filings.toolsHormel Foods 10-Q 2022-05-01
Filed 2022-06-02. 7 sections, 168K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended May 1, 2022
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________________________ to ________________________________________
Commission File Number: 1-2402
HORMEL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 41-0319970 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1 Hormel Place
Austin, MN 55912
(Address of Principal Executive Office, including zip code)
(507) 437-5611
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||||||||
| Common Stock | $0.01465 | par value | HRL | New York Stock Exchange |
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 ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at May 29, 2022 | ||||||||||||||||
| Common Stock | $.01465 | par value | 546,055,595 | ||||||||||||||
| Common Stock Non-Voting | $.01 | par value | 0 |
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share amounts
Unaudited
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| May 1, 2022 | April 25, 2021 | May 1, 2022 | April 25, 2021 | ||||||||||||||||||||||||||||||||
| Net Sales | $ | 3,096,559 | $ | 2,606,621 | $ | 6,140,917 | $ | 5,067,768 | |||||||||||||||||||||||||||
| Cost of Products Sold | 2,543,088 | 2,130,314 | 5,048,697 | 4,141,291 | |||||||||||||||||||||||||||||||
| Gross Profit | 553,471 | 476,307 | 1,092,220 | 926,477 | |||||||||||||||||||||||||||||||
| Selling, General and Administrative | 224,659 | 199,966 | 450,631 | 396,346 | |||||||||||||||||||||||||||||||
| Equity in Earnings of Affiliates | 5,916 | 13,074 | 12,814 | 27,302 | |||||||||||||||||||||||||||||||
| Operating Income | 334,728 | 289,415 | 654,402 | 557,433 | |||||||||||||||||||||||||||||||
| Other Income and Expense: | |||||||||||||||||||||||||||||||||||
| Interest and Investment Income | 1,799 | 10,992 | 5,668 | 28,284 | |||||||||||||||||||||||||||||||
| Interest Expense | 14,658 | 7,788 | 29,298 | 16,015 | |||||||||||||||||||||||||||||||
| Earnings Before Income Taxes | 321,868 | 292,620 | 630,772 | 569,702 | |||||||||||||||||||||||||||||||
| Provision for Income Taxes | 60,189 | 64,699 | 129,383 | 119,386 | |||||||||||||||||||||||||||||||
| Net Earnings | 261,679 | 227,921 | 501,389 | 450,316 | |||||||||||||||||||||||||||||||
| Less: Net Earnings (Loss) Attributable to Noncontrolling Interest | 62 | 21 | 201 | 133 | |||||||||||||||||||||||||||||||
| Net Earnings Attributable to Hormel Foods Corporation | $ | 261,617 | $ | 227,901 | $ | 501,188 | $ | 450,184 | |||||||||||||||||||||||||||
| Net Earnings Per Share | |||||||||||||||||||||||||||||||||||
| Basic | $ | 0.48 | $ | 0.42 | $ | 0.92 | $ | 0.83 | |||||||||||||||||||||||||||
| Diluted | $ | 0.48 | $ | 0.42 | $ | 0.91 | $ | 0.82 | |||||||||||||||||||||||||||
| Weighted-average Shares Outstanding | |||||||||||||||||||||||||||||||||||
| Basic | 544,702 | 540,195 | 543,691 | 540,054 | |||||||||||||||||||||||||||||||
| Diluted | 550,036 | 547,536 | 548,982 | 547,490 |
See Notes to Consolidated Financial Statements
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands
Unaudited
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| May 1, 2022 | April 25, 2021 | May 1, 2022 | April 25, 2021 | ||||||||||||||||||||||||||||||||
| Net Earnings | $ | 261,679 | $ | 227,921 | $ | 501,389 | $ | 450,316 | |||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), Net of Tax: | |||||||||||||||||||||||||||||||||||
| Foreign Currency Translation | 14,071 | (7,025) | 14,996 | 10,863 | |||||||||||||||||||||||||||||||
| Pension and Other Benefits | 2,603 | 4,199 | 5,138 | 8,399 | |||||||||||||||||||||||||||||||
| Deferred Hedging | 27,701 | 38,029 | 36,105 | 50,628 | |||||||||||||||||||||||||||||||
| Total Other Comprehensive Income (Loss) | 44,375 | 35,203 | 56,239 | 69,890 | |||||||||||||||||||||||||||||||
| Comprehensive Income | 306,054 | 263,124 | 557,628 | 520,206 | |||||||||||||||||||||||||||||||
| Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest | 77 | (16) | 335 | 401 | |||||||||||||||||||||||||||||||
| Comprehensive Income Attributable to Hormel Foods Corporation | $ | 305,977 | $ | 263,140 | $ | 557,293 | $ | 519,805 |
See Notes to Consolidated Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
In thousands, except share and per share amounts
Unaudited
| May 1, 2022 | October 31, 2021 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and Cash Equivalents | $ | 861,719 | $ | 613,530 | |||||||
| Short-term Marketable Securities | 23,478 | 21,162 | |||||||||
| Accounts Rece |
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
The Company is a global manufacturer and marketer of branded food products. It operates in four reportable segments as described in Note M - Segment Reporting in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
The Company reported net earnings per diluted share of $0.48 for the second quarter of fiscal 2022, up 14 percent compared to last year. Significant factors impacting the quarter were:
-
Net sales for the second quarter were a record, driven by growth from the Company's foodservice businesses and the inclusion of the Planters*®* snack nuts business.
