Hormel Foods Corporation F2Q10 (Qtr End 04/25/10) Earnings Call Transcript

Hormel Foods Corporation F2Q10 (Qtr End 04/25/10) Earnings Call Transcript
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Hormel Foods Corporation (HRL)

F2Q10 Earnings Call

May 19, 2010 8:30 am ET

Executives

Kevin Jones – Director IR

Jeff Ettinger - Chairman of the Board, President and Chief Executive Officer

Jody Feragen - Senior Vice President and Chief Financial Officer

Analysts

Farha Aslam – Stephens Inc.

Jonathan Feeney – Janney Montgomery Scott

Akshay Jagdale – KeyBanc Capital Markets

Diane Geissler – CLSA

Tim Ramey – DA Davidson

Christina McGlone – Deutsche Bank

Eric Larson – Soleil Securities

Robert Moskow – Credit Suisse

Ann Gurkin – Davenport & Company

Mike Hamilton – RBC Dain Rauscher

Presentation

Operator

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(Operator Instructions) Welcome to the Hormel Foods Second Quarter Earnings Conference Call on today the 19

th

of May 2010. I would now hand the conference over to your host Mr. Kevin Jones.

Kevin Jones

Welcome to the Hormel Foods conference call for the second quarter of fiscal 2010. We released our results this morning before the market opened around 6:30 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, Senior Vice President and Chief Financial Officer. Because Jeff and I are in New York and Jody is in Austin you may experience a bit of a delay in some of our responses to your questions as we sort out who should respond to a particular question. We appreciate your patience in that regard. 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 then 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 19, 2010. The dial-in number is 800-406-7325 and the access code is 4286994. 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 24, 2010, which was filed with the SEC on March 5, 2010, for more details. It can be accessed on our website.

Now I’ll turn the call over to Jeff.

Jeff Ettinger

It’s nice to be here in New York this morning and to have the opportunity to talk about another fine quarter of results. We are pleased to report strong earnings and sales for the second quarter. Our Q2 earnings of $0.67 per share excluding the one time charges of $0.10 per share associated with the plant closing and the healthcare laws represent a 14% increase over our results of a year ago. Total dollar sales were also up 7% over a year ago.

This quarter once again demonstrates the benefit of our balanced business model as the strong performance of our Jennie-O Turkey Store and specialty food segments more than made up for the results of our grocery product and all other segments.

I will now take you through each segment. Our grocery product segment reported a dollar sales increase of 6% and a segment operating profit decrease of 2%, the latter after adjusting for the one time charges associated with our Valley Fresh plant closing. Net of the new item sales of Mexican products under the MegaMex foods venture and of the discontinued Carapelli Olive Oil sales, revenues for grocery products would have been flat for the quarter.

Stronger sales of our Mexican products and our Hormel Chili and Hormel Mary Kitchen hash products were not able to completely offset the pressure on margins and our Spam family of products and our Hormel Bacon bits items, prompted by higher raw material costs. The increased sales of Hormel Chili and Hormel Mary Kitchen hash resulted from increased distribution and from our new Hormel brand advertising campaign. The campaign is designed to leverage our leading brand strength in numerous categories to promote cross purchase intent.

We are pleased with the success of our MegaMex food venture so far as sales of over $120 million through the first half are on pace to easily exceed the base level sales of $200 million on an annualized basis.

Our refrigerated food segment reported operating profit up 7% aided by stronger cut out margins compared to a year ago. Sales were also up 7% for refrigerated foods. We enjoyed particularly strong sales of Hormel Party Trays and Hormel Pepperoni, helped in part by new products, in part by our Hormel brand advertising campaign, and in part by the great efforts of our sales organization in generating meaningful and store promotions.

We are pleased with the progress in the integration of our recent Country Crock side dish business. Our team has done a good job stabilizing this business during the quarter. We can now provide complete meal solutions to consumers in the refrigerated section of the store complementing our Hormel refrigerated entrees and Lloyd’s Barbeque products.

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