What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-12-05 compared with 2023-12-06 · 338 added, 518 removed, 282 unchanged (75% of the section changed)

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Executive Overview

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 believes fiscal 2024 demonstrated the solid execution of its strategy, the power of its portfolio and the resilience of its team.

The Company achieved net sales of $11.9 billion, declining 2 percent compared to the prior year, as the benefit from broad-based growth in the Foodservice segment and value-added growth in the Retail segment from Applegate ® , value-added fresh pork, bacon, and value-added turkey, was more than offset by declines in the Retail and International segments.

Declines in the Retail segment were driven primarily by significant year-over-year pricing declines for whole bird and commodity turkey and softness in the Convenient Meals & Proteins vertical.

International net sales declines were driven by lower commodity exports and lower net sales in China.

Segment profit increased 2 percent compared to prior year, as favorable results in the International segment were partially offset by unfavorable results in the Retail segment.

Segment profit for the Foodservice segment was comparable to the prior year.

Net earnings increased 1 percent compared to the prior year, as improved segment profit and favorable interest and investment income were partially offset by a higher effective tax rate.

Adjusted net earnings (1) — excluding the impact of costs associated with the Company’s Transform and Modernize (T&M) initiative, litigation settlements, and the gain on the divestiture of Hormel Health Labs, LLC (Hormel Health Labs) — declined 2 percent.

Diluted earnings per

share and adjusted diluted earnings per share (1) for fiscal 2024 were $1.47 and $1.58, respectively, compared to $1.45 and $1.61 last year.

International segment profit increased significantly compared to prior year due to contribution from the Company’s minority investments, improved mix and favorable costs in the Company's China business, and favorable export product mix.

Segment profit for the Foodservice segment was comparable to the prior year as the benefit from higher sales and lower logistics expenses were offset by higher selling, general and administrative (SG&A) expenses.

Retail segment profit declined for the full year due to lower sales, lower equity in earnings of affiliates, and higher SG&A expenses.

These declines were partially offset by the benefit from lower logistics expenses, savings from the T&M initiative, and the lapping of a non-cash impairment charge associated with the Justin’s ® trade name in fiscal 2023.

Fiscal 2024 was an important year of investment for the Company's multi-year T&M initiative.

The Company made meaningful progress on the initiative, which is expected to deliver long-term value to the organization.

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

Capital expenditures in fiscal 2024 were $256 million, including investments in capacity expansions for Hormel ® Fire Braised ® products, Applegate ® products and the Jiaxing, China, facility.

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.

Dividends paid to shareholders were a record $615 million.

Fiscal 2025 Outlook (2) :

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 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.

The Company continues to navigate through a dynamic consumer and operating environment.

Organic net sales (1) growth of 1 percent to 3 percent is expected in fiscal 2025, which assumes benefits from modestly higher volumes, growth in key categories and markets, higher brand support and innovation, market-based pricing actions, and the current assumptions for raw material costs.

From a bottom-line perspective, diluted earnings per share are expected to be $1.51 to $1.65 and adjusted diluted earnings per share (1) are expected to be $1.58 to $1.72.

Earnings are expected to decline in the first half of the year as growth in key categories and markets is expected to be offset by the recovery from a prior year production disruption at the Company's Suffolk, Virginia, facility, the impact from lower commodity turkey markets, and higher SG&A expenses, including increased brand support through advertising.

Segment profit growth from all three segments is expected in the back half of the year.

Major risks to the outlook include incremental inflationary pressures 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 solid balance sheet.

The Company plans to continue to support the business through increased marketing and advertising investments for its leading brands.

Further, continued capital expenditure investments including investments for data and technology related to its T&M initiative and capacity expansions for Hormel ® Fire Braised ® products, Applegate ® products and the Jiaxing, China, facility.

The annual dividend for 2025 will be $1.16 per share, representing an increase of 3 percent and marking the 59th consecutive year of dividend increases.

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 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.

Consistent with the plan outlined at its 2023 investor day, the Company expects fiscal 2025 to be a year of acceleration in its T&M initiative.

For fiscal 2025, the Company expects a benefit to net earnings from its T&M initiative.

A review of the Company’s fiscal 2024 performance compared to fiscal 2023 appears in the following section.

A review of fiscal 2023 performance compared to fiscal 2022 is set forth in Part II, Item 7 of the Company’s Form 10-K for the fiscal year ended October 29, 2023, under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by reference.

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

generally accepted accounting principles (GAAP).

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Results of Operations

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

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.

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

The Company 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 in the United States.

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 Foodservice segment consists primarily of the processing, marketing, and sale of food products for foodservice, convenience store, and commercial customers located in the United States.

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.

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

The Company’s fiscal year consisted of 52 weeks in fiscal years 2024, 2023, and 2022.

Fiscal year 2025 will consist of 52 weeks.

FISCAL YEARS 2023 AND 2022

CONSOLIDATED RESULTS

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In thousands, except per share amounts October 27, 2024 October 29, 2023 % Change October 27, 2024 October 29, 2023 % Change

Net Earnings $ 195,935 $ 279,883 (30.0) $ 793,572 $ 999,987 (20.6)

Net Earnings Attributable to Hormel Foods Corporation

$ 220,196 $ 195,935 12.4 $ 805,038 $ 793,572 1.4

Diluted Earnings Per Share 0.40 0.36 11.1 1.47 1.45 1.4

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0.42 0.42 — 1.58 1.61 (1.9)

(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).

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

Volume and Net Sales

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Net Sales $ 3,138,091 $ 3,198,079 (1.9) $ 11,920,797 $ 12,110,010 (1.6)

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.

Volume for the fourth quarter and full year of fiscal 2024 declined, as higher volume in the Foodservice segment was more than offset by lower volume in the Retail segment, primarily in the Convenient Meals & Proteins and the Value-Added Meats verticals.

Net sales declined in the fourth quarter of fiscal 2024, as higher net sales in the Foodservice and International segments were more than offset by declines in the Retail segment, driven by significant year-over-year pricing declines for whole bird turkeys and lower sales of Planters ® snack nuts resulting from production disruptions at the Suffolk, Virginia, facility.

Full year fiscal 2024 net sales declined compared to the prior year, as the benefit from broad-based growth in the Foodservice segment and value-added growth in the Retail segment from Applegate ® , value-added fresh pork, bacon, and value-added turkey, was more than offset by declines in the Retail and International segments.

Declines in the Retail segment were driven primarily by significant year-over-year pricing declines for whole bird and commodity turkey and softness in the Convenient Meals & Proteins vertical.

International net sales declines were driven by lower commodity exports and lower net sales in China.

In fiscal 2025, the Company expects net sales growth, which assumes benefits from modestly higher volumes, growth in key categories and markets, higher brand support and innovation, market-based pricing actions, and the current assumptions for raw material costs.

Risks to this outlook include slowing consumer demand and market price fluctuations.

Cost of Products Sold

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2024 2023 % Change 2024 2023 % Change

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Cost of products sold for the fourth quarter and full year of fiscal 2024 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.

Cost of products sold per pound increased one percent in fiscal 2024, driven primarily by product mix changes and inflationary pressures, partially offset by cost savings from the Company's T&M initiative.

In fiscal 2025, raw material costs for pork, beef, and nuts are anticipated to be above historical levels.

Feed costs are expected to be lower as compared to the prior year.

The Company is anticipating normalized levels of inflation for employee, packaging, and production related expenses.

The Company expects its T&M initiative to deliver cost savings in fiscal 2025, targeting the procurement of ingredients and supplies, logistics, and production costs.

Fourth Quarter Ended Fiscal Year Ended

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16.6 % 16.1 % 17.0 % 16.5 %

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.

Gross profit as a percent of net sales for the fourth quarter and full year of fiscal 2024 increased, as pricing actions and cost savings from the Company's T&M initiative were partially offset by inflationary pressures.

Compared to fiscal 2023, gross profit as a percent of net sales increased for the Retail and International segments and decreased for the Foodservice segment.

In fiscal 2025, the Company expects gross profit as a percent of net sales to increase compared to the prior year.

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

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7.2 % 6.6 % 7.8 % 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.

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

SG&A expenses for the fourth quarter of fiscal 2024 increased due to higher employee-related expenses and higher consulting fees related to the Company’s T&M initiative.

For full year fiscal 2024, the increase in SG&A expenses and SG&A expenses as a percent of net sales is attributed to higher employee-related expenses, higher consulting fees related to the Company’s T&M initiative, and antitrust settlements, partially offset by the lapping of an unfavorable arbitration ruling in the prior year.

Adjusted SG&A expenses as a percent of net sales (1) for fiscal 2024 increased due to employee-related expenses.

Advertising investments in fiscal 2024 were $163 million, representing a 2 percent increase compared to fiscal 2023.

In fiscal 2025, the Company intends to continue investing in its leading brands and for full year advertising expense to increase compared to the prior year.

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Equity in Earnings of Affiliates $ 11,838 $ 541 2,088.2 $ 51,088 $ 42,754 19.5

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.

Equity in earnings of affiliates increased for the fourth quarter and full year of fiscal 2024 as growth in the International segment's minority interests in Indonesia and the Philippines and the lapping of an impairment of a corporate venturing investment in the prior year were partially offset by weaker results for MegaMex Foods.

The Company accounts for its majority-owned operations under the consolidation method.

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Interest Expense 19,430 18,360 5.8 80,894 73,402 10.2

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.

Interest and investment income increased in the fourth quarter of fiscal 2024 primarily due to favorable rabbi trust performance.

Interest and investment income increased for the full year of fiscal 2024 due to favorable rabbi trust performance as well as higher cash balances and interest rates.

Interest expense increased in fiscal 2024 due to higher interest rates on debt issued during the year.

Effective Tax Rate

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Effective Tax Rate 21.5 % 20.5 % 22.3 % 21.8 %

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.

The effective tax rate for fiscal 2024 included a benefit from the purchase of federal energy tax credits.

The fiscal 2023 effective tax rate included a benefit related to the deduction for foreign-derived intangible income that did not repeat in fiscal 2024.

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

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Net sales and segment profit for each of the Company’s reportable segments are set forth below.

The Company does not allocate deferred compensation, non-recurring expenses associated with the T&M initiative, investment income, interest expense, or interest income to its segments when measuring performance.

The Company also retains various other income and expenses at the corporate level.

Equity in earnings of affiliates is included in segment profit;

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

These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

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

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Earnings Before Income Taxes $ 280,030 $ 245,805 13.9 $ 1,035,434 $ 1,013,472 2.2

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

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152,932 147,043 4.0 562,768 606,073 (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).

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.

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

For the fourth quarter of fiscal 2024, growth from many branded items, including Applegate ® natural and organic meats, Hormel ® Black Label ® bacon, the SPAM ® family of products, Jennie-O ® ground turkey, and Hormel ® Square Table™ entrees was more than offset by volume and net sales declines driven by the Value Added Meats, Snacking & Entertaining, and Convenient Meals & Proteins verticals.

Excluding the impact of last year's non-cash impairment charge, adjusted segment profit (1) increased due to continued benefits from lower logistics expenses and incremental savings from the T&M initiative.

Full year fiscal 2024 volume and net sales declined as value-added growth from many branded items was more than offset by declines in the Value Added Meats, Convenient Meals & Proteins, and Snacking & Entertaining verticals.

For fiscal 2024, segment profit declined due to lower sales, lower equity in earnings of affiliates, and higher SG&A expenses.

These declines were partially offset by the benefit from lower logistics expenses and savings from the T&M initiative.

Additionally, a non-cash impairment charge of $28.4 million was recorded in the fourth quarter of fiscal 2023 associated with the Justin’s ® trade name.

In fiscal 2025, the Company expects modest net sales growth and comparable volumes for its Retail segment.

Top line growth is expected to be supported by key categories, higher brand support, and innovation.

Earnings are expected to grow compared to the prior year.

Risks to this outlook include slowing consumer demand, unfavorable sales mix, and higher-than-expected operating costs.

Fourth Quarter Ended Fiscal Year Ended

4 unchanged sentences

Segment Profit 154,340 167,571 (7.9) 596,292 595,682 0.1

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.

Fourth quarter volume and net sales growth were driven by strong performance across the premium prepared proteins, salty snacks, turkey, bacon, and pizza toppings categories.

Products such as Heritage Premium Meats offerings, Hormel ® Fire Braised ® meats, branded Jennie-O ® turkey, Planters ® snack nuts, and Cafe H ® globally inspired proteins delivered top line growth.

Segment profit decreased due to lower margins in Heritage Premium Meats, poultry, and pizza toppings as well as higher SG&A expenses.

Full year fiscal 2024 volume and net sales increased due to broad-based growth across many categories.

Segment profit was comparable to prior year as the benefit from higher sales, lower logistics expenses, and savings from the T&M initiative were offset by lower fourth quarter margins and higher SG&A expenses.

In fiscal 2025, the Company anticipates year-over-year growth for volume, net sales, and segment profit from its Foodservice segment after removing the impacts from the Hormel Health Labs divestiture in the fourth quarter of fiscal 2024.

Risks to this outlook include a softening of foodservice industry demand, lower-than-expected raw material markets which through market-based pricing can negatively impact net sales, and higher-than-expected operating costs.

International

5 unchanged sentences

Segment Profit 27,058 9,511 184.5 92,084 55,234 66.7

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.

For the fourth quarter, net sales grew due to demand in China and strong branded exports for SPAM ® luncheon meat and Skippy ® peanut butter.

Considerable volume declines in turkey exports resulted in lower volumes compared to prior year.

Segment profit for the quarter was significantly above the prior year, due to improved export margins, favorable results in China, and growth from our investments in the Philippines and Indonesia.

Full year fiscal 2024 volume and net sales declined as higher branded exports were more than offset by lower commodity exports and lower net sales in China.

Segment profit increased significantly due to contribution from the Company’s minority investments, improved mix and favorable costs in the Company's China business, and favorable export product mix.

In fiscal 2025, the Company anticipates year-over-year growth for volume, net sales, and segment profit from its International segment.

Risks to this outlook include macroeconomic conditions in multinational markets, cost inflation, and potential political tariffs.

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

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Noncontrolling Interest (236) (452) (407) (653)

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.

For the fourth quarter of fiscal 2024, net unallocated expense increased as higher employee-related expenses and expenses related to the Company’s T&M initiative were partially offset by favorable rabbi trust performance and a gain on the divestiture of Hormel Health Labs.

For fiscal 2024, net unallocated expense was comparable to the prior year as expenses related to the Company’s T&M initiative, higher employee-related expenses, and expenses related to antitrust settlements were offset by the lapping of an unfavorable arbitration ruling in the prior year, higher interest income, and favorable rabbi trust performance.

(1) NON-GAAP MEASURES

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

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

The Company believes these non-GAAP measures provide useful information to investors because they aid analysis and understanding of the Company’s results and business trends relative to past performance and the Company’s competitors.

Non-GAAP measures are not intended to be a substitute for GAAP measures in analyzing financial performance.

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

Transform and Modernize (T&M) Initiative

In the fourth quarter of fiscal 2023, the Company announced a multi-year T&M initiative.

In presenting non-GAAP measures, the Company adjusts for (i.e., excludes) expenses for this initiative that are non-recurring, comprised primarily of project-based external consulting fees and asset write-offs related to portfolio optimization (i.e., reducing the complexity and optimizing the assortment of the product portfolio).

The Company believes that non-recurring costs associated with the T&M initiative are not reflective of the Company’s ongoing operating cost structure;

therefore, the Company is excluding these discrete costs.

The Company does not adjust for (i.e., does not exclude) certain costs related to the T&M initiative that are expected to continue after the project ends, such as software license fees and internal employee expenses, because those costs are considered ongoing in nature as a component of normal operating costs.

The Company also does not adjust for savings realized through the T&M initiative as these are considered ongoing in nature and reflect expected ongoing operating performance.

Legal Matters

From time to time, the Company incurs expenses related to discrete legal matters that the Company believes are not indicative of the Company’s core operating performance, do not reflect expected future operating costs, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

The Company adjusts for (i.e., excludes) these expenses.

Litigation Settlements

In the second and third quarters of fiscal 2024, the Company entered into settlement agreements with certain plaintiffs in its pending antitrust litigation.

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

Arbitration Ruling

In the third quarter of fiscal 2023, the Company accrued for an unexpected, unfavorable arbitration ruling involving an isolated commercial dispute with a third party.

This matter was settled in the fourth quarter of fiscal 2023.

Gain on Sale of Business

In the fourth quarter of fiscal 2024, the Company sold the Hormel Health Labs business, resulting in a gain on the sale.

The Company believes the one-time benefit from the sale is not reflective of the Company’s ongoing operating cost structure, is not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

Thus, the Company adjusted for (i.e.

excluded) the gain.

Organic Net Sales

The non-GAAP adjusted financial measurement of organic net sales provides investors with additional information to facilitate the comparison of past and present operations.

Organic net sales excludes the impact of the sale of the Hormel Health Labs business in the Foodservice segment in fiscal 2024.

Impairment Charges

In the fourth quarter of fiscal 2023, the Company incurred impairment charges associated with the Justin’s ® trade name and a corporate venturing investment.

The Company believes that non-recurring costs for these impairments are not reflective of the Company’s ongoing operating cost structure, are not indicative of the Company’s core operating performance, do not reflect expected future operating costs, and may not be meaningful when comparing the Company’s operating performance against that of prior periods;

therefore, the Company is excluding these discrete costs.

The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP measures presented in this Annual Report on Form 10-K.

The tax impacts were calculated using the effective tax rate for the quarter in which the transactions occurred.

Fourth Quarter Ended Fiscal Year Ended

in thousands, except per share amounts

October 27, 2024 October 29, 2023 October 27, 2024 October 29, 2023

Cost of Products Sold (GAAP) $ 2,616,861 $ 2,683,655 $ 9,898,659 $ 10,110,169

Transform and Modernize Initiative (1)

(910) (944) (5,557) (944)

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

Adjusted Cost of Products Sold (Non-GAAP) $ 2,615,950 $ 2,682,711 $ 9,893,102 $ 10,109,225

Gross Profit (GAAP) $ 521,230 $ 514,425 $ 2,022,138 $ 1,999,841

Transform and Modernize Initiative (1)

910 944 5,557 944

Adjusted Gross Profit (Non-GAAP) $ 522,140 $ 515,368 $ 2,027,695 $ 2,000,785

$ 238,587 $ 216,546 $ 1,005,294 $ 942,167

Transform and Modernize Initiative (2)

(16,440) (8,397) (47,456) (8,397)

Pork Antitrust Litigation Settlements — — (11,750) —

Red Meat Wages Antitrust Litigation Settlement — — (13,500) —

Poultry Wages Antitrust Litigation Settlement — — (3,500) —

Gain on Sale of Business 3,922 — 3,922 —

Arbitration Ruling — 1,671 — (68,329)

Adjusted SG&A (Non-GAAP)

$ 226,069 $ 209,820 $ 933,010 $ 865,441

Equity in Earnings of Affiliates (GAAP) $ 11,838 $ 541 $ 51,088 $ 42,754

Impairment Charges — 6,985 — 6,985

Adjusted Equity in Earnings of Affiliates (Non-GAAP) $ 11,838 $ 7,526 $ 51,088 $ 49,739

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

Impairment Charges — (28,383) — (28,383)

Adjusted Goodwill and Intangible Impairment (Non-GAAP) $ — $ — $ — $ —

Operating Income (GAAP) $ 294,481 $ 270,037 $ 1,067,932 $ 1,072,046

Transform and Modernize Initiative (1)(2)

17,350 9,340 53,013 9,340

Pork Antitrust Litigation Settlements — — 11,750 —

Red Meat Wages Antitrust Litigation Settlement — — 13,500 —

Poultry Wages Antitrust Litigation Settlement — — 3,500 —

Gain on Sale of Business (3,922) — (3,922) —

Arbitration Ruling — (1,671) — 68,329

Impairment Charges — 35,368 — 35,368

Adjusted Operating Income (Non-GAAP) $ 307,909 $ 313,074 $ 1,145,773 $ 1,185,083

Fourth Quarter Ended Fiscal Year Ended

in thousands, except per share amounts

October 27, 2024 October 29, 2023 October 27, 2024 October 29, 2023

Earnings Before Income Taxes (GAAP) $ 280,030 $ 245,805 $ 1,035,434 $ 1,013,472

Transform and Modernize Initiative (1)(2)

17,350 9,340 53,013 9,340

Pork Antitrust Litigation Settlements — — 11,750 —

Red Meat Wages Antitrust Litigation Settlement — — 13,500 —

Poultry Wages Antitrust Litigation Settlement — — 3,500 —

Gain on Sale of Business (3,922) — (3,922) —

Arbitration Ruling — (1,671) — 68,329

Impairment Charges — 35,368 — 35,368

Adjusted Earnings Before Income Taxes (Non-GAAP) $ 293,459 $ 288,843 $ 1,113,275 $ 1,126,509

Provision for Income Taxes (GAAP) $ 60,070 $ 50,322 $ 230,803 $ 220,552

Transform and Modernize Initiative (1)(2)

3,730 1,915 11,739 1,915

Pork Antitrust Litigation Settlements — — 2,644 —

Red Meat Wages Antitrust Litigation Settlement — — 2,930 —

Poultry Wages Antitrust Litigation Settlement

Gain on Sale of Business (843) — (843) —

Arbitration Ruling — (343) — 14,847

Impairment Charges — 7,250 — 7,250

Adjusted Provision for Income Taxes (Non-GAAP) $ 62,957 $ 59,145 $ 248,031 $ 244,565

Net Earnings Attributable to Hormel Foods Corporation (GAAP) $ 220,196 $ 195,935 $ 805,038 $ 793,572

Transform and Modernize Initiative (1)(2)

13,620 7,426 41,274 7,426

Pork Antitrust Litigation Settlements — — 9,106 —

Red Meat Wages Antitrust Litigation Settlement — — 10,571 —

Poultry Wages Antitrust Litigation Settlement

Gain on Sale of Business (3,078) — (3,078) —

Arbitration Ruling — (1,328) — 53,482

Impairment Charges — 28,118 — 28,118

Adjusted Net Earnings Attributable to Hormel Foods Corporation (Non-GAAP) $ 230,738 $ 230,150 $ 865,650 $ 882,597

Diluted Earnings Per Share (GAAP)

$ 0.40 $ 0.36 $ 1.47 $ 1.45

Transform and Modernize Initiative (1)(2)

0.02 0.01 0.08 0.01

Pork Antitrust Litigation Settlements — — 0.02 —

Red Meat Wages Antitrust Litigation Settlement — — 0.02 —

Poultry Wages Antitrust Litigation Settlement

Gain on Sale of Business (0.01) — (0.01) —

Arbitration Ruling — — — 0.10

Impairment Charges — 0.05 — 0.05

Adjusted Diluted Earnings Per Share (Non-GAAP)

$ 0.42 $ 0.42 $ 1.58 $ 1.61

Fourth Quarter Ended Fiscal Year Ended

in thousands, except per share amounts

October 27, 2024 October 29, 2023 October 27, 2024 October 29, 2023

SG&A as a Percent of Net Sales (GAAP)

7.6 % 6.8 % 8.4 % 7.8 %

Transform and Modernize Initiative (2)

(0.5) (0.3) (0.4) (0.1)

Pork Antitrust Litigation Settlements — — (0.1) —

Red Meat Wages Antitrust Litigation Settlement — — (0.1) —

Poultry Wages Antitrust Litigation Settlement

Gain on Sale of Business 0.1 — — —

Arbitration Ruling — 0.1 — (0.6)

Adjusted SG&A as a Percent of Net Sales (Non-GAAP)

7.2 % 6.6 % 7.8 % 7.1 %

(1) Comprised primarily of asset write-offs related to portfolio optimization.

(2) Comprised primarily of project-based external consulting fees.

Adjusted Segment Profit (Non-GAAP)

1 unchanged sentence

October 27, 2024 October 29, 2023

In thousands GAAP Non-GAAP Adjustments Non-GAAP Reported

GAAP Non-GAAP

In thousands GAAP Non-GAAP Adjustments (1)

Non-GAAP GAAP Non-GAAP Adjustments (2)

Segment Profit

6 unchanged sentences

Earnings Before Income Taxes $ 280,030 $ 13,428 $ 293,459 $ 245,805 $ 43,038 $ 288,843

(1) Net Unallocated Expense adjustments in the fourth quarter of fiscal 2024 comprised of non-recurring T&M initiative costs and the gain on the sale of Hormel Health Labs.

(2) Retail segment profit adjustment in the fourth quarter of fiscal 2023 is due to an impairment charge associated with the Justin’s ® trade name.

Net Unallocated Expense adjustments for the fourth quarter of fiscal 2023 comprised of an unfavorable arbitration ruling, impairment charge associated with a corporate venturing investment, and non-recurring T&M initiative costs.

Fiscal Year Ended

October 27, 2024 October 29, 2023

In thousands GAAP Non-GAAP Adjustments Non-GAAP Reported

GAAP Non-GAAP

In thousands GAAP Non-GAAP Adjustments (1)

Non-GAAP GAAP Non-GAAP Adjustments (2)

Segment Profit

6 unchanged sentences

Earnings Before Income Taxes $ 1,035,434 $ 77,841 $ 1,113,275 $ 1,013,472 $ 113,038 $ 1,126,509

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)

1,160,490 1,281,287 (9.4) 4,440,352 4,834,575 (8.2)

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

Organic Net Sales (1)

(1) Net Unallocated Expense adjustments in fiscal 2024 comprised of non-recurring T&M initiative costs, litigation settlements for pork, red meat wages, and poultry wages antitrust cases, and the gain on the sale of Hormel Health Labs.

(2) Retail segment profit adjustment in fiscal 2023 is due to an impairment charge associated with the Justin’s ® trade name.

Net Unallocated Expense adjustments in fiscal 2023 comprised of an unfavorable arbitration ruling, impairment charge associated with a corporate venturing investment, and non-recurring T&M initiative costs.

Forward-looking U.S.

GAAP to Non-GAAP Measures

The tables below show the calculations to reconcile from the estimated fiscal 2025 GAAP measures to the estimated adjusted non-GAAP measures.

Fiscal 2025 Outlook - Organic Net Sales (Non-GAAP)

To facilitate the comparison of past and present net sales performance, the Company’s fiscal 2025 outlook for net sales growth has been adjusted to reflect organic net sales.

Organic net sales exclude the impact of the sale of the Hormel Health Labs business in the fourth quarter of fiscal 2024.

The adjustment removes the full year fiscal 2024 net sales of the operation, which were reported within the Foodservice segment.

Fiscal 2025 Outlook

2024 Results Change

Net Sales (GAAP)

$ 11,900,000 - $ 12,200,000 $ 11,920,797 0 % - 2 %

(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).

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, which was effective January 1, 2022.

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 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 Foodservice segment.

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

Cost of Products Sold

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2022 2021 % Change 2022 2021 % Change

Cost of Products Sold $ 2,717,058 $ 2,876,669 (5.5) $ 10,294,120 $ 9,458,283 8.8

Cost of products sold for the fourth quarter decreased, resulting from lower sales due to the additional week in fiscal 2021.

For fiscal 2022, cost of products sold increased due to inflationary pressures stemming from raw materials, packaging, freight, labor, and other inputs.

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

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2022 2021 % Change 2022 2021 % Change

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

Percent of Net Sales

Hormel Health Labs Divestiture

— - — (107,643)

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.

Selling, General, and Administrative (SG&A)

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2022 2021 % Change 2022 2021 % Change

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

Percent of Net Sales

Organic Net Sales (Non-GAAP)

$ 11,900,000 - $ 12,200,000 $ 11,813,154 1 % - 3 %

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

SG&A expenses for fiscal 2022 increased due to the inclusion of the Planters ® snack nuts business and higher marketing and advertising investments.

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 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

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2022 2021 % Change 2022 2021 % Change

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 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 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 in Affiliates

Foreign 78,481

Total $ 271,058

Interest and Investment Income and Interest Expense

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2022 2021 % Change 2022 2021 % Change

Interest and Investment Income $ 7,933 $ 10,138 (21.7) $ 28,012 $ 46,878 (40.2)

Interest Expense 17,602 15,589 12.9 62,515 43,307 44.4

Interest and investment income decreased in the fourth quarter and full year of fiscal 2022 primarily due to losses on the rabbi trust.

Interest expense in fiscal 2022 reflects the full year impact of debt issued in 2021.

Effective Tax Rate

Fourth Quarter Ended Fiscal Year Ended

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

Fiscal 2025 Outlook - Adjusted Diluted Earnings per Share (Non-GAAP)

The non-GAAP measure of adjusted diluted earnings per share excludes estimated charges associated with the T&M initiative.

The Company’s strategic investments in the T&M 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.

Fiscal 2025 Outlook

Diluted Earnings per Share (GAAP)

$ 1.51 - $ 1.65

Effective Tax Rate 21.7 % 20.0 % 21.7 % 19.3 %

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 of the Notes to the Consolidated Financial Statements.

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 30, October 31, October 30, October 31,

In thousands 2022 2021 % Change 2022 2021 % Change

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

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

Net Unallocated Expense 18,498 17,669 4.7 99,297 112,836 (12.0)

Noncontrolling Interest 128 12 994.1 239 301 (20.6)

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

Fourth Quarter Ended Fiscal Year Ended

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

In thousands 2022 2021 % Change 2022 2021 % Change

Volume (lbs.) 810,044 980,339 (17.4) 3,245,625 3,546,324 (8.5)

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

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

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.

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

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

In thousands 2022 2021 % Change 2022 2021 % Change

Volume (lbs.) 266,447 301,111 (11.5) 1,027,124 1,007,667 1.9

Net Sales $ 1,009,672 $ 1,043,634 (3.3) $ 3,691,408 $ 3,130,174 17.9

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

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

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

In thousands 2022 2021 % Change 2022 2021 % Change

Volume (lbs.) 83,999 98,399 (14.6) 331,421 379,145 (12.6)

Net Sales $ 207,350 $ 230,068 (9.9) $ 779,799 $ 837,936 (6.9)

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 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

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 30, October 31, October 30, October 31,

In thousands 2022 2021 2022 2021

Net Unallocated Expense $ 18,498 $ 17,669 $ 99,297 $ 112,836

Noncontrolling Interest 128 12 239 301

For the fourth quarter of fiscal 2022, net unallocated expense increased slightly as unfavorable investment performance was mostly offset with lower corporate expense.

For fiscal 2022, net unallocated expense decreased due to one-time acquisition costs and accounting adjustments of $43 million related to the acquisition of the Planters ® snack nuts business in fiscal 2021.

The overall decline was partially offset by higher interest expense and lower investment income net of deferred compensation.

Non-GAAP Financial Measures

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 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 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.

Transform and Modernize Initiative 0.07 - 0.07

Adjusted Diluted Earnings per Share (Non-GAAP)

Fiscal Year Ended

October 30, 2022 October 31, 2021

In thousands, except per share amounts Reported

GAAP Reported

GAAP Acquisition Costs and Adjustments

Non-GAAP Non-GAAP

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

Cost of Products Sold 10,294,120 9,458,283 (12,900) 9,445,383 9.0

Gross Profit 2,164,686 1,927,906 12,900 1,940,806 11.5

Selling, General, and Administrative 879,265 853,071 (30,303) 822,768 6.9

Equity in Earnings of Affiliates 27,185 47,763 — 47,763 (43.1)

Operating Income 1,312,607 1,122,599 43,203 1,165,802 12.6

Interest and Investment Income (Expense) 28,012 46,878 — 46,878 (40.2)

Interest Expense 62,515 43,307 — 43,307 44.4

Earnings Before Income Taxes 1,278,103 1,126,170 43,203 1,169,373 9.3

Provision for Income Taxes 277,877 217,029 5,975 223,004 24.6

Net Earnings 1,000,226 909,140 37,228 946,368 5.7

Net Earnings Attributable to Noncontrolling Interest 239 301 — 301 (20.5)

Net Earnings Attributable to Hormel Foods Corporation $ 999,987 $ 908,839 $ 37,228 $ 946,067 5.7

Diluted Net Earnings Per Share $ 1.82 $ 1.66 $ 0.06 $ 1.73 5.2

ORGANIC VOLUME (NON-GAAP)

Fourth Quarter Ended

October 30, 2022 October 31, 2021

Lbs., in thousands Reported

(GAAP) Reported

(GAAP) 53rd Week

(Non-GAAP) Organic

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)

Fiscal Year Ended

October 30, 2022 October 31, 2021

Lbs., in thousands Reported

(GAAP) Acquisitions Organic

(Non-GAAP) Reported

(GAAP) 53rd Week

(Non-GAAP) Organic

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)

ORGANIC NET SALES (NON-GAAP)

Fourth Quarter Ended

October 30, 2022 October 31, 2021

In thousands Reported

(GAAP) Reported

(GAAP) 53rd Week

(Non-GAAP) Organic

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

Fiscal Year Ended

October 30, 2022 October 31, 2021

In thousands Reported

(GAAP) Acquisitions Organic

(Non-GAAP) Reported

(GAAP) 53rd Week

(Non-GAAP) Organic

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

$ 1.58 - $ 1.72

Supplemental Financial Measures (Non-GAAP)

EBIT and EBITDA (Non-GAAP)

The Company provides earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation, and amortization (EBITDA) because it believes these measures are useful to management and investors as indicators of operating performance net of non-operating income and expenses, and because they are commonly used to benchmark the Company’s performance.

Fiscal Year Ended

In thousands October 27, 2024 October 29, 2023

EBIT (Non-GAAP):

Net Earnings Attributable to Hormel Foods Corporation $ 805,038 $ 793,572

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Interest and Investment Income 48,396 14,828

EBIT $ 1,312,367 $ 1,122,297

EBIT (Non-GAAP)

$ 1,068,339 $ 1,072,698

EBITDA (Non-GAAP):

EBIT per above 1,068,339 1,072,698

Depreciation and Amortization 257,756 253,311

EBITDA $ 1,548,252 $ 1,331,606

EBITDA (Non-GAAP)

$ 1,326,095 $ 1,326,009

LIQUIDITY AND CAPITAL RESOURCES

When assessing liquidity and capital resources, the Company evaluates cash and cash equivalents, short-term and long-term investments, income from operations, and borrowing capacity.

When assessing its liquidity and capital resources, the Company evaluates cash and cash equivalents, short-term and long-term investments, income from operations, and borrowing capacity.

Cash Flow Highlights

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In millions October 27, 2024 October 29, 2023

Cash and Cash Equivalents $ 737 $ 982

Cash and Cash Equivalents at End of Period $ 742 $ 737

Cash Provided by (Used in) Operating Activities

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Cash Provided by (Used in) Financing Activities (1,030) (600)

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.

Increase (Decrease) in Cash and Cash Equivalents

Cash and cash equivalents was comparable to the prior year, increasing $5 million during fiscal 2024.

The Company repaid a portion of long-term debt by using existing cash on hand and the proceeds from new debt issued in fiscal 2024.

Cash provided by operating activities has been sufficient to cover dividend payments and capital expenditures during fiscal 2024.

The purchase of a minority interest in Garudafood was the primary driver of the decline in cash and cash equivalents in the prior year.

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 $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.

– In fiscal 2024, inventory decreased $95 million due to a better alignment of product levels with customer demand as well as less turkey and associated feed supplies.

The $36 million decrease in fiscal 2023 was a result of strategic inventory management efforts implemented to address elevated inventory levels.

– Prepaid expenses and other assets decreased $13 million in fiscal 2024 compared to an increase of $69 million in fiscal 2023.

This activity was primarily related to settlements associated with the Company’s hedging activities.

– In fiscal 2024, accounts receivable was comparable to the prior year, decreasing $2 million.

The $49 million decrease in fiscal 2023 was primarily due to timing of sales and more efficient collections.

– Accounts payable and accrued expenses decreased $27 million in fiscal 2024 related to the timing of payments which was partially offset by higher employee-related and promotional expenses.

In fiscal 2023, accounts payable and accrued expenses decreased $141 million related to the timing of payments and lower promotional and incentive compensation expenses.

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 $256 million and $270 million in fiscal 2024 and 2023, respectively.

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.

The most notable projects in fiscal 2024 were investments for capacity expansions in Barron, Wisconsin and at the Jiaxing, China, facility.

Significant projects for fiscal 2023 included investments in a new production line for the SPAM ® family of products in Dubuque, Iowa, the 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.

▪ In fiscal 2023, the Company purchased a minority interest in Garudafood for $426 million.

Cash Provided by (Used in) Financing Activities

• The Company paid $950 million of its senior unsecured notes upon maturity on June 3, 2024.

• Proceeds from the issuance of long-term debt were $498 million during fiscal 2024.

The Company issued senior unsecured notes with an aggregate principal amount of $500 million due March 2027.

▪ Cash dividends paid to the Company’s shareholders are an ongoing financing activity for the Company with payments totaling $615 million in fiscal 2024 and $593 million in fiscal 2023.

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.

The annualized dividend rate was $1.13 per share in fiscal 2024, compared to $1.10 per share in fiscal 2023.

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

Sources and Uses of Cash

The Company's balanced business model, with diversification across raw material inputs, channels, and categories, provides stability in ever changing economic environments.

The Company maintains a disciplined capital allocation strategy by applying a waterfall approach, which focuses first on required uses of cash such as capital expenditures to maintain facilities, dividend returns to investors, mandatory debt repayments, and pension obligations.

Next, the Company looks to strategic items in support of growth initiatives such as capital projects, acquisitions, additional dividend increases, and working capital investments.

The Company believes its balanced business model, with diversification across raw material inputs, channels, and categories, provides stability in ever-changing economic environments.

The Company maintains a disciplined capital allocation strategy and uses a waterfall approach, which focuses first on core uses of cash, such as capital expenditures to maintain facilities, dividend returns to investors, mandatory debt repayments, and fulfillment of pension obligations.

Next, the Company looks to strategic items in support of growth initiatives, such as other capital projects, acquisitions, additional dividend increases, and working capital investments.

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

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 believes its anticipated income from operations, cash on hand, borrowing capacity under the current unsecured revolving 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.

The Company's ability to leverage its balance sheet through the issuance of debt provides the flexibility to pursue strategic opportunities which may require additional funding.

The Company has multiple sources of liquidity to complete such investments and acquisitions.

For example, the Company’s historic ability to leverage its balance sheet through the issuance of debt has provided the flexibility to pursue strategic opportunities.

Dividend Payments

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The Company has paid 385 consecutive quarterly dividends since becoming a public company in 1928.

The annual dividend rate for fiscal 2024 will increase to $1.13 per share, representing the 58th consecutive annual dividend increase.

The Board of Directors approved an increased annual dividend rate for fiscal 2025, raising it to $1.16 per share from $1.13 per share, representing the 59th consecutive annual dividend increase.

Capital Expenditures

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

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

Capital expenditures supporting growth opportunities in fiscal 2025 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.

Capital expenditures for fiscal 2025 are estimated to be $275 million to $300 million.

As of October 27, 2024, the Company’s outstanding debt included $2.9 billion of fixed rate unsecured senior notes due in fiscal 2027, 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.

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

During fiscal 2024, the Company made $69 million of interest payments and the Company expects to make $73 million of interest payments in fiscal 2025 on these notes.

On March 8, 2024, the Company issued senior unsecured notes with an aggregate principal amount of $500 million.

These proceeds were used, along with cash on hand, to repay $950 million in senior unsecured notes which matured on June 3, 2024.

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

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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

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.

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 for general corporate purposes, which may include repaying existing debt, funding acquisitions, and for working capital or other general purposes.

The lending commitments under the facility 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 October 29, 2023, the Company had no outstanding draws from this facility.

As of October 27, 2024, the Company had no outstanding borrowings from this facility.

Debt Covenants

The Company’s debt and credit agreements contain customary terms and conditions including representations, warranties, and covenants.

These debt covenants limit the ability of the Company to, among other things, incur debt for borrowed money secured by certain liens, engage in certain sale and leaseback transactions, and require maintenance of certain consolidated leverage ratios.

As of October 29, 2023, the Company was in compliance with all covenants and expects to maintain compliance in the future.

The Company’s debt agreements contain customary terms and conditions including representations, warranties, and covenants.

These debt covenants limit the ability of the Company to, among other things, incur debt for borrowed money secured by certain liens, or engage in certain sale and leaseback transactions, and the covenants require the Company to maintain certain consolidated leverage ratios.

As of October 27, 2024, the Company was in compliance with all covenants in its debt agreements and expects to maintain compliance in the future.

Cash Held by International Subsidiaries

As of October 29, 2023, the Company had $164 million of cash and cash equivalents held by international subsidiaries.

As of October 27, 2024, the Company’s international subsidiaries held $225 million of cash and cash equivalents.

The Company maintains all undistributed earnings as permanently reinvested.

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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.

Under the share repurchase authorization, the Company may repurchase shares periodically, depending on market conditions and other factors, and may do so in open market purchases or privately negotiated transactions.

The share repurchase authorization has no expiration date.

The Company did not repurchase any shares of stock during fiscal 2024.

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

The following table shows a schedule of the Company's material cash commitments as of October 29, 2023:

The Company’s material cash commitments as of October 27, 2024 are as follows:

In millions Payments Due by Periods

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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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CRITICAL ACCOUNTING ESTIMATES

Management's 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 effect on the reporting of consolidated financial statements.

Management’s 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 GAAP.

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.

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The Company believes the following are its critical accounting estimates:

Revenue Recognition

The Company recognizes sales at the point in time when the performance obligation has been satisfied and control of the product has transferred to the customer.

Obligations for the Company are usually fulfilled once shipped product is received or picked up by the customer.

Revenue is recorded net of applicable provisions for discounts, returns, and allowances.

Trade Promotions

The Company promotes products through consumer incentives and trade promotions.

These promotional programs include, but are not limited to, discounts, slotting fees, coupons, rebates, and in-store display incentives.

Customer trade promotion and consumer incentive activities are recorded as a reduction to revenue and a corresponding accrued liability based on amounts estimated as variable consideration.

Judgments and Uncertainties:

The Company offers various sales incentives to customers and consumers.

Incentives offered off-invoice include prompt pay allowances, will call allowances, spoilage allowances, and temporary price reductions.

These incentives are recognized as reductions of revenue at the time control is transferred.

Coupons are used as an incentive for consumers to purchase various products.

The coupons reduce revenue at the time they are offered, based on estimated redemption rates.

Promotional contracts are performed by customers to promote the Company’s products to consumers.

These incentives reduce revenue at the time of performance through direct payments and accrued promotional funds.

Accrued promotional funds are unpaid liabilities for promotional contracts in process or completed at the end of a quarter or fiscal year.

Accruals with customers are based on defined performance.

The Company estimates variable consideration associated with promotional programs using the expected value method to determine the total expected consideration.

Estimating variable consideration requires judgment and is based largely on an assessment of anticipated performance informed by historical experience, expected participation, and current market trends.

Sensitivity of Estimate to Change:

The liability relating to these agreements is based on a review of the outstanding contracts on which performance has taken place but which the promotional payments relating to such contracts remain unpaid as of the end of the fiscal year.

The level of customer performance and the historical spend rate versus contracted rates are estimates used to determine these liabilities.

The liability relating to these promotional activities is based on a review of the outstanding contracts for which performance has taken place but which remain unpaid.

As of October 27, 2024 and October 29, 2023, the Company's accrued trade promotion liabilities were $81.8 million and $64.1 million, respectively.

The Company records income taxes in accordance with the liability method of accounting.

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As of October 27, 2024, the Company had $20.1 million of unrecognized tax benefits, including estimated interest and penalties, recorded in Other Long-term Liabilities.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting.

The Company allocates the purchase price of an acquired business to the assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date with the excess recorded as Goodwill.

Judgments and Uncertainties:

The acquisition method of accounting requires the Company to make significant estimates and assumptions regarding the fair value of the acquired assets.

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

Significant assumptions used to value identifiable intangible assets may include projected revenue growth, estimated cash flows, discount rates, royalty rates, and other factors.

Determining the useful life of an intangible asset also requires judgment.

Certain acquired brands are expected to have indefinite lives based on their history and the Company’s intent to continue to support and build the brands.

Other acquired assets, such as customer relationships, are expected to have determinable useful lives.

Sensitivity of Estimate to Change:

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 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.

Assumptions in valuing this asset included future earnings projections, customer attrition rate, and discount rate, among others.

The Company believes the estimates applied are based on reasonable assumptions, but which are inherently uncertain.

As a result, actual results may differ from the assumptions and judgments used to determine fair value of the assets acquired, which could result in material impairment losses in the future.

Goodwill and Other Indefinite-Lived Intangibles

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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.

If the carrying value of the reporting unit or indefinite-lived intangible asset exceeds the estimated fair value, it is considered impaired which requires a reduction to earnings.

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.

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

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

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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 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.

During the fourth quarter of fiscal 2024, the Company performed a qualitative assessment to evaluate its goodwill and indefinite-lived intangible assets for impairment.

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

Fiscal 2024 net sales for Planters ® snack nuts were negatively impacted by production disruptions at the Suffolk, Virginia, facility.

The Company believes these impacts are short term in nature (less than one year) and projects sales to recover to historical levels shortly after supply normalizes.

Should the impact last longer, or be more severe than currently anticipated, it is likely the Company would have to recognize an impairment charge on this trade name, which is currently valued at $675 million.

Pension and Other Post-Retirement Benefits

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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.

Due to the lack of readily available market prices, private equity investments are valued by models using a combination of available market data and unobservable inputs that consider earnings multiples, discounted cash flows, and other qualitative and quantitative factors.

Benefit plan assets are reported at fair value.

Due to the lack of readily available market prices, fund managers value private equity investments using models that include a combination of available market data and unobservable inputs that consider earnings multiples, discounted cash flows, and other qualitative and quantitative factors.

Other benefit plan investments are measured at Net Asset Value (NAV) per share of the fund’s underlying investments as a practical expedient.

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Health Care Cost Trend Rate 0.9 (0.8) 15.8 (13.9)

As of October 29, 2023, the Company had $79.4 million and $638.4 million of private equity and NAV investments, respectively.

As of October 27, 2024, the Company had $87.3 million of private equity and real estate funds and $724.5 million of investments carried at NAV.

These valuations are subject to judgments and assumptions of the funds which may prove to be incorrect, resulting in risks of incorrect valuation of these investments.

The Company seeks to mitigate these risks by evaluating the appropriateness of the funds’ judgments and assumptions by reviewing the financial data included in the funds’ financial statements.

The Company also holds quarterly meetings with the investment adviser to review fund performance, which include comparisons to the relevant indices.

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.

The Company seeks to mitigate these risks by performing various procedures, such as comparing the expected returns based on appropriate benchmarks to reported market values and performing price tests on certain underlying investments.

Additionally, a look back comparison of values from audited financial statements to unaudited statements and roll forward calculations of known cash activity are completed to obtain further assurance of reporting accuracy.

These procedures cover a majority of the value held in the private equity and NAV investments for each investment type.

Variances larger than specified thresholds are investigated further to verify the reported values are reasonable.

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