Form 8-K HORMEL FOODS CORP /DE/ For: Nov 22

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15 (d) of

the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)   November 22, 2016

 

HORMEL FOODS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

1 Hormel Place

Austin, MN  55912

(Address of Principal Executive Office)

 

Registrant’s telephone number, including area code:  (507) 437-5611

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Section 2 – FINANCIAL INFORMATION

 

Item 2.02 Results of Operations and Financial Condition

 

On November 22, 2016, the Company issued an earnings release announcing its financial results for the fourth quarter ended October 30, 2016.  A copy of the earnings release is furnished as Exhibit 99 to this Form 8-K and is incorporated herein by reference.

 

Section 9 – FINANCIAL STATEMENTS AND EXHIBITS

 

Item 9.01 Financial Statements and Exhibits

 

(d)                     Exhibits furnished pursuant to Item 2.02

 

99       Earnings release issued November 22, 2016

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

		HORMEL FOODS CORPORATION
			(Registrant)
Dated: November 22, 2016		By	/s/J. N. SHEEHAN
			J. N. SHEEHAN
			Senior Vice President
			and Chief Financial Officer
Dated: November 22, 2016		By	/s/J. L. HAYNES
			J. L. HAYNES
			Vice President and
			Controller

 

2

Exhibit 99

 

INVESTOR CONTACT:		MEDIA CONTACT:
Nathan Annis		Wendy Watkins
(507) 437-5248		(507) 437-5345
[email protected]		[email protected]

 

HORMEL FOODS ACHIEVES RECORD FOURTH QUARTER AND FULL YEAR RESULTS

 

AUSTIN, Minn. (November 22, 2016) – Hormel Foods Corporation (NYSE: HRL) today reported record performance for the fiscal year 2016 fourth quarter and full year.

 

All comparisons are to the fourth quarter or full year of fiscal 2015. The fourth quarter and full year of 2016 contains an extra week as compared to the prior year. All earnings per share measures are adjusted to reflect the two-for-one stock split distributed on February 9, 2016.

 

SUMMARY

 

Fourth Quarter

 

·                  Record diluted earnings per share of $0.45, up 29 percent from 2015 GAAP EPS of $0.35; diluted EPS up 22 percent from non-GAAP1 adjusted diluted EPS2 of $0.37

·                  Record net earnings of $244 million, up 30 percent from 2015 GAAP net earnings of $187 million; net earnings up 22 percent from non-GAAP1 adjusted net earnings2 of $200 million

·                  Record dollar sales of $2.6 billion, up 9 percent; volume up 9 percent

·                  Refrigerated Foods operating profit up 51 percent; volume up 9 percent; dollar sales up 8 percent

·                  Jennie-O Turkey Store operating profit up 26 percent; volume up 32 percent; dollar sales up 29 percent

·                  Grocery Products operating profit up 5 percent; volume up 12 percent (sales of JUSTIN’S® products contributed 2 percent to volume growth); dollar sales up 16 percent (sales of JUSTIN’S® products contributed 6 percent to sales growth)

·                  International & Other operating profit down 16 percent; volume up 11 percent; dollar sales up 2 percent

·                  Specialty Foods operating profit down 10 percent as compared to 2015 GAAP operating profit; operating profit down 42 percent as compared to 2015 non-GAAP1 adjusted segment operating profit2;  volume down 29 percent ; dollar sales down 20 percent

 

COMMENTARY

 

“We had a strong finish to fiscal 2016, achieving record earnings for the fourteenth consecutive quarter,” said Jim Snee, president and chief executive officer. “Three of our five business segments delivered sales, volume, and earnings growth, again demonstrating our balanced business model. Refrigerated Foods and Jennie-O Turkey Store both had excellent quarters with growth coming from value-added, branded products and improved market conditions. Grocery Products enjoyed a strong quarter aided by the inclusion of the JUSTIN’S® specialty nut butter business in addition to strong results from SPAM® luncheon meat and SKIPPY® peanut butter,” Snee said.

 

“Specialty Foods sales declined, primarily due to the divestiture of Diamond Crystal Brands in May, while sales of MUSCLE MILK® protein products were strong,” mentioned Snee. “Specialty Foods earnings decreased primarily due to increased advertising. Our International

 

1

 

segment had a tough quarter as the team continues to work through challenging market conditions in China.”

 

“Fiscal 2017 will mark the 51st consecutive year we have increased our dividend, an accomplishment few other companies can claim,” Snee said. “Effective in the new fiscal year the annual dividend will be $0.68 per share, a 17 percent increase.”