-
Segment profit for the quarter increased 15 percent. Strong results from the Jennie-O Turkey Store segment, growth from the foodservice businesses in Refrigerated Foods, and the inclusion of the Planters*®* snack nuts business were the key contributors to growth.
-
The Company grew earnings before income taxes, net earnings, and diluted earnings per share, marking the third consecutive quarter of earnings growth. Diluted earnings per share is expected to increase marginally in the third quarter after adjusting for the one-time costs associated with the acquisition of the Planters*®* snack nuts business in the prior year.
-
Refrigerated Foods sales and segment profit increased as a result of strong results from the foodservice businesses, more than offsetting higher operational and logistics costs.
-
Jennie-O Turkey Store segment profit increased due to higher commodity prices and strong foodservice sales.
-
Grocery Products segment profit declined, as organic sales growth and the contribution from the Planters*®* snack nuts business was unable to overcome significant inflationary pressures and lower results from MegaMex.
-
International & Other segment profit declined, as profit growth in China was offset by lower results from the export business, which was negatively impacted by logistics challenges and higher freight expenses.
-
Year-to-date cash flow from operations was $577.1 million, up 60 percent compared to the prior year.
-
A wide-spread outbreak of highly pathogenic avian influenza (HPAI) began in February and was confirmed in the Jennie-O Turkey Store supply chain in late March. It has since been detected at multiple turkey farms across Minnesota and Wisconsin that supply the Company. This has resulted in the loss of flocks, the temporary quarantine of farms, and the establishment of control zones in the impacted areas. HPAI had an immaterial impact on the Jennie-O Turkey Store's segment results for the quarter.
Consolidated Results
Volume, Net Sales, Earnings, and Diluted Earnings per Share
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands, except per share amounts | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Volume (lbs.) | 1,164,198 | 1,192,948 | (2.4) | 2,369,070 | 2,372,654 | (0.2) | |||||||||||||||||||||||||||||
| Organic Volume (1) | 1,099,220 | 1,192,948 | (7.9) | 2,230,585 | 2,372,654 | (6.0) | |||||||||||||||||||||||||||||
| Net Sales | $ | 3,096,559 | $ | 2,606,621 | 18.8 | $ | 6,140,917 | $ | 5,067,768 | 21.2 | |||||||||||||||||||||||||
| Organic Net Sales (1) | 2,857,545 | 2,606,621 | 9.6 | 5,630,079 | 5,067,768 | 11.1 | |||||||||||||||||||||||||||||
| Earnings Before Income Taxes | 321,868 | 292,620 | 10.0 | 630,772 | 569,702 | 10.7 | |||||||||||||||||||||||||||||
| Net Earnings Attributable to Hormel Foods Corporation | 261,617 | 227,901 | 14.8 | 501,188 | 450,184 | 11.3 | |||||||||||||||||||||||||||||
| Diluted Earnings per Share | 0.48 | 0.42 | 14.3 | 0.91 | 0.82 | 11.0 | |||||||||||||||||||||||||||||
(1) See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by U.S. Generally Accepted Accounting Principles (GAAP).
Net Sales
Record net sales for the second quarter and first six months of the year were driven by the inclusion of the Planters*®* snack nuts business and growth from the Company's foodservice businesses. Additionally, all segments benefited from pricing actions taken during the quarter and first half of the year to offset inflationary pressures. The second quarter marked the sixth consecutive quarter of record sales.
Cost of Products Sold
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Cost of Products Sold | $ | 2,543,088 | $ | 2,130,314 | 19.4 | $ | 5,048,697 | $ | 4,141,291 | 21.9 |
Cost of products sold for the second quarter and first six months of fiscal 2022 increased due to inflationary pressures stemming from raw materials, packaging, freight, labor and many other inputs. The inclusion of the Planters*®* snack nuts business was also a driver of higher costs.
Costs are expected to remain elevated due to the continued impacts of broad-based inflation. Raw material input costs for pork, beef, turkey, chicken, avocados, and feed are anticipated to remain above historical levels.
