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 FIRST QUARTER RESULTS
AUSTIN, Minn., February 27, 2006 (BUSINESS WIRE) – Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2006 first quarter.
HIGHLIGHTS
• Diluted EPS of $.50, up 9 percent from $.46 per share in 2005
• Dollar sales of $1.4 billion increased 11 percent from 2005 (up 1 percent excluding acquisitions)
• Volume up 12 percent compared to last year (same as last year excluding acquisitions)
• Jennie-O Turkey Store operating profit up 17 percent; volume down 6 percent; dollar sales up 2 percent
• Refrigerated Foods operating profit up 3 percent; volume up 21 percent (up 3 percent excluding acquisitions); dollar sales up 15 percent (down 2 percent excluding acquisitions)
• Grocery Products operating profit down 6 percent; volume up 5 percent (same as last year excluding acquisitions); dollar sales up 5 percent (up 2 percent excluding acquisitions)
• Specialty Foods operating profit up 192 percent; volume up 27 percent (up 8 percent excluding acquisitions); dollar sales up 37 percent (up 23 percent excluding acquisitions)
• All Other operating profit up 33 percent; volume down 21 percent; dollar sales down 17 percent
• Company changed method of accounting for inventory which had an immaterial effect on prior year results
Hormel Foods Corporation (NYSE: HRL), the multinational marketer of consumer-branded meat and food products, today reported fiscal 2006 first quarter net earnings of $69.3 million, up 7 percent from earnings of $64.6 million a year earlier. Diluted earnings per share for the quarter were $.50 this year compared to $.46 per share last year and sales totaled $1.4 billion, up from $1.3 billion in fiscal 2005.
Pretax earnings for the first quarter of fiscal 2006 included a $9.2 million charge ($.04 per share) for the adoption of SFAS 123(R) (Share-Based Payment) and a $7.3 million charge ($.03 per share) for expenses relating to non-qualified plan settlements due to executive retirements. Approximately $12 million of this total is reflected in General Corporate Expense, and the balance within the segments. The effective tax rate was lower because of a $3.4 million after tax ($.02 per share) discrete tax benefit that was recognized in the first quarter. The combined effect of these items reduced earnings per share by $.05.
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COMMENTARY
“We are off to a good start in fiscal 2006,” said Jeffrey M. Ettinger, president and chief executive officer. “The balanced strength of our business allowed us to deliver top and bottom line growth for the quarter, even though we faced considerably higher energy and freight costs. Continued strong performance from Jennie-O Turkey Store and significant improvement from the Specialty Foods segment were key drivers behind our solid first quarter results,” Ettinger stated.
SEGMENT OPERATING HIGHLIGHTS
Jennie-O Turkey Store (19% of Net Sales, 32% of Total Operating Profit)
Jennie-O Turkey Store benefited from high turkey meat markets, lower feed costs and value-added sales growth. While overall tonnage for the segment was lower due to planned reductions in harvest, value-added volume was up 9 percent. Sales dollars were up 2 percent despite a reduction in volume due to the higher markets and improved mix. All three channels of value-added products, retail, foodservice and deli reported growth. Products/categories within these channels reporting growth include Oven Ready items, frozen turkey burgers, traypack and rotisserie products.
Refrigerated Foods (53% of Net Sales, 29% of Total Operating Profit)
Refrigerated Foods delivered 3 percent higher operating profit driven by the contributions from last year’s acquisitions and growth in key categories like HORMEL refrigerated entrees, flavored meats and party trays. Sales dollars without acquisitions were down due to lower markets compared to last year. Foodservice volume was up 6 percent led by growth in the bacon category with items like APPLEWOOD smoked and BLACK LABEL bacon. The sliced meats category also reported double-digit growth driven by the BREAD READY beef and ham items. Case ready products sold through the Precept Foods joint venture reported exceptional growth in the quarter. The national roll-out of HORMEL NATURAL CHOICE luncheon meats, which were introduced in the first quarter, has received outstanding acceptance by our customers and shipments began in February.
Grocery Products (14% of Net Sales, 26% of Total Operating Profit)
The Grocery Products segment reported mixed results with higher sales but lower operating profits. Higher costs associated with beef and freight more than off-set the benefit received from lower pork input costs. The microwave category continued to deliver excellent growth and we are expanding our production capabilities to meet demand. The ethnic line of products also reported growth, while chili sales were down in the quarter due to a difficult year-ago comparison.
Specialty Foods (11% of Net Sales, 8% of Total Operating Profit)
Specialty Foods reported improved results across all business units and delivered profitability at levels that are expected to continue. The Mark-Lynn Foods acquisition that was completed in 2005 was an important contributor in the quarter. Other areas contributing to these results include sugar substitutes, sugar, liquid portions, ingredients and nutritional products.
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All Other (3% of Net Sales, 5% of Total Operating Profit)
The All Other segment operating profit improvement was driven by the International operating segment. Export sales of fresh pork and the SPAM family of products as well as improved profitability from the China operations were the biggest areas of operating profit improvement. Sales and volume were down from discontinuing unprofitable fresh pork export sales.
General
General Corporate Expense was up as a result of the adoption of SFAS 123(R) and the non-qualified plan settlements as previously mentioned.
The Net Interest and Investment Income was a larger expense because of lower returns ($2.5 million) on the Rabbi Trust.
Effective with the first quarter, the company changed its accounting method for inventory from LIFO (Last-In First-Out) to FIFO (First-In First-Out). The net pretax effect to the fiscal 2005 first quarter results was a positive $255,000. All prior year information has been restated for the retrospective application of the change in accounting method.
OUTLOOK
“Looking ahead, we believe that lower pork markets will benefit our value-added processed items in Refrigerated Foods and certain items in Grocery Products. On the flip side, cost factors that could pressure profitability are higher beef, freight and energy costs. Also, as expected, we are starting to see higher levels of egg sets and poult placements in the turkey industry that we expect will result in more turkeys coming to market in the late summer/early fall. After assessing these factors, along with our expectation of continued success in growing our value-added portfolio, our GAAP earnings guidance for the second quarter of fiscal 2006 is in a range of $.42 to $.48 per share, up from $.40 per share in Q2 of fiscal 2005. For the full year of fiscal 2006, we are increasing our GAAP earnings per share guidance from a range of $1.86 - $1.96 to a range of $1.90 - $2.00,” Ettinger concluded.
DIVIDENDS
Effective February 15, 2006, the company paid its 310th consecutive quarterly dividend. The annual rate is $.56 per share.
CONFERENCE CALL
A conference call will be Webcast at 9:30 a.m. CT on Monday, February 27, 2006. 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 5540639. The Webcast replay will be available at 12:00 (noon) CT, February 27, and archived for one year. The audio
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replay will be available beginning at 10:30 a.m. CT on Monday, February 27, 2006, through 11:29 p.m. CT on March 24, 2006.
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 regarding Forward-Looking Statements that appears on pages 31-34 in the company’s Annual Report for the fiscal year ended October 30, 2005, which can be accessed at www.hormel.com under “Investor”.
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Segment Data
Fiscal 2006 First Quarter Segment Operating Results (in Thousands)
| | FIRST QUARTER — 13 WEEKS ENDED | |
| | January 29, 2006 | | Restated*
January 30, 2005 | | % Change | |
SALES | | | | | | | | | |
Grocery Products | | $ | 203,957 | | $ | 193,825 | | 5.2 | |
Refrigerated Foods | | 745,886 | | 648,432 | | 15.0 | |
Jennie-O Turkey Store | | 267,046 | | 261,082 | | 2.3 | |
Specialty Foods | | 151,162 | | 110,092 | | 37.3 | |
All Other | | 47,882 | | 58,000 | | (17.4 | ) |
Total | | $ | 1,415,933 | | $ | 1,271,431 | | 11.4 | |
| | | | | | | | | |
OPERATING PROFIT | | | | | | | |
Grocery Products | | $ | 32,769 | | $ | 34,944 | | (6.2 | ) |
Refrigerated Foods | | 36,909 | | 35,866 | | 2.9 | |
Jennie-O Turkey Store | | 39,679 | | 34,055 | | 16.5 | |
Specialty Foods | | 10,328 | | 3,541 | | 191.7 | |
All Other | | 5,728 | | 4,297 | | 33.3 | |
Total segment operating profit | | 125,413 | | 112,703 | | 11.3 | |
Net interest and investment income | | (5,348 | ) | (2,169 | ) | (146.6 | ) |
General corporate expense | | (19,765 | ) | (7,847 | ) | (151.9 | ) |
Income before tax | | $ | 100,300 | | $ | 102,687 | | (2.3 | ) |
* Retrospective application of FIFO inventory valuation
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | Thirteen Weeks Ended | |
| | | | Restated* | |
| | 1-29-2006 | | 1-30-2005 | |
| | | | | |
Net sales | | $ | 1,415,933 | | $ | 1,271,431 | |
| | | | | |
Cost of products sold | | 1,062,938 | | 959,363 | |
| | | | | |
GROSS PROFIT: | | 352,995 | | 312,068 | |
| | | | | |
Expenses: | | | | | |
Selling and delivery | | 158,334 | | 137,791 | |
| | | | | |
Marketing | | 33,691 | | 31,726 | |
| | | | | |
Administrative & general | | 57,720 | | 40,622 | |
| | | | | |
TOTAL EXPENSES: | | 249,745 | | 210,139 | |
| | | | | |
Equity in earnings of affiliates | | 2,398 | | 2,927 | |
| | | | | |
