SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 29, 2000 Commission File
Number 1-2402
HORMEL FOODS CORPORATION
Incorporated Under the Laws
of the State of Delaware Fein #41-0319970
1 Hormel Place
Austin, Minnesota 55912-3680
Telephone - (507) 437-5737
None
- ------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant.
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES XXX NO
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding at April 29, 2000
- -------------------------------------------------------------------------------
Common Stock $.0586 par value 140,257,443
Common Stock Non-Voting $.01 par value -0-
Pages: This report contains twelve pages numbered sequentially from this cover
page.
FORM 10-Q
STATEMENTS OF FINANCIAL POSITION
(In Thousands of Dollars)
HORMEL FOODS CORPORATION
April 29, October 30,
2000 1999
--------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 125,987 $ 188,310
Short-term marketable securities--
at cost which approximates market 22,890 60,252
Accounts receivable 251,393 266,059
Inventories 291,995 270,239
Deferred income taxes 10,479 9,526
Prepaid expenses 21,525 5,757
--------------- --------------
TOTAL CURRENT ASSETS 724,269 800,143
DEFERRED INCOME TAXES 60,691 60,051
INTANGIBLES 95,559 98,544
INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES 142,957 142,879
OTHER ASSETS 86,453 78,344
PROPERTY, PLANT AND EQUIPMENT
Land 13,629 13,108
Buildings 291,781 286,662
Equipment 679,269 652,723
Construction in progress 56,398 49,693
--------------- --------------
1,041,077 1,002,186
Less allowance for depreciation (519,126) (496,562)
---------------- --------------
521,951 505,624
$ 1,631,880 $ 1,685,585
=============== ==============
See notes to financial statements
FORM 10-Q
STATEMENTS OF FINANCIAL POSITION
(In Thousands of Dollars)
HORMEL FOODS CORPORATION
April 29, October 30,
2000 1999
------------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 131,140 $ 162,585
Accrued expenses 24,259 37,255
Accrued marketing 42,993 34,882
Employee compensation 46,956 73,050
Taxes, other than federal income taxes 0 12,333
Dividends payable 12,449 11,902
Federal income tax 34,376 12,186
Current maturities of long-term debt 38,781 41,214
------------- ------------
TOTAL CURRENT LIABILITIES 330,954 385,407
LONG-TERM DEBT--less current maturities 175,233 184,723
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION 252,625 252,236
OTHER LONG-TERM LIABILITIES 24,527 22,077
SHAREHOLDERS' INVESTMENT
Preferred Stock, par value $.01 a share--
authorized 80,000,000 shares; issued--
none
Common Stock, non-voting, par value $.01
a share--authorized 80,000,000 shares;
issued--none
Common Stock, par value $.0586 a share--
authorized 400,000,000 shares;
issued 140,257,443 shares April 29, 2000
issued 142,724,870 shares Oct. 30, 1999 8,146 8,364
Accumulated other comprehensive loss (8,839) (6,305)
Retained earnings 849,234 839,083
------------- -------------
TOTAL SHAREHOLDERS' INVESTMENT 848,541 841,142
------------- --------------
$ 1,631,880 $ 1,685,585
============= =============
See notes to financial statements
FORM 10-Q
STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Amounts)
HORMEL FOODS CORPORATION
Three Months Ended Six Months Ended
April 29, May 1, April 29, May 1,
2000 1999 2000 1999
------------- ------------ ------------- --------------
Sales, less returns and allowances $ 879,023 $ 791,095 $ 1,782,936 $ 1,590,100
Cost of products sold 638,909 564,072 1,279,741 1,121,312
------------ ------------ ------------- -------------
GROSS PROFIT 240,114 227,023 503,195 468,788
Expenses:
Selling and delivery 92,390 87,472 187,279 174,271
Marketing 73,115 73,750 158,092 151,764
Administrative and general 18,595 16,111 35,089 34,646
------------ ------------ ------------- -------------
OPERATING INCOME 56,014 49,690 122,735 108,107
Other income and expenses:
Other income--net 4,298 4,280 10,350 9,754
Equity in earnings of affiliates 670 (1,806) 4 2,954
Interest expense (4,338) (3,683) (7,899) (6,616)
------------ ------------ ------------- -------------
EARNINGS BEFORE INCOME TAXES 56,644 48,481 125,190 114,199
Provision for income taxes 20,390 16,647 45,088 39,985
------------ ------------ ------------- -------------
NET EARNINGS $ 36,254 $ 31,834 $ 80,102 $ 74,214
============ ============ ============= =============
NET EARNINGS PER SHARE (DILUTED) $ 0.26 $ 0.22 $ 0.56 $ 0.50
============ ============ ============= =============
