Hormel Foods 2011 Annual Report Download - page 18

16 Hormel Foods Corporation
T
he Company expects to continue its strong top-line momen
-
tum entering 2012. The current general wellness movement
and overall trend toward more nutr
i
t
i
ous
p
roducts are
ex
p
ected to contribute to robust sales o
f
Jennie-O Turke
y
Stor
e
®
b
r
a
n
ded
it
e
m
s
a
n
d
Ho
rm
el
®
N
a
t
u
r
a
l
C
h
o
i
ce
®
de
li m
ea
t
s
.
Strong sales of
Ho
rm
el
®
p
e
pp
eroni and
p
arty tray items are
a
lso antici
p
ated as the Com
p
any continues to find innov
a
-
t
ive options
f
or consumer snacking occasions. The
H
orme
l
®
Com
p
leat
s
®
line of microwave meals is ex
p
ected to benefit
f
rom new packaging and advertising that was introduced
during fiscal 2011. Following the addition of the
Wh
o
lly
Guacamol
e
®
line of refrigerated products, the Company’s
broad Mexican
f
oods
p
ort
f
olio should
p
rovide yet another
plat
f
orm
f
or growth in the upcoming year.
G
ross Profit: Gross profit was $336.0 million and $1.33 billion
for the
20
11 fourth quarter and fiscal year, respectively, com-
pared to $355.0 million and $1.24 billion last year. As a pe
r
-
c
enta
g
e of net sales,
g
ross profit decreased to 16.
0
percent
for the fourth quarter compared to 17.
2
percent in fiscal
20
1
0
,
a
nd decreased to 16.
9
percent for the year compared to 17.
2
p
ercent in fiscal
20
1
0
.
G
ross
p
rofit for fiscal
20
1
0
included
a
charge of
$
9.7 million incurred during the second quarter
related to the closing of the Company’s Valley Fresh plant.
J
ennie-O Turkey Store had an outstanding year as value-
a
dded sales growth,
f
avorable commodity meat margins, and
effi
ciencies achieved throughout its supply chain and oper
a
-
tions were able to o
ff
set hi
g
her
f
eed costs. Mar
g
ins on
f
resh
pork exports were also stron
g
for the
C
ompany’s international
business. In Re
f
ri
g
erated Foods,
f
avorable spreads between
ho
g
costs and primal values
g
enerated sizable
g
ains in the
first half of the fiscal year. However, these mar
g
ins weakened
i
n the latter half, resultin
g
in lower profits for pork opera
-
tions in the third and fourth
q
uarters. Meanwhile,
p
ork
p
rimal
c
osts and other raw materials remained high throughout the
y
ear and reduced margins for the Company’s value-added
businesses. Shipping and handling expenses also increased
c
ompared to fiscal 2010 across all segments of the Company.
Pricing initiatives were able to o
ff
set a portion o
f
the higher
c
osts dur
i
n
g
the year, but mar
gi
ns be
g
an to be ne
g
at
i
vely
i
mpacted in the second hal
f
o
f
the year.
Enterin
g
fiscal
20
1
2
, the
C
ompany continues to face head
-
w
inds from hi
g
h and volatile raw material costs across all
segments of the
C
ompany. Higher grain costs will also remain
a
concern, as well as anticipated declines in pork operating
margins compared to fiscal 2011. Strategic and moderate
p
r
i
ce
i
ncreases may be
p
ursued as necessary on
p
roducts
most significantly impacted by the elevated input costs. Given
c
urrent conditions, the Refrigerated Foods and JOTS seg
-
ments are ex
p
ected to maintain their
p
ositions in fiscal 2012
ag
a
i
nst h
i
stor
i
cally h
ig
h results. Year-over-year compar
i
sons
a
re likely to be di
ffi
cult in the short-term, becomin
g
more
favorable in the latter half of the year.
O
verall the
C
ompany’s
The Com
p
any’s fiscal year consisted of 52 weeks in 2011,
5
3 weeks in 2010, and 52 weeks in 2009. All com
p
arisons
provided throughout this discussion are there
f
ore impacted by
the additional week in fiscal 2010
.
Additionally, all prior year share and per share
fig
ures
throu
g
hout th
i
s d
i
scuss
i
on have been restated, as appropr
i
-
ate, to reflect the two-for-one split of the
C
ompany’s common
s
tock, which was effected Februar
y
1,
20
11.
FI
SC
AL YEAR
S
20
11 AND
20
1
0
:
Co
n
so
li
d
at
ed
R
esu
lt
s
N
et Earnin
g
s: Net earnings attributable to the Company
f
or the fourth
q
uarter of fiscal 2011 were
$
117.3 million,
a decrease of 3.2 percent compared to earnin
g
s of $121.1
million
f
or the same quarter last year. Diluted earnin
g
s per
s
hare were $0.43 compared to $0.45 for the same quarter last
y
ear. Net earnin
g
s attributable to the
C
ompany for fiscal
20
11
increased 15.9 percent to $474.2 million, from $409.0 million
ad
j
uste
d
(
1
)
net earnings attributable to the Company in fiscal
2010. Diluted earnings per share for fiscal 2011 increased
15.2 percent to
$
1.74 compared to
$
1.51 ad
j
usted
(
1
)
d
il
u
t
ed
e
arn
i
ngs per share last year
.
O
n a U.S. GAAP basis, net earnings attributable to the
C
ompany for fiscal 2011 increased 19.9 percent to $474.2
million
,
from $395.6 million in fiscal 2010. U.S. GAAP diluted
e
arnin
g
s per share for fiscal
20
11 increased 1
9
.
2
percent to
$1.74 compared to $1.46 last fiscal year.
Ne
t
S
al
es
:Net sales for the fourth quarter increased to $2.10
billion from
$
2.06 billion in 2010, an increase of 2.0
p
ercent.
Net sales for fiscal 2011 increased 9.3
p
ercent to
$
7.90 bil
-
lion compared to
$
7.22 billion in the prior year. Tonnage for
t
he fourth
q
uarter decreased 7.1
p
ercent to 1.24 billion lbs.
c
ompared to the prior year at 1.34 billion lbs. Tonnage for
t
he fiscal year increased 0.6
p
ercent to 4.82 billion lbs. from
4
.80 billion lbs. in the prior year. Four of the Company’s five
reportin
g
se
g
ments delivered sales
g
rowth in the
f
ourth
q
uarter of fiscal
20
11, and all five se
g
ments improved on a
full year basis compared to fiscal
20
1
0
.
O
n
g
oin
g
media inves
t
-
ments to support the
C
ompany’s key brands were successful
i
n stren
g
thenin
g
value-added sales durin
g
the year, partic
u
-
larly for retail products within the Refrigerated Foods and
J
ennie-O Turkey Store
(
JOTS
)
segments. Favorable volumes
a
nd pricing also generated significant increases in commodity
meat sales for JOTS over the prior year. Additionally, strong
f
resh pork export sales were experienced throughout the
fiscal year and further enhanced to
p
-line results. Sales com
-
par
i
sons were also
i
mpacted by pr
i
c
i
n
g
i
n
i
t
i
at
i
ves, wh
i
ch were
t
aken throu
g
hout fiscal
20
11 in all se
g
ments of the
C
ompany
i
n response to hi
g
her input costs. However, the hi
g
her pricin
g
be
g
an to impact tonna
g
e results in the latter half of the year.
(
1
)
S
ee discussion re
g
ardin
g
20
1
0
adjusted net earnin
g
s on pa
g
e
2
4.