Hormel Foods Corporation · NYSE:HRL
Hormel Foods — CAGNY 2016
51 slides from Hormel Foods's conference presentation, Feb 16, 2016
Slide 1: Muscle Milk
USCLE MILK
Slide 2: Jody Feragen, EVP and CFO
Jody Feragen Executive Vice President and Chief Financial Officer
Slide 3: Legal Disclosure
Legal Disclosure This presentation may contain information that is “forward looking” as defined in the Private Securities Litigation Reform Act of 1995. • Any “forward looking” statements are based on current expectations that are subject to risks and uncertainties, which could cause actual results
Slide 4: Q1 2016 Results
Q1 2016 Results In millions except per share 2016 2015 Change Sales $2,293 $2,395 - 4% Net Earnings $235 **$187 + 25% Net earnings per share* $0.43 **$0.35 + 23% • Record earnings – 11th consecutive quarter • Sales down due to lower pork markets and lower turkey harvest levels • Tonnage -3% YOY due
Slide 5: Grocery Products
Grocery Products Segment Operating Results First Quarter 2016 • Improved operational and supply chain efficiencies Sales Operating Profit* – Closure of Stockton, CA plant • Favorable raw material costs - 4% + 26% • Lower canned meat sales • Favorable results for Hormel® bacon toppings, CHI-CHI’S® an
Slide 6: Refrigerated Foods
Refrigerated Foods Segment Operating Results First Quarter 2016 • Improved performance from value-added businesses Sales Operating Profit • Strong pork operating margins • Addition of Applegate Farms, LLC + 2% + 65% • Higher sales volume offset by lower pork markets • Favorable results for Hormel Ga
Slide 7: Jennie-O Turkey Store
Jennie-O Turkey Store Segment Operating Results First Quarter 2016 Sales Operating • Lower harvest volumes Profit – Improving bird performance • Benefiting from lower feed costs - 2% - 15% • Sales down due to lower raw material supplies – Volume down 23% 1Q15 1Q16 1Q15 1Q16
Slide 8: Specialty Foods
Specialty Foods Segment Operating Results First Quarter 2016 • Favorable input costs Sales Operating • Improved operational and supply chain efficiencies Profit • Growth of Muscle Milk® brand – Ready to drink products + 44% - 10% • Decreased sales of sports nutrition contract packaging – Generally l
Slide 9: International & Other
International & Other Segment Operating Results First Quarter 2016 Operating • Strong SKIPPY® sales Sales Profit* • Softer pork exports – challenging market conditions + 1% - 7% • China results lower on difficult comparable period – Discontinuation of SPAM® luncheon meat imports • Unfavorable curren
Slide 10: Financial Metrics (1Q16)
Financial Metrics (1Q16) • Advertising spend was $48.1 million, up 14% YOY – Fiscal 2016 plan up low double digits compared to 2015 • Effective tax rate was 33.6% – Approximately 33.5% to 34% expected in fiscal 2016 • Depreciation and amortization was $31.8 million, down 3% YOY – $130 million planne
Slide 11: 2016 Market Outlook
2016 Market Outlook Hogs • USDA production estimate + 2% over 2015 • USDA pork operating margins moderating in 2H16 Turkeys • USDA Production estimate + 5% to + 6% over 2015 • Prices moderating into 2H16 – assuming no further AI occurrences Grains • USDA calling for 2016 grain prices lower than 2015
Slide 12: Strong Balance Sheet
Strong Balance Sheet As of 1/24/2016 Total Assets Total Liabilities and in millions Shareholders Investment in millions Long-Term $4,095 $4,164 Total Shareholders Assets Investment Current $607 Other Liabilities $1,946 $250 Long-Term Debt Assets $1,020 Current Liabilities $6,041 $6,041
Slide 13: Balance Sheet Optionality
SRR cme «< Balance Sheet Optionality 0.10x $3 BILLION Capacity for additional
Slide 14: Cash Flow
Cash Flow Free Cash Flow in millions $1,000 + 65% $800 $462 $848 $874 $600 $400 $529 $394 $200 2011 2012 2013 2014 2015 LTM LTM Non-GAAP calculation based on data from Statement of Cash Flows found in Company’s annual reports. 1Q15 1Q16
Slide 15: Priorities for Cash Flow
Priorities for Cash Flow 2010-2015 Business Growth Return to Shareholders in millions $2,500 $2,080 $2,000 $1,500 $1,020 $1,000 $730 $500 $440 Organic Strategic Share Dividends Investments Acquisitions Repurchase
Slide 16: Annual Dividend Performance
Annual Dividend Performance
Slide 17: Return on Invested Capital
Return on Invested Capital 20% 15% 10% 5% 0% Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 -5% Based on fiscal 2015 data for Hormel Foods and time relative data for peers
Slide 18: Jeff Ettinger, Chairman and CEO
Jeff Ettinger Chairman of the Board and Chief Executive Officer
Slide 19: Financial Performance Goals
Financial Performance Goals 5% Revenue Growth 10% Operating Income Growth
Slide 20: Hormel Foods Total Company Growth
Hormel Foods Total Company Growth Sales Earnings Per Share** in billions + 5% + 12% CAGR CAGR $9.3 $1.32* $7.2 $0.76* 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 **Based on 2:1 stock split distributed on February 9, 2016. *Based on non-GAAP earnings which excludes certain adjustments
Slide 21: Mergers and Acquisitions
in millions Mergers and Acquisitions Global Multi-Cultural Healthy/ Holistic Provena On-the-Go Foods, Inc. 03 05 06 07 08 09 10 11 13 14 15
Slide 22: Expanding Our Consumer Connections
Expanding Our Consumer Connections Mexico
Slide 23: | fits aed Ce
| fits aed Ce APPLEGATE Y NATUR T ORGANIC MEATS ; 4
Slide 24: Innovation
Innovation The contribution of innovation efforts is a key component of our success IRI Pacesetters Progressive Grocer Picks
Slide 25: Core Growth
Core Growth Household + 2.3M + 5.6M + 5.4M + 1.6M 25% Penetration Net Household Gains 20% 15% 2015 10% 2011 5% IRI, Consumer and Shopper Insights Advantage - Total US All Outlets 5 Years Ended 12/27/2015
Slide 26: Leveraging Enhanced Efficiency
Leveraging Enhanced Efficiency
Slide 27: Leveraging Enhanced Efficiency
Leveraging Enhanced Efficiency
Slide 28: Management Depth
Management Depth Senior Management Team Average 26 YEARS TENURE
Slide 29: MORE THAN
DY MORE THAN ae < wees oom “ile — together again
Slide 30: Jim Snee, President and COO
Jim Snee President and Chief Operating Officer
Slide 31: 2016 Outlook
2016 Outlook EPS** • Jennie-O Turkey Store – Return to growth $2.00 + 14% to 18% • Grocery Products & + 8% to 12% $1.50 Refrigerated Foods – Favorable input costs $1.00 $1.50 $1.43 • Specialty Foods $1.32* to – Muscle Milk® brand contribution to $0.50 $1.56 $1.48 – Supply chain efficiencies • Intern
Slide 32: Segment Operating Results
Segment Operating Results Grocery Refrigerated Jennie-O Specialty International Total Products Foods Turkey Store Foods & Other Segment 2016 Q1 26% 65% - 2% 44% 1% 30% FY 2015* 23% 26% 1% 48% 4% 19% FY 2014 - 9% 45% 23% - 20% 19% 16% FY 2013 18% 2% - 7% 7% 43% 6% FY 2012 12% -22% 16% 8% 38% 1% FY 20
Slide 33: Our Balanced Model
Our Balanced Model Protein Packaged Foods Pork and Turkey Peanuts and Avocados Retail Foodservice Financially Innovative Conservative Culture
Slide 34: Growth Platforms
Growth Platforms Global Multicultural Healthy / Holistic On-the-Go
Slide 35: Global Growth
Global Global Growth Jiaxing Hormel Foods Co. Ltd.
Slide 36: Brand-Driven Growth
bi Brand-D sor meare le! Sams MNSGLE
Slide 37: Total Awareness Jennie-O Brand
Healthy / Total Awareness Holistic Jennie-O® Brand 2015 2009
Slide 38: Ground Turkey Share is Growing
Healthy / Ground Turkey Share Holistic is Growing Jennie-O ® Lean Ground Turkey Tray Ranks #2 Among All Share of Ground Meats Exact Weight Items in the Meat Department Nationally Total US – Rank Product 12.6% Multi Outlet 1 Oscar Mayer Hardwood Smoked Bacon Sliced Rfg 16 oz $212,736,011 ® 2 Jennie-O
Slide 39: Market Share
Global Multicultural Healthy / On-the- Holistic Go Market Share 42%
Slide 40: Global Healthy / Holistic
Global Healthy / On-the- Holistic Go
Slide 41: Global Healthy / Holistic
Global Healthy / On-the- Holistic Go
Slide 42: Healthy / Holistic
Food OG heat APPLEGATE NATURAL & ORGANIC MEATS Fee bee " ems cen Patt Fi APPLEGATE le naturals pa utnennasie. # 1 BROADENS ORGANIC AND NATURAL OUR APPEAL ATTRACTIVE MARKET SHARES IN to younger and health conscious Marg in Profile value-added proteins CONSUMERS
Slide 43: Portfolio Alignment with Consumers
Portfolio Alignment with Consumers Millennials Gen X Boomers Matures Source: IRI Custom DB MULO 52 Wk End 12/27/2015
Slide 44: Leading Brands
Leading Brands am nal Gy" wenteare GQ 30 BRANDS HAVE aI wwscue - MILK #H10R#2 «= "e MARKET SHARE _ Lloy®. POSITIONS IN THEIR CATEGORY SPAM
Slide 45: Supporting Our Brands
Supporting Our Brands
Slide 46: Long Runway for Growth
Long Runway for Growth Low Household Penetration (HHP) 100% 75% 50% 20% 24% 25% 7% 9% 12% 3% 6% SLICED GROUND MEATS TURKEY IRI, Consumer and Shopper Insights Advantage - Total US All Outlets 52 Weeks Ended 12/27/2015
Slide 47: Capital Investments to Drive Growth
Capital Investments to Drive Growth • China Plant – Jiaxing, China • Bacon Production Expansion • Jennie-O ® Tray Pack Production Expansion • R&D Expansion
Slide 48: Total Shareholder Return
Total Shareholder Return Comparison of 5-Year Cumulative Return Hormel Foods Corporation S&P Packaged Foods & Meats S&P 500 $100 invested on 10/29/10 in stock or index – including reinvestment of dividends 2010 2011 2012 2013 2014 2015
Slide 49: Muscle Milk
USCLE MILK
Slide 50: Adjusted Financial Measures
Adjusted Financial Measures Adjusted segment operating profit, net earnings, and diluted net earnings per share exclude charges relating to the closure of the Stockton, California, manufacturing facility and the exit from international joint venture businesses in the first quarter of fiscal 2015. Th
Slide 51: Adjusted Financial Measures
Adjusted Financial Measures Adjusted segment operating profit, net earnings, and diluted net earnings per share exclude charges relating to the closure of the Stockton, California, manufacturing facility and the exit from international joint venture businesses in the first quarter, and charges relat