EX-99 3 a04-2661_1ex99.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 FIRST QUARTER RESULTS

 

AUSTIN, Minn., February 19, 2004 (BUSINESS WIRE) – Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2004 first quarter ended January 24, 2004.

 

HIGHLIGHTS

 

•                  EPS of $.37, versus $.34 in 2003 (prior year includes 2 cents of net earnings from non-recurring items)

•                  Dollar sales of $1.1 billion increased 12 percent from 2003

•                  Volume up 5 percent compared to last year

•                  Refrigerated Foods operating profit up 178 percent; volume down 7 percent due to discontinuation of hog processing at Rochelle, IL; dollar sales up 8 percent

•                  Jennie-O Turkey Store operating profit up 24 percent (up 62 percent w/o non-recurring earnings in 2003); volume up 5 percent; dollar sales up 10 percent

•                  Grocery Products operating profit down 24 percent; volume down 7 percent; dollar sales down 5 percent

•                  Specialty Foods operating profit up 42 percent; volume up 156 percent (19 percent w/o acquisitions); dollar sales up 129 percent (8 percent w/o acquisitions)

•                  Strong demand across all channels for HORMEL value-added pork and JENNIE-O TURKEY STORE turkey products that deliver great flavor and convenience

 

Hormel Foods Corporation (NYSE: HRL-News), the multinational marketer of consumer-branded meat and food products, today reported fiscal 2004 first quarter net earnings of $51.8 million, up 10 percent from $46.9 million a year earlier.  Earnings per share were $.37 versus $.34 (prior year includes 2 cents of net earnings from non-recurring items) in the fiscal 2003 first quarter.  Sales totaled $1.1 billion, up from $1.0 billion in the same period last year.

 

COMMENTARY AND OUTLOOK

 

“Exceptional demand for our value-added pork and turkey products resulted in better-than-expected performance in the first quarter,” said Joel W. Johnson, chairman of the board, president and chief executive officer. “Our protein businesses, Refrigerated Foods and Jennie-O Turkey Store, have made significant progress in improving their product mix.  Products that offer great flavor and convenience – such as HORMEL pre-cooked bacon, fully cooked entrees and JENNIE-O TURKEY STORE “So Easy” fully cooked entrees – were the best performers in the quarter,” Johnson continued.  “With pork and turkey markets back to normal, the benefits of our value-added products are more visible,” Johnson

 

 

said.  “Foodservice also continued to deliver strong growth, with dollar sales up 15 percent, driven by key brands including ALWAYS TENDER boneless pork, BREAD READY meats, and AUSTIN BLUES BBQ.

 

“Grocery Products faced a difficult comparison in the first quarter because of higher pork and beef raw material costs,” Johnson said.  “Most of the sales and volume decline was due to lower sales of the DINTY MOORE CLASSIC BAKES product line,” Johnson continued.  “This decrease reflected two factors: last year’s pipeline fill and this year’s below-plan sales,” Johnson said.  “We expect Grocery Products will again face difficult comparisons next quarter because of higher raw material costs this year and war-induced ‘pantry loading’ last year.  However, we have many exciting initiatives within this segment planned for 2004, and we believe Grocery Products will strengthen as the year unfolds,” Johnson concluded.

 

“The integration of Century Foods International and Diamond Crystal Brands continues to meet our expectations in our Specialty Foods Segment,” said Johnson.  “Higher promotion and integration expenses, and a temporary shift in product mix caused margins to be lower than planned, but expect to see improvement in the upcoming quarters,” Johnson said.

 

“Our International business reported strong results, with volume up 47 percent and operating profit up 36 percent,” Johnson said.  “Strong margins from international sales of the SPAM Family of Products, STAGG chili and improved earnings from the China operations were key contributors to the increased profits,” Johnson concluded.

 

“After assessing industry factors and our own business plans and prospects, our earnings guidance for the second quarter is in a range of $.28 to $.34.  For the full year of fiscal 2004, our earnings guidance is in a range of $1.46 to $1.60,” Johnson concluded.

