HORMEL FOODS CORP /DE/ - Annual Report: 2017 (Form 10-K)

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ANNUAL REPORT ON FORM 10-K

 

 

HORMEL FOODS CORPORATION

 

 

OCTOBER 29, 2017

 

 

 

 

 

 

 

 

 

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 29, 2017

or

 

[    ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________________ to ________________________________________

 

Commission File Number: 1-2402

 

HORMEL FOODS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Registrant’s telephone number, including area code (507) 437-5611

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Securities registered pursuant to Section 12(g) of the Act:  None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes X   No    

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes      No X

 

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    

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months.  Yes X   No    

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  (X)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer X	Accelerated filer
Non-accelerated filer           (Do not check if a smaller reporting company)	Smaller reporting company
	Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes      No X

 

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of April 30, 2017, was $9,415,266,160 based on the closing price of $35.08 on the last business day of the registrant’s most recently completed second fiscal quarter.

 

As of December 1, 2017, the number of shares outstanding of each of the registrant’s classes of common stock was as follows:

 

Common Stock, $0.01465 – Par Value 529,585,006 shares

Common Stock Non-Voting, $0.01 Par Value – 0 shares

 

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, are incorporated by reference into Part I, Items 1 and 1A and Part II, Items 5-8 and 9A, and included as Exhibit 13.1 filed herewith.  Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held January 30, 2018, are incorporated by reference into Part III, Items 10-14.

 

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HORMEL FOODS CORPORATION

TABLE OF CONTENTS

 

PART I
Item 1.	BUSINESS	3
Item 1A.	RISK FACTORS	8
Item 1B.	UNRESOLVED STAFF COMMENTS	8
Item 2.	PROPERTIES	8
Item 3.	LEGAL PROCEEDINGS	10
Item 4.	MINE SAFETY DISCLOSURES	10
PART II
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	11
Item 6.	SELECTED FINANCIAL DATA	11
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	12
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	12
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	12
Item 9A.	CONTROLS AND PROCEDURES	12
Item 9B.	OTHER INFORMATION	12
PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	13
Item 11.	EXECUTIVE COMPENSATION	13
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	13
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	13
Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	13
PART IV
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	13
SIGNATURES		14

 

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PART I

 

Item 1.  BUSINESS

 

(a)  General Development of Business

 

Hormel Foods Corporation, a Delaware corporation (the Company), was founded by George A. Hormel in 1891 in Austin, Minnesota, as Geo. A. Hormel & Company.  The Company started as a processor of meat and food products and continues in this line of business.  The Company’s name was changed to Hormel Foods Corporation on January 31, 1995.  The Company is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally.  Although pork and turkey remain the major raw materials for its products, the Company has emphasized for several years the manufacturing and distribution of branded, value-added consumer items rather than the commodity fresh meat business.  The Company has continually expanded its product portfolio through organic growth, new product development, and acquisitions.

 

Internationally, the Company markets its products through Hormel Foods International Corporation (HFIC), a wholly owned subsidiary.  HFIC has a presence in the international marketplace through joint ventures and placement of personnel in strategic foreign locations such as Australia, Brazil, Canada, China, Japan, and the Philippines.  HFIC has a global presence with a minority position in a food company in the Philippines (The Purefoods-Hormel Company, Inc., 40% holding).

 

On November 27, 2017, subsequent to the end of the fiscal year, the Company completed the acquisition of Columbus Manufacturing, Inc. (Columbus), an authentic premium deli meat and salami company, from Chicago-based Arbor Investments.  The purchase price is approximately $850.0 million.  The transaction was closed in the first quarter of fiscal 2018 and was funded with cash on hand along with borrowing $375.0 million under a term loan facility and $375.0 million under a revolving credit facility.  The allocation of the purchase price will be finalized upon completion of the fair value analysis of Columbus’s assets.  Columbus specializes in authentic premium deli meat and salami and allows the Company to enhance its scale in the deli by broadening its portfolio of products, customers, and consumers.

 

On August 22, 2017, the Company acquired Cidade do Sol (Ceratti) for a preliminary purchase price of approximately $103.5 million, subject to customary working capital adjustments. The transaction was funded by the Company with cash on hand.  The acquisition of the Ceratti® brand allows the Company to establish a full in-country presence in the fast-growing Brazilian market with a premium brand.