Gross Profit
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | ||||||||||||||||||||||||||||||||
| Gross Profit | $ | 553,471 | $ | 476,307 | 16.2 | $ | 1,092,220 | $ | 926,477 | 17.9 | ||||||||||||||||||||||||||||
| Percentage of Net Sales | 17.9 | % | 18.3 | % | 17.8 | % | 18.3 | % |
Gross profit as a percentage of net sales for the second quarter and first six months of 2022 declined, driven primarily by higher freight and operational expenses. Compared to the prior year, gross profit as a percentage of net sales for the second quarter increased for Jennie-O Turkey Store and declined for Grocery Products and Refrigerated Foods. Gross profit as a percentage of net sales was flat for the International & Other segment. For the first six months of 2022, gross profit as a percentage of net sales increased for the Jennie-O Turkey Store and International & Other segments and was lower for Grocery Products and Refrigerated Foods.
Looking ahead to the third quarter of fiscal 2022, the Company expects gross profit as a percentage of net sales to improve compared to the prior year but decline from the second quarter. The Company expects a year over year benefit from the actions it has taken to offset inflationary pressures. These actions include pricing, improving promotional effectiveness, and shifting to a more profitable mix. Compared to the prior quarter, lower margins at Jennie-O Turkey Store due to impacts from HPAI and significant inflationary pressure above current pricing levels in the Grocery Products segment are expected to drive the overall decline. The net impact of input cost inflation poses the largest risk to these assumptions.
Selling, General and Administrative (SG&A)
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| SG&A | $ | 224,659 | $ | 199,966 | 12.3 | $ | 450,631 | $ | 396,346 | 13.7 | |||||||||||||||||||||||||
| Percentage of Net Sales | 7.3 | % | 7.7 | % | 7.3 | % | 7.8 | % |
For the second quarter and first six months of fiscal 2022, SG&A expenses increased due to the addition of the Planters*®* snack nuts business and higher marketing and advertising investments. As a percent of net sales, SG&A expenses declined, driven by strong sales and disciplined cost management.
Advertising investments in the second quarter were $39.2 million compared to $30.9 million last year. For the first half of 2022, advertising investments increased 32.7% compared to the prior year. The Company plans to continue to invest in its leading brands.
Equity in Earnings of Affiliates
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Equity in Earnings of Affiliates | $ | 5,916 | $ | 13,074 | (54.8) | $ | 12,814 | $ | 27,302 | (53.1) |
Equity in earnings of affiliates for the second quarter and first half of 2022 decreased significantly due to lower results for MegaMex. MegaMex results were negatively impacted by significantly higher costs for avocados and additional inflationary pressures.
Effective Tax Rate
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| May 1, 2022 | April 25, 2021 | May 1, 2022 | April 25, 2021 | ||||||||||||||||||||
| Effective Tax Rate | 18.7 | % | 22.1 | % | 20.5 | % | 21.0 | % |
The effective tax rate for the second quarter decreased as this year's tax rate reflects stock option exercise benefits. The effective tax rate for fiscal 2022 is expected to be between 20.5% and 22.5%. For further information, refer to Note K - Income Taxes.
Segment Results
Net sales and segment profit for each of the Company’s reportable segments are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the profit and other financial information shown below.
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||||||||||||||
| Grocery Products | $ | 873,572 | $ | 628,232 | 39.1 | $ | 1,729,163 | $ | 1,205,831 | 43.4 | |||||||||||||||||||||||||
| Refrigerated Foods | 1,644,284 | 1,453,380 | 13.1 | 3,271,812 | 2,820,457 | 16.0 | |||||||||||||||||||||||||||||
| Jennie-O Turkey Store | 407,287 | 351,179 | 16.0 | 791,759 | 684,500 | 15.7 | |||||||||||||||||||||||||||||
| International & Other | 171,416 | 173,830 | (1.4) | 348,184 | 356,980 | (2.5) | |||||||||||||||||||||||||||||
| Total | $ | 3,096,559 | $ | 2,606,621 | 18.8 | $ | 6,140,917 | $ | 5,067,768 | 21.2 | |||||||||||||||||||||||||
| Segment Profit | |||||||||||||||||||||||||||||||||||
| Grocery Products | $ | 89,299 | $ | 97,970 | (8.9) | $ | 188,785 | $ | 190,172 | (0.7) | |||||||||||||||||||||||||
| Refrigerated Foods | 178,492 | 173,352 | 3.0 | 340,884 | 314,524 | 8.4 | |||||||||||||||||||||||||||||
| Jennie-O Turkey Store | 61,799 | 12,700 | 386.6 | 105,536 | 39,640 | 166.2 | |||||||||||||||||||||||||||||
| International & Other | 23,653 | 24,481 | (3.4) | 49,737 | 56,685 | (12.3) | |||||||||||||||||||||||||||||
| Total Segment Profit | 353,243 | 308,503 | 14.5 | 684,941 | 601,020 | 14.0 | |||||||||||||||||||||||||||||
| Net Unallocated Expense | 31,436 | 15,904 | 97.7 | 54,370 | 31,451 | 72.9 | |||||||||||||||||||||||||||||
| Noncontrolling Interest | 62 | 21 | 197.7 | 201 | 133 | 51.2 | |||||||||||||||||||||||||||||
| Earnings Before Income Taxes | $ | 321,868 | $ | 292,620 | 10.0 | $ | 630,772 | $ | 569,702 | 10.7 | |||||||||||||||||||||||||
Grocery Products
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Volume (lbs.) | 373,163 | 313,795 | 18.9 | 744,678 | 618,129 | 20.5 | |||||||||||||||||||||||||||||
| Net Sales | $ | 873,572 | $ | 628,232 | 39.1 | $ | 1,729,163 | $ | 1,205,831 | 43.4 | |||||||||||||||||||||||||
| Segment Profit | 89,299 | 97,970 | (8.9) | 188,785 | 190,172 | (0.7) |
Volume and sales for the second quarter and first six months of fiscal 2022 increased due to the inclusion of the Planters*®* snack nuts business and strength across the portfolio. Organic sales growth for the second quarter was led by the Wholly*®, SKIPPY®, SPAM®, and Dinty Moore®* brands, in addition to strategic pricing actions.
