Hormel Foods 2013 Annual Report Download - page 59

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57
The Affiliated Business Units include the Farmer John, Burke
Corporation, Dan’s Prize, Saag’s Products, Inc., and Precept
Foods businesses. Precept Foods, LLC, is a 50.01 percent
owned joint venture.
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 private label shelf stable products,
nutritional products, sugar, and condiments to industrial,
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 International & 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.
This segment was previously the All Other segment, and was
renamed in the second quarter of fiscal 2013, with no change
in the composition of the segment.
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 expense
(income), general corporate expense, and noncontrolling
interest when reconciling to earnings before income taxes.
The Company’s financial assets and liabilities also include
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, utilizing discounted cash flows (Level 2), was
$261.7 million as of October 27, 2013, and $283.6 million as of
October 28, 2012.
In accordance with the provisions of ASC 820, the Company
also measures certain nonfinancial assets and liabilities at
fair value that are recognized or disclosed on a nonrecurring
basis (e.g. goodwill, intangible assets, and property, plant and
equipment). During fiscal years 2013, 2012, and 2011, there
were no material remeasurements of assets or liabilities at
fair value on a nonrecurring basis subsequent to their initial
recognition.
NOTE O
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 International & Other.
The Grocery Products segment consists primarily of the pro-
cessing, 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 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.
(4) During fiscal 2012 and 2013, the Company held trading securities as part of a portfolio maintained to generate investment income and to provide
cash for operations of the Company, if necessary. The portfolio was managed by a third party who was responsible for daily trading activities, and all
assets within the portfolio were highly liquid. The cash, U.S. government securities, and highly rated money market funds held by the portfolio were
classified as Level 1. The investment portfolio also included corporate bonds, international government securities, commercial paper, agency securi-
ties, mortgage-backed securities, and other asset-backed securities for which there is an active, quoted market. Market prices were obtained from a
variety of industry standard providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and
therefore, these securities were classified as Level 2. These securities were liquidated in the first quarter of fiscal 2013.