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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15
(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 29, 1994, Commission
File No. 1-2402
GEO A. HORMEL & COMPANY
(Exact name of registrant as specified in its
charter)
Delaware 41-
0319970
(State or other Jurisdiction of (I.R.S.
Employer
Incorporation or organization)
Identification No.)
1 Hormel Place
Austin, Minnesota
55912-3680
(Address of principal executive offices) (zip
Code)
Registrant's telephone number, including area code (507)
437-5737
Securities registered pursuant to Section 12 (b) of the Act:
Name of
Each Exchange on
Title of Each Class Which
Registered
Common Stock, $.1172 Par Value New York
Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been
subject to such
filing requirements for the past 90 days. Yes X No
State the aggregate market value of the voting stock held by
non- affiliates
of the registrant as of December 1, 1994.
Common Stock-- $1,076,060,436
Indicate the number of shares outstanding of each of the
issuer's classes of
common stock, as of the latest practicable date covered by
this report.
Common Stock, $.1172 Par Value--76,700,180 shares at
December 1, 1994
Common Stock Non-Voting, $.01 Par Value--0 shares at
December 1, 1994
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Stockholders' Report for the year
ended October 29,
1994, are incorporated by reference into Part II and
included as a separate
section in the electronic filing to the SEC.
Portions of the proxy statement for the Annual Meeting of
the Stockholders to be
held January 31, 1995, are incorporated by reference into
Part II and included as
a separate section in the electronic filing to the SEC.
PART I
Item 1. BUSINESS
General Development of Business
(a) Geo. A. Hormel & Company, a Delaware
corporation, was founded by
George A. Hormel in 1891 in Austin, Minnesota.
The Company
started as a processor of meat and food products
and continues in
this line of business. The parent company
operating under the
trade name Hormel Foods Corporation is primarily
engaged in the
production of a variety of meat and food
products and the
marketing of those products throughout the
United States.
Although pork remains the major raw material for
Hormel products,
the Company has been emphasizing for several
years the manufacture
and distribution of branded, consumer packaged
items rather than
the commodity fresh meat business closely
associated with the
industry in the past. The emphasis of new
product introductions
the past few years has been in shelf stable,
microwaveable entrees
such as Top Shelf, Kid's Kitchen and Micro-Cup
single-serving
entrees, a variety of branded turkey products
produced and sold
under the Jennie-O label, and ethnic foods such
as the Chi-Chi's
line of Mexican foods and House of Tsang
oriental sauces and food
products.
The Company's larger subsidiaries include
Jennie-O Foods, Inc.;
Dubuque Foods, Inc.; Farm Fresh Catfish Company
and Hormel Foods
International Corporation. Jennie-O, a Willmar,
Minnesota based
turkey processor, was acquired in December 1986.
Jennie-O markets
its products nationwide through its own sales
force and brokers,
providing the Company with a significant
presence in this
important, fast growing segment of the industry.
Dubuque Foods, Inc. formerly called FDL
Marketing was formed in
1985 to be the exclusive marketer of the
production of FDL Foods,
Inc., a Dubuque, Iowa, meat packer. In July of
1993, the Company
acquired through two subsidiaries, Dubuque
Foods, Inc. and
Rochelle Foods, Inc., a portion of the assets of
FDL Foods.
Dubuque Foods acquired the brands and
trademarks, and Rochelle
Foods, Inc. acquired the operations at Rochelle,
Illinois of FDL
Foods. FDL Foods has a co-packing agreement to
produce product
for Dubuque Foods, Inc. with the acquired brands
and trademarks.
Farm Fresh Catfish Company, acquired in 1983,
competes in another
growing segment of the food industry. Farm
Fresh raises,
slaughters and distributes farm raised catfish
primarily in the
southeastern section of the United States
through a network of
brokers.
The Company markets its products internationally
through Hormel
Foods International Corporation. Hormel Foods
International has
a domestic subsidiary, Vista International
Packaging,Inc., which
imports, customizes, and distributes, a variety
of natural and
artificial casings for the meat and food
processing industry.
-2-
Item 1. BUSINESS--Continued
The Company has not been involved in any
bankruptcy, receivership
or similar proceedings during its history.
Substantially all of
the assets of the Company have been acquired in
the ordinary
course of business.
The Company had no significant change in the
type of products
produced or services rendered, nor in the
markets or methods of
distribution since the beginning of the fiscal
year.
Industry Segment
(b) Hormel Foods Corporation is engaged in a single
industry segment
"meat and food processing". The meat and food
processing
industry is very competitive with respect to
price, marketing and
customer service. In addition to meat
processing firms, the
Company competes with consumer packaged food
manufacturers as
well as seafood, poultry and vegetable protein
processors.
Description of Business
(c) The principal products of the Company are meat
and food products
which are sold fresh, frozen, cured, smoked,
cooked and canned.
The percentage of total revenues contributed by
classes of
similar products for the last three fiscal years
of the Company
are as follows:
Year Ended
October October
October
29,1994 30,1993
31,1992
Meat Products 57.3% 57.0%
58.7%
Prepared Foods 26.0 26.9
27.7
Poultry, Fish, Other 16.7 16.1
13.6
100.0% 100.0%
100.0%
Meat Products includes fresh meats, sausages,
hams, wieners and
bacon. Prepared Foods products include canned
luncheon meats,
shelf stable microwaveable entrees, stews,
chilies, hash, meat
spreads and frozen processed products. Jennie-O
turkey and Farm
Fresh catfish products are included in the
Poultry, Fish and
Other category.
Hormel Foods has numerous trademarks and patents
which are
important to the Company's business. Some of
the trademarks are
registered and some are not. The more
-3-
Item 1. BUSINESS--Continued
significant trademarks are: HORMEL, BLACK
LABEL, BY GEORGE, CURE
81, CUREMASTER, DI LUSSO, DINTY MOORE, FRANK 'N
STUFF, HOMELAND,
LAYOUT PACK, LIGHT & LEAN, LIGHT & LEAN 97,
LITTLE SIZZLERS, MARY
KITCHEN, RANGE BRAND, ROSA GRANDE, SANDWICH
MAKER, SPAM,
WRANGLERS, TOP SHELF, JENNIE-O, FARM FRESH,
KID'S KITCHEN, FAST
'N EASY, DUBUQUE, QUICK MEAL, and OLD
SMOKEHOUSE. The Company
holds 19 foreign and 23 U. S. patents.
The Company for the past several years has been
concentrating on
processed, consumer branded products with year
round demand to
minimize the seasonal variation experienced with
commodity type
products. Pork continues to be the primary raw
material for
Company products and although live pork
producers are moving
toward larger and year round confinement
operations, there is
still a seasonal variation in the supply of
fresh pork materials.
The expanding line of processed items has
reduced but not
eliminated the sensitivity of Company results to
raw material
supply and price fluctuations.
Quarterly results for fiscal 1994 and 1993 are
reported on page
50, Note J to the financial statements in the
Annual Report to
Stockholders for 1994.
On October 29, 1994, the Company had unused
lines of credit of
$10,000,000. A fee is paid for the availability
of fixed credit
lines. The parent company has no long-term
debt except for
Industrial Revenue Bonds with varying maturities
and a $5,000,000
loan used for an investment in an affordable
housing project.
There was no commercial paper outstanding at the
end of fiscal
1994. Financial resources and anticipated funds
from operations
are considered adequate to meet normal operating
cash
requirements in 1995.
The Company has no customers, the loss of which,
would have a
significant effect on the Company's business.
During fiscal year
1994, no customer accounted for more than 6.5%
of sales. Backlog
orders are not significant due to the perishable
nature of a
large portion of the products and orders are
accepted and shipped
on a current basis.
The Company continues to develop and introduce
new products each
year. No new product in 1994 required a
material investment of
Company assets. Improving and developing new
products is the
responsibility of task forces including
personnel from
operations, marketing, administration,
engineering, and research
and development. Research and development
expenditures for
fiscal 1994, 1993, and 1992, respectively, were
$7,742,973,
$6,904,764, and $5,780,399. There are 29
professional employees
engaged in full time research, 11 in the area of
improving
existing products and 18 in developing new
products.
As of October 29, 1994, the Company had over
9,500 active
employees.
-4-
Item 1. BUSINESS--Continued
HORMEL
Livestock slaughtered by the parent company is
purchased by
Company buyers, commission dealers, sale barns
and terminal
markets located principally in Minnesota, Iowa,
Nebraska and
South Dakota. The level of pork production in
the United States
has an impact on Hormel's operations. Any
significant decrease
in the supply of pork has an adverse effect
because of higher
costs and lower margins coupled with an under-
utilization of
Company facilities. A significant increase in
the supply of pork
normally results in lower costs and higher
margins. The live
pork industry, to minimize the supply variations
which also
impact this profitability, is rapidly moving to
very large,
vertically integrated, year round confinement
operations. The
Company, as well as its major competitors is
analyzing options
that will allow it to maximize the benefits of
reduced volatility
in the supply of fresh pork.
Products under the Hormel label are sold in all
50 states by the
parent Company. Products are sold by
approximately 605
salespeople operating in assigned territories
coordinated from
district sales offices located in most of the
larger United
States cities, and by approximately 485 brokers
and distributors.
Distribution of products to customers is by
common carrier.
The parent Company has a plant at Fremont,
Nebraska, that
slaughters livestock for processing. The
slaughter facilities at
the Austin, Minnesota plant are leased to
Quality Pork Processors
of Dallas, Texas under a custom slaughter
arrangement with the
Company. A subsidiary, Rochelle Foods, Inc.,
Rochelle, Illinois,
also provides the Company with needed raw
materials and product
through its pork slaughter and processing
operation.
Facilities that produce manufactured items are
located in Algona,
Iowa; Austin, Minnesota; Beloit, Wisconsin;
Aurora, Illinois;
Davenport, Iowa; Fremont, Nebraska; Houston,
Texas; Knoxville,
Iowa; Oklahoma City, Oklahoma; Stockton,
California; Tucker,
Georgia; and Wichita, Kansas. Custom
manufacturing for Hormel is
performed by several companies including
Owatonna Canning
Company, Owatonna, Minnesota; Lakeside Packing
Company,
Plainview, Minnesota; and Western Steer Mom and
Pops of
Claremont, North Carolina.
JENNIE-O FOODS
Jennie-O Foods, Inc., a Willmar, Minnesota,
based turkey
processor, has turkey raising, slaughter and
processing
operations at various locations within
Minnesota. Jennie-O
contracts with turkey growers to supplement the
turkeys it raises
to meet its raw material requirements for whole
birds and
processed turkey products. A major multi-year
expansion program
was completed in 1991, significantly increasing
slaughter and
processing capacity at the Willmar locations and
moderately
increasing Jennie-O's turkey raising capacity.
-5-
Item 1. BUSINESS--Continued
Capacity was further increased in 1992 when
Jennie-O contracted
with West Central Turkeys, Inc. of Pelican
Rapids, Minnesota, to
co-pack whole birds and processed turkey
products. West Central
Turkeys, Inc. began an expansion of the Pelican
Rapids facility
in 1994 due to the increased demand for capacity
by Jennie-O.
Jennie-O has an option to purchase the assets of
West Central
Turkeys.
HORMEL FOODS INTERNATIONAL
Hormel Foods International markets the Company's
products in
international areas including the Philippines,
Japan and various
European countries. The Company, through Hormel
Foods
International, has licensed certain companies to
manufacture SPAM
luncheon meat overseas on a royalty basis,
principally: Newforge
Foods Limited in Great Britain, and K. R.
Darling Downs in
Australia. Hormel Foods International owns a
domestic
corporation, Vista International Packaging,
Inc., a food
packaging company located in Kenosha, Wisconsin,
and Hormel FSC,
Inc., a foreign sales corporation, which engages
in export
related activities. In 1994, Hormel Foods
International opened
offices in Mexico and Hong Kong to increase the
sales and
marketing support in these geographical areas of
the
international marketplace.
FARM FRESH CATFISH
Farm Fresh Catfish company continues to operate
slaughter and
processing plants in Arkansas and Mississippi.
Live fish are
purchased from independent growers to supplement
the supply
provided by its own farms in Arkansas and
Mississippi. The
catfish business continues to be a very
competitive commodity
oriented market segment. During 1994, Farm
Fresh wrote down its
live fish inventory which had a negative impact
on its operating
results.
DUBUQUE FOODS, INC.
Dubuque Foods, Inc., formerly called FDL
Marketing, Inc.,
purchased the brands and trademarks of FDL
Foods, Inc., Dubuque,
Iowa, in July of 1993. FDL Foods will produce
product to Dubuque
Foods' specifications at its Dubuque, Iowa plant
under a five
year co-packing agreement with Dubuque Foods.
FDL Foods also
sold its Rochelle, Illinois slaughter and
processing operations
to Rochelle Foods, Inc., a sister subsidiary of
Dubuque Foods.
Rochelle Foods will also produce product for
Dubuque Foods under
a co-packing arrangement, however, following a
transition period,
it will primarily produce product for Hormel
Foods under the
Hormel trademark.
-6-
Item 1. BUSINESS--Continued
Executive Officers of the Registrant
(d).
Year
Which First
Elected
Name Office
Age Officer
Joel W. Johnson President
51 1991
& Chief Executive
Officer
Don J. Hodapp Executive Vice President
56 1969
& Chief Financial
Officer
Gary J. Ray Executive Vice President
48 1988
James W. Cole Group Vice President,
60 1990
Foodservice
David N. Dickson Group Vice President,
51 1989
International,
Planning and Development
Stanley E. Kerber Group Vice President,
56 1977
Meat Products
Robert F. Patterson Group Vice President,
54 1984
Prepared Foods
Eric A. Brown Senior Vice President,
48 1987
Meat Products
Richard W. Schlange Vice President and
59 1969
Controller
Mahlon C. Schneider Vice President and
55 1990
General Counsel
Robert J. Thatcher Vice President and
64 1968
Treasurer
Forrest D. Dryden Vice President, Research
51 1987
& Development
Jerry C. Figenskau Vice President,
54 1994
Specialty Products
James A. Jorgenson Vice President,
49 1990
Human Resources
Marvin F. Moes Vice President,
59 1983
Frozen Foods Division
Gary C. Paxton Vice President,
49 1992
Manufacturing
-7-
Item 1. BUSINESS--Continued
Year
Which First
Elected
Name Office
Age Officer
Ronald E. Plath Vice President, Hormel
60 1989
and President Hormel
Foods International
Corp.
Don L. Pohlman Vice President,
58 1988
Foodservice Sales
Kenneth P. Regner Vice President,
57 1989
Engineering
James N. Rieth Vice President, Hormel
54 1981
and President
Jennie-O Foods, Inc.
Robert A. Slavik Vice President,
49 1993
Meat Products Sales
Robert G. Wells Vice President, Pork,
58 1982
Provisions and
Refineries
Thomas J. Leake Corporate Secretary
49 1990
No family relationship exists among the
executive officers.
All of the above executive officers have been
employed by the
Registrant in an officer capacity for more
than the past five years
except Mr. James W. Cole, President and
Chief Operating Officer of
Farm Fresh Catfish Company until July 4, 1988
when he was appointed
President, FDL Marketing, Inc., on November
21, 1988 he was appointed
Chairman, President and Chief Executive
Officer of FDL Marketing until
being elected Group Vice President
Foodservice Group on August 27,
1990; Mr. Mahlon C. Schneider, employed
December 11, 1989 as Senior
Attorney until being appointed Assistant
General Counsel on January
29, 1990, on November 19, 1990 he was elected
Vice President and
General Counsel; Mr. James A. Jorgenson,
General Manager of the
Fremont plant until August 31, 1987 when he
became General Manager of
the Austin plant, on November 19, 1990 he was
elected Vice President,
Manufacturing, and on December 30, 1991, he
was elected Vice
President, Human Resources; Mr. Joel W.
Johnson, Executive
-8-
Item 1. BUSINESS--Continued
Vice President and General Manager of Oscar
Mayer Foods until being
employed by the Company as Executive Vice
President, Sales and
Marketing on June 27, 1991, on July 27, 1992
he was elected President
of the Company, and on September 30, 1993, he
was elected to the
additional post of Chief Executive Officer;
Mr. Gary Paxton, Director
Sausage Production until November 19, 1990
when he was named Plant
Manager of the Austin Plant, on January 28,
1992 he was elected Vice
President, Manufacturing; Mr. Robert A.
Slavik, Director Meat
Products Sales until January 26, 1993 when he
was elected Vice
President, Meat Products Sales; Mr. Jerry C.
Figenskau, Director of
Marketing Services until December 30, 1991
when he was named Director
Specialty Products, on January 24, 1994 he was
elected Vice
President, Specialty Products.
The executive officers are elected annually by
the Board of Directors
at the first meeting following the Annual
Meeting of Stockholders.
Vacancies may be filled and additional
officers elected at any
regular or special meeting.
Item 2. PROPERTIES
Approximate
Floor Space
(Square Feet) Owned
or Expiration
Location Unless Noted Leased
Date
Hormel Foods Corporation
Slaughtering and
Processing Plants
Austin, Minnesota
Slaughter 212,000 Owned
Leased Out
Processing 912,000 Owned
Fremont, Nebraska 534,000 Owned
Rochelle, Illinois 425,000 Owned
(Rochelle Foods, Inc.)
-9-
Item 2. PROPERTIES--continued
Processing Plants
Algona, Iowa 152,000 Owned
Austin, Minnesota Annex 82,000 Owned
Beloit, Wisconsin 338,000 Owned
Davenport, Iowa 117,000 Owned
Houston, Texas 93,000 Owned
Knoxville, Iowa 130,000 Owned
Oklahoma City, Oklahoma 56,000 Owned
Ottumwa, Iowa 135,000 Owned
Closed
Stockton, California 139,000 Owned
Tucker, Georgia 259,000 Owned
Wichita, Kansas 75,000 Owned
(Dold Foods, Inc.)
Long Prairie, Minnesota 78,000 Owned
(Dan's Prize, Inc.)
Aurora, Illinois 70,000
Leased January 1998
(Creative Contract Packaging Corp.)
Aurora, Illinois 70,000
Leased
(Herb-Ox Plant)
Research and Development
Center
Austin, Minnesota 56,000 Owned
Corporate Offices
Austin, Minnesota 119,000 Owned
Jennie-O Foods, Inc.
Willmar, Minnesota
Airport Plant location 282,000 Owned
Willmar, Minnesota
Benson Ave. Plant 79,000 Owned
Melrose, Minnesota Plant 119,000 Owned
Turkey farms - acres 7,600 Owned
Henning, Minnesota 5,200 Owned
Feed Mill
Atwater, Minnesota 14,000 Owned
Feed Mill
Farm Fresh Catfish, Inc.
Hollandale, Mississippi
Plant 50,000 Owned
Lake Village, Arkansas Plant 21,000 Owned
Fish farms - water acres 4,700
Leased Various
Vista International Packaging, Inc.
Kenosha, Wisconsin Plant 61,000 Owned
-10-
Item 2. PROPERTIES--continued
Algona Food Equipment Company (AFECO)
Algona, Iowa Plant 45,000 Owned
The Company has started major expansion or
renovation projects
at the Fremont, Nebraska plant, and the
Davenport, Iowa plant.
The Company believes its operating facilities
are well maintained
and suitable for current production volumes,
and after the
completion of the expansion and renovation
projects, for all
volumes which are anticipated in the
foreseeable future. During
1994 the Company established a reserve for a
probable loss on
disposition of the remaining facility at
Ottumwa, Iowa, which is
closed and available for sale.
Item 3. LEGAL PROCEEDINGS
The Company, its wholly-owned subsidiary Farm
Fresh Catfish
Company, and Farm Fresh Catfish Company's
principal competitors
are defendants in a civil class action suit in
the United States
District Court for the Northern District of
Mississippi, Delta
Division, filed on February 7, 1992, on behalf
of all purchasers
of catfish products in the United States 1980-
1990. The suit
alleges a conspiracy by the defendants to fix
prices of all farm-
raised catfish products in violation of the
antitrust laws, and
demands unspecified monetary damages, costs of
suit, and
attorneys' fees. Management believes the
plaintiffs' claim will
be a very large amount. Any damages awarded
would be trebled in
accordance with the antitrust laws. Similar
suits have been
pending in California and Alabama state courts
since 1992 as well.
Management believes that plaintiffs' claims in
each suit are
without merit and intends to vigorously defend
against each
allegation. While the outcome of commercial
litigation cannot be
predicted with certainty, management believes
that the ultimate
resolution of this matter will not have a
material effect on the
Company's consolidated financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matters were submitted to stockholders
during the fourth
quarter of the 1994 fiscal year.
-11-
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED
STOCKHOLDER MATTERS
Information about Common Stock market prices,
dividends,
principal market of trade and number of
stockholders on
pages 37 and 38 of the Annual Stockholders'
Report for the year
ended October 29, 1994, is incorporated herein
by reference.
The Company's Common Stock has been listed on
the New York
Stock Exchange since January 16, 1990.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data for the ten years
ended October 29,
1994, on pages 40 and 41 of the Annual
Stockholders' Report for
the year ended October 29, 1994, is
incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATION
Management's Discussion and Analysis of
Financial Condition and
Results of Operations on pages 52 and 53 of
the Annual
Stockholders' Report for the year ended
October 29, 1994, is
incorporated herein by reference.
-12-
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements, including
unaudited
quarterly data, on pages 42 through 50 and
Report of
Independent Auditors on page 51 of the Annual
Stockholders'
Report for the year ended October 29, 1994 are
incorporated
herein by reference.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Information under "Election of Directors",
contained on
pages 3 through 6 of the definitive proxy
statement for the
Annual Meeting of Stockholders to be held
January 31, 1995,
is incorporated herein by reference.
Information concerning Executive Officers is
set forth in
Item 1(d) of Part I pursuant to Instruction 3,
Paragraph (b)
of Item 401 of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION
Information for the year ended October 29,
1994, under
"Executive Compensation" on pages 8 through 13
and
"Compensation of Directors" on page 5 of the
definitive proxy
statement for the Annual Meeting of
Stockholders to be
held January 31, 1995, is incorporated herein
by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Ownership of securities of the Company by
certain beneficial
owners and management for the year ended
October 29, 1994, as
set forth on pages 6 through 8 of the
definitive proxy
statement for the Annual Meeting of
Stockholders to be held
January 31, 1995, is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information under "Other Information Relating
to Directors,
Nominees, and Executive Officers" for the year
ended
October 29, 1994, as set forth on pages 14 and
15 of the
definitive proxy statement for the Annual
Meeting of
Stockholders to be held January 31, 1995, is
incorporated herein
by reference.
-13-
PART IV
Item 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) (1) and (2)--The response to this
portion of Item 14 is
submitted as a separate section of this
report.
(3) --List of Exhibits--The response to
this portion of
Item 14 is submitted as a separate
section of this
report.
(c) The response to this portion of Item 14
is submitted as
separate section of this report.
(d) The response to this portion of Item 14
is submitted as
separate section of this report.
-14-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities
Exchange Act of 1934, the Registrant has duly caused
this report to
be signed on its behalf by the undersigned, thereunto
duly authorized.
GE0. A. HORMEL & COMPANY
By /s/ Joel W. Johnson
1/27/95
Joel W. Johnson, President,
Date
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934,
this report has been signed below by the following
persons on behalf
of the Registrant and in the capacities and on the date
indicated:
/s/ Richard L. Knowlton 1/27/95 Chairman of the
Board
Richard L. Knowlton Date and Director
President,Chief
Executive
/s/Joel W. Johnson 1/27/95 Officer and
Director
Joel W. Johnson Date (Principal
Executive Officer)
Executive Vice
President
& Chief
Financial Officer
and Director
/s/ Don J. Hodapp 1/27/95 Principal
Financial and
Don J. Hodapp Date Accounting
Officer)
/s/ Gary J. Ray 1/27/95 Executive Vice
President
Gary J. Ray Date and Director
/s/ James W. Cole 1/27/95 Group Vice
President
James W. Cole Date Foodservice and
Director
Group Vice
President
International,
/s/ David N. Dickson 1/27/95 Planning &
Development
David N. Dickson Date and Director
/s/ Stanley E. Kerber 1/27/95 Group Vice
President Meat
Stanley E. Kerber Date Products and
Director
Group Vice
President
/s/ Robert F. Patterson 1/27/95 Prepared Foods
Robert F. Patterson Date and Director
-15-
/s/ John W. Allen 1/27/95 Director
John W. Allen Date
/s/ William S. Davila 1/27/95 Director
William S. Davila Date
/s/ Luella G. Goldberg 1/27/95 Director
Luella G. Goldberg Date
/s/ Geraldine M. Joseph 1/27/95 Director
Geraldine M. Joseph Date
/s/ Earl B. Olson 1/27/95 Director
Earl B. Olson Date
/s/ Ray V. Rose 1/27/95 Director
Ray V. Rose Date
/s/ Dr. Robert R. Waller 1/27/95 Director
Dr. Robert R. Waller Date
-16-
F-1
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1), (2), AND (3) AND ITEM 14 (c)
AND (d)
LIST OF FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
LIST OF EXHIBITS
YEAR ENDED OCTOBER 29, 1994
GEO. A. HORMEL & COMPANY
Austin, Minnesota
F-2
Item 14(a) (1), (2) and (3) and Item 14 (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
GEO. A. HORMEL & COMPANY
October 29, 1994
The following consolidated financial statements of
Hormel Foods Corporation
included in the Annual Report of the Registrant to its
stockholders for the year
ended October 29, 1994, are incorporated herein by
reference in Item 8 of Part
II of this report:
Consolidated Statements of Financial Position--October
29, 1994,
Consolidated Statements of Operations--Years Ended
October 29, 1994,
October 30, 1993 and October 31, 1992.
Consolidated Statements of Changes in Stockholders'
Investment--Years
Ended October 29, 1994, October 30, 1993, and
October 31, 1992
Consolidated Statements of Cash Flows--Years Ended
October 29, 1994,
October 30, 1993 and October 31, 1992
Notes to Financial Statements--October 29, 1994
Report of Independent Auditors
The following consolidated financial statement
schedules of HOrmel Foods
Corporation required pursuant to Item 14(d) are
submitted herewith:
Schedule II Valuation and Qualifying Accounts and
Reserves..F-3
All other schedules for which provision is made in the
applicable
accounting regulation of the Securities and Exchange
Commission are
not required under the related instructions or are
inapplicable, and
therefore have been omitted.
FINANCIAL STATEMENTS AND SCHEDULES OMITTED
Condensed parent company financial statements of the
registrant are
omitted pursuant to Rule 5-04(c) of Article 5 of
Regulation S-X.
LIST OF EXHIBITS
GEO. A. HORMEL & COMPANY
Number Description of Document
* (3) A-1 Certification of Incorporation as
amended to date.
(filed as Exhibit 3A-1 to Annual Report
on Form 10-K
for fiscal year ended October 27, 1990.)
* (3) B-1 By-laws as amended to date (filed as
Exhibit 3B-1 to
Annual Report on Form 10-K for fiscal
year ended
October 30, 1993.)
(4) Pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K,
copies of instruments defining the
rights of holders
of long-term debt are not filed. The
Company agrees
to furnish a copy thereof to the
Securities and Exchange
Commission upon request.
(9) None.
(10) None.
(11) None.
(12) None.
**(13) Pages 37 through 54 of the Annual Report
to Stockholders
for fiscal year ended October 29, 1994.
(18) None.
(19) None.
(22) None.
**(23) Consent of Independent Auditors.
(24) None.
(25) None.
**(27) Financial Data Schedule
(28) None.
* Document has previously been filed with the
Securities and Exchange
Commission and is incorporated herein by reference.
** These Exhibits transmitted via EDGAR.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference to this Annual
Report (Form 10K) of Hormel Foods Corporation of our report
dated November 22, 1994, included in the 1994 Annual Report
to Stockholders of Hormel Foods
Corporation.
Our audits also included the financial statement schedule of
Hormel Foods Corporation listed in Item 14(a). This
schedule is the responsibility of the Company's management.
Our responsibility is to express an
opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material
respects the information set forth therein.
We also consent to the incorporation by reference in Post-
Effective Amendment Number 2 to Registration Statement
Number 33-14614 on Form S-8 dated December 6, 1988, in
Registration Statement Number 33-14615 on Form
S-8 dated May 20, 1987, in Post-Effective Amendment Number 1
to Registration Number 33-29053 dated January 26, 1990, in
Registration Statement Number 33-43246 on Form S-8 dated
October 9, 1991, and in Registration
Statement Number 33-45408 on Form S-8 dated January 30, 1992
of our report dated November 22, 1994, with respect to the
consolidated financial statements incorporated herein by
reference, and our report included in
the preceding paragraph with respect to the financial
statement schedule included in this annual Report (Form 10-
K) of Hormel Foods Corporation.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
January 27, 1995
F-3
SCHEDULE II--VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
HORMEL FOODS
CORPORATION
(Dollars in
Thousands)
COL. A | COL. B | COL.
C | COL. D | COL. E
| |
Additions | |
| | (1)
(2) | |
| Balance at | Charged to
Charged to | | Balance at
| Beginning | Costs and
Other Accounts-| Deductions-- | End of
Classification | of Period | Expense
Describe | Describe | Period
- - ------------------------------------------------------------
- - ------------------------------------------
Valuation reserve deduction
from assets account:
Fiscal year ended
October 29, 1994:
Allowance for
doubtful accounts
$ 0 $ 471 (1) $1,413
(116)(2)
Fiscal year ended
October 30, 1993:
Allowance for
doubtful accounts
receivable $1,375 $912
$ 38 (3) $1,069 (1) $1,413
(157)(2)
Fiscal year ended
October 31, 1992:
Allowance for
doubtful accounts
receivable $1,375 $998
$ 0 $1,350 (1) $1,375
(352)(2)
Note (1)-Uncollectible accounts written off.
Note (2)-Recoveries on accounts previously written off.
Note (3)-Reserve on records of Dan's Prize, Inc. at the date
consolidated into Hormel Foods Corporation.
1
Stockholder Information
New and longstanding owners of Hormel Foods Corporation
oftentimes
have questions regarding stock certificates and duplicate
mailings.
Corporate Headquarters
Hormel Foods Corporation
1 Hormel Place
Austin, Minn. 55912-3680
(507) 437-5611
Independent Auditors
Ernst & Young
1400 Pillsbury Center
Minneapolis, Minn. 55402
Stock Listing
New York Stock Exchange
The corporation's daily trading activity, stock price and
dividend
information can be found in the financial section of most
newspapers
under the New York Stock Exchange listing "Hormel."
Transfer Agent and Registrar
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
P.O. Box 738
South St. Paul, Minn. 55075
For the convenience of stockholders, Norwest Bank Minnesota,
N.A., is
providing a toll-free number (1-800-468-9716) that can be
used
whenever questions arise regarding changes in registered
ownership,
lost or stolen certificates, address changes or other
matters
pertaining to the transfer of stock or stockholder records.
Representatives of Norwest Bank Minnesota, N.A., are
available to
assist stockholders from 8:00 a.m. to 5:00 p.m. (Central
standard
time) every business day. When requesting information,
stockholders
must provide their tax identification number, the name(s) in
which
their stock is registered and their record address.
2
Dividend Policy
Hormel Foods Corporation's Board of Directors typically
declares the
payment of a cash dividend each quarter. Since becoming a
public
company in 1928, Hormel Foods has never failed to make a
quarterly
dividend - a payout record that now extends to 66 years.
Stockholder Record Data
Usually the third week in January, April, July and October
which is
approximately 25 days before the payable date.
Dividend Payment Dates
The fifteenth of February, May, August and November. Postal
delays may
cause receipt dates to vary.
Dividend Reinvestment
Hormel Foods Corporation's Dividend Reinvestment Plan
provides
stockholders of record a cost-free method of purchasing
additional
shares of Company stock without paying brokerage commission
or other
service fees.
Participants in the plan may choose to have all their
dividends
automatically reinvested, make optional additional cash
payments or do
both in purchasing shares of Hormel Foods common stock.
All brokerage expenses are paid by Hormel Foods Corporation.
Personal
recordkeeping is simplified by an account statement that is
mailed to
participants by Norwest Bank Minnesota, N.A., plan
administrator,
after each investment.
To enroll in the plan or to obtain additional information,
contact
Norwest Bank Minnesota, N.A., using the address or telephone
number
provided with their listing in this section as Company
transfer agent
and registrar.
Tax Reports on Dividend Income
Hormel Foods Corporation is required to report to the
Internal Revenue
Service the total amount of dividends paid to each
stockholder during
the preceding year on Form 1099. This information is
supplied by the
transfer agent to the IRS for each stockholder account. This
form,
3
which may be used as a convenient reference and record when
personal
income taxes are filed, is mailed to stockholders after the
end of
each calendar year.
Reports and Publications
The objective in this 1994 Annual Report is to provide a
single,
comprehensive document describing the corporation's business
and
financial results. Additional sources of information about
the Company
include the following:
Form 10-K Report
Filed annually with the Securities and Exchange Commission,
this
report is available without charge in January, upon request,
to
stockholders of record and/or beneficial owners of the
Company's
common stock.
Form 10-Q
Filed quarterly with the Securities and Exchange Commission,
these
reports are available in March, June and September.
Notice of Annual Meeting and Proxy Statement
Mailed in January, accompanying the Notice of Annual Meeting
and Proxy
Statement, is the proxy card. The proxy card should be
signed, dated
and returned promptly to ensure all shares are represented
at the
meeting and voted in accordance with instructions of their
holder.
Quarterly Reports
Mailed to each stockholder in February, May, August and
November.
Report on Annual Meeting
Mailed to each stockholder in February, shortly after the
Annual
Meeting of Stockholders.
4
Duplicate Mailings
Sometimes several accounts are established for an individual
stockholder due to variations in name, initials or address.
Stockholders are encouraged to consolidate multiple accounts
to avoid
duplicate mailings to the same address.
To consolidate multiple accounts, write to Norwest Bank
Minnesota,
N.A., or call their toll-free number. (Use the address
and/or
telephone number provided with their listing in this section
as
Company transfer agent and registrar.) If possible, labels
or label
information indicating which name(s) are to be deleted
should
accompany your request. This procedure provides a
significant cost
reduction in production and mailing of reports and saves
stockholders
the annoyance of receiving duplicate mail.
This will not in any way affect dividend check mailings.
Each
registered stockholder will continue to receive regular
quarterly
dividends.
Questions About Hormel Foods
From Stockholders, call or write:
Thomas J. Leake
Corporate Secretary
Hormel Foods Corporation
1 Hormel Place
Austin, Minn. 55912-3680
(507) 437-5669
From Security Analysts, call or write:
Robert J. Thatcher
Vice President and Treasurer
Hormel Foods Corporation
1 Hormel Place
Austin, Minn. 55912-3680
(507) 437-5950
From the Media, call or write:
V. Allan Krejci
Director of Public Relations
Hormel Foods Corporation
1 Hormel Place
Austin, Minn. 55912-3680
(507) 437-5345
Annual Meeting Invitation
5
All Hormel Foods Corporation stockholders are encouraged to
attend
this year's Annual Meeting. The meeting is held each year on
the last
Tuesday in January. The 1995 Annual Meeting will be held
Tuesday,
January 31, in the Austin (Minn.) High School Auditorium.
The meeting
will convene at 8:00 p.m.
Common Stock Data
The high and low closing price of the Company's common stock
and the
dividends per share declared for each fiscal quarter of 1994
and 1993,
respectively, are shown below.
1994 High Low Dividend
First Quarter 23 20 1/2 $.125
Second Quarter 21 3/8 19 $.125
Third Quarter 23 19 $.125
Fourth Quarter 24 1/2 21 1/2 $.125
1993 High Low Dividend
First Quarter 24 1/4 20 7/8 $.11
Second Quarter 25 1/4 20 3/8 $.11
Third Quarter 22 1/8 20 1/2 $.11
Fourth Quarter 22 5/8 20 7/8 $.11
Page 1
1994 Financial Section
40 Selected Financial Data
42 Consolidated Statements of Financial Position
44 Consolidated Statements of Operations
45 Consolidated Statements of Changes in Stockholders'
Investment
46 Consolidated Statements of Cash Flows
47 Notes to Consolidated Financial Statements
51 Report of Independent Auditors Responsibilities
for Financial Statements
52 Management's Discussion and Analysis of Financial
Condition
and Results of Operations
54 A Corporate Profile
Selected Financial Data
(In Thousands,
Except Per Share Amounts) 1994 1993 *1992
1991 1990 1989 1988 *1987 1986
1985
Operations
Net Sales $3,064,793 $2,853,997$2,813,651
$2,836,222$2,681,180$2,340,513 $2,292,847$2,314,082
$1,960,237 $1,502,235
Net Earnings Before
Cumulative Effect of
Accounting Changes 117,975 100,770 95,174
86,393 77,124 70,114 60,192 45,944 39,079
38,618
Percent of Sales 3.85% 3.53% 3.38%
3.05% 2.88% 3.00% 2.63% 1.99% 1.99%
2.57%
Cumulative Effect of
Accounting Changes (127,529)**
Net Earnings (Loss) 117,975 (26,759) 95,174
86,393 77,124 70,114 60,192 45,944 39,079
38,618
Wage Costs 351,096 325,115 304,696
278,537 267,391 254,449 253,937 255,429 222,535
233,512
Total Taxes
(excluding Payroll Tax) 82,915 70,026 64,968
60,035 51,990 48,983 44,541 41,797 38,297
40,500
Depreciation and
Amortization 36,611 32,174 38,972
36,269 35,554 36,863 35,517 33,535 30,741
28,087
Financial Position
Working Capital $443,298 $392,846 $401,216
$346,164 $293,818 $232,941 $156,476 $147,969
$196,199 $152,985
Properties (net) 270,886 244,987 216,390
231,817 235,026 244,362 263,056 263,917 255,159
264,679
Total Assets 1,196,718 1,093,559 913,015
856,835 799,422 727,429 706,548 697,970 584,744
560,939
Long-Term Debt
Less Current
Maturities 10,300 5,700 7,624
22,833 24,535 19,228 20,399 48,831 63,264
64,334
Stockholders' Investment 661,089 570,888 644,284
583,408 513,832 470,929 418,716 373,120 339,925
311,605
Per Share of Common Stock
Net Earnings Before
Cumulative Effect of
Accounting Changes $1.54 $1.31 $1.24
$1.13 $1.01 $0.91 $0.79 $0.60 $0.51
$0.50
Page 3
Cumulative Effect
of Accounting Changes (1.66)
Net Earnings (Loss) 1.54 (0.35) 1.24
1.13 1.01 0.91 0.79 0.60 0.51
0.50
Dividends 0.50 0.44 0.36
0.30 0.26 0.22 0.18 0.15 0.14
0.13
Stockholders' Investment 8.62 7.45 8.41
7.61 6.70 6.14 5.46 4.86 4.42
4.05
*53 Weeks
**Adoption of SFAS No. 106 and SFAS No. 109
Consolidated Statements of Financial Position
(In Thousands)
October 29, 1994 October 30, 1993
Assets
Current Assets
Cash and cash equivalents
$248,599 $157,558
Short-term marketable securities at cost which approximates
market 11,360 14,862
Accounts receivable
228,369 218,487
Inventories
199,243 208,101
Deferred income taxes
14,213 12,393
Prepaid expenses
6,431 8,503
Total current assets
708,215 619,904
Deferred Income Taxes
70,791 79,872
4
Intangibles
79,302 72,508
Investments and Other Assets
67,524 76,288
Property, Plant and Equipment
Land
6,658 6,025
Buildings
152,786 143,222
Equipment
451,301 422,485
Construction in progress
26,476 13,589
637,221 585,321
Less allowance for depreciation
(366,335) (340,334)
270,886 244,987
$1,196,718 $1,093,559
(In Thousands, Except Share and Per Share Amounts)
October 29, 1994 October 30, 1993
Liabilities and Stockholders' Investment
Current Liabilities
Accounts payable
$112,851 $98,357
Accrued expenses
29,320 30,212
Accrued advertising
31,863 24,587
Employee compensation
41,989 40,195
Taxes, other than federal income taxes
17,606 14,011
5
Dividends payable
9,585 8,434
Federal income taxes
21,303 11,262
Current maturities of long-term debt
400
Total current liabilities
264,917 227,058
Long-Term Debt - less current maturities
10,300 5,700
Accumulated Postretirement Benefit Obligation
235,124 233,326
Accrued Pension Costs
12,265 48,363
Other Long-Term Liabilities
13,023 8,224
Stockholders' Investment
Preferred Stock, par value $.01 a share - authorized
40,000,000 shares;
issued - none
Common stock, nonvoting, par value $.01 a share - authorized
40,000,000 shares;
issued - none
Common Stock, par value $.1172 a share - authorized
200,000,000 shares;
issued 76,852,128 shares
9,007 9,007
Additional paid-in capital
15,696 14,513
Shares held in treasury
(3,632) (4,103)
21,071 19,417
Earnings reinvested in business
640,018 551,471
661,089 570,888
$1,196,718 $1,093,559
6
See notes to consolidated financial statements.
Consolidated Statements of Operations
Fiscal Year Ended
(In Thousands, Except Per Share Amounts)
October 29, 1994 October 30, 1993 October 31, 1992
Sales, less returns and allowances
$3,064,793 $2,853,997 $2,813,651
Cost of products sold
2,345,492 2,206,945 2,192,154
Gross profit
719,301 647,052 621,497
Expenses:
Selling and delivery
467,062 424,432 412,458
Administrative and general
65,184 67,302 62,535
Operating income
187,055 155,318 146,504
Other income and expenses:
Other income - net
6,538 7,199 8,401
Interest expense
(2,523) (1,371) (3,851)
Earnings before income taxes and cumulative effect
of accounting changes
191,070 161,146 151,054
Provision for income taxes
73,095 60,376 55,880
Earnings before cumulative effect of accounting changes
117,975 100,770 95,174
Cumulative effect of accounting changes:
Accounting for postretirement benefits, net of tax
(140,823)
7
Accounting for income taxes
13,294
Net earnings (loss)
$117,975 $(26,759) $95,174
Earnings (loss) per share:
Before cumulative effect of accounting changes
$1.54 $1.31 $1.24
Cumulative effect of accounting changes
(1.66)
Net earnings (loss) per share
$1.54 $(0.35) $1.24
See notes to consolidated financial statements.
Consolidated Statements of Changes in Stockholders'
Investment
Additional Earnings Total
Common
Stock Treasury Stock Paid-In Reinvested
Stockholders'
(In Thousands, Except Per Share Amounts) Shares
Amount Shares Amount Capitalin Business
Investment
Balance at October 26, 1991 76,852
$9,007 (211) $(4,265) $7,968 $570,698
$583,408
Purchases of Common Stock
(327) (6,262) (6,262)
Exercise of stock options
283 5,443 (5,828) (385)
Tax benefit of stock options
2,404 2,404
Restricted stock grants
30 619 619
Adjustment in minimum pension liability
(3,084) (3,084)
Net earnings
95,174 95,174
Cash dividends - $.36 per share
(27,590) (27,590)
Balance at October 31, 1992 76,852
9,007 (225) (4,465) 10,372 629,370
644,284
8
Purchases of Common Stock
(437) (9,861) (9,861)
Exercise of stock options
481 10,201 (9,808) 393
Tax benefit of stock options
4,141 4,141
Restricted stock grant
1 22 22
Adjustment in minimum pension liability
(7,580) (7,580)
Net loss
(26,759) (26,759)
Cash dividends - $.44 per share
(33,752) (33,752)
Balance at October 30, 1993 76,852
9,007 (180) (4,103) 14,513 551,471
570,888
Purchases of Common Stock
(90) (1,851) (1,851)
Exercise of stock options
108 2,322 (2,937) (615)
Tax benefit of stock options
1,183 1,183
Adjustment in minimum pension liability
11,840 11,840
Net earnings
117,975 117,975
Cash dividends - $.50 per share
(38,331) (38,331)
Balance at October 29, 1994 76,852
$9,007 (162) $(3,632) $15,696 $640,018
$661,089
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Fiscal Year Ended
(In Thousands)
October 29, 1994 October 30, 1993 October 31, 1992
9
Operating Activities
Net earnings (loss)
$117,975 $(26,759) $95,174
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation
33,655 30,162 34,260
Amortization of intangibles
2,956 2,012 4,712
Cumulative effect of accounting changes
127,529
Provision for deferred income taxes
(5,859) (3,715) (10,081)
Loss on investments
4,368
(Gain) loss on property/equipment sales and idle
facility 4,312 (93)
1,023
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
(9,882) (28,707) 2,689
Decrease (increase) in inventories and prepaid
expenses 10,930 (22,778) (11,962)
Increase in accounts payable and accrued expenses
40,686 22,101 16,413
Net cash provided by operating activities
199,141 99,752 132,228
Investing Activities
Sale of short-term marketable securities
3,309
Purchase of short-term marketable securities
(357) (14,862)
Acquisitions of businesses
(9,750) (33,791)
Purchases of property/equipment
(65,441) (59,725) (22,942)
10
Proceeds from sales of property/equipment
1,575 1,058 3,085
(Increase) in investments and other assets
(3,973) (20,754) (9,518)
Net cash used in investing activities
(74,637) (128,074) (29,375)
Financing Activities
Proceeds from long-term borrowings
5,000 3,100
Principal payments on long-term debt
(2,141) (22,440)
Dividends paid on Common Stock
(37,178) (32,213) (26,445)
Other
(1,285) (5,305) (3,624)
Net cash used in financing activities
(33,463) (39,659) (49,409)
Increase (decrease) in cash and cash
equivalents 91,041 (67,981)
53,444
Cash and cash equivalents at beginning of year
157,558 225,539 172,095
Cash and cash equivalents at end of year
$248,599 $157,558 $225,539
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
October 29, 1994
Note A: Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial
statements
include the accounts of Hormel Foods Corporation and all of
its
majority-owned subsidiaries after elimination of all
significant
11
intercompany accounts, transactions and profits.
Segment Information: Hormel Foods is engaged in a single
business
segment designated as "meat and food processing." As a
federally
inspected food processor, Hormel Foods is engaged in the
processing of
meat and poultry products, production of a variety of
prepared foods and
the marketing of those products.
Inventories: Inventories are valued at the lower of cost or
market.
Livestock and the materials portion of products are valued
on the first-
in, first-out method with the exception of the materials
portion of
turkey products which are valued on the last-in, first-out
method.
Substantially all inventoriable expenses, packages and
supplies are
valued by the last-in, first-out method.
Property, Plant and Equipment: Property, plant and equipment
are carried
at cost less accumulated depreciation. Depreciation is
provided over the
estimated useful lives of the related assets, primarily on a
straight-
line basis.
Amortization of Intangibles: Goodwill and other intangibles
are being
amortized over periods up to 40 years. Accumulated
amortization at
October 29, 1994, and October 30, 1993, was $11,966,000 and
$9,010,000,
respectively.
12
Statement of Cash Flows: The Company considers all short-
term marketable
securities with maturities of less than 90 days to be cash
equivalents.
All short-term marketable securities are carried at cost
which
approximates market values.
Acquisitions: The Company acquired several businesses during
fiscal 1994
and 1993 which are included in the Company's results of
operations since
the respective acquisition dates. The results of these
acquired
businesses, either individually or in the aggregate, were
not
significant to the Company's results of operations.
Accounting Changes: The Company adopted Statements of
Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting
for
Postretirement Benefits Other Than Pensions," and SFAS No.
109,
"Accounting for Income Taxes," in 1993 (see Notes E and F).
SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity
Securities," is effective for fiscal 1995 and will not have
a
significant effect on the Company when adopted.
Earnings Per Share: Earnings per share of Common Stock are
based on the
weighted average number of shares outstanding during the
year. The
dilutive effects of Common Stock equivalents were not
significant in any
year presented.
13
Fiscal Year: The Company's fiscal year ends on the last
Saturday in
October. Fiscal year 1994 and 1993 consisted of 52 weeks and
fiscal year
1992 consisted of 53 weeks.
Note B: Inventories
Inventoriable expenses, packages and supplies amounting to
approximately
$48,700,000 at October 29, 1994, and $47,200,000 at October
30, 1993,
are stated at cost determined by the last-in, first-out
method, and are
$21,900,000 and $21,600,000 lower in the respective years
than such
inventories determined under the first-in, first-out method.
