Hormel Foods 2014 Annual Report Download - page 27

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25
General corporate expense for the fourth quarter and year
was $7.5 million and $26.7 million, respectively, compared
to $3.4 million and $21.4 million for the comparable periods
of fiscal 2012. An increase in the Company’s lower of cost or
market inventory reserve caused a notable expense increase
for the fourth quarter and fiscal year compared to fiscal 2012.
The higher expense for both the fourth quarter and fiscal year
also reflects an increase in employee-related expenses com-
pared to fiscal 2012.
Net earnings attributable to the Company’s noncontrolling
interests were $1.1 million and $3.9 million for the 2013
fourth quarter and fiscal year, respectively, compared to $1.7
million and $4.9 million for the comparable periods of fiscal
2012. The Company’s Precept Foods business generated lower
results for both the fourth quarter and full year compared to
fiscal 2012. However, these declines were partially offset by
continued improvement from the Company’s China operations,
which were up for both the fourth quarter and fiscal year com-
pared to fiscal 2012 results.
RELATED PARTY TRANSACTIONS
The Company was not party to any material related party
transactions during fiscal years 2014, 2013, or 2012.
Liquidity and Capital Resources
Cash and cash equivalents were $334.2 million at the end of
fiscal year 2014 compared to $434.0 million at the end of fiscal
year 2013 and $682.4 million at the end of fiscal year 2012.
During fiscal 2014, cash provided by operating activities
was $746.9 million compared to $637.8 million in 2013 and
$517.8 million in 2012. Continued higher earnings and net
positive working capital changes largely generated the
increase in 2014.
Cash used in investing activities decreased to $616.8 million
in fiscal year 2014 from $691.1 million in fiscal year 2013
and increased from $106.8 million in fiscal year 2012. The
fourth quarter of fiscal 2014 included $424.3 million used
to purchase CytoSport Holdings, Inc. and the fiscal year
also included $41.9 million used to purchase the China
based SKIPPY® peanut butter business in Weifang, China
from Unilever United States Inc. The larger use of cash in
fiscal 2013 included $665.4 million used to acquire the U.S.
based SKIPPY® peanut butter business. In anticipation of
that purchase in the prior year, the Company liquidated its
marketable securities portfolio at the end of the first quarter
of fiscal 2013, which generated $77.6 million in cash. Capital
expenditures in fiscal 2014 increased to $159.1 million, from
$106.8 million in 2013 and $132.3 million in 2012. Capital
expenditures for fiscal 2015 are estimated to be approximately
$180.0 million to $200.0 million.
Cash used in financing activities was $229.4 million in fiscal
2014 compared to $195.5 million in fiscal 2013 and $192.7
million in fiscal 2012.
The Company used $58.9 million for common stock repur-
chases during fiscal 2014, compared to $70.8 million in fiscal
2013 and $61.4 million in fiscal 2012. During fiscal 2014,
the Company repurchased 1.3 million shares of its common
stock at an average price per share of $46.87. On January 31,
2013, the Company announced that its Board of Directors had
authorized the repurchase of 10.0 million shares of its com-
mon stock with no expiration date. At of the end of fiscal 2014,
there were 8.2 million shares remaining for repurchase under
that authorization.
Cash dividends paid to the Company’s shareholders also
continue to be an ongoing financing activity for the Company,
with $203.2 million in dividends paid in fiscal 2014, compared
to $174.3 million in the fiscal 2013 and $152.2 million in fiscal
2012. The dividend rate was $0.80 per share in 2014, which
reflected a 17.6 percent increase over the fiscal 2013 rate. The
Company has paid dividends for 345 consecutive quarters and
expects to continue doing so in the future. The annual dividend
rate for fiscal 2015 was increased 25.0 percent to $1.00 per
share, representing the 49th consecutive 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.
Maximizing the value returned to shareholders through div-
idend payments remains a priority for use of the Company’s
strong cash position going forward. The Company remains
focused on growing the business, utilizing innovation to drive
organic growth, and is also well positioned to take advantage
of strategic acquisition opportunities. Capital spending to
enhance and expand current operations will also be a signifi-
cant cash outflow in fiscal 2015.