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 July 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 July 29, 1994
Common Stock - $.1172 par value 76,634,650
Common Stock Non-Voting - $.01 par value -0-
Pages: This report contains eleven pages numbered
sequentially from this cover page.
FORM 10-Q
PART I - FINANCIAL INFORMATION
STATEMENTS OF FINANCIAL POSITION
GEO. A. HORMEL & COMPANY
July 30 October 30,
1994 1993
(Unaudited)
(Thousands of Dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 182,473 $ 157,558
Short-term marketable securities--
at cost which approximates market 14,615 14,862
Accounts receivable 190,824 218,487
Inventories 211,482 208,101
Deferred income taxes 12,122 12,393
Prepaid expenses 6,172 8,503
TOTAL CURRENT ASSETS 617,688 619,904
DEFERRED INCOME TAXES 79,370 79,872
INTANGIBLES 70,484 72,508
INVESTMENTS AND OTHER ASSETS 73,482 76,288
PROPERTY, PLANT AND EQUIPMENT
Land 6,658 6,025
Buildings 152,723 143,222
Equipment 442,559 422,485
Construction in progress 25,746 13,589
627,686 585,321
Less allowance for depreciation (359,521) 340,334)
268,165 244,987
$1,109,189 $1,093,559
See notes to financial statements
FORM 10-Q
STATEMENTS OF FINANCIAL POSITION
GEO. A. HORMEL & COMPANY
July 30, October 30,
1994 1993
(Unaudited)
(Thousands of Dollars)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 87,183 $ 98,357
Accrued expenses 34,176 30,212
Accrued advertising 27,292 24,587
Employee compensation 42,187 40,195
Taxes other than federal income taxes 14,304 14,011
Dividends payable 9,580 8,434
Federal income tax 5,865 11,262
TOTAL CURRENT LIABILITIES 220,587 227,058
LONG-TERM DEBT-less current maturities 5,700 5,700
ACCUMULATED POSTRETIREMENT BENEFIT
OBLIGATION 233,326 233,326
ACCRUED PENSION COSTS 34,538 48,363
OTHER LONG-TERM LIABILITIES 10,983 8,224
STOCKHOLDERS' INVESTMENT 2
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 15,280 14,513
Shares held in treasury. ( 4,781) ( 4,103)
19,506 19,417
Earnings reinvested in business 584,549 551,471
604,055 570,888
$1,109,189 $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 Nine Months Ended
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
Sales, less returns
and allowances $741,144 $677,835 $2,224,331 $2,036,623
Cost of products
sold 579,974 525,562 1,735,113 1,583,069
GROSS PROFIT 161,170 152,273 489,218 453,554
Expenses:
Selling and
delivery 114,702 107,990 344,887 318,656
Administrative
and general 14,747 15,898 43,290 48,058
OPERATING INCOME 31,721 28,385 101,041 86,840
Other income and expenses:
Other income-net 1,816 1,611 4,664 5,471
Interest expense ( 472) ( 259) (1,676) ( 917)
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 33,065 29,737 104,029 91,394
Provision for
income taxes 12,903 11,569 40,291 34,286
EARNINGS BEFORE CUMULATIVE
EFFECT OF
ACCOUNTING CHANGES$ 20,162 $ 18,168 $ 63,738 $ 57,108
Cumulative effect of accounting changes:
Accounting for postretirement
benefits, net of tax (140,823)
Accounting for income taxes 13,294
NET EARNINGS (LOSS) $ 20,162 $ 18,168 $ 63,738 $ (70,421)
Earnings (loss) per share:
Before cumulative effect
of accounting changes $0.26 $0.23 $0.83 $0.74
Cumulative effect of
accounting changes (1.66)
NET EARNINGS (LOSS)
PER SHARE $0.26 $0.23 $0.83 $(0.92)
See notes to financial statements
FORM 10-Q
STATEMENTS OF CASH FLOWS (Unaudited)
GEO. A. HORMEL & COMPANY
Nine Months Ended
July 30, July 31,
1994 1993
(Thousands of Dollars )
OPERATING ACTIVITIES
Net earnings (loss) $ 63,738 ($70,421)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 24,056 22,455
Amortization of intangibles 2,025 1,330
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 773 ( 4,801)
(Gain) loss on sales of property,
plant and equipment (375) ( 29)
Changes in operating assets and
