Form 8-K HORMEL FOODS CORP /DE/ For: Nov 24

 

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 24, 2015

 

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:

 

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

 

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

 

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

 

[  ] 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 24, 2015, the Company issued an earnings release announcing its financial results for the fourth quarter ended October 25, 2015.  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 24, 2015

 

 

 

 

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 24, 2015	By	/s/J. H. FERAGEN
		J. H. FERAGEN
		Executive Vice President
		and Chief Financial Officer
Dated: November 24, 2015	By	/s/J. N. SHEEHAN
		J. N. SHEEHAN
		Vice President and Controller

 

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Exhibit 99

 

INVESTOR CONTACT:	MEDIA CONTACT:
Jana Haynes	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 24, 2015) – Hormel Foods Corporation (NYSE: HRL) today reported record performance for the fiscal year 2015 fourth quarter and full year.

 

All comparisons are to the fourth quarter or full year of fiscal 2014.

 

SUMMARY

 

Fourth Quarter

 

·                 Record non-GAAP1 adjusted diluted EPS2 of $0.74, up 17 percent from $0.63 per share.

·                 GAAP diluted EPS of $0.69.

·                 Dollar sales of $2.4 billion, down 6 percent; volume down 2 percent.

¨            Grocery Products operating profit up 57 percent; volume up 5 percent; dollar sales up 4 percent.  Excluding incremental net sales of MegaMex Foods products, volume down 2 percent and dollar sales down 2 percent.

·                 Refrigerated Foods operating profit up 27 percent; volume up 2 percent (volume flat excluding sales of APPLEGATE® natural and organic meats); dollar sales down 5 percent (dollar sales down 12 percent excluding sales of APPLEGATE® natural and organic meats).

·                 Jennie-O Turkey Store operating profit down 23 percent; volume down 21 percent; dollar sales down 18 percent.  Decreases reflect the substantial impact of the avian influenza outbreak, as flocks lost earlier in the year created large volume shortfalls in operations and sales.

·                 Specialty Foods operating profit up 63 percent; volume up 1 percent; dollar sales down 3 percent.

·                 International & Other operating profit up 3 percent; volume up 5 percent; dollar sales flat.

 

For the year ended October 25, 2015, non-GAAP1 adjusted net earnings2 were a record $714.4 million, up 19 percent from net earnings of $602.7 million last year.  Non-GAAP1 adjusted diluted earnings per share2 were $2.64, up 18 percent from diluted net earnings per share of $2.23 last year.  On a GAAP basis, the company reported fiscal 2015 net earnings of $686.1 million.  GAAP diluted earnings per share were $2.54.  Sales for the year ended October 25, 2015, totaled $9.3 billion, down 1 percent from last year.

 

COMMENTARY

 

“I am proud of the excellent fourth quarter delivered by our team, achieving record earnings for the tenth straight quarter.  We reported record bottom line results for the full year, with fiscal 2015 adjusted net earnings up 19 percent over last year and all five segments registering earnings growth,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer.  “Strong contributions to these full-year results were made both by such long-standing company brands as SPAM® luncheon meat, HORMEL® pepperoni, and DINTY MOORE® stew, and also by more recently created or acquired product lines such as HORMEL GATHERINGS® party trays, HORMEL® NATURAL CHOICE® meats, WHOLLY GUACAMOLE® dips, and MUSCLE MILK® protein nutrition products. We did face some headwinds during the year, including

 

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lower revenues impacted by declining pork markets and the loss of sales and operational efficiency related to highly pathogenic avian influenza in the Jennie-O Turkey Store segment. Our experienced team navigated these challenges to post this impressive bottom line performance.”

 

“2016 will mark the 50th consecutive year we have increased our dividend, an achievement matched by few other companies.  Effective in the new fiscal year the annual dividend will be $1.16 per share, a substantial 16 percent increase,” stated Ettinger.

 

SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER

 

Grocery Products (18% of Net Sales, 25% of Total Segment Operating Profit)

Grocery Products segment profit increased 57 percent with favorable raw material costs, improved plant efficiencies, and higher equity in earnings.  Sales were up 4 percent, including the additional net sales of MegaMex Foods products not reflected in the prior year.  Increased sales of DINTY MOORE® stew and HORMEL® chili, along with WHOLLY GUACAMOLE® dips in our MegaMex Foods joint venture, contributed to the gains.

