HORMEL FOODS CORP DE

Previous wording

The Company reported diluted net earnings per share of $0.32 for the third quarter of fiscal 2024, up 7 percent compared to the same period last year. Adjusted diluted net earnings per share(1) was $0.37. Significant factors impacting the quarter are listed below. All comparisons are to the same period of the prior year unless otherwise noted.

Current wording

The Company reported diluted earnings per share of $0.31 for the first quarter of fiscal 2025, down 23 percent compared to the same period last year. Adjusted diluted earnings per share(1) was $0.35. Significant factors impacting the quarter are listed below. All comparisons are to the same period of the prior year unless otherwise noted.

Previous wording

•Net sales for the third quarter decreased 2 percent. The benefit from higher volume and net sales in the Foodservice segment was more than offset by lower volume and net sales in the Retail and International segments.

Current wording

•Net sales for the first quarter were flat compared to the prior year while organic net sales(1) increased. The benefit from higher organic volume(1) and organic net sales(1) in the Foodservice segment was more than offset by lower volume and net sales in the Retail and International segments.

Previous wording

•Segment profit for the third quarter decreased 6 percent. Improved results in the International segment were more than offset by declines in profit for each of the Retail and Foodservice segments.

Current wording

•Total segment profit for the first quarter decreased 13 percent. Segment profit growth in the International segment was more than offset by declines in segment profit for each of the Retail and Foodservice segments.

Previous wording

•Foodservice segment profit decreased in the current quarter, as higher sales were more than offset by higher SG&A expenses.

Current wording

•Foodservice segment profit decreased in the first quarter, as higher sales were offset by margin pressures, primarily in non-core businesses.

Previous wording

•Earnings before income taxes for the third quarter increased 9 percent, as the impact of lower net sales was more than offset by lower selling, general, and administrative (SG&A) expenses compared to the prior period, which included an unfavorable arbitration ruling. Adjusted earnings before income taxes(1)decreased 8 percent.

Current wording

•Earnings before income taxes for the first quarter decreased 24 percent, as the impact of higher organic net sales(1) was more than offset by higher cost of products sold and higher selling, general, and administrative (SG&A) expenses compared to the prior period. Adjusted earnings before income taxes(1) decreased 18 percent.

Previous wording

•The pre-tax impact of expenses related to the Company’s transform and modernize initiative and antitrust litigation settlements in the third quarter of fiscal 2024 was $30.5 million, most of which was recorded in SG&A expense. The pre-tax impact of expenses related to the Company's arbitration ruling in the third quarter of fiscal 2023 was $70.0 million, all of which was recorded in SG&A expense.

Current wording

•The pre-tax impact of expenses related to the Company’s T&M initiative, the loss on the sale of a non-core sow operation, and an antitrust litigation settlement in the first quarter of fiscal 2025 was $25.7 million, most of which was recorded in SG&A.

Previous wording

•Year-to-date cash flow from operations was $858 million, an increase of 18 percent compared to the prior year.

Current wording

•Year-to-date cash flow from operations was $309 million, a decrease of 23 percent compared to the prior year.

Previous wording

(1) See the “Non-GAAP Measures” section below for a description of the Company’s use of measures not defined by United States Generally Accepted Accounting Principles (GAAP).

Current wording

(1) See the “Non-GAAP Measures” section below for a description of the Company’s use of measures not defined by United States (U.S.) Generally Accepted Accounting Principles (GAAP).

Previous wording

Net sales for the third quarter of fiscal 2024 decreased as the benefit from higher volume and net sales in the Foodservice segment was more than offset by lower volume and net sales in each of the Retail and International segments. In the Retail segment, lower volume and net sales were driven by significant year-over-year volume and pricing declines for whole bird turkeys, lower sales of Planters® snack nuts resulting from production disruptions at the Suffolk, Virginia, facility, and lower center-store and contract manufacturing volumes. In the International segment, top-line declines were driven by lower commodity export volumes and lower net sales in China.

Current wording

Net sales for the first quarter of fiscal 2025 decreased compared to the prior year, as the benefit from higher net sales in the Foodservice segment was more than offset by lower net sales in each of the Retail and International segments.

Previous wording

Cost of products sold for the third quarter and the first nine months of fiscal 2024 decreased due primarily to lower sales. On a per pound basis, cost of products sold for the first nine months of fiscal 2024 was comparable to the same period of the prior year.

Current wording

Cost of products sold for the first quarter of fiscal 2025 increased due primarily to higher commodity input costs. On a per pound basis, cost of products sold for the first three months of fiscal 2025 increased compared to the prior year.

