SEGMENT REPORTING

9 Months Ended

Jul. 28, 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, or 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						Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018			July 28, 2019			July 29, 2018
Sales to Unaffiliated Customers
Grocery Products	$	543,088		$	607,054		$	1,785,232		$	1,832,123
Refrigerated Foods	1,301,101			1,288,394			3,837,732			3,788,097
Jennie-O Turkey Store	298,781			316,100			925,271			942,735
International & Other	147,735			147,594			447,569			458,048
Total	$	2,290,705		$	2,359,142		$	6,995,804		$	7,021,003

Intersegment Sales
Grocery Products	$	10		$	14		$	32		$	28
Refrigerated Foods	5,282			1,660			10,733			5,210
Jennie-O Turkey Store	31,804			28,069			90,665			78,297
International & Other	—			—			—			—
Total	37,096			29,743			101,430			83,535
Intersegment elimination	(37,096		)	(29,743		)	(101,430		)	(83,535		)
Total	$	—		$	—		$	—		$	—

Net Sales
Grocery Products	$	543,098		$	607,068		$	1,785,264		$	1,832,151
Refrigerated Foods	1,306,383			1,290,054			3,848,465			3,793,307
Jennie-O Turkey Store	330,585			344,169			1,015,936			1,021,032
International & Other	147,735			147,594			447,569			458,048
Intersegment elimination	(37,096		)	(29,743		)	(101,430		)	(83,535		)
Total	$	2,290,705		$	2,359,142		$	6,995,804		$	7,021,003

Segment Profit
Grocery Products	$	58,778		$	83,433		$	258,574		$	274,184
Refrigerated Foods	171,795			151,924			492,476			476,375
Jennie-O Turkey Store	21,278			23,305			76,931			93,102
International & Other	18,755			18,646			58,058			64,151
Total segment profit	270,606			277,308			886,039			907,812
Net unallocated expense	9,584			19,686			297			48,384
Noncontrolling interest	(22		)	110			279			352
Earnings Before Income Taxes	$	261,000		$	257,732		$	886,021		$	859,780

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 third quarter and first nine months of fiscal 2019 and 2018.



	Three Months Ended				Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
U.S. Retail	$	1,163,367	$	1,221,398	$	3,672,189	$	3,778,544
U.S. Foodservice	729,321		729,247		2,135,633		2,060,594
U.S. Deli	229,386		240,777		693,377		672,252
International	168,631		167,720		494,605		509,613
Total	$	2,290,705	$	2,359,142	$	6,995,804	$	7,021,003

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 Jennie-O Turkey Store 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 Jennie-O Turkey Store products. The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products. The Miscellaneous category includes CytoSport. The reduction in this category during fiscal 2019 is due to the divestiture of CytoSport on April 15, 2019. The amount of total revenues contributed by classes of similar products for the third quarter and first nine months of fiscal 2019 and 2018 are as follows:



	Three Months Ended				Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
Perishable	$	1,355,765	$	1,325,886	$	4,014,372	$	3,948,767
Shelf-stable	417,535		428,133		1,299,263		1,297,474
Poultry	427,622		453,926		1,296,677		1,325,037
Miscellaneous	89,783		151,197		385,492		449,725
Total	$	2,290,705	$	2,359,142	$	6,995,804	$	7,021,003