Segment Reporting

12 Months Ended

Oct. 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. Periods presented herein 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 commercial 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 operating 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 that these segments, if operated independently, would report the profit and other financial information shown below.



	Fiscal Year
(in thousands)		2019			2018			2017
Sales to Unaffiliated Customers
Grocery Products		$	2,369,317		$	2,480,367		$	2,507,503
Refrigerated Foods		5,210,741			5,109,881			4,759,839
Jennie-O Turkey Store		1,323,783			1,331,013			1,355,163
International & Other		593,476			624,439			545,014
Total		$	9,497,317		$	9,545,700		$	9,167,519
Intersegment Sales
Grocery Products		$	41		$	38		$	32
Refrigerated Foods		16,351			8,591			7,832
Jennie-O Turkey Store		123,712			110,753			113,384
International & Other		$	—		—			—
Total		140,104			119,382			121,248
Intersegment Elimination		(140,104		)	(119,382		)	(121,248		)
Total		$	—		$	—		$	—
Net Sales
Grocery Products		$	2,369,358		$	2,480,405		$	2,507,535
Refrigerated Foods		5,227,092			5,118,472			4,767,671
Jennie-O Turkey Store		1,447,495			1,441,766			1,468,547
International & Other		593,476			624,439			545,014
Intersegment Elimination		(140,104		)	(119,382		)	(121,248		)
Total		$	9,497,317		$	9,545,700		$	9,167,519
Segment Profit
Grocery Products		$	339,497		$	353,266		$	373,330
Refrigerated Foods		681,763			670,948			666,125
Jennie-O Turkey Store		117,962			131,846			183,433
International & Other		75,513			88,953			85,304
Total Segment Profit		1,214,735			$	1,245,013		$	1,308,192
Net Unallocated Expense		5,362			64,171			29,915
Noncontrolling Interest		342			442			368
Earnings Before Income Taxes		$	1,209,715		$	1,181,284		$	1,278,645
Assets
Grocery Products		$	1,774,235		$	2,172,117		$	2,181,762
Refrigerated Foods		3,583,639			3,444,646			2,389,896
Jennie-O Turkey Store		1,023,787			1,016,961			910,614
International & Other		692,310			679,003			675,878
Corporate		1,035,033			829,565			817,758
Total		$	8,109,004		$	8,142,292		$	6,975,908
Additions to Property, Plant & Equipment
Grocery Products		$	37,892		$	13,042		$	16,443
Refrigerated Foods		174,506			220,499			79,836
Jennie-O Turkey Store		31,607			131,946			88,063
International & Other		9,248			16,513			33,124
Corporate		40,585			7,607			3,820
Total		$	293,838		$	389,607		$	221,286
Depreciation and Amortization
Grocery Products		$	31,406		$	35,210		$	37,089
Refrigerated Foods		77,100			70,579			45,926
Jennie-O Turkey Store		34,696			33,316			31,603
International & Other		10,666			10,755			4,042
Corporate		11,342			11,998			12,317
Total		$	165,210		$	161,858		$	130,977

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. The amount of total revenues contributed by sales channel for the last three fiscal years are as follows:



	Fiscal Year Ended
(in thousands)	October 27, 2019		October 28, 2018		October 29, 2017
U.S. Retail	$	4,947,398	$	5,112,988	$	5,492,825
U.S. Foodservice	2,943,352		2,824,951		2,611,218
U.S. Deli	939,069		914,009		460,250
International	667,498		693,752		603,226
Total	$	9,497,317	$	9,545,700	$	9,167,519

The Company’s products primarily consist of meat and other food products. The amount of total revenues contributed by classes of similar products for the last three fiscal years are as follows:



	Fiscal Year Ended
(in thousands)	October 27, 2019		October 28, 2018		October 29, 2017
Perishable	$	5,370,409	$	5,336,046	$	4,922,958
Poultry	1,849,294		1,842,320		1,750,996
Shelf-stable	1,829,138		1,765,955		1,851,839
Miscellaneous	448,476		601,379		641,726
Total	$	9,497,317	$	9,545,700	$	9,167,519

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 reduction in the Miscellaneous category during fiscal 2019 is due to the divestiture of CytoSport on April 15, 2019.

Revenues from external customers are classified as domestic or foreign based on the destination where title passes. No individual foreign country is material to the consolidated results. Additionally, the Company’s long-lived assets located in foreign countries are not significant. Total revenues attributed to the U.S. and all foreign countries in total for the last three fiscal years are as follows:



	Fiscal Year Ended
(in thousands)	October 27, 2019		October 28, 2018		October 29, 2017
United States	$	8,934,911	$	8,957,305	$	8,631,325
Foreign	562,406		588,395		536,194
Total	$	9,497,317	$	9,545,700	$	9,167,519

In fiscal 2019, sales to Walmart Inc. (Walmart) represented $1.4 billion or 13.5% of the Company’s consolidated revenues (measured as gross sales less returns and allowances). In fiscal 2018, sales to Walmart represented $1.4 billion or 13.6% of the Company’s consolidated revenues. Walmart is a customer for all four segments of the Company.