 

Refrigerated Foods (48% of Net Sales, 36% of Total Segment Operating Profit)

Refrigerated Foods segment profit increased 27 percent driven by strong results from our affiliated business units, along with the addition of the Applegate business, higher pork operating margins, and improved product mix.  Dollar sales were down 5 percent on 2 percent higher volume, reflecting lower pricing compared to last year’s record high pork markets and the dissolution of the Precept Foods joint venture.  Sales growth of value-added items were led by retail sales of HORMEL® refrigerated entrees, HORMEL® pepperoni, and HORMEL GATHERINGS® party trays, and foodservice sales of HORMEL® FIRE BRAISEDTM  meats and HORMEL® pizza toppings.

 

Jennie-O Turkey Store (17% of Net Sales, 24% of Total Segment Operating Profit)

Jennie-O Turkey Store segment profit declined 23 percent and sales were down 18 percent.  The reductions reflect the substantial impact of the avian influenza outbreak earlier this year, as previously lost flocks created considerable volume shortfalls in plant operations and sales.

 

Specialty Foods (11% of Net Sales, 7% of Total Segment Operating Profit)

Specialty Foods delivered a 63 percent segment profit increase.  Non-GAAP1 adjusted segment profit2 increased 155 percent.  Results reflect synergies captured within the CytoSport and Century Foods supply chain and a beneficial comparison to prior year, which included CytoSport acquisition-related costs of $9.3 million.  Non-GAAP1 adjusted segment profits2 exclude nonrecurring charges of $21.5 million relating to a goodwill impairment charge for the Diamond Crystal Brands business and an $8.9 million reduction to a contingent consideration liability related to the CytoSport acquisition.  Sales decreased 3 percent as the addition of MUSCLE MILK® protein beverage sales did not fully offset lower sales of sports nutrition contract packaging.

 

International & Other (6% of Net Sales, 8% of Total Segment Operating Profit)

International & Other posted segment profit 3 percent ahead of last year while sales were flat.  Results were driven by strong SPAM® luncheon meat exports and continued growth of our China business, muted by soft demand for fresh pork exports in certain markets.

 

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OUTLOOK

 

“I am pleased with our momentum heading into fiscal 2016, and we should enjoy renewed revenue growth as the year proceeds,” remarked Ettinger.  “We expect lower input costs to provide a tailwind for our Grocery Products and Refrigerated Foods value-added businesses next year, offsetting modestly lower pork operating margins.  Strong demand for our APPLEGATE® natural and organic products will be an additional growth catalyst for the Refrigerated Foods segment.  We look for Jennie-O Turkey Store to return to growth in the back half of fiscal 2016 if there are no significant recurrences of avian influenza, benefitting from strong demand for branded JENNIE-O® products and low grain costs.  Specialty Foods should deliver increases through the growth of its MUSCLE MILK® protein nutrition products, and we expect International to achieve year-over-year improved results through the expansion of our business in China along with increased sales of our SPAM® and SKIPPY® family of products.  Taking these factors into account, we are setting our fiscal 2016 earnings guidance range at $2.85 to $2.95 per share.”

 

DIVIDENDS

 

Effective November 16, 2015, the company paid its 349th consecutive quarterly dividend, at the annual rate of $1.00.

 

CONFERENCE CALL

 

A conference call will be webcast at 8:30 a.m. CT on Tuesday, November 24, 2015. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 888-329-8893 and providing the access code 6355504.  An audio replay is available by calling 888-329-8893 and entering access code 6355504.  The audio replay will be available beginning at 11:30 a.m. CT on Tuesday, November 24, 2015, through 11:30 a.m. CT on December 8, 2015.  The webcast replay will be available at 11:30 a.m. CT, Tuesday, November 24, 2015, and will remain on our 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.

 

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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, 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.  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.

 

Fourth Quarter

(In thousands, except per share amounts)		2014 Earnings		2015 Non- GAAP Adjusted Earnings		Diamond Crystal Brands Impairment		CytoSport Contingent Consideration Adjustment		2015 GAAP Earnings
Grocery Products		$   50,051		$   78,772						$  78,772
Refrigerated Foods		87,296		111,287						111,287
Jennie-O Turkey Store		95,253		73,227						73,227
Specialty Foods		13,747		35,015		$(21,537)		$8,870		22,348
International & Other		22,629		23,300						23,300
Total segment operating profit		$268,976		$321,601		$(21,537)		$8,870		$308,934
General corporate expense		(6,192)		(16,649)						(16,649)
Net interest & investment expense		(2,626)		(3,341)						(3,341)
Earnings before income taxes		$260,158		$301,611		$(21,537)		$8,870		$288,944
Income taxes		(88,894)		(101,713)						(101,713)
Net earnings attributable to Hormel Foods Corporation		$ 171,264		$199,898		$  (21,537)		$8,870		$ 187,231
Diluted net earnings per share		$    0.63		$    0.74		$  (0.08)		$  0.03		$   0.69

