Hormel Foods Corp. (HRL)
Q4 2010 Earnings Call
November 23, 2010 9:00 am ET
Jeffrey Ettinger – Chairman, President, Chief Executive Officer
Jody Feragen – Executive Vice President, Chief Financial Officer
Kevin Jones – Director of Investor Relations
Akshay Jagdale – KeyBanc Capital Markets
Ken Zaslow – BMO Capital Markets
Christina McGlone – Deutsche Bank
Farha Aslam – Stephens Inc.
Diane Geissler – CLSA
Tim Ramey – D.A. Davidson & Co.
Will Sawyer – Credit Suisse
Lindsay Drucker-Mann – Goldman Sachs
Todd Duvick – Bank of America Merrill Lynch
Eric Larson – Soleil Securities
Ann Gurkin – Davenport & Company
Mike Hamilton – RBC Dain Rauscher
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Ladies and gentlemen, thank you for standing by and welcome to the Hormel Foods Fourth Quarter Earnings conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. If you have a question, please press the star followed by the one on your touchtone phone. If you’d like to withdraw your question, please press the star followed by the two. If you are using speaker equipment, please lift the handset before making your selection. This conference is being recorded today, Tuesday, November 23, 2010.
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 fourth quarter of fiscal 2010. We released our results this morning before the market opened around 6:30 am Central time. If you did not receive a copy of the release, you can find it on our website at
under the Investor 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 and the year; then Jody will provide detailed financial results for the quarter. The line will be open for questions following Jody’s remarks. I would ask that you please adhere to one question plus one follow-up question, and if you have further questions you can always go to the back to the queue and likely we will have an opportunity to ask that question as well. Campbell has a conference call beginning one hour after ours started, and so we want to make sure we finish on time. Thank you for your cooperation on that.
An audio replay of this call will be available beginning at 10:30 am Central time today, November 23, 2010. The dial-in number is 800-406-7325 and the access code is 4384165. 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 32 through 38 in the Company’s 10-Q for the quarter ended July 25, 2010 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. Earnings per share for Q4 increased to $0.90, up a solid 17% from a year ago. For the full year, our U.S. GAAP earnings per share were $2.92, up 15% from last year. We did benefit from having 14 weeks in the quarter compared to 13 weeks a year ago.
Our goal for fiscal 2010 coming off a very strong earnings year but on declining sales was to restore our top line growth. Our sales momentum from the previous two quarter accelerated in the fourth quarter. Total Company sales for the quarter were $2.1 billion, up a substantial 23% from a year ago. As a result, we exceeded the $7 billion level in sales for the first time in our Company’s history, and all five segments contributed to the sales gain.
I will now take you through each segment. Our grocery products groups reported a segment profit decrease of 6% and a sales gain of 24% for the fourth quarter. For the year, segment operating profit was down 4% and sales were up 13%. Segment profit during the quarter and for the year was adversely impacted by higher raw material costs and the Q2 charge related to the Valley Fresh plant closing. Notwithstanding this profit decrease, we were pleased to see the solid sales results delivered by the grocery products unit and our consumer product sales organization. Sales were driven higher by Hormel Chili and Hash, Compleats microwave meals, and strong sales growth across much of our MegaMex foods product portfolio.
Last quarter I said I would provide more clarity around the impact of MegaMex food on the grocery products operating margins. Our operating margins for the year was 15%. Without MegaMex food sales, it would have been 18%. The absence of Carapelli sales also improved operating margins for grocery products. Going forward, because Don Miguel sales initially will not be reflected in our segment top line results, the profits on those sales should improve the reported operating margin for grocery products.