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Item 7. Management’s Discussion and Analysis

2023-12-06 compared with 2022-12-06 · 454 added, 198 removed, 346 unchanged (65% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

The Company achieved its third consecutive year of record net sales in fiscal 2022.

Net sales increased 9 percent to $12.5 billion, primarily driven by the full year inclusion of the Planters ® snack nuts business and by growth from the Company's foodservice businesses.

Organic net sales 1 growth of 6 percent can be attributed to improvement from the foodservice businesses and pricing actions to mitigate inflationary pressures in each business segment ( 1 See explanation of non-GAAP financial measures in the Consolidated Results section).

Volume and organic volume 1 declined 7 percent and 8 percent, respectively.

Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume was primarily due to lower commodity sales resulting from the Company's new pork supply agreement, which was effective January 1, 2022.

Net earnings increased 10 percent compared to fiscal 2021, benefiting from the inclusion of the Planters ® snack nuts business, significant profit growth for the Jennie-O Turkey Store segment, and higher sales across the foodservice businesses.

Net earnings were negatively impacted by broad-based inflationary pressures stemming from raw materials, packaging, freight, labor, and other inputs.

Pricing actions to mitigate these pressures were announced and implemented throughout fiscal 2022.

Diluted earnings per share for fiscal 2022 was $1.82, compared to $1.66 last year.

Fiscal 2022 contained one less week than the prior year.

Earnings for Jennie-O Turkey Store increased significantly due to higher commodity prices and foodservice sales.

Highly pathogenic avian influenza (HPAI) was confirmed in the Jennie-O Turkey Store supply chain in March 2022.

In the second half of the year, the team effectively managed a limited turkey supply and maximized operational performance.

Refrigerated Foods segment profit for the full year increased, primarily driven by strong results from the foodservice businesses, more than offsetting higher operational and logistics costs.

Grocery Products segment profit declined, as the contribution from the Planters ® snack nuts business and organic net sales growth was more than offset by inflationary pressures and lower results from MegaMex.

International & Other segment profit declined due in large part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight and warehouse expenses.

The Company achieved its second consecutive year of net sales in excess of $12 billion in fiscal 2023.

Net sales were $12.1 billion, declining 3 percent compared to the prior year, as the benefit from pricing actions to mitigate inflationary pressures was more than offset by the impact of lower volumes in the Retail and International segments and lower net pricing in certain categories, such as bacon, reflecting raw material commodity deflation.

Volume declined for the full year, primarily due to declines in commodity pork availability as a result of the Company's new pork supply agreement and lower turkey supply in the first half of the year due to the impacts of HPAI.

Segment profit declined 11 percent, as higher results in the Foodservice segment were more than offset by significantly lower results in the Retail and International segments.

Net earnings declined 21 percent due to lower segment profit and the pre-tax impact of an adverse arbitration ruling of $68.3 million.

Adjusted net earnings (1) — excluding the impact of the adverse arbitration ruling, non-cash impairment charges, and costs associated with the Company's transformation and modernization initiative — declined 12 percent.

Diluted net earnings per share and adjusted diluted net earnings per share (1) for fiscal 2023 were $1.45 and $1.61, respectively, compared to $1.82 last year.

Segment profit for the Foodservice segment increased due to improved mix across the portfolio.

Retail segment profit declined significantly for the full year, driven primarily by lower volumes, unfavorable mix, and higher operating expenses, partially offset by the benefit from pricing actions across the portfolio and higher equity in earnings from MegaMex Foods, LLC (MegaMex Foods).

International segment profit declined due to lower sales in China and lower turkey commodity sales.

The Company again reinvested into the business through capital expenditures and returned a record amount of cash to shareholders in the form of dividends.

Capital expenditures in fiscal 2022 were $279 million, including investments in new production capabilities for retail and foodservice pepperoni, an expansion of bacon capacity, work on a new line for the SPAM ® family of products to be opened in the first half of fiscal 2023, and other projects to support growth of branded products and increase automation.

The annual dividend for 2023 will be $1.10 per share and marks the 57th consecutive year of dividend increases.

In August 2022, the Company announced a new strategic operating model and has transitioned, effective October 31, 2022, to three operating segments – Retail, Foodservice, and International.

The three new segments will continue to be supported by the Company's One Supply Chain team and corporate functions.

Additionally, the Company will be standing up a Brand Fuel Center of Excellence, which will house enterprise-wide brand management expertise, e-commerce capabilities, insights-led innovation and analytical support to further enable data-driven decisions.

Changes to the Company's operating segments have no impact on historical consolidated results of operations, financial position, or cash flows.

Earnings will be reported under this structure beginning with the release of fiscal 2023 first quarter results in early March 2023.

The Company will provide recast financial information for fiscal years 2021 and 2022 in February 2023.

Capital expenditures in fiscal 2023 were $270 million, including investments in new production capabilities for retail and foodservice pepperoni and an expansion for the SPAM ® family of products.

The Company continues to prioritize investments in growth, innovation, cost savings, automation, and maintenance.

The annual dividend for 2024 will be $1.13 per share, representing an increase of 3 percent and marking the 58th consecutive year of dividend increases.

During fiscal 2023, the Company purchased a 30% common stock interest in Garudafood, a food and beverage company in Indonesia.

This investment expands the Company's presence in Southeast Asia and supports the global execution of the snacking and entertaining strategic priority.

The Company obtained this minority interest in Garudafood for a purchase price of $426 million, including associated transaction costs.

The Company funded this transaction with cash on hand.

Fiscal 2024 Outlook (2) :

The Company expects sales and earnings growth in fiscal 2023.

From a top-line perspective, the Company anticipates to benefit from higher levels of brand investment, increased production capacity, pricing actions effective in the second half of fiscal 2022, and actions related to its new strategic operating model.

Earnings growth is expected from the Foodservice and International segments and improvement across the supply chain.

The Company expects to again operate in a volatile, complex and high-cost environment in fiscal 2023.

Risks to the outlook include incremental inflationary pressures, further supply chain disruption, and the impact of deteriorating macroeconomic conditions on the Company's customers, consumers, and operators.

The Company continues to navigate through a dynamic operating environment characterized by slowing consumer demand, inflationary pressures, and headwinds in its turkey business.

Net sales growth of 1 percent to 3 percent is expected and assumes volume growth in key categories, higher brand support and innovation, a benefit from incremental pricing actions, and the current assumptions for raw material input costs.

From a bottom-line perspective, diluted net earnings per share are expected to be $1.43 to $1.57 and adjusted diluted net earnings per share (1) are expected to be $1.51 to $1.65.

Earnings are expected to decline in the first half of the year due to the impact from lower turkey markets, lower volumes in the Retail segment, expenses associated with the transformation and modernization initiative, and softness in the Company's China business.

Segment profit growth from all three segments is expected in the back half of the year as these pressures abate and as benefits from the transformation and modernization initiative are realized.

Major risks to the outlook include incremental inflationary pressures, significantly lower turkey markets than expected, and the impact of deteriorating macroeconomic conditions on the Company's customers, consumers, and operators.

The Company remains in a strong financial position due to its consistent cash flow, liquidity, and strong balance sheet.

The Company plans to continue to support the business through increased marketing and advertising investments for its leading brands as well as investments into its production capabilities, including a new line for the SPAM ® family of products, a large investment to expand its operations and capabilities in China, and projects to increase automation and efficiency.

The Company remains committed to returning cash to shareholders in the form of dividends.

The Company plans to continue to support the business through increased marketing and advertising investments for its leading brands as well as investments into its production capabilities, including converting the Barron, Wisconsin, plant into a value-added facility to support growth across the portfolio.

The Company is also expanding capacity for high-demand Planters ® snack nuts items.

Returning cash to shareholders in the form of dividends remains a top priority for the Company.

Consistent with the plan outlined at its recent investor day, the Company expects fiscal 2024 to be a year of investment and remains focused on its strategic priorities, executing on its transformation and modernization initiative, fueling its innovation pipeline, and exiting the year with momentum in its business segments.

For fiscal 2024, the Company expects a modest benefit to net earnings from its transformation and modernization initiative.

A detailed review of the Company's fiscal 2023 performance compared to fiscal 2022 appears in the following section.

A detailed review of the fiscal 2021 performance compared to fiscal 2020 is set forth in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended October 31, 2021, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by reference.

A detailed review of fiscal 2022 performance compared to fiscal 2021 is also provided due to the change in reportable segments which occurred in the first quarter of fiscal 2023.

(1) See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by U.S.

generally accepted accounting principles (GAAP).

(2) All forward-looking comparisons for fiscal 2024 are comparing fiscal 2023 GAAP figures to projected fiscal 2024 GAAP figures, unless otherwise noted.

Results of Operations

The Company is a processor of branded and unbranded food products for retail, foodservice, deli, and commercial customers.

The Company operates in the following four reportable segments:

Grocery Products:

The Grocery Products segment primarily consists 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 (MegaMex) joint venture.

Refrigerated Foods:

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

Jennie-O Turkey Store:

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

International & Other:

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 royalty arrangements and other joint ventures.

The Company transitioned to a new operating model in the first quarter of fiscal 2023 and now reports its results in the following three reportable segments:

The Retail segment consists primarily of the processing, marketing, and sale of food products sold predominantly in the retail market.

This segment also includes the results from the Company’s MegaMex Foods, LLC joint venture.

The Foodservice segment consists primarily of the processing, marketing, and sale of food and nutritional products for foodservice, convenience store, and commercial customers.

The International segment processes, markets, and sells Company products internationally.

This segment also includes the results from the Company’s international joint ventures, equity method investments, and royalty arrangements.

Prior period segment results have been retrospectively recast to reflect the new reportable segments.

The Company’s fiscal year consisted of 52 weeks in fiscal years 2023 and 2022 and 53 weeks in fiscal year 2021.

Fiscal year 2024 will consist of 52 weeks.

FISCAL YEARS 2023 AND 2022

CONSOLIDATED RESULTS

6 unchanged sentences

0.42 0.51 (17.2) 1.61 1.82 (11.4)

(1) See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by U.S.

generally accepted accounting principles (GAAP).

Volume and Net Sales

2 unchanged sentences

Volume (lbs.) 1,155,445 1,160,490 (0.4) 4,411,738 4,604,169 (4.2)

Net Sales $ 3,198,079 $ 3,283,475 (2.6) $ 12,110,010 $ 12,458,806 (2.8)

Volume for the fourth quarter of fiscal 2023 was comparable with last year, as higher turkey volumes in each segment were offset by lower Retail volumes in the convenient meals and proteins and the snacking and entertaining verticals.

Net sales declined in the fourth quarter, as higher Foodservice segment sales and the benefit from higher turkey volumes were more than offset by lower volumes in the Retail segment and continued pressure in the International segment.

Fiscal 2023 marked the second consecutive year of net sales in excess of $12 billion.

Net sales declined for the full year, as the benefit from pricing actions to mitigate inflationary pressures was more than offset by the impact of lower volumes in the Retail and International segments and lower net pricing in certain categories, such as bacon, reflecting raw material commodity

The primary drivers of lower volume in fiscal 2023 were declines in commodity pork availability as a result of the Company's new pork supply agreement and lower turkey supply in the first half of the year from the impacts of HPAI.

In fiscal 2024, the Company expects sales growth, which assumes benefits from modestly higher volumes, growth in key categories, higher brand support and innovation, incremental pricing actions, and the current assumptions for raw material costs.

Risks to this outlook include slowing consumer demand and greater-than-expected pricing headwinds in the turkey business.

Cost of Products Sold

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Cost of Products Sold $ 2,683,655 $ 2,717,058 (1.2) $ 10,110,169 $ 10,294,120 (1.8)

Cost of products sold for the fourth quarter and full year of fiscal 2023 decreased due to lower sales.

On a volume basis, cost of products sold increased 2 percent in fiscal 2023, driven primarily by inflationary pressures stemming from, among other inputs, packaging, logistics, and labor.

In fiscal 2024, costs are expected to moderate relative to the high levels of inflation the business has absorbed since the beginning of fiscal 2021.

Raw material input costs for pork, beef, and feed are anticipated to remain volatile and above historical levels.

The Company expects its transformation and modernization initiative to begin delivering modest cost savings in fiscal 2024, targeting packaging, logistics, and production costs.

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Gross Profit $ 514,425 $ 566,417 (9.2) $ 1,999,841 $ 2,164,686 (7.6)

Percent of Net Sales

16.1 % 17.3 % 16.5 % 17.4 %

Consolidated gross profit as a percent of net sales for the fourth quarter and full year of fiscal 2023 decreased, driven primarily by unfavorable mix in the Retail and International segments and the persistent impact of inflationary pressures.

Pricing actions helped mitigate some of the impact from inflationary pressures.

Compared to fiscal 2022, gross profit as a percent of net sales for the fourth quarter and full year increased for the Foodservice segment but declined for the Retail and International segments.

In fiscal 2024, the Company expects gross profit as a percent of net sales to be comparable to fiscal 2023.

Incremental cost inflation and unfavorable sales mix pose the largest risks to this outlook.

Selling, General, and Administrative (SG&A)

Fourth Quarter Ended Fiscal Year Ended

In thousands October 29, 2023 October 30, 2022 % Change October 29, 2023 October 30, 2022 % Change

SG&A $ 216,546 $ 206,487 4.9 $ 942,167 $ 879,265 7.2

Percent of Net Sales

6.8 % 6.3 % 7.8 % 7.1 %

Adjusted Percent of Net Sales (1)

6.6 % 6.3 % 7.1 % 7.1 %

(1) See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by U.S.

generally accepted accounting principles (GAAP).

SG&A expenses for the fourth quarter of fiscal 2023 increased as higher professional service expense related to the Company's transformation and modernization initiative and higher advertising expense were partially offset by lower employee-related expenses.

For full year fiscal 2023, the increase in SG&A expenses and SG&A expenses as a percent of net sales is attributed to an adverse arbitration ruling totaling $68.3 million.

Adjusted SG&A expenses as a percent of net sales (1) for fiscal 2023 were comparable to the prior year.

Advertising investments in fiscal 2023 were $160 million, representing a 2% increase compared to fiscal 2022.

In fiscal 2024, the Company intends to continue investing in its leading brands and for full year advertising expense to increase compared to the prior year.

Research and development continues to be a vital part of the Company's strategy to grow existing brands and expand into new branded items.

Research and development expenses were $33.7 million in fiscal 2023, compared to $34.7 million in fiscal 2022.

Equity in Earnings of Affiliates

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Equity in Earnings of Affiliates $ 541 $ 7,234 (92.5) $ 42,754 $ 27,185 57.3

Equity in earnings of affiliates for the fourth quarter of fiscal 2023 decreased, resulting from the $7.0 million impairment of a corporate venturing investment.

Equity in earnings of affiliates for the full year of fiscal 2023 increased due to significantly higher results for MegaMex Foods, reflecting a benefit from pricing actions and lower avocado input costs.

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, including balances due to or from affiliates, are included on the Consolidated Statements of Financial Position as Investments in Affiliates.

The composition of this line item as of October 29, 2023, was as follows:

In thousands Investments in Affiliates

Foreign 511,103

Total $ 725,121

Goodwill and Intangible Impairment

An impairment charge related to the Justin's ® trade name of $28.4 million was recorded in the fourth quarter of fiscal 2023.

Interest and Investment Income and Interest Expense

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Interest and Investment Income $ (5,872) $ 7,933 (174.0) $ 14,828 $ 28,012 (47.1)

Interest Expense 18,360 17,602 4.3 73,402 62,515 17.4

Interest and investment income decreased in the fourth quarter of fiscal 2023 primarily due to higher pension costs.

Interest and investment income decreased for the full year of fiscal 2023 due to higher pension costs, partially offset by increased interest income and improved performance on the rabbi trust.

Interest expense increased in fiscal 2023 due to the impact of an interest rate swap.

Effective Tax Rate

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

2023 2022 2023 2022

Effective Tax Rate 20.5 % 21.7 % 21.8 % 21.7 %

The effective tax rate for fiscal 2023 reflects a benefit related to the deduction for foreign-derived intangible income.

The fiscal 2022 effective tax rate included a benefit for stock option exercises.

For additional information, refer to Note N - Income Taxes of the Notes to the Consolidated Financial Statements.

The Company expects the effective tax rate in fiscal 2024 to be between 21.0 and 23.0 percent.

SEGMENT RESULTS

Net sales and 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 profit and other financial information shown below.

Additional segment financial information can be found in Note P - Segment Reporting of the Notes to the Consolidated Financial Statements.

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Retail $ 1,983,253 $ 2,066,454 (4.0) $ 7,749,039 $ 7,987,598 (3.0)

Foodservice 1,032,353 1,009,672 2.2 3,639,492 3,691,408 (1.4)

International 182,474 207,350 (12.0) 721,479 779,799 (7.5)

Total Net Sales $ 3,198,079 $ 3,283,475 (2.6) $ 12,110,010 $ 12,458,806 (2.8)

Segment Profit

Retail $ 118,660 $ 198,852 (40.3) $ 577,690 $ 721,832 (20.0)

Foodservice 167,571 148,203 13.1 595,682 547,686 8.8

International 9,511 28,810 (67.0) 55,234 107,642 (48.7)

Total Segment Profit 295,743 375,865 (21.3) 1,228,606 1,377,161 (10.8)

Net Unallocated Expense 49,485 18,498 167.5 214,482 99,297 116.0

Noncontrolling Interest (452) 128 (454.6) (653) 239 (372.7)

Earnings Before Income Taxes $ 245,805 $ 357,495 (31.2) $ 1,013,472 $ 1,278,103 (20.7)

Volume for the full year of fiscal 2023 was negatively impacted by lower fresh pork availability resulting from the Company's new pork supply agreement (primarily impacting the first quarter) and lower turkey volumes due to the impacts of HPAI in the Company's vertically integrated turkey supply chain (primarily impacting the first half).

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Volume (lbs.) 788,030 810,044 (2.7) 3,055,393 3,245,625 (5.9)

Net Sales $ 1,983,253 $ 2,066,454 (4.0) $ 7,749,039 $ 7,987,598 (3.0)

Segment Profit 118,660 198,852 (40.3) 577,690 721,832 (20.0)

Adjusted Segment Profit (1)

147,043 198,852 (26.1) 606,073 721,832 (16.0)

(1) See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by U.S.

generally accepted accounting principles (GAAP).

For the fourth quarter of fiscal 2023, volume and net sales growth from the value-added meats, emerging brands and bacon verticals was more than offset by declines in the convenient meals and proteins and the snacking and entertaining verticals.

In addition to continued recovery across the Jennie-O ® turkey portfolio, items such as Applegate ® natural and organic meats, Hormel ® Black Label ® bacon, Chi-Chi's ® and La Victoria ® salsas, Corn Nuts ® products and Hormel ® Square Table™ entrees grew volume and net sales during the quarter.

Net sales declines continued to be partially attributed to the difficult comparison from high levels of demand for Skippy ® spreads last year.

Full year fiscal 2023 net sales declined primarily due to lower volumes from the convenient meals and proteins and value-added meats verticals, declines in the snacking and entertaining vertical and lower market-driven pricing on raw bacon items.

Segment profit declined for the fourth quarter due to lower sales, unfavorable mix and increased brand investments.

Additionally, a non-cash impairment charge of $28.4 million was recorded in the fourth quarter associated with the Justin's ® trade name.

For fiscal 2023, segment profit declined due to lower volumes, unfavorable mix, and higher operating expenses, partially offset by the benefit from pricing actions across the portfolio, higher equity in earnings from MegaMex Foods, and improved bacon volumes.

In fiscal 2024, the Company expects volume and net sales from its Retail segment to be comparable to the prior year.

Volume growth in key categories, higher brand support and innovation, and a benefit from incremental pricing actions are expected to be positive catalysts for the business.

Earnings are expected to decline compared to the prior year, driven primarily by commodity headwinds in the Company's turkey business.

Risks to this outlook include a further slowing in consumer demand and greater-than-expected pricing headwinds in the turkey business.

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Volume (lbs.) 279,288 266,447 4.8 1,026,772 1,027,124 —

Net Sales $ 1,032,353 $ 1,009,672 2.2 $ 3,639,492 $ 3,691,408 (1.4)

Segment Profit 167,571 148,203 13.1 595,682 547,686 8.8

Volume and net sales for the fourth quarter of fiscal 2023 increased, driven by a significant recovery across the Jennie-O ® turkey portfolio and strong demand for premium bacon, pizza toppings and premium breakfast sausage.

Additionally, volume and net sales increased for the Cafe H ® , Austin Blues ® and Hormel ® Cure 81 ® brands.

Net sales declined for full year fiscal 2023 primarily due to lower net pricing in certain categories, reflecting raw material commodity deflation and lower turkey and fresh pork volumes.

For the fourth quarter, segment profit increased due to the contribution from higher volumes and improved mix.

Segment profit increased during fiscal 2023 due to improved mix across the portfolio.

In fiscal 2024, the Company anticipates higher volume, net sales and segment profit from its Foodservice segment compared to the prior year.

Risks to this outlook include a softening of foodservice industry demand, lower-than-expected raw material input costs (negatively impacting net sales), and higher-than-expected operating costs.

International

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 % Change 2023 2022 % Change

Volume (lbs.) 88,128 83,999 4.9 329,573 331,421 (0.6)

Net Sales $ 182,474 $ 207,350 (12.0) $ 721,479 $ 779,799 (7.5)

Segment Profit 9,511 28,810 (67.0) 55,234 107,642 (48.7)

As anticipated, net sales declined for the fourth quarter of fiscal 2023 as a result of lower branded export volumes and lower sales in China, primarily related to the retail business.

Volume growth was driven by low-margin turkey and commodity fresh pork.

For the full year of fiscal 2023, net sales declined primarily due to lower SPAM ® luncheon meat exports, lower sales in China, and lower commodity turkey prices.

Segment profit for the fourth quarter declined significantly due to continued softness in China and lower branded export demand, partially offset by the contribution from the Company's minority investment in Garudafood.

Segment profit for fiscal 2023 declined significantly due to lower sales in China, lower commodity turkey sales, and lower branded export margins.

In fiscal 2024, the Company expects a rebound in its International segment, including higher net sales and segment profit.

This recovery is expected to be driven by improvement across the business, including from its multinational businesses in China and Brazil, partnership in the Philippines, and branded exports.

Risks to this outlook include continued softness in China and commodity headwinds impacting the export business.

Unallocated Income and Expense

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 level.

Equity in Earnings of Affiliates is included in segment profit;

however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded.

Fourth Quarter Ended Fiscal Year Ended

October 29, October 30, October 29, October 30,

In thousands 2023 2022 2023 2022

Net Unallocated Expense $ 49,485 $ 18,498 $ 214,482 $ 99,297

Noncontrolling Interest (452) 128 (653) 239

For the fourth quarter of fiscal 2023, net unallocated expense increased as a result of higher pension costs, higher professional service expenses related to the Company's transformation and modernization initiative, and from the impairment of a corporate venturing investment.

In addition to these drivers, net unallocated expense for fiscal 2023 increased as a result of an adverse arbitration ruling totaling $68.3 million.

(1) Non-GAAP Financial Measures

This filing includes measures of financial performance that are not defined by U.S.

The Company utilizes these non-GAAP measures to understand and evaluate operating performance on a consistent basis.

These measures may also be used when making decisions regarding resource allocation and in determining incentive compensation.

The Company believes these non-GAAP financial measures provide useful information to investors because they facilitate year-over-year comparison and provide additional information about trends in the Company’s operations.

Non-GAAP measures are not intended to be a substitute for U.S.

GAAP measures in analyzing financial performance.

These non-GAAP measures are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

Adjusted SG&A expenses as a percent of net sales excludes the impact of an adverse arbitration ruling and certain costs associated with the transformation and modernization initiative.

Adjusted diluted net earnings per share excludes the impact of an adverse arbitration ruling, impairment charges associated with the Justin's ® trade name and a corporate venturing investment, and costs associated with the transformation and modernization initiative.

The tax impact was calculated using the effective tax rate for the quarter in which the expense was incurred.

The non-GAAP financial measure of adjusted segment profit for the Retail segment excludes the impact of the impairment charge associated with the Justin's ® trade name.

The Company's fiscal 2024 outlook for adjusted diluted net earnings per share is a non-GAAP financial measure that excludes, or has otherwise been adjusted for, items impacting comparability, including estimated charges associated with the transformation and modernization initiative.

The Company's strategic investments in the transformation and modernization initiative are expected to cease at the end of the investment period, are not expected to recur in the foreseeable future, and are not considered representative of the Company's underlying operating performance.

The Company provides earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation, and amortization (EBITDA) because these measures are useful to management and investors as indicators of operating strength relative to prior years and are commonly used to benchmark the Company’s performance.

The following tables show the calculations to reconcile from the GAAP measures to the non-GAAP financial measures.

ADJUSTED SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES AS A PERCENT OF NET SALES (NON-GAAP) AND ADJUSTED DILUTED NET EARNINGS PER SHARE (NON-GAAP)

Fourth Quarter Ended

October 29, 2023 October 30, 2022

In thousands, except per share amounts GAAP Non-GAAP Adjustments Non-GAAP Reported

GAAP Non-GAAP

Net Sales $ 3,198,079 $ — $ 3,198,079 $ 3,283,475 (2.6)

Cost of Products Sold 2,683,655 (944) 2,682,711 2,717,058 (1.3)

Gross Profit 514,425 944 515,368 566,417 (9.0)

Selling, General, and Administrative 216,546 (6,726) 209,820 206,487 1.6

Equity in Earnings of Affiliates 541 6,985 7,526 7,234 4.0

Goodwill and Intangible Impairment 28,383 (28,383) — — —

Operating Income 270,037 43,038 313,074 367,164 (14.7)

Interest and Investment Income (5,872) — (5,872) 7,933 (174.0)

Interest Expense 18,360 — 18,360 17,602 4.3

Earnings Before Income Taxes 245,805 43,038 288,843 357,495 (19.2)

Provision for Income Taxes 50,322 8,822 59,145 77,484 (23.7)

Net Earnings 195,483 34,216 229,698 280,011 (18.0)

Net Earnings (Loss) Attributable to Noncontrolling Interest (452) — (452) 128 (454.6)

Net Earnings Attributable to Hormel Foods Corporation $ 195,935 $ 34,216 $ 230,150 $ 279,883 (17.8)

Diluted Net Earnings Per Share $ 0.36 $ 0.06 $ 0.42 $ 0.51 (17.2)

Selling, General, and Administrative Expenses as a Percent of Net Sales

6.8 % 6.6 % 6.3 %

Fiscal Year Ended

October 29, 2023 October 30, 2022

In thousands, except per share amounts GAAP Non-GAAP Adjustments Non-GAAP Reported

GAAP Non-GAAP

Net Sales $ 12,110,010 $ — $ 12,110,010 $ 12,458,806 (2.8)

Cost of Products Sold 10,110,169 (944) 10,109,225 10,294,120 (1.8)

Gross Profit 1,999,841 944 2,000,785 2,164,686 (7.6)

Selling, General, and Administrative 942,167 (76,726) 865,441 879,265 (1.6)

Equity in Earnings of Affiliates 42,754 6,985 49,739 27,185 83.0

Goodwill and Intangible Impairment 28,383 (28,383) — — —

Operating Income 1,072,046 113,038 1,185,083 1,312,607 (9.7)

Interest and Investment Income 14,828 — 14,828 28,012 (47.1)

Interest Expense 73,402 — 73,402 62,515 17.4

Earnings Before Income Taxes 1,013,472 113,038 1,126,509 1,278,103 (11.9)

Provision for Income Taxes 220,552 24,012 244,565 277,877 (12.0)

Net Earnings 792,920 89,026 881,945 1,000,226 (11.8)

Net Earnings (Loss) Attributable to Noncontrolling Interest (653) — (653) 239 (372.7)

Net Earnings Attributable to Hormel Foods Corporation $ 793,572 $ 89,026 $ 882,597 $ 999,987 (11.7)

Diluted Net Earnings Per Share $ 1.45 $ 0.16 $ 1.61 $ 1.82 (11.4)

Selling, General, and Administrative Expenses as a Percent of Net Sales

7.8 % 7.1 % 7.1 %

ADJUSTED SEGMENT PROFIT (NON-GAAP)

Fourth Quarter Ended

October 29, 2023 October 30, 2022

In thousands GAAP Non-GAAP Adjustments Non-GAAP Reported

GAAP Non-GAAP

Segment Profit

Retail $ 118,660 $ 28,383 $ 147,043 $ 198,852 (26.1)

Foodservice 167,571 — 167,571 148,203 13.1

International 9,511 — 9,511 28,810 (67.0)

Total Segment Profit 295,743 28,383 324,126 375,865 (13.8)

Net Unallocated Expense 49,485 (14,655) 34,830 18,498 88.3

Noncontrolling Interest (452) — (452) 128 (454.6)

Earnings Before Income Taxes $ 245,805 $ 43,038 $ 288,843 $ 357,495 (19.2)

Fiscal Year Ended

October 29, 2023 October 30, 2022

In thousands GAAP Non-GAAP Adjustments Non-GAAP Reported

GAAP Non-GAAP

Segment Profit

Retail $ 577,690 $ 28,383 $ 606,073 $ 721,832 (16.0)

Foodservice 595,682 — 595,682 547,686 8.8

International 55,234 — 55,234 107,642 (48.7)

Total Segment Profit 1,228,606 28,383 1,256,989 1,377,161 (8.7)

Net Unallocated Expense 214,482 (84,655) 129,827 99,297 30.7

Noncontrolling Interest (653) — (653) 239 (373.1)

Earnings Before Income Taxes $ 1,013,472 $ 113,038 $ 1,126,510 $ 1,278,103 (11.9)

ADJUSTED DILUTED NET EARNINGS PER SHARE OUTLOOK (NON-GAAP)

Diluted Net Earnings per Share $1.43 - $1.57 $1.45

Arbitration Ruling — $0.10

Impairment Charges

Transformation and Modernization Initiative

Adjusted Diluted Net Earnings per Share $1.51 - $1.65 $1.61

EBIT AND EBITDA (NON-GAAP)

Fiscal Year Ended

In thousands October 29, 2023 October 30, 2022

Net Earnings Attributable to Hormel Foods Corporation $ 793,572 $ 999,987

Income Tax Expense 220,552 277,877

Interest Expense 73,402 62,515

Interest and Investment Income 14,828 28,012

EBIT $ 1,072,698 $ 1,312,367

EBIT per above 1,072,698 1,312,367

Depreciation and Amortization 253,311 235,885

EBITDA $ 1,326,009 $ 1,548,252

FISCAL YEARS 2022 AND 2021

CONSOLIDATED RESULTS

A detailed review of fiscal 2022 performance compared to fiscal 2021 is provided due to the change in reportable segments which occurred in the first quarter of fiscal 2023.

Net Earnings and Diluted Earnings Per Share

Fourth Quarter Ended Fiscal Year Ended

In thousands, except per share amounts October 30, 2022 October 31, 2021 % Change October 30, 2022 October 31, 2021 % Change

Net Earnings $ 279,883 $ 281,738 (0.7) $ 999,987 $ 908,839 10.0

Diluted Earnings Per Share 0.51 0.51 — 1.82 1.66 9.6

Adjusted Diluted Earnings Per Share (1)

0.51 0.51 — 1.82 1.73 5.2

Volume and Net Sales

Fourth Quarter Ended Fiscal Year Ended

In thousands October 30, 2022 October 31, 2021 % Change October 30, 2022 October 31, 2021 % Change

Volume (lbs.) 1,160,490 1,379,848 (15.9) 4,604,169 4,933,136 (6.7)

Organic Volume (1)

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Net sales decreased for the fourth quarter of fiscal 2022 due to reduced commodity sales and the impact from an additional week of sales last year.

Organic net sales for the fourth quarter increased, led by growth from the Grocery Products and International & Other segments.

The Grocery Products segment benefited from pricing actions effective at the beginning of the fourth quarter.

Organic net sales for the fourth quarter increased, led by growth from the Retail and Foodservice segments.

The Retail segment benefited from pricing actions effective at the beginning of the fourth quarter.

Fiscal 2022 marked the third consecutive year of record sales for the Company.

Record net sales were primarily driven by the inclusion of the Planters ® snack nuts business and growth from the Company's foodservice businesses.

Record net sales were primarily driven by the inclusion of the Planters ® snack nuts business and growth from the Foodservice segment.

All segments implemented pricing actions during the fiscal year to combat inflationary pressures.

In fiscal 2023, the Company expects sales growth and to benefit from higher levels of brand investment, increased production capacity, pricing actions effective in the second half of fiscal 2022, and actions related to its new strategic operating model.

Cost of Products Sold

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The inclusion of the Planters ® snack nuts business was also a driver of higher costs for the full year.

In fiscal 2023, costs are expected to remain elevated due to the continued impacts of broad-based inflation.

Raw material input costs for pork, beef, turkey, and feed are anticipated to remain volatile and above historical levels.

Fourth Quarter Ended Fiscal Year Ended

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Gross Profit $ 566,417 $ 578,081 (2.0) $ 2,164,686 $ 1,927,906 12.3

Percentage of Net Sales 17.3 % 16.7 % 17.4 % 16.9 %

Consolidated gross profit as a percentage of net sales for the fourth quarter and full year of fiscal 2022 increased primarily due to improved profitability from the Jennie-O Turkey Store segment, the inclusion of the Planters ® snack nuts business, and pricing actions to help mitigate inflationary pressures across all segments.

Gross profit as a percentage of net sales also benefited from the reduction of lower margin commodity sales resulting from the Company's new pork supply agreement.

Compared to the prior year, gross profit as a percentage of net sales for the fourth quarter of fiscal 2022 increased for the Jennie-O Turkey Store segment and declined for the other segments.

For fiscal 2022, gross profit as a percentage of net sales increased for the Jennie-O Turkey Store and International & Other segments and decreased for the Refrigerated Foods and Grocery Products segments.

Percent of Net Sales

17.3 % 16.7 % 17.4 % 16.9 %

Consolidated gross profit as a percent of net sales for the fourth quarter of fiscal 2022 increased primarily due to improved profitability from the Retail segment.

For fiscal 2022, gross profit as a percent of net sales increased primarily due to improved profitability from the Foodservice and International segments, the inclusion of the Planters ® snack nuts business, and pricing actions to help mitigate inflationary pressures across all segments.

Gross profit as a percent of net sales for fiscal 2022 also benefited from the reduction of lower margin commodity sales resulting from the Company's pork supply agreement that was new in fiscal 2022.

Compared to the prior year, gross profit as a percent of net sales for the fourth quarter of fiscal 2022 increased for the Retail segment and declined for the other segments.

For fiscal 2022, gross profit as a percent of net sales increased for Foodservice and International segments and decreased modestly for the Retail segment.

All business segments were negatively impacted by broad-based inflationary pressures.

In fiscal 2023, the Company expects gross profit as a percentage of net sales to be comparable to fiscal 2022.

Incremental cost inflation poses the largest risk to this assumption.

Selling, General, and Administrative (SG&A)

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SG&A $ 206,487 $ 230,441 (10.4) $ 879,265 $ 853,071 3.1

Percentage of Net Sales 6.3 % 6.7 % 7.1 % 7.5 %

Percent of Net Sales

6.3 % 6.7 % 7.1 % 7.5 %

SG&A expenses for the fourth quarter of fiscal 2022 declined primarily due to the additional week in fiscal 2021.

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As a percent of net sales, SG&A expenses declined for the full year, driven by record sales and disciplined cost management.

Advertising investments in fiscal year 2022 were $157 million, representing a 14 percent increase compared to fiscal 2021.

In fiscal 2023, the Company intends to continue investing in key brands including Planters ® , SPAM ® , SKIPPY ® , Columbus ® , Hormel ® Black Label ® , Hormel ® pepperoni, and Jennie-O ® .

Research and development continues to be a vital part of the Company's strategy to grow existing brands and expand into new branded items.

Research and development expenses were $8.6 million and $34.7 million for the fourth quarter and full year of fiscal 2022, respectively, compared to $8.3 million and $33.6 million for the corresponding periods in fiscal 2021.

Advertising investments in fiscal 2022 were $157 million, representing a 14 percent increase compared to fiscal 2021.

Research and development continued to be a vital part of the Company's strategy to grow existing brands and expand into new branded items.

Research and development expenses were $34.7 million in fiscal 2022, compared to $33.6 million in fiscal 2021.

Equity in Earnings of Affiliates

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Equity in Earnings of Affiliates $ 7,234 $ 10,041 (28.0) $ 27,185 $ 47,763 (43.1)

Equity in earnings of affiliates for the fourth quarter and full year of fiscal 2022 decreased significantly due to lower results for MegaMex.

MegaMex results have been negatively impacted by inflationary pressures, including significantly higher costs for avocados.

Equity in earnings of affiliates for the fourth quarter and full year of fiscal 2022 decreased significantly due to lower results for MegaMex Foods.

MegaMex Foods results were negatively impacted by inflationary pressures, including significantly higher costs for avocados.

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 receivables from other affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates.

These investments, along with receivables from other affiliates, are included on the Consolidated Statements of Financial Position as Investments in Affiliates.

The composition of this line item as of October 30, 2022, was as follows:

In thousands Investments/Receivables

In thousands Investments in Affiliates

Foreign 78,481

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The effective tax rate for fiscal 2021 included the benefit of one-time state tax discrete items.

For additional information, refer to Note N - Income Taxes.

The Company expects the effective tax rate in fiscal 2023 to be between 21.0 and 23.0 percent.

For additional information, refer to Note N - Income Taxes of the Notes to the Consolidated Financial Statements.

SEGMENT RESULTS

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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 segment profit and other financial information shown below.

Additional segment financial information can be found in Note P - Segment Reporting.

Therefore, the Company does not represent that these segments, if operated independently, would report the profit and other financial information shown below.

Additional segment financial information can be found in Note P - Segment Reporting of the Notes to the Consolidated Financial Statements.

Fourth Quarter Ended Fiscal Year Ended

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In thousands 2022 2021 % Change 2022 2021 % Change

Grocery Products $ 934,174 $ 905,030 3.2 $ 3,533,138 $ 2,809,445 25.8

Refrigerated Foods 1,759,161 1,888,311 (6.8) 6,691,230 6,333,410 5.6

Jennie-O Turkey Store 391,866 459,754 (14.8) 1,507,421 1,495,151 0.8

International & Other 198,274 201,655 (1.7) 727,017 748,183 (2.8)

Retail $ 2,066,454 $ 2,181,048 (5.3) $ 7,987,598 $ 7,418,079 7.7

Foodservice 1,009,672 1,043,634 (3.3) 3,691,408 3,130,174 17.9

International 207,350 230,068 (9.9) 779,799 837,936 (6.9)

Total Net Sales $ 3,283,475 $ 3,454,751 (5.0) $ 12,458,806 $ 11,386,189 9.4

Segment Profit

Grocery Products $ 102,378 $ 111,235 (8.0) $ 367,642 $ 382,197 (3.8)

Refrigerated Foods 167,402 196,819 (14.9) 685,394 664,558 3.1

Jennie-O Turkey Store 75,891 30,492 148.9 218,860 76,006 188.0

International & Other 30,194 31,343 (3.7) 105,264 115,943 (9.2)

Retail $ 198,852 $ 167,551 18.7 $ 721,832 $ 690,127 4.6

Foodservice 148,203 163,367 (9.3) 547,686 431,992 26.8

International 28,810 38,970 (26.1) 107,642 116,585 (7.7)

Total Segment Profit 375,865 369,888 1.6 1,377,161 1,238,704 11.2

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Earnings Before Income Taxes $ 357,495 $ 352,230 1.5 $ 1,278,103 $ 1,126,170 13.5

Grocery Products

Fourth Quarter Ended Fiscal Year Ended

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Segment Profit 198,852 167,551 18.7 721,832 690,127 4.6

Net sales for the fourth quarter of fiscal 2022 increased due to strong demand for SKIPPY ® peanut butter and the impact of pricing actions across the Mexican and simple-meals portfolios.

For the full year, net sales increased primarily due to the inclusion of the Planters ® snack nuts business and the impact from strategic pricing actions.

For the fourth quarter of fiscal 2022, segment profit declined, as pricing actions did not offset the impact from continued inflationary pressures.

Full year segment profit decreased, as the contribution from the Planters ® snack nuts business and organic net sales growth was more than offset by inflationary pressures and lower results from MegaMex.

In fiscal 2023, the Grocery Products segment will be reported within the Company's new Retail and Foodservice segments.

Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

Refrigerated Foods

Fourth Quarter Ended Fiscal Year Ended

October 30, October 31, October 30, October 31,

In thousands 2022 2021 % Change 2022 2021 % Change

Volume (lbs.) 530,166 657,488 (19.4) 2,104,665 2,437,217 (13.6)

Net Sales $ 1,759,161 $ 1,888,311 (6.8) $ 6,691,230 $ 6,333,410 5.6

Segment Profit 167,402 196,819 (14.9) 685,394 664,558 3.1

Volume and net sales declined in the fourth quarter of fiscal 2022 due to the impact from an additional week in the fourth quarter of last year and lower commodity sales.

Products such as Hormel ® Natural Choice ® meats, Hormel ® Bacon 1 TM fully cooked bacon, Hormel ® Fire Braised TM flame-seared meats, Hormel Gatherings ® party trays and Applegate ® breaded chicken grew volume and sales for the quarter.

For fiscal 2022, net sales increased due to strong results from the foodservice businesses, strategic pricing actions across the portfolio, and the inclusion of the Planters ® snack nuts business in the convenience channel.

Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume for the fourth quarter and full year was due primarily to lower commodity sales resulting from the Company's new pork supply agreement.

The decline in segment profit for the fourth quarter of fiscal 2022 was driven by lower commodity profitability and higher operational, logistics and raw material costs.

Segment profit growth for full year of fiscal 2022 was primarily due to strong results from the foodservice businesses, more than offsetting higher operational and logistics costs.

In fiscal 2023, the Refrigerated Foods segment will be reported within the Company's new Retail and Foodservice segments.

Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

Jennie-O Turkey Store

Net sales for the fourth quarter of fiscal 2022 decreased due to the impact from an additional week in the fourth quarter of last year and lower commodity sales.

These declines more than offset strong demand for Skippy ® peanut butter and the impact of pricing actions across the global flavors and convenient meals and proteins verticals.

For fiscal 2022, net sales increased primarily due to the inclusion of the Planters ® snack nuts business and the impact from strategic pricing actions.

Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume for the fourth quarter and full year of fiscal 2022 was primarily due to lower commodity sales resulting from the Company's new pork supply agreement, in addition to supply impacts on the Company's vertically integrated supply chain as a result of HPAI.

For the fourth quarter of fiscal 2022, segment profit increased due to higher commodity turkey prices, improved value-added mix, and pricing actions to offset the impact from continued inflationary pressures.

Fiscal 2022 segment profit increased, as the contribution from the Planters ® snack nuts business and higher commodity turkey prices more than offset the impact of inflationary pressures and lower results from MegaMex Foods.

Fourth Quarter Ended Fiscal Year Ended

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Segment Profit 148,203 163,367 (9.3) 547,686 431,992 26.8

As anticipated, volume and sales declined in the fourth quarter of fiscal 2022 as a result of the supply impacts on the Company's vertically integrated supply chain from HPAI.

For fiscal 2022, higher foodservice and whole-bird sales due to favorable pricing drove the marginal sales increase.

For the fourth quarter of fiscal 2022, segment profit growth was primarily due to higher commodity prices and improved value-added mix.

For the full year fiscal 2022, higher commodity prices and foodservice sales drove the substantial improvement in segment profit.

In fiscal 2023, the Jennie-O Turkey Store segment will be reported within the Company's new Retail, Foodservice, and International segments.

The Company expects the impacts from HPAI to reduce production volume in its turkey facilities through at least the first half of fiscal 2023.

Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

International & Other

Volume and net sales declined in the fourth quarter of fiscal 2022 due to the impact from an additional week in the fourth quarter of fiscal 2021 and lower turkey sales.

Partially offsetting these declines, products such as Hormel ® Natural Choice ® meats, Hormel ® Bacon 1 TM fully cooked bacon and Hormel ® Fire Braised TM flame-seared meats grew volume and sales for the fourth quarter of fiscal 2022.

Fiscal 2022 volume and net sales increased due to strong results across the portfolio as the industry continued to recover from pandemic-related declines and from the inclusion of the Planters ® snack nuts business in the convenience channel.

The decline in segment profit for the fourth quarter of fiscal 2022 was driven by the impact from an additional week in the fourth quarter of fiscal 2021 and higher operational, logistics and raw material costs.

Segment profit growth for fiscal 2022 was primarily due to significantly higher net sales as described above.

International

Fourth Quarter Ended Fiscal Year Ended

4 unchanged sentences

Segment Profit 28,810 38,970 (26.1) 107,642 116,585 (7.7)

In the fourth quarter of fiscal 2022, volume and net sales growth from the SPAM ® and SKIPPY ® brands and the multinational businesses were offset by lower fresh pork and refrigerated export sales.

For fiscal 2022, volume and sales declined as a result of lower commodity sales due to the Company's new pork supply agreement and ongoing export logistics challenges.

Segment profit declined in the fourth quarter of fiscal 2022, as growth in China did not overcome the impact of lower margins and higher logistics expenses for the export business.

Segment profit for the full year declined due in large part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight expenses.

In fiscal 2023, the International & Other segment will be reported within the Company's new International segment.

Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

In the fourth quarter of fiscal 2022, volume and net sales growth from the SPAM ® and Skippy ® brands and the multinational businesses were more than offset by lower commodity turkey, fresh pork and refrigerated export sales.

For fiscal 2022, volume and sales declined as a result of lower commodity sales due to the Company's new pork supply agreement, lower turkey sales as a result of the supply impacts on the Company's vertically integrated supply chain from HPAI, and ongoing export logistics challenges.

Segment profit declined in the fourth quarter of fiscal 2022, as growth in China did not overcome the impact of lower commodity turkey sales, lower branded export margins, and higher logistics expenses for the export business.

Segment profit for fiscal 2022 declined due in large part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight expenses.

Unallocated Income and Expense

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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.

however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded.

Fourth Quarter Ended Fiscal Year Ended

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Non-GAAP Financial Measures

The non-GAAP adjusted financial measurement of adjusted diluted earnings per share is presented to provide investors with additional information to facilitate the comparison of past and present operations.

The non-GAAP financial measure of adjusted diluted earnings per share is presented to provide investors with additional information to facilitate the comparison of past and present operations.

This measurement 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 in which the expenses and accounting adjustments were incurred.

The non-GAAP adjusted financial measurements of organic volume and organic net sales are presented to provide investors with additional information to facilitate the comparison of past and present operations.

Organic volume and organic net sales exclude the impacts of the acquisition of the Planters ® snack nuts business (June 2021) in the Grocery Products, Refrigerated Foods, and International & Other segments.

The non-GAAP financial measures of organic volume and organic net sales are presented to provide investors with additional information to facilitate the comparison of past and present operations.

Organic volume and organic net sales exclude the impacts of the acquisition of the Planters ® snack nuts business (June 2021) in the Retail, Foodservice, and International segments.

Organic volume and organic net sales also exclude the impact of the 53rd week in fiscal 2021 as approximated based on average weekly sales for the fourth quarter (fourteen weeks) ended October 31, 2021.

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.

The Company believes these non-GAAP financial measures provide useful information to investors because they are the measures used to evaluate performance on a comparable year-over-year basis.

Non-GAAP measures are not intended to be a substitute for U.S.

GAAP measures in analyzing financial performance.

These non-GAAP measures are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

The following tables show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.

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GAAP Reported

GAAP Acquisition Costs and Adjustments Non-GAAP Non-GAAP

GAAP Acquisition Costs and Adjustments

Non-GAAP Non-GAAP

Net Sales $ 12,458,806 $ 11,386,189 $ — $ 11,386,189 9.4

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(GAAP) Reported

(GAAP) 53rd Week Organic

(GAAP) 53rd Week

(Non-GAAP) Organic

Grocery Products 388,270 403,550 (28,825) 374,725 3.6

Refrigerated Foods 530,166 657,488 (46,963) 610,525 (13.2)

Jennie-O Turkey Store 163,785 240,771 (17,198) 223,573 (26.7)

International & Other 78,269 78,039 (5,574) 72,465 8.0

Retail 810,044 980,339 (70,024) 910,315 (11.0)

Foodservice 266,447 301,111 (21,508) 279,603 (4.7)

International 83,999 98,399 (7,029) 91,371 (8.1)

Total Volume 1,160,490 1,379,848 (98,561) 1,281,287 (9.4)

4 unchanged sentences

(Non-GAAP) Reported

(GAAP) 53rd Week Organic

(GAAP) 53rd Week

(Non-GAAP) Organic

Grocery Products 1,499,558 (138,186) 1,361,372 1,340,895 (28,825) 1,312,070 3.8

Refrigerated Foods 2,104,665 (22,127) 2,082,538 2,437,217 (46,963) 2,390,254 (12.9)

Jennie-O Turkey Store 703,824 — 703,824 824,184 (17,198) 806,986 (12.8)

International & Other 296,122 (3,503) 292,619 330,841 (5,574) 325,267 (10.0)

Retail 3,245,625 (138,186) 3,107,439 3,546,324 (70,024) 3,476,300 (10.6)

Foodservice 1,027,124 (22,127) 1,004,997 1,007,667 (21,508) 986,159 1.9

International 331,421 (3,503) 327,918 379,145 (7,029) 372,117 (11.9)

Total Volume 4,604,169 (163,817) 4,440,352 4,933,136 (98,561) 4,834,575 (8.2)

4 unchanged sentences

(GAAP) Reported

(GAAP) 53rd Week Organic

(GAAP) 53rd Week

(Non-GAAP) Organic

Grocery Products $ 934,174 $ 905,030 $ (64,645) $ 840,385 11.2

Refrigerated Foods 1,759,161 1,888,311 (134,879) 1,753,432 0.3

Jennie-O Turkey Store 391,866 459,754 (32,840) 426,914 (8.2)

International & Other 198,274 201,655 (14,404) 187,251 5.9

Retail $ 2,066,454 $ 2,181,048 $ (155,789) $ 2,025,259 2.0

Foodservice 1,009,672 1,043,634 (74,545) 969,089 4.2

International 207,350 230,068 (16,433) 213,635 (2.9)

Total Net Sales $ 3,283,475 $ 3,454,751 $ (246,768) $ 3,207,983 2.4

4 unchanged sentences

(Non-GAAP) Reported

(GAAP) 53rd Week Organic

(GAAP) 53rd Week

(Non-GAAP) Organic

Grocery Products $ 3,533,138 $ (514,708) $ 3,018,430 $ 2,809,445 $ (64,645) $ 2,744,800 10.0

Refrigerated Foods 6,691,230 (80,979) 6,610,251 6,333,410 (134,879) 6,198,531 6.6

Jennie-O Turkey Store 1,507,421 — 1,507,421 1,495,151 (32,840) 1,462,311 3.1

International & Other 727,017 (9,877) 717,140 748,183 (14,404) 733,779 (2.3)

Retail $ 7,987,598 $ (514,708) $ 7,472,890 $ 7,418,079 $ (155,789) $ 7,262,290 2.9

Foodservice 3,691,408 (80,979) 3,610,429 3,130,174 (74,545) 3,055,629 18.2

International 779,799 (9,877) 769,922 837,936 (16,433) 821,503 (6.3)

Total Net Sales $ 12,458,806 $ (605,565) $ 11,853,241 $ 11,386,189 $ (246,768) $ 11,139,421 6.4

EBIT and EBITDA

EBIT AND EBITDA (NON-GAAP)

Fiscal Year Ended

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Cash Provided by (Used in) Financing Activities (600) (487)

Cash and cash equivalents increased in fiscal 2022.

Cash and cash equivalents decreased in fiscal 2023.

The Company’s income from operations was sufficient to cover dividend payments and capital expenditures.

Cash on hand was also used to fund an investment in Garudafood, a food and beverage company in Indonesia.

Additional details related to significant drivers of cash flows are provided below.

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▪ Cash flows from operating activities were largely impacted by changes in operating assets and liabilities.

– Accounts receivable decreased $28 million in fiscal 2022 primarily due to timing of collections.

The $192 million increase in fiscal 2021 is largely due to increased sales and the incremental impact of the Planters ® snack nuts business.

– In fiscal 2022, inventory increased $352 million due to inflation in raw material and other input costs and maintaining higher inventory levels.

The $145 million increase in fiscal 2021 is due to higher raw material and supply costs and the acquisition of the Planters ® snack nuts business.

– Accounts payable and accrued expenses decreased $15 million in fiscal 2022 related to the timing of payments.

In fiscal 2021, accounts payable and accrued expenses increased $115 million related to the incremental impact of the Planters ® snack nuts business.

– Accounts receivable decreased $49 million in fiscal 2023 primarily due to timing of sales and more efficient collections.

The $28 million decrease in fiscal 2022 is largely due to timing of collections.

– In fiscal 2023, inventory decreased $36 million as a result of strategic inventory management efforts implemented to address elevated inventory levels.

The $352 million increase in fiscal 2022 is due to inflation in raw material and other input costs and maintaining higher inventory levels.

– Prepaid expenses and other assets increased $69 million in fiscal 2023 primarily due to cash collateral requirements for the Company's hedging programs and timing of payments related to infrastructure improvement commitments.

The increase in fiscal 2022 of $15 million is primarily due to the timing of payments.

– Accounts payable and accrued expenses decreased $141 million in fiscal 2023 related to the timing of payments and lower promotional and incentive compensation expenses.

In fiscal 2022, accounts payable and accrued expenses decreased $15 million related to the timing of payments.

Cash Provided by (Used in) Investing Activities

▪ In fiscal 2023, the Company acquired a minority interest in Garudafood for $426 million, including associated transaction costs.

▪ Capital expenditures were $270 million and $279 million in fiscal 2023 and 2022, respectively.

The largest spend in both years was related to capacity expansion in Omaha, Nebraska.

Additional projects included an expansion of bacon capacity at the Austin, Minnesota facility and a new production line for the SPAM ® family of products in Dubuque, Iowa in fiscal 2022 and Project Orion in fiscal 2021.

▪ In fiscal 2021, the Company acquired the Planters ® snack nuts business for $3.4 billion.

The largest projects for fiscal 2023 included a new production line for the SPAM ® family of products in Dubuque, Iowa, initial phases of the transition from harvest to value-added capacity in Barron, Wisconsin, wastewater infrastructure in Austin, Minnesota, and pepperoni capacity in Omaha, Nebraska.

The largest spend in fiscal 2022 also included the capacity expansion for SPAM ® and pepperoni as well as for bacon in Austin, Minnesota.

Cash Provided by (Used in) Financing Activities

▪ Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company with payments totaling $558 million in fiscal 2022 and $523 million in fiscal 2021.

The dividend rate was $1.04 per share in fiscal 2022, which reflected a 6 percent increase over the fiscal 2021 rate of $0.98 per share.

▪ The Company issued $2.3 billion of long-term debt in fiscal 2021.

Proceeds from the issuance, along with cash on hand, were used to fund the acquisition of the Planters ® snack nuts business.

▪ The Company repaid $250 million of its senior unsecured notes upon maturity in fiscal 2021.

▪ Cash dividends paid to the Company’s shareholders are an ongoing financing activity for the Company with payments totaling $593 million in fiscal 2023 and $558 million in fiscal 2022.

The dividend rate was $1.10 per share in fiscal 2023 compared to $1.04 per share in fiscal 2022.

▪ During fiscal 2023, the Company repurchased 310,000 shares for $12 million.

Sources and Uses of Cash

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Finally, the Company evaluates opportunistic uses including incremental debt repayment and share repurchases.

The Company believes its anticipated income from operations, cash on hand, and borrowing capacity under the current credit facility will be adequate to meet all short-term and long-term commitments.

The Company believes its anticipated income from operations, cash on hand, borrowing capacity under the current credit facility, and access to capital markets will be adequate to meet all short-term and long-term commitments.

The Company continues to look for opportunities to make investments and acquisitions that align with its strategic priorities.

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Capital expenditures are first allocated to required maintenance and then growth opportunities based on the needs of the business.

Capital expenditures supporting growth opportunities in fiscal 2023 will focus on projects for capacity, innovation, automation, and new technology.

Capital expenditures supporting growth opportunities in fiscal 2024 are expected to focus on projects related to value-added capacity, infrastructure, and new technology.

Capital expenditures for fiscal 2024 are estimated to be $280 million.

As of October 30, 2022, the Company’s outstanding debt included $3.3 billion of fixed rate unsecured senior notes due in fiscal 2024, 2028, 2030, and 2051.

As of October 29, 2023, the Company’s outstanding debt included $3.3 billion of fixed rate unsecured senior notes due in fiscal 2024, 2028, 2030, and 2051 with interest payable semi-annually.

During fiscal 2023, the Company made $55 million of interest payments and expects to make $55 million of interest payments in fiscal 2024 on these notes.

See Note L - Long-term Debt and Other Borrowing Arrangements for additional information.

In fiscal 2023, $950 million of the notes was reclassified as Current Maturities of Long-term Debt on the Consolidated Statements of Financial Position.

See Note L - Long-Term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information.

Borrowing Capacity

As a source of short-term financing, the Company maintains a $750 million unsecured revolving credit facility.

The maximum commitment under this credit facility may be further increased by $375 million, generally by mutual agreement of the lenders and us, subject to certain customary conditions.

The maximum commitment under this credit facility may be further increased by $375 million, generally by mutual agreement of the lenders and

the Company, subject to certain customary conditions.

Funds drawn from this facility may be used by the Company to refinance existing debt, for working capital or other general corporate purposes, and for funding acquisitions.

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Share Repurchases

The Company is authorized to repurchase 3,987,494 shares of stock as part of an existing plan approved by the Company’s Board of Directors.

During fiscal year 2022, the Company did not repurchase any shares of stock.

The Company is authorized to repurchase 3,677,494 shares of common stock as part of an existing plan approved by the Company’s Board of Directors.

During fiscal 2023, the Company repurchased 310,000 shares for $12 million.

The Company continues to evaluate share repurchases as part of its capital allocation strategy.

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Other Commitments (5)

110 51 59 — —

(1) The Company commits to purchase quantities of livestock, grain, and other raw materials to ensure a steady supply of production inputs.

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The purchase commitments listed above do not reflect the impact of the hedging instruments that manage the risk of fluctuating commodity markets.

See Note F - Derivatives and Hedging and Note J - Commitments and Contingencies for additional information.

See Note F - Derivatives and Hedging and Note J - Commitments and Contingencies of the Notes to the Consolidated Financial Statements for additional information.

(2) As of October 29, 2023, the Company’s outstanding debt included unsecured senior notes due in fiscal 2024, 2028, 2030, and 2051.

The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position.

See Note L - Long-term Debt and Other Borrowing Arrangements for additional information.

See Note L - Long-Term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information.

(3) Represents pension and other post-retirement benefit payments related to the Company's unfunded defined benefit plans.

Benefit payments reflect expectations for the next ten years as estimates are not readily available beyond that point.

See Note G - Pension and Other Post-retirement Benefits for additional information.

(4) See Note K - Leases for additional detail.

(5) Includes obligations related to infrastructure improvements supporting various manufacturing facilities.

See Note G - Pension and Other Post-Retirement Benefits of the Notes to the Consolidated Financial Statements for additional information.

(4) See Note K - Leases of the Notes to the Consolidated Financial Statements for additional detail.

Lease payments exclude $31.2 million of legally binding minimum lease payments for leases signed but not yet commenced.

(5) Includes obligations related to infrastructure improvements supporting various manufacturing facilities and a media advertising agreement.

Off Balance Sheet Arrangements

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This amount includes revocable standby letters of credit totaling $2.7 million 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.

Letters of credit are not reflected on the Consolidated Statements of Financial Position.

CRITICAL ACCOUNTING ESTIMATES

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generally accepted accounting principles.

The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements.

See Note A - Summary of Significant Accounting Policies for additional information.

The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can

have a meaningful effect on the reporting of consolidated financial statements.

See Note A - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for additional information.

Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions.

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Fair value of the assets and liabilities acquired is determined through established valuation techniques, such as the income, cost or market approach.

The Company may utilize third-party

valuation experts to assist in the fair value determination.

The Company may utilize third-party valuation experts to assist in the fair value determination.

The fair value measurements of identifiable intangibles are based on available historical information and expectations and assumptions about the future.

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Sensitivity of Estimate to Change:

The Company did not have any business combinations in fiscal 2022.

The Company did not have any business combinations in fiscal 2023 and 2022.

On June 7, 2021, the Company acquired the Planters ® snack nuts business for $3.4 billion and used a third-party valuation specialist to perform the valuation of the assets acquired.

Refer to Note B - Acquisitions and Divestitures for additional information.

The Company acquired tradenames which were determined to have a fair value of $712.0 million.

Key assumptions used to calculate the fair value of the tradenames using a relief from royalty model included revenue projections, royalty rates, and discount rates.

Refer to Note B - Acquisitions and Divestitures of the Notes to the Consolidated

Financial Statements for additional information.

The Company acquired trade names which were determined to have a fair value of $712.0 million.

Key assumptions used to calculate the fair value of the trade names using a relief from royalty model included revenue projections, royalty rates, and discount rates.

The Company also identified customer relationships which were assigned a fair value of $51.0 million using the distributor method under the income approach.

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Goodwill and Other Indefinite-Lived Intangibles

Other indefinite-lived intangible assets primarily include tradenames obtained through business acquisitions which are originally recorded at their estimated fair values at the date of acquisition.

Other indefinite-lived intangible assets primarily include trade names obtained through business acquisitions which are originally recorded at their estimated fair values at the date of acquisition.

Goodwill is the residual after allocating the purchase price to net assets acquired and is allocated across the Company’s reporting units:

Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International.

Retail, Foodservice, and International.

Goodwill and indefinite-lived intangible assets are not amortized but tested annually for impairment, or more frequently if impairment indicators arise.

If the carrying value of these assets exceeds the estimated fair value, the asset is considered impaired which requires a reduction to earnings.

See Note A - Summary of Significant Accounting Policies for additional details regarding the Company’s procedures.

See Note A - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for additional details regarding the Company’s procedures.

Judgments and Uncertainties:

Determining whether impairment indicators exist and estimating the fair value of the Company’s goodwill reporting units and intangible assets for impairment testing requires significant judgment.

Indefinite-lived tradenames are evaluated for impairment using an income approach utilizing the relief from royalty method.

Indefinite-lived trade names are evaluated for impairment using an income approach utilizing the relief from royalty method.

Significant assumptions include royalty rate, annual projected revenue, discount rate, and estimated long-term growth rate.

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Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.

As a result of organizational changes in the first quarter of fiscal 2023, the Company conducted an assessment of its operating segments and reporting units.

Based on this analysis, goodwill was reallocated using the relative fair value approach.

Prior to the goodwill reallocation, an impairment assessment was performed which indicated no impairment to the Company's reporting units.

Subsequent to the goodwill reallocation, the Company completed quantitative impairment testing on each new reporting unit.

The estimated fair value of each goodwill reporting unit exceeded the calculated carrying value by more than 50 percent.

During the fourth quarter of fiscal 2023, the Company performed a qualitative assessment of goodwill.

No goodwill impairment charges were recorded as a result of the testing.

The Company last completed quantitative testing in fiscal 2021 and the estimated fair value of each goodwill reporting unit exceeded the calculated carrying value by more than 50 percent.

Based on the 2021 testing, a 10 percent decline in projected cash flows or 10 percent increase in the discount rate would not result in an impairment.

The Company also performed qualitative impairment testing for indefinite-lived intangible assets in the fourth quarter of fiscal 2022.

No impairment charges were recorded as a result of the testing.

The Company last completed quantitative testing in fiscal 2021 and the estimated fair value of each indefinite-lived intangible asset exceeded the carrying value by more than 10 percent.

No goodwill impairment charges were recorded as a result of the assessment.

Based on the quantitative testing performed in the first quarter of fiscal 2023, a 10 percent decline in projected cash flows or 10 percent increase in the discount rate would not result in an impairment.

The Company also performed a qualitative impairment assessment for indefinite-lived intangible assets in the fourth quarter of fiscal 2023.

As a result of the qualitative assessment, it was determined that it was more likely than not the Justin's ® trade name was impaired, and the Company performed a quantitative impairment test.

As a result of the quantitative impairment test, a $28.4 million intangible asset impairment charge was recorded for the Justin's ® trade name.

No other impairment charges were recorded as a result of the qualitative assessment.

The Company last completed quantitative testing for the other indefinite-lived intangible assets in fiscal 2021 and the estimated fair value of each indefinite-lived intangible asset exceeded the carrying value by more than 10 percent.

Based on the fiscal 2021 testing, a 10 percent decline in forecasted revenue or 10 percent increase in the discount rate would not result in a material impairment.

Based on the fiscal 2023 quantitative impairment test, a 10 percent decline in forecasted revenue or 10 percent increase in the discount rate used for the Justin's ® trade name would not result in additional material impairment.

Pension and Other Post-Retirement Benefits

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Mortality and discount rates used are based on actuarial tables elected at each fiscal year-end.

The Company uses third-party specialists

to assist in the determination of these estimates and the calculation of certain employee benefit expenses and the outstanding obligation.

The Company uses third-party specialists to assist in the determination of these estimates and the calculation of certain employee benefit expenses and the outstanding obligation.

Benefit plan assets are stated at fair value.

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The assumed discount rate, expected long-term rate of return on plan assets, rate of future compensation increase, interest crediting rate, and the health care cost trend rate have a significant impact on the amounts reported for the benefit plans.

For the year ended October 30, 2022, the Company had $1,200.0 million and $212.0 million in pension benefit obligation and post-retirement benefit obligation, respectively.

For the year ended October 29, 2023, the Company had $1.2 billion and $186.2 million in pension benefit obligation and post-retirement benefit obligation, respectively.

For fiscal 2024, the Company expects pension benefit costs of $44.3 million and post-retirement benefit costs of $10.5 million.

A one-percentage-point change in these rates would have the following effects:

1-Percentage-Point

One-Percentage-Point

Benefit Cost Benefit Obligation

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On an annual basis, the Company performs pricing tests on certain underlying investments to gain additional assurance of the reliability of values received from the fund manager.

See Note G - Pension and Other Post-retirement Benefits for additional information.

See Note G - Pension and Other Post-Retirement Benefits of the Notes to the Consolidated Financial Statements for additional information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis