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 THIRD QUARTER RESULTS
AUSTIN, Minn., August 25, 2005 (BUSINESS WIRE) – Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2005 third quarter.
HIGHLIGHTS
• Diluted EPS of $.37, up 16 percent from adjusted earnings from operations of $.32 per share in 2004 (2004 GAAP earnings were $.40 per share, which included a one-time $.08 per share gain from the sale of Vista International Packaging, Inc.)
• Dollar sales of $1.4 billion increased 17 percent from 2004 (up 4 percent excluding acquisitions/divestitures)
• Volume up 22 percent compared to last year (up 4 percent excluding acquisitions/divestitures)
• Jennie-O Turkey Store operating profit up 226 percent; volume up 6 percent; dollar sales up 3 percent
• Refrigerated Foods operating profit down 17 percent; volume up 39 percent (up 7 percent excluding acquisitions); dollar sales up 28 percent (up 2 percent excluding acquisitions)
• Grocery Products operating profit up 8 percent; volume up 6 percent (down 1 percent excluding acquisitions); dollar sales up 10 percent (up 6 percent excluding acquisitions)
• Specialty Foods operating profit up 10 percent; volume up 11 percent (down 2 percent excluding acquisitions); dollar sales up 16 percent (up 6 percent excluding acquisitions)
• Acquisition integrations on target
Hormel Foods Corporation (NYSE: HRL-News), the multinational marketer of consumer-branded meat and food products, today reported fiscal 2005 third quarter net earnings of $51.4 million, up 15 percent from adjusted earnings from operations of $44.8 million a year earlier (last year GAAP earnings were $56.3 million, which includes $11.5 million after tax gain from the sale of Vista). Diluted earnings per share were $.37 this year compared to $.32 per share from adjusted earnings from operations last year (GAAP earnings were $.40 per share, which includes $.08 per share gain from the sale of Vista). Sales totaled $1.4 billion, up from $1.2 billion in fiscal 2004.
For the nine months ended July 31, 2005, net earnings were $171.7 million, or $1.23 per diluted share (up 14 percent), compared to $150.3 million from adjusted earnings from operations a year ago, or $1.07 per diluted share (GAAP earnings were $161.8 million and $1.15 per share, which includes $11.5 million after tax gain from Vista sale, or $.08 per share). Sales totaled $3.9 billion, up 15 percent, from $3.4 billion in the same period last year.
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COMMENTARY AND OUTLOOK
“Our turkey business delivered another outstanding quarter driven by continued value-added sales growth, lower grain markets and efficiencies in our production facilities. Impressive growth from several of our value-added products in Refrigerated Foods and key categories in the Grocery Products segment benefited the bottom line as well,” said Joel W. Johnson, chairman of the board and chief executive officer. “The acquisitions that were completed earlier in the year are gaining momentum and made positive contributions also,” Johnson said.
“The year-over-year improvement in both the top and bottom line reported by the Grocery Products segment is encouraging. Two important areas of growth include the HORMEL microwave line of products and the SPAM family of products,” Johnson said. “Chili shipments were down in the quarter versus last year, partially due to pipe line inventory gains last year as STAGG chili was expanded nationally. Looking forward, we have good commitments for the upcoming fall and winter chili season,” said Johnson.
“We continue to see very good demand for our value-added protein products that are sold through our Refrigerated Foods and
Jennie-O Turkey Store segments. Items like our HORMEL fully cooked entrees, HORMEL party trays and JENNIE-O TURKEY STORE tray pack items reported double-digit growth. Also, our case-ready business reported outstanding growth, with volume up 40 percent,” Johnson said.
“The integration of the four acquisitions that were completed this year, Farmer John, Mexican Accent, Mark-Lynn Foods and Lloyd’s Barbeque Company, continues to go well. We are very pleased the way these businesses fit into the Hormel Foods organization and the contributions they made in the quarter,” commented Johnson. “We continue to explore additional opportunities that would complement our portfolio,” said Johnson.
“The outlook for our business looks good going into the fourth quarter. Even though last year’s fourth quarter included an extra week, solid performance from all segments should enable us to deliver improved results for the quarter compared to a year ago,” Johnson said.
“After assessing industry factors and our business plans and prospects, our earnings guidance for the fourth quarter of fiscal 2005 is in a range of $.50 to $.56 per share. For the full year of fiscal 2005, we are tightening our earnings guidance from $1.70 - $1.80 to $1.73 - $1.79,” Johnson concluded.
OPERATING HIGHLIGHTS
Grocery Products (13% of Net Sales, 25% of Total Segment Operating Profit)
• Dollar sales totaled $182 million, up 10 percent.
• Volume up 6 percent. Contributors to the increase include Mexican Accent products, SPAM family of products and HORMEL microwave products.
• Operating profit was up 8 percent. New profitable sales from Mexican Accent, increased sales from the SPAM family of products and improved costs for HORMEL flavored bacon bits were the key drivers behind the increase in operating profit.
• The roll-out of the 15 oz. microwave HORMEL and STAGG chili items are getting good reception from retailers. We expect additional distribution in the fourth quarter.
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Refrigerated Foods (53% of Net Sales, 32% of Total Segment Operating Profit)
• Dollar sales totaled $726 million, up 28 percent.
• Volume increased 39 percent.
• Operating profit down 17 percent. Exceptional prior year pork margins created difficult comparisons. Improved results from value-added retail items helped off-set some of the variance.
• Outstanding growth from case-ready products with volume up 40 percent.
• Value-added areas of growth reporting double-digit volume increases include HORMEL fully cooked entrees, HORMEL party trays and Dilusso Deli Company items.
• Completed the integration of Lloyd’s Barbeque Company into segment. Excellent progress is being made achieving cost synergies and the sales volumes are tracking at planned levels.
• Farmer John synergy projects continue to reveal cost saving opportunities.
• Foodservice volume up 3 percent driven by growth from precooked breakfast sausage, ALWAYS TENDER pork, AUSTIN BLUES BBQ, APPLEWOOD smoked bacon and CAFÉ H products.
Jennie-O Turkey Store (20% of Net Sales, 30% of Total Segment Operating Profit)
• Dollar sales totaled $266 million, an increase of 3 percent.
• Volume was up 6 percent. Double-digit volume growth items include JENNIE-O TURKEY STORE rotisserie turkey breasts, premium seasoned turkey breasts, tray pack and turkey burgers.
• Operating profit totaled $27 million compared to $8 million last year. The higher operating profit resulted from a combination of value-added sales growth, lower feed costs and efficiencies in our production facilities.
Specialty Foods (10% of Net Sales, 8% of Total Segment Operating Profit)
• Dollar sales increased 16 percent to $133 million.
• Volume was up 11 percent and operating profit was up 10 percent as a result of the addition of Mark-Lynn Foods and strong sugar substitute sales. Century Foods International posted lower sales in the quarter.
• Integration of Mark-Lynn on target.
All Other (4% of Net Sales, 5% of Total Segment Operating Profit)
• Dollar sales down 5 percent to $48 million. Year-ago results included $7 million of sales from Vista International Packaging, which was sold in the third quarter of fiscal 2004. Excluding Vista, this year’s dollar sales were up 11 percent, driven by strong export sales of fresh pork. Dan’s Prize also reported double-digit growth.
• Volume was down 3 percent compared with last year.
• Operating profit was down 25 percent, due principally to Vista’s removal from our portfolio.
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Net Interest and Investment Income/General Corporate Expense
• Net interest and investment income improved in 2005 due to a $3.2 million increase in the Rabbi Trust return compared to a year ago.
• General corporate expenses were higher in 2005 because of the $18.1 million pre-tax gain from the sale of Vista and a credit of $2.4 million for a reduction to post-retirement benefits (Medicare Act of 2003) that occurred in 2004.
DIVIDENDS
Effective August 15, 2005, the company paid its 308th consecutive quarterly dividend. The annual rate is $.52 per share.
CONFERENCE CALL
A conference call will be Webcast at 9:30 a.m. CT on Thursday, August 25, 2005. 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 8740934. The Webcast replay will be available at 12:00 (noon) CT, August 25, and archived for one year. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, August 25, 2005, through 11:30 p.m. CT on September 23, 2005.
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 leverages its extensive expertise, innovation and high competencies in pork and turkey processing and marketing to bring quality, value-added brands to the global marketplace. For the past five years, Hormel Foods was named one of “The 400 Best Big Companies in America” by Forbes magazine. The company enjoys a strong reputation among consumers, retail grocers, foodservice and industrial customers for products that are highly regarded for quality, taste, nutrition, convenience and value. For more information, visit www.hormel.com.
