Hormel Foods Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended October 30, 2022 (52 weeks); comparative FY2021 had 53 weeks. The filing also reports fourth-quarter results. Hormel is a branded food company operating in Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other; it announced a shift to Retail, Foodservice, and International segments effective FY2023.
Financial results and position
| Metric | FY2022 | Change vs. FY2021 |
|---|---|---|
| Net sales | $12.459 billion | +9.4%; organic sales +6.4% |
| Net earnings attributable to Hormel | $1.000 billion | +10.0% |
| Diluted EPS | $1.82 | Up from $1.66 |
| Gross profit / gross margin | $2.165 billion / 17.4% | Margin up from 16.9% |
| Operating income | $1.313 billion | Up from $1.123 billion |
| Cash from operating activities | $1.135 billion | Up from $1.002 billion |
| Capital expenditures | $279 million | Up from $232 million |
| Cash and cash equivalents | $982 million | Up from $614 million |
| Long-term debt, including current maturities | $3.299 billion | Down from $3.324 billion |
FY2022 volume declined 6.7% overall and 8.2% organically. Reported sales and earnings benefited from the full-year inclusion of Planters, acquired in June 2021, and foodservice growth; organic sales growth also reflected pricing actions. Inventory rose $352 million, mainly due to input-cost inflation and higher inventory levels. Dividends paid were $558 million; no shares were repurchased.
Fourth-quarter net sales were $3.283 billion, down 5.0%, while organic sales increased 2.4%. Net earnings attributable to Hormel were $280 million, down 0.7%; diluted EPS was $0.51, unchanged. The quarter’s comparison was affected by the extra week in FY2021 and lower commodity sales.
Segment results for the year: Grocery Products sales were $3.533 billion, with profit down 3.8% to $368 million; Refrigerated Foods sales were $6.691 billion, with profit up 3.1% to $685 million; Jennie-O sales were $1.507 billion, with profit up 188% to $219 million; International & Other sales were $727 million, with profit down 9.2% to $105 million.
Liquidity included an undrawn $750 million revolving credit facility, scheduled to expire in May 2026. Hormel reported compliance with debt covenants and stated that operating cash flow, cash on hand, and borrowing capacity should meet its commitments. FY2022 interest expense was $63 million. The filing reports $3.3 billion of senior notes due in 2024, 2028, 2030, and 2051.
Outlook, commentary, and risks
- Management expected FY2023 sales and earnings growth, citing brand investment, added capacity, prior-year pricing actions, and the new operating model. No numerical sales or earnings guidance range was provided.
- Management expected FY2023 gross margin to be comparable to FY2022; incremental inflation was identified as the largest risk to that expectation. The expected effective tax rate was 21%–23%, and planned capital expenditures were approximately $350 million.
- Highly pathogenic avian influenza affected Jennie-O’s supply chain; management expected reduced turkey production through at least the first half of FY2023.
- Broad inflation in raw materials, packaging, freight, labor, and other inputs weighed on results. Other cited risks include supply-chain disruption, labor availability and costs, commodity volatility, disease outbreaks, changing demand, foreign-exchange exposure, cyber incidents, regulation, and climate-related impacts.
- Walmart represented approximately 15.6% of FY2022 gross sales less returns and allowances; the top five customers represented approximately 36%. The company is a defendant in four sets of pork- and turkey-industry antitrust lawsuits; management had not recorded reserves and did not expect currently known litigation to materially affect results, financial condition, or liquidity.
- Hormel reported no goodwill or indefinite-lived intangible impairment charges in FY2022. The financial statements received an unqualified audit opinion, and the auditor also concluded internal control over financial reporting was effective.
Key facts for investors to verify
- Whether pricing and branded-product growth can offset continued inflation without further margin pressure.
- The duration and financial impact of HPAI-related production constraints and the pace of turkey supply recovery.
- Cash-flow conversion and inventory levels, given the $352 million inventory increase during FY2022.
- Debt maturities, interest costs, and capacity to fund planned capital investment and dividends.
- Performance under the new reporting segments and whether FY2023 growth expectations are achieved.
- Developments in the antitrust cases, labor negotiations, and other contingencies; the filing gives no clear quantified estimate of potential antitrust exposure.