Previous wording

For the third quarter of fiscal 2024, gross profit as a percent of net sales was flat. For the first nine months of fiscal 2024, gross profit as a percent of net sales increased in the International segment and was comparable for the Retail and Foodservice segments. All segments benefited from savings realized as part of the Company’s transform and modernize initiative.

Current wording

For the first quarter of fiscal 2025, gross profit as a percent of net sales declined. Gross profit as a percent of net sales increased in the International segment and decreased for the Retail and Foodservice segments. All segments benefited from savings realized as part of the Company’s T&M initiative.

Previous wording

Looking ahead to the fourth quarter of fiscal 2024, the Company expects gross profit as a percent of net sales to increase compared to last year. The Company expects gross profit as a percent of net sales to increase for the International segment and be comparable for the Retail and Foodservice segments.

Current wording

For the second quarter of fiscal 2025, the Company expects gross profit as a percent of net sales to decrease for each reporting segment compared to last year.

Previous wording

For the third quarter, SG&A and SG&A as a percent of net sales decreased due to the accrual for an unfavorable arbitration ruling in the prior year, which was partially offset by current year litigation settlements. Adjusted SG&A as a percent of net sales(1) increased compared to last year. For the first nine months of fiscal 2024, SG&A and SG&A as a percent of net sales increased, primarily due to higher employee-related expenses.

Current wording

For the first quarter, SG&A and SG&A as a percent of net sales increased due to the loss on the sale of a non-core sow operation, employee-related expenses, and expenses related to the T&M initiative. Adjusted SG&A as a percent of net sales(1) increased compared to last year due to employee-related expenses.

Previous wording

Advertising investments in the third quarter were $40 million, a decrease of 6 percent compared to last year. The decline was partially due to lower support for the Planters® brand due to production disruptions at the Suffolk, Virginia, facility. For the first nine months of fiscal 2024, advertising investments were $128 million, an increase of 4 percent compared to last year. The Company expects full-year advertising expense to increase compared to the prior year.

Current wording

Advertising investments in the first quarter were $43 million, a decrease of 2 percent compared to last year. The decline was partially due to lower support for the Planters® brand due to production disruptions at the Suffolk facility. The Company expects full-year advertising expense to increase compared to the prior year.

Previous wording

Equity in earnings of affiliates for the third quarter and the first nine months of fiscal 2024 decreased due to lower results for MegaMex Foods, LLC, partially offset by improvements from the Company’s international investments.

Current wording

Equity in earnings of affiliates for the first quarter of fiscal 2025 is comparable to the prior year as favorable results for MegaMex Foods, LLC, were offset by the Company’s international investments.

Previous wording

Interest and investment income for the third quarter and the first nine months of fiscal 2024 increased due to a higher average cash balance, favorable market interest rates, and improved performance from the rabbi trust. Interest expense increased in the third quarter and first nine months of fiscal 2024 due to the second quarter debt issuance.

Current wording

Interest and investment income for the first quarter of fiscal 2025 decreased predominately due to performance from the rabbi trust. Interest expense increased in the first quarter of fiscal 2025 due to the prior year debt issuance.

Previous wording

The effective tax rate in the third quarter was flat to last year. The higher effective tax rate for the first nine months of fiscal 2024 is primarily due to higher federal deductions in the prior year partially offset by the purchase of federal transferable energy credits in the current year. The effective tax rate for fiscal 2024 is expected to be between 22.0% and 23.0%. For further information, refer to Note K - Income Taxes of the Notes to the Consolidated Financial Statements.

Current wording

The effective tax rate in the first quarter was 21.8% compared to 23.4% last year. The lower effective tax rate for the first three months of fiscal 2025 is primarily due to the purchase of federal transferable energy credits in the current year. The effective tax rate for fiscal 2025 is expected to be between 22.0% and 23.0%. For additional information, refer to Note L - Income Taxes of the Notes to the Consolidated Financial Statements.

Previous wording

Net sales and segment profit for each of the Company’s reportable segments are set forth below. The Company does not allocate deferred compensation, non-recurring expenses associated with the transform and modernize initiative, investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded. These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

Current wording

Net sales and segment profit for each of the Company’s reportable segments are set forth below. The Company does not allocate deferred compensation, non-recurring expenses associated with the T&M initiative, gains or losses on the sale of businesses, investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded. These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

Previous wording

Volume and net sales growth in the third quarter of fiscal 2024 were driven primarily by strong performance across the turkey, premium prepared proteins, bacon, and pepperoni categories. Notable products such as Hormel® Fire Braised™meats, Hormel® Bacon 1™cooked bacon, Café H® globally inspired proteins, and Rosa Grande® premium pepperoni delivered strong volume and net sales growth. Growth from branded Jennie-O® turkey items continued to benefit top-line results. For the first nine months of fiscal 2024, volume and net sales growth was broad-based and across numerous categories.