 

OPERATING HIGHLIGHTS

 

Grocery Products (16 % of Net Sales, 35 % of Segment Operating Profit)

 

•                  Dollar sales totaled $184 million, down 5 percent.

•                  Volume was down by 7 percent.  Weaker sales from DINTY MOORE CLASSIC BAKES products, which were introduced at the end of the third quarter of 2002, represented about two-thirds of the loss.  HORMEL chili and MARY KITCHEN hash were the other two brands causing most of the volume loss in the quarter.   CARAPELLI olive oil and HORMEL microcups reported solid growth in the quarter.  DINTY MOORE AMERICAN CLASSICS microwave dinners also contributed double-digit volume growth.

•                  Operating profit was down 24 percent, or $11 million, reflecting higher raw material costs.

•                  CARAPELLI pasta and sauce was launched in the first quarter.  This line of products is available in the boxed pasta section, and brings authentic Italian flavor to the category.

•                  Twelve new HORMEL microcup items were introduced.

 

Refrigerated Foods (48 % of Net Sales, 31 % of Segment Operating Profit)

 

•                  Dollar sales totaled $545 million, up 8 percent.

•                  Volume decreased 7 percent due to the discontinuation of hog processing at the Rochelle, IL plant.

 

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•                  Operating profit improved 178 percent to $30 million, reflecting better market conditions and continued strength from value-added, branded products.

•                  Strong pork demand generated a 24-percent improvement in the live hog market prices versus last year.  This better aligned our hog contract costs with open market prices.

•                  Value-added products in multiple retail categories continued to lead growth within this segment, including double-digit volume performers HORMEL Fully Cooked Entrees, Canadian bacon and pre-cooked bacon. Dry sausage products volume grew 8 percent.

•                  Foodservice reported double-digit volume growth in key categories including ALWAYS TENDER boneless pork, AUSTIN BLUES BBQ, BREAD READY meats and CAFÉ H products.

 

Jennie-O Turkey Store (21 % of Net Sales, 23 % of Segment Operating Profit)

•                  Dollar sales increased 10 percent to $238 million.

•                  Volume was up 5 percent.  Higher bird weights and stronger demand offset the production reductions announced last year.

•                  Operating profit totaled $22 million, up 24 percent from last year. Excluding the $4.2 million non-recurring earnings reported in last year’s results, (vitamin settlement improved operating profit by $5.9 million, and a plant closing reduced operating profit by $1.7 million) operating profit improved 62 percent.

•                  Value-added volume grew 11 percent.  Strong volume growth continued for value-added products such as JENNIE-O TURKEY STORE bacon, bratwurst, “So Easy” fully cooked entrees and fresh dinner sausage.

•                  Excellent production efficiencies in the plant and live bird growing areas benefited segment operating results.  However, higher grain costs will increase live bird production costs in the second quarter.

•                  Foodservice and deli volumes were up 18 and 6 percent, respectively.

 

Specialty Foods (10 % of Net Sales, 5 % of Segment Operating Profit)

•                  Dollar sales increased 129 percent (8 percent excluding Diamond Crystal Brands and Century Foods International).

•                  Volume was up 156 percent (19 percent excluding Diamond Crystal Brands and Century Foods International).

•                  Operating profit improved 42 percent.

•                  Hormel HealthLabs, Inc. recorded 11 percent volume growth.

•                  The Diamond Crystal Brands and Century Foods International acquisitions integration continues to meet expectations.  Re-alignment of personnel and product lines within the Specialty Foods Segment will create additional efficiencies for the segment in the upcoming quarters.

 

All Other (5 % of Net Sales, 6 % of Segment Operating Profit)

•                  Dollar sales increased 9 percent to $57 million.

•                  Volume was 27 percent higher than a year earlier, primarily due to strong export sales of fresh pork and growth in the China operations.

•                  Operating profit was up 22 percent.  Strong margins from international sales of the SPAM Family of Products, STAGG chili, improved earnings from the China operations and strong performance from our subsidiary, Dan’s Prize, were key contributors to the increased operating profit.

•                  The divestiture of the Campofrio investment, which will be reported in the second quarter, will enable us to re-deploy capital into more strategic investments.