Segment profit for the second quarter and first half of the year declined, as the contribution from the Planters*®* snack nuts business and organic sales growth was unable to overcome significant inflationary pressures and lower results from MegaMex.
Volume, sales and segment profit during the first half of fiscal 2022 were negatively impacted by production constraints due to labor shortages.
Looking forward, the Grocery Products segment will continue to be challenged by inflationary pressures until the recently announced pricing actions become effective in the fourth quarter. Additional risks to profitability include higher than anticipated elasticities impacting sales volumes and labor shortages impacting production on key product lines.
Refrigerated Foods
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Volume (lbs.) | 517,477 | 593,271 | (12.8) | 1,090,229 | 1,188,586 | (8.3) | |||||||||||||||||||||||||||||
| Net Sales | $ | 1,644,284 | $ | 1,453,380 | 13.1 | $ | 3,271,812 | $ | 2,820,457 | 16.0 | |||||||||||||||||||||||||
| Segment Profit | 178,492 | 173,352 | 3.0 | 340,884 | 314,524 | 8.4 |
For the second quarter and first half of 2022, sales increased due to strong results from the foodservice businesses, strategic pricing actions across the portfolio, and from the inclusion of the Planters*®* snack nuts business. Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume for the first half of fiscal 2022 was due primarily to lower commodity sales resulting from the Company's new pork supply agreement.
Segment profit growth during the second quarter and first six months of 2022 was driven by strong results from the foodservice businesses, more than offsetting higher operational and logistics costs.
Volume, sales and segment profit during the first half of fiscal 2022 were negatively impacted by production constraints due to labor shortages.
Refrigerated Foods expects a strong finish to the year, led by continued strength in the foodservice businesses and strong demand for its retail products. Risks to profitability include additional inflationary pressures and labor shortages impacting production on key product lines.
Jennie-O Turkey Store
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Volume (lbs.) | 201,608 | 202,624 | (0.5) | 390,108 | 396,193 | (1.5) | |||||||||||||||||||||||||||||
| Net Sales | $ | 407,287 | $ | 351,179 | 16.0 | $ | 791,759 | $ | 684,500 | 15.7 | |||||||||||||||||||||||||
| Segment Profit | 61,799 | 12,700 | 386.6 | 105,536 | 39,640 | 166.2 |
Sales for the second quarter and first half of fiscal 2022 increased for all areas of the business, led by higher foodservice, whole bird and retail sales. Increased volume in the foodservice business was not enough to offset large commodity volume declines.
For the second quarter and first six months of the year, higher commodity prices and improved foodservice sales drove the substantial improvement in segment profit.
Given the uncertainty regarding HPAI and based on our current expectations, Jennie-O Turkey Store sales volumes are projected to decline approximately 30 percent in the back half of the year due to supply gaps in its vertically integrated supply chain. With the third quarter representing the seasonal earnings low for this business, we expect third quarter earnings to be in line with last year.
International & Other
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | % Change | May 1, 2022 | April 25, 2021 | % Change | |||||||||||||||||||||||||||||
| Volume (lbs.) | 71,949 | 83,257 | (13.6) | 144,056 | 169,746 | (15.1) | |||||||||||||||||||||||||||||
| Net Sales | $ | 171,416 | $ | 173,830 | (1.4) | $ | 348,184 | $ | 356,980 | (2.5) | |||||||||||||||||||||||||
| Segment Profit | 23,653 | 24,481 | (3.4) | 49,737 | 56,685 | (12.3) |
Volume and sales declined during the second quarter and first half of the year as a result of current export logistics challenges and lower commodity sales due to the Company's new pork supply agreement. Second quarter retail sales in China improved as pantry loading and sales to food security programs in response to COVID-related lockdowns helped offset declines in foodservice sales.
Segment profit for the second quarter and first six months of 2022 declined due in most part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight expenses.
The International & Other segment continues to see strong demand both in its export business and in China. However, due to the impact of two partial plant shutdowns in China as a result of COVID-related restrictions and persistent export logistics challenges, there remains a risk to earnings growth in the back half of the year.
