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 23, 2007) – Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2007 third quarter.
HIGHLIGHTS
Third Quarter
· Consolidated segment operating profit up 6 percent compared to last year
· Diluted EPS of $.41, down 5 percent from $.43 per share in 2006 (higher effective tax rate in 2007)
· Dollar sales of $1.52 billion increased 8 percent from 2006 (up 7 percent excluding acquisitions)
· Volume up 1 percent compared to last year (same as last year excluding acquisitions)
· Grocery Products operating profit down 2 percent; volume down 1 percent; dollar sales up 1 percent
· Refrigerated Foods operating profit up 23 percent; volume down 1 percent (down 2 percent excluding acquisitions); dollar sales up 9 percent (up 7 percent excluding acquisitions)
· Jennie-O Turkey Store operating profit down 19 percent; volume down 1 percent; dollar sales up 4 percent
· Specialty Foods operating profit up 28 percent; volume up 6 percent; dollar sales up 14 percent
· All Other operating profit up 67 percent; volume up 16 percent; dollar sales up 27 percent
· Announced the acquisition of Burke Corporation today
The company reported fiscal 2007 third quarter net earnings of $57.4 million, down 4 percent from earnings of $59.6 million a year earlier. Diluted earnings per share for the quarter were $.41 this year compared to $.43 per share last year and sales totaled $1.52 billion, up from $1.41 billion in fiscal 2006.
For the nine months ended July 29, 2007, net earnings were $200.7 million, or $1.44 per diluted share (up 2 percent), compared to $196.1 million a year ago, or $1.41 per diluted share. Sales totaled $4.53 billion, up 8 percent, from $4.19 billion in the same period last year.
COMMENTARY
“As we previously announced, the higher than expected input costs within the Grocery Products segment pressured profitability more than we anticipated. This caused the company to fall short of the original expectations for the quarter,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Within the Grocery Products segment, we saw mixed results for the quarter. For example, we had significant distribution gains and sales growth from
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our HORMEL COMPLEATS microwave trays. However, part of this growth was offset from weakness in our chunk chicken and CHI-CHI’S sauce business,” Ettinger stated.
“While we were disappointed with the overall results, we were encouraged by the 6 percent growth in our consolidated segment operating profit lead by strong year-over-year performance in Refrigerated Foods, Specialty Foods and the International division. We were also satisfied with the progress Jennie-O Turkey Store is making to offset the higher grain input costs through higher pricing. Based on this progress, we expect Jennie-O Turkey Store will meet last year’s fourth quarter results,” Ettinger commented.
“An important part of our growth plan is to make strategic acquisitions that fit into our business system and leverages our infrastructure. This morning we announced the purchase of Burke Corporation, a manufacturer of pizza-toppings and other fully-cooked meat products, which fits this profile perfectly. This addition will strengthen our position in the pizza-topping industry and will expand our existing product offering to foodservice customers. This acquisition will be accretive to fiscal 2008 and has annual sales of $125 million,” Ettinger concluded.
SEGMENT OPERATING HIGHLIGHTS – THIRD QUARTER
Grocery Products (13% of Net Sales, 26% of Total Operating Profit)
Operating profit in the Grocery Products segment declined 2 percent compared to last year. Higher commodity input costs (pork, beef, chicken) pressured margins throughout the quarter. Price advances taken on part of the product portfolio at the beginning of the quarter were not enough to offset the higher input costs. The profitability of the SPAM Family of products, chunk chicken, and HORMEL bacon bits were all negatively affected by higher input costs. Profits were also down from lower than expected sales of CHI CHI’S sauces and VALLEY FRESH chunk meats. The HORMEL COMPLEATS microwave tray line of products continues to gain market share and grow at a double-digit pace. Volume and net sales of the SPAM Family of products were also strong during the quarter behind promotional support for the product’s 70th anniversary.
Refrigerated Foods (54% of Net Sales, 35% of Total Operating Profit)
The Refrigerated Foods segment reported a 9 percent increase in sales and a 23 percent increase in operating profit for the quarter. The strong performances from our Meat Products and Foodservice value-added businesses were key contributors to the increase in operating profit. In Meat Products, strong volume and sales results were generated by ALWAYS TENDER flavored meats, HORMEL party trays, HORMEL refrigerated entrees, and DILUSSO DELI COMPANY products. The line of NATURAL CHOICE products also continues to gain distribution and consumer acceptance. Foodservice products posting strong results include BREAD READY sliced meats and AUSTIN BLUES BBQ products. Farmer John also continued to see improvement in operating results this quarter driven by demand for foodservice products such as sliced ham and precooked breakfast meats.
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Jennie-O Turkey Store (19% of Net Sales, 20% of Total Operating Profit)
Operating profit for the Jennie-O Turkey Store segment was 19 percent lower than last year. Price advances have helped reduce the earnings gap caused by higher grain input costs, and we expect further progress to be made in the fourth quarter. Value-added sales in the segment grew 8 percent behind strong demand for products across each of the retail, deli, and foodservice channels. JENNIE-O TURKEY STORE frozen turkey burgers continue to grow in both the retail and foodservice markets. The rotisserie line of products also performed well in the quarter with a double-digit increase in volume.
Specialty Foods (11% of Net Sales, 14% of Total Operating Profit)
The Specialty Foods segment reported segment profit 28 percent higher for the third quarter compared to last year. Each of the business units in the segment contributed to the higher profits. The Specialty Products business unit continued to benefit from price increases for specialty ingredients and double-digit volume and sales growth in contract manufacturing. Results at Diamond Crystal Brands were driven by a favorable product mix shift as higher sales of nutritional products offset lower commodity sugar volume. Century Foods also continued to deliver solid growth behind strong demand for ready-to-drink and nutritional jar products.
