8-K
HORMEL FOODS CORP /DE/ (HRL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 21, 2020
HORMEL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-2402 | 41-0319970 |
|---|---|---|
| (State or Other Jurisdiction of<br><br>Incorporation) | (Commission File<br><br>Number) | (IRS Employer Identification Number) |
1 Hormel Place
Austin, MN 55912
(Address of Principal Executive Office, including zip code)
(507) 437-5611
Registrant’s telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock $0.01465 par value | HRL | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Section 2 – FINANCIAL INFORMATION
Item 2.02 Results of Operations and Financial Condition
On May 21, 2020, the Company issued an earnings release announcing its financial results for the second quarter ended April 26, 2020. A copy of the earnings release is furnished as Exhibit 99 to this Form 8-K and is incorporated herein by reference.
Section 8 – OTHER EVENTS
Item 8.01 Other Events
The below risk factor relating to the COVID-19 pandemic updates and supplements the risk factors disclosed in Part II, “Item 1A. Risk Factors” in the Company's Form 10-Q for the fiscal quarter ended January 26, 2020, which can be accessed at hormelfoods.com in the "Investors" section.
The uncertain and rapidly changing COVID-19 pandemic could adversely affect the Company’s business, financial condition and results of operations.
The ongoing COVID-19 global pandemic has had, and will likely to continue to have, negative impacts across many of the Company's business units and facilities. The Company's operations and business have been impacted directly and indirectly by various government actions taken to stop or slow the spread of COVID-19, including travel restrictions, border shutdowns, stay-at-home and shelter-in-place orders, shutdowns of non-essential businesses, and emergency declarations.
The near and long term impacts of COVID-19 are unknown and impossible to predict with any level of certainty. At this time, the following potential risk factors arising from COVID-19 pandemic, may cause one or more of the following impacts on the Company's operations:
| • | One or more of the Company's manufacturing facilities may be shutdown, or have their operations significantly impacted, due to employee illnesses, increased absenteeism, and/or actions by government agencies. Capital projects may be delayed as additional capacity is no longer currently needed. The Company's co-manufacturers and material suppliers may face similar impacts. |
|---|---|
| • | Regulatory restrictions and measures taken at the Company's facilities to prevent or slowdown the spread of COVID-19 may impact facilities’ efficiency. |
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| • | Operating costs may increase as measures are put in place to prevent or slowdown the spread of COVID-19, such as facility improvements, employee testing, short term disability policies, and manufacturing employee bonus payments. |
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| • | Any new or additional measures required by national, state or local governments to combat COVID-19 may similarly add additional operational costs. |
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| • | Ongoing closure or reduced operations at foodservice establishments may impact results for the Foodservice division. Bankruptcy filings and/or delinquent payments from foodservice industry or other customers may negatively impact cash flow. |
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| • | A national and/or global economic downturn may impact consumer purchase behavior, such as reduced foodservice volume, lower volume in premium brands, and potential loss of business to private label. |
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| • | It may become more difficult and/or expensive to obtain debt or equity financing necessary to sustain our operations, make capital expenditures, and/or finance future acquisitions. |
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| • | The Company may face litigation by stockholders, employees, suppliers, customers, consumers, and others relating to COVID-19 and its effects. |
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| • | The Company relies on its dedicated employees, many of whom have a long tenure with the company. Operations may be negatively impacted if members of the Company's leadership team, or other key employees, become ill with COVID-19 or otherwise terminate their employment as a result of COVID-19. Further, we may face challenges hiring, onboarding, and training new employees, including leadership, which may impact results. The Company may also face operational challenges if government quarantine orders restrict movement of employees. |
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| • | In accordance with recommendations to reduce large gatherings and increase social distancing, many of the Company's office-based employees are working remotely, which may bring additional information technology and data security risks. |
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| • | Supply chain disruptions of various types arising from COVID-19 may impact the Company's ability to make products, the cost for such products, and the ability to deliver products to customers. Closure or reduced operations of material suppliers could result in shortages of key raw materials, as well as impact prices for those materials. The volatility in the market for raw material and supplies could impact the Company's profitability. |
| --- | --- |
| • | National, state, and local government orders closing or limiting operation of borders and ports, or imposing quarantine, could impact the Company's ability to obtain raw materials and to deliver finished goods to customers. |
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| • | COVID-19 has wide-reaching impacts to society and the business making all decisions, interactions, and transactions significantly more complex. |
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| • | The Company is committed to being transparent through communications to inform shareholders, employees, customers, consumers, and others about the enhanced safety protocols implemented. The Company must keep pace with a rapidly changing media environment. If the Company's public relations efforts are not effective or if consumers perceive them to be irresponsible, the Company's competitive position, reputation, and market share may suffer. |
| --- | --- |
The COVID-19 pandemic outbreak is an unprecedented situation and the Company's understanding of its impacts are changing and evolving on a weekly if not daily basis. The additional risk factors identified here are based upon information known at this time. The COVID-19 pandemic may adversely impact the Company's operations in one or more ways not identified to date.
