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 January 29, 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 January 29, 1994
Common Stock - $.1172 par value 76,647,490
Common Stock Non-Voting - $.01 par value -0-
Pages: This report contains nine pages numbered sequentially from this
cover page.
1
FORM 10-Q
PART I - FINANCIAL INFORMATION
STATEMENTS OF FINANCIAL POSITION
GEO. A. HORMEL & COMPANY
January 29, October 30,
1994 1993
(Unaudited)
(Thousands of Dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 172,728 $ 157,558
Short-term marketable securities--
at cost which approximates market 14,798 14,862
Accounts receivable 184,701 218,487
Inventories 221,655 208,101
Deferred income taxes 12,303 12,393
Prepaid expenses 8,287 8,503
TOTAL CURRENT ASSETS 614,472 619,904
DEFERRED INCOME TAXES 81,391 79,872
INTANGIBLES 71,833 72,508
INVESTMENTS AND OTHER ASSETS 74,952 76,288
PROPERTY, PLANT AND EQUIPMENT
Land 6,008 6,025
Buildings 144,005 143,222
Equipment 427,161 422,485
Construction in progress 19,485 13,589
596,659 585,321
Less allowance for depreciation (346,745) (340,334)
249,914 244,987
$1,092,562 $1,093,559
See notes to financial statements
2
FORM 10-Q
STATEMENTS OF FINANCIAL POSITION
GEO. A. HORMEL & COMPANY
January 29, October 30,
1994 1993
(Unaudited)
(Thousands of Dollars)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 87,041 $ 98,357
Accrued expenses 28,116 30,212
Accrued advertising 28,416 24,587
Employee compensation 28,184 40,195
Taxes other than federal income taxes 15,068 14,011
Dividends payable 9,587 8,434
Federal income tax 17,350 11,262
TOTAL CURRENT LIABILITIES 213,762 227,058
LONG-TERM DEBT - less current maturities 5,700 5,700
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION 233,326 233,326
ACCRUED PENSION COSTS 49,307 48,363
OTHER LONG-TERM LIABILITIES 9,741 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 14,792 14,513
Shares held in treasury. ( 4,692) ( 4,103)
19,107 19,417
Earnings reinvested in business 561,619 551,471
580,726 570,888
$1,092,562 $1,093,559
See notes to financial statements
3
FORM 10-Q
STATEMENTS OF EARNINGS (Unaudited)
GEO. A. HORMEL & COMPANY
(In Thousands of Dollars, Except Per Share Amounts)
Three Months Ended
January 29, January 30,
1994 1993
Sales, less returns and allowances $ 716,169 $ 682,102
Cost of products sold 557,409 533,806
GROSS PROFIT 158,760 148,296
Expenses:
Selling and delivery 112,707 104,654
Administrative and general 14,029 16,712
OPERATING INCOME 32,024 26,930
Other income and expenses:
Other income-net 1,871 2,134
Interest expense ( 591) ( 308)
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 33,304 28,756
Provision for income taxes 12,754 10,477
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES $ 20,550 $ 18,279
Cumulative effect of accounting changes:
Accounting for postretirement
benefits, net of tax (140,823)
Accounting for income taxes 13,294
NET EARNINGS (LOSS) $ 20,550 ($109,250)
Earnings (loss) per share:
Before cumulative effect
of accounting changes $ .27 $ .24
Cumulative effect of
accounting changes (1.66)
NET EARNINGS (LOSS)
PER SHARE $ .27 ($1.42)
See notes to financial statements
4
FORM 10-Q
STATEMENTS OF CASH FLOWS (Unaudited)
GEO. A. HORMEL & COMPANY
Three Months Ended
January 29, January 30,
1994 1993
(Thousands of Dollars)
OPERATING ACTIVITIES
Net earnings (loss) $ 20,550 ($109,250)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 7,883 7,009
Amortization of intangibles 675 305
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 ( 1,429) ( 1,600)
(Gain) loss on sales of property,
plant and equipment (6) (8)
Changes in operating assets and liabilities:
Decrease (increase) in accounts
receivable 33,786 35,371
Decrease (increase) in inventories
and prepaid expenses (13,338) (11,705)
Increase (decrease) in accounts
payable and other liabilities (11,988) (30,895)
NET CASH BY OPERATING ACTIVITIES 36,145 16,756
INVESTING ACTIVITIES
Purchase of short term marketable securities 64
Purchases of property, plant and
equipment (13,101) ( 6,655)
Proceeds from sales of property,
plant and equipment 285 184
Decrease (increase) in investments
and other assets 1,336 ( 3,516)
NET CASH USED IN INVESTING ACTIVITIES (11,416) ( 9,987)
FINANCING ACTIVITIES
Principal payments on long-term debt ( 200)
Dividends paid on Common Stock ( 8,530) ( 6,897)
Other ( 1,029) ( 258)
NET CASH USED IN FINANCING ACTIVITIES ( 9,559) ( 7,355)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 15,170 ( 586)
Cash and Cash Equivalents
at beginning of year 157,558 225,539
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $172,728 $224,953
See notes to financial statements
5
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 re-
curring 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 three month periods ended January 29,
1994 and January 30, 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.
