Hormel Foods 2011 Annual Report Download - page 59

5
7
Hormel Foods Corporation
Corporation, Dan’s Prize, Saag’s Products, Inc., and Precept
F
oods businesses. Prece
p
t Foods, LLC, is a 50.01
p
ercent
owned
j
o
i
nt venture
.
T
he Jennie-O Turkey Store se
g
ment consists primarily of the
processin
g
, marketin
g
, and sale o
f
branded and unbranded
turkey products
f
or retail,
f
oodservice, and
f
resh product
cus
t
omers.
T
he
S
pecialty Foods se
g
ment includes the Diamond
C
rystal
B
rands,
C
entury Foods International, and Hormel
Sp
ecialty
P
roducts operating segments. This segment consists of the
packaging and sale of various sugar and sugar substitute
p
roducts, salt and
p
e
pp
er
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
t
i
on
products, gelat
i
n products, and pr
i
vate label canned meats to
retail and
f
oodservice customers. This se
g
ment also includes
the processin
g
, marketin
g
, and sale o
f
nutritional
f
ood prod
-
ucts and supplements to hosp
i
tals, nurs
i
n
g
homes, and other
marketers o
f
nutritional products.
T
he All
O
ther se
g
ment includes the Hormel Foods
I
nternational operating segment, which manufactures,
markets, and sells
C
om
p
any
p
roducts internationally. This
s
egment also includes the results from the Company’s inter
-
nat
i
onal
j
o
i
nt ventures and m
i
scellaneous corporate sales.
I
ntersegment sales are recorded at pr
i
ces that approx
i
mate
cost and are eliminated in the Consolidated Statements
of
O
perations. The
C
ompany does not allocate investment
i
ncome,
i
nterest expense, and
i
nterest
i
ncome to
i
ts se
g
ments
w
hen measurin
g
performance. The
C
ompany also retains
v
arious other income and unallocated expenses at corporate.
E
quity in earnin
g
s of affiliates is included in se
g
ment opera
t
-
ing profit; however, earnings attributable to the
C
ompany’s
noncontrolling interests are excluded. These items are
included below as net interest and investment ex
p
ense
(
income
)
, general corporate expense, and noncontrolling
interest when reconciling to earnings be
f
ore income taxes.
Sales and operatin
g
profits for each of the Company’s report
-
able se
g
ments and reconciliation to earnin
g
s be
f
ore income
taxes are set forth below. The
C
ompany is an inte
g
rated
enterprise, characterized by substantial interse
g
ment coop
-
eration, cost allocations, and sharin
g
of assets. Therefore, the
The Com
p
any’s financial assets and liabilities also include
cash, accounts rece
i
vable, accounts
p
ayable, and other l
i
ab
i
l
i
-
ties,
f
or which carrying value approximates
f
air value. The
Company does not carry its long-term debt at fair value in its
Consolidated Statements of Financial Position. Based on bor
-
rowin
g
rates available to the
C
ompany for lon
g
-term financin
g
w
ith similar terms and avera
g
e maturities, the
f
air value o
f
lon
g
-term debt (includin
g
current maturities), utilizin
g
di
s
-
counted cash flows, was $266.9 million as of October 30, 2011,
and $371.8 million as of October 31, 2010.
I
n accordance with the
p
rovisions of A
SC
820
, the
C
om
p
any
a
l
so
m
easu
r
es
ce
rt
a
in n
o
nfin
a
n
c
i
a
l
asse
t
s
a
n
d
li
ab
iliti
es
a
t
f
air value that are recognized or disclosed on a nonrecurring
basis
(
e.g. goodwill, intangible assets, and property, plant
and equipment
)
. During the second quarter of fiscal 2010, the
Company made the decision to close its Valley Fresh plant
in Turlock
,
C
alifornia. The facilities in that location were
evaluated durin
g
that process and the
C
ompany recorded a
pretax char
g
e of $6.6 million to reduce the property, plant
and equipment to its current estimated fair value. Durin
g
the
fiscal
y
ears ended October
3
0, 2011, and October
3
1, 2010,
th
e
r
e
w
e
r
e
n
o
o
th
e
r m
a
t
e
ri
a
l r
e
m
easu
r
e
m
e
nt
s
o
f
asse
t
s
o
r
liabilities at fair value on a nonrecurring basis subsequent to
their initial recognition
.
Note O
S
E
G
M
E
N
T
R
E
P
O
RTIN
G
The Com
p
any develo
p
s,
p
rocesses, and distributes a wide
array of food
p
roducts in a variety of markets. The Com
p
any
reports its results in the
f
ollowing
fi
ve segments:
G
rocer
y
P
roducts, Refrigerated Foods, Jennie-O Turkey Store,
Specialty Foods, and All Other.
Th
e
G
rocery Products se
g
ment consists primarily o
f
the
processin
g
, marketin
g
, and sale o
f
shel
f
-stable
f
ood products
s
old predominantly in the retail market. This se
g
ment also
includes the results from the
C
ompany’s
M
e
g
a
M
ex Foods,
L
LC
(
M
eg
a
M
e
x
)
j
oint venture.
The Refrigerated Foods segment includes the Hormel
R
e
f
rigerated operating segment and the A
ffi
liated Business
U
nits. This segment consists primarily o
f
the processing,
marketing, and sale o
f
branded and unbranded pork and bee
f
products
f
or retail,
f
oodservice, and
f
resh product customers.
The A
ffi
liated Business Units include the Farmer John
,
Burke