Hormel Foods 2014 Annual Report Download - page 21

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Segment profit for Grocery Products decreased 21.1 percent
for the fourth quarter and 8.7 percent for the year compared
to fiscal 2013. Profit results for the fourth quarter were ham-
pered by high meat input costs and reduced volumes following
related pricing actions. Partially offsetting the decrease were
higher equity in earnings results from the MegaMex joint
venture in the fourth quarter, as the prior year included higher
incentive expense on the Fresherized Foods acquisition. For
the fiscal year, improved margins of Hormel® bacon toppings
and the Herdez® line of salsas and sauces within our MegaMex
joint venture were unable to offset the margin declines in
products such as the SPAM® family of products, Hormel® chili,
Hormel® Compleats® microwave meals, and Dinty Moore® stew.
Looking ahead, the Company expects pork commodity prices
to normalize as the year progresses, providing input cost
relief in fiscal 2015 for Grocery Products. Growth for SKIPPY®
peanut butter products is anticipated following the September
kick-off of a national advertising campaign after many years
off air. Effective at the beginning of fiscal 2015, Fresherized
Foods, the makers of Wholly Guacamole®
, will be integrated
into the Grocery Products sales and distribution systems
giving this brand the full benefit of the Company’s sales force
Grocery Products: Grocery Products net sales decreased
3.4 percent for the fiscal 2014 fourth quarter and increased
2.7 percent for the year compared to fiscal 2013. Tonnage
decreased 4.8 percent for the quarter and increased 3.3
percent for the year compared to prior year results. The com-
parative results for the fiscal year reflect the addition of the
SKIPPY® peanut butter business beginning in the second quar-
ter of fiscal 2013. This business contributed an incremental
$73.3 million of net sales and 49.1 million lbs. to the results
for the fiscal year.
Net sales for Grocery Products in the fourth quarter were neg-
atively impacted by lower tonnage in the canned meat portfo-
lio due to pricing actions taken earlier in the year to partially
offset higher commodity cost inputs. Softer sales of Hormel®
chili and the Hormel® Compleats® line of microwave meals led
to the fourth quarter decline. For the fiscal year, sales gains
for Hormel® bacon toppings and the Herdez® line of salsas and
sauces within the MegaMex joint venture offset lower sales
of the Hormel® Compleats® line of microwave meals and the
SPAM® family of products.
Income Taxes: The Company’s effective tax rate for the fiscal 2014 fourth quarter and year was 34.1 percent and 34.3 percent,
respectively, compared to 33.9 percent and 33.6 percent, respectively, for the fourth quarter and year in fiscal 2013. The higher
rate for fiscal 2014 is due to the impact of net favorable adjustments and settlements with various state jurisdictions in fiscal
2013. The Company expects the effective tax rate in fiscal 2015 to be between 34.0 percent and 34.5 percent.
Segment Results
Net sales and operating profits for each of the Company’s reportable segments are set forth below. The Company is an inte-
grated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the
Company does not represent that these segments, if operated independently, would report the operating profit and other finan-
cial information shown below. (Additional segment financial information can be found in Note O “Segment Reporting.”)
Fourth Quarter Ended Year Ended
October 26, October 27, October 26, October 27,
(in thousands) 2014 2013 % Change 2014 2013 % Change
Net Sales
Grocery Products $ 405,166 $ 419,615 (3.4) $ 1,558,265 $ 1,517,557 2.7
Refrigerated Foods 1,211,890 1,108,157 9.4 4,644,179 4,251,515 9.2
Jennie-O Turkey Store 509,980 459,670 10.9 1,672,452 1,601,868 4.4
Specialty Foods 277,559 212,485 30.6 907,120 932,533 (2.7)
International & Other 139,176 123,275 12.9 534,240 448,181 19.2
Total Net Sales $ 2,543,771 $ 2,323,202 9.5 $ 9,316,256 $ 8,751,654 6.5
Segment Operating Profit
Grocery Products $ 50,051 $ 63,476 (21.1) $ 195,064 $ 213,646 (8.7)
Refrigerated Foods 87,296 79,453 9.9 338,020 232,692 45.3
Jennie-O Turkey Store 95,253 65,550 45.3 272,362 222,117 22.6
Specialty Foods 13,747 15,975 (13.9) 71,514 88,873 (19.5)
International & Other 22,629 22,069 2.5 84,745 71,490 18.5
Total Segment Operating Profit 268,976 246,523 9.1 961,705 828,818 16.0
Net interest and investment
expense (income) 2,626 595 341.3 9,468 7,482 26.5
General corporate expense 6,192 7,466 (17.1) 33,434 26,694 25.2
Noncontrolling interest 584 1,145 (49.0) 3,349 3,865 (13.4)
Earnings Before Income Taxes $ 260,742 $ 239,607 8.8 $ 922,152 $ 798,507 15.5