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 30, 2004, which can be accessed at http://www.hormel.com
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Segment Data
Fiscal 2005 Third Quarter Segment Operating Results (in Thousands)
| | THIRD QUARTER – 13 WEEKS ENDED | |
| | July 31, 2005 | | July 24, 2004 | | % Change | |
SALES | | | | | | | |
Grocery Products | | $ | 182,029 | | $ | 165,207 | | 10.2 | |
Refrigerated Foods | | 725,883 | | 567,073 | | 28.0 | |
Jennie-O Turkey Store | | 266,055 | | 258,042 | | 3.1 | |
Specialty Foods | | 133,403 | | 115,371 | | 15.6 | |
All Other | | 47,651 | | 50,306 | | (5.3 | ) |
Total | | $ | 1,355,021 | | $ | 1,155,999 | | 17.2 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
Grocery Products | | $ | 23,089 | | $ | 21,477 | | 7.5 | |
Refrigerated Foods | | 29,712 | | 35,680 | | (16.7 | ) |
Jennie-O Turkey Store | | 27,005 | | 8,279 | | 226.2 | |
Specialty Foods | | 7,569 | | 6,896 | | 9.8 | |
All Other | | 4,719 | | 6,325 | | (25.4 | ) |
Total segment operating profit | | 92,094 | | 78,657 | | 17.1 | |
Other income and net interest | | (4,425 | ) | (6,730 | ) | 34.2 | |
Gen. corporate (expense) income | | (6,137 | ) | 16,804 | | (136.5 | ) |
Income before tax | | $ | 81,532 | | $ | 88,731 | | (8.1 | ) |
| | YEAR TO DATE – 39 WEEKS ENDED | |
| | July 31, 2005 | | July 24, 2004 | | % Change | |
SALES | | | | | | | |
Grocery Products | | $ | 566,490 | | $ | 535,673 | | 5.8 | |
Refrigerated Foods | | 2,062,166 | | 1,653,684 | | 24.7 | |
Jennie-O Turkey Store | | 777,031 | | 735,359 | | 5.7 | |
Specialty Foods | | 374,323 | | 350,635 | | 6.8 | |
All Other | | 156,079 | | 159,308 | | (2.0 | ) |
Total | | $ | 3,936,089 | | $ | 3,434,659 | | 14.6 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
Grocery Products | | $ | 86,523 | | $ | 84,888 | | 1.9 | |
Refrigerated Foods | | 91,065 | | 102,648 | | (11.3 | ) |
Jennie-O Turkey Store | | 95,277 | | 47,178 | | 102.0 | |
Specialty Foods | | 19,007 | | 19,991 | | (4.9 | ) |
All Other | | 13,726 | | 19,476 | | (29.5 | ) |
Total segment operating profit | | 305,598 | | 274,181 | | 11.5 | |
Other income and net interest | | (12,414 | ) | (7,581 | ) | (63.8 | ) |
Gen. corporate expense | | (20,259 | ) | (12,026 | ) | (68.5 | ) |
Income before tax | | $ | 272,925 | | $ | 254,574 | | 7.2 | |
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | Thirteen Weeks Ended | | Thirty-Nine Weeks Ended | |
| | 7-31-2005 | | 7-24-2004 | | 7-31-2005 | | 7-24-2004 | |
| | | | | | | | | |
Net sales | | $ | 1,355,021 | | $ | 1,155,999 | | $ | 3,936,089 | | $ | 3,434,659 | |
| | | | | | | | | |
Cost of products sold | | 1,054,277 | | 899,071 | | 3,020,841 | | 2,632,536 | |
| | | | | | | | | |
GROSS PROFIT: | | 300,744 | | 256,928 | | 915,248 | | 802,123 | |
| | | | | | | | | |
Expenses: | | | | | | | | | |
Selling and delivery | | 144,490 | | 123,156 | | 420,772 | | 377,517 | |
| | | | | | | | | |
Marketing | | 29,379 | | 24,915 | | 90,288 | | 77,981 | |
| | | | | | | | | |
Administrative & general | | 41,817 | | 32,490 | | 123,675 | | 107,709 | |
| | | | | | | | | |
Gain on sale of business | | 0 | | (18,063 | ) | 0 | | (18,063 | ) |
| | | | | | | | | |
TOTAL EXPENSES AND GAIN ON SALE OF BUSINESS: | | 215,686 | | 162,498 | | 634,735 | | 545,144 | |
| | | | | | | | | |
Equity in earnings of affiliates | | 899 | | 1,031 | | 4,826 | | 5,176 | |
| | | | | | | | | |
OPERATING INCOME: | | 85,957 | | 95,461 | | 285,339 | | 262,155 | |
| | | | | | | | | |
Other income & expenses: | | | | | | | | | |
Interest & investment income (loss) | | 2,898 | | (85 | ) | 8,389 | | 12,497 | |
| | | | | | | | | |
Interest expense | | (7,323 | ) | (6,645 | ) | (20,803 | ) | (20,078 | ) |
| | | | | | | | | |
EARNINGS BEFORE INCOME TAXES: | | 81,532 | | 88,731 | | 272,925 | | 254,574 | |
| | | | | | | | | |
Provision for income taxes | | 30,099 | | 32,388 | | 101,199 | | 92,754 | |
(effective tax rate) | | 36.92 | % | 36.50 | % | 37.08 | % | 36.43 | % |
