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 26, 1997 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 April 26, 1997
Common Stock - $.1172 par value 76,481,146
Common Stock Non-Voting - $.01 par value - 0 -
Pages: This report contains eleven pages numbered sequentially from this cover
page.
<PAGE>
Form 10-Q
STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
<TABLE>
<CAPTION>
April 26, October 26,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS $ 105,542 $ 188,473
Cash and cash equivalents
Short-term marketable securities--
at cost which approximates market 33,442 14,642
Accounts receivable 198,068 230,869
Inventories 275,321 271,097
Deferred income taxes 11,897 11,615
Prepaid expenses 6,287 6,563
TOTAL CURRENT ASSETS 630,557 723,259
DEFERRED INCOME TAXES 67,374 68,686
INTANGIBLES 136,302 124,193
INVESTMENTS AND OTHER ASSETS 153,954 98,514
PROPERTY, PLANT AND EQUIPMENT
Land 11,747 8,517
Buildings 228,301 210,450
Equipment 555,589 538,562
Construction in Progress 66,572 71,085
862,209 828,614
Less allowance for depreciation (413,324) (407,128)
448,885 421,486
$ 1,437,072 $ 1,436,138
</TABLE>
See notes to financial statements
<PAGE>
Form 10-Q
STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
April 26, October 26,
1997 1996
LIABILITIES AND SHAREHOLDERS' (Unaudited)
INVESTMENT
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 92,925 $ 121,004
Accrued expenses 35,854 42,190
Accrued marketing 5,772 22,768
Employee compensation 35,507 41,493
Taxes, other than federal income taxes 14,982 14,991
Dividends payable 12,090 11,611
Federal income tax 1,368 9,804
Current maturities of long-term debt 2,645 2,548
TOTAL CURRENT LIABILITIES 201,143 266,409
LONG-TERM DEBT--less current maturities 189,575 127,003
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION 241,382 239,616
OTHER LONG-TERM LIABILITIES 23,450 17,559
SHAREHOLDERS' INVESTMENT
Preferred Stock, par value
$.01
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 77,534,398 10/26/96
Issued 76,481,146 4/26/97 8,964 9,087
Additional paid-in capital 5,204 32,214
Shares held in treasury 0 (535)
14,168 40,766
Earnings reinvested in business 767,354 744,785
781,522 _785,551
$ 1,437,072 $ 1,436,138
</TABLE>
See notes to financial statements
<PAGE>
Form 10-Q
STATEMENTS OF EARNINGS (Unaudited)
HORMEL FOODS CORPORATION
(In Thousands of Dollars, Except Per Share Amounts)
Three Months Ended Six Months Ended
April 26, April 27, April 26, April 27,
1997 1996 1997 1996
<TABLE>
<CAPTION>
Sales, less returns and
<S> <C> <C> <C> <C>
allowances $798,455 $746,658 $1,608,764 $1,471,039
Cost of products sold 608,841 568,198 $1,235,641 $1,115,143
GROSS PROFIT 189,614 178,460 373,123 355,896
Expenses:
Selling and delivery 130,101 125,628 262,473 253,134
Administrative and general 18,207 17,230 36,212 39,980
OPERATING INCOME 41,306 35,602 74,438 62,782
Other income and expenses:
Other Income--net 2,874 2,700 5,848 8,995
Interest expense (3,342) (432) (6,400) (840)
EARNINGS BEFORE INCOME TAXES 40,838 37,870 73,886 70,937
Provision for income taxes 15,150 13,350 27,216 25,751
NET EARNINGS $ 25,688 $ 24,520 $ 46,670 $ 45,186
Earnings per share:
NET EARNINGS PER SHARE $0.33 $0.32 $0.61 $0.59
</TABLE>
See notes to financial statements
<PAGE>
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
April 26, April 27,
1997 1996
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 46,670 $ 45,186
Adjustments to reconcile to
net cash provided by
operating activities:
Depreciation 21,261 18,078
Amoritization of intangibles 3,959 2,067
Provision for deferred income taxes 1,030 (726)
(Gain) loss on property/equipment
sales and idle facility (446) (3,599)
Changes in operating assets and liabilities:
Decrease(increase)in accounts receivable 2,801 41,323
(Increase)decrease in inventories
and prepaid expenses (3,948) (32,382)
Increase(decrease) in accounts
payable and accrued expenses (58,185) (17,985)
NET CASH PROVIDED BY OPERATING ACTIVITIES 43,142 51,962
INVESTING ACTIVITIES
Sale of marketable securities 26,300 1,016
Purchase of marketable securities (45,100) 0
Acquisitions of businesses (140) 0
Purchases of property/equipment (52,022) (56,431)
Proceeds from sales of prop./equip. 3,807 4,825
(Increase)decrease in investments
and other assets (71,368) (8,084)
NET CASH USED IN INVESTING ACTIVITIES (138,523) (58,674)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 64,337 0
Principal payments
on long-term debt (1,668) (1,323)
Dividends paid on Common Stock (23,612) (22,634)
Stock Repurchase (26,759) 0
Other 152 (5,496)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 12,450 (29,453)
(DECREASE)INCREASE IN CASH AND
CASH EQUIVALENTS (82,931) (36,165)
Cash and cash equivalents at
beginning of year 188,473 189,539
CASH AND CASH EQUIVALENTS
AT END OF YEAR $105,542 $153,374
</TABLE>
See notes to financial statements
<PAGE>
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 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 1996 Hormel Foods Corporation
Annual Report to Shareholders, which is incorported by reference on Form
10-K.
