UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended OCTOBER 25, 1997, Commission File No. 1-2402
HORMEL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-0319970
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1 HORMEL PLACE AUSTIN, MINNESOTA 55912-3680
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (507) 437-5611
Securities registered pursuant to Section 12 (b) of the Act:
COMMON STOCK, PAR VALUE $.1172 PER SHARE NEW YORK STOCK EXCHANGE
TITLE OF EACH CLASS Name of Each Exchange
on Which Registered
Securities registered pursuant to Section 12 (g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes+X+ No+++
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 registrantis knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of the
Corporation at December 1, 1997 was $1,294,238,990 based on the closing
price of $29.9375 per share. As of December 1, 1997 the number of shares
outstanding of each of the Corporationis classes of common stock was as
follows:
COMMON STOCK, $.1172 PAR VALUE--75,776,510 SHARES
COMMON STOCK NON-VOTING, $.01 PAR VALUE--0 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Stockholders' Report for the year ended October 25,
1997, are incorporated by reference into Part I and Part II Items 5-9, and
included as a separate section in the electronic filing to the SEC.
Portions of the proxy statement for the Annual Meeting of the Stockholders
to be held January 27, 1998, are incorporated by reference into Part III,
Items 10-13 and included as a separate section in the electronic filing to
the SEC.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
(a) Hormel Foods Corporation, a Delaware corporation, 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
parent 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. Although pork remains the
major raw material for Hormel products, the Company has
emphasized for several years the manufacture and distribution of
branded, consumer packaged items rather than the commodity fresh
meat business. New product introductions the past few years have
emphasized a variety of branded turkey products produced and sold
under the Jennie-O label and the fast growing ethnic food market
with Chi-Chi's line of Mexican foods, House of Tsang oriental
sauces and food products, and Mediterranean food products under
the Marrakesh Express and Peloponnese labels.
In October 1996, the Company purchased Stagg Foods, Inc., a
leading West Coast producer of chili and stew products through an
exchange of stock. Stagg Foods is operated as part of the main
Hormel business.
The Company is larger subsidiaries include Jennie-O Foods, Inc.;
Dubuque Foods, Inc.; Hormel Foods International Corporation and
Vista International Packaging, Inc.
Jennie-O, a Willmar, Minnesota based turkey processor, markets
its products nationwide through its own sales force and brokers,
providing the Company with a significant presence in this
important segment of the industry.
Dubuque Foods, Inc. formerly named FDL Marketing, Inc. was formed
in 1985 to be the exclusive marketer of the production of FDL
Foods, Inc., a Dubuque, Iowa, meat packer. In July of 1993, the
Company acquired through two subsidiaries, Dubuque Foods, Inc.
and Rochelle Foods, Inc., a portion of the assets of FDL Foods.
Dubuque Foods acquired the FDL Foods brands and trademarks.
Rochelle Foods acquired the FDL Foods manufacturing operations at
Rochelle, Illinois. Rochelle Foods is a co-packer for both Hormel
and Dubuque Foods. Dubuque Foods has no production facilities and
contracts with various co-packers to supply product under its
label.
The Company markets its products internationally through Hormel
Foods International Corporation. Hormel Foods International has
been increasing its presence in the international marketplace
through joint ventures and placement of personnel in strategic
foreign locations. Joint ventures have been established in
Mexico, China, and Australia. Hormel International marketing and
sales personnel are located in Spain, China and Australia.
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<PAGE>
ITEM 1. BUSINESS--CONTINUED
Investment of personnel and capital in the foreign operation of
the business is expected to continue for the foreseeable future.
During 1996 minority investments were made in food companies in
Poland and Spain which resulted in an increased Hormel presence
in those area.
Vista International Packaging, Inc. imports, customizes, and
distributes a variety of natural and artificial casings for the
meat and food processing industry.
Late in 1996, the Company announced its intention to exit the
fish business either through sale or closure of its subsidiary
Farm Fresh Catfish Company. The sale of Farm Fresh was negotiated
and closed during the first quarter of 1997.
During the first quarter of fiscal 1998 the Company announced an
agreement to sell its bulk gelatin/specialized protein plant and
business located in Davenport, Iowa to Goodman Fielder Limited of
Sydney, Australia for $71,400,000. The 125 production and
administrative employees in Davenport are included in the sale
agreement. The sale is expected to close late in January 1998.
The Company has not been involved in any bankruptcy, receivership
or similar proceedings during its history. Substantially all of
the assets of the Company have been acquired in the ordinary
course of business.
The Company had no significant change in the type of products
produced or services rendered, nor in the markets or methods of
distribution since the beginning of the fiscal year.
INDUSTRY SEGMENT
(B) Hormel Foods Corporation is engaged in a single industry segment
"Meat and Food Processing". The meat and food processing industry
is very competitive with respect to price, marketing and customer
service. In addition to meat processing firms, the Company
competes with consumer packaged food manufacturers as well as
seafood, poultry and vegetable protein processors.
DESCRIPTION OF BUSINESS
(C) The principal products of the Company are meat and food products
which are sold fresh, frozen, cured, smoked, cooked and canned.
The percentage of total revenues contributed by classes of
similar products for the last three fiscal years of the Company
are as follows:
YEAR ENDED
----------------------------
OCTOBER OCTOBER OCTOBER
25, 1997 26, 1996 28, 1995
-------- -------- --------
Meat Products ......... 54.1% 52.6% 54.4%
Prepared Foods ........ 26.5% 28.1 28.0
Poultry, Fish, Other .. 19.4% 19.3 17.6
---- ---- ----
100.0% 100.0% 100.0%
===== ===== =====
Meat Products includes fresh meats, sausages, hams, wieners and
bacon. Prepared Foods products include canned luncheon meats,
shelf stable microwaveable entrees, stews, chilies, hash, meat
spreads and frozen processed products. Jennie-O turkey and Farm
Fresh catfish products are included in the Poultry, Fish and
Other category.
Hormel Foods has numerous trademarks and patents which are
important to the Company's business. Some of the trademarks are
registered and some are not. The more significant trademarks are:
HORMEL, BLACK LABEL, BY GEORGE, CURE 81, CUREMASTER, DI LUSSO,
DINTY MOORE, HOMELAND, LAYOUT PACK, LIGHT & LEAN, LITTLE
SIZZLERS, MARY KITCHEN, RANGE BRAND, ROSA GRANDE, SANDWICH MAKER,
SPAM, WRANGLERS, JENNIE-O, KID'S KITCHEN, FAST 'N EASY, DUBUQUE,
QUICK MEAL, OLD SMOKEHOUSE, and HOUSE OF TSANG. The Company holds
15 foreign and 24 U. S. patents.
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<PAGE>
The Company for the past several years has been concentrating on
processed, consumer branded products with year round demand to
minimize the seasonal variation experienced with commodity type
products. Pork continues to be the primary raw material for
Company products. Although, live pork producers are moving toward
larger and more efficient year round confinement operations,
there is still a seasonal variation in the supply of fresh pork
materials. The expanding line of processed items has reduced but
not eliminated the sensitivity of Company results to raw material
supply and price fluctuations.
Quarterly results for fiscal 1997 and 1996 are reported on page
29, Note K to the financial statements in the Annual Report to
Stockholders for 1997.
On October 25, 1997, the Company had unused lines of credit of
$24,475,000. A fee is paid for the availability of fixed credit
lines. Long-term debt consists of a private placement of Senior
Notes for $110,000,000 maturing October 15, 2002 and October 15,
2006; and $64,400,000 of long-term notes, denominated in Spanish
Pesetas, used to purchase a 21.4 percent equity interest in
Campofrio Alimentacion, S.A., Madrid, Spain. To provide an almost
perfect hedge against currency fluctuations, the investment in
Campofrio was also made in Pesetas. Other long-term debt includes
$5,700,000 in small issue Industrial Revenue Bonds of varying
maturities and $11,046,000 of promissory notes through 2008
secured by limited partnership interests in the Federal
Affordable Housing Program.
Financial resources and anticipated funds from operations are
considered adequate to meet normal operating cash requirements in
1998.
The Company has no customers the loss of which would have a
significant effect on the Company's business. During fiscal year
1997, no customer accounted for more than 5.3% of sales. Backlog
orders are not significant due to the perishable nature of a
large portion of the products and orders are accepted and shipped
on a current basis.
The Company continues to develop and introduce new products each
year. No new product in 1997 required a material investment of
Company assets. Improving and developing new products is the
responsibility of task forces including personnel from
operations, marketing, administration, engineering, and research
and development. Research and development expenditures for fiscal
1997, 1996 and 1995, respectively, were $8,580,000, $8,022,000,
and $7,829,212. There are 29 professional employees engaged in
full time research, 18 in the area of improving existing products
and 11 in developing new products.
As of October 25, 1997, the Company had over 11,000 active
employees.
Livestock slaughtered by the parent company is purchased by
Company buyers, commission dealers, sale barns, terminal markets
or under long-term supply contracts at locations principally in
Minnesota, Iowa, Nebraska, Colorado and South Dakota. The level
of pork production in the United States has an impact on Hormel's
operations. Any significant decrease in the supply of pork has an
adverse effect because of higher costs and lower margins coupled
with an under-utilization of Company facilities. A significant
increase in the supply of pork normally results in lower costs
and higher margins. To minimize supply variations which impact
profitability the live pork industry is rapidly moving to very
large, vertically integrated, year-round confinement operations.
The Company, as its major competitors, continues to implement
options to maximize the benefits of reduced volatility in the
supply of fresh pork through long-term contracts and supply
agreements.
Products under the Hormel label are sold in all 50 states by the
parent Company. Products are sold by approximately 575 sales
personnel operating in assigned territories coordinated from
district sales offices located in most of the larger United
States cities, and by approximately 450 brokers and distributors.
Distribution of products to customers is by common carrier.
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<PAGE>
The Company has plants at Austin, Minnesota; Fremont, Nebraska
and Rochelle, Illinois that slaughter livestock for processing.
The slaughter facility at Austin is leased to Quality Pork
Processors of Dallas, Texas under a custom slaughter arrangement.
Facilities that produce manufactured items are located in Algona,
Iowa; Austin, Minnesota; Beloit, Wisconsin; Aurora, Illinois;
Osceola, Iowa; Fremont, Nebraska; Knoxville, Iowa; Oklahoma City,
Oklahoma; Stockton, California; Tucker, Georgia; and Wichita,
Kansas. Custom manufacturing for Hormel is performed by several
companies including Owatonna Canning Company, Owatonna,
Minnesota; Lakeside Packing Company, Plainview, Minnesota; and
Western Steer Mom and Pops of Claremont, North Carolina. Power
Logistics, Inc. operates a distribution center for the Company at
Osceola, Iowa.
JENNIE-O FOODS
Jennie-O Foods, Inc., a Willmar, Minnesota, based turkey
processor, has turkey raising, slaughter and processing
operations at various locations within Minnesota. Jennie-O
contracts with turkey growers to supplement the turkeys it raises
to meet its raw material requirements for whole birds and
processed turkey products. As part of Jennie-O's long term
expansion program,the Heartland Food Company plant in Marshall,
Minnesota was purchased in October 1997.
HORMEL FOODS INTERNATIONAL
Hormel Foods International Corporation markets the Company's
products in international areas including the Philippines, Japan
and various European countries. The Company, through Hormel Foods
International, has licensed companies to manufacture SPAM
luncheon meat overseas on a royalty basis, principally Tulip
International in Denmark. Hormel Foods International owns Hormel
FSC, Inc., a foreign sales corporation, which engages in export
related activities. Hormel Foods International has offices in
Australia, China and Spain to increase the sales and marketing
support in the international marketplace. During 1997 a minority
investment was made in Campofrio Alimentacion, S.A.,Madrid,
Spain.
VISTA INTERNATIONAL PACKAGING
Vista International Packaging, Inc., previously a subsidiary of
Hormel Foods International became a subsidiary of the parent
company in 1995. Vista is a food packaging company located in
Kenosha, Wisconsin which imports, customizes, and distributes, a
variety of natural and artificial casings for the meat and food
processing industry.
DUBUQUE FOODS
Dubuque Foods, Inc., formerly called FDL Marketing, Inc.,
purchased the brands and trademarks of FDL Foods, Inc., Dubuque,
Iowa, in July of 1993. FDL Foods also sold its Rochelle, Illinois
slaughter and processing operations to Rochelle Foods, Inc., a
sister subsidiary of Dubuque Foods. Dubuque Foods has co-packing
arrangements with Rochelle Foods and others to manufacture
products under its brand names.
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<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
(d) YEAR
WHICH FIRST
ELECTED
NAME OFFICE AGE OFFICER
---- ------ --- -------
<S> <C> <C> <C>
Joel W. Johnson Chairman of the Board, 54 1991
President and Chief
Executive Officer
Don J. Hodapp Executive Vice President 59 1969
& Chief Financial Officer
Gary J. Ray Executive Vice President 51 1988
Eric A. Brown Group Vice President, 51 1987
Prepared Foods
James W. Cole Group Vice President, 63 1990
Foodservice Group
David N. Dickson Group Vice President, 54 1989
International and
Corporate Development
Stanley E. Kerber Group Vice President, 59 1977
Meat Products
Michael J. McCoy Vice President and 50 1994
Treasurer
Richard W. Schlange Vice President and 62 1969
Controller
Mahlon C. Schneider Vice President and 58 1990
General Counsel
Richard A. Bross Vice President, 46 1995
Grocery Products
Forrest D. Dryden Vice President, Research 54 1987
& Development
Ronald W. Fielding Vice President, Hormel 45 1997
and President
Hormel Foods International
Jerry C. Figenskau Vice President, 57 1994
Specialty Products
James A. Jorgenson Vice President, 52 1990
Human Resources
Gary C. Paxton Vice President, 52 1992
Manufacturing
Kenneth P. Regner Vice President, 60 1989
Engineering
James N. Rieth Vice President, Hormel 57 1981
and President and
Chief Executive Officer
Jennie-O Foods
Robert A. Slavik Vice President, 52 1993
Meat Products Sales
Thomas J. Leake Corporate Secretary 52 1990
</TABLE>
No family relationship exists among the executive officers.
