Hormel Foods Reports 7% Increase in Sales

Hormel Foods Corporation reported its performance for the fiscal year 2010 second quarter.
HIGHLIGHTS

Second Quarter

-- Diluted adjusted EPS of $0.67, up 14 percent from $0.59 per share in 2009(1) -- Adjusted earnings exclude the previously announced, one-time charges amounting to $0.10 per diluted share that were incurred, relating to the Valley Fresh plant closing and the tax impact of the new health care laws
-- Adjusted segment operating profit up 18 percent from last year(1)
-- Dollar sales of $1.7 billion up 7 percent from 2009
-- Volume up 2 percent from 2009
-- Grocery Products adjusted operating profit down 2 percent(1); volume up 10 percent; dollar sales up 6 percent
-- Refrigerated Foods operating profit up 7 percent; volume flat; dollar sales up 7 percent
-- Jennie-O Turkey Store operating profit up 93 percent; volume down 3 percent; dollar sales up 1 percent
-- Specialty Foods operating profit up 39 percent; volume up 8 percent; dollar sales up 13 percent
-- All Other operating profit down 18 percent; volume flat; dollar sales up 7 percent

Excluding the one-time charges referenced above, the company reported fiscal 2010 second quarter adjusted(1) net earnings of $91.3 million, up 14 percent from net earnings of $80.4 million a year earlier. For the six months ended April 25, 2010, adjusted(1) net earnings were $202.5 million, up 25 percent from the same period last year. Diluted adjusted(1) net earnings per share were $1.50, up 25 percent from $1.20 last year.

On a GAAP basis, the company reported fiscal 2010 second quarter net earnings of $77.9 million, down 3 percent from net earnings of $80.4 million a year earlier. Diluted GAAP earnings per share for the quarter were $0.57 this year compared to $0.59 per share last year. GAAP segment operating profit for the quarter was $146 million, up 10 percent from a year ago. Grocery Products segment operating profit for the quarter was $33 million, down 24 percent from a year ago. For the six months ended April 25, 2010, GAAP net earnings were $189.1 million or $1.40 per diluted share (up 17 percent) compared to net earnings of $161.8 million or $1.20 per diluted share from the same period last year.

Sales for the quarter totaled $1.7 billion, which was up 7 percent from fiscal 2009. For the six months ended April 25, 2010, sales totaled $3.4 billion, up 4 percent from the same period last year.

COMMENTARY
"We are pleased to report excellent earnings and sales for the quarter, which were up 14 percent and 7 percent, respectively. This quarter demonstrated the value of our balanced model, as our Jennie-O Turkey Store and Specialty Foods segments more than made up for the more difficult quarter experienced by our Grocery Products segment due to increased raw material costs. We are also gratified to see our sales grow in all five of our segments," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

"Our Jennie-O Turkey Store segment had an outstanding quarter, showing strength across the board. Our Specialty Foods segment also enjoyed a strong quarter, aided by strong sales of nutritional products, sugar substitutes and private label canned meats. Our Refrigerated Foods segment had improved results, primarily resulting from strong cutout margins, and our International segment had weaker results," remarked Ettinger.

"We were pleased with the progress made with our new product lines under our MegaMex Foods venture and our Country Crock(R) side dish acquisition, as both product lines contributed to our results this quarter," commented Ettinger.

SEGMENT OPERATING HIGHLIGHTS -- SECOND QUARTER

Grocery Products (15% of Net Sales, 22% of Total Segment Operating Profit)
The Grocery Products segment experienced soft segment operating profit results, down 2 percent on an adjusted(1) basis, due to higher protein costs. Net sales exceeded last year by 6 percent, led by strong results from our core products, such as Hormel(R) chili and Hormel(R) Mary Kitchen(R) hash. Results from our MegaMex Foods business continue to meet expectations.

Refrigerated Foods (53% of Net Sales, 38% of Total Segment Operating Profit)
Despite the rapid rise in primal values during the quarter, the Refrigerated Foods segment exceeded last year's profitability by 7 percent, due primarily to stronger cutout margins. Net sales for the quarter also increased 7 percent, with strong contributions from products such as Hormel(R) party trays and Hormel(R) pepperoni. Positive contributions from our new Country Crock(R) business were also reflected in the results.

Jennie-O Turkey Store (17% of Net Sales, 22% of Total Segment Operating Profit)
Jennie-O Turkey Store improved its segment operating profit results by a remarkable 93 percent from a year ago. Strength across the board, including stronger commodity meat markets and improved efficiencies contributed to the strong results. Sales of our value-added products rose in all three trade channels.

Specialty Foods (12% of Net Sales, 15% of Total Segment Operating Profit)
The Specialty Foods segment recorded an outstanding quarter, with segment profit up 39 percent from 2009. Each business unit contributed to the increase, led by sales of sports nutrition products, private label canned meat products, and sugar substitutes. Revenues overall also exceeded last year by 13 percent.

All Other (3% of Net Sales, 3% of Total Segment Operating Profit)
The All Other segment, which includes Hormel Foods International, experienced an 18 percent decline in segment profit for the quarter. This decline was due primarily to continued weakness in fresh pork exports resulting from decreased demand in our key markets. Revenues for the segment exceeded last year, aided by strong sales of the SPAM(R) family of products.

Net Interest and Investment Income
Lower net interest and investment income reflects a gain in 2009 on the dissolution of the Carapelli joint venture and current year lower returns on the rabbi trust investments.

General Corporate Expense
General corporate expenses were slightly lower than last year (down 2 percent).

OUTLOOK
"Excluding the 10 cent per share impact of the one-time charges relating to the closing of the Valley Fresh plant and the reduced value of the deferred tax asset resulting from the new health care laws, we are raising our full year guidance range from $2.68 to $2.78 per share to $2.75 to $2.85 per share. We anticipate continued higher hog costs during the remainder of the year, and we recognize the strong investment performance in our rabbi trust last year will result in a more difficult comparison in the back half of the year. However, we believe our strong brands and our dedicated team will allow us to overcome those obstacles," concluded Ettinger.

DIVIDENDS
Effective May 15, 2010, the Company paid its 327th consecutive quarterly dividend, at the annual rate of $0.84.

CONFERENCE CALL
A conference call will be Webcast at 7:30 a.m. CT (8:30 a.m. ET) on Wednesday, May 19, 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 4286994. An audio replay is available by calling 800-406-7325 and entering access code 4286994. The audio replay will be available beginning at 10:30 a.m. CT on Wednesday, May 19, 2010, through 11:59 p.m. CT on Wednesday, June 2, 2010. The Webcast replay will be available at 10:30 a.m. CT, Wednesday, May 19, 2010, and archived for one year.

ADJUSTED EARNINGS
(1)Adjusted net earnings excludes one-time charges 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 exclude one-time charges relating to the Valley Fresh plant closing.

ABOUT HORMEL FOODS CORPORATION
Hormel Foods Corporation, based in Austin, Minn., is a multinational manufacturer and marketer of consumer-branded food and meat products, many of which are among the best known and trusted in the food industry. The company leverages its extensive expertise, innovation and high competencies in pork and turkey processing and marketing to bring quality, value-added brands to the global marketplace. The company is a member of the Standard & Poor's 500 Index. Hormel Foods was named one of "One of the 100 Most Trustworthy Companies" by Forbes in 2010. The company enjoys a strong reputation among consumers, retail grocers, foodservice and industrial customers for products highly regarded for quality, taste, nutrition, convenience and value. For more information, visit http://www.hormelfoods.com.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish