HORMEL FOODS CORP DE
For the period ended Jul 28, 2024. Filed Sep 4, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 28, 2024 · Filed Sep 4, 2024
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Non-GAAP Measures
(1)Non-GAAP Measures
This filing includes measures of financial performance that are not defined by GAAP. The Company utilizes these non-GAAP measures to understand and evaluate operating performance on a consistent basis. These measures may also be used when making decisions regarding resource allocation and in determining incentive compensation. The Company believes these non-GAAP measures provide useful information to investors because they aid analysis and understanding of the Company’s results and business trends relative to past performance and the Company’s competitors. Non-GAAP measures are not intended to be a substitute for GAAP measures in analyzing financial performance. These non-GAAP measures are not calculated in accordance with GAAP and may be different from non-GAAP measures used by other companies.
Transform and Modernize Initiative
In the fourth quarter of fiscal 2023, the Company announced a multi-year transform and modernize initiative. In presenting non-GAAP measures, the Company adjusts for (i.e., excludes) expenses for this initiative that are non-recurring, comprised primarily of project-based external consulting fees and asset write-offs related to portfolio optimization (i.e., reducing the complexity and optimizing the assortment of the product portfolio). The Company believes that non-recurring costs associated with the transform and modernize initiative are not reflective of the Company’s ongoing operating cost structure; therefore, the Company is excluding these discrete costs. The Company does not adjust for (i.e., does not exclude) certain costs related to the transform and modernize initiative that are expected to continue after the project ends, such as software license fees and internal employee expenses, because those costs are considered ongoing in nature as a component of normal operating costs.
Legal Matters
From time to time, the Company incurs expenses related to discrete legal matters that the Company believes are not indicative of the Company’s core operating performance, do not reflect expected future operating costs, and may not be meaningful when comparing the Company’s operating performance against that of prior periods. The Company adjusts for (i.e., excludes) these expenses.
Litigation Settlements
In the second and third quarters of fiscal 2024, the Company entered into settlement agreements with certain plaintiffs in its pending antitrust litigation. See Note I - Commitments and Contingencies of the Notes to the Consolidated Financial Statements for additional information.
Arbitration Ruling
In the third quarter of fiscal 2023, the Company received an unexpected, unfavorable arbitration ruling involving an isolated commercial dispute with a third party.
The table below shows the calculations to reconcile from the GAAP measures to the non-GAAP measures presented in this Quarterly Report on Form 10-Q. The tax impacts were calculated using the effective tax rate for the quarter in which the expenses were incurred.
| Quarter Ended | Nine Months Ended | |||
|---|---|---|---|---|
| In thousands, except per share amounts | July 28, 2024 | July 30, 2023 | July 28, 2024 | July 30, 2023 |
| Cost of Products Sold (GAAP) | $2,410,075 | $2,465,251 | $7,281,798 | $7,426,514 |
| Transform and Modernize Initiative(1) | (1,226) | — | (4,646) | — |
| Adjusted Cost of Products Sold (Non-GAAP) | $2,408,848 | $2,465,251 | $7,277,152 | $7,426,514 |
| Gross Profit (GAAP) | $488,369 | $498,048 | $1,500,908 | $1,485,417 |
| Transform and Modernize Initiative(1) | 1,226 | — | 4,646 | — |
| Adjusted Gross Profit (Non-GAAP) | $489,595 | $498,048 | $1,505,554 | $1,485,417 |
| SG&A (GAAP) | $259,653 | $291,073 | $766,707 | $725,621 |
| Transform and Modernize Initiative(2) | (12,280) | — | (31,016) | — |
| Pork Antitrust Litigation Settlements | — | — | (11,750) | — |
