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 25, 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 January 25, 1997
Common Stock - $.1172 par value 77,015,066
Common Stock Non-Voting - $.01 par value - 0 -
Pages: This report contains twelve pages numbered sequentially from this
cover page.
Form 10-Q
STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
January 25, October 26,
1997 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS $ 149,629 $ 188,473
Cash and cash equivalents
Short-term marketable securities--
at cost which approximates market 33,998 14,642
Accounts receivable 210,409 230,869
Inventories 266,455 271,097
Deferred income taxes 11,756 11,615
Prepaid expenses 6,054 6,563
TOTAL CURRENT ASSETS 678,301 723,259
DEFERRED INCOME TAXES 68,030 69,686
INTANGIBLES 122,461 124,193
INVESTMENTS AND OTHER ASSETS 171,883 98,514
PROPERTY, PLANT AND EQUIPMENT
Land 10,095 8,517
Buildings 209,577 210,450
Equipment 535,537 538,562
Construction in Progress 75,611 71,085
830,820 828,614
Less allowance for depreciation (405,778) (407,128)
425,042 421,486
$ 1,465,717 $ 1,436,138
</TABLE>
See notes to financial statements
Form 10-Q
STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
<TABLE>
<CAPTION>
January 25, October 26,
1997 1996
LIABILITIES AND SHAREHOLDERS' (Unaudited)
INVESTMENT
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 102,204 $ 121,004
Accrued expenses 43,418 42,190
Accrued marketing 17,015 22,768
Employee compensation 27,918 41,493
Taxes, other than federal income taxes 16,449 14,991
Dividends payable 12,162 11,611
Federal income tax 11,134 9,804
Current maturities of long-term debt 2,557 2,548
TOTAL CURRENT LIABILITIES 232,857 266,409
LONG-TERM DEBT--less current maturities 191,320 127,003
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION 240,704 239,616
OTHER LONG-TERM LIABILITIES 19,441 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:
Issued 77,534,398 shares 10/26/96
Issued 77,034,398 shares 1/25/97 9,028 9,087
Additional paid-in capital 19,324 32,214
Shares held in treasury (501) (535)
27,851 40,766
753,544 744,785
781,395 785,551
$ 1,465,717 $ 1,436,138
</TABLE>
See notes to financial statements
Form 10-Q
STATEMENTS OF EARNINGS (Unaudited)
HORMEL FOODS CORPORATION
(In Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
January 25, January 27,
1997 1996
Sales, less returns and
<S> <C> <C>
allowances $ 810,309 $ 724,381
Cost of products sold 626,800 546,944
GROSS PROFIT 183,509 177,437
Expenses:
Selling and delivery 132,371 127,506
Administrative and general 18,005 22,750
OPERATING INCOME 33,133 27,181
Other income and expenses:
Other Income--net 2,973 6,296
Interest expense (3,058) (409)
EARNINGS BEFORE INCOME TAXES 33,048 33,068
Provision for income taxes 12,066 12,401
NET EARNINGS $ 20,982 $ 20,667
Earnings per share:
NET EARNINGS PER SHARE $ 0.27 $ 0.27
</TABLE>
See notes to financial statements
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
HORMEL FOODS CORPORATION
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
January 25, January 27,
1997 1996
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 20,982 $ 20,667
Adjustments to reconcile to
net cash provided by
operating activities:
Depreciation 10,549 8,823
Amoritization of intangibles 1,872 1,034
Provision for deferred income taxes 515 (72)
(Gain) loss on property/equipment
sales and idle facility (22) (3,593)
Changes in operating assets
and liabilities:
Decrease(increase)in accounts
receivable 20,460 41,713
Increase)decrease in inventories
and prepaid expenses 5,151 (15,990)
Increase(decrease) in accounts
payable and accrued expenses (31,142) 736
NET CASH PROVIDED BY OPERATING
ACTIVITIES 28,365 53,318
INVESTING ACTIVITIES
Sale of available-for-sale
securities 0 485
Purchase of held-to-maturity securities (19,357) 0
Acquisitions of businesses (140) 0
Purchases of property/equipment (17,072) (20,358)
Proceeds from sales of prop./equip. 2,989 4,678
(Increase)decrease in investments
and other assets (73,369) (3,211)
NET CASH USED IN INVESTING
ACTIVITIES (106,949) (18,406)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 64,336 0
Principal payments
on long-term debt (10) 0
Dividends paid on Common Stock (11,662) (11,123)
Stock Repurchase (13,035) 0
Other 111 84
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 39,740 (11,039)
(DECREASE)INCREASE IN CASH AND
CASH EQUIVALENTS (38,844) 23,873
Cash and cash equivalents at
beginning of year 188,473 189,539
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 149,629 $ 213,412
</TABLE>
See notes to financial statements
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 month period ended January 25,
1997, and January 26, 1996 are not necessarily indicative of the results to
be expected for the full year.
