Hormel Foods 2011 Annual Report Download - page 49

47
Hormel Foods Corporation
Tar
g
et allocat
i
ons are establ
i
shed
i
n consultat
i
on w
i
th outs
i
de
advisors throu
g
h the use o
f
asset-liability modelin
g
to attempt
to match the duration o
f
the plan assets with the duration o
f
the
C
ompany’s projected benefit liability. The asset allocation
s
trate
g
y attempts to minimize the lon
g
-term cost of pension
benefits, reduce the volatility of pension expense, and achieve
a healthy funded status for the plans. The target range for
ownershi
p
of the
C
om
p
any’s common stock was included
w
ithin the Large Capitalization Equity target range in the
p
r
i
or year
.
As of the 2011 measurement date,
p
lan assets included 1.7
million shares of common stock of the Company havin
g
a
market value of $49.7 million or 6% of total plan assets.
D
ividends paid durin
g
the year on shares held by the plan
w
ere $1.1 million. In 2011, the Company issued 1.1 million
s
hares to the plan pursuant to the stock split, and the plan
s
old 1.1 million shares. In
20
1
0
, plan assets included a pre
-
sp
lit 1.7 million shares of common stock of the
C
om
p
any hav
-
ing a market value of
$
76.1 million or 9% of total plan assets
.
T
he Company made discretionary contributions of $23.6 mil
-
lion and $70.3 million to the Company’s defined benefit plans
in 2011 and 2010, respectively. Based on the October
3
0, 2011
measurement date, the
C
ompany anticipates makin
g
required
contributions of $21.2 million to fund the pension plans durin
g
fiscal year
20
1
2
. The
C
ompany also expects to make contrib
u
-
tions of
$
29.4 million during 2012 that represent benefit pay
-
ments for unfunded
p
lans.
B
ene
fi
ts ex
p
ected to be
p
aid over the next ten
fi
scal years are
as
f
ollows:
Pos
t-
P
ens
i
on
r
et
i
remen
t
(
in thousands
)
B
ene
fi
t
s
B
ene
fi
ts
20
1
2
$
44,33
4
$
23,82
6
201
3
45,30
9
22,35
9
20
1
4
47
,
464
22,53
4
20
1
5
4
9
,76
9
22
,64
6
20
16 5
2
,44
9
22
,6
80
20
17 -
202
1
3
08,135 1
08
,761
P
ost-retirement benefits are net of expected federal su
b
-
s
idy receipts related to prescription dru
g
benefits
g
ranted
under the Medicare Prescription Drug, Improvement and
M
odernization Act of 2003, which are estimated to be
$
2.8
million per year through 2021.
F
or measurement
p
ur
p
oses, an 8.0
%
annual rate of increase in the
p
er ca
p
ita cost of covered health care benefits for
p
re
-
M
edicare and post-Medicare retirees’ coverage is assumed for 2012. The pre-Medicare and post-Medicare rate is assumed to
decrease to 5.0% for 2017
,
and remain at that level thereafter
.
The assumed discount rate, expected lon
g
-term rate o
f
return on plan assets, rate o
f
f
uture compensation increase, and health
care cost trend rate have a si
g
ni
fi
cant impact on the amounts reported
f
or the bene
fi
t plans. A one-percenta
g
e-point chan
g
e in
these rates would have the
f
ollowin
g
e
ff
ects
:
1
-Percenta
g
e-Poin
t
Ex
p
ens
e
Benefit
O
bligatio
n
(
in thousands
)
I
n
c
r
ease
Dec
r
ease
I
n
c
r
ease
Dec
r
ease
P
ension Bene
fi
ts:
D
iscount rate
$
(10,652
)
$
1
3,15
3
$
(111,456
)
$
1
38,02
0
E
xpected lon
g
-term rate o
f
return on plan asset
s
$
3,664
$
(3,664
)
–
–
R
ate o
f
f
uture com
p
ensation increase
$
2
,1
96
$
(2,108
)
$
1
1,
0
6
0
$
(10,660
)
P
ost-retirement Bene
fi
ts
:
D
iscount rate
$
936
$
2
,564
$
(33,208
)
$
39,67
9
H
ea
l
t
h
care cost tren
d
rate
$
1
,
774
$
(1,478
)
$
32,10
1
$
(27,631
)
The actual and tar
g
et wei
g
hted-avera
g
e asset allocations for the
C
ompany’s pension plan assets as of the plan measurement
da
t
e
a
r
e
as
f
o
ll
o
w
s
:
20
11
20
1
0
A
sset Cate
g
or
y
Actual Target
R
ange
Ac
t
ual
T
ar
g
et
R
an
ge
L
ar
g
e
C
apitalization Equity
22.1% 20-35%
24.1
%
22-
3
2
%
H
ormel Foods
C
or
p
oration
S
tock
5.7% 0-10%
9.0
%
–
S
mall
C
a
p
italization E
q
uity
11.9% 5-15%
14.0
%
3
-1
3%
I
nternational E
q
uity
18.1% 15-25%
17.8
%
1
5
-2
5%
P
rivate E
q
uit
y
2.5% 0-15%
1.2
%
0-1
5%
T
otal E
q
uity
S
ecurities
60.3% 55-75%
66.1
%
55
-7
5%
F
ixed Income
38.3% 25-45%
3
1.8
%
2
5
-4
5%
C
ash and
C
ash E
q
uivalent
s
1.4% –
2.1
%
–