Hormel Foods 2015 Annual Report Download - page 3

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Jeffrey M. Ettinger
Chairman of the Board and Chief Executive Offi cer
“ Our team remains dedicated to our
company’s long legacy of innovation
and continuous improvement, allowing
us to provide foods that fi t today’s
lifestyles, interests, and tastes as
we address ever-changing needs of
consumers.”
Dear fellow shareholders: In fi scal 2015, Hormel Foods continued to innovate and
adapt our offerings to meet the constantly evolving needs of consumers. Delivering foods that
fi t today’s busy lifestyles, products focused on nutritious and holistic attributes, and items with
new and adventurous fl avors from many cultures around the globe will drive our future growth.
Continued success in the marketplace resulted in another
year of strong fi nancial performance. In fi scal 2015, we
achieved a record $2.64 adjusted earnings per share* ,
representing growth of 18 percent. In recognition of this
fi nancial performance, our share price rose 30 percent
in fi scal 2015, compared to the S&P 500 Index which grew
only 6 percent over the same time period.
Refrigerated Foods had a blow-out year, achieving
26 percent operating profi t growth, despite a sales
decrease of 6 percent. Sharply declining pork markets
compared to last year were a benefi t for our value-added
businesses, but reduced the selling prices of many of our
products. With a continued focus on innovative product
solutions such as Hormel® Fire Braised™ meats in our
foodservice channel and Hormel Gatherings® party trays in
the retail trade, we continued to grow our portfolio and
improve the Refrigerated Foods segment margin structure.
Our Grocery Products segment turned in a great year,
benefi ting from lower meat protein input costs and
delivering a 23 percent increase in adjusted segment
profi t*
. Sales growth of 4 percent over last year was led
by continued demand for the iconic SPAM® family of
products and our great new portable and on-trend
Wholly Guacamole® minis.
While Jennie-O Turkey Store had an excellent start to the
year, highly pathogenic avian infl uenza dealt a signifi cant
blow to the business this spring. Approximately 20 percent
of our supply chain volume was lost in the back half of the
year. The dedicated and experienced employees through-
out our business worked closely with suppliers, custom-
ers, government agencies, and others in the industry to
slow the spread of the virus, minimize the impact to our
stakeholders, and repopulate our turkey system as quickly
as possible. Under the circumstances, it was impressive
that Jennie-O Turkey Store fi nished fi scal 2015 with sales
down 2 percent and earnings up 1 percent.
Specialty Products delivered 48 percent adjusted segment
profi t growth*
and 22 percent sales growth this year,
primarily driven by the addition of Muscle Milk® protein
nutrition products. The team quickly integrated the
business and capitalized on synergies to drive sustain-
able margins.
Our team in China continued to deliver growth in fi scal
2015. To support this level of expansion going forward, we
broke ground on a new prepared meats manufacturing
facility in Jiaxing, China, scheduled to be operational by
the end of 2016. The plant will produce SPAM® luncheon
meat and a variety of refrigerated and frozen meat items
sold in both the foodservice and retail channels. The gains
we experienced in China this year were muted by soft
demand for fresh pork in certain markets. With these
headwinds, the International & Other segment fi nished the
year with a 4 percent increase in adjusted segment profi t*
on fl at sales.
*References to adjusted fi nancial performance represent non-GAAP measurements, see page 17 to reconcile non-GAAP adjusted measures to GAAP measures.