Hormel Foods (HRL)
Q2 2011 Earnings Call
May 25, 2011 9:00 am ET
Jody Feragen - Chief Financial Officer, Executive Vice President and Director
Kevin Jones - Director of Investor Relations
Jeffrey Ettinger - Chairman, Chief Executive Officer and President
Diane Geissler - Credit Agricole Securities (USA) Inc.
Ann Gurkin - Davenport & Company, LLC
Lindsay Mann - Goldman Sachs Group Inc.
Robert Moskow - Crédit Suisse AG
Eric Larson - Soleil Securities Group, Inc.
Kenneth Zaslow - BMO Capital Markets U.S.
Farha Aslam - Stephens Inc.
Akshay Jagdale - KeyBanc Capital Markets Inc.
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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Hormel Foods Second Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, May 25, 2011. I would now like to turn the conference over to Kevin Jones. Please go ahead, sir.
Good morning. Welcome to the Hormel Foods' conference call for the second quarter of fiscal 2011. We released our results this morning before the market opened around 6 a.m. Central Time. If you did not receive a copy of the release, you can find it on our website at www.hormelfoods.com under the Investors section.
On our call today is Jeff Ettinger, Chairman of the Board, President and Chief Executive Officer; and Jody Feragen, Executive Vice President and Chief Financial Officer. Jeff will provide a review of the operating results for the quarter, then Jody will provide detailed financial results for the quarter. The line will be open for questions following Jody's remarks.
An audio replay of this call will be available beginning at 10:30 a.m. Central Time today, May 25, 2011. The dial-in number is (800) 406-7325, and the access code is 4434269. It will also be posted to our website and archived for one year.
Before we get started with the results of the quarter, I need to reference the Safe Harbor statement. Some of the comments made today will be forward looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed in or implied by the statements we will be making. Among the factors that may affect the operating results of the company are fluctuations in the cost and availability of raw materials and market conditions for finished products. Please refer to Pages 27 through 33 in the company's Form 10-Q for the quarter ended January 30, 2011, which was filed with the SEC on March 11, 2011, for more details. It can be accessed on our website.
Now I'll turn the call over to Jeff.
Good morning, everyone. We are pleased to report another excellent quarter in terms of both earnings and sales. Earnings for the second quarter were $0.40 per share, up a solid 18% over adjusted earnings of $0.34 per share a year ago. You may recall that our adjusted results last year excluded onetime charges totaling $0.05 per share associated with the Valley Fresh plant closing and the change to the health care laws. Total dollar sales were up 15% over a year ago, and we were again able to register sales gains in all 5 segments. This is the fifth consecutive quarter we have achieved year-over-year sales increases in every segment.
On the earnings side, this quarter once again demonstrated the benefit of our balanced business model, as the strong performance by our Refrigerated Foods, Jennie-O Turkey Store and all other segments more than made up for softer results from our Grocery Products and Specialty Foods segments.
I will now take you through each segment. Our Grocery Products segment reported a segment operating profit decrease of 9% from our adjusted earnings a year ago and a $1 sales increase of 1% for the second quarter. We saw solid sales growth from core products, such as SPAM luncheon meat, Dinty Moore stew and Hormel Mary Kitchen hash. But distribution costs associated with the launch of our Hormel Compleats Kids line of microwave meals and softer sales of our existing line of Compleats microwave meals hindered our results in the quarter. We remain pleased with the performance of our MegaMex Food venture as increased sales of our Mexican food products continued to contribute positively to our overall results.
Our Refrigerated Foods segment had another strong quarter, with segment operating profit up 27%, aided by higher pork operating margin. Sales were up 16%. On the retail side, we enjoyed a strong sales of Hormel Party Trays, Hormel Natural Choice deli products and Hormel Cure 81 premium hams. Our Hormel Country Crock line of side dishes also contributed nicely to our sales growth.
The food service trade remains choppy, with areas of strength and areas that remain soft. Sales of our branded products, including Natural Choice deli meats, AUSTIN BLUES BBQ products and Café H ethnic products all grew during the quarter. Our Jennie-O Turkey Store segment had another outstanding quarter, with segment operating profit up 45% and sales up 25%. Jennie-O's results came from higher commodity meat prices, improved efficiencies throughout the entire business and vibrant sales of value-added products. Export sales of dark meat from Turkey also remained strong.
Sales increased for Jennie-O in all 3 value-added areas: Retail, Food Service and Deli, led by Retail tray pack fresh turkey, Turkey Burgers and Turkey Bacon. We continued to generate excellent exposure for the Jennie-O Turkey Store brand through our sponsorship of The Biggest Loser reality TV show.