These various risks may also increase the likelihood of other risk factors identified in the Company's Form 10-Q for the fiscal quarter ended January 26, 2020, occurring or impact their severity.
Section 9 – FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits
(d) Exhibits furnished pursuant to Item 2.02
| 99 | Earnings release issued May 21, 2020 |
|---|---|
| 101 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
| 104 | The cover page from this Current Report on Form 8-K, formatted as Inline XBRL. |
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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 hereunto duly authorized.
| HORMEL FOODS CORPORATION | ||
|---|---|---|
| (Registrant) | ||
| Dated: May 21, 2020 | By | /s/ JAMES P. SNEE |
| JAMES P. SNEE | ||
| Chairman of the Board, President and | ||
| Chief Executive Officer | ||
| Dated: May 21, 2020 | By | /s/ JAMES N. SHEEHAN |
| JAMES N. SHEEHAN | ||
| Executive Vice President and | ||
| Chief Financial Officer |
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Exhibit
| INVESTOR CONTACT:<br><br>Nathan Annis<br><br>(507) 437-5248<br><br>ir@hormel.com | MEDIA CONTACT:<br><br>Media Relations<br><br>(507) 437-5345<br><br>media@hormel.com |
|---|
HORMEL FOODS REPORTS SECOND QUARTER RESULTS
The company remains focused on implementing best-in-class employee safety measures, leveraging its balanced business model and maintaining financial discipline.
The company withdraws guidance due to uncertainty regarding the impact of COVID-19.
AUSTIN, Minn. (May 21, 2020) – Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the second quarter of fiscal 2020. All comparisons are to the second quarter of fiscal 2019 unless otherwise noted.
The impact of the Sadler's Smokehouse acquisition (March 2020) and the CytoSport divestiture (April 2019) are excluded in the presentation of the non-GAAP measures of organic volume and organic net sales. The impact of the one-time gain associated with the CytoSport divestiture last year is excluded from prior year adjusted pretax earnings and adjusted diluted earnings per share. Operating free cash flow is also presented as a non-GAAP metric.
EXECUTIVE SUMMARY
| • | Volume of 1.2 billion lbs., up 4%; organic volume^1^ up 7% |
|---|---|
| • | Record net sales of $2.4 billion, up 3%; organic net sales^1^ up 6% |
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| • | Pretax earnings of $286 million, down 10%; down 5% to adjusted pretax earnings^1^ last year primarily due to lower investment income |
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| • | Operating margin of 12.1%, compared to 13.3% last year |
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| • | Effective tax rate of 20.6%, compared to 11.1% last year |
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| • | Diluted earnings per share of $0.42, down 19%; down 9% to adjusted diluted earnings per share^1^ last year |
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| • | Cash flow from operations of $360 million, up 102% |
| --- | --- |
| • | Operating free cash flow^1^ of $280 million, up 115% |
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EXECUTIVE COMMENTARY AND OUTLOOK
"As a global branded food company, we play a critical role in providing safe, high-quality food during this challenging time," said Jim Snee, chairman of the board, president and chief executive officer. "I am incredibly proud of the heroic efforts of our production professionals, who have risen to the challenge and continue to produce food with a sense of purpose and pride. Our commitment is to ensure every Hormel Foods employee is safe and healthy and can continue to meet the needs of our customers and consumers."
"Our financial results this quarter demonstrate the value of our balanced business model and our team's ability to react to a rapidly changing environment," Snee said. "We continue to excel and gain market share in channels that are open and available to us, namely the retail channel. We know consumers are looking for trusted brands, and we will continue investing in our leading brands such as SPAM^®^, SKIPPY^®^,
Jennie-O^®^, Hormel^®^Natural Choice^®^and Applegate^®^. Our strong balance sheet and stable cash flows give us the confidence to lean into our business and make the right long-term decisions for our team members, suppliers, customers and shareholders. Even though the COVID-19 pandemic has caused a dramatic shift in consumer behavior, operational disruptions and extreme volatility in raw material markets, we remain financially strong and well-positioned to weather the pandemic."