 

 

Full Year

(In thousands, except per share amounts)		2014 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		$195,064		$239,108		$(10,526)								$228,582
Refrigerated Foods		338,020		424,968										424,968
Jennie-O Turkey Store		272,362		276,217										276,217
Specialty Foods		71,514		105,925						$(21,537)		$8,870		93,258
International & Other		84,745		87,864				$(9,546)						78,318
Total segment operating profit		961,705		1,134,082		(10,526)		(9,546)		(21,537)		8,870		1,101,343
General corporate expense		(33,434)		(35,199)										(35,199)
Net interest & investment expense		(9,468)		(10,177)										(10,177)
Earnings before income taxes		918,803		1,088,706		(10,526)		(9,546)		(21,537)		8,870		1,055,967
Income taxes		(316,126)		(374,334)		3,685		770						(369,879)
Net earnings attributable to Hormel Foods Corporation		$602,677		$714,372		$  (6,841)		$ (8,776)		$ (21,537)		$ 8,870		$ 686,088
Diluted net earnings per share*		$   2.23		$   2.64		$  (0.03)		$  (0.03)		$  (0.08)		$  0.03		$   2.54

 

*Earnings per share does not sum across due to rounding

 

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About Hormel Foods

 

Hormel Foods Corporation, based in Austin, Minn., is a multinational manufacturer and marketer of consumer-branded food and meat products, many of which are among the best known and trusted in the food industry. The company leverages its extensive expertise, innovation and high competencies in pork and turkey processing and marketing to bring branded, value-added products to the global marketplace. The company is a member of the Standard & Poor’s (S&P) 500 Index, S&P 500 Dividend Aristocrats for 2015, was named the 2013 Sustainable Supply Chain of the Year by Refrigerated & Frozen Foods magazine, and was again named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the seventh year in a row. Hormel Foods was also recognized as a 2015 Military Friendly Employer by G.I. Jobs magazine, on the 2015 Best for Vets Employers List by Military Times, and was named one of the 2015 40 Best Companies for Leaders by Chief Executive magazine. The company enjoys a strong reputation among consumers, retail grocers, foodservice and industrial customers for products highly regarded for quality, taste, nutrition, convenience and value. For more information, visit http://www.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 appear on pages 34-40 in the company’s Form 10-Q for the quarter ended July 26, 2015, which was filed with the SEC on September 4, 2015, and can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

 

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Segment Data

 

Fiscal 2015 Fourth Quarter Segment Operating Results (dollars in thousands)

 

		FOURTH QUARTER – 13 WEEKS ENDED
NET SALES		October 25, 2015				October 26, 2014				% Change
Grocery Products			$	422,570			$	405,166			4.3
Refrigerated Foods				1,149,496				1,211,890			(5.1)
Jennie-O Turkey Store				420,312				509,980			(17.6)
Specialty Foods				269,887				277,559			(2.8)
International & Other				138,593				139,176			(0.4)
Total			$	2,400,858			$	2,543,771			(5.6)
OPERATING PROFIT
Grocery Products			$	78,772			$	50,051			57.4
Refrigerated Foods				111,287				87,296			27.5
Jennie-O Turkey Store				73,227				95,253			(23.1)
Specialty Foods				22,348				13,747			62.6
International & Other				23,300				22,629			3.0
Total segment operating profit				308,934				268,976			14.9
Net interest and investment expense (income)				3,341				2,626			27.2
General corporate expense				16,649				6,192			168.9
Noncontrolling interest				212				584			(63.7)
Earnings before income taxes			$	289,156			$	260,742			10.9

 

 

		YEAR TO DATE – 52 WEEKS ENDED
NET SALES		October 25, 2015				October 26, 2014				% Change
Grocery Products			$	1,617,680			$	1,558,265				3.8
Refrigerated Foods				4,372,347				4,644,179				(5.9)
Jennie-O Turkey Store				1,635,776				1,672,452				(2.2)
Specialty Foods				1,103,359				907,120				21.6
International & Other				534,701				534,240				0.1
Total			$	9,263,863			$	9,316,256				(0.6)
OPERATING PROFIT
Grocery Products			$	228,582			$	195,064				17.2
Refrigerated Foods				424,968				338,020				25.7
Jennie-O Turkey Store				276,217				272,362				1.4
Specialty Foods				93,258				71,514				30.4
International & Other				78,318				84,745				(7.6)
Total segment operating profit				1,101,343				961,705				14.5
Net interest and investment expense (income)				10,177				9,468				7.5
General corporate expense				35,199				33,434				5.3
Noncontrolling interest				1,176				3,349			(64.9)
Earnings before income taxes			$	1,057,143			$	922,152				14.6

