Hormel Foods Corporation (NYSE:HRL) Q2 2016 Earnings Conference Call Transcript

May 18, 2016 • 08:00 am ET

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Hormel Foods Corporation (NYSE:HRL) Q2 2016 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day, and welcome to the Hormel Foods' Second Quarter 2016 Earnings Conference Call. All participants are in a listen-only mode. Today's conference is being recorded.

At this time, I would like to turn the conference over to Jana Haynes, Director of IR. Please go ahead.

Executive
Jana Haynes

Thank you. Good morning. Welcome to the Hormel Foods' conference call for the second quarter of fiscal 2016. We've released our results this morning before the market opened, around 6:30 AM Eastern Time. In addition, we issued a separate press release announcing the acquisition of Justin's LLC. If you did not receive a copy of the releases, you can find them on our website at www.hormelfoods.com under the Investor section.

On our call today is Jeff Ettinger, Chairman of the Board and CEO; Jim Snee, President and COO; and Jody Feragen, EVP and CFO. Jeff will provide an overview of the quarter, and then Jim will comment on the Justin's acquisition, our review of the operating results, outlook, and guidance for fiscal 2016. Jody will provide detailed financial results for the quarter. The line will 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 into the queue. An audio replay of this call will be available beginning at 10 AM Central Time today, May 18, 2016. The dial-in number is 800-346-0976, and the access code is 2194984. It will also be posted to our website and archived for one year.

(Forward-Looking Cautionary Statements)

Now I will turn the call over to Jeff.

Executive
Jeff Ettinger

Thank you, Jana, and good morning, everyone. We are pleased to report record results for our second quarter of fiscal 2016. Earnings in the second quarter were $0.40 per share, up a robust 21% from last year. Sales for the quarter were $2.3 billion, a 1% increase despite lower turkey volumes at Jennie-O Turkey Store, and soft export demand in our international segment.

We reached an agreement to sell Diamond Crystal Brands in the second quarter, and completed the transaction in recent days. This business which was part of our specialty foods segment represented approximately $260 million of annual sales. While Diamond Crystal Brands performed acceptably, it did not fit our long-term strategic priorities.

As a result of the transaction, there was a small goodwill impairment recorded this quarter to reflect the final sales price. Our specialty foods group will retain Hormel Health Labs, a provider of nutritional foods and beverages developed specifically for individuals with special dietary needs, which was previously a part of Diamond Crystal Brands. We continue to ensure a smooth transition for the customers and employees of Diamond Crystal Brands.

In addition to our earnings release this morning, we also announced the acquisition of Justin's LLC, a pioneer in the specialty nut butter category. The acquisition comes with the fast-growing Justin's brand of natural and organic products, a strong management team, access to new customers