| Red Meat Wages Antitrust Litigation Settlement | (13,500) | — | (13,500) | — |
| Poultry Wages Antitrust Litigation Settlement | (3,500) | — | (3,500) | — |
| Arbitration Ruling | — | (70,000) | — | (70,000) |
| Adjusted SG&A (Non-GAAP) | $230,373 | $221,073 | $706,941 | $655,621 |
| Operating Income (GAAP) | $236,693 | $216,759 | $773,452 | $802,009 |
| Transform and Modernize Initiative(1)(2) | 13,506 | — | 35,663 | — |
| Pork Antitrust Litigation Settlements | — | — | 11,750 | — |
| Red Meat Wages Antitrust Litigation Settlement | 13,500 | — | 13,500 | — |
| Poultry Wages Antitrust Litigation Settlement | 3,500 | — | 3,500 | — |
| Arbitration Ruling | — | 70,000 | — | 70,000 |
| Adjusted Operating Income (Non-GAAP) | $267,200 | $286,759 | $837,864 | $872,009 |
| Earnings Before Income Taxes (GAAP) | $225,719 | $207,626 | $755,404 | $767,666 |
| Transform and Modernize Initiative(1)(2) | 13,506 | — | 35,663 | — |
| Pork Antitrust Litigation Settlements | — | — | 11,750 | — |
| Red Meat Wages Antitrust Litigation Settlement | 13,500 | — | 13,500 | — |
| Poultry Wages Antitrust Litigation Settlement | 3,500 | — | 3,500 | — |
| Arbitration Ruling | — | 70,000 | — | 70,000 |
| Adjusted Earnings Before Income Taxes (Non-GAAP) | $256,225 | $277,626 | $819,816 | $837,666 |
| Provision for Income Taxes (GAAP) | $48,984 | $45,055 | $170,733 | $170,230 |
| Transform and Modernize Initiative(1)(2) | 2,931 | — | 8,009 | — |
| Pork Antitrust Litigation Settlements | — | — | 2,644 | — |
| Red Meat Wages Antitrust Litigation Settlement | 2,930 | — | 2,930 | — |
| Poultry Wages Antitrust Litigation Settlement | 760 | — | 760 | — |
| Arbitration Ruling | — | 15,190 | — | 15,190 |
| Adjusted Provision for Income Taxes (Non-GAAP) | $55,603 | $60,245 | $185,074 | $185,420 |
| Quarter Ended | Nine Months Ended | |||
|---|---|---|---|---|
| In thousands, except per share amounts | July 28, 2024 | July 30, 2023 | July 28, 2024 | July 30, 2023 |
| Net Earnings Attributable to Hormel Foods Corporation (GAAP) | $176,701 | $162,679 | $584,842 | $597,637 |
| Transform and Modernize Initiative(1)(2) | 10,575 | — | 27,654 | — |
| Pork Antitrust Litigation Settlements | — | — | 9,106 | — |
| Red Meat Wages Antitrust Litigation Settlement | 10,571 | — | 10,571 | — |
| Poultry Wages Antitrust Litigation Settlement | 2,741 | — | 2,741 | — |
| Arbitration Ruling | — | 54,810 | — | 54,810 |
| Adjusted Net Earnings Attributable to Hormel Foods Corporation (Non-GAAP) | $200,588 | $217,489 | $634,913 | $652,447 |
| Diluted Net Earnings Per Share (GAAP) | $0.32 | $0.30 | $1.07 | $1.09 |
| Transform and Modernize Initiative(1)(2) | 0.02 | — | 0.05 | — |
| Pork Antitrust Litigation Settlements | — | — | 0.02 | — |
| Red Meat Wages Antitrust Litigation Settlement | 0.02 | — | 0.02 | — |
| Poultry Wages Antitrust Litigation Settlement | — | — | — | — |
| Arbitration Ruling | — | 0.10 | — | 0.10 |
| Adjusted Diluted Net Earnings Per Share (Non-GAAP) | $0.37 | $0.40 | $1.16 | $1.19 |
| SG&A as a Percent of Net Sales (GAAP) | 9.0% | 9.8% | 8.7% | 8.1% |
|---|---|---|---|---|
| Transform and Modernize Initiative(2) | (0.4) | — | (0.4) | — |
| Pork Antitrust Litigation Settlements | — | — | (0.1) | — |
| Red Meat Wages Antitrust Litigation Settlement | (0.5) | — | (0.2) | — |
| Poultry Wages Antitrust Litigation Settlement | (0.1) | — | — | — |
| Arbitration Ruling | — | (2.4) | — | (0.8) |
| Adjusted SG&A as a Percent of Net Sales (Non-GAAP) | 7.9% | 7.5% | 8.0% | 7.4% |
| Operating Margin (GAAP) | 8.2% | 7.3% | 8.8% | 9.0% |
| Transform and Modernize Initiative(1)(2) | 0.5 | — | 0.4 | — |
| Pork Antitrust Litigation Settlements | — | — | 0.1 | — |
| Red Meat Wages Antitrust Litigation Settlement | 0.5 | — | 0.2 | — |
| Poultry Wages Antitrust Litigation Settlement | 0.1 | — | — | — |
| Arbitration Ruling | — | 2.4 | — | 0.8 |
| Adjusted Operating Margin (Non-GAAP) | 9.2% | 9.7% | 9.5% | 9.8% |
(1) Comprised primarily of asset write-offs related to portfolio optimization.
(2) Comprised primarily of project-based external consulting fees.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.