-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NqGQn2yZUidB2ok79ikRWBzZBt9Td6cT5XuLdQyIR91vxdwgPEynibpeiZXuImY8 GcguitUcE96p8p7mx0fJ8g== 0000048465-97-000004.txt : 19970222 0000048465-97-000004.hdr.sgml : 19970222 ACCESSION NUMBER: 0000048465-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961026 FILED AS OF DATE: 19970124 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORMEL FOODS CORP /DE/ CENTRAL INDEX KEY: 0000048465 STANDARD INDUSTRIAL CLASSIFICATION: 2011 IRS NUMBER: 410319970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02402 FILM NUMBER: 97510085 BUSINESS ADDRESS: STREET 1: 1 HORMEL PL CITY: AUSTIN STATE: MN ZIP: 55912-3680 BUSINESS PHONE: 5074375737 MAIL ADDRESS: STREET 1: 1 HORMEL PLACE CITY: AUSTIN STATE: MN ZIP: 55912-3680 FORMER COMPANY: FORMER CONFORMED NAME: HORMEL GEO A & CO DATE OF NAME CHANGE: 19920703 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended October 26, 1996, 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: Name of Each Exchange on Title of Each Class Which Registered Common Stock,$.1172 Par Value New York Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No State the aggregate market value of the voting stock held by non- affiliates of the registrant as of December 2, 1996. Common Stock--$1,188,168,446 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date covered by this report. Common Stock, $.1172 Par Value--77,392,529 shares at December 2, 1996 Common Stock Non-Voting, $.01 Par Value--0 shares at December 2, 1996 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Stockholders' Report for the year ended October 26, 1996, are incorporated by reference into Part II and included as a separate section in the electronic filing to the SEC. Portions of the proxy statement for the Annual Meeting of the Stockholders to be held January 28, 1997, are incorporated by reference into Part II and included as a separate section in the electronic filing to the SEC. PART I Item 1. BUSINESS General Development of Business (a) 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 closely associated with the industry in the past. 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 Peloponnese and Melting Pot 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 will be operated as part of the main Hormel business. The Company's larger subsidiaries include Jennie-O Foods, Inc.; Dubuque Foods, Inc.; Farm Fresh Catfish Company; 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, and growing 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 of product for both Hormel and Dubuque Foods. Dubuque Foods has no production facilities and contracts with various co-packers to supply product under its label. Farm Fresh Catfish Company, acquired in 1983, competes in the seafood protein segment of the food industry. Farm Fresh raises, slaughters and distributes farm raised catfish primarily in the southeastern section of the United States through a network of brokers. Late in 1996 the Company announced its intention to exit the fish business. Details of a pending sale in 1997 were not announced. Item 1. BUSINESS--CONTINUED 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 England, China and Australia. Investment of personnel and capital in the foreign segment of the business is expected to continue for the foreseeable future. During calendar 1996 minority investments were made in foreign food companies in Poland and Spain which should result in increased Hormel presence in these areas. Vista International Packaging, Inc. imports, customizes, and distributes, a variety of natural and artificial casings for the meat and food processing industry. 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 processores. 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 26,1996 28,1995 29, 1994 Meat Products 52.6% 54.4% 57.3% Prepared Foods 28.1 28.0 26.0 Poultry, Fish, Other 17.6 16.7 19.3 100.0% 100.0% 100.0%
Item 1. BUSINESS--Continued 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, FRANK 'N STUFF, 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 16 foreign and 23 U. S. patents. The Company for the past several years has been concentrating on processed, consumer branded products with year round demand to minimize the seasonal variation experienced with commodity type products. Pork continues to be the primary raw material for Company products and although live pork producers are moving toward larger and year round confinement operations, there is still a seasonal variation in the supply of fresh pork materials. The expanding line of processed items has reduced but not eliminated the sensitivity of Company results to raw material supply and price fluctuations. Quarterly results for fiscal 1996 and 1995 are reported on page 29, Note K to the financial statements in the Annual Report to Stockholders for 1996. On October 26, 1996, the Company had unused lines of credit of $10,000,000. A fee is paid for the availability of fixed credit lines. In October of 1996 the Company completed a private placement of Senior Notes for $110,000,000. The Senior Notes will mature October 15, 2002 and October 15, 2006. Other long-term debt consisted of Industrial revenue bonds with varying maturities of $7,750,000 and $11,259,000 of promissory notes through 2001 secured by limited partnership interests in the federal affordable housing program. No commercial paper was outstanding at the end of fiscal 1996. During the first quarter of 1997, a minority interest in Campofrio Alimentacion, Madrid, Spain was purchased with the proceeds of a credit agreement denominated in Spanish pesetas. Financial resources and anticipated funds from operations are considered adequate to meet normal operating cash requirements in 1997. The Company has no customers the loss of which would have a significant effect on the Company's business. During fiscal Item 1. BUSINESS--Continued year 1996, no customer accounted for more than 5.0% 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 1996 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 1996, 1995 and 1994, respectively, were $8,022,000,$7,829,212 and $7,742,973. There are 29 professional employees engaged in full time research, 11 in the area of improving existing products and 18 in developing new products. As of October 26, 1996, the Company had over 11,000 active employees. Livestock slaughtered by the parent company is purchased by Company buyers, commission dealers, sale barns and terminal markets located principally in Minnesota, Iowa, Nebraska and South Dakota. The level of pork production in the United States has an impact on Hormel's operations. Any significant decrease in the supply of pork has an adverse effect because of higher costs and lower margins coupled with an under- utilization of Company facilities. A significant increase in the supply of pork normally results in lower costs and higher margins. 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 well as its major competitors continues to analyze options that will allow them to maximize the benefits of reduced volatility in the supply of fresh pork. Products under the Hormel label are sold in all 50 states by the parent Company. Products are sold by approximately 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. The parent Company has a plant at Fremont, Nebraska, that slaughters livestock for processing. The slaughter facilities at the Austin, Minnesota plant are leased to Quality Pork Processors of Dallas, Texas under a custom slaughter arrangement with the Company. A subsidiary, Rochelle Foods, Inc., Rochelle, Illinois, also provides the Company with needed raw materials and product through its pork slaughter and processing operation. Item 1. BUSINESS--Continued Facilities that produce manufactured items are located in Algona, Iowa; Austin, Minnesota; Beloit, Wisconsin; Aurora, Illinois; Davenport, 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. The Company has under construction a processing plant and shipping center in Osceola, Iowa. This facility is expected to be fully operational by May of 1997. 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, a new plant was opened during 1996 at Montevideo, Minnesota which substantially increased Jennie-O's processing capacity. 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 Newforge Foods Limited in Great Britain. 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 England to increase the sales and marketing support in these geographical areas of the international marketplace. During 1996 minority investments were made in Poz Meats, Poznan, Poland and Campofrio Alimentacion, Madrid, Spain. FARM FRESH CATFISH Farm Fresh Catfish Company operates slaughter and processing plants in Arkansas and Mississippi. Live fish are purchased from independent growers to supplement the supply provided by its own farms. Late in 1996 the Company announced its intention to exit the fish business. Details of a pending sale in 1997 were not announced. Item 1. BUSINESS--Continued VISTA INTERNATIONAL PACKAGING Vista International Packaging, Inc., previously a subsidiary of Hormel Foods International was switched to 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. Item 1. BUSINESS--Continued
Executive Officers of the Registrant (d) Year Which First Elected Name Office Age Officer Joel W. Johnson Chairman of the Board, 53 1991 President and Chief Executive Officer Don J. Hodapp Executive Vice President 58 1969 & Chief Financial Officer Gary J. Ray Executive Vice President 50 1988 Eric A. Brown Group Vice President, 50 1987 Prepared Foods Group James W. Cole Group Vice President, 62 1990 Foodservice Group David N. Dickson Group Vice President, 53 1989 International and Corporate Development Stanley E. Kerber Group Vice President, 58 1977 Meat Products Group Richard W. Schlange Vice President and 61 1969 Controller Mahlon C. Schneider Vice President and 57 1990 General Counsel Richard A. Bross Vice President, 45 1995 Grocery Products Forrest D. Dryden Vice President, Research 53 1987 & Development Division Jerry C. Figenskau Vice President, 56 1994 Specialty Products Division James A. Jorgenson Vice President, 51 1990 Human Resources Gary C. Paxton Vice President, 51 1992 Manufacturing Item 1. BUSINESS--Continued Year Which First Elected Name Office Age Officer Kenneth P. Regner Vice President, 59 1989 Engineering James N. Rieth Vice President, Hormel 56 1981 and President Jennie-O Foods, Inc. Robert A. Slavik Vice President, 51 1993 Meat Products Sales Michael J. McCoy Treasurer 49 1994 Thomas J. Leake Corporate Secretary 51 1990
No family relationship exists among the executive officers. All of the above executive officers have been employed by the Registrant in an officer capacity for more than the past five years except Mr. Gary Paxton, Director Sausage Production until November 19, 1990 when he was named Plant Manager of the Austin Plant, on January 28, 1992 he was elected Vice President, Manufacturing; Mr. Robert A. Slavik, Director Meat Products Sales until January 26, 1993 when he was elected Vice President, Meat Products Sales; Mr. Jerry C. Figenskau, Director of Marketing Services until December 30, 1991 when he was named Director Specialty Products, on January 24, 1994 he was elected Vice President, Specialty Products; 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 and on January 1, 1996 he was elected Treasurer. The executive officers are elected annually by the Board of Directors at the first meeting following the Annual Meeting of Stockholders. Vacancies may be filled and additional officers elected at any regular or special meeting. Item 2. PROPERTIES Approximate Floor Space (Square Feet) Owned or Expiration Location Unless Noted Leased Date Hormel Foods Corporation Slaughtering and Processing Plants Austin, Minnesota Slaughter 212,000 Owned (Leased Out) Processing 924,000 Owned Fremont, Nebraska 636,000 Owned Rochelle, Illinois 430,000 Owned (Rochelle Foods, Inc.) Processing Plants Algona, Iowa 152,000 Owned Austin, Minnesota Annex 82,000 Owned Beloit, Wisconsin 338,000 Owned Davenport, Iowa 148,000 Owned Ft. Dodge, Iowa 17,000 Owned (Leased out) Houston, Texas 93,000 Owned (Closed) Knoxville, Iowa 130,000 Owned Oklahoma City, Oklahoma 56,000 Owned Osceola, Iowa Owned (Under construction) Stockton, California 139,000 Owned Tucker, Georgia 259,000 Owned Wichita, Kansas 75,000 Owned (Dold Foods, Inc.) Aurora, Illinois 70,000 Leased January 1998 (Creative Contract Packaging Corp.) Aurora, Illinois 70,000 Owned (Herb-Ox Plant) Research and Development Center Austin, Minnesota 56,000 Owned Corporate Offices Austin, Minnesota 119,000 Owned Stagg Foods, Inc. Hillsboro, Oregon 100,000 Owned Dan's Prize, Inc. Long Prairie, Minnesota 78,999 Owned Item 2. PROPERTIES--continued 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, MinnPlant 80,000 Owned Pelican Rapids, Minnesota 185,000 Owned West Central Turkeys Plant Farm Fresh Catfish, Inc. Hollandale, Mississippi Plant 50,000 Sale in Progress Lake Village, Ark Plant 21,000 Sale in Progress Fish farms - water acres 3,198 Leased Various Vista International Packaging, Inc. Kenosha, Wisconsin Plant 61,000 Owned Algona Food Equipment Company (AFECO) Algona, Iowa Plant 45,000 Owned The Company has major expansion or renovation projects in progress at Austin, Minnesota, Osceola, Iowa, Fremont, Nebraska 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 projects, for all volumes which are anticipated in the foreseeable future. The Company is in negotiations for the sale of the assets of Farm Fresh Catfish. The transaction will close early in 1997 if the negotiations are successful. 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 1996 fiscal year. At the Annual Meeting of Stockholders to be held January 28, 1997 shareholders will vote on a proposed amendment of the Hormel Foods Corporation 1991 Key Employee Stock Option and Award Plan. The amendment will enable options and awards granted under the Plan to qualify as deductible performance based compensation under Sections 162(m) of the Internal Revenue Code. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Information about Common Stock market prices, dividends, principal market of trade and number of stockholders on pages 32 of the Annual Stockholders' Report for the year ended October 26, 1996, 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 26, 1996, on pages 18 and 19 of the Annual Stockholders' Report for the year ended October 26, 1996, 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 26, 1996, 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 26, 1996 is incorporated herein by reference. Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information under "Election of Directors", contained on pages 3 through 5 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 1997, 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 26, 1996, under "Executive Compensation" on pages 7 through 13 and "Compensation of Directors" on page 5 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 1997, 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 26, 1996, as set forth on pages 6 and 7 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 1997, 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 26, 1996, as set forth on page 13 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 1997, 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 15, 1996 announcing the acquisition, through an exchange of stock, of Stagg Foods, Inc., a leading West Coast producer of chili and related products. The Company filed a Form 8-K on October 17, 1996 announcing that Robert F. Patterson, Group Vice President of the Prepared Foods Group, and a Director of the Company would retire December 31, 1996. Eric A. Brown, Senior Vice President of the Meat Products Group was named to succeed Patterson. The Company filed a Form 8-K on October 18, 1996 announcing the completion of a private placement of Senior Notes in the amount of $110,000,000. The Company filed a Form 8-K on November 1, 1996 announcing it had signed a letter of intent for an asset sale of its wholly owned subsidiary, Farm Fresh Catfish Company, and that a $5,400,000 charge was being taken against fiscal 1996 earnings for the transaction. The Company filed a Form 8-K on December 20, 1996 announcing the purchase of a 21.4 percent minority interest in Spanish company Campofrio Alimentacion, S.A. headquartered in Madrid, Spain. The Company filed a Form 8-K on January 10, 1997 announcing the election of Eric A. Brown, Group Vice President Prepared Foods Group to the Company's Board of Directors. (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. 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 24, 1997 Joel W. Johnson, Chairman of the Board, President and Chief Executive Officer Date 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: Chairman of the Board, President, Chief Executive /s/Joel W. Johnson 1/24/97 Officer and Director Joel W. Johnson Date (Principal Executive Officer) Executive Vice President and Chief Financial Officer and Director /s/ Don J. Hodapp 1/24/97 (Principal Financial and Don J. Hodapp Date Accounting Officer) /s/ Gary J. Ray 1/24/97 Executive Vice President Gary J. Ray Date and Director Group Vice President /s/ Eric A. Brown 1/24/97 Prepared Foods Group Eric A. Brown Date and Director /s/ James W. Cole 1/24/97 Group Vice President James W. Cole Date Foodservice Group and Director Group Vice President International and /s/ David N. Dickson 1/24/97 Corporate Development David N. Dickson Date and Director /s/ Stanley E. Kerber 1/24/97 Group Vice President Stanley E. Kerber Date Meat Products Group and Director /s/ John W. Allen 1/24/97 Director John W. Allen Date /s/ William S. Davila 1/24/97 Director William S. Davila Date /s/ E. Peter Gillette Jr. 1/24/97 Director E. Peter Gillette Jr. Date /s/ Luella G. Goldberg 1/24/97 Director Luella G. Goldberg Date /s/ Geraldine M. Joseph 1/24/97 Director Geraldine M. Joseph Date /s/ Earl B. Olson 1/24/97 Director Earl B. Olson Date /s/ Ray V. Rose 1/24/97 Director Ray V. Rose Date /s/ Dr. Robert R. Waller 1/24/97 Director Dr. Robert R. Waller Date 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 26, 1996 HORMEL FOODS CORPORATION Austin, Minnesota F-2 Item 14(a) (1), (2) and (3) and Item 14 (c) and (d) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES HORMEL FOODS CORPORATION October 26, 1996 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 26, 1996, are incorporated herein by reference in Item 8 of Part II of this report: Consolidated Statements of Financial Position--October 26, 1996 and October 28, 1995. Consolidated Statements of Operations--Years Ended October 26, 1996, October 28, 1995 and October 29, 1994. Consolidated Statements of Changes in Shareholders' Investment--Years Ended October 26, 1996, October 28, 1995 and October 29, 1994. Consolidated Statements of Cash Flows--Years Ended October 26, 1996, October 28, 1995 and October 29, 1994. Notes to Financial Statements--October 26, 1996. 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.
F-3 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES HORMEL FOODS CORPORATION (Dollars in Thousands) COL. A COL. B COL. C COL. D COL. E Additions (1) (2) Balance at Charged to Charged to Balance at Beginning Costs and Other Accounts- Deductions-- End of Classification of Period Expense Describe Describe Period - - - - ----------------------------------------------------------------------------- Valuation reserve deduction from assets account: Fiscal year ended October 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) Fiscal year ended October 29, 1994: Allowance for doubtful accounts receivable $1,413 $355 $ 0 $ 471 (1) $1,413 (116)(2) Note (1)-Uncollectible accounts written off. Note (2)-Recoveries on accounts previously written off.
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) None. (12) None. **(13) Pages 17 through 32 of the Annual Report to Stockholders for fiscal year ended October 26, 1996. (18) None. (19) None. (22) None. **(23) Consent of Independent Auditors. (24) None. (25) None. **(27) Financial Data Schedule (28) None. ** These Exhibits transmitted via EDGAR. CERTIFICATE OF INCORPORATION OF HORMEL FOODS CORPORATION (Secretary of State of Delaware of the November 18, 1960 Agreement of Merger between Geo This Certificate became effective December 30, 1960, upon filing in the office of the. A. Hormel & Company and Hormel Incorporated.) FIRST: The name of this corporation is HORMEL FOODS CORPORATION. (Amended 2-1-95) SECOND: Its principal office in the State of Delaware is located at 100 West Tenth Street, in the City of Wilmington, County of New Castle, Delaware. The name and address of its resident agent is the Corporation Trust Company, 100 West Tenth Street, Wilmington, Delaware. THIRD: The nature of the business, or objects or purposes to be transacted, promoted or carried on are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do, and in any part of the world, viz: (a) To manufacture, buy and in any manner acquire and to prepare for market and import, export, sell and deal in, both at wholesale and retail and on its own account and on commission, all kinds of meats and meat products and all kinds of food and food products, and in connection therewith to carry on the business of slaughtering livestock and poultry and to deal in and with all kinds of products and by-products arising therefrom; to own and operate packing houses and canning establishments and to market, sell and deal in and with all articles produced or handled in connection therewith; to acquire by purchase or lease and to sell, mortgage, own, manage and operate such real estate and such personal property as may be necessary or convenient in the conduct of its business; to manufacture ice and to operate refrigeration plants, to own and operate refrigerator and other cars, either as owner or lessee, and generally to do all those things which are incidental to the aforesaid business. (b) To buy, or otherwise acquire, sell, lease, mortgage, own, manage, and operate farms and plantations; to deal in the products thereof; and to transact all business incidental or appurtenant thereto. (c) To manufacture, purchase, or otherwise acquire, to hold, own, mortgage, pledge, sell, assign, and transfer, or otherwise dispose of, to invest, trade in, deal in and deal with goods, wares, and merchandise and property of every class and description. (d) To acquire, by purchase or otherwise, to own, hold, buy, sell, convey, lease, mortgage or otherwise encumber real estate or other property, personal or mixed. (e) To acquire the good will, trademarks, rights and property, and to undertake the whole or any part of the business or liabilities of any person, firm, association or corporation; and to pay for the same in cash, the stock of this corporation, bonds, debentures, promissory notes, or otherwise; and to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of the business so acquired; and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (f) To apply for, obtain, register, lease, purchase, or otherwise to acquire, and to hold, use, own, operate and introduce, and to sell, assign, or otherwise dispose of, any trademarks, trade names, patents, inventions, improvements and processes used in connection with or secured under Letter Patent of the United States, or elsewhere, or otherwise: and to use, exercise, develop, grant licenses in respect of, or otherwise turn to account, any such trademarks, patents, licenses, processes and the like or any such property or rights. (g) To enter into, perform and carry out contract of every kind with any person, firm, association or corporation, and to draw, make, accept, endorse, discount, execute and issue promissory notes, bills of exchange, warrants, bonds, debentures and other negotiable or trans- ferable instruments for any of the objects or purposes of the corporation, and to secure the same by mortgage, pledge, deed of trust, or otherwise. (h) To hold, purchase or otherwise acquire, to sell, assign, transfer, mortgage, pledge or otherwise dispose of, shares of the capital stock and bonds, debentures or other evidences of indebtedness created by any other corporation or corporations, and, while the holder thereof, to exercise all the rights and privileges of ownership, including the right to vote thereon. (i) To purchase, hold, sell and transfer shares of its own capital stock; provided that the corporation shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital, and that shares of its own capital stock belonging to the corporation shall not be voted upon, directly or indirectly. (j) To negotiate policies of insurance, for its own benefit or for the benefit of others, upon the life or lives of any one or more of its officers or employees and to pay the premiums thereon; to cause or permit itself to be made the beneficiary of existing policies of insurance on the life or lives of any one or more of its officers or employees and thereafter to pay the premiums thereon; to cause other persons to be made the beneficiaries of existing policies of insurance on the life or lives of any one or more of its officers or employees and thereafter to pay the premiums thereon; and to pay the premiums on existing policies of insurance, on the life or lives of any one or more of its officers or employees, in which either this corporation or any other person or persons is or are named as beneficiary or beneficiaries. (k) To do any and all things set forth herein as objects, purposes, powers or otherwise, and to do all other things which corporations organized under the laws of the State of Delaware may do, to the same extent and as fully as natural persons might do, so far as may be permitted by law; provided, however, that nothing herein contained shall be deemed to authorize this corporation to construct, hold, maintain or operate within the State of Delaware railroads, railways, telegraph or telephone lines, or to carry on within said State any public utility business. (l) In general, to carry on any other business in connection with the foregoing, and to have and to exercise all the powers conferred, now or hereafter, by the laws of Delaware upon this corporation. The foregoing clauses shall be construed both as objects and powers; and it is hereby expressly provided that the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the powers of this corporation. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 280,000,000 shares, divided into three classes consisting of 200,000,000 shares of Common Stock, par value $.1172 per share ("Common Stock"), 40,000,000 shares of Nonvoting Common Stock, par value $.01 per share ("Nonvoting Common Stock") and 40,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred Stock"). Section A. Preferred Stock. The Board of Directors is authorized at any time and from time to time, subject to any limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in one or more series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be in- cluded in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing the series of Preferred Stock. Section B. Common Stock. 1. Voting rights. Each holder of record of Common Stock shall he entitled to one (1) vote on all matters for each share of Common Stock owned of record by such holder. 2. Dividends. Subject to the rights of the holders of Preferred Stock and any other class or series of stock having a preference as to dividends over the Common Stock then outstanding, the holders of the Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors, provided, however, that: (a) No cash dividend or other distribution of assets, rights, evidence of indebtedness or any other property shall be declared, paid or made to the holders of Common Stock unless a cash dividend or other such distribution in like kind and equal per-share amount is simultaneously declared, paid or made to the holders of the Nonvoting Common Stock; and that (b) Stock dividends declared on the Common Stock shall be payable solely in shares of Common Stock. No stock dividend shall be declared or paid on the Common Stock unless a stock dividend payable in shares of Nonvoting Common Stock, proportionate on a per-share basis to the dividend on the Common Stock, is simultaneously declared and paid on the Nonvoting Common Stock. 3. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock and any other class or series of stock having a preference as to liquidating distributions over the Common Stock, the holders of the Common Stock shall be entitled to share ratably on a per-share basis with the holders of the Nonvoting Common Stock as a single class in all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders. A consolidation or merger of the Corporation with and into any other corporation or corporations shall not be deemed to be a liquidation, dissolution, or winding-up of the Corporation as those terms are used in this paragraph 3. Section C. Nonvoting Common Stock. 1. Voting Rights. Except as otherwise required by law or provided in this Certificate of Incorporation, the holders of shares of Nonvoting Common Stock shall have no vote on any matter. 2. Dividends. Subject to the rights of the holders of Preferred Stock and any other class or series of stock having a preference as to dividends over the Nonvoting Common Stock then outstanding, the holders of the Nonvoting Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors, provided, however, that: (a) No cash dividend or other distribution of assets, rights, evidence of indebtedness or any other property shall be declared, paid or made to the holders of the Nonvoting Common Stock unless a cash dividend or other such distribution in like kind and equal per-share amount is simultaneously declared, paid or made to the holders of Common Stock; and that (b) Stock dividends declared on the Nonvoting Common Stock shall be payable solely in shares of Nonvoting Common Stock. No stock dividend shall be declared or paid on the Nonvoting Common Stock unless a stock dividend payable in shares of Common Stock, proportionate on a per- share basis to the dividend on the Nonvoting Common Stock, is simultaneously declared and paid on the Common Stock. 3. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock and any other class or series of stock having a preference as to liquidating distributions over the Nonvoting Common Stock, the holders of the Nonvoting Common Stock shall be entitled to share ratably on a per-share basis with the holders of the Common Stock as a single class in all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders. A consolidation or merger of the Corporation with and into any other corporation or corporations shall not be deemed to be a liquidation, dissolution, or winding-up of the Corporation as those terms are used in this paragraph 3. (Amended January 10, 1949; December 22, 1959; November 18, 1960; January 30, 1968; November 22, 1971; January 29, 1980; December 5, 1983; September 3, 1985; February 17, 1987; June 1, 1987; January 31, 1990; January 30, 1991) FIFTH: The corporation is to have perpetual existence. SIXTH: The private property of the stockholders of the corporation shall not be subject to the payment of corporate debts of the corporation to any extent whatever. SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code, or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall. if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. EIGHTH: In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (a) To make, alter, amend and rescind the Bylaws of this corporation; (b) From time to time to determine whether and to what extent and at which times and places and under what conditions and regulations, the accounts and books of this corporation (other than the stock ledger) or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right of inspecting any account, book, or document of this corporation except as conferred by statute, unless authorized by a resolution of stockholders or directors; (c) To fix the amount to be reserved as working capital; to authorize and cause to be executed mortgages and liens upon the real and personal property and franchises of this corporation; (d) By resolution or resolutions passed by a majority of the whole Board, to 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 the Bylaws of the corporation shall have and may exercise the powers of the Board of Directors in the management of the business and the 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 the Bylaws of the corporation or as may be determined from time to time by resolution adopted by the Board of Directors. Both stockholders and directors shall have the power, if the Bylaws so provide, to hold their meetings either within or without the State of Delaware; the corporation shall also have the power, if the Bylaws so provide, to have one or more offices within or without the State of Delaware, in addition to the principal office in Delaware, and to keep the books of this corporation (subject to the provisions of the statute) outside of the State of Delaware at such places as may from time to time be designated by the Board of Directors. (Amended January 29, 1980) This corporation may in its Bylaws confer powers additional to the foregoing upon the directors and may also confer upon them powers in addition to the powers and authorities expressly conferred upon them by the statute. NINTH: Except as otherwise expressly provided in this Article NINTH: (i) any merger or consolidation of the corporation with or into any other corporation; (ii) any sale, lease, exchange or other disposition of all or substantially all of the assets of the corporation to or with any other corporation, person or other entity; (iii) the issuance or transfer of any securities of the corporation to any other corporation, person or other entity in exchange for assets or securities or a combination thereof (except assets or securities or a combination thereof so acquired in a single transaction or a series of related transactions having an aggregate fair market value of less than $5,000,000); or (iv) the issuance or transfer of any securities of the corporation to any other corporation, person or other entity for cash, shall require the affirmative vote of the holders of (a) at least 75% of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, (considered for the purposes of this Article as one class), and (b) at least a majority of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors which are not beneficially owned, directly or indirectly, by such other corporation, person or other entity, if, as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon, such other corporation, person or other entity is the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified by law or in any agreement with any national securities exchange. The provisions of this Article NINTH shall not apply to any transaction described in clauses (i), (ii), (iii) or (iv) of the first paragraph of this Article, (i) with another corporation if a majority, by vote, of the outstanding shares of all classes of capital stock of such other corporation entitled to vote generally in the election of directors, (considered for this purpose as one class), is owned of record or beneficially by the corporation and/or its subsidiaries; or (ii) with another corporation, person or other entity if the Board of Directors of the corporation shall by resolution have approved a memorandum of under- standing with such other corporation, person or other entity with respect to and substantially consistent with such transaction prior to the time such other corporation, person or other entity became the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors. For the purposes of this Article NINTH, a corporation, person or other entity shall be deemed to be the beneficial owner of any shares of capital stock of the corporation (i) which it has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, or (ii) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (i) of this paragraph above), by any other corporation, person or other entity (a) with which it or its "affiliate" or "associate" (as referenced below) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of capital stock of the corporation or (b) which is its "affiliate" or "associate" as those terms were defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on December 1, 1979. For the purposes of this Article NINTH, the outstanding shares of capital stock of the corporation shall include shares deemed owned through the application of clauses (i) and (ii) of this paragraph but shall not include any other shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. The Board of Directors of the corporation shall have the power and duty to determine for the purposes of this Article NINTH, on the basis of information then known to it, whether (i) any corporation, person or other entity beneficially owns, directly or indirectly, 5% or more of the out- standing shares of capital stock of the corporation entitled to vote generally in the election of directors, or is an "affiliate" or an "associate" (as referenced above) of another, (ii) any proposed sale, lease, exchange or other disposition of part of the assets of the corporation involves a substantial part of the assets of the corporation, (iii) assets or securities, or a combination thereof, to be acquired in exchange for securities of the corporation, have an aggregate fair market value of less than $5,000,000 and whether the same are proposed to be acquired in a single transaction or a series of related transactions, and (iv) the memorandum of understanding referred to above is substantially consistent with the transaction to which it relates. Any such determination by the Board shall be conclusive and binding for all purposes of this Article NINTH. Notwithstanding any other provision of this Certificate of Incorporation or the Bylaws (and in addition to any other vote that may be required by law, this Certificate of Incorporation or the Bylaws), there shall be required to amend, alter, change, or repeal, directly or indirectly, this Article NINTH the affirmative vote of (i) at least 75% of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors and (ii) at least a majority of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors exclusive of all voting stock of the corporation beneficially owned, directly or indirectly by any corporation, person or entity which is, as of the record date for the determination of stockholders entitled to notice of such amendment, alteration, change or repeal, and to vote thereon, the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors. (Added by amendment January 29, 1980) TENTH: Except as otherwise provided in the Certificate of Incorporation or the Bylaws, the corporation reserves the right to amend, alter, change or repeal any provision contained in this Agreement of Merger which constitutes the Certificate of Incorporation, as amended. of the corporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. (Renumbered by amendment January 29, 1980) ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages or breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation law is amended after approval by the stockholders of this provision to authorize corporate action further elimi- nating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. (Added February 17, 1987) 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 7-22-96) 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 orig- inally 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, Assis- tant 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 ex-officio 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 ex-officio 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 Direc- tors 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 corpora- tion. 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 stockf 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 AND EMPLOYEES 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 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. 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. (Bylaw 42 added November 20, 1967; amended May 27, 1980) 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. EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference to this Annual Report (Form 10K) of Hormel Foods Corporation of our report dated November 26, 1996, included in the 1996 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 4, 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 26, 1996, 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 24, 1997 1996 Financial Section 18 Selected Financial Data 20 Consolidated Statements of Financial Position 22 Consolidated Statements of Operations 23 Consolidated Statements of Changes in Shareholders' Investment 24 Consolidated Statements of Cash Flows 25 Notes to Consolidated Financial Statements 29 Report of Independent Auditors 30 Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Responsibilities for Financial Statements 32 Corporate Information Selected Financial Data (In Thousands, Except Per Share Amounts) 1996 1995 1994 1993 *1992 1991 1990 1989 1988 *1987 1986 Operations Net Sales $3,098,685 $3,046,195 $3,064,793 $2,853,997 $2,813,651 $2,836,222 $2,681,180 $2,340,513 $2,292,847 $2,314,082 $1,960,237 Net Earnings Before Cumulative Effect of Accounting Changes 79,408 120,436 117,975 100,770 95,174 86,393 77,124 70,114 60,192 45,944 39,079 Percent of Sales 2.56% 3.95% 3.85% 3.53% 3.38% 3.05% 2.88% 3.00% 2.63% 1.99% 1.99% Cumulative Effect of Accounting Changes (127,529)** Net Earnings (Loss) 79,408 120,436 117,975 (26,759) 95,174 86,393 77,124 70,114 60,192 45,944 39,079 Wage Costs 398,824 373,901 351,096 325,115 304,696 278,537 267,391 254,449 253,937 255,429 222,535 Total Taxes (Excluding Payroll Tax) 56,992 84,329 82,915 70,026 64,968 60,035 51,990 48,983 44,541 41,797 38,297 Depreciation and Amortization 42,700 37,220 36,611 32,174 38,972 36,269 35,554 36,863 35,517 33,535 30,741 Financial Position Working Capital $ 456,850 $ 441,452 $ 443,298 $ 392,846 $ 401,216 $ 346,164 $ 293,818 $ 232,941 $ 156,476 $ 147,969 $ 196,199 Properties (Net) 421,486 333,084 270,886 244,987 216,390 231,817 235,026 244,362 263,056 263,917 255,159 Total Assets 1,436,138 1,223,860 1,196,718 1,093,559 913,015 856,835 799,422 727,429 706,548 697,970 584,744 Long-Term Debt Less Current Maturities 127,003 16,959 10,300 5,700 7,624 22,833 24,535 19,228 20,399 48,831 63,264 Shareholders' Investment 785,551 732,047 661,089 570,888 644,284 583,408 513,832 470,929 418,716 373,120 339,925 Per Share of Common Stock Net Earnings Before Cumulative Effect of Accounting Changes $ 1.04 $ 1.57 $ 1.54 $ 1.31 $ 1.24 $ 1.13 $ 1.01 $ 0.91 $ 0.79 $ 0.60 $ 0.51 Cumulative Effect of Accounting Changes (1.66) Net Earnings (Loss) 1.04 1.57 1.54 (0.35) 1.24 1.13 1.01 0.91 0.79 0.60 0.51 Dividends 0.60 0.58 0.50 0.44 0.36 0.30 0.26 0.22 0.18 0.15 0.14 Shareholders' Investment 10.13 9.54 8.62 7.45 8.41 7.61 6.70 6.14 5.46 4.86 4.42 *53 Weeks **Adoption of SFAS No. 106 and SFAS No. 109 Consolidated Statements of Financial Position (In Thousands) October 26, 1996 October 28, 1995 Assets Current Assets Cash and cash equivalents $ 188,473 $ 189,539 Short-term marketable securities 14,642 8,489 Accounts receivable 230,869 231,407 Inventories 271,097 210,898 Deferred income taxes 11,615 13,255 Prepaid expenses 6,563 5,679 Total current assets 723,259 659,267 Deferred Income Taxes 68,686 66,204 Intangibles 124,193 81,650 Investments and Other Assets 98,514 83,655 Property, Plant and Equipment Land 8,517 8,009 Buildings 210,450 166,888 Equipment 538,562 495,641 Construction in progress 71,085 51,388 828,614 721,926 Less allowance for depreciation (407,128) (388,842) 421,486 333,084 $1,436,138 $1,223,860 (In Thousands) October 26, 1996 October 28, 1995 Liabilities and Shareholders' Investment Current Liabilities Accounts payable $ 121,004 $ 97,479 Accrued expenses 42,190 26,246 Accrued marketing expenses 22,768 20,638 Employee compensation 41,493 44,700 Taxes, other than federal income taxes 14,991 15,380 Dividends payable 11,611 11,123 Federal income taxes 9,804 118 Current maturities of long-term debt 2,548 2,131 Total current liabilities 266,409 217,815 Long-Term Debt less current maturities 127,003 16,959 Accumulated Postretirement Benefit Obligation 239,616 235,659 Accrued Pension Costs 7,240 Other Long-Term Liabilities 17,559 14,140 Shareholders' Investment Preferred Stock, par value $.01 a share authorized 40,000,000 shares; issued none Common Stock, nonvoting, par value $.01 a share authorized 40,000,000 shares; issued none Common Stock, par value $.1172 a share authorized 200,000,000 shares; issued 77,534,398 shares Oct. 26, 1996 issued 76,852,128 shares Oct. 28, 1995 9,087 9,007 Additional paid-in capital 32,214 16,624 Shares held in treasury (535) (3,922) 40,766 21,709 Earnings reinvested in business 744,785 710,338 785,551 732,047 $1,436,138 $1,223,860 See notes to consolidated financial statements. Consolidated Statements of Operations Fiscal Year Ended (In Thousands, Except Per Share Amounts) October 26, 1996 October 28, 1995 October 29, 1994 Sales, less returns and allowances $3,098,685 $3,046,195 $3,064,793 Cost of products sold 2,398,272 2,294,254 2,345,492 Gross profit 700,413 751,941 719,301 Expenses: Selling and delivery 503,108 502,729 467,062 Administrative and general 75,659 65,766 65,184 Restructuring charges 8,659 Operating income 112,987 183,446 187,055 Other income and expenses: Interest and investment income 14,106 12,762 6,538 Interest expense (1,619) (1,529) (2,523) Earnings before income taxes 125,474 194,679 191,070 Provision for income taxes 46,066 74,243 73,095 Net earnings $ 79,408 $ 120,436 $ 117,975 Net earnings per share $ 1.04 $ 1.57 $1.54 See notes to consolidated financial statements. Consolidated Statements of Changes in Shareholders' investment Additional Earnings Total Paid-In Reinvested Shareholders' (In Thousands, Except Per Share Amounts) Shares Amount Shares Amount Capital in Business Investment Balance at October 30, 1993 76,852 $9,007 (180) $(4,103) $14,513 $551,471 $570,888 Purchases of Common Stock (90) (1,851) (1,851) Exercise of stock options 108 2,322 (2,937) (615) Tax benefit of stock options 1,183 1,183 Adjustment in minimum pension liability 11,840 11,840 Net earnings 117,975 117,975 Cash dividends $.50 per share (38,331) (38,331) Balance at October 29, 1994 76,852 9,007 (162) (3,632) 15,696 640,018 661,089 Purchases of Common Stock (60) (1,480) (1,480) Exercise of stock options 72 1,190 (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 76,852 9,007 (150) (3,922) 16,624 710,338 732,047 Purchases of Common Stock (1,015) (24,334) (24,334) Exercise of stock options 114 3,013 (1,114) 1,899 Shares retired (1,027) (120) 1,027 24,708 (24,588) 0 Issuance of stock for Stagg Foods, Inc. 1,709 200 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 77,534 $9,087 (24) $ (535) $32,214 $744,785 $785,551 See notes to consolidated financial statements. Consolidated Statements of Cash Flows Fiscal Year Ended (In Thousands) October 26, 1996 October 28, 1995 October 29, 1994 Operating Activities Net earnings $ 79,408 $ 120,436 $117,975 Adjustments to reconcile to net cash provided by operating activities: Depreciation 38,280 33,367 33,655 Amortization of intangibles 4,419 3,853 2,956 Provision for deferred income taxes (2,347) 5,164 (5,859) (Gain) loss on investments (4,627) 4,368 (Gain) loss on property/equipment sales and idle facility (3,767) (239) 4,312 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 2,773 (3,038) (9,882) (Increase) decrease in inventories and prepaid expenses (56,771) (10,903) 10,930 Increase (decrease) in accounts payable and accrued expenses 52,040 (57,266) 40,686 Net cash provided by operating activities 109,408 91,374 199,141 Investing Activities Sale of available-for-sale securities 13,116 2,871 3,309 Purchase of held-to-maturity securities (14,642) (357) Acquisitions of businesses (12,845) (6,201) (9,750) Purchases of property/equipment (122,942) (97,181) (65,441) Proceeds from sales of property/equipment 5,410 1,855 1,575 (Increase) in investments and other assets (18,418) (16,141) (3,973) Net cash used in investing activities (150,321) (114,797) (74,637) Financing Activities Proceeds from long-term borrowings 110,553 10,000 5,000 Principal payments on long-term debt (3,393) (1,610) Dividends paid on Common Stock (45,613) (42,946) (37,178) Share repurchase (23,966) Other 2,266 (1,081) (1,285) Net cash provided by (used in) financing activities 39,847 (35,637) (33,463) (Decrease) increase in cash and cash equivalents (1,066) (59,060) 91,041 Cash and cash equivalents at beginning of year 189,539 248,599 157,558 Cash and cash equivalents at end of year $ 188,473 $ 189,539 $248,599 See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTs October 26, 1996 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 foodservice 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. 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 26, 1996, and October 28, 1995, was $20,238,000 and $15,819,000, respectively. 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 noncompete agreement. The acquisition resulted in the recording of $34,052,000 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 26, 1996, 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 include all media advertising but exclude the costs associated with coupons, samples and market research. Advertising costs for fiscal years 1996, 1995 and 1994 were $177,202,000, $176,207,000 and $157,495,000, respectively. 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 October 1995, the Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation. Under SFAS No. 123, companies can elect to account for stock-based compensation plans using a fair-value-based method or continue measuring compensation expense for these plans using the intrinsic value method prescribed in Accounting Principles Board opinion No. 25. SFAS No. 123 requires that companies electing to continue using the intrinsic method make pro forma disclosures of net income and earnings per share as if the fair-value- based method of accounting had been applied. The company will adopt the disclosure requirements of SFAS No. 123 in fiscal 1997. Because the company anticipates continuing to account for stock-based compensation using the intrinsic value method, SFASNo. 123 will not have an impact on the company's results of operations or financial position. 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 1996, 1995 and 1994 consisted of 52 weeks. 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. Short-term marketable securities at October 28, 1995, consisted of Adjustable Rate Mortgage Backed Securities with variable maturities through 2027. The company's cash and cash equivalents and short-term marketable securities at October 26, 1996, and October 28, 1995, consisted of the following (cost approximates fair value, in thousands): October 26, 1996 October 28, 1995 Cash and Cash Short-term Cash and CashShort-term Equivalents Marketable Securities EquivalentsMarketable Securities Held-to-maturity securities: Commercial paper $ 49,862 $14,642 $ 22,312 Municipal securities 85,900 95,140 Preferred securities 14,000 31,000 Other 8,496 28,050 Available-for-sale securities $8,489 Cash 30,215 13,037 Total $188,473 $14,642 $189,539$8,489 C Inventories Inventoriable expenses, packages and supplies amounting to approximately $66,100,000 at October 26, 1996, and $56,900,000 at October 28, 1995, are stated at cost determined by the last-in, first-out method and are $27,100,000 and $26,100,000 lower in the respective years than such inventories determined under the first-in, first-out method. Turkey products amounting to $15,400,000 at October 26, 1996, and $8,100,000 at October 28, 1995, are stated at cost determined by the last- in, first-out method and are $2,000,000 lower in 1996 and $900,000 lower in 1995 than such inventories determined under the first-in, first-out method. D Long-Term Debt and Other Borrowing Arrangements Long-term debt consists of: October 26, October 28, (In Thousands) 1996 1995 Industrial revenue bonds with variable interest rates, due 1999 to 2005 $ 7,750 $ 5,700 Promissory notes, principal and interest due annually through 2001, interest at 6.5% and 8.9%, secured by limited partnership interests in affordable housing 11,259 13,390 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 Other 542 129,551 19,090 Less current maturities 2,548 2,131 $127,003 $16,959 At October 26, 1996, the company had unused lines of credit of $10,000,000 for short-term borrowing. A fixed fee is paid for the availability of credit lines. Amounts due related to long-term debt for each of the next five years are $2.5 million, $2.7 million, $3.9 million, $25.4 million and $24.1 million, respectively. Total interest paid during fiscal 1996, 1995 and 1994 was $1,629,000, $1,582,000 and $1,791,000, respectively. 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 1996, 1995 and 1994 were $8,128,000, $8,147,000 and $7,880,000, 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: (In Thousands) 1996 19951994 Service cost benefits earned during the year $ 8,631 $ 7,656$ 7,839 Interest cost on projected benefit obligation 32,158 31,67030,201 Actual return on plan assets (35,569) (62,186)(25,298) Net amortization and deferral 143 29,312(3,912) Net pension costs $ 5,363 $ 6,452$ 8,830 Assumptions used in accounting for the defined benefit plans were: 1996 19951994 Weighted average discount rates 7.75% 7.75%8.25% Rates of increase in compensation levels 5.00 5.005.50 Expected long-term rate of return on assets 9.50 9.509.50 The following table sets forth the plans' funded status and amounts recognized in the statements of financial position: October 26, 1996 October 28, 1995 Plans Whose Plans Whose Plans WhosePlans Whose Assets Exceed Accrued Benefits Assets ExceedAccrued Benefits (In Thousands) Accrued Benefits Exceed Assets Accrued BenefitsExceed Assets Actuarial present value of benefit obligations: Vested benefit obligation $335,796 $ 28,051 $329,274$ 26,646 Nonvested benefit obligation 23,239 7,958 23,0467,558 Accrued benefits 359,035 36,009 352,32034,204 Effects of estimated future pay increases 37,036 7,798 37,7565,951 Projected benefit obligations 396,071 43,807 390,07640,155 Plan assets at fair value 435,033 415,983 Projected benefit obligations in excess of (less than) benefit plan assets (38,962) 43,807 (25,907)40,155 Unrecognized prior service cost (9,337) (2,111) (10,195)(1,517) Unrecognized net gain (loss) 7,954 (9,229) 9,592(12,245) Remaining net asset (obligation) at transition (348) (5,007) (454)(5,703) Adjustment required to recognize minimum liability 9,05013,514 Net pension liability (asset) in statements of financial position $ (40,693) $ 36,510 $ (26,964)$ 34,204 As of the 1996 valuation date, plan assets included Common Stock of the company having a market value of $70,888,760. 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: (In Thousands) 1996 19951994 Postretirement benefit cost Service cost of benefits earned $ 2,533 $ 1,933$ 2,007 Interest cost of benefit obligation 17,571 15,76915,623 Net amortization of deferred gains (176) (1,642)(750) $19,928 $16,060$16,880 The actuarial present value of postretirement benefit obligations and the amount reported in the Consolidated Statements of Financial Position as of October 26, 1996, and October 28, 1995, are as follows: Accumulated postretirement benefit obligations as of the August 1 measurement date: (In Thousands) 1996 1995 Retirees $170,765 $169,580 Fully eligible active participants 22,463 20,935 Other active participants 50,491 47,951 243,719 238,466 Unrecognized net gains (losses) (3,406) 1,247 Unrecognized prior service cost 3,787 Benefit payments subsequent to measurement date (4,484)(4,054) Accrued postretirement benefit cost $239,616 $235,659 Assumptions used in determining the accumulated postretirement benefit obligation: 1996 19951994 Medical plan cost trend rate 6.5% declining 7.0% declining7.5% declining to 5.5% in to 5.5% in to 5.5% in year 2004 year 1998 year 1998 Weighted average discount rate 7.75% 7.75%8.25% The health care cost trend rate assumption has a significant effect on the amount reported. For example, a one percent increase in the health care cost trend rate would increase the accumulated postretirement benefit obligation by $19.3 million at October 26, 1996, and the net periodic cost by $1.7 million for the year. G Income Taxes The components of the provision for income taxes are as follows: (In Thousands) 1996 19951994 Current: U.S. Federal $39,124 $57,899$65,808 State 9,311 11,18013,146 48,435 69,07978,954 Deferred: U.S. Federal (2,136) 4,645(5,067) State (233) 519(792) (2,369) 5,164(5,859) $46,066 $74,243$73,095 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 $80.3 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 26, October 28, (In Thousands) 1996 1995 Deferred tax liabilities Tax over book depreciation $(28,427)$(27,834) Prepaid pension (15,706)(15,270) Other, net (7,599)(4,556) Deferred tax assets Vacation accrual 3,983 3,712 Insurance accruals 4,711 4,155 Deferred compensation 6,056 5,482 Postretirement benefits 92,899 91,365 Pension accrual 10,284 7,996 Other, net 14,100 14,409 Net deferred tax assets $ 80,301 $ 79,459 Reconciliation of the statutory federal income tax rate to the company's effective tax rate is as follows: 1996 19951994 U.S. statutory rate 35.0% 35.0%35.0% State taxes on income, net of federal tax benefit 4.7 3.94.2 All other, net (3.0) (.8)(.9) Effective tax rate 36.7% 38.1%38.3% Total income taxes paid during fiscal 1996, 1995 and 1994 were $38,263,000, $89,582,000 and $56,298,000, respectively. H Arrangement With FDL Foods, Inc. In 1996, as a result of the sale of FDL Foods, Inc, (FDL), to a third party, the company terminated a five-year copacking agreement. Under the agreement, the company provided a revolving line of credit secured by substantially all of the assets of FDL. The borrowings under the agreement at October 28, 1995, were $19,400,000 and were included in Investments and Other Assets. I Commitments In order to ensure a steady supply of hogs and turkeys and to keep the cost of products stable, the company and its subsidiary, Jennie-O Foods, Inc., have entered into contracts with producers for the purchase of hogs and turkeys at formula-based prices over periods of up to 11 years. Under these contracts, the company and Jennie-O Foods are committed at October 26, 1996, to purchase hogs and turkeys, assuming current price levels, as follows: (In Thousands) 1997$ 424,606 1998346,775 1999312,071 2000228,930 2001219,827 Later years835,533 Total$2,367,742 The company has commitments to expend approximately $82,458,000 to complete construction in progress at various locations at October 26, 1996. The company also has noncancelable operating lease commitments on facilities and equipment totaling $10,430,000 at October 26, 1996, which is payable in approximately equivalent annual amounts over the next five years. The company has also pledged $12.5 million of government securities as collateral guaranteeing a loan at October 26, 1996. J Stock Options Under the company's stock option plans, the company may grant employees and nonemployee directors options to purchase Common Stock of the company at 100 percent of the market value on the date of grant. 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 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 outstanding expire at various dates ranging from fiscal 2001 through 2006. Options are exercisable upon grant and are outstanding as follows: Shares Balance October 30, 1993 1,862,000 Granted 374,000 Exercised (383,000) Balance October 29, 1994 1,853,000 Granted 383,000 Exercised (275,000) Balance October 28, 1995 1,961,000 Granted 764,000 Exercised (165,000) Balance October 26, 1996 2,560,000 K 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 amount includes certain accruals and asset write-downs necessary to recognize the ultimate loss that will be realized upon exiting the business through sale or liquidation. Accruals requiring future cash payments at October 26, 1996, are not material. The accruals recorded reflect management's best estimate of the net costs to be incurred. L Quarterly Results of Operations (Unaudited) The following tabulations reflect the unaudited quarterly results of operations for the years ended October 26, 1996, and October 28, 1995: Gross NetEarnings (In Thousands, Except Per Share Data) Net Sales Profit EarningsPer Share 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 1995 First quarter $ 730,720 $202,145 $ 35,488 $0.46 Second quarter 748,046 182,037 25,354 0.33 Third quarter 732,356 169,029 21,019 0.28 Fourth quarter 835,073 198,730 38,575 0.50 $3,046,195 $751,941 $120,436 $1.57 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 26, 1996 and October 28, 1995, 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 26, 1996. 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 financial position of Hormel Foods Corporation at October 26, 1996 and October 28, 1995, and the results of its operations and its cash flows for each of the three years in the period ended October 26, 1996 in conformity with generally accepted accounting principles. Minneapolis, Minnesota November 26, 1996 Management's discussion and analysis of Financial Condition and Results of Operations Fiscal years 1996 and 1995 The company has been working for several years to expand its line of consumer-branded products to reduce exposure to fluctuating commodity prices. Considerable progress in achieving this objective has been made through the introduction of numerous products using turkey, chicken and beef. However, pork, and to a lesser extent turkey, remain the company's major raw materials. Fluctuations in these raw material prices have a significant impact on year-end results. Record high feed grain costs throughout most of the year resulted in raw material prices that were substantially higher than anticipated. The company's ability to maintain normal margin levels during this protracted period of higher raw material costs was restricted due to large quantities of competing proteins, mainly beef, available at extremely favorable retail prices. The pressure on margins eased somewhat as feed grain prices began to moderate late in the year and the excess quantities of 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 last year. Tonnage volume 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 last year. Sales for the quarter were $877,775,000, a 5.1 percent increase from 1995 sales of $835,073,000. Tonnage volume declined 7.1 percent in 1996 compared to last year. The tonnage volume drop experienced for both the quarter 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 tonnage volume declined, is due to moderately higher price 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 to 16.2 percent from 16.5 percent last 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 last year. These expenditures emphasize the company's expanding base of branded consumer products. Continued aggressive advertising and promotional activities are planned in 1997 to accelerate the growth opportunities that are becoming available with the moderation of high feed grain costs. 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 reflect a $7,500,000 settlement of antitrust suits involving Farm Fresh Catfish Company. In the fourth quarter an $8,700,000 restructuring reserve was established to recognize potential losses from the sale or liquidation of Farm Fresh as the company exits the fish business. Research and development continues to be an integral part of the company's strategy to extend existing brands and expand offerings of new consumer-branded items. Research and development expenses for the quarter and year were $1,801,000 and $8,022,000, respectively, compared to $2,003,000 and $7,829,000 for the same periods last year. The company's effective tax rate decreased to 36.7 percent from 38.1 percent in 1995. This reflects 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. Continued moderation of feed grain and raw material prices should allow the company to return to pre-1996 margin levels and combined with aggressive marketing programs meet 1997 profit plans. Fiscal years 1995 and 1994 Earnings for the year were $120,436,000, an increase of 2.1 percent over 1994 earnings of $117,975,000. Net sales in 1995 declined 0.6 percent to $3,046,195,000 from $3,064,793,000 the previous year. Tonnage volume for the year decreased 1.4 percent compared to 1994. During 1995, wholly owned subsidiary Jennie-O Foods, Inc., continued to expand its presence in the fast growing turkey business. Jennie-O, which had its second best year in 1995 and is an important and valued contributor to company results, expanded its turkey raising capacity by exercising an option to purchase West Central Turkeys of Pelican Rapids, Minn., and also began construction of a new processing plant in Montevideo, Minn. Earnings for the fourth quarter of 1995 were $38,575,000, a decrease of 28.9 percent from the same period in 1994. Net sales decreased 0.6 percent to $835,073,000 compared to $840,462,000 in the fourth quarter of 1994. Tonnage volume for the quarter decreased 8.9 percent compared to 1994. The drop reflected an industrywide initiative by major retailers to reduce inventories, a resistance to higher prices for commodity- type products and a reduction of fresh pork availability resulting from the closing of the FDL Foods slaughter operation in Dubuque, Iowa, in September 1995. FDL Foods, Inc., provided fresh pork products to the company subsidiary Dubuque Foods, Inc., under a co- packing arrangement. Selling and delivery expenses for the quarter and year were $123,284,000 and $502,729,000, respectively, compared to $122,175,000 and $467,062,000 for the same periods in 1994. As a percentage of sales, selling and delivery expenses increased to 16.5 percent from 15.2 percent the previous year which primarily reflected increased spending and advertising and promotions. Marketing expenses increased to $47,802,000 for the quarter and $206,404,000 for the year as compared to $46,609,000 and $184,368,000 in 1994. Administrative and general expenses were $16,528,000 and $65,766,000 for the quarter and year to date compared to $21,894,000 and $65,184,000 in 1994. The higher administrative and general expenses in the fourth quarter of 1994 were due to the establishment of a reserve for the impairment in the carrying value of an affiliated business. The company adjusted pension and other postretirement plan actuarial assumptions as of August 1, 1995. The adjustments included a decrease in the discount rate from 8.25 percent to 7.75 percent as a result of generally lower long-term interest rates. (See Note E to the Consolidated Financial Statements for Fiscal 1995.) The net effect of contributions and actuarial assumption changes resulted in a decrease in the pension liability recorded under SFAS No. 87 at October 28, 1995. The company's effective tax rate decreased to 38.1 percent from 38.3 percent in 1994. This reflected the initial return from the company's investment in the Federal Affordable Housing Program. Liquidity and Sources of Capital The company, as it has for many years, has an exceptionally strong balance sheet. Cash, cash equivalents and short-term marketable securities were $203,115,000 at the end of 1996 compared to $198,028,000 last year. Long-term debt increased during the fourth quarter by the private placement with five insurance companies of $110,000,000 in Senior Notes. The Notes will mature October 15, 2002, and October 15, 2006, and are being used to finance an $85,000,000 new plant project in Osceola, Iowa, with the remaining proceeds being used for other corporate needs. Other long-term debt consists of industrial revenue bonds with varying maturities and loans financing investment in affordable housing funds. The continuing strong balance sheet provides the company with the ability to take advantage of expansion or acquisition opportunities that may arise. During 1996, cash provided by operating activities was $109,408,000 compared to $91,374,000 last year. Changes in cash and cash requirements from operating activities were in the ordinary course of business and reflected a return of accounts payable and accrued expenses to more normal levels than experienced in 1995. Cash required for investing activities in 1996 increased to $150,321,000 from $114,797,000 in 1995. The cash was used to continue an aggressive program to maintain facilities and expand production capacities primarily at Hormel Foods and Jennie-O Foods, Inc. At the end of the year, the company had commitments to expend approximately $82,500,000 to complete construction in progress at various locations. In addition to the new production plant and distribution facility being built in Osceola, Iowa, Hormel Foods has major renovation and construction projects at processing facilities located at Austin, Minn., and Fremont, Neb. Jennie-O Foods completed and opened a new processing facility at Montevideo, Minn., in April 1996 and, in June, purchased an investment in Viking Turkey Hatchery at Detroit Lakes, Minn. Jennie-O Foods has numerous smaller projects in progress to expand their turkey raising and processing capacity. During the year, the company authorized the repurchase of up to five million shares of its Common Stock. By the end of the year, the company had repurchased and retired 1,027,128 shares at a cost of $24,708,000. Late in the year, the company acquired all the stock of Stagg Foods, Inc., a manufacturer of chili products for $40,000,000 of the company's stock. The transaction resulted in the recording of goodwill which is being amortized over 30 years. Financial ratios for 1996 and 1995 are presented below: 1996 1995 Liquidity Ratios Current ratio 2.7 3.0 Receivables turnover 13.4 13.3 Days sales in receivables 27.2 27.7 Inventory turnover 10.0 11.2 Days sales in inventory 41.3 33.6 Leverage Ratio Long-term debt to equity 16.5%2.6% Operating Ratios Pretax profit to net worth 16.5%28.0% Pretax profit to total assets 9.4%16.1% 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. R.W. Schlange Vice President and Controller Joel W. Johnson Chairman of the Board President and Chief Executive Officer CORPORATE INFORMATION 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 11,200 shareholders and comprised of nearly 10,900 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 news- papers in the New York Stock Exchange listing. Transfer Agent and Registrar Norwest Bank Minnesota, N.A. 161 North Concord Exchange P.O. Box 738 South St. Paul, MN 55075-0738 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 shareholders, allows for full or partial dividend reinvestment and voluntary cash purchases with brokerage commissions or other service fees paid by the company. Automatic Debit for Cash Contributions 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 their 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 Quarterly dividends are typically paid on the fifteenth of February, May, August and November. Postal delays may cause receipt dates to vary. 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. 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 28, 1997, 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 important to and owned by Hormel Foods Corporation or its subsidiaries. Consumer Affairs Inquiries regarding products of Hormel Foods Corporation should be addressed to: Consumer Affairs Department Hormel Foods Corporation 1 Hormel Place Austin, MN 55912-3680 or call 1-800-523-4635 Common Stock Data The high and low closing price of the company's common stock and the dividends per share declared for each fiscal quarter of 1996 and 1995, respectively, are shown below. 1996 High Low Dividend First Quarter 251/2 227/8 $.15 Second Quarter 273/4 24 $.15 Third Quarter 27 227/8 $.15 Fourth Quarter 241/4 201/2 $.15 1995 High Low Dividend First Quarter 263/8 233/4 $.145 Second Quarter 277/8 251/8 $.145 Third Quarter 27 241/8 $.145 Fourth Quarter 267/8 233/8 $.145 EX-27 2
5 1000 12-MOS OCT-26-1996 OCT-26-1996 188,473 14,642 230,869 0 271,097 723,259 828,614 407,128 1,436,138 266,409 127,003 9,087 0 0 31,679 1,436,138 3,098,685 3,098,685 2,398,272 2,398,272 0 0 1,619 125,474 46,066 79,408 0 0 0 79,408 1.04 1.04
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