Hormel Foods Reports Double-Digit Growth In Fourth Quarter Sales And EPS
November 23, 2010
- Diluted EPS of $.90, up 17 percent from $.77 per share in 2009
- Segment operating profit increased 20 percent from last year
- Dollar sales of $2.1 billion, increased 23 percent from 2009
- Volume up 14 percent from last year
- Grocery Products operating profit down 6 percent; volume up 22 percent; dollar sales up 24 percent
- Refrigerated Foods operating profit up 22 percent; volume up 9 percent; dollar sales up 26 percent
- Jennie-O Turkey Store operating profit up 90 percent; volume up 19 percent; dollar sales up 19 percent
- Specialty Foods operating profit down 6 percent; volume up 12 percent; dollar sales up 12 percent
- All Other operating profit down 3 percent; volume up 27 percent; dollar sales up 33 percent
- Diluted EPS of $2.92, up 15 percent from $2.53 per share in 2009
- Segment operating profit up 19 percent from last year
- Dollar sales of $7.2 billion up 11 percent from 2009
- Volume up 5 percent from last year
- Grocery Products operating profit down 4 percent; volume up 14 percent; dollar sales up 13 percent
- Refrigerated Foods operating profit up 22 percent; volume up 2 percent; dollar sales up 11 percent
- Jennie-O Turkey Store operating profit up 65 percent; volume up 5 percent; dollar sales up 7 percent
- Specialty Foods operating profit up 18 percent; volume up 8 percent; dollar sales up 10 percent
- All Other operating profit down 5 percent; volume up 7 percent; dollar sales up 13 percent
The company reported fiscal 2010 fourth quarter net earnings of $121.1 million, up 17 percent from earnings of $103.9 million a year earlier. Diluted earnings per share for the quarter were $0.90 this year compared to $0.77 per share last year (up 17 percent). Sales totaled $2.1 billion, which was up 23 percent from fiscal 2009. Fiscal fourth quarter 2010 includes 14 weeks versus 13 weeks in 2009.
For the twelve months ending October 31, 2010, net earnings on a U.S. GAAP basis were $395.6 million, or $2.92 per diluted share, up from $2.53 a year earlier. On an adjusted basis1, net earnings were $409.0 million or $3.02 per diluted share. Sales totaled $7.2 billion, up 11 percent from last year’s $6.5 billion.
“We are pleased to report a strong finish this year, with both earnings and sales up double-digits this quarter. Earnings growth was driven by segment profit gains in our Jennie-O Turkey Store and Refrigerated Foods segments,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.
“Our Jennie-O Turkey Store segment led the way with robust earnings attributable to improved efficiencies across all areas of our business, aided by strong commodity turkey meat prices and lower grain costs. Our Refrigerated Foods segment also posted strong earnings,
benefiting from higher pork operating margins. Our Grocery Products segment had a difficult quarter, hampered by higher raw material input costs in comparison to very low input costs a year ago,” commented Ettinger.
“We hit the seven billion dollar mark in annual sales for the first time in our Company’s history, fueled by sales growth across all five of our segments. We were particularly gratified that sales grew across all of our branded, value-added product portfolios,” stated Ettinger.
“We continue to be pleased with the excellent progress made with our new product lines in both our MegaMex Foods business and our Country Crock®side dish acquisition, both of which contributed to our positive results this quarter,” remarked Ettinger.
“This morning, we announced an $.18 per share increase to our annual dividend rate (or 21.4%), making the new dividend $1.02 per share. This is the 45th consecutive year in which we’ve increased our dividend,” Ettinger concluded.
SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER
Grocery Products (14% of Net Sales, 21% of Total Segment Operating Profit)
The Grocery Products segment profit declined 6 percent due primarily to higher raw material costs. Sales grew 24 percent driven primarily by increased sales of HORMEL® chili and hash, COMPLEATS® microwave meals, and strong sales growth across much of the MegaMex Foods product portfolio. The SPAM® family of products also showed solid sales growth in the quarter.
Refrigerated Foods (53% of Net Sales, 42% of Total Segment Operating Profit)
Refrigerated Foods delivered another strong quarter, with segment operating profit up 22 percent, aided by strong pork operating margins. Sales grew 26 percent, led by sales of HORMEL® party trays and pepperoni, and NATURAL CHOICE® deli meats in the Meat Products group, and by sales of CAFÉ H® ethnic meats, NATURAL CHOICE® deli meats and AUSTIN BLUES® barbecue meats in the Foodservice group.
1See explanation regarding adjusted earnings with tables on page 5 of this release.