Current wording

Organic volume(1) and net sales growth in the first quarter of fiscal 2025 were driven primarily by strong performance across the premium prepared proteins, turkey, premium bacon, and breakfast sausage categories. Notable products such as branded Jennie-O® turkey items, Hormel® Fire Braised™meats, Café H® globally inspired proteins, and Cure 81® ham delivered strong volume and net sales growth.

Previous wording

For the fourth quarter, the Company expects Foodservice segment profit to be in line with prior year, with the impact from volume growth expected to be offset by higher SG&A compared to last year.

Current wording

For the second quarter, the Company expects Foodservice segment profit to decline compared to the prior year, as organic top-line growth is expected to be more than offset by margin pressures in non-core businesses and higher input costs.

Previous wording

In the fourth quarter of fiscal 2024, the Company expects International segment profit to increase significantly compared to last year. This recovery is expected to be driven by improvement across the business, including increased branded exports, growth in China and Brazil, and contributions from investments in the Philippines and Indonesia.

Current wording

In the second quarter of fiscal 2025, the Company expects International segment profit to decrease compared to the prior year. Value-added growth across China and Indonesia is expected to be more than offset by softness in Brazil.

Previous wording

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.

Current wording

In the fourth quarter of fiscal 2023, the Company announced a multi-year T&M 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 expenses related to supply chain and portfolio optimization (e.g., asset write-offs, severance, or relocation-related costs). The Company believes that non-recurring costs associated with the T&M 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 T&M 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. The Company also does not adjust for savings realized through the T&M initiative as these are considered ongoing in nature and reflective of expected future operating performance.

Previous wording

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.

Current wording

In the first quarter of fiscal 2025, the Company entered into a settlement agreement with a plaintiff in a pending antitrust litigation. See Note J - Commitments and Contingencies of the Notes to the Consolidated Financial Statements for additional information.

Previous wording

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.

Current wording

The tables below show 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 transactions occurred.

Previous wording

(1) Comprised primarily of asset write-offs related to portfolio optimization.

Current wording

(1) Comprised primarily of asset write-offs and severance expenses related to supply chain and portfolio optimization.

Previous wording

Cash and cash equivalents decreased $199 million during the first nine months of fiscal 2024, primarily as a result of the Company repaying a portion of long-term debt by using existing cash on hand and the proceeds from new debt issued in fiscal 2024. Cash provided by operating activities has been sufficient to cover dividend payments and capital expenditures during the first nine months of fiscal 2024. The purchase of a minority interest in PT Garudafood Putra Putri Jaya Tbk (Garudafood) was the primary driver of the decline in cash and cash equivalents in the prior year. Additional details related to significant drivers of cash flows are provided below.

Current wording

Cash and cash equivalents increased $99 million and $227 million during the first quarter of fiscal 2025 and fiscal 2024, respectively. Cash provided by operating activities was sufficient to cover dividend payments and capital expenditures in both years. Additional details related to significant drivers of cash flows are provided below.

Previous wording

•Cash flows from operating activities during the first nine months of fiscal 2024 were largely impacted by changes in operating assets and liabilities.

Current wording

•Cash flows from operating activities were largely impacted by changes in operating assets and liabilities.

Previous wording

–Accounts receivable decreased $89 million and $81 million during the nine months ended July 28, 2024 and July 30, 2023, respectively, primarily due to lower sales.

Current wording

–Accounts receivable decreased $57 million and $68 million during the first quarter of fiscal 2025 and fiscal 2024, respectively, primarily due to lower sales compared to the fourth quarter of the prior year.

Previous wording

–Inventory decreased $31 million during the first nine months of fiscal 2024 compared to an increase of $21 million in the comparable period of the prior year. The decrease in inventory during fiscal 2024 was due to benefits in supply chain processes associated with the Company's transform and modernize initiative as well as the impact of production disruptions at the Suffolk, Virginia manufacturing facility. These reduced levels of inventory were partially offset by higher levels of turkey on hand in fiscal 2024. The increase in inventory during fiscal 2023 was due to production outpacing sales.