Unallocated Income and Expenses
The Company does not allocate deferred compensation, investment income, interest expense or interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at the corporate level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| in thousands | May 1, 2022 | April 25, 2021 | May 1, 2022 | April 25, 2021 | |||||||||||||||||||
| Net Unallocated Expense | $ | 31,436 | $ | 15,904 | $ | 54,370 | $ | 31,451 | |||||||||||||||
| Noncontrolling Interest | 62 | 21 | 201 | 133 |
For the second quarter and first six months of 2022, net unallocated expense increased due to lower investment income from the Company's Rabbi Trust and higher interest expense.
Non-GAAP Financial Measures
The non-GAAP adjusted financial measures of organic net sales and organic volume are presented to provide investors with additional information to facilitate the comparison of past and present operations. Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impact of the acquisition of the Planters*®* snack nuts business (June 2021) in the Grocery Products, Refrigerated Foods and International & Other segments.
The Company believes these non-GAAP financial measures provide useful information to investors, because they are the measures used to evaluate performance on a comparable year-over-year basis. Non-GAAP measures are not intended to be a substitute for U.S. GAAP measures in analyzing financial performance. These non-GAAP measures are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.
| RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||||||||||
| ORGANIC VOLUME AND NET SALES (NON-GAAP) | |||||||||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||||||||
| May 1, 2022 | April 25, 2021 | ||||||||||||||||||||||||||||
| in thousands | Reported GAAP | Acquisitions | Organic (Non-GAAP) | Reported GAAP | Organic % Change | ||||||||||||||||||||||||
| Volume (lbs.) | |||||||||||||||||||||||||||||
| Grocery Products | 373,163 | (54,150) | 319,013 | 313,795 | 1.7 | ||||||||||||||||||||||||
| Refrigerated Foods | 517,477 | (9,608) | 507,869 | 593,271 | (14.4) | ||||||||||||||||||||||||
| Jennie-O Turkey Store | 201,608 | — | 201,608 | 202,624 | (0.5) | ||||||||||||||||||||||||
| International & Other | 71,949 | (1,220) | 70,730 | 83,257 | (15.0) | ||||||||||||||||||||||||
| Total Volume | 1,164,198 | (64,978) | 1,099,220 | 1,192,948 | (7.9) | ||||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||||||||
| Grocery Products | $ | 873,572 | $ | (200,775) | $ | 672,797 | $ | 628,232 | 7.1 | ||||||||||||||||||||
| Refrigerated Foods | 1,644,284 | (34,759) | 1,609,525 | 1,453,380 | 10.7 | ||||||||||||||||||||||||
| Jennie-O Turkey Store | 407,287 | — | 407,287 | 351,179 | 16.0 | ||||||||||||||||||||||||
| International & Other | 171,416 | (3,480) | 167,935 | 173,830 | (3.4) | ||||||||||||||||||||||||
| Total Net Sales | $ | 3,096,559 | $ | (239,014) | $ | 2,857,545 | $ | 2,606,621 | 9.6 | ||||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||||||||||
| May 1, 2022 | April 25, 2021 | ||||||||||||||||||||||||||||
| in thousands | Reported GAAP | Acquisitions | Organic (Non-GAAP) | Reported GAAP | Organic % Change | ||||||||||||||||||||||||
| Volume (lbs.) | |||||||||||||||||||||||||||||
| Grocery Products | 744,678 | (117,362) | 627,316 | 618,129 | 1.5 | ||||||||||||||||||||||||
| Refrigerated Foods | 1,090,229 | (18,182) | 1,072,047 | 1,188,586 | (9.8) | ||||||||||||||||||||||||
| Jennie-O Turkey Store | 390,108 | — | 390,108 | 396,193 | (1.5) | ||||||||||||||||||||||||
| International & Other | 144,056 | (2,942) | 141,114 | 169,746 | (16.9) | ||||||||||||||||||||||||
| Total Volume | 2,369,070 | (138,485) | 2,230,585 | 2,372,654 | (6.0) | ||||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||||||||
| Grocery Products | $ | 1,729,163 | $ | (436,507) | $ | 1,292,656 | $ | 1,205,831 | 7.2 | ||||||||||||||||||||
| Refrigerated Foods | 3,271,812 | (66,012) | 3,205,800 | 2,820,457 | 13.7 | ||||||||||||||||||||||||
| Jennie-O Turkey Store | 791,759 | — | 791,759 | 684,500 | 15.7 | ||||||||||||||||||||||||
| International & Other | 348,184 | (8,320) | 339,864 | 356,980 | (4.8) | ||||||||||||||||||||||||
| Total Net Sales | $ | 6,140,917 | $ | (510,838) | $ | 5,630,079 | $ | 5,067,768 | 11.1 |
Related Party Transactions
There has been no material change in the information regarding Related Party Transactions as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
When assessing liquidity and capital resources, the Company evaluates cash and cash equivalents, short-term and long-term investments, income from operations, and borrowing capacity.