NET EARNINGS PER SHARE (BASIC) $ 0.26 $ 0.22 $ 0.57 $ 0.51
============ ============ ============= =============
See notes to financial statements
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
HORMEL FOODS CORPORATION
Six Months Ended
April 29, May 1,
2000 1999
---------------- -------------
OPERATING ACTIVITIES
Net earnings $ 80,102 $ 74,214
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 29,671 28,753
Amortization of intangibles 2,985 3,463
Equity in earnings of affiliates (4) (2,954)
Provision for deferred income taxes (1,627) 2,005
(Gain) loss on property/equipment sales 465 610
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 14,666 23,403
(Increase) decrease in inventories
and prepaid expenses (37,524) (25,404)
Increase (decrease) in accounts payable
and accrued expenses (49,728) (17,690)
--------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 39,006 86,400
INVESTING ACTIVITIES
Sale of held-to-maturity securities 67,897 34,409
Purchase of held-to-maturity securities (30,535) (49,344)
Purchases of property/equipment (48,067) (28,915)
Proceeds from sales of property/equipment 1,604 532
(Increase) decrease in investments and other assets (10,609) (29,959)
--------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (19,710) (73,277)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 3,456 24,620
Principal payments on long-term debt (12,262) (2,802)
Dividends paid on Common Stock (24,244) (23,865)
Stock Repurchase (45,793) (22,559)
Other (2,776) 822
--------------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (81,619) (23,784)
--------------- ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (62,323) (10,661)
Cash and cash equivalents at beginning of year 188,310 203,934
--------------- ------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 125,987 $ 193,273
=============== ============
See notes to financial statements
FORM 10-Q
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(In Thousands)
HORMEL FOODS CORPORATION
NOTE A
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
for a fair presentation.
The accounting policies followed by the Company are set forth in Note A to the
Company's Financial Statements in the 1999 Hormel Foods Corporation Annual
Report to Shareholders, which is incorporated by reference on Form 10-K.
NOTE B
The results of operations for the three and six month periods ended April 29,
2000 and May 1, 1999 are not necessarily indicative of the results to be
expected for the full year.
NOTE C
Total comprehensive income (net income plus other comprehensive income) was
$34,646 and $77,568 for the three and six-month periods ended April 29, 2000
compared to $31,671 and $74,081 for the three and six-month periods ended May 1,
1999. Other comprehensive income consists of minimum pension liability
adjustments and foreign currency translation adjustments.
NOTE D
The following table sets forth the denominator for the computation of basic and
diluted earnings per share:
Three Months Ended Six Months Ended
------------------ ----------------
April 29, 2000 May 1, 1999 April 29, 2000 May 1, 1999
-------------- ----------- -------------- -----------
Denominator for basic earnings per share
- weighted-average shares 140,771 146,520 141,556 146,710
Dilutive potential common shares 846 1,212 1,147 1,043
--- ----- ----- -----
Denominator for diluted earnings per
share - adjusted weighted-average shares
and assumed conversions 141,617 147,732 142,703 147,753
======= ======= ======= =======
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In Thousands except share amounts)
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
Net earnings in the second quarter increased 13.9 percent to $36,254 from
$31,834 during the same quarter of 1999. Sales for the quarter increased 11.1
percent to $879,023 from $791,095 last year. Tonnage for the period increased
2.0 percent to 751,173 pounds compared to 1999.
Net reported earnings for the first six months of fiscal 2000 were $80,102
compared to $74,214 last year. The 1999 results include a gain, net of taxes, of
$3,808 on the sale of land by Campofrio Alimentacion, S.A., a Spanish company in
which Hormel has 21.4 percent ownership interest. Excluding the one-time gain,
net operating earnings for the first half of 2000 were $80,102 compared to
$70,406 last year, an increase of 13.8 percent. Tonnage volume for the six
months increased 3.7 percent over 1999 to 1,536,328, which is a record volume
for the first two quarters.
