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 27, 1996 Commission File
Number 1-2402
HORMEL FOODS CORPORATION
Incorporated Under the Laws
of the State of Delaware FEIN #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 27, 1996
Common Stock - $.1172 par value 76,724,833
Common Stock Non-Voting - $.01 par value -0-
Pages: This report contains ten pages numbered sequentially from this
cover page.
1
FORM 10-Q
PART I - FINANCIAL INFORMATION
STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
January 27, October 28,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 213,412 $ 189,539
Short-term marketable securities--
at cost which approximates market 8,004 8,489
Accounts receivable 189,694 231,407
Inventories 226,563 210,898
Deferred Income Taxes 13,734 13,255
Prepaid expenses 6,004 5,679
TOTAL CURRENT ASSETS 657,411 659,267
DEFERRED INCOME TAXES 65,797 66,204
INTANGIBLES 80,616 81,650
INVESTMENTS AND OTHER ASSETS 86,867 83,655
PROPERTY, PLANT AND EQUIPMENT
Land 7,841 8,009
Buildings 173,429 166,888
Equipment 493,897 495,641
Construction in progress 54,764 51,388
729,931 721,926
Less allowance for depreciation (386,397) (388,842)
343,534 333,084
$1,234,225 $1,223,860
See notes to financial statements
2
FORM 10-Q
STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
January 27, October 28,
1996 1995
(Unaudited)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 95,424 $ 97,479
Accrued expenses 29,913 26,246
Accrued marketing expenses 23,577 20,638
Employee compensation 28,366 44,700
Taxes other than federal income taxes 16,311 15,380
Dividends payable 11,511 11,123
Federal income taxes 9,755 118
Current maturities of long-term debt 2,131 2,131
TOTAL CURRENT LIABILITIES 216,988 217,815
LONG-TERM DEBT - less current maturities 16,959 16,959
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION 235,659 235,659
ACCRUED PENSION COSTS 8,719 7,240
OTHER LONG-TERM LIABILITIES 14,612 14,140
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 16,854 16,624
Shares held in treasury. ( 3,399) ( 3,922)
22,462 21,709
Earnings reinvested in business 718,826 710,338
741,288 732,047
$1,234,225 $1,223,860
See notes to financial statements
3
FORM 10-Q
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
HORMEL FOODS CORPORATION
(In Thousands of Dollars, Except Per Share Amounts)
Three Months Ended
January 27, January 28,
1996 1995
Sales, less returns and allowances $ 724,381 $ 730,720
Cost of products sold 546,944 528,575
GROSS PROFIT 177,437 202,145
Expenses:
Selling and delivery 127,506 129,853
Administrative and general 22,750 17,782
OPERATING INCOME 27,181 54,510
Other income and expenses:
Other income-net 6,296 3,454
Interest expense ( 409) ( 311))
EARNINGS BEFORE INCOME TAXES 33,068 57,653
Provision for income taxes 12,401 22,165
NET EARNINGS $ 20,667 $ 35,488
EARNINGS PER SHARE $ 0.27 $ 0.46
See notes to financial statements
4
FORM 10-Q
STATEMENTS OF CASH FLOWS (Unaudited)
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
Three Months Ended
January 27, January 28,
1996 1995
OPERATING ACTIVITIES
Net earnings $ 20,667 $ 35,488
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 8,823 8,178
Amortization of intangibles 1,034 870
Provision for deferred income taxes ( 72) 2,015
(Gain) loss on property/equipment sales (3,593) (97)
Changes in operating assets and liabilities:
Decrease in accounts receivable 41,713 37,113
(Increase) in inventories
and prepaid expenses (15,990) (19,734)
(Decrease) in accounts payable and
accrued expenses 736 (37,485)
NET CASH PROVIDED BY OPERATING ACTIVITIES 53,318 26,348
INVESTING ACTIVITIES
Sale of short-term marketable securities 485 1,835
Acquisitions of businesses 0 (1,159)
Purchases of property/equipment (20,358) (17,254)
Proceeds from sales of property/equipment 4,678 1,299
(Increase) decrease in investments
and other assets (3,211) (10,790)
NET CASH USED IN INVESTING ACTIVITIES (18,406) (26,069)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 0 10,000
Dividends paid on Common Stock (11,123) (9,586)
Other 84 ( 831)
NET CASH USED IN FINANCING ACTIVITIES (11,039) ( 417)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 23,873 ( 138)
Cash and cash equivalents
at beginning of year 189,539 248,599
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $213,412 $248,461
See notes to financial statements
5
FORM 10-Q
NOTES TO FINANCIAL STATEMENTS (Unaudited)
HORMEL FOODS CORPORATION
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 1995 Hormel Foods
Corporation 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 27,
1996, and January 28, 1995 are not necessarily indicative of the
results to be expected for the full year.
6
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
Quarterly sales and earnings for the first quarter were
$724,381,000 and $20,667,000 compared to $730,720,000 and
$35,488,000 respectively, last year. Tonnage volume decreased 15.0
percent for the quarter compared to the same period in 1995. The
drop in dollar sales and tonnage volume was due primarily to the
discontinuance by Dubuque Foods, Inc., a wholly owned subsidiary,
of sales of fresh pork produced under the Dubuque brand by FDL
Foods, Inc. of Dubuque, Iowa. The 41.8 percent decline in earnings
had been expected since the record 1995 first quarter had benefited
from pork raw material costs which were at their lowest level in
two decades. These low cost levels could not be maintained and
they increased throughout the remainder of 1995 and into the first
quarter of 1996.
