Exhibit 99
INVESTOR CONTACT: | | MEDIA CONTACT: |
Kevin Jones | | Julie Craven |
(507) 437-5248 | | (507) 437-5345 |
kcjones@hormel.com | | media@hormel.com |
HORMEL FOODS REPORTS FIRST QUARTER RESULTS
AUSTIN, Minn. (Feb. 19, 2009) – Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal 2009 first quarter.
HIGHLIGHTS
· Diluted EPS of $.60, down 6 percent from $.64 per share in 2008
· Segment operating profit down 14 percent from last year
· Dollar sales of $1.7 billion up 4 percent from 2008
· Volume down 1 percent from 2008
· Grocery Products operating profit up 9 percent; volume up 2 percent; dollar sales up 6 percent
· Refrigerated Foods operating profit down 27 percent; volume down 2 percent; dollar sales up 5 percent
· Jennie-O Turkey Store operating profit down 16 percent; volume flat; dollar sales up 5 percent
· Specialty Foods operating profit down 16 percent; volume down 8 percent (down 11 percent excluding acquisitions); dollar sales down 5 percent (down 8 percent excluding acquisitions)
· All Other operating profit down 9 percent; volume up 15 percent; dollar sales up 17 percent
The company reported fiscal 2009 first quarter net earnings of $81.4 million, down 8 percent from earnings of $88.2 million a year earlier. Diluted earnings per share for the quarter were $.60 this year compared to $.64 per share last year and sales totaled $1.69 billion, up from $1.62 billion in fiscal 2008.
COMMENTARY
“Despite a very challenging economic climate, our first quarter results leave us on track to meet our annual earnings guidance goal. As anticipated, we started out the year with weaker operating results, resulting in a decline of 4 cents per share from our record earnings of a year ago. Our Grocery Products segment had a solid quarter, led by strong canned meat sales. Our Jennie-O Turkey Store segment is doing a good job of addressing the difficult market conditions, including very weak commodity meat markets and higher input costs that continue to work their way through the system,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.
“Our Refrigerated Foods segment experienced a difficult quarter. Higher than anticipated hog costs, combined with weaker than expected primal markets, led to losses in our pork operations that we were not able to offset, despite a strong performance by our meat products group. Our Specialty Foods and All Other segments also had weaker results,” remarked Ettinger.
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“Changes in consumer behavior resulting from the recession have had a mixed effect on our sales. We have seen an upswing in sales of many of our retail products, particularly some of our traditional franchises across our different business segments, and a softening of demand for some of our newer convenience items. On balance, our overall retail sales have been relatively strong, while foodservice sales show softness” commented Ettinger.
SEGMENT OPERATING HIGHLIGHTS – FIRST QUARTER
Grocery Products (14% of Net Sales, 29% of Total Segment Operating Profit)
The Grocery Products segment reported a 6 percent sales increase and a 9 percent increase in operating profit for the quarter compared to last year. Strong sales of canned meat items such as our SPAM family of products, DINTY MOORE stews and HORMEL chili more than offset softer sales of our COMPLEATS microwavable meals.
Refrigerated Foods (53% of Net Sales, 33% of Total Segment Operating Profit)
Operating profit for the Refrigerated Foods segment decreased 27 percent for the quarter, primarily attributable to a significant decline in the spread between hog costs and primal values. The Meat Products business unit performed well during the quarter, led by strong results for value-added products such as HORMEL CURE 81 hams, DILUSSO DELI COMPANY products, HORMEL BLACK LABEL bacon, and HORMEL NATURAL CHOICE sandwich meats. Foodservice sales declined during the quarter, reflecting the decision by consumers to eat more meals at home and the reduction in both business and personal travel.
Jennie-O Turkey Store (18% of Net Sales, 21% of Total Segment Operating Profit)
Operating profit for Jennie-O Turkey Store was down 16 percent in the first quarter. Higher grain costs compared with a year ago continued to work their way through the system. These were not fully recovered in light of the significantly lower commodity market for breast meat. Continued strong sales of value-added products by the retail group during the quarter helped minimize the decline from our year-ago results.
Specialty Foods (11% of Net Sales, 11% of Total Segment Operating Profit)
The Specialty Foods group reported a decrease in operating profit of 16 percent. Sales of ready-to-drink and nutritional powders at Century Foods softened due to the difficult economic conditions. Hormel Specialty Products also suffered from reduced contract packaging sales of microwave products. On the other hand, Diamond Crystal Brands experienced solid growth during the quarter, led by improved performance of their nutritional healthcare products.
