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Press release from Business Wire

Hormel Foods Reports First Quarter Results

Tuesday, February 22, 2011

Hormel Foods Reports First Quarter Results06:30 EST Tuesday, February 22, 2011 AUSTIN, Minn. (Business Wire) -- Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2011 first quarter. All comparisons are to the first quarter of fiscal 2010. All per share results reported here are on a two-for-one stock split adjusted basis. HIGHLIGHTSFirst Quarter Diluted EPS of $.55, up 34 percent from $.41 per share Segment operating profit up 33 percent Dollar sales of $1.9 billion up 11 percent Volume up 4 percent Jennie-O Turkey Store operating profit up 122 percent; volume up 5 percent; dollar sales up 14 percent Refrigerated Foods operating profit up 37 percent; volume up 2 percent; dollar sales up 13 percent Grocery Products operating profit down 10 percent; volume up 5 percent; dollar sales up 6 percent Specialty Foods operating profit down 12 percent; volume up 7 percent; dollar sales up 2 percent All Other operating profit up 29 percent; volume up 8 percent; dollar sales up 17 percent The company reported fiscal 2011 first quarter net earnings of $148.8 million, up 34 percent from earnings of $111.2 million a year earlier. Diluted earnings per share for the quarter were $.55 this year compared to $.41 per share last year. Sales totaled $1.92 billion, which was up 11 percent from fiscal 2010. COMMENTARY “We are pleased to report double-digit increases in both sales and earnings for the quarter. All five segments generated year-over-year sales growth. Earnings growth was led by excellent performance by our Jennie-O Turkey Store and Refrigerated Foods segments,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Our Jennie-O Turkey Store segment had an outstanding quarter, driven by favorable commodity meat margins and improved efficiencies across the entire supply chain and operations. It also experienced improved sales of value-added products. Our Refrigerated Foods segment had a strong quarter, as well, benefiting from continued high pork operating margins. We were pleased by the performance of our international business in the All Other segment, too. Both our Grocery Products and Specialty Foods segments were pressured by higher commodity input costs during the quarter,” remarked Ettinger. SEGMENT OPERATING SUMMARIES – FIRST QUARTERGrocery Products (14% of Net Sales, 20% of Total Segment Operating Profit)The Grocery Products segment operating profit declined 10 percent, due primarily to higher raw material costs. Sales grew 6 percent, led by higher sales of the SPAM®family of products, Hormel® chili, Hormel® flavored bits and Hormel® Mary Kitchen® hash, and strong sales growth of the MegaMex Foods franchise. Refrigerated Foods (53% of Net Sales, 39% of Total Segment Operating Profit)The Refrigerated Foods segment had a strong first quarter, with segment operating profit 37 percent greater than last year, as favorable spreads between hog costs and primal values benefited the segment. Sales grew 13 percent during the quarter, featuring higher sales of Hormel® party trays, Hormel® pepperoni, Hormel® refrigerated entrees, Hormel® Always Tender® flavored meats, and aided by the inclusion of Hormel® Country Crock® side dishes. Jennie-O Turkey Store (19% of Net Sales, 30% of Total Segment Operating Profit)Jennie-O Turkey Store had an outstanding quarter, with segment operating profit up 122 percent. Better commodity meat prices and improved efficiencies in the supply chain and operations helped drive results. Sales grew 14 percent for this segment with increased commodity meat and value-added sales, featuring increased sales of Jennie-O Turkey Store® turkey burgers, turkey bacon and fresh tray pack items. Specialty Foods (10% of Net Sales, 7% of Total Segment Operating Profit)Segment operating profit for Specialty Foods declined 12 percent, due primarily to higher raw material costs. Sales grew 2 percent, as higher sales of sugar and blended products were partially offset by lower sales of contract manufacturing and sugar substitute products. All Other (4% of Net Sales, 4% of Total Segment Operating Profit)Segment operating profit for the All Other segment, which consists primarily of Hormel Foods International, increased 29 percent for the quarter, while sales grew 17 percent, led primarily by stronger exports of fresh pork and the SPAM®family of products. Net Interest and Investment IncomeNet interest and investment expense was flat with a year ago. General Corporate ExpenseGeneral corporate expenses were higher than last year due to expenses associated with the vesting of options under the Universal Stock Option award granted to all employees in 2007. OUTLOOK “Due to our strong results in the first quarter, we are raising our full year guidance range from $1.55 to $1.60 per share to $1.62 to $1.68 per share. We expect to see higher input costs the balance of the year, and our team will continue to tackle the challenge of offsetting these added costs with pricing and efficiency gains. Nevertheless, we believe our strong portfolio of branded products and our balanced model should allow us to build upon the momentum of our excellent start,” concluded