The substantially higher pork raw material costs were the major
factor in producing a gross profit as a percentage of sales of 24.5
percent compared to 27.7 percent last year. The impact of the
increase in pork raw material costs on gross profit was mitigated
by increased sales volume of manufactured consumer branded items,
which are not as sensitive to the fluctuations of the pork market
and a gain recorded of approximately $3,000,000 from the sale of an
idle plant facility.
Marketing expenses decreased slightly during the first quarter to
$54,684,000 from $55,678,000 in 1995. The Company continues to
emphasize both its well established products and its newer ethnic
product introductions in its promotional programs. Selling and
delivery expenses remained virtually unchanged at 17.6 percent and
17.8 percent of sales for 1996 and 1995 respectively. Administra-
tive and general expenses increased to 3.1 percent of sales in the
quarter compared to 2.4 percent for the same period last year. The
increase reflected a settlement of an antitrust class action
lawsuit in the amount of $7,500,000. Farm Fresh Catfish and Hormel
Foods Corporation were two of several defendants in an alleged
conspiracy to fix prices among processors of catfish. Although the
Company considered the plaintiff's claims to be without merit since
many of the events in question happened more than two years before
Hormel formed Farm Fresh in 1983, the Company decided to settle the
lawsuits since continued defense of the case subjected the Company
and its shareholders to unnecessary risks due to the potential size
of the claim and the inherent uncertainty of commercial litigation.
7
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
The Company's core Hormel business continues to be the major
contributor to earnings. Jennie-O Foods was a strong performer
despite lower margins experienced in the first quarter due to large
cost increases for feedstuffs. Jennie-O's new turkey processing
plant under construction at Montevideo, Minnesota is on schedule
with a projected start up in May.
Results for the quarter at Dubuque Foods were less than planned as
the higher pork raw material costs had a greater impact on Dubuque
Foods than the primary Hormel business.
The effective tax rate for the first three months of 1996 was 37.5
percent compared to 38.5 percent last year due to a lower overall
effective state tax rate.
Other income-net for the first quarter of 1996 was $6,296,000
compared to $3,454,000 in 1995. The increase was primarily the
result of a realized gain on the sale of oil and gas stock that had
been classified as available for sale.
8
FORM 10-Q
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
FINANCIAL CONDITION
Ratio comparisons for the first quarter of 1996 and 1995, which
demonstrate the Company's financial strength, are as follows:
End of Quarter
1st Quarter 1st Quarter
1996 1995
Liquidity Ratios
Current ratio 3.0 2.8
Receivables turnover 13.8 13.9
Days sales in receivables 23.9 days 23.8 days
Inventory turnover 10.1 10.1
Days sales in inventory 37.8 days 38.0 days
Leverage Ratio
Long-term debt to equity 2.6% 3.0%
Operating Ratios
Pre-tax profit to net worth 18.0% 34.3%
Pre-tax profit to total assets 10.8% 19.3%
Changes during the first quarter in current asset and liability
balances followed normal seasonal patterns.
During the first quarter, the Company invested $20,358,000 in new
plant and equipment. The Company has major renovation or expansion
projects in progress at its Fremont, Nebraska, Austin, Minnesota
and Osceola, Iowa locations. Jennie-O Foods is building a new
plant in Montevideo, Minnesota which is scheduled to be completed
in May of this year. Investment in plant and equipment continues
to emphasize productivity gains while improving ergonomics and
safety conditions for employees.
During the quarter the Company recognized the gain on the sale of
an idle plant facility at Ottumwa, Iowa and realized a gain on the
sale of oil and gas stocks held as an investment available for
sale.
The Company continues to keep excess funds invested short term as
it examines business opportunities that meet its long-term
operating goals.
Long-term debt consists of small issue Industrial Revenue Bonds of
varying maturities and debt used for investment in the federal
government affordable housing program. The leverage ratio
indicates the significant amount of borrowing capacity available to
take advantage of any business opportunities that may arise through
acquisition or internal expansion.
9
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
The Company filed a Form 8-K on December 13, 1995
announcing the retirement of Richard L. Knowlton
from the Hormel Foods Corporation Board of Directors.
Company President Joel W. Johnson, who succeeded Mr.
Knowlton as Chief Executive Officer in September 1993,
was elected to the additional position of Chairman of
the Board.
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.
HORMEL FOODS CORPORATION
Date: By:
D. J. HODAPP
Executive Vice President
& Chief Financial Officer
Date: By:
M. J. McCOY
Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-29-1996
<PERIOD-END> JAN-27-1996
<CASH> 213,412
<SECURITIES> 8,004
<RECEIVABLES> 189,694
<ALLOWANCES> 0
<INVENTORY> 13,734
<CURRENT-ASSETS> 657,411
<PP&E> 729,931
<DEPRECIATION> 386,397
<TOTAL-ASSETS> 1,234,225
<CURRENT-LIABILITIES> 216,988
<BONDS> 16,959
<COMMON> 9,007
0
0
<OTHER-SE> 13,455
<TOTAL-LIABILITY-AND-EQUITY> 1,234,225
<SALES> 724,831
<TOTAL-REVENUES> 724,831
<CGS> 546,944
<TOTAL-COSTS> 546,944
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 409
<INCOME-PRETAX> 33,068
<INCOME-TAX> 12,401
<INCOME-CONTINUING> 20,667
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,667
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
