SEGMENT REPORTING

3 Months Ended

Jan. 27, 2019

The Company develops, processes, and distributes a wide array of food products in a variety of markets. The Company reports its results in the following four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. At the beginning of fiscal 2019, the Hormel Deli Solutions division combined all deli businesses, including the Jennie-O Turkey Store deli division, into one division within the Refrigerated Foods segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. Fiscal 2018 segment results have been adjusted to reflect these changes.

The Grocery Products segment consists primarily of the processing, marketing, and sale of shelf-stable food products sold predominantly in the retail market, along with the sale of nutritional and private label shelf-stable products to retail, foodservice, and industrial customers. This segment also includes the results from the Company’s MegaMex joint venture.

The Refrigerated Foods segment consists primarily of the processing, marketing, and sale of branded and unbranded pork, beef, and poultry products for retail, foodservice, deli, and commercial customers.

The Jennie-O Turkey Store segment consists primarily of the processing, marketing, and sale of branded and unbranded turkey products for retail, foodservice, and fresh product customers.

The International & Other segment includes Hormel Foods International, which manufactures, markets, and sells Company products internationally. This segment also includes the results from the Company’s international joint ventures and royalty arrangements.

Intersegment sales are recorded at prices that approximate cost and are eliminated in the Consolidated Statements of Operations. The Company does not allocate investment income, interest expense, and interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included below as Net unallocated expense and Noncontrolling interest when reconciling to earnings before income taxes.

Sales and profits for each of the Company’s reportable segments and reconciliation to earnings before income taxes are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent these segments, if operated independently, would report the profit and other financial information shown below.



	Three Months Ended
(in thousands)	January 27, 2019			January 28, 2018
Sales to Unaffiliated Customers
Grocery Products	$	606,825		$	603,577
Refrigerated Foods	1,278,747			1,254,637
Jennie-O Turkey Store	321,234			322,760
International & Other	153,549			150,319
Total	$	2,360,355		$	2,331,293

Intersegment Sales
Grocery Products	$	22		$	4
Refrigerated Foods	2,178			2,164
Jennie-O Turkey Store	28,811			24,689
International & Other	—			—
Total	31,011			26,857
Intersegment elimination	(31,011		)	(26,857		)
Total	$	—		$	—

Net Sales
Grocery Products	$	606,847		$	603,581
Refrigerated Foods	1,280,925			1,256,801
Jennie-O Turkey Store	350,045			347,449
International & Other	153,549			150,319
Intersegment elimination	(31,011		)	(26,857		)
Total	$	2,360,355		$	2,331,293

Segment Profit
Grocery Products	$	95,297		$	97,545
Refrigerated Foods	162,593			157,531
Jennie-O Turkey Store	37,904			37,724
International & Other	24,978			24,655
Total segment profit	320,772			317,455
Net unallocated expense	13,891			12,394
Noncontrolling interest	94			104
Earnings Before Income Taxes	$	306,975		$	305,165

Revenue has been disaggregated into the categories below to show how sales channels affect the nature, amount, timing, and uncertainty of revenue and cash flows for the first three months of fiscal 2019 and 2018.



	Three Months Ended
(in thousands)	January 27, 2019		January 28, 2018
U.S. Retail	$	1,253,315	$	1,299,672
U.S. Foodservice	689,905		657,103
U.S. Deli	251,276		210,997
International	165,859		163,521
Total	$	2,360,355	$	2,331,293

The Company’s products primarily consist of meat and other food products. Perishable includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding JOTS products). Shelf-stable includes canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, hash, stews, meat spreads, flour and corn tortillas,

salsas, tortilla chips, and other items that do not require refrigeration. The Poultry category is composed primarily of JOTS products. The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products. The amount of total revenues contributed by classes of similar products for the first three months of fiscal 2019 and 2018 are as follows:



	Three Months Ended
(in thousands)	January 27, 2019		January 28, 2018
Perishable	$	1,341,152	$	1,318,873
Poultry	441,392		443,442
Shelf-stable	436,897		424,593
Miscellaneous	140,914		144,385
Total	$	2,360,355	$	2,331,293