Hormel Foods 2013 Annual Report Download - page 23

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General corporate expense for the fourth quarter and year
was $7.5 million and $26.7 million, respectively, compared to
$3.4 million and $21.4 million for the comparable periods of
the prior year. An increase in the Company’s lower of cost or
market inventory reserve caused a notable expense increase
for the fourth quarter and fiscal year compared to fiscal 2012.
The higher expense for both the fourth quarter and fiscal year
also reflects an increase in employee-related expenses com-
pared to the prior year.
Net earnings attributable to the Company’s noncontrolling
interests were $1.1 million and $3.9 million for the 2013
fourth quarter and fiscal year, respectively, compared to $1.7
million and $4.9 million for the comparable periods of fiscal
2012. The Company’s Precept Foods business generated
lower results for both the fourth quarter and full year com-
pared to fiscal 2012. However, these declines were partially
offset by continued improvement from the Company’s China
operations, which were up for both the fourth quarter and
fiscal year compared to prior year results.
FISCAL YEARS 2012 AND 2011:
Consolidated Results
Net Earnings: Net earnings attributable to the Company
for the fourth quarter of fiscal 2012 were $132.6 million, an
increase of 13.0 percent compared to earnings of $117.3
million for the same quarter in fiscal 2011. Diluted earnings
per share were $0.49 compared to $0.43 for the same quarter
in fiscal 2011. Net earnings attributable to the Company for
fiscal 2012 increased 5.5 percent to $500.1 million, from
$474.2 million in fiscal 2011. Diluted earnings per share for
fiscal 2012 increased 6.9 percent to $1.86 compared to $1.74
per share in fiscal 2011.
Net Sales: Net sales for the fourth quarter of fiscal 2012
increased to $2.17 billion from $2.10 billion in 2011, an
increase of 3.2 percent. Net sales for fiscal 2012 increased
4.3 percent to $8.23 billion compared to $7.90 billion in fiscal
2011. Tonnage for the fourth quarter increased 1.6 percent
to 1.26 billion lbs. compared to 1.24 billion lbs. for the same
period in fiscal 2011. Tonnage for fiscal year 2012 increased
0.2 percent to 4.83 billion lbs. from 4.82 billion lbs. in fiscal
2011. Four of the Company’s five reporting segments deliv-
ered sales growth in the fourth quarter of fiscal 2012, and
all five segments improved on a full year basis compared to
fiscal 2011. Increased value-added sales across all segments
of the Company drove the top-line results for both the fourth
quarter and fiscal year in 2012. The more modest tonnage
increase reflected a decline in commodity meat sales for both
the Refrigerated Foods and Jennie-O Turkey Store segments
in fiscal 2012 compared to fiscal 2011.
International & Other: International & Other net sales
increased 37.9 percent for the fiscal 2013 fourth quarter and
23.3 percent for the year compared to fiscal 2012. Strong
export sales of the SPAM® family of products and improved
performance by the Company’s China operations were the
principal drivers of the top-line results for both the fourth
quarter and fiscal year. The addition of worldwide SKIPPY®
product sales (excluding Mainland China) also enhanced top-
line results, contributing $17.5 million of net sales and 9.3
million lbs. in the fourth quarter and $51.0 million of net sales
and 26.4 million lbs. for fiscal 2013.
International & Other segment profit increased 82.0 percent
and 43.3 percent for the fiscal 2013 fourth quarter and year,
respectively, compared to fiscal 2012. Segment profit gains
for the fourth quarter and fiscal year were largely driven by
robust margins on exports of the SPAM® family of products
and fresh pork items. Improved overall results for the
Company’s international joint ventures also provided a benefit
for fiscal 2013.
After achieving another record segment profit year in fiscal
2013, the Company’s international business is entering 2014
with good momentum. The Company expects strong export
sales of the SPAM® family of products and fresh pork to
continue in fiscal 2014, coupled with positive results from the
Company’s China operations and the addition of a full year
of SKIPPY® product sales. Subsequent to the end of the fiscal
year, the Company completed the acquisition of the China
based SKIPPY® peanut butter business which will further
enhance the Company’s presence in China and results for
this segment.
Unallocated Income and Expenses: The Company does not
allocate investment income, interest expense, and interest
income to its segments when measuring performance. The
Company also retains various other income and unallocated
expenses at corporate. Equity in earnings of affiliates is
included in segment operating profit; however, earnings
attributable to the Company’s noncontrolling interests are
excluded. These items are included in the segment table for
the purpose of reconciling segment results to earnings before
income taxes.
Net interest and investment expense (income) for the fourth
quarter and fiscal year was a net expense of $0.6 million
and $7.5 million, respectively, compared to a net expense of
$1.4 million and $6.3 million for the comparable periods of
fiscal 2012. The decreased expense for the fourth quarter is
primarily due to better returns on the Company’s rabbi trust.
For the year, increased net expense primarily reflects lower
interest income, as the acquisition of the United States based
SKIPPY® peanut butter business decreased invested funds in
the current year. Interest expense was $12.5 million for fiscal
2013, decreasing slightly from $12.9 million in fiscal 2012. The
Company expects interest expense to be approximately $12.0
to $14.0 million for fiscal 2014.