Company Quick10K Filing
Quick10K
Hormel Foods
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$39.51 536 $21,160
10-Q 2019-04-28 Quarter: 2019-04-28
10-Q 2019-01-27 Quarter: 2019-01-27
10-K 2018-10-28 Annual: 2018-10-28
10-Q 2018-07-29 Quarter: 2018-07-29
10-Q 2018-04-29 Quarter: 2018-04-29
10-Q 2018-01-28 Quarter: 2018-01-28
10-K 2017-10-29 Annual: 2017-10-29
10-Q 2017-07-30 Quarter: 2017-07-30
10-Q 2017-04-30 Quarter: 2017-04-30
10-Q 2017-01-29 Quarter: 2017-01-29
10-K 2016-10-30 Annual: 2016-10-30
10-Q 2016-07-24 Quarter: 2016-07-24
10-Q 2016-04-24 Quarter: 2016-04-24
10-Q 2016-01-24 Quarter: 2016-01-24
10-K 2015-10-25 Annual: 2015-10-25
10-Q 2015-07-26 Quarter: 2015-07-26
10-Q 2015-04-26 Quarter: 2015-04-26
10-Q 2015-01-25 Quarter: 2015-01-25
10-K 2014-10-26 Annual: 2014-10-26
10-Q 2014-07-27 Quarter: 2014-07-27
10-Q 2014-04-27 Quarter: 2014-04-27
10-Q 2014-01-26 Quarter: 2014-01-26
8-K 2019-05-23 Earnings, Exhibits
8-K 2019-04-15 Regulation FD, Exhibits
8-K 2019-03-25 Officers, Exhibits
8-K 2019-02-21 Earnings, Exhibits
8-K 2019-02-19 Regulation FD, Exhibits
8-K 2019-01-29 Code of Ethics, Shareholder Vote, Exhibits
8-K 2018-11-20 Earnings, Exhibits
8-K 2018-11-19 Officers, Exhibits
8-K 2018-08-23 Earnings, Exhibits
8-K 2018-05-24 Earnings, Exhibits
8-K 2018-05-21 Amend Bylaw, Exhibits
8-K 2018-02-22 Earnings, Exhibits
8-K 2018-02-06 Officers, Exhibits
8-K 2018-01-30 Officers, Shareholder Vote, Exhibits
FSLR First Solar 6,210
FCNCA First Citizens Bancshares 5,100
WAL Western Alliance 4,940
CAPL Crossamerica Partners 540
WINS Wins Finance Holdings 411
NWFL Norwood Financial 205
ALOT Astronova 177
JP Jupai Holdings 125
GST Gastar Exploration 0
UNIR Uniroyal Global 0
HRL 2019-04-28
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 hrl-20190428xex311.htm
EX-31.2 hrl-20190428xex312.htm
EX-32.1 hrl-20190428xex321.htm

Hormel Foods Earnings 2019-04-28

HRL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 28, 2019
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)
Delaware
(State or other jurisdiction of incorporation or organization)
 
41-0319970
(I.R.S. Employer Identification No.)
1 Hormel Place
Austin, Minnesota
(Address of principal executive offices)
 
55912-3680
(Zip Code)
(507) 437-5611
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock $0.01465 par value
 
HRL
 
New York Stock Exchange
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      X   YES                         NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                X   YES                         NO
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          
 
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 Exchange Act).        Yes  X  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at June 2, 2019
 
Common Stock
 
$.01465 par value      
533,844,537

 
Common Stock Non-Voting
 
$.01 par value                      
–0–

 


Table of Contents

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands, except share and per share amounts)
 
 
 
 
 
April 28,
2019
 
October 28,
2018
 
(Unaudited)
 
 

Assets
 

 
 

Current Assets
 

 
 

Cash and Cash Equivalents
$
639,327

 
$
459,136

Short-term Marketable Securities
6,675

 

Accounts Receivable
537,447

 
600,438

Inventories
1,030,574

 
963,527

Income Taxes Receivable
293

 
3,995

Prepaid Expenses
24,219

 
16,342

Other Current Assets
12,132

 
6,662

Total Current Assets
2,250,667

 
2,050,100

 
 
 
 
Goodwill
2,486,635

 
2,714,116

 
 
 
 
Other Intangibles
1,040,392

 
1,207,219

 
 
 
 
Pension Assets
205,229

 
195,153

 
 
 
 
Investments in and Receivables from Affiliates
276,478

 
273,153

 
 
 
 
Other Assets
181,777

 
189,951

 
 
 
 
Property, Plant and Equipment
 
 
 
Land
49,642

 
50,332

Buildings
1,011,242

 
956,260

Equipment
1,851,640

 
1,863,020

Construction in Progress
259,683

 
332,205

Less: Allowance for Depreciation
(1,677,640
)
 
(1,689,217
)
Net Property, Plant and Equipment
1,494,567

 
1,512,600

 
 
 
 
Total Assets
$
7,935,745

 
$
8,142,292

 
See Notes to Consolidated Financial Statements

3

Table of Contents

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands, except share and per share amounts)
 
 
 
 
 
April 28,
2019
 
October 28,
2018
 
(Unaudited)
 
 
Liabilities and Shareholders' Investment
 

 
 

Current Liabilities
 

 
 

Accounts Payable
$
523,673

 
$
618,830

Accrued Expenses
59,144

 
48,298

Accrued Workers Compensation
24,935

 
24,594

Accrued Marketing Expenses
126,252

 
118,887

Employee Related Expenses
182,720

 
224,736

Taxes Payable
22,154

 
2,490

Interest and Dividends Payable
112,798

 
101,079

Total Current Liabilities
1,051,676

 
1,138,914

 
 
 
 
Long-term Debt–Less Current Maturities
250,000

 
624,840

 
 
 
 
Pension and Post-retirement Benefits
488,479

 
477,557

 
 
 
 
Other Long-term Liabilities
101,378

 
99,070

 
 
 
 
Deferred Income Taxes
142,428

 
197,093

 
 
 
 
Shareholders' Investment
 
 
 
Preferred Stock, Par Value $.01 a Share–
 
 
 
Authorized 160,000,000 Shares; Issued–None
 
 
 
Common Stock, Non-voting, Par Value $.01 a Share–
 
 
 
Authorized 400,000,000 Shares; Issued–None


 


Common Stock, Par Value $.01465 a Share–
7,854

 
7,825

Authorized 1,600,000,000 Shares;
 
 
 
Issued 536,092,537 Shares April 28, 2019
 
 
 
Issued 534,135,484 Shares October 28, 2018
 
 
 
Additional Paid-in Capital
163,980

 
106,528

Accumulated Other Comprehensive Loss
(278,135
)
 
(243,498
)
Retained Earnings
6,003,637

 
5,729,956

Hormel Foods Corporation Shareholders' Investment
5,897,336

 
5,600,811

Noncontrolling Interest
4,448

 
4,007

Total Shareholders' Investment
5,901,784

 
5,604,818

 
 
 
 
Total Liabilities and Shareholders' Investment
$
7,935,745

 
$
8,142,292

 
See Notes to Consolidated Financial Statements

4

Table of Contents

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
April 28,
2019
 
April 29,
2018 *
 
April 28,
2019
 
April 29,
2018
Net Sales
$
2,344,744

 
$
2,330,568

 
$
4,705,099

 
$
4,661,861

Cost of Products Sold
1,875,595

 
1,837,765

 
3,747,616

 
3,670,762

Gross Profit
469,149

 
492,803

 
957,483

 
991,099

 
 
 
 
 
 
 
 
Selling, General and Administrative
170,076

 
204,549

 
363,620

 
424,421

Equity in Earnings of Affiliates
13,291

 
13,486

 
24,749

 
37,017

 
 
 
 
 
 
 
 
Operating Income
312,364

 
301,740

 
618,612

 
603,695

 
 
 
 
 
 
 
 
Other Income and Expense:
 
 
 
 
 
 
 
Interest and Investment Income
11,297

 
2,144

 
18,171

 
10,083

Interest Expense
(5,615
)
 
(7,001
)
 
(11,762
)
 
(11,730
)
 
 
 
 
 
 
 
 
Earnings Before Income Taxes
318,046

 
296,883

 
625,021

 
602,048

 
 
 
 
 
 
 
 
Provision for Income Taxes
35,410

 
59,361

 
100,866

 
61,315

 
 
 
 
 
 
 
 
Net Earnings
282,636

 
237,522

 
524,155

 
540,733

Less: Net Earnings Attributable to Noncontrolling Interest
207

 
138

 
301

 
242

Net Earnings Attributable to Hormel Foods Corporation
$
282,429

 
$
237,384

 
$
523,854

 
$
540,491

 
 
 
 
 
 
 
 
Net Earnings Per Share
 
 
 
 
 
 
 
Basic
$
0.53

 
$
0.45

 
$
0.98

 
$
1.02

Diluted
$
0.52

 
$
0.44

 
$
0.96

 
$
1.00

 
 
 
 
 
 
 
 
Weighted-average Shares Outstanding
 
 
 
 
 
 
 
Basic
535,480

 
529,799

 
534,988

 
529,626

Diluted
546,330

 
542,811

 
546,724

 
543,146

 *Adjusted due to the adoption of Accounting Standards Update (ASU) 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). See Note A - General.

See Notes to Consolidated Financial Statements


5

Table of Contents

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
April 28,
2019
 
April 29,
2018
 
April 28,
2019
 
April 29,
2018
Net Earnings
$
282,636

 
$
237,522

 
$
524,155

 
$
540,733

Other Comprehensive Income, Net of Tax:
 
 
 
 
 
 
 
Foreign Currency Translation
5,901

 
4,796

 
7,747

 
9,008

Pension and Other Benefits
1,770

 
2,487

 
5,209

 
4,973

Deferred Hedging
6,707

 
(613
)
 
6,346

 
(1,263
)
Total Other Comprehensive Income
14,378

 
6,670

 
19,302

 
12,718

Comprehensive Income
297,014

 
244,192

 
543,457

 
553,451

Less: Comprehensive Income Attributable to Noncontrolling Interest
378

 
385

 
441

 
638

Comprehensive Income Attributable to Hormel Foods Corporation
$
296,636

 
$
243,807

 
$
543,016

 
$
552,813

 
See Notes to Consolidated Financial Statements


6

Table of Contents

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT
(in thousands, except per share amounts)
(Unaudited)

 
Three Months Ended April 29, 2018
 
 
 
 
 
 
 
 
 
 
 
Hormel Foods Corporation Shareholders
 
 
 
 
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Non-
controlling
Interest
 
Total
Shareholders’
Investment
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at January 28, 2018
529,988

 
$
7,764

 

 
$

 
$
19,242

 
$
5,366,501

 
$
(242,176
)
 
$
4,043

 
$
5,155,374

Net Earnings
 
 
 
 
 
 
 
 
 
 
237,384

 
 
 
138

 
237,522

Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
6,423

 
247

 
6,670

Purchases of Common Stock
 
 
 
 
(593
)
 
(19,542
)
 
 
 
 
 
 
 
 
 
(19,542
)
Stock-based Compensation Expense
 
 
1

 
 
 
 
 
4,051

 
 
 
 
 
 
 
4,052

Exercise of Stock Options/Restricted Shares
738

 
9

 
 
 
 
 
7,212

 
 
 
 
 
 
 
7,221

Shares Retired
(593
)
 
(8
)
 
593

 
19,542

 
(19,534
)
 
 
 
 
 
 
 

Declared Cash Dividends – $0.1875 Per Share
 
 
 
 
 
 
 
 
 
 
(99,664
)
 
 
 
 
 
(99,664
)
Balance at April 29, 2018
530,133

 
$
7,766

 

 
$

 
$
10,971

 
$
5,504,221

 
$
(235,753
)
 
$
4,428

 
$
5,291,633

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended April 28, 2019
 
 
 
 
 
 
 
 
 
 
 
Hormel Foods Corporation Shareholders
 
 
 
 
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Non-
controlling
Interest
 
Total
Shareholders’
Investment
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at January 27, 2019
534,170

 
$
7,826

 

 
$

 
$
130,196

 
$
5,856,029

 
$
(292,342
)
 
$
4,070

 
$
5,705,779

Net Earnings
 
 
 
 
 
 
 
 
 
 
282,429

 
 
 
207

 
282,636

Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
14,207

 
171

 
14,378

Purchases of Common Stock
 
 
 
 
(562
)
 
(22,813
)
 
 
 
 
 
 
 
 
 
(22,813
)
Stock-based Compensation Expense
 
 
1

 
 
 
 
 
5,567

 
 
 
 
 
 
 
5,568

Exercise of Stock Options/Restricted Shares
2,485

 
35

 
 
 
 
 
28,390

 
 
 
 
 
 
 
28,425

Shares Retired
(562
)
 
(8
)
 
562

 
22,813

 
(173
)
 
(22,632
)
 
 
 
 
 

Declared Cash Dividends – $0.21 per share
 
 
 
 
 
 
 
 
 
 
(112,189
)
 
 
 
 
 
(112,189
)
Balance at April 28, 2019
536,093

 
$
7,854

 

 
$

 
$
163,980

 
$
6,003,637

 
$
(278,135
)
 
$
4,448

 
$
5,901,784




















7

Table of Contents

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT
(in thousands, except per share amounts)
(Unaudited)

 
Six Months Ended April 29, 2018
 
 
 
 
 
 
 
 
 
 
 
Hormel Foods Corporation Shareholders
 
 
 
 
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Non-
controlling
Interest
 
Total
Shareholders’
Investment
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at October 29, 2017
528,424

 
$
7,741

 

 
$

 
$
13,670

 
$
5,162,571

 
$
(248,075
)
 
$
3,790

 
$
4,939,697

Net Earnings
 
 
 
 
 
 
 
 
 
 
540,491

 
 
 
242

 
540,733

Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
12,322

 
396

 
12,718

Purchases of Common Stock
 
 
 
 
(1,331
)
 
(44,741
)
 
 
 
 
 
 
 
 
 
(44,741
)
Stock-based Compensation Expense
 
 
1

 
 
 
 
 
11,390

 
 
 
 
 
 
 
11,391

Exercise of Stock Options/Restricted Shares
3,040

 
43

 
 
 
 
 
30,633

 
 
 
 
 
 
 
30,676

Shares Retired
(1,331
)
 
(19
)
 
1,331

 
44,741

 
(44,722
)
 
 
 
 
 
 
 

Declared Cash Dividends – $0.375 Per Share
 
 
 
 
 
 
 
 
 
 
(198,841
)
 
 
 
 
 
(198,841
)
Balance at April 29, 2018
530,133

 
$
7,766

 

 
$

 
$
10,971

 
$
5,504,221

 
$
(235,753
)
 
$
4,428

 
$
5,291,633

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended April 28, 2019
 
 
 
 
 
 
 
 
 
 
 
Hormel Foods Corporation Shareholders
 
 
 
 
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Non-
controlling
Interest
 
Total
Shareholders’
Investment
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at October 28, 2018
534,135

 
$
7,825

 

 
$

 
$
106,528

 
$
5,729,956

 
$
(243,498
)
 
$
4,007

 
$
5,604,818

Net Earnings
 
 
 
 
 
 
 
 
 
 
523,854

 
 
 
301

 
524,155

Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
19,162

 
140

 
19,302

Purchases of Common Stock
 
 
 
 
(1,627
)
 
(67,622
)
 
 
 
 
 
 
 
 
 
(67,622
)
Stock-based Compensation Expense
 
 
1

 
 
 
 
 
13,513

 
 
 
 
 
 
 
13,514

Exercise of Stock Options/Restricted Shares
3,585

 
52

 
 
 
 
 
44,371

 
 
 
 
 
 
 
44,423

Shares Retired
(1,627
)
 
(24
)
 
1,627

 
67,622

 
(432
)
 
(67,166
)
 
 
 
 
 

Cumulative Effect Adjustment from Adoption of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


   ASU 2016-16
 
 
 
 
 
 
 
 
 
 
(10,475
)
 
 
 
 
 
(10,475
)
   ASU 2017-12
 
 
 
 
 
 
 
 
 
 
21

 
(21
)
 
 
 

   ASU 2018-02
 
 
 
 
 
 
 
 
 
 
52,342

 
(53,778
)
 
 
 
(1,436
)
Declared Cash Dividends – $0.42 Per Share
 
 
 
 
 
 
 
 
 
 
(224,895
)
 
 
 
 
 
(224,895
)
Balance at April 28, 2019
536,093

 
$
7,854

 

 
$

 
$
163,980

 
$
6,003,637

 
$
(278,135
)
 
$
4,448

 
$
5,901,784

 
See Notes to Consolidated Financial Statements


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HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended
 
April 28,
2019
 
April 29,
2018
Operating Activities
 

 
 

Net Earnings
$
524,155

 
$
540,733

Adjustments to Reconcile to Net Cash Provided by Operating Activities:
 
 
 
Depreciation
74,458

 
74,081

Amortization of Intangibles
6,285

 
6,235

Equity in Earnings of Affiliates
(24,749
)
 
(37,017
)
Distribution from Equity Method Investees
10,000

 
10,024

(Benefit) Provision for Deferred Income Taxes
(37,940
)
 
(74,486
)
Loss (Gain) on Property/Equipment Sales and Plant Facilities
458

 
(1,384
)
Gain on Sale of Business
(16,469
)
 

Non-cash Investment Activities
(17,632
)
 
(8,451
)
Stock-based Compensation Expense
13,514

 
11,391

Changes in Operating Assets and Liabilities, Net of Acquisitions:
 
 
 
Decrease (Increase) in Accounts Receivable
32,634

 
87,141

(Increase) Decrease in Inventories
(111,601
)
 
(59,094
)
(Increase) Decrease in Prepaid Expenses and Other Current Assets
(7,198
)
 
(3,926
)
Increase (Decrease) in Pension and Post-retirement Benefits
6,380

 
1,525

(Decrease) Increase in Accounts Payable and Accrued Expenses
(108,347
)
 
(122,847
)
Increase (Decrease) in Net Income Taxes Payable
21,645

 
19,416

Net Cash Provided by Operating Activities
365,593

 
443,341

 
 
 
 
Investing Activities
 
 
 
Net (Purchase) Sale of Securities
(6,664
)
 

Proceeds from Sale of Business
473,885

 

Acquisitions of Businesses/Intangibles

 
(857,673
)
Purchases of Property/Equipment
(87,621
)
 
(141,160
)
Proceeds from Sales of Property/Equipment
31,167

 
6,439

(Increase) Decrease in Investments, Equity in Affiliates, and Other Assets
(110
)
 
2,906

   Proceeds from Company-owned Life Insurance
14,170

 
3,028

Net Cash Provided by (Used in) Investing Activities
424,827

 
(986,460
)
 
 
 
 
Financing Activities
 
 
 
Net Proceeds from Short-term Debt

 
185,000

Proceeds from Long-term Debt

 
375,000

Repayments of Long-term Debt
(374,840
)
 
(237
)
Dividends Paid on Common Stock
(212,287
)
 
(189,139
)
Share Repurchase
(67,622
)
 
(44,741
)
Proceeds from Exercise of Stock Options
44,277

 
29,978

Net Cash (Used in) Provided by Financing Activities
(610,472
)
 
355,861

 
 
 
 
Effect of Exchange Rate Changes on Cash
243

 
4,707

Increase (Decrease) in Cash and Cash Equivalents
180,191

 
(182,551
)
Cash and Cash Equivalents at Beginning of Year
459,136

 
444,122

Cash and Cash Equivalents at End of Quarter
$
639,327

 
$
261,571


See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE A - GENERAL
 
Basis of Presentation: The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.  The Consolidated Statement of Financial Position at October 28, 2018, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2018.
 
Investments: The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans.  Under the plans, the participants can defer certain types of compensation and elect to receive a return on the deferred amounts based on the changes in fair value of various investment options, primarily a variety of mutual funds.  The Company has corporate-owned life insurance policies on certain participants in the deferred compensation plans.  The cash surrender value of the policies is included in Other Assets on the Consolidated Statements of Financial Position.  The securities held by the trust are classified as trading securities.  Therefore, unrealized gains and losses associated with these investments are included in the Company’s earnings.  Securities held by the trust generated gains of $4.8 million and $6.2 million for the second quarter and six months ended April 28, 2019, compared to losses of $2.2 million and gains of $1.2 million for the second quarter and six months ended April 29, 2018.
 
Supplemental Cash Flow Information: Non-cash investment activities presented on the Consolidated Statements of Cash Flows primarily consist of unrealized gains or losses on the Company’s rabbi trust.  The noted investments are included in Other Assets on the Consolidated Statements of Financial Position.  Changes in the value of these investments are included in the Company’s Net Earnings and are presented in the Consolidated Statements of Operations as Interest and Investment Income.

Guarantees: The Company enters into various agreements guaranteeing specified obligations of affiliated parties.  The Company’s guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement.  The Company currently provides revocable standby letters of credit totaling $2.4 million to guarantee obligations that may arise under workers compensation claims of an affiliated party.  This potential obligation is not reflected in the Company’s Consolidated Statements of Financial Position.

Reclassifications: Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.  The reclassifications had no impact on Net Earnings or Operating Income, other than those related to the adoption of ASU 2017-07 as described within the new accounting pronouncements adopted in the current fiscal year.

Accounting Changes and Recent Accounting Pronouncements:
New Accounting Pronouncements Adopted in Current Fiscal Year 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This topic converges the guidance within U.S. GAAP and international financial reporting standards and supersedes ASC 605, Revenue Recognition. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions which were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The updated guidance is to be applied either retrospectively or by using a cumulative effect adjustment. The Company adopted the provisions of the new standard using the full retrospective method at the beginning of fiscal 2019. The Company made the following policy elections upon adoption: to account for shipping and handling costs as contract fulfillment costs and to exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price. The Company will account for variable consideration using the expected value method. The Company also applied the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included in the Consolidated

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Statements of Operations. The Company did not have a cumulative effect adjustment as a result of adoption. Adoption of the new standard did not have a material impact on the Company’s results of operations. Additional qualitative disclosures have been provided in Note B - Revenue Recognition and further disaggregation of revenues provided in Note N - Segment Reporting.

In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). The updated guidance requires the recognition of the income tax consequences of an intra-entity asset transfer, other than transfers of inventory, when the transfer occurs. For intra-entity transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. The updated guidance is effective for reporting periods beginning after December 15, 2017, with early adoption permitted only within the first interim period of a fiscal year. The guidance is required to be applied on a modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification from prepaid tax assets to deferred tax assets. In addition, due to the impact of the lower tax rate on deferred tax balances resulting from the Tax Cuts and Jobs Act (Tax Act), the Company recognized a cumulative effect adjustment to Retained Earnings of $10.5 million.

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). The updated guidance requires an employer to report the service cost component of net periodic pension cost and net periodic post-retirement benefit cost in the same line item as other compensation costs. Other components of net periodic pension cost and net periodic post-retirement benefit cost must be presented in the income statement separately from the service cost component and outside income from operations. Additionally, only the service cost component is eligible for capitalization. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The updated guidance should be applied retrospectively for the presentation of components of net benefit cost and prospectively, for the capitalization of the service cost component of net benefit cost. The Company adopted the updated provisions at the beginning of fiscal 2019. The Company elected to utilize a practical expedient which allows the Company to use historical amounts disclosed in the Pension and Other Post-retirement Benefits footnote as an estimation basis for retrospectively applying the requirements to separately report the other components in the income statement. Due to the retrospective adoption, the Company reclassified $4.6 million and $9.2 million of non-service cost components of net periodic benefit costs out of Operating Income to Interest and Investment Income on the Consolidated Statements of Operations for the three months and six months ended April 29, 2018.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities (Topic 815). The updated guidance expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements apply prospectively. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim or annual period. The Company early adopted the updated guidance at the beginning of fiscal 2019, therefore eliminating the requirement to separately measure and report hedge ineffectiveness. The Company applied the amendment to cash flow hedge relationships existing on the date of adoption using a modified retrospective approach.
Presentation and disclosure requirements were applied on a prospective basis. The adoption resulted in an immaterial adjustment from Retained Earnings to Accumulated Other Comprehensive Loss.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The updated guidance allows entities to reclassify stranded income tax effects resulting from the Tax Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The Company early adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification of $53.8 million to Accumulated Other Comprehensive Loss.


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In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350). The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years and is to be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company early adopted the updated provisions on a prospective basis at the beginning of fiscal 2019. The impact related to adoption was immaterial in the first six months of fiscal 2019, but the Company will continue to evaluate in future quarters.

New Accounting Pronouncements Not Yet Adopted
  
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement, and presentation of expenses will depend on the classification as a finance or operating lease. The update also requires certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. In July 2018, the FASB issued ASU 2018-11, which provides an optional transition method in addition to the existing modified retrospective transition method allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The requirements of the new standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2020 and is in the process of evaluating the impact of adoption on its consolidated financial statements and related disclosures.
 
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 958). The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment methodology with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The updated guidance is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2021 and is in the process of evaluating the impact of adopting the updated provisions.
 
In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (ASC). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is currently assessing the impact of adoption on its consolidated financial statements, results of operations, and cash flows.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715). The updated guidance improves disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.
Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they either are not relevant to the Company, or they are not expected to have a material effect on its business practices, financial condition, results of operations, or disclosures.



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NOTE B - REVENUE RECOGNITION

Revenue from Contracts with Customers: Effective October 29, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers using the full retrospective adoption method. The impact of adopting this guidance was immaterial to the Company’s financial statements and related disclosures. Under ASC 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance, where payment terms are identified, and collectability is probable. The Company’s customer contracts predominantly contain a single performance obligation to fulfill customer orders for the purchase of specified products. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Revenue from product sales is primarily identified by purchase orders (“contracts”) which in some cases are governed by a master sales agreement. The purchase orders in combination with the invoice typically specify quantity and product(s) ordered, shipping terms, and certain aspects of the transaction price including discounts. Contracts are at standalone pricing or governed by pricing lists or brackets. Revenue is recognized as control of the promised good transfers to the customer in an amount reflective of the consideration the Company expects to receive in exchange for those goods. The Company’s revenue is recognized at a point in time when obligations under the terms of the agreement are satisfied once the shipped product is received or picked up by the customer. Revenues are recognized at the net consideration the Company expects to receive in exchange for the goods. The amount of net consideration recognized includes estimates of variable consideration, including costs for trade promotion programs, consumer incentives, and allowances and discounts associated with distressed or potentially unsaleable products.

A majority of the Company’s revenue is short-term in nature with shipments within one year from order date. The Company's payment terms generally range between 7 to 45 days and vary by sales channel and other factors.

The Company promotes products through advertising, consumer incentives, and trade promotions. These programs include discounts, slotting fees, coupons, rebates, and in-store display incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the sale price based on amounts estimated as variable consideration. The Company estimates variable consideration at the expected value method to determine the total consideration which the Company expects to be entitled. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.
 
The Company elected to account for shipping and handling costs as contract fulfillment costs, and exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price.

Disaggregation of Revenue: The Company discloses revenue by reportable segment. A reconciliation of these disaggregated revenues is provided in Note N - Segment Reporting.

Contract Balances: The Company does not have significant deferred revenue or unbilled receivable balances as a result of transactions with customers.

Contract Costs: The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with duration of one year or less, which are expensed and included in the Consolidated Statements of Operations.


NOTE C - ACQUISITIONS AND DIVESTITURES
 
Divestiture: On April 15, 2019, the Company completed the sale of CytoSport, Inc. (CytoSport), which includes the Muscle Milk® and Evolve® brands, to PepsiCo, Inc., and received proceeds of $473.9 million, subject to working capital adjustments. The divestiture resulted in a pre-tax gain of approximately $16.5 million recognized in Selling, General and Administrative expense and a tax benefit of $17.0 million recognized within the Provision for Income Taxes on the Consolidated Statements of Operations.

CytoSport's results of operations through the date of divestiture are included within Earnings Before Income Taxes in the Consolidated Statements of Operations and are reported within the Grocery Products and International & Other segments (See Note N - Segment Reporting).



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Acquisition: On November 27, 2017, the Company acquired Columbus Manufacturing, Inc. (Columbus), an authentic premium deli meat and salami company, from Chicago-based Arbor Investments for a final purchase price of $857.4 million. The transaction was funded with cash on hand and by borrowing $375.0 million under a term loan facility and $375.0 million under a revolving credit facility.

Columbus specializes in authentic premium deli meat and salami. This acquisition allows the Company to enhance its scale in the deli by broadening its portfolio of products, customers, and consumers.

The acquisition was accounted for as a business combination using the acquisition method. The Company obtained an independent appraisal and completed purchase accounting for the acquisition in the fourth quarter of fiscal 2018. A final allocation of the purchase price to the acquired assets, liabilities, and goodwill is presented in the table below.
(in thousands)
 
Accounts receivable
$
21,199

Inventory
32,817

Prepaid and other assets
881

Other assets
936

Property, plant and equipment
83,662

Intangible assets
223,704

Goodwill
610,602

Current liabilities
(21,366
)
Deferred taxes
(95,077
)
   Purchase price
$
857,358



Goodwill is calculated as the excess of the purchase price over the fair value of the net assets recognized. The $610.6 million of goodwill recorded as part of the acquisition primarily reflects the value of the potential to expand presence in the deli channel and serves as the catalyst for uniting all of the Company's deli businesses into one customer-facing organization. The goodwill balance is not expected to be deductible for income tax purposes. The goodwill and intangible assets have been allocated to the Refrigerated Foods segment.

Operating results for this acquisition have been included in the Company’s Consolidated Statements of Operations from the date of acquisition and are reflected in the Refrigerated Foods segment.


NOTE D - INVENTORIES
 
Principal components of inventories are:
(in thousands)
April 28,
2019
 
October 28,
2018
Finished products
$
586,427

 
$
525,628

Raw materials and work-in-process
261,663

 
247,495

Operating supplies
117,956

 
126,644

Maintenance materials and parts
64,528

 
63,760

Total
$
1,030,574

 
$
963,527














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Table of Contents

NOTE E - GOODWILL AND INTANGIBLE ASSETS
 
Goodwill: The changes in the carrying amounts of goodwill for the three and six months ended April 28, 2019, are presented in the table below. The reduction in goodwill for the quarter is due to the divestiture of CytoSport on April 15, 2019. Beginning balances have been reclassified to conform to the current year presentation between segments. See Note N - Segment Reporting and Note C - Acquisitions and Divestitures for additional information.
(in thousands)
Grocery
Products
 
Refrigerated
Foods
 
JOTS
 
International
& Other
 
Total
Balance at January 27, 2019
$
857,373

 
$
1,458,692

 
$
176,628