 

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

	Thirteen Weeks Ended						Fifty-Two Weeks Ended
	October 25, 2015			October 26, 2014			October 25, 2015			October 26, 2014
Net sales		$	2,400,858		$	2,543,771		$	9,263,863		$	9,316,256
Cost of products sold			1,905,828			2,120,187			7,455,282			7,751,273
GROSS PROFIT			495,030			423,584			1,808,581			1,564,983
Selling, general and administrative			188,952			165,939			743,611			650,948
Goodwill impairment charge			21,537			-			21,537			-
Equity in earnings of affiliates			7,957			5,723			23,887			17,585
OPERATING INCOME			292,498			263,368			1,067,320			931,620
Other income & expenses:
Interest & investment income			479			766			2,934			3,236
Interest expense			(3,821)			(3,392)			(13,111)			(12,704)
EARNINGS BEFORE INCOME TAXES			289,156			260,742			1,057,143			922,152
Provision for income taxes			101,713			88,894			369,879			316,126
(effective tax rate)			35.18%			34.09%			34.99%			34.28%
NET EARNINGS			187,443			171,848			687,264			606,026
Less: net earnings attributable to noncontrolling interest			212			584			1,176			3,349
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION		$	187,231		$	171,264		$	686,088		$	602,677
NET EARNINGS PER SHARE
Basic		$	0.71		$	0.65		$	2.60		$	2.28
Diluted		$	0.69		$	0.63		$	2.54		$	2.23
WEIGHTED AVG. SHARES OUTSTANDING
Basic		264,324			263,588			264,072			263,812
Diluted		270,896			269,828			270,501			270,216
DIVIDENDS DECLARED PER SHARE		$	0.25		$	0.20		$	1.00		$	0.80

 

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HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands)

 

		October 25, 2015					October 26, 2014
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$		347,239			$	334,174
Accounts receivable			605,689					609,526
Inventories			993,265					1,054,552
Income taxes receivable			6,132					25,678
Deferred income taxes			86,902					86,853
Prepaid expenses			14,383					15,250
Other current assets			9,422					6,738
TOTAL CURRENT ASSETS			2,063,032					2,132,771
INTANGIBLES			2,526,703					1,781,296
OTHER ASSETS			538,357					539,785
PROPERTY, PLANT & EQUIPMENT, NET			1,011,739					1,001,767
TOTAL ASSETS			$		6,139,831			$	5,455,619
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term debt				$	185,000			$	-
Current liabilities excluding debt					1,029,025				954,692
TOTAL CURRENT LIABILITIES					1,214,025				954,692
LONG-TERM DEBT – LESS CURRENT MATURITIES				250,000				250,000
OTHER LONG-TERM LIABILITIES				674,413				638,871
SHAREHOLDERS’ INVESTMENT				4,001,393				3,612,056
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT				$	6,139,831			$	5,455,619

 

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HORMEL FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

 

		Fifty-Two Weeks Ended
		October 25, 2015			October 26, 2014
OPERATING ACTIVITIES
Net earnings			$   687,264			$   606,026
Depreciation and amortization of intangibles			133,434			130,044
Goodwill impairment charge			21,537			-
Decrease in working capital			131,095			9,124
Other			18,662			1,685
NET CASH PROVIDED BY OPERATING ACTIVITIES			991,992			746,879
INVESTING ACTIVITIES
Acquisitions of businesses/intangibles			(770,587)			(466,204)
Net purchases of property/equipment			(125,562)			(148,853)
Decrease in investments, equity in affiliates, and other assets			(4,798)			(1,718)
NET CASH USED IN INVESTING ACTIVITIES			(900,947)			(616,775)
FINANCING ACTIVITIES
Net proceeds from short-term debt			185,000			-
Dividends paid on common stock			(250,834)			(203,156)
Share repurchase			(24,928)			(58,937)
Other			20,135			32,723
NET CASH USED IN FINANCING ACTIVITIES			(70,627)			(229,370)
Effect of exchange rate changes on cash			(7,353)			(574)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			13,065			(99,840)
Cash and cash equivalents at beginning of year			334,174			434,014
CASH AND CASH EQUIVALENTS AT END OF YEAR			$  347,239			$  334,174

 

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