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<PAGE>
All of the above executive officers have been employed by the
Registrant in an officer capacity for more than the past five years
except Mr. Robert A. Slavik, Director Meat Products Sales until
January 26, 1993 when he was elected Vice President, Meat Products
Sales; Mr. Jerry C. Figenskau, Director of Marketing Services until
December 30, 1991 when he was named Director Specialty Products, on
January 24, 1994 he was elected Vice President, Specialty Products;
Mr. Richard A. Bross, Director of Grocery Products Marketing until
January 3, 1994 when he was named General Manager of Grocery Products,
on January 30, 1995 he was elected Vice President, Grocery Products;
Mr. Michael J. McCoy Vice President, Treasurer of FDL Foods, Inc.
until being employed by the Company on special assignment Treasury
Division on October 3, 1994, on November 21, 1994 he was appointed
Assistant Treasurer, on January 1, 1996 he was elected Treasurer and
on January 27, 1997 he was elected Vice President, Treasurer; Mr.
Ronald W. Fielding, Regional Manager, Oscar Mayer Foods Corporation
until being employed by the Company as Meat Products Regional Sales
Manager-Southwest Region on January 24, 1994; on June 5, 1995 he was
elected Vice President, Hormel Foods International Corporation; on
January 1, 1996 he was elected President, Hormel Foods International;
and on January 27, 1997 he was elected Vice President, Hormel and
President, Hormel Foods International.
The executive officers are elected annually by the Board of Directors
at the first meeting following the Annual Meeting of Stockholders.
Vacancies may be filled and additional officers elected at any regular
or special meeting.
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
Approximate
Floor Space
(Square Feet) Owned or Expiration
Location Unless Noted Leased Date
-------- ------------ ------ ----
Hormel Foods Corporation
------------------------
<S> <C> <C> <C>
SLAUGHTERING AND
PROCESSING PLANTS
Austin, Minnesota
Slaughter 217,000 Owned (Leased Out)
Processing 1,024,000 Owned
Fremont, Nebraska 637,000 Owned
Rochelle, Illinois 434,000 Owned
(Rochelle Foods, Inc.)
PROCESSING PLANTS
Algona, Iowa 152,000 Owned
Austin, Minnesota Annex 83,000 Owned
Beloit, Wisconsin 338,000 Owned
Davenport, Iowa 148,000 Owned Sale Closing
1/98
Ft. Dodge, Iowa 17,000 Owned (Leased out)
Houston, Texas 93,000 Owned (Closed)
Knoxville, Iowa 130,000 Owned
Oklahoma City, Oklahoma 57,000 Owned
Osceola, Iowa Plant 333,000 Owned
Osceola, IA Dist.Center 235,000 Owned
Stockton, California 139,000 Owned
Tucker, Georgia 259,000 Owned
Wichita, Kansas 75,000 Owned
(Dold Foods, Inc.)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Approximate
Floor Space
(Square Feet) Owned or Expiration
Location Unless Noted Leased Date
-------- ------------ ------ ----
<S> <C> <C> <C>
Aurora, Illinois
(Creative Contract
Packaging Corp.) 71,000 Owned
Aurora, Illinois
(Herb-Ox Plant) 70,000 Owned
Research and Development
Austin, Minnesota 56,000 Owned
CORPORATE OFFICES
Austin, Minnesota 119,000 Owned
STAGG FOODS, INC.
Hillsboro, Oregon 100,000 Owned (Closed)
DAN'S PRIZE, INC.
Long Prairie, 78,999 Owned
Minnesota-Plant
JENNIE-O FOODS, INC.
Willmar, Minnesota
Airport Plant location 282,000 Owned
Willmar, Minnesota
Benson Ave. Plant 79,000 Owned
Melrose, Minnesota-Plant 119,000 Owned
Turkey farms - acres 9,032 Owned
Henning, Minnesota 5,200 Owned
Feed Mill
Atwater, Minnesota 14,000 Owned
Feed Mill
Montevideo, Minnesota-Plant 80,000 Owned
Pelican Rapids, Minnesota 185,000 Owned
West Central Turkeys Plant
Marshall, Minnesota
Heartland Foods, Minn 140,000 Owned
VISTA INTERNATIONAL
PACKAGING, INC.
Kenosha, Wisconsin Plant 61,000 Owned
ALGONA FOOD EQUIPMENT
COMPANY (AFECO)
Algona, Iowa Plant 45,000 Owned
</TABLE>
The Company has expansion or renovation projects in progress at
Austin, Minnesota; Osceola, Iowa; Fremont, Nebraska; Rochelle,
Illinois and at various Jennie-O locations.
The Company believes its operating facilities are well maintained and
suitable for current production volumes, and after the completion of
the expansion and renovation for all volumes which are anticipated in
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company knows of no pending material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth quarter of
the 1997 fiscal year.
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<PAGE>
At the Annual Meeting of Stockholders to be held January 27, 1998
shareholders will vote on the following:
Approval of the Company's Operators' Share Incentive Compensation
Plan to enable certain compensation paid under the Plan to
qualify as deductible performance-based compensation under
Section 162(m) of the Internal Revenue Code.
Approval of the Company's Long-Term Incentive Plan to enable
compensation paid under the Plan to qualify as deductible
performance-based compensation under Section 162(m) of the
Internal Revenue Code.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The high and low closing price of the Companyis Common Stock and the
dividends per share declared for each fiscal quarter of 1997 and 1996,
respectively, are shown below:
<TABLE>
<CAPTION>
1997 HIGH LOW DIVIDEND
------------------- --------- -------- --------
<S> <C> <C> <C>
First Quarter 27-7/8 23-1/2 $.155
Second Quarter 27 23-7/8 $.155
Third Quarter 28-7/16 23-7/8 $.155
Fourth Quarter 32-1/2 28-1/16 $.155
1996 HIGH LOW DIVIDEND
------------------- --------- -------- --------
First Quarter 25-1/2 22-7/8 $.15
Second Quarter 27-3/4 24 $.15
Third Quarter 27 22-7/8 $.15
Fourth Quarter 24-1/4 20-1/2 $.15
</TABLE>
Information about dividends,principal market of trade and and number
of stockholders on pages 32 of the Annual Stockholders' Report for the
year ended October 25, 1997, is incorporated herein by reference. The
Company's Common Stock has been listed on the New York Stock Exchange
since January 16, 1990.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data for the ten years ended October 25, 1997, on
pages 18 and 19 of the Annual Stockholders' Report for the year ended
October 25, 1997, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 30 and 31 of the Annual Stockholders'
Report for the year ended October 25, 1997, is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements, including unaudited quarterly data,
on pages 20 through 29 and Report of Independent Auditors on page 29
of the Annual Stockholders' Report for the year ended October 25, 1997
is incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information under "Election of Directors", contained on pages 3
through 5 of the definitive proxy statement for the Annual Meeting of
Stockholders to be held January 27, 1998, is incorporated herein by
reference.
Information concerning Executive Officers is set forth in Item 1(d) of
Part I pursuant to Instruction 3, Paragraph (b) of Item 401 of
Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Information for the year ended October 25, 1997, under "Executive
Compensation" on pages 8 through 20 and "Compensation of Directors" on
page 5 of the definitive proxy statement for the Annual Meeting of
Stockholders to be held January 27, 1998, is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Ownership of securities of the Company by certain beneficial owners
and management for the year ended October 25, 1997, as set forth on
pages 7 and 8 of the definitive proxy statement for the Annual Meeting
of Stockholders to be held January 27, 1998, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information under "Other Information Relating to Directors, Nominees,
and Executive Officers" for the year ended October 25, 1997, as set
forth on page 13 of the definitive proxy statement for the Annual
Meeting of Stockholders to be held January 27, 1998, is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2)--The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) --List of Exhibits--The response to this portion of Item 14
is submitted as a separate section of this report.
(b) The Company filed a Form 8-K on October 26, 1997 announcing the
election of John R. Block and Joseph T. Mallof as directors of
the Company replacing retiring Board members Earl B. Olsen and
Ray V. Rose.
The Company filed a Form 8-K on December 17, 1997 announcing the
sale of its Davenport, Iowa gelatin/specialized proteins plant to
Goodman Fielder Limited of Sydney, Australia for $71,400,000. The
sale is scheduled to close in January 1998.
(c) The response to this portion of Item 14 is submitted as separate
section of this report.
(d) The response to this portion of Item 14 is submitted as separate
section of this report.
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<PAGE>
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/ Joel W. Johnson January 23, 1998
---------------------------------------------------------------
Joel W. Johnson, Chairman of the Board Date
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 date indicated:
<TABLE>
<CAPTION>
<S> <C>
/s/ Joel W. Johnson 1/23/98 Chairman of the Board, President,
--------------------------------------------- Chief Executive Officer and Director
Joel W. Johnson Date (Principal Executive Officer)
Executive Vice President
and Chief Financial Officer
/s/ Don J. Hodapp 1/23/98 and Director
--------------------------------------------- (Principal Financial and
Don J. Hodapp Date Accounting Officer)
/s/ Gary J. Ray 1/23/98
--------------------------------------------- Executive Vice President
Gary J. Ray Date and Director
/s/ Eric A. Brown 1/23/98 Group Vice President
--------------------------------------------- Prepared Foods Group
Eric A. Brown Date and Director
/s/ James W. Cole 1/23/98
--------------------------------------------- Group Vice President
James W. Cole Date Foodservice Group and Director
/s/ David N. Dickson 1/23/98 Group Vice President
--------------------------------------------- International and
David N. Dickson Date Corporate Development and Director
/s/ Stanley E. Kerber 1/23/98
--------------------------------------------- Group Vice President Meat
Stanley E. Kerber Date Products Group and Director
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
/s/ John W. Allen 1/23/98 Director
---------------------------------------------
John W. Allen Date
/s/ John R. Block 1/23/98 Director
---------------------------------------------
John R. Block Date
/s/ William S. Davila 1/23/98 Director
---------------------------------------------
William S. Davila Date
/s/ E. Peter Gillette Jr 1/23/98 Director
---------------------------------------------
E. Peter Gillette Jr Date
/s/ Luella G. Goldberg 1/23/98 Director
---------------------------------------------
Luella G. Goldberg Date
/s/ Geraldine M. Joseph 1/23/98 Director
---------------------------------------------
Geraldine M. Joseph Date
/s/ Joseph T. Mallof 1/23/98 Director
---------------------------------------------
Joseph T. Mallof Date
/s/ Dr. Robert R. Waller 1/23/98 Director
---------------------------------------------
Dr. Robert R. Waller Date
</TABLE>
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<PAGE>
F-1
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1), (2), AND (3) AND ITEM 14 (c) AND (d)
LIST OF FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENT SCHEDULE
LIST OF EXHIBITS
YEAR ENDED OCTOBER 25, 1997
HORMEL FOODS CORPORATION
Austin, Minnesota
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<PAGE>
F-2
ITEM 14(A) (1), (2) AND (3) AND ITEM 14 (C) AND (D)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
HORMEL FOODS CORPORATION
OCTOBER 25, 1997
The following consolidated financial statements of Hormel Foods Corporation
included in the Annual Report of the Registrant to its stockholders for the year
ended October 25, 1997, are incorporated herein by reference in Item 8 of Part
II of this report:
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION--October 25, 1997 and October 26,
1996.
CONSOLIDATED STATEMENTS OF OPERATIONS--Years Ended October 25, 1997, October 26,
1996 and October 28, 1995.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT--Years Ended
October 25, 1997, October 26, 1996 and October 28, 1995.
CONSOLIDATED STATEMENTS OF CASH FLOWS--Years Ended October 25, 1997, October 26,
1996 and October 28, 1995.
NOTES TO FINANCIAL STATEMENTS--October 25, 1997.
REPORT OF INDEPENDENT AUDITORS
The following consolidated financial statement schedule of Hormel Foods
Corporation required pursuant to Item 14(d) is submitted herewith:
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES .............. F-3
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
FINANCIAL STATEMENTS AND SCHEDULES OMITTED
Condensed parent company financial statements of the registrant are omitted
pursuant to Rule 5-04(c) of Article 5 of Regulation S-X.
-14-
<PAGE>
F-3
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
HORMEL FOODS CORPORATION
(DOLLARS IN THOUSANDS)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS- DEDUCTIONS- END OF
CLASSIFICATION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
VALUATION RESERVE DEDUCTION
FROM ASSETS ACCOUNT:
FISCAL YEAR ENDED
OCTOBER 25, 1997
Allowance for
doubtful accounts
receivable ............................ $ 1,413 $ 757 $ (140)(3) $ 822(1) $ 1,273
(65)(2)
FISCAL YEAR ENDED
OCTOBER 26, 1996
Allowance for
doubtful accounts
receivable ............................ $ 1,413 $ 453 $ 0 $ 542(1) $ 1,413
(89)(2)
FISCAL YEAR ENDED
OCTOBER 28, 1995
Allowance for
doubtful accounts
receivable ............................ $ 1,413 $ 971 $ 0 $ 1,189(1) $ 1,413
(218)(2)
</TABLE>
- ----------
NOTE (1) - Uncollectible accounts written off.
NOTE (2) - Recoveries on accounts previously written off.
NOTE (3) - Reserve on records of Farm Fresh Catfish Company before the sale
occurred during Fiscal 1997.
-15-
<PAGE>
LIST OF EXHIBITS
HORMEL FOODS CORPORATION
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
**(3) A-1 Certification of Incorporation as amended to date.
**(3) B-1 By-laws as amended to date.
(4) Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K,
copies of instruments defining the rights of holders of
long-term debt are not filed. The Company agrees to
furnish a copy thereof to the Securities and Exchange
Commission upon request.
(9) None.
(10) None.
(11) Statement Regarding Computation of Per Share Earnings.
(12) None.
**(13) Pages 17 through 32 of the Annual Report to Stockholders
for fiscal year ended October 25, 1997.
(18) None.
(19) None.
(22) None.
**(23) Consent of Independent Auditors.
(24) None.
(25) None.
**(27) Financial Data Schedule
**(99) Proxy Statement for the Annual Meeting of Stockholders to
be held January 27, 1998.
- ----------
** These Exhibits transmitted via EDGAR.
-16-
<PAGE>
HORMEL FOODS CORPORATION
ITEM 14 A (3) OF FORM 10-K
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED
------------------------------------------
OCTOBER 25, OCTOBER 26, OCTOBER 28,
1997 1996 1995
------------ ------------ ------------
AS REPORTED:
Average Share Outstanding .......... 76,494,846 76,506,427 76,689,386
Income ............................. $109,492,000 $ 79,408,000 $120,436,000
Share Amount ....................... $ 1.43 $ 1.04 $ 1.57
============ ============ ============
PRIMARY:
Average Share Outstanding .......... 76,494,846 76,506,427 76,689,386
Net effect of dilutive stock options
based on the treasury stock method
using average market price ......... 381,865 178,166 297,276
------------ ------------ ------------
Total Shares .................. 76,876,711 76,684,593 76,986,662
Net Income ......................... $109,492,000 $ 79,408,000 $120,436,000
Per Share Amount ................... $ 1.42 $ 1.04 $ 1.56
============ ============ ============
DILUTED:
Average Shares Outstanding ......... 76,494,846 76,506,427 76,689,386
Net effect of dilutive stock
options based on the
treasury stock method using
the year-end market price if
higher than average price .......... 570,825 178,166 297,276
------------ ------------ ------------
Total Shares .................. 77,065,671 76,684,593 76,986,662
Income ............................. $109,492,000 $ 79,408,000 $120,436,000
Share Amount ....................... $ 1.42 $ 1.04 $ 1.56
============ ============ ============
-17-
<PAGE>
BYLAWS
OF
HORMEL FOODS CORPORATION
NAME
1. The name of the corporation is HORMEL FOODS CORPORATION. (Amended October
26, 1992; Amended December 7, 1995 to conform with Amendment to Articles of
Incorporation Effective February 1, 1995)
OFFICES
2. The principal office of the corporation in the State of Delaware shall be
in the City of Wilmington, County of New Castle, and the name of the
resident agent in charge thereof shall be The Corporation Trust Company,
whose address is 100 West Tenth Street, Wilmington, Delaware. (Amended
April 17, 1930; September 20, 1930; June 13, 1949)
In addition to its principal office in the State of Delaware, the
corporation may establish and maintain an office or offices at Austin,
Minnesota, and at such other places as the Board of Directors may from time
to time appoint or the business of the corporation may require.
CORPORATE SEAL
3. The corporate seal of the corporation shall be circular in form and shall
have inscribed thereon the name of the corporation, the year of its
creation (1928) and the words "Seal", "Incorporated", and "Delaware".
STOCKHOLDERS' MEETINGS
4. All meetings of the stockholders shall be held at the office of the
corporation at Austin, Minnesota, or at such other place as the Board of
Directors may previously determine.
5. A. An annual meeting of the stockholders of the corporation shall be held
on the last Tuesday of January in each year, at eight o'clock p.m. or
at such other time as the Board of Directors may designate, when the
stockholders shall elect by plurality vote, by ballot, a Board of
Directors, and transact such other business as may properly be brought
before the meeting. (Amended November 15, 1938; June 14, 1954; April
18, 1966; October 28, 1968; April 28, 1969; December 20, 1984)
B. To be properly brought before the annual meeting of stockholders,
business must be (1) specified in the notice of the meeting, (2)
directed to be brought before the meeting by the Board of Directors or
(3) proposed at the meeting by a stockholder who (i) was a stockholder
of record at the time of giving the notice provided for in these
Bylaws, (ii) is entitled to vote at the meeting, and (iii) gives prior
notice of the matter, which must otherwise be a proper matter for
stockholder action, in the manner herein provided. For business to be
properly brought before the annual meeting by a stockholder, the
stockholder must give written notice to the Secretary of the
corporation so as to be received at the principal executive offices of
the corporation at least ninety (90) days before the date that is one
year after the prior year's annual meeting. Such notice shall set
forth (1) the name and record address of the stockholder, (2) the
class and number of shares of the corporation owned by the
stockholder, (3) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business, and (4) any material interest in such business of the
stockholder. The chairman of the meeting may refuse to acknowledge any
proposed business not made in compliance with the foregoing procedure.
(Added 7-22-96)
C. Nominations of persons for election as Directors may be made at the
annual meeting of stockholders (a) by or at the direction of the Board
of Directors or (b) by any stockholder who (1) was a stockholder of
record at the time of giving of the notice provided for in these
Bylaws, (2) is entitled to vote at the meeting and (3) gives prior
notice of the nomination in the manner herein provided. For a
nomination to be properly made by a stockholder, the stockholder must
give written notice to the Secretary of the corporation so as to be
received at the principal executive offices of the corporation at
least ninety (90) days before the date that is one year after the
prior year's regular meeting. Such notice shall set forth (a) as to
the stockholder giving the notice: (i) the name and record address of
the stockholder, and (ii) the class and number of shares of the
corporation owned by the stockholder; and (b) as to each person the
stockholder proposes to nominate: (i) the name, business address and
residence address of the person, (ii) the principal occupation or
employment of the person and (iii) the class and number of shares of
the corporation's capital stock beneficially owned by the person. The
chairman of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure. (Added
72296)
6. The holders of a majority of the stock issued and outstanding, present in
person, or represented by proxy, shall be requisite and shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by law, by the certificate of incorporation,
or by these Bylaws. If, however, such majority shall not be present or
represented at any meeting of the stockholders, the stockholders present in
person or by proxy shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until the
requisite amount of stock shall be present. At such adjourned meeting at
which the requisite amount of stock shall be represented, any business may
be transacted which might have been transacted at the meeting as originally
notified.
7. At each meeting of the stockholders every stockholder shall be entitled to
vote in person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period.
Each stockholder shall have one vote for each share of stock registered in
his name on the books of the corporation. The vote for Directors, and, upon
demand of any stockholder, the vote upon any question before the meeting,
shall be by ballot. All elections shall be held and all questions decided
by a plurality vote. (Amended March 23, 1970)
8. Written notice of the annual meeting shall be mailed to each stockholder at
such address as appears on the stock book of the corporation at least ten
days prior to the meeting. (Amended October 28, 1975)
9. A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the residence of each, and
the number of shares held by each, shall be prepared by the Secretary and
filed at the place where the election is to be held, at least ten days
before every election, and shall at all times, during the usual hours for
business, and during the whole time of said election, be open to the
examination of any stockholder. (Amended February 19, 1968)
10. Special meetings of the stockholders, for any purpose, or purposes, unless
otherwise prescribed by the statute, may be called by the Chairman of the
Board, or Secretary at the request, in writing, of stockholders owning a
majority in amount of the entire capital stock of the corporation issued
and outstanding. Such request shall state the purpose or purposes of the
proposed meeting. (Amended January 31, 1984; Amended September 27, 1993,
Effective October 1, 1993; Amended December 7, 1995)
11. Business transacted at all special meetings shall be confined to the
objects stated in the call.
12. Written notice of a special meeting of stockholders, stating the time and
place and object thereof, shall be mailed, postage prepaid, at least ten
days before such meeting, to each stockholder at such address as appears on
the books of the corporation. (Amended October 28, 1975)
DIRECTORS
13. The property and business of the corporation shall be managed by its Board
of Directors. The number of Directors shall be established from time to
time by resolution of the stockholders or the Board of Directors. The
Directors of the corporation shall be elected annually at the annual
meeting of stockholders and each Director shall be elected to serve until
his successor shall be elected and shall qualify. (Amended November 16,
1964; June 21, 1965; November 25, 1968; August 25, 1969; December 22, 1969;
February 24, 1970; December 19, 1972; July 22, 1974; September 23, 1974;
December 22, 1975; November 29; 1976; December 27, 1978; July 23, 1979;
January 29, 1980)
14. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or
by Certificate of Incorporation or by these Bylaws directed or required to
be exercised or done by the stockholders.
DIRECTORS' MEETINGS
15. (Amended September 27, 1993, Effective October 1, 1993; Deleted December 7,
1995)
15. Regular meetings of the Board, after the organizational meeting, shall be
held without notice at the Corporate Office of the corporation at Austin,
Minnesota, on the fourth Monday of January, March, May, July, September,
October and November at 1:00 p.m. or such other time as the Board shall
designate, or, without notice, at such other time or place, within or
without the State of Minnesota, as the Board of Directors may from time to
time designate. (Amended July 16, 1935; June 14, 1954; May 20, 1957; April
17, 1967; February 19, 1968; March 25, 1980; January 28, 1985)
16. Special meetings of the Board may be called by the Chairman of the Board on
one day's notice to each Director, either personally or by mail or by
telegram or telephone; special meetings shall be called by the Chairman of
the Board, or Secretary in like manner or on like notice on the written
request of two Directors. (Amended January 31, 1984; Amended September 27,
1993, Effective October 1, 1993; Amended December 7, 1995)
17. At all meetings of the Board, a majority of the number of Directors
authorized by the Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically
provided by statute or by the Certificate of Incorporation or by these
Bylaws. (Amended January 18, 1965)
COMPENSATION OF DIRECTORS
18. Directors, as such, shall not receive any stated salary for their services,
but, by resolution of the Board, a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of
the Board; PROVIDED, That nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity
and receiving compensation therefor.
19. Members of special or standing committees may be allowed like compensation
for attending committee meetings.
COMMITTEES
20. The Board of Directors may, by resolution or resolutions, passed by a
majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the Directors of the corporation,
which, to the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the corporation and may have
power to authorize the seal of the corporation to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be stated in these Bylaws or as may be determined from time to
time by resolution adopted by the Board of Directors.
21. The committees shall keep regular minutes of their proceedings and report
the same to the Board at each regular meeting.
VACANCIES
22. In case of any vacancy in the Board of Directors by reason of death,
resignation, or otherwise, the remaining Directors, by majority vote, may
elect a successor to hold office until a successor has been elected by the
stockholders. (Amended April 18, 1955; November 25, 1974; October 26, 1992
[Bylaw 33 renumbered to Bylaw 23, and following sections renumbered])
OFFICERS
23. The officers of the corporation shall be elected by the Board of Directors
and shall be a Chairman of the Board, a President, one or more Vice
Presidents of whatever special designation the Board may determine, a
Secretary and a Treasurer. The Board may also elect Assistant Vice
Presidents, Assistant Secretaries and Assistant Treasurers, and a
Controller and Assistant Controllers. The Chairman of the Board and the
President must be Directors, but other officers need not be Directors. The
designation and duties of any Vice President may be changed by the Board at
any time. (Amended November 19, 1929; July 8, 1946; April 18, 1955; April
21, 1958; July 19, 1965; January 15, 1968; February 19, 1968; August 25,
1969; August 24, 1981; April 25, 1983; January 31, 1984; Amended September
27, 1993, Effective October 1, 1993; Amended December 7, 1995)
24. The Board of Directors, at its first meeting after each Annual Meeting of
Stockholders, shall elect a Chairman of the Board, a President, one or more
Vice Presidents, a Secretary and a Treasurer, and may elect a Controller,
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and
Assistant Controllers. Such action may be taken by unanimous written
consent in lieu of a meeting. (Amended May 11, 1942; July 8, 1946; April
18, 1955; July 19, 1965; January 15, 1968; February 19, 1968; August 25,
1969; August 24, 1981; April 25, 1983; January 31, 1984; October 26, 1992;
Amended September 27, 1993, Effective October 1, 1993; Amended December 7,
1995)
25. The Board may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to
time by the Board.
26. The Board of Directors shall have the right to fix the salaries of all
officers of the corporation.
27. The officers of the corporation shall hold office until their successors
are elected and qualify in their stead. Any officers elected by the Board
of Directors may be removed at any time by the affirmative vote of a
majority of the whole Board of Directors. If the office of any officer
becomes vacant for any reason, the vacancy shall be filled by the
affirmative vote of the majority of the whole Board of Directors. In its
discretion, the Board may leave unfilled any office except that of
President, Treasurer or Secretary. (Amended April 18, 1955)
THE CHAIRMAN OF THE BOARD
28. A. The Chairman of the Board shall preside at all meetings of
stockholders and Directors.
B. The Chairman of the Board shall be an exofficio member of all standing
committees of the Board except those committees which the Board
determines will comprise only nonemployee Directors, specifically
including the Audit Committee and the Compensation Committee.
C. The Chairman of the Board shall be the Chief Executive Officer of the
corporation and shall have general and active management of the
business of the corporation. (Bylaw 28 added December 7, 1995)
THE PRESIDENT
29. A. In the absence of the Chairman of the Board, the President shall
preside at meetings of the stockholders and Directors. In the
event of a vacancy in the office of the Chairman of the Board,
the President shall exercise the powers of the Chairman of the
Board until the vacancy in the office of the Chairman of the
Board has been filed.
B. The President shall be an exofficio member of all standing
committees of the Board except those committees which the Board
determines will comprise only nonemployee Directors, specifically
including the Audit Committee and the Compensation Committee.
C. The President shall have powers and duties appropriate to the
office of President, taking into account Bylaw 28.C. (Bylaw 29
added December 7, 1995)
30. (Amended April 18, 1955; April 16, 1962; July 19, 1965; February 19, 1968;
August 25, 1969; August 24, 1981; January 31, 1984; May 19, 1986; deleted
September 27, 1993 to be effective October 1, 1993)
VICE PRESIDENTS
30. A. In the absence or disability of the President, the duties and powers
of the President will be exercised by the Executive Vice Presidents,
if any, in the order of their seniority with the Company; if there is
no Executive Vice President, then by such of the Group Vice Presidents
as are members of the Board in the order of their seniority on the
Board, and if any two Group Vice presidents have the same seniority on
the Board, then in the order of their seniority with the corporation
until the Board of Directors shall designate one of their number to
perform such duties. (Amended July 8, 1946; April 18, 1955; April 21,
1958; July 19, 1965; January 15, 1968; February 19, 1968; August 27,
1979; August 24, 1981; April 25, 1983)
B. In the absence or disability of the President, or the Executive Vice
Presidents and all of the Group Vice Presidents, the Vice Presidents
who are members of the Board of Directors in the order of their
seniority on the Board shall perform the duties and exercise the
powers of the President until the Board of Directors shall designate
one of their number to perform such duties. (Amended July 8, 1946;
April 21, 1958; July 19, 1965; January 15, 1968; February 19, 1968;
August 25, 1969; August 24, 1981; April 25, 1983)
THE SECRETARY AND ASSISTANT SECRETARIES
31. A. The Secretary shall attend all sessions of the Board and all meetings
of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform
like duties for the standing committees when required. He shall give,
or cause to be given, notice of all meetings of the stockholders and
of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or Chief Executive Officer of
the corporation, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation, and when authorized by the
Board, affix it to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of the
Treasurer. (Amended October 26, 1992; Amended September 27, 1993,
Effective October 1, 1993)
B. The Assistant Secretaries in the order of their seniority shall, in
the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary, and shall perform such other
duties as the Board of Directors shall prescribe.
THE TREASURER AND ASSISTANT TREASURERS
32. The Treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in
books belonging to the corporation, and shall deposit all moneys and other
valuable effects in the name and to the credit of the corporation, in such
depositories as may be designated by the Board of Directors.
A. He shall disburse the funds of the corporation as may be ordered by
the Board, taking the proper vouchers for such disbursement, and shall
render to the Chief Executive Officer of the corporation and
Directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the
financial condition of the corporation. (Amended September 27, 1993,
Effective October 1, 1993)
B. He shall give the corporation a bond if required by the Board of
Directors in a sum, and with one or more sureties satisfactory to the
Board, for the faithful performance of the duties of his office, and
for the restoration of the corporation in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession
or under his control belonging to the corporation.
C. The Assistant Treasurers in the order of their seniority shall, in the
absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer, and shall perform such other
duties as the Board of Directors shall prescribe.
DUTIES OF OFFICERS MAY BE DELEGATED
33. In case of the absence of an officer of the corporation, or for any other
reason that the Board may deem sufficient, the Board may delegate, for the
time being, the powers or duties, or any of them of such officer to any
other officer, or to any Director, PROVIDED, a majority of the entire Board
concur therein.
CERTIFICATES OF STOCK
34. Stock certificates of the corporation shall be numbered consecutively and
shall be entered on the books of the corporation as they are issued. They
shall exhibit the holders' names and the number of shares and shall be
signed by the Chairman of the Board or the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Until such other transfer agent is appointed, the
Secretary shall sign as transfer agent. Each certificate shall bear the
corporate seal or a facsimile thereof. Each certificate shall recite the
kind or class of stock it represents. (Amended September 8, 1947; April 18,
1955; November 24, 1959; October 26, 1992; Amended September 27, 1993,
Effective October 1, 1993; Amended December 7, 1995)
Where a certificate is countersigned by (i) a transfer agent other than the
corporation or its employee, or (ii) a registrar other than the Corporation
or its employee, either of which countersignatures may be a facsimile, any
other signature on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue. (Added by amendment
January 12, 1942; September 8, 1947; April 18, 1955; November 24, 1959;
October 27, 1969; October 26, 1992; November 23, 1992)
TRANSFER OF STOCK
35. All transfer of stock of the corporation shall be made on the books of the
corporation only by the person named in the certificate or by an attorney
lawfully constituted in writing, and upon the surrender of certificates for
the stock so transferred. Unless other transfer agents be designated by the
Board of Directors, the Secretary shall be the sole transfer agent.
CLOSING OF TRANSFER BOOKS
36. The Board of Directors shall have power to close the stock transfer books
of the corporation for a period not exceeding sixty (60) days preceding the
date of any meeting of stockholders or the date for payment of any dividend
or the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect; PROVIDED,
however, that in lieu of closing the stock transfer books as aforesaid, the
Board of Directors may fix in advance a date, not exceeding sixty (60) days
preceding the date of any meeting of stockholders or the date for the
payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go
into effect as a record date for the determination of the stockholders
entitled to notice of, and to vote at any such meeting, or entitled to
receive payment of any such dividend, or to any such allotment of rights,
or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and in such case only such stockholders as shall
be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on
the books of the corporation after any such record date fixed as aforesaid.
(Amended November 21, 1966; March 23, 1970)
REGISTERED STOCKHOLDERS
37. The corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not it shall have
express or other notice thereof, save expressly provided by the laws of
Delaware.
LOST CERTIFICATE
38. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact and advertise
the same in such manner as the Board of Directors may require, and
the Board of Directors may, in their discretion, before issuing a
new certificate, require the owner of the lost or destroyed
certificate, or his legal representative, to give the corporation a
bond, in such sum as they may direct, not exceeding double the
value of the stock, to indemnify the corporation against any claim
that may be made against it on account of alleged loss of any such
certificate; a new certificate of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed may be
issued without requiring any bond when, in the judgment of the
Directors, it is proper so to do.
CHECKS AND NOTES
39. Checks, drafts, orders for the payment of money and promissory notes shall
be signed or endorsed in the name of the corporation by such person or
persons as the Board of Directors, by resolution, shall from time to time
appoint.
FISCAL YEAR
40. The fiscal year of the corporation shall end on the last Saturday of
October in each year.
DIVIDENDS
41. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital
stock.
Before payment of any dividend, there may be set aside out of any funds of
the corporation available for dividends such sum or sums as the Directors
from time to time, in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such other purposes
as the Directors shall think conducive to the interests of the corporation.
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
42. The corporation to the fullest extent permitted by the applicable laws of
the State of Delaware in effect from time to time shall indemnify each
officer against the expenses of any action to which such officer is a party
or is threatened to be made a party in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding")
by reason of the fact that he is or was an officer of the corporation; and
the corporation may purchase and maintain insurance for the purpose of
indemnification to the fullest extent permitted by said laws.
Notwithstanding any other provision of these Bylaws and except as otherwise
specifically provided for herein, the corporation shall be required to
indemnify an officer in connection with a proceeding (or part thereof
including any counterclaim in any proceeding) commenced by such officer
only if the commencement of such proceeding (or part thereof including any
counterclaim in any proceeding) by the officer was authorized by the Board
of Directors.
As used in this Bylaw: (i) the term officer means any person who is, was or
may hereafter be a director, officer, employee or agent of this corporation
or, at the request of this corporation, of any other corporation or of any
partnership, joint venture, trust or other enterprise and the rights of
indemnification under this Bylaw shall inure to the benefit of the heirs
and legal representatives of any such persons, (ii) the term action means
any threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative including those by or in
the right of the corporation and whether or not involving an act or
omission of an officer in his capacity as such and whether or not he is an
officer at the time of such action, and (iii) the term expenses of any
action shall include attorneys' fees, judgments, fines, amounts paid in
settlement and any other expenses incurred in connection with an action but
in the case of actions by or in the right of the corporation the term shall
not include judgments or other amounts paid to the corporation. The
foregoing terms shall be construed and shall be deemed to be amended from
time to time as necessary so as to permit indemnification to the fullest
extent permitted under the applicable laws of the State of Delaware then in
effect.
The corporation's obligation, if any, to indemnify or to advance expenses
to any Indemnitee who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise shall be reduced by any amount such
Indemnitee may collect as indemnification or advancement of expenses from,
or insurance related to, such other corporation, partnership, joint
venture, trust, or other enterprise.
(Bylaw 42 added November 20, 1967; amended May 27, 1980; July 28, 1997)
WAIVER OF NOTICES
43. Any stockholder, director or officer may waive any notice required to be
given under these Bylaws.
AMENDMENTS
44. These Bylaws may be altered or amended by the Board of Directors at any
meeting by the affirmative vote of a majority of the whole Board of
Directors. The Bylaws may also be altered or amended at any meeting of the
stockholders by the affirmative vote of a majority of the stock issued and
outstanding.
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS
<S> <C> <C>
JOEL W. JOHNSON (4*,5,7*) MICHAEL J. MCCOY WILLIAM S. DAVILA (1,2*)
Chairman of the Board Vice President Los Angeles, CA
President Treasurer President Emeritus
Chief Executive Officer The Vons Companies, Inc.
Director since June 1991 GARY C. PAXTON Director since January 1993
Vice President
DON J. HODAPP (4,6*) Manufacturing E. PETER GILLETTE, JR. (2,6)
Executive Vice President Minneapolis, MN
Chief Financial Officer KENNETH P. REGNER President
Director since April 1986 Vice President Piper Trust Company
Engineering Director since July 1996
GARY J. RAY (3*,4)
Executive Vice President JAMES N. RIETH, PH.D. LUELLA G. GOLDBERG (5,6)
Operations Vice President Minneapolis, MN
Director since November 1990 President and Trustee Emerita
Chief Executive Officer Wellesley College
ERIC A. BROWN (4) Jennie-O Foods Member Board of Overseers
Group Vice President University of Minnesota
Prepared Foods RICHARD W. SCHLANGE Carlson School of Management
Director since January 1997 Vice President Director since September 1993
Controller
JAMES W. COLE (3,4) GERALDINE M. JOSEPH (1*,5)
Group Vice President MAHLON C. SCHNEIDER Minneapolis, MN
Foodservice Vice President Former U.S. Ambassador to
Director since November 1990 General Counsel The Netherlands
Senior Fellow, Emerita
DAVID N. DICKSON (4,6) ROBERT A. SLAVIK Hubert H. Humphrey Institute
Group Vice President Vice President Sales of Public Affairs
International and Meat Products Director August 1974-July 1978
Corporate Development Reelected April 1981
Director since November 1990 THOMAS J. LEAKE
Secretary JOSEPH T. MALLOF (2,7)
STANLEY E. KERBER (3,4) Racine, WI
Group Vice President JAMES W. CAVANAUGH President
Meat Products Assistant Secretary North American Consumer Products
Director since November 1990 S.C. Johnson & Son, Inc.
KEVIN C. JONES Director since October 1997
RICHARD A. BROSS Assistant Secretary
Vice President ROBERT R. WALLER, M.D. (5*,7)
Grocery Products JEFFREY M. ETTINGER Rochester, MN
Assistant Treasurer President and Chief Executive Officer
FORREST D. DRYDEN, PH.D. Mayo Foundation
Vice President JOHN W. ALLEN, PH.D. (1,7) Director since January 1993
Research and Development East Lansing, MI
Professor and Director ----------------
RONALD W. FIELDING of the Food Industry Alliance (1) Audit Committee
Vice President Michigan State University (2) Compensation Committee
President of Hormel Foods Director since October 1989 (3) Contributions Committee
International (4) Executive Committee
JOHN R. BLOCK (1,5) (5) Nominating Committee
JERRY C. FIGENSKAU Falls Church, VA (6) Employee Benefits Committee
Vice President Former U.S. Secretary (7) Personnel Committee
Specialty Products 0f Agriculture * Denotes Chairperson
President
JAMES A. JORGENSON Food Distributors International
Vice President Director since October 1997
Human Resources
</TABLE>
-19-
<PAGE>
HORMEL FOODS CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
(In Thousands, Except Per Share
Amounts)
<CAPTION>
1997 1996 1995 1994
---------- ---------- ---------- ----------
OPERATIONS
<S> <C> <C> <C> <C>
Net Sales ............................. $3,256,551 $3,098,685 $3,046,195 $3,064,793
Net Earnings Before Cumulative
Effect of Accounting Changes ........ 109,492 79,408 120,436 117,975
Percent of Sales .................... 3.36% 2.56% 3.95% 3.85%
Cumulative Effect of Accounting Changes
Net Earnings (Loss) ................... 109,492 79,408 120,436 117,975
Wage Costs ............................ 435,789 398,824 373,901 351,096
Total Taxes (excluding Payroll Tax) ... 73,115 56,992 84,329 82,915
Depreciation and Amortization ......... 52,925 42,700 37,220 36,611
FINANCIAL POSITION
Working Capital ....................... $ 410,774 $ 456,850 $ 441,452 $ 443,298
Properties (net) ...................... 488,738 421,486 333,084 270,886
Total Assets .......................... 1,528,535 1,436,138 1,223,860 1,196,718
Long-Term Debt
Less Current Maturities ............. 198,232 127,003 16,959 10,300
Shareholders' Investment .............. 802,202 785,551 732,047 661,089
PER SHARE OF COMMON STOCK
Net Earnings Before Cumulative
Effect of Accounting Changes ........ $ 1.43 $ 1.04 $ 1.57 $ 1.54
Cumulative Effect of Accounting Changes
Net Earnings (Loss) ................... 1.43 1.04 1.57 1.54
Dividends ............................. 0.62 0.60 0.58 0.50
Shareholders' Investment .............. 10.59 10.13 9.54 8.62
* 53 Weeks
** Adoption of SFAS No. 106 and No. 109
END OF PAGE 18
</TABLE>
- ----------
* 53 Weeks
** Adoption of SFAS No. 106 and No. 109
HORMEL FOODS CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
(In Thousands, Except Per Share Amounts)
<CAPTION>
1993 *1992 1991 1990
----------- ----------- ----------- -----------
OPERATIONS
<S> <C> <C> <C> <C>
Net Sales ..................... $ 2,853,997 $ 2,813,651 $ 2,836,222 $ 2,681,180
Net Earnings Before Cumulative
Effect of Accounting Changes 100,770 95,174 86,393 77,124
Percent of Sales ............ 3.53% 3.38% 3.05% 2.88%
Cumulative Effect of Accounting
Changes ......................... (127,529)**
Net Earnings (Loss) ........... (26,759) 95,174 86,393 77,124
Wage Costs .................... 325,115 304,696 278,537 267,391
Total Taxes (excluding Payroll
Tax) ............................ 70,026 64,968 60,035 51,990
Depreciation and Amortization . 32,174 38,972 36,269 35,554
FINANCIAL POSITION
Working Capital ............... $ 392,846 $ 401,216 $ 346,164 $ 293,818
Properties (net) .............. 244,987 216,390 231,817 235,026
Total
Assets .......................... 1,093,559 913,015 856,835 799,422
Long-Term Debt
Less Current
Maturities ...................... 5,700 7,624 22,833 24,535
Shareholders'
Investment ...................... 570,888 644,284 583,408 513,832
PER SHARE OF COMMON STOCK
Net Earnings Before Cumulative
Effect of Accounting Changes $ 1.31 $ 1.24 $ 1.13 $ 1.01
Cumulative Effect of Accounting
Changes ......................... -1.66
Net Earnings (Loss) ........... (0.35) 1.24 1.13 1.01
Dividends ..................... 0.44 0.36 0.30 0.26
Shareholders'
Investment ...................... 7.45 8.41 7.61 6.70
</TABLE>
- ----------
* 53 Weeks
** Adoption of SFAS No. 106 and No. 109
HORMEL FOODS CORPORATION
SELECTED FINANCIAL DATA
(In Thousands, Except Per
Share Amounts)
1989 1988
---------- ----------
OPERATIONS
Net Sales ................................ $2,340,513 $2,292,847
Net Earnings Before Cumulative
Effect of Accounting Changes ........... 70,114 60,192
Percent of Sales ....................... 3.00% 2.63%
Cumulative Effect of Accounting
Changes
Net Earnings (Loss) ...................... 70,114 60,192
Wage Costs ............................... 254,449 253,937
Total Taxes (excluding Payroll
Tax) ....................................... 48,983 44,541
Depreciation and Amortization ............ 36,863 35,517
FINANCIAL POSITION
Working Capital .......................... $ 232,941 $ 156,476
Properties (net) ......................... 244,362 263,056
Total
Assets ..................................... 727,429 706,548
Long-Term Debt
Less Current
Maturities ................................. 19,228 20,399
Shareholders'
Investment ................................. 470,929 418,716
PER SHARE OF COMMON STOCK
Net Earnings Before Cumulative
Effect of Accounting Changes ........... $ 0.91 $ 0.79
Cumulative Effect of Accounting
Changes
Net Earnings (Loss) ...................... 0.91 0.79
Dividends ................................ 0.22 0.18
Shareholders'
Investment ................................. 6.14 5.46
- ----------
* 53
Weeks
** Adoption of SFAS No. 106 and No. 109
-20-
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
HORMEL FOODS CORPORATION
October 25, October 26,
1997 1997
----------- -----------
(In Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................. $ 146,853 $ 188,473
Short-term marketable securities ........... 5,533 14,642
Accounts receivable ........................ 233,966 230,869
Inventories ................................ 265,346 271,097
Deferred income taxes ...................... 12,204 11,615
Prepaid expenses ........................... 7,450 6,563
----------- -----------
TOTAL CURRENT ASSETS .... 671,352 723,259
DEFERRED INCOME TAXES ........................ 68,629 68,686
INTANGIBLES .................................. 131,710 124,193
INVESTMENTS IN AFFILIATES .................... 113,372 43,667
OTHER ASSETS ................................. 54,734 54,847
PROPERTY, PLANT AND EQUIPMENT
Land ....................................... 11,467 8,517
Buildings .................................. 242,124 210,450
Equipment .................................. 594,159 538,562
Construction in progress ................... 72,179 71,085
----------- -----------
919,929 828,614
Less allowance for depreciation ............ (431,191) (407,128)
----------- -----------
488,738 421,486
----------- -----------
$ 1,528,535 $ 1,436,138
=========== ===========
-21-
<PAGE>
<TABLE>
<CAPTION>
October 25, October 26,
1997 1996
----------- -----------
(In Thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable .................................................... $ 120,385 $ 121,004
Accrued expenses .................................................... 34,564 42,190
Accrued marketing expenses .......................................... 21,543 22,768
Employee compensation ............................................... 46,275 41,493
Taxes, other than federal income taxes .............................. 16,524 14,991
Dividends payable ................................................... 11,980 11,611
Federal income taxes ................................................ 4,712 9,804
Current maturities of long-term debt ................................ 4,595 2,548
----------- -----------
TOTAL CURRENT LIABILITIES 260,578 266,409
LONG-TERM DEBT--less current maturities ............................... 198,232 127,003
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION ......................... 243,343 239,616
OTHER LONG-TERM LIABILITIES ........................................... 24,180 17,559
SHAREHOLDERS' INVESTMENT
Preferred Stock, par value $.01 a
share--authorized 40,000,000 shares;
issued - none
Common Stock, non-voting, par value
$.01 a share--authorized 40,000,000
shares; issued - none
Common Stock, par value $.1172 a share--
authorized 200,000,000 shares;
issued 75,776,510 shares Oct. 25, 1997,
issued 77,534,398 shares Oct. 26, 1996 ....................... 8,881 9,087
Additional paid-in capital .......................................... 32,214
Shares held in treasury ............................................. (535)
----------- -----------
8,881 40,766
Earnings reinvested in business ..................................... 793,321 744,785
----------- -----------
802,202 785,551
----------- -----------
$ 1,528,535 $ 1,436,138
=========== ===========
</TABLE>
-22-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
HORMEL FOODS CORPORATION
(In Thousands, Except Per Share Amounts)
<CAPTION>
Fiscal Year Ended
October 25, October 26, October 28,
1997 1996 1995
------------------ ---------------- ----------------
<S> <C> <C> <C>
Sales, less returns and
allowances $3,256,551 $3,098,685 $3,046,195
Cost of products sold 2,497,662 2,398,272 2,294,254
------------------ ---------------- ----------------
GROSS
PROFIT 758,889 700,413 751,941
Expenses:
Selling and delivery 514,931 503,108 502,729
Administrative and general 75,788 75,659 65,766
Restructuring charges (5,176) 8,659
------------------ ---------------- ----------------
OPERATING
INCOME 173,346 112,987 183,446
Other income and expense:
Interest and investment income 9,156 14,106 12,762
Equity in earnings of affiliates 3,402
Interest expense (15,043) (1,619) (1,529)
------------------ ---------------- ----------------
EARNINGS BEFORE INCOME TAXES 170,861 125,474 194,679
Provision for income taxes 61,369 46,066 74,243
------------------ ---------------- ----------------
NET
EARNINGS $ 109,492 $ 79,408 $ 120,436
================== ================ ================
NET EARNINGS PER SHARE $ 1.43 $ 1.04 $ 1.57
================== ================ ================
</TABLE>
-23-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT
HORMEL FOODS CORPORATION
(In Thousands, Except Per Share Amounts)
<CAPTION>
COMMON STOCK TREASURY STOCK
------------------ ----------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at October 29, 1994 76,852 9,007 (162) (3,632)
------ ----- ---- ------
Purchases of Common Stock (60) (1,480)
Exercise of stock options 72 1,190
Tax benefit of stock options
Adjustment in minimum pension liability
Net earnings
Cash dividends - $.58 per share
------ ----- ---- ------
Balance at October 28, 1995 76,852 9,007 (150) (3,922)
Purchases of Common Stock (1,015) (24,334)
Exercise of stock options 114 3,013
Shares retired (1,027) (120) 1,027 24,708
Issuance of stock for Stagg Foods, Inc. 1,709 200
Tax benefit of stock options
Adjustment in minimum pension liability
Net earnings
Cash dividends - $.60 per share
------ ----- ---- ------
Balance at October 26, 1996 77,534 9,087 (24) (535)
Purchases of Common Stock (1,748) (45,457)
Exercise of stock options 15 368
Shares retired (1,757) (206) 1,757 45,624
Tax benefit of stock options
Adjustment in minimum pension liability
Net earnings
Cash dividends - $.62 per share
------ ----- ---- ------
Balance at October 25, 1997 75,777 8,881 0 $ 0
</TABLE>
-24-
<PAGE>
<TABLE>
HORMEL FOODS CORPORATION
<CAPTION>
(In Thousands, Except Per Share Amounts) Additional Earnings Total
Paid-in Reinvested Shareholders'
Capital in Business Investment
----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Balance at October 29, 1994 $ 15,696 $ 640,018 $ 661,089
Purchases of Common Stock (1,480)
Exercise of stock options (1,720) (530)
Tax benefit of stock options 928 928
Adjustment in minimum pension liability (3,912) (3,912)
Net earnings 120,436 120,436
Cash dividends - $.58 per share (44,484) (44,484)
----------- ------------ ---------------
Balance at October 28, 1995 16,624 710,338 732,047
Purchases of Common Stock (24,334)
Exercise of stock options (1,114) 1,899
Shares Retired (24,588) 0
Issuance of stock for Stagg Foods, Inc. 39,800 40,000
Tax benefit of stock options 378 378
Adjustment in minimum pension liability 2,254 2,254
Net earnings 79,408 79,408
Cash dividends - $.60 per share (46,101) (46,101)
----------- ------------ ---------------
Balance at October 26, 1996 32,214 744,785 785,551
Purchases of Common Stock (45,457)
Exercise of stock options (132) 236
Shares Retired (32,281) (13,137) 0
Tax benefit of stock options 67 67
Adjustment in minimum pension liability (140) (140)
Net earnings 109,492 109,492
Cash dividends - $.62 per share (47,547) (47,547)
----------- ------------ ---------------
Balance at October 25, 1997 $ 0 $ 793,321 $ 802,202
=========== ============ ===============
</TABLE>
-25-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
HORMEL FOODS CORPORATION
<CAPTION>
Fiscal Year Ended
-------------------------------------------
October 25, October 26, October 28,
(In Thousands) 1997 1996 1995
-------- --------- --------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings ....................................................... $ 109,492 $ 79,408 $ 120,436
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation ................................................... 44,915 38,280 33,367
Amortization of intangibles .................................... 8,010 4,419 3,853
Equity in earnings of affiliates ............................... (3,402)
Provision for deferred income taxes ............................ (444) (2,347) 5,164
Gain on investments ............................................ (4,627)
(Gain) loss on property/equipment
sales and idle facility ...................................... 50 (3,767) (239)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ..................... (3,097) 2,773 (3,038)
Decrease (increase) in inventories
and prepaid expenses .......................................... 4,864 (56,771) (10,903)
Increase (decrease) in accounts payable
and accrued expenses .......................................... 2,101 52,040 (57,266)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................ 162,489 109,408 91,374
========= ========= =========
INVESTING ACTIVITIES
Sale of held-to-maturity securities ............................... 62,394
Sale of available-for-sale securities ............................. 13,116 2,871
Purchase of held-to-maturity securities ........................... (53,285) (14,642)
Acquisitions of businesses ........................................ (140) (12,845) (6,201)
Purchases of property/equipment ................................... (116,381) (122,942) (97,181)
Proceeds from sales of property/equipment ......................... 4,163 5,410 1,855
Increase in investments, equity in affiliates,
and other assets ................................................. (83,011) (18,418) (16,141)
Dividends from affiliate .......................................... 1,206 -- --
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES ................................ (185,054) (150,321) (114,797)
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
FINANCING ACTIVITIES
<S> <C> <C> <C>
Proceeds from long-term borrowings ................................ 77,625 110,553 10,000
Principal payments on long-term debt .............................. (4,349) (3,393) (1,610)
Dividends paid on Common Stock .................................... (47,178) (45,613) (42,946)
Stock Repurchase .................................................. (45,457) (23,966)
Other ............................................................. 304 2,266 (1,081)
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES ................................................. (19,055) 39,847 (35,637)
--------- --------- ---------
DECREASE IN CASH AND
CASH EQUIVALENTS ..................................................... (41,620) (1,066) (59,060)
Cash and cash equivalents at beginning of year ....................... 188,473 189,539 248,599
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR ..................................................... $ 146,853 $ 188,473 $ 189,539
========= ========= =========
</TABLE>
See notes to consolidated financial statements
-27-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HORMEL FOODS CORPORATION
October 25, 1997
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Hormel Foods Corporation and all of its majority-owned subsidiaries
after elimination of all significant intercompany accounts, transactions and
profits.
BUSINESS OVERVIEW: Hormel is engaged in a single business segment designated as
"meat and food processing." As a federally inspected food processor, Hormel is
engaged in the processing of meat and poultry products, production of prepared
foods, and the marketing of those products to food wholesalers, retailers, and
food service distributors in the United States. The principal raw materials for
the Company's products are pork and turkey. The Company's earnings are
influenced by the cyclical nature of these raw material costs.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PRESENTATION: Certain prior year amounts have been reclassified to conform to
the fiscal 1997 presentation.
INVENTORIES: Inventories are valued at the lower of cost or market. Livestock
and the materials portion of products are valued on the first-in, first-out
method, with the exception of the materials portion of turkey products which are
valued on the last-in, first-out method. Substantially all inventoriable
expenses, packages and supplies are valued by the last-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are carried at cost
less accumulated depreciation. Depreciation is provided over the estimated
useful lives of the related assets, primarily on a straight-line basis. The
carrying value of property, plant and equipment is assessed annually and/or when
factors indicating an impairment are present. The Company determines such
impairment by measuring undiscounted future cash flows. If an impairment is
present, the assets are reported at the lower of carrying value or fair value.
Beginning in 1996, the Company capitalized certain software development and
implementation costs. Prior to 1996, such costs were not significant.
Development and implementation costs are expensed until the Company has
determined that the software will result in probable future economic benefits
and management has committed to funding the project. Thereafter, all direct,
external implementation costs and purchased software costs are capitalized and
amortized using the straight-line method over the remaining estimated useful
lives, not exceeding five years.
AMORTIZATION OF INTANGIBLES: Goodwill and other intangibles are being amortized
over periods up to 40 years. The carrying value of intangible assets is assessed
annually and/or when factors indicating impairment are present. The Company
employs an undiscounted cash flow method of assessment for these assets.
Accumulated amortization at October 25, 1997 and October 26, 1996 was
$28,248,000 and $20,238,000, respectively.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities denominated in foreign
currency are translated at the current exchange rate as of the balance sheet
date, and income statement amounts are translated at the average monthly
exchange rate. Translation adjustments resulting from fluctuations in exchange
rates are recorded in a separate component of shareholders' investment. Periodic
and cumulative gains or losses resulting from foreign currency translation are
not material.
EQUITY METHOD INVESTMENTS: The Company has a number of investments in joint
ventures and other entities where its voting interests are in excess of twenty
percent but no greater than fifty percent. The Company accounts for such
investments under the equity method of accounting, and its underlying share of
each investee's equity is reported in the consolidated balance sheet as part of
investments in affiliates. The difference between the price paid for each equity
investment and the Company's underlying share of each investee's equity is
accounted for as goodwill and reported in the consolidated balance sheet as part
of intangibles.
The Company's only material equity investment is in the common stock of a
Spanish company, Campofrio Alimentacion, S.A. (Campofrio). The Company purchased
a 21.36 % interest in Campofrio in 1997 for $64.3 million, which resulted in the
recording of $17.9 million of goodwill. The fair value of such publicly traded
securities was $112.6 million at October 25, 1997.
ACQUISITIONS: The Company acquired Stagg Foods, Inc., a manufacturer of chili
products, in October of 1996 for $40,000,000 of the Company's stock.
Additionally, the Company paid $10,000,000 in cash to the former owners under a
five year non-compete agreement. The acquisition resulted in the recording of
$32,056,000 of goodwill which is being amortized over 30 years.
The Company also acquired several other businesses during each of the three
fiscal years ended October 25, 1997 which are included in the Company's results
of operations since the respective acquisition dates. The results of these
acquired businesses, either individually or in the aggregate, were not
significant to the Company's results of operations.
ADVERTISING EXPENSES: Advertising costs are expensed when incurred. Advertising
expenses includes all media advertising, but excludes the costs associated with
coupons, samples, and market research. Advertising costs for fiscal years 1997,
1996, and 1995 were $190.1 million, $177.2 million and $176.2 million,
respectively.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses incurred
for fiscal years 1997, 1996, and 1995 were $8,580,000, $8,022,000, and
$7,829,000, respectively.
INCOME TAXES: The Company records income taxes in accordance with the asset and
liability method of accounting. Deferred taxes are recognized for the estimated
taxes ultimately payable or recoverable based on enacted tax law.
Changes in enacted tax rates are reflected in the tax provision as they occur.
EARNINGS PER SHARE: Earnings per share of Common Stock are based on the weighted
average number of shares outstanding during the year. The dilutive effects of
Common Stock equivalents were not significant in any year presented.
FISCAL YEAR: The Company's fiscal year ends on the last Saturday in October.
Fiscal years 1997, 1996, and 1995 consisted of 52 weeks.
ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS: The Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" in 1995. The implementation
of this statement did not have a material impact on results of operations.
In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, "Earnings Per Share," which is required to be adopted in the first
quarter of fiscal 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share and restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options will be excluded. Management does not
expect the adoption of SFAS No. 128 will have a material impact on its future
computations of earnings per share.
-28-
<PAGE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
Statement No. 130 establishes standards for the reporting of comprehensive
income and its components in a full set of general-purpose financial statements.
The Company will be required to adopt Statement No. 130 in fiscal 1999, and does
not expect the measure of comprehensive income to be materially different from
the measure of net income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures About Segments of
An Enterprise and Related Information." Statement No. 131 revises information
regarding the reporting of operating segments. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will be required to adopt Statement No. 131 in fiscal
1999. The Company does not believe that the adoption of this standard will
result in segment disclosures that are materially different than those provided
under the current accounting standards.
NOTE B--CASH AND CASH EQUIVALENTS AND SHORT-TERM MARKETABLE SECURITIES
The Company considers all investments with an original maturity of three months
or less on their acquisition date to be cash equivalents. The Company classifies
investments with an original maturity of more than three months on their
acquisition date as short-term marketable securities. The Company's cash and
cash equivalents and short-term marketable securities at October 25, 1997 and
October 26, 1996, consisted of the following (cost approximates fair value, in
thousands):
<TABLE>
<CAPTION>
OCTOBER 25, 1997 OCTOBER 26, 1996
---------------- ----------------
Short-term Short-term
Cash and Cash MARKETABLE Cash and Cash MARKETABLE
EQUIVALENTS SECURITIES EQUIVALENTS SECURITIES
----------- ---------- ----------- ----------
Held-to-maturity
securities:
<S> <C> <C> <C> <C>
Commercial paper .......... $ 15,780 $ 5,533 $ 49,862 $ 14,642
Municipal securities ...... 80,064 -- 85,900 --
Preferred securities ...... 10,000 -- 14,000 --
Other ..................... 4,700 -- 8,496 --
Cash ....................... 36,309 -- 30,215 --
-------- -------- -------- --------
Total ...................... $146,853 $ 5,533 $188,473 $ 14,642
======== ======== ======== ========
</TABLE>
The Company recognized a gain on the sale of short-term marketable securities in
fiscal 1996 of $4.6 million.
NOTE C--INVENTORIES
Principal components of inventories are:
<TABLE>
<CAPTION>
OCTOBER 25, 1997 OCTOBER 26, 1996
---------------- ----------------
(In Thousands)
<S> <C> <C>
Finished products ............................ $ 145,897 $ 158,106
Raw materials & work-in-process .............. 86,762 85,847
Materials and supplies ....................... 59,846 56,266
LIFO reserve ................................. (27,159) (29,122)
--------- ---------
Total ........................................ $ 265,346 $ 271,097
========= =========
</TABLE>
Inventoriable expenses, packages and supplies, and turkey products amounting to
approximately $84.5 million at October 25, 1997 and $81.5 million at October 26,
1996 are stated at cost determined by the last-in, first-out method, and are
$27.2 million and $29.1 million lower in the respective years than such
inventories determined under the first-in, first-out method.
NOTE D--LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
Long-term debt consists of:
<TABLE>
<CAPTION>
October 25, October 26,
1997 1996
-------- --------
(In Thousands)
Industrial revenue bonds
with variable interest rates,
<S> <C> <C> <C> <C>
due 1999 to 2005 ......................................... $ 5,700 $ 7,750
Promissory notes, principal and interest due
annually through 2001, interest at 6.5%
and 8.9%, secured by limited partnership
interests in affordable housing .......................... 11,046 11,259
Medium term unsecured notes,
$35,000,000 maturing in 2002 and
$75,000,000 maturing in 2006, with
interest at 7.16% and 7.35%, respectively ................ 110,000 110,000
Medium term unsecured notes, principal
and interest due annually through 2003,
interest at 6.5% ......................................... 64,337
Medium term secured notes with variable rates, principal
and interest due annually through
2005, secured by various equipment ....................... 8,468
Variable Rate - Revolving Credit Agreements .............. 2,776
Other .................................................... 500 542
-------- --------
202,827 129,551
Less current maturities .................................. 4,595 2,548
-------- --------
$198,232 $127,003
======== ========
</TABLE>
The Company has various lines of credit which have a maximum available
commitment of $27,251,000. As of October 25, 1997, the Company has unused lines
of credit of $24,475,000 which bear interest at variable rates below prime. A
fixed fee is paid for the availability of credit lines.
Aggregate annual maturities of long term debt for the five fiscal years after
October 25, 1997 are as follows
----------------------------------------------
(In Thousands)
1998 $ 4,595
1999 6,410
2000 42,589
2001 41,217
2002 and thereafter 108,016
==============================================
Total interest paid during fiscal 1997, 1996, and 1995 was $14,908,000,
$1,629,000, and $1,582,000, respectively.
NOTE E--BENEFIT PLANS
The Company and its subsidiaries have several noncontributory defined benefit
plans and defined contribution plans covering most employees. Total costs
associated with the Company's defined contribution benefit plans in 1997, 1996,
and 1995 were $ 9,025,000, $8,128,000, and $8,147,000, respectively. Benefits
for defined benefit pension plans covering hourly employees are provided based
on stated amounts for each year of service while plan benefits covering salaried
employees are based on final average compensation. The Company's funding policy
is to make annual contributions of not less than the minimum required by
applicable regulations.
A summary of the components of net periodic pension cost for defined benefit
plans is as follows:
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
Service cost--benefits
earned during the year ................. $ 8,737 $ 8,631 $ 7,656
Interest cost on projected
benefit obligation ..................... 32,780 32,158 31,670
Actual return on plan
assets ................................. (138,023) (35,569) (62,186)
Net amortization and
deferral ............................... 101,068 143 29,312
--------- --------- ---------
Net pension costs ...................... $ 4,562 $ 5,363 $ 6,452
========= ========= =========
Assumptions used in accounting for the defined benefit plans were:
1997 1996 1995
--------- --------- ---------
Weighted average discount
rates .................................. 7.25% 7.75% 7.75%
Rates of increase in
compensation levels .................... 5.00 5.00 5.00
Expected long-term rate of
return on assets ....................... 9.50 9.50 9.50
-29-
<PAGE>
The following table sets forth the plans' funded status and amounts recognized
in the statements of financial position:
OCTOBER 25, 1997 OCTOBER 26, 1996
--------------------- ----------------------
Plans Plans Plans Plans
Whose Whose Whose Whose
Assets Accrued Assets Accrued
Exceed Benefits Exceed Benefits
Accrued Exceed Accrued Exceed
BENEFITS ASSETS BENEFITS ASSETS
--------- --------- --------- ---------
(In Thousands)
Actuarial present value of
benefit obligations:
Vested benefit obligation ... $ 352,991 $ 32,911 $ 335,796 $ 28,051
Non-vested benefit
obligation .................. 27,389 7,748 23,239 7,598
--------- --------- --------- ---------
Accrued benefits ............ 380,380 40,659 359,035 35,649
Effects of estimated
future pay increase ....... 41,624 4,110 37,036 7,798
--------- --------- --------- ---------
Projected benefit
obligations ............... 422,004 44,769 396,071 43,447
Plan assets at fair value ... 543,344 -- 435,033 --
--------- --------- --------- ---------
Projected benefit
obligations in
excess of (less than)
benefit plan assets ....... (121,340) 44,769 (38,962) 43,447
Unrecognized prior
service cost .............. (8,475) (1,820) (9,337) (2,111)
Unrecognized net gain
(loss) .................... 87,603 (6,371) 7,954 (9,729)
Remaining net asset
(obligation) at transition .. (242) (4,310) (348) (5,007)
Adjustment required to
recognize minimum liability -- 8,400 -- 9,050
--------- --------- --------- ---------
Net pension liability
(asset) in statements
of financial position ..... $ (42,454) $ 40,668 $ (40,693) $ 35,650
========= ========= ========= =========
As of the 1997 valuation date, plan assets included Common Stock of the Company
having a market value of $76,273,000.
NOTE F--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides medical and life insurance benefits to certain retired
employees. Eligible employees who retired prior to January 1, 1987, remain on
the medical plan in effect when they retired. The medical plan for eligible
employees who retired after January 1, 1987, is automatically modified to
incorporate plan benefit and plan provision changes whenever they are made to
the active employee plan. Employees hired after January 1, 1990, are eligible
for postretirement medical coverage, but must pay the full cost of the coverage.
A summary of the components of postretirement benefit costs is as follows:
1997 1996 1995
--------- --------- ---------
(In Thousands)
Postretirement benefit cost -
Service cost of benefits earned ....... $ 2,639 $ 2,533 $ 1,933
Interest cost of benefit
obligation .......................... 18,237 17,571 15,769
Net amortization of deferred
gains ............................... 129 (176) (1,642)
--------- --------- ---------
$ 21,005 $ 19,928 $ 16,060
========= ========= =========
The actuarial present value of postretirement benefit obligations and the amount
reported in the Consolidated Statements of Financial Position as of October 25,
1997 and October 26, 1996 are as follows:
Accumulated postretirement benefit obligations as of the August 1 measurement
date (in thousands):
1997 1996
--------- -------
Retirees ............................... $165,077 $170,765
Fully eligible active participants ..... 29,809 22,463
Other active participants .............. 67,554 50,491
--------- -------
262,440 243,719
Unrecognized net losses ................ (16,371) (3,406)
Unrecognized prior service cost ........ 3,436 3,787
Benefit payments subsequent to
measurement date ...................... (6,162) (4,484)
--------- -------
Accrued postretirement benefit cost .... $243,343 $239,616
======== ========
Assumptions used in determining the accumulated postretirement benefit
obligation:
1997 1996 1995
---------- ---------- ---------
Medical plan cost 6.0% 6.5% 7.0%
declining declining declining
trend rate to 5.5% to 5.5% to 5.5%
in year in year in year
2004 2004 1998
Weighted average
discount rate 7.25% 7.75% 7.75%
==== ==== ====
-30-
<PAGE>
The health care cost trend rate assumption has a significant effect on the
amount reported. For example, a 1% increase in the health care cost trend rate
would increase the accumulated postretirement benefit obligation by $13.1
million at October 25, 1997 and the net periodic cost by $1.7 million for the
year.
NOTE G--INCOME TAXES
The components of the provision for income taxes are as follows:
1997 1996 1995
--------- --------- ---------
(In Thousands)
Current:
U. S. Federal ..................... $ 52,198 $ 39,124 $ 57,899
State ............................. 9,538 9,311 11,180
--------- --------- ---------
61,736 48,435 69,079
Deferred:
U. S. Federal ..................... (329) (2,136) 4,645
State ............................. (38) (233) 519
--------- --------- ---------
(367) (2,369) 5,164
--------- --------- ---------
$ 61,369 $ 46,066 $ 74,243
========= ========= =========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company believes
that, based upon its lengthy and consistent history of profitable operations, it
is probable that the net deferred tax assets of $80.8 million will be realized
on future tax returns, primarily from the generation of future taxable income.
Significant components of the deferred income tax liabilities and assets were as
follows:
October 25, October 26,
1997 1996
------- -------
(In Thousands)
Deferred tax liabilities -
Tax over book depreciation $(32,513) $(28,427)
Prepaid pension (16,389) (15,706)
Other, net (9,714) (7,599)
Deferred tax assets -
Vacation accrual 4,171 3,983
Insurance accruals 4,489 4,711
Deferred compensation 6,586 6,056
Postretirement benefits 94,344 92,899
Pension accrual 12,484 10,284
Other, net 17,376 14,100
------- -------
Net deferred tax assets $80,834 $80,301
======= =======
Reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
1997 1996 1995
--------- --------- ---------
U. S. statutory rate ................... 35.0% 35.0% 35.0%
State taxes on income, net
of federal tax benefit ............... 3.6 4.7 3.9
All other, net ......................... (2.7) (3.0) (.8)
--------- --------- ---------
Effective tax rate ..................... 35.9% 36.7% 38.1%
========= ========= =========
Total income taxes paid during fiscal 1997, 1996, and 1995 were $66.5 million,
$38.3 million, and $89.6 million, respectively.
NOTE H: Commitment
In order to ensure a steady supply of hogs and turkeys and to keep the cost of
products stable, the Company and its subsidiary, Jennie-O Foods, Inc., have
entered into contracts with producers for the purchase of hogs and turkeys at
formula based prices over periods of up to 15 years. Under these contracts, the
Company and Jennie-O are committed at October 25, 1997, to purchase hogs and
turkeys, assuming current price levels, as follows (in thousands) :
1998 $ 610,356
1999 509,099
2000 423,007
2001 416,431
2002 356,937
Later years 1,388,526
-------------
Total $ 3,704,356
=============
Estimated purchases under these contracts for fiscal 1997, 1996, and 1995 were
$422.1 million, $367.4 million, and $200.4 million, respectively.
The Company has commitments to expend approximately $65.2 million to complete
construction in progress at various locations at October 25, 1997. The Company
also has noncancellable operating lease commitments on facilities and equipment
totaling $17.5 million at October 25, 1997. The terms of the leases extend to
ten years. The Company has also pledged $23.7 million of government securities
as collateral guaranteeing a loan at October 25, 1997.
NOTE I--STOCK OPTIONS
The Company has stock option plans for employees and nonemployee directors. The
Company's policy is to grant options with the exercise price equal to the market
price of the common stock on the date of grant. The Company follows APB opinion
No. 25, "Accounting for Stock Issued to Employees" and related interpretations
in accounting for its employee stock options. Under APB Opinion No. 25, when the
exercisable price of employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recorded.
Options are exercisable upon grant and expire at various dates ranging from
fiscal 2001 to 2007.
Following is a summary of stock option activity:
WEIGHTED-AVG
SHARES OPTION PRICE
-------- -----------
Balance October 29, 1994 1,853,000 $20.89
Granted 383,000 24.76
Exercised (275,000) 17.97
-------- -----
Balance October 28, 1995 1,961,000 22.05
Granted 764,000 23.88
Exercised (165,000) 19.30
-------- -----
Balance October 26, 1996 2,560,000 22.78
Granted 8,000 23.88
Exercised (22,000) 21.57
Balance October 25, 1997 2,546,000 $22.79
========= ======
The weighted-average fair value of options granted during 1997 and 1996 is
$8.17. The fair value of each option grant is estimated as of the date of grant
using the Black-Scholes single option-pricing model assuming a weighted average
risk-free interest rate of 5.95%, an expected dividend yield rate of 2.0%,
expected lives of 10 years and volatility of 22.2%. Exercise prices ranged from
$19.75 to $25.13, with a remaining average contractual life of 7 years at
October 25, 1997. Had compensation expense for stock options been determined
based on the fair value method (instead of the intrinsic value method) at the
grant dates for awards, the Company's 1997 and 1996 net income and earnings per
share would have decreased by less than 1%. The effects of applying the fair
value method of measuring compensation expense for 1997 is likely not
representative of the effects for future years in part because the fair value
method was applied only to stock options granted after October 28, 1995.
NOTE J--RESTRUCTURING CHARGE
RESTRUCTURING CHARGE: The Company recorded an $8.7 million restructuring charge
($5.4 million after tax or $.07 per share) in the fourth quarter of 1996 related
to the exit from its catfish business. The restructuring charge included
accruals related to the estimated costs associated with closing the fish farms
and processing plants and liquidating the business. The amount accrued included
$3.6 million to close the farms and fish processing plants; $2.7 million and
$1.7 million of write-downs to estimated net realizable value related to fixed
assets and live fish inventory, respectively; and $600,000 of employee related
costs.
Although the accruals that were established in 1996 were based upon a complete
business liquidation which was likely at the time, the Company was ultimately
able to sell the catfish business in 1997. The sale of the catfish business
resulted in a change in estimate of the restructuring accrual to $3.5 million,
requiring the reversal of $5.2 million ($3.2 million after tax or $.04 per
share) of the reserve in 1997. The Company has retained an accrual of
approximately $650,000 at October 25, 1997, related to the costs estimated to be
incurred on employee related and final settlement costs.
-31-
<PAGE>
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following tabulations reflect the unaudited quarterly results of operations
for the years ended October 25, 1997 and October 26, 1996:
Gross Net Earnings
Net Sales Profit Earnings Per Share
---------- ---------- ---------- --------
(In Thousands,
(Except Per Share Data)
1997
First quarter ........ $ 810,309 $ 183,509 $ 20,982 $ 0.27
Second quarter ....... 798,455 189,614 25,688 0.33
Third quarter ........ 779,679 170,153 18,153 0.24
Fourth quarter ....... 868,108 215,613 44,669 0.59
---------- ---------- ---------- --------
$3,256,551 758,889 109,492 $ 1.43
========== ========== ========== ========
1996
First quarter ........ $ 724,381 $ 177,437 $ 20,667 $ 0.27
Second quarter ....... 746,658 178,460 24,520 0.32
Third quarter ........ 749,871 145,972 4,010 0.05
Fourth quarter ....... 877,775 198,544 30,211 0.40
---------- ---------- ---------- --------
$3,098,685 $ 700,413 79,408 $ 1.04
========== ========== ========== ========
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and
Board of Directors
Hormel Foods Corporation
Austin, Minnesota
We have audited the accompanying consolidated statements of financial position
of Hormel Foods Corporation as of October 25, 1997 and October 26, 1996, and the
related consolidated statements of operations, changes in shareholders'
investment and cash flows for each of the three years in the period ended
October 25, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hormel Foods
Corporation at October 25, 1997 and October 26, 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended October 25, 1997 in conformity with generally accepted accounting
principles.
Minneapolis, Minnesota
November 24, 1997
END OF PAGE 29
-32-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FISCAL YEARS 1997 AND 1996:
A major goal of the company for a number of years has been to expand its line of
consumer-branded products. One result of increased sales of branded products is
reduced exposure to fluctuating commodity prices. Progress has been made in
reaching this objective through the introduction of numerous products using
turkey, chicken and beef. Pork, however, remains the company's major raw
material and fluctuations in pork raw material prices had a significant impact
on company results in 1997 and 1996.
The record high feed grain costs experienced in 1996 moderated somewhat in 1997
but remained above historic levels. Although the company was able to improve
margins in 1997, the high raw material costs did not allow the return to
pre-1996 margin levels.
Earnings for the year increased 37.9 percent to $109,492,000 from $79,408,000 in
1996. Net sales in 1997 increased 5.1 percent to $3,256,551,000 from
$3,098,685,000 last year. Tonnage for the year decreased 0.5 percent compared to
1996.
Earnings for the fourth quarter of 1997 were $44,669,000, an increase of 47.9
percent over earnings of $30,211,000 for the same period last year. Sales for
the quarter were $868,108,000, a 1.1 percent decrease from $877,775,000 in 1996.
Tonnage declined 1.2 percent in 1997 compared to last year.
The drop in tonnage for both the quarter and year was a result of reduced
commodity pork sales and the sale of Farm Fresh Catfish Company during the year.
The increase in earnings, while sales dollars and tonnage either improved
marginally or declined, is due to a product mix which included a larger
proportion of higher margin consumer-processed items.
The company's core branded business continues to be the major contributor to
earnings. Tonnage volume in the Grocery Products Division was up 4.5 percent for
the year, due primarily to the Stagg Foods acquisition. The combination of
HORMEL(R) chili and STAGG(R) chili continues to be favorable. All ethnic brands,
with the exception of the CHI-CHI's(R) product line, achieved double-digit
growth. Sales to mass-merchandisers continue strong and volume is expected to
grow.
The Meat Products Group completed the year with tonnage growth exceeding 12.0
percent while continuing a favorable trend of increased sales of value-added
product versus commodity product.
The Foodservice Group, strong all year, picked up momentum in the fourth quarter
with tonnage of branded products up over 18.0 percent during the quarter and
14.0 percent for the year. Total tonnage was also up 18.0 percent for the
quarter and 12.0 percent for the year.
In the international area, the Company purchased a 21.4 percent equity interest
in Campofrio Alimentacion, S.A. in Spain. Construction projects of the China
joint ventures continued as scheduled. The venture in Shanghai began production
in October and acceptance of product has been good. The Beijing venture is
presently scheduled for January 1998 start up.
International tonnage for the year increased 26.9 percent over 1996. Major
growth areas included fresh pork and Jennie-O Foods turkey products. Margins on
export sales were also under pressure throughout the year due to high raw
material costs.
Jennie-O Foods, Inc. tonnage increased 12.0 percent over last year with sales
dollar growth exceeding 14.0 percent compared to 1996. While tonnage and sales
dollars were up, high feed costs for the year continued the squeeze on
historical margins that began in 1996. During October 1997, Jennie-O acquired
the assets of Heartland Foods in Marshall, Minn. This acquisition makes Jennie-O
Foods the second largest turkey processor in the country. The absorption of
Heartland Foods into Jennie-O is proceeding very well.
In the fourth quarter of 1996, the company announced it would exit the fish
business. A $5,400,000 after tax restructuring reserve was established to
recognize potential losses from the sale or liquidation of Farm Fresh Catfish
Company. The sale of Farm Fresh assets in 1997 resulted in a favorable after tax
reduction of the reserve in the amount of $3,200,000.
Selling and delivery expenses for the quarter and year were $125,273,000 and
$514,931,000, respectively, as compared to $124,285,000 and $503,108,000 last
year. As a percentage of sales, selling and delivery expenses decreased slightly
to 15.8 percent from 16.2 percent in 1996.
Marketing expenses, which are included in selling and delivery expenses,
increased to $51,063,000 for the quarter and $217,637,000 for the year compared
to $49,079,000 and $209,021,000 last year. These expenditures emphasize the
company's continued commitment to expanding its base of branded consumer
products. Both the parent company and Jennie-O Foods are planning aggressive
advertising and promotional activities in 1998 which will emphasize both
established products as well as the newer ethnic and easy preparation items.
Administrative and general expenses were $24,744,000 and $75,788,000 for the
quarter and year, respectively, compared to $20,570,000 and $75,659,000 in 1996.
As a percentage of sales, administrative and general expenses for the year
decreased slightly to 2.3 percent from 2.4 percent last year. These expenses are
expected to remain at this level for the next few years as a result of two
ongoing data processing initiatives started in 1996 and the amortization of
intangibles from the Stagg Foods and Campofrio acquisitions.
Research and development continues to be an important part of the company's
strategy to extend existing brands and expand its offerings of new
consumer-branded items in both existing and fast-growing ethnic food market
segments. A significant part of the research and development effort is directed
to development of environmentally friendly packaging that protects the product,
is convenient for the consumer and minimizes packaging costs. Research and
development expenses for the quarter and year were $2,212,000 and $8,580,000,
respectively, compared to $1,801,000 and $8,022,000 for the same periods last
year.
The company's effective tax rate decreased to 35.9 percent from 36.7 percent in
1996. The reduction is due in part to increased affordable housing tax credits,
foreign equity earnings which are net of tax, a favorable completion of a
federal tax audit and a decrease in state and local taxes.
Further moderation of feed grain and raw material prices, combined with
aggressive marketing programs, should allow the company to return to pre-1996
margin levels and meet 1998 profit plans.
For many years internally developed software has been developed so as to
eliminate the need for revision in the year 2000. The company has an ongoing
program to review outside developed software for year 2000 problems. Costs to
correct year 2000 issues are expected to be immaterial.
FISCAL YEARS 1996 AND 1995
Record high feed grain costs throughout most of 1996 resulted in substantially
higher raw material prices. The company was unable to maintain normal margin
levels during this protracted period of high raw material prices. The pressure
on margins began to ease somewhat late in the year as feed grain prices began to
moderate and excess quantities of competing proteins, primarily beef, declined.
Earnings for the year were $79,408,000, a decrease of 34.1 percent from 1995
earnings of $120,436,000. Net sales in 1996 increased 1.7 percent to
$3,098,685,000 from $3,046,195,000 the previous year. Tonnage for the year
decreased 12.1 percent compared to 1995.
Earnings for the fourth quarter of 1996 declined 21.7 percent to $30,211,000
from $38,575,000 for the same period in 1995. Sales for the quarter were
$877,775,000, a 5.1 percent increase from 1995 sales of $835,073,000. Tonnage
for the quarter declined 7.1 percent compared to 1995.
The drop in tonnage for both the quaarter and year resulted from reduced fresh
pork sales following the discontinuance of a pork supply agreement with FDL
Foods, Inc., late in 1995. The increase in sales dollars, while tonange
declined, was due to moderately higher price levels and a product mix which
included a significantly larger proportion of higher priced consumer processed
items. levels and a product mix which included a significantly larger proportion
of higher priced consumer-processed items.
Selling and delivery expenses for the quarter and year were $124,285,000 and
$503,108,000, respectively, as compared to $123,283,000 and $502,729,000 for the
same periods in 1995. As a percentage of sales, selling and delivery expenses
decreased slightly in 1996 to 16.2 percent from 16.5 percent the previous year.
Marketing expenses increased to $49,079,000 for the quarter and $209,021,000 for
the year compared to $47,802,000 and $206,404,000 in 1995.
Administrative and general expenses were $20,570,000 and $75,659,000 for the
quarter and year compared to $16,528,000 and $65,766,000, respectively, in 1995.
These expenses increased for the quarter and year as a result of two initiatives
undertaken as part of a strategic review of distribution and data processing
systems. In addition, year-to-date expenses reflected a $7,500,000 settlement of
antitrust suits involving Farm Fresh Catfish Company.
During the fourth quarter of 1996, an after tax $5,400,000 restructuring reserve
was established to recognize potential losses from the sale or liquidation of
Farm Fresh as the company proceeded with its announced intention of exiting the
fish business.
-33-
<PAGE>
The company's effective tax rate in 1996 decreased to 36.7 percent from 38.1
percent the previous year. This reflected the disproportionately larger effect
that deductible permanent differences between tax and financial income have on
lower levels of financial income from operations and continued returns from
investments in the Federal Affordable Housing Program.
LIQUIDITY
The company continues to have an exceptionally strong balance sheet. Cash and
cash equivalents and short-term marketable securities were $152,386,000 at the
end of 1997 compared to $203,115,000 last year. Long-term debt consists of small
issue Industrial Revenue Bonds of varying maturities, debt used for investment
in the Federal Affordable Housing program, $110,000,000 in Senior Notes maturing
in 2002 and 2006 and $64,400,000 of long-term notes, denominated in Spanish
pesetas , used to purchase a 21.4 percent equity interest in Campofrio in Spain.
The strong balance sheet provides the company with the ability to take advantage
of expansion or acquisition opportunities that may arise.
During 1997, cash provided by operating activities was $162,489,000 compared to
$109,408,000 last year. The increase in cash and cash provided by operating
activities was primarily the result of the increase in net earnings and changes
in working capital items which were in the normal course of business.
Cash required for investing activities in 1997 increased to $185,054,000 from
$150,321,000 in 1996. The cash was used to continue an aggressive program to
maintain facilities and expand production capacities primarily at Hormel Foods
and Jennie-O Foods, purchase the equity interest in Campofrio in Spain and
investments in foreign joint ventures in China and Poland.
In addition to completing construction of the new production plant and
distribution facility at Osceola, Iowa, in 1997, construction projects continue
at Osceola; Austin, Minn.; Fremont, Neb. and at various Jennie-O locations. At
the end of the year, the company had commitments to expend approximately
$65,000,000 to complete construction in progress at various locations.
During the year, the company retired 1,757,000 shares of its Common Stock at a
cost of $45,624,000 under a repurchase plan authorized in 1996.
Financial ratios for 1997 and 1996 are presented below:
1997 1996
---- ----
LIQUIDITY RATIOS
Current ratio ............................ 2.6 2.7
Receivables turnover ..................... 14.0 13.4
Days sales in receivables ................ 26.2 27.2
Inventory turnover ....................... 9.3 10.0
Days sales in inventory .................. 38.8 41.3
LEVERAGE RATIO
Long-term debt to equity ................. 25.3% 16.5%
OPERATING RATIOS
Pretax profit to net worth ............... 21.5% 16.5%
Pretax profit to total assets ............ 11.5% 9.4%
RESPONSIBILITIES FOR FINANCIAL STATEMENTS
The accompanying financial statements were prepared by the management of Hormel
Foods Corporation which is responsible for their integrity and objectivity.
These statements have been prepared in accordance with generally accepted
accounting principles appropriate in the circumstances and, as such, include
amounts that are based on our best estimates and judgments.
Hormel Foods Corporation has developed a system of internal controls designed to
assure that the records reflect the transactions of the company and that the
established policies and procedures are adhered to. This system is augmented by
well-communicated written policies and procedures, a strong program of internal
audit and well-qualified personnel.
These financial statements have been audited by Ernst & Young LLP, independent
auditors, and their report appears on page 29. Their audit is conducted in
accordance with generally accepted auditing standards and includes a review of
the company's accounting and financial controls and tests of transactions.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the independent auditors, management and the
internal auditors to assure that each is carrying out its responsibilities. Both
Ernst & Young LLP and our internal auditors have full and free access to the
Audit Committee, with or without the presence of management, to discuss the
results of their audit work and their opinions on the adequacy of internal
controls and the quality of financial reporting.
/s/ Joel W. Johnson /s/ R.W. Schlange
- ------------------------------------ -------------------------------
Joel W. Johnson R.W. Schlange
Chairman of the Board Vice President and Controller
President and Chief Executive Officer
-34-
<PAGE>
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Ending Jan. 24 Ending Apr. 25 Ending July 25 Ending Oct. 31
-------------- -------------- -------------- --------------
DIVIDENDS
(EST. DATES):
<S> <C> <C> <C> <C>
Declaration Date Nov. 24, 1997 March 23, 1998 May 18, 1998 Sept. 28, 1998
Ex-Dividend Date Jan. 14, 1998 April 15, 1998 July 15, 1998 Oct. 14, 1998
Record Date Jan. 24, 1998 April 18, 1998 July 18, 1998 Oct. 24, 1998
Payable Date Feb. 15, 1998 April 18, 1998 Aug. 15, 1998 Nov. 15, 1998
QUARTERLY EARNINGS RELEASES/
QUARTERLY REPORTS
(EST. DATE) Feb. 12, 1998 May 14, 1998 Aug. 13, 1998 *Nov. 25, 1998
*See Reports and
Publications
</TABLE>
- --------------------------------------------------------------------------------
BUSINESS DESCRIPTION
Hormel Foods Corporation is a multinational manufacturer and marketer of
consumer-branded meat and food products, many of which are among the best known
and trusted in the food industry. It enjoys a strong reputation among consumers,
retail grocers and foodservice and industrial customers for products highly
regarded for quality, taste, nutrition, convenience and value. Hormel Foods
Corporation is owned by approximately 11,500 shareholders and comprised of more
than 11,000 employees, including subsidiaries.
CORPORATE HEADQUARTERS
Hormel Foods Corporation
1 Hormel Place
Austin, MN 55912-3680
INDEPENDENT AUDITORS
Ernst & Young LLP
1400 Pillsbury Center
Minneapolis, MN 55402-1491
STOCK LISTING
New York Stock Exchange
The corporation's daily trading activity, stock price and dividend information
can be found in the financial section of most newspapers in the New York Stock
Exchange listing.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
P.O. Box 64854
South St. Paul, MN 55164-0854
For the convenience of shareholders, a toll-free number (1-800-468-9716) can be
used whenever questions arise regarding changes in registered ownership, lost or
stolen certificates, address changes or other matters pertaining to the transfer
of stock or shareholder records. When requesting information, shareholders must
provide their tax identification number, the name(s) in which their stock is
registered and their record address.
If you hold stock in more than one account, duplicate mailings of financial
information may result. You can help eliminate the added expense by requesting
that only one copy be sent. Please supply the transfer agent with the names in
which all accounts are registered and the name of the account for which you wish
to receive mailings. This will not in any way affect dividend check mailings.
Hormel Foods Corporation's DIVIDEND REINVESTMENT PLAN, available to record
shareholders, allows for full dividend reinvestment and voluntary cash purchases
with brokerage commissions or other service fees paid by the company. AUTOMATIC
DEBIT FOR CASH CONTRIBUTION is also available. This is a convenient method to
have money automatically withdrawn each month from a checking or savings account
and invested in your DIVIDEND REINVESTMENT PLAN account. To enroll in the plan
or obtain additional information, contact Norwest Bank Minnesota, N.A., using
the address or telephone number provided with its listing in this section as
company transfer agent and registrar.
An optional DIRECT DIVIDEND DEPOSIT service offers shareholders a convenient
method of having quarterly dividend payments electronically deposited into their
personal checking or savings account. The dividend payment is made in the
account each payment date, providing shareholders with immediate use of their
money. For information about the service and how to participate, contact Norwest
Bank Minnesota, N.A., transfer agent.
DIVIDENDS
The declaration of dividends and all dates related to the declaration of
dividends are subject to the judgment and discretion of the Board of Directors
of Hormel Foods Corporation. Therefore, there can be no assurance that the
events indicated in the table above will occur or occur on the indicated dates.
The Declaration Date is the day on which the Board of Directors votes to declare
the dividend. The Ex-Dividend Date is the date which the New York Stock Exchange
sets to quote the price of the stock without the dividend. The Record Date is
the date on which you must be a shareholder of record on the company's books to
receive the dividend. The Payable Date closely follows the day of mailing of the
checks. If a check is not received on this date, please wait at least one week
to allow for possible postal delays before contacting the company.
REPORTS AND PUBLICATIONS
Copies of the company's Form 10-K annual report to the Securities and Exchange
Commission (SEC), the Form 10-Q quarterly reports to the SEC, proxy statement,
quarterly earnings releases, the Annual Meeting of Shareholders brochure or
other printed corporate literature are available free of charge upon request.
Telephone (507) 437-5164. *As part of our ongoing effort to reduce costs, and
recognizing the company's Annual Report to Shareholders is mailed approximately
one month following the fourth quarter earnings release date, no quarterly
report will be produced and mailed to shareholders. If desired, shareholders may
contact (507) 437-5164 to obtain a copy of the fourth quarter earnings release
made available to both the media and security analysts.
QUESTIONS ABOUT HORMEL FOODS
Shareholder Inquiries
(507) 437-5669
Analyst/Investor Inquiries
(507) 437-5950
Media Inquiries
(507) 437-5345
ANNUAL MEETING
The Annual Meeting of Shareholders will be held Tuesday, January 27, 1998, in
the Richard L. Knowlton Auditorium at Austin (Minn.) High School. The meeting
will convene at 8:00 p.m.
TRADEMARKS
Throughout this Annual Report to Shareholders, references in italic represent
valuable trademarks licensed or owned by Hormel Foods Corporation or its
subsidiaries.
CONSUMER AFFAIRS
Inquiries regarding products of Hormel Foods Corporation should be addressed :
Consumer Affairs Department Hormel Foods Corporation 1 Hormel Place Austin, MN
55912-3680 or call 1-800-523-4635
-35-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10K) of
Hormel Foods Corporation of our report dated November 24, 1997, included in the
1997 Annual Report to Stockholders of Hormel Foods Corporation.
Our audits also included the financial statement schedule of Hormel Foods
Corporation listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in Registration Statement
Number 333-17327 on Form S-3 dated December 5, 1996, in Post-Effective Amendment
Number 2 to Registration Statement Number 33-14614 on Form S-8 dated December 6,
1988, in Registration Statement Number 33-14615 on Form S-8 dated May 27, 1987,
in Post-Effective Amendment Number 1 to Registration Number 33-29053 dated
January 26, 1990, in Registration Statement Number 33-43246 on Form S-8 dated
October 10, 1991, and in Registration Statement Number 33-45408 on Form S-8
dated January 31, 1992 of our report dated November 24, 1997, with respect to
the consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this annual Report (Form 10-K) of Hormel Foods
Corporation.
/S/ ERNST & YOUNG LLP
Minneapolis, Minnesota
January 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-25-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-25-1997
<CASH> 146,853
<SECURITIES> 5,533
<RECEIVABLES> 233,966
<ALLOWANCES> 0
<INVENTORY> 265,346
<CURRENT-ASSETS> 671,352
<PP&E> 919,929
<DEPRECIATION> 431,191
<TOTAL-ASSETS> 1,528,535
<CURRENT-LIABILITIES> 260,578
<BONDS> 198,232
0
0
<COMMON> 8,881
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,528,535
<SALES> 3,256,551
<TOTAL-REVENUES> 3,258,551
<CGS> 2,497,662
<TOTAL-COSTS> 2,497,662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,043
<INCOME-PRETAX> 170,861
<INCOME-TAX> 61,369
<INCOME-CONTINUING> 109,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,492
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
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