Joel W.

Wednesday, January 26, 2000

Joel W. Johnson calls it "management stewardship" and what it is is how Hormel Foods Corp. stays on top.

Johnson, chairman of the board, president and chief executive officer of Hormel Foods, reported the Austin-based multinational marketer of consumer-branded meat and food products, recorded its strongest year ever in volume and financial performance.

The scene was the annual meeting of shareholders of Hormel Foods Corp. in Knowlton Auditorium at Austin High School Tuesday night.

Today, financial pages everywhere are reporting Hormel Foods received stockholder approval of splitting the par value of the company’s common stock, from $.1172 to $.0586 per share, and increasing the number of authorized shares from 200 million to 400 million.

The action executed a two-for-one stock split first approved by the company’s board of directors Nov. 22.

Fiscal 1999 dollar sales grew 3 percent to $3.4 billion. Tonnage increased 7.1 percent over 1998 to 3 billion pounds. Earnings after taxes were $163.4 million vs. $139.3 million reported in 1998 and represents an increase of $24.1 million, or 17.3 percent.

The 1999 year-end results included a gain of $3.8 million or 5 cents per share realized from the sale of land by Campofrio in which Hormel Foods has a 21.4 percent interest.

But excluding that one-time gain, operating earnings for the year were $159.6 million, or $2.17 per share.

Compare that to fiscal 1998 operating earnings, which showed a gain of $17.4 million, or 23 cents per share.

"Thus, Hormel Foods operating results, the best measure of ongoing progress, improved 31 percent in fiscal 1999 or 55 cents per share over fiscal 1998," Johnson told shareholders. "In terms of margin, net income rose to 4.9 percent of sales from 4.3 percent in 1998 and reflects the continued transition toward the branded, value-added component of our business."

But, there’s more to another success story filed by Johnson.

"In 1999, the company increased its dividend to 66 cents from 64 cents per share," Johnson told shareholders. "As you may be aware, Hormel Foods recently announced the intent to raise the dividend to 70 cents (35 cents per share with the stock split) per share, or an increase of 4 cents per share (2 cents with the stock split)."

"This is the company’s 34th consecutive annual increase. Hormel Foods has never missed a dividend payment since becoming a public company in 1928," he said.

According to Johnson, the company’s stewardship management follows six key strategies, which, he said, "are solidly in place and are growing our business."

But, not only did Johnson tell shareholders what the strategies are for Hormel Foods, but he answered the question on the minds of the most cynical of shareholders: "What’s next?"

"Our first strategy has been to add value to fresh pork," he said. "We are taking the lead in the way fresh pork is being delivered to consumers, branding fresh pork and adding value to what has traditionally been a basic commodity."

Then, he said, "So, with the success of this strategy, you might ask, as I do, ‘What’s next?’"

Johnson’s answer: Making pork and beef even more convenient by introducing Hormel and Always Tender fully cooked pork and fully cooked beef.

"Today, 40 percent of Americans spend 30 minutes or less preparing a meal. Of those, 73 percent wait until 4:30 p.m. to decide what’s for dinner. The trend toward dinner in minutes is here to stay," he said.

That set the tone for his address to shareholders: list a strategy and tell how the company is going to capitalize on it.