All comparisons are to the first quarter of fiscal 2010. All per share results reported here are on a two-for-one stock split adjusted basis.
HIGHLIGHTS
First Quarter
• Diluted EPS of $.55, up 34 percent from $.41 per share
• Segment operating profit up 33 percent
• Dollar sales of $1.9 billion up 11 percent
• Volume up 4 percent
• Jennie-O Turkey Store operating profit up 122 percent; volume up 5 percent; dollar sales up 14 percent
• Refrigerated Foods operating profit up 37 percent; volume up 2 percent; dollar sales up 13 percent
• Grocery Products operating profit down 10 percent; volume up 5 percent; dollar sales up 6 percent
• Specialty Foods operating profit down 12 percent; volume up 7 percent; dollar sales up 2 percent
• All Other operating profit up 29 percent; volume up 8 percent; dollar sales up 17 percent
The company reported fiscal 2011 first quarter net earnings of $148.8 million, up 34 percent from earnings of $111.2 million a year earlier. Diluted earnings per share for the quarter were $.55 this year compared to $.41 per share last year. Sales totaled $1.92 billion, which was up 11 percent from fiscal 2010.
COMMENTARY
“We are pleased to report double-digit increases in both sales and earnings for the quarter. All five segments generated year-over-year sales growth. Earnings growth was led by excellent performance by 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 had an outstanding quarter, driven by favorable commodity meat margins and improved efficiencies across the entire supply chain and operations. It also experienced improved sales of value-added products. Our Refrigerated Foods segment had a strong quarter, as well, benefitting from continued high pork operating margins. We were pleased by the performance of our international business in the All Other segment, too. Both our Grocery Products and Specialty Foods segments were pressured by higher commodity input costs during the quarter,” remarked Ettinger.
SEGMENT OPERATING SUMMARIES – FIRST QUARTER
Grocery Products (14% of Net Sales, 20% of Total Segment Operating Profit)
The Grocery Products segment operating profit declined 10 percent, due primarily to higher raw material costs. Sales grew 6 percent, led by higher sales of the SPAM® family of products, Hormel® chili,Hormel® flavored bits and Hormel® Mary Kitchen® hash, and strong sales growth of the MegaMex Foods franchise.
Refrigerated Foods (53% of Net Sales, 39% of Total Segment Operating Profit)
The Refrigerated Foods segment had a strong first quarter, with segment operating profit 37 percent greater than last year, as favorable spreads between hog costs and primal values benefitted the segment. Sales grew 13 percent during the quarter, featuring higher sales ofHormel® party trays, Hormel® pepperoni, Hormel® refrigerated entrees, Hormel® Always Tender® flavored meats, and aided by the inclusion of Hormel® Country Crock® side dishes.
Jennie-O Turkey Store (19% of Net Sales, 30% of Total Segment Operating Profit)
Jennie-O Turkey Store had an outstanding quarter, with segment operating profit up 122 percent. Better commodity meat prices and improved efficiencies in the supply chain and operations helped drive results. Sales grew 14 percent for this segment with increased commodity meat and value-added sales, featuring increased sales ofJennie-O Turkey Store® turkey burgers, turkey bacon and fresh tray pack items.
Specialty Foods (10% of Net Sales, 7% of Total Segment Operating Profit)
Segment operating profit for Specialty Foods declined 12 percent, due primarily to higher raw material costs. Sales grew 2 percent, as higher sales of sugar and blended products were partially offset by lower sales of contract manufacturing and sugar substitute products.
All Other (4% of Net Sales, 4% of Total Segment Operating Profit)
Segment operating profit for the All Other segment, which consists primarily of Hormel Foods International, increased 29 percent for the quarter, while sales grew 17 percent, led primarily by stronger exports of fresh pork and the SPAM® family of products.
Net Interest and Investment Income
Net interest and investment expense was flat with a year ago.
General Corporate Expense
General corporate expenses were higher than last year due to expenses associated with the vesting of options under the Universal Stock Option award granted to all employees in 2007.
OUTLOOK
“Due to our strong results in the first quarter, we are raising our full year guidance range from $1.55 to $1.60 per share to $1.62 to $1.68 per share. We expect to see higher input costs the balance of the year, and our team will continue to tackle the challenge of offsetting these added costs with pricing and efficiency gains. Nevertheless, we believe our strong portfolio of branded products and our balanced model should allow us to build upon the momentum of our excellent start,” concluded Ettinger.
DIVIDENDS
Effective February 15, 2011, the Company paid its 330th consecutive quarterly dividend, at the annual rate of $.51.
WEBCAST
The Company’s results will be discussed during its presentation at the CAGNY Conference via webcast at 1:45 p.m. EST on Tuesday, February 22, 2011. Access is available at https://www.hormelfoods.com. The Webcast replay will be available at 3:45 p.m. EST, Tuesday, February 22, 2011, and archived for one year.
