SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1994 Commission File
Number 1-2402
GEO. A. HORMEL & COMPANY
Incorporated Under the Laws
of the State of Delaware EIN #41-0319970
1 Hormel Place
Austin, Minnesota 55912-3680
Telephone - (507) 437-5737
NONE
Former name, former address and former fiscal year, if
changed since last report
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES XXX NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.
Class Outstanding at April 30, 1994
Common Stock - $.1172 par value 76,620,167
Common Stock Non-Voting - $.01 par value -0-
Pages: This report contains ten pages numbered sequentially
from this
cover page.
FORM 10-Q
PART I - FINANCIAL INFORMATION
STATEMENTS OF FINANCIAL POSITION
GEO. A. HORMEL & COMPANY
April 30 October 30,
1994 1993
(Unaudited)
(Thousands of Dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 173,416 $ 157,558
Short-term marketable securities--
at cost which approximates market 14,720 14,862
Accounts receivable 187,491 218,487
Inventories 223,751 208,101
Deferred income taxes 12,212 12,393
Prepaid expenses 8,363 8,503
TOTAL CURRENT ASSETS 619,953 619,904
DEFERRED INCOME TAXES 82,142 79,872
INTANGIBLES 71,158 72,508
INVESTMENTS AND OTHER ASSETS 72,174 76,288
PROPERTY, PLANT AND EQUIPMENT
Land 6,008 6,025
Buildings 146,033 143,222
Equipment 436,354 422,485
Construction in progress 23,717 13,589
612,112 585,321
Less allowance for depreciation (353,431) (340,334)
258,681 244,987
$1,104,108 $1,093,559
FORM 10-Q
STATEMENTS OF FINANCIAL POSITION
GEO. A. HORMEL & COMPANY
April 30, October 30,
1994 1993
(Unaudited)
(Thousands of Dollars)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 85,376 $ 98,357
Accrued expenses 31,814 30,212
Accrued advertising 27,704 24,587
Employee compensation 35,521 40,195
Taxes other than federal income taxes 14,549 14,011
Dividends payable 9,577 8,434
Federal income tax 6,021 11,262
TOTAL CURRENT LIABILITIES 210,562 227,058
LONG-TERM DEBT -less current maturities 5,700 5,700
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION 233,326 233,326
ACCRUED PENSION COSTS 50,250 48,363
OTHER LONG-TERM LIABILITIES 10,580 8,224
STOCKHOLDERS' INVESTMENT
Preferred Stock, par value $.01 a
share--authorized 40,000,000 shares;
issued - none
Common stock, non-voting, par value
$.01 a share--authorized 40,000,000
shares; issued - none
Common Stock, par value $.1172 a share --
authorized 200,000,000 shares; issued
76,852,128 shares 9,007 9,007
Additional paid-in capital 14,895 14,513
Shares held in treasury. 5,080) ( 4,103)
18,822 19,417
Earnings reinvested in business 574,868 551,471
593,690 570,888
$1,104,108 $1,093,559
See notes to financial statements
FORM 10-Q
STATEMENTS OF EARNINGS (Unaudited)
GEO. A. HORMEL & COMPANY
(In Thousands of Dollars, Except Per Share Amounts)
Three Months Ended Six Months Ended
April 30, May 1, April 30, May 1,
1994 1993 1994 1993
Sales, less returns
and allowances $767,018 $676,686 $1,483,187 $1,358,788
Cost of products sold 597,730 523,701 1,155,139 1,057,507
GROSS PROFIT 169,288 152,985 328,048 301,281
Expenses:
Selling and delivery 117,478 106,012 230,185 210,666
Administrative
and general 14,514 15,448 28,543 32,160
OPERATING INCOME 37,296 31,525 69,320 58,455
Other income and expenses:
Other income-net 977 1,726 2,848 3,860
Interest expense ( 613) ( 350) (1,204) ( 658)
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 37,660 32,901 70,964 61,657
Provision for
income taxes 14,634 12,240 27,388 22,717
EARNINGS BEFORE CUMULATIVE
EFFECT OF
ACCOUNTING CHANGES $ 23,026 $ 20,661 $ 43,576 $ 38,940
Cumulative effect of accounting changes:
Accounting for postretirement
benefits, net of tax (140,823)
Accounting for income taxes 13,294
NET EARNINGS (LOSS) $ 23,026 $ 20,661 $ 43,576 $ (88,589)
Earnings (loss) per share:
Before cumulative effect
of accounting changes $0.30 $0.27 $0.57 $0.51
Cumulative effect of
accounting changes (1.66)
NET EARNINGS (LOSS)
PER SHARE $0.30 $0.27 $0.57 $(1.15)
See notes to financial statements
FORM 10-Q
STATEMENTS OF CASH FLOWS (Unaudited)
GEO. A. HORMEL & COMPANY
Six Months Ended
April 30, May 1,
1994 1993
(Thousands of Dollars)
OPERATING ACTIVITIES
Net earnings (loss) $ 43,576 ($88,589)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 15,896 15,104
Amortization of intangibles 1,350 609
Cumulative effect of accounting change:
Accounting for postretirement benefits,
net of tax 140,823
Accounting for income taxes (13,294)
Provision for deferred income taxes ( 2,089) ( 3,201)
(Gain) loss on sales of property,
plant and equipment 6 ( 24)
Changes in operating assets and liabilities:
Decrease (increase) in accounts
receivable 30,996 38,645
Decrease (increase) in inventories
and prepaid expenses (15,510) (28,629)
Increase (decrease) in accounts
payable and other liabilities (13,396) (32,776)
NET CASH PROVIDED
BY OPERATING ACTIVITIES 60,829 28,668
INVESTING ACTIVITIES
Purchase of short term
marketable securities 142
Purchases of property, plant and
equipment (29,958) (25,759)
Proceeds from sales of property,
plant and equipment 363 512
Decrease in investments
and other assets 4,114 2,941
NET CASH USED IN INVESTING ACTIVITIES (25,339) (22,306)
FINANCING ACTIVITIES
Principal payments on long-term debt ( 200)
Dividends paid on Common Stock (18,021) (15,346)
Other ( 1,611) ( 5,228)
NET CASH USED IN FINANCING
ACTIVITIES (19,632) (20,774)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 15,858 (14,412)
Cash and Cash Equivalents at
at beginning of year 157,558 225,539
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $173,416 $211,127
See notes to financial statements
FORM 10-Q
NOTES TO FINANCIAL STATEMENTS (Unaudited)
GEO. A. HORMEL & COMPANY
NOTE A
In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary for a fair
presentation.
The accounting policies followed by the Company are set
forth in Note A to the Company's Financial Statements in the
1993 Geo. A. Hormel & Company Annual Report to Stockholders,
which is incorporated by reference on Form 10-K.
NOTE B
The results of operations for the six month periods ended
April 30, 1994 and May 1, 1993, are not necessarily
indicative of the results to be expected for the full year.
NOTE C
Fiscal 1993 has been restated to reflect the adoption of
SFAS No. 106 and SFAS No. 109 effective as of the beginning
of fiscal 1993.
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GEO. A. HORMEL & COMPANY
RESULTS OF OPERATIONS
Net earnings in the second quarter increased 11.4 percent to
$23,026,000 from $20,661,000 during the same quarter of 1993
(1993 results have been restated for effect of accounting
changes). Sales for the quarter increased to $767,018,000
from $676,686,000 last year. Both the earnings and sales
represent record results for second quarter performance.
The increase in earnings and sales dollars was the result of
sales tonnage volume increasing 14.9 percent compared to
last year, lower raw material costs, and changes in product
mix, with volume increases in certain higher margin
processed food products.
Earnings for the first six months of 1994 were $43,576,000
compared to $38,940,000 for the same period last year. Net
sales for the first half of 1994 increased $124,399,000 to
$1,483,187,000. Tonnage volume also had a significant 7.8
percent increase over the same period of 1993.
The Company's core Hormel Foods business continues to be the
major contributor to earnings and sales results. The
performance of the Prepared Foods Group was especially
noteworthy with the Grocery Products Division experiencing
excellent volume and market share growth. House of Tsang
oriental sauces and seasoning oils, and the Herb-Ox brand of
bouillon and dry soup mixes, two recent acquisitions,
continue to grow sales and distribution according to plan.