OPERATING INCOME: | | 105,648 | | 104,856 | |
| | | | | |
Other income & expenses: | | | | | |
Interest & investment income | | 884 | | 4,605 | |
| | | | | |
Interest expense | | (6,232 | ) | (6,774 | ) |
| | | | | |
EARNINGS BEFORE INCOME TAXES: | | 100,300 | | 102,687 | |
| | | | | |
Provision for income taxes | | 31,024 | | 38,054 | |
(effective tax rate) | | 30.93 | % | 37.06 | % |
| | | | | |
NET EARNINGS | | $ | 69,276 | | $ | 64,633 | |
| | | | | |
NET EARNINGS PER SHARE (Basic) | | $ | .50 | | $ | .47 | |
NET EARNINGS PER SHARE (Diluted) | | $ | .50 | | $ | .46 | |
* Retrospective application of FIFO inventory valuation
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| | | | Restated* | |
| | January 29, 2006 | | October 30, 2005 | |
| | (In Thousands) | |
ASSETS | | | | | |
| | | | | |
CURRENT ASSETS | | | | | |
Cash and cash equivalents | | $ | 111,673 | | $ | 131,046 | |
Short-term marketable securities | | 18,800 | | 38,500 | |
Accounts receivable | | 273,787 | | 301,001 | |
Inventories | | 534,885 | | 534,572 | |
Deferred income taxes | | 39,549 | | 39,428 | |
Prepaid expenses & other current assets | | 66,367 | | 20,691 | |
| | | | | |
TOTAL CURRENT ASSETS | | 1,045,061 | | 1,065,238 | |
| | | | | |
INTANGIBLES | | 639,288 | | 641,686 | |
| | | | | |
OTHER ASSETS | | 278,257 | | 261,960 | |
| | | | | |
PROPERTY, PLANT & EQUIPMENT, NET | | 874,164 | | 877,676 | |
| | | | | |
TOTAL ASSETS | | $ | 2,836,770 | | $ | 2,846,560 | |
| | | | | |
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | | | | | |
| | | | | |
TOTAL CURRENT LIABILITIES | | $ | 516,548 | | $ | 583,172 | |
| | | | | |
LONG-TERM DEBT – LESS CURRENT MATURITIES | | 350,403 | | 350,430 | |
| | | | | |
OTHER LONG-TERM LIABILITIES | | 315,318 | | 314,228 | |
| | | | | |
SHAREHOLDERS’ INVESTMENT | | 1,654,501 | | 1,598,730 | |
| | | | | |
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT | | $ | 2,836,770 | | $ | 2,846,560 | |
* Retrospective application of FIFO inventory valuation
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Thirteen Weeks Ended | |
| | | | Restated* | |
| | 1-29-2006 | | 1-30-2005 | |
| | (In Thousands) | |
OPERATING ACTIVITIES | | | | | |
Net earnings | | $ | 69,276 | | $ | 64,633 | |
Adjustments to reconcile to net cash provided by operating activities: | | | | | |
Depreciation | | 27,568 | | 24,137 | |
Amortization of intangibles | | 2,492 | | 2,023 | |
Equity in earnings of affiliates | | (2,196 | ) | (2,739 | ) |
Provision for deferred income taxes | | (4,841 | ) | (13,814 | ) |
Loss on property/equipment sales and plant facilities | | 89 | | 181 | |
Changes in operating assets and liabilities net of acquisitions: | | | | | |
Decrease in accounts receivable | | 25,696 | | 17,084 | |
Increase in inventories, prepaid expenses, and other current assets | | (49,794 | ) | (17,176 | ) |
Increase (Decrease) in accounts payable and accrued expenses | | (66,887 | ) | 4,131 | |
Other | | 11,571 | | 1,477 | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | 12,974 | | 79,937 | |
| | | | | |
INVESTING ACTIVITIES | | | | | |
Sale of held-to-maturity securities | | 112,775 | | 178,800 | |
Purchase of held-to-maturity securities | | (93,075 | ) | (76,800 | ) |
Acquisitions of businesses | | 1,444 | | (188,243 | ) |
Purchases of property / equipment | | (25,434 | ) | (24,761 | ) |
Proceeds from sales of property / equipment | | 1,289 | | 514 | |
Decrease (Increase) in investments, equity in affiliates, net pension assets, and other assets | | (6,271 | ) | 952 | |
NET CASH USED IN INVESTING ACTIVITIES | | (9,272 | ) | (109,538 | ) |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Principal payments on long-term debt | | (16 | ) | (15 | ) |
Dividends paid on common stock | | (17,914 | ) | (15,516 | ) |
Stock repurchase | | (8,441 | ) | (1,229 | ) |
Other | | 3,296 | | 4,685 | |
NET CASH USED IN FINANCING ACTIVITIES | | (23,075 | ) | (12,075 | ) |
DECREASE IN CASH AND CASH EQUIVALENTS | | (19,373 | ) | (41,676 | ) |
Cash and cash equivalents at beginning of year | | 131,046 | | 179,881 | |
CASH AND CASH EQUIVALENTS AT END OF QUARTER | | $ | 111,673 | | $ | 138,205 | |
* Retrospective application of FIFO inventory valuation
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