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
Sales and earnings for the first quarter were $810,309,000 and $20,982,000
compared to $724,381,000 and $20,667,000 respectively last year. Tonnage
volume for the quarter increased .5 percent over 1996 to 647,406,000
pounds.
The increase in sales dollars, while earnings and tonnage volume remained
flat, was a result of higher pork raw material costs and changes in the
product mix between fresh pork and manufactured items. Although corn and
soymeal prices have stabilized from record levels in 1996, live hog numbers
continued to decline and produced pork raw material prices 29 percent
higher than last year. The high raw material prices continued to place
pressure on the Company's ability to maintain comparable gross margins
during the first quarter.
Slaughter levels for the quarter were 5.4 percent less than for the first
quarter of 1996 which produced corresponding reductions in commodity fresh
pork sales. Increases in the Company's mix of branded, consumer-packaged
items more than offset the reduction in commodity fresh pork sales. The
pressure on margins was mitigated to some extent by the increased volume of
higher margin manufactured items in the product mix.
The Company's core Hormel business continues to be the major contributor to
earnings. Within the Prepared Foods Group, tonnage volume for the Grocery
Products Division during the first quarter was up 12 percent compared to
last year primarily due to the acquisition of Stagg Foods in October of
1996. Market share gains were also realized in DINTY MOORE stew, HORMEL
bacon bits and microwave meals. The Specialty Products Division is behind
a year ago in tonnage volume but ahead of their 1997 plan.
The Meat Products Group experienced a volume increase of 10 percent
primarily related to consumer packaged fresh pork. Increases in boneless
ham categories were also a significant factor in the increased volume. The
consumer group of sliced pepperoni, including turkey pepperoni, also grew
in volume and feature activity.
The Foodservice Group had a strong first quarter with tonnage volume up 4
percent over the first quarter of 1996. There was a significant shift in
the food service product mix as volume gains in branded products more than
offset the double digit decline in commodity fresh pork tonnage. These
volume gains were significant as extreme weather conditions, while not as
severe as the situations last year in the northeast, still impacted the
Foodservice business during the quarter particularly in the Midwest.
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
Hormel Foods International completed the first quarter with a tonnage
volume gain of 105 percent over last year. However the volume increase was
tempered by the same inability to recover appropriate margins experienced
in the U.S.
During the quarter Hormel Foods International purchased 21 percent of
Campofrio in Spain and 13 percent of Pozmeat in Poland. These
acquisitions, along with joint ventures in China and other parts of the
world, provide a growing presence in the international marketplace.
Jennie-O Foods, Inc. experienced a 20 percent increase in sales volume over
the first quarter of 1996. While corn and soymeal prices have fallen from
the record levels experienced in 1996, the lower feed costs have not yet
worked completely through the production cycle. This has prevented
Jennie-O from realizing their customary margins. Results for the first
quarter were also affected by higher than normal winter storm expenses
during December and January. Late in the quarter, Jennie-O introduced a
new fat free bacon wrapped turkey filet similar to bacon wrapped beef filet
mignon, a line of uncooked spiced marinated turkey filets and a line of
high temperature breast products that provide a real roast turkey flavor.
Results for the quarter at Dubuque Foods were less than planned as high
pork raw material costs have a greater impact on Dubuque than the primary
Hormel business.
Marketing expenses increased 3.4 percent during the quarter to $56,537,000
from $54,684,000 in 1996. The Company continues to emphasize both its well
established products along with newer ethnic products in its promotional
programs.
