Hormel Foods Achieves Record Third Quarter Results and Raises Full Year Guidance

AUSTIN, Minn.--(BUSINESS WIRE)--Hormel Foods Corporation (NYSE: HRL) today reported record performance for the fiscal year 2016 third quarter.

All comparisons are to the third quarter of fiscal 2015. All earnings per share measures have been adjusted to reflect the two-for-one stock split distributed on February 9, 2016.

SUMMARY

• Record diluted earnings per share of $0.36, up 33 percent from $0.27 per share.
• Record net earnings of $195.7 million, up 33 percent from net earnings of $146.9 million.
• Record dollar sales of $2.3 billion, up 5 percent; volume up 1 percent.
• Refrigerated Foods operating profit up 24 percent; volume up 3 percent; dollar sales up 9 percent.
• Jennie-O Turkey Store operating profit up 59 percent; volume up 29 percent; dollar sales up 20 percent.
• International & Other operating profit up 5 percent; volume up 10 percent; dollar sales up 5 percent.
• Grocery Products operating profit flat; volume up 1 percent; dollar sales up 3 percent.
• Specialty Foods operating profit down 13 percent; volume down 32 percent; dollar sales down 25 percent. Decreases reflect the impact from the divestiture of the Diamond Crystal Brands business.

COMMENTARY

“We are pleased to announce exceptional results this quarter with three of our five segments delivering volume, sales and earnings growth. This is also our thirteenth consecutive quarter of record earnings which is a testament to our balanced business model,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer. “Excellent results in Refrigerated Foods were driven by the addition of the Applegate business, foodservice sales of OLD SMOKEHOUSE® bacon, HORMEL® BACON 1™ fully cooked bacon, and HORMEL® FIRE BRAISED™ meats, and retail sales of HORMEL® NATURAL CHOICE® meats. Jennie-O Turkey Store also returned to growth, posting strong double-digit sales and earnings increases,” stated Ettinger.

“Iconic brands such as SPAM® and SKIPPY® drove increased sales in our Grocery Products and International segments. We enjoyed strong growth from MUSCLE MILK® protein products led by innovative new items such as MUSCLE MILK® protein smoothies, though Specialty Foods did not show growth this quarter due to the sale of Diamond Crystal Brands,” commented Ettinger.

SEGMENT OPERATING HIGHLIGHTS – THIRD QUARTER

Refrigerated Foods (50% of Net Sales, 44% of Total Segment Operating Profit)
Refrigerated Foods segment profit increased 24 percent aided by the inclusion of the Applegate business, favorable market conditions, and growth in value-added products. Results reflect a favorable comparison to the prior year, which included Applegate transaction costs of $8.6 million. Sales increased 9 percent on continued success in foodservice products including OLD SMOKEHOUSE® bacon and HORMEL® FIRE BRAISED™ meats, and retail products such as HORMEL® NATURAL CHOICE® meats and HORMEL GATHERINGS® party trays. Brands experiencing declines in sales include retail deli products and LLOYDS® barbeque ribs.

Jennie-O Turkey Store (18% of Net Sales, 20% of Total Segment Operating Profit)
Jennie-O Turkey Store segment profit increased 59 percent and sales increased 20 percent following the recovery from highly pathogenic avian influenza in fiscal 2015. JENNIE-O® value-added foodservice and deli products contributed to sales growth during the quarter. Results reflect a $9.6 million mark-to-market loss on hedges.

International & Other (6% of Net Sales, 7% of Total Segment Operating Profit)
International segment profit increased 5 percent and sales increased 5 percent. Exports of fresh pork, SKIPPY® peanut butter, and the SPAM® family of products drove the improved results.

Grocery Products (17% of Net Sales, 19% of Total Segment Operating Profit)
Grocery Products segment profit was flat for the quarter due to an increase in advertising spend and transaction costs related to the Justin’s, LLC acquisition. Sales grew 3 percent led by the inclusion of JUSTIN’S® products in addition to increases in the SPAM® family of products, SKIPPY® peanut butter, and WHOLLY GUACAMOLE® dips.

Specialty Foods (9% of Net Sales, 10% of Total Segment Operating Profit)
Specialty Foods segment profit decreased 13 percent and sales decreased 25 percent. Continued growth in MUSCLE MILK® protein products did not offset reduced contract packaging sales and the divestiture of Diamond Crystal Brands.

PROVISION FOR INCOME TAXES
Income taxes for the quarter benefited from a $14 million reduction due to discrete tax events primarily related to an international entity restructuring.

OUTLOOK

“We expect a strong finish to fiscal 2016, led by valued-added sales in Refrigerated Foods, Jennie-O Turkey Store and International,” remarked James P. Snee, president and chief operating officer. “Franchises such as SKIPPY® peanut butter products, WHOLLY GUACAMOLE® dips, and MUSCLE MILK® protein products are positioned to drive sales growth for the fourth quarter,” stated Snee.

“As a result of another excellent quarter we are increasing our 2016 annual guidance to $1.60 to $1.64 per share from $1.56 to $1.60 per share,” commented Snee. “We expect to show sales and earnings growth in fiscal 2017 and will provide a more definitive guidance range on our fourth quarter conference call in November,” added Snee.

DIVIDENDS

Effective August 15, 2016, the company paid its 352^nd consecutive quarterly dividend, at the annual rate of $0.58.

CONFERENCE CALL

A conference call will be webcast at 8:00 a.m. CT on Thursday, August 18, 2016. Access is available at www.hormelfoods.com. The call will also be available via telephone by dialing 800- 533-7619 and providing the access code 6233484. An audio replay is available by going to https://jsp.premiereglobal.com/webrsvp and entering the access code 6233484. The webcast replay will be available at 11:00 a.m. CT, Thursday, August 18, 2016, and will remain on our website for one year.

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. Hormel Foods, which 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, is celebrating its 125th anniversary in 2016. The company is a member of the Standard & Poor's (S&P) 500 Index, S&P 500 Dividend Aristocrats, and was named one of “The 100 Best Corporate Citizens” by Corporate Responsibility Magazine for the eighth year in a row. Hormel Foods also received a perfect score on the 2016 Human Rights Campaign Foundation’s Corporate Equality Index, was recognized on the 2016 Best for Vets Employers List by Military Times, and was named one of the 2016 Best Companies for Leaders by Chief Executive 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. For more information, visit http://www.hormelfoods.com and http://2015csr.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 which appear on pages 32 - 39 in the company’s Form 10-Q for the fiscal quarter ended April 24, 2016, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

Segment Data

Fiscal 2016 Third Quarter Segment Operating Results (dollars in thousands)