All Other (3% of Net Sales, 5% of Total Operating Profit)
The All Other segment, which includes the International business unit, had another strong quarter with operating profit up 67 percent compared to last year. Strong volume and sales growth of value-added products was a major driver of the higher profits. The company continues to have success building worldwide demand for the SPAM Family of products and STAGG chili. Profitability in the segment was also improved by higher equity in earnings of affiliates from our joint venture in the Philippines. The company’s China operations reported lower profits as price advances have not offset higher hog input costs.
General Corporate Expense
General corporate expense was higher compared to last year mostly due to a $2.3 million gain on the sale of a company airplane recognized in 2006. The balance of the difference relates to the timing of accruals. The 2007 year-to-date expenses are at a normalized level.
Effective Tax Rate
This quarter’s effective tax rate of 36.4 percent was slightly higher than our expected 35.6 percent rate because of an unfavorable discrete tax event. It was significantly higher than last year’s rate of 32.0 percent because last year included favorable discrete tax events. The earnings per share impact between last year’s rate and this year’s rate is $.03 per share.
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OUTLOOK
“As noted in our preannouncement on August 9, we expect to see higher input costs continue into the fourth quarter. During these periods of commodity inflation, we remain focused on the long-term objectives of the company to grow the business through new product development and build upon our market share positions in our key categories,” Ettinger said.
After assessing industry factors and our business plans and prospects, we are reaffirming our previous guidance range of $.62 - $.68 per share for the fourth quarter and the full year range is $2.06 - $2.12,” Ettinger concluded.
DIVIDENDS
Effective August 15, 2007, the company paid its 316th consecutive quarterly dividend. The annual rate is $.60 per share.
CONFERENCE CALL
A conference call will be Webcast at 9:30 a.m. CT on Thursday, August 23, 2007. Access is available at www.hormel.com. If you do not have Internet access and want to listen to the call over the phone, the dial in number is 800-218-0713. An audio replay is available by calling 800-405-2236 and entering access code 11094727. The audio replay will be available beginning at 11:30 a.m. CT on Thursday, August 23, 2007, through 11:59 p.m. CT on September 7, 2007. The Webcast replay will be available at 11:30 a.m. CT, August 23, and archived for one year.
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 each of the past eight years, Hormel Foods has been named one of “The Best Big Companies in America” by Forbes 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 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 materially. Please refer to the cautionary statement regarding Forward-Looking Statements that appears on pages 26-31 in the company’s Form 10-Q for the quarter ended April 29, 2007, which can be accessed at www.hormel.com under “Investor-SEC Filings.”
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Segment Data
Fiscal 2007 Third Quarter Segment Operating Results (in Thousands)
| | THIRD QUARTER — 13 WEEKS ENDED | |
| | July 29, 2007 | | July 30, 2006 | | % Change | |
NET SALES | | | | | | | |
Grocery Products | | $ | 202,150 | | $ | 199,545 | | 1.3 | |
Refrigerated Foods | | 825,285 | | 756,611 | | 9.1 | |
Jennie-O Turkey Store | | 278,588 | | 267,754 | | 4.0 | |
Specialty Foods | | 167,694 | | 146,583 | | 14.4 | |
All Other | | 46,288 | | 36,401 | | 27.2 | |
Total | | $ | 1,520,005 | | $ | 1,406,894 | | 8.0 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
Grocery Products | | $ | 26,868 | | $ | 27,525 | | (2.4 | ) |
Refrigerated Foods | | 36,764 | | 30,023 | | 22.5 | |
Jennie-O Turkey Store | | 20,841 | | 25,715 | | (19.0 | ) |
Specialty Foods | | 14,075 | | 10,989 | | 28.1 | |
All Other | | 4,853 | | 2,907 | | 66.9 | |
Total segment operating profit | | 103,401 | | 97,159 | | 6.4 | |
Net interest and investment income | | (5,260 | ) | (7,216 | ) | 27.1 | |
General corporate expense | | (7,862 | ) | (2,410 | ) | (226.2 | ) |
Income before tax | | $ | 90,279 | | $ | 87,533 | | 3.1 | |
| | YEAR TO DATE — 39 WEEKS ENDED | |
| | July 29, 2007 | | July 30, 2006 | | % Change | |
NET SALES | | | | | | | |
Grocery Products | | $ | 631,991 | | $ | 604,457 | | 4.6 | |
Refrigerated Foods | | 2,419,596 | | 2,230,977 | | 8.5 | |
Jennie-O Turkey Store | | 825,246 | | 789,407 | | 4.5 | |
Specialty Foods | | 513,842 | | 454,761 | | 13.0 | |
All Other | | 138,010 | | 108,570 | | 27.1 | |
Total | | $ | 4,528,685 | | $ | 4,188,172 | | 8.1 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
Grocery Products | | $ | 99,046 | | $ | 90,909 | | 9.0 | |
Refrigerated Foods | | 122,893 | | 104,667 | | 17.4 | |
Jennie-O Turkey Store | | 64,761 | | 92,034 | | (29.6 | ) |
Specialty Foods | | 48,398 | | 33,534 | | 44.3 | |
All Other | | 16,193 | | 11,026 | | 46.9 | |
Total segment operating profit | | 351,291 | | 332,170 | | 5.8 | |
Net interest and investment income | | (13,911 | ) | (15,959 | ) | 12.8 | |
General corporate expense | | (23,051 | ) | (26,780 | ) | 13.9 | |
Income before tax | | $ | 314,329 | | $ | 289,431 | | 8.6 | |
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