Hormel Foods Corporation (NYSE:HRL):
- Third-quarter EPS exceed prior year by three cents per share
- Net earnings up 14 percent over same period last year
- Sales up 17 percent over same period last year
- The Turkey Store and Diamond Crystal Brand Nutritional Products integration proceeding smoothly
- Hormel announces new segment reporting
Hormel Foods Corporation (NYSE:HRL), a multinational marketer of consumer-branded food and meat products, yesterday announced third quarter sales of $1,039,491,000, a 17 percent increase from sales of $886,015,000 for the same 13-week period of fiscal 2000. Earnings per share of $.24 were three cents better than last year’s third quarter earnings per share of $.21. Net earnings for the quarter were $33,212,000 compared to year-earlier third quarter earnings of $29,136,000.
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Net earnings for the first nine months of the year were $113,638,000, an increase of four percent over net earnings of $109,238,000 for the comparable period of 2000. Earnings per share were $.81 compared to $.77 for the same three quarters last year.
Dollar sales of $3,005,390,000 for the nine months were up 13 percent from sales of $2,668,951,000 for the corresponding 39 weeks last year.
“We were pleased with the third quarter sales and earnings performance, particularly in light of the softening economy and higher raw material costs,” said Joel W. Johnson, chairman of the board, president and chief executive officer. “We saw improved results in many areas of the business. Third-quarter volume for our Grocery Products operating segment, for instance, was higher than a year ago. In addition, the integration of our two recent acquisitions, The Turkey Store and Diamond Crystal Brands Nutritional Products, continue to progress better than expected.
“High prices for raw materials pressured our margins during the third quarter,” Johnson continued. “Our procurement contracts with pork producers generated positive returns in the third quarter, but profits were affected because high raw material prices have prevailed longer than anticipated. Even with the extended period of high hog costs, (six percent over last year) Hormel Foods was able to exceed prior year earnings by three cents per share. This is a good example of how our hog contracts and our branded, value-added strategy have reduced commodity exposure.”
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By GlobalDataWith the acquisition of The Turkey Store, management reassessed how it should report the performance of its operations. With this announcement, Hormel plans to report its business segments as follows:
Segment Business Conducted
——- ——————
1. Hormel Foods Primarily processing, marketing and sale of branded
and unbranded pork products for the retail, food
service and commodity customer markets
2. Turkey Primarily processing, marketing and sale of branded
and unbranded turkey products for the retail, food
service and commodity customer markets
3. All Other Business units that produce, market and sell beef
products, food packaging (i.e., casings for hot dogs)
and food equipment, and that manufacture, market and
sell company products internationally
Segmented sales and operating profits for each of the business segments are listed below:
Segment Operating Results
in Millions
THIRD QUARTER – 13 WEEKS ENDED
——————————
July 28, July 29,
SALES 2001 2000 % Change
—– ——- ——- ——–
Hormel Foods 756.0 708.9 6.6
Turkey 237.9 132.7 79.3
All Others 45.6 44.4 2.7
Total 1,039.5 886.0 17.3
OPERATING PROFIT
—————-
Hormel Foods 41.9 38.3 9.4
Turkey 14.7 5.5 167.3
All Others 1.2 2.2 (45.5)
Total Segment operating profit 57.8 46.0 25.7
Other income and net interest 5.6 0.8 600.0
General corporate expenses 1.3 (0.3) (533.3)
Income before tax 50.9 45.5 11.9
———————————————————————-
Segment Operating Results
in Millions
YEAR-TO-DATE – 39 WEEKS ENDED
—————————–
July 28, July 29,
SALES 2001 2000 % Change
—– ——- ——- ——–
Hormel Foods 2,287.6 2,142.9 6.8
Turkey 578.6 396.9 45.8
All Others 139.2 129.2 7.7
Total 3,005.4 2,669.0 12.6
OPERATING PROFIT
—————-
Hormel 158.4 149.8 5.7
Turkey 29.4 17.3 69.9
All Others 3.7 5.7 (35.1)
Total Segment operating profit 191.5 172.8 10.8
Other income and net interest 9.8 (1.7) (676.5)
General corporate expenses 4.6 3.8 21.1
Income before tax 177.1 170.7 3.7
Operating Highlights
Hormel Foods
The Hormel Foods business segment comprises operating segments that focus on the processing, marketing and sale of branded and unbranded pork products (which may be refrigerated or shelf-stable) to retail outlets, including grocery stores and large discount chains, and to restaurants and other away-from-home venues (the Refrigerated Foods and Grocery Products operating segments). In addition, the Hormel HealthLabs operating segment, which serves hospitals, nursing homes and other health facilities, is included in the Hormel Foods business segment.
