Hormel Foods Corporation (NYSE:HRL) Q3 2015 Earnings Conference Call Transcript

Aug 19, 2015 • 09:00 am ET

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Hormel Foods Corporation (NYSE:HRL) Q3 2015 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day and welcome to the Hormel Foods third-quarter 2015 earnings conference call. All participants are in a listen-only mode. Today's conference is being recorded.

At this time I'd like to turn the conference over to Jana Haynes, Director of Investor Relations. Please go ahead.

Executive
Jana Haynes

Thank you. Good morning. Welcome to the Hormel Foods conference call for the third quarter of fiscal 2015. We released our results this morning before the market opened, around 6:00 AM Eastern Time. If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section.

On our call today is Jeff Ettinger, Chairman of the Board, President, and Chief Executive Officer, and Jody Feragen, Executive Vice President and Chief Financial Officer. Jeff will provide a review of the operating results for the quarter and then Jody will provide detailed financial results.

The line will be open for questions following Jody's remarks. As a courtesy to the other analysts, please limit yourself to one question with one follow-up. If you have additional queries, you are welcome to get back in the queue.

An audio replay of this call will be available beginning at 11:00 AM Central Time today, August 19, 2015. The dial-in number is 888-203-1112 and the access code is 173-2023. The audio replay will be posted on our website and archived for one year.

(Forward Looking Cautionary Statements)

Now I'll turn the call over to Jeff.

Executive
Jeff Ettinger

Thank you, Jana, and good morning, everyone. Earlier today we announced record third-quarter non-GAAP earnings of $0.56 per share, up 10% over last year, with four of our five segments registering gains this quarter. We generated sales of $2.2 billion, a decrease of 4% versus last year on a 3% volume increase.

Sales were lower due to turkey supply shortages in our Jennie-O Turkey Store segment and price deflation in the pork markets, primarily impacting sales within our Refrigerated Foods and International segments. To illustrate the dramatic change in pork markets, the average USDA pork cut-out price in July 2014 was $133, compared to $83 in July of 2015, almost a 40% decrease.

While across the Company our team is generally focused on our goal of 5% top-line growth, in this particular market scenario volume growth may be the more appropriate metric by which to gauge results. I will now take you through each segment.

Refrigerated Foods finalized the purchase of Applegate near the end of the third quarter, on July 13, 2015. I am pleased to welcome the Applegate team to Hormel Foods.

Refrigerated Foods grew operating profit 9% inclusive of incurring $8.6 million in transaction costs related to the acquisition of Applegate. Results were driven by lower pork input costs and strong performance by our value-added retail and food service businesses.

Refrigerated Foods' sales were down 11% this quarter despite a 2% volume increase. As I mentioned earlier, lower sales were primarily due to pricing decreases on items such as bacon, driven by the declining pork