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Hormel Foods Reports Fourth Quarter And Fiscal 2019 Earnings; Provides Fiscal 2020 Outlook

November 26, 2019
Hormel Foods corporate logo
Hormel Foods corporate logo

AUSTIN, Minn., Nov. 26, 2019 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the fourth quarter of fiscal 2019. All comparisons are to the fourth quarter of fiscal 2018 unless otherwise noted. Results reflect the divestiture of the CytoSport business. The impact of this transaction is excluded in the presentation of the non-GAAP measures below.

EXECUTIVE SUMMARY - FISCAL 2019

EXECUTIVE SUMMARY - FOURTH QUARTER

FISCAL 2020 OUTLOOK
“In 2020, we expect to grow operating income as we did in 2019 while also growing sales,” said Jim Snee, chairman of the board, president and chief executive officer. “We are excited about our growth prospects in foodservice, retail and deli, led by brands such as SPAM®, Wholly®, Jennie-O®, Hormel® Natural Choice®, Hormel® Gatherings® and Applegate®. We are also putting a lot of energy behind our recent innovations in brands such as Herdez®, SKIPPY®, Columbus® and Hormel® Bacon 1TM. I am confident we have the right strategy, business model and leadership team to continue delivering long-term sustainable growth.”

The company’s outlook assumes higher protein prices and further volatility related to the impact from African swine fever and global trade uncertainty. The company’s expected fiscal 2020 organic pretax earnings growth rate is in line with the company’s near-term goal of 5-7% organic pretax earnings growth. As a reminder, CytoSport earnings in 2019 contributed 10 cents to earnings per share. The company also expects a higher effective tax rate in fiscal 2020 with a range of 20.5% and 22.5%.


Fiscal 2020 Outlook

Net Sales Guidance (in billions)

$9.50 - $10.30

Earnings per Share Guidance

$1.69 - $1.83

STRATEGIC INVESTMENTS
“We are excited to announce our plans to build a state-of-the-art dry sausage production facility to give us much-needed capacity for our Columbus® charcuterie products,” Snee said. “The plant will allow us to continue expanding distribution of Columbus® products to the East Coast. Construction is already underway, and we expect the new facility to be operational in early fiscal 2021.”

“We continue to make excellent progress on our Burke pizza toppings plant expansion and plan to start production in the back half of fiscal 2020,” Snee said. “This expansion will provide ample capacity to continue growing our pizza toppings business in the foodservice channel.”

DIVIDENDS
“We announced an 11 percent increase to our annual dividend, making the new dividend $0.93 per share,” Snee said. “This is the 54th consecutive year in which we’ve increased our dividend and the 11th consecutive year in which we have increased the dividend at a double-digit rate, demonstrating again that Hormel Foods is an uncommon company.”

Effective November 15, 2019, the company paid its 365th consecutive quarterly dividend at the annual rate of $0.84 per share.

COMMENTARY - FOURTH QUARTER
“Refrigerated Foods has been a strong earnings contributor all year, and this quarter was no different. I am proud of how our value-added businesses helped offset another steep decline in commodity profits,” Snee said. “Grocery Products and Jennie-O Turkey Store posted modest earnings growth while the International results were below our expectations as the team continues to manage through challenges due to African swine fever and global trade uncertainty.”

“We grew organic volume and sales in three of our four segments this quarter,” Snee said. “Our SPAM® family of products and Herdez® authentic salsas and sauces were notable contributors within Grocery Products. Refrigerated Foods delivered strong value-added sales growth with excellent results posted by brands such as Hormel® Bacon 1TM, Hormel® Fire BraisedTM, Hormel® Black Label® and Columbus®. Jennie-O Turkey Store delivered top-line growth led by a double-digit increase in whole bird sales. We made nice gains in lean ground turkey distribution, but we have much more work to do.”

SEGMENT HIGHLIGHTS – FOURTH QUARTER

Refrigerated Foods

Volume and sales increased on strong demand for foodservice items such as Hormel® Bacon 1TM cooked bacon, pizza toppings and Hormel® Fire BraisedTM products. Retail sales of Hormel® Black Label® bacon, Applegate® products, Hormel® Natural Choice® products, Hormel Gatherings® party trays and Columbus® branded deli items also contributed to growth. Segment profit declined as record value-added profits did not offset a 46% decline in commodity profits and higher operational expenses.

Grocery Products

Volume and sales decreases were related to the divestiture of CytoSport. Organic volume and sales increased due to strong demand for MegaMex items, including Herdez® salsas and sauces, and growth from the SPAM® family of products. The positive performances of these businesses offset lower pricing on SKIPPY® peanut butter spreads and the divestiture of CytoSport. As a reminder, the segment incurred a $17 million non-cash impairment in the fourth quarter of 2018 related to the CytoSport business.

Jennie-O Turkey Store

Volume and sales increased as growth from the whole-bird and commodity businesses more than offset lower retail sales. Jennie-O® lean ground turkey results improved during the quarter compared to the third quarter due to the successful execution of advertising and promotional activities in select markets. Segment profit increased, driven by operational improvements and lower freight expense.

International & Other

Volume, sales and profit for the quarter declined significantly, driven by weakness in branded and fresh pork exports and our multinational business in Brazil. Higher pork prices due to African swine fever led to higher input costs in China and Brazil. SPAM® luncheon meat and SKIPPY® peanut butter products continue to show growth in China.

SELECTED FINANCIAL DETAILS - FISCAL 2019

Income Statement

Cash Flow Statement

Balance Sheet

PRESENTATION

A conference call will be webcast at 8 a.m. CT on Tuesday, November 26, 2019. Access is available at www.hormelfoods.com by clicking on “Investors.” The call will also be available via telephone by dialing 888-220-8451 and providing the access code 1340983. An audio replay will be available by going to www.hormelfoods.com. The webcast replay will be available at 11 a.m. CT, Tuesday, November 26, 2019, and will remain on the website for one year.

ABOUT HORMEL FOODS - Inspired People. Inspired Food.™

Hormel Foods Corporation, based in Austin, Minn., is a global branded food company with over $9 billion in annual revenues across more than 80 countries worldwide. Its brands include SKIPPY®, SPAM®, Hormel® Natural Choice®, Applegate®, Justin’s®, Wholly®, Hormel® Black Label®, Columbus® and more than 30 other beloved brands. The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the 11th year in a row, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. In 2016, the company celebrated its 125th anniversary and announced its new vision for the future — Inspired People. Inspired Food.™ — focusing on its legacy of innovation. For more information, visit www.hormelfoods.com and http://csr.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 that appears on pages 35-41 in the company’s Form 10-Q for the quarter ended July 28, 2019, which can be accessed at www.hormelfoods.com under “Investors.”

1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurements of organic net sales and organic volume are presented to provide investors additional information to facilitate the comparison of past and present operations. The company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. 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.

Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the CytoSport divestiture (April 2019) in the Grocery Products and International & Other segments. The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures in the fourth quarter and year-to-date of fiscal 2019 and fiscal 2018.

RECONCILIATION OF NON-GAAP MEASURES

(In thousands)




Fourth Quarter



FY19


FY18


VOLUME (LBS.)

Reported
GAAP


Reported
GAAP*

Divestitures

Organic
(Non-GAAP)

Non-GAAP
% Change

Grocery Products

313,489



346,214


(37,394)


308,820


1.5


Refrigerated Foods

598,474



592,298



592,298


1.0


Jennie-O Turkey Store

242,421



231,180



231,180


4.9


International & Other

82,493



95,600


(1,257)


94,343


(12.6)


TOTAL

1,236,877



1,265,292


(38,651)


1,226,641


0.8


NET SALES







Grocery Products

$

584,085



$

648,244


$

(71,415)


$

576,829


1.3


Refrigerated Foods

1,373,009



1,321,784



1,321,784


3.9


Jennie-O Turkey Store

398,512



388,278



388,278


2.6


International & Other

145,907



166,391


(2,233)


164,158


(11.1)


TOTAL

$

2,501,513



$

2,524,697


$

(73,648)


$

2,451,049


2.1










Year-to-Date



FY19


FY18


VOLUME (LBS.)

Reported
GAAP


Reported
GAAP*

Divestitures

Organic
(Non-GAAP)

Non-GAAP
% Change

Grocery Products

1,283,492



1,328,693


(73,915)


1,254,778


2.3


Refrigerated Foods

2,325,156



2,327,140



2,327,140


(0.1)


Jennie-O Turkey Store

789,337



784,655



784,655


0.6


International & Other

339,296



357,690


(2,626)


355,064


(4.4)


TOTAL

4,737,281



4,798,178


(76,541)


4,721,637


0.3


NET SALES







Grocery Products

$

2,369,317



$

2,480,367


$

(141,401)


$

2,338,966


1.3


Refrigerated Foods

5,210,741



5,109,881



5,109,881


2.0


Jennie-O Turkey Store

1,323,783



1,331,013



1,331,013


(0.5)


International & Other

593,476



624,439


(4,696)


619,743


(4.2)


TOTAL

$

9,497,317



9,545,700


$

(146,097)


$

9,399,603


1.0


















* FY18 segment results have been adjusted to reflect the changes in the Grocery Products, Refrigerated Foods and Jennie-O Turkey Store segments.

HORMEL FOODS CORPORATION

SEGMENT DATA

(Unaudited) (In thousands)




Thirteen Weeks Ended



October 27,
2019


October 28,
2018*


% Change

NET SALES







Grocery Products


$

584,085



$

648,244



(9.9)


Refrigerated Foods


1,373,009



1,321,784



3.9


Jennie-O Turkey Store


398,512



388,278



2.6


International & Other


145,907



166,391



(12.3)


TOTAL


$

2,501,513



$

2,524,697



(0.9)
















SEGMENT PROFIT







Grocery Products


$

80,923



$

79,082



2.3


Refrigerated Foods


189,287



194,573



(2.7)


Jennie-O Turkey Store


41,031



38,744



5.9


International & Other


17,455



24,802



(29.6)


TOTAL SEGMENT PROFIT


328,696



337,201



(2.5)


Net unallocated expense


5,065



15,787



(67.9)


Noncontrolling interest


63



90



(30.0)


EARNINGS BEFORE INCOME TAX


$

323,694



$

321,504



0.7









Fifty-Two Weeks Ended



October 27,
2019


October 28,
2018*


% Change

NET SALES







Grocery Products


$

2,369,317



$

2,480,367



(4.5)


Refrigerated Foods


5,210,741



5,109,881



2.0


Jennie-O Turkey Store


1,323,783



1,331,013



(0.5)


International & Other


593,476



624,439



(5.0)


TOTAL


$

9,497,317



$

9,545,700



(0.5)
















SEGMENT PROFIT







Grocery Products


$

339,497



$

353,266



(3.9)


Refrigerated Foods


681,763



670,948



1.6


Jennie-O Turkey Store


117,962



131,846



(10.5)


International & Other


75,513



88,953



(15.1)


TOTAL SEGMENT PROFIT


1,214,735



1,245,013



(2.4)


Net unallocated expense


5,362



64,171



(91.6)


Noncontrolling interest


342



442



(22.6)


EARNINGS BEFORE INCOME TAX


$

1,209,715



$

1,181,284



2.4


HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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




Thirteen Weeks Ended


Fifty-Two Weeks Ended



October 27,
2019


October 28,
2018*


October 27,
2019


October 28,
2018*

Net sales


$

2,501,513



$

2,524,697



$

9,497,317



$

9,545,700


Cost of products sold


2,007,790



1,991,369



7,612,669



7,566,227


GROSS PROFIT


493,723



533,328



1,884,648



1,979,473


Selling, general and administrative


183,795



205,287



727,584



841,205


Goodwill/intangible impairment




17,279





17,279


Equity in earnings of affiliates


11,068



8,814



39,201



58,972


OPERATING INCOME


320,996



319,576



1,196,265



1,179,961


Interest & investment income


5,793



8,257



31,520



27,817


Interest expense


(3,095)



(6,329)



(18,070)



(26,494)


EARNINGS BEFORE INCOME TAXES


323,694



321,504



1,209,715



1,181,284


Provision for income taxes


68,128



60,008



230,567



168,702


(effective tax rate)