 

On August 16, 2017, the Company acquired Fontanini Italian Meats and Sausages (Fontanini), a branded foodservice business, from Capitol Wholesale Meats, Inc. for a preliminary purchase price of $427.9 million, subject to customary working capital adjustments.  The transaction provides a cash flow benefit resulting from the amortization of the tax basis of assets, the net present value of which is approximately $90.0 million.  The transaction was funded by the Company with cash on hand and by utilizing short-term financing.  Fontanini specializes in authentic Italian meats and sausages, as well as a variety of other premium meat products including pizza toppings and meatballs and allows the Company to expand its foodservice business.

 

On January 3, 2017, the Company completed the sale of Clougherty Packing, LLC, parent company of Farmer John and Saag’s Specialty Meats, along with PFFJ, LLC, farm operations in California, Arizona, and Wyoming.  The closing price was $145.0 million in cash.

 

On May 26, 2016, the Company acquired Justin’s, LLC (Justin’s) of Boulder, Colorado, for a purchase price of $280.9 million.  The transaction provides a cash flow benefit resulting from the amortization of the tax basis of assets, the net present value of which is approximately $70.0 million.  The purchase price was funded by the Company with cash on hand and by utilizing short-term financing.  This acquisition allowed the Company to enhance its presence in the specialty natural and organic nut butter category.

 

On May 9, 2016, the Company completed the sale of Diamond Crystal Brands resulting in proceeds, net of selling costs, of closing price of $110.1 million.

 

On July 13, 2015, the Company acquired Applegate Farms, LLC (Applegate) of Bridgewater, New Jersey, for a final purchase price of $774.1 million in cash.  The purchase price was funded by the Company with cash on hand and by utilizing short-term financing.  This acquisition allows the Company to expand the breadth of its protein offerings to provide consumers more choice in this fast growing category.

 

The Company has not been involved in any bankruptcy, receivership, or similar proceedings during its history.  Substantially all the assets of the Company have been acquired in the ordinary course of business.

 

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The Company had no other significant change in the type of products produced or services rendered, or in the markets or methods of distribution, since the beginning of the 2017 fiscal year.

 

(b)  Segments

 

The Company’s business is reported in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods, and International & Other.  Net sales to unaffiliated customers, operating profit, total assets, and the presentation of certain other financial information by segment, are reported in Note P of the Notes to Consolidated Financial Statements and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, incorporated herein by reference.

 

(c)  Description of Business

 

Products and Distribution

 

The Company’s products primarily consist of meat and other food products.  The meat products are sold fresh, frozen, cooked, and canned.  The percentages of total revenues contributed by classes of similar products for the last three fiscal years are as follows:

 

		Fiscal Year Ended
		October 29, 2017					October 30, 2016					October 25, 2015
Perishable			53.7	%				53.1	%				53.0	%
Poultry			20.2					18.2					18.4
Shelf-stable			19.1					20.5					18.6
Miscellaneous			7.0					8.2					10.0
			100.0	%				100.0	%				100.0	%

 

Reporting of revenues from external customers is based on similarity of products, as the same or similar products are sold across multiple distribution channels such as retail, foodservice, or international.  Revenues reported are based on financial information used to produce the Company’s general-purpose financial statements.

 

The Perishable category includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding JOTS products).  Shelf-stable includes canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, hash, stews, meat spreads, flour and corn tortillas, salsas, tortilla chips, and other items that do not require refrigeration.  The Poultry category is composed primarily of JOTS products.  The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products.

 

Domestically, the Company sells its products in all 50 states.  The Company’s products are sold through its sales personnel, operating in assigned territories or as dedicated teams serving major customers, coordinated from sales offices located in most of the larger U.S. cities. The Company also utilizes independent brokers and distributors.  As of October 29, 2017, the Company had approximately 1,030 sales personnel engaged in selling its products.  Distribution of products to customers is primarily by common carrier.

 

Through HFIC, the Company markets its products in various locations throughout the world.  Some of the larger markets include Australia, Brazil, Canada, China, England, Japan, Mexico, Micronesia, the Philippines, Singapore, and South Korea.  The distribution of export sales to customers is by common carrier, while the China and Brazil operations own and operate their own delivery system.  The Company, through HFIC, has licensed companies to manufacture various Company products internationally on a royalty basis, with the primary licensees being Tulip International of Denmark and CJ CheilJedang Corporation of South Korea.

 

Raw Materials

 

The Company has, for the past several years, been concentrating on branded products for consumers 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.  The Company’s expanding line of branded products has reduced, but not eliminated, the sensitivity of Company results to raw material supply and price fluctuations.

 

The majority of the hogs harvested by the Company are purchased under supply contracts from producers located principally in Minnesota, Iowa, Nebraska, and Kansas.  The cost of hogs and the utilization of the Company’s facilities are affected by both the level and the methods of pork production in the United States.  The Company uses supply contracts to ensure a stable supply of raw materials.  The Company’s contracts are based on market-based formulas and/or markets of certain swine production inputs,

 

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to better balance input costs with customer pricing, and all contract costs are fully reflected in the Company’s reported financial statements.  In fiscal 2017, the Company purchased 96 percent of its hogs under supply contracts.  The Company also procures a portion of its hogs through farms it either owns or operates in Colorado.

 

In fiscal 2017, JOTS raised turkeys representing approximately 77 percent of the volume needed to meet its raw material requirements for whole bird and branded turkey products.  Turkeys not sourced within the Company are contracted with independent turkey growers.  JOTS’ turkey-raising farms are located throughout Minnesota and Wisconsin.

 

Production costs in raising hogs and turkeys are subject primarily to fluctuations in feed grain prices and, to a lesser extent, fuel costs.  To manage this risk, the Company hedges a portion of its anticipated purchases of grain using futures contracts.

 

Additionally, the cost and supply of avocados, peanuts, whey, and natural and organic protein are impacted by the changing market forces of supply and demand, which can impact the cost of the Company’s products. The Company uses long-term supply contracts and forward buying in an attempt to manage these risks.

 

Manufacturing

 

The Company has two plants that harvest hogs for processing.  Quality Pork Processors, Inc. of Dallas, Texas, operates the harvesting facility in Austin, Minnesota, under a custom harvesting arrangement.  The Company currently has seven turkey harvest and processing operations, and 31 facilities that produce and distribute other manufactured items.  Albert Lea Select Foods, Inc. operates the processing facility in Albert Lea, Minnesota, under a custom manufacturing agreement.  Company products are also custom manufactured by several other companies.  The following are the Company’s larger custom manufacturers: Abbyland Foods, Inc., Abbotsford, Wisconsin; Agropur Division Natrel USA, Maplewood, Minnesota; Algood Food Company, Louisville, Kentucky; Busseto Foods, Inc., Fresno, California; Deitz & Watson, Inc., Philadelphia, Pennsylvania; HP Hood LLC, Lynnfield, Massachusetts; John F. Martin and Sons, Stevens, Pennsylvania; Jones Dairy Farm, Fort Atkinson, Wisconsin; OSI Industries LLC, Chicago, Illinois; Perdue Farms Inc., Salisbury, Maryland; Reichel Foods, Inc., Rochester, Minnesota; Reser’s Fine Foods, Topeka, Kansas; Steuben Foods, Jamaica, New York; and West Liberty Foods, LLC, West Liberty, Iowa.  Exel, Inc., based in Westerville, Ohio, operates distribution centers for the Company in Dayton, Ohio, and Osceola, Iowa.

 

Patents and Trademarks

 

There are numerous patents and trademarks important to the Company’s business.  The Company holds 39 U.S.-issued and 10 foreign patents.  Most of the trademarks are registered.  Some of the more significant owned or licensed trademarks used by the Company or its affiliates are:

 

HORMEL, ALWAYS TENDER, APPLEGATE, AUSTIN BLUES, BACON 1, BLACK LABEL, BREAD READY, CAFÉ H, CERATTI, CHI-CHI’S, COLUMBUS, COMPLEATS, CURE 81, CYTOSPORT, DAN’S PRIZE, DI LUSSO, DINTY MOORE, DON MIGUEL, DOÑA MARIA, EMBASA, EVOLVE, FAST ‘N EASY, FIRE BRAISED, FONTANINI, HERDEZ, HORMEL GATHERINGS, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN’S, LA VICTORIA, LAYOUT, LLOYD’S, MARY KITCHEN, MUSCLE MILK, NATURAL CHOICE, OLD SMOKEHOUSE, PILLOW PACK, RANGE BRAND, REV, ROSA GRANDE, SKIPPY, SPAM, SPECIAL RECIPE, THICK & EASY, VALLEY FRESH, and WHOLLY GUACAMOLE.

 

The Company’s patents expire after a term that is typically 20 years from the date of filing, with earlier expiration possible based on the Company’s decision to pay required maintenance fees.  As long as the Company intends to continue using its trademarks, they are renewed indefinitely.

 

Customers and Backlog Orders

 

During fiscal year 2017, sales to Wal-Mart Stores, Inc. (Wal-Mart) represented approximately 14.4 percent of the Company’s revenues (measured as gross sales less returns and allowances), compared to 13.7 percent in fiscal 2016.  Wal-Mart is a customer for all five segments of the Company.  The five largest customers in each segment make up approximately the following percentage of segment sales: 47 percent of Grocery Products, 40 percent of Refrigerated Foods, 42 percent of JOTS, 49 percent of Specialty Foods, and 20 percent of International & Other.  The loss of one or more of the top customers in any of these segments could have a material adverse effect on the results of such segment.  Backlog orders are not significant due to the perishable nature of a large portion of the products.  Orders are accepted and shipped on a current basis.

 

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Competition

 

The production and sale of meat and food products in the United States and internationally are highly competitive.  The Company competes with manufacturers of pork and turkey products, as well as national and regional producers of other meat and protein sources, such as beef, chicken, fish, peanut butter, and whey.  The Company believes its largest domestic competitors for its Refrigerated Foods segment in 2017 were Tyson Foods, Inc. and Smithfield Foods, Inc.; for its Grocery Products segment, Conagra Brands, Inc., General Mills, Inc., Campbell Soup Co., and J. M. Smucker Co.; and for JOTS, Cargill, Inc. and Butterball, LLC.

 

All segments compete on the basis of price, product quality and attributes, brand identification, breadth of product line, and customer service.  Through aggressive marketing and strong quality assurance programs, the Company’s strategy is to provide higher quality products that possess strong brand recognition, which would then support higher value perceptions from customers.

 

Research and Development

 

Research and development continues to be a vital part of the Company’s strategy to extend existing brands and expand into new branded items.  The expenditures for research and development for fiscal 2017, 2016, and 2015, were approximately $34.2 million, $34.7 million, and $32.0 million, respectively.  There are approximately 145 employees engaged in full-time research and development, 69 in the area of improving existing products and 76 in developing new products.

 

Employees

 

As of October 29, 2017, the Company had approximately 20,200 active domestic and foreign employees.

 

(d) Geographic Areas

 

Financial information about geographic areas, including total revenues attributed to the U.S. and all foreign countries in total for the last three fiscal years of the Company, is reported in Note P of the Notes to Consolidated Financial Statements of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, incorporated herein by reference.

 

(e) Available Information

 

The Company makes available, free of charge on its Web site at www.hormelfoods.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.  These reports are accessible under the caption, “Investors – Filings & Reports – SEC Filings” on the Company’s Web site and are available as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

 

The documents noted above are also available in print, free of charge, to any stockholder who requests them.

 

(f) Executive Officers of the Registrant

 

				CURRENT OFFICE AND PREVIOUS
NAME		AGE		FIVE YEARS EXPERIENCE		DATES
James P. Snee		50		Chairman of the Board, President and Chief Executive Officer		11/20/17 to Present
				President and Chief Executive Officer		10/31/16 to 11/19/17
				President and Chief Operating Officer		10/26/15 to 10/30/16
				Group Vice President/President Hormel Foods International Corporation		10/29/12 to 10/25/15
James N. Sheehan		62		Senior Vice President and Chief Financial Officer		10/31/16 to Present
				Vice President and Chief Accounting Officer		05/30/16 to 10/30/16
				Vice President and Controller		05/01/00 to 05/29/16
Steven G. Binder		60		Executive Vice President/President Hormel Business Units		10/31/11 to Present
Glenn R. Leitch		57		Executive Vice President (Supply Chain)		12/04/17 to Present
				Group Vice President/President Jennie-O Turkey Store, Inc.		10/31/11 to 12/03/17

 

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(f) Executive Officers of the Registrant - Continued

 

				CURRENT OFFICE AND PREVIOUS
NAME		AGE		FIVE YEARS EXPERIENCE		DATES
Deanna T. Brady		52		Group Vice President/President Consumer Product Sales		10/26/15 to Present
				Group Vice President (Foodservice)		10/28/13 to 10/25/15
				Vice President Sales (Foodservice Sales)		07/30/07 to 10/27/13
Thomas R. Day		59		Group Vice President (Refrigerated Foods)		10/28/13 to Present
				Group Vice President (Foodservice)		11/01/10 to 10/27/13
Donald H. Kremin		57		Group Vice President (Specialty Foods Group)		10/31/11 to Present
Luis G. Marconi		51		Group Vice President (Grocery Products)		10/31/16 to Present
				Vice President (Grocery Products Marketing)		03/05/12/to 10/30/16
James M. Splinter		55		Group Vice President (Corporate Strategy)		10/31/16 to Present
				Group Vice President (Grocery Products)		11/01/10 to 10/30/16
Larry L. Vorpahl		54		Group Vice President/President Hormel Foods International Corporation		10/26/15 to Present
				Group Vice President/President Consumer Products Sales		10/31/05 to 10/25/15
Mark A. Coffey		55		Senior Vice President (Supply Chain and Manufacturing)		03/28/17 to Present
				Vice President (Supply Chain)		02/06/17 to 03/27/17
				Vice President (Affiliated Businesses)		10/31/11 to 02/05/17
Janet L. Hogan		53		Senior Vice President (Human Resources)		03/28/17 to Present
				Vice President (Human Resources)		01/18/17 to 03/27/17
Steven J. Lykken		47		Senior Vice President/President Jennie-O Turkey Store, Inc.		12/04/17 to Present
				President Applegate Farms, Inc.		04/11/16 to 12/03/17
				Chief Operating Officer Applegate Farms, Inc.		08/17/15 to 04/10/16
				Senior Vice President Jennie-O Turkey Store, Inc. (Commodity/Supply Chain)		06/06/11 to 08/16/15
Lori J. Marco		50		Senior Vice President (External Affairs) and General Counsel		03/30/15 to Present
				Vice President (External Affairs) and General Counsel		01/24/11 to 03/29/15
Kevin L. Myers, Ph.D.		52		Senior Vice President (Research and Development and Quality Control)		03/30/15 to Present
				Vice President (Research and Development)		10/28/13 to 03/29/15
				Director Product and Process Development (Research and Development)		04/30/12 to 10/27/13
Jana L. Haynes		45		Vice President and Controller		05/30/16 to Present
				Director of Investor Relations		10/28/13 to 05/29/16
				Director of Taxes		01/01/07 to 10/27/13
Gary L. Jamison		52		Vice President and Treasurer		5/30/16 to Present
				Vice President and Chief Financial Officer Jennie-O Turkey Store, Inc.		12/31/12 to 05/29/16
				Vice President Finance Clougherty Packing, LLC		08/28/06 to 12/30/12

 

No family relationship exists among the executive officers.

 

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 time.

 

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Item 1A.  RISK FACTORS

 

Information on the Company’s risk factors included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 32 through 34 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.

 

Item 1B.  UNRESOLVED STAFF COMMENTS

 

None.

 

Item 2.  PROPERTIES

 

Location		Principal Segment (1)		Approximate Area (Square Feet, Unless Noted)			Owned or Leased		Lease Expiration Date
Harvest and Processing Plants
Austin, Minnesota		Refrigerated Foods Grocery Products Specialty Foods International & Other		1,406,000			Owned
Barron, Wisconsin		JOTS		425,000			Owned
Faribault, Minnesota		JOTS		191,000			Owned
Fremont, Nebraska		Refrigerated Foods Grocery Products Specialty Foods International & Other		700,000			Owned
Melrose, Minnesota		JOTS		133,000			Owned
Willmar, Minnesota		JOTS		339,000			Owned
Processing Plants
Albert Lea, Minnesota		Refrigerated Foods		80,000			Owned
Algona, Iowa		Refrigerated Foods		154,000			Owned
Alma, Kansas		Refrigerated Foods		66,000			Owned
Aurora, Illinois		Specialty Foods Grocery Products		147,000			Owned
Beijing, China		International & Other		95,000			80% Owned
Beloit, Wisconsin		Grocery Products Specialty Foods		346,000			Owned
		Grocery Products Specialty Foods		5,000			Leased		Monthly
Browerville, Minnesota		Refrigerated Foods		108,000			Owned
Dubuque, Iowa		Grocery Products		344,000			Owned
Hayward, California		Refrigerated Foods		128,000			Leased		April 2021
Hayward, California		Refrigerated Foods		67,000			Leased		September 2032
Jiaxing, China		International & Other		1,256,000			Owned
Knoxville, Iowa		Refrigerated Foods		131,000			Owned
Lathrop, California		Refrigerated Foods		87,000			Owned
Little Rock, Arkansas		Grocery Products		167,000			Owned
Long Prairie, Minnesota		Refrigerated Foods		96,000			Owned
McCook, Illinois		Refrigerated Foods		176,000			Owned
Mendota Heights, Minnesota		Refrigerated Foods		76,000			Owned
Montevideo, Minnesota		JOTS		89,000			Owned
Nevada, Iowa		Refrigerated Foods		226,000			Owned
Osceola, Iowa		Refrigerated Foods		376,000			Owned
Pelican Rapids, Minnesota		JOTS		375,000			Owned
Quakertown, Pennsylvania		Specialty Foods		13,000			Owned
Rochelle, Illinois		Refrigerated Foods Grocery Products Specialty Foods		406,000			Owned
Shanghai, China		International & Other		41,000			Leased		September 2018

 

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Item 2. PROPERTIES – Continued

 

				Approximate Area
				(Square Feet,			Owned or		Lease
Location		Principal Segment (1)		Unless Noted)			Leased		Expiration Date
Processing Plants (continued)
Sparta, Wisconsin		Specialty Foods		385,000			Owned
Tucker, Georgia		Grocery Products		259,000			Owned
		Refrigerated Foods
		Specialty Foods
Vinhedo, Brazil		International & Other		422,000			Leased		Monthly
Weifang, China		International & Other		117,000			Owned
Wichita, Kansas		Refrigerated Foods		89,000			Owned
Warehouse/Distribution Centers
Austin, Minnesota		Refrigerated Foods Grocery Products		72,000			Owned
Beijing, China		International & Other		24,000			Leased		June 2018
Dayton, Ohio		Refrigerated Foods Grocery Products Specialty Foods		140,000			Owned
Eldridge, Iowa		Grocery Products Specialty Foods		424,000			Leased		July 2019
Hayward, California		Refrigerated Foods		41,000			Leased		September 2032
Hayward, California		Refrigerated Foods		8,000			Leased		April 2021
Osceola, Iowa		Refrigerated Foods		233,000			Owned
Sparta, Wisconsin		Specialty Foods		50,000			Leased		June 2019
Willmar, Minnesota		JOTS		123,000			Owned
				5,000			Leased		November 2018
Hog Production Facilities
Las Animas, Colorado		Refrigerated Foods		815,000			Owned
Hatcheries
Barron, Wisconsin		JOTS		29,000			Owned
Detroit Lakes, Minnesota		JOTS		27,000			Owned
Henning, Minnesota		JOTS		22,000			Owned
Feed Mills
Atwater, Minnesota		JOTS		19,000			Owned
Barron, Wisconsin		JOTS		26,000			Owned
Dawson, Minnesota		JOTS		37,000			Owned
Faribault, Minnesota		JOTS		25,000			Owned
Henning, Minnesota		JOTS		5,000			Owned
Northfield, Minnesota		JOTS		17,000			Owned
Perham, Minnesota		JOTS		26,000			Owned
Swanville, Minnesota		JOTS		29,000			Owned
Turkey Farms
Minnesota and Wisconsin		JOTS		14,500 (2)			Owned
Research and Development
Austin, Minnesota		All Segments		135,000			Owned
Shanghai, China		International & Other		4,000			Leased		September 2018
Willmar, Minnesota		JOTS		10,000			Owned

 

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Item 2. PROPERTIES – Continued

 

				Approximate Area
				(Square Feet,			Owned or		Lease
Location		Principal Segment (1)		Unless Noted)			Leased		Expiration Date
Administrative Offices
Austin, Minnesota		All Segments		299,000			Owned
Beijing, China		International & Other		4,000			Leased		June 2018
Boulder, Colorado		Grocery Products		6,000			Leased		August 2019
Bridgewater, New Jersey		Refrigerated Foods		29,000			Leased		January 2024
Gainesville, Georgia		Refrigerated Foods		5,000			Leased		November 2019
Hayward, California		Refrigerated Foods		17,000			Leased		September 2032
Hayward, California		Refrigerated Foods		12,000			Leased		April 2021
Las Animas, Colorado		Refrigerated Foods		2,000			Leased		July 2019
Moorabbin, Australia		International & Other		3,000			Leased		September 2018
Shanghai, China		International & Other		20,000			Leased		September 2018
Walnut Creek, California		Specialty Foods		22,000			Leased		April 2023
Willmar, Minnesota		JOTS		56,000			Owned

 

(1)        Many of the Company’s properties are not exclusive to any one segment, and a few of the properties are utilized in all five segments. For locations that support multiple segments, but with a substantial percentage of activity attributable to certain segments, only the principal segments have been
listed.

(2)        Acres.

 

The Company believes its operating facilities are well maintained and suitable for current production volumes, and expansion plans are either completed or in process to accommodate all volumes anticipated in the foreseeable future.

 

Item 3.  LEGAL PROCEEDINGS

 

The Company is a party to various legal proceedings related to the on-going operation of its business, including claims both by and against the Company.  At any time, such proceedings typically involve claims related to product liability, contract disputes, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors, or suppliers.  Resolution of any currently known matters, either individually or in the aggregate, is not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.

 

Item 4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

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PART II

 

Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

The high and low sales price of the Company’s common stock and the dividends per share declared for each quarter of fiscal 2017 and fiscal 2016 are shown below (as adjusted for the two-for-one stock split distributed on February 9, 2016):

 

2017		High		Low		Dividend
First Quarter		$38.840		$33.180		$0.170
Second Quarter		37.960		33.970		0.170
Third Quarter		35.480		32.260		0.170
Fourth Quarter		34.530		29.750		0.170
2016		High		Low		Dividend
First Quarter		$40.390		$32.920		$0.145
Second Quarter		45.720		37.490		0.145
Third Quarter		40.535		33.700		0.145
Fourth Quarter		40.000		35.870		0.145

 

Additional information about dividends, principal market of trade, and number of stockholders on pages 68 and 69 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.  The Company’s common stock has been listed on the New York Stock Exchange since January 16, 1990.

 

Issuer purchases of equity securities in the fourth quarter of fiscal year 2017 are shown below:

 

Period		Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1
July 31, 2017 –
September 3, 2017		-		$  -		-		10,452,337
September 4, 2017 – October 1, 2017		-		-		-		10,452,337
October 2, 2017 – October 29, 2017		-		-		-		10,452,337
Total		-		$  -		-

 

1On January 31, 2013, the Company announced its Board of Directors had authorized the repurchase of 10,000,000 shares of its common stock with no expiration date.  The repurchase program was authorized at a meeting of the Company’s Board of Directors on January 29, 2013.  On November 23, 2015, the Board of Directors authorized a two-for-one split of the Company’s common stock.  As part of the resolution to approve that stock split, the number of shares remaining to be repurchased was adjusted proportionately.  The stock split was subsequently approved by stockholders at the Company’s Annual Meeting on January 26, 2016, and effected January 27, 2016.  All numbers in the table above reflect the impact of this stock split.

 

 

Item 6.  SELECTED FINANCIAL DATA

 

Selected Financial Data for the five fiscal years ended October 29, 2017, on page 14 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.

 

 

Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Information in the Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 15 through 35 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.

 

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Information on the Company’s exposure to market risk included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 34 and 35 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.

 

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Consolidated Financial Statements, including unaudited quarterly data, on pages 39 through 67 and the Report of Independent Registered Public Accounting Firm on page 38 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, are incorporated herein by reference.

 

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

Item 9A.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)).  In designing and evaluating the disclosure controls and procedures, management recognized any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance the information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission  rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

(a)               The report entitled “Management’s Report on Internal Control Over Financial Reporting” on page 36 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.

 

(b)               The report entitled “Report of Independent Registered Public Accounting Firm” on page 37 of the Annual Stockholders’ Report for the fiscal year ended October 29, 2017, is incorporated herein by reference.

 

(c)                During the fourth quarter of fiscal year 2017, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Item 9B.  OTHER INFORMATION

 

None.

 

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PART III

 

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Information under “Item 1 – Election of Directors” on pages 2 through 6, information under “Board Independence” on pages 8 and 9, and information under “Board of Director and Committee Meetings” on pages 9 and 10 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 30, 2018, is incorporated herein by reference.

 

Information concerning Executive Officers is set forth in Part I, Item 1(f) of this Annual Report on Form 10-K, pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K.

 

Information under “Section 16(a) Beneficial Ownership Reporting Compliance,” on page 43 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 30, 2018, is incorporated herein by reference.

 

The Company has adopted a Code of Ethical Business Conduct in compliance with applicable rules of the Securities and Exchange Commission that applies to its principal executive officer, its principal financial officer, and its principal accounting officer or controller, or persons performing similar functions.  A copy of the Code of Ethical Business Conduct is available on the Company’s Web site at www.hormelfoods.com, free of charge, under the caption, “Investors –Governance – Governance Documents.”  The Company intends to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Ethical Business Conduct by posting such information on the Company’s Web site at the address and location specified above.

 

Item 11.  EXECUTIVE COMPENSATION

 

Information commencing with “Executive Compensation” on page 16 through “Potential Payments Upon Termination at Fiscal 2017 Year End” on pages 31 and 32, and information under “Compensation of Directors” on pages 11 through 13 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 30, 2018, is incorporated herein by reference.

 

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

Information under “Equity Compensation Plan Information” on page 43, and information under “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” on pages 14 through 16 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 30, 2018, is incorporated herein by reference.

 

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Information under “Related Party Transactions” on page 43 and “Board Independence” on pages 8 and 9 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 30, 2018, is incorporated herein by reference.

 

Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Information under “Independent Registered Public Accounting Firm Fees” and “Audit Committee Preapproval Policies and Procedures” on page 14 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 30, 2018, is incorporated herein by reference.

 

 

 

PART IV

 

Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

The response to Item 15 is submitted as a separate section of this report.

 

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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.

 

	HORMEL FOODS CORPORATION
	By:	/s/ JAMES P. SNEE	December 20, 2017
		JAMES P. SNEE, Chairman of the Board,	Date
		President, Chief Executive Officer, and Director

 

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 dates indicated.

 

Name		Date		Title
/s/ JAMES P. SNEE		12/20/17		Chairman of the Board, President, Chief Executive
JAMES P. SNEE				Officer, and Director
				(Principal Executive Officer)
/s/ JAMES N. SHEEHAN		12/20/17		Senior Vice President and Chief Financial Officer
JAMES N. SHEEHAN				(Principal Financial Officer)
/s/ JANA L. HAYNES		12/20/17		Vice President and Controller
JANA L. HAYNES				(Principal Accounting Officer)
/s/ GARY C. BHOJWANI*		12/20/17		Director
GARY C. BHOJWANI
/s/ TERRELL K. CREWS*		12/20/17		Director
TERRELL K. CREWS
/s/ GLENN S. FORBES*		12/20/17		Director
GLENN S. FORBES
/s/ STEPHEN M. LACY*		12/20/17		Director
STEPHEN M. LACY
/s/ JOHN L. MORRISON*		12/20/17		Director
JOHN L. MORRISON
/s/ ELSA A. MURANO*		12/20/17		Director
ELSA A. MURANO
/s/ ROBERT C. NAKASONE*		12/20/17		Director
ROBERT C. NAKASONE
/s/ SUSAN K. NESTEGARD*		12/20/17		Director
SUSAN K. NESTEGARD
/s/ DAKOTA A. PIPPINS*		12/20/17		Director
DAKOTA A. PIPPINS
/s/ CHRISTOPHER J. POLICINSKI*		12/20/17		Director
CHRISTOPHER J. POLICINSKI
/s/ SALLY J. SMITH*		12/20/17		Director
SALLY J. SMITH
/s/ STEVEN A. WHITE*		12/20/17		Director
STEVEN A. WHITE
*By: /s/ JANA L. HAYNES		12/20/17
JANA L. HAYNES
as Attorney-In-Fact

 

F-1

 

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ANNUAL REPORT ON FORM 10-K

 

 

 

 

 

ITEM 15

 

 

 

LIST OF FINANCIAL STATEMENTS

 

 

 

FINANCIAL STATEMENT SCHEDULE

 

 

 

LIST OF EXHIBITS

 

 

 

 

 

FISCAL YEAR ENDED OCTOBER 29, 2017

 

 

 

HORMEL FOODS CORPORATION

 

 

 

Austin, Minnesota

 

15