Hormel Foods 2010 Annual Report Download - page 56

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54
Foods businesses. Precept Foods, LLC, is a 50.01 percent
owned joint venture between Hormel Foods Corporation and
Cargill Meat Solutions Corporation, a wholly-owned subsid-
iary of Cargill, Incorporated.
The Jennie-O Turkey Store segment consists primarily
of the processing, marketing, and sale of branded and
unbranded turkey products for retail, foodservice, and
fresh product customers.
The Specialty Foods segment includes the Diamond Crystal
Brands, Century Foods International, and Hormel Specialty
Products operating segments. This segment consists of the
packaging and sale of various sugar and sugar substitute
products, salt and pepper products, liquid portion products,
dessert mixes, ready-to-drink products, sports nutrition
products, gelatin products, and private label canned meats to
retail and foodservice customers. This segment also includes
the processing, marketing, and sale of nutritional food prod-
ucts and supplements to hospitals, nursing homes, and other
marketers of nutritional products.
The All Other segment includes the Hormel Foods
International operating segment, which manufactures,
markets, and sells Company products internationally. This
segment also includes the results from the Company’s inter-
national joint ventures and miscellaneous corporate sales.
Intersegment sales are recorded at prices that approximate
cost and are eliminated in the Consolidated Statements
of Operations. The Company does not allocate investment
income, interest expense, and interest income to its segments
when measuring performance. The Company also retains
various other income and unallocated expenses at corporate.
Equity in earnings of affiliates is included in segment operat-
ing profit; however, earnings attributable to the Company’s
noncontrolling interests are excluded. These items are
included below as net interest and investment income, gen-
eral corporate expense, and noncontrolling interest when
reconciling to earnings before income taxes.
The Company’s financial assets and liabilities also include
cash, accounts receivable, accounts payable, and other liabili-
ties, for which carrying value approximates fair value. The
Company does not carry its long-term debt at fair value in its
Consolidated Statements of Financial Position. Based on bor-
rowing rates available to the Company for long-term financing
with similar terms and average maturities, the fair value of
long-term debt (including current maturities), utilizing dis-
counted cash flows, was $371.8 million as of October 31, 2010,
and $383.5 million as of October 25, 2009.
As discussed in Note A, the FASB allowed deferral of the
provisions of ASC 820 for one year for nonfinancial assets
and liabilities measured at fair value that are recognized or
disclosed on a nonrecurring basis. Pursuant to this allowed
deferral, the Company adopted the provisions of ASC 820 at
the beginning of fiscal 2010 for its nonfinancial assets and lia-
bilities. During the second quarter of fiscal 2010, the Company
made the decision to close its Valley Fresh plant in Turlock,
California. The facilities in that location were evaluated during
that process and the Company recorded a pretax charge of
$6.6 million to reduce the property, plant and equipment to
its current estimated fair value. During the fiscal year ended
October 31, 2010, there were no other material remeasure-
ments of assets or liabilities at fair value on a nonrecurring
basis subsequent to their initial recognition.
Note N
SEGMENT REPORTING
The Company develops, processes, and distributes a wide
array of food products in a variety of markets. The Company
reports its results in the following five segments: Grocery
Products, Refrigerated Foods, Jennie-O Turkey Store,
Specialty Foods, and All Other.
The Grocery Products segment consists primarily of the
processing, marketing, and sale of shelf-stable food products
sold predominantly in the retail market. This segment also
includes the results from the Company’s MegaMex Foods,
LLC (MegaMex) joint venture.
The Refrigerated Foods segment includes the Hormel
Refrigerated operating segment and the Affiliated Business
Units. This segment consists primarily of the processing,
marketing, and sale of branded and unbranded pork and beef
products for retail, foodservice, and fresh product customers.
The Affiliated Business Units include the Farmer John, Burke
Corporation, Dan’s Prize, Saag’s Products, Inc., and Precept