

(15,144

)

(16,414

)

 

 

 

 

 

 

 

 

 

 

EARNINGS BEFORE INCOME TAXES:

 

52,281

 

51,562

 

124,166

 

130,848

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

18,480

 

18,822

 

43,425

 

47,757

 

(effective tax rate)

 

35.35

%

36.50

%

34.97

%

36.50

%

 

 

 

 

 

 

 

 

 

 

NET EARNINGS

 

$

33,801

 

$

32,740

 

$

80,741

 

$

83,091

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS PER SHARE (Basic)

 

$

.24

 

$

.24

 

$

.58

 

$

.60

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS PER SHARE (Diluted)

 

$

.24

 

$

.23

 

$

.58

 

$

.59

 

 

6

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

 

April 26,
2003

 

October 26,
2002

 

 

 

(In Thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

156,979

 

$

309,563

 

Accounts receivable

 

242,779

 

275,460

 

Inventories

 

382,103

 

355,638

 

Deferred income taxes

 

7,759

 

7,431

 

Prepaid expenses & other current assets

 

42,017

 

14,078

 

 

 

 

 

 

 

TOTAL CURRENT ASSETS

 

831,637

 

962,170

 

 

 

 

 

 

 

INTANGIBLES

 

455,302

 

366,296

 

 

 

 

 

 

 

OTHER ASSETS

 

303,746

 

239,052

 

 

 

 

 

 

 

PROPERTY, PLANT & EQUIPMENT, NET

 

676,720

 

652,678

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

2,267,405

 

$

2,220,196

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

 

 

 

 

 

 

 

 

 

 

 

TOTAL CURRENT LIABILITIES

 

$

385,775

 

$

410,111

 

 

 

 

 

 

 

LONG-TERM DEBT - LESS CURRENT MATURITIES

 

408,019

 

409,648

 

 

 

 

 

 

 

OTHER LONG-TERM LIABILITIES

 

295,219

 

285,182

 

 

 

 

 

 

 

SHAREHOLDERS’ INVESTMENT

 

1,178,392

 

1,115,255

 

 

 

 

 

 

 

TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT

 

$

2,267,405

 

$

2,220,196

 

 

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