6
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GEO. A. HORMEL & COMPANY
RESULTS OF OPERATIONS
Quarterly sales and net earnings for the first quarter were
$716,169,000 and $20,550,000 compared to $682,102,000 and
$18,279,000, respectively, last year. Gross profit as a percentage
of sales increased slightly to 22.17 percent from 21.74 percent in
1993. Total operating expenses were virtually unchanged from last
year at 17.70 percent of sales producing operating income of 4.47
percent of sales this year compared to 3.95 percent one year ago.
Tonnage volume for the quarter increased 1.4 percent over 1993.
Solid increases in the Company's consumer branded business was the
major reason for the volume growth and record earnings.
The Company's core Hormel business continues to be the major
contributor to earnings led by outstanding results in the Prepared
Foods Group. Jennie-O Foods, Inc., Dubuque Foods, Inc., and Hormel
Foods International Corporation wholly owned subsidiaries, all made
positive contributions to first quarter results. Jennie-O, the
nation's second largest turkey processor reported record earnings
in the quarter despite higher feed costs. This was achieved
through increased marketing initiatives, improved farm and plant
operations, and relatively good markets.
The effective tax rate for the first three months of 1994 was 38.3
percent compared to 36.4 percent last year. One percent of the
increase is due to the increase in the statutory rated passed in
August 1993.
Advertising expenses increased during the first quarter to
$45,399,000 from $40,219,000 in 1993. The Company continues to
emphasize both its older mature base of products and its newer
product introductions.
During the first quarter, the Company through its wholly owned
subsidiary, Hormel Foods International Corporation, signed a
distribution agreement with Zwanenberg de Mexico. Zwanenberg,
based in Mexico City will sell branded, processed meat products
manufactured by the Company and its subsidiaries. The Company sees
Mexico as a large and growing market opportunity, and continues to
explore a separate distribution arrangement for its shelf stable,
prepared food items in that market. Hormel Foods International is
also exploring growth opportunities in other developing markets
throughout the world.
7
FORM 10-Q
FINANCIAL CONDITION
Record earnings for the first quarter of 1994 added to the strong
financial condition of the Company. Ratio comparisons for the
first quarter of 1994 and 1993, which demonstrate the Company's
financial strength, are as follows:
End of Quarter
1st Quarter 1st Quarter
1994 1993
Liquidity Ratios
Current ratio 2.9 3.1
Receivables turnover 14.2 15.9
Days sales in receivables 23.5 days 20.7 days
Inventory turnover 10.4 11.1
Days sales in inventory 36.3 days 33.9 days
Leverage Ratio
Long-term debt to equity 1.0% 1.5%
Operating Ratios
Pre-tax profit to net worth 23.1% 19.7%
Pre-tax profit to total assets 12.2% 12.2%
Changes during the first quarter in current asset and liability
balances followed normal seasonal patterns. Changes in accounts
receivable and accounts payable reflect the significant sales and
production increases during the quarter over last year. Inventory
is also higher due to promotional activities planned for later in
the second quarter.
The Company evaluates plant and equipment, on an ongoing basis, to
achieve the best productivity, utilization and return on
investment. During the first quarter, the Company invested
$13,101,000 in new plant and equipment. The Company has major
renovation or expansion projects in progress at its Fremont,
Nebraska plant and at Aurora, Illinois, where a facility is being
prepared for the production of the Herb-Ox line of bouillon and
soups. Investment in plant and equipment, including the Fremont
and Aurora projects, continues to emphasize investment that
contributes to productivity gains while improving ergonomics and
safety conditions for employees.
The Company continues to keep excess funds invested short term as
it examines acquisitions that meet its long-term operating goals.
The small long-term debt balance consists of small-issue Industrial
Revenue Bonds of varying maturities. The leverage ratio shows the
significant borrowing capacity available to take advantage of any
business opportunities that may arise through acquisition or
internal expansion.
8
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
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