AUSTIN, Minn., May 20, 2021 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the second quarter of fiscal 2021. All comparisons are to the second quarter of fiscal 2020 unless otherwise noted.

Hormel Foods corporate logo

EXECUTIVE SUMMARY - SECOND QUARTER

  • Volume of 1.2 billion lbs., down 3%
  • Record net sales of $2.6 billion, up 8%
  • Pretax earnings of $293 million, up 2%
  • Operating margin of 11.1%, compared to 12.1% last year
  • Effective tax rate of 22.1%, compared to 20.6% last year
  • Diluted earnings per share of $0.42, flat compared to last year

EXECUTIVE COMMENTARY
"Once again, our balanced business model has proven to be a winning formula as our team delivered record sales in the first half and is on pace to deliver a second consecutive year of record sales," said Jim Snee, chairman of the board, president and chief executive officer. "We were able to achieve these record results through strong foodservice sales, continued elevated demand in the retail, deli and international channels, and improved supply chain performance."

"We anticipated rapid demand changes in our foodservice business, and our team delivered, with sales exceeding 2019 pre-pandemic levels," Snee said. "The investments we have made over the years to build a world-class foodservice business, including an experienced direct sales force and portfolio of products that solve for customer challenges, give us a competitive advantage as the industry recovery accelerates."

"In addition to foodservice growth, demand in our retail and deli channels remains elevated compared to pre-pandemic levels, especially from brands such as SPAM®, Jennie-O®, Hormel® Gatherings®, Hormel® Black Label®, Applegate®, Columbus®, Herdez® and Wholly®," Snee said. "Finally, our international business has never been stronger, with double-digit growth coming from our China business and branded exports."

"The supply chain progress we have made in a difficult operating environment is impressive, and our production team members deserve credit for our record results," Snee said. "Further, we are now benefiting from strategic actions we took before the pandemic to increase production capacity, especially for the pizza toppings and dry sausage categories."

OUTLOOK
"We are increasing our full year sales guidance range and reaffirming our earnings per share guidance range of $1.70 to $1.82 per share, both of which exclude the expected impact of the Planters® snack nuts business," Snee said. "We have a very positive outlook on the foodservice industry and continue to see elevated demand in the retail, deli and international channels. As we enter this inflationary period, we will continue to offset margin pressure with price actions and supply chain improvements. Our experienced management team has a proven ability to navigate and grow our business in volatile market conditions."


Fiscal 2021 Outlook*

Net Sales Guidance (in billions)

$10.20 - $10.80

Diluted Earnings per Share Guidance

$1.70 - $1.82

*Does not include the estimated impact from the pending acquisition of the Planters® snack nuts business.

COVID-19 RESPONSE
"Team member safety is our top priority, and to date, over 51 percent of our domestic team members have been fully vaccinated, which is well ahead of the country's vaccination rate," Snee said. "We remain focused on continuing to keep our team members safe even as the impact of the pandemic to our business starts to fade."

In the second quarter, the company absorbed approximately $6 million ($19 million Q2 fiscal 2021 year-to-date) in direct incremental supply chain costs primarily related to enhanced safety measures in its production facilities. The company estimates most of the incremental supply chain costs are temporary and will continue to decline as the pandemic subsides.

PLANTERS® ACQUISITION UPDATE
In February 2021, the company entered into a definitive agreement to acquire the Planters® snack nuts business. The company expects to close the transaction in June 2021. See the news release dated Feb. 11, 2021, for additional details.

SEGMENT HIGHLIGHTS – SECOND QUARTER

Refrigerated Foods

  • Volume up 3%
  • Net sales up 17%
  • Segment profit up 32%

Strong sales growth was led by a significant recovery in foodservice, growth from retail and deli brands, and higher commodity sales. Nearly every foodservice category experienced growth, led by pizza toppings and brands such as Fontanini® and Hormel® Bacon 1. Retail and deli growth was driven by numerous brands, including Hormel® Black Label®, Hormel® Gatherings®, Sadlers® and Applegate®. The improvement in segment profit was driven by foodservice growth, increased retail fresh pork profits and lower operational costs.

