All comparisons are to the third quarter or first nine months 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 $.36 up 13 percent from diluted EPS of $.32
- Segment operating profit up 2 percent
- Dollar sales of $1.9 billion, up 10 percent, on flat volume
- Grocery Products operating profit up 19 percent; volume up 1 percent; dollar sales up 4 percent
- Jennie-O Turkey Store operating profit up 14 percent; volume down 3 percent; dollar sales up 11 percent
- Refrigerated Foods operating profit down 12 percent; volume down 1 percent; dollar sales up 10 percent
- Specialty Foods operating profit down 8 percent; volume flat; dollar sales up 11 percent
- All Other operating profit up 67 percent; volume up 22 percent; dollar sales up 35 percent
The company reported fiscal 2011 third quarter net earnings of $98.5 million, up 15 percent from net earnings of $85.4 million a year earlier. For the nine months ended July 31, 2011, net earnings were $356.9 million, up 24 percent from adjusted1 net earnings of $287.8 million the same period last year. Diluted net earnings per share for the nine months ended July 31, 2011 were $1.31, up 24 percent from diluted adjusted1 net earnings per share of $1.06 last year.
On a U.S. GAAP basis, net earnings for the nine months ended July 31, 2011 were $356.9 million or $1.31 per diluted share (both up 30 percent) compared to net earnings of $274.4 million or $1.01 per diluted share from the same period last year.
Sales for the quarter were $1.9 billion, up 10 percent from the same period in fiscal 2010. For the nine months ended July 31, 2011, sales totaled $5.8 billion, up 12 percent from the same period last year.
1See explanation regarding adjusted earnings with table on page 4 of this release.
“We are pleased to report improved earnings per share and sales for the quarter, which were up 13 percent and 10 percent, respectively,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “Earnings growth was led by our Grocery Products and Jennie-O Turkey Store segments, both of which had a strong quarter. Our international business in our All Other segment was also a strong contributor to our earnings results.
Our Grocery Products segment generated solid results, benefitting from strong sales of Mexican products by our MegaMex Foods joint venture, and of our SPAM® family of products. I was pleased to see sales of our Hormel® Compleats® microwave mealsgrow nicely in the quarter. Our Jennie-O Turkey Store segment delivered another good quarter, aided by strong value-added sales and operational and supply chain efficiencies. Our international business in our All Other segment achieved impressive results, led by strong pork export sales. Lower pork operating margins hindered our Refrigerated Foods segment results and our Specialty Foods segment was pressured by higher than expected raw material costs during the quarter.”
SEGMENT OPERATING HIGHLIGHTS – THIRD QUARTER
Grocery Products (13% of Net Sales, 21% of Total Segment Operating Profit)
The Grocery Products segment exceeded last year’s profitability by 19 percent. Net sales increased over last year’s results by 4 percent. Improved sales of our SPAM® family of products, as well as of Mexican food products by our MegaMex Foods joint venture helped offset higher commodity input costs. Sales of Hormel® Compleats® microwave mealsalso grewduring the quarter.
Refrigerated Foods (55% of Net Sales, 38% of Total Segment Operating Profit)
Refrigerated Foods segment profit declined by 12 percent, due primarily to lower pork operating margins. Net sales for the quarter increased 10 percent, with strong contributions from products such as Hormel® pepperoni, Hormel® bacon, Hormel® party trays, Hormel® Natural Choice® deli meats and Hormel® Country Crock® sides.
Jennie-O Turkey Store (17% of Net Sales, 24% of Total Segment Operating Profit)
Jennie-O Turkey Store had another solid quarter, with segment operating profit up 14 percent from a year ago. Increased value-added sales and improved efficiencies contributed to the good results. Net sales for the quarter rose 11 percent.
Specialty Foods (11% of Net Sales, 12% of Total Segment Operating Profit)
The Specialty Foods segment operating profit declined 8 percent, due to higher raw material costs. Net sales grew 11 percent, led by higher sales of private label canned meats and sugar.
All Other (4% of Net Sales, 5% of Total Segment Operating Profit)
The All Other segments, which consist primarily of Hormel Foods International, grew segment profit 67 percent and net sales by 35 percent, driven principally by stronger exports of fresh pork and improved results by our international joint ventures.
General Corporate Expense and Taxes
General corporate expenses were lower due to a reduction in the lower of cost or market inventory reserve. Our effective tax rate for the third quarter of 2011 was favorably impacted by the resolution of tax matters with various federal and state tax jurisdictions.
“As a result of our solid results in the third quarter, we are raising our full year guidance range to $1.70 to $1.75 per share from $1.67 to $1.73 per share,” concluded Ettinger.
Effective August 15, 2011, the Company paid its 332nd consecutive quarterly dividend, at the annual rate of $.51, marking its 83rd year of paying dividends.
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.
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.