Hormel Foods 2011 Annual Report Download - page 26

24 Hormel Foods Corporation
2
009 quarter and twelve months. The higher expense for
both the
f
ourth
q
uarter and year re
fl
ected an increase in the
lower o
f
cost or market inventory reserve and higher pension
ex
p
ense com
p
ared to fiscal 2009. These were
p
artially offset
by a reduction in expenses for medical benefits in fiscal 2010.
N
et earnin
g
s attributable to the
C
ompany’s noncontrollin
g
interests were $1.5 million and $4.2 million for the fiscal
20
1
0
fourth quarter and year, respectively, compared to
$0.7 million and $3.2 million for the comparable periods of
fiscal
2009
. The increases for fiscal
20
1
0
p
rimarily reflected
im
p
roved
p
erformance from the
C
om
p
any’s Prece
p
t Foods
bus
in
ess.
2
010 Adjusted Net Earnin
g
s:
A
d
j
usted net earn
i
ngs and
adjusted diluted earnings per share for fiscal 2010 are
non-GAAP financial measurements, which are provided to
assist investors and other readers of the
C
ompany’s financial
s
tatements in better understandin
g
the
C
ompany’s operatin
g
per
f
ormance by excludin
g
the impact o
f
certain non-recurrin
g
items affectin
g
comparability. Non-
G
AAP measurements are
n
o
t int
e
n
ded
t
o
be
a
subs
tit
u
t
e
f
o
r
U
.
S
.
G
AAP m
easu
r
e
m
e
nt
s
in analyzing financial performance. These non-
G
AAP mea
-
s
urements are not in accordance with any generally accepted
accounting principles and may be different from non-GAAP
measurements used by other com
p
an
i
es
.
Adjusted net earnings for fiscal 2010 exclude charges of
$
6.3
million ($0.02 per diluted share) related to the closin
g
of the
C
ompany’s Valley Fresh plant in Turlock,
C
alifornia, and an
income tax char
g
e of $7.1 million ($0.03 per diluted share)
primarily
f
rom the chan
g
e in tax treatment o
f
Medicare Part
D
subsidies b
y
new health care laws enacted in
20
1
0
. Both
char
g
es were incurred in the second quarter of fiscal
20
1
0
.
T
he following tables show the calculations to reconcile from
adjusted earnings to U.
S
.
G
AAP earnings for fiscal year
20
1
0
.
Unallocated Income and Expenses: The
C
ompany does not
a
llocate investment income, interest ex
p
ense, and interest
i
ncome to its segments when measuring performance. The
C
om
p
any also retains various other income and unallocated
e
xpenses at corporate. Equity in earnings o
f
a
ffi
liates is
i
ncluded in segment operating pro
fi
t; however, earnings
a
ttributable to the Company’s noncontrolling interests are
e
xcluded. These items are included in the se
g
ment table
f
or
t
he purpose o
f
reconcilin
g
se
g
ment results to earnin
g
s be
f
ore
i
ncome taxes.
Net interest and investment expense (income) for the fi
s
-
c
al 2010 fourth
q
uarter and year was a net ex
p
ense of $4.6
million and
$
22.0 million, res
p
ectively, com
p
ared to a net
e
x
p
ense of
$
4.5 million and
$
8.4 million for the com
p
arable
p
eriods of fiscal 2009. Lower investment returns on the
C
om
p
any’s rabbi trust for su
pp
lemental executive retirement
p
lans and de
f
erred income
p
lans were the
p
rimary driver
o
f the increased net ex
p
ense in fiscal 2010, as the Com
p
any
t
ransitioned the majority o
f
this port
f
olio to
fi
xed return
i
nvestments to reduce the exposure to volat
i
l
i
ty
i
n equ
i
ty
markets. The
C
ompany also recorded increased amortization
related to affordable housin
g
investments durin
g
fiscal
20
1
0
.
Additionally, fiscal 2009 results included a $3.6 million pretax
g
ain reco
g
nized on the dissolution of the
C
ompany’s
C
arapelli
USA, LLC
j
oint venture. Interest expense was
$
26.6 million for
fiscal 2010, decreasing from
$
28.0 million in fiscal 2009 due to
o
utstanding borrowings against the Company’s line of credit
i
n the pr
i
or year. The only debt balance rema
i
n
i
ng at the end
o
f fiscal 2010 related to the Com
p
any’s
$
350.0 million senior
notes which matured in 2011.
G
eneral corporate expense for the fiscal
20
1
0
fourth quarter
a
nd year was $14.9 million and $40.3 million, respectively,
c
ompared to $10.3 million and $38.3 million for the fiscal
Year Ended October 31, 2010
Tax Item
s
Primaril
y
2010 Ad
j
uste
d
V
a
ll
ey
F
res
h
Rela
t
ed
t
o
20
1
0
U
.
S
.
(
in thousands, exce
p
t
p
er share amounts
)
Earn
i
ng
s
P
lant
C
losur
e
H
ealth
C
are Law
s
G
AAP Earnings
E
arnings before income taxes
$
63
4
,
284
$
(
9
,
733
)
$
–
$
62
4
,
55
1
I
n
co
m
e
t
a
x
es
(
221
,
110
)
3,
455
(
7
,
120
)
(
224
,
775
)
N
et earn
i
ngs
$
4
1
3,
174
$
(
6
,
278
)
$
(
7
,
120
)
$
3
99
,
77
6
N
et earn
i
ngs attr
i
butable to
H
ormel Foods Corporation
$
4
08,98
5
$
(
6,278
)
$
(
7,120
)
$
3
95,58
7
D
iluted net earnin
g
s per share
$
1
.
51
$
(
0.02
)
$
(
0.03
)
$
1
.
46