Jennie-O Foods, Inc. made a substantial contribution to
Company results in the second quarter. This performance
follows a record setting first quarter and the business plan
for the third and fourth quarters projects a continued
strong performance.
Results at Dubuque Foods, Inc. and Farm Fresh Catfish were
negative for the quarter and reflect product lines more
susceptible to the fluctuations of the commodity markets for
fresh pork and catfish. The heavy price competition in
these two commodity markets is expected to continue
throughout the remainder of the year, which could impact the
ability of Dubuque Foods and Farm Fresh Catfish to
accomplish their business plan for 1994.
No plants or distribution centers were disposed of in the
first half of either 1993 or 1994. Other income is
primarily interest income from short term marketable
securities.
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GEO. A. HORMEL & COMPANY
RESULTS OF OPERATIONS
The effective tax rate for the quarter and first half was
38.9 and 38.6 percent, respectively, compared to 37.2 and
36.8 percent last year. One percent of the increase is due
to the increase in the statutory rate in August of 1993.
During 1993, depreciation and amortization declined
significantly compared to 1992 as the machinery and
equipment purchased with the construction of the Austin,
Minnesota plant became fully depreciated in the eleventh
period of 1992. The relationship of changes in depreciation
and plant and equipment additions returned to more normal
levels when comparing 1994 and 1993 totals. Amortization of
intangibles increased in 1994 with the acquisitions in the
third quarter of 1993 of the FDL Foods trademarks and
brands, and the Herb-Ox bouillon and dry soup product lines.
Interest expense for the quarter and year to date increased
compared to last year as several state income tax audits
were settled.
Advertising expenses for the quarter and first six months
were $46,937,000 and $92,336,000 compared to $41,124,000 and
$81,343,000 for the same period in 1993. The Company
continues to introduce new products while promoting its
older more mature product lines to increase market share.
The importance of this strategy was highlighted in the
second quarter with increased market share for HORMEL CHILI,
SPAM luncheon meat, DINTY MOORE beef stew and MARY KITCHEN
hash. This enabled the Company to offset the heavy price
competition in its fresh pork commodity items.
FORM 10-Q
FINANCIAL CONDITION
Ratio comparisons presented below as of the end of the
second quarter reflect the continued strong financial
condition of the Company:
End of End of
2nd Quarter 2nd Quarter
1994 1993
Liquidity Ratios
Current ratio 2.9 3.2
Receivables turnover 14.6 15.9
Days sales in receivables 23.1 days 20.3 days
Inventory turnover 10.7 10.6*
Days sales in inventory 35.4 days 37.1
days*
Leverage Ratio
Long-term debt to equity 1.0% 1.4%*
Operating Ratios
Pre-tax profit to net worth 24.4% 20.9%*
Pre-tax profit to total assets 12.9% 13.0%*
* Results reflect restatement for effect of accounting
changes.
Changes during the second quarter in current asset and
liability
balances followed normal seasonal patterns. Major sales
campaigns scheduled during the last half of each year
account for the rise in inventory that occurs during the
second quarter. The Company continues to invest excess
funds in short-term marketable securities as it examines
possible acquisitions and investments that meet its long-
term operating goals.
The Company's investment in plant and equipment continues to
emphasize productivity gains and improved ergonomics and
safety for its employees. The Company began a major
renovation and expansion of its Fremont, Nebraska plant
which will continuethroughout most of 1994. The Company
also is relocating the acquired Herb-Ox bouillon production
to a newly acquired company owned facility in Aurora,
Illinois, and will be starting an expansion of its gelatin
facility at Davenport, Iowa later in 1994.
The Company's long-term debt consists of Industrial Revenue
Bonds with varying maturity dates. As shown by the leverage
ratio, significant borrowing capacity is available if needed
to take advantage of any business opportunity that may arise
through acquisition or internal expansion.
FORM 10-Q
PART II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
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 thereunto duly
authorized.
GEO. A. HORMEL & COMPANY
Date: By:
D. J. HODAPP
Executive Vice President
& Chief Financial Officer
Date: By:
R. J. THATCHER
Vice President and
Treasurer
