UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~January 24,~~July 25, 2021


☐			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)						(I.R.S. Employer Identification No.)

1 Hormel Place

Austin, MN 55912

(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:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

$0.01465

par value

HRL

New York Stock Exchange

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. ☒ Yes ☐ No

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). ☒ Yes ☐ No

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	☒	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 ☒ 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 February 28, 2021

Class

Outstanding at August 29, 2021

Common Stock

$.01465

par value

540,148,249

Common Stock

$.01465

par value

542,556,859

Common Stock Non-Voting

$.01

par value

Common Stock Non-Voting

$.01

par value

Table of Contents

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

Item 1.		Financial Statements
	Consolidated Statements of Financial Position
	Consolidated Statements of Operations
	Consolidated Statements of Comprehensive Income
	Consolidated Statements of Changes in Shareholders' Investment
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Results of Operations
		Overview
		Consolidated Results
		Segment Results
		Related Party Transactions
	Liquidity and Capital Resources
	Critical Accounting Policies
	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

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

In thousands, except share and per share amounts


		January 24, 2021		October 25, 2020			July 25, 2021		October 25, 2020
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and Cash Equivalents	Cash and Cash Equivalents	$	1,751,541	$	1,714,309	Cash and Cash Equivalents	$	291,363	$	1,714,309
Short-term Marketable Securities	Short-term Marketable Securities	17,520		17,338		Short-term Marketable Securities	18,372		17,338
Accounts Receivable (Net of Allowance for Doubtful Accounts of $4,085 at January 24, 2021, and $4,012 at October 25, 2020)		706,654		702,419
Accounts Receivable (Net of Allowance for Doubtful Accounts of $3,906 at July 25, 2021, and $4,012 at October 25, 2020)						Accounts Receivable (Net of Allowance for Doubtful Accounts of $3,906 at July 25, 2021, and $4,012 at October 25, 2020)	896,008		702,419
Inventories	Inventories	1,086,660		1,072,762		Inventories	1,426,738		1,072,762
Income Taxes Receivable	Income Taxes Receivable	8,997		41,449		Income Taxes Receivable	16,408		41,449
Prepaid Expenses	Prepaid Expenses	21,356		18,349		Prepaid Expenses	26,250		18,349
Other Current Assets	Other Current Assets	8,935		12,438		Other Current Assets	13,534		12,438
Total Current Assets	Total Current Assets	3,601,663		3,579,063		Total Current Assets	2,688,672		3,579,063

Goodwill	Goodwill	2,617,589		2,612,727		Goodwill	4,907,073		2,612,727

Other Intangibles	Other Intangibles	1,073,455		1,076,285		Other Intangibles	1,863,713		1,076,285

Pension Assets	Pension Assets	189,852		183,232		Pension Assets	203,093		183,232

Investments In and Receivables From Affiliates	Investments In and Receivables From Affiliates	304,867		308,372		Investments In and Receivables From Affiliates	304,417		308,372

Other Assets	Other Assets	272,239		250,382		Other Assets	298,071		250,382

Property, Plant and Equipment	Property, Plant and Equipment					Property, Plant and Equipment
Land	Land	62,561		62,543		Land	72,085		62,543
Buildings	Buildings	1,256,462		1,250,529		Buildings	1,331,987		1,250,529
Equipment	Equipment	2,093,204		2,084,930		Equipment	2,382,940		2,084,930
Construction in Progress	Construction in Progress	389,477		369,453		Construction in Progress	263,632		369,453
Less: Allowance for Depreciation	Less: Allowance for Depreciation	(1,903,438)		(1,869,233)		Less: Allowance for Depreciation	(1,983,503)		(1,869,233)
Net Property, Plant and Equipment	Net Property, Plant and Equipment	1,898,265		1,898,222		Net Property, Plant and Equipment	2,067,141		1,898,222

Total Assets	Total Assets	$	9,957,932	$	9,908,282	Total Assets	$	12,332,182	$	9,908,282

See Notes to Consolidated Financial Statements

Table of Contents

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

In thousands, except share and per share amounts


		January 24, 2021		October 25, 2020			July 25, 2021		October 25, 2020
		(Unaudited)					(Unaudited)
Liabilities and Shareholders' Investment	Liabilities and Shareholders' Investment					Liabilities and Shareholders' Investment
Current Liabilities	Current Liabilities					Current Liabilities
Accounts Payable	Accounts Payable	$	558,523	$	644,609	Accounts Payable	$	654,162	$	644,609

Accrued Expenses	Accrued Expenses	50,901		59,136		Accrued Expenses	51,108		59,136
Accrued Workers Compensation	Accrued Workers Compensation	28,643		25,070		Accrued Workers Compensation	29,278		25,070
Accrued Marketing Expenses	Accrued Marketing Expenses	133,042		108,502		Accrued Marketing Expenses	133,925		108,502
Employee Related Expenses	Employee Related Expenses	204,191		252,845		Employee Related Expenses	216,065		252,845
Taxes Payable	Taxes Payable	45,897		22,480		Taxes Payable	17,453		22,480
Interest and Dividends Payable	Interest and Dividends Payable	137,583		132,632		Interest and Dividends Payable	140,469		132,632
Current Maturities of Long-term Debt	Current Maturities of Long-term Debt	258,690		258,691		Current Maturities of Long-term Debt	8,732		258,691
Total Current Liabilities	Total Current Liabilities	1,417,469		1,503,965		Total Current Liabilities	1,251,191		1,503,965

Long-term Debt - Less Current Maturities	Long-term Debt - Less Current Maturities	1,043,050		1,044,936		Long-term Debt - Less Current Maturities	3,316,262		1,044,936

Pension and Post-retirement Benefits	Pension and Post-retirement Benefits	555,220		552,878		Pension and Post-retirement Benefits	559,958		552,878

Other Long-term Liabilities	Other Long-term Liabilities	161,988		157,399		Other Long-term Liabilities	174,473		157,399

Deferred Income Taxes	Deferred Income Taxes	224,477		218,779		Deferred Income Taxes	236,566		218,779

Shareholders' Investment	Shareholders' Investment					Shareholders' Investment
Preferred Stock, Par Value $0.01 a Share–	Preferred Stock, Par Value $0.01 a Share–	0		0		Preferred Stock, Par Value $0.01 a Share–	—		—
Authorized 160,000,000 Shares; Issued–NaN
Authorized 160,000,000 Shares; Issued–None						Authorized 160,000,000 Shares; Issued–None
Common Stock, Non-voting, Par Value $0.01 a Share–	Common Stock, Non-voting, Par Value $0.01 a Share–	0		0		Common Stock, Non-voting, Par Value $0.01 a Share–	—		—
Authorized 400,000,000 Shares; Issued–NaN
Authorized 400,000,000 Shares; Issued–None						Authorized 400,000,000 Shares; Issued–None
Common Stock, Par Value $0.01465 a Share–	Common Stock, Par Value $0.01465 a Share–	7,908		7,909		Common Stock, Par Value $0.01465 a Share–	7,948		7,909
Authorized 1,600,000,000 Shares;	Authorized 1,600,000,000 Shares;					Authorized 1,600,000,000 Shares;
Shares Issued as of January 24, 2021: 539,796,305
Shares Issued as of July 25, 2021: 542,536,431						Shares Issued as of July 25, 2021: 542,536,431
Shares Issued as of October 25, 2020: 539,887,092	Shares Issued as of October 25, 2020: 539,887,092					Shares Issued as of October 25, 2020: 539,887,092
Additional Paid-in Capital	Additional Paid-in Capital	298,988		289,554		Additional Paid-in Capital	354,162		289,554
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	(360,869)		(395,250)		Accumulated Other Comprehensive Loss	(317,528)		(395,250)
Retained Earnings	Retained Earnings	6,604,506		6,523,335		Retained Earnings	6,743,701		6,523,335
Hormel Foods Corporation Shareholders' Investment	Hormel Foods Corporation Shareholders' Investment	6,550,532		6,425,548		Hormel Foods Corporation Shareholders' Investment	6,788,284		6,425,548
Noncontrolling Interest	Noncontrolling Interest	5,195		4,778		Noncontrolling Interest	5,448		4,778
Total Shareholders' Investment	Total Shareholders' Investment	6,555,727		6,430,326		Total Shareholders' Investment	6,793,732		6,430,326

Total Liabilities and Shareholders' Investment	Total Liabilities and Shareholders' Investment	$	9,957,932	$	9,908,282	Total Liabilities and Shareholders' Investment	$	12,332,182	$	9,908,282

See Notes to Consolidated Financial Statements

Table of Contents

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except per share amounts

Unaudited


		Thirteen Weeks Ended				Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		January 24, 2021		January 26, 2020				July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Net Sales	Net Sales	$	2,461,147	$	2,384,434		Net Sales	$	2,863,670	$	2,381,457	$	7,931,438	$	7,188,357
Cost of Products Sold	Cost of Products Sold	2,010,977		1,916,014			Cost of Products Sold	2,440,322		1,959,032		6,581,613		5,820,158
Gross Profit	Gross Profit	450,170		468,421			Gross Profit	423,348		422,426		1,349,825		1,368,198

Selling, General and Administrative	Selling, General and Administrative	196,380		195,521			Selling, General and Administrative	226,284		181,085		622,630		570,518

Equity in Earnings of Affiliates	Equity in Earnings of Affiliates	14,228		7,588			Equity in Earnings of Affiliates	10,420		8,235		37,722		25,843

Operating Income	Operating Income	268,018		280,488			Operating Income	207,484		249,576		764,917		823,523

Other Income and Expense:	Other Income and Expense:						Other Income and Expense:
Interest and Investment Income (Expense)	Interest and Investment Income (Expense)	17,291		13,251			Interest and Investment Income (Expense)	8,457		15,513		36,740		25,289
Interest Expense	Interest Expense	(8,227)		(3,577)			Interest Expense	(11,703)		(5,724)		(27,718)		(12,798)

Earnings Before Income Taxes	Earnings Before Income Taxes	277,082		290,162			Earnings Before Income Taxes	204,238		259,364		773,940		836,014

Provision for Income Taxes	Provision for Income Taxes	54,687		47,209			Provision for Income Taxes	27,164		56,103		146,549		162,186

Net Earnings	Net Earnings	222,395		242,953			Net Earnings	177,074		203,260		627,390		673,828
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest	Less: Net Earnings (Loss) Attributable to Noncontrolling Interest	112		81			Less: Net Earnings (Loss) Attributable to Noncontrolling Interest	157		141		290		103
Net Earnings Attributable to Hormel Foods Corporation	Net Earnings Attributable to Hormel Foods Corporation	$	222,283	$	242,872		Net Earnings Attributable to Hormel Foods Corporation	$	176,917	$	203,119	$	627,101	$	673,726

Net Earnings Per Share	Net Earnings Per Share						Net Earnings Per Share
Basic	Basic	$	0.41	$	0.45		Basic	$	0.33	$	0.38	$	1.16	$	1.25
Diluted	Diluted	$	0.41	$	0.45		Diluted	$	0.32	$	0.37	$	1.15	$	1.23

Weighted-average Shares Outstanding	Weighted-average Shares Outstanding						Weighted-average Shares Outstanding
Basic	Basic	539,913		535,075			Basic	541,746		539,108		540,618		537,434
Diluted	Diluted	547,444		544,815			Diluted	548,072		547,149		547,684		546,112

See Notes to Consolidated Financial Statements

Table of Contents

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands

Unaudited


		Thirteen Weeks Ended				Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		January 24, 2021		January 26, 2020				July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Net Earnings	Net Earnings	$	222,395	$	242,953		Net Earnings	$	177,074	$	203,260	$	627,390	$	673,828
Other Comprehensive Income (Loss), Net of Tax:	Other Comprehensive Income (Loss), Net of Tax:						Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	Foreign Currency Translation	17,888		7,937			Foreign Currency Translation	12,626		(836)		23,489		(19,105)
Pension and Other Benefits	Pension and Other Benefits	4,199		3,512			Pension and Other Benefits	4,199		3,526		12,598		10,619
Deferred Hedging	Deferred Hedging	12,599		(5,103)			Deferred Hedging	(8,612)		13,376		42,016		(23,830)
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	34,686		6,346			Total Other Comprehensive Income (Loss)	8,213		16,066		78,103		(32,316)
Comprehensive Income	Comprehensive Income	257,081		249,299			Comprehensive Income	185,287		219,326		705,493		641,513
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest	Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest	417		205			Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest	270		181		671		169
Comprehensive Income Attributable to Hormel Foods Corporation	Comprehensive Income Attributable to Hormel Foods Corporation	$	256,664	$	249,094		Comprehensive Income Attributable to Hormel Foods Corporation	$	185,017	$	219,145	$	704,822	$	641,344

See Notes to Consolidated Financial Statements

Table of Contents

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

In thousands, except per share amounts

Unaudited


		Thirteen Weeks Ended January 26, 2020																							Thirteen Weeks Ended July 26, 2020

		Common Stock			Treasury Stock			Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Non- controlling Interest				Total Shareholders’ Investment				Common Stock						Treasury Stock			Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Non- controlling Interest				Total Shareholders’ Investment
		Shares	Amount		Shares	Amount										Shares								Amount			Shares			Amount
Balance at October 27, 2019		534,489	$	7,830	0	$	0			$	184,921			$	6,128,207				$	(399,500)			$	4,077		$	5,925,535
Balance at April 26, 2020																								Balance at April 26, 2020	538,949			$	7,896		—	$	—			$	265,128			$	6,336,946			$	(447,908)			$	4,140			$	6,166,202
Net Earnings	Net Earnings											242,872					81				242,953			Net Earnings														203,119								141				203,260
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)													6,222			124				6,346			Other Comprehensive Income (Loss)																		16,026				40				16,066
Contribution from Noncontrolling Interest																								Contribution from Noncontrolling Interest																										—
Purchases of Common Stock	Purchases of Common Stock																				0			Purchases of Common Stock																										—
Stock-based Compensation Expense	Stock-based Compensation Expense		0					9,298													9,298			Stock-based Compensation Expense										3,724																3,724
Exercise of Stock Options/Restricted Shares	Exercise of Stock Options/Restricted Shares	2,926	43					36,310													36,353			Exercise of Stock Options/Restricted Shares	438			6						7,740																7,746
Shares Retired	Shares Retired																				0			Shares Retired																										—
Declared Cash Dividends – $0.2325 per Share	Declared Cash Dividends – $0.2325 per Share											(124,438)									(124,438)			Declared Cash Dividends – $0.2325 per Share														(125,253)												(125,253)
Balance at January 26, 2020		537,415	$	7,873	0	$	0	$	230,529			$	6,246,641	$	(393,278)		$	4,281			$	6,096,045
Balance at July 26, 2020																								Balance at July 26, 2020	539,387			$	7,902		—	$	—	$	276,592			$	6,414,813			$	(431,882)			$	4,322			$	6,271,747

		Thirteen Weeks Ended January 24, 2021																							Thirteen Weeks Ended July 25, 2021

		Common Stock			Treasury Stock			Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Non- controlling Interest				Total Shareholders’ Investment				Common Stock						Treasury Stock			Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Non- controlling Interest				Total Shareholders’ Investment
		Shares	Amount		Shares	Amount										Shares								Amount			Shares			Amount
Balance at October 25, 2020		539,887	$	7,909	0	$	0			$	289,554			$	6,523,335				$	(395,250)			$	4,778		$	6,430,326
Balance at April 25, 2021																								Balance at April 25, 2021	540,411			$	7,917		—	$	—			$	319,048			$	6,699,336			$	(325,629)			$	5,178			$	6,705,851
Net Earnings	Net Earnings											222,283					112				222,395			Net Earnings														176,917								157				177,074
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)													34,381			305				34,686			Other Comprehensive Income (Loss)																		8,100				113				8,213