The Company's core Hormel business continues to be the major contributor to
earnings. The increase in sales dollars and earnings on a smaller increase in
tonnage volume reflects higher price levels for raw materials and a product mix,
which includes a larger proportion of branded, manufactured products.
Within the Refrigerated Foods Group hog processing levels for the second quarter
were flat compared to the same period last year. While Hormel numbers were flat,
USDA federally inspected processing numbers for the quarter were down 3.6
percent from 1999. Hormel's hog contracts continue to ensure a quality supply of
hogs during a time of some herd liquidation. Hog contracts, which are accounted
for on a current basis, were a positive benefit to the Company for the quarter.
Tonnage of the Foodservice unit of Refrigerated Foods increased 18.0 percent
for the quarter and 17.0 percent year to date compared to the same periods
last year. The premium fresh pork category, which includes ALWAYS
TENDER(-Registered Trademark-) Pork, increased 44.0 percent for the quarter
compared to 1999. During the quarter, Foodservice introduced AUSTIN BLUES
BBQ(-Registered Trademark-), a line of fully cooked premium smoked meats,
including St. Louis - style ribs, beef briskets, center-cut pork loin and
pulled pork. The AUSTIN BLUES BBQ(-Registered Trademark-) line has been very
well received by restaurants looking to menu up-scaled products.
The Meat Products unit of the Refrigerated Group had tonnage increases of 2.3
and 6.8 percent respectively for the quarter and first half compared to 1999.
ALWAYS TENDER(-Registered Trademark-) Pork continued its strong performance
with a double-digit sales increase for the tenth consecutive quarter.
Retailers report that their overall pork sales have increased as a result of
the ALWAYS TENDER(-Registered Trademark-) program. The introduction of ALWAYS
TENDER(-Registered Trademark-) Fresh Beef has been met with excellent trade
enthusiasm. National distribution of the new line of beef products is
expected by the end of the third quarter
Despite a late Easter season, sales of CURE 81(-Registered Trademark-) Ham
increased from last years record level. Additionally, record high market
shares were achieved in the bacon and pepperoni categories during the quarter.
The Grocery Products unit of the Grocery Products Group experienced a 4.1
percent tonnage growth compared to the first half of 1999. During the second
quarter market share gains were realized in SPAM(-Registered Trademark-)
Luncheon Meat, HORMEL(-Registered Trademark-) Chili, DINTY MOORE(-Registered
Trademark-) Beef Stew, HORMEL(-Registered Trademark-) Chunk Meats,
HORMEL(-Registered Trademark-) Real Bacon Bits, EL TORITO(-Registered
Trademark-) and HERDEZ(-Registered Trademark-) Salsas.
During the second quarter, the Company introduced a new "Kid friendly"
all-plastic microwaveable cup in ten markets under the KID'S
KITCHEN(-Registered Trademark-) label. Thirteen items are being sold in this
new shelf stable cup, which has no metal or sharp edges.
The Carapelli(-Registered Trademark-) Olive Oil launch is on plan.
Distribution is increasing rapidly and will be over 80 percent ACV by the
middle of the third quarter. Acceptance of the product line is over 90
percent with most accounts placing 6 to 7 SKUs.
In the International Group, export sales were up 9.5 and 27.0 percent for the
quarter and six months, respectively, compared to last year. Significant
volume gains were experienced in SPAM(-Registered Trademark-) Luncheon Meat,
HORMEL(-Registered Trademark-) Chunk Meats, DINTY MOORE(-Registered
Trademark-) Canned Meats and HORMEL(-Registered Trademark-) Dry Sausage
Toppings.
Sales tonnage in China doubled compared to 1999 with Foodservice and new
Chinese-style products driving the growth. SPAM(-Registered Trademark-)
Luncheon Meat share in the UK reached another 52-week high exceeding 53
percent and STAGG(-Registered Trademark-) Chili sales are growing in
Australia, Canada, and the UK.
Jennie-O sales tonnage increased 7.0 and 3.6 percent for the quarter and six
months, respectively, compared to 1999. Sales within the Foodservice Division
grew at a 20 percent pace for the second quarter in a row. Retail product
sales increases were led by continued double-digit increases in
JENNIE-O(-Registered Trademark-) Turkey Burger, JENNIE-O(-Registered
Trademark-) Turkey Frank, JENNIE-O(-Registered Trademark-) Extra Lean Bacon
and JENNIE-O(-Registered Trademark-) Pan Roasts.