Selling and delivery expenses and administrative and general expenses for
the quarter declined to 16.3 and 22 percent of sales from 17.6 and 31
percent of sales in 1996. The decrease is the result of the higher price
level experienced this year. In addition, 1996 administrative and general
expenses included a settlement of a class action lawsuit in the amount of
$7,500,000.
The effective tax rate for the first three months of 1997 was 36.5 percent
compared to 37.5 percent last year. The decrease was a result of increases
in deductible permanent differences between tax and financial income and
the tax credits realized from investments in the Federal Affordable Housing
Program.
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
Other income-net for the first quarter of 1997 was $2,973,000 compared to
$6,296,000 in 1996. The decrease was primarily the result of a gain
recognized in 1996 on the sale of oil and gas stock that had been
classified as available for sale.
FINANCIAL CONDITION
Ratio comparisons for the first quarter of 1997 and 1996, which demonstrate
the Company's financial strength, are as follows:
End of Quarter
1st Quarter 1st Quarter
1997 1996
<TABLE>
<CAPTION>
Liquidity Ratios
<S> <C> <C>
Current ratio 2.9 3.0
Receivables turnover 14.7 13.8
Days sales in receivables 23.7 days 23.9 days
Inventory turnover 9.3 10.1
Days sales in inventory 38.8 days 37.8 days
Leverage Ratio
Long-term debt to equity 24.8% 2.6%
Operating Ratios
Pre-tax profit to net worth 16.9% 18.0%
Pre-tax profit to total assets 9.1% 10.8%
</TABLE>
Changes during the first quarter in current asset and liability balances
followed normal seasonal patterns except for accounts receivable and
inventories. Accounts receivables and inventories reflect larger balances
due to the increased price levels resulting from high pork raw material
costs.
During the first quarter, the Company invested $17,072,000 in new plant and
equipment. The Company is building a new manufacturing plant and
distribution center at Osceola, Iowa. The distribution center was opened
in the first quarter and the manufacturing plant is scheduled to be fully
operational in May. Investment in plant and equipment continues to
emphasize productivity gains, and efficient product flow while improving
ergonomics and safety conditions for employees.
FORM 10-Q
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HORMEL FOODS CORPORATION
RESULTS OF OPERATIONS
During the first quarter the Company through Hormel Foods International
Corporation purchased a 21.6 percent equity interest in Campofrio in Spain
for approximately $64,400,000. The investment was financed through long-
term notes denominated in Spanish Pesetas.
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, debt used for investment in the federal affordable housing
program, $110,000,000 in Senior Notes and $64,400,000 of long-term notes
used to purchase the equity interest in Campofrio. The leverage ratio
indicates that significant borrowing capacity remains to take advantage of
any business opportunities that may arise through acquisition or internal
expansion.
During the first quarter of fiscal 1997, 500,000 shares of Hormel Common
Stock were purchased and retired under the share repurchase program
approved in 1996.
FORM 10-Q
PART II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders.
At the Annual Meeting of Shareholders on January 28, 1997 the
proposal to amend the Hormel Foods Corporation 1991 Key Employee
Stock Option and Award Plan was approved.
For: 62,483,525 Against: 1,267,241 Abstain: 614,224
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: By: s/s
D. J. HODAPP
Executive Vice President
& Chief Financial Officer
Date: By: s/s
M. J. McCOY
Treasurer
c:\wp\doc\10q\97-1.doc
12
12
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-25-1997
<PERIOD-END> JAN-25-1997
<CASH> 149,629
<SECURITIES> 33,998
<RECEIVABLES> 210,409
<ALLOWANCES> 0
<INVENTORY> 266,455
<CURRENT-ASSETS> 678,301
<PP&E> 830,820
<DEPRECIATION> (405,778)
<TOTAL-ASSETS> 1,465,717
<CURRENT-LIABILITIES> 232,857
<BONDS> 191,320
<COMMON> 9,028
0
0
<OTHER-SE> 18,823
<TOTAL-LIABILITY-AND-EQUITY> 1,465,717
<SALES> 810,309
<TOTAL-REVENUES> 810,309
<CGS> 626,800
<TOTAL-COSTS> 626,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,058
<INCOME-PRETAX> 33,048
<INCOME-TAX> 12,066
<INCOME-CONTINUING> 20,982
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,982
<EPS-PRIMARY> $0.27
<EPS-DILUTED> $0.27
</TABLE>