Ettinger. DIVIDENDS Effective February 15, 2011, the Company paid its 330th consecutive quarterly dividend, at the annual rate of $.51. WEBCAST The Company's results will be discussed during its presentation at the CAGNY Conference via webcast at 1:45 p.m. EST on Tuesday, February 22, 2011. Access is available at http://www.hormelfoods.com. The Webcast replay will be available at 3:45 p.m. EST, Tuesday, February 22, 2011, 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 branded, value-added products to the global marketplace. The company is a member of the Standard & Poor's 500 Index, Dow Jones Sustainability Indexes, Maplecroft Climate Innovation Indexes, Global 1000 Sustainable Performance Leaders and was named one of "The 100 Most Trustworthy Companies” by Forbes in 2010. 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 http://www.hormelfoods.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 and Risk Factors that appear on pages 25-29 in the company's Annual Report for the fiscal year ended Oct. 31, 2010, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.” “Country Crock” is a registered trademark of the Unilever Group of Companies and is used under license. All rights reserved. Segment Data   Fiscal 2011 First Quarter Segment Operating Results (in thousands)   FIRST QUARTER – 13 WEEKS ENDED       NET SALESJanuary 30, 2011January 24, 2010% Change Grocery Products $ 276,899 $ 261,644 5.8 Refrigerated Foods 1,010,702 892,302 13.3 Jennie-O Turkey Store 364,517 319,951 13.9 Specialty Foods 191,345 186,942 2.4 All Other 78,09566,60817.2   Total $1,921,558$1,727,44711.2       OPERATING PROFIT Grocery Products $ 48,562 $ 54,170 (10.4 ) Refrigerated Foods 96,134 70,188 37.0 Jennie-O Turkey Store 73,825 33,267 121.9 Specialty Foods 17,278 19,630 (12.0 ) All Other 9,9937,72229.4   Total segment operating profit 245,792 184,977 32.9 Net interest and investment expense (income) 6,138 6,118 0.3 General corporate expense 11,252 10,363 8.6 Noncontrolling interest 1,2091,06213.8   Earnings before income taxes $229,611$169,55835.4     HORMEL FOODS CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)   Thirteen Weeks Ended1-30-2011   1-24-2010*   Net sales $ 1,921,558 $ 1,727,447   Cost of products sold   1,547,553     1,409,060     GROSS PROFIT: 374,005 318,387   Selling, general and administrative 145,161 145,532   Equity in earnings of affiliates 6,905   2,821     OPERATING INCOME: 235,749 175,676   Other income & expenses: Interest & investment income 441 443 Interest expense (6,579)(6,561)   EARNINGS BEFORE INCOME TAXES: 229,611 169,558   Provision for income taxes 79,576 57,289 (effective tax rate) 34.66%33.79%   NET EARNINGS150,035112,269 Less: net earnings attributable to noncontrolling interest   1,209     1,062   NET EARNINGS ATTRIBUTABLE TO  HORMEL FOODS CORPORATION$148,826   $111,207     NET EARNINGS PER SHAREBasic$.56   $.42   Diluted$.55   $.41     WEIGHTED AVG SHARES OUTBasic 266,560 267,178 Diluted 271,740 270,712   DIVIDENDS DECLAREDPER SHARE$.1275   $.1050     * Shares and per share figures have been restated to give effect to the two-for-one stock split, which was approved by shareholders at the Company's Annual Meeting on January 31, 2011. HORMEL FOODS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION     January 30, 2011October 31, 2010 (in thousands) ASSETS   CURRENT ASSETS Cash and cash equivalents $ 598,813 $ 467,845 Short-term marketable securities 50,719 50,595 Accounts receivable 406,677 430,939 Inventories 787,280 793,771 Income taxes receivable 0 8,525 Deferred income taxes 69,474 70,703 Prepaid expenses 13,612 12,153 Other current assets 22,65523,635   TOTAL CURRENT ASSETS 1,949,230 1,858,166   INTANGIBLES 769,730 770,545   OTHER ASSETS 488,356 503,104   PROPERTY, PLANT & EQUIPMENT, NET 915,632922,103   TOTAL ASSETS $4,122,948$4,053,918     LIABILITIES AND SHAREHOLDERS' INVESTMENT   TOTAL CURRENT LIABILITIES $ 1,020,203 $ 1,101,213   OTHER LONG-TERM LIABILITIES 550,761 546,066   SHAREHOLDERS' INVESTMENT 2,551,9842,406,639   TOTAL LIAB. & SHAREHOLDERS' INVESTMENT $4,122,948$4,053,918   HORMEL FOODS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   Thirteen Weeks Ended1-30-2011   1-24-2010 OPERATING ACTIVITIES (in thousands) Net earnings $ 150,035 $ 112,269 Depreciation and amortization of intangibles 31,197 30,850 Increase in working capital (21,177 ) (33,222 ) Other   1,246     4,038   NET CASH PROVIDED BY OPERATING ACTIVITIES 161,301 113,935   INVESTING ACTIVITIES Acquisitions of businesses/intangibles (7,207 ) (384 ) Net purchases of property / equipment (15,457 ) (17,652 ) Decrease (Increase) in investments, equity in affiliates, and other assets   8,174     (565)NET CASH USED IN INVESTING ACTIVITIES (14,490 ) (18,601 )   FINANCING ACTIVITIES Dividends paid on common stock (27,904 ) (25,373 ) Share repurchase (13,731 ) (16,081 ) Other   25,792     9,960   NET CASH USED IN FINANCING ACTIVITIES   (15,843)   (31,494)INCREASE IN CASH AND CASH EQUIVALENTS 130,968 63,840 Cash and cash equivalents at beginning of year   467,845     385,252   CASH AND CASH EQUIVALENTS AT END OF QUARTER$598,813   $449,092   Hormel Foods CorporationInvestor Contact:Kevin Jones, 507-437-5248kcjones@hormel.comorMedia Contact:Julie Craven, 507-437-5345media@hormel.com