 

SEGMENT OPERATING HIGHLIGHTS — FOURTH QUARTER

 

Refrigerated Foods (47% of Net Sales, 44% of Total Segment Operating Profit)

Refrigerated Foods segment profit increased 51 percent driven by excellent results in our foodservice and retail channels in addition to lower input costs. Sales grew 8 percent on volume growth of 9 percent aided by foodservice products such as HORMEL® BACON 1TM fully cooked bacon and HORMEL® pepperoni, and retail products such as APPLEGATE® deli meats, HORMEL® NATURAL CHOICE® meats, and HORMEL GATHERINGS® party trays.

 

Jennie-O Turkey Store (21% of Net Sales, 24% of Total Segment Operating Profit)

Jennie-O Turkey Store segment profit increased 26 percent and sales increased 29 percent following the recovery from avian influenza in fiscal 2015. Increased earnings reflect improved live production results in addition to strong sales growth from JENNIE-O® branded foodservice products.

 

Grocery Products (19% of Net Sales, 22% of Total Segment Operating Profit)

Grocery Products sales increased 16 percent on the inclusion of JUSTIN’S® specialty nut butters along with strong sales of SPAM® luncheon meat and SKIPPY® peanut butter. Segment profit increased 5 percent. Grocery Products increased advertising for key products such as SKIPPY® P.B. Bites during the quarter.

 

International & Other (5% of Net Sales, 5% of Total Segment Operating Profit)

International segment profit decreased 16 percent while sales increased 2 percent. High pork raw material costs and soft retail demand continue to weigh on the China meat business.

 

Specialty Foods (8% of Net Sales, 5% of Total Segment Operating Profit)

Specialty Foods segment profit decreased 10 percent while sales were down 20 percent, primarily due to the divestiture of Diamond Crystal Brands in May. MUSCLE MILK® branded items posted double-digit sales growth with increases across many product lines including protein powders and ready-to-drink protein beverages.

 

OUTLOOK

 

“In fiscal 2017, we expect to generate organic sales growth consistent with our long-term goal of five percent coupled with mid-single-digits earnings growth,” said Snee. “Grocery Products is positioned to deliver an excellent year aided by the inclusion of JUSTIN’S® specialty nut butters and contributions from branded products such as SKIPPY® peanut butter and HERDEZ® salsas. Jennie-O Turkey Store should benefit from favorable grain prices and increasing demand for JENNIE-O® branded products. We anticipate continued low input costs for our value-added products in Refrigerated Foods in addition to positive momentum in both retail and foodservice channels.”

 

2

 

“We expect the International segment to show growth through increased exports and improved results from our China business,” mentioned Snee. “Specialty Foods is expected to show year-over-year sales and earnings growth net of the Diamond Crystal Brands divestiture and will benefit from continued strong results from MUSCLE MILK® protein products.”

 

“Taking all these factors into account and considering the previous three years of strong double-digit earnings increases, we would have expected our fiscal 2017 earnings guidance range to be $1.71 to $1.77 per share,” commented Snee. “However, after excluding earnings from the Farmer John divestiture of approximately 3 cents per share, we are setting our fiscal 2017 earnings guidance range at $1.68 to $1.74 per share,” Snee said.

 

DIVIDENDS

 

Effective November 15, 2016, the company paid its 353rd consecutive quarterly dividend at the annual rate of $0.58.

 

CONFERENCE CALL

 

A conference call will be webcast at 8:30 a.m. CT on Tuesday, November 22, 2016. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 877-627-6590 and providing the access code 5999118. An audio replay is available by going to https://jsp.premiereglobal.com/webrsvp and entering the access code 5999118. The webcast replay will be available at 11:30 a.m. CT, Tuesday, November 22, 2016, and will remain on the website for one year.

 

1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS

 

The non-GAAP adjusted financial measurements are presented to provide investors additional information to facilitate the comparison of past and present operations. The non-GAAP adjusted financial measurements are used for internal purposes to evaluate the results of operations and to measure a component of certain employee incentive plans in fiscal year 2015. 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.

 

2 ADJUSTED FINANCIAL MEASURES

 

Adjusted segment operating profit, net earnings, and diluted net earnings per share exclude charges relating to the closure of the Stockton, California, manufacturing facility and the exit from international joint venture businesses in the first quarter of fiscal 2015, and charges relating to the goodwill impairment charge associated with the Diamond Crystal Brands business and an adjustment to the contingent consideration accrual for CytoSport in the fourth quarter of fiscal 2015. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in both the fourth quarter and full year of fiscal 2015.

