Kiger's Notebook

Home Federal Bank 3Q 2009 earnings - back in the black

Back in black.

That's the song Home Federal Bank is singing this morning. It released its third quarter earnings report last night and the numbers were on the positive side of the ledger for the first time since 2007.

The big number that jumps out is the net income of $881,000. In the third quarter of 2008, the bank holding company posted $7.1 million loss.

Here are a few other highlights. I should have more soon on this

• Diluted earnings per share of $0.12 compared to diluted loss per share of $1.93 in third quarter of 2008
• Provision for loan losses down $12.4 million from third quarter of 2008
• Net interest margin of 3.46%, up 25 basis points from third quarter of 2008
• Nonperforming assets of $77.2 million, down $2.3 million from second quarter of 2009

Year to Date Highlights

• Net loss of $10.9 million compared to net loss of $7.6 million in the first nine months of 2008
• Diluted loss per share of $3.32 compared to diluted loss per share of $2.08 in the first nine months of 2008
• Provision for loan losses up $4.8 million over first nine months of 2008
• Net interest margin of 3.35%, up 14 basis points from first nine months of 2008
• Nonperforming assets of $77.2 million, up $2.4 million in the first nine months of 2009

President’s Statement

"We are pleased to report positive earnings for the third quarter of 2009” said Bradley Krehbiel, Principal Executive Officer of HMN. “While the economic environment for commercial real estate continues to be challenging, we are encouraged by some recent sales and renewed interest in some of our non-performing real estate. We continue to focus our efforts on reducing non-performing assets, reducing industry loan concentrations, increasing our core retail and commercial deposit relationships and reducing expenses. We believe that, over time, our focus on these areas will be effective in generating improved financial results. In the meantime, Home Federal Savings Bank continues to have adequate available liquidity and its capital position remains above the levels required for it to be considered a well capitalized financial institution by regulatory standards.”

IBM's 2009 3Q earnings - income up 14%

I'll wade through this and see if there is any direct-Rochester issues.

-------

Third-quarter net income was $3.2 billion compared with $2.8 billion in the third quarter of 2008, an increase of 14 percent.  Total revenues for the third quarter of 2009 of $23.6 billion increased 1 percent from the second quarter of 2009, and decreased 7 percent (5 percent, adjusting for currency) from the third quarter of 2008.

 IBM REPORTS 2009 THIRD-QUARTER RESULTS

 ·  Diluted earnings of $2.40 per share, up 18 percent;

·   Full-year 2009 EPS expectations raised to at least $9.85 from at least $9.70;

·    Net income of $3.2 billion, up 14 percent; net margin of 13.6 percent, up 2.5 points;

·    Free cash flow of $3.4 billion, up $1.3 billion year-to-year;

·    Cash balance of $11.5 billion, while reducing debt $4 billion in third quarter;

·            Pre-tax income margin of 18.6 percent, up 3.2 points;

·            Gross profit margin of 45.1 percent, up 1.8 points; up 20 of last 21 quarters;

·            Revenue of $23.6 billion, up 1 percent quarter-to-quarter; down 7 percent, or 5 percent adjusting for currency year-to-year;

·            Software pre-tax margin of 32.1 percent, up 6.2 points; profit up 21 percent;

·            Services pre-tax margin of 14.9 percent, up 2.4 points; profit up 11 percent;

·            Services signings of $11.8 billion; 13 services deals greater than $100 million;

·            Services backlog of $134 billion, up $5 billion year-to-year;

·            Market share gains in hardware and software.

IBM's 2009 3Q earnings = Thurs.

Not sure if anything specific to Rochester will come out in this report, but Big Blue will release its Third Quarter earnings Thursday after the markets close.

We'll see if IBM can keep increasing earnings, despite flat or slumping sales.

Here's some tidbits from AP's preview of what is expected in this report:

• OVERVIEW: Armonk, N.Y.-based IBM has managed to keep boosting profits despite the recession and slumping sales, a fact that speaks to the company's reliance on technology services and software. Those are two things many companies are still willing to pay for, because they help save money by offloading or automating information-technology chores. IBM's numbers are in some ways a gauge of the health of corporate spending on technology, but only in very specific areas, like outsourcing and tech services and software that will help those companies save money over the long term.

• BY THE NUMBERS: Analysts expect IBM to earn $2.38 per share on $23.38 billion in sales. In the same quarter last year, IBM earned $2.04 per share on $25.3 billion in sales.

• ANALYST TAKE: Keith Bachman, an analyst with BMO Capital Markets, wrote in a note to clients Monday that he believes IBM's stock has underperformed recently because of investor fears about the company's ability to boost revenue.

However, with an improving economic climate, "IBM should be able to show some amount of revenue upside compared with Street estimates in the next two quarters (more likely the December quarter)," Bachman wrote.

More on Hormel's earnings

Here's what I whipped together on Hormel this a.m. (after writing my column. You'd think I'd be better at deadlines after 17 or years in this business). One tidbit I found interesting is that Hormel ended its joint venture deal selling Carapelli Olive Oil. Not sure when that happened or why. 

The things you learn during the course of a day. Anyway, here's the print piece:

Despite difficult terrain and low sales numbers, Hormel Foods Corp. is staying on pace to deliver on its forecast of better-than-expected 2009 earnings.

The Austin-based Fortune 500 food giant’s third quarter earnings report this morning backed up its announcement last week that 2009 is going to exceed its earlier expectations.

Earnings for the quarter were up by 50 percent, to 57 cents a share from 38 cents share in the same quarter in 2008. The net earnings for the quarter is $77 million, a big jump from last year’s $51.9 million.

Analysts polled by Thomson Reuters had predicted 52 cents per share in profit.

Revenue fell 6 percent to $1.57 billion from $1.68 billion. Analysts had expected $1.7 billion.

Much of the gains came from positive results from two segments — refrigerated foods and Jennie-O Store — that previously have taken big hits in the rough economy.

“Our refrigerated foods segment rebounded to post higher earnings on an enhanced sales mix and lower costs, despite weak cutout margins during much of the quarter.

Our Jennie-O Turkey Store segment also showed continued improvement in the quarter,” wrote CEO and President Jeffrey M. Ettinger in today’s announcement.

Refrigerated foods’ operating profit climbed by 60 percent compared to 2008, while profit from Jennie-O’s birds soared 97 percent.

Counterbalancing those big numbers is the sobering fact that Jennie-O’s profit was down 61 percent in 2008’s third quarter because of a whopping $53 million increase in feed costs; refrigerated foods was down by 1 percent.

Despite the better profit numbers for this quarter, sales for the company overall were down by 6 percent, to $1.6 billion.

A major factor for this, Hormel officials say, is subtraction of sales of Carapelli olive oil following the end of that joint venture as well as reductions of turkey production for international sales.

A continuing trend of people eating more at home benefited the grocery products segment yet again, despite “soft sales” of its previously strong Home Compleats microwave meals products.

The segment reported an increase in operating profit by 11 percent, much of that built on strong sales of Spam, Hormel chili and Herdez food products.

Ettinger characterized all of this as meaning Hormel is on track to hit its recently increased annual 2009 earnings forecast to the range of $2.36 to $2.42 per share.

“Although we are faced with challenges including the weak economy, a continued excess supply of commodity turkey meat, and difficult export markets, our balanced business model, continued strength in our core franchise products … should allow us to deliver an excellent year,” he said.

Hormel seems on track after 3Q earnings report

Despite difficult terrain, Hormel Foods seems to be staying on pace to deliver on its forecast of better-than-expected 2009 earnings. 

 This morning's 3Q earnings report looks pretty solid at first glance, particularly in previously battered refrigerated foods and Jennie-O Turkey Store areas. Here's some directly from Hormel's earnings' report. After I take a closer look at this, I'll have more.