NOTE B
The results of operations for the three and six month periods ended April
26, 1997, and April 27, 1996 are not necessarily indicative of the results
to be expected for the full year.
<PAGE>
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
Net earnings in the second quarter increased $1,168,000 to $25,688,000 from
$24,520,000 during the same quarter of 1996. Sales for the quarter
increased 6.9 percent to $798,455,000 from $746,658,000 last year. Sales
tonnage for the period increased .66 percent compared to the same quarter
of 1996.
During the second quarter continued high pork prices limited the Company's
ability to obtain customary margins in its pork operations. Slaughter
levels for the quarter and first half continued the trend from the first
quarter with industry slaughter being 5.8 percent less than the first six
months of 1996. Lower slaughter levels which produce corresponding
reductions in fresh pork sales for the Company are expected to continue
through the third quarter. While corn prices have stabilized, soybean meal
prices are higher than a year ago continuing the pressure on turkey margins
at Jennie-O. Growth in the tonnage volume of branded consumer packaged
products mitigated the impact of the margin pressures felt on the commodity
type pork and turkey products.
Sales and earnings for the first half of 1997 were $1,608,764,000 and
$46,670,000 compared to $1,471,039,000 and $45,186,00, respectively, last
year. Tonnage volume increased .6 percent for the half compared to the
same period in 1996.
Gross margins for the quarter and first six months as a percentage of sales
was 23.7 and 23.2 percent compared to 23.9 and 24.2 percent for the
corresponding periods of 1996. The effect of the continuing high price
levels of live pork and soymeal on the Company's gross margin was partially
offset by growth in higher margin manufactured consumer branded products
which are not as sensitive to fresh pork and turkey market fluctuations.
Marketing expenses for the quarter and first half were $52,129,000 and
$108,666,000, respectively, compared to $51,307,000 and $105,991,000 for
the same periods of 1996. The Company continues to emphasize both its well
established products and its newer ethnic product introductions in its
promotional programs. Selling and delivery expenses as a percentage of
sales declined to 16.3 percent for the quarter and six months compared to
16.9 and 17.2 percent for the same periods last year as a result of
increased sales volume. Administrative and general expenses for the second
quarter of 1997 were comparable with last year at 2.3 percent of sales.
For the half year, administrative and general expenses decreased to 2.3
percent from 2.7 percent in 1996.
<PAGE>
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. Tonnage in the Grocery Products Division was up 7 percent
compared to last year primarily due to the Stagg Food acquisition. The
canned chili business for both Hormel and Stagg brands experienced growth
in sales tonnage, market share and in the overall category during the first
six months. The Meat Products and Foodservice groups also experienced
significant gains for the quarter and year to date in sales of branded
products helping to mitigate the effect of the high pork raw material
prices.
Jennie-O sales and tonnage volume for the first half both increased more
than 20 percent over the same period in 1996. High feed costs continued to
squeeze historical margins. The high feed costs are expected to continue
until the size of the 1997 corn and soybean crops can be predicted with
more certainty. Jennie-O has introduced new marinated turkey breast
tenders which have been accepted very well in the marketplace.
Hormel Foods International tonnage volume for the first six months of 1997
increased substantially over last year. Major export growth areas included
fresh pork and Jennie-O turkey products. The introduction of Stagg canned
chili in Canada continues with excellent consumer demand. The construction
projects of the joint ventures in China continue on schedule. The venture
in Shanghai will begin production and sale of their Hormel product line in
the third quarter while the Beijing venture is scheduled to be operational
in the first quarter of 1998.
Other income is primarily interest and dividends from the investment of
excess funds. Interest expense for the quarter and first half was
$3,342,000 and $6,400,000 compared to $432,000 and $840,000 for the same
periods last year. The increases are a result of $110,000,000 in Senior
Notes issued in the fourth quarter of 1996 and $64,400,000 in long-term
notes to finance the acquisition of 21.6 percent of Campofrio in Spain
issued in the first quarter of 1997.
The effective tax rate for the quarter and first half was 37.1 and 36.8
percent compared to 35.3 and 36.3 for the same periods last year. The
increase was a result of reductions in deductible permanent differences
between tax and financial income primarily related to tax exempt interest
and dividend received deduction.
<PAGE>
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Ratio comparisons presented below as of the end of the second quarter
relfect the continued strong financial condition of the Company.:
End of Quarter
2nd Quarter 2nd Quarter
1997 1996
<TABLE>
<CAPTION>
Liquidity Ratios
<S> <C> <C>
Current ratio 3.1 3.0
Receivables turnover 15.0 14.0
Days sales in receivables 22.5 days 23.6 days
Inventory turnover 9.1 9.8
Days sales in inventory 40.7 days 39.7 days
Leverage Ratio
Long-term debt to equity 24.6% 2.4%
Operating Ratios
Pre-tax profit to net worth 18.9% 19.2%
Pre-tax profit to total assets 10.3% 11.6%
</TABLE>
Changes during the first six months in current asset and liability balances
followed normal seasonal patterns. Inventory levels are adequate for the
traditional promotional activities that occur during the third and fourth
quarters.
During the first half the Company paid $26,759,000 to purchase and retire
1,035,600 shares under a repurchase plan announced March 25, 1996. Since
inception, 2,035,600 shares have been purchased under the plan.
During the first half, the Company invested $52,022,000 in new plant and
equipment. The Company is building a new manufacturing plant and
distribution center at Osceola, Iowa. The distribution center became fully
operational in the first quarter and the manufacturing plant will be
staffing for full operations during the third quarter. Investment in plant
and equipment continues to emphasize productivity gains and efficient
product flow while improving ergonomics and safety conditions for
employees.
<PAGE>
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
The Company continues to keep excess funds invested short term as it
continues to examine business opportunities that meet its long-term
operating goals.
Long term debt consists of small issue Industrial Revenue Bonds of varying
maturities, debt used for investment in the federal affordable housing
program, $110,000,000 in Senior Notes and $64,400,000 of long-term notes,
denominated in Spanish Pesetas, used to purchase a 21.6 percent equity
interest in Campofrio in Spain. The leverage ratio indicates that
significant borrowing capacity remains to take advantage of any business
opportunities that may arise through acquisition or internal expansion.
<PAGE>
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.
HORMEL FOODS CORPORATION
Date: 6/10/97 By: s/s
D. J. HODAPP
Executive Vice President
& Chief Financial Officer
Date: 6/10/97 By: s/s
M. J. McCOY
Vice President and Treasurer
c:\wp\doc\10q\new.doc
11
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-25-1997
<PERIOD-END> APR-26-1997
<CASH> 105,542
<SECURITIES> 33,442
<RECEIVABLES> 198,068
<ALLOWANCES> 0
<INVENTORY> 275,321
<CURRENT-ASSETS> 630,557
<PP&E> 862,209
<DEPRECIATION> (413,324)
<TOTAL-ASSETS> 1,437,072
<CURRENT-LIABILITIES> 201,143
<BONDS> 189,575
<COMMON> 8,964
0
0
<OTHER-SE> 5,204
<TOTAL-LIABILITY-AND-EQUITY> 1,437,072
<SALES> 1,608,764
<TOTAL-REVENUES> 1,608,764
<CGS> 1,235,641
<TOTAL-COSTS> 1,235,641
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,400
<INCOME-PRETAX> 0
<INCOME-TAX> 73,886
<INCOME-CONTINUING> 27,216
<DISCONTINUED> 46,670
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,670
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
