UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~FORM 10-Q

~~[ X ]~~



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January ~~27, 2019~~26, 2020

~~[ ]~~



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________________ to ________________________________________

Commission File Number: 1-2402

HORMEL FOODS CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		41-0319970
(State or other jurisdiction of incorporation or organization)		~~41-0319970~~ (I.R.S. Employer Identification No.)

1 Hormel Place



~~1 Hormel Place~~ ~~Austin, Minnesota~~ ~~(Address of principal executive offices)~~		~~55912-3680~~ ~~(Zip Code)~~

Austin, MN55912

~~(507) 437-5611~~(Address of Principal Executive Office, including zip code)

(507) 437-5611

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X ~~YES~~ ☒ Yes ☐ NONo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). X ☒ ~~YES~~Yes ☐ NONo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer X	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes X ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



~~Class~~	~~Outstanding at March 3, 2019~~
~~Common Stock~~	~~$.01465 par value~~	~~535,675,778~~
~~Common Stock Non-Voting~~	~~$.01 par value~~	~~–0–~~

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

Item 1.		Financial Statements
	~~CONSOLIDATED STATEMENTS OF FINANCIAL POSITION~~Consolidated Statements of Financial Position - January ~~27, 2019~~26, 2020 and October ~~28, 2018~~27, 2019
	~~CONSOLIDATED STATEMENTS OF OPERATIONS~~Consolidated Statements of Operations - Three Months Ended January ~~27, 2019~~26, 2020 and ~~January 28, 2018~~
~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - Three Months Ended January 27, 2019 and January 28, 2018~~
~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT - Three Months Ended January 28, 2018 and Three Months Ended~~ January 27, 2019
	~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~Consolidated Statements of Comprehensive Income - Three Months Ended January ~~27, 2019~~26, 2020 and January ~~28, 2018~~27, 2019
	~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Consolidated Statements of Changes in Shareholders' Investment - Three Months Ended January 26, 2020 and January 27, 2019
	Consolidated Statements of Cash Flows - Three Months Ended January 26, 2020 and January 27, 2019
	Notes to Consolidated Financial Statements

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
	~~CRITICAL ACCOUNTING POLICIES~~Critical Accounting Policies
	~~RESULTS OF OPERATIONS~~Results of Operations
		Overview
		Consolidated Results
		Segment Results
		Related Party Transactions
	~~LIQUIDITY AND CAPITAL RESOURCES~~Liquidity and Capital Resources
	~~FORWARD-LOOKING STATEMENTS~~Forward-looking Statements

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Item 4.		Controls and Procedures

PART II - OTHER INFORMATION

Item 1.		Legal Proceedings

Item 1A.		Risk Factors

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.		Exhibits

SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. ~~Financial Statements~~FINANCIAL STATEMENTS

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)

January 27,
2019 October 28,
2018
(Unaudited)
ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 512,689
$ 459,136
Accounts receivable 565,060
600,438
Inventories 994,428
963,527
Income taxes receivable 147
3,995
Prepaid expenses 23,601
16,342
Other current assets 4,761
6,662
TOTAL CURRENT ASSETS 2,100,686
2,050,100

GOODWILL 2,716,750
2,714,116

OTHER INTANGIBLES 1,204,991
1,207,219

PENSION ASSETS 200,448
195,153

INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES 277,837
273,153

OTHER ASSETS 171,005
189,951

PROPERTY, PLANT AND EQUIPMENT
Land 49,162
50,332
Buildings 958,884
956,260
Equipment 1,819,284
1,863,020
Construction in progress 302,929
332,205
Less: Allowance for depreciation (1,646,578 ) (1,689,217 )
Net property, plant and equipment 1,483,681
1,512,600

TOTAL ASSETS $ 8,155,398
$ 8,142,292




	January 26, 2020			October 27, 2019
	(Unaudited)
Assets
Current Assets
Cash and Cash Equivalents	$	724,419		$	672,901
Short-term Marketable Securities	14,808			14,736
Accounts Receivable	562,483			574,396
Inventories	1,057,277			1,042,362
Income Taxes Receivable	187			19,924
Prepaid Expenses	24,817			22,637
Other Current Assets	10,976			14,457
Total Current Assets	2,394,967			2,361,413

Goodwill	2,484,088			2,481,645

Other Intangibles	1,031,804			1,033,862

Pension Assets	141,892			135,915

Investments In and Receivables From Affiliates	290,777			289,157

Other Assets	251,353			177,901

Property, Plant and Equipment
Land	54,450			49,758
Buildings	1,138,514			1,083,902
Equipment	1,990,262			1,965,478
Construction in Progress	275,498			256,190
Less: Allowance for Depreciation	(1,763,497		)	(1,726,217		)
Net Property, Plant and Equipment	1,695,228			1,629,111

Total Assets	$	8,290,109		$	8,109,004

~~See Notes to Consolidated Financial Statements~~

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)

January 27,
2019 October 28,
2018
(Unaudited)
LIABILITIES AND SHAREHOLDERS’ INVESTMENT

CURRENT LIABILITIES

Accounts payable $ 505,617
$ 618,830
Accrued expenses 50,361
48,298
Accrued workers compensation 25,215
24,594
Accrued marketing expenses 139,338
118,887
Employee related expenses 160,242
224,736
Taxes payable 63,791
2,490
Interest and dividends payable 116,370
101,079
Current maturities of long-term debt 374,878
—
TOTAL CURRENT LIABILITIES 1,435,812
1,138,914

LONG-TERM DEBT–less current maturities 250,000
624,840

PENSION AND POST-RETIREMENT BENEFITS 484,004
477,557

OTHER LONG-TERM LIABILITIES 100,134
99,070

DEFERRED INCOME TAXES 179,669
197,093

SHAREHOLDERS’ INVESTMENT
Preferred stock, par value $.01 a share–
authorized 160,000,000 shares; issued–none
Common stock, non-voting, par value $.01
a share–authorized 400,000,000 shares; issued–none

Common stock, par value $.01465 a share– 7,826
7,825
authorized 1,600,000,000 shares;
issued 534,169,855 shares January 27, 2019
issued 534,135,484 shares October 28, 2018
Additional paid-in capital 130,196
106,528
Accumulated other comprehensive loss (292,342 ) (243,498 )
Retained earnings 5,856,029
5,729,956
HORMEL FOODS CORPORATION SHAREHOLDERS’ INVESTMENT 5,701,709
5,600,811
NONCONTROLLING INTEREST 4,070
4,007
TOTAL SHAREHOLDERS’ INVESTMENT 5,705,779
5,604,818

TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT $ 8,155,398
$ 8,142,292




	January 26, 2020			October 27, 2019
	(Unaudited)
Liabilities and Shareholders' Investment
Current Liabilities
Accounts Payable	$	490,042		$	590,033
Accrued Expenses	64,702			62,031
Accrued Workers Compensation	27,116			24,272
Accrued Marketing Expenses	110,093			96,305
Employee Related Expenses	164,933			213,515
Taxes Payable	30,489			6,208
Interest and Dividends Payable	127,452			112,685
Current Maturities of Long-term Debt	8,259			—
Total Current Liabilities	1,023,085			1,105,049

Long-term Debt–Less Current Maturities	308,972			250,000

Pension and Post-retirement Benefits	539,972			536,490

Other Long-term Liabilities	145,923			115,356

Deferred Income Taxes	176,113			176,574

Shareholders' Investment
Preferred Stock, Par Value $.01 a Share–
Authorized 160,000,000 Shares; Issued–None
Common Stock, Non-voting, Par Value $.01 a Share–
Authorized 400,000,000 Shares; Issued–None
Common Stock, Par Value $.01465 a Share–	7,873			7,830
Authorized 1,600,000,000 Shares;
Issued 537,414,897 Shares January 26, 2020
Issued 534,488,746 Shares October 27, 2019
Additional Paid-in Capital	230,529			184,921
Accumulated Other Comprehensive Loss	(393,278		)	(399,500		)
Retained Earnings	6,246,641			6,128,207
Hormel Foods Corporation Shareholders' Investment	6,091,764			5,921,458
Noncontrolling Interest	4,281			4,077
Total Shareholders' Investment	6,096,045			5,925,535

Total Liabilities and Shareholders' Investment	$	8,290,109		$	8,109,004

See Notes to Consolidated Financial ~~Statements~~Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended
January 27,
2019 January 28,
2018 *
Net sales $ 2,360,355
$ 2,331,293
Cost of products sold 1,872,021
1,832,997
GROSS PROFIT 488,334
498,296

Selling, general and administrative 193,544
219,872
Equity in earnings of affiliates 11,458
23,531

OPERATING INCOME 306,248
301,955

Other income and expense:
Interest and investment income 6,874
7,939
Interest expense (6,147 ) (4,729 )

EARNINGS BEFORE INCOME TAXES 306,975
305,165

Provision for income taxes 65,456
1,954

NET EARNINGS 241,519
303,211
Less: Net earnings attributable to noncontrolling interest 94
104
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION $ 241,425
$ 303,107

NET EARNINGS PER SHARE:
BASIC $ 0.45
$ 0.57
DILUTED $ 0.44
$ 0.56

WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC 534,495
529,453
DILUTED 547,118
543,482



	Three Months Ended
	January 26, 2020			January 27, 2019
Net Sales	$	2,384,434		$	2,360,355
Cost of Products Sold	1,916,014			1,872,021
Gross Profit	468,421			488,334

Selling, General and Administrative	195,521			193,544
Equity in Earnings of Affiliates	7,588			11,458

Operating Income	280,488			306,248

Other Income and Expense:
Interest and Investment Income	13,251			6,874
Interest Expense	(3,577		)	(6,147		)

Earnings Before Income Taxes	290,162			306,975

Provision for Income Taxes	47,209			65,456

Net Earnings	242,953			241,519
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest	81			94
Net Earnings Attributable to Hormel Foods Corporation	$	242,872		$	241,425

Net Earnings Per Share
Basic	$	0.45		$	0.45
Diluted	$	0.45		$	0.44

Weighted-average Shares Outstanding
Basic	535,075			534,495
Diluted	544,815			547,118

*Adjusted due to the adoption of Accounting Standards Update (ASU) 2017-07, ~~Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). See Note A - General.~~

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

Three Months Ended
January 27,
2019 January 28,
2018
NET EARNINGS $ 241,519
$ 303,211
Other comprehensive income, net of tax:
Foreign currency translation 1,846
4,212
Pension and other benefits 3,439
2,486
Deferred hedging (361 ) (650 )
TOTAL OTHER COMPREHENSIVE INCOME 4,924
6,048
COMPREHENSIVE INCOME 246,443
309,259
Less: Comprehensive income attributable to noncontrolling interest 63
253
COMPREHENSIVE INCOME ATTRIBUTABLE TO HORMEL FOODS CORPORATION $ 246,380
$ 309,006




	Three Months Ended
	January 26, 2020			January 27, 2019
Net Earnings	$	242,953		$	241,519
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	7,937			1,846
Pension and Other Benefits	3,512			3,439
Deferred Hedging	(5,103		)	(361		)
Total Other Comprehensive Income (Loss)	6,346			4,924
Comprehensive Income	249,299			246,443
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest	205			63
Comprehensive Income Attributable to Hormel Foods Corporation	$	249,094		$	246,380

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended January 28, 2018

Hormel Foods Corporation Shareholders

Common
Stock

Treasury
Stock

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

Non-
controlling
Interest

Total
Shareholders’
Investment
Shares
Amount
Shares
Amount

Balance at October 29, 2017 528,424
$ 7,741
—
$ —
$ 13,670
$ 5,162,571
$ (248,075 ) $ 3,790
$ 4,939,697
Net earnings 303,107
104
303,211
Other comprehensive income (loss) 5,899
149
6,048
Purchases of common stock (738 ) (25,199 ) (25,199 )
Stock-based compensation expense 7,339
7,339
Exercise of stock options/restricted shares 2,302
34
23,421
23,455
Shares retired (738 ) (11 ) 738
25,199
(25,188 ) —
Declared cash dividends – $0.1875 per share (99,177 ) (99,177 )
Balance at January 28, 2018 529,988
$ 7,764
—
$ —
$ 19,242
$ 5,366,501
$ (242,176 ) $ 4,043
$ 5,155,374

Three Months Ended January 27, 2019

Hormel Foods Corporation Shareholders
Common
Stock Treasury
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
(Loss) Income Non-
controlling
Interest Total
Shareholders’
Investment
Shares
Amount
Shares
Amount

Balance at October 28, 2018 534,135
$ 7,825
—
$ —
$ 106,528
$ 5,729,956
$ (243,498 ) $ 4,007
$ 5,604,818
Net earnings 241,425
94
241,519
Other comprehensive income (loss) 4,955
(31 ) 4,924
Purchases of common stock (1,065 ) (44,809 ) (44,809 )
Stock-based compensation expense

7,946
7,946
Exercise of stock options/restricted shares 1,100
17
15,981
15,998
Shares retired (1,065 ) (16 ) 1,065
44,809
(259 ) (44,534 ) —
Cumulative effect adjustment from adoption of:

   ASU 2016-16 (10,475 ) (10,475 )
   ASU 2017-12 21
(21 ) —
   ASU 2018-02 52,342
(53,778 ) (1,436 )
Declared cash dividends – $0.21 per share (112,706 ) (112,706 )
Balance at January 27, 2019 534,170
$ 7,826
—
$ —
$ 130,196
$ 5,856,029
$ (292,342 ) $ 4,070
$ 5,705,779



	Three Months Ended January 27, 2019

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 28, 2018	534,135		$	7,825		—		$	—		$	106,528		$	5,729,956		$	(243,498	)	$	4,007		$	5,604,818
Net Earnings														241,425						94			241,519
Other Comprehensive Income (Loss)																	4,955			(31		)	4,924
Purchases of Common Stock						(1,065	)	(44,809		)													(44,809		)
Stock-based Compensation Expense											7,946												7,946
Exercise of Stock Options/Restricted Shares	1,100		17								15,981												15,998
Shares Retired	(1,065	)	(16		)	1,065		44,809			(259		)	(44,534		)							—
Cumulative Effect Adjustment from the Adoption of:
ASU 2016-16														(10,475		)							(10,475		)
ASU 2017-12														21			(21		)				—
ASU 2018-02														52,342			(53,778		)				(1,436		)
Declared Cash Dividends – $0.21 per Share														(112,706		)							(112,706		)
Balance at January 27, 2019	534,170		$	7,826		—		$	—		$	130,196		$	5,856,029		$	(292,342	)	$	4,070		$	5,705,779

	Three Months Ended January 26, 2020

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 27, 2019	534,489		$	7,830		—		$	—		$	184,921		$	6,128,207		$	(399,500	)	$	4,077		$	5,925,535
Net Earnings														242,872						81			242,953
Other Comprehensive Income (Loss)																	6,222			124			6,346
Purchases of Common Stock																							—
Stock-based Compensation Expense											9,298												9,298
Exercise of Stock Options/Restricted Shares	2,926		43								36,310												36,353
Shares Retired																							—
Declared Cash Dividends – $0.2325 per Share														(124,438		)							(124,438		)
Balance at January 26, 2020	537,415		$	7,873		—		$	—		$	230,529		$	6,246,641		$	(393,278	)	$	4,281		$	6,096,045

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Three Months Ended
January 27,
2019 January 28,
2018
OPERATING ACTIVITIES

Net earnings $ 241,519
$ 303,211
Adjustments to reconcile to net cash provided by operating activities:
Depreciation 36,848
35,867
Amortization of intangibles 3,170
3,256
Equity in earnings of affiliates (11,458 ) (23,531 )
Distribution from equity method investees —
23
Provision (benefit) for deferred income taxes 125
(68,856 )
Loss (gain) on property/equipment sales and plant facilities 450
(1,131 )
Non-cash investment activities (9,516 ) (10,880 )
Stock-based compensation expense 7,946
7,339
Changes in operating assets and liabilities, net of acquisitions:
Decrease (increase) in accounts receivable 36,262
69,629
(Increase) decrease in inventories (30,901 ) (21,255 )
(Increase) decrease in prepaid expenses and other current assets (5,625 ) 569
Increase (decrease) in pension and post-retirement benefits 4,237
2,132
(Decrease) increase in accounts payable and accrued expenses (147,318 ) (58,077 )
Increase (decrease) in net income taxes payable 61,686
65,881
NET CASH PROVIDED BY OPERATING ACTIVITIES 187,425
304,177

INVESTING ACTIVITIES
Acquisitions of businesses/intangibles —
(858,102 )
Purchases of property/equipment (39,430 ) (53,694 )
Proceeds from sales of property/equipment 30,305
751
Decrease (increase) in investments, equity in affiliates, and other assets 7,302
2,718
Proceeds from company-owned life insurance 144
3,028
NET CASH USED IN INVESTING ACTIVITIES (1,679 ) (905,299 )

FINANCING ACTIVITIES
Net proceeds from short-term debt —
255,000
Proceeds from long-term debt —
375,000
Repayments of long-term debt 38
(274 )
Dividends paid on common stock (100,125 ) (89,814 )
Share repurchase (44,809 ) (25,199 )
Proceeds from exercise of stock options 15,997
23,455
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (128,899 ) 538,168

EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,294 ) 4,607
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 53,553
(58,347 )
Cash and cash equivalents at beginning of year 459,136
444,122
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 512,689
$ 385,775



	Three Months Ended
	January 26, 2020			January 27, 2019
Operating Activities
Net Earnings	$	242,953		$	241,519
Adjustments to Reconcile to Net Cash Provided by Operating Activities:
Depreciation	41,194			36,848
Amortization	8,135			3,170
Equity in Earnings of Affiliates	(7,588		)	(11,458		)
Distribution from Equity Method Investees	10,000			—
Provision for Deferred Income Taxes	49			125
(Gain) Loss on Property/Equipment Sales and Plant Facilities	(23		)	450
Non-cash Investment Activities	(12,761		)	(9,516		)
Stock-based Compensation Expense	9,298			7,946
Changes in Operating Assets and Liabilities, Net of Acquisitions:
Decrease (Increase) in Accounts Receivable	11,492			36,262
(Increase) Decrease in Inventories	(14,915		)	(30,901		)
(Increase) Decrease in Prepaid Expenses and Other Current Assets	(5,451		)	(5,625		)
Increase (Decrease) in Pension and Post-retirement Benefits	647			4,237
(Decrease) Increase in Accounts Payable and Accrued Expenses	(135,988		)	(147,318		)
Increase (Decrease) in Net Income Taxes Payable	41,376			61,686
Net Cash Provided by Operating Activities	188,418			187,425

Investing Activities
Net (Purchase) Sale of Securities	(16		)	—
Purchases of Property/Equipment	(58,211		)	(39,430		)
Proceeds from Sales of Property/Equipment	1,114			30,305
(Increase) Decrease in Investments, Equity in Affiliates, and Other Assets	(4,509		)	7,302
Proceeds from Company-owned Life Insurance	1,118			144
Net Cash (Used in) Provided by Investing Activities	(60,504		)	(1,679		)

Financing Activities
Repayments of Long-term Debt and Finance Leases	(2,019		)	38
Dividends Paid on Common Stock	(112,249		)	(100,125		)
Share Repurchase	—			(44,809		)
Proceeds from Exercise of Stock Options	36,353			15,997
Net Cash (Used in) Provided by Financing Activities	(77,915		)	(128,899		)

Effect of Exchange Rate Changes on Cash	1,519			(3,294		)
Increase (Decrease) in Cash and Cash Equivalents	51,518			53,553
Cash and Cash Equivalents at Beginning of Year	672,901			459,136
Cash and Cash Equivalents at End of Quarter	$	724,419		$	512,689

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A - ~~GENERAL~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. The ~~balance sheet~~Consolidated Statement of Financial Position at October ~~28, 2018,~~27, 2019, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October ~~28, 2018.~~

~~Investments:~~ 27, 2019. The ~~Company maintains a rabbi trust~~significant accounting policies used in preparing these Consolidated Financial Statements are consistent with those described in Note A - Summary of Significant Accounting Policies to ~~fund certain supplemental executive retirement plans and deferred income plans. Under~~ the plans, the participants can defer certain types of compensation and elect to receive a return on the deferred amounts based on the changes in fair value of various investment options, primarily a variety of mutual funds. The Company has corporate-owned life insurance policies on certain participantsConsolidated Financial Statements in the ~~deferred compensation plans. The cash surrender value~~Form 10-K with the exception of the policies is included in other assets on the Consolidated Statements of Financial Position. The securities held by the trust are classified as trading securities. Therefore, unrealized gains and losses associated with these investments are includednew requirements adopted in the ~~Company’s earnings. Securities held by the trust generated gains~~first quarter of ~~$1.4 million for the three months ended January 27, 2019, compared to gains of $3.4 million for the three months ended January 28, 2018.~~fiscal 2020.

~~Supplemental Cash Flow Information:~~ Rounding:Non-cash investment activities presented on the Consolidated Statements of Cash Flows primarily consist of unrealized gains or losses on the Company’s rabbi trust. The noted investments are included in other assets on the Consolidated Statements of Financial Position. Changes in the value of these investments are included in the Company’s net earnings and are presented Certain amounts in the Consolidated Financial Statements ~~of Operations as either interest~~ and ~~investment income (loss) or interest expense, as appropriate.~~

~~Guarantees:~~ The Company enters into various agreements guaranteeing specified obligations of affiliated parties. The Company’s guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement. The Company currently provides revocable standby letters of credit totaling $2.4 millionassociated notes may not foot due to guarantee obligations that may arise under workers compensation claims of an affiliated party. This potential obligation is not reflected in the Company’s Consolidated Statements of Financial Position.

~~Reclassifications:~~ ~~Certain reclassifications of previously reported amounts~~rounding. All percentages have been made to conform to the current year presentation. The reclassifications had no impact on net earnings or operating income, other than those related to the adoption of ASU 2017-07 as described within the new accounting pronouncements adopted in the current fiscal year.calculated using unrounded amounts.

Accounting Changes and Recent Accounting Pronouncements:

New Accounting Pronouncements Adopted in Current Fiscal Year

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606). This topic converges the guidance within U.S. GAAP and international financial reporting standards and supersedes ASC 605,~~ ~~Revenue Recognition~~. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions which were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The updated guidance is to be applied either retrospectively or by using a cumulative effect adjustment. The Company adopted the provisions of the new standard using the full retrospective method at the beginning of fiscal 2019. The Company made the following policy elections upon adoption: to account for shipping and handling costs as contract fulfillment costs and to exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price. The Company will account for variable consideration using the expected value method. The Company also applied the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included in the Consolidated Statements of Operations. The Company did not have a cumulative effect adjustment as a result of adoption. Adoption of the

~~new standard did not~~ have a material impact on the Company’s results of operations. Additional qualitative disclosures have been provided in Note B - Revenue Recognition and further disaggregation of revenues provided in Note N - Segment Reporting.

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740)~~. The updated guidance requires the recognition of the income tax consequences of an intra-entity asset transfer, other than transfers of inventory, when the transfer occurs. For intra-entity transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. The updated guidance is effective for reporting periods beginning after December 15, 2017, with early adoption permitted only within the first interim period of a fiscal year. The guidance is required to be applied on a modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification from prepaid tax assets to deferred tax assets. In addition, due to impact of the lower tax rate on deferred tax balances resulting from the Tax Cuts and Jobs Act (Tax Act), the Company recognized a cumulative effect adjustment to retained earnings of $10.5 million.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715)~~. The updated guidance requires an employer to report the service cost component of net periodic pension cost and net periodic post-retirement benefit cost in the same line item as other compensation costs. Other components of net periodic pension cost and net periodic post-retirement benefit cost must be presented in the income statement separately from the service cost component and outside income from operations. Additionally, only the service cost component is eligible for capitalization. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The updated guidance should be applied retrospectively for the presentation of components of net benefit cost and prospectively, for the capitalization of the service cost component of net benefit cost. The Company adopted the updated provisions at the beginning of fiscal 2019. The Company elected to utilize a practical expedient which allows the Company to use historical amounts disclosed in the Pension and Other Post-retirement Benefits footnote as an estimation basis for retrospectively applying the requirements to separately report the other components in the income statement. Due to the retrospective adoption, the Company reclassified $4.6 million of non-service cost components of net periodic benefit costs out of operating income to interest and investment income on the Consolidated Statements of Operations for the three months ended January 28, 2018.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities (Topic 815)~~. The updated guidance expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements apply prospectively. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim or annual period. The Company early adopted the updated guidance at the beginning of fiscal 2019, therefore eliminating the requirement to separately measure and report hedge ineffectiveness. The Company applied the amendment to cash flow hedge relationships existing on the date of adoption using a modified retrospective approach.

~~Presentation and disclosure requirements were applied on a prospective basis. The adoption resulted in an immaterial adjustment from retained earnings to accumulated other comprehensive income.~~

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220).~~ The updated guidance allows entities to reclassify stranded income tax effects resulting from the Tax Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The Company early adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification of $53.8 million to accumulated other comprehensive loss.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ ~~Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350).~~ ~~The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement~~

that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years and is to be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company early adopted the updated provisions on a prospective basis at the beginning of fiscal 2019. The impact related to adoption was immaterial in the first quarter and the Company will continue to evaluate in future quarters.

~~New Accounting Pronouncements Not Yet Adopted~~

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12twelve months. Recognition, measurement, and presentation of expenses will depend on the classification as a finance or operating lease. The update also requires ~~certain~~expanded quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. In July 2018, the FASB issued ASU 2018-11, which provides an optional transition method in addition to the existing modified retrospective transition method allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The requirements of the new standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company ~~will adopt~~adopted the provisions of this new accounting standard at the beginning of fiscal ~~2020~~2020. For transition purposes, the Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification, and isinitial direct costs. The Company elected the comparative periods practical expedient, and as a result, the Company did not adjust its comparative period financial information or make the new required lease disclosures for periods before the effective date. Upon adoption, the Company recognized right-of-use assets of $112.7 million and lease liabilities of $114.1 million in the ~~process~~Consolidated Statements of ~~evaluating~~Financial Position as of October 28, 2019. The new standard did not have a material impact on the ~~impact~~Consolidated Statements of ~~adoption on its consolidated financial statements and related disclosures.~~Operations or the Consolidated Statements of Cash Flows.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic ~~958)~~326). The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment ~~methodology~~approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The updated guidance is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2021 and is ~~currently assessing~~in the ~~timing and impact~~process of ~~adopting~~evaluating the ~~updated provisions.~~impact.

~~In July 2018, the FASB issued ASU 2018-09,~~ ~~Codification Improvements~~. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (ASC). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is currently assessing the impact of adoption on its consolidated financial statements, results of operations, and cash flows.

In August 2018, the FASB issued ASU 2018-13,Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance~~improves~~ requires entities to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Amendments in this guidance also require disclosure of transfers into and out of Level 3 of the fair value hierarchy, purchases and issues of Level 3 assets and liabilities, and clarify that the measurement uncertainty disclosure is as of the reporting date. The guidance removes requirements onto disclose the amounts and reasons for transfers between Level 1 and Level 2, policy for timing between of transfers between levels, and the valuation processes for Level 3 fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2021 and is ~~currently assessing~~in the ~~timing and impact~~process of ~~adopting~~evaluating the ~~updated provisions.~~impact.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715). The updated guidance ~~improves~~requires additional disclosures of weighted-average interest crediting rates for cash balance plans and an

explanation of the reasons for significant gains and losses related to changes in the benefit obligation. Amendments in the guidance also clarify the requirement to disclose the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets. The same disclosure is needed for the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The guidance removes certain previous disclosure requirements no longer considered cost beneficial. The amendments are effective for ~~employers who sponsor defined benefit pension or other postretirement plans.~~fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740). The updated guidance simplifies the accounting for income taxes by removing certain exceptions in Topic 740 and clarifying and amending existing guidance. The amendments are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

~~Any other recently~~

Recently issued accounting standards or pronouncements not disclosed above have been excluded as they ~~either~~ are not relevant to the ~~Company, or they are not expected to have a material effect on its business practices, financial condition, results of operations, or disclosures.~~Company.

NOTE B - ~~REVENUE RECOGNITION~~ACQUISITIONS AND DIVESTITURES

~~Revenue from Contracts with Customers:~~Divestiture: ~~Effective October 29, 2018,~~On April 15, 2019, the Company ~~adopted ASC 606,~~ ~~Revenue from Contracts with Customers~~completed the sale of CytoSport, Inc. (CytoSport), which includes the ~~using the full retrospective adoption method.~~Muscle Milk^® and Evolve^® brands, to PepsiCo, Inc., and received final proceeds of $479.8 million. The impact of adopting this guidance was immaterial to the Company’s financial statements and related disclosures. Under ASC 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance, where payment terms are identified, and collectability is probable. The Company’s customer contracts predominantly contain a single performance obligation to fulfill customer orders for the purchase of specified products. A performance obligation is a promisedivestiture resulted in a ~~contract to transfer~~pretax gain of $16.5 million recognized in Selling, General and Administrative expense and a ~~distinct good or service to~~tax benefit of $17.0 million recognized within the customer. Revenue from product sales is primarily identified by purchase orders (“contracts”) which in some cases are governed by a master sales agreement. The purchase orders in combination with the invoice typically specify quantity and product(s) ordered, shipping terms, and certain aspects of the transaction price including discounts. Contracts are at standalone pricing or governed by pricing lists or brackets. Revenue is recognized as control of the promised good transfers to the customer in an amount reflective of the consideration the Company expects to receive in exchangeProvision for those goods. The Company’s revenue is recognized at a point in time when obligations under the terms of the agreement are satisfied once the shipped product is received or picked up by the customer. Revenues are recognized at the net consideration the Company expects to receive in exchange for the goods. The amount of net consideration recognized includes estimates of variable consideration, including costs for trade promotion programs, consumer incentives, and allowances and discounts associated with distressed or potentially unsaleable products.

A majority of the Company’s revenue is short-term in nature with shipments within one year from order date. The Company's payment terms generally range between 7 to 45 days and vary by sales channel and other factors.

The Company promotes products through advertising, consumer incentives, and trade promotions. These programs include discounts, slotting fees, coupons, rebates, and in-store display incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the sale price basedIncome Taxes on amounts estimated as variable consideration. The Company estimates variable consideration at the expected value method to determine the total consideration which the Company expects to be entitled. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.

The Company elected to account for shipping and handling costs as contract fulfillment costs, and exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price.

~~Disaggregation of Revenue:~~ ~~The Company discloses revenue by reportable segment. A reconciliation of these disaggregated revenues is provided in Note N - Segment Reporting.~~

~~Contract Balances:~~ ~~The Company does not have significant deferred revenue or unbilled receivable balances as a result of transactions with customers.~~

~~Contract Costs:~~ ~~The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with duration of one year or less, which are expensed and included in~~ the Consolidated Statements of Operations.

~~NOTE C - ACQUISITIONS~~

~~On November 27, 2017,~~CytoSport's results of operations through the ~~Company acquired Columbus Manufacturing, Inc. (Columbus), an authentic premium deli meat and salami company, from Chicago-based Arbor Investments for a final purchase price~~date of ~~$857.4 million. The transaction was funded with cash on hand and by borrowing $375.0 million under a term loan facility and $375.0 million under a revolving credit facility.~~

~~Columbus specializes~~divestiture are included within Earnings Before Income Taxes in ~~authentic premium deli meat and salami. This acquisition allows~~ the ~~Company to enhance its scale in the deli by broadening its portfolio of products, customers, and consumers.~~

The acquisition was accounted for as a business combination using the acquisition method. The Company obtained an independent appraisal and completed purchase accounting for the acquisition in the fourth quarter of fiscal 2018. A final allocation of the purchase price to the acquired assets, liabilities, and goodwill is presented in the table below.

(in thousands)
Accounts receivable $ 21,199
Inventory 32,817
Prepaid and other assets 881
Other assets 936
Property, plant and equipment 83,662
Intangible assets 223,704
Goodwill 610,602
Current liabilities (21,366 )
Deferred taxes (95,077 )
Purchase price $ 857,358

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets recognized. The goodwill recorded as part of the acquisition primarily reflects the value of the potential to expand presence in the deli channel and serve as the catalyst for uniting all of the Company's deli businesses into one customer-facing organization. The goodwill balance is not expected to be deductible for income tax purposes. The goodwill and intangible assets have been allocated to the Refrigerated Foods segment.

~~Operating results for this acquisition have been included in the Company’s~~ Consolidated Statements of Operations ~~from the date of acquisition~~ and are ~~reflected in~~reported within the ~~Refrigerated Foods segment.~~Grocery Products and International & Other segments (See Note N - Segment Reporting).

NOTE DC - INVENTORIES

Principal components of inventories are:

(in thousands) January 27,
2019 October 28,
2018
Finished products $ 551,487
$ 525,628
Raw materials and work-in-process 245,422
247,495
Operating supplies 134,912
126,644
Maintenance materials and parts 62,607
63,760
Total $ 994,428
$ 963,527



(in thousands)	January 26, 2020		October 27, 2019
Finished Products	$	628,124	$	604,035
Raw Materials and Work-in-Process	249,954		255,474
Operating Supplies	111,781		116,981
Maintenance Materials and Parts	67,419		65,872
Total	$	1,057,277	$	1,042,362

NOTE ED - GOODWILL AND INTANGIBLE ASSETS

Goodwill: The changes in the carrying amounts of goodwill for the three months ended January ~~27, 2019,~~26, 2020, are ~~presented in the table below. Beginning balances have been reclassified to conform to the current year presentation between segments. See Note N - Segment Reporting for additional information.~~as follows:

(in thousands)
Grocery
Products

Refrigerated
Foods
JOTS
International
& Other
Total
Reported balance at October 28, 2018 $ 882,582
$ 1,406,897
$ 203,214
$ 221,423
$ 2,714,116
Segment reclassification (25,209 ) 51,795
(26,586 ) —
—
Adjusted balance at October 28, 2018 857,373
1,458,692
176,628
221,423
2,714,116
Foreign currency translation —
—
—
2,634
2,634
Balance at January 27, 2019 $ 857,373
$ 1,458,692
$ 176,628
$ 224,057
$ 2,716,750



(in thousands)	Grocery Products		Refrigerated Foods		Jennie-O Turkey Store		International & Other		Total
Balance at October 27, 2019	$	632,301	$	1,458,692	$	176,628	$	214,024	$	2,481,645
Foreign Currency Translation	—		—		—		2,443		2,443
Balance at January 26, 2020	$	632,301	$	1,458,692	$	176,628	$	216,467	$	2,484,088

Intangible Assets: The carrying amounts for indefinite-lived intangible assets are ~~presented in the table below.~~as follows:

(in thousands) January 27,
2019 October 28,
2018
Brands/tradenames/trademarks $ 1,107,651
$ 1,108,122
Other intangibles 184
184
Foreign currency translation (2,937 ) (3,484 )
Total $ 1,104,898
$ 1,104,822



(in thousands)	January 26, 2020			October 27, 2019
Brands/Tradenames/Trademarks	$	953,190		$	959,400
Other Intangibles	184			184
Foreign Currency Translation	(3,393		)	(3,803		)
Total	$	949,981		$	955,781

The gross carrying amount and accumulated amortization for definite-lived intangible assets are ~~presented in the table below.~~as follows:

January 27, 2019 October 28, 2018
(in thousands)
Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization
Customer lists/relationships $ 137,039
$ (39,236 ) $ 137,039
$ (36,367 )
Other intangibles 6,626
(1,848 ) 6,155
(1,547 )
Foreign currency translation —
(2,488 ) —
(2,883 )
Total $ 143,665
$ (43,572 ) $ 143,194
$ (40,797 )



	January 26, 2020					October 27, 2019
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer Lists/Relationships	$	113,739	$	(39,057	)	$	113,739	$	(36,744	)
Tradenames/Trademarks	10,536		(1,911		)	4,326		(1,589		)
Other Intangibles	2,631		(1,324		)	2,631		(1,228		)
Foreign Currency Translation	—		(2,791		)	—		(3,054		)
Total	$	126,906	$	(45,083	)	$	120,696	$	(42,615	)

Amortization expense was ~~$3.2~~$2.7 million and ~~$3.3~~$3.2 million for the ~~quarters~~three months ended January ~~27, 2019~~26, 2020 and January ~~28, 2018,~~27, 2019, respectively.

Estimated annual amortization expense for the five fiscal years after October ~~28, 2018,~~27, 2019, is as follows:


(in millions)
2019	$12.7
(in thousands)
2020	12.7	$	11,700
2021	12.8	12,000
2022	12.5	11,644
2023	11.6	10,739
2024		8,921

NOTE FE - PENSION AND OTHER POST-RETIREMENT BENEFITS



	Post-retirement Benefits
	Three Months Ended
(in thousands)	January 26, 2020			January 27, 2019
Service Cost	$	195		$	174
Interest Cost	2,460			3,165
Amortization of Prior Service Cost	(663		)	(669		)
Recognized Actuarial Loss	275			—
Curtailment Loss (Gain)	—			(620		)
Net Periodic Cost	$	2,267		$	2,050

Non-service cost components of net pension and postretirement benefit cost are presented within ~~interest~~Interest and ~~investment income~~Investment Income on the Consolidated Statements of Operations.

Curtailments ~~were~~ recognized in the first quarter of fiscal 2019 were due to the sale of the Fremont, Nebraska, production facility.

NOTE GF - DERIVATIVES AND HEDGING

Cash Flow Hedges: The Company designates corn and lean hog futures and options used to offset price fluctuations in the Company’s future direct grain and hog purchases as cash flow hedges. Effective gains or losses related to these cash flow hedges are reported in ~~accumulated other comprehensive loss~~Accumulated Other Comprehensive Loss (AOCL) and reclassified into earnings, through ~~cost~~Cost of ~~products sold,~~Products Sold, in the period or periods in which the hedged transactions affect earnings. The Company typically does not hedge its grain exposure beyond the next two upcoming fiscal years and its hog exposure beyond the next fiscal year.

Fair Value Hedges: The Company designates the futures it uses to minimize the price risk assumed when fixed forward priced contracts are offered to the Company’s commodity suppliers as fair value hedges. The intent of the program is to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery. Changes in the fair value of the futures contracts, along with the gain or loss on the hedged purchase commitment, are marked-to-market through earnings and ~~are~~ recorded on the Consolidated Statements of Financial Position as a ~~current asset~~Current Asset and ~~liability,~~Liability, respectively. Effective gains or losses related to these fair value hedges are recognized through ~~cost~~Cost of ~~products sold~~Products Sold in the period or periods in which the hedged transactions affect earnings.

Other Derivatives: The Company holds certain futures and options contract positions as part of a merchandising program and to manage the Company’s exposure to fluctuations in commodity markets. The Company has not applied hedge accounting to these positions. Activity related to derivatives not designated as hedges is immaterial to the consolidated financial statements.



	Volume
Commodity Contracts	January ~~27, 2019~~26, 2020	October ~~28, 2018~~27, 2019
Corn	~~20.8~~25.3 million bushels	~~23.0~~30.4 million bushels
Lean ~~hogs~~Hogs	~~4.0~~182.0 million ~~cwt~~pounds	~~0.6~~187.3 million ~~cwt~~pounds

Fair Value of Derivatives: The fair values of the Company’s derivative instruments ~~(in thousands)~~ as of January ~~27, 2019,~~

Location on Consolidated Statements

of Financial Position

⁽¹⁾ Amounts represent the gross fair value of derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statements of Financial Position. See Note LK - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Fair Value Hedge - ~~Assets(Liabilities)~~Assets (Liabilities): The carrying amount of the Company's fair value hedge ~~liabilities (in thousands)~~assets (liabilities) as of January ~~27, 2019,~~26, 2020, and October ~~28, 2018,~~27, 2019, were as follows:


Location on Consolidated Statements of Financial Position	Carrying Amount of the Hedged Assets/(Liabilities)				Carrying Amount of the Hedged Assets/(Liabilities)
	January 27, 2019		October 28, 2018
(in thousands)					January 26, 2020			October 27, 2019
Accounts Payable	(1,362	)	(594	)	$	(2,347	)	$	(2,805	)

~~AOCL~~Accumulated Other Comprehensive Loss Impact: In fiscal 2019, the Company adopted the amended guidance of Topic 815. As a result, hedge ineffectiveness related to effective relationships is now deferred in AOCL until the hedged item impacts earnings. Prior to fiscal 2019, gains or losses on the derivative instrument in excess of the cumulative change in the cash flows of the hedged item, if any (i.e, the ineffective portion) were recognized in the Consolidated Statements of Operations during the current period. As of January ~~27, 2019,~~26, 2020, the Company has included in ~~AOCL,~~Accumulated Other Comprehensive Loss hedging losses of ~~$1.0~~$3.6 million, ~~(before tax)~~before tax, relating to its positions. The Company expects to recognize the majority of these ~~losses~~gains over the next 12twelve months.

AOCL into Earnings (1)

(Ineffective Portion)

AOCL into Earnings ⁽¹⁾

Excluded Component ⁽²⁾

~~(1)~~ ~~See Note I - Accumulated Other Comprehensive Loss for the after-tax impact of these gains or losses on net earnings.~~

~~(2)~~ ~~Loss recognized in AOCL for three month ended January 27, 2019, includes an immaterial adjustment due to early adoption of ASU 2017-12.~~

~~(3)~~ ~~Represents the time value amount of lean hog options excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in AOCL.~~



	Cost of Products Sold
	Three Months Ended
(in thousands)	January 26, 2020			January 27, 2019
Consolidated Statements of Operations	$	1,916,014		$	1,872,021

Cash Flow Hedges - Commodity Contracts
Gain (Loss) Reclassified from AOCL	(1,875		)	(1,243		)
Amortization of Excluded Component from Options	—			(1,358		)

Fair Value Hedges - Commodity Contracts
Gain (Loss) on Commodity Futures ⁽¹⁾	3,186			932
Total Gain (Loss) Recognized in Earnings	$	1,311		$	(1,669	)

Gain (loss) on commodity futures (1)

~~(1)Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the~~ quarter, which were offset by a corresponding gain on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity ~~contract,~~contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to-market through earnings with no impact on a net basis.

NOTE HG - INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

NOTE IH - ACCUMULATED OTHER COMPREHENSIVE LOSS

(in thousands)
Foreign
Currency
Translation

Pension &
Other
Benefits

Deferred
Gain (Loss) -
Hedging

Accumulated
Other
Comprehensive
Loss
Reported balance at October 28, 2018 $ (44,854 ) $ (197,613 ) $ (1,031 ) $ (243,498 )
Impact of adoption of ASU
ASU 2017-12 (21 ) (1) (21 )
ASU 2018-02 (53,778 ) (1) (53,778 )
Adjusted balance at October 28, 2018 (44,854 ) (251,391 ) (1,052 ) (297,297 )
Unrecognized gains (losses)
Gross 1,877
2,203
(1,509 ) 2,571
Tax effect

(533 ) 204
(329 )
Reclassification into net earnings
Gross

2,334
(2) 1,243
(3) 3,577
Tax effect

(565 ) (299 ) (864 )
Net of tax amount 1,877
3,439
(361 ) 4,955
Balance at January 27, 2019 $ (42,977 ) $ (247,952 ) $ (1,413 ) $ (292,342 )



(in thousands)	Foreign Currency Translation			Pension & Other Benefits				Deferred Gain (Loss) - Hedging				Accumulated Other Comprehensive Loss
Balance at October 27, 2019	$	(52,996	)	$	(348,877	)		$	2,373			$	(399,500	)
Unrecognized Gains (Losses)
Gross	7,812			(10		)		(8,626		)		(824		)
Tax Effect	—			—				2,105				2,105
Reclassification into Net Earnings
Gross	—			4,666			⁽¹⁾	1,875			⁽²⁾	6,541
Tax Effect	—			(1,143		)		(457		)		(1,600		)
Net of Tax Amount	7,812			3,513				(5,103		)		6,222
Balance at January 26, 2020	$	(45,184	)	$	(345,364	)		$	(2,730	)		$	(393,278	)

~~(1)~~ ~~Cumulative effect from the adoption of Accounting Standards Update. See Note A - General for additional details.~~

~~(2) Included in the computation of net periodic cost. See Note F - Pension and Other Post-Retirement Benefits for additional details.~~

~~(3)Included in cost of products sold in the Consolidated Statements of Operations.~~


⁽¹⁾	Included in the computation of net periodic cost. See Note E - Pension and Other Post-Retirement Benefits for additional details.


⁽²⁾	Included in Cost of Products Sold in the Consolidated Statements of Operations.

NOTE JI - INCOME TAXES

The Company's tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. The effects of tax legislation are recognized in the period in which the law is enacted. The deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years the related temporary differences are anticipated to reverse.

On December 22, 2017, the United States (U.S.) enacted comprehensive tax legislation into law, H.R. 1, commonly referred to as the Tax Act. Except for certain provisions, the Tax Act is effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer, the majority of the provisions, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income, and introducing new limitations on certain business deductions, ~~will now apply~~applied to the Company in fiscal 2019. ~~In addition, for~~For fiscal 2019 and ~~effective in the first quarter,~~future periods, the U.S. federal corporate income tax rate ~~was reduced from a blended rate of 23.4 percent for fiscal 2018, to~~is 21.0 ~~percent in fiscal 2019 and beyond.~~

The Company's effective tax rate for the first three months of fiscal 2019 was 21.3 percent compared to 0.6 percent for the respective period last year. The lower effective tax rate in the prior year is primarily related to deferred tax remeasurements in fiscal 2018 as a result of the Tax Act. The Company expects a full-year effective tax rate between 20.5 percent and 23.0 percent for fiscal 2019.percent.

In March 2018, the FASB issued ASU 2018-05, ~~which provides guidance for companies related~~Income Taxes: Amendments to ~~the Tax Act. ASU 2018-05 allows for~~SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (Topic 740), allowing a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts.Based on current interpretation of the Tax Act, the Company made reasonable estimates to record provisional adjustments during fiscal 2018, as described above. The Company continued to evaluate such amounts within the first quarter of fiscal 2019 and determined no adjustments were required within the remaining portion of the measurement period. As of January 27, 2019, the Company ~~has~~ completed the accounting for the tax effects of the Tax Act.

During fiscal 2018, the Company provisionally recorded the transition tax on its foreign earnings. Those foreign earnings have been deemed repatriated for U.S. federal tax purposes. The Company maintains all earnings are permanently reinvested. Accordingly, no additional income taxes have been provided for withholding tax, state tax, or other taxes.

The Company's effective tax rate for the first three months of fiscal 2020 was 16.3 percent compared to 21.3 percent for the respective period last year. The lower rate in the first three months of fiscal 2020 was impacted by a large volume of stock option exercises. The Company expects a full-year effective tax rate between 20.5 percent and 22.5 percent for fiscal 2020.

The amount of unrecognized tax benefits, including interest and penalties, is recorded in ~~other long-term liabilities.~~Other Long-term Liabilities. If recognized as of January 26, 2020, and January 27, 2019, ~~and January 28, 2018, $27.2~~$23.3 million and ~~$25.7~~$27.2 million, respectively, would impact the Company’s effective tax rate. The Company includes accrued interest and penalties related to uncertain tax positions in ~~income tax expense.~~Income Tax Expense. Interest and penalties included in ~~income tax expense~~Income Tax Expense was immaterial for the first three months of fiscal ~~2019~~2020 and fiscal ~~2018.~~2019. The amount of accrued interest and penalties at January ~~27, 2019,~~26, 2020, and January ~~28, 2018,~~27, 2019, associated with unrecognized tax benefits was $6.5 ~~million and $7.3 million, respectively.~~million.

The Company is regularly audited by federal and state taxing authorities. The United States Internal Revenue Service (I.R.S.) isconcluded its examination of fiscal 2017 in the ~~final stages~~second quarter of ~~examination with respect to~~ fiscal ~~2017.~~2019. The Company has elected to participate in the Compliance Assurance Process (CAP) for fiscal years 2018 through ~~2020.~~2021. The objective of CAP is to contemporaneously work with the I.R.S. to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company may elect to continue participating in CAP for future tax years. The Company may withdraw from the program at any time.

The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, ~~as far~~dating back asto 2011. While it is reasonably possible that one or more of these audits may be completed within the next 12 months and the related unrecognized tax benefits may change, based on the status of the examinations it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.

NOTE KJ - STOCK-BASED COMPENSATION

The Company issues stock options, restricted stock units, and restricted shares as part of its stock incentive plans for employees and non-employee directors. During the three months ended January 26, 2020, stock-based compensation expense was $9.3 million, compared to $7.9 million for the three months ended January 27, 2019. The Company recognizes stock-based compensation expense ratably over the shorter of the vesting period or the individual's retirement eligibility date. The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.

At January 26, 2020, there was $32.5 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans. This compensation is expected to be recognized over a weighted-average period of approximately 2.6 years. During the three months ended January 26, 2020, cash received from stock option exercises was $36.4 million, compared to $16.0 million for the three months ended January 27, 2019.

Shares issued for option exercises, restricted stock units, and restricted shares may be either authorized but unissued shares or shares of treasury stock.

Stock Options: The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. Options typically vest over four years and expire ten years after the date of the grant. ~~The~~

Effective with fiscal 2020 grants, the Company ~~recognizes stock-based compensation expense ratably over~~has determined the ~~shorter of the requisite service period or vesting period. The fair~~equity award value ~~of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.~~for eligible employees will be delivered 50 percent in stock options as described above and 50 percent in time-vested restricted stock units with a three-year cliff vesting.

During the third quarter of fiscal 2018, the Company made a one-time grant of 200 stock options to each active, full-time employee and 100 stock options to each active, part-time employee of the Company on April 30, 2018. The options vest in five years and expire ten years after the grant date.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of January ~~27, 2019, and changes during the three months then ended,~~26, 2020 is as follows:


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value		Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at October 28, 2018	29,536	$	23.55
Outstanding at October 27, 2019							25,994	$	26.49
Granted	1,474	44.91					1,004	45.54
Exercised	1,097	14.60					3,059	13.87
Forfeited	383	36.17					65	36.56
Outstanding at January 27, 2019	29,530	$	24.78	5.4	$	497,495
Exercisable at January 27, 2019	21,031	$	19.69	4.0	$	457,942
Outstanding at January 26, 2020							23,874	28.88		5.6	$	438,098
Exercisable at January 26, 2020							16,670	$	24.51	4.3	$	378,778

Three Months Ended
January 27,
2019 January 28,
2018
Weighted-average grant date fair value $ 9.48
$ 6.93
Intrinsic value of exercised options $ 32,241
$ 56,302



	Three Months Ended
	January 26, 2020		January 27, 2019
Weighted-average Grant Date Fair Value	$	7.67	$	9.48
Intrinsic Value of Exercised Options	97,946		32,241

Three Months Ended
January 27,
2019 January 28,
2018
Risk-free interest rate 2.9 % 2.3 %
Dividend yield 1.9 % 2.0 %
Stock price volatility 19.0 % 19.0 %
Expected option life 8 years
8 years



	Three Months Ended
	January 26, 2020		January 27, 2019
Risk-free Interest Rate	1.7	%	2.9	%
Dividend Yield	2.0	%	1.9	%
Stock Price Volatility	19.0	%	19.0	%
Expected Option Life	8 years		8 years

Restricted Stock Units: Restricted stock units are valued equal to the market price of the common stock on the date of grant and ~~non-employee director groups.~~vest after three years. These awards accumulate dividend equivalents, which are provided as additional units and are subject to the same vesting requirements as the underlying grant.



	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Restricted Units at October 27, 2019	—	$	—
Granted	169	45.54
Restricted Units at January 26, 2020	169	$	45.54	2.9	$	7,980



	Three Months Ended
	January 26, 2020		January 27, 2019
Weighted-average Grant Date Fair Value	$	45.54	$	—
Fair Value of Restricted Stock Units Granted	7,695		—

Restricted Shares: Restricted shares awarded to non-employee directors annually on February 1 are subject to a restricted period which expires the date of the Company’s next annual stockholders meeting. Newly elected directors receive a prorated award of restricted shares of the Company's common stock, which ~~expire~~expires on the date of the Company's second succeeding annual stockholders meeting. A reconciliation of the restricted shares (in thousands) as of January ~~27, 2019, and changes during the three months then ended,~~26, 2020 is as follows:

Shares
Weighted-
Average Grant
Date Fair Value
Restricted at October 28, 2018 52
$ 34.08
Granted 1
45.36
Restricted at January 27, 2019 53
$ 34.33

Three Months Ended
January 27,
2019 January 28,
2018
Weighted-average grant date fair value $ 34.33
$ 35.62
Fair value of restricted shares granted 53
—
Fair value of shares vested —
133



	Three Months Ended
	January 26, 2020		January 27, 2019
Weighted-average Grant Date Fair Value	$	42.76	$	34.33
Fair Value of Restricted Shares Granted	53		53

NOTE LK - FAIR VALUE MEASUREMENTS

Pursuant to the provisions of ASC 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. The Company classifies assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement. The three levels are defined as follows:

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

Cash and cash equivalents (1)

Other trading securities (2)

Commodity derivatives (3)

Cash and Cash Equivalents ⁽¹⁾

Short-term Marketable Securities ⁽²⁾

Other Trading Securities ⁽³⁾

Commodity Derivatives ⁽⁴⁾

Deferred compensation (2)

Deferred Compensation ⁽³⁾

Cash and cash equivalents (1)

Other trading securities (2)

Commodity derivatives (3)

Cash and Cash Equivalents ⁽¹⁾

Short-term Marketable Securities ⁽²⁾

Other Trading Securities ⁽³⁾

Commodity Derivatives ⁽⁴⁾

Deferred compensation (2)

Deferred Compensation ⁽³⁾

by the rabbi trust. These balances are classified as Level 2. The Company also offers a fixed rate investment option to participants. The rate earned on these investments is adjusted annually based on a specified percentage of the I.R.S. applicable federal rates. These balances are classified as Level 2. Securities held by the trust are classified as trading securities. Therefore, unrealized gains and losses associated with these investments are included in the Company's earnings. Securities held by the trust generated gains of $5.2 million for the three months ended January 26, 2020, compared to gains of $1.4 million for the three months ended January 27, 2019.

The Company has operating leases for manufacturing facilities, office space, warehouses, transportation equipment, and miscellaneous real estate and equipment contracts. Finance leases primarily include turkey growing facilities and an aircraft. The Company's lessor portfolio consists primarily of immaterial operating leases of farm land to third parties.

The Company determines if an arrangement contains a lease at inception. Right-of-use assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. Leases with an initial term of twelve months or less are not recorded on the Consolidated Statements of Financial Position. The Company combines lease and non-lease components together in determining the minimum lease payments for all leases.

The length of the lease term used in recording right-of-use assets and lease liabilities is based on the contractually required lease term adjusted for any options to renew, early terminate, or purchase the lease that are reasonably certain of being exercised. Most leases include 1 or more options to renew or terminate. The exercise of lease renewal and termination options is at the Company’s discretion and generally is not reasonably certain at lease commencement. The Company’s lease agreements typically do not contain material residual value guarantees. The Company has 1 lease with an immaterial residual value guarantee that is included in the minimum lease payments.

Certain lease agreements include rental payment increases over the lease term that can be fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index or rate are recognized as incurred.

If the rate implicit in the lease is not readily determinable, the Company used its periodic incremental borrowing rate, based on the information available at commencement date, to determine the present value of future lease payments. For the initial implementation of ASU 2016-02, Leases (Topic 842) the incremental borrowing rate on October 28, 2019, was used to determine the present value of existing operating right-of-use assets and lease liabilities.

Supplemental balance sheet information related to leases as of January 26, 2020, are as follows:



(in thousands)	Location on Consolidated Statements of Financial Position	January 26, 2020
Right-of-Use Assets
Operating	Other Assets	$	60,226
Finance	Net Property, Plant and Equipment	67,126
Total Right-of-Use Assets		$	127,352
Liabilities
Current
Operating	Accrued Expenses	$	13,728
Finance	Current Maturities of Long-Term Debt	8,259
Noncurrent
Operating	Other Long-Term Liabilities	48,561
Finance	Long-Term Debt - Less Current Maturities	58,972
Total Lease Liabilities		$	129,520

Lease expenses for the three months ended January 26, 2020, are as follows:



(in thousands)	January 26, 2020
Operating Lease Cost ⁽¹⁾	$	5,124
Finance Lease Cost
Amortization of Right-of-Use Assets	1,999
Interest on Lease Liabilities	605
Variable Lease Cost ⁽²⁾	102,668
Net Lease Cost	$	110,396

The weighted-average remaining lease term and discount rate for lease liabilities included in the Consolidated Statements of Financial Position as of January 26, 2020, are as follows:



	January 26, 2020
Weighted Average Remaining Lease Term
Operating Leases	7.57 years
Finance Leases	8.83 years
Weighted Average Discount Rate
Operating Leases	2.30	%
Finance Leases	3.58	%

Supplemental cash flow and other information related to leases for the three months ended January 26, 2020, are as follows:



(in thousands)	January 26, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Operating Leases	$	3,057
Operating Cash Flows from Finance Leases	605
Financing Cash Flows from Finance Leases	2,019

The maturity of the Company's lease liabilities as of January 26, 2020, are as follows:



(in thousands)	Operating Leases ⁽¹⁾		Finance Leases ⁽²⁾		Total
2020 (nine months remaining)	$	11,691	$	7,891	$	19,582
2021	11,653		10,338		21,991
2022	9,139		9,934		19,072
2023	8,157		9,738		17,895
2024	5,730		9,612		15,341
2025	3,396		8,117		11,513
2026 and beyond	18,644		21,192		39,836
Total Lease Payments	$	68,410	$	76,821	$	145,231
Less: Imputed Interest	6,120		9,591		15,711
Present Value of Lease Liabilities	$	62,290	$	67,230	$	129,520

NOTE M - EARNINGS PER SHARE DATA

NOTE N - SEGMENT REPORTING


	Three Months Ended						Three Months Ended
(in thousands)	January 27, 2019			January 28, 2018			January 26, 2020			January 27, 2019
Sales to Unaffiliated Customers
Grocery Products	$	606,825		$	603,577		$	540,626		$	606,825
Refrigerated Foods	1,278,747			1,254,637			1,351,790			1,278,747
Jennie-O Turkey Store	321,234			322,760			330,128			321,234
International & Other	153,549			150,319			161,890			153,549
Total	$	2,360,355		$	2,331,293		$	2,384,434		$	2,360,355

Intersegment Sales
Grocery Products	$	22		$	4		$	7		$	22
Refrigerated Foods	2,178			2,164			5,803			2,178
Jennie-O Turkey Store	28,811			24,689			27,842			28,811
International & Other	—			—			—			—
Total	31,011			26,857			33,652			31,011
Intersegment elimination	(31,011		)	(26,857		)
Intersegment Elimination							(33,652		)	(31,011		)
Total	$	—		$	—		$	—		$	—

Net Sales
Grocery Products	$	606,847		$	603,581		$	540,633		$	606,847
Refrigerated Foods	1,280,925			1,256,801			1,357,593			1,280,925
Jennie-O Turkey Store	350,045			347,449			357,970			350,045
International & Other	153,549			150,319			161,890			153,549
Intersegment elimination	(31,011		)	(26,857		)
Intersegment Elimination							(33,652		)	(31,011		)
Total	$	2,360,355		$	2,331,293		$	2,384,434		$	2,360,355

Segment Profit
Grocery Products	$	95,297		$	97,545		$	68,435		$	95,297
Refrigerated Foods	162,593			157,531			167,343			162,593
Jennie-O Turkey Store	37,904			37,724			38,551			37,904
International & Other	24,978			24,655			19,952			24,978
Total segment profit	320,772			317,455
Net unallocated expense	13,891			12,394
Noncontrolling interest	94			104
Total Segment Profit							294,280			320,772
Net Unallocated Expense							4,199			13,891
Noncontrolling Interest							81			94
Earnings Before Income Taxes	$	306,975		$	305,165		$	290,162		$	306,975

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~~flows. The amount of total revenues contributed by sales channel for the first three months of fiscal 2020 and 2019 ~~and 2018.~~are as follows:


	Three Months Ended				Three Months Ended
(in thousands)	January 27, 2019		January 28, 2018		January 26, 2020		January 27, 2019
U.S. Retail	$	1,253,315	$	1,299,672	$	1,226,430	$	1,253,315
U.S. Foodservice	689,905		657,103		709,106		689,905
U.S. Deli	251,276		210,997		260,638		251,276
International	165,859		163,521		188,260		165,859
Total	$	2,360,355	$	2,331,293	$	2,384,434	$	2,360,355



	Three Months Ended
(in thousands)	January 26, 2020		January 27, 2019
Perishable	$	1,400,195	$	1,341,152
Poultry	459,083		441,392
Shelf-stable	450,704		436,897
Miscellaneous	74,452		140,914
Total	$	2,384,434	$	2,360,355

Perishable includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding ~~JOTS~~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,

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

CytoSport on April 15, 2019.

NOTE O - SUBSEQUENT EVENTS

Item 2. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

RESULTS OF OPERATIONS

Consolidated Results

Volume, Net Sales, Earnings, and Diluted Earnings per Share

Organic Volume ⁽¹⁾

Organic Net Sales ⁽¹⁾

⁽¹⁾The non-GAAP adjusted financial measurements are presented to provide investors additional information to facilitate the comparison of past and present operations. The Company believes these non-GAAP financial measurements provide useful information to investors because they are measurements used to evaluate performance on a comparable year-over-year basis. These non-GAAP measurements are not in accordance with accounting principles generally accepted in the United States (GAAP) nor intended to be a substitute for GAAP measurements in analyzing financial performance. These non-GAAP measurements may be different from measures used by other companies.

Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the CytoSport divestiture (April 2019) in the Grocery Products and International & Other segments. The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures in the first quarter of fiscal 2019.



Reconciliation of Non-GAAP Measures

	First Quarter
	Fiscal 2020		Fiscal 2019
(in thousands)	Reported GAAP		Reported GAAP		Divestitures			Organic (Non-GAAP)		Organic % Change
Volume (lbs.)
Grocery Products	292,919		338,743		(34,807		)	303,936		(3.6	)
Refrigerated Foods	605,608		589,356		—			589,356		2.8
Jennie-O Turkey Store	197,200		182,159		—			182,159		8.3
International & Other	91,260		86,635		(1,027		)	85,608		6.6
Total Volume	1,186,987		1,196,893		(35,834		)	1,161,059		2.2

Net Sales
Grocery Products	$	540,626	$	606,825	$	(63,172	)	$	543,653	(0.6	)
Refrigerated Foods	1,351,790		1,278,747		—			1,278,747		5.7
Jennie-O Turkey Store	330,128		321,234		—			321,234		2.8
International & Other	161,890		153,549		(1,982		)	151,567		6.8
Total Net Sales	$	2,384,434	$	2,360,355	$	(65,154	)	$	2,295,201	3.9

Cost of Products Sold

Gross profit as a percentage of net sales declined for the first quarter. Higher pork and beef raw material costs impacted the Refrigerated Foods, Grocery Products, and International & Other ~~increased marginally in~~segments. Grocery Products was further impacted by a weaker sales mix due to the divestiture of CytoSport and lower Skippy^® peanut butter pricing. International & Other saw pork costs for its multinational and affiliated businesses increase significantly over the first quarter of fiscal 2019 ~~while Refrigerated Foods and JOTS declined slightly compared~~due to the prior year. Grocery Products was flat. Lower raw material costs in China positively impacted International & Other margins during the quarter. Margins in Refrigerated Foods were negatively impactedsupply shortages caused by ~~lower commodity profits driven by higher grain-based hog contract costs. JOTS~~African swine fever. Jennie-O Turkey Store declined on lower retail ~~sales of lean ground turkey.~~and foodservice sales.

Looking ahead to the second quarter of fiscal 2020, the Company expects the ~~foodservice and deli~~value-added businesses in Refrigerated Foods and ~~favorable input costs in China~~continued improvement at Jennie-O Turkey Store to help offset declines in the International & Other and Grocery Products segments. The divestiture of the CytoSport business and lower ~~lean ground turkey sales at JOTS and~~Skippy^® peanut butter pricing will continue to impact Grocery Products in the ~~impact of significantly weaker pork export margins.~~second quarter.

Selling, General and Administrative (SG&A)

Equity in Earnings of Affiliates

The ~~increase in the~~ effective tax rate ~~for~~in fiscal 2020 was impacted by a large volume of stock option exercises during the first ~~quarter of fiscal 2019 was primarily due to deferred tax remeasurements in fiscal 2018 as a result of the Tax Act.~~quarter. The Company still expects a full-year effective tax rate between 20.5 and ~~23.0~~22.5 percent for fiscal ~~2019.~~2020. For further information, refer to Note JI - Income Taxes.

Net sales for the first quarter of fiscal ~~2019 increased on growth from~~2020 decreased due to the CytoSport divestiture and lower ~~Herdez~~Skippy^® ~~salsas and sauces,~~ ~~Wholly Guacamole~~^® ~~dips,~~ ~~Muscle Milk~~^® ~~protein products, and~~peanut butter sales. These declines more than offset growth from the SPAM^® family of ~~products. These sales increases were partially offset by declines in contract manufacturing.~~products, Justin's^® branded items, Wholly^® guacamole dips, and Herdez^® salsas and sauces.

The Company anticipates lower volume and sales ~~growth~~ in the second quarter ~~led by~~due to the ~~branded center store~~divestiture of CytoSport and ~~Mexican foods portfolios. Growth in the branded center store portfolio~~lower prices on Skippy^® peanut butter products. Segment profit is also expected to ~~be offset by lower margins in contract manufacturing and lower equity in earnings.~~decline, primarily due to the impact from the divestiture of CytoSport.

First quarter volume and net sales increases were led by ~~the new Hormel Deli Solutions division with~~ strong ~~gains coming from~~demand for value-added products and higher commodity sales. Branded sales growth was led by ~~Columbus~~Hormel^® ~~branded items and~~ ~~Jennie-O~~Black Label^® ~~premium deli meats. Foodservice sales of~~ ~~Old Smokehouse~~^®bacon and Hormel^®~~Fire Braised~~^TM ~~products and retail sales of~~ ~~Hormel® pepperoni,~~ ~~Hormel~~® ~~Natural Choice~~Cure 81^® ham in retail, Hormel^® pizza toppings andFontanini^® items in foodservice, and Hormel^® Gatherings^® party trays in deli. Applegate^® ~~products~~branded items in retail and foodservice also ~~showed excellent~~contributed to sales growth.

Jennie-O Turkey Store

International & Other

Unallocated Income and Expenses

Related Party Transactions

LIQUIDITY AND CAPITAL RESOURCES

Contractual Obligations and Commercial Commitments

The Company records income taxes in accordance with the provisions of ASC 740, Income Taxes. The Company is unable to determine its contractual obligations by year related to this pronouncement, as the ultimate amount or timing of settlement of its reserves for income taxes cannot be reasonably estimated. The total liability for unrecognized tax benefits, including interest and penalties, at January ~~27, 2019,~~26, 2020, was ~~$27.2~~$23.3 million.

Off-Balance Sheet Arrangements

FORWARD-LOOKING STATEMENTS

Item 3. ~~Quantitative and Qualitative Disclosures About Market Risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Hog Markets: The Company’s earnings are affected by fluctuations in the live hog market. To minimize the impact on earnings, and to ensure a steady supply of quality hogs, the Company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to 10 years. Hogs purchased under contract accounted for 9693 percent and 9596 percent of the total hogs purchased by the Company during the first three months of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively. The majority of these contracts use market-based formulas based on hog futures, hog primal values, or industry reported hog markets. Other contracts use a formula based on the cost of production, which can fluctuate independently from hog markets. The Company’s value-added branded portfolio helps mitigate changes in hog and pork market prices. Therefore, a hypothetical 10 percent change in the cash hog market would have had an immaterial effect on the Company’s results of operations.

Turkey Production Costs: The Company raises or contracts for live turkeys to meet the majority of its raw material supply requirements. Production costs in raising turkeys are subject primarily to fluctuations in feed prices, and to a lesser extent, fuel costs. Under normal, long-term market conditions, changes in the cost to produce turkeys are offset by proportional changes in the turkey market.

Other Input Costs: The costs of raw materials, packaging materials, freight, fuel, and energy may cause the Company's results to fluctuate significantly. To manage input cost volatility, the Company pursues cost saving measures, forward pricing, derivatives, and pricing actions when necessary.

Investments: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of January ~~27, 2019,~~26, 2020, the balance of these securities totaled ~~$146.9~~$170.3 million compared to ~~$137.3~~$157.5 million as of October ~~28, 2018.~~27, 2019. A majority of these securities represent fixed income funds. The Company is subject to market risk due to fluctuations in the value of the remaining investments, as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis. A 10 percent decline in the value of the investments not held in fixed income funds would have a negative impact to the Company’s pretax earnings of approximately ~~$6.1~~$8.2 million, while a 10 percent increase in value would have a positive impact of the same amount.

International Assets: The fair values of certain Company assets are subject to fluctuations in foreign currencies. The Company's net asset position in foreign currencies as of January ~~27, 2019~~26, 2020 was ~~$530.6~~$566.8 million, compared to ~~$687.7~~$543.8 million as of October ~~28, 2018,~~27, 2019, with most of the exposure existing in Chinese yuan and Brazilian real. Changes in currency exchange rates impact the fair values of the Company assets either currently through the Consolidated Statements of Operations ~~as currency gains/losses~~within Interest and Investment Income or through the Consolidated Statements of Financial Position within ~~other comprehensive loss.~~Accumulated Other Comprehensive Loss.

Item 4. ~~Controls and Procedures~~CONTROLS AND PROCEDURES

disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information the Company is required to disclose in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. ~~Legal Proceedings~~LEGAL PROCEEDINGS

Item 1A. ~~Risk Factors~~RISK FACTORS

The Company’s operations are subject to the general risks of the food industry.

The food products manufacturing industry is subject to the risks posed by:

food contamination caused by disease-producing organisms or pathogens, such as Listeria monocytogenes, Salmonella, and pathogenic EE. coli.;

The pathogens ~~which~~that may cause food contamination are found generally in livestock and in the environment and thus may be present in our products. These pathogens also can be introduced to our products as a result of improper handling by customers or consumers. We do not have control over handling procedures once our products have been shipped for distribution. If one or more of these risks were to materialize, the Company’s brand and business reputation could be negatively impacted. In addition, revenues could decrease, costs of doing business could increase, and the Company’s operating results could be adversely affected.

Deterioration of economic conditions could harm the Company’s business.

The Company's business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital, energy availability and costs (including fuel surcharges), and the effects of governmental

initiatives to manage economic conditions. Decreases in consumer spending rates and shifts in consumer product preferences could also negatively impact the Company.

Volatility in financial markets and the deterioration of national and global economic conditions could impact the Company’s operations as follows:

The Company utilizes hedging programs to manage its exposure to various commodity market risks, which qualify for hedge accounting for financial reporting purposes. Volatile fluctuations in market conditions could cause these instruments to become ineffective, which could require any gains or losses associated with these instruments to be reported in the Company’s earnings each period. These instruments may limit the Company’s ability to benefit from market gains if commodity prices become more favorable than those secured under the Company’s hedging programs.

Additionally, if a highly pathogenic human disease outbreak developed in the United States or internationally, it may negatively impact the national or global economy, demand for Company products, supplies to the Company, the Company's production processes, and/or the Company’s workforce availability, and the Company’s financial results could suffer. Most recently, the Company is monitoring the coronavirus outbreak and its impact on China operations. The Company has developed contingency

plans to address infectious disease scenarios and the potential impact on its operations, and will continue to update these plans as necessary. There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

Outbreaks of disease among livestock and poultry flocks could harm the Company’s revenues and operating margins.

The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including African swine fever (ASF), Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of such diseases could adversely affect the Company’s supply of raw materials, increase the cost of production, reduce utilization of the Company’s harvest facilities, and reduce operating margins. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally.

According to the Ministry of Agriculture and Rural Affairs of the People's Republic of China, as of November 2019, the outbreak of ASF in China has eliminated over 40 percent of the country's hog herd compared to the prior year. The disease has also spread to additional countries in Asia and Europe. If an outbreak of ASF were to occur in the United States, the Company's supply of hogs and pork could be materially impacted.

The Company has developed business continuity plans for various disease scenarios and will continue to update these plans as necessary. There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

Fluctuations in commodity prices and availability of pork, poultry, beef, feed grains, avocados, peanuts, energy, and whey could harm the Company’s earnings.

The Company’s results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, beef, feed grains, avocados, peanuts, and whey as well as energy costs and the selling prices for many of our products, which are determined by constantly changing market forces of supply and demand.

The live hog industry has evolved to large, vertically-integrated operations using long-term supply agreements. This has resulted in fewer hogs being available on the cash spot market. Consequently, the Company uses long-term supply contracts based on market-based formulas or the cost of production to ensure a stable supply of raw materials while minimizing extreme fluctuations in costs over the long-term. This may result, in the short-term, in higher live hog costs compared to the cash spot market depending on the relationship of the cash spot market to contract prices. Market-based pricing on certain product lines, and lead time required to implement pricing adjustments, may prevent all or part of these cost increases from being recovered, and these higher costs could adversely affect our short-term financial results.

~~JOTS~~Jennie-O Turkey Store raises turkeys and contracts with turkey growers to meet its raw material requirements for whole birds and processed turkey products. Results in these operations are affected by the cost and supply of feed grains, which fluctuate due to climate conditions, production forecasts, and supply and demand conditions at local, regional, national, and worldwide ~~levels.~~markets. The Company attempts to manage some of its short-term exposure to fluctuations in feed prices by forward buying, using futures contracts, and pursuing pricing advances. However, these strategies may not be adequate to overcome sustained increases in market prices due to alternate uses for feed grains or other changes in these market conditions.

The ~~supply~~supplies of natural and organic proteins may impact the Company’s ability to ensure a continuing supply of these products. To mitigate this risk, the Company ~~enters into long-term agreements~~partners with multiple long-term suppliers.

International trade barriers and other restrictions could result in less foreign demand and increased domestic supply of proteins, thereby potentially lowering prices. The Company occasionally utilizes in-country production to limit this exposure.

~~Outbreaks of disease among livestock and poultry flocks could harm the Company’s revenues and operating margins.~~

The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including African Swine Fever (ASF), Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of disease could adversely affect the Company’s supply of raw materials, increase the cost of production, reduce utilization of the Company’s harvest facilities, and reduce

operating margins. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally. The Company has developed business continuity plans for various disease scenarios and will continue to update these plans as necessary. There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

Market demand for the Company’s products may fluctuate.

The Company faces competition from other producers of ~~alternative meats and protein sources, including~~proteins such as pork, beef, turkey, chicken, and fish, as well as providers of alternative proteins such as nut butters, whey, and ~~whey.~~plant-based proteins. The ~~bases~~factors on which the Company competes include:

Demand for the Company’s products is also affected by competitors’ promotional spending, the effectiveness of the Company’s advertising and marketing programs, and consumer perceptions. Failure to identify and react to changes in food trends such as

sustainability of product sources and animal welfare could lead to, among other things, reduced demand for the Company’s brands and products. The Company may be unable to compete successfully on any or all of these ~~bases~~factors in the future.

The Company’s operations are subject to the general risks associated with acquisitions and divestitures.

The Company has made several acquisitions and divestitures in recent years, most recently the acquisition of Sadler's Smokehouse, that align with the Company’s strategic initiative ~~of delivering~~to deliver long-term value to shareholders. The Company regularly reviews strategic opportunities to grow through acquisitions and to divest non-strategic assets. Potential risks associated with these transactions include ~~the~~ the inability to consummate a transaction on favorable terms, the diversion of management's attention from other business concerns, the potential loss of key employees and customers of current or acquired companies, the inability to integrate or divest operations successfully, the possible assumption of unknown liabilities, potential disputes with buyers or sellers, potential impairment charges if purchase assumptions are not achieved or market conditions decline, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience. Any or all of these risks could impact the Company’s financial results and business reputation. In addition, acquisitions outside the United States may present unique challenges and increase the Company's exposure to the risks associated with foreign operations.

The Company’s operations are subject to the general risks of litigation.

The Company is involved on an ongoing basis in litigation arising in the ordinary course of business. Trends in litigation may include class actions involving employees, consumers, competitors, suppliers, shareholders, or injured persons, and claims relating to product liability, contract disputes, intellectual property, advertising, labeling, wage and hour laws, employment practices, or environmental matters. Litigation trends and the outcome of litigation cannot be predicted with certainty and adverse litigation trends and outcomes could ~~adversely~~negatively affect the Company’s financial results.

The Company is subject to the loss of a material contract.

The Company is a party to several supply, distribution, contract packaging, and other material contracts. The loss of a material contract could adversely affect the Company’s financial results.

Government regulation, present and future, exposes the Company to potential sanctions and compliance costs that could adversely affect the Company’s business.

The Company’s operations are subject to extensive regulation by the U.S. Department of Homeland Security, the U.S. Department of Agriculture, the U.S. Food and Drug Administration, federal and state taxing authorities, and other federal, state, and local authorities who oversee workforce immigration laws, laws regulating the protection of personal information, cyber-security regulations, tax regulations, animal welfare, food safety standards, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company’s

manufacturing facilities and products are subject to continuous inspection by federal, state, and local authorities. Claims or enforcement proceedings could be brought against the Company in the future. The availability of government inspectors due to a government furlough could also cause disruption to the Company’s manufacturing facilities. Additionally, the Company is subject to new or modified laws, regulations, and accounting standards. The Company’s failure or inability to comply with such requirements could subject the Company to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions.

The Company is subject to stringent environmental regulation and potentially subject to environmental litigation, proceedings, and investigations.

The Company’s past and present business operations and ownership and operation of real property are subject to stringent federal, state, and local environmental laws and regulations pertaining to the discharge of materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. Compliance with these laws and regulations, ~~and the ability to comply with~~as well as any modifications, ~~to these laws and regulations,~~ is material to the Company’s business. ~~New matters or sites may be identified in the future requiring additional investigation, assessment, or expenditures. In addition, some~~Some of the Company’s facilities have been in operation for many years and, over time, the Company and other prior operators of these facilities may have generated and disposed of wastes that now may be considered hazardous. Future discovery of contamination of property underlying or in the vicinity of the Company’s present or former properties or manufacturing facilities and/or waste disposal sites could require the Company to incur additional ~~expenses.~~expenses related to additional investigation, assessment or other requirements. The occurrence of any of these events, the implementation of new laws and regulations, or ~~stricter~~updated interpretation of existing laws or regulations could adversely affect the Company’s financial results.

The Company’s foreign operations pose additional risks to the Company’s business.

The Company operates its business and markets its products internationally. The Company’s foreign operations are subject to the risks described above, as well as risks related to fluctuations in currency values, foreign currency exchange controls, compliance with foreign laws, compliance with applicable U.S. laws, including the Foreign Corrupt Practices Act, and other economic or political uncertainties. International sales are subject to risks related to general economic conditions, imposition of tariffs, quotas, trade barriers and other restrictions, enforcement of remedies in foreign jurisdictions and compliance with applicable foreign laws, and other economic and political uncertainties. All of these risks could result in increased costs or decreased revenues, which could adversely affect the Company’s financial results.

The Company may be adversely impacted if the Company is unable to protect information technology systems against, or effectively respond to, cyber-attacks or security ~~breaches, interruptions or other failures.~~breaches.

Information technology systems are an important part of the Company’s business operations. Attempted cyber-attack and other cyber incidents are occurring more frequently and are being made by groups and individuals with a wide range of motives and expertise.

In addition, the Company is in the ~~initial planning stage for~~midst of a ~~process~~multi-year transformation project (Project Orion) to achieve better analytics, customer service, and process efficiencies through the use of Oracle Cloud Solutions. This project is expected to improve the efficiency and effectiveness of certain financial and business transaction processes and the underlying systems environment. ~~Implementation is~~The Company implemented human resources and payroll functionality in December 2019. Additional integrations are expected to ~~occur in phases~~take place throughout fiscal 2020 and over the next ~~several~~few years. Such an implementation is a major undertaking from a financial, management, and personnel perspective. The implementation of the enterprise resource planning system may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated.

In an attempt to mitigate these risks, the Company has implemented and continues to evaluate security initiatives and business continuity plans.

Deterioration of labor relations or increases in labor costs could harm the Company’s business.

As of January ~~27, 2019,~~26, 2020, the Company had approximately 18,700 employees worldwide, of which approximately ~~3,210~~3,220 were represented by labor unions, principally the United Food and Commercial Workers Union. A significant increase in labor costs or a deterioration of labor relations at any of the Company’s facilities or contracted hog processing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results. Union contracts at the Company's facilities in Algona, Iowa; Atlanta, Georgia; Austin, Minnesota; and Beloit, Wisconsin will expire during fiscal 2019, covering approximately 2,300 employees. Negotiations have not yet been initiated.

Item 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

October 29, 2018 –

December 3, 2018 –

December 31, 2018 –

¹fiscal 2020. The maximum number of shares that may yet be purchased under the plans or programs as of January 26, 2020 is 4,758,235. On January ~~31,~~29, 2013, the ~~Company announced its~~Company's Board of Directors ~~had~~ authorized the repurchase of 10,000,000 shares

of its common stock with no expiration date. ~~The repurchase program was authorized at a meeting of the Company’s Board of Directors on~~On January ~~29, 2013. On November 23, 2015,~~26, 2016, the Board of Directors ~~authorized~~approved a two-for-one split of the Company’s common ~~stock.~~stock to be effective January 27, 2016. As part of the ~~resolution to approve the~~ stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately. The stock split was subsequently approved by stockholders at the Company’s Annual Meeting on January 26, 2016, and effected January 27, 2016. All numbers in the table above reflect the impact of this stock split.proportionately



	Pension Benefits
	Three Months Ended
(in thousands)	January 26, 2020			January 27, 2019
Service Cost	$	8,896		$	6,510
Interest Cost	13,410			15,097
Expected Return on Plan Assets	(25,321		)	(23,125		)
Amortization of Prior Service Cost	(542		)	(698		)
Recognized Actuarial Loss	5,596			3,701
Curtailment Loss (Gain)	—			2,825
Net Periodic Cost	$	2,039		$	4,310


(in thousands)	Segment	% Owned	January 27, 2019		October 28, 2018		Segment	% Owned	January 26, 2020		October 27, 2019
MegaMex Foods, LLC	Grocery Products	50%	$	207,589	$	205,148	Grocery Products	50%	$	211,535	$	218,592
Foreign Joint Ventures	International & Other	Various (26-40%)	70,248		68,005
Other Joint Ventures							International & Other	Various (20-40%)	79,242		70,565
Total			$	277,837	$	273,153			$	290,777	$	289,157



	Three Months Ended
	January 27, 2019			January 28, 2018 *
Net sales	$	2,360,355		$	2,331,293
Cost of products sold	1,872,021			1,832,997
GROSS PROFIT	488,334			498,296

Selling, general and administrative	193,544			219,872
Equity in earnings of affiliates	11,458			23,531

OPERATING INCOME	306,248			301,955

Other income and expense:
Interest and investment income	6,874			7,939
Interest expense	(6,147		)	(4,729		)

EARNINGS BEFORE INCOME TAXES	306,975			305,165

Provision for income taxes	65,456			1,954

NET EARNINGS	241,519			303,211
Less: Net earnings attributable to noncontrolling interest	94			104
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION	$	241,425		$	303,107

NET EARNINGS PER SHARE:
BASIC	$	0.45		$	0.57
DILUTED	$	0.44		$	0.56

WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC	534,495			529,453
DILUTED	547,118			543,482




	Three Months Ended January 28, 2018

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 29, 2017	528,424		$	7,741		—		$	—		$	13,670		$	5,162,571		$	(248,075	)	$	3,790		$	4,939,697
Net earnings														303,107						104			303,211
Other comprehensive income (loss)																	5,899			149			6,048
Purchases of common stock						(738	)	(25,199		)													(25,199		)
Stock-based compensation expense											7,339												7,339
Exercise of stock options/restricted shares	2,302		34								23,421												23,455
Shares retired	(738	)	(11		)	738		25,199			(25,188		)										—
Declared cash dividends – $0.1875 per share														(99,177		)							(99,177		)
Balance at January 28, 2018	529,988		$	7,764		—		$	—		$	19,242		$	5,366,501		$	(242,176	)	$	4,043		$	5,155,374

	Three Months Ended January 27, 2019

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 28, 2018	534,135		$	7,825		—		$	—		$	106,528		$	5,729,956		$	(243,498	)	$	4,007		$	5,604,818
Net earnings														241,425						94			241,519
Other comprehensive income (loss)																	4,955			(31		)	4,924
Purchases of common stock						(1,065	)	(44,809		)													(44,809		)
Stock-based compensation expense											7,946												7,946
Exercise of stock options/restricted shares	1,100		17								15,981												15,998
Shares retired	(1,065	)	(16		)	1,065		44,809			(259		)	(44,534		)							—
Cumulative effect adjustment from adoption of:
ASU 2016-16														(10,475		)							(10,475		)
ASU 2017-12														21			(21		)				—
ASU 2018-02														52,342			(53,778		)				(1,436		)
Declared cash dividends – $0.21 per share														(112,706		)							(112,706		)
Balance at January 27, 2019	534,170		$	7,826		—		$	—		$	130,196		$	5,856,029		$	(292,342	)	$	4,070		$	5,705,779



(in thousands)
Accounts receivable	$	21,199
Inventory	32,817
Prepaid and other assets	881
Other assets	936
Property, plant and equipment	83,662
Intangible assets	223,704
Goodwill	610,602
Current liabilities	(21,366		)
Deferred taxes	(95,077		)
Purchase price	$	857,358



		Fair Value (1)
Derivatives Designated as Hedges:	Location on Consolidated Statements of Financial Position	January 27, 2019		October 28, 2018
Commodity contracts	Other current assets	$	1,730	$	(30	)



		Fair Value ⁽¹⁾
(in thousands)	Location on Consolidated Statements of Financial Position	January 26, 2020			October 27, 2019
Derivatives Designated as Hedges:
Commodity Contracts	Other Current Assets	$	(921	)	$	6,405



	Gain/(Loss) Recognized in AOCL (1)						Location on Consolidated Statements of Operations	Gain/(Loss) Reclassified from AOCL into Earnings (1)					Gain/(Loss) Recognized in Earnings (Ineffective Portion)
	Three Months Ended							Three Months Ended					Three Months Ended
Cash Flow Hedges:	January 27, 2019			January 28, 2018				January 27, 2019			January 28, 2018		January 27, 2019		January 28, 2018
Commodity Contracts (2)	$	(843	)	$	(387	)	Cost of products sold	$	(1,243	)	$	608	$	—	$	(90	)
Excluded Component (3)	$	(687	)



	Gain/(Loss) Recognized in AOCL ⁽¹⁾						Location on Consolidated Statements of Operations	Gain/(Loss) Reclassified from AOCL into Earnings ⁽¹⁾
	Three Months Ended							Three Months Ended
(in thousands)	January 26, 2020			January 27, 2019				January 26, 2020			January 27, 2019
Cash Flow Hedges:
Commodity Contracts	$	(8,626	)	$	(843	)	Cost of Products Sold	$	(1,875	)	$	(1,243	)
Excluded Component ⁽²⁾	—			(687		)


⁽¹⁾	See Note H - Accumulated Other Comprehensive Loss for the after-tax impact of these gains or losses on Net Earnings.


⁽²⁾	Represents the time value amount of lean hog options excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in AOCL.


⁽¹⁾	Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the


	Fair Value Measurements at January 27, 2019								Fair Value Measurements at January 26, 2020
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value
Cash and cash equivalents (1)	$	512,689	$	512,689	$	—	$	—
Other trading securities (2)	146,895		—		146,895		—
Commodity derivatives (3)	3,552		2,526		1,026		—
Cash and Cash Equivalents ⁽¹⁾									$	724,419	$	721,216	$	3,203	$	—
Short-term Marketable Securities ⁽²⁾									14,808		5,533		9,275		—
Other Trading Securities ⁽³⁾									170,302		—		170,302		—
Commodity Derivatives ⁽⁴⁾									9,133		9,133		—		—
Total Assets at Fair Value	$	663,136	$	515,215	$	147,921	$	—	$	918,662	$	735,882	$	182,780	$	—
Liabilities at Fair Value
Deferred compensation (2)	$	60,225	$	—	$	60,225	$	—
Deferred Compensation ⁽³⁾									$	64,356	$	—	$	64,356	$	—
Total Liabilities at Fair Value	$	60,225	$	—	$	60,225	$	—	$	64,356	$	—	$	64,356	$	—


	Fair Value Measurements at October 28, 2018								Fair Value Measurements at October 27, 2019
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value
Cash and cash equivalents (1)	$	459,136	$	459,136	$	—	$	—
Other trading securities (2)	137,311		—		137,311		—
Commodity derivatives (3)	4,611		4,611		—		—
Cash and Cash Equivalents ⁽¹⁾									$	672,901	$	672,458	$	443	$	—
Short-term Marketable Securities ⁽²⁾									14,736		5,186		9,550		—
Other Trading Securities ⁽³⁾									157,526		—		157,526		—
Commodity Derivatives ⁽⁴⁾									12,882		12,882		—		—
Total Assets at Fair Value	$	601,058	$	463,747	$	137,311	$	—	$	858,045	$	690,526	$	167,519	$	—
Liabilities at Fair Value
Deferred compensation (2)	$	60,181	$	—	$	60,181	$	—
Deferred Compensation ⁽³⁾									$	62,373	$	—	$	62,373	$	—
Total Liabilities at Fair Value	$	60,181	$	—	$	60,181	$	—	$	62,373	$	—	$	62,373	$	—


⁽¹⁾	Includes short-term lease costs, which are immaterial.


⁽¹⁾	Operating lease payments exclude $3.6 million of legally binding minimum lease payments for leases signed but not yet commenced.


⁽²⁾	Over the life of the lease contracts, finance lease payments include $8.9 million related to purchase options which are reasonably certain of being exercised.


▪	the possible unavailability and/or expense of liability insurance.


▪	The financial stability of our customers and suppliers may be compromised, which could result in additional bad debts for the Company or non-performance by suppliers; and


▪	The value of our investments in debt and equity securities may decline, including most significantly the Company’s trading securities held as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans, and the Company’s assets held in pension plans.



Period	Total Number of Shares Purchased¹	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs¹	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs¹
October 29, 2018 – December 2, 2018	—	—		—	9,067,156
December 3, 2018 – December 30, 2018	276,324	$	41.93	276,324	8,790,832
December 31, 2018 – January 27, 2019	788,303	42.15		788,303	8,002,529
Total	1,064,627	$	42.09	1,064,627



31.1	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101	~~XBRL Instance Document~~The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended January 26, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Financial Position, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Investment, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

~~101.SCH~~104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended January 26, 2020, formatted in Inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~	~~XBRL Taxonomy Extension Labels Linkbase Document~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~(included as Exhibit 101).



		HORMEL FOODS CORPORATION
		(Registrant)


Date: March ~~5, 2019~~3, 2020	By	/s/ JAMES N. SHEEHAN
		JAMES N. SHEEHAN
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: March ~~5, 2019~~3, 2020	By	/s/ JANA L. HAYNES
		JANA L. HAYNES
		Vice President and Controller
		(Principal Accounting Officer)

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

New York Stock Exchange