| | | | | | | | | |
NET EARNINGS | | $ | 51,433 | | $ | 56,343 | | $ | 171,726 | | $ | 161,820 | |
| | | | | | | | | |
NET EARNINGS PER SHARE (Basic) | | $ | .37 | | $ | .41 | | $ | 1.24 | | $ | 1.17 | |
NET EARNINGS PER SHARE (Diluted) | | $ | .37 | | $ | .40 | | $ | 1.23 | | $ | 1.15 | |
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| | July 31, 2005 | | October 30, 2004 | |
| | (In Thousands) | |
ASSETS | | | | | |
| | | | | |
CURRENT ASSETS | | | | | |
Cash and cash equivalents | | $ | 134,893 | | $ | 288,881 | |
Accounts receivable | | 268,084 | | 272,738 | |
Inventories | | 508,737 | | 425,655 | |
Deferred income taxes | | 30,857 | | 29,254 | |
Prepaid expenses & other current assets | | 16,426 | | 12,875 | |
| | | | | |
TOTAL CURRENT ASSETS | | 958,997 | | 1,029,403 | |
| | | | | |
INTANGIBLES | | 611,594 | | 512,942 | |
| | | | | |
OTHER ASSETS | | 281,792 | | 287,386 | |
| | | | | |
PROPERTY, PLANT & EQUIPMENT, NET | | 882,392 | | 704,237 | |
| | | | | |
TOTAL ASSETS | | $ | 2,734,775 | | $ | 2,533,968 | |
| | | | | |
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | | | | | |
| | | | | |
TOTAL CURRENT LIABILITIES | | $ | 545,431 | | $ | 464,366 | |
| | | | | |
LONG-TERM DEBT – LESS CURRENT MATURITIES | | 361,160 | | 361,510 | |
| | | | | |
OTHER LONG-TERM LIABILITIES | | 311,976 | | 308,844 | |
| | | | | |
SHAREHOLDERS’ INVESTMENT | | 1,516,208 | | 1,399,248 | |
| | | | | |
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT | | $ | 2,734,775 | | $ | 2,533,968 | |
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Thirty-Nine Weeks Ended | |
| | 7-31-2005 | | 7-24-2004 | |
| | (In Thousands) | |
OPERATING ACTIVITIES | | | | | |
Net earnings | | $ | 171,726 | | $ | 161,820 | |
Adjustments to reconcile to net cash provided by operating activities: | | | | | |
Depreciation | | 79,499 | | 64,581 | |
Amortization of intangibles | | 7,092 | | 5,247 | |
Equity in earnings of affiliates | | (4,705 | ) | (4,587 | ) |
Provision for deferred income taxes | | (4,126 | ) | (9,353 | ) |
Loss (Gain) on property/equipment sales and plant facilities | | 164 | | (63 | ) |
Gain on sales of business and investment | | 0 | | (24,285 | ) |
Changes in operating assets and liabilities net of acquisitions: | | | | | |
Decrease in accounts receivable | | 37,533 | | 29,312 | |
Increase in inventories, prepaid expenses, and other current assets | | (23,206 | ) | (68,336 | ) |
(Decrease) Increase in accounts payable and accrued expenses | | (8,263 | ) | 12,515 | |
Other | | 5,375 | | 3,909 | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | 261,089 | | 170,760 | |
| | | | | |
INVESTING ACTIVITIES | | | | | |
Purchase of held-to-maturity securities | | 0 | | (3,250 | ) |
Acquisitions of businesses | | (339,944 | ) | (2,097 | ) |
Purchases of property / equipment | | (78,212 | ) | (57,234 | ) |
Proceeds from sales of property / equipment | | 1,719 | | 827 | |
Proceeds from sales of business and investment | | 0 | | 126,774 | |
Decrease (Increase) in investments, equity in affiliates, net pension assets, and other assets | | 10,574 | | (21,947 | ) |
Dividends from affiliates | | 775 | | 0 | |
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | | (405,088 | ) | 43,073 | |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Proceeds from short-term debt | | 115,000 | | 0 | |
Principal payments on short-term debt | | (55,000 | ) | 0 | |
Principal payments on long-term debt | | (5,035 | ) | (21,569 | ) |
Dividends paid on common stock | | (51,469 | ) | (45,729 | ) |
Stock repurchase | | (22,592 | ) | (13,141 | ) |
Other | | 9,107 | | 8,985 | |
NET CASH USED IN FINANCING ACTIVITIES | | (9,989 | ) | (71,454 | ) |
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | | (153,988 | ) | 142,379 | |
Cash and cash equivalents at beginning of year | | 288,881 | | 97,976 | |
CASH AND CASH EQUIVALENTS AT END OF QUARTER | | $ | 134,893 | | $ | 240,355 | |
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