All Other (4% of Net Sales, 6% of Total Segment Operating Profit)
The All Other segment, which includes Hormel Foods International, experienced a 9 percent decrease in operating profit for the quarter. Strong sales from exports of fresh pork and the SPAM family of products were unable to fully offset the negative impact of the strengthening US dollar and weaker results experienced by our joint ventures.
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Net Interest and Investment Income
A $1.7 million gain in the rabbi trust investments significantly improved net interest and investment income for the quarter versus last year.
General Corporate Expense
General corporate expenses for the first quarter were 18 percent lower than last year, due to lower net compensation, pension and insurance expenses.
General
The company has changed the classification of shipping and handling cost from selling and delivery expense to cost of products sold. Classification of the expense in cost of products sold better reflects the cost of producing and distributing our products. The expense has been reclassified in all comparable periods.
OUTLOOK
“We are reconfirming our fiscal 2009 guidance of $2.15 - $2.25 per share. Although we are on track to meet our goal, we recognize there could be continued challenges to our business as a result of the turbulent economy. We believe our strong consumer franchises, with many good value offerings, and our strong management team should allow us to meet our goals,” concluded Ettinger.
DIVIDENDS
Effective Feb 15, 2009, the Company paid its 322nd consecutive quarterly dividend. The annual rate is $.76.
CONFERENCE CALL
A conference call will be Webcast at 8:30 a.m. CT on Thursday, Feb. 19, 2009. Access is available at www.hormelfoods.com. If you do not have Internet access and want to listen to the call over the phone, the dial in number is 800-366-3908. An audio replay is available by calling 800-405-2236 and entering access code 11125920. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, Feb. 19, 2009, through 11:59 p.m. CT on Friday, March 6, 2009. The Webcast replay will be available at 10:30 a.m. CT, Thursday, Feb. 19, 2009, 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. In each of the past 10 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 highly regarded for quality, taste, nutrition, convenience and value.
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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 31-35 in the company’s Annual Report for the fiscal year ended Oct. 26, 2008, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”
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Segment Data
Fiscal 2009 First Quarter Segment Operating Results (in Thousands)
FIRST QUARTER – 13 WEEKS ENDED
| | January 25, 2009 | | January 27, 2008 | | % Change | |
NET SALES | | | | | | | |
Grocery Products | | $ | 241,943 | | $ | 227,415 | | 6.4 | |
Refrigerated Foods | | 897,424 | | 857,460 | | 4.7 | |
Jennie-O Turkey Store | | 305,039 | | 291,449 | | 4.7 | |
Specialty Foods | | 178,890 | | 188,787 | | (5.2 | ) |
All Other | | 65,790 | | 56,054 | | 17.4 | |
Total | | $ | 1,689,086 | | $ | 1,621,165 | | 4.2 | |
| | | | | | | |
OPERATING PROFIT | | | | | | | |
Grocery Products | | $ | 39,635 | | $ | 36,369 | | 9.0 | |
Refrigerated Foods | | 45,745 | | 62,806 | | (27.2 | ) |
Jennie-O Turkey Store | | 29,249 | | 34,804 | | (16.0 | ) |
Specialty Foods | | 15,317 | | 18,293 | | (16.3 | ) |
All Other | | 8,245 | | 9,025 | | (8.6 | ) |
Total segment operating profit | | 138,191 | | 161,297 | | (14.3 | ) |
Net interest and investment income | | (5,064 | ) | (11,658 | ) | 56.6 | |
General corporate expense | | (8,497 | ) | (10,328 | ) | 17.7 | |
Earnings before income taxes | | $ | 124,630 | | $ | 139,311 | | (10.5 | ) |
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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | Thirteen Weeks Ended | |
| | 1-25-2009 | | 1-27-2008* | |
| | | | | |
Net sales | | $ | 1,689,086 | | $ | 1,621,165 | |
| | | | | |
Cost of products sold | | 1,416,771 | | 1,328,474 | |
| | | | | |
GROSS PROFIT: | | 272,315 | | 292,691 | |
| | | | | |
Selling, general and administrative | | 142,525 | | 144,091 | |
| | | | | |
Equity in earnings of affiliates | | (96 | ) | 2,369 | |
| | | | | |
OPERATING INCOME: | | 129,694 | | 150,969 | |
| | | | | |
Other income & expenses: | | | | | |
Interest & investment income (loss) | | 2,391 | | (4,938 | ) |
| | | | | |
Interest expense | | (7,455 | ) | (6,720 | ) |
| | | | | |
EARNINGS BEFORE INCOME TAXES: | | 124,630 | | 139,311 | |
| | | | | |
Provision for income taxes | | 43,247 | | 51,130 | |
(effective tax rate) | | 34.70 | % | 36.70 | % |
| | | | | |
NET EARNINGS | | $ | 81,383 | | $ | 88,181 | |
| | | | | |
NET EARNINGS PER SHARE | | | | | |
Basic | | $ | .61 | | $ | .65 | |
Diluted | | $ | .60 | | $ | .64 | |
| | | | | |
WEIGHTED AVG SHARES OUT | | | | | |
Basic | | 134,377 | | 135,706 | |
Diluted | | 135,163 | | 137,666 | |
| | | | | |
DIVIDENDS DECLARED PER SHARE | | $ | .190 | | $ | .185 | |
| | | | | | | | | |
* Includes retrospective reclassification of shipping and handling expenses to cost of products sold from selling, general and administrative.