The overall market outlook for the second half of 2000 anticipates strong values
for whole turkeys, particularly in the smaller hen category. The impact of the
expected strong values is diminished, somewhat, by recent increases in the price
of feed grain.
Selling and delivery expenses for the quarter and six months were $92,390 and
$187,279 compared to $87,472 and $174,271 last year. Marketing expenses were
$73,115 for the quarter and $158,092 to-date compared to $73,750 and $151,764 in
1999. The increases for the quarter and to-date reflect the increased volume
over last year. The Company continues to emphasize its well-established products
as well as its newer ethnic product lines in promotional programs targeted to
increase sales of high margin processed items.
Administrative and general expenses increased to $18,595 and $35,089 for the
quarter and six months from $16,111 and $34,646 last year.
The effective tax rate for the quarter and first half was 36.0 percent compared
to 34.3 and 35.0 percent for the respective periods in 1999. The increase in
rates reflects the changing proportion of permanent tax differences to total
income.
FORM 10-Q
LIQUIDITY AND CAPITAL RESOURCES
Ratio comparisons for the first quarter of 2000 and 1999, which demonstrate the
Company's financial strength, are as follows:
END OF QUARTER
2nd Quarter 2nd Quarter
2000 1999
------------ ------------
Liquidity Ratios
Current ratio 2.2 2.8
Receivables turnover 13.8 15.1
Days sales in receivables 25.7 days 22.9 days
Inventory turnover 9.1 9.0
Days sales in inventory 41.6 days 41.9 days
Leverage Ratio
Long-term debt to equity 25.2% 27.6%
Operating Ratios
Pre-tax profit to net worth 29.6% *27.6%
Pre-tax profit to total assets 15.1% *14.5%
* Includes $3,808 in pre-tax profit from sale of land by Campofrio.
Changes during the first six months in current asset and liability balances
followed normal seasonal patterns. Accounts receivable and inventory balances
are consistent with the price levels for pork and past and future sales volumes.
During the first six months, the Company invested $48,067 in new plant and
equipment primarily in Houston, Texas; Austin, Minnesota; Rochelle, Illinois and
at various Jennie-O locations in Minnesota. Investment in plant and equipment
continues to emphasize productivity gains and efficient product flow while
improving ergonomics and safety conditions for employees.
The Company continues to keep excess funds invested short-term. The leverage
ratio indicates that significant borrowing capacity remains to take advantage of
business opportunities that may arise through acquisition or internal expansion.
During the second quarter the Company purchased 1,268,600 shares under the share
repurchase program at an average cost of $16.37 per share. To-date in fiscal
2000, 2,503,000 shares have been repurchased at a cost of $18.30 per share.
Total shares repurchased, under the currently approved plan is 7,238,000 shares
with an average cost of $18.93 per share.
FORM 10-Q
FORWARD-LOOKING STATEMENTS
The Company and its representatives may from time to time make written or oral
statements with respect to annual or long-term goals and expectations of the
Company. These statements include but are not limited to the Company's filings
with the Securities and Exchange Commission and in its reports to shareholders.
The Company cautions readers not to place undue reliance on forward-looking
statements, which represent current views as of the date made.
Exhibit 99 to the Annual Report on Form 10-K for year ended October 30, 1999
provides the full text of the Company's cautionary statement relevant to
forward-looking statements and information for the purpose of "Safe Harbor"
provisions of the Private Securities Litigations Reform Act of 1995.
FORM 10-Q
PART II - OTHER INFORMATION
HORMEL FOODS CORPORATION
Item 4. Results of Votes of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K
The Company filed a Form 8-K on March 27, 2000 announcing the
retirement of one long time officer and director and the election of
two new members to its Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
HORMEL FOODS CORPORATION
------------------------
(Registrant)
Date: June 13, 2000 By /s/ M. J. McCOY
-------------------- ---------------------------------
M. J. McCOY
Senior Vice President
and Chief Financial Officer
Date: June 13, 2000 By /s/ F. D. HALVIN
--------------------------------
-------------------- F. D. HALVIN
Treasurer