Current wording

–Inventory decreased $56 million during the first quarter of fiscal 2025 compared to a decrease of $104 million in the comparable period of the prior year. The decrease in inventory during fiscal 2025 was primarily driven by holiday sales and constrained turkey inventories. The decrease in inventory during fiscal 2024 was due to improvement in the Company's supply chain and the negative impact of Highly Pathogenic Avian Influenza on turkey operations.

Previous wording

–Accounts payable and accrued expenses decreased $95 million during the first nine months of fiscal 2024 due to the general timing of payments, feed and livestock deferral payments, and annual incentive payments. These decreases were partially offset by higher accruals for marketing and legal expenses. Accounts payable and accrued expenses decreased $131 million during the first nine months of fiscal 2023 due to the general timing of payments and annual incentive payments, partially offset by higher accruals for legal expenses.

Current wording

–Accounts payable and accrued expenses decreased $56 million and $132 million during the first quarter of fiscal 2025 and fiscal 2024, respectively. These decreases were driven by annual incentive payments as well as livestock and feed deferral payments which were partially offset by higher marketing accruals. The decrease during fiscal 2024 was also due to the general timing of payments and inventory management.

Previous wording

•Capital expenditures were $173 million and $169 million during the first nine months of fiscal 2024 and fiscal 2023, respectively. The largest spend during fiscal 2024 was for the transition from harvest to value-added capacity at the facility in Barron, Wisconsin and wastewater infrastructure to support operations in Austin, Minnesota. The largest spend during fiscal 2023 was related to capacity expansion for pepperoni and the SPAM® family of products.

Current wording

•Capital expenditures were $72 million and $47 million during the first quarter of fiscal 2025 and fiscal 2024, respectively. The largest project during both years was for the transition from harvest to value-added capacity for Hormel® Fire Braised® products and Applegate® products at the facility in Barron, Wisconsin. Other significant projects included equipment upgrades for chili production in Beloit, Wisconsin during fiscal year 2025 and wastewater infrastructure to support operations in Austin, Minnesota during both fiscal year 2025 and fiscal year 2024.

Previous wording

•Cash dividends paid to the Company’s shareholders were $460 million during the first nine months of fiscal 2024, compared to $443 million in the comparable period of fiscal 2023.

Current wording

•Cash dividends paid to the Company’s shareholders totaled $155 million during the first quarter of fiscal 2025, compared to $150 million in the comparable period of fiscal 2024.

Previous wording

The Company believes its balanced business model, with diversification across raw material inputs, channels, and categories, provides stability in ever-changing economic environments. The Company maintains a disciplined capital allocation strategy and uses a waterfall approach, which focuses first on core uses of cash, such as capital expenditures to maintain facilities, dividend returns to investors, mandatory debt repayments, and fulfillment of pension obligations. Next, the Company looks to strategic items in support of growth initiatives, such as capital projects, acquisitions, additional dividend increases, and working capital investments. Finally, the Company evaluates opportunistic uses, including incremental debt repayment and share repurchases.

Current wording

The Company believes its balanced business model, with diversification across raw material inputs, channels, and categories, provides stability in ever-changing economic environments. The Company maintains a disciplined capital allocation strategy and uses a waterfall approach, which focuses first on core uses of cash, such as capital expenditures to maintain facilities, dividend returns to investors, mandatory debt repayments, and fulfillment of pension obligations. Next, the Company looks to strategic items in support of growth initiatives, such as other capital projects, acquisitions, additional dividend increases, and working capital investments. Finally, the Company evaluates opportunistic uses, including incremental debt repayment and share repurchases.

Previous wording

The Company believes its anticipated income from operations, cash on hand, borrowing capacity under the current unsecured revolving credit facility, and access to capital markets will be adequate to meet all short-term and long-term commitments. The Company continues to look for opportunities to make investments and acquisitions that align with its strategic priorities. The Company has multiple sources of liquidity to complete such investments and acquisitions. For example, the Company’s historic ability to leverage its balance sheet through the issuance of debt has provided the flexibility to pursue strategic opportunities.

Current wording

The Company believes its anticipated income from operations, cash on hand, borrowing capacity under the current unsecured revolving credit facility, and access to capital markets will be adequate to meet all short-term and long-term commitments. The Company continues to look for opportunities to make investments and acquisitions that align with its strategic priorities. The

Previous wording

The Company remains committed to providing returns to investors through cash dividends. The Company has paid 384 consecutive quarterly dividends since becoming a public company in 1928. The Board of Directors approved an increased annual dividend rate for fiscal 2024 raising it to $1.13 per share from $1.10 per share, representing the 58th consecutive annual dividend increase.

Current wording

The Company remains committed to providing returns to investors through cash dividends. The Company has paid 386 consecutive quarterly dividends since becoming a public company in 1928. The Board of Directors approved an increased annual dividend rate for fiscal 2025, raising it to $1.16 per share from $1.13 per share, representing the 59th consecutive annual dividend increase.

Previous wording

Capital expenditures are allocated to required maintenance and growth opportunities based on the needs of the business. Capital expenditures supporting growth opportunities in fiscal 2024 are expected to focus on projects related to value-added capacity, infrastructure, and new technology. Capital expenditures for fiscal 2024 are estimated to be $280 million.

Current wording

Capital expenditures are allocated to required maintenance and growth opportunities based on the needs of the business. Capital expenditures supporting growth opportunities in fiscal 2025 are expected to focus on projects related to value-added capacity, infrastructure, and new technology. Capital expenditures for fiscal 2025 are estimated to be $275 million to $300 million.

Previous wording

As of July 28, 2024, the Company’s outstanding debt included $2.9 billion of fixed rate unsecured senior notes due in fiscal 2027, 2028, 2030, and 2051 with interest payable semi-annually. During the first nine months of fiscal 2024, the Company made $55 million of interest payments and the Company expects to make an additional $13 million of interest payments during fiscal 2024 on these notes. On March 8, 2024, the Company issued senior unsecured notes with an aggregate principal amount of $500 million. These proceeds were used, along with cash on hand, to repay $950 million in senior unsecured notes which matured on June 3, 2024. See Note J - Long-Term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information.

Current wording

As of January 26, 2025, the Company’s outstanding debt included $2.9 billion of fixed rate unsecured senior notes due in fiscal 2027, 2028, 2030, and 2051 with interest payable semi-annually. During the first three months of fiscal 2025, the Company made $25 million of interest payments and the Company expects to make an additional $49 million of interest payments during fiscal 2025 on these notes. See Note K - Long-term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information.

Previous wording

As a source of short-term financing, the Company maintains a $750 million unsecured revolving credit facility. The maximum commitment under this credit facility may be further increased by $375 million, generally by mutual agreement of the lenders and the Company, subject to certain customary conditions. Funds drawn from this facility may be used by the Company for general corporate purposes, which may include repaying existing debt, funding acquisitions, and for working capital or other general purposes. The lending commitments under the facility are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of July 28, 2024, the Company had no outstanding draws from this facility.

Current wording

As a source of short-term financing, the Company maintains a $750 million unsecured revolving credit facility. The maximum commitment under this credit facility may be further increased by $375 million, generally by mutual agreement of the lenders and the Company, subject to certain customary conditions. Funds drawn from this facility may be used by the Company for general corporate purposes, which may include repaying existing debt, funding acquisitions, and for working capital or other general purposes. The lending commitments under the facility are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of January 26, 2025, the Company had no outstanding borrowings from this facility.

Previous wording

As of July 28, 2024, the Company's international subsidiaries held $197 million of cash and cash equivalents. The Company maintains all undistributed earnings as permanently reinvested. The Company evaluates the balance and uses of cash held internationally based on the needs of the business.

Current wording

As of January 26, 2025, the Company’s international subsidiaries held $234 million of cash and cash equivalents. The Company maintains all undistributed earnings as permanently reinvested. The Company evaluates the balance and uses of cash held internationally based on the needs of the business.

Previous wording

The Company is authorized to repurchase 3,677,494 shares of common stock as part of an existing plan approved by the Company’s Board of Directors. Under the share repurchase authorization, the Company may repurchase shares periodically, depending on market conditions and other factors, and may do so in open market purchases or privately negotiated transactions. The share repurchase authorization has no expiration date. The Company did not repurchase any shares of stock during the first nine months of fiscal 2024. The Company continues to evaluate share repurchases as part of its capital allocation strategy.

Current wording

The Company is authorized to repurchase 3,677,494 shares of common stock as part of an existing plan approved by the Company’s Board of Directors. Under the share repurchase authorization, the Company may repurchase shares periodically, depending on market conditions and other factors, and may do so in open market purchases or privately negotiated transactions. The share repurchase authorization has no expiration date. The Company did not repurchase any shares of stock during the first three months of fiscal 2025. The Company continues to evaluate share repurchases as part of its capital allocation strategy.