21.0

%


18.7

%


19.1

%


14.3

%

NET EARNINGS


255,566



261,496



979,148



1,012,582


Less: net earnings attributable to noncontrolling interest


63



90



342



442


NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION


$

255,503



$

261,406



$

978,806



$

1,012,140











NET EARNINGS PER SHARE









Basic


$

0.48



$

0.49



$

1.83



$

1.91


Diluted


$

0.47



$

0.48



$

1.80



$

1.86











WEIGHTED AVG. SHARES OUTSTANDING







Basic


534,151



533,110



534,578



530,742


Diluted


543,802



545,421



545,232



543,869











Dividends declared per share


$

0.2100



$

0.1875



$

0.8400



$

0.7500



*Adjusted due to the adoption of Accounting Standards Update (ASU) 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715).

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited) (In thousands)




October 27, 2019


October 28, 2018

ASSETS

Cash and cash equivalents


$

672,901



$

459,136


Short-term marketable securities


14,736




Accounts receivable


574,396



600,438


Inventories


1,042,362



963,527


Income taxes receivable


19,924



3,995


Prepaid expenses


22,637



16,342


Other current assets


14,457



6,662


TOTAL CURRENT ASSETS


2,361,413



2,050,100







Goodwill


2,481,645



2,714,116


Other intangibles


1,033,862



1,207,219


Pension assets


135,915



195,153


Investments in and receivables from affiliates


289,157



273,153


Other assets


177,901



189,951


Property, plant & equipment, net


1,629,111



1,512,600


TOTAL ASSETS


$

8,109,004



$

8,142,292












LIABILITIES AND SHAREHOLDERS' INVESTMENT






Accounts payable


$

590,033



$

618,830


Accrued expenses


62,031



48,298


Accrued worker's compensation


24,272



24,594


Accrued marketing


96,305



118,887


Employee-related expenses


213,515



224,736


Taxes payable


6,208



2,490


Interest and dividends payable


112,685



101,079


TOTAL CURRENT LIABILITIES


1,105,049



1,138,914







Long-term debt, less current maturities


250,000



624,840


Pension and post-retirement benefits


536,490



477,557


Other long-term liabilities


115,356



99,070


Deferred income taxes


176,574



197,093


Accumulated other comprehensive loss


(399,500)



(243,498)


Other shareholder's investment


6,325,035



5,848,316


TOTAL LIAB. & SHAREHOLDERS' INVESTMENT


$

8,109,004



$

8,142,292


HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)




Fifty-Two Weeks Ended



October 27, 2019


October 28, 2018

OPERATING ACTIVITIES





Net earnings


$

979,148



$

1,012,582


Depreciation and amortization


165,209



161,858


Goodwill/intangible impairment




17,279


(Increase) decrease in working capital


(215,548)



76,580


Other


(5,813)



(26,570)


NET CASH PROVIDED BY OPERATING ACTIVITIES


922,996



1,241,729







INVESTING ACTIVITIES





Net (purchase) sale of securities


(14,496)




Proceeds from sale of business


479,806




Acquisitions of businesses/intangibles




(857,668)


Net purchases of property/equipment


(256,436)



(379,858)


Decrease in investments, equity in affiliates, and other assets


11,279



2,158


NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES


220,153



(1,235,368)







FINANCING ACTIVITIES





Net (payments) proceeds from long-term debt


(374,840)



374,840


Dividends paid on common stock


(437,053)



(388,107)


Share repurchase


(174,246)



(46,898)


Other


59,895



71,803


NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES


(926,244)



11,638


Effect of exchange rate changes on cash


(3,140)



(2,985)


INCREASE IN CASH AND CASH EQUIVALENTS


213,765



15,014


Cash and cash equivalents at beginning of year


459,136



444,122


CASH AND CASH EQUIVALENTS AT END OF YEAR


$

672,901



$

459,136


INVESTOR CONTACT:

MEDIA CONTACT:

Nathan Annis

Wendy Watkins

(507) 437-5248

(507) 437-5345

ir@hormel.com

media@hormel.com

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SOURCE Hormel Foods Corporation