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In the second quarter, the company absorbed approximately $20 million in incremental supply chain costs primarily related to lower production volumes, employee bonuses and enhanced safety measures in its production facilities. The company expects to absorb another $60-$80 million in the second half of the year, weighted primarily to the third quarter. The majority of the increased costs are expected to be temporary.
“Our leadership team has extensive experience effectively managing through volatile input cost markets and changes in consumer behavior, but we have always done so with a fully functioning supply chain across the industry,” Snee said. “The COVID-19 pandemic has created industry uncertainty as to whether we will experience further interruptions. Additionally, the foodservice industry is in the very early stages of a recovery, and we are actively monitoring the pace and magnitude of this recovery. As a result of this uncertainty, we are withdrawing our full-year sales and earnings guidance."
COVID-19 RESPONSE
"Employee safety has been and will continue to be our top priority, and this is why we are committed to making the necessary investments to keep our team members safe," Snee said. "Our industry-leading effort to enhance safety protections for our team members is complemented by our new awareness initiative, called KEEP COVID OUT!, which reinforces the importance of taking preventive measures at our production facilities and in our communities where we work and live."
Enhanced safety procedures have been implemented across the company's facilities, including providing personal protective equipment for all production team members, frequent disinfecting of high-touch areas, reconfiguration of common areas and workstations, temperature and wellness screenings, revised shift scheduling, reducing production line speeds, new guidelines on carpooling, more extensive social distancing measures throughout each facility and where possible, providing remote work opportunities and facilitating access to rapid testing for employees. The company's safety procedures meet or exceed CDC and OSHA guidelines, ensuring that its practices continue to reflect best practices in the food industry. The company has also announced over $11 million in bonuses to all full- and part-time plant production team members.
"I have the highest level of confidence that we have the right strategy, sound fundamentals, best-in-class management and the financial strength to thrive in this dynamic marketplace," Snee said. "I appreciate the work happening across all areas of our company and know we will continue do what is best for our team members and customers."
SEGMENT HIGHLIGHTS – SECOND QUARTER
Refrigerated Foods
•Volume flat; organic volume^1^ down 1%
•Net sales down 1%; organic net sales^1^ down 3%
•Segment profit down 17%
Strong retail and deli products sales and the Sadler's Smokehouse acquisition did not fully offset a dramatic decline in foodservice sales. Improved results from products such as Hormel^®^ Black Label^®^bacon, Applegate^®^ natural and organic meats, Columbus^®^charcuterie, Hormel^®^ pepperoni and Lloyd's^®^ barbeque meats were more than offset by the adverse profit impact from significantly lower foodservice sales and higher operational costs.
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Grocery Products
•Volume up 7%; organic volume^1^ up 19%
•Net sales up 8%; organic net sales^1^ up 20%
•Segment profit up 22%
Volume and sales increased as a result of higher consumer demand for branded retail products. Double-digit growth from products such as the SPAM^®^ family of products, SKIPPY^®^ peanut butter, Hormel^®^ chili and Hormel^®^ Compleats^®^microwave meals more than offset the divestiture of the CytoSport business last year. The significant increase in profit was due to higher sales and an improved mix across the portfolio.
Jennie-O Turkey Store
•Volume up 19%
•Net sales up 12%
•Segment profit up 54%
Improved retail, commodity and whole-bird sales more than offset a decline in foodservice sales. Distribution gains prior to the COVID-19 outbreak and subsequent strong demand during the outbreak for Jennie-O^®^ lean ground products drove double-digit retail sales increases. Segment profit increased due to higher sales and improved operational and live production performance.
International & Other
•Volume down 2%; organic volume^1^ down 1%
•Net sales up 2%; organic net sales^1^ up 3%
•Segment profit up 62%
Strong global demand for SPAM^®^luncheon meat and other branded exports overcame softer foodservice sales, especially in China. Segment profit increased as higher branded export margins and income from affiliates more than offset weaker results in China and lower fresh pork export margins.
CHANNEL HIGHLIGHTS – SECOND QUARTER
In an effort to add an increased level of disclosure and clarity to the nature, timing and uncertainty of our revenue, net sales have been disaggregated into sales channels, which can also be found in the Form 10-Q. The COVID-19 pandemic and subsequent shelter-in-place restrictions drove higher and sustained retail sales for each of the company's segments. The company delivered market share gains in the majority of its retail categories as consumers purchased branded food products at an accelerated rate through various retail outlets, including traditional, mass, club, discount and e-commerce retailers. Deli channel sales increased even as some categories declined. The effect of the pandemic also caused sharp sales declines in the foodservice channel during the quarter for each of the company's segments. International sales increased primarily due to exports of branded and commodity products in the International & Other and Jennie-O Turkey Store segments.
