Hormel Foods Corporation HRL -4.76% reported its performance for the fiscal year 2011-second quarter.
All comparisons are to the second quarter or first half of fiscal 2010. All per share results reported here have been adjusted to give effect to the two-for-one stock split, which was effective February 1, 2011.
· Diluted EPS of $.40, up 18 percent from diluted adjusted EPS of $.34
· Adjusted earnings in 2010 exclude the one-time charges amounting to $0.05 per diluted share that were incurred, relating to the Valley Fresh plant closing and the tax impact of the new health care laws
· Segment operating profit up 18 percent compared to adjusted operating profit a year ago
· Dollar sales of $2 billion, up 15 percent
· Volume up 7 percent
· Refrigerated Foods operating profit up 27 percent; volume up 4 percent; dollar sales up 16 percent
· Jennie-O Turkey Store operating profit up 45 percent; volume up 17 percent; dollar sales up 25 percent
· Grocery Products operating profit down 9 percent compared to adjusted operating profit a year ago; volume up 2 percent; dollar sales up 1 percent
· Specialty Foods operating profit down 11 percent; volume up 6 percent; dollar sales up 4 percent
· All Other operating profit up 104 percent; volume up 24 percent; dollar sales up 45 percent
The company reported fiscal 2011-second quarter net earnings of $109.6 million, up 20 percent from adjusted net earnings of $91.3 million a year earlier. For the six months, ended May 1, 2011, net earnings were $258.4 million, up 28 percent from adjusted net earnings of $202.5 million the same period last year. Diluted net earnings per share for the six months ended May 1, 2011 were $.95, up 27 percent from diluted adjusted net earnings per share of $.75 last year.
On a U.S. GAAP basis, the company's fiscal 2011-second quarter net earnings of $109.6 million were up 41 percent from net earnings of $77.9 million a year earlier. Diluted U.S. GAAP earnings per share for the quarter were $.40 this year, up 38 percent compared to $.29 per share last year. U.S. GAAP segment operating profit for the quarter was $183.6 million, up 25 percent from a year ago. Grocery Products U.S. GAAP segment operating profit for the quarter was $39 million, up 18 percent from a year ago. For the six months ended May 1, 2011, U.S. GAAP net earnings were $258.4 million or $.95 per diluted share (up 37 percent and 36 percent, respectively) compared to U.S. GAAP net earnings of $189.1 million or $.70 per diluted share from the same period last year.
Sales for the quarter were $2 billion, up 15 percent from fiscal 2010. For the six months, ended May 1, 2011, sales totaled $3.9 billion, up 13 percent from the same period last year.
"We are pleased to report double-digit growth in both earnings and sales for the quarter. Earnings growth was led by our Refrigerated Foods and Jennie-O Turkey Store segments, both of which had a strong quarter. We are also gratified to attain sales growth in all five of our segments," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.
"Our Refrigerated Foods segment generated excellent results, benefitting from strong pork operating margins, and our Jennie-O Turkey Store segment delivered another outstanding quarter, aided by stronger commodity meat prices and improved efficiencies. Our international business in our All Other segment also achieved impressive results, driven by strong export sales. Both our Grocery Products and Specialty Foods segments were pressured by higher commodity costs during the quarter," remarked Ettinger.
SEGMENT OPERATING HIGHLIGHTS—SECOND QUARTER
Grocery Products (13% of Net Sales, 21% of Total Segment Operating Profit) The Grocery Products segment operating profit declined 9 percent from adjusted segment-operating profit a year ago, due to higher input costs. Net sales exceeded last year by 1 percent. Strong results from our core products, such as the SPAM(R) family of products, Hormel(R) bacon toppings, Hormel(R) Mary Kitchen(R) hash and Dinty Moore(R) stew offset soft sales of our microwave products and imported canned meats. The MegaMex Foods business continued to grow sales.
Refrigerated Foods (53% of Net Sales, 38% of Total Segment Operating Profit) The Refrigerated Foods segment exceeded last year's profitability by 27 percent, due primarily to higher pork operating margins. Net sales for the quarter increased 16 percent, with strong contributions from products such as Hormel(R) party trays, Hormel(R) Natural Choice(R) deli meats and Hormel(R) Cure 81(R) premium hams. Positive contributions from the new Hormel(R) Country Crock(R) business were also reflected in the results.
Jennie-O Turkey Store (19% of Net Sales, 26% of Total Segment Operating Profit) Jennie-O Turkey Store had another excellent quarter, with segment operating profit up 45 percent from a year ago. Stronger commodity meat markets and improved efficiencies contributed to the good results. Net sales for the quarter rose 25 percent, and sales of our value-added products rose in all three-trade channels.
Specialty Foods (10% of Net Sales, 10% of Total Segment Operating Profit) The Specialty Foods segment operating profit declined 11 percent, due to higher raw material costs. Net sales grew 4 percent, as higher sales of private label canned meats, sugar and blended items offset softer nutritional jar sales.
All Other (5% of Net Sales, 5% of Total Segment Operating Profit) The All Other segments, which consist primarily of Hormel Foods International, grew segment profit 104 percent, and grew net sales by 45 percent, driven mostly by stronger exports of fresh pork and the SPAM(R) family of products.
General Corporate Expense General corporate expenses were higher than last year due primarily to higher pension and insurance costs.
"Given our strong results in the second quarter, we are raising our full year guidance range to $1.67 to $1.73 per share from $1.62 to $1.68 per share. We anticipate seeing higher input costs during the remainder of the year, and our team will continue to drive efficiency gains and advance pricing to offset these higher costs. We believe our strong portfolio of brands and our balanced model will allow us to overcome those obstacles," concluded Ettinger.
Effective May 15, 2011, the Company paid its 331st consecutive quarterly dividend, at the annual rate of $.51.
The audio replay of the conference call held on 25th may is available till 11:59 p.m. CT on Wednesday, June 8, 2011. The Webcast replay is 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 for 2010 (a non-GAAP financial measurement) exclude one-time charges of $6.3 million ($0.02 per diluted share) relating to the closure of the Valley Fresh plant and an income tax charge of $7.1 million ($0.03 per diluted share) primarily due to the change in tax treatment of Medicare Part D reimbursements by health care laws enacted in the prior year. Adjusted segment operating profit and Grocery Products adjusted segment operating profit exclude the one-time charges relating to the Valley Fresh plant closing.
About Hormel Foods
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 branded, value-added products to the global marketplace. The company is a member of the Standard & Poor's 500 Index, Dow Jones Sustainability Indexes, Maplecroft Climate Innovation Indexes, Global 1000 Sustainable Performance Leaders and was named 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.