Grocery Products

  • Volume down 14%
  • Net sales down 8%
  • Segment profit down 23%

Volume and sales declined due to difficult comparisons from extremely high levels of demand last year. Demand for branded retail products remained elevated compared to pre-pandemic levels, led by growth in the quarter from Wholly® guacamole and Herdez® salsas and sauces. Segment profit declined due to lower sales. For reference, the segment delivered exceptional growth in the second quarter of fiscal 2020 due to consumer stock-up during the onset of the pandemic.

Jennie-O Turkey Store

  • Volume down 3%
  • Net sales up 2%
  • Segment profit down 54%

Sales increased due to a recovery in foodservice and higher whole bird shipments. Retail sales declined but remain elevated compared to pre-pandemic levels. Segment profit decreased due to the impact of a dramatic increase in feed costs during the quarter.

International & Other

  • Volume flat
  • Net sales up 17%
  • Segment profit up 6%

Sales increased, driven by continued strong results in China and higher sales of branded exports. In China, foodservice sales have fully recovered to pre-pandemic levels. The increase in segment profit was due to growth in China and the Philippines, and higher fresh pork export margins.

CHANNEL HIGHLIGHTS – SECOND QUARTER
In an effort to add an increased level of disclosure and clarity to sales trends compared to the prior year and pre-pandemic levels, net sales have been disaggregated into sales channels. Demand for the company's retail items remained elevated, as exhibited by double-digit growth over fiscal 2019. Foodservice sales exceeded pre-pandemic levels after steep declines last year caused by the effects of the pandemic. Deli channel sales increased due to growth from branded grab-and-go and prepared foods items. International sales increased due to exceptional results in China and growth from branded exports.



Thirteen Weeks Ended



April 25, 2021
compared to
April 26, 2020


April 25, 2021
compared to
April 28, 2019

Net Sales Percent Change (%)





U.S. Retail




16


U.S. Foodservice


28



1


U.S. Deli


4



9


International


11



23


Total


8



11







SELECTED FINANCIAL DETAILS
Any forward-looking guidance does not include the estimated impact from the pending acquisition of the Planters® snack nuts business.

Income Statement

  • Selling, general and administrative expenses were up 3% compared to the prior year, due to higher employee-related expenses.
  • Advertising spend was $31 million compared to $35 million in the prior year.
  • Interest and investment income increased during the quarter. Higher investment income partially offset the additional interest expense from the bond issuance in the prior year.
  • Operating margin was 11.1% compared to 12.1% in fiscal 2020. Higher raw material and feed costs negatively impacted margins during the quarter.
  • The effective tax rate was 22.1% compared to 20.6% last year. Last year's rate benefited from a large volume of stock option exercises during the quarter.

Cash Flow Statement

  • Cash flow from operations was $156 million, down 57%. The decrease was due to an intentional increase in inventory to meet elevated demand.
  • The company paid its 371st consecutive quarterly dividend on May 17, 2021, at the annual rate of $0.98 per share, a 5% increase over the prior year.
  • Capital expenditures in the second quarter were $45 million compared to $80 million last year. The company's target for capital expenditures in fiscal 2021 is $260 million. Large projects include a pepperoni capacity expansion in Nebraska, Project Orion and other projects to support growth of branded products.
  • Share repurchases for the quarter totaled $1 million, representing 18 thousand shares purchased.
  • Depreciation and amortization expense in the second quarter was $52 million compared to $51 million last year. The full-year expense is expected to be approximately $210 million.

Balance Sheet

  • The pending acquisition of the Planters® snack nuts business is expected to be financed through a combination of cash on hand, short-term debt and long-term debt. The company expects this acquisition will responsibly leverage its balance sheet without compromising its disciplined capital allocation policy.
  • Cash on hand decreased to $1.5 billion from $1.7 billion at the beginning of the year.
  • Total debt decreased to $1.0 billion from $1.3 billion at the beginning of the year as the company repaid its $250 million bond at maturity in April 2021.
  • Working capital increased to $2.3 billion from $2.1 billion at the beginning of the year. The increase is due to an intentional increase in inventory to meet elevated demand.