Purchases of Common Stock	Purchases of Common Stock				(199)	(8,837)															(8,837)			Purchases of Common Stock																										0
Stock-based Compensation Expense	Stock-based Compensation Expense		0					7,781													7,781			Stock-based Compensation Expense										4,479																4,479
Exercise of Stock Options/Restricted Shares	Exercise of Stock Options/Restricted Shares	108	2					1,763													1,765			Exercise of Stock Options/Restricted Shares	2,125			31						30,635																30,666
Shares Retired	Shares Retired	(199)	(3)		199	8,837		(110)				(8,724)									0			Shares Retired																										—
Declared Cash Dividends – $0.2450 per Share	Declared Cash Dividends – $0.2450 per Share											(132,389)									(132,389)			Declared Cash Dividends – $0.2450 per Share														(132,551)												(132,551)
Balance at January 24, 2021		539,796	$	7,908	0	$	0	$	298,988			$	6,604,506	$	(360,869)		$	5,195			$	6,555,727
Balance at July 25, 2021																								Balance at July 25, 2021	542,536			$	7,948		—	$	—	$	354,162			$	6,743,701			$	(317,528)			$	5,448			$	6,793,732

Table of Contents


	Thirty-Nine Weeks Ended July 26, 2020


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		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									673,726				103		673,828
Other Comprehensive Income (Loss)											(32,382)		66		(32,316)
Contribution from Noncontrolling Interest													76		76
Purchases of Common Stock				(302)	(12,360)										(12,360)
Stock-based Compensation Expense		1					19,188								19,189
Exercise of Stock Options/Restricted Shares	5,200	75					72,632								72,707
Shares Retired	(302)	(4)		302	12,360		(149)		(12,207)						—
Declared Cash Dividends – $0.6975 per Share									(374,913)						(374,913)
Balance at July 26, 2020	539,387	$	7,902	—	$	—	$	276,592	$	6,414,813	$	(431,882)	$	4,322	$	6,271,747

	Thirty-Nine Weeks Ended July 25, 2021


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non- controlling Interest		Total Shareholders’ Investment
	Shares	Amount		Shares	Amount
Balance at October 25, 2020	539,887	$	7,909	—	$	—	$	289,554	$	6,523,335	$	(395,250)	$	4,778	$	6,430,326
Net Earnings									627,101				290		627,390
Other Comprehensive Income (Loss)											77,722		381		78,103

Purchases of Common Stock				(217)	(9,653)										(9,653)
Stock-based Compensation Expense	38	1					20,313								20,313
Exercise of Stock Options/Restricted Shares	2,828	41					44,416								44,457
Shares Retired	(217)	(3)		217	9,653		(120)		(9,530)						—
Declared Cash Dividends – $0.7350 per Share									(397,204)						(397,204)
Balance at July 25, 2021	542,536	$	7,948	—	$	—	$	354,162	$	6,743,701	$	(317,528)	$	5,448	$	6,793,732

See Notes to Consolidated Financial Statements

Table of Contents

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

Unaudited


		Thirteen Weeks Ended					Thirty-Nine Weeks Ended
		January 24, 2021		January 26, 2020			July 25, 2021		July 26, 2020
Operating Activities	Operating Activities					Operating Activities
Net Earnings	Net Earnings	$	222,395	$	242,953	Net Earnings	$	627,390	$	673,828
Adjustments to Reconcile to Net Cash Provided by Operating Activities:	Adjustments to Reconcile to Net Cash Provided by Operating Activities:					Adjustments to Reconcile to Net Cash Provided by Operating Activities:
Depreciation	Depreciation	41,395		41,194		Depreciation	130,636		122,694
Amortization	Amortization	9,648		8,135		Amortization	31,854		27,080

Equity in Earnings of Affiliates	Equity in Earnings of Affiliates	(14,228)		(7,588)		Equity in Earnings of Affiliates	(37,722)		(25,843)
Distributions Received from Equity Method Investees	Distributions Received from Equity Method Investees	11,250		10,000		Distributions Received from Equity Method Investees	33,749		27,499
Provision for Deferred Income Taxes	Provision for Deferred Income Taxes	335		49		Provision for Deferred Income Taxes	2,375		(1,890)
Loss (Gain) on Property/Equipment Sales and Plant Facilities	Loss (Gain) on Property/Equipment Sales and Plant Facilities	1,388		(23)		Loss (Gain) on Property/Equipment Sales and Plant Facilities	1,596		631

Non-cash Investment Activities	Non-cash Investment Activities	(11,693)		(12,761)		Non-cash Investment Activities	(21,802)		(10,965)
Stock-based Compensation Expense	Stock-based Compensation Expense	7,781		9,298		Stock-based Compensation Expense	20,313		19,189
Changes in Operating Assets and Liabilities, Net of Acquisitions:	Changes in Operating Assets and Liabilities, Net of Acquisitions:					Changes in Operating Assets and Liabilities, Net of Acquisitions:
Decrease (Increase) in Accounts Receivable	Decrease (Increase) in Accounts Receivable	(3,444)		11,492		Decrease (Increase) in Accounts Receivable	(191,783)		(66,053)
Decrease (Increase) in Inventories	Decrease (Increase) in Inventories	(11,876)		(14,915)		Decrease (Increase) in Inventories	(202,217)		87,030
Decrease (Increase) in Prepaid Expenses and Other Current Assets	Decrease (Increase) in Prepaid Expenses and Other Current Assets	17,634		(5,451)		Decrease (Increase) in Prepaid Expenses and Other Current Assets	47,553		(25,279)
Increase (Decrease) in Pension and Post-retirement Benefits	Increase (Decrease) in Pension and Post-retirement Benefits	1,134		647		Increase (Decrease) in Pension and Post-retirement Benefits	3,629		5,003
Increase (Decrease) in Accounts Payable and Accrued Expenses	Increase (Decrease) in Accounts Payable and Accrued Expenses	(124,092)		(135,988)		Increase (Decrease) in Accounts Payable and Accrued Expenses	(30,187)		(10,562)
Increase (Decrease) in Net Income Taxes Payable	Increase (Decrease) in Net Income Taxes Payable	58,059		41,376		Increase (Decrease) in Net Income Taxes Payable	22,403		55,723
Net Cash Provided by (Used in) Operating Activities	Net Cash Provided by (Used in) Operating Activities	205,686		188,418		Net Cash Provided by (Used in) Operating Activities	437,786		878,086

Investing Activities	Investing Activities					Investing Activities
Net (Purchase) Sale of Securities	Net (Purchase) Sale of Securities	(206)		(16)		Net (Purchase) Sale of Securities	(1,304)		(2,642)

Acquisitions of Businesses/Intangibles						Acquisitions of Businesses/Intangibles	(3,396,246)		(270,789)
Purchases of Property and Equipment	Purchases of Property and Equipment	(40,363)		(58,211)		Purchases of Property and Equipment	(139,361)		(226,830)
Proceeds from Sales of Property and Equipment	Proceeds from Sales of Property and Equipment	1,461		1,114		Proceeds from Sales of Property and Equipment	1,910		1,466
Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets	Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets	(1,149)		(4,509)		Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets	668		(8,424)
Proceeds from Company-owned Life Insurance	Proceeds from Company-owned Life Insurance	956		1,118		Proceeds from Company-owned Life Insurance	4,015		1,180

Net Cash Provided by (Used in) Investing Activities	Net Cash Provided by (Used in) Investing Activities	(39,301)		(60,504)		Net Cash Provided by (Used in) Investing Activities	(3,530,320)		(506,040)

Financing Activities	Financing Activities					Financing Activities

Proceeds from Long-term Debt						Proceeds from Long-term Debt	2,276,292		992,381
Repayments of Long-term Debt and Finance Leases	Repayments of Long-term Debt and Finance Leases	(2,165)		(2,019)		Repayments of Long-term Debt and Finance Leases	(256,535)		(6,221)
Dividends Paid on Common Stock	Dividends Paid on Common Stock	(125,516)		(112,249)		Dividends Paid on Common Stock	(390,206)		(362,003)
Share Repurchase	Share Repurchase	(8,837)		0		Share Repurchase	(9,653)		(12,360)
Proceeds from Exercise of Stock Options	Proceeds from Exercise of Stock Options	1,765		36,353		Proceeds from Exercise of Stock Options	44,007		72,118

Proceeds from Noncontrolling Interest						Proceeds from Noncontrolling Interest	—		77
Net Cash Provided by (Used in) Financing Activities	Net Cash Provided by (Used in) Financing Activities	(134,754)		(77,915)		Net Cash Provided by (Used in) Financing Activities	1,663,905		683,992

Effect of Exchange Rate Changes on Cash	Effect of Exchange Rate Changes on Cash	5,600		1,519		Effect of Exchange Rate Changes on Cash	5,683		428
Increase (Decrease) in Cash and Cash Equivalents	Increase (Decrease) in Cash and Cash Equivalents	37,232		51,518		Increase (Decrease) in Cash and Cash Equivalents	(1,422,946)		1,056,466
Cash and Cash Equivalents at Beginning of Year	Cash and Cash Equivalents at Beginning of Year	1,714,309		672,901		Cash and Cash Equivalents at Beginning of Year	1,714,309		672,901
Cash and Cash Equivalents at End of Quarter	Cash and Cash Equivalents at End of Quarter	$	1,751,541	$	724,419	Cash and Cash Equivalents at End of Quarter	$	291,363	$	1,729,368

See Notes to Consolidated Financial Statements

Table of Contents

HORMEL FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

NOTE A - 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 Consolidated Statement of Financial Position at October 25, 2020, 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 25, 2020. The significant accounting policies used in preparing these Consolidated Financial Statements are consistent with those described in Note A - Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Form 10-K with the exception of new requirements adopted in the first quarter of fiscal 2021. The Company has considered the impact of COVID-19 and determined there have been no material changes in the Company’s ~~Significant Accounting Policies,~~significant accounting policies, including estimates and assumptions, as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 25, 2020.

Rounding: Certain amounts in the Consolidated Financial Statements and associated notes may not foot due to rounding. All percentages have been calculated using unrounded amounts.

Accounting Changes and Recent Accounting Pronouncements:

New Accounting Pronouncements Adopted in Current Fiscal Year

In June 2016, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ~~ASU~~Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 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 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. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021. The adoption did not have a material impact on the Company's consolidated financial statements, thus no cumulative-effect adjustment to retained earnings was necessary.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance requires entities to disclose the 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 to 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. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021 and adoption did not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715). The updated guidance 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 fiscal years ending after December 15, 2020, with early adoption permitted. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021. The adoption did not impact the Company's interim disclosure and is not anticipated to have a material impact on the annual disclosure.

Table of Contents

New Accounting Pronouncements Not Yet Adopted

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

~~Table of Contents~~

amending existing guidance. The amendments are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company ~~is currently assessing~~will adopt the ~~timing~~provisions of this new accounting standard at the beginning of fiscal 2022 and does not expect adoption to have a material impact ~~of adopting the updated provisions.~~on its consolidated financial statements.

Recently issued accounting standards or pronouncements not disclosed ~~above~~ have been excluded as they are not relevant to the Company.

NOTE B - ACQUISITIONS AND DIVESTITURES

~~Acquisition:~~Acquisitions: On June 7, 2021, the Company acquired the Planters®snack nuts business from The Kraft Heinz Company. The acquisition includes the Planters®, NUT-rition®, Planters®Cheez Balls and Corn Nuts®brands. The preliminary purchase price is $3.4 billion, pending final purchase accounting and working capital adjustments. The transaction was funded with the Company’s cash on hand and from the issuance of long-term debt. See Note J - Long-term Debt and Other Borrowing Arrangements for additional details.

Planters®is an iconic snack brand and this acquisition significantly expands the Company's presence, and should broaden the scope for future acquisitions, in the growing snacking space. Operating results for this acquisition have been included in the Company's Consolidated Statements of Operations from the date of acquisition and reflected primarily in the Grocery Products segment. The acquisition contributed $141.3 million of net sales since the date of acquisition. As the acquisition has been integrated within the Company's existing operations, post-acquisition net income is not discernible. Acquisition-related costs were $27.5 million and $30.3 million for the thirteen and thirty-nine weeks ended July 25, 2021, respectively, which are reflected in the Consolidated Statements of Operations as Selling, General and Administrative. Additional one-time adjustments related the preliminary revaluation of acquired inventory of $12.9 million were recognized in the Consolidated Statements of Operations as Cost of Products Sold for the thirteen and thirty-nine weeks ended July 25, 2021. The combined impact of these one-time acquisition costs and accounting adjustments were $40.4 million and $43.2 million for the thirteen and thirty-nine weeks ended July 25, 2021.

The acquisition was accounted for as a business combination using the acquisition method. The Company has estimated the acquisition date fair values of the assets acquired using independent appraisals. Preliminary allocations of the purchase price to acquired assets, including goodwill and intangibles assets, is presented in the table below. The Company expects to finalize purchase allocations as soon as practicable, but no later than one year from the acquisition date.


(in thousands)	Preliminary Purchase Allocation
Inventory	$	149,224
Property, Plant and Equipment	162,091
Goodwill	2,286,932
Other Intangibles	798,000
Purchase Price	$	3,396,246

Goodwill is calculated as the excess of the purchase price over the fair values of the net assets acquired and is expected to be deductible for tax purposes. The goodwill recorded as part of the acquisition primarily reflects the value of the potential to expand the Company's presence in the growing snacking space and serve as a platform for innovation.

The following unaudited pro forma financial information presents the combined results of operations as if the acquisition of the Planters® snack nuts business had occurred on October 27, 2019. These unaudited pro forma results do not necessarily reflect the actual results of operations that would have been achieved had the acquisition occurred on that date, nor are they necessarily indicative of future results of operations.


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Pro Forma Net Sales	$	2,981,630	$	2,635,561	$	8,606,935	$	7,983,636
Pro Forma Net Earnings Attributable to Hormel Foods Corporation	215,983		211,135		704,143		664,304

Table of Contents

The pro forma results include charges for depreciation and amortization of acquired assets and interest expense on debt issued to finance the acquisition, as well as the related income taxes. The pro forma results for the thirty-nine weeks ended July 26, 2020 also include nonrecurring adjustments relating to the recognition of transaction costs incurred and revaluation of inventory acquired, along with the related income tax effects, which in the aggregate reduce pro forma net earnings by $41.1 million. The pro forma results for the thirteen and thirty-nine weeks ended July 25, 2021 include an adjustment to add back the transaction costs incurred and revaluation of inventory acquired in those periods, along with the related income tax effects, since those costs are reflected in the preceding fiscal year on a pro forma basis.

On March 2, 2020, the Company acquired the assets comprising the Sadler's Smokehouse business (Sadler's) for a final purchase price of $270.8 million. Sadler's is an authentic, pit-smoked meats business based in Henderson, Texas. This acquisition strengthens the Company's foodservice position and provides an opportunity to further extend the Sadler's product line into the retail and deli channels.

The transaction was funded with cash on hand and accounted for as a business combination using the acquisition method. The Company completed an allocation of the fair value of the assets acquired utilizing third-party valuation appraisals during fiscal 2020.

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 the Refrigerated Foods segment. Pro forma results are not material for inclusion.

NOTE C - GOODWILL AND INTANGIBLE ASSETS

Goodwill: The changes in the carrying amounts of goodwill for the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, are:


(in thousands)	(in thousands)	Grocery Products		Refrigerated Foods		Jennie-O Turkey Store		International & Other		Total		(in thousands)	Grocery Products		Refrigerated Foods		Jennie-O Turkey Store		International & Other		Total
Balance at April 25, 2021												Balance at April 25, 2021	$	632,301	$	1,607,005	$	176,628	$	198,102	$	2,614,036
Goodwill Acquired(1)												Goodwill Acquired(1)	1,878,660		353,135		—		55,137		2,286,932
Foreign Currency Translation												Foreign Currency Translation	—		—		—		6,105		6,105
Balance at July 25, 2021												Balance at July 25, 2021	$	2,510,961	$	1,960,140	$	176,628	$	259,344	$	4,907,073
(in thousands)												(in thousands)	Grocery Products		Refrigerated Foods		Jennie-O Turkey Store		International & Other		Total
Balance at October 25, 2020	Balance at October 25, 2020	$	632,301	$	1,607,005	$	176,628	$	196,793	$	2,612,727	Balance at October 25, 2020	$	632,301	$	1,607,005	$	176,628	$	196,793	$	2,612,727

Goodwill Acquired(1)												Goodwill Acquired(1)	1,878,660		353,135		—		55,137		2,286,932
Foreign Currency Translation	Foreign Currency Translation	0		0		0		4,863		4,863		Foreign Currency Translation	—		—		—		7,415		7,415
Balance at January 24, 2021		$	632,301	$	1,607,005	$	176,628	$	201,656	$	2,617,589
Balance at July 25, 2021												Balance at July 25, 2021	$	2,510,961	$	1,960,140	$	176,628	$	259,344	$	4,907,073

(1) Represents preliminary allocation of goodwill to reportable segments. See additional details regarding the acquisition in Note B - Acquisitions and Divestitures.

Intangible Assets: The carrying amounts for indefinite-lived intangible assets are:


(in thousands)	(in thousands)	January 24, 2021		October 25, 2020		(in thousands)	July 25, 2021		October 25, 2020
Brands/Tradenames/Trademarks	Brands/Tradenames/Trademarks	$	953,190	$	953,190	Brands/Tradenames/Trademarks	$	1,700,190	$	953,190
Other Intangibles	Other Intangibles	184		184		Other Intangibles	184		184
Foreign Currency Translation	Foreign Currency Translation	(6,203)		(6,923)		Foreign Currency Translation	(5,766)		(6,923)
Total	Total	$	947,171	$	946,452	Total	$	1,694,609	$	946,452

The increase in Brands/Tradenames/Trademarks represents the estimated fair value of indefinite-lived assets acquired as part of the acquisition of the Planters® snack nuts business and is preliminary pending final purchase accounting adjustments. See Note B - Acquisitions and Divestitures.

Table of Contents

The gross carrying amount and accumulated amortization for definite-lived intangible assets are:


		January 24, 2021				October 25, 2020					July 25, 2021					October 25, 2020
(in thousands)	(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		(in thousands)	Gross Carrying Amount		Accumulated Amortization		Weighted Ave Life (In Years)	Gross Carrying Amount		Accumulated Amortization		Weighted Ave Life (In Years)
Customer Lists/Relationships	Customer Lists/Relationships	$	117,239	$	(48,303)	$	117,239	$	(45,996)	Customer Lists/Relationships	$	168,239	$	(53,409)	12.7	$	117,239	$	(45,996)	12.2
Other Intangibles	Other Intangibles	60,241		(5,021)		60,631		(4,298)		Other Intangibles	60,241		(7,211)		13.8	60,631		(4,298)		13.8
Tradenames/Trademarks	Tradenames/Trademarks	10,536		(4,053)		10,536		(3,518)		Tradenames/Trademarks	10,536		(5,125)		4.9	10,536		(3,518)		4.9

Foreign Currency Translation	Foreign Currency Translation	0		(4,354)		0		(4,760)		Foreign Currency Translation	—		(4,165)		—	—		(4,760)		—
Total	Total	$	188,016	$	(61,732)	$	188,406	$	(58,572)	Total	$	239,016	$	(69,910)	12.7	$	188,406	$	(58,572)	12.3

The increase in Customer Lists/Relationships represents the estimated fair value of definite-lived assets acquired as part of the acquisition of the Planters® snack nuts business and is preliminary pending final purchase accounting adjustments. See Note B - Acquisitions and Divestitures.

Amortization expense was ~~$4.0~~$4.4 million and ~~$2.7~~$12.3 million for the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, respectively, compared to $4.1 million and ~~January~~$10.3 million for the thirteen and thirty-nine weeks ended July 26, ~~2020, respectively.~~2020.

~~Table of Contents~~

Estimated annual amortization expense for the five fiscal years after October 25, 2020, ~~is:~~is as follows:


(in thousands)	(in thousands)			(in thousands)
2021	2021	$	16,477	2021	$	17,948
2022	2022	16,037		2022	19,680
2023	2023	15,132		2023	18,775
2024	2024	13,048		2024	16,691
2025	2025	11,432		2025	15,075

NOTE D - INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

The Company accounts for its majority-owned operations under the consolidation method. Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method. These investments, along with any related receivables from affiliates, are included in the Consolidated Statements of Financial Position as Investments In and Receivables From Affiliates.

Investments In and Receivables From Affiliates consist of:


(in thousands)	(in thousands)	Segment	% Owned	January 24, 2021		October 25, 2020		(in thousands)	Segment	% Owned	July 25, 2021		October 25, 2020
MegaMex Foods, LLC	MegaMex Foods, LLC	Grocery Products	50%	$	214,974	$	220,907	MegaMex Foods, LLC	Grocery Products	50%	$	209,613	$	220,907
Other Joint Ventures	Other Joint Ventures	International & Other	Various (20-40%)	89,893		87,466		Other Joint Ventures	International & Other	Various (20-40%)	94,805		87,466
Total	Total			$	304,867	$	308,372	Total			$	304,417	$	308,372

Equity in Earnings of Affiliates consists of:


			Thirteen Weeks Ended					Thirteen Weeks Ended			Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	Segment	January 24, 2021		January 26, 2020		(in thousands)	Segment	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
MegaMex Foods, LLC	MegaMex Foods, LLC	Grocery Products	$	12,433	$	9,461	MegaMex Foods, LLC	Grocery Products	$	7,529	$	5,799	$	29,625	$	22,939
Other Joint Ventures	Other Joint Ventures	International & Other	1,794		(1,873)		Other Joint Ventures	International & Other	2,891		2,435		8,097		2,904
Total	Total		$	14,228	$	7,588	Total		$	10,420	$	8,235	$	37,722	$	25,843

For the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, ~~$11.3~~$11.2 million and $33.7 million of dividends were received from affiliates, compared to ~~$10.0~~$7.5 million and $27.5 million of dividends received for the thirteen and thirty-nine weeks ended ~~January~~July 26, 2020.

Table of Contents

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, of which ~~$11.7~~$11.2 million is remaining as of ~~January 24,~~July 25, 2021. This difference is being amortized through Equity in Earnings of Affiliates.

NOTE E - INVENTORIES

Principal components of inventories are:


(in thousands)	(in thousands)	January 24, 2021		October 25, 2020		(in thousands)	July 25, 2021		October 25, 2020
Finished Products	Finished Products	$	543,669	$	546,070	Finished Products	$	766,817	$	546,070
Raw Materials and Work-in-Process	Raw Materials and Work-in-Process	325,735		318,975		Raw Materials and Work-in-Process	414,039		318,975
Operating Supplies	Operating Supplies	143,157		136,547		Operating Supplies	161,239		136,547
Maintenance Materials and Parts	Maintenance Materials and Parts	74,099		71,170		Maintenance Materials and Parts	84,642		71,170
Total	Total	$	1,086,660	$	1,072,762	Total	$	1,426,738	$	1,072,762

NOTE F - DERIVATIVES AND HEDGING

The Company uses hedging programs to manage price risk associated with commodity ~~purchases.~~purchases and interest rates. These programs utilize futures and options contracts to manage the Company’s exposure to price fluctuations in the ~~commodities~~ markets. The Company has determined its designated hedging programs to be highly effective in offsetting the changes in fair value or cash flows generated

~~Table of Contents~~

by the items hedged. Effectiveness testing is performed on a quarterly basis to ascertain a high level of effectiveness for cash flow and fair value hedging programs.

Cash Flow Commodity 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 (AOCL) and reclassified into earnings, through Cost of 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. Due to extreme market volatility, the Company took strategic hedges to cover a significant portion of its expected grain purchases through fiscal 2022.

Fair Value Commodity 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 recorded on the Consolidated Statements of Financial Position as a Current Asset and Liability, respectively. Effective gains or losses related to these fair value hedges are recognized through Cost of Products Sold in the period or periods in which the hedged transactions affect earnings.

Cash Flow Interest Rate Hedges: In the second quarter of fiscal 2021, the Company designated 2 separate interest rate locks as cash flow hedges to manage interest rate risk associated with the anticipated debt transactions required to fund the acquisition of the Planters® snack nuts business. The total notional amount of the Company's locks was $1,250 million. In the third quarter of fiscal 2021, the associated unsecured senior notes were issued with a tenor of seven and thirty years and both locks were lifted (See Note J - Long-term Debt and Other Borrowing Arrangements). Mark-to-market gains and losses on these instruments were deferred as a component of AOCL until lifted. The resulting gain in AOCL is reclassified to Interest Expense in the period when 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: The Company's outstanding commodity futures and options contracts related to its hedging programs include:

Volume

Commodity Contracts

~~January 24,~~July 25, 2021

October 25, 2020

Corn

~~30.7~~43.5 million bushels

26.0 million bushels

Lean Hogs

~~140.4~~115.9 million pounds

153.7 million pounds

Table of Contents

Fair Value of Derivatives: The fair values of the Company’s derivative instruments are:

Gross Fair Value (1)

Gross Fair Value

(in thousands)

Location on Consolidated Statements

of Financial Position

January 24, 2021

October 25, 2020

(in thousands)

Location on Consolidated Statements

of Financial Position

July 25, 2021

October 25, 2020

Derivatives Designated as Hedges:

Commodity Contracts(1)

Other Current Assets

9,372

(1,330)

Commodity Contracts(1)

Other Current Assets

24,824

(1,330)

(1) Amounts represent the gross fair value of commodity derivative assets and liabilities. The Company nets the commodity 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 commodity derivative contract. The amount or timing of cash collateral balances may impact the classification of the commodity derivative in the Consolidated Statements of Financial Position. The gross asset position as of ~~January 24,~~July 25, 2021 is offset by the obligation to return net cash collateral of ~~$2.6~~$17.1 million contained within the master netting arrangement. The gross liability position as of October 25, 2020 is offset by the right to reclaim net cash collateral of $12.3 million. See Note I - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Fair Value Hedge - Assets (Liabilities): The carrying amounts of the Company's fair value hedge assets (liabilities) are:

Location on Consolidated Statements

of Financial Position

Location on Consolidated Statements

of Financial Position

Carrying Amount(1) of the Hedged

Assets/(Liabilities)

Location on Consolidated Statements

of Financial Position

Carrying Amount of the Hedged
Assets/(Liabilities)

(in thousands)

January 24, 2021

October 25, 2020

(in thousands)

July 25, 2021

October 25, 2020

Accounts Payable(1)

7,018

4,269

Accounts Payable(1)

5,400

4,269

(1) Amounts represent the carrying amount of fair value hedged assets and liabilities which are offset by other assets included in master netting arrangements described above.

Accumulated Other Comprehensive Loss Impact: As of ~~January 24,~~July 25, 2021, the Company included in Accumulated Other Comprehensive Loss hedging gains ~~of $19.4 million~~ (before tax) ~~relating~~of $43.4 million on commodity contracts and $14.7 million related to ~~its~~interest rate settled positions. The Company expects to recognize the majority of ~~these~~the gains on commodity contracts over the next twelve months. Gains on interest rate contracts offset the hedged interest payments over the tenor of the debt instruments.

~~Table of Contents~~

The effect of Accumulated Other Comprehensive Loss for gains or losses (before tax) related to the Company's derivative instruments is as follows:


		Gain/(Loss) Recognized in AOCL (1)				Location on Consolidated Statements of Operations		Gain/(Loss) Reclassified from AOCL into Earnings (1)								Gain/(Loss) Recognized in AOCL (1)						Location on Consolidated Statements of Operations		Gain/(Loss) Reclassified from AOCL into Earnings (1)
		Thirteen Weeks Ended					Thirteen Weeks Ended							Thirteen Weeks Ended									Thirteen Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020			January 24, 2021		January 26, 2020		(in thousands)			July 25, 2021			July 26, 2020						July 25, 2021		July 26, 2020
Cash Flow Hedges:	Cash Flow Hedges:														Cash Flow Hedges:
Commodity Contracts	Commodity Contracts	$	16,552	$	(8,626)		Cost of Products Sold		$	(50)		$	(1,875)		Commodity Contracts		$	5,467		$	(943)		Cost of Products Sold		$	14,261		$	(18,645)
Excluded Component (2)												Excluded Component (2)				1,261			—					—			—
Interest Rate Contracts												Interest Rate Contracts				(3,675)			—			Interest Expense		152			—


	Gain/(Loss) Recognized in AOCL (1)				Location on Consolidated Statements of Operations	Gain/(Loss) Reclassified from AOCL into Earnings (1)
	Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
(in thousands)	July 25, 2021		July 26, 2020			July 25, 2021		July 26, 2020
Cash Flow Hedges:
Commodity Contracts	$	58,129	$	(57,514)	Cost of Products Sold	$	18,723	$	(25,997)
Excluded Component (2)	1,261		—			—		—
Interest Rate Contracts	14,864		—		Interest Expense	152		—

(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 corn options excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in AOCL.

Table of Contents

Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for gains or losses (before tax) related to the Company's derivative instruments is as follows:


		Cost of Products Sold				Consolidated Statements of Operations Impact
		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020				(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Consolidated Statements of Operations		$	2,010,977	$	1,916,014
Net Earnings Attributable to Hormel Foods Corporation								Net Earnings Attributable to Hormel Foods Corporation	$	176,917	$	203,119	$	627,101	$	673,726

Cash Flow Hedges - Commodity Contracts	Cash Flow Hedges - Commodity Contracts							Cash Flow Hedges - Commodity Contracts
Gain (Loss) Reclassified from AOCL	Gain (Loss) Reclassified from AOCL	(50)		(1,875)				Gain (Loss) Reclassified from AOCL	14,261		(18,645)		18,723		(25,997)

Amortization of Excluded Component from Options								Amortization of Excluded Component from Options	(1,543)		—		(1,543)		—

Fair Value Hedges - Commodity Contracts	Fair Value Hedges - Commodity Contracts							Fair Value Hedges - Commodity Contracts
Gain (Loss) on Commodity Futures (1)	Gain (Loss) on Commodity Futures (1)	(2,913)		3,186				Gain (Loss) on Commodity Futures (1)	(11,739)		4,341		(26,010)		13,487

Total Gain (Loss) on Commodity Contracts (2)								Total Gain (Loss) on Commodity Contracts (2)	$	979	$	(14,304)	$	(8,830)	$	(12,510)

Cash Flow Hedges - Interest Rate Locks								Cash Flow Hedges - Interest Rate Locks
Amortization of Gain on Interest Rate Locks								Amortization of Gain on Interest Rate Locks	152		—		152		—

Total Gain on Interest Rate Locks (3)								Total Gain on Interest Rate Locks (3)	$	152	$	—	$	152	$	—

Total Gain (Loss) Recognized in Earnings	Total Gain (Loss) Recognized in Earnings	$	(2,963)	$	1,311			Total Gain (Loss) Recognized in Earnings	$	1,131	$	(14,304)	$	(8,678)	$	(12,510)

(1) Amounts represent gains or losses on commodity contracts designated as fair value hedges that were closed during the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, and ~~January~~July 26, 2020, which were offset by a corresponding gain or loss on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity 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.

(2) Total Gain (Loss) on Commodity Contracts is recognized in earnings through Cost of Products Sold.

(3) Total Gain (Loss) on Interest Rate Locks is recognized in earnings through Interest Expense.

Table of Contents

NOTE G - PENSION AND OTHER POST-RETIREMENT BENEFITS

Net periodic benefit cost for pension and other post-retirement benefit plans consists of:


		Pension Benefits				Pension Benefits
		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020				(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Service Cost	Service Cost	$	9,107	$	8,896			Service Cost	$	9,107	$	8,896	$	27,321	$	26,688
Interest Cost	Interest Cost	12,362		13,410				Interest Cost	12,362		13,411		37,086		40,232
Expected Return on Plan Assets	Expected Return on Plan Assets	(25,189)		(25,321)				Expected Return on Plan Assets	(25,189)		(25,321)		(75,567)		(75,963)
Amortization of Prior Service Cost	Amortization of Prior Service Cost	(367)		(542)				Amortization of Prior Service Cost	(367)		(542)		(1,101)		(1,626)
Recognized Actuarial Loss	Recognized Actuarial Loss	5,578		5,596				Recognized Actuarial Loss	5,578		5,595		16,735		16,787

Net Periodic Cost	Net Periodic Cost	$	1,491	$	2,039			Net Periodic Cost	$	1,491	$	2,039	$	4,474	$	6,118


		Post-retirement Benefits				Post-retirement Benefits
		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020				(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Service Cost	Service Cost	$	131	$	195			Service Cost	$	131	$	192	$	392	$	579
Interest Cost	Interest Cost	1,948		2,460				Interest Cost	1,948		2,322		5,844		7,111
Amortization of Prior Service Cost	Amortization of Prior Service Cost	(164)		(663)				Amortization of Prior Service Cost	(164)		(662)		(492)		(1,988)
Recognized Actuarial Loss	Recognized Actuarial Loss	496		275				Recognized Actuarial Loss	495		261		1,486		784

Net Periodic Cost	Net Periodic Cost	$	2,411	$	2,267			Net Periodic Cost	$	2,410	$	2,113	$	7,230	$	6,486

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

Table of Contents

NOTE H - ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of Accumulated Other Comprehensive Loss are:


Thirteen Weeks Ended January 24, 2021
(in thousands)	(in thousands)	Foreign Currency Translation		Pension & Other Benefits			Hedging Deferred Gain (Loss)			Accumulated Other Comprehensive Loss		(in thousands)	Foreign Currency Translation		Pension & Other Benefits			Derivatives & Hedging			Accumulated Other Comprehensive Loss

Balance at April 25, 2021												Balance at April 25, 2021	$	(53,565)	$	(324,780)		$	52,717		$	(325,629)
Unrecognized Gains (Losses)												Unrecognized Gains (Losses)
Gross												Gross	12,513		—			3,054			15,567
Tax Effect												Tax Effect	—		—			(738)			(738)
Reclassification into Net Earnings												Reclassification into Net Earnings
Gross												Gross	—		5,542		(1)	(14,413)		(2)	(8,871)
Tax Effect												Tax Effect	—		(1,343)			3,485			2,142
Net of Tax Amount												Net of Tax Amount	12,513		4,199			(8,612)			8,100
Balance at July 25, 2021												Balance at July 25, 2021	$	(41,053)	$	(320,580)		$	44,105		$	(317,528)

Balance at October 25, 2020	Balance at October 25, 2020	$	(64,161)	$	(333,178)		$	2,089		$	(395,250)	Balance at October 25, 2020	$	(64,161)	$	(333,178)		$	2,089		$	(395,250)
Unrecognized Gains (Losses)	Unrecognized Gains (Losses)											Unrecognized Gains (Losses)
Gross	Gross	17,583		0			16,552			34,135		Gross	23,108		—			74,254			97,362
Tax Effect	Tax Effect	0		0			(3,993)			(3,993)		Tax Effect	—		—			(17,928)			(17,928)
Reclassification into Net Earnings	Reclassification into Net Earnings											Reclassification into Net Earnings
Gross	Gross	0		5,543		(1)	50		(2)	5,593		Gross	—		16,628		(1)	(18,875)		(2)	(2,247)
Tax Effect	Tax Effect	0		(1,343)			(10)			(1,353)		Tax Effect	—		(4,030)			4,565			535
Net of Tax Amount	Net of Tax Amount	17,583		4,199			12,599			34,381		Net of Tax Amount	23,108		12,598			42,016			77,722
Balance at January 24, 2021		$	(46,578)	$	(328,979)		$	14,688		$	(360,869)
Balance at July 25, 2021												Balance at July 25, 2021	$	(41,053)	$	(320,580)		$	44,105		$	(317,528)

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

(2) Included in Cost of Products Sold and Interest Expense in the Consolidated Statements of Operations. See Note F - Derivatives and Hedging for additional details.

~~Table of Contents~~

NOTE I - 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.

Table of Contents

The Company’s financial assets and liabilities carried at fair value on a recurring basis as of ~~January 24,~~July 25, 2021, and October 25, 2020, and their level within the fair value hierarchy, are:


		Fair Value Measurements at January 24, 2021									Fair Value Measurements at July 25, 2021
(in thousands)	(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)		(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)
Assets at Fair Value	Assets at Fair Value									Assets at Fair Value
Cash and Cash Equivalents (1)	Cash and Cash Equivalents (1)	$	1,751,541	$	1,750,458	$	1,083	$	0	Cash and Cash Equivalents (1)	$	291,363	$	286,153	$	5,210	$	—
Short-term Marketable Securities (2)	Short-term Marketable Securities (2)	17,520		5,749		11,771		0		Short-term Marketable Securities (2)	18,372		6,722		11,650		—
Other Trading Securities (3)	Other Trading Securities (3)	192,705		0		192,705		0		Other Trading Securities (3)	200,339		—		200,339		—
Commodity Derivatives (4)	Commodity Derivatives (4)	6,763		6,763		0		0		Commodity Derivatives (4)	11,821		7,023		4,798		—
Total Assets at Fair Value	Total Assets at Fair Value	$	1,968,529	$	1,762,970	$	205,559	$	0	Total Assets at Fair Value	$	521,895	$	299,898	$	221,997	$	—
Liabilities at Fair Value	Liabilities at Fair Value									Liabilities at Fair Value
Deferred Compensation (3)	Deferred Compensation (3)	$	68,714	$	0	$	68,714	$	0	Deferred Compensation (3)	$	69,365	$	—	$	69,365	$	—
Total Liabilities at Fair Value	Total Liabilities at Fair Value	$	68,714	$	0	$	68,714	$	0	Total Liabilities at Fair Value	$	69,365	$	—	$	69,365	$	—


		Fair Value Measurements at October 25, 2020									Fair Value Measurements at October 25, 2020
(in thousands)	(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)		(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)
Assets at Fair Value	Assets at Fair Value									Assets at Fair Value
Cash and Cash Equivalents (1)	Cash and Cash Equivalents (1)	$	1,714,309	$	1,713,098	$	1,211	$	0	Cash and Cash Equivalents (1)	$	1,714,309	$	1,713,098	$	1,211	$	—
Short-term Marketable Securities (2)	Short-term Marketable Securities (2)	17,338		5,728		11,610		0		Short-term Marketable Securities (2)	17,338		5,728		11,610		—
Other Trading Securities (3)	Other Trading Securities (3)	173,114		0		173,114		0		Other Trading Securities (3)	173,114		—		173,114		—
Commodity Derivatives (4)	Commodity Derivatives (4)	10,950		10,950		0		0		Commodity Derivatives (4)	10,950		10,950		—		—
Total Assets at Fair Value	Total Assets at Fair Value	$	1,915,711	$	1,729,776	$	185,935	$	0	Total Assets at Fair Value	$	1,915,711	$	1,729,776	$	185,935	$	—
Liabilities at Fair Value	Liabilities at Fair Value									Liabilities at Fair Value
Deferred Compensation (3)	Deferred Compensation (3)	$	65,154	$	0	$	65,154	$	0	Deferred Compensation (3)	$	65,154	$	—	$	65,154	$	—
Total Liabilities at Fair Value	Total Liabilities at Fair Value	$	65,154	$	0	$	65,154	$	0	Total Liabilities at Fair Value	$	65,154	$	—	$	65,154	$	—

The following methods and assumptions were used to estimate the fair value of the financial assets and liabilities above:

(1) The Company’s cash equivalents considered Level 1 consist primarily of bank deposits, money market funds rated AAA, or other highly liquid investment accounts, and have a maturity date of three months or less. Cash equivalents considered Level 2 are funds holding agency bonds or securities recognized at amortized cost.

~~Table of Contents~~

(2) The Company holds securities as part of a portfolio maintained to generate investment income and to provide cash for operations of the Company, if necessary. The portfolio is managed by a third party who is responsible for daily trading activities, and all assets within the portfolio are highly liquid. The cash, U.S. government securities, and money market funds rated AAA held by the portfolio are classified as Level 1. The current investment portfolio also includes corporate bonds and other asset backed securities for which there is an active, quoted market. Market prices are obtained from a variety of industry providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and therefore, these securities are classified as Level 2.

(3) The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred compensation plans. The funds held in the rabbi trust relate to the supplemental executive retirement plans and have been invested primarily in fixed income funds managed by a third party. The declared rate on these funds is set based on a formula using the yield of the general account investment portfolio supporting the fund, adjusted for expenses and other charges. The rate is guaranteed for one year at issue and may be reset annually on the policy anniversary, subject to a guaranteed minimum rate. As the value is based on adjusted market rates and the fixed rate is only reset on an annual basis, these funds are classified as Level 2.

Under the deferred compensation plans, 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~~options. These funds are managed by a

Table of Contents

third-party insurance policy, the values of which represent their cash surrender value based on the fair value of the underlying investments in the account and include equity securities, money market accounts, bond funds or other portfolios for which there is an active quoted market. Therefore, these policies 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 also classified as Level 2. The funds held in the rabbi trust are included in Other Assets on the Consolidated Statements of Financial Position. The related deferred compensation liabilities are included in Other Long-term Liabilities on the Consolidated Statements of Financial Position with investment options generally mirroring those funds held by the rabbi trust. Therefore, the investments are classified as Level 2. Securities held by the trust are classified as trading securities. Unrealized gains and losses associated with these investments are included in the Company's earnings. During the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, securities held by the trust generated gains of ~~$11.8~~$1.5 million and $18.6 million, respectively, compared to ~~gains~~losses of ~~$5.2~~$9.3 million and $2.6 million for the thirteen and thirty-nine weeks ended ~~January~~July 26, ~~2020.~~2020, respectively.

(4) The Company’s commodity derivatives represent futures contracts and options used in its hedging or other programs to offset price fluctuations associated with purchases of corn and hogs, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers. The Company’s futures contracts for corn are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange. These are active markets with quoted prices available, and these contracts are classified as Level 1. Over-the-counter (OTC) derivative instruments are valued using discounted cash flow models, observable and non-observable market inputs, and other mathematical pricing models. The Company’s corn futures option contracts are OTC instruments classified as Level 2 whose value is calculated using the Black-Scholes pricing model, corn future prices quoted from the Chicago Board of Trade, and other adjustments to inputs that are observable in active markets. All derivatives are reviewed for potential credit risk and risk of nonperformance. The net balance for each program is included in Other Current Assets or Accounts Payable, as appropriate, in the Consolidated Statements of Financial Position. As of ~~January 24,~~July 25, 2021, the Company has recognized the obligation to return net cash collateral of ~~$2.6~~$17.1 million from various counterparties (including ~~cash of $11.1 million less $13.7~~$29.4 million of realized ~~loss)~~gains offset by cash owed of $46.5 million). As of October 25, 2020, the Company had recognized the right to reclaim net cash collateral of $12.3 million from various counterparties (including cash of $25.5 million less $13.2 million of realized loss).

The Company’s financial assets and liabilities include accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value. The Company does not carry its long-term debt at fair value in its Consolidated Statements of Financial Position. The fair value of long-term debt, utilizing discounted cash flows (Level 2), was ~~$1,267.7~~$3,367.0 million as of ~~January 24,~~July 25, 2021, and $1,238.8 million as of October 25, 2020.

In accordance with the provisions of ASC 820, the Company measures certain nonfinancial assets and liabilities at fair value, which are recognized or disclosed on a nonrecurring basis (e.g. goodwill, intangible assets, and property, plant and equipment). During the ~~thirteen~~thirty-nine weeks ended ~~January 24,~~July 25, 2021, and ~~January~~July 26, 2020, there were no material remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

Table of Contents

NOTE J - LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS

Long-term Debt consists of:


(in thousands)	July 25, 2021		October 25, 2020
Senior Unsecured Notes, with Interest at 3.050%, Interest Due Semi-annually through June 2051 Maturity Date	$	600,000	$	—
Senior Unsecured Notes, with Interest at 1.800%, Interest Due Semi-annually through June 2030 Maturity Date	1,000,000		1,000,000
Senior Unsecured Notes, with Interest at 1.700%, Interest Due Semi-annually through June 2028 Maturity Date	750,000		—
Senior Unsecured Notes, with Interest at 0.650%, Interest Due Semi-annually through June 2024 Maturity Date	950,000		—
Senior Unsecured Notes, with Interest at 4.125%, Interest Due Semi-annually through April 2021 Maturity Date	—		250,000
Unamortized Discount on Senior Notes	(8,668)		(2,630)
Unamortized Debt Issuance Costs	(24,329)		(7,979)
Finance Lease Liabilities	55,071		61,030
Other Financing Arrangements	2,920		3,206
Total	$	3,324,994	$	1,303,627
Less: Current Maturities of Long-term Debt	8,732		258,691
Long-term Debt - Less Current Maturities	$	3,316,262	$	1,044,936

Senior Unsecured Notes: The Company repaid its $250.0 million senior unsecured notes upon maturity in April 2021.

On June 11, 2020, the Company issued senior notes in an aggregate principal amount of $1.0 billion, due June 11, 2030. The notes bear interest at a fixed rate of 1.800% per annum, with interest paid semi-annually in arrears on June 11 and December 11 of each year, commencing December 11, 2020. The notes may be redeemed in whole or in part at any time at the applicable redemption price set forth in the prospectus supplement. If a change of control triggering event occurs, the Company must offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

On June 3, 2021, the Company issued $950.0 million aggregate principal amount of its 0.650% notes due 2024 (the "2024 Notes"), $750.0 million aggregate principal amount of its 1.700% notes due 2028 (the "2028 Notes") and $600.0 million aggregate principal amount of its 3.050% notes due 2051 (the "2051 Notes"). Interest will accrue per annum at the stated rates with interest on the notes being paid semi-annually in arrears on June 3 and December 3 of each year, commencing December 3, 2021. Interest rate risk was hedged utilizing interest rate locks on the 2028 Notes and 2051 Notes. The Company lifted the hedges in conjunction with the issuance of these notes. See Note F - Derivatives and Hedging for additional details. The 2024 Notes may be redeemed in whole or in part one year after their issuance without penalty for early partial payments or full redemption. The 2028 Notes and 2051 Notes may be redeemed in whole or in part at any time at the applicable redemption price. If a change of control triggering event occurs, the Company must offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

Unsecured Revolving Credit Facility: On May 6, 2021, the Company entered into an unsecured revolving credit agreement with Wells Fargo Bank, National Association as administrative agent, swingline lender and issuing lender, U.S. Bank National Association, JPMorgan Chase Bank, N.A. and BofA Securities, Inc. as syndication agents and the lenders party thereto. In connection with entering the revolving credit agreement, the Company terminated its existing credit facility that was entered into on June 24, 2015. The revolving credit agreement provides for an unsecured revolving credit facility with an aggregate principal commitment amount at any time outstanding of up to $750.0 million with an uncommitted increase option of an additional $375.0 million upon the satisfaction of certain conditions. Extensions of credit under the facility may be made in the form of revolving loans, swingline loans and letters of credit. The lending commitments under the agreement are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of July 25, 2021, and October 25, 2020, the Company had no outstanding draws from these facilities.

Debt Covenants: The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of July 25, 2021, the Company was in compliance with all of these covenants.

Table of Contents

NOTE K - 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.

The Company's effective tax rate for the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, was ~~19.7~~13.3 percent and 18.9 percent compared to ~~16.3~~21.6 percent and 19.4 percent for the corresponding ~~period~~periods a year ago. The decrease in the effective tax rate for the thirteen weeks ended July 25, 2021 was primarily driven by an increased volume of stock option exercises and a one-time foreign tax benefit.

The amount of unrecognized tax benefits, including interest and penalties, is recorded in Other Long-term Liabilities. If recognized as of ~~January 24,~~July 25, 2021, and ~~January~~July 26, 2020, ~~$28.3~~$24.5 million and ~~$23.3~~$24.7 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. Interest and penalties included in income tax expense was immaterial for the thirteen and thirty-nine weeks ended ~~January 24,~~July 25, 2021, and ~~January~~July 26, 2020. The amount of accrued interest and penalties at ~~January 24,~~July 25, 2021, and ~~January~~July 26, 2020, associated with unrecognized tax benefits was ~~$7.3~~$7.5 million and ~~$6.5~~$6.2 million, respectively.

The Company is regularly audited by federal and state taxing authorities. The United States Internal Revenue Service (I.R.S.) concluded its examination of fiscal 2018 in the fourth quarter of fiscal ~~2020.~~2020, and fiscal 2019 in the second quarter of fiscal 2021. The Company has elected to participate in the Compliance Assurance Process (CAP) for fiscal years through 2022. 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, dating back to 2015. 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 KL - EARNINGS PER SHARE DATA

The reported net earnings attributable to the Company were used when computing basic and diluted earnings per share. The following table sets forth the shares used as the denominator for those computations:


		Thirteen Weeks Ended		Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021	January 26, 2020		(in thousands)	July 25, 2021	July 26, 2020	July 25, 2021	July 26, 2020
Basic Weighted-Average Shares Outstanding	Basic Weighted-Average Shares Outstanding	539,913	535,075		Basic Weighted-Average Shares Outstanding	541,746	539,108	540,618	537,434
Dilutive Potential Common Shares	Dilutive Potential Common Shares	7,531	9,740		Dilutive Potential Common Shares	6,326	8,041	7,066	8,678
Diluted Weighted-Average Shares Outstanding	Diluted Weighted-Average Shares Outstanding	547,444	544,815		Diluted Weighted-Average Shares Outstanding	548,072	547,149	547,684	546,112

Antidilutive Potential Common Shares	Antidilutive Potential Common Shares	2,194	2,734		Antidilutive Potential Common Shares	2,350	1,626	2,305	2,178

~~Table of Contents~~

NOTE L-M- SEGMENT REPORTING

The Company develops, processes, and distributes a wide array of food products in a variety of markets. The Company reports its results in the following 4 segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other.

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

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

Table of Contents

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

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

Intersegment sales are recorded at prices that approximate cost and are eliminated in the Consolidated Statements of Operations. The Company does not allocate deferred compensation, investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. One-time acquisition-related costs and accounting adjustments associated with the purchase of the Planters® snack nuts business were also retained at the corporate level. Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

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

Table of Contents


		Thirteen Weeks Ended				Thirteen Weeks Ended	Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020				(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Sales to Unaffiliated Customers	Sales to Unaffiliated Customers							Sales to Unaffiliated Customers
Grocery Products	Grocery Products	$	577,599	$	540,626			Grocery Products	$	698,584	$	580,798	$	1,904,415	$	1,804,674
Refrigerated Foods	Refrigerated Foods	1,367,077		1,351,790				Refrigerated Foods	1,624,641		1,363,092		4,445,099		3,962,219
Jennie-O Turkey Store	Jennie-O Turkey Store	333,321		330,128				Jennie-O Turkey Store	350,897		286,805		1,035,397		959,988
International & Other	International & Other	183,150		161,890				International & Other	189,548		150,762		546,528		461,475
Total	Total	$	2,461,147	$	2,384,434			Total	$	2,863,670	$	2,381,457	$	7,931,438	$	7,188,357

Intersegment Sales	Intersegment Sales							Intersegment Sales
Grocery Products	Grocery Products	$	0	$	7			Grocery Products	$	—	$	—	$	—	$	13
Refrigerated Foods	Refrigerated Foods	5,957		5,803				Refrigerated Foods	7,636		5,092		19,527		16,143
Jennie-O Turkey Store	Jennie-O Turkey Store	26,692		27,842				Jennie-O Turkey Store	30,581		25,361		89,715		82,082
International & Other	International & Other	0		0				International & Other	—		—		—		0
Total	Total	32,650		33,652				Total	38,217		30,454		109,242		98,237
Intersegment Elimination	Intersegment Elimination	(32,650)		(33,652)				Intersegment Elimination	(38,217)		(30,454)		(109,242)		(98,237)
Total	Total	$	—	$	—			Total	$	—	$	—	$	—	$	—

Net Sales	Net Sales							Net Sales
Grocery Products	Grocery Products	$	577,599	$	540,633			Grocery Products	$	698,584	$	580,798	$	1,904,415	$	1,804,687
Refrigerated Foods	Refrigerated Foods	1,373,034		1,357,593				Refrigerated Foods	1,632,277		1,368,185		4,464,626		3,978,362
Jennie-O Turkey Store	Jennie-O Turkey Store	360,013		357,970				Jennie-O Turkey Store	381,478		312,166		1,125,112		1,042,070
International & Other	International & Other	183,150		161,890				International & Other	189,548		150,762		546,528		461,475
Intersegment Elimination	Intersegment Elimination	(32,650)		(33,652)				Intersegment Elimination	(38,217)		(30,454)		(109,242)		(98,237)
Total	Total	$	2,461,147	$	2,384,434			Total	$	2,863,670	$	2,381,457	$	7,931,438	$	7,188,357

Segment Profit	Segment Profit							Segment Profit
Grocery Products	Grocery Products	$	92,202	$	68,435			Grocery Products	$	80,791	$	80,169	$	270,963	$	276,367
Refrigerated Foods	Refrigerated Foods	141,171		167,343				Refrigerated Foods	153,216		152,822		467,740		451,596
Jennie-O Turkey Store	Jennie-O Turkey Store	26,940		38,551				Jennie-O Turkey Store	5,874		7,069		45,514		72,968
International & Other	International & Other	32,204		19,952				International & Other	27,915		23,620		84,600		66,735
Total Segment Profit	Total Segment Profit	292,517		294,280				Total Segment Profit	267,796		263,679		868,817		867,666
Net Unallocated Expense	Net Unallocated Expense	15,547		4,199				Net Unallocated Expense	63,715		4,457		95,166		31,754

Noncontrolling Interest	Noncontrolling Interest	112		81				Noncontrolling Interest	157		141		290		103
Earnings Before Income Taxes	Earnings Before Income Taxes	$	277,082	$	290,162			Earnings Before Income Taxes	$	204,238	$	259,364	$	773,940	$	836,014

Revenue has been disaggregated into the categories below to show how sales channels affect the nature, amount, timing, and uncertainty of revenue and cash flows. The amount of total revenues contributed by sales channel ~~for the thirteen weeks~~ are:


		Thirteen Weeks Ended				Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020			(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
U.S. Retail	U.S. Retail	$	1,390,628	$	1,226,430		U.S. Retail	$	1,520,365	$	1,390,075	$	4,365,081	$	4,072,156
U.S. Foodservice	U.S. Foodservice	586,336		709,106			U.S. Foodservice	851,897		588,130		2,162,481		1,864,050
U.S. Deli	U.S. Deli	279,259		260,638			U.S. Deli	266,506		238,076		777,308		721,748
International	International	204,924		188,260			International	224,902		165,177		626,568		530,402
Total	Total	$	2,461,147	$	2,384,434		Total	$	2,863,670	$	2,381,457	$	7,931,438	$	7,188,357

The ~~shift~~improvement demonstrated in ~~revenues from the~~ U.S. Foodservice ~~to U.S. Retail channel~~ in ~~first quarter of fiscal~~the thirteen and thirty-nine weeks ended July 25, 2021, was driven by recovery of the foodservice industry following restrictions imposed by the COVID-19 pandemic ~~and subsequent restrictions.~~in fiscal 2020.

Table of Contents

The Company’s products primarily consist of meat and other food products. The amount of total revenues contributed by classes of similar products are:


		Thirteen Weeks Ended				Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020			(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Perishable	Perishable	$	1,376,821	$	1,400,195		Perishable	$	1,610,378	$	1,365,741	$	4,440,347	$	4,016,266
Shelf-stable	Shelf-stable	523,936		450,704			Shelf-stable	670,446		511,732		1,761,883		1,581,789
Poultry	Poultry	474,651		459,083			Poultry	500,121		426,345		1,468,957		1,368,386
Miscellaneous	Miscellaneous	85,739		74,452			Miscellaneous	82,726		77,640		260,251		221,915
Total	Total	$	2,461,147	$	2,384,434		Total	$	2,863,670	$	2,381,457	$	7,931,438	$	7,188,357

Perishable includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding Jennie-O Turkey Store products). Shelf-stable includes canned luncheon meats, nut butters, chilies, shelf-stable microwaveable meals, hash, stews, salsas, tortilla chips, snack nuts, and other items that do not require refrigeration. The Poultry category is composed primarily of Jennie-O Turkey Store products. The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products. ~~The increase in Shelf-stable sales in the first quarter of fiscal 2021 was driven by consumer demand during the COVID-19 pandemic.~~

~~NOTE M - SUBSEQUENT EVENT~~

~~On February 10, 2021, subsequent to~~The asset values below reflect the ~~end~~preliminary purchase allocations associated with the acquisition of ~~the first quarter, the Company announced that it has entered into a definitive agreement to acquire~~ the Planters® snack nuts ~~portfolio from the Kraft Heinz Company. The proposed transaction is expected to close in calendar Q2 2021, subject to regulatory review and approval. The acquisition includes the~~ ~~Planters~~®, ~~NUT-rition~~®, ~~Planters~~®~~Cheez Balls and~~ ~~Corn Nuts~~®~~brands. The purchase price is $3.35 billion, subject to customary adjustments. The transaction is expected to provide a tax benefit valued at approximately $560 million.~~business.

~~Planters~~®~~is an iconic leading snack brand and this acquisition will allow the Company to significantly expand its presence in the growing snacking space. The~~ ~~Planters~~®~~brand will complement the Company’s snacking portfolioand broaden the scope for future acquisitions in this space.~~

~~The transaction is expected to be funded from the Company’s cash on hand and a combination of long- and short-term debt.~~


(in thousands)	July 25, 2021		October 25, 2020
Assets
Grocery Products	$	4,590,540	$	1,713,883
Refrigerated Foods	4,758,687		4,188,250
Jennie-O Turkey Store	1,087,773		1,111,318
International & Other	797,181		721,729
Corporate	1,098,001		2,173,101
Total	$	12,332,182	$	9,908,282

Additions to Property, Plant, & Equipment
Grocery Products	$	12,468	$	34,409
Refrigerated Foods	93,020		249,441
Jennie-O Turkey Store	10,723		42,042
International & Other	6,776		3,737
Corporate	16,375		37,872
Total	$	139,361	$	367,501

Table of Contents

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Overview

The Company is a global manufacturer and marketer of branded food products. It operates in four reportable segments as described in Note LM - Segment Reporting in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company reported net earnings per diluted share of ~~$0.41~~$0.32 for the ~~first~~third quarter of fiscal 2021, down 14% compared to ~~$0.45 per diluted share in the first quarter of fiscal 2020.~~last year. Significant factors impacting the quarter were:

•~~The ongoing COVID-19 pandemic~~Net sales for the third quarter were the highest in the Company's history, with growth from every segment and ~~subsequent changes in consumer behavior continued to drive higher and sustained retail~~all four channels. Net sales ~~in each~~benefited from the inclusion of the ~~Company's segments. Foodservice net sales were impacted by regional shutdowns during~~Planters® snack nuts business.

•Segment profit for the quarter increased 2 percent, due primarily from the contribution of the Planters® snack nuts business, strong growth from the Company's foodservice business in Refrigerated Foods, and ~~remained below prior year levels.~~growth from the International & Other segment. All four business segments absorbed higher input costs due to inflation on raw materials, freight, labor, and supplies.

•Earnings before income taxes for the quarter ~~declined $13 million~~decreased 21 percent compared to the prior year. ~~The Company absorbed~~One-time acquisition costs and accounting adjustments related to the acquisition of the Planters® snack nuts business were approximately ~~$15~~$40 million ~~in direct incremental supply chain costs due to COVID-related expenses.~~for the quarter.

•International & Other segment profit increased, driven by higher sales and improved branded and fresh pork export margins.

•Grocery Products segment profit increased due to strong results from the MegaMex joint venture and the contribution from the Planters® snack nuts business. These benefits were offset by higher ~~sales, improved mix~~input costs, and higher ~~earnings from MegaMex.~~

•~~International & Other segment profit increased significantly driven by improved results for branded exports, an accelerating recovery in China~~manufacturing and ~~higher income from the Company's partners in the Philippines, South Korea and Europe.~~logistics costs.

•Refrigerated Foods segment profit ~~declined due to lower~~was flat, as higher earnings from the foodservice ~~sales, a decrease in~~business, numerous pricing actions, and increased commodity profits fully offset significantly higher raw material costs and ~~incremental supply chain costs related to the COVID-19 pandemic.~~increased freight expenses.

•Jennie-O Turkey Store segment profit ~~declined sharply primarily driven by~~was lower ~~foodservice sales, increased supply chain costs related~~due to the ~~COVID-19 pandemic~~impact of significantly higher feed costs and ~~higher~~an increase in freight expenses.

•~~Year-to-date cash flow from operations was $205.7 million, up 9 percent compared to last year.~~

•~~Subsequent to the end of the quarter, the~~The Company ~~announced a definitive agreement to acquire~~acquired the Planters® snack nuts business for ~~$3.35~~$3.4 billion in cash in a transaction that is expected to provide a tax benefit valued at approximately $560 million, equating to an effective purchase price of $2.79 billion. The proposed transaction is expected to close in calendar Q2 2021, subject to regulatory review and approval.during the quarter. The acquisition ~~includes~~included the Planters®, NUT-rition®, Planters® Cheez Balls and Corn Nuts® brands. The transaction closed on June 7, 2021.

Response to COVID-19

The Company is committed to making investments necessary to keep its team members safe. In the ~~first~~third quarter of fiscal 2021, the Company absorbed approximately ~~$15~~$2 million ($21 million for the first nine months of fiscal 2021) in direct incremental supply chain costs primarily related to ~~lower production volumes and~~ enhanced safety measures in its production facilities. ~~As the pandemic evolves and the vaccine becomes more widely available, the Company will continue to keep the health and safety of its team members as the top priority.~~ The Company estimates most of the incremental supply chain costs are temporary and will ~~be minimized after~~eventually decline as the pandemic subsides.

Consolidated Results

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


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands, except per share amounts)	(in thousands, except per share amounts)	January 24, 2021		January 26, 2020		% Change		(in thousands, except per share amounts)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Volume (lbs.)	Volume (lbs.)	1,179,706		1,186,987		(0.6)		Volume (lbs.)	1,180,634		1,165,214		1.3	3,553,288		3,585,273		(0.9)

Organic Volume (1)								Organic Volume (1)	1,143,725		1,165,214		(1.8)	3,510,214		3,585,273		(2.1)
Net Sales	Net Sales	$	2,461,147	$	2,384,434	3.2		Net Sales	$	2,863,670	$	2,381,457	20.2	$	7,931,438	$	7,188,357	10.3

Organic Net Sales (1)								Organic Net Sales (1)	2,722,330		2,381,457		14.3	7,755,075		7,188,357		7.9
Earnings Before Income Taxes	Earnings Before Income Taxes	277,082		290,162		(4.5)		Earnings Before Income Taxes	204,238		259,364		(21.3)	773,940		836,014		(7.4)
Net Earnings Attributable to Hormel Foods Corporation	Net Earnings Attributable to Hormel Foods Corporation	222,283		242,872		(8.5)		Net Earnings Attributable to Hormel Foods Corporation	176,917		203,119		(12.9)	627,101		673,726		(6.9)
Diluted Earnings per Share	Diluted Earnings per Share	0.41		0.45		(8.9)		Diluted Earnings per Share	0.32		0.37		(13.5)	1.15		1.23		(6.5)

Adjusted Diluted Earnings Per Share (1)								Adjusted Diluted Earnings Per Share (1)	0.39		0.37		5.4	1.21		1.23		(1.6)

Table of Contents

(1) The non-GAAP adjusted financial measurements of organic net sales, organic volume and adjusted diluted earnings per share are presented to provide investors with additional information to facilitate the comparison of past and present operations. 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 acquisition of the Planters® snack nuts business (June 2021) in the Grocery Products, Refrigerated Foods and International & Other segments and the Sadler's Smokehouse acquisition (March 2020) in the Refrigerated Foods segment. Adjusted diluted earnings per share excludes the impact of the acquisition-related expenses and accounting adjustments related to the acquisition of the Planters® snack nuts business. The tax impact was calculated using the effective tax rate for the quarter the expenses and accounting adjustments were incurred.

~~Net Sales~~The Company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

~~For~~The tables below show the ~~first quarter of fiscal 2021, all four segments generated net sales growth. Record net sales for~~calculations to reconcile from the ~~quarter were primarily driven by higher retail, deli and international sales. Brands such as SPAM~~®, ~~SKIPPY~~®, ~~Hormel~~® ~~Black Label~~®~~, Applegate~~®~~, Columbus~~® ~~and~~ ~~Jennie-O~~® ~~experienced robust gains. Strong whole bird sales at Jennie-O Turkey Store and pork commodity sales in Refrigerated Foods also contributed~~GAAP measures to ~~record sales. These increases more than offset continued declines in~~ the ~~Company's foodservice businesses, which were negatively impacted by regional shutdowns caused by a resurgence in COVID-19 cases during the quarter.~~non-GAAP adjusted measures.

Table of Contents


RECONCILIATION OF NON-GAAP MEASURES
In thousands, except per share amounts

ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP)


	Thirteen Weeks Ended
	July 25, 2021						July 26, 2020
	Reported GAAP		Acquisition Costs and Adjustments		Non-GAAP		Reported GAAP		Non-GAAP % Change
Net Sales	$	2,863,670	$	—	$	2,863,670	$	2,381,457	20.2
Cost of Products Sold	2,440,322		(12,900)		2,427,422		1,959,032		23.9
Gross Profit	423,348		12,900		436,248		422,426		3.3
Selling, General and Administrative	226,284		(27,462)		198,822		181,085		9.8
Equity in Earnings of Affiliates	10,420		—		10,420		8,235		26.5
Operating Income	207,484		40,362		247,846		249,576		(0.7)
Interest and Investment Income (Expense)	8,457		—		8,457		15,513		(45.5)
Interest Expense	(11,703)		—		(11,703)		(5,724)		104.5
Earnings Before Income Taxes	204,238		40,362		244,600		259,364		(5.7)
Provision for Income Taxes	27,164		5,368		32,532		56,103		(42.0)
Net Earnings	177,074		34,994		212,068		203,260		4.3
Less: Net Earnings Attributable to Noncontrolling Interest	157		—		157		141		11.3
Net Earnings Attributable to Hormel Foods Corporation	$	176,917	$	34,994	$	211,911	$	203,119	4.3

Diluted Net Earnings Per Share	$	0.32	$	0.06	$	0.39	$	0.37	5.4



	Thirty-Nine Weeks Ended
	July 25, 2021						July 26, 2020
	Reported GAAP		Acquisition Costs and Adjustments		Non-GAAP		Reported GAAP		Non-GAAP % Change
Net Sales	$	7,931,438	$	—	$	7,931,438	$	7,188,357	10.3
Cost of Products Sold	6,581,613		(12,900)		6,568,713		5,820,158		12.9
Gross Profit	1,349,825		12,900		1,362,725		1,368,198		(0.4)
Selling, General and Administrative	622,630		(30,303)		592,327		570,518		3.8
Equity in Earnings of Affiliates	37,722		—		37,722		25,843		46.0
Operating Income	764,917		43,203		808,120		823,523		(1.9)
Interest and Investment Income (Expense)	36,740		—		36,740		25,289		45.3
Interest Expense	(27,718)		—		(27,718)		(12,798)		116.6
Earnings Before Income Taxes	773,940		43,203		817,143		836,014		(2.3)
Provision for Income Taxes	146,549		5,975		152,524		162,186		(6.0)
Net Earnings	627,390		37,228		664,618		673,828		(1.4)
Less: Net Earnings Attributable to Noncontrolling Interest	290		—		290		103		181.6
Net Earnings Attributable to Hormel Foods Corporation	$	627,101	$	37,228	$	664,329	$	673,726	(1.4)

Diluted Net Earnings Per Share	$	1.15	$	0.06	$	1.21	$	1.23	(1.6)

Table of Contents


ORGANIC VOLUME AND NET SALES (NON-GAAP)

	Thirteen Weeks Ended
	July 25, 2021						July 26, 2020
(in thousands)	Reported GAAP		Acquisitions		Organic (Non-GAAP)		Reported GAAP		Organic % Change
Volume (lbs.)
Grocery Products	319,216		(30,124)		289,092		307,198		(5.9)
Refrigerated Foods	591,143		(5,784)		585,359		605,546		(3.3)
Jennie-O Turkey Store	187,220		—		187,220		171,313		9.3
International & Other	83,055		(1,001)		82,054		81,156		1.1
Total Volume	1,180,634		(36,909)		1,143,725		1,165,214		(1.8)

Net Sales
Grocery Products	$	698,584	$	(117,681)	$	580,903	$	580,798	—
Refrigerated Foods	1,624,641		(21,002)		1,603,639		1,363,092		17.6
Jennie-O Turkey Store	350,897		—		350,897		286,805		22.3
International & Other	189,548		(2,657)		186,891		150,762		24.0
Total Net Sales	$	2,863,670	$	(141,340)	$	2,722,330	$	2,381,457	14.3

	Thirty-Nine Weeks Ended
	July 25, 2021						July 26, 2020
(in thousands)	Reported GAAP		Acquisitions		Organic (Non-GAAP)		Reported GAAP		Organic % Change
Volume (lbs.)
Grocery Products	937,345		(30,124)		907,221		963,819		(5.9)
Refrigerated Foods	1,779,729		(11,950)		1,767,779		1,787,698		(1.1)
Jennie-O Turkey Store	583,413		—		583,413		577,990		0.9
International & Other	252,801		(1,001)		251,800		255,766		(1.6)
Total Volume	3,553,288		(43,075)		3,510,214		3,585,273		(2.1)

Net Sales
Grocery Products	$	1,904,415	$	(117,681)	$	1,786,734	$	1,804,674	(1.0)
Refrigerated Foods	4,445,099		(56,026)		4,389,073		3,962,219		10.8
Jennie-O Turkey Store	1,035,397		—		1,035,397		959,988		7.9
International & Other	546,528		(2,657)		543,871		461,475		17.9
Total Net Sales	$	7,931,438	$	(176,364)	$	7,755,075	$	7,188,357	7.9

Net Sales

The Company delivered record quarterly net sales, with growth from all four segments and across all four channels. Strong results from the Company's foodservice businesses in Refrigerated Foods and Jennie-O Turkey Store, the inclusion of the Planters® snack nuts business, and increased commodity sales in Jennie-O Turkey Store were the primary drivers of record sales for the quarter. All segments benefited from higher net pricing during the quarter due to strategic actions taken to offset inflationary pressures.

The Company delivered record net sales for the first nine months of fiscal 2021. The increases are due primarily to strong growth from the retail, deli and foodservice businesses within Refrigerated Foods, the inclusion of the Planters® snack nuts business, continued strength within International & Other, and higher commodity sales in Jennie-O Turkey Store.

Table of Contents

Cost of Products Sold


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020		% Change		(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Cost of Products Sold	Cost of Products Sold	$	2,010,977	$	1,916,014	5.0		Cost of Products Sold	$	2,440,322	$	1,959,032	24.6	$	6,581,613	$	5,820,158	13.1

Cost of products sold for the third quarter and first ~~quarter~~nine months of fiscal 2021 increased due to ~~record net sales~~inflationary pressures stemming from raw materials, packaging, freight, labor and ~~approximately $15 million in direct~~many other inputs. The inclusion of the Planters® snack nuts business during the third quarter also was a driver of higher costs.

Direct incremental supply chain costs related to the COVID-19 ~~pandemic. These~~pandemic for the third quarter and first nine months of fiscal 2021 were approximately $2 million and $21 million, respectively. This compares to approximately $40 million and $60 million of higher operational costs ~~included lower production volumes and enhanced safety measures~~related to the COVID-19 pandemic incurred in the ~~Company's facilities.~~third quarter and the first nine months of fiscal 2020.

The Company expects ~~higher grain costs~~ to ~~negatively impact Jennie-O Turkey Store. Grain costs are also expected to drive the price of hogs higher~~operate in a high cost environment for the ~~balance~~remainder of the year. ~~Incremental COVID-related costs are expected to decrease as the pandemic subsides.~~

Gross Profit


		Thirteen Weeks Ended							Thirteen Weeks Ended								Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021			January 26, 2020			% Change		(in thousands)	July 25, 2021			July 26, 2020				% Change	July 25, 2021			July 26, 2020			% Change
Gross Profit	Gross Profit	$	450,170		$	468,421		(3.9)		Gross Profit	$	423,348		$	422,426			0.2	$	1,349,825		$	1,368,198		(1.3)
Percentage of Net Sales	Percentage of Net Sales	18.3		%	19.6		%			Percentage of Net Sales	14.8		%	17.7		%			17.0		%	19.0		%

~~For~~Gross profit as a percentage of net sales for the third quarter and first nine months of 2021 declined, driven primarily by broad-based inflationary pressures and a lag in mitigating pricing actions. Gross profit as a percentage of net sales declined for all four business segments during the third quarter and first nine months of fiscal 2021.

Looking ahead to the fourth quarter of fiscal 2021, the Company expects gross profit as a percentage of net sales declined. Record sales, the mix impact from lower enterprise-wide foodservice sales and higher operational costs related to the impact of the COVID-19 pandemic were the primary drivers of the decline. These factors were partially offset by improved margins in the Grocery Products and International and Other segments.

~~Looking ahead to the second quarter of fiscal 2021, the Company anticipates Refrigerated Foods~~ to improve ~~on better foodservice results~~sequentially compared to the ~~prior year and for~~third quarter as additional pricing actions go into effect. An acceleration in input cost inflation poses the ~~International and Other segment~~largest risk to show growth due to continued strength in China. These improvements are expected to offset a decline in Grocery Products, which benefited from unprecedented demand in the second quarter of last year. Jennie-O Turkey Store is expected to be negatively impacted by the dramatic increase in grain costs. Price increases across the Jennie-O Turkey store portfolio are expected to take effect late during the second quarter.this assumption.

Selling, General and Administrative (SG&A)


		Thirteen Weeks Ended							Thirteen Weeks Ended					Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021			January 26, 2020			% Change		(in thousands)	July 25, 2021			July 26, 2020			% Change	July 25, 2021			July 26, 2020			% Change
SG&A	SG&A	$	196,380		$	195,521		0.4		SG&A	$	226,284		$	181,085		25.0	$	622,630		$	570,518		9.1
Percentage of Net Sales	Percentage of Net Sales	8.0		%	8.2		%			Percentage of Net Sales	7.9		%	7.6		%		7.9		%	7.9		%

For the third quarter and first nine months of fiscal 2021, SG&A expenses ~~for the first quarter were flat compared~~increased due to one-time acquisition-related costs related to the ~~prior year.~~Planters® snack nuts business and higher employee-related expenses.

Advertising spend in the ~~first~~third quarter was ~~$34~~$31 million, ~~down 3%~~compared to $24 million last year. Advertising investments for the first nine months of fiscal 2021 were up 1 percent compared to last year. The Company plans to continue to invest ~~behind~~in its leading ~~brands, including SPAM~~®~~, Hormel~~® ~~Black Label~~®~~, Jennie-O~~®, ~~SKIPPY~~® ~~and~~ ~~Hormel~~® ~~pepperoni.~~brands.

Equity in Earnings of Affiliates


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020		% Change		(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Equity in Earnings of Affiliates	Equity in Earnings of Affiliates	$	14,228	$	7,588	87.5		Equity in Earnings of Affiliates	$	10,420	$	8,235	26.5	$	37,722	$	25,843	45.9

Equity in earnings of affiliates for the third quarter and first ~~quarter~~nine months increased significantly due to ~~a stronger performance~~continued strength at MegaMex and from the Company's joint venture in the ~~Philippines and improved results for MegaMex due to favorable avocado costs.~~Philippines.

Table of Contents

Effective Tax Rate

Thirteen Weeks Ended
January 24, 2021 January 26, 2020
Effective Tax Rate 19.7 % 16.3 %


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Effective Tax Rate	13.3	%	21.6	%	18.9	%	19.4	%

The lower effective tax rate in the ~~prior year~~current quarter was driven by a higher volume of stock option exercises ~~during the quarter. For further information, refer to Note J - Income Taxes.~~

and a one-time foreign tax benefit. The Company expects the effective tax rate in fiscal 2021 to be between ~~20.0~~19.0 and ~~21.5~~20.5 percent. ~~This excludes any impact from the announced acquisition of the~~ ~~Planters~~® ~~snack nuts business.~~For further information, refer to Note K - Income Taxes.

Segment Results

Net sales and ~~operating profits~~segment profit for each of the Company’s reportable segments are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the ~~operating~~ profit and other financial information shown below.


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020		% Change		(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Net Sales	Net Sales							Net Sales
Grocery Products	Grocery Products	$	577,599	$	540,626	6.8		Grocery Products	$	698,584	$	580,798	20.3	$	1,904,415	$	1,804,674	5.5
Refrigerated Foods	Refrigerated Foods	1,367,077		1,351,790		1.1		Refrigerated Foods	1,624,641		1,363,092		19.2	4,445,099		3,962,219		12.2
Jennie-O Turkey Store	Jennie-O Turkey Store	333,321		330,128		1.0		Jennie-O Turkey Store	350,897		286,805		22.3	1,035,397		959,988		7.9
International & Other	International & Other	183,150		161,890		13.1		International & Other	189,548		150,762		25.7	546,528		461,475		18.4
Total	Total	$	2,461,147	$	2,384,434	3.2		Total	$	2,863,670	$	2,381,457	20.2	$	7,931,438	$	7,188,357	10.3

Segment Profit	Segment Profit							Segment Profit
Grocery Products	Grocery Products	$	92,202	$	68,435	34.7		Grocery Products	$	80,791	$	80,169	0.8	$	270,963	$	276,367	(2.0)
Refrigerated Foods	Refrigerated Foods	141,171		167,343		(15.6)		Refrigerated Foods	153,216		152,822		0.3	467,740		451,596		3.6
Jennie-O Turkey Store	Jennie-O Turkey Store	26,940		38,551		(30.1)		Jennie-O Turkey Store	5,874		7,069		(16.9)	45,514		72,968		(37.6)
International & Other	International & Other	32,204		19,952		61.4		International & Other	27,915		23,620		18.2	84,600		66,735		26.8
Total Segment Profit	Total Segment Profit	292,517		294,280		(0.6)		Total Segment Profit	267,796		263,679		1.6	868,817		867,666		0.1
Net Unallocated Expense	Net Unallocated Expense	15,547		4,199		270.3		Net Unallocated Expense	63,715		4,457		1,329.6	95,166		31,754		199.7
Noncontrolling Interest	Noncontrolling Interest	112		81		38.8		Noncontrolling Interest	157		141		11.1	290		103		182.2
Earnings Before Income Taxes	Earnings Before Income Taxes	$	277,082	$	290,162	(4.5)		Earnings Before Income Taxes	$	204,238	$	259,364	(21.3)	$	773,940	$	836,014	(7.4)

Grocery Products


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020		% Change		(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Volume (lbs.)	Volume (lbs.)	304,334		292,919		3.9		Volume (lbs.)	319,216		307,198		3.9	937,345		963,819		(2.7)
Net Sales	Net Sales	$	577,599	$	540,626	6.8		Net Sales	$	698,584	$	580,798	20.3	$	1,904,415	$	1,804,674	5.5
Segment Profit	Segment Profit	92,202		68,435		34.7		Segment Profit	80,791		80,169		0.8	270,963		276,367		(2.0)

Volume and net sales ~~increased~~ for the ~~first~~third quarter ~~driven by strength across many center store products, including~~increased due to the inclusion of the Planters®snack nuts business. On an organic basis, sales growth from brands such as SPAM® ~~family of products, SKIPPY~~® ~~spreads,~~ , Hormel® Compleats® ~~meals,~~ ~~Hormel~~and Wholly® ~~chili and~~overcame the impact of lower contract manufacturing sales. For the first nine months of fiscal 2021, net sales increased due to the contribution from the ~~Herdez~~Planters® ~~salsas and sauces.~~snack nuts business, offsetting the decline in many other product lines attributable to the extremely high levels of demand last year.

For the ~~first~~third quarter, ~~of fiscal 2021,~~ segment profit increased due to strong results from the MegaMex joint venture and the contribution from the Planters®snack nuts business. These benefits were mostly offset by higher ~~sales, improved mix~~input costs, and higher ~~earnings from the Company's MegaMex business.~~manufacturing and logistics

For the second quarter, Grocery Products expects strong demand for its branded retail items to continue, though results are expected to decline as the business laps the unprecedented level of demand it experienced last year.

2331

Table of Contents

costs. Segment profit declined for the first nine months of fiscal 2021 as the benefit of the Planters®snack nuts business in the third quarter was offset by lower organic net sales and higher input costs.

~~Refrigerated Foods~~

Thirteen Weeks Ended

(in thousands)
January 24, 2021 January 26, 2020
%
Change
Volume (lbs.) 595,315 605,608 (1.7)
Net Sales $ 1,367,077 $ 1,351,790 1.1
Segment Profit 141,171 167,343 (15.6)
Specific to the third quarter, volume, net sales and segment profit were negatively impacted by production constraints due to labor shortages.

~~First~~Grocery Products expects year-over-year volume, sales, and segment profit growth in the fourth quarter ~~net~~due to the impact from the Planters®snack nuts business and continued strength for the MegaMex joint venture. Risks to profitability include higher pork trim prices and labor shortages on key product lines.

Refrigerated Foods


	Thirteen Weeks Ended					Thirty-Nine Weeks Ended
(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Volume (lbs.)	591,143		605,546		(2.4)	1,779,729		1,787,698		(0.4)
Net Sales	$	1,624,641	$	1,363,092	19.2	$	4,445,099	$	3,962,219	12.2
Segment Profit	153,216		152,822		0.3	467,740		451,596		3.6

Net sales for the third quarter increased asdue to strong results from the foodservice, retail and deli businesses, and elevated pricing across most categories. The recovery in foodservice continued to accelerate, with net sales exceeding both last year and pre-pandemic levels in almost every category. Retail and deli sales increased due primarily to growth ~~more than overcame significant declines~~ from ~~foodservice. Growth was led by brands such as~~ Hormel® Black Label®~~, Sadlers~~ bacon, ®~~, Applegate~~®~~, and~~ Columbus®. grab-and-go items, Hormel® refrigerated entrees, and Hormel® Gatherings® party trays. The decline in volume was due to lower shipments of commodity pork. For the first nine months of fiscal 2021, net sales increased due to strong growth from the retail, deli, and foodservice businesses within Refrigerated Foods.

For the third quarter and first ~~quarter, Refrigerated Foods segment profit declined due to lower~~nine months of fiscal 2021, higher earnings from the foodservice ~~sales, a decrease in~~business, numerous pricing actions, and increased commodity profits fully offset significantly higher raw material costs and ~~incremental supply chain costs related to the COVID-19 pandemic.~~increased freight expenses.

Specific to the third quarter, volume, net sales and segment profit were negatively impacted by production constraints due to labor shortages.

Led by the continued recovery in the foodservice business, Refrigerated Foods is expecting improved results in the ~~second~~fourth quarter ~~due to projected~~in spite of higher ~~foodservice demand as~~input and logistics costs and the ~~industry recovers from the sudden collapse following the onset~~impact of ~~the COVID-19 pandemic last year. Strength from the retail and deli businesses is expected to continue.~~labor shortages.

Jennie-O Turkey Store


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020		% Change		(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Volume (lbs.)	Volume (lbs.)	193,569		197,200		(1.8)		Volume (lbs.)	187,220		171,313		9.3	583,413		577,990		0.9
Net Sales	Net Sales	$	333,321	$	330,128	1.0		Net Sales	$	350,897	$	286,805	22.3	$	1,035,397	$	959,988	7.9
Segment Profit	Segment Profit	26,940		38,551		(30.1)		Segment Profit	5,874		7,069		(16.9)	45,514		72,968		(37.6)

~~Sales~~Volume and net sales increased ~~for~~in the ~~first~~third quarter ~~as growth across the entire retail portfolio, led by double-digit growth~~of fiscal 2021 due to improved foodservice, whole bird, and commodity shipments. Sales of Jennie-O® lean ground turkey increased due to pricing actions implemented in prior quarters and ~~Jennie-O~~®~~Oven Ready~~® ~~products,~~remain meaningfully above pre-pandemic levels. For the first nine months, higher shipments and ~~strong holiday sales of~~better pricing on commodity items, including whole birds, ~~more than offset significantly lower foodservice sales.~~drove higher volume and sales for the segment.

~~The decline in foodservice sales, increased supply chain costs related to the COVID-19 pandemic and higher freight expenses were the primary drivers of the decline in segment~~Segment profit for the third quarter and first ~~quarter.~~nine months of fiscal 2021 was lower due primarily to the impact of significantly higher feed costs.

~~In the second quarter,~~ Jennie-O Turkey Store expects improved results in the fourth quarter from both the value-added and commodity portfolios, which are expected to benefit from higher pricing, to be offset by the impact from dramatically higher grain ~~costs to result in lower earnings compared to the prior year. The Company has announced price increases across the portfolio, which are expected to take effect late in the second quarter.~~costs.

Table of Contents

International & Other


		Thirteen Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020		% Change		(in thousands)	July 25, 2021		July 26, 2020		% Change	July 25, 2021		July 26, 2020		% Change
Volume (lbs.)	Volume (lbs.)	86,489		91,260		(5.2)		Volume (lbs.)	83,055		81,156		2.3	252,801		255,766		(1.2)
Net Sales	Net Sales	$	183,150	$	161,890	13.1		Net Sales	$	189,548	$	150,762	25.7	$	546,528	$	461,475	18.4
Segment Profit	Segment Profit	32,204		19,952		61.4		Segment Profit	27,915		23,620		18.2	84,600		66,735		26.8

~~For the first quarter,~~Strong sales ~~increased due to broad-based strength across branded businesses, including continued~~ growth ~~in China and robust sales of~~ from SPAM® luncheon meat, a recovery in foodservice exports, continued strong results in China, and ~~SKIPPY~~® ~~peanut butter.~~improved performance in Brazil led to record net sales during the third quarter. For the first nine months of fiscal 2021, net sales increased, driven by continued strong results in China and higher demand for branded exports.

~~The significant increase~~In addition to higher sales, the improvement in segment profit for the third quarter was ~~due to~~driven by higher branded and fresh pork export margins. For the first nine months of fiscal 2021, segment profit improved ~~results for branded~~significantly, driven by gains from exports, ~~an accelerating recovery in China and~~ higher income from the Company's partners in the Philippines, South Korea and ~~Europe.~~Europe, and strong results in China.

~~Year-over-year improvement in China~~International & Other expects strength from exports to continue, leading to improved results. International shipping interruptions pose a risk to export sales and ~~continued strong demand for branded exports is anticipated for International and Other in the second quarter.~~profit growth.

Unallocated Income and Expenses

The Company does not allocate deferred compensation, investment income, interest expense or interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at the corporate

~~Table of Contents~~

level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.


		Thirteen Weeks Ended				Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands)	(in thousands)	January 24, 2021		January 26, 2020			(in thousands)	July 25, 2021		July 26, 2020		July 25, 2021		July 26, 2020
Net Unallocated Expense	Net Unallocated Expense	$	15,547	$	4,199		Net Unallocated Expense	$	63,715	$	4,457	$	95,166	$	31,754
Noncontrolling Interest	Noncontrolling Interest	112		81			Noncontrolling Interest	157		141		290		103

For the third quarter and first ~~quarter,~~nine months of fiscal 2021, net unallocated expense ~~increased due~~included $40 million and $43 million, respectively, of one-time acquisition costs and accounting adjustments related to ~~higher~~the acquisition of the Planters® snack nuts business. Higher interest expense and employee related expenses ~~related~~also contributed to ~~tax settlements and deal fees.~~the increase from prior year.

Related Party Transactions

There has been no material change in the information regarding Related Party Transactions as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 25, 2020.

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents were ~~$1,751.5~~$291 million at the end of the first ~~thirteen~~thirty-nine weeks of fiscal 2021 compared to ~~$724.4~~$1,729 million at the end of the comparable fiscal 2020 period. The primary driver of the ~~increased cash~~decrease is the ~~issuance~~use of ~~$1.0 billion in debt in~~cash to fund the acquisition of the Planters® snack nuts business the third quarter of ~~2020.~~fiscal 2021.

Cash provided by operating activities was ~~$205.7~~$438 million in the first ~~thirteen~~thirty-nine weeks of fiscal 2021 compared to ~~$188.4~~$878 million in the same period of fiscal 2020. The decline was due to increased inventory driven by significantly higher raw material markets along with the additional accounts receivable and inventory activity for the Planters® snack nuts business since its acquisition. Cash flows from operating activities continue to provide a consistent source of liquidity. The ~~COVID-19 pandemic has caused supply chain disruptions, market volatility and a shift in consumer behavior; however, the~~ Company believes its balanced business model and strong balance sheet ~~makes~~make it well-positioned to continue to weather the effects of the COVID-19 pandemic.

Cash used in investing activities was ~~$39.3~~$3,530 million in the first ~~thirteen~~thirty-nine weeks of fiscal 2021 compared to ~~$60.5~~$506 million in the same period of fiscal 2020. In the third quarter of fiscal 2021, the Company completed the acquisition of the Planters® snack nuts business for a preliminary purchase price of $3.4 billion. In the first thirty-nine weeks of 2020, the Company acquired Sadler's Smokehouse for $271 million. See Note B - Acquisitions and Divestitures for additional information on acquisitions.

Table of Contents

Capital expenditures in the first ~~thirteen~~thirty-nine weeks of fiscal 2021 were ~~$40.4~~$139 million compared to ~~$58.2~~$227 million in the same period of fiscal 2020. The Company estimates its fiscal 2021 capital expenditures to be approximately ~~$260.0~~$260 million. Key projects for the full year include expansion of the Company’s dry sausage operations in ~~Papillion, Nebraska; construction of an R&D center in Jiaxing; Project Orion;~~Nebraska and other projects to support growth of branded products.

Cash ~~used in~~provided by financing activities was ~~$134.8~~$1,664 million in the first ~~thirteen~~thirty-nine weeks of fiscal 2021 compared to ~~$77.9~~$684 million in the same period of fiscal 2020. On June 3, 2021, the Company issued unsecured senior notes in an aggregate principal amount of $2.3 billion to fund the acquisition of the Planters® snack nuts business. The Company ~~repurchased $8.8~~repaid $250 million of its senior unsecured notes upon maturity in April 2021. On June 11, 2020, the Company issued senior notes in an aggregate principal amount of $1.0 billion. See Note J - Long-term Debt and Other Borrowing Arrangements for additional information on debt.

The Company used $10 million for common stock repurchases in the first ~~thirteen~~thirty-nine weeks of fiscal 2021 compared to ~~no repurchases~~$12 million repurchased during the same period of the prior year. For additional information pertaining to the Company’s share repurchase plans or programs, see Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.

Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company. Dividends paid in the first ~~thirteen~~thirty-nine weeks of fiscal 2021 were ~~$125.5~~$390 million compared to ~~$112.2~~$362 million in the comparable period of fiscal 2020. For fiscal 2021, the annual dividend rate was increased to $0.98 per share, representing the 55th consecutive annual dividend increase. The Company has paid dividends for ~~370~~372 consecutive quarters.

The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of ~~January 24,~~July 25, 2021, the Company was in compliance with all of these debt covenants.

~~In fiscal 2021, the Company is expected to fund the $3.35 billion acquisition of the~~ ~~Planters~~® snack nuts business using a combination of cash on hand and long- and short-term debt. The Company remains confident in its ability to meet its current and future cash flow needs and is dedicated to returning cash to shareholders through dividend payments. Other top priorities include reinvestments to ensure employee and food safety, capital expenditures to enhance and expand operations, and growing the business through innovation. The Company continues to evaluate opportunities for strategic acquisitions.

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 24,~~July 25, 2021, was ~~$28.3~~$24 million.

There have been no other material changes to the information regarding the Company’s future contractual financial obligations previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 25, 2020.

~~Table of Contents~~

Off-Balance Sheet Arrangements

As of ~~January 24,~~July 25, 2021, and October 25, 2020, the Company had ~~$47.5~~$47 million of standby letters of credit issued on its behalf. The standby letters of credit are related primarily ~~related~~ to the Company’s self-insured workers compensation programs. This amount includes ~~$3.1~~$3 million as of ~~January 24,~~July 25, 2021, and October 25, 2020 of revocable standby letters of credit for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

Trademarks

References to the Company’s brands or products in italics within this report represent valuable trademarks owned or licensed by Hormel Foods, LLC or other subsidiaries of Hormel Foods Corporation.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful impact on the reporting of consolidated financial statements. See Note A - Summary of Significant Accounting Policies for a discussion of significant accounting policies.

Critical accounting policies are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. The Company has considered the impact of COVID-19 and recent acquisition of the Planters® snack nuts business and determined there have been no material changes in the Company’s Critical Accounting Policies as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 25, 2020. As conditions resulting from the COVID-19 pandemic evolve, the Company expects these judgments and estimates may be subject to change, which could materially impact future periods.

Table of Contents

FORWARD-LOOKING STATEMENTS

This report contains “forward-looking” information within the meaning of the federal securities laws. The “forward-looking” information may include statements concerning the Company’s outlook for the future as well as other statements of beliefs, future plans, strategies, or anticipated events and similar expressions concerning matters that are not historical facts.

The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. The Company is filing this cautionary statement in connection with the Reform Act. When used in this Quarterly Report on Form 10-Q, the Company’s Annual Report to Stockholders, other filings by the Company with the Securities and Exchange Commission, the Company’s press releases, and oral statements made by the Company’s representatives, the words or phrases “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify forward-looking statements within the meaning of the Reform Act. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected.

In connection with the “safe harbor” provisions of the Reform Act, the Company is identifying risk factors that could affect financial performance and cause the Company’s actual results to differ materially from opinions or statements expressed with respect to future periods. The discussion of risk factors in Part II, Item 1A of this Quarterly Report on Form 10-Q contains certain cautionary statements regarding the Company’s business, which should be considered by investors and others. Such risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.

In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company’s business or results, and is not undertaking to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company’s business or results of operations.

The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to any changes in the national and worldwide economic environment, which could include, among other things, changes resulting from the COVID-19 pandemic, economic conditions, political developments, civil unrest, currency exchange rates, interest and inflation rates, accounting standards, taxes, and laws and regulations affecting the Company and its markets.

~~Table of Contents~~

Item 3. 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 9496 and 9394 percent of the total hogs purchased by the Company during the first ~~thirteen~~thirty-nine weeks of fiscal years 2021 and 2020, 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.

The Company utilizes a hedge program to reduce exposure and offset the fluctuations in the Company's future direct hog purchases. The program utilizes lean hog futures which are accounted for under cash flow hedge accounting. The fair value of the Company's open futures contracts in this program as of ~~January 24,~~July 25, 2021 was ~~$8.4~~$8.2 million compared to $3.1 million as of October 25, 2020. The Company measures its market risk exposure on its lean hog futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for lean hogs. A 10 percent decrease in the market price for lean hogs would have negatively impacted the fair value of the Company's ~~January 24,~~July 25, 2021, open lean hog contracts by ~~$9.3~~$7.5 million, which in turn would lower the Company's future cost on purchased hogs by a similar amount.

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.

Table of Contents

The Company utilizes a hedge program to reduce exposure and offset the fluctuation in the Company's future direct grain purchases. This program utilizes corn futures and options for Jennie-O Turkey Store, and these contracts are accounted for under cash flow hedge accounting. The fair value of the Company’s open futures contracts and options as of ~~January 24,~~July 25, 2021, was ~~$8.0~~$22.0 million compared to $(0.1) million as of October 25, 2020. The Company measures its market risk exposure on its grain futures contracts and options using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for grain. A 10 percent decrease in the market price for grain would have negatively impacted the fair value of the Company’s ~~January 24,~~July 25, 2021, open grain contracts by ~~$8.8~~$11.9 million, which in turn would lower the Company’s future cost on purchased grain by a similar amount.

Other Input Costs: The costs of other raw materials such as beef, nuts, and, chicken, 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 24,~~July 25, 2021, the balance of these securities totaled ~~$192.7~~$200.3 million compared to $173.1 million as of October 25, 2020. The rabbi trust is invested primarily in 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 ~~$10.3~~$9.8 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 24,~~July 25, 2021 was ~~$582.3~~$639.4 million, compared to $541.2 million as of October 25, 2020, 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 within Interest and Investment Income or through the Consolidated Statements of Financial Position within Accumulated Other Comprehensive Loss.

The Company measures its foreign currency exchange risk by using a 10 percent sensitivity analysis on the Company's primary foreign net asset position, the Chinese yuan and Brazilian real, as of ~~January 24,~~July 25, 2021. A 10 percent strengthening in the value of the Chinese yuan relative to the U.S. dollar would result in other comprehensive income of approximately ~~$46.8~~$41.0 million pretax. A 10 percent weakening in the value of the Chinese yuan relative to the U.S. dollar would result in other comprehensive loss of approximately ~~$38.3~~$33.5 million pretax. A 10 percent strengthening in the value of the Brazilian real relative to the U.S. dollar would result in other comprehensive income of approximately ~~$11.8~~$13.3 million pretax. A 10 percent weakening in the value of the Brazilian real relative to the U.S. dollar would result in other comprehensive loss of approximately ~~$9.7~~$10.9 million pretax.

~~Table of Contents~~

Item 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). In designing and evaluating the 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 the Securities and Exchange 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.

(b) Internal Controls.

The Company is in the midst of a multi-year transformation project (Project Orion) to achieve better analytics, customer service, and process efficiencies through the use of Oracle Cloud Solutions. Components supporting human resources, payroll, and finance were implemented in fiscal 2020. There have been no material implementations in fiscal 2021. Additional phases will continue over the next several years. Emphasis has been on the maintenance of internal controls and assessment of the design and operating effectiveness of key control activities throughout development and deployment of each phase. On June 7, 2021, the Company completed its acquisition of the Planters® snack nuts business. In conducting

Table of Contents

its assessment of the effectiveness of the Company’s internal control over financial reporting at fiscal year-end, management intends to exclude Planters® from that assessment, as permitted under Securities and Exchange Commission rules.

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the ~~first~~third quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Company is a party to various legal proceedings related to the ongoing operation of its business, including claims both by and against the Company. At any time, such proceedings typically involve claims related to product liability, labeling, contracts, antitrust regulations, intellectual property, competition laws, employment practices, or other actions brought by employees, customers, consumers, competitors or suppliers. The Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable. However, future developments or settlements are uncertain and may require the Company to change such accruals as proceedings progress. Resolutions of any currently known matters, either individually or in the aggregate, are not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.

The Company is a defendant in three sets of antitrust lawsuits broadly targeting the pork and turkey industries. None of these cases involve allegations of bid rigging or other criminal conduct. The Company has not established reserves as it does not believe it will have liability in any of these cases.

Item 1A. RISK FACTORS

BUSINESS AND OPERATIONAL RISKS

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, tax rates, availability of capital, energy availability and costs (including fuel surcharges), political developments, civil unrest, 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 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.

~~Table of Contents~~

▪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.

▪The Company depends on stable, liquid and well-functioning capital and credit markets to fund operations. There can be no assurance that future volatility or disruption in the capital and credit markets will not impair the Company's liquidity or increase costs of borrowing.

▪The Company may be required to redirect cash flow from operations or explore alternative strategies, such as disposing of assets, to the payment of principal and interest on its indebtedness.

The Company may utilize hedging programs to manage its exposure to various market risks, such as commodity prices and interest rates, 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 or interest rates become more favorable than those secured under the Company’s hedging programs.

The Company's goodwill and indefinite lived intangible assets are initially recorded at fair value and are not amortized, but are reviewed for impairment annually or more frequently if impairment indicators arise. Impairment testing requires judgement around estimates and assumptions and is impacted by factors such as revenue growth rates, operating margins, tax rates, royalty rates, and discount rates. An unfavorable change in these factors may lead to the impairment of goodwill and/or intangible assets.

Table of Contents

Additionally, if a highly pathogenic human disease outbreak developed in the United States, it may negatively impact the national economy, demand for Company products, and/or the Company’s workforce availability, and the Company’s financial results could suffer. 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, these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

The uncertain and rapidly changing COVID-19 pandemic could adversely affect the Company’s business, financial condition and results of operations. The ongoing COVID-19 global pandemic has had, and will likely continue to have, negative impacts across many of the Company's business units and facilities. The Company's operations and business have been impacted directly and indirectly by various government actions taken to stop or slow the spread of COVID-19, including travel restrictions, border shutdowns, stay-at-home and shelter-in-place orders, shutdowns of non-essential businesses, and emergency declarations.

The near- and long-term impacts of COVID-19 are unknown and impossible to predict with any level of certainty. The following risk factors arising from COVID-19 pandemic have had and/or may continue to have one or more of the following impacts on the Company's operations:

•One or more of the Company's manufacturing facilities may be shut down or have their operations significantly impacted due to employee illnesses, increased absenteeism, and/or actions by government agencies. Capital projects may be delayed as additional capacity is no longer currently needed. The Company's co-manufacturers and material suppliers may face similar impacts.

•Regulatory restrictions and measures taken at the Company's facilities to prevent or slow down the spread of COVID-19 may impact facilities’ efficiency.

•Operating costs may increase as measures are put in place to prevent or slow down the spread of COVID-19, such as facility improvements, employee testing, short-term disability policies, and manufacturing employee bonus payments.

•Any new or additional measures required by national, state or local governments to combat COVID-19 may similarly add additional operational costs.

•Ongoing closure or reduced operations at foodservice establishments may impact results for the Company's foodservice business. Bankruptcy filings and/or delinquent payments from foodservice industry or other customers may negatively impact cash flow.

•A national and/or global economic downturn may impact consumer purchase behavior, such as reduced foodservice volume, lower volume in premium brands, and potential loss of business to private label.

•It may become more difficult and/or expensive to obtain debt or equity financing necessary to sustain the Company's operations, make capital expenditures, and/or finance future acquisitions.

•The Company may face litigation by stockholders, employees, suppliers, customers, consumers, and others relating to COVID-19 and its effects.

•The Company relies on its dedicated employees, many of whom have a long tenure with the Company. Operations may be negatively impacted if members of the Company's leadership team, or other key employees, become ill with COVID-19 or otherwise terminate their employment as a result of COVID-19. Further, the Company may face challenges hiring, onboarding, and training new employees, including leadership, which may impact results. The Company also may face operational challenges if government quarantine orders restrict movement of employees.

•It is possible that the COVID-19 pandemic could negatively affect the Company's labor availability, relations, or labor costs.

•~~In accordance with recommendations to reduce large gatherings and increase social distancing, many~~Many of the Company's office-based employees are working remotely, which may bring additional information technology and data security risks.

~~Table of Contents~~

•Supply chain disruptions of various types arising from COVID-19 may impact the Company's ability to make products, the cost for such products, and the ability to deliver products to customers. Closure or reduced operations of material suppliers could result in shortages of key raw materials, as well as impact prices for those materials. The volatility in the market for raw material and supplies could impact the Company's profitability.

•National, state, and local government orders closing or limiting operation of borders and ports, or imposing quarantine, could impact the Company's ability to obtain raw materials and to deliver finished goods to customers.

•COVID-19 has wide-reaching impacts to society and the business making all decisions, interactions, and transactions significantly more complex.

•The Company is committed to being transparent through communications to inform shareholders, employees, customers, consumers, and others about the enhanced safety protocols implemented. The Company must keep pace with a rapidly changing media environment. If the Company's public relations efforts are not effective or if consumers perceive them to be irresponsible, the Company's competitive position, reputation, and market share may suffer.

The extent of the impact on the Company’s business, financial condition, and results of operations is dependent on the length and severity of the pandemic. Vaccines to prevent COVID-19 were approved by health agencies in the U.S. and other countries in which the Company operates, which began to be administered near the end of calendar year 2020. ~~Distribution of the vaccines has been slower than anticipated. In addition, new strains~~New variants of the virus appear to have increased transmissibility, which could complicate treatment and vaccination programs. The COVID-19 pandemic is an unprecedented situation and the Company's understanding of and response to its impacts is changing and evolving. The

Table of Contents

additional risk factors identified here are based upon information known at this time. The COVID-19 pandemic may adversely impact the Company's operations in one or more ways not identified to date.

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 that align with the Company’s strategic initiative of delivering 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 inability to consummate a transaction timely or on favorable terms, diversion of management's attention from other business concerns, potential loss of key employees and customers of current or acquired companies, inability to integrate or divest operations successfully, possible assumption of unknown liabilities, potential disputes with buyers or sellers, inability to obtain favorable financing terms, potential impairment charges if purchase assumptions are not achieved, 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 level of indebtedness ~~may increase~~increased significantly to fund ~~future acquisitions, such as~~ the ~~recently announced definitive agreement to acquire~~purchase of the Planters®snack nuts ~~business. Additional~~business and may continue to increase to fund future acquisitions. Higher levels of debt may among other things, impact the Company's liquidity and increase the Company's exposure to negative fluctuations in interest rates.

The Company is subject to disruption of operations at co-manufacturers, suppliers, customers, or other third-party service providers. Disruption of operations at co‑manufacturers or other suppliers may impact the Company’s product or raw material supply, which could have an adverse effect on the Company’s financial results. Additionally, actions taken to mitigate the impact of any potential disruption, including increasing inventory in anticipation of a potential production or supply interruption, may adversely affect the Company’s financial results.

Disruptions related to significant customers or sales channels could result in a reduction in sales or change in the mix of products sold, which could adversely affect the Company's results of operations.

The Company regularly engages third-party service providers to support various business functions such as benefit plan administration, payroll processing, information technology, and cloud computing services. A disruption in services from these partners could have an adverse effect on the Company's business.

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. The Company currently sources approximately 30% of its pork raw materials from Wholestone Farms, LLC (Wholestone) under a supply agreement expiring in December 2021. The Company is in negotiations with Wholestone as well as evaluating alternative procurement options.

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. Information technology systems are an important part of the Company’s business operations. In addition, the Company increasingly relies upon third-party service providers for a variety of business functions, including cloud-based services. ~~Attempted cyber-attack~~Cyber-attacks 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 midst of a 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. The initial phase to implement the human resource and payroll process was deployed during the first quarter of fiscal 2020. During the third quarter of fiscal 2020, the Company implemented the finance phase of the project. Additional integrations are expected to take place over the next few years. Such an implementation is a major undertaking from a financial, management,

~~Table of Contents~~

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, labor availability or increases in labor costs could harm the Company’s Business. As of ~~January 24,~~July 25, 2021, the Company had ~~approximately 20,100~~over 20,000 employees worldwide, of which approximately ~~3,700~~20 percent of the Company's employees 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 co-manufacturing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results. Labor and skilled labor availability challenges could continue to have an adverse effect on the Company's business.

Table of Contents

INDUSTRY RISKS

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 spoilage;

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

▪food allergens;

▪nutritional and health-related concerns;

▪federal, state, and local food processing controls;

▪consumer product liability claims;

▪product tampering; and

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

The pathogens that may cause food contamination are found generally in livestock and in the environment and thus may be present in our products. These pathogens can also 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.

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.

In recent years, the outbreak of ASF has impacted hog herds in China, Asia, Europe, and ~~Europe.~~the Caribbean. 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,~~raw materials and ~~energy~~other inputs 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 ~~peanuts~~tree nuts as well as supplies, energy, ~~costs~~and other inputs 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. Typically, this results in fewer hogs being available on the cash spot market. Consequently, the Company uses long-term supply contracts priced 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 and pork 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.

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 fluctuates due to climate conditions, production forecasts, and supply and demand conditions at local, regional, national, and worldwide

~~Table of Contents~~

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 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 partners with multiple long-term suppliers.

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

Table of Contents

Market demand for the Company’s products may fluctuate. The Company faces competition from producers of alternative meats and protein sources, including pork, beef, turkey, chicken, fish, nut butters, whey, and plant-based proteins. The factors on which the Company competes include:

▪price;

▪product quality and attributes;

▪brand identification;

▪breadth of product line; and

▪customer service.

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 factors in the future.

LEGAL AND REGULATORY RISKS

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 others, and claims relating to product liability, contract disputes, antitrust regulations, intellectual property, advertising, labeling, wage and hour laws, employment practices or environmental matters. Neither litigation trends nor the outcomes of litigation can be predicted with certainty and adverse litigation trends and outcomes could negatively 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 which oversee workforce immigration, taxation, animal welfare, food safety, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company’s manufacturing facilities and products are subject to ongoing 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. A recent federal district court ruling has had a negative impact on harvest capacity and labor costs. Harvest facilities the Company uses are negotiating to resolve the situation and expect to reach a solution, but harvest capacity and labor costs will continue to be negatively impacted until a solution is reached. There can be no assurance a solution will be reached, in which case the negative impacts of the ruling would continue.

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, as well as any modifications, is material to the Company’s business. 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 related to additional investigation, assessment or other requirements. The occurrence of any of these events, the implementation of new laws and regulations or stricter 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.

Table of Contents

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities
Thirteen Weeks Ended January 24, 2021
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 25, 2020 - November 29, 2020 — — — 4,456,320
November 30, 2020 - December 27, 2020 — — — 4,456,320
December 28, 2020 - January 24, 2021 198,725 $ 44.47 198,725 4,257,595
Total 198,725 $ 44.47 198,725

1There were no issuer purchases of equity securities in the thirteen weeks ended July 25, 2021. The maximum number of shares that may yet be purchased under the plans or programs as of July 25, 2021 is 4,239,594. On January 29, 2013, the Company's Board of Directors authorized the repurchase of 10,000,000 shares of its common stock with no expiration date. On January 26, 2016, the Board of Directors approved a two-for-one split of the Company’s common stock to be effective January 27, 2016. As part of the stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately.

Item 6. EXHIBITS


2.1			First Amendment to the Asset Purchase Agreement dated as of June 7, 2021, by and between The Kraft Heinz Company and Hormel Foods Corporation ~~dated as of February 10, 2021.~~ .Exhibits and schedules identified in the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be furnished to the Securities and Exchange Commission upon request.

4.1			Form of 0.650% Notes due 2024 (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated June 3, 2021, File No. 001-02402)

4.2			Form of 1.700% Notes due 2028 (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated June 3, 2021, File No. 001-02402)

4.3			Form of 3.050% Notes due 2051 (Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated June 3, 2021, File No. 001-02402)

10.1			U.S. $750,000,000 Credit Agreement, dated as of May 6, 2021, among the Company, Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender, and the lenders identified on the signature pages thereof (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 6, 2021, File No. 001- 02402)

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			The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~January 24,~~July 25, 2021, 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.

104			The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~January 24,~~July 25, 2021, formatted in Inline XBRL (included as Exhibit 101).

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		HORMEL FOODS CORPORATION
		(Registrant)



Date: ~~March 2,~~September 3, 2021	By	/s/ JAMES N. SHEEHAN
		JAMES N. SHEEHAN
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)



Date: ~~March 2,~~September 3, 2021	By	/s/ JANA L. HAYNES
		JANA L. HAYNES
		Vice President and Controller
		(Principal Accounting Officer)


Issuer Purchases of Equity Securities
Thirteen Weeks Ended January 24, 2021

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 25, 2020 - November 29, 2020	—	—		—	4,456,320
November 30, 2020 - December 27, 2020	—	—		—	4,456,320
December 28, 2020 - January 24, 2021	198,725	$	44.47	198,725	4,257,595
Total	198,725	$	44.47	198,725