Jennie-O Turkey Store (19% of Net Sales, 23% of Total Segment Operating Profit)
Jennie-O Turkey Store had an excellent quarter, with segment operating profit up 90 percent, driven by efficiency gains throughout the entire supply chain and in its operations. Earnings were also aided by higher commodity turkey meat prices and an incremental gain of 7.3 million dollars, attributable to open grain positions in their hedging program that affected earnings during the quarter. Sales grew 19 percent, led by sales gains in each of the value-added businesses.
Specialty Foods (10% of Net Sales, 10% of Total Segment Operating Profit)
The Specialty Foods segment had a challenging quarter with segment profit down 6 percent, resulting from higher raw material costs in its Specialty Products business. These more than offset stronger results in the other two businesses led by sales of sugar, sugar substitutes and nutritional jars. Sales improved 12 percent, with gains across all three businesses.
All Other (4% of Net Sales, 4% of Total Segment Operating Profit)
Segment profit for the All Other segment, which consists primarily of Hormel Foods International, declined 3 percent, hindered by higher input costs associated with export sales. Sales grew 33 percent, driven primarily by higher export sales of the SPAM® family of products.
Net Interest and Investment Income
Net interest and investment income was flat with a year ago.
General Corporate Expense
General corporate expenses were higher due to an increase in the lower of cost or market inventory reserve and higher pension and insurance expenses.
“We have solid top-line momentum heading into fiscal 2011. We also expect to generate segment profit growth in all five segments. Pork operating margins and turkey fundamentals remain strong. We also face some headwinds during fiscal 2011 including continued higher raw material costs, higher commodity grain costs and a more difficult comparison with a 53 week year and the hedging gain. Taking all of these factors and others into account, we are setting our fiscal 2011 guidance range at $3.10 to $3.20 per share,” remarked Ettinger.
Effective November 15, 2010, the Company paid its 329thconsecutive quarterly dividend. The annual rate for 2010 was $0.84.
A conference call will be webcast at 8:00 a.m. CT on Tuesday, November 23, 2010. Access is available at http://www.hormelfoods.com. If you do not have Internet access and want to listen to the call over the phone, the dial in number is 877-941-2333 and you must provide the access code of 4384165. An audio replay is available by calling 800-406-7325 and entering access code 4384165. The audio replay will be available beginning at 10:30 a.m. CT on Tuesday, November 23, 2010, through 11:59 p.m. CT on December 7, 2010. The Webcast replay will be available at 10:30 a.m. CT, Tuesday, November 23, 2010, and archived for one year.
COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
The non-GAAP adjusted financial measurements are provided to assist the investor in better understanding the Company’s operating performance by excluding the impact of certain non-recurring items affecting comparability. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with any generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
Adjusted net earnings excludes one-time charges in the second quarter of $6.3 million ($.05 per diluted share) relating to the closure of the Valley Fresh plant and an income tax charge of $7.1 million ($.05 per diluted share) primarily from the change in tax treatment of Medicare Part D reimbursements by the new health care laws. Adjusted segment operating profit and Grocery Products adjusted segment operating profit for the twelve months ended October 31, 2010, exclude one-time charges relating to the Valley Fresh plant closing. The tables below show the calculations to reconcile from adjusted earnings to U.S. GAAP earnings.
“Country Crock” is a registered trademark of the Unilever Group of Companies and is used under license. All rights reserved.
