Hormel Foods 2010 Annual Report Download - page 19

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included in the Consolidated Statement of Financial Position
as investments in and receivables from affiliates. The compo-
sition of this line item at October 31, 2010, was as follows:
(in thousands)
Country Investments/Receivables
United States $ 123,451
Philippines 63,894
Vietnam 20,501
Mexico 4,931
Japan 1,612
Total $ 214,389
Income Taxes: The Company’s effective tax rate for the
fourth quarter and year was 34.8 percent and 36.0 percent,
respectively, in fiscal 2010 compared to 34.0 percent and 34.5
percent, respectively, for the quarter and year in fiscal 2009.
The higher rate for fiscal 2010 primarily reflects a change
in the tax treatment of Medicare Part D subsidies, resulting
from new health care laws enacted in 2010. The lower rates in
fiscal 2009 for both the fourth quarter and fiscal year are also
due to significantly higher returns on the Company’s rabbi
trust investments compared to the current year, which are not
taxable. The Company expects the effective tax rate in fiscal
2011 to be between 35.0 and 36.0 percent.
Equity in Earnings of Affiliates: Equity in earnings of affiliates
was $4.1 million and $13.1 million for the fourth quarter and
year, respectively, compared to $1.4 million and $4.8 million
last year. On October 26, 2009, the Company completed the
formation of MegaMex Foods, LLC (MegaMex), a 50 percent
owned joint venture which markets Mexican foods in the
United States. Favorable results from this joint venture were
the primary driver of the increased earnings for both the
fourth quarter and fiscal year, offsetting slightly lower overall
results from the Company’s other joint ventures.
During the Company’s fourth quarter, MegaMex also acquired
Don Miguel Foods, a leading provider of branded frozen and
fresh authentic Mexican appetizers, snacks, and hand-held
items. As a result of this acquisition, as well as improved per-
formance anticipated from the Company’s other joint venture
operations, the Company expects equity in earnings of affili-
ates to increase in fiscal 2011.
In conformity with U.S. GAAP, the Company accounts for its
majority-owned operations under the consolidation method.
Investments in which the Company owns a minority interest
are accounted for under the equity or cost method. These
investments, along with receivables from other affiliates, are
Segment Results
Net sales and operating profits for each of the Company’s reportable segments are set forth below. The Company is an inte-
grated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, we
do not represent that these segments, if operated independently, would report the operating profit and other financial informa-
tion shown below. (Additional segment financial information can be found in Note N “Segment Reporting.”)
Fourth Quarter Ended Year Ended
October 31, October 25, October 31, October 25,
(in thousands) 2010 2009 % Change 2010 2009 % Change
Net Sales
Grocery Products $ 287,112 $ 232,043 23.7 $ 1,040,455 $ 924,682 12.5
Refrigerated Foods 1,082,941 857,178 26.3 3,818,788 3,436,242 11.1
Jennie-O Turkey Store 402,048 337,544 19.1 1,310,412 1,227,709 6.7
Specialty Foods 212,017 189,051 12.1 782,958 708,730 10.5
All Other 78,921 59,286 33.1 268,106 236,308 13.5
Total $ 2,063,039 $ 1,675,102 23.2 $ 7,220,719 $ 6,533,671 10.5
Segment Operating Profit
Grocery Products $ 43,134 $ 46,004 (6.2) $ 155,922 $ 162,531 (4.1)
Refrigerated Foods 86,065 70,440 22.2 276,315 226,171 22.2
Jennie-O Turkey Store 47,544 25,062 89.7 143,644 86,909 65.3
Specialty Foods 19,886 21,247 (6.4) 80,727 68,484 17.9
All Other 9,448 9,695 (2.5) 26,126 27,631 (5.4)
Total segment operating profit 206,077 172,448 19.5 682,734 571,726 19.4
Net interest and investment income (4,572) (4,481) (2.0) (22,024) (8,432) (161.2)
General corporate expense (14,889) (10,294) (44.6) (40,348) (38,312) (5.3)
Noncontrolling interest 1,460 730 100.0 4,189 3,165 32.4
Earnings before income taxes $ 188,076 $ 158,403 18.7 $ 624,551 $ 528,147 18.3