 

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•                  We have a non-binding letter of intent for the sale of our Vista International casing business, and expect the deal to close in our second quarter.  Terms and conditions of the sale have not been disclosed.

 

General Corporate Income (Expense)

•                  Expenses increased $6.9 million, primarily from higher pension and medical costs ($2.5 million), sales reorganization expenses ($2.1 million) and stock options expense ($.8 million).

 

DIVIDENDS

 

Effective February 15, 2004, the company paid its 302nd consecutive quarterly dividend.  The annual rate is $.45 per share.

 

CONFERENCE CALL

 

A conference call will be Webcast at 10:00 a.m. CT on Thursday, February 19, 2004.  Access is available at www.hormel.com.  If you do not have Internet access and want to listen to an audio replay, call 800-642-1687 in the United States and 706-645-9291 internationally and enter conference call ID 5379871.  The Webcast replay will be available at 12:00 (noon) CT, February 19, and archived for one year.  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.microsoft.com/windows/windowsmedia/download/default.asp.  The audio replay will be available beginning at 12:00 (noon) CT on Thursday, February 19, 2004, through 11:59 p.m. CT on March 5, 2004.

 

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 99.1 of the company’s Annual Report on Form 10-K for the fiscal year ended October 25, 2003, which can be accessed at http://www.hormel.com

 

 

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Segment Data
 

Fiscal 2004 First Quarter Segment Operating Results (in Thousands)

 

 

 

FIRST QUARTER  -  13 WEEKS ENDED

 

 

 

January 24, 2004

 

January 25, 2003

 

% Change

 

SALES

 

 

 

 

 

 

 

Grocery Products

 

$

183,836

 

$

193,988

 

(5.2

)

Refrigerated Foods

 

544,624

 

506,810

 

7.5

 

Jennie-O Turkey Store

 

237,535

 

215,759

 

10.1

 

Specialty Foods

 

112,183

 

49,032

 

128.8

 

All Others

 

57,355

 

52,861

 

8.5

 

Total

 

$

1,135,533

 

$

1,018,450

 

11.5

 

 

 

 

 

 

 

 

 

OPERATING PROFIT

 

 

 

 

 

 

 

Grocery Products

 

$

34,383

 

$

45,309

 

(24.1

)

Refrigerated Foods

 

29,789

 

10,701

 

178.4

 

Jennie-O Turkey Store

 

22,227

 

17,879

 

24.3

 

Specialty Foods

 

4,718

 

3,331

 

41.6

 

All Others

 

6,323

 

5,169

 

22.3

 

Total segment operating profit

 

97,440

 

82,389

 

18.3

 

Other income and net interest

 

(3,608

)

(5,186

)

30.4

 

Gen. corporate (expense)

 

(12,216

)

(5,318

)

(129.7

)

Income before tax

 

$

81,616

 

$

71,885

 

13.5

 

 

5

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

 

 

 

Thirteen Weeks Ended

 

 

 

1-24-2004

 

1-25-2003

 

 

 

 

 

 

 

Net sales

 

$

1,135,533

 

$

1,018,450

 

 

 

 

 

 

 

Cost of products sold

 

863,757

 

766,285

 

 

 

 

 

 

 

GROSS PROFIT:

 

271,776

 

252,165

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

Selling and delivery

 

125,773

 

119,814

 

 

 

 

 

 

 

Marketing

 

25,867

 

28,071

 

 

 

 

 

 

 

Administrative & general

 

36,618

 

28,090

 

 

 

 

 

 

 

TOTAL EXPENSES:

 

188,258

 

175,975

 

 

 

 

 

 

 

Equity in earnings of affiliates

 

1,706

 

881

 

 

 

 

 

 

 

OPERATING INCOME:

 

85,224

 

77,071

 

 

 

 

 

 

 

Other income & expenses:

 

 

 

 

 

Interest & investment income

 

3,202

 

1,861

 

 

 

 

 

 

 

Interest expense

 

(6,810

)

(7,047

)

 

 

 

 

 

 

EARNINGS BEFORE INCOME TAXES:

