Hormel Foods Corporation — FY2011 Form 10-K
Reporting period: Fiscal year ended October 30, 2011. The filing is an annual report; the supplied text does not provide clear standalone fourth-quarter financial results.
Business context
Hormel produces and markets branded meat and food products in the United States and internationally. Its five reported segments are Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods, and All Other. The company emphasized branded, value-added products over commodity fresh meat. In fiscal 2011, perishable meat, poultry, shelf-stable, and other products represented 55.1%, 19.1%, 16.8%, and 9.0% of total revenue, respectively.
In the fourth quarter, MegaMex Foods, Hormel’s 50%-owned joint venture, acquired Fresherized Foods, producer of Wholly Guacamole, Wholly Salsa, and Wholly Queso products.
Financial performance and capital
- The supplied filing text refers readers to the incorporated Annual Stockholders’ Report for the financial statements and management discussion. It does not provide clear fiscal 2011 values for revenue, operating or net income, cash flow, margins, cash, debt balances, or liquidity.
- Research and development spending was approximately $29.4 million in 2011, versus $27.6 million in 2010 and $25.4 million in 2009.
- Hormel issued 4.125% notes due 2021; the excerpt does not state the principal amount. It also identifies a $300 million revolving credit agreement.
- Fiscal 2011 quarterly dividends were $0.1275 per share, compared with $0.1050 per share in 2010; figures reflect the February 2011 two-for-one stock split.
- During fiscal Q4, the company repurchased 2,619,300 shares under its announced program for an average $27.60 per share. The program had 3,331,900 shares remaining at October 30, 2011.
Changes, outlook, and risks
- Product mix shifted modestly versus 2010: perishable meat rose to 55.1% from 54.3%, poultry to 19.1% from 18.7%, while shelf-stable declined to 16.8% from 17.5% and other to 9.0% from 9.5%. These are revenue-mix figures, not growth rates.
- Hormel purchased 95% of its hogs under supply contracts and raised turkeys equal to about 72% of Jennie-O’s requirements. Grain prices affect hog and turkey production costs; the company hedges a portion of anticipated grain purchases. Contracting and branded products mitigate, but do not eliminate, input-cost exposure.
- Wal-Mart represented approximately 12.5% of fiscal 2011 revenue, down from 13.0% in 2010. The filing warns that losing major customers could materially affect a segment.
- The business faces intense competition and exposure to raw-material prices, supply, and facility utilization. The incorporated risk-factor and management-discussion sections are not reproduced in the supplied text; specific guidance and a quantified outlook are therefore not clear.
- Management said known legal proceedings were not expected to materially affect financial condition, results, or liquidity. Disclosure controls were assessed as effective; no material fourth-quarter change in internal control over financial reporting was reported.
Important facts for investors to verify
- FY2011 revenue, earnings, margins, cash generation, balance-sheet liquidity, and debt maturities in the incorporated financial statements and MD&A.
- Segment-level performance and the effects of input costs, pricing, and the Fresherized Foods acquisition.
- Detailed risk factors, hedging exposure, and management’s outlook in the full Annual Stockholders’ Report.
- Capital allocation, including the share-repurchase program, dividends, and financing associated with the 2021 notes.