In the third quarter, Hormel Foods had $756 million in sales, a seven percent increase compared to the same quarter last year. Operating profit totaled $41.9 million, a nine percent increase compared with the year-ago quarter. Sales volume in Meat Products, a division of Refrigerated Foods, decreased three percent during the quarter, while sales dollars increased three percent. The division’s volume decline resulted from the discontinuation of the second shift hog processing at the Rochelle, IL, plant, a move designed to eliminate unprofitable sales and accommodate additional branded, value-added production. The ALWAYS TENDER line of flavored and fresh meats, HORMEL Fully Cooked Entrees and HORMEL premium deli products reported exceptional results for the quarter. Foodservice, also a division of Refrigerated Foods, which serves restaurants and other away-from-home venues, had a four percent decrease in volume compared to the prior year’s quarter. This was due in part to the softening economy, as consumers are reducing the frequency of dining outside the home. In addition, attendance has declined at many of the domestic theme parks, typically a strong venue for Foodservice during the summer months. It is important to note, however, that branded product volume within Foodservice grew six percent, indicating that the division’s fundamentals remain positive.
These value-added products are the strategic core of the Foodservice division. The Grocery Products operating segment reported a three percent volume increase and a six percent sales dollars increase compared to the third quarter last year. Notable increases came from SPAM Luncheon Meat, HORMEL CHILI, MARY KITCHEN Hash and CARAPELLI Olive Oil. The canned meats categories continue to show strength based on ACNielsen data for the third quarter.
Hormel Foods continues to execute its strategy of introducing branded products through its various distribution channels. During the quarter, Hormel Foods introduced three precooked entree items (two chicken and one turkey) that add further variety to its line of precooked products. “We are very pleased with the consumers’ positive response to the HORMEL brand across multiple protein types,” Johnson stated.
In addition, Hormel continues to expand its existing branded products into new distribution channels. The introduction of shelf-stable products, such as MARY KITCHEN corned beef hash and HORMEL Chili with beans, into the Foodservice channel has generated new volume.
The Hormel HealthLabs unit, which serves hospitals, nursing homes and other health facilities, reported a solid third quarter. Volume and sales dollars exceeded expectations.
Turkey
This business segment was formed with the acquisition of The Turkey Store in February 2001 and its subsequent combination with the company’s Jennie-O Foods operation. The performance of Jennie-O Turkey Store since the acquisition continues to exceed expectations.
For the quarter, sales were $237.9 million compared to $132.7 million last year, a 79 percent increase. Operating profits were $14.7 million compared to $5.5 million last year, a 167 percent increase. On a comparable basis, Jennie-O volume was up nine percent in the third quarter compared to the prior year’s quarter, and Turkey Store volume was up 11 percent. This business segment’s volume growth has been fueled in part by Jennie-O Turkey Store’s enhanced brand portfolio, which has provided new opportunities with major retailers and foodservice operators. The innovative and expanding array of new products include TURKEY STORE brand Mexican and Italian flavored ground turkey, TURKEY STORE beer brats and cheddar brats, JENNIE-O Marinated Tenders and JENNIE-O Two Bib Ribz cooked and sauced turkey thighs.
Other synergies from live production, plant operations and selling, general and administrative, are on track to meet or exceed expectations.
All Other
This business segment includes several smaller business units, including Hormel Foods international business, the beef products marketing and selling operations, food packaging (casings) and our food equipment unit (which the company recently announced it plans to sell). Together, these businesses accounted for four percent of sales and two percent of operating profit during the third quarter.
In the third quarter, the All Other business segment had sales of $45.6 million compared to $44.4 million last year, a three percent increase. Operating profit was $1.2 million compared to $2.2 million last year, a 46 percent decrease.
International volume was up 12 percent for the quarter and 22 percent year-to-date. The China business continues to gain momentum, with volume up 29 percent for the quarter and 50 percent year-to-date.
Net profits were reduced by the company’s investment in Campofrio, which did not achieve plan for the quarter as a result of high raw material costs in Europe.
General
The effective tax rate was down in the third quarter as the result of recognizing favorable tax settlements. The company expects the rate to return to more historic levels in the fourth quarter.
About Hormel Foods Corporation
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 enjoys a strong reputation among consumers, retail grocers, and foodservice consumers for products regarded for quality, taste, nutrition, convenience and value. (Items listed in bold throughout this release represent trademarks owned or licensed by Hormel Foods Corporation or its subsidiaries.)
Forward-Looking Statements
This press 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 28, 2000, which can be accessed at http://www.hormel.com.
HORMEL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In thousands, except per share amounts – unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
July 28, 2001 July 29, 2000 July 28, 2001 July 29, 2000
————- ————- ————- ————-
Net Sales $ 1,039,491 $ 886,015 $ 3,005,390 $ 2,668,951
Earnings before
Income Tax 50,914 45,503 177,087 170,693
Provision for
Income Tax 17,702 16,367 63,449 61,455
Net Earnings 33,212 29,136 113,638 109,238
Earnings Per
Share $ .24 $ .21 $ .81 $ .77
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands – unaudited)
July 28, 2001 July 29, 2000
————- ————-
Current Assets $ 809,570 $ 686,576
Property, Plant & Equip., Net 679,907 529,387
Other 632,120 392,907
Total Assets $2,121,597 $1,608,870
Current Liabilities $ 399,927 $ 315,949
Long-Term Debt 487,899 166,279
Other Long-Term Liabilities 285,762 276,898
Equity 948,009 849,744
Total Liabilities $2,121,597 $1,608,870
