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Hormel Foods Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: March 9, 2012 01:39PM
Hormel Foods Corp. (HRL) filed Quarterly Report for the period ended 2012-01-29.
Highlight of Business Operations:The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans, which is included in other assets on the Consolidated Statements of Financial Position. The securities held by the trust are classified as trading securities. Therefore, unrealized gains and losses associated with these investments are included in the Companys earnings. Securities held by the trust generated a gain of $1.3 million for the quarter ended January 29, 2012, compared to a gain of $0.4 million for the quarter ended January 30, 2011. The Company has transitioned the majority of this portfolio to more fixed return investments to reduce the exposure to volatility in equity markets.
The Company also holds securities as part of an investment portfolio, which are classified as short-term marketable securities on the Consolidated Statements of Financial Position. These investments are also trading securities. Therefore, unrealized gains and losses are included in the Companys earnings. The Company recorded a gain of $0.3 million related to these investments for the quarter ended January 29, 2012, compared to a gain of $0.1 million for the quarter ended January 30, 2011.
As of January 29, 2012, the Company has included in accumulated other comprehensive loss (AOCL), hedging gains of $9.2 million (before tax) relating to these positions, compared to gains of $27.3 million (before tax) as of October 30, 2011. The Company expects to recognize the majority of these gains over the next 12 months. The balance as of January 29, 2012, includes gains of $4.2 million related to the Companys soybean meal futures contracts. These contracts were de-designated as cash flow hedges effective January 30, 2011, as they were no longer highly effective. These gains will remain in AOCL until the hedged transactions occur or it is probable the hedged transactions will not occur. Gain or losses related to these contracts after the date of de-designation have been recognized in earnings as incurred.
The Company reported net earnings per diluted share of $0.48 for the first quarter of fiscal 2012, a decrease of 12.7 percent compared to $0.55 per diluted share in the first quarter of fiscal 2011. Significant factors impacting the quarter were:
Cash provided by operating activities was $152.2 million in the first quarter of fiscal 2012 compared to $165.3 million in the same period of fiscal 2011. Lower earnings were the primary driver of the decrease, partially offset by favorable overall changes in working capital balances and an incremental $7.1 million of dividends received from the Companys joint venture operations in fiscal 2012 compared to the prior year.