Hormel Foods 2015 Annual Report Download - page 28

26
General corporate expense for the fourth quarter and fi scal
2014 was $6.2 million and $33.4 million, respectively, com-
pared to $7.5 million and $26.7 million for the comparable
periods of fi scal 2013. The lower expense for the fourth
quarter refl ects lower salary and pension related expenses
compared to fi scal 2013. General corporate expense for fi scal
2014 was higher compared to fi scal 2013, primarily the result
of a bad debt incurred in the third quarter.
Net earnings attributable to the Company’s noncontrolling
interests were $0.6 million and $3.3 million for the fourth
quarter and fi scal 2014, respectively, compared to $1.1 million
and $3.9 million for the comparable periods of fi scal 2013.
Precept Foods generated lower results for both the fourth
quarter and full year of fi scal 2014 compared to fi scal 2013.
This joint venture was dissolved at the end of fi scal year
2014. For fi scal 2014, these declines were partially offset by
improved results from the Company’s China operations.
RELATED PARTY TRANSACTIONS
During the fourth quarter of fi scal 2015, the company pur-
chased 400,000 shares of common stock from The Hormel
Foundation at $62.32 per share, representing the average
closing price for the three days of September 15, September
16, and September 17, 2015. Settlement took place on
September 18, 2015.
The Company was not party to any other material related
party transactions during fi scal years 2015, 2014, or 2013.
Liquidity and Capital Resources
Cash and cash equivalents were $347.2 million at the end of
fi scal 2015 compared to $334.2 million at the end of fi scal
2014 and $434.0 million at the end of fi scal 2013.
During fi scal 2015, cash provided by operating activities was
$992.0 million compared to $746.9 million in fi scal 2014 and
$637.8 million in fi scal 2013. Continued higher earnings and
net positive working capital changes largely generated the
increase in fi scal 2015.
Cash used in investing activities increased to $900.9 million
in fi scal 2015 from $616.8 million in fi scal 2014 and $691.1
million in fi scal 2013. Fiscal 2015 included $774.1 used to
purchase Applegate Farms, LLC in the third quarter. The
fourth quarter of fi scal 2014 included $424.3 million used to
purchase CytoSport Holdings, Inc. and fi scal 2014 included
$41.9 million used to purchase the China based SKIPPY®
peanut butter business in Weifang, China from Unilever United
States Inc. Fiscal 2013 included $665.4 million used to acquire
the U.S. based SKIPPY® peanut butter business. In anticipation
of that purchase, the Company liquidated its marketable secu-
rities portfolio at the end of the fi rst quarter of fi scal 2013,
which generated $77.6 million in cash. Capital expenditures in
fi scal 2015 decreased to $144.1 million, from $159.1 million in
2014 and increased from $106.8 million in 2013. The primary
reason for lower capital expenditures in fi scal 2015 compared
to fi scal 2014 was the Company’s decision to delay the addi-
tion of capacity at JOTS in the face of the lower turkey supply
in fi scal 2015 due to the impacts of HPAI. Capital expenditures
for fi scal 2016 are estimated to be approximately $250.0 mil-
lion as several projects in process during fi scal 2015 will be
completed, including construction of the Company’s new plant
in Jiaxing, China.
Cash used in fi nancing activities was $70.6 million in fi scal
2015 compared to $229.4 million in fi scal 2014 and $195.5
million in fi scal 2013. In the third quarter of fi scal 2015, in
connection with the purchase of Applegate, the Company
borrowed $300.0 million under a term loan facility and $50.0
million under a revolving credit facility, of which $165.0 million
was paid down in the fourth quarter. On March 16, 2015, the
Company purchased the remaining 19.29% ownership interest
in its Shanghai Hormel Foods Corporation joint venture from
the minority partner Shanghai Shangshi Meat Products Co.
Ltd., resulting in 100.0% ownership at the end of the second
quarter. The interest was purchased with $11.7 million in
cash, along with the transfer of land use rights and buildings
held by the joint venture.
The Company used $24.9 million for common stock repur-
chases during fi scal 2015, compared to $58.9 million in
fi scal 2014 and $70.8 million in fi scal 2013. During fi scal
year 2015, 0.4 million shares were repurchased from The
Hormel Foundation at the average closing price for the three
days of September 15, September 16, and September 17,
2015, or $62.32. On January 29, 2013, the Company’s Board
of Directors had authorized the repurchase of 10.0 million
shares of its common stock with no expiration date. At of the
end of fi scal 2015, there were 7.8 million shares remaining for
repurchase under that authorization.
Cash dividends paid to the Company’s shareholders continues
to be an ongoing fi nancing activity for the Company, with
$250.8 million in dividends paid in fi scal 2015, compared to
$203.2 million in the fi scal 2014 and $174.3 million in fi scal
2013. The dividend rate was $1.00 per share in 2015, which
refl ected a 25.0 percent increase over the fi scal 2014 rate
of $0.80 per share. The Company has paid dividends for 349
consecutive quarters and expects to continue doing so in the
future. The annual dividend rate for fi scal 2016 was increased
16.0 percent to $1.16 per share, representing the 50th consec-
utive annual dividend increase.
Cash fl ows from operating activities continue to provide the
Company with its principal source of liquidity. The Company
does not anticipate a signifi cant risk to cash fl ows from
this source in the foreseeable future because the Company
operates in a relatively stable industry and has strong brands
across many product lines.
The Company takes pride in its legacy of increasing the divi-
dend returned to shareholders year-after-year. The Company
remains focused on growing the business through supporting
innovation to drive organic growth, along with strategic
acquisitions. Reinvesting in the business is a top priority, with
employee safety and food safety taking top priority. Capital
spending to enhance and expand current operations will also
be a signifi cant cash outfl ow in fi scal 2016.
26
General corporate expense for the fourth quarter and fiscal
2014 was $6.2 million and $33.4 million, respectively, com-
pared to $7.5 million and $26.7 million for the comparable
periods of fiscal 2013. The lower expense for the fourth
quarter reflects lower salary and pension related expenses
compared to fiscal 2013. General corporate expense for fiscal
2014 was higher compared to fiscal 2013, primarily the result
of a bad debt incurred in the third quarter.
Net earnings attributable to the Company’s noncontrolling
interests were $0.6 million and $3.3 million for the fourth
quarter and fiscal 2014, respectively, compared to $1.1 million
and $3.9 million for the comparable periods of fiscal 2013.
Precept Foods generated lower results for both the fourth
quarter and full year of fiscal 2014 compared to fiscal 2013.
This joint venture was dissolved at the end of fiscal year
2014. For fiscal 2014, these declines were partially offset by
improved results from the Company’s China operations.
RELATED PARTY TRANSACTIONS
During the fourth quarter of fiscal 2015, the company pur-
chased 400,000 shares of common stock from The Hormel
Foundation at $62.32 per share, representing the average
closing price for the three days of September 15, September
16, and September 17, 2015. Settlement took place on
September 18, 2015.
The Company was not party to any other material related
party transactions during fiscal years 2015, 2014, or 2013.
Liquidity and Capital Resources
Cash and cash equivalents were $347.2 million at the end of
fiscal 2015 compared to $334.2 million at the end of fiscal
2014 and $434.0 million at the end of fiscal 2013.
During fiscal 2015, cash provided by operating activities was
$992.0 million compared to $746.9 million in fiscal 2014 and
$637.8 million in fiscal 2013. Continued higher earnings and
net positive working capital changes largely generated the
increase in fiscal 2015.
Cash used in investing activities increased to $900.9 million
in fiscal 2015 from $616.8 million in fiscal 2014 and $691.1
million in fiscal 2013. Fiscal 2015 included $774.1 used to
purchase Applegate Farms, LLC in the third quarter. The
fourth quarter of fiscal 2014 included $424.3 million used to
purchase CytoSport Holdings, Inc. and fiscal 2014 included
$41.9 million used to purchase the China based SKIPPY®
peanut butter business in Weifang, China from Unilever United
States Inc. Fiscal 2013 included $665.4 million used to acquire
the U.S. based SKIPPY® peanut butter business. In anticipation
of that purchase, the Company liquidated its marketable secu-
rities portfolio at the end of the first quarter of fiscal 2013,
which generated $77.6 million in cash. Capital expenditures in
fiscal 2015 decreased to $144.1 million, from $159.1 million in
2014 and increased from $106.8 million in 2013. The primary
reason for lower capital expenditures in fiscal 2015 compared
to fiscal 2014 was the Company’s decision to delay the addi-
tion of capacity at JOTS in the face of the lower turkey supply
in fiscal 2015 due to the impacts of HPAI. Capital expenditures
for fiscal 2016 are estimated to be approximately $250.0 mil-
lion as several projects in process during fiscal 2015 will be
completed, including construction of the Company’s new plant
in Jiaxing, China.
Cash used in financing activities was $70.6 million in fiscal
2015 compared to $229.4 million in fiscal 2014 and $195.5
million in fiscal 2013. In the third quarter of fiscal 2015, in
connection with the purchase of Applegate, the Company
borrowed $300.0 million under a term loan facility and $50.0
million under a revolving credit facility, of which $165.0 million
was paid down in the fourth quarter. On March 16, 2015, the
Company purchased the remaining 19.29% ownership interest
in its Shanghai Hormel Foods Corporation joint venture from
the minority partner Shanghai Shangshi Meat Products Co.
Ltd., resulting in 100.0% ownership at the end of the second
quarter. The interest was purchased with $11.7 million in
cash, along with the transfer of land use rights and buildings
held by the joint venture.
The Company used $24.9 million for common stock repur-
chases during fiscal 2015, compared to $58.9 million in
fiscal 2014 and $70.8 million in fiscal 2013. During fiscal
year 2015, 0.4 million shares were repurchased from The
Hormel Foundation at the average closing price for the three
days of September 15, September 16, and September 17,
2015, or $62.32. On January 29, 2013, the Company’s Board
of Directors had authorized the repurchase of 10.0 million
shares of its common stock with no expiration date. As of the
end of fiscal 2015, there were 7.8 million shares remaining for
repurchase under that authorization.
Cash dividends paid to the Company’s shareholders continues
to be an ongoing financing activity for the Company, with
$250.8 million in dividends paid in fiscal 2015, compared to
$203.2 million in the fiscal 2014 and $174.3 million in fiscal
2013. The dividend rate was $1.00 per share in 2015, which
reflected a 25.0 percent increase over the fiscal 2014 rate
of $0.80 per share. The Company has paid dividends for 349
consecutive quarters and expects to continue doing so in the
future. The annual dividend rate for fiscal 2016 was increased
16.0 percent to $1.16 per share, representing the 50th consec-
utive annual dividend increase.
Cash flows from operating activities continue to provide the
Company with its principal source of liquidity. The Company
does not anticipate a significant risk to cash flows from
this source in the foreseeable future because the Company
operates in a relatively stable industry and has strong brands
across many product lines.
The Company takes pride in its legacy of increasing the divi-
dend returned to shareholders year-after-year. The Company
remains focused on growing the business through supporting
innovation to drive organic growth, along with strategic
acquisitions. Reinvesting in the business is a top priority, with
employee safety and food safety taking top priority. Capital
spending to enhance and expand current operations will also
be a significant cash outflow in fiscal 2016.