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Press release from Business Wire

Hormel Foods Reports Fourth Quarter Results

Tuesday, November 22, 2011

Hormel Foods Reports Fourth Quarter Results06:30 EST Tuesday, November 22, 2011 AUSTIN, Minn. (Business Wire) -- Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2011 fourth quarter and full year. All comparisons are to the fourth quarter or full year of fiscal 2010. All per share results reported here have been adjusted to give effect to the two-for-one stock split, which was effective February 1, 2011. HIGHLIGHTSFourth Quarter All quarterly comparisons are based on a 13 week quarter in fiscal 2011, compared to a 14 week quarter in fiscal 2010 Diluted EPS of $.43, down 4 percent from $.45 per share Segment operating profit decreased 5 percent Dollar sales of $2.1 billion, increased 2 percent; volume down 7 percent Grocery Products operating profit up 3 percent; volume down 6 percent; dollar sales down 2 percent Refrigerated Foods operating profit down 19 percent; volume down 8 percent; dollar sales up 1 percent Jennie-O Turkey Store operating profit up 4 percent; volume down 11 percent; dollar sales up 2 percent Specialty Foods operating profit up 12 percent; volume down 1 percent; dollar sales up 10 percent All Other operating profit up 3 percent; volume up 2 percent; dollar sales up 12 percent Fiscal Year All annual comparisons are based on a 52 week fiscal year in 2011, compared to a 53 week fiscal year in 2010 Record diluted EPS of $1.74, up 19 percent from diluted EPS of $1.46 Segment operating profit up 13 percent Record dollar sales of $7.9 billion, up 9 percent; volume up 1 percent Grocery Products operating profit up 4 percent; volume flat; dollar sales up 2 percent Refrigerated Foods operating profit up 6 percent; volume down 1 percent; dollar sales up 10 percent Jennie-O Turkey Store operating profit up 43 percent; volume up 1 percent; dollar sales up 12 percent Specialty Foods operating profit down 5 percent; volume up 3 percent; dollar sales up 7 percent All Other operating profit up 39 percent; volume up 13 percent; dollar sales up 26 percent The company reported fiscal 2011 fourth quarter net earnings of $117.3 million, down 3 percent from earnings of $121.1 million a year earlier. Diluted earnings per share for the quarter were $0.43, down 4 percent compared to $0.45 last year. Sales for the quarter were $2.1 billion, up 2 percent from the same period in fiscal 2010. For the year ended October 30, 2011, net earnings were $474.2 million, up 16 percent from adjusted1 net earnings of $409.0 million last year, and up 20 percent from U.S. GAAP net earnings of $395.6 million. Diluted net earnings per share were $1.74, up 15 percent from diluted adjusted1 net earnings per share of $1.51 last year and up 19 percent from U.S. GAAP diluted earnings per share of $1.46. Sales for the year ended October 30, 2011, totaled $7.9 billion, up 9 percent from last year. COMMENTARY “I am proud of the team for finishing an outstanding year with a fourth quarter that met our expectations. For the quarter, we are pleased to have generated segment profit increases in four out of five segments and an overall net sales increase. Our tonnage was down in comparison with the 14 week quarter last year, but we held our own on volumes in the face of significant pricing actions,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. "In looking at the full year, we delivered significant sales growth of 9 percent, ending the year at a record $7.9 billion, with all five segments registering increases. We also grew earnings per share by an excellent 19 percent, finishing at record earnings of $1.74 per share. We enjoyed a particularly strong performance by the Jennie-O Turkey Store team, and both our All Other (International) and Refrigerated Foods segments