PRESENTATION
A conference call will be webcast at 8 a.m. CDT on Thursday, May 20, 2021. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-317-6003 and providing the access code 7986531. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at noon CDT, Thursday, May 20, 2021, and will remain on the website for one year.

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 12 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 "Forward-Looking Statements" and "Risk Factors" that appear on pages 26-32 in the company's Form 10-Q for the fiscal quarter ended Jan. 24, 2021, which 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.

HORMEL FOODS CORPORATION
SEGMENT DATA
Unaudited
In thousands




Thirteen Weeks Ended



April 25,
2021


April 26,
2020


% Change

Net Sales







Grocery Products


$

628,232



$

683,250



(8.1)


Refrigerated Foods


1,453,380



1,247,336



16.5


Jennie-O Turkey Store


351,179



343,056



2.4


International & Other


173,830



148,823



16.8


Total


$

2,606,621



$

2,422,465



7.6
















Segment Profit







Grocery Products


$

97,970



$

127,763



(23.3)


Refrigerated Foods


173,352



131,431



31.9


Jennie-O Turkey Store


12,700



27,348



(53.6)


International & Other


24,481



23,164



5.7


Total Segment Profit


308,503



309,706



(0.4)


Net Unallocated Expense


15,904



23,098



(31.1)


Noncontrolling Interest


21



(119)



117.4


Earnings Before Income Taxes


$

292,620



$

286,489



2.1









 










Twenty-Six Weeks Ended



April 25,
2021


April 26,
2020


% Change

Net Sales







Grocery Products


$

1,205,831



$

1,223,876



(1.5)


Refrigerated Foods


2,820,457



2,599,127



8.5


Jennie-O Turkey Store


684,500



673,183



1.7


International & Other


356,980



310,714



14.9


Total


$

5,067,768



$

4,806,899



5.4
















Segment Profit







Grocery Products


$

190,172



$

196,198



(3.1)


Refrigerated Foods


314,524



298,775



5.3


Jennie-O Turkey Store


39,640



65,899



(39.8)


International & Other


56,685



43,115



31.5


Total Segment Profit


601,020



603,986



(0.5)


Net Unallocated Expense


31,451



27,297



15.2


Noncontrolling Interest


133



(39)



444.1


Earnings Before Income Taxes


$

569,702



$

576,651



(1.2)


 


HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
In thousands, except per share amounts




Thirteen Weeks Ended


Twenty-Six Weeks Ended



April 25,
2021


April 26,
2020


April 25,
2021


April 26,
2020

Net Sales


$

2,606,621



$

2,422,465



$

5,067,768



$

4,806,899


Cost of Products Sold


2,130,314



1,945,113



4,141,291



3,861,127


Gross Profit


476,307



477,352



926,477



945,773


Selling, General and Administrative


199,966



193,912



396,346



389,433


Equity in Earnings of Affiliates


13,074



10,021



27,302



17,608


Operating Income


289,415



293,460



557,433



573,948


Interest and Investment Income (Expense)


10,992



(3,474)



28,284



9,777


Interest Expense


(7,788)



(3,497)



(16,015)



(7,074)


Earnings Before Income Taxes


292,620



286,489



569,702



576,651


Provision for Income Taxes


64,699



58,873



119,386



106,083


Effective Tax Rate


22.1

%


20.6

%


21.0

%


18.4

%

Net Earnings


227,921



227,615



450,316



470,568


Less: Net Earnings (Loss) Attributable to Noncontrolling Interest


21



(119)



133



(39)


Net Earnings Attributable to Hormel Foods Corporation


$

227,901



$

227,734



$

450,184



$

470,606











Net Earnings Per Share









Basic


$

0.42



$

0.42



$

0.83



$

0.88


Diluted


$

0.42



$

0.42



$

0.82



$

0.86











Weighted-average Shares Outstanding







Basic


540,195



538,119



540,054



536,597


Diluted


547,536



546,373



547,490



545,594











Dividends Declared per Share


$

0.2450



$

0.2325



$

0.4900



$

0.4650


 


HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited
In thousands




April 25,
2021


October 25,
2020

Assets

Cash and Cash Equivalents


$

1,484,533



$

1,714,309


Short-term Marketable Securities


17,700



17,338


Accounts Receivable


722,185



702,419


Inventories


1,229,030



1,072,762


Income Taxes Receivable


9,263



41,449


Prepaid Expenses


23,875



18,349


Other Current Assets


27,707



12,438


Total Current Assets


3,514,292



3,579,063







Goodwill


2,614,036



2,612,727


Other Intangibles


1,068,399



1,076,285


Pension Assets


196,473



183,232


Investments In and Receivables From Affiliates


309,256



308,372


Other Assets


289,059



250,382


Net Property, Plant and Equipment


1,897,489



1,898,222


Total Assets


$

9,889,004



$

9,908,282












Liabilities and Shareholders' Investment

Accounts Payable


$

577,365



$

644,609


Accrued Expenses


47,196



59,136


Accrued Workers Compensation


28,681



25,070


Accrued Marketing Expenses


118,452



108,502


Employee Related Expenses


226,111



252,845


Taxes Payable


28,940



22,480


Interest and Dividends Payable


139,102



132,632


Current Maturities of Long-term Debt


9,333



258,691


Total Current Liabilities


1,175,179



1,503,965







Long-term Debt - Less Current Maturities


1,040,486



1,044,936


Pension and Post-retirement Benefits


557,400



552,878


Other Long-term Liabilities


172,626



157,399


Deferred Income Taxes


237,461



218,779


Accumulated Other Comprehensive Loss


(325,629)



(395,250)


Other Shareholders' Investment


7,031,479



6,825,576


Total Liabilities and Shareholders' Investment


$

9,889,004



$

9,908,282


 


HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
In thousands



Thirteen

Weeks Ended


Twenty-Six

Weeks Ended



April 25,
2021


April 26,
2020


April 25,
2021


April 26,
2020

Operating Activities









Net Earnings


$

227,921



$

227,615



$

450,316



$

470,568


Depreciation and Amortization


52,263



50,588



103,306



99,917


Decrease (Increase) in Working Capital


(127,799)



65,774



(190,384)



(37,065)


Other


3,189



15,895



(1,979)



14,870


Net Cash Provided by (Used in) Operating Activities


155,573



359,872



361,259



548,290











Investing Activities









Net (Purchase) Sale of Securities


(516)



(1,975)



(722)



(1,991)


Acquisitions of Businesses/Intangibles




(268,878)





(268,878)


Purchases of Property and Equipment


(45,182)



(80,352)



(85,544)



(138,563)


Proceeds From Sales of Property and Equipment


193



7



1,653



1,121


Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets


(2,450)



(11,433)



(2,643)



(14,824)


Net Cash Provided by (Used in) Investing Activities


(47,955)



(362,631)



(87,256)



(423,135)











Financing Activities









Repayments of Long-term Debt and Finance Leases


(252,194)



(2,050)



(254,360)



(4,069)


Dividends Paid on Common Stock


(132,271)



(124,501)



(257,787)



(236,750)


Share Repurchase


(816)



(12,360)



(9,653)



(12,360)


Other


11,575



28,095



13,340



64,448


Net Cash Provided by (Used in) Financing Activities


(373,706)



(110,816)



(508,459)



(188,731)


Effect of Exchange Rate Changes on Cash


(920)



(4,771)



4,680



(3,252)


Increase (Decrease) in Cash and Cash Equivalents


(267,008)



(118,346)



(229,776)



(66,828)


Cash and Cash Equivalents at Beginning of Year


1,751,541



724,419



1,714,309



672,901


Cash and Cash Equivalents at End of Quarter


$

1,484,533



$

606,073



$

1,484,533



$

606,073


 

 

INVESTOR CONTACT:

Nathan Annis

(507) 437-5248

ir@hormel.com


MEDIA CONTACT:

Media Relations

(507) 437-5345

media@hormel.com

 

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SOURCE Hormel Foods Corporation

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