 

3

 

Fourth Quarter

 

(In thousands, except per share amounts)		2016 Earnings			2015 Non- GAAP Adjusted Earnings			Diamond Crystal Brands Impairment			CytoSport Contingent Consideration Adjustment			2015 GAAP Earnings
Grocery Products		$	82,734		$	78,772								$	78,772
Refrigerated Foods		168,040			111,287									111,287
Jennie-O Turkey Store		92,299			73,227									73,227
Specialty Foods		20,182			35,015			$	(21,537	)	$	8,870		22,348
International & Other		19,570			23,300									23,300
Total segment operating profit		382,825			$	321,601		(21,537		)	8,870			308,934
General corporate expense		(17,325		)	(16,649		)							(16,649		)
Net interest & investment expense		(1,017		)	(3,341		)							(3,341		)
Earnings before income taxes		364,483			$	301,611		(21,537		)	8,870			288,944
Income taxes		(120,543		)	(101,713		)							(101,713		)
Net earnings attributable to Hormel Foods Corporation		$	243,940		$	199,898		$	(21,537	)	$	8,870		$	187,231
Diluted net earnings per share		$	0.45		$	0.37		$	(0.04	)	$	0.02		$	0.35

 

Full Year

 

(In thousands, except per share amounts)		2016 Earnings			2015 Non- GAAP Adjusted Earnings			Stockton Plant Closure			International Business Exit			Diamond Crystal Brands Impairment			CytoSport Contingent Consideration Adjustment			2015 GAAP Earnings
Grocery Products		$	268,461		$	239,108		$	(10,526	)										$	228,582
Refrigerated Foods		585,652			424,968															424,968
Jennie-O Turkey Store		329,427			276,217															276,217
Specialty Foods		110,917			105,925									$	(21,537	)	$	8,870		93,258
International & Other		78,409			87,864						$	(9,546	)							78,318
Total segment operating profit		1,372,866			1,134,082			(10,526		)	(9,546		)	(21,537		)	8,870			1,101,343
General corporate expense		(49,436		)	(35,199		)													(35,199		)
Net interest & investment expense		(6,680		)	(10,177		)													(10,177		)
Earnings before income taxes		1,316,750			1,088,706			(10,526		)	(9,546		)	(21,537		)	8,870			1,055,967
Income taxes		(426,698		)	(374,334		)	3,685			770									(369,879		)
Net earnings attributable to Hormel Foods Corporation		$	890,052		$	714,372		$	(6,841	)	$	(8,776	)	$	(21,537	)	$	8,870		$	686,088
Diluted net earnings per share		$	1.64		$	1.32		$	(0.01	)	$	(0.02	)	$	(0.04	)	$	0.02		$	1.27

 

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 75 countries worldwide. Its brands include SKIPPY®, SPAM®, Hormel® Natural Choice®, Applegate®, Justin’s®, Wholly Guacamole®, Hormel® Black Label® 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 eighth 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://2015csr.hormelfoods.com/.

 

4

 

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 which appear on pages 33 - 40 in the company’s Form 10-Q for the fiscal quarter ended July 24, 2016, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

 

5

 

Segment Data

 

Fiscal 2016 Fourth Quarter Segment Operating Results (dollars in thousands)

 

		FOURTH QUARTER
		14 WEEKS ENDED			13 WEEKS ENDED
		October 30, 2016			October 25, 2015			% Change
NET SALES
Grocery Products		$	491,724		$	422,570		16.4
Refrigerated Foods		1,237,276			1,149,496			7.6
Jennie-O Turkey Store		541,409			420,312			28.8
Specialty Foods		216,674			269,887			(19.7	)
International & Other		140,858			138,593			1.6
Total		$	2,627,941		$	2,400,858		9.5
OPERATING PROFIT
Grocery Products		$	82,734		$	78,772		5.0
Refrigerated Foods		168,040			111,287			51.0
Jennie-O Turkey Store		92,299			73,227			26.0
Specialty Foods		20,182			22,348			(9.7	)
International & Other		19,570			23,300			(16.0	)
Total segment operating profit		382,825			308,934			23.9
Net interest and investment expense (income)		1,017			3,341			(69.6	)
General corporate expense		17,325			16,649			4.1
Less: Noncontrolling interest		250			212			17.9
Earnings before income taxes		$	364,733		$	289,156		26.1
		YEAR TO DATE
		53 WEEKS ENDED			52 WEEKS ENDED
		October 30, 2016			October 25, 2015			% Change
NET SALES
Grocery Products		$	1,684,756		$	1,617,680		4.1
Refrigerated Foods		4,647,173			4,372,347			6.3
Jennie-O Turkey Store		1,740,968			1,635,776			6.4
Specialty Foods		939,134			1,103,359			(14.9	)
International & Other		511,193			534,701			(4.4	)
Total		$	9,523,224		$	9,263,863		2.8
OPERATING PROFIT
Grocery Products		$	268,461		$	228,582		17.4
Refrigerated Foods		585,652			424,968			37.8
Jennie-O Turkey Store		329,427			276,217			19.3
Specialty Foods		110,917			93,258			18.9
International & Other		78,409			78,318			0.1
Total segment operating profit		1,372,866			1,101,343			24.7
Net interest and investment expense (income)		6,680			10,177			(34.4	)
General corporate expense		49,436			35,199			40.4
Less: Noncontrolling interest		465			1,176			(60.5	)
Earnings before income taxes		$	1,317,215		$	1,057,143		24.6

 

6

 

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

		Fourteen Weeks Ended			Thirteen Weeks Ended			Fifty-Three Weeks Ended			Fifty-Two Weeks Ended
		October 30, 2016			October 25, 2015*			October 30, 2016			October 25, 2015*
Net sales		$	2,627,941		$	2,400,858		$	9,523,224		$	9,263,863
Cost of products sold		2,029,421			1,905,828			7,365,049			7,455,282
GROSS PROFIT		598,520			495,030			2,158,175			1,808,581
Selling, general and administrative		244,006			188,952			871,974			743,611
Goodwill impairment charge		—			21,537			991			21,537
Equity in earnings of affiliates		11,236			7,957			38,685			23,887
OPERATING INCOME		365,750			292,498			1,323,895			1,067,320
Other income & expenses:
Interest & investment income		2,271			479			6,191			2,934
Interest expense		(3,288		)	(3,821		)	(12,871		)	(13,111		)
EARNINGS BEFORE INCOME TAXES		364,733			289,156			1,317,215			1,057,143
Provision for income taxes		120,543			101,713			426,698			369,879
(effective tax rate)		33.05		%	35.18		%	32.39		%	34.99		%
NET EARNINGS		244,190			187,443			890,517			687,264
Less: net earnings attributable to noncontrolling interest		250			212			465			1,176
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION		$	243,940		$	187,231		$	890,052		$	686,088
NET EARNINGS PER SHARE
Basic		$	0.46		$	0.35		$	1.68		$	1.30
Diluted		$	0.45		$	0.35		$	1.64		$	1.27
WEIGHTED AVG. SHARES OUTSTANDING
Basic		528,778			528,648			529,290			528,143
Diluted		541,312			541,793			542,473			541,002
DIVIDENDS DECLARED PER SHARE		$	0.145		$	0.125		$	0.58		$	0.50

 

*Shares and per share figures have been restated to give effect to the two-for-one stock split distributed on February 9. 2016.

 

7

 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands)

 

		October 30, 2016			October 25, 2015
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	415,143		$	347,239
Accounts receivable		591,310			605,689
Inventories		985,683			993,265
Income taxes receivable		18,282			6,132
Deferred income taxes		—			86,902
Prepaid expenses		13,775			14,383
Other current assets		5,719			9,422
		2,029,912			2,063,032
TOTAL CURRENT ASSETS
DEFERRED INCOME TAXES		6,223			—
INTANGIBLES		2,737,755			2,526,703
OTHER ASSETS		490,728			538,357
PROPERTY, PLANT & EQUIPMENT, NET		1,105,449			1,011,739
TOTAL ASSETS		$	6,370,067		$	6,139,831
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term debt		$	—		$	185,000
Current liabilities excluding debt		1,053,196			1,029,025
TOTAL CURRENT LIABILITIES		1,053,196			1,214,025
LONG-TERM DEBT — LESS CURRENT MATURITIES		250,000			250,000
OTHER LONG-TERM LIABILITIES		615,465			674,413
SHAREHOLDERS’ INVESTMENT		4,451,406			4,001,393
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT		$	6,370,067		$	6,139,831

 

8

 

HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

 

		Fifty-Three Weeks Ended			Fifty-Two Weeks Ended
		October 30, 2016			October 25, 2015
OPERATING ACTIVITIES
Net earnings		$	890,517		$	687,264
Depreciation and amortization of intangibles		131,968			133,434
Goodwill impairment charge		991			21,537
(Increase) decrease in working capital		(51,425		)	131,095
Other		20,797			18,662
NET CASH PROVIDED BY OPERATING ACTIVITIES		992,848			991,992
INVESTING ACTIVITIES
Proceeds from sale of business		110,149			—
Acquisitions of businesses/intangibles		(280,889		)	(770,587		)
Net purchases of property/equipment		(249,297		)	(125,562		)
Decrease (increase) in investments, equity in affiliates, and other assets		11,078			(4,798		)
NET CASH USED IN INVESTING ACTIVITIES		(408,959		)	(900,947		)
FINANCING ACTIVITIES
Net (payments to) proceeds from short-term debt		(185,000		)	185,000
Dividends paid on common stock		(296,493		)	(250,834		)
Share repurchase		(87,885		)	(24,928		)
Other		59,732			20,135
NET CASH USED IN FINANCING ACTIVITIES		(509,646		)	(70,627		)
Effect of exchange rate changes on cash		(6,339		)	(7,353		)
INCREASE IN CASH AND CASH EQUIVALENTS		67,904			13,065
Cash and cash equivalents at beginning of year		347,239			334,174
CASH AND CASH EQUIVALENTS AT END OF YEAR		$	415,143		$	347,239

 

9