•U.S. retail net sales up 16%
•U.S. deli net sales up 5%
•U.S. foodservice net sales down 21%
•International net sales up 11%
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SELECTED FINANCIAL DETAILS
Income Statement
| • | Selling, general and administrative expenses increased year over year. The inclusion of the one-time gain resulting from the CytoSport divestiture led to lower expenses in fiscal 2019. |
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| • | Advertising investments were $35 million, flat to last year. |
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| • | Interest and investment income declined during the quarter due to losses on investments of $12 million. |
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| • | Operating margin was 12.1%, compared to 13.3% in fiscal 2019. Operating margin last year benefited from the one-time gain resulting from the CytoSport divestiture. |
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| • | The effective tax rate was 20.6%, compared to 11.1% last year. The lower rate in fiscal 2019 was due to the benefit of the tax gain from the CytoSport divestiture. |
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Cash Flow Statement
| • | Cash flow from operations was $360 million, up 102%. Lower levels of inventory and accounts receivable drove the majority of the increase. |
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| • | Operating free cash flow^1^was $280 million, up 115%. |
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| • | The company paid its 367th consecutive quarterly dividend on May 15, 2020, at the annual rate of $0.93 per share, an 11% increase over the prior year. |
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| • | The company finalized the acquisition of Sadler's Smokehouse for $269 million during the quarter. |
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| • | Capital expenditures in the second quarter were $80 million, compared to $48 million last year. The company's target for capital expenditures in fiscal 2020 is $340 million. Large projects include the Burke pizza toppings plant expansion, a new dry sausage facility in Nebraska, Project Orion and other projects to support growth of branded products. |
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| • | Share repurchases for the quarter totaled $12 million, representing 0.3 million shares purchased. |
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| • | Depreciation and amortization expense in the second quarter was $51 million, compared to $41 million last year. The full-year expense is expected to be approximately $200 million. |
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Balance Sheet
| • | The company remains in a strong financial position with limited debt and consistent cash flows. |
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| • | The company recently renewed its shelf registration statement and will be looking at near-term opportunities to access the debt capital markets to refinance existing debt maturing in April 2021 and to maintain ample liquidity at favorable interest rates. |
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| • | Cash on hand decreased to $606 million from $673 million at the beginning of the year. |
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| • | Total debt is $315 million, up from $250 million at the beginning of the year. The increase is attributable to the adoption of the new lease accounting standards. |
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| • | Working capital decreased to $924 million from $1,256 million at the beginning of the year, primarily related to the long-term debt becoming a current maturity during the quarter. |
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PRESENTATION
A conference call will be webcast at 8 a.m. CDT on Thursday, May 21, 2020. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-254-3590 and providing the access code 7355932. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at 11 a.m. CDT, Thursday, May 21, 2020, and will remain on the website for one year.
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ABOUT HORMEL FOODS - Inspired People. Inspired Food.™
Hormel Foods Corporation, based in Austin, Minn., is a global branded food company with over $9 billion in annual revenue across more than 80 countries worldwide. Its brands include SKIPPY^®^, SPAM^®^, Hormel^®^ Natural Choice^®^, Applegate^®^, Justin's^®^, Wholly^®^, Hormel^®^ Black Label^®^, Columbus^®^ and more than 30 other beloved brands. The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named on the "Global 2000 World's Best Employers" list by Forbes magazine for three straight years, is one of Fortune magazine's most admired companies, has appeared on Corporate Responsibility Magazine's "The 100 Best Corporate Citizens" list for 11 years in a row, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. The company lives by its purpose statement - Inspired People. Inspired Food.™ - to bring some of the world's most trusted and iconic brands to tables across the globe. For more information, visit 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 statements regarding "Risk Factors" and "Forward-Looking Statements" that appear on pages 30-35 in the company's Form 10-Q for the fiscal quarter ended Jan. 26, 2020, in addition to a supplemental risk factor relating to the COVID-19 pandemic included in our Form 8-K filed on May 21, 2020. Both can be accessed at hormelfoods.com in the "Investors" section.
Note: Due to rounding, numbers presented throughout this news release may not sum precisely to the totals provided, and percentages may not precisely reflect the absolute figures.
^1^ COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurement of adjusted earnings before income taxes (adjusted pretax earnings) and adjusted diluted earnings per share is presented to provide investors with additional information to facilitate the comparison of past and present operations. Adjusted earnings per share excludes the one-time gain associated with the divestiture of the CytoSport business in the second quarter of fiscal 2019, which was recognized in net unallocated expense and provision for income taxes. The tax benefit was driven by the sale of shares of the CytoSport legal entity.