 

81,616

 

71,885

 

 

 

 

 

 

 

Provision for income taxes

 

29,790

 

24,945

 

(effective tax rate)

 

36.50

%

34.70

%

 

 

 

 

 

 

NET EARNINGS

 

$

51,826

 

$

46,940

 

 

 

 

 

 

 

NET EARNINGS PER SHARE (Basic)

 

$

.37

 

$

.34

 

NET EARNINGS PER SHARE (Diluted)

 

$

.37

 

$

.34

 

 

6

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

 

 

January 24,
2004

 

October 25,
2003

 

 

 

(In Thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

81,938

 

$

97,976

 

Short term marketable securities

 

3,250

 

0

 

Accounts receivable

 

266,369

 

291,481

 

Inventories

 

404,086

 

403,213

 

Deferred income taxes

 

10,855

 

14,732

 

Prepaid expenses & other current assets

 

60,714

 

16,572

 

 

 

 

 

 

 

TOTAL CURRENT ASSETS

 

827,212

 

823,974

 

 

 

 

 

 

 

INTANGIBLES

 

511,667

 

509,986

 

 

 

 

 

 

 

OTHER ASSETS

 

382,212

 

357,819

 

 

 

 

 

 

 

PROPERTY, PLANT & EQUIPMENT, NET

 

695,293

 

701,342

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

2,416,384

 

$

2,393,121

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

 

 

 

 

 

 

 

 

 

 

 

TOTAL CURRENT LIABILITIES

 

$

419,654

 

$

441,990

 

 

 

 

 

 

 

LONG-TERM DEBT – LESS CURRENT MATURITIES

 

395,256

 

395,273

 

 

 

 

 

 

 

OTHER LONG-TERM LIABILITIES

 

302,295

 

303,123

 

 

 

 

 

 

 

SHAREHOLDERS’ INVESTMENT

 

1,299,179

 

1,252,735

 

 

 

 

 

 

 

TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT

 

$

2,416,384

 

$

2,393,121

 

 

7

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Thirteen Weeks Ended

 

 

 

01-24-2004

 

01-25-2003

 

 

 

(In Thousands)

 

OPERATING ACTIVITIES

 

 

 

 

 

Net earnings

 

$

51,826

 

$

46,940

 

Adjustments to reconcile to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

21,275

 

20,232

 

Amortization of intangibles

 

1,750

 

274

 

Equity in earnings of affiliates

 

(1,358

)

(674

)

Provision for deferred income taxes

 

(2,597

)

(278

)

Loss on property/equipment sales and plant facilities

 

0

 

1,276

 

Changes in operating assets and liabilities net of acquisitions:

 

 

 

 

 

Decrease in accounts receivable

 

25,112

 

34,241

 

(Increase) in inventories and prepaid expenses, and other current assets

 

(44,384

)

(42,457

)

(Decrease) in accounts payable and accrued expenses

 

(21,280

)

(35,834

)

Other

 

806

 

0

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

31,150

 

23,720

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

Purchase of held-to-maturity securities

 

(3,250

)

0

 

Acquisitions of businesses

 

(2,070

)

(117,578

)

Purchases of property / equipment

 

(15,830

)

(13,378

)

Proceeds from sales of property / equipment

 

604

 

396

 

(Increase) in investments, equity in affiliates, and other assets

 

(3,161

)

(53,695

)

NET CASH USED IN INVESTING ACTIVITIES

 

(23,707

)

(184,255

)

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

Principal payments on long-term debt

 

(2,351

)

(932

)

Dividends paid on common stock

 

(14,550

)

(13,484

)

Stock repurchase

 

(8,711

)

(2,571

)

Other

 

2,131

 

1,041

 

NET CASH USED IN FINANCING ACTIVITIES

 

(23,481

)

(15,946

)

 

 

 

 

 

 

(DECREASE) IN CASH AND CASH EQUIVALENTS

 

(16,038

)

(176,481

)

Cash and cash equivalents at beginning of year

 

97,976

 

309,563

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF QUARTER

 

$

81,938

 

$

133,082

 

 

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