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Item 2. Management’s Discussion and Analysis

2025-05-29 compared with 2025-02-27 · 174 added, 123 removed, 259 unchanged (53% of the section changed)

3 unchanged sentences

The Company’s three reportable segments, Retail, Foodservice, and International, are described in Note N - Segment Reporting in the Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company reported diluted earnings per share of $0.31 for the first quarter of fiscal 2025, down 23 percent compared to the same period last year.

The Company reported diluted earnings per share of $0.33 for the second quarter of fiscal 2025, down 3 percent compared to the same period last year.

Adjusted diluted earnings per share (1) was $0.35.

1 unchanged sentence

All comparisons are to the same period of the prior year unless otherwise noted.

• Net sales for the first quarter were flat compared to the prior year while organic net sales (1) increased.

The benefit from higher organic volume (1) and organic net sales (1) in the Foodservice segment was more than offset by lower volume and net sales in the Retail and International segments.

• Total segment profit for the first quarter decreased 13 percent.

Segment profit growth in the International segment was more than offset by declines in segment profit for each of the Retail and Foodservice segments.

• Retail segment profit declined in the first quarter as benefits from the Transform and Modernize (T&M) initiative and margin growth from the Emerging Brands and Convenient Meals & Proteins verticals partially mitigated the impact from lower sales and higher raw material costs within the Snacking & Entertaining vertical, higher input costs, and unfavorable whole turkey dynamics.

• Foodservice segment profit decreased in the first quarter, as higher sales were offset by margin pressures, primarily in non-core businesses.

• International segment profit increased in the first quarter, as improved export margins and growth in China were partially offset by softness in Brazil and lower equity in earnings.

• Earnings before income taxes for the first quarter decreased 24 percent, as the impact of higher organic net sales (1) was more than offset by higher cost of products sold and higher selling, general, and administrative (SG&A) expenses compared to the prior period.

• Net sales for the second quarter were comparable to the prior year.

Organic net sales (1) increased 1 percent with growth from the Foodservice and International segments and comparable net sales in the Retail segment.

• Total segment profit for the second quarter decreased 3 percent.

Segment profit growth in the Retail segment was more than offset by declines in segment profit for each of the Foodservice and International segments.

• Retail segment profit grew in the second quarter primarily due to benefits from operational efficiencies as part of the Transform and Modernize (T&M) initiative and favorable selling, general, and administrative (SG&A) expenses.

• Foodservice segment profit decreased in the second quarter, as higher net sales were more than offset by margin pressures, primarily in non-core businesses.

• International segment profit declined in the second quarter, as meaningful net sales growth was primarily offset by a shift in export customer mix and softness in Brazil.

• Earnings before income taxes for the second quarter decreased 6 percent, as the benefits from higher net sales and lower SG&A expenses were more than offset by higher cost of products sold and lower interest and investment income compared to the prior period.

Adjusted earnings before income taxes (1) decreased 8 percent.

• The pre-tax impact of expenses related to the Company’s T&M initiative, the loss on the sale of a non-core sow operation, and an antitrust litigation settlement in the first quarter of fiscal 2025 was $25.7 million, most of which was recorded in SG&A.

• Year-to-date cash flow from operations was $309 million, a decrease of 23 percent compared to the prior year.

• The pre-tax impact of non-recurring expenses related to the Company’s T&M initiative in the second quarter of fiscal 2025 was $16.6 million, most of which was recorded in SG&A.

• Cash flow from operations was $366 million for the first six months of fiscal 2025, a 43 percent decrease from the comparable period of the prior year.

The decline in cash flow from operations was primarily due to an inventory build in the second quarter of fiscal 2025 in advance of the important summer selling season.

Changes in global trade policies, including recently announced tariffs and retaliatory tariffs, did not have a material impact on our results of operations during the second quarter or first six months of fiscal 2025.

The Company continues to monitor and evaluate the impact of proposed and enacted tariffs, including proposed and enacted retaliatory tariffs, and other trade restrictions, as well as our ability to mitigate their impacts, which remains uncertain.

Consolidated Results

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

Quarter Ended

Quarter Ended Six Months Ended

In thousands, except per share amounts

January 26, 2025 January 28, 2024 %

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Volume (lbs.) 999,390 1,059,843 (5.7) 2,054,698 2,161,397 (4.9)

12 unchanged sentences

Volume and Net Sales

Net sales for the first quarter of fiscal 2025 decreased compared to the prior year, as the benefit from higher net sales in the Foodservice segment was more than offset by lower net sales in each of the Retail and International segments.

In the Foodservice segment, organic volume (1) and net sales growth in the first quarter of fiscal 2025 were primarily driven by strong performance across the premium prepared proteins, turkey, premium bacon, and breakfast sausage categories.

Notable products such as branded Jennie-O ® turkey items, Hormel ® Fire Braised™ meats, Café H ® globally inspired proteins, and Cure 81 ® ham delivered strong volume and net sales growth.

In the Retail segment, many of the Company's key flagship and rising brands delivered net sales growth relative to last year, including the SPAM ® family of products, Applegate ® natural and organic meats, Hormel ® Black Label ® bacon, Jennie-O ® ground turkey, Wholly ® guacamole, and Hormel ® pepperoni.

As anticipated, lower sales of snack nuts due to impacts from the production disruption at the Suffolk, Virginia facility was a primary driver of year-over-year net sales declines.

In the International segment, net sales growth in China and branded exports were more than offset by softness in Brazil and lower commodity turkey exports.

In the second quarter of fiscal 2025, the Company expects net sales growth from each segment compared to the prior year.

Net sales increased and volume decreased for the second quarter and first six months of fiscal 2025 compared to the prior year.

For the second quarter of fiscal 2025, net sales increased in each of the Foodservice and International segments and were comparable in the Retail segment.

Organic net sales (1) growth was broad-based in the Foodservice segment, with notable contributions from the customized solutions business and the turkey portfolio.

The International segment drove net sales performance through exports and robust growth in the China market.

Within the Retail segment, the Mexican portfolio and value-added turkey products each delivered high-single-digit growth, which was primarily offset by the impacts of promotional timing.

For the first six months of fiscal 2025, net sales increased in each of the Foodservice and International segments and decreased in the Retail segment.

The Foodservice segment led the Company's overall organic net sales (1) growth through the customized solutions business, the turkey portfolio, and premium prepared proteins.

In the International segment, the China market and exports were the largest contributors to top-line performance.

For the Retail segment, growth from value-added turkey, Applegate ® natural and organic meats, the Mexican portfolio, and the SPAM ® family of products was primarily offset by declines in branded and private label deli meats.

For the second quarter of fiscal 2025, volume growth in the International segment was more than offset by volume declines in the Retail and Foodservice segments.

For the first six months of fiscal 2025, organic volume (1) in the Foodservice segment was comparable to the prior year.

Volume increased in the International segment and declined in the Retail segment for the first six months of fiscal 2025.

In the third quarter of fiscal 2025, the Company expects net sales growth from each of its segments compared to the prior year.

Cost of Products Sold

Quarter Ended

January 26, 2025 January 28, 2024 %

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Cost of Products Sold $ 2,414,377 $ 2,383,546 1.3 $ 4,927,957 $ 4,871,723 1.2

Cost of products sold for the first quarter of fiscal 2025 increased due primarily to higher commodity input costs.

On a per pound basis, cost of products sold for the first three months of fiscal 2025 increased compared to the prior year.

Quarter Ended

January 26, 2025 January 28, 2024 %

Cost of products sold for the second quarter and first six months of fiscal 2025 increased primarily due to higher commodity input costs, mainly nuts, pork bellies and beef.

On a per pound basis, cost of products sold for the second quarter and first six months of fiscal 2025 increased compared to the prior year.

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Gross Profit $ 484,433 $ 503,806 (3.8) $ 959,666 $ 1,012,539 (5.2)

Percent of Net Sales 16.7 % 17.4 % 16.3 % 17.2 %

For the first quarter of fiscal 2025, gross profit as a percent of net sales declined.

Gross profit as a percent of net sales increased in the International segment and decreased for the Retail and Foodservice segments.

All segments benefited from savings realized as part of the Company’s T&M initiative.

For the second quarter of fiscal 2025, the Company expects gross profit as a percent of net sales to decrease for each reporting segment compared to last year.

For the second quarter and first six months of fiscal 2025, gross profit as a percent of net sales declined.

For the second quarter of fiscal 2025, gross profit as a percent of net sales was comparable for the Retail segment and decreased for the International and Foodservice segments.

All segments benefited from savings realized as part of the Company’s T&M initiative in the second quarter and first six months of fiscal 2025.

For the third quarter of fiscal 2025, the Company expects gross profit as a percent of net sales to increase compared to last year.

The Company expects gross profit as a percent of net sales to increase for the Retail segment, to be comparable for the Foodservice segment, and to decrease for the International segment.

Selling, General, and Administrative (SG&A)

Quarter Ended

January 26, 2025 January 28, 2024 %

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

SG&A $ 251,432 $ 266,668 (5.7) $ 514,445 $ 507,054 1.5

3 unchanged sentences

Adjusted Percent of Net Sales (1)

8.2 % 8.5 % 8.1 % 8.1 %

(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 first quarter, SG&A and SG&A as a percent of net sales increased due to the loss on the sale of a non-core sow operation, employee-related expenses, and expenses related to the T&M initiative.

Adjusted SG&A as a percent of net sales (1) increased compared to last year due to employee-related expenses.

Advertising investments in the first quarter were $43 million, a decrease of 2 percent compared to last year.

The decline was partially due to lower support for the Planters ® brand due to production disruptions at the Suffolk facility.

The Company expects full-year advertising expense to increase compared to the prior year.

For the second quarter of fiscal 2025, SG&A and SG&A as a percent of net sales decreased, primarily due to the lapping of prior year legal expenses and lower advertising expenses.

For the first six months of fiscal 2025, SG&A and SG&A as a percent of net sales increased, as the loss on the sale of a non-core sow operation and increased expenses related to the T&M initiative were partially offset by the lapping of prior year legal expenses and lower advertising expenses.

Advertising investments in the second quarter were $36 million, a decrease of 18 percent compared to last year.

The decline was partially due to year over year timing impacts for investments in the Planters ® brand.

For the first six months of fiscal 2025, advertising investments were $80 million, a decrease of 10 percent compared to last year.

The Company expects advertising investments to increase in the second half of fiscal 2025 compared to the prior year.

Equity in Earnings of Affiliates

Quarter Ended

In thousands January 26, 2025 January 28, 2024 %

Quarter Ended Six Months Ended

In thousands April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Equity in Earnings of Affiliates $ 15,350 $ 15,182 1.1 $ 31,461 $ 31,273 0.6

Equity in earnings of affiliates for the first quarter of fiscal 2025 is comparable to the prior year as favorable results for MegaMex Foods, LLC, were offset by the Company’s international investments.

Equity in earnings of affiliates for the second quarter and first six months of fiscal 2025 was comparable to the prior year as favorable results for MegaMex Foods, LLC, were offset by the results of the Company’s other equity method investments.

Interest and Investment Income and Interest Expense

Quarter Ended

In thousands January 26, 2025 January 28, 2024 %

Quarter Ended Six Months Ended

In thousands April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Interest and Investment Income $ 1,653 $ 13,497 (87.8) $ 10,857 $ 32,932 (67.0)

Interest Expense 19,516 21,679 (10.0) 38,977 40,005 (2.6)

Interest and investment income for the first quarter of fiscal 2025 decreased predominately due to performance from the rabbi trust.

Interest expense increased in the first quarter of fiscal 2025 due to the prior year debt issuance.

Interest and investment income for the second quarter and first six months of fiscal 2025 decreased predominately due to lower cash balances and performance from the rabbi trust.

Interest expense decreased in the second quarter and first six months of fiscal 2025 as the benefit from lapping prior year amortization of interest rate swaps was partially offset by higher interest due to the prior year debt issuance.

Effective Tax Rate

Quarter Ended

January 26, 2025 January 28, 2024

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 April 27, 2025 April 28, 2024

Effective Tax Rate 22.0 % 22.5 % 21.9 % 23.0 %

The effective tax rate in the first quarter was 21.8% compared to 23.4% last year.

The lower effective tax rate for the first three months of fiscal 2025 is primarily due to the purchase of federal transferable energy credits in the current year.

The effective tax rate for fiscal 2025 is expected to be between 22.0% and 23.0%.

The effective tax rate in the second quarter of fiscal 2025 was 22.0% compared to 22.5% last year.

The Company benefited primarily from higher federal deductions, the purchase of federal transferable energy tax credits, and favorable state audit settlements in the second quarter and first six months of fiscal 2025.

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

The effective tax rate for fiscal 2025 is expected to be between 22.0% and 23.0%.

Segment Results

7 unchanged sentences

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

Quarter Ended

January 26, 2025 January 28, 2024 % Change

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 % Change April 27, 2025 April 28, 2024 % Change

Retail $ 1,783,835 $ 1,788,556 (0.3) $ 3,673,968 $ 3,699,827 (0.7)

15 unchanged sentences

$ 230,489 $ 244,139 (5.6) $ 448,561 $ 529,685 (15.3)

Quarter Ended

January 26, 2025 January 28, 2024 %

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Volume (lbs.) 677,277 724,994 (6.6) 1,414,162 1,490,406 (5.1)

1 unchanged sentence

Segment Profit 137,135 132,399 3.6 256,281 281,904 (9.1)

In the first quarter of fiscal 2025, volume and net sales decreased compared to last year.

Collectively, flagship and rising brands delivered growth relative to last year, led by the SPAM ® brand, Applegate ® natural and organic meats, Hormel ® Black Label ® bacon, Jennie-O ® ground turkey, Wholly ® guacamole, and Hormel ® pepperoni.

As anticipated, lower sales of snack nuts due to impacts from the production disruption at the Suffolk facility was a primary driver of the year-over-year net sales decline.

For the first quarter of fiscal 2025, segment profit declined as the benefits from the T&M initiative and margin growth from the Emerging Brands and Convenient Meals & Proteins verticals partially mitigated the impact from lower sales and higher raw material costs within the Snacking & Entertaining vertical, higher input costs, and unfavorable whole turkey dynamics.

For the second quarter of fiscal 2025, Retail segment profit is anticipated to decline versus the prior year.

Year-over-year benefits from the T&M initiative and growth from the Value Added Meats and Bacon verticals are expected to be more than offset by a challenging snack nuts comparison and higher raw material costs.

Quarter Ended

January 26, 2025 January 28, 2024 %

Net sales in the second quarter of fiscal 2025 were comparable to the prior year, as high-single-digit growth from both our Mexican portfolio and value-added turkey products was primarily offset by the impacts of promotional timing.

Two-thirds of the Retail segment's volume decline in the quarter was due to lower commodity shipments and contract manufacturing.

The segment's flagship and rising brands continued to hold leadership positions in their respective categories in the quarter.

Notably, the Planters ® brand exceeded volume and net sales expectations for the second quarter of fiscal 2025, while demand for Jennie-O ® lean ground turkey remained strong.

For the first six months of fiscal 2025, net sales for the Retail segment declined, as growth from value-added turkey products, Applegate ® natural and organic meats, the Mexican portfolio, and the SPAM ® family of products was primarily offset by declines in branded and private label deli meats.

Over one-half of the Retail segment’s volume decline for the first six months of fiscal 2025 was due to lower commodity shipments and contract manufacturing.

Retail segment profit increased in the second quarter of fiscal 2025, primarily due to benefits from operational efficiencies as part of the T&M initiative and favorable SG&A expenses.

For the first six months of fiscal 2025, segment profit decreased due to lower net sales and higher raw material costs.

For the third quarter of fiscal 2025, Retail segment profit is anticipated to increase compared to the prior year, driven by top-line growth and year over year benefits from the T&M initiative.

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Volume (lbs.) 242,595 261,832 (7.3) 486,449 517,839 (6.1)

6 unchanged sentences

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

Organic volume (1) and net sales growth in the first quarter of fiscal 2025 were driven primarily by strong performance across the premium prepared proteins, turkey, premium bacon, and breakfast sausage categories.

Notable products such as branded Jennie-O ® turkey items, Hormel ® Fire Braised™ meats, Café H ® globally inspired proteins, and Cure 81 ® ham delivered strong volume and net sales growth.

Segment profit decreased for the first quarter of fiscal 2025 as higher sales were primarily offset by margin pressures in non-core businesses.

For the second quarter, the Company expects Foodservice segment profit to decline compared to the prior year, as organic top-line growth is expected to be more than offset by margin pressures in non-core businesses and higher input costs.

Organic net sales (1) growth was broad-based in the Foodservice segment in the second quarter of fiscal 2025, with notable contributions from the customized solutions business and the turkey portfolio.

Branded products such as Jennie-O ® , Hormel ® Fire Braised™ meats and Café H ® globally inspired proteins delivered another quarter of strong volume and net sales growth.

Several categories achieved volume growth in the second quarter of fiscal 2025, despite industry softness.

Volume growth in these categories was more than offset by the impact of reduced commodity shipments.

For the first six months of fiscal 2025, organic net sales (1) growth in the Foodservice segment was led by the customized solutions business, the Jennie-O ® turkey portfolio, and premium prepared proteins.

Organic volume (1) was comparable to the prior year period.

Segment profit decreased for the second quarter and first six months of fiscal 2025 as higher net sales were more than offset by margin pressures, primarily in non-core businesses.

The Foodservice segment continued to benefit from an extensive range of solutions-based products, its direct-selling organization and a diverse channel presence during the second quarter and first six months of fiscal 2025.

For the third quarter of fiscal 2025, the Company expects Foodservice segment profit to increase compared to the prior year, driven by organic top-line growth.

International

Quarter Ended

January 26, 2025 January 28, 2024 %

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 %

Change April 27, 2025 April 28, 2024 %

Volume (lbs.) 79,518 73,017 8.9 154,087 153,153 0.6

1 unchanged sentence

Segment Profit 18,407 23,202 (20.7) 39,252 43,234 (9.2)

During the first quarter of fiscal 2025, strong volume and net sales growth in China and growth in exports such as SPAM ® luncheon meat, Skippy ® peanut butter, and fresh pork were more than offset by softness in Brazil and lower commodity turkey exports.

The China business benefited from a continued focus on new customers and product offerings, which drove sales

momentum within the foodservice channel.

Within the China retail channel, the team deployed successful initiatives to gain new distribution, launch profitable innovation and increase promotional activity to offset consumer challenges.

Strong shipments of the SPAM ® family of products to the Philippines market was the largest contribution to export growth.

Segment profit increased in the first quarter of fiscal 2025, as improved export margins and growth in China were partially offset by softness in Brazil and lower equity in earnings.

In the second quarter of fiscal 2025, the Company expects International segment profit to decrease compared to the prior year.

Value-added growth across China and Indonesia is expected to be more than offset by softness in Brazil.

Double-digit volume and net sales growth in exports, and robust growth in the China market drove top-line performance in the International segment in the second quarter of fiscal 2025.

Strong shipments within the refrigerated portfolio, primarily of bacon and pepperoni, made the largest contribution to export growth.

Our in-country China business continued to benefit from top-line momentum in both the retail and foodservice channels, supported by innovative product launches.

For the first six months of fiscal 2025, the China market and exports were the largest contributors to top-line performance.

International segment profit decreased in the second quarter of fiscal 2025 as meaningful net sales growth was primarily offset by a temporary shift in export customer mix and softness in Brazil.

For the first six months of fiscal 2025, segment profit declined, as net sales growth was primarily offset by softness in Brazil.

In the third quarter of fiscal 2025, the Company expects International segment profit to increase compared to the prior year.

Value-added growth across China is expected to be partially offset by continued softness in Brazil.

Unallocated Income and Expense

Quarter Ended

January 26, 2025 January 28, 2024

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 April 27, 2025 April 28, 2024

Net Unallocated Expense $ 65,411 $ 60,694 $ 126,111 $ 94,714

Noncontrolling Interest (275) (70) (320) (204)

Net unallocated expense increased for the first quarter of fiscal 2025 due to the loss on the sale of a non-core sow operation, the impact of lapping higher rabbi trust investment gains in the prior year, and higher employee-related expenses.

For the second quarter of fiscal 2025, net unallocated expense increased driven by reduced interest income and unfavorable rabbi trust performance, which was partially offset by the absence of prior year pork antitrust litigation settlements.

Net unallocated expense also increased for the first six months of fiscal 2025 due to these factors as well as the loss on sale of a non-core sow operation.

Related Party Transactions

9 unchanged sentences

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 expenses related to supply chain and portfolio optimization (e.g., asset write-offs, severance, or relocation-related costs).

In presenting non-GAAP measures, the Company adjusts for (i.e., excludes) expenses for this initiative that are non-recurring, which are primarily project-based external consulting fees and expenses related to supply chain and portfolio optimization (e.g., asset write-offs, severance, or relocation-related costs).

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

4 unchanged sentences

In the first quarter of fiscal 2025, the Company sold Mountain Prairie, LLC, a non-core sow operation, resulting in a loss on the sale.

The Company believes the one-time detriment from the sale, including transaction costs, 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.

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

Thus, the Company has adjusted for (i.e.

excluded) the loss.

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.

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 are not 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 first quarter of fiscal 2025, the Company entered into a settlement agreement with a plaintiff in a pending antitrust litigation.

In the second quarter of fiscal 2024, the Company agreed to settle with three classes of plaintiffs in the pork antitrust litigation.

In the first quarter of fiscal 2025, the Company entered into a settlement agreement with an additional plaintiff in this matter.

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

4 unchanged sentences

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

Quarter Ended

In thousands, except per share amounts January 26, 2025 January 28, 2024

Quarter Ended Six Months Ended

In thousands, except per share amounts April 27, 2025 April 28, 2024 April 27, 2025 April 28, 2024

Cost of Products Sold (GAAP) $ 2,414,377 $ 2,383,546 $ 4,927,957 $ 4,871,723

22 unchanged sentences

Transform and Modernize Initiative (1)(2)

3,641 2,665 6,727 4,985

Loss on Sale of Business — — 2,469 —

3 unchanged sentences

Transform and Modernize Initiative (1)(2)

12,910 9,179 23,979 17,171

Loss on Sale of Business — — 8,855 —

1 unchanged sentence

Adjusted Net Earnings Attributable to Hormel Foods Corporation (Non-GAAP) $ 192,928 $ 207,562 $ 383,615 $ 434,418

Quarter Ended

In thousands, except per share amounts January 26, 2025 January 28, 2024

Diluted Earnings Per Share (GAAP)

1 unchanged sentence

Transform and Modernize Initiative (1)(2)

0.02 0.02 0.04 0.03

Loss on Sale of Business — — 0.02 —

2 unchanged sentences

$ 0.35 $ 0.38 $ 0.70 $ 0.79

Quarter Ended Six Months Ended

April 27, 2025 April 28, 2024 April 27, 2025 April 28, 2024

SG&A as a Percent of Net Sales (GAAP) 8.7 % 9.2 % 8.7 % 8.6 %

Transform and Modernize Initiative (2)

(0.5) (0.3) (0.5) (0.3)

Loss on Sale of Business — — (0.2) —

3 unchanged sentences

Transform and Modernize Initiative (1)(2)

0.6 0.4 0.5 0.4

Loss on Sale of Business — — 0.2 —

5 unchanged sentences

Quarter Ended

January 26, 2025 January 28, 2024

April 27, 2025 April 28, 2024

In thousands GAAP GAAP Divestiture

9 unchanged sentences

Total Net Sales $ 2,898,810 $ 2,887,352 $ (28,211) $ 2,859,141 1.4

Six Months Ended

April 27, 2025 April 28, 2024

In thousands GAAP GAAP Divestiture

Non-GAAP Organic

Volume (lbs.)

Retail 1,414,162 1,490,406 — 1,490,406 (5.1)

Foodservice 486,449 517,839 (32,516) 485,323 0.2

International 154,087 153,153 — 153,153 0.6

Total Volume (lbs.) 2,054,698 2,161,397 (32,516) 2,128,882 (3.5)

Retail $ 3,673,968 $ 3,699,827 $ — $ 3,699,827 (0.7)

Foodservice 1,866,627 1,845,090 (55,109) 1,789,981 4.3

International 347,028 339,346 — 339,346 2.3

Total Net Sales $ 5,887,623 $ 5,884,263 $ (55,109) $ 5,829,154 1.0

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

Cash Flow Highlights

Quarter Ended

January 26, 2025 January 28, 2024

Six Months Ended

April 27, 2025 April 28, 2024

Cash and Cash Equivalents at End of Period

4 unchanged sentences

Increase (Decrease) in Cash and Cash Equivalents (72,193) 749,836

Cash and cash equivalents increased $99 million and $227 million during the first quarter of fiscal 2025 and fiscal 2024, respectively.

Cash provided by operating activities was sufficient to cover dividend payments and capital expenditures in both years.

Cash and cash equivalents decreased $72 million during the first six months of fiscal 2025 as the Company utilized cash on hand to make additional purchases of inventory, capital assets, and energy tax credits as well as fund regular dividend payments.

During the first six months of fiscal 2024, cash and cash equivalents increased $750 million primarily as a result of proceeds received from the issuance of long-term debt.

Cash provided by operating activities was sufficient to cover dividend payments and capital expenditures during the first six months of fiscal 2024.

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

1 unchanged sentence

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

– Accounts receivable decreased $57 million and $68 million during the first quarter of fiscal 2025 and fiscal 2024, respectively, primarily due to lower sales compared to the fourth quarter of the prior year.

– Inventory decreased $56 million during the first quarter of fiscal 2025 compared to a decrease of $104 million in the comparable period of the prior year.

The decrease in inventory during fiscal 2025 was primarily driven by holiday sales and constrained turkey inventories.

The decrease in inventory during fiscal 2024 was due to improvement in the Company's supply chain and the negative impact of Highly Pathogenic Avian Influenza on turkey operations.

– Accounts payable and accrued expenses decreased $56 million and $132 million during the first quarter of fiscal 2025 and fiscal 2024, respectively.

These decreases were driven by annual incentive payments as well as livestock and feed deferral payments which were partially offset by higher marketing accruals.

The decrease during fiscal 2024 was also due to the general timing of payments and inventory management.

– Net income taxes payable decreased $14 million during the first quarter of fiscal 2025, compared to an increase of $63 million in the comparable period of the prior year.

– Inventory increased $156 million during the first six months of fiscal 2025 compared to a decrease of $7 million in the comparable period of the prior year.

The increase in inventory during fiscal 2025 was driven by intentional seasonal and promotional inventory build, as well as softer sales.

The decrease in inventory during fiscal 2024 was due to improvements in the Company’s supply chain, partially offset by higher levels of turkey on hand.

– Accounts payable and accrued expenses decreased $77 million and $78 million during the first six months of fiscal 2025 and fiscal 2024, respectively.

The decrease during fiscal 2025 was driven by annual incentive payments, legal settlements, and livestock and feed deferral payments which were partially offset by higher marketing accruals.

The decrease during fiscal 2024 was caused by the general timing of payments, annual incentive payments, and livestock and feed deferral payments, which were partially offset by higher accruals for marketing and legal expenses.

– Net income taxes payable decreased $12 million during the first six months of fiscal 2025, compared to an increase of $29 million in the comparable period of the prior year.

The decrease in fiscal 2025 was the result of purchasing federal transferable energy tax credits.

– Accounts receivable decreased $71 million and $88 million during the first six months of fiscal 2025 and fiscal 2024, respectively, primarily due to lower sales compared to the fourth quarter of the prior year.

Cash Provided by (Used in) Investing Activities

• Capital expenditures were $72 million and $47 million during the first quarter of fiscal 2025 and fiscal 2024, respectively.

• Capital expenditures were $147 million and $107 million during the first six months of fiscal 2025 and fiscal 2024, respectively.

The largest project during both years was for the transition from harvest to value-added capacity for Hormel ® Fire Braised ® products and Applegate ® products at the facility in Barron, Wisconsin.

Other significant projects included equipment upgrades for chili production in Beloit, Wisconsin during fiscal year 2025 and wastewater infrastructure to support operations in Austin, Minnesota during both fiscal year 2025 and fiscal year 2024.

• Proceeds from the sale of business were $13.6 million during the first quarter of fiscal 2025 as the Company sold its equity interest in Mountain Prairie, LLC.

There were no divestitures during the first three months of fiscal 2024.

Other significant projects included investments in data and technology during fiscal 2025 and wastewater infrastructure to support operations in Austin, Minnesota during fiscal 2024.

• Proceeds from the sale of business were $13.1 million during the first six months of fiscal 2025, primarily from the sale of the Company’s equity interest in Mountain Prairie, LLC.

Cash Provided by (Used in) Financing Activities

• Cash dividends paid to the Company’s shareholders totaled $155 million during the first quarter of fiscal 2025, compared to $150 million in the comparable period of fiscal 2024.

• In the first six months of fiscal 2024, proceeds from the issuance of long-term debt were $498 million due to the Company's issuance of senior unsecured notes with aggregate principal amount of $500 million.

• Cash dividends paid to the Company’s shareholders totaled $314 million during the first six months of fiscal 2025, compared to $305 million in the comparable period of fiscal 2024.

• Proceeds from the exercise of stock options were $26 million in the first six months of fiscal 2025, compared to $27 million in the first six months of fiscal 2024.

Sources and Uses of Cash

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.

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.

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

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

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

The Company remains committed to providing returns to investors through cash dividends.

The Company remains committed to providing returns to investors through cash dividends on its common stock.

The Company has paid 387 consecutive quarterly dividends since becoming a public company in 1928.

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

As of January 26, 2025, 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 the first three months of fiscal 2025, the Company made $25 million of interest payments and the Company expects to make an additional $49 million of interest payments during fiscal 2025 on these notes.

As of April 27, 2025, 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 the first six months of fiscal 2025, the Company made $37 million of interest payments and the Company expects to make an additional $37 million of interest payments during fiscal 2025 on these notes.

See Note K - 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 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 January 26, 2025, the Company had no outstanding borrowings from this facility.

The maximum commitment under this credit facility may be further increased by $375 million upon the satisfaction of certain conditions.

Extensions of credit under the facility may be applied by the Company to refinance existing indebtedness and for working capital and other general corporate purposes, including acquisition funding, and may be made in the form of revolving loans, swing line loans, and letters of credit.

The lending commitments under the facility are scheduled to expire on March 25, 2030, at which time the Company will be required to pay in full all obligations then outstanding.

As of April 27, 2025, the Company had no outstanding borrowings from this facility.

Debt Covenants

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 January 26, 2025, the Company was in compliance with all covenants in its debt agreements and expects to maintain compliance in the future.

As of April 27, 2025, 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 January 26, 2025, the Company’s international subsidiaries held $234 million of cash and cash equivalents.

As of April 27, 2025, the Company’s international subsidiaries held $247 million of cash and cash equivalents.

The Company maintains all undistributed earnings as permanently reinvested.

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The share repurchase authorization has no expiration date.

The Company did not repurchase any shares of stock during the first three months of fiscal 2025.

The Company did not repurchase any shares of stock during the first six months of fiscal 2025.

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

Subsequent to quarter-end but prior to the filing of this Quarterly Report on Form 10-Q, the Company used $13.5 million of cash on hand to pay the Red Meat Wages Antitrust Litigation settlement.

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

There have been no material changes to the information regarding the Company’s future contractual financial obligations previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 27, 2024.

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In connection with the “safe harbor” provisions of the Reform Act, the Company is identifying risk factors that could affect financial performance and cause the Company’s actual results to differ materially from opinions or statements expressed with respect to future periods.

The discussion of risk factors in the Company’s most recent Annual Report on Form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q contain certain cautionary statements regarding the Company’s business, which should be considered by investors and others.

The discussion of risk factors in the Company’s most recent Annual Report on Form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q contains certain cautionary statements regarding the Company’s business, which should be considered by investors and others.

Such risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.

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deterioration of labor relations or labor availability or increases to labor costs;

general risks of the food industry, including those related to food safety, such as costs resulting from food contamination, product recalls, the remediation of food safety events at its facilities, including the production disruption at the Suffolk, Virginia, facility, or outbreaks of disease among livestock and poultry flocks;

general risks of the food industry, including those related to food safety, such as costs resulting from food contamination, product recalls, the remediation of food safety events at its facilities, including the production disruption at the Suffolk, Virginia, facility, food-specific laws or regulations, or outbreaks of disease

among livestock and poultry flocks;

fluctuations in commodity prices and availability of raw materials and other inputs;

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compliance with stringent environmental regulations and potential environmental litigation;

and risks arising from the Company’s foreign operations, including geopolitical risk, exchange rate risk, legal, tax, and regulatory risk, and risks associated with tariffs.

and risks arising from the fact that the Company operates globally, with product manufactured and sold in foreign markets and a variety of inputs sourced from around the world, these risks including geopolitical risk, exchange rate risk, legal, tax, and regulatory risk, and risks associated with trade policies, export and import controls, and tariffs.

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-Q

Item 2. Management’s Discussion and Analysis