The non-GAAP adjusted financial measurements of organic net sales and organic volume are presented to provide investors with additional information to facilitate the comparison of past and present operations. Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the Sadler's Smokehouse acquisition (March 2020) in the Refrigerated Foods segment and the CytoSport divestiture (April 2019) in the Grocery Products and International & Other segments.
The company defines the non-GAAP adjusted financial measurement of operating free cash flow as cash provided by or used in operating activities from continuing operations (a GAAP measure) less capital expenditures. The company views operating free cash flow as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments.
The company believes these non-GAAP financial measurements provide useful information to investors, because they are the measurements used to evaluate performance on a comparable year-over-year basis. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in
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analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | ||||||||||||||
| ADJUSTED EARNINGS (NON-GAAP) | ||||||||||||||
| Thirteen Weeks Ended | ||||||||||||||
| April 26, 2020 | April 28, 2019 | |||||||||||||
| 2020 GAAP Earnings | 2019 GAAP Earnings | Gain on CytoSport Sale | 2019 Non-GAAP Adjusted Earnings | % Change | ||||||||||
| Total segment profit | $ | 309,706 | $ | 294,661 | $ | — | $ | 294,661 | 5.1 | |||||
| Net unallocated expense | 23,098 | (23,178 | ) | 16,469 | (6,709 | ) | (444.3 | ) | ||||||
| Noncontrolling interest | (119 | ) | 207 | — | 207 | (157.5 | ) | |||||||
| Earnings Before Income Taxes | $ | 286,489 | $ | 318,046 | $ | (16,469 | ) | $ | 301,577 | (5.0 | ) | |||
| Provision for income taxes | 58,873 | 35,410 | 16,972 | 52,382 | 12.4 | |||||||||
| Net Earnings | $ | 227,615 | $ | 282,636 | $ | (33,441 | ) | $ | 249,195 | (8.7 | ) | |||
| Less: Net earnings attributable to noncontrolling interest | (119 | ) | 207 | — | 207 | (157.5 | ) | |||||||
| Net Earnings attributable to Hormel Foods Corporation | $ | 227,734 | $ | 282,429 | $ | (33,441 | ) | $ | 248,988 | (8.5 | ) | |||
| Diluted Earnings Per Share | $ | 0.42 | $ | 0.52 | $ | (0.06 | ) | $ | 0.46 | (8.7 | ) |
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| ORGANIC VOLUME AND NET SALES (NON-GAAP) | |||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Thirteen Weeks Ended | |||||||||||||||||||||||||||||||||
| April 26, 2020 | April 28, 2019 | ||||||||||||||||||||||||||||||||
| VOLUME (LBS.) | Reported<br><br>GAAP | Acquisitions | Organic<br><br>(Non-GAAP) | Reported<br><br>GAAP | Divestitures | Organic<br><br>(Non-GAAP) | Organic (Non-GAAP)<br><br>% Change | ||||||||||||||||||||||||||
| Grocery Products | 363,703 | — | 363,703 | 340,602 | (35,103 | ) | 305,499 | 19.1 | |||||||||||||||||||||||||
| Refrigerated Foods | 576,543 | (3,730 | ) | 572,813 | 578,795 | — | 578,795 | (1.0 | ) | ||||||||||||||||||||||||
| Jennie-O Turkey Store | 209,477 | — | 209,477 | 175,611 | — | 175,611 | 19.3 | ||||||||||||||||||||||||||
| International & Other | 83,350 | — | 83,350 | 84,999 | (1,025 | ) | 83,974 | (0.7 | ) | ||||||||||||||||||||||||
| TOTAL | 1,233,072 | (3,730 | ) | 1,229,343 | 1,180,007 | (36,128 | ) | 1,143,879 | 7.5 | ||||||||||||||||||||||||
| NET SALES | |||||||||||||||||||||||||||||||||
| Grocery Products | $ | 683,250 | $ | — | $ | 683,250 | $ | 635,319 | $ | (67,415 | ) | $ | 567,904 | 20.3 | |||||||||||||||||||