also generated nice profit increases for the year. We enhanced our support of our key HORMEL and JENNIE-O TURKEY STORE brands in fiscal 2011 with effective advertising campaigns, and added to the portfolio of our fast-growing MegaMex Foods joint venture through the acquisition of the WHOLLY GUACAMOLE line and other related products," commented Ettinger. "This morning we announced a $.09 per share increase to the annual dividend (or 17.6 percent), making the new dividend $.60 per share. This marks the 46th consecutive year in which we have increased our dividend, and further evidences our intention to deliver superior total returns to our shareholders," stated Ettinger. SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTERGrocery Products (13% of Net Sales, 23% of Total Segment Operating Profit)The Grocery Products segment profit increased 3 percent, due in part to improved results by the MegaMex Foods joint venture. Sales overall for the quarter were down 2 percent. The SPAM® family of products and HORMEL® Bacon Toppings showed solid sales growth in the quarter. Refrigerated Foods (52% of Net Sales, 36% of Total Segment Operating Profit)Refrigerated Foods segment profit declined 19 percent, as lower pork operating margins and higher commodity input costs negatively impacted results. Net sales for the quarter were up 1 percent, led by HORMEL® convenience bacon and HORMEL® CURE 81® hams in the Meat Products group and HORMEL® NATURAL CHOICE® deli meats and pizza toppings in the Foodservice group. Jennie-O Turkey Store (20% of Net Sales, 25% of Total Segment Operating Profit)Jennie-O Turkey Store had a solid quarter, with segment profit up 4 percent and sales up 2 percent. The continued sales growth of value-added products and improved efficiencies throughout the supply chain and operations offset higher feed costs during the quarter. Specialty Foods (11% of Net Sales, 11% of Total Segment Operating Profit)The Specialty Foods segment posted operating profits 12 percent higher than last year on a 10 percent increase in sales. Sales mix improvements on bulk and nutritional items and higher sales of private label canned meats contributed to the improved results. All Other (4% of Net Sales, 5% of Total Segment Operating Profit)The All Other segment, which consists primarily of Hormel Foods International, posted segment profits that were 3 percent ahead of last year, and sales grew 12 percent. Results were primarily driven by stronger fresh pork exports. General Corporate ExpenseGeneral corporate expenses were lower, driven principally by a reduction in the lower of cost or market inventory reserve. OUTLOOK "We expect to deliver sales and earnings growth in fiscal 2012, even amidst some difficult comparisons and less-than-favorable macro conditions. In particular, we are looking for our Grocery Products, Specialty Foods and All Other (International) units to drive profit growth in fiscal 2012, as our Refrigerated Foods and Jennie-O Turkey Store segments maintain their position against historically high results. We also anticipate the comparisons to be more difficult in the first half of the year, becoming more favorable later in the year. Taking all of the relevant factors into account, we are setting our 2012 guidance range at $1.79 to $1.89 per share," remarked Ettinger. DIVIDENDS Effective November 15, 2011, the Company paid its 333rd consecutive quarterly dividend, at the annual rate of $.51, marking the beginning of its 84th consecutive year of dividends paid. CONFERENCE CALL A conference call will be webcast at 8:00 a.m. CT on Tuesday, November 22, 2011. Access is available at http://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 877-941-8609 and the access code is 4482517. An audio replay is available by calling 800-406-7325 and entering access code 4482517. The audio replay will be available beginning at 10:30 a.m. CT on Tuesday, November 22, 2011, through 11:59 p.m. CT on December 6, 2011. The Webcast replay will be available at 10:30 a.m. CT, Tuesday, November 22, 2011, and archived for one year. 1COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS The non-GAAP adjusted financial measurements are provided to assist the investor in better understanding the Company's operating performance by excluding the impact of certain non-recurring items affecting comparability. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with any generally accepted accounting principles and may be different from non-GAAP measures used by other companies. ADJUSTED EARNINGS Adjusted net earnings for 2010 (a non-GAAP financial measurement) exclude one-time charges of $6.3 million ($0.02 per diluted share) relating to the closure of the Valley Fresh plant and an income tax charge of $7.1 million ($0.03 per diluted share) primarily due to the change in tax treatment of Medicare Part D reimbursements by health care laws enacted in the prior year. The table below shows the calculations to reconcile from adjusted earnings to U.S. GAAP earnings for 2010.                     Year to Date Tax items Valley primarily 2011 U.S. 2010 Fresh related to 2010 U.S. GAAP Adjusted Plant health GAAP Earnings Earnings Closure care laws Earnings Grocery Products $ 162,556 $ 165,655 $ (9,733 ) $ 155,922 Refrigerated Foods 292,624 276,315 276,315 Jennie-O Turkey Store 204,940 143,644 143,644 Specialty Foods 76,905 80,727 80,727 All Other   36,250   26,126       26,126 Total segment operating profit 773,275 692,467 (9,733 ) 682,734 Net interest and investment expense (income) 23,448 22,024 22,024 General corporate expense   35,992   40,348       40,348 EBIT Attributable to Hormel Foods 713,835 630,095 (9,733 ) 620,362 Income taxes   239,640   221,110   (3,455 ) $ 7,120     224,775 Net earnings attributable toHormel Foods Corporation $ 474,195 $ 408,985 $ (6,278 ) $ (7,120 ) $ 395,587   Diluted net earnings per share $ 1.74 $ 1.51 $ (0.02 ) $ (0.03 ) $ 1.46   About Hormel Foods 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 33-39 in the company's Form 10-Q for the quarter ended July 31, 2011, which was filed with the SEC on September 9, 2011, and can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”     Segment Data Fiscal 2011 Fourth Quarter Segment Operating Results (in Thousands)       FOURTH QUARTER ENDED         NET SALESOctober 30, 2011October 31, 2010% Change Grocery Products $ 282,018 $ 287,112 (1.8 ) Refrigerated Foods 1,092,024 1,082,941 0.8 Jennie-O Turkey Store 408,943 402,048 1.7 Specialty Foods 232,213 212,017 9.5 All Other   88,700   78,92112.4   Total $2,103,898$2,063,0392.0     OPERATING PROFIT Grocery Products $ 44,518 $ 43,134 3.2 Refrigerated Foods 69,420 86,065 (19.3 ) Jennie-O Turkey Store 49,561 47,544 4.2 Specialty Foods 22,322 19,886 12.2 All Other   9,770   9,4483.4   Total segment operating profit 195,591 206,077 (5.1 ) Net interest and investment expense (income) 6,611 4,572 44.6 General corporate expense 9,827 14,889 (34.0 ) Noncontrolling interest   1,186   1,460(18.8) Earnings before income taxes $180,339$188,076(4.1)   YEAR TO DATE ENDED   NET SALESOctober 30, 2011October 31, 2010% Change Grocery Products $ 1,064,558 $ 1,040,455 2.3 Refrigerated Foods 4,189,224 3,818,788 9.7 Jennie-O Turkey Store 1,467,222 1,310,412 12.0 Specialty Foods 835,584 782,958 6.7 All Other   338,501   268,10626.3   Total $7,895,089$7,220,7199.3     OPERATING PROFIT Grocery Products $ 162,556 $ 155,922 4.3 Refrigerated Foods 292,624 276,315 5.9 Jennie-O Turkey Store 204,940 143,644 42.7 Specialty Foods 76,905 80,727 (4.7 ) All Other   36,250   26,12638.8   Total segment operating profit 773,275 682,734 13.3 Net interest and investment expense (income) 23,448 22,024 6.5 General corporate expense 35,992 40,348 (10.8 ) Noncontrolling interest   5,001   4,18919.4   Earnings before income taxes $718,836$624,55115.1       HORMEL FOODS CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)             Quarter EndedYear Ended10-30-201110-31-2010*10-30-2011     10-31-2010*   Net sales $ 2,103,898 $ 2,063,039 $ 7,895,089 $ 7,220,719   Cost of products sold   1,767,872     1,708,066     6,560,976     5,981,977     GROSS PROFIT: 336,026 354,973 1,334,113 1,238,742   Selling, general and administrative 156,694 166,456 618,586 605,293   Equity in earnings of affiliates   7,618     4,131     26,757     13,126     OPERATING INCOME: 186,950 192,648 742,284 646,575   Other income & expenses: Interest & investment (loss) income (3,338 ) 2,389 (786 ) 4,565 Interest expense   (3,273)   (6,961)   (22,662)   (26,589)   EARNINGS BEFORE INCOME TAXES: 180,339 188,076 718,836 624,551   Provision for income taxes 61,844 65,468 239,640 224,775 (effective tax rate)   34.29%   34.81%   33.34%   35.99%   NET EARNINGS118,495122,608479,196399,776 Less: Net earnings attributable to noncontrolling interest   1,186     1,460     5,001     4,189   NET EARNINGS ATTRIBUTABLE TOHORMEL FOODS CORPORATION$117,309   $121,148   $474,195   $395,587     NET EARNINGS PER SHAREBasic$.44   $.46   $1.78   $1.48   Diluted$.43   $.45   $1.74   $1.46     WEIGHTED AVG SHARES O/SBasic 264,913 266,204 266,394 266,732 Diluted 270,314 270,594 271,915 270,698   DIVIDENDS DECLAREDPER SHARE$.1275   $.1050   $.5100   $.4200     * Shares and per share figures have been restated to reflect the two-for-one stock split effected February 1, 2011.     HORMEL FOODS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION         October 30, 2011October 31, 2010 (In Thousands) ASSETS   CURRENT ASSETS Cash and cash equivalents $ 463,130 $ 467,845 Short-term marketable securities 76,077 50,595 Accounts receivable 461,110 430,939 Inventories 885,823 793,771 Income taxes receivable 24,423 8,525 Deferred income taxes 69,203 70,703 Prepaid expenses 10,048 12,153 Other current assets   8,417   23,635   TOTAL CURRENT ASSETS 1,998,231 1,858,166   INTANGIBLES 762,930 770,545   OTHER ASSETS 576,140 503,104   PROPERTY, PLANT & EQUIPMENT, NET   907,090   922,103   TOTAL ASSETS $4,244,391$4,053,918     LIABILITIES AND SHAREHOLDERS' INVESTMENT   TOTAL CURRENT LIABILITIES $ 778,186 $ 1,101,213   LONG-TERM DEBT – LESS CURRENT MATURITIES 250,000 0   OTHER LONG-TERM LIABILITIES 556,389 546,066   SHAREHOLDERS' INVESTMENT   2,659,816   2,406,639   TOTAL LIAB. & SHAREHOLDERS' INVESTMENT $4,244,391$4,053,918     HORMEL FOODS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     Year Ended10-30-2011     10-31-2010 (In Thousands) OPERATING ACTIVITIES Net earnings $ 479,196 $ 399,776 Depreciation and amortization of intangibles 124,165 125,591 Increase in working capital (102,781 ) (65,683 ) Other   (10,101)   25,848   NET CASH PROVIDED BY OPERATING ACTIVITIES 490,479 485,532   INVESTING ACTIVITIES Net purchase of securities (20,000 ) (50,000 ) Acquisitions of businesses/intangibles (7,207 ) (28,104 ) Net purchases of property / equipment (92,525 ) (84,908 ) Increase in investments, equity in affiliates, and other assets   (51,253)   (95,464)NET CASH USED IN INVESTING ACTIVITIES (170,985 ) (258,476 )   FINANCING ACTIVITIES (Payments on) Proceeds from long-term debt, net (102,436 ) 0 Dividends paid on common stock (129,975 ) (109,374 ) Share repurchase (152,930 ) (69,574 ) Other   61,132     34,485   NET CASH USED IN FINANCING ACTIVITIES   (324,209)   (144,463)(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,715 ) 82,593 Cash and cash equivalents at beginning of year   467,845     385,252   CASH AND CASH EQUIVALENTS AT END OF YEAR$463,130   $467,845   Hormel Foods CorporationInvestor Contact:Kevin Jones, 507-437-5248kcjones@hormel.comorMedia Contact:Julie Craven, 507-437-5345media@hormel.com