Hormel Foods 2011 Annual Report Download - page 17

15
Hormel Foods Corporation
Results of
Op
erations
O
VERVIE
W
T
he Com
p
any is a
p
rocessor of branded and unbranded food
products
f
or retail,
f
oodservice, and
f
resh product custom
-
ers. The
C
ompany operates in the followin
g
five reportable
s
e
g
men
t
s
:
S
e
g
ment
B
usiness
C
onducted
G
rocery
P
ro
d
uct
s
This se
g
ment consists primarily of the pr
o
-
c
essin
g
, marketin
g
, and sale of shelf-stable
food products sold predominantly in the
retail market. This segment also includes the
results from the
C
ompany’s MegaMex Foods,
LLC
(
MegaMex
)
joint venture.
R
efrigerate
d
F
ood
s
This segment includes the Hormel
R
efrigerated operating segment and the
A
ffiliated Business Units. This segment
c
onsists primarily o
f
the processing, market
-
i
ng, and sale o
f
branded and unbranded pork
a
nd bee
f
p
roducts
f
or retail,
f
oodservice,
a
nd
f
resh product customers. The A
ffi
liated
Bus
i
ness Un
i
ts
i
nclude the Farmer John
,
Burke
C
orporation, Dan’s Prize,
S
aa
g
’s
Products
,
I
n
c., and Precept Foods businesses.
Precept Foods, LL
C
, is a 5
0
.
0
1 percent owned
j
oint venture.
Je
nni
e
-
O
T
urke
y
Store
This se
g
ment consists primarily of the pr
o
-
c
essin
g
, marketin
g
, and sale of branded and
u
nbranded turkey
p
roducts for retail, food
-
service, and fresh
p
roduct customers.
Sp
ecialt
y
F
oo
ds
This se
g
ment includes the Diamond
C
rystal
Brands
(
DCB
)
, Centur
y
Foods
I
n
t
e
rn
a
ti
o
n
al
(
CFI
)
, and Hormel S
p
ecialty Products
(
HSP
)
o
perating segments. This segment consists of
t
he packaging and sale of various sugar and
sugar subst
i
tute products, salt and pepper
p
roducts, l
iq
u
i
d
p
ort
i
on
p
roducts, dessert
m
i
xes, ready-to-dr
i
nk
p
roducts, s
p
orts nutr
i
-
ti
on products,
g
elat
i
n products, and pr
i
vate
l
abel canned meats to retail and
f
oodservice
c
ustomers. This se
g
ment also includes the
processin
g
, marketin
g
, and sale of nutritional
food products and supplements to hospitals,
nursing homes, and other marketers of nutri
-
t
ional
p
roducts.
All Other This se
g
ment includes the Hormel Foods
I
n
ternational operating segment, which
manufactures, markets, and sells
C
om
p
any
products internationally. This segment also
i
ncludes the results from the Com
p
any’s
i
nternat
i
onal
j
o
i
nt ventures and m
i
scella
-
neous cor
p
orate sa
l
es
.
I
ncome
T
axes:
T
he Company records income taxes in accor
-
d
ance with the liability method o
f
accountin
g
. De
f
erred taxes
a
re reco
g
nized
f
or the estimated taxes ultimately payable or
recoverable based on enacted tax law.
C
han
g
es in enacted tax
rates are reflected in the tax provision as they occur
.
The
C
om
p
any com
p
utes its
p
rovision for income taxes based
o
n the statutory tax rates and tax planning opportunities
a
va
i
lable to
i
t
i
n the var
i
ous
j
ur
i
sd
i
ct
i
ons
i
n wh
i
ch
i
t operates.
Significant judgment is required in evaluating the Company’s
t
ax pos
i
t
i
ons and determ
i
n
i
ng
i
ts annual tax prov
i
s
i
on.
W
hi
le
t
he Com
p
any considers all of its tax
p
ositions fully su
pp
or
t
-
a
ble, the Company is occasionally challen
g
ed by various tax
a
uthorities re
g
ardin
g
the amount of taxes due. The
C
ompany
reco
g
nizes a tax position in its
fi
nancial statements when
i
t is more likely than not that the position will be sustained
u
pon examination, based on the technical merits of the posi
-
t
ion. That position is then measured at the largest amount of
benefit that is greater than 5
0
percent likely of being realized
u
pon ultimate settlement. A change in judgment related to the
e
x
p
ected ultimate resolution of uncertain tax
p
ositions will be
recognized in earnings in the quarter o
f
such change.
Contingent Liabilities: At any time, the Com
p
any may be
sub
j
ect to
i
nvest
ig
at
i
ons, le
g
al proceed
i
n
g
s, or cla
i
ms related
t
o the on-
g
oin
g
operation o
f
its business, includin
g
claims
both by and a
g
ainst the
C
ompany.
S
uch proceedin
g
s typically
i
nvolve claims related to product liability, contract disputes,
wa
g
e and hour laws, employment practices, or other actions
brought by employees, consumers, competitors, or suppli
-
e
rs. The
C
om
p
any routinely assesses the likelihood of any
ad
verse outcomes re
l
ate
d
to t
h
ese matters on a case
by
case
basis, as well as the potential ranges of losses and fees. The
C
om
p
any establishes accruals for its
p
otential ex
p
osure, as
a
ppropriate, for claims against the Company when losses
become
p
robable and reasonably est
i
mable.
W
h
ere t
h
e
C
ompany is able to reasonably estimate a ran
g
e of potential
l
osses, the
C
ompany records the amount within that ran
g
e
t
hat constitutes the
C
ompany’s best estimate. These accruals
a
r
e
de
t
e
rmin
ed
based
o
n th
e
f
ac
t
s
a
n
d
c
ir
cu
m
s
t
a
n
ces
r
e
l
a
t
ed
t
o the individual cases and require estimates and jud
g
ments
regarding the interpretation of facts and laws, as well as the
e
ffectiveness of strategies or other factors beyond our control.