Hormel Foods 2013 Annual Report Download - page 47

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amounts for each year of service, while plan benefits covering
salaried employees are based on final average compensation.
The Company’s funding policy is to make annual contributions
of not less than the minimum required by applicable regula-
tions. Actuarial gains and losses and any adjustments resulting
from plan amendments are deferred and amortized to expense
over periods ranging from 8-30 years.
Certain groups of employees are eligible for post-retirement
health or welfare benefits. Benefits for retired employees vary
for each group depending on respective retirement dates and
applicable plan coverage in effect. Contribution requirements
for retired employees are governed by the Retiree Health
Care Payment Program and may change each year as the
cost to provide coverage is determined. Eligible employees
hired after January 1, 1990, may receive post-retirement
medical coverage but must pay the full cost of the coverage.
On October 17, 2012, the plan was amended, effective April
1, 2013, to terminate coverage for certain nonunion retirees
who retired on or after August 1, 2002, and who are or will be
Medicare eligible. If the cost of the nonunion retiree coverage
is currently subsidized by the Company for the affected retir-
ees, credits will be established in a health reimbursement
account to help reimburse the retiree for the cost of purchas-
ing coverage in the individual market. Actuarial gains and
losses and any adjustments resulting from plan amendments
are deferred and amortized to expense over periods ranging
from 6-19 years.
Several changes were enacted that affected the Company’s
defined benefit pension plans at the 2011 measurement
date. The defined benefit pension plan covering collectively
bargained employees was amended as a result of labor
negotiations, causing an increase in the benefit obligation.
The benefit obligation for the other defined benefit plans
was reduced as a result of a change in the pension formula
effective January 1, 2017. The amended formula remains a
defined benefit formula, but will base the accrued benefit
credit on age and service and define the benefit as a lump
sum. Effective October 31, 2016, the 401k match for these
participants will be increased.
NOTE H
LONG-TERM DEBT AND OTHER BORROWING
ARRANGEMENTS
Long-term debt consists of:
October 27, October 28,
(in thousands) 2013 2012
Senior unsecured notes, with interest at
4.125%, interest due semi-annually
through April 2021 maturity date $ 250,000 $ 250,000
Less current maturities – –
Total $ 250,000 $ 250,000
The Company has a $300.0 million revolving line of credit
which bears interest at a variable rate based on LIBOR. As of
October 27, 2013, and October 28, 2012, the Company had not
drawn from this line of credit. A fixed fee is paid for the avail-
ability of this credit line. On November 22, 2011, the Company
amended the terms and conditions for this line of credit and
extended the maturity date to November 2016.
The Company is required by certain covenants in its debt
agreements to maintain specified levels of financial ratios and
financial position. At the end of the current fiscal year, the
Company was in compliance with all of these covenants.
Total interest paid during fiscal 2013, 2012, and 2011 was
$12.5 million, $12.9 million, and $31.7 million, respectively.
NOTE I
PENSION AND OTHER POST-RETIREMENT BENEFITS
The Company has several defined benefit plans and defined
contribution plans covering most employees. Total costs asso-
ciated with the Company’s defined contribution benefit plans
in 2013, 2012, and 2011 were $29.9 million, $27.8 million, and
$27.1 million, respectively. Benefits for defined benefit pension
plans covering hourly employees are provided based on stated
Net periodic cost of defined benefit plans included the following:
Pension Benefits Post-retirement Benefits
(in thousands) 2013 2012 2011 2013 2012 2011
Service cost $ 30,979 $ 23,425 $ 24,206 $ 2,494 $ 2,272 $ 2,219
Interest cost 47,688 49,135 50,282 14,910 17,910 18,891
Expected return on plan assets (73,144) (68,511) (62,989) – – –
Amortization of prior service cost (5,079) (5,079) (607) (1,332) 3,561 4,341
Recognized actuarial loss (gain) 34,019 20,130 16,633 7,719 (3) (4)
Curtailment charge 6 – – – – –
Net periodic cost $ 34,469 $ 19,100 $ 27,525 $ 23,791 $ 23,740 $ 25,447