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HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| | January 25, 2009 | | October 26, 2008 | |
| | (In Thousands) | |
ASSETS | | | | | |
| | | | | |
CURRENT ASSETS | | | | | |
Cash and cash equivalents | | $ | 264,737 | | $ | 154,778 | |
Short-term marketable securities | | 2,371 | | 0 | |
Accounts receivable | | 370,130 | | 411,010 | |
Inventories | | 741,944 | | 784,542 | |
Deferred income taxes | | 47,347 | | 45,948 | |
Prepaid expenses & other current assets | | 40,431 | | 41,900 | |
| | | | | |
TOTAL CURRENT ASSETS | | 1,466,960 | | 1,438,178 | |
| | | | | |
INTANGIBLES | | 768,035 | | 770,544 | |
| | | | | |
OTHER ASSETS | | 423,099 | | 430,092 | |
| | | | | |
PROPERTY, PLANT & EQUIPMENT, NET | | 972,937 | | 977,657 | |
| | | | | |
TOTAL ASSETS | | $ | 3,631,031 | | $ | 3,616,471 | |
| | | | | |
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | | | | | |
| | | | | |
TOTAL CURRENT LIABILITIES | | $ | 752,508 | | $ | 781,233 | |
| | | | | |
LONG-TERM DEBT – LESS CURRENT MATURITIES | | 350,000 | | 350,000 | |
| | | | | |
OTHER LONG-TERM LIABILITIES | | 480,988 | | 477,666 | |
| | | | | |
SHAREHOLDERS’ INVESTMENT | | 2,047,535 | | 2,007,572 | |
| | | | | |
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT | | $ | 3,631,031 | | $ | 3,616,471 | |
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HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Thirteen Weeks Ended | |
| | 1-25-2009 | | 1-27-2008 | |
| | (In Thousands) | |
OPERATING ACTIVITIES | | | |
Net earnings | | $ | 81,383 | | $ | 88,181 | |
Depreciation and amortization of intangibles | | 31,033 | | 33,060 | |
Decrease in working capital | | 61,713 | | 38,520 | |
Other | | (2,739 | ) | (2,836 | ) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | 171,390 | | 156,925 | |
| | | | | |
INVESTING ACTIVITIES | | | | | |
Net purchase (sale) of available-for-sale securities | | 1,528 | | (47,799 | ) |
Acquisitions of businesses/intangibles | | (543 | ) | (1,013 | ) |
Net purchases of property / equipment | | (23,919 | ) | (31,197 | ) |
(Increase) Decrease in investments, equity in affiliates, and other assets | | (4,075 | ) | 7,920 | |
NET CASH USED IN INVESTING ACTIVITIES | | (27,009 | ) | (72,089 | ) |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Net payments on debt | | 0 | | (70,054 | ) |
Dividends paid on common stock | | (24,877 | ) | (20,346 | ) |
Share repurchase | | (10,375 | ) | (14,162 | ) |
Other | | 830 | | 14,211 | |
NET CASH USED IN FINANCING ACTIVITIES | | (34,422 | ) | (90,351 | ) |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | 109,959 | | (5,515 | ) |
Cash and cash equivalents at beginning of year | | 154,778 | | 149,749 | |
CASH AND CASH EQUIVALENTS AT END OF QUARTER | | $ | 264,737 | | $ | 144,234 | |
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