Year to Date
|2009 U.S. GAAP Earnings||2010 Adjusted
|Valley Fresh Plant Closure||Tax items primarily related to health care laws||2010 U.S. GAAP Earnings|
|Grocery Products||$ 162,531||$165,655||$ (9,733)||$ 155,922|
|Jennie-O Turkey Store||86,909||143,644||143,644|
|Total segment operating profit||571,726||692,467||(9,733)||682,734|
|Net interest and investment income||(8,432)||(22,024)||(22,024)|
|General corporate expense||(38,312)||(40,348)||(40,348)|
|Earnings before income taxes||524,982||630,095||(9,733)||620,362|
|Income taxes||(182,169)||(221,110)||3,455||$ (7,120)||(224,775)|
|Net earnings attributable to
Hormel Foods Corporation
|$ 342,813||$ 408,985||$ (6,278)||$ (7,120)||$ 395,587|
|Diluted net earnings per share||$ 2.53||$ 3.02||$ (0.05)||$ (0.05)||$ 2.92|
# # #
Fiscal 2010 Fourth Quarter Segment Operating Results (in Thousands)
|FOURTH QUARTER ENDED|
|NET SALES||October 31, 2010||October 25, 2009||% Change|
|Grocery Products||$ 287,112||$ 232,043||23.7|
|Jennie-O Turkey Store||402,048||337,544||19.1|
|Total||$ 2,063,039||$ 1,675,102||23.2|
|Grocery Products||$ 43,134||$ 46,004||(6.2)|
|Jennie-O Turkey Store||47,544||25,062||89.7|
|Total segment operating profit||206,077||172,448||19.5|
|Net interest and investment income||(4,572)||(4,481)||(2.0)|
|General corporate expense||(14,889)||(10,294)||(44.6)|
|Earnings before income taxes||$ 188,076||$ 158,403||18.7|
|YEAR TO DATE ENDED|
|NET SALES||October 31, 2010||October 25, 2009||% Change|
|Grocery Products||$ 1,040,455||$ 924,682||12.5|
|Jennie-O Turkey Store||1,310,412||1,227,709||6.7|
|Total||$ 7,220,719||$ 6,533,671||10.5|
|Grocery Products||$ 155,922||$ 162,531||(4.1)|
|Jennie-O Turkey Store||143,644||86,909||65.3|
|Total segment operating profit||682,734||571,726||19.4|
|Net interest and investment income||(22,024)||(8,432)||(161.2)|
|General corporate expense||(40,348)||(38,312)||(5.3)|
|Earnings before income taxes||$ 624,551||$ 528,147||18.3|
|HORMEL FOODS CORPORATION|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(In thousands, except per share amounts)|
|Quarter Ended||Year Ended|
|Net sales||$ 2,063,039||$ 1,675,102||$ 7,220,719||$ 6,533,671|
|Cost of products sold||1,708,066||1,370,908||5,981,977||5,434,800|
|Selling, general and administrative||166,456||142,704||605,293||567,085|
|Equity in earnings of affiliates||4,131||1,394||13,126||4,793|
|Other income & expenses:|
|Interest & investment income||2,389||2,178||4,565||19,563|
|EARNINGS BEFORE INCOME TAXES:||188,076||158,403||624,551||528,147|
|Provision for income taxes||65,468||53,797||224,775||182,169|
|(effective tax rate)||34.81%||33.96%||35.99%||34.49%|
|Less: Net earnings attributable to
|NET EARNINGS ATTRIBUTABLE TO
HORMEL FOODS CORPORATION
|$ 121,148||$ 103,876||$ 395,587||$ 342,813|
|NET EARNINGS PER SHARE|
|Basic||$ .91||$ .78||$ 2.97||$ 2.55|
|Diluted||$ .90||$ .77||$ 2.92||$ 2.53|
|WEIGHTED AVG SHARES OUT|
|PER SHARE||$ .21||$ .19||$ .84||$ .76|
|HORMEL FOODS CORPORATION|
|CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION|
|October 31, 2010||October 25, 2009|
|Cash and cash equivalents||$ 467,845||$ 385,252|
|Short-term marketable securities||50,595||0|
|Income taxes receivable||8,525||0|
|Deferred income taxes||70,703||66,435|
|Other current assets||23,635||19,253|
|TOTAL CURRENT ASSETS||1,858,166||1,574,733|
|PROPERTY, PLANT & EQUIPMENT, NET||922,103||952,713|
|LIABILITIES AND SHAREHOLDERS’ INVESTMENT|
|TOTAL CURRENT LIABILITIES||$ 1,101,213||$ 685,029|
|LONG-TERM DEBT – LESS CURRENT MATURITIES||0||350,000|
|OTHER LONG-TERM LIABILITIES||546,066||532,705|
|TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT||$4,053,918||$3,692,055|
|HORMEL FOODS CORPORATION|
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS|
|Net earnings||$ 399,776||$ 345,978|
|Depreciation and amortization of intangibles||125,591||127,138|
|(Increase) Decrease in working capital||(65,683)||87,033|
|NET CASH PROVIDED BY OPERATING ACTIVITIES||485,532||558,768|
|Net (purchase) sale of securities||(50,000)||3,899|
|Acquisitions of businesses/intangibles||(28,104)||(701)|
|Net purchases of property/equipment||(84,908)||(91,958)|
|(Increase) Decrease in investments, equity in affiliates, and other assets||(95,464)||3,532|
|NET CASH USED IN INVESTING ACTIVITIES||(258,476)||(85,228)|
|Net (payments on) proceeds from debt||0||(100,000)|
|Dividends paid on common stock||(109,374)||(101,376)|
|NET CASH USED IN FINANCING ACTIVITIES||(144,463)||(243,066)|
|INCREASE IN CASH AND CASH EQUIVALENTS||82,593||230,474|
|Cash and cash equivalents at beginning of year||385,252||154,778|
|CASH AND CASH EQUIVALENTS AT END OF YEAR||$ 467,845||$ 385,252|