UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FormFORM 10-Q
[ X ]  
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 28, 20182024
or
[     ]  
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________________________________ to _______________________________________________________

Commission File Number: 1-2402
hml-20231029_g1.jpg
HORMEL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware41-0319970
Delaware
(State or other jurisdiction of incorporation or organization)
41-0319970
(I.R.S. Employer Identification No.)

1 Hormel Place,
Austin Minnesota
55912-3680
(Address of principal executive offices)
55912-3680
(Zip Code)
(507) 437-5611
(Registrant’s telephone number, including area code)
NoneNot Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock$0.01465par valueHRLNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       X  YES                  NO☒ Yes                ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      X  YES                  NO☒  Yes                ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  X  
☒
Accelerated filer
☐
Non-accelerated filer
(Do not check if a smaller reporting company)☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  X ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at February 25, 2024
Common Stock$0.01465par value547,687,578 
Common Stock Nonvoting$0.01par value0 

ClassOutstanding at March 4, 2018
Common Stock$.01465 par value      529,534,149
Common Stock Non-Voting$.01 par value                       -0-


Table of Contents

TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
3
Item 1.
3
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION – JConsolidated Statements of Operationsanuary 28, 2018 and October 29, 2017
3
CONSOLIDATED STATEMENTS OF OPERATIONS – Three Consolidated Statements of Comprehensive IncomeMonths Ended January 28, 2018 and January 27, 2017
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – Three Consolidated Condensed Statements of Financial PositionMonths Ended January 28, 2018 and January 29, 2017
5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT – Twelve Months Ended October Consolidated Statements of Changes in Shareholders29, 2017 and Three Months Ended January 28, 2018’ Investment
6
CONSOLIDATED STATEMENTS OF CASH FLOWS – Consolidated Condensed Statements of Cash FlowsThree Months Ended January 28, 2018 and January 29, 2017
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes tothe Consolidated Financial Statements
8
Item 2.
20
CRITICAL ACCOUNTING POLICIESResults of Operations
20
RESULTS OF OPERATIONSOverview
20
OverviