000239 Hormel Reports 13.7% Increase in Earnings

Austin, MN - Hormel Foods Corporation announced operating earnings of $43,848,000, or $.30 per share, for the first quarter ended January 29. This is an improvement of $5,276,000, or 13.7%, over first quarter operating earnings one year ago of $38,572,000, or $.26 per share.

Total reported earnings for the first quarter of fiscal 1999 of $42,380,000, or $.29 per share, were slightly higher than announced operating earnings due to a one-time gain of $3,808,000, or $.03 per share, for the sale of land by Campofrio Alimentacion, S.A., Madrid, Spain, a leading global foods company in which Hormel Foods has a 21.4% ownership interest.

All per share amounts have been adjusted to reflect the two-for-one split of Hormel Foods common stock approved by shareholders on January 25.

Dollar sales for the first quarter were $903,913,000, an increase of $104,908,000, or 13.1%, from the $799,005,000 reported for the first quarter of fiscal 1999. This corresponds to a 5.4% tonnage increase which followed an 8.7% gain in last year's first quarter and 7.1% for the full fiscal 1999 year.

Joel W. Johnson, chairman of the board, president and chief executive officer, was pleased with the overall performance of the company's core business groups and the key strategies in place that continue to provide solid top and bottom line growth. “The volume growth continues at Hormel Foods. We are pleased to see customers and consumers responding favorably to our many product initiatives. Our quarterly earnings gains have been particularly strong in recent years and the just concluded first quarter was no exception,” said Johnson. “Our basic strategies of adding value to fresh pork, growing the ethnic foods business, expanding foodservice and core consumer franchises, and building upon our already successful Jennie-O Foods and international operations are producing the very positive financial results we have reported.”

Within the Prepared Foods Group, many of the company's best-known brands, SPAM luncheon meat, Dinty Moore stew, Hormel chili, Mary Kitchen hash and Hormel chunk chicken and chunk ham enjoyed double-digit tonnage gains. The El Torito line of Mexican sauces and foods continued to perform well in its markets and will be helped by the introduction of frozen fajitas and a sweet corn cake mix for club store sales. The company's line of microwave entrees was expanded to include two new Dinty Moore American Classics items -- au gratin potatoes & ham and macaroni & cheese with Cure 81 ham -- as well as a new Kid's Kitchen cheezy mac & franks.

As evidence of the company's continuing emphasis to form strategic partnerships with its key customers, the Grocery Products Division was notified it had been selected to receive Wal-Mart Stores' prestigious “Vendor of the Quarter” award for excellence in product, value and service. The company's Meat Products Division was similarly honored last year.

Late in the first quarter, Hormel Foods announced the formation of a joint venture with Eridania Beghin-Say (EBS) of Paris, France, to market the Carapelli brand of olive oil in the United States and Puerto Rico. Initial trade acceptance of the premium extra virgin, extra virgin, mild and light olive oil varieties has exceeded expectations.

Volume growth of key branded processed meats and fresh pork products were contributing factors behind the Refrigerated Foods Group's first quarter results. A new sales record for retail ham products, led by Cure 81 ham, was established during the Christmas holiday season. Bacon sales were also at an all-time high and Hormel pepperoni, fueled by the introduction of a new Tabasco flavor as well as deli-style and bite-size varieties, also showed strong volume and category share growth. Sales of Hormel turkey breast and beef deli products rose due to increased market distribution while effective trade promotions led to volume gains for Di Lusso Genoa salami and Hormel hard salami. All categories of Always Tender fresh pork continued their exceptional growth record. Development of this growing brand was enhanced with the introduction of four varieties of fully cooked entrees -- beef roast, pork roast, beef tips with gravy and meat loaf with tomato sauce.

Also within the Refrigerated Foods Group, Foodservice operations recorded double-digit increases in branded tonnage. Hormel franks, Fast'N Easy burgers, pork sausage and precooked bacon as well as Special Recipe pork sausage, Grill Perfect bacon, Layout Pack wide-shingled bacon, Old Smokehouse Applewood smoked bacon and Bread Ready presliced meats showed excellent gains. The first quarter introduction of Always Tender fresh pork to foodservice customers has resulted in significant sales volume growth.

Jennie-O Foods also enjoyed strong foodservice tonnage increases supported by expanded distribution with national distributors, major national restaurant chains and contract foodservice accounts. Retail sales increased substantially with tonnage increases and volume share gains coming from Jennie-O turkey burgers, Jennie-O turkey franks, Jennie-O Extra Lean turkey bacon and Jennie-O white and dark turkey pan roasts.

For Hormel Foods International (HFI), fresh and frozen pork and Jennie-O turkey contributed to strong tonnage and dollar sales growth. In Guam, initial sales of Tabasco flavored SPAM luncheon meat have been impressive. New Chinese- style hams, in select and smoked varieties, are off to a good start in the Beijing and Shanghai markets. During the quarter, Hormel Alimentos S.A. de C.V., a key joint venture in Mexico, purchased the Solo brand of bouillon. Plans are to greatly broaden distribution of this well-known brand. Another joint venture, Purefoods-Hormel Company, based in Manila, Philippines, announced plans to construct a new plant to manufacture for retail sale the Tender Juicy and Beefy brands of hot dogs and for foodservice accounts a variety of sliced luncheon meats.

Effective February 15, the company paid its 286th consecutive quarterly dividend which also represented the 34th consecutive annual increase in the quarterly dividend rate. Reflecting the two-for-one stock split, the newly established annual rate is $.35 per share.

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