Table of Contents
ANNUAL REPORT ON FORM 10-K
HORMEL FOODS CORPORATION
OCTOBER 25, 2009
Washington, D.C. 20549
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 25, 2009
or
o
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
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
41-0319970
(I.R.S. Employer Identification No.)
1 Hormel Place
Austin, Minnesota
55912-3680
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code (507) 437-5611
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $.0586 par value
New York Stock Exchange
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 o
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 o 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 o
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 o No o
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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of April 26, 2009 (the last business day of the registrant’s most recently completed second fiscal quarter) was $2,117,802,675 based on the closing price of $30.63 per share on that date.
As of November 27, 2009, the number of shares outstanding of each of the registrant’s classes of common stock was as follows:
Common Stock, $.0586 Par Value – 133,628,663 shares
Common Stock Non-Voting, $.01 Par Value – 0 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, 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 26, 2010, are incorporated by reference into Part III, Items 10-14.
1
TABLE OF CONTENTS
PART I
Item 1.
BUSINESS
3
Item 1A.
RISK FACTORS
8
Item 1B.
UNRESOLVED STAFF COMMENTS
Item 2.
PROPERTIES
9
Item 3.
LEGAL PROCEEDINGS
11
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
12
Item 6.
SELECTED FINANCIAL DATA
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
13
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Item 9A.
CONTROLS AND PROCEDURES
Item 9B.
OTHER INFORMATION
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11.
EXECUTIVE COMPENSATION
14
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
15
2
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 George A. Hormel & Company. The Company started as a processor of meat and food products and continues in this line of business. The Company 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, Canada, China, Japan, and the Philippines. HFIC also has a global presence with minority positions in food companies in Mexico (Hormel Alimentos, 50% holding) and the Philippines (Purefoods-Hormel, 40% holding), and in a hog production and processing operation in Vietnam (San Miguel Purefoods (Vietnam) Co. Ltd., 49% holding).
On October 26, 2009, subsequent to the end of the fiscal year, the Company also completed the formation of MegaMex Foods, LLC, a joint venture which will market Mexican foods in the United States. The Company will have a 50 percent ownership interest in this joint venture, and the investment will be included in the Company’s Grocery Products segment.
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, or in the markets or methods of distribution since the beginning of the 2009 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 All Other. Net sales to unaffiliated customers and operating profit, and the presentation of certain other financial information by segment, are reported in Note L 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 Stockholder’s Report for the fiscal year ended October 25, 2009, incorporated herein by reference.
(c) Description of Business
The Company’s products primarily consist of meat and other food products. The meat products are sold fresh, frozen, cured, smoked, cooked, and canned. The percentages of total revenues contributed by classes of similar products for the last three fiscal years of the Company are as follows:
Fiscal Year Ended
October 25, 2009
October 26, 2008
October 28, 2007
Perishable meat
53.9
%
53.5
54.2
Poultry
19.3
19.2
Shelf-stable
17.3
17.1
16.8
Other
9.5
10.2
9.8
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.
Perishable meat includes fresh meats, sausages, hams, wieners, and bacon (excluding JOTS products). The Poultry category is composed primarily of JOTS products. Shelf-stable includes canned luncheon meats, shelf-stable microwaveable entrees, stews, chilies, hash, meat spreads, flour and corn tortillas, salsas, tortilla chips, and other items that do not require refrigeration. The Other category primarily consists of nutritional food products and supplements, sugar and sugar substitutes, creamers, salt and pepper products, sauces and salad dressings, dessert and drink mixes, and industrial gelatin products.
Construction of the new production facility in Dubuque, Iowa continues, which will provide additional capacity for canned and microwave tray items beginning in January 2010. No other new products in fiscal 2009 required a material investment of the Company’s assets.
Domestically, the Company sells its products in all 50 states. The Company’s products are sold through its sales personnel, operating in assigned territories coordinated from sales offices located in most of the larger U.S. cities, as well as independent brokers and distributors. Dedicated sales teams also serve major retail customers and coordinate sales of both Grocery Products and Refrigerated Foods products. As of October 25, 2009, the Company had approximately 662 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, Canada, China, England, Japan, Mexico, and Micronesia. The distribution of export sales to customers is by common carrier, while the China 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.
The Company has, for the past several years, been concentrating on processed 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. Although the live pork industry has evolved to large, vertically integrated, year-round confinement operations, and supply contracts have become prevalent in the industry, there is still a seasonal variation in the supply of fresh pork materials. The Company’s expanding line of processed items 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 Colorado, Idaho, Illinois, Iowa, Kansas, Minnesota, Nebraska, Oklahoma, South Dakota, Texas, Utah, Wisconsin, and Canada. 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 movement toward year-round confinement operations which operate under supply agreements with processors has resulted in fewer hogs being available on the spot cash market. The Company, along with others in the industry, uses supply contracts to manage the effects of this trend and to ensure a stable supply of raw materials. The Company has converted the majority of its contracts to market-based formulas to better match input costs with customer pricing, and all contract costs are fully reflected in the Company’s reported financial statements. In fiscal 2009, the Company purchased 93 percent of its hogs under supply contracts. The Company also procures a portion of its hogs through farms that it either owns or operates in Arizona, California, Colorado, Kansas, and Wyoming.
In fiscal 2009, JOTS raised turkeys representing approximately 69 percent of the volume needed to meet its raw material requirements for whole bird and processed 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 periodically hedges a portion of its anticipated purchases of grain using futures contracts.
The Company has four plants that harvest hogs for processing. Quality Pork Processors, Inc. of Dallas, Texas, operates the harvesting facility at Austin, Minnesota under a custom harvesting arrangement. The Company has six turkey harvest and processing operations, and 40 facilities that produce and distribute other manufactured items. Albert Lea Select Foods, Inc. operates the processing facility at 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: Steuben Foods, Jamaica, New York; Lakeside Packing Company, Manitowoc, Wisconsin; Schroeder Milk, Maplewood, Minnesota; Reichel Foods, Rochester, Minnesota; Power Packaging, St. Charles, Illinois; and Tony Downs, St. James, Minnesota. Power
4
Logistics, Inc., based in St. Charles, Illinois, operates distribution centers for the Company in Dayton, Ohio, and Osceola, Iowa.
There are numerous patents and trademarks that are important to the Company’s business. The Company holds 8 foreign and 46 U.S.-issued patents. Some of the trademarks are registered and some are not. Some of the more significant owned or licensed trademarks used by the Company or its affiliates are:
HORMEL, ALWAYS TENDER, AMERICAN CLASSICS, AUSTIN BLUES, BANGKOK PADANG, BLACK LABEL, BREAD READY, BÚFALO, CAFÉ H, CALIFORNIA NATURAL, CHI-CHI’S, COMPLEATS, CURE 81, CUREMASTER, DAN’S PRIZE, DI LUSSO, DINTY MOORE, DODGER DOG, DOÑA MARIA, DUBUQUE, EMBASA, FARMER JOHN, FAST ‘N EASY, GRANDE GOURMET, HERB-OX, HERDEZ, HIBACHI GRILL, HOMELAND, HOUSE OF TSANG, JENNIE-O TURKEY STORE, KID’S KITCHEN, LA VICTORIA, LAYOUT, LITTLE SIZZLERS, LLOYD’S, MAGNIFOODS, MANNY’S, MARRAKESH EXPRESS, MARY KITCHEN, NATURAL CHOICE, NATURASELECT, OLD SMOKEHOUSE, PELOPONNESE, PILLOW PACK, POCO PAC, PREP CHEF, PREMORO, RANGE BRAND, RICO OLE’, ROSA GRANDE, SAAG’S, SANDWICH MAKER, SAUCY BLUES, SPAM, SPAMTASTIC, STAGG, TEZZATA, THICK & EASY, VALLEY FRESH, and WRANGLERS.
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.
During fiscal year 2009, sales to Wal-Mart Stores, Inc. (Wal-Mart) represented approximately 13 percent of the Company’s revenues (measured as gross sales less returns and allowances), an increase of one percent from fiscal year 2008. 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: 48 percent of Grocery Products, 38 percent of Refrigerated Foods, 40 percent of JOTS, 40 percent of Specialty Foods, and 31 percent of All 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.
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, and fish. The Company believes that its largest domestic competitors for its Refrigerated Foods segment in 2009 were Tyson Foods, Smithfield Foods, and Sara Lee Corporation; for its Grocery Products segment, ConAgra Foods, General Mills, and Campbell Soup Co.; and for JOTS, Cargill, Inc. and Butterball, LLC.
All segments compete on the basis of price, product quality, brand identification, 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.
The Company competes using this same strategy in international markets around the world.
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 2009, 2008, and 2007, were approximately $25,398,000, $22,689,000, and $21,475,000, respectively. There are 113 employees engaged in full time research and development, 54 in the area of improving existing products and 59 in developing new products.
As of October 25, 2009, the Company had approximately 18,600 active employees.
5
(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 L of the Notes to Consolidated Financial Statements of the Annual Stockholder’s Report for the fiscal year ended October 25, 2009, 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 “Investors” caption of 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
YEAR
FIRST
CURRENT OFFICE AND PREVIOUS
ELECTED
NAME
AGE
FIVE YEARS EXPERIENCE
DATES
OFFICER
Jeffrey M. Ettinger
51
Chairman of the Board, President and Chief Executive Officer
11/21/06 to Present
1998
President and Chief Executive Officer
01/01/06 to 11/20/06
President and Chief Operating Officer
06/28/04 to 12/31/05
Jody H. Feragen
53
Senior Vice President and Chief Financial Officer
01/01/07 to Present
2000
Vice President (Finance) and Treasurer
10/31/05 to 12/31/06
Vice President and Treasurer
10/29/01 to 10/30/05
Ronald W. Fielding
56
Executive Vice President (Grocery Products/ Corporate Development)
04/07/08 to Present
1997
Executive Vice President (Grocery Products/ Mergers and Acquisitions)
01/01/07 to 04/06/08
Group Vice President (Grocery Products)
Group Vice President (Consumer Products Sales)
07/26/04 to 10/30/05
Steven G. Binder
52
Group Vice President (Refrigerated Foods)
07/30/07 to Present
Group Vice President (Foodservice)
10/30/00 to 07/29/07
Richard A. Bross
58
Group Vice President/President Hormel Foods International Corporation
10/29/01 to Present
1995
Robert A. Tegt
Group Vice President/President Jennie-O Turkey Store
12/01/08 to Present
2005
Group Vice President (Specialty Foods Group)
10/29/07 to 11/30/08
Vice President (Specialty Foods Group)
01/01/06 to 10/28/07
Senior Vice President (Foodservice Division) — Jennie-O Turkey Store
04/30/01 to 12/31/05
Michael D. Tolbert
2004
10/31/05 to 11/30/08
Vice President/President Jennie-O Turkey Store
05/31/04 to 10/30/05
Larry L. Vorpahl
46
10/31/05 to Present
1999
Vice President and General Manager (Grocery Products)
12/01/03 to 10/30/05
6
(f) Executive Officers of the Registrant-Continued
James W. Cavanaugh
60
Senior Vice President (External Affairs) and General Counsel
10/29/07 to Present
2001
Senior Vice President (External Affairs), General Counsel, and Corporate Secretary
01/01/05 to 10/28/07
Corporate Secretary and Senior Attorney
01/29/01 to 12/31/04
Thomas R. Day
Senior Vice President (Foodservice)
Vice President (Foodservice Sales)
William F. Snyder
Senior Vice President (Supply Chain)
Vice President (Refrigerated Foods Operations)
11/01/99 to 10/30/05
D. Scott Aakre
45
Vice President (Marketing-Grocery Products)
Director of Marketing (Grocery Products)
09/15/03 to 10/30/05
Deanna T. Brady
44
2007
Regional Sales Manager-West (Foodservice Sales)
06/02/03 to 07/29/07
Julie H. Craven
54
Vice President (Corporate Communications)
08/01/05 to Present
Director (Corporate Communications)
05/20/02 to 07/31/05
Michael L. Devine
55
Vice President (Grocery Products Operations)
10/27/08 to Present
2008
Director (Grocery Products Operations Strategy)
09/03/07 to 10/26/08
Plant Manager (Stockton)
07/29/96 to 09/02/07
Bryan D. Farnsworth
Vice President (Quality Management)
Director (Quality Management)
12/02/96 to 07/31/05
Roland G. Gentzler
Assistant Controller and Director of Finance (Refrigerated Foods)
05/01/00 to 12/31/06
Dennis B. Goettsch
Vice President (Foodservice Marketing)
10/30/00 to Present
Daniel A. Hartzog
Vice President (Consumer Products Sales)
07/26/04 to Present
David P. Juhlke
50
Vice President (Human Resources)
Vice President (Human Resources/Administration) — Jennie-O Turkey Store
04/30/01 to 10/30/05
Donald H. Kremin
49
Vice President (Consumer Product Sales)
Director Wal-Mart Business Team (Consumer Product Sales)
09/05/05 to 10/28/07
Director Customer Development-Eastern Chains (Consumer Product Sales)
07/26/04 to 09/04/05
Phillip L. Minerich, Ph.D.
Vice President (Research and Development)
Director (Product & Process Development & Packaging)
07/14/03 to 10/30/05
Kurt F. Mueller
Douglas R. Reetz
7
James R. Schroeder
Vice President (Engineering)
04/27/09 to Present
2009
Manager of Project and Plant Engineering (Corporate Office)
01/11/99 to 04/26/09
Bruce R. Schweitzer
Plant Manager (Austin)
07/19/04 to 10/30/05
James N. Sheehan
Vice President and Controller
05/01/00 to Present
James P. Snee
42
Vice President (Affiliated Business Units- Refrigerated Foods)
Director (Purchasing)
02/13/06 to 10/26/08
Regional Sales Manager-West and Corporate National Accounts Manager (Foodservice Sales)
11/01/99 to 02/12/06
James M. Splinter
47
Vice President (Marketing-Consumer Products- Refrigerated Foods)
06/02/03 to Present
2003
Joe C. Swedberg
Vice President (Legislative Affairs)
08/11/08 to Present
Vice President (Legislative Affairs and Marketing Services)
06/02/03 to 08/10/08
Brian D. Johnson
Corporate Secretary & Senior Attorney
Assistant Secretary & Senior Attorney
01/31/05 to 10/28/07
Senior Attorney
08/14/00 to 01/30/05
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 regular or special meeting.
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 31 through 34 of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, 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 orLeased
LeaseExpirationDate
Harvest and Processing Plants
Refrigerated Foods
Grocery Products
Specialty Foods
All Other
1,352,000
Owned
Barron, Wisconsin
JOTS
372,000
Beijing, China
94,000
80.0% Owned
Faribault, Minnesota
170,000
Fremont, Nebraska
670,000
Melrose, Minnesota
136,000
Vernon, California
632,000
93,000
Leased
March 2014
Willmar, Minnesota
337,000
Processing Plants
Albert Lea, Minnesota
78,000
Algona, Iowa
153,000
Alma, Kansas
70,000
Ames, Iowa
9,000
Monthly
Aurora, Illinois
141,000
Beloit, Wisconsin
339,000
Bremen, Georgia
156,000
Browerville, Minnesota
95,000
Chino, California
88,000
April 2015
Dubuque, Iowa
342,000
Duluth, Georgia
80,000
Ft. Dodge, Iowa
17,000
Knoxville, Iowa
130,000
Lathrop, California
85,000
Long Prairie, Minnesota
82,000
Laverton, Australia
22,000
March 2011
Mitchellville, Iowa
81,000
Montevideo, Minnesota
Nevada, Iowa
139,000
New Berlin, Wisconsin
84,000
February 2012
Osceola, Iowa
365,000
Pelican Rapids, Minnesota
282,000
Perrysburg, Ohio
183,000
Quakertown, Pennsylvania
10,000
Rochelle, Illinois
404,000
San Leandro, California
41,000
November 2021
Savannah, Georgia
300,000
Shanghai, China
33,000
80.7% Owned
4,000
September 2011
Sparta, Wisconsin
385,000
Item 2. PROPERTIES - - Continued
Processing Plants (continued)
St. Paul, Minnesota
58,000
Stockton, California
Tucker, Georgia
Turlock, California
Visalia, California
107,000
Wichita, Kansas
Warehouse/Distribution Centers
83,000
None
Bondurant, Iowa
99,000
Dayton, Ohio
140,000
Eldridge, Iowa
424,000
July 2019
Fresno, California
25,000
2,000
December 2009
233,000
232,000
July 2010
96,000
September 2010
118,000
112,000
Hog Confinement Buildings
Albin, Wyoming
458,000
Corcoran, California
816,000
December 2010
Las Animas, Colorado
653,000
Pine Bluffs, Wyoming
64,000
Snowflake, Arizona
1,506,000
Hatcheries
28,000
Detroit Lakes, Minnesota
31,000
Henning, Minnesota
Feed Mills
6,000
Atwater, Minnesota
19,000
26,000
5,000
Dawson, Minnesota
37,000
Northfield, Minnesota
10
Feed Mills (continued)
Perham, Minnesota
Swanville, Minnesota
29,000
Turkey Farms
Minnesota and Wisconsin
15,000(2)
All Segments
Administrative Offices
231,000
May 2010
Gainesville, Georgia
June 2014
14,000
11,000
July 2011
Spicer, Minnesota
June 2011
21,000
(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’s production facility in Dubuque, Iowa, is under construction and is scheduled to begin manufacturing in January 2010. The Company believes its operating facilities are well maintained and suitable for current production volumes, and expansion plans are 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. The resolution of any currently known matters is not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth quarter of the 2009 fiscal year.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES
The high and low sales prices of the Company’s common stock and the dividends per share declared for each quarter of fiscal 2009 and fiscal 2008, respectively, are shown below:
High
Low
Dividend
First Quarter
$
31.87
24.84
0.190
Second Quarter
33.43
29.26
Third Quarter
36.36
29.17
Fourth Quarter
39.02
34.64
41.82
34.90
0.185
42.64
37.24
41.98
33.99
38.08
27.26
Additional information about dividends, principal market of trade, and number of stockholders on page 61 of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, 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 2009 are shown below:
Period
TotalNumber ofSharesPurchased(1)
AveragePrice PaidPer Share
Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms(2)
Maximum Number ofShares that May YetBe Purchased Underthe Plans orPrograms(2)
July 27, 2009 —August 30, 2009
30,000
37.41
1,758,572
August 31, 2009 — September 27, 2009
284,948
36.96
284,912
1,473,660
September 28, 2009 — October 25, 2009
355,705
35.48
1,117,955
Total
670,653
36.19
670,617
The 36 shares repurchased during the quarter, other than through publicly announced plans or programs, represent purchases for the Company’s employee awards program.
On October 2, 2002, the Company announced that its Board of Directors had authorized the Company to repurchase up to 10,000,000 shares of common stock with no expiration date.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data for the five fiscal years ended October 25, 2009, on page 17 of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, 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 18 through 35 of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, is incorporated herein by reference.
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 25, 2009, is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements, including unaudited quarterly data, on pages 39 through 60 and the Report of Independent Registered Public Accounting Firm on page 38 of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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 that 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 that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that 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 that 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 Stockholder’s Report for the fiscal year ended October 25, 2009, is incorporated herein by reference.
(b) The report entitled “Report of Independent Registered Public Accounting Firm” on page 37 of the Annual Stockholder’s Report for the fiscal year ended October 25, 2009, is incorporated herein by reference.
(c) During the fourth quarter of fiscal year 2009, there has been no changed 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
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information under “Item 1 - Election of Directors” on pages 2 through 4, information under “Board Independence” on pages 5 and 6, and information under “Board of Director and Committee Meetings” on pages 6 and 7 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 26, 2010, is incorporated herein by reference.
Information concerning Executive Officers is set forth in Part I, Item 1(f) of this Annual Report of 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 30 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 26, 2010, 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 — Corporate Governance.” 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 13 through “Potential Payments Upon Termination at Fiscal 2009 Year End” on pages 29 and 30, and information under “Compensation of Directors” on pages 9 through 11 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 26, 2010, is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information regarding the Company’s equity compensation plans as of October 25, 2009, is shown below:
Plan Category
Number of Securities to beIssued UponExercise ofOutstandingOptions, Warrantsand Rights
Weighted-AverageExercise Priceof OutstandingOptions,Warrants andRights
Number of Securities RemainingAvailable for Future Issuanceunder Equity CompensationPlans (Excluding SecuritiesReflected in Column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
11,603,865
30.86
18,997,874
Equity compensation plans not approved by security holders
—
Information under “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” on pages 12 and 13 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 26, 2010, is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information under “Related Party Transactions” on page 30 and “Board Independence” on pages 5 and 6 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 26, 2010, 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 pages 11 and 12 of the Company’s definitive proxy statement for the Annual Meeting of Stockholders to be held January 26, 2010, is incorporated herein by reference.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The response to Item 15 is submitted as a separate section of this report.
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.
By:
/s/ JEFFREY M. ETTINGER
December 16, 2009
JEFFREY M. ETTINGER, Chairman of the
Date
Board, President 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 dates indicated.
Name
Title
12/16/09
Chairman of the Board, President, Chief
JEFFREY M. ETTINGER
Executive Officer, and Director
(Principal Executive Officer)
/s/ JODY H. FERAGEN
Senior Vice President, Chief Financial
JODY H. FERAGEN
Officer, and Director
(Principal Financial Officer)
/s/ JAMES N. SHEEHAN
JAMES N. SHEEHAN
(Principal Accounting Officer)
/s/ TERRELL K. CREWS*
Director
TERRELL K. CREWS
/s/ SUSAN I. MARVIN*
SUSAN I. MARVIN
/s/ JOHN L. MORRISON*
JOHN L. MORRISON
ELSA A. MURANO
/s/ ROBERT C. NAKASONE*
ROBERT C. NAKASONE
/s/ SUSAN K. NESTEGARD*
SUSAN K. NESTEGARD
/s/ RONALD D. PEARSON*
RONALD D. PEARSON
/s/ DAKOTA A. PIPPINS*
DAKOTA A. PIPPINS
/s/ DR. HUGH C. SMITH*
DR. HUGH C. SMITH
/s/ JOHN G. TURNER*
JOHN G. TURNER
*By: /s/ JAMES N. SHEEHAN
JAMES N. SHEEHAN,
as Attorney-In-Fact
F-1
ITEM 15
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULE
LIST OF EXHIBITS
FISCAL YEAR ENDED OCTOBER 25, 2009
16
F-2
Item 15
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
The following consolidated financial statements of Hormel Foods Corporation included in the Annual Stockholders’ Report for the fiscal year ended October 25, 2009, are incorporated herein by reference in Item 8 of Part II of this report:
Consolidated Statements of Financial Position—October 25, 2009, and October 26, 2008.
Consolidated Statements of Operations—Fiscal Years Ended October 25, 2009, October 26, 2008, and October 28, 2007.
Consolidated Statements of Changes in Shareholders’ Investment—Fiscal Years Ended October 25, 2009, October 26, 2008, and October 28, 2007.
Consolidated Statements of Cash Flows—Fiscal Years Ended October 25, 2009, October 26, 2008, and October 28, 2007.
Notes to Financial Statements—October 25, 2009.
Report of Independent Registered Public Accounting Firm
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule of Hormel Foods Corporation required pursuant to Item 15(c) is submitted herewith:
Schedule II - Valuation and Qualifying Accounts and Reserves...F-3
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.
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.
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F-3
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In Thousands)
Additions
Balance at
Charged to
Beginning
Costs and
Other Accounts-
Deductions-
End of
Classification
of Period
Expenses
Describe
Valuation reserve deduction from assets account:
Fiscal year ended
Allowance for
doubtful accounts
1,112
receivable
3,144
1,821
0
(211)
4,064
768
3,180
473
117
(3)
(142)
979
3,922
(257
)
187
(4)
(307)
Note (1) — Uncollectible accounts written off.
Note (2) — Recoveries on accounts previously written off.
Note (3) — Increase in the reserve due to the inclusion of Boca Grande accounts receivable.
Note (4) — Increase in the reserve due to the inclusion of Burke and Provena accounts receivable.
18
NUMBER
DESCRIPTION OF DOCUMENT
3.1(1)
Certificate of Incorporation as amended to date. (Incorporated by reference to Exhibit 3A-1 to Hormel’s Annual Report on Form 10-K/A for the fiscal year ended October 28, 2000, File No. 001-02402.)
3.2(1)
Bylaws as amended to date. (Incorporated by reference to Exhibit 3.2 to Hormel’s Quarterly Report on Form 10-Q for the quarter ended January 25, 2009, File No. 001-02402.)
4.1(1)
Indenture dated as of June 1, 2001, between Hormel and U.S. Bank Trust National Association, as Trustee relating to certain outstanding debt securities. (Incorporated by reference to Exhibit 4.1 to Hormel’s Registration Statement on Form S-4 dated, August 28, 2001, File No. 333-68498.)
4.2(1)
Supplemental Indenture No. 1 dated as of June 4, 2001, to Indenture dated as of June 1, 2001, between Hormel and U.S. Bank Trust National Association, as Trustee, relating to certain outstanding debt securities. (Incorporated by reference to Exhibit 4.2 to Hormel’s Registration Statement on Form S-4 dated August 28, 2001, File No. 333-68498.)
4.3(1)
Letter of Representations dated June 5, 2001, among Hormel, U.S. Bank Trust National Association, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of Hormel. (Incorporated by reference to Exhibit 4.3 to Hormel’s Registration Statement on Form S-4 dated August 28, 2001, File No. 333-68498.)
4.4(1)
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of holders of certain long-term debt are not filed. Hormel agrees to furnish copies thereof to the Securities and Exchange Commission upon request.
10.1(1)(3)
Hormel Foods Corporation Operators’ Shares Incentive Compensation Plan. (Incorporated by reference to Appendix A to Hormel’s definitive Proxy Statement filed on December 19, 2007, File No. 001-02402.)
10.2(1)(3)
Hormel Foods Corporation Supplemental Executive Retirement Plan (2005 Restatement). (Incorporated by reference to Exhibit 10.1 to Hormel’s Current Report on Form 8-K dated September 18, 2006, File No. 001-02402.)
10.3(1)(3)
Hormel Foods Corporation 2000 Stock Incentive Plan (Amended 1-31-2006). (Incorporated by reference to Exhibit 10.1 to Hormel’s Current Report on Form 8-K dated January 31, 2006, File No. 001-02402.)
10.4(1)(3)
Hormel Foods Corporation Executive Deferred Income Plan II (2008 Restatement (2nd)). (Incorporated by reference to Exhibit 10.1 to Hormel’s Current Report on Form 8-K dated July 28, 2008, File No. 001-02402.)
10.5(1)(3)
Form of Indemnification Agreement for Directors and Officers. (Incorporated by reference to Exhibit 10.8 to Hormel’s Annual Report on Form 10-K for the fiscal year ended October 26, 2002, File No. 001-02402.)
10.6(1)(3)
Hormel Foods Corporation Nonemployee Director Deferred Stock Plan (Plan Adopted October 4, 1999; Amended and Restated Effective January 1, 2008). (Incorporated by reference to Exhibit 10.6 to Hormel’s Annual Report on Form 10-K for the fiscal year ended October 26, 2008, File No. 001-02402.)
10.7(1)(3)
Hormel Foods Corporation 2009 Nonemployee Director Deferred Stock Plan (Plan Adopted November 24, 2008). (Incorporated by reference to Exhibit 10.2 to Hormel’s Quarterly Report on Form 10-Q for the quarter ended January 25, 2009, File No. 001-02402.)
10.8(1)(3)
Hormel Foods Corporation 2009 Long-Term Incentive Plan. (Incorporated by reference to Exhibit 10.1 to Hormel’s Current Report on Form 8-K dated January 27, 2009, File No. 001-02402.)
19
LIST OF EXHIBITS (CONTINUED)
10.9(1)(3)
Hormel Survivor Income Plan for Executives (1993 Restatement). (Incorporated by reference to Exhibit 10.11 to Hormel’s Annual Report on Form 10-K for the fiscal year ended October 29, 2006, File No. 001-02402.)
11.1(1)
Statement re: computation of per share earnings. (Included in Exhibit 13.1 filed with this Annual Report on Form 10-K for the fiscal year ended October 25, 2009.)
13.1(2)
Pages 17 through 62 of the Annual Stockholders’ Report for the fiscal year ended October 25, 2009.
18.1(1)
Preferability Letter Regarding Change in Accounting Principle. (Incorporated by reference to Exhibit 18.1 to Hormel’s Quarterly Report on Form 10-Q for the quarter ended January 25, 2009, File No. 001-02402.)
21.1(2)
Subsidiaries of the Registrant.
23.1(2)
Consent of Independent Registered Public Accounting Firm.
24.1(2)
Power of Attorney.
31.1(2)
Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2(2)
32.1(2)
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1(1)
U.S. $200,000,000 Credit Agreement, dated as of June 1, 2005, between Hormel, the banks identified on the signature pages thereof, and Citicorp U.S.A. Inc., as Administrative Agent. (Incorporated by reference to Exhibit 99 to Hormel’s Current Report on Form 8-K dated June 1, 2005, File No. 001-02402.)
Document has previously been filed with the Securities and Exchange Commission and is incorporated herein by reference.
These exhibits transmitted via EDGAR.
Management contract or compensatory plan or arrangement.
20