“Country Crock” is a registered trademark of the Unilever Group of Companies and is used under license. All rights reserved.
Statements Follow
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Segment Data
Fiscal 2011 First Quarter Segment Operating Results (in thousands)
FIRST QUARTER – 13 WEEKS ENDED
NET SALES January 30, 2011 January 24, 2010 % Change
Grocery Products $ 276,899 $ 261,644 5.8
Refrigerated Foods 1,010,702 892,302 13.3
Jennie-O Turkey Store 364,517 319,951 13.9
Specialty Foods 191,345 186,942 2.4
All Other 78,095 66,608 17.2
Total $ 1,921,558 $ 1,727,447 11.2
OPERATING PROFIT
Grocery Products $ 48,562 $ 54,170 (10.4)
Refrigerated Foods 96,134 70,188 37.0
Jennie-O Turkey Store 73,825 33,267 121.9
Specialty Foods 17,278 19,630 (12.0)
All Other 9,993 7,722 29.4
Total segment operating profit 245,792 184,977 32.9
Net interest and investment expense (income) 6,138 6,118 0.3
General corporate expense 11,252 10,363 8.6
Noncontrolling interest 1,209 1,062 13.8
Earnings before income taxes $ 229,611 $ 169,558 35.4
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Thirteen Weeks Ended
1-30-2011 1-24-2010*
Net sales $ 1,921,558 $ 1,727,447
Cost of products sold 1,547,553 1,409,060
GROSS PROFIT: 374,005 318,387
Selling, general and administrative 145,161 145,532
Equity in earnings of affiliates 6,905 2,821
OPERATING INCOME: 235,749 175,676
Other income & expenses:
Interest & investment income 441 443
Interest expense (6,579) (6,561)
EARNINGS BEFORE INCOME TAXES: 229,611 169,558
Provision for income taxes 79,576 57,289
(effective tax rate) 34.66% 33.79%
NET EARNINGS 150,035 112,269
Less: net earnings attributable to noncontrolling interest 1,209 1,062
NET EARNINGS ATTRIBUTABLE TO
HORMEL FOODS CORPORATION $ 148,826 $ 111,207
NET EARNINGS PER SHARE
Basic $ .56 $ .42
Diluted $ .55 $ .41
WEIGHTED AVG SHARES OUT
Basic 266,560 267,178
Diluted 271,740 270,712
DIVIDENDS DECLARED
PER SHARE $ .1275 $ .1050
* Shares and per share figures have been restated to give effect to the two-for-one stock split, which was approved by shareholders at the Company’s Annual Meeting on January 31, 2011.
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
January 30, 2011 October 31, 2010
(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 598,813 $ 467,845
Short-term marketable securities 50,719 50,595
Accounts receivable 406,677 430,939
Inventories 787,280 793,771
Income taxes receivable 0 8,525
Deferred income taxes 69,474 70,703
Prepaid expenses 13,612 12,153
Other current assets 22,655 23,635
TOTAL CURRENT ASSETS 1,949,230 1,858,166
INTANGIBLES 769,730 770,545
OTHER ASSETS 488,356 503,104
PROPERTY, PLANT & EQUIPMENT, NET 915,632 922,103
TOTAL ASSETS $ 4,122,948 $ 4,053,918
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
TOTAL CURRENT LIABILITIES $ 1,020,203 $ 1,101,213
OTHER LONG-TERM LIABILITIES 550,761 546,066
SHAREHOLDERS’ INVESTMENT 2,551,984 2,406,639
TOTAL LIAB. & SHAREHOLDERS’ INVESTMENT $ 4,122,948 $ 4,053,918
HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirteen Weeks Ended
1-30-2011 1-24-2010
OPERATING ACTIVITIES (in thousands)
Net earnings $ 150,035 $ 112,269
Depreciation and amortization of intangibles 31,197 30,850
Increase in working capital (21,177) (33,222)
Other 1,246 4,038
NET CASH PROVIDED BY OPERATING ACTIVITIES 161,301 113,935
INVESTING ACTIVITIES
Acquisitions of businesses/intangibles (7,207) (384)
Net purchases of property / equipment (15,457) (17,652)
Decrease (Increase) in investments, equity in affiliates, and other assets 8,174 (565)
NET CASH USED IN INVESTING ACTIVITIES (14,490) (18,601)
FINANCING ACTIVITIES
Dividends paid on common stock (27,904) (25,373)
Share repurchase (13,731) (16,081)
Other 25,792 9,960
NET CASH USED IN FINANCING ACTIVITIES (15,843) (31,494)
INCREASE IN CASH AND CASH EQUIVALENTS 130,968 63,840
Cash and cash equivalents at beginning of year 467,845 385,252
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 598,813 $ 449,092