Cash Flow Highlights
| Six Months Ended | ||||||||
| in millions | May 1, 2022 | April 25, 2021 | ||||||
| Cash and Cash Equivalents | $ | 862 | $ | 1,485 | ||||
| Cash Provided by (Used in) Operating Activities | 577 | 361 | ||||||
| Cash Provided by (Used in) Investing Activities | (126) | (87) | ||||||
| Cash Provided by (Used in) Financing Activities | (204) | (508) |
Cash and cash equivalents increased $248 million in the six months ended May 1, 2022 as cash from operating activities was sufficient to cover dividend payments and capital expenditures. Cash and cash equivalents decreased compared to the prior year due to funding the purchase of the Planters*®* snack nuts business. Additional details related to significant drivers of cash flows are provided below.
Cash Provided by (Used in) Operating Activities
- Cash flows from operating activities benefited from earnings, while changes in operating assets and liabilities during the six months ended May 1, 2022 were overall unfavorable.
–Inventory increased $226 million compared to $155 million in the prior year. The higher inventory value in fiscal 2022 was primarily due to increased raw material costs while the increase in inventory levels during fiscal 2021 was the result of strategic inventory management.
–Accounts receivable declined $109 million in the six months ended May 1, 2022 as a result of the timing of sales and collections. In comparison, accounts receivable increased $20 million in the six months ended April 25, 2021.
–Accounts payable and accrued expenses decreased $46 million and $103 million in the six months ended May 1, 2022 and April 25, 2021, respectively, primarily due to the timing of invoice payments and annual incentive compensation payments.
Cash Provided by (Used in) Investing Activities
- Capital expenditures were $128 million and $86 million in the six months ended May 1, 2022 and April 25, 2021, respectively. The Company's target for capital expenditures for fiscal 2022 is $310 million. The largest spend in both years was related to capacity expansion in Omaha, Nebraska. Additional projects include a new production line for the SPAM*®* family of products in Dubuque, Iowa in fiscal 2022 and Project Orion in fiscal 2021. Looking to the remainder of the year, the Company will prioritize projects which increase value added production capacity, drive cost savings and leverage automation.
Cash Provided by (Used in) Financing Activities
-
Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company with payments totaling $274 million in the six months ended May 1, 2022 compared to $258 million in the comparable period of fiscal 2021. For fiscal 2022, the annual dividend rate was increased 6 percent to $1.04 per share, representing the 56th consecutive annual dividend increase. The Company has paid dividends for 375 consecutive quarters.
-
Proceeds from exercise of stock options was $75 million in the six months ended May 1, 2022 compared to $13 million in the comparable period of fiscal 2021. The increase in proceeds was caused by the number of options exercised with 3.6 million shares issued during fiscal 2022 compared to 0.7 million shares during fiscal 2021.
-
The Company repaid $250.0 million of its senior unsecured notes upon maturity in April 2021.
Sources and Uses of Cash
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 applies a waterfall approach to capital resource allocation, which focuses first on required uses of cash such as capital expenditures to maintain facilities, dividend returns to investors, and mandatory debt repayments. Next, the Company looks to strategic items in support of growth initiatives such as acquisitions and innovation investments, which is followed by opportunistic uses including incremental debt repayment and share repurchases. The Company believes its anticipated income from operations, cash on hand, and borrowing capacity under the current credit facility will be adequate to meet all short-term and long-term commitments. The Company's ability to leverage its
balance sheet through the issuance of debt provides the flexibility to take advantage of strategic opportunities which may require additional funding.
There have been no material changes to the information regarding the Company’s future contractual financial obligations previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2021.
The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of May 1, 2022, the Company was in compliance with all of these debt covenants and expects to maintain this compliance.
Trademarks
References to the Company’s brands or products in italics within this report represent valuable trademarks owned or licensed by Hormel Foods, LLC or other subsidiaries of Hormel Foods Corporation.
CRITICAL ACCOUNTING ESTIMATES
This discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. The significant accounting policies used in preparing these Consolidated Financial Statements are consistent with those described in Note A - Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Form 10-K with the exception of new requirements adopted in the first quarter of fiscal 2022.
Critical accounting estimates are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. The Company has considered the impact of COVID-19 and determined there have been no material changes in the Company’s Critical Accounting Estimates as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 31, 2021. As conditions resulting from the COVID-19 pandemic evolve, the Company expects these judgments and estimates may be subject to change, which could materially impact future periods.
FORWARD-LOOKING STATEMENTS
This report contains “forward-looking” information within the meaning of the federal securities laws. The “forward-looking” information may include statements concerning the Company’s outlook for the future as well as other statements of beliefs, future plans, strategies, or anticipated events and similar expressions concerning matters that are not historical facts.
The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. The Company is filing this cautionary statement in connection with the Reform Act. When used in this Quarterly Report on Form 10-Q, the Company’s Annual Report to Stockholders, other filings by the Company with the Securities and Exchange Commission, the Company’s press releases, and oral statements made by the Company’s representatives, the words or phrases “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify forward-looking statements within the meaning of the Reform Act. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected.
In connection with the “safe harbor” provisions of the Reform Act, the Company is identifying risk factors that could affect financial performance and cause the Company’s actual results to differ materially from opinions or statements expressed with respect to future periods. The discussion of risk factors in the Company's most recent Annual Report on form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q contain certain cautionary statements regarding the Company’s business, which should be considered by investors and others. Such risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.
In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company’s business or results, and is not undertaking to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company’s business or results of operations.
The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to changes in the national and worldwide economic environment, which could include, among other things, risks related to the deterioration of economic conditions; the COVID-19 pandemic; risks associated with acquisitions and divestitures; potential disruption of operations including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk of loss of a material contract; the Company’s inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company’s products; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulation and potential environmental litigation; and risks arising from the Company’s foreign operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various forms of market risk as a part of its ongoing business practices. The Company utilizes derivative instruments to mitigate earnings fluctuations due to market volatility.
Commodity Price Risk: The Company is subject to commodity price risk primarily through grain and live hog markets. To reduce these exposures and offset the fluctuations caused by changes in market conditions, the Company employs hedging programs. These programs utilize futures, swaps, and options and are accounted for as cash flow hedges. The fair value of the Company’s cash flow commodity contracts as of May 1, 2022, was $70.8 million compared to $25.2 million as of October 31, 2021. The Company measures its market risk exposure on its cash flow commodity contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices. A 10 percent decrease in the market price would have negatively impacted the fair value of the Company's cash flow commodity contracts as of May 1, 2022, by $37.3 million, which in turn would lower the Company's future cost on purchased commodities by a similar amount.
Interest Rate Risk: The Company is subject to interest rate risk primarily from changes in fair value of long-term fixed rate debt. As of May 1, 2022, the Company’s long-term debt had a carrying amount of $2.9 billion compared to $3.3 billion as of October 31, 2021. The Company measures its market risk exposure of long-term fixed rate debt using a sensitivity analysis, which considers a 10 percent change in interest rates. A 10 percent decrease in interest rates would have positively impacted the fair value of the Company’s long-term debt as of May 1, 2022, by $85.2 million. A 10 percent increase would have negatively impacted the long-term debt by $80.2 million.
To reduce the risk of changes in fair value of long-term debt, the Company has entered into an interest rate swap on a portion of the debt that receives a fixed rate and pays a floating rate. The notional amount of the Company's interest rate swap is $450.0 million. The Company measures its market risk exposure on interest rate contracts using sensitivity analysis, which considers a hypothetical change of 25 basis points in the underlying benchmark interest rate. An increase of 25 basis points would have negatively impacted the fair value of the Company's interest rate swap by $2.1 million, while a decrease of 25 basis points would increase the value by a similar amount.
Foreign Currency Exchange Rate Risk: The fair values of certain Company assets are subject to fluctuations in foreign currency exchange rates. The Company's net asset position in foreign currencies as of May 1, 2022 was $658.2 million, compared to $657.2 million as of October 31, 2021, with most of the exposure existing in Chinese yuan and Brazilian real. The Company currently does not use market risk sensitive instruments to manage this risk.
Investment Risk: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of May 1, 2022, the balance of these securities totaled $191.1 million compared to $203.0 million as of October 31, 2021. The rabbi trust is invested primarily in fixed income funds. The Company is subject to market risk due to fluctuations in the value of the remaining investments as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis. A 10 percent decline in the value of the investments not held in fixed income funds would have a negative impact to the Company’s pretax earnings of approximately $8.1 million, while a 10 percent increase in value would have a positive impact of the same amount.
Item 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information the Company is required to disclose in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Internal Controls.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the second quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings related to the ongoing operation of its business, including claims both by and against the Company. At any time, such proceedings typically involve claims related to product liability, labeling, contracts, antitrust regulations, intellectual property, competition laws, employment practices, or other actions brought by employees, customers, consumers, competitors or suppliers. The Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable. However, future developments or settlements are uncertain and may require the Company to change such accruals as proceedings progress. Resolution of any currently known matters, either individually or in the aggregate, is not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.
The Company is a defendant in three sets of antitrust lawsuits broadly targeting the pork and turkey industries. None of these cases involve allegations of bid rigging or other criminal conduct. The Company has not established reserves as it does not believe it will have liability in any of these cases.
Item 1A. RISK FACTORS
The Company's business, operations, and financial condition are subject to various risks and uncertainties. There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2021, except as follows:
BUSINESS AND OPERATIONAL RISKS
Deterioration of economic conditions could harm the Company’s business. The Company's business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, tax rates, availability of capital, energy availability and costs (including fuel surcharges), political developments, civil unrest, and the effects of governmental initiatives to manage economic conditions. Decreases in consumer spending rates and shifts in consumer product preferences could also negatively impact the Company.
Volatility in financial markets and the deterioration of national and global economic conditions could impact the Company’s operations as follows:
▪The financial stability of our customers and suppliers may be compromised, which could result in additional bad debts for the Company or non-performance by suppliers.
▪The value of our investments in debt and equity securities may decline, including most significantly the Company’s trading securities held as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans, and the Company’s assets held in pension plans.
▪Future volatility or disruption in the capital and credit markets could impair the Company's liquidity or increase costs of borrowing.
▪The Company may be required to redirect cash flow from operations or explore alternative strategies, such as disposing of assets, to fulfill the payment of principal and interest on its indebtedness.
Although the Company has no operations in Russia or Ukraine, inflated fuel costs and supply chain shortages and delays have been experienced due to the impact of the conflict on the global economy. Further escalation related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, additional supply chain disruptions, rising prices for oil and other commodities, volatility in capital markets and foreign exchange rates, rising interest rates or heightened cybersecurity risks, any of which may adversely affect the Company's business. In addition, the effects of the ongoing conflict could heighten many of the Company's other risk factors described in Part I, Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2021.
The Company utilizes hedging programs to manage its exposure to various market risks, such as commodity prices and interest rates, which qualify for hedge accounting for financial reporting purposes. Volatile fluctuations in market conditions could cause these instruments to become ineffective, which could require any gains or losses associated with these instruments to be reported in the Company’s earnings each period. These instruments may limit the Company’s ability to benefit from market gains if commodity prices and/or interest rates become more favorable than those secured under the Company’s hedging programs.
The Company's goodwill and indefinite lived intangible assets are initially recorded at fair value and are not amortized, but are reviewed for impairment annually or more frequently if impairment indicators arise. Impairment testing requires judgement around estimates and assumptions and is impacted by factors such as revenue growth rates, operating margins, tax rates, royalty rates, and discount rates. An unfavorable change in these factors may lead to the impairment of goodwill and/or intangible assets.
Additionally, if another highly pathogenic human disease outbreak developed in the United States, it may negatively impact the national economy, demand for Company products, and/or the Company’s workforce availability, and the Company’s financial results could suffer. The Company has developed contingency plans to address infectious disease scenarios and the potential impact on its operations, and will continue to update these plans as necessary. There can be no assurance given, however, these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.
Deterioration of labor relations, labor availability or increases in labor costs could harm the Company’s business. As of May 1, 2022, the Company employed more than 20,000 people worldwide, of which approximately 20 percent were represented by labor unions, principally the United Food and Commercial Workers Union. A significant increase in labor costs or a deterioration of labor relations at any of the Company’s facilities or co-manufacturing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results. Labor and skilled labor availability challenges could continue to have an adverse effect on the Company's business. All union contracts are currently effective with none set to expire during the remainder of fiscal 2022.
INDUSTRY RISKS
Outbreaks of disease among livestock and poultry flocks could harm the Company’s revenues and operating margins.
The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including African swine fever (ASF), Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of such diseases could adversely affect the Company’s supply of raw materials, increase the cost of production, reduce utilization of the Company’s harvest facilities, and reduce operating margins. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally.
In recent years, the outbreak of ASF has impacted hog herds in China, Asia, Europe, and the Caribbean. If an outbreak of ASF were to occur in the United States, the Company's supply of hogs and pork could be materially impacted.
HPAI was detected within the United States in 2022 and was confirmed within the Company's Jennie-O Turkey Store supply chain. The impact of HPAI will reduce production volume in the Company's turkey facilities through the end of the fiscal year. The Company is continuing to monitor the situation and will take the appropriate actions to protect the health of the turkeys across the supply chain.
The Company has developed business continuity plans for various disease scenarios and will continue to update these plans as necessary. There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no issuer purchases of equity securities in the quarter ended May 1, 2022. The maximum number of shares that may yet be purchased under the plans or programs as of May 1, 2022 is 3,987,494. On January 29, 2013, the Company's Board of Directors authorized the repurchase of 10,000,000 shares of its common stock with no expiration date. On January 26, 2016, the Board of Directors approved a two-for-one split of the Company’s common stock to be effective January 27, 2016. As part of the stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately.
Item 6. EXHIBITS
| 31.1 | Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 31.2 | Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 32.1 | Certification Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
| 101 | The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended May 1, 2022, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Condensed Statements of Financial Position, (iv) Consolidated Statements of Changes in Shareholders' Investment, (v) Consolidated Condensed Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements. | ||||
| 104 | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended May 1, 2022, formatted in Inline XBRL (included as Exhibit 101). |
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 | ||||||||
| (Registrant) | ||||||||
| Date: June 2, 2022 | By | /s/ JACINTH C. SMILEY | ||||||
| JACINTH C. SMILEY | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
| Date: June 2, 2022 | By | /s/ PAUL R. KUEHNEMAN | ||||||
| PAUL R. KUEHNEMAN | ||||||||
| Vice President and Controller | ||||||||
| (Principal Accounting Officer) |