Turkey
products amounting to $9,500,000 at October 29, 1994, and
$7,000,000 at
October 30, 1993, are stated at cost determined by the last-
in, first-
out method and are $200,000 lower in 1994 and $600,000 lower
in 1993
than such inventories determined under the first-in, first-
out method.
Note C: Long-Term Debt and Other Borrowing Arrangements
Long-term debt consists of:
October 29,
October 30,
(In Thousands) 1994
1993
14
Industrial revenue bonds with
variable interest rates,
due 1999 to 2005 $5,700
$5,700
Other 5,000
10,700
5,700
Less current maturities 400
$10,300
$5,700
At October 29, 1994, the Company had unused lines of credit
of
$10,000,000 for short-term borrowing. A fixed fee is paid
for the
availability of credit lines.
Total interest paid during fiscal 1994, 1993 and 1992 was
$1,791,000,
$1,386,000 and $4,082,000, respectively.
Note D: Benefit Plans
The Company and its subsidiaries have several
noncontributory defined
benefit plans and defined contribution plans covering most
employees.
Total costs associated with the Company's defined
contribution benefit
plans in 1994, 1993 and 1992 were $7,880,000, $7,119,000 and
$6,560,000,
respectively. Benefits for defined benefit pension plans
covering hourly
employees are provided based on stated amounts for each year
of service
while plan benefits covering salaried employees are based on
final
15
average compensation. The Company's funding policy is to
make annual
contributions of not less than the minimum required by
applicable
regulations.
A summary of the components of net periodic pension cost for
defined
benefit plans is as follows:
(In Thousands) 1994 1993
1992
Service cost - benefits earned
during the year $7,839 $7,068
$7,017
Interest cost on projected
benefit obligation 30,201 30,039
30,488
Actual return on plan assets (25,298)
(32,949) (30,228)
Net amortization and deferral (3,912) 6,244
812
Net pension costs $8,830 $10,402
$8,089
Assumptions used in accounting for the defined benefit plans
were:
1994 1993
1992
Weighted average discount rates 8.25% 7.75%
8.25%
Rates of increase in compensation levels 5.50 5.25
6.00
Expected long-term rate of return on assets 9.50 9.25
9.75
The following table sets forth the plans' funded status and
amounts
recognized in the statements of financial position:
16
October 29, 1994 October 30, 1993
Plans
Whose Plans Whose Plans Whose Plans Whose
Assets
Exceed Accrued Benefits Assets Exceed Accrued Benefits
(In Thousands) Accrued
Benefits Exceed Assets Accrued Benefits Exceed
Assets
Actuarial present value of benefit obligations:
Vested benefit obligation
$313,197 $17,490 $150,576
$191,639
Nonvested benefit obligation
20,031 6,547 14,197 13,697
Accrued benefits
333,228 24,037 164,773
205,336
Effects of estimated future pay increases
35,457 6,795 38,236 3,264
Projected benefit obligations
368,685 30,832 203,009
208,600
Plan assets at fair value
365,210 184,775
166,881
Projected benefit obligations
in excess of benefit plan assets
3,475 30,832 18,234 41,719
Unrecognized prior service cost
(11,024) (1,699) (9,214)
(4,520)
Unrecognized net loss
(3,663) (6,614) (2,951)
(22,868)
Remaining net asset (obligation) at transition
(560) (6,400) 3,839 (11,601)
Adjustment required to recognize minimum liability
7,918 35,725
Net pension liability (asset)
in statements of financial position
$(11,772) $24,037 $9,908
$38,455
As of the 1994 valuation date, plan assets included Common
Stock of the
Company having a market value of $68,962,000.
17
Note E: Postretirement Benefits Other Than Pensions
The Company provides medical and life insurance benefits to
certain
retired employees. Eligible employees who retired prior to
January 1,
1987, remain on the medical plan in effect when they
retired. The
medical plan for eligible employees who retired after
January 1, 1987,
is automatically modified to incorporate plan benefit and
plan provision
changes whenever they are made to the active employee plan.
Employees
hired after January 1, 1990, are eligible for postretirement
medical
coverage, but must pay the full cost of the coverage.
In fiscal 1993, the Company adopted SFAS No. 106,
"Employers' Accounting
for Postretirement Benefits Other Than Pensions." This
statement
requires the accrual of the postretirement benefit costs of
health care
and life insurance during the years an employee provides
services. The
unfunded cumulative obligation of $227.2 million ($140.8
million after
tax) was charged against earnings, effective as of the
beginning of
fiscal 1993. The effect of the new rule on fiscal 1993 was
to increase
postretirement benefit costs by $6,128,000 and reduce net
earnings
before the cumulative effect of accounting changes by
$3,900,000.
The cost of these benefits as recorded under the previous
pay as you go
accounting policy was $14.2 million in fiscal 1992, which
year has not
18
been restated. The postretirement benefit costs for fiscal
1994 and 1993
under SFAS No. 106 were as follows:
1994 1993
Postretirement benefit cost -
Service cost of benefits earned $2,007,000
$1,948,000
Interest cost of benefit obligation 15,623,000
18,133,000
Net amortization of deferred gains (750,000)
$16,880,000
$20,081,000
The actuarial present value of postretirement benefit
obligations and
the amount reported in the Consolidated Statements of
Financial Position
as of October 29, 1994, and October 30, 1993, were as
follows:
Accumulated postretirement benefit obligations as of the
August 1
measurement date:
1994
1993
Retirees $148,481,000
$158,945,000
Fully eligible active participants 15,039,000
14,838,000
Other active participants 34,993,000
35,205,000
198,513,000
208,988,000
Unrecognized net gains 41,103,000
27,826,000
19
Benefit payments subsequent to
measurement date (4,492,000)
(3,488,000)
Accrued postretirement
benefit cost $235,124,000
$233,326,000
Assumptions used in determining the accumulated
postretirement benefit
obligation:
1994
1993
Medical plan cost trend rate 7.5% declining 8.0%
declining
to 5.5% in
to 5.5% in
year 1998
year 1998
Weighted average discount rate 8.25%
7.75%
The health care cost trend rate assumption has a significant
effect on
the amount reported. For example, a one percent increase in
the health
care cost trend rate would increase the accumulated
postretirement
benefit obligation by $16.7 million at October 29, 1994, and
the net
periodic cost by $1.2 million for the year.
Note F: Income Taxes
The Company adopted SFAS No. 109, "Accounting for Income
Taxes," as of
the beginning of fiscal 1993, changing its method of
accounting for
income taxes from the deferred method to the liability
method. As
permitted under SFAS No. 109, prior years' financial
statements have not
20
been restated. The cumulative effect of adopting SFAS No.
109 as of
November 1, 1992, was to increase net income by $13.3
million.
The components of the provision for income taxes
attributable to income
before the change in accounting principle were as follows:
Deferred
Liability Method
Method
(In Thousands) 1994 1993
1992
Current:
U.S. Federal $65,808 $52,883
$55,823
State 13,146 11,208
10,138
78,954 64,091
65,961
Deferred:
U.S. Federal (5,067) (3,481)
(8,680)
State (792) (234)
(1,401)
(5,859) (3,715)
(10,081)
$73,095 $60,376
$55,880
Deferred income taxes reflect the net tax effects of
temporary
differences between the carrying amounts of assets and
liabilities for
financial reporting purposes and the amounts used for income
tax
purposes. The Company believes that, based upon its lengthy
and
21
consistent history of profitable operations, it is probable
that the net
deferred tax assets of $85 million will be realized on
future tax
returns, primarily from the generation of future taxable
income.
Significant components of the deferred income tax
liabilities and assets
were as follows:
October 29,
October 30,
1994
1993
Deferred tax liabilities-
Tax over book depreciation $(26,847)
$(28,407)
Prepaid pension (8,371)
Other, net (2,815)
(3,929)
Deferred tax assets-
Vacation accrual 3,259
3,275
Insurance accruals 4,510
4,309
Deferred compensation 4,601
3,558
Postretirement benefits 91,157
90,717
Pension accrual 6,528
12,547
Other, net 12,982
10,195
Net deferred tax assets $85,004
$92,265
Reconciliation of the statutory federal income tax rate to
the Company's
22
effective tax rate is as follows:
1994 1993
1992
U.S. statutory rate 35.0% 34.8%
34.0%
State taxes on income, net of
federal tax benefit 4.2 4.3
3.8
All other, net (.9) (1.6)
(.8)
Effective tax rate 38.3% 37.5%
37.0%
Included in the provision for deferred federal income taxes
for fiscal
year ended 1992 are the effects of timing differences as
follows:
(In Thousands)
1992
Depreciation
$(2,436)
Employee benefit plans
(2,760)
All other, net
(3,484)
$(8,680)
Total income taxes paid during fiscal 1994, 1993 and 1992
were
$56,298,000, $67,750,000 and $57,161,000, respectively.
Note G: Arrangement With FDL Foods, Inc.
In accordance with a five-year copacking agreement with FDL
Foods, Inc.
(FDL), Dubuque, Iowa, facility, the Company has a revolving
credit
23
agreement secured by substantially all of the assets of FDL.
The Company
may lend up to $30,000,000 to FDL at one percent over the
prime rate
through July 1, 1995. Borrowings under the agreement at
October 29,
1994, and October 30, 1993, were $19,200,000 and
$25,300,000,
respectively, and are included in Investments and Other
Assets.
The Company also acts as an agent of FDL for the purchase of
livestock,
which purchases may be up to $15,000,000 and are repayable
in full on a
weekly basis under a credit agreement. The balances at
October 29, 1994,
and October 30, 1993, are $4,300,000 and $6,400,000,
respectively, and
are included in accounts receivable.
Note H: Commitments
In order to ensure a steady supply of livestock and turkeys
and to keep
the cost of products stable, the Company and its subsidiary,
Jennie-O
Foods, Inc., have entered into contracts with producers for
the purchase
of hogs and turkeys at formula based prices over periods of
up to 12
years. Under these contracts, the Company and Jennie-O are
committed at
October 29, 1994, to purchase hogs and live turkeys,
assuming current
price levels, as follows:
1995
$247,852,000
24
1996
173,638,000
1997
174,187,000
1998
174,874,000
1999
154,025,000
Later years
433,765,000
Total
$1,358,341,000
The Company has commitments to expend approximately
$38,915,000 to
complete construction in progress at various locations at
October 29,
1994.
Note I: Stock Options
Under the Company's stock option plans, the Company may
grant employees
and nonemployee directors options to purchase Common Stock
of the
Company at 100 percent of the market value on the date of
grant. Options
outstanding expire at various dates ranging from fiscal 1995
through
2004. Options are exercisable upon grant and are outstanding
as follows:
Shares Price
per Share
Balance October 26, 1991 2,205,000 $7.50
to $19.75
Granted 512,000 20.75
to 21.38
Exercised (542,000) 7.50
to 15.06
25
Balance October 31, 1992 2,175,000 9.31
to 21.38
Granted 537,000 23.50
to 23.88
Exercised (850,000) 9.31
to 20.75
Balance October 30, 1993 1,862,000 9.31
to 23.88
Granted 374,000 20.50
Exercised (383,000) 9.31
to 15.06
Balance October 29, 1994 1,853,000 $15.06
to $23.88
Note J: Quarterly Results of Operations (Unaudited)
The following tabulation reflects the unaudited quarterly
results of
operations for the years ended October 29, 1994, and October
30, 1993:
(In Thousands, First Quarter Second
Quarter Third Quarter Fourth Quarter
Total Year
Except Per Share Data) 1994 1993 1994
1993 1994 1993 1994 1993 1994
1993
Net sales $716,169 $682,102 $767,018
$676,686 $741,144 $677,835 $840,462 $817,374
$3,064,793$2,853,997
Gross profit* 158,760 148,296 169,288
152,985 161,170 152,273 230,083 193,498 719,301
647,052
Earnings before cumulative
effect of accounting
changes 20,550 18,279 23,026
20,661 20,162 18,168 54,237 43,662 117,975
100,770
Cumulative effect of
accounting changes,
net of taxes (127,529)
(127,529)
Net earnings (loss) $20,550 $(109,250) $23,026
$20,661 $20,162 $18,168 $54,237 $43,662 $117,975
$(26,759)
26
Earnings (loss) per share:
Before cumulative effect
of accounting change $0.27 $0.24 $0.30
$0.27 $0.26 $0.23 $0.71 $0.57 $1.54
$1.31
Cumulative effect of
accounting change (1.66)
(1.66)
Net earnings (loss) per share $0.27 $(1.42) $0.30
$0.27 $0.26 $0.23 $0.71 $0.57 $1.54
$(0.35)
*1993 amounts have been restated to reflect the adoption of
SFAS No. 106 as of the beginning of the year.
Report of Independent Auditors
To the Stockholders and Board of Directors
Hormel Foods Corporation
Austin, Minnesota
We have audited the accompanying consolidated statements of
financial
position of Hormel Foods Corporation as of October 29, 1994
and October
30, 1993, and the related consolidated statements of
operations, changes
in stockholders' investment and cash flows for each of the
three years
in the period ended October 29, 1994. These financial
statements are the
responsibility of the Company's management. Our
responsibility is to
express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to
27
obtain reasonable assurance about whether the financial
statements are
free of material misstatement. An audit includes examining,
on a test
basis, evidence supporting the amounts and disclosures in
the financial
statements. An audit also includes assessing the accounting
principles
used and significant estimates made by management, as well
as evaluating
the overall financial statement presentation. We believe
that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present
fairly, in all material respects, the financial position of
Hormel Foods
Corporation at October 29, 1994 and October 30, 1993, and
the results of
its operations and its cash flows for each of the three
years in the
period ended October 29, 1994 in conformity with generally
accepted
accounting principles.
As discussed in the notes to the consolidated financial
statements, in
1993 the Company changed its methods of accounting for
income taxes and
postretirement benefits other than pensions.
Minneapolis, Minnesota
November 22, 1994
Responsibilities for Financial Statements
28
The accompanying financial statements were prepared by the
management of
Hormel Foods Corporation which is responsible for their
integrity and
objectivity. These statements have been prepared in
accordance with
generally accepted accounting principles appropriate in the
circumstances and, as such, include amounts that are based
on our best
estimates and judgments.
Hormel Foods Corporation has developed a system of internal
controls
designed to assure that the records reflect the transactions
of the
Company and that the established policies and procedures are
adhered to.
This system is augmented by well-communicated written
policies and
procedures, a strong program of internal audit and well-
qualified
personnel.
These financial statements have been audited by Ernst &
Young LLP,
independent auditors, and their report appears on this page.
Their audit
is conducted in accordance with generally accepted auditing
standards
and includes a review of the Company's accounting and
financial controls
and tests of transactions.
The Audit Committee of the Board of Directors, composed
solely of
outside directors, meets periodically with the independent
auditors,
management and the internal auditors to assure that each is
carrying out
29
its responsibilities. Both Ernst & Young LLP and our
internal auditors
have full and free access to the Audit Committee, with or
without the
presence of management, to discuss the results of their
audit work and
their opinions on the adequacy of internal controls and the
quality of
financial reporting.
R.W. Schlange
Vice President and Controller
Joel W. Johnson
President
Chief Executive Officer
Management's Discussion and Analysis of Financial Condition
and Results
of Operations
Fiscal Years 1994 and 1993
Earnings for the year were a record $117,975,000, an
increase of 17.1
percent over 1993 earnings of $100,770,000 reported before
the 1993
cumulative effects of adopting SFAS No. 106, "Employers'
Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No.
109,
"Accounting for Income Taxes." Fiscal 1993 results after
cumulative
effects of accounting changes were a net loss of
$26,759,000. The
30
comparative discussion of fiscal 1994 and 1993 results will
exclude the
cumulative effects of the noncash accounting changes adopted
in 1993.
This will accurately reflect the Company's operating results
in 1993 and
the outstanding performance and growth that continued for
the 11th
straight year in 1994.
Net sales in 1994 were $3,064,793,000, an increase of 7.4
percent, or
$210,796,000, over the previous record of $2,853,997,000
recorded in
1993. Tonnage volume was also at record levels and increased
9.4 percent
over last year.
Earnings for the fourth quarter of 1994 were $54,237,000, an
increase of
24.2 percent over the same period one year ago. Net sales
increased 2.8
percent to $840,462,000, compared to $817,374,000 in the
fourth quarter
of 1993. Tonnage volume for the quarter increased 8.3
percent compared
to last year.
The Company continues to focus attention on improving its
core
businesses, expanding market share of mature consumer-
branded products
and introducing new products in the convenience and ethnic
market
segments. Pork remains a primary raw material for Company
products and
the supply of live hogs has an impact on Company results.
Pork raw
material prices declined by more than 20 percent toward the
end of the
31
fourth quarter in 1994. Lower raw material prices and a
product mix that
included a larger proportion of higher margin processed
items increased
gross profit as a percent of sales to 27.4 percent for the
quarter and
23.5 percent for the year from 23.7 percent and 22.7 percent
for the
same periods last year. Farm Fresh Catfish Company, a wholly
owned
subsidiary, wrote down its live fish inventory which had a
negative
impact on its operating results.
Selling and delivery expenses for the quarter and year were
$122,175,000
and $467,062,000 as compared to $105,776,000 and
$424,432,000 for the
same periods in 1993. As a percentage of sales, selling and
delivery
expenses increased to 15.2 percent from 14.9 percent in 1993
which
primarily reflects increased spending on advertising and
promotions.
Administrative and general expenses were $21,894,000 and
$65,184,000 for
the quarter and year to date, compared to $19,244,000 and
$67,302,000
last year.
At the end of 1994, the Company established reserves for the
impairment
in value of two investments. A reserve was established for a
probable
loss on disposition of the Company's remaining facility at
Ottumwa,
Iowa, which is idle and available for sale. The Company also
established
a reserve for the carrying value of an investment in an
affiliated
32
business. Neither of these reserves was considered material.
Advertising and promotional expenses increased to
$46,609,000 for the
quarter and $184,368,000 for the year, compared to
$36,889,000 and
$162,308,000 in 1993. These expenditures emphasize the
Company's
commitment to expanding its base of branded consumer
products. The
parent company and its larger subsidiaries, which include
Jennie-O
Foods, Inc., and Dubuque Foods, Inc., plan to continue
aggressive
advertising and promotional activities in 1995.
Research and development continues to be an integral part of
the
Company's strategy to extend existing brands and expand its
offerings of
new consumer-branded items in both existing and new food
market
segments. An important part of research and development
efforts include
packaging which effectively protects the product, is
convenient for the
consumer and minimizes cost while using environmentally
friendly
materials.
As a result of rising interest rates during 1994, the
Company increased
its key pension and other postretirement plan actuarial
assumptions as
of the August 1, 1994, measurement date, including an
increase in the
discount rate to 8.25 percent (see Note D to the
Consolidated Financial
Statements). The net effect of these changes resulted in a
decrease in
33
the minimum pension liability recorded under SFAS No. 87 at
October 29,
1994.
The Company's effective tax rate increased to 38.3 percent
from 37.5
percent in 1993. This reflects the remaining effect of the
increase in
the federal statutory rate to 35 percent and an increase in
state income
taxes.
The Company anticipates pork raw material prices to continue
at
favorable levels, at least through the first quarter of
1995. Raw
material supplies are expected to be adequate, and the
Company has
aggressive marketing plans in place to meet 1995 profit
plans.
Fiscal Years 1993 and 1992
Higher pork raw material prices experienced in 1993 and
large supplies
of competing protein sources resulted in heavy competition
and pressure
on selling prices. These conditions required all areas of
the Company to
aggressively market their products while implementing cost
efficiencies
to meet profit projections. Despite operating results that
produced
record operating earnings and dollar sales, a one-time net
charge for
accounting changes resulted in a net loss for fiscal 1993.
The net loss for 1993 was $26,759,000, compared to 1992
earnings of
$95,174,000. The loss was a result of the adoption of
Statement of
34
Financial Accounting Standards (SFAS) No. 106 "Employers'
Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 106
requires
companies to accrue the cost of future retiree health care
benefits in
the year earned instead of the year paid. The Company also
adopted SFAS
No. 109, "Accounting for Income Taxes," under which deferred
income
taxes are adjusted to reflect tax rates currently in effect.
Adopting
the new accounting standards resulted in a net cumulative
charge of
$127,529,000 for 1993 and reduced current year operating
earnings before
cumulative effect of accounting changes by $3,900,000.
Results from continuing operations before adoption of the
noncash
accounting changes more accurately reflect the Company's
outstanding
performance in 1993. Excluding the current year and
cumulative effect of
accounting changes, the Company earned $104,670,000, an
improvement of
$9,496,000 over 1992 results. Record sales of $2,853,997,000
exceeded
1992 sales by $40,346,000, or 1.4 percent. Sales tonnage
volume for 1993
decreased 5.5 percent from 1992, reflecting reduced supplies
of fresh
pork available to Dubuque Foods, Inc., a wholly owned
subsidiary, for a
portion of the year when supplier FDL Foods, Inc., closed
its Rochelle,
Ill., pork slaughtering operation. The increase in sales
dollar volume
on reduced tonnage volume highlights the increase in pork
raw material
35
prices and a product mix with significant increases in
higher priced
consumer-branded items.
Earnings for the fourth quarter of 1993 were $43,662,000,
compared to
$42,021,000 last year. Earnings for the quarter include the
current year
effect of the accounting changes of $975,000. Dollar sales
for the
quarter were down 2.9 percent to $817,374,000 from
$841,665,000 last
year. The 1992 quarter included 14 weeks while the 1993
quarter included
13 weeks which accounts for the lower sales volume. Sales
tonnage volume
for the quarter decreased by 11.5 percent compared to last
year, also
reflecting the extra week in 1992 and the reduced pork
supply at Dubuque
Foods mentioned previously.
Selling and delivery expenses for the quarter and year were
$105,776,000
and $424,432,000, compared to $109,325,000 and $412,458,000
for the same
periods in 1992. The decrease in the selling and delivery
expenses for
the fourth quarter of 1993 reflects reduced quarter sales
compared to
1992. As a percentage of sales, selling and delivery
expenses increased
slightly to 14.9 percent from 14.7 percent in 1992.
Administrative and
general expenses were $19,244,000 and $67,302,000 for the
quarter and to
date, compared to $17,891,000 and $62,535,000 last year. The
majority of
this increase reflects the adoption of SFAS No. 106 in the
fourth
36
quarter of 1993.
Advertising and promotional expenses increased to
$36,889,000 for the
quarter and $162,308,000 for the year, compared to
$32,700,000 and
$144,553,000 in 1992. This emphasizes the Company's intent
to expand its
branded consumer products.
Consistent with the favorable interest rate and inflationary
environment
in 1993, the Company reduced its key pension and other
postretirement
plan actuarial assumptions as of the August 1, 1993,
measurement date,
including a reduction in the discount rate to 7.75 percent
(see Note D
to the Consolidated Financial Statements). The net effect of
these
changes resulted in an increase in the minimum pension
liability
recorded under SFAS No. 87 at October 30, 1993.
The Company's effective tax rate increased to 37.5 percent
from 37
percent in 1992. As shown in Note F to the Consolidated
Financial
Statements, this reflects an increase in the federal
statutory rate from
34 percent to 35 percent, effective January 1, 1993 (the
Company's
blended federal rate for 1993 was 34.83 percent).
Liquidity and Sources of Capital
The Company continues to have an exceptionally strong
balance sheet.
Cash and short-term marketable securities were $259,959,000
at the end
37
of 1994, compared to $172,420,000 last year. Long-term debt
increased to
$10,300,000 from $5,700,000 at the end of 1993. Long-term
debt consists
of industrial revenue bonds with varying maturities and a
loan to
finance an investment in an affordable housing fund. This
liquidity and
low debt load provide the Company with the ability to take
advantage of
expansion or acquisition opportunities that may arise.
During 1994, items providing or requiring cash for operating
activities
were normal and in the ordinary course of business. Cash
provided by
operating activities was $199,141,000, compared to
$99,752,000 in 1993.
Cash required for investing activities in 1994 declined to
$74,637,000
from $128,074,000 last year. There were no material
acquisitions of
businesses in 1994. Major construction projects during 1994
included
pork slaughter and cutting renovations at the Hormel Foods
plant in
Fremont, Neb.; expansion of the gelatin processing
operations at
Davenport, Iowa, and a major expansion of the warehouse and
shipping
facilities at Jennie-O Foods, Inc. The Fremont and Davenport
projects
will continue into 1995. Additional projects being
considered for 1995
are renovations at Rochelle Foods, Rochelle, Ill., and
additional
projects supporting the growth of Jennie-O Foods' business.
Financial ratios for 1994 and 1993 are presented below:
38
Liquidity Ratios 1994
1993
Current ratio 2.7
2.7
Receivables turnover 13.7
14.0
Days sales in receivables 27.2
27.9
Inventory turnover 11.5
11.2
Days sales in inventory 31.0
34.4
Leverage Ratio
Long-term debt to equity
1.6% 1.0%
Operating Ratios
Pretax profit* to net worth
31.0% 26.5%
Pretax profit* to total assets
16.7% 16.1%
*Computed without cumulative effect of accounting changes
for 1993.
A Corporate Profile
Having served the needs of generations of consumers for more
than a
century, Hormel Foods Corporation continues to successfully
build upon
its role as one of the leading processors and marketers of
branded,
value-added meat and food products. The broad industry arena
in which
Hormel Foods now competes nationally and internationally
creates many
new avenues of opportunity for long-term growth.
39
Hormel Foods and its family of subsidiaries manufacture,
market and
distribute thousands of processed food products which are
known and
respected by consumers, retail grocers, foodservice
operators and
industrial customers. Many of the Company's products are
among the best
known and trusted in the food industry. They not only enjoy
strong brand
identification and leading market shares but address
important customer
and consumer priorities for high standards of quality,
taste, nutrition,
convenience and value.
Principal products of the Company are branded, processed
meat and food
entrees which are sold fresh, frozen, cured, smoked, cooked
and canned.
Included are sausages, hams, franks, bacon, canned luncheon
meats,
shelf-stable microwaveable entrees, stews, chilies, hash,
meat spreads
and frozen processed products. These and other products are
sold in all
50 states by sales representatives coordinated from district
and/or area
sales offices located in most of the larger United States
cities. These
efforts are supported by brokers and distributors.
A majority of the Company's products is sold under the
Hormel brandmark.
Other well-established trademarks which are familiar to
consumers and
have contributed to the Company's established reputation for
uncompromising quality and value are as follows:
40
Black Label Layout Pack
By George Light & Lean
Cure 81 Light & Lean 97
Curemaster Little Sizzlers
Di Lusso Mary Kitchen
Dinty Moore Old Smokehouse
Dubuque Quick Meal
Farm Fresh Range Brand
Fast'N Easy Rosa Grande
Frank'N Stuff Sandwich Maker
Homeland SPAM
Jennie-O Top Shelf
Kid's Kitchen Wranglers
The Company's Corporate Offices are headquartered in Austin,
Minn., as
are its Research & Development Center and its 1,122,043
square foot
"flagship" plant. Facilities for pork operations at the
Austin plant are
leased to Quality Pork Processors, Inc., under a custom
slaughter
arrangement which provides the Company with needed raw
materials for
production operations. A Hormel Foods plant in Fremont,
Neb., is also a
pork slaughtering and processing operation. A wholly owned
subsidiary,
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Rochelle Foods, Inc., Rochelle, Ill., provides the Company
with
additional raw materials through its pork slaughtering and
processing
operation.
Facilities producing manufactured meat and food products are
located in
Algona, Iowa; Austin, Minn.; Beloit, Wis.; Davenport, Iowa;
Fremont,
Neb.; Houston, Texas; Knoxville, Iowa; Oklahoma City, Okla.;
Stockton,
Calif.; Tucker, Ga., and Wichita, Kan. Custom manufacturing
of selected
Hormel Foods products is performed by several companies
adhering to
strict Company specifications and quality guidelines.
Dubuque Foods, Inc., a wholly owned subsidiary headquartered
in Dubuque,
Iowa, has a custom manufacturing agreement with FDL Foods,
Inc., also
based in Dubuque, whereby various consumer-branded and
foodservice meat
products are produced. Through two other wholly owned
subsidiaries,
Jennie-O Foods, Inc., Willmar, Minn., and Farm Fresh Catfish
Company,
Hollandale, Miss., Hormel Foods is a leading producer of
whole and
processed turkey products and grain-fed, farm-raised catfish
which are
sold through retail grocery stores and foodservice outlets.
Another
wholly owned subsidiary, Dan's Prize, Inc., headquartered in
Cornelia,
Ga., but with a manufacturing plant in Long Prairie, Minn.,
produces
roast beef, corned beef, pastrami, prime rib and other
cooked meats for
42
the foodservice and deli industries.
Hormel Foods Corporation also operates in international
areas, including
the Philippines, Japan, Korea, Australia, England, Panama
and other
countries through Hormel Foods International Corporation
(HFIC). With
exports to more than 40 countries, HFIC continues to expand
its presence
around the globe.
Hormel Foods Corporation is owned by approximately 10,500
stockholders
and comprised of more than 9,500 employees, including
subsidiaries.
References appearing in boldface in this 1994 Annual Report
to
Stockholders represent valuable trademarks important to and
owned by
Hormel Foods Corporation or its subsidiaries.
_ Hormel Foods Corporation 1995