HIGHLIGHTS

• Diluted EPS of $.57, up 50 percent from $.38 per share in 2008

• Segment operating profit up 33 percent from last year

• Dollar sales of $1.57 billion, decreased 6 percent from 2008

• Volume down 4 percent from 2008

• Grocery Products operating profit up 11 percent; volume down 8 percent; dollar sales down 6 percent

• Refrigerated Foods operating profit up 60 percent; volume down 1 percent; dollar sales down 5 percent

• Jennie-O Turkey Store operating profit up 97 percent; volume down 2 percent; dollar sales down 5 percent

• Specialty Foods operating profit down 2 percent; volume down 13 percent (down 16 percent excluding acquisitions); dollar sales down 13 percent (down 15 percent excluding acquisitions)

• All Other operating profit down 19 percent; volume down 4 percent; dollar sales down 10 percent

• Net Interest and Investment Income improved significantly due to gains in the rabbi trust investments versus losses a year ago.

The company reported fiscal 2009 third quarter net earnings of $77.2 million, up 49 percent from earnings of $51.9 million a year earlier. Diluted earnings per share for the quarter were $.57 this year compared to $.38 per share last year. Sales totaled $1.6 billion, which were down 6 percent from fiscal 2008. For the nine months ending July 26, 2009, net earnings were $238.9 million, or $1.76 per diluted share, up from $1.58 a year earlier. Sales totaled $4.9 billion, which are even with last year.

IBM 2Q earnings coming - what do you want to know?

On Thursday, IBM will kick out its 2 quarter earnings report. This means the standard press release and numbers.

To change things up a bit, I thought I'd check in with the astute readers of this blog. What do you want to know about IBM's 2Q earnings report? What are your questions?

Let me know. It is possible I might be able to get them answered.

Here's an interesting preview tidbit from the Associated Press about IBM's upcoming report. It might help inspire some questions.

• Why it's important: As one of the world's largest corporate technology suppliers, IBM's results say a lot about how much businesses are willing to spend on everything from computer servers to software and consulting services. But it can be tricky to read those results for clues about the broader economy. 

For one thing, IBM right now is booking revenue on contracts that may have been signed months or even years ago. Second, in a down economy, companies often turn to IBM's outsourcing services as a way to save money, so IBM's sales can go up even while everything else is going down.

The best way to interpret IBM's results for signs of the health of the overall economy is in the company's overall forecast.

• What the experts say: On average, analysts polled by Thomson Reuters expect IBM to earn $2.02 per share on $23.58 billion in revenue. In the same quarter of last year, the company reported a profit of $1.98 per share on revenue of $26.8 billion.

• You'll know the economy is improving if: IBM's sales show some improvement that can't be attributed mainly to weakness in the dollar. Another encouraging sign would be if the company raises its already-bullish forecast for $9.20 per share in profit in 2009.

• You'll know the economy is not improving if: IBM backs off the forecast at all.

• The quote: Brian Marshall, an analyst with Broadpoint.AmTech, wrote in a research note Thursday that IBM's management has "navigated the turbulent "economic currents" over the past decade with fine stewardship," but cautioned there might be little room left for IBM to keep wringing out increases in its profit margin.

Internal Mayo Clinic memo on financials

Here's the full internal Mayo Clinic memo on the financials of the first 4 months of 2009 that I was looking for on Friday. I have a full story on this in the weekend edition.

Dear Colleagues,

We’re writing to provide an update on Mayo Clinic’s performance through the first four months of 2009 and report on the progress we’re making in our long-term goal of transforming Mayo Clinic for the future. 

Our collective efforts to transform our practices, manage expenses, and improve our revenues are beginning to bear fruit.  This is due to your commitment and willingness to address our challenges head-on.  But we’ve only run the first mile of our transformation marathon.

We must take advantage of our momentum.  There is no doubt that we will face significant financial pressures throughout 2009 and into the future.  Nothing less than our mission is at stake.  We are working to ensure that Mayo Clinic stands ready to meet the needs of everyone who turns to us for answers and looks to us for hope. 

Creating value

All of our activities are designed to create value:  the best quality, safety and service outcomes at the lowest cost over time.  Together we are redesigning our care models and business processes to improve outcomes and reduce costs -- to improve value to our patients.  Here are just a few examples:

* Patient Access/Payer Mix project in Rochester:  This project is designed to balance appointments among Medicare, employee and privately insured patients, which provide different rates of reimbursement for care.  The project is focused on improving access for patients in Endocrinology, Gastroenterology, Pulmonary Medicine, General Internal Medicine, Neurology, Orthopedics, ENT and Urology.

* Expense Management and Revenue Enhancement project in Arizona:  Plans are targeted at increasing appointment conversions to commercial/contracted patients, seeing all referred patients -- Medicare and commercial/contract -- (with limited exceptions), seeing all self-referred commercial/contract patients (with limited exceptions), and increasing awareness of Mayo Clinic among Arizona’s patient base. 

* Lean Project Initiatives in Florida:  In April, our Florida campus kicked off a wave of lean projects designed to help continue removing waste from the practice.  Initial areas of focus include reducing the costs of care for procedures and patient groups, as well as patient flow processes in a clinic-based practice and in the operating rooms. 

* Mayo Post Acute Care program in Mayo Health System (MHS):  This program expands and develops high-quality, post-acute care pathways between MHS entities, critical access hospitals, acute care settings, skilled nursing facilities, and home care in response to patient needs of MHS and Mayo Clinic.  The results show significant benefits to patients and our staff both from clinical outcomes and satisfaction perspectives.

* Quality Management Systems in Research:  This initiative is well under way implementing new business processes designed to improve service, eliminate waste, ensure compliance, increase revenue, reduce costs and improve overall value to advance the research strategic priorities in all locations.  Significant progress has already been made as Mayo Clinic creates a new comprehensive research management system.

* Health policy discussions:  We continue to work at a national level to build consensus for needed reform that will be based on the value of care provided and that will keep the patient’s interest at heart.

You can read about additional efforts, learn how to share your success stories, and find the latest financial reports from all of our campuses on our Creating Value intranet site.

Financial performance

We had a strong financial performance in April. All operating units were either on plan or favorable to plan for the month.  This has moved our year-to-date performance ahead of plan. Income from operating activities (including practice, research, education, diversification and fund-raising activities) through the end of April is $28 million favorable to plan.  

It’s important to emphasize that our improved performance has been largely due to our expense management efforts.  We must continue to have strong performance in both expense management and revenue generation to remain on plan for the year.

 

Expense management alone will not sustain our practice model for the long term. 

Investment performance improved in April, with a return of 3 percent for the month.

 However, we are still recovering from investment losses in January and February and the year-to-date return is -3 percent.  Fund-raising for the endowment year-to-date is about $1 million below plan. 

What you can do

Our efforts to manage expenses and to transform our practices are investments in creating a stronger and more dynamic Mayo Clinic that will be able to adapt and meet the changing needs of our patients.  We cannot lose sight of the reason we do this work -- to preserve the ability of people who are the best in the world at what they do to provide the best care for our patients. 

Thank you for taking up this challenge and for the important work you do every day to serve our patients and each other.  Your constant commitment to our patients’ needs gives them the reassurance that they remain in good hands and that Mayo Clinic will be here for them in the future. 

Denis Cortese, M.D.     

President and CEO       

Mayo Clinic

Shirley Weis 

Chief Administrative Officer 

Mayo Clinic    

Hormel reports record earnings

Here's some from the earnings report Austin stalwart Hormel Foods just kicked out. It looks like it recovered from the Swine Flu. I'll know more once I read this piggy in depth.

The company reported fiscal 2009 second quarter net earnings of $80.4 million, up 4 percent from earnings of $77.6 million a year earlier. Diluted earnings per share for the quarter were $.59 this year compared to $.56 per share last year and sales totaled $1.6 billion, even with fiscal 2008. For the six months ended April 26, 2009, net earnings were $161.8 million, or $1.20 per diluted share, the latter of which was even with last year. Sales totaled $3.3 billion, up 2 percent, from $3.2 billion in the same period last year.

COMMENTARY

"We are pleased to report record earnings for the quarter. Our Grocery Products segment again delivered increases in sales and segment profit, with strong sales of canned meats and Mexican products. Our Jennie-O Turkey Store segment continues to rebound, despite difficult market conditions, as they were faced with even lower commodity meat prices than in the first quarter," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

"Our Refrigerated Foods segment experienced another difficult quarter, as continued weak cut-out margins led to losses in our pork operations. The overall weakness in this segment masked a very strong performance by our Meat Products group, which achieved high single-digit sales increases of its branded portfolio of products. Our Specialty Foods segment was essentially flat, while our All Other segment had weaker results," remarked Ettinger.

"We have seen a continuation of some of the same trends we saw in the first quarter, as consumers seek value in retail channels while foodservice sales remain soft. Unlike the first quarter, however, we have seen improvement in sales of some of our convenience items, including our refrigerated entrees and our COMPLEATS microwave meals," commented Ettinger.

Home Fed Bank posts loss for 1Q

While its daily operations are showing signs of strengthening, Home Federal Savings Bank’s first quarter earnings report today was overshadowed by a 276 percent drop in net income.

The Rochester bank reported a loss of $2.6 million for the first three months of 2009 compared to net income of $1.5 million for this period in 2008.

Home Federal President Brad Krehbiel explains that loss as primarily due to the bank increasing by $5 million its provision to cover loan loses to $6.6 million, up from $1.6 million in 2008. That was needed, he said, because of a drop in the estimated value of collateral covering loans.

“We needed to take these steps. We are very transparent about what we are doing,” he said.

Krehbiel, who took over as president at the end of January, pointed out positive signs also in the report.

“People need to look at us as a going concern. We are seeing an income gain on sales of mortgage loans as well as a modest increase of our net increase margin.,” he says. “Our basic business model is continuing to work.”

Gain on sales of loans increased $267,000. Fees and service charges increased $148,000 because of increased retail deposit account activity and fees

Net interest income was $8.8 million for the first quarter of 2009, an increase of $0.1 million, or 1.1 percent, compared to $8.7 million for the first quarter of 2008.

Diluted loss per common share for the first quarter of 2009 was $0.83, down $1.22 from diluted earnings per common share of $0.39 for the first quarter of 2008.

What does Kreihbiel tell customers  about this earnings report?

“We have a higher liquidity ratio as well as higher capital levels than we’ve had in recent history,” he said. “Can we survive a loss in the first quarter? The answer is yes.”

IBM's 1Q - sales down, profit better than expected

Here's a little from AP's early take on IBM's 1 Quarter earnings report this afternoon:

IBM Corp.'s first-quarter results slipped as all its major business units suffered declines, but the company backed its bullish outlook for 2009 on Monday, reflecting its belief that a broad mix of services and software will help it weather the recession.

The Armonk, New York-based company's profit beat Wall Street's forecast, but sales fell short. The stock fell 2.2 percent in after-hours trading Monday.

IBM reported after the market closed that that its profit was $2.30 billion, or $1.70 per share. That was higher than the $1.66 per share analysts were expecting.

In the same period last year, IBM earned $2.32 billion, or $1.64 per share.
Sales fell 11 percent to $21.7 billion, $800 million short of the $22.5 billion analysts polled by Thomson Reuters were expecting. 

Services revenue was $13.2 billion, down 10 percent. Software sales were $4.5 billion, a 6 percent decline.

Hardware sales took a bigger hit, falling 24 percent to $3.2 billion. Sales of both high-end mainframe computers and industry-standard servers showed double-digit declines.

The company reiterated its previous guidance for earnings of $9.20 per share in 2009.