liabilities:
Decrease (increase) in Notes Receivable (18,000)
Decrease (increase) in accounts
receivable 27,663 17,907
Decrease (increase) in inventories
and prepaid expenses ( 1,050) (39,220)
Increase (decrease) in accounts
payable and other liabilities (18,683) ( 4,221)
NET CASH PROVIDED BY OPERATING ACTIVITIES 98,147 32,529
INVESTING ACTIVITIES
Purchase of short term
marketable securities 246
Acquisitions of businesses (33,791)
Purchases of property, plant and
equipment (47,857) (48,975)
Proceeds from sales of property,
plant and equipment 998 555
Decrease in investments
and other assets 2,806 7,655
NET CASH USED IN INVESTING ACTIVITIES (43,807) (74,556)
FINANCING ACTIVITIES
Principal payments on long-term debt ( 341)
Dividends paid on Common Stock (27,598) (23,782)
Other ( 1,827) ( 5,229)
NET CASH USED IN FINANCING ACTIVITIES (29,425) (29,352)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 24,915 (71,379)
Cash and Cash Equivalents at
at beginning of year 157,558 225,539
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $182,473 $154,160
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 nine month periods ended
July 30, 1994 and July 31, 1993, are not necessarily
4
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 third quarter increased 11 percent to
$20,162,000 from $18,168,000 during the same quarter of
1993. Sales dollars increased 9.3 percent to $741,144,000
from $677,835,000 one year ago. Sales tonnage volume
increased 14.1 percent in the third quarter compared to last
year. A portion of this increase was due to FDL Foods, Inc.
of Dubuque, Iowa, closing their pork slaughter and cut
operation in Rochelle, Illinois in February 1993. This
resulted in reduced product available for sale by Dubuque
Foods, Inc. (formerly FDL Marketing, Inc.) a wholly owned
subsidiary of Hormel.
The FDL Foods operations in Rochelle were purchased by
Rochelle Foods, Inc., a subsidiary of the Company, in July
of 1993. Rochelle Foods reopened the closed pork slaughter
and cut operations in August of 1993 and co-packs for both
Hormel and Dubuque Foods.
FDL Foods also sold their brands and trademarks to Dubuque
Foods in July of 1993. FDL Foods currently co-packs product
for Dubuque Foods at its Dubuque, Iowa plant.
Earnings for the first nine months of 1994 were $63,738,000
compared to $57,108,000, an 11.6 percent increase over the
same period last year. Sales dollars and tonnage volume
also showed substantial increases. Net sales dollars
increased $187,708,000 to $2,224,331,000 over 1993, while
sales tonnage increased 9.8 percent through three quarters
of 1994 over the comparable period last year.
The Company's core Hormel business continued to be the major
contributor to earnings and sales growth. Of the major
subsidiaries Jennie-O Foods, Inc. and Hormel Foods
International Corp., which includes a domestic packaging
company, Vista International, continue to make substantial
contributions to Company results. The performance of
Jennie-O is particularly significant given the intense
competition in the turkey industry. Dubuque Foods, Inc. and
Farm Fresh Catfish Company continue to incur losses as a
large portion of their business is tied to commodity priced
products. Intense price competition is expected to continue
in all meat protein markets throughout the fourth quarter
continuing the pressure on margins.
Gross profit for the third quarter and year to date was 21.8
and 22.0 percent of sales respectively compared to 22.5 and
22.3 percent for the same periods last year. The reduction
in margins for the quarter and year to-date is a result of
the increase in commodity sales of fresh pork due to the
reopening of the Rochelle kill and cut operations and
subsequent increases in pork supplies.
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GEO. A. HORMEL & COMPANY
RESULTS OF OPERATIONS (continued)
Expenses as a percent of sales decreased slightly for the
quarter and year to date to 17.5 and 17.5 percent from 18.3
and 18.0 respectively in 1993. This was due to the effect
of the increased sales on the fixed expense categories.
During the third quarter the closed distribution center at
Charlotte, North Carolina was sold for a small gain. No
facilities were sold in 1993.
The relationship of changes in depreciation and plant and
equipment additions returned to more normal levels when
comparing 1994 and 1993 totals. The comparison of 1993 and
1992 totals for depreciation and amortization and asset
additions was distorted due to equipment purchased with the
construction of the Austin, Minnesota plant becoming fully
depreciated in the eleventh period of 1992.
The effective tax rate for the quarter and first nine months
was 39.0 and 38.7 percent compared to 38.9 and 37.5 percent
last year.
Advertising expenses for the quarter and to date were
$45,423,000 and $137,759,000 compared to $44,076,000 and
$125,419,000 for the comparable periods in 1993.
Advertising expenditures continue to support the Company's
mature products and brands, as well as the promotion of new
products such as HOUSE OF TSANG TAKE OUT meals and JENNIE-O
NATURAL CHOICE brand premium turkey products.
FORM 10-Q
FINANCIAL CONDITION
Ratio comparisons presented below as of the end of the third
quarter reflect the continued strong financial condition of
the Company:
End of 3rd Quarter
1994 1993
Liquidity Ratios
Current ratio 2.8 3.0
Receivables turnover 14.5 15.0
Days sales in receivables 23.5 days 23.1 days
Inventory turnover 11.0 10.2
Days sales in inventory 33.4 days 39.1
days*
Leverage Ratio
Long-term debt to equity 1.0% 1.4%*
Operating Ratios
Pre-tax profit to net worth 23.6% 20.5%*
Pre-tax profit to total assets 12.6% 12.6%*
* Results reflect restatement for effect of accounting
changes.
Changes during the third quarter of 1994 in current asset
and liability balances followed normal seasonal patterns.
In 1993 cash and short term marketable securities decreased
due to the purchase of the Rochelle, Illinois plant from FDL
Foods, and the brands and trademarks of FDL Foods by two
company subsidiaries, Rochelle, Foods, Inc. and Dubuque
Foods, Inc. respectively. Also in 1993 the Company
purchased the Herb-Ox brand line of bouillon and dried soup
mixes from Reckett and Colman.
During the third quarter of 1994, the Company announced its
intention to purchase most of Nalley's Fine Foods Division,
and Nalley's Canada Limited, consumer foods businesses
currently owned by Curtice-Burns, Inc. of Rochester, New
York. Completion of the acquisition is contingent upon the
purchase of Curtice-Burns, Inc., by Dean Foods Company, and
the negotiation of definitive agreements between the Company
and Dean Foods, and obtaining necessary government
approvals. It now appears that Curtice-Burns will be sold
to someone other than Dean Foods which would prevent the
transaction from going forward as planned.
During the fourth quarter the Company will complete the
purchase of American Institutional Products, Inc. (AIP),
which manufactures and distributes a line of instant food
thickeners and prepackaged food products for the health care
industry.
FORM 10-Q
FINANCIAL CONDITION
Major sales campaigns started toward the end of the third
quarter should result in inventory decreasing and accounts
receivable increasing at year end.
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 and
have required growth and profit potential.
Investment in plant and equipment continues to emphasize
productivity gains and improved ergonomics and safety for
our employees.
The Company's long-term debt consists of Industrial Revenue
Bonds of varying maturities. Significant borrowing capacity
is available to the Company 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.
June 10, 1994: The Company announced it is seeking to
purchase most of the consumer foods businesses
comprising Nalley's Fine Foods Division and Nalley's
Canada Limited, currently owned by Curtice-Burns, Inc.,
Rochester, New York. The purchase of Nalley's by the
Company is subject to the prior acquisition of Curtice-
Burns by Dean Foods Company, Franklin Park, Illinois.
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
