Hormel Foods 2014 Annual Report Download - page 23

21
fiscal 2013. The increased expense for the fourth quarter and
fiscal year is primarily due to lower returns on the Company’s
rabbi trust. Interest expense was $12.7 million for fiscal
2014, increasing slightly from $12.5 million in fiscal 2013, as
the Company utilized its revolving line of credit to fund the
CytoSport acquisition in the fourth quarter. The Company
expects interest expense to be approximately $12.0 million
to $14.0 million for fiscal 2015.
General corporate expense for the fourth quarter and year
was $6.2 million and $33.4 million, respectively, compared
to $7.5 million and $26.7 million for the comparable periods
of the prior year. The lower expense for the fourth quarter
reflects lower salary and pension related expenses compared
to the prior year. General corporate expense for the fiscal year
was higher compared to last year, primarily the result of a bad
debt incurred in the third quarter.
Net earnings attributable to the Company’s noncontrolling
interests were $0.6 million and $3.3 million for the 2014 fourth
quarter and fiscal year, respectively, compared to $1.1 million
and $3.9 million for the comparable periods of fiscal 2013. The
Company’s Precept Foods business generated lower results
for both the fourth quarter and full year compared to fiscal
2013. This joint venture was dissolved at the end of the fiscal
year. For the fiscal year, these declines were partially offset by
improved results from the Company’s China operations.
FISCAL YEARS 2013 AND 2012:
Consolidated Results
Net Earnings: Net earnings attributable to the Company
for the fourth quarter of fiscal 2013 were $157.3 million, an
increase of 18.7 percent compared to earnings of $132.6
million for the same quarter in fiscal 2012. Diluted earnings
per share were $0.58 compared to $0.49 for the same quarter
in fiscal 2012. Net earnings attributable to the Company for
fiscal 2013 increased 5.2 percent to $526.2 million, from
$500.1 million in fiscal 2012. Diluted earnings per share for
fiscal 2013 increased 4.8 percent to $1.95 compared to $1.86
per share in fiscal 2012.
Net Sales: Net sales for the fourth quarter of fiscal 2013
increased to $2.32 billion from $2.17 billion in fiscal 2012, an
increase of 7.1 percent. Net sales for fiscal 2013 increased
6.3 percent to $8.75 billion compared to $8.23 billion in fiscal
2012. Tonnage for the fourth quarter increased 3.0 percent
to 1.30 billion lbs. compared to 1.26 billion lbs. for the same
period in fiscal 2012. Tonnage for the fiscal year increased 2.8
percent to 4.97 billion lbs. from 4.83 billion lbs. in fiscal 2012.
Four of the Company’s five reporting segments delivered sales
growth in the fourth quarter of fiscal 2013, and all five seg-
ments improved on a full year basis compared to fiscal 2012.
Net sales for fiscal 2013 were enhanced by the addition of the
SKIPPY® peanut butter business acquired at the beginning of
the second quarter. These sales contributed an incremental
$94.8 million of net sales and 58.1 million lbs. for the fourth
quarter, and $272.8 million of net sales and 163.4 million lbs.
In fiscal 2015, the Company will benefit from a full year of
CytoSport sales while leveraging operational efficiencies
and purchasing synergies to maximize the potential of
this business.
International & Other: International & Other net sales
increased 12.9 percent for the fiscal 2014 fourth quarter and
19.2 percent for the year compared to fiscal 2013. Continued
strong sales for the Company’s China operations and pork
exports, along with the addition of the China based SKIPPY®
peanut butter sales were the primary drivers of the top-
line results for the fourth quarter. The combined SKIPPY®
business, including the U.S. based business acquired at the
beginning of the second quarter of fiscal 2013, contributed an
incremental $40.8 million of net sales and 25.0 million lbs. for
the fiscal year comparison.
International & Other segment profit increased 2.5 percent
and 18.5 percent for the fiscal 2014 fourth quarter and year,
respectively, compared to fiscal 2013. Additional margins
from China based SKIPPY® peanut butter sales and higher
royalty income offset lower sales and margins on exports
of the SPAM® family of products, as higher meat input costs
pressured margins during the fourth quarter. Segment profit
gains for the fiscal year were largely driven by robust margins
for the Company’s China operations along with export sales of
fresh pork items and improved royalty income.
After achieving another record segment profit year in fiscal
2014, the Company’s international business is entering 2015
with strong momentum. The Company expects solid export
sales of the SPAM® family of products and SKIPPY® peanut
butter sales, coupled with continued positive results from the
Company’s China operations. To further expand our presence
in China, the Company recently announced the construction
of a new refrigerated foods plant slated to open in the back
half of fiscal 2016. This facility will produce pepperoni, bacon,
ham, and other refrigerated meat items sold in both foodser-
vice and retail channels within China. The Company is also
considering a potential exit from its business in Vietnam early
in fiscal 2015, which has been part of a larger joint venture in
the region and has not delivered the results expected from our
international investments.
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 $2.6 million
and $9.5 million, respectively, compared to a net expense of
$0.6 million and $7.5 million for the comparable periods of