| Refrigerated Foods | 1,247,336 | (21,610 | ) | 1,225,726 | 1,257,884 | — | 1,257,884 | (2.6 | ) | ||||||||||||||||||||||||
| Jennie-O Turkey Store | 343,056 | — | 343,056 | 305,256 | — | 305,256 | 12.4 | ||||||||||||||||||||||||||
| International & Other | 148,823 | — | 148,823 | 146,285 | (1,907 | ) | 144,378 | 3.1 | |||||||||||||||||||||||||
| TOTAL | $ | 2,422,465 | $ | (21,610 | ) | $ | 2,400,855 | $ | 2,344,744 | $ | (69,322 | ) | $ | 2,275,422 | 5.5 | Twenty-Six Weeks Ended | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||
| April 26, 2020 | April 28, 2019 | ||||||||||||||||||||||||||||||||
| VOLUME (LBS.) | Reported<br><br>GAAP | Acquisitions | Organic<br><br>(Non-GAAP) | Reported<br><br>GAAP | Divestitures | Organic<br><br>(Non-GAAP) | Organic (Non-GAAP)<br><br>% Change | ||||||||||||||||||||||||||
| Grocery Products | 656,621 | — | 656,621 | 679,345 | (69,910 | ) | 609,435 | 7.7 | |||||||||||||||||||||||||
| Refrigerated Foods | 1,182,152 | (3,730 | ) | 1,178,422 | 1,168,151 | — | 1,168,151 | 0.9 | |||||||||||||||||||||||||
| Jennie-O Turkey Store | 406,676 | — | 406,676 | 357,770 | — | 357,770 | 13.7 | ||||||||||||||||||||||||||
| International & Other | 174,610 | — | 174,610 | 171,634 | (2,052 | ) | 169,583 | 3.0 | |||||||||||||||||||||||||
| TOTAL | 2,420,059 | (3,730 | ) | 2,416,329 | 2,376,900 | (71,962 | ) | 2,304,939 | 4.8 | ||||||||||||||||||||||||
| NET SALES | |||||||||||||||||||||||||||||||||
| Grocery Products | $ | 1,223,876 | $ | — | $ | 1,223,876 | $ | 1,242,144 | $ | (130,588 | ) | $ | 1,111,556 | 10.1 | |||||||||||||||||||
| Refrigerated Foods | 2,599,127 | (21,610 | ) | 2,577,516 | 2,536,631 | — | 2,536,631 | 1.6 | |||||||||||||||||||||||||
| Jennie-O Turkey Store | 673,183 | — | 673,183 | 626,490 | — | 626,490 | 7.5 | ||||||||||||||||||||||||||
| International & Other | 310,714 | — | 310,714 | 299,834 | (3,889 | ) | 295,946 | 5.0 | |||||||||||||||||||||||||
| TOTAL | $ | 4,806,899 | $ | (21,610 | ) | $ | 4,785,289 | $ | 4,705,099 | $ | (134,477 | ) | $ | 4,570,623 | 4.7 | OPERATING FREE CASH FLOW (NON-GAAP) | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||||||||||
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||||||||||||||||||||
| April 26, <br>2020 | April 28, <br>2019 | % Change | April 26, <br>2020 | April 28, <br>2019 | % Change | ||||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 359,872 | $ | 178,168 | $ | 548,290 | $ | 365,593 | |||||||||||||||||||||||||
| Purchases of property/equipment | (80,352 | ) | (48,191 | ) | (138,563 | ) | (87,621 | ) | |||||||||||||||||||||||||
| Operating free cash flow | $ | 279,520 | $ | 129,977 | 115.1 | $ | 409,727 | $ | 277,972 | 47.4 |
7
HORMEL FOODS CORPORATION
SEGMENT DATA
(Unaudited) (In thousands)
| Thirteen Weeks Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| April 26, <br>2020 | April 28, <br>2019 | % Change | ||||||
| NET SALES | ||||||||
| Grocery Products | $ | 683,250 | $ | 635,319 | 7.5 | |||
| Refrigerated Foods | 1,247,336 | 1,257,884 | (0.8 | ) | ||||
| Jennie-O Turkey Store | 343,056 | 305,256 | 12.4 | |||||
| International & Other | 148,823 | 146,285 | 1.7 | |||||
| TOTAL | $ | 2,422,465 | $ | 2,344,744 | 3.3 | |||
| SEGMENT PROFIT | ||||||||
| Grocery Products | $ | 127,763 | $ | 104,499 | 22.3 | |||
| Refrigerated Foods | 131,431 | 158,088 | (16.9 | ) | ||||
| Jennie-O Turkey Store | 27,348 | 17,749 | 54.1 | |||||
| International & Other | 23,164 | 14,325 | 61.7 | |||||
| TOTAL SEGMENT PROFIT | 309,706 | 294,661 | 5.1 | |||||
| Net unallocated expense | 23,098 | (23,178 | ) | (199.7 | ) | |||
| Noncontrolling interest | (119 | ) | 207 | (157.5 | ) | |||
| EARNINGS BEFORE INCOME TAX | $ | 286,489 | $ | 318,046 | (9.9 | ) | ||
| Twenty-Six Weeks Ended | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| April 26, <br>2020 | April 28, <br>2019 | % Change | ||||||
| NET SALES | ||||||||
| Grocery Products | $ | 1,223,876 | $ | 1,242,144 | (1.5 | ) | ||
| Refrigerated Foods | 2,599,127 | 2,536,631 | 2.5 | |||||
| Jennie-O Turkey Store | 673,183 | 626,490 | 7.5 | |||||
| International & Other | 310,714 | 299,834 | 3.6 | |||||
| TOTAL | $ | 4,806,899 | $ | 4,705,099 | 2.2 | |||
| SEGMENT PROFIT | ||||||||
| Grocery Products | $ | 196,198 | $ | 199,796 | (1.8 | ) | ||
| Refrigerated Foods | 298,775 | 320,681 | (6.8 | ) | ||||
| Jennie-O Turkey Store | 65,899 | 55,653 | 18.4 | |||||
| International & Other | 43,115 | 39,303 | 9.7 | |||||
| TOTAL SEGMENT PROFIT | 603,986 | 615,433 | (1.9 | ) | ||||
| Net unallocated expense | 27,297 | (9,287 | ) | (393.9 | ) | |||
| Noncontrolling interest | (39 | ) | 301 | (113.0 | ) | |||
| EARNINGS BEFORE INCOME TAX | $ | 576,651 | $ | 625,021 | (7.7 | ) |
8
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except per share amounts)
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 26, <br>2020 | April 28, <br>2019 | April 26, <br>2020 | April 28, <br>2019 | |||||||||
| Net sales | $ | 2,422,465 | $ | 2,344,744 | $ | 4,806,899 | $ | 4,705,099 | ||||
| Cost of products sold | 1,945,113 | 1,875,595 | 3,861,127 | 3,747,616 | ||||||||
| GROSS PROFIT | 477,352 | 469,149 | 945,773 | 957,483 | ||||||||
| Selling, general and administrative | 193,912 | 170,076 | 389,433 | 363,620 | ||||||||
| Equity in earnings of affiliates | 10,021 | 13,291 | 17,608 | 24,749 | ||||||||
| OPERATING INCOME | 293,460 | 312,364 | 573,948 | 618,612 | ||||||||
| Interest & investment income (expense) | (3,474 | ) | 11,297 | 9,777 | 18,171 | |||||||
| Interest expense | (3,497 | ) | (5,615 | ) | (7,074 | ) | (11,762 | ) | ||||
| EARNINGS BEFORE INCOME TAXES | 286,489 | 318,046 | 576,651 | 625,021 | ||||||||
| Provision for income taxes | 58,873 | 35,410 | 106,083 | 100,866 | ||||||||
| (effective tax rate) | 20.6 | % | 11.1 | % | 18.4 | % | 16.1 | % | ||||
| NET EARNINGS | 227,615 | 282,636 | 470,568 | 524,155 | ||||||||
| Less: Net earnings (loss) attributable to noncontrolling interest | (119 | ) | 207 | (39 | ) | 301 | ||||||
| NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION | $ | 227,734 | $ | 282,429 | $ | 470,606 | $ | 523,854 | ||||
| NET EARNINGS PER SHARE | ||||||||||||
| Basic | $ | 0.42 | $ | 0.53 | $ | 0.88 | $ | 0.98 | ||||
| Diluted | $ | 0.42 | $ | 0.52 | $ | 0.86 | $ | 0.96 | ||||
| WEIGHTED-AVERAGE SHARES OUTSTANDING | ||||||||||||
| Basic | 538,119 | 535,480 | 536,597 | 534,988 | ||||||||
| Diluted | 546,373 | 546,330 | 545,594 | 546,724 | ||||||||
| Dividends declared per share | $ | 0.2325 | $ | 0.2100 | $ | 0.4650 | $ | 0.4200 |
9
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited) (In thousands)
| April 26, <br>2020 | October 27, <br>2019 | |||||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash and cash equivalents | $ | 606,073 | $ | 672,901 | ||
| Short-term marketable securities | 16,841 | 14,736 | ||||
| Accounts receivable | 536,009 | 574,396 | ||||
| Inventories | 1,048,992 | 1,042,362 | ||||
| Income taxes receivable | 342 | 19,924 | ||||
| Prepaid expenses | 24,229 | 22,637 | ||||
| Other current assets | 16,410 | 14,457 | ||||
| TOTAL CURRENT ASSETS | 2,248,896 | 2,361,413 | ||||
| Goodwill | 2,682,839 | 2,481,645 | ||||
| Other intangibles | 1,023,936 | 1,033,862 | ||||
| Pension assets | 147,878 | 135,915 | ||||
| Investments in and receivables from affiliates | 303,194 | 289,157 | ||||
| Other assets | 238,273 | 177,901 | ||||
| Property, plant & equipment, net | 1,750,165 | 1,629,111 | ||||
| TOTAL ASSETS | $ | 8,395,181 | $ | 8,109,004 | ||
| LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||
| Accounts payable | $ | 502,133 | $ | 590,033 | ||
| Accrued expenses | 67,481 | 62,031 | ||||
| Accrued workers' compensation | 25,339 | 24,272 | ||||
| Accrued marketing | 111,657 | 96,305 | ||||
| Employee-related expenses | 179,328 | 213,515 | ||||
| Taxes payable | 54,765 | 6,208 | ||||
| Interest and dividends payable | 125,595 | 112,685 | ||||
| Current maturities of long-term debt | 258,295 | — | ||||
| TOTAL CURRENT LIABILITIES | 1,324,595 | 1,105,049 | ||||
| Long-term debt, less current maturities | 56,861 | 250,000 | ||||
| Pension and post-retirement benefits | 542,753 | 536,490 | ||||
| Other long-term liabilities | 139,517 | 115,356 | ||||
| Deferred income taxes | 165,253 | 176,574 | ||||
| Accumulated other comprehensive loss | (447,908 | ) | (399,500 | ) | ||
| Other shareholders' investment | 6,614,110 | 6,325,035 | ||||
| TOTAL LIABILITIES & SHAREHOLDERS’ INVESTMENT | $ | 8,395,181 | $ | 8,109,004 |
10
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
| Thirteen<br><br>Weeks Ended | Twenty-Six<br><br>Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 26, <br>2020 | April 28, <br>2019 | April 26, <br>2020 | April 28, <br>2019 | |||||||||
| OPERATING ACTIVITIES | ||||||||||||
| Net earnings | $ | 227,615 | $ | 282,636 | $ | 470,568 | $ | 524,155 | ||||
| Depreciation and amortization | 50,588 | 40,725 | 99,917 | 80,743 | ||||||||
| Decrease (increase) in working capital | 65,774 | (84,828 | ) | (37,065 | ) | (166,487 | ) | |||||
| Other | 15,895 | (60,365 | ) | 14,870 | (72,818 | ) | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 359,872 | 178,168 | 548,290 | 365,593 | ||||||||
| INVESTING ACTIVITIES | ||||||||||||
| Net (purchase) sale of securities | (1,975 | ) | (6,664 | ) | (1,991 | ) | (6,664 | ) | ||||
| Proceeds from sale of business | — | 473,885 | — | 473,885 | ||||||||
| Acquisitions of businesses/intangibles | (268,878 | ) | — | (268,878 | ) | — | ||||||
| Purchases of property/equipment | (80,352 | ) | (48,191 | ) | (138,563 | ) | (87,621 | ) | ||||
| Proceeds from sales of property/equipment | 7 | 862 | 1,121 | 31,167 | ||||||||
| Increase in investments, equity in affiliates, and other assets | (11,433 | ) | 6,614 | (14,824 | ) | 14,060 | ||||||
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | (362,631 | ) | 426,506 | (423,135 | ) | 424,827 | ||||||
| FINANCING ACTIVITIES | ||||||||||||
| Repayments of long-term debt and finance leases | (2,050 | ) | (374,878 | ) | (4,069 | ) | (374,840 | ) | ||||
| Dividends paid on common stock | (124,501 | ) | (112,162 | ) | (236,750 | ) | (212,287 | ) | ||||
| Share repurchase | (12,360 | ) | (22,813 | ) | (12,360 | ) | (67,622 | ) | ||||
| Other | 28,095 | 28,280 | 64,448 | 44,277 | ||||||||
| NET CASH USED IN FINANCING ACTIVITIES | (110,816 | ) | (481,573 | ) | (188,731 | ) | (610,472 | ) | ||||
| Effect of exchange rate changes on cash | (4,771 | ) | 3,537 | (3,252 | ) | 243 | ||||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (118,346 | ) | 126,638 | (66,828 | ) | 180,191 | ||||||
| Cash and cash equivalents at beginning of period | 724,419 | 512,689 | 672,901 | 459,136 | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF QUARTER | $ | 606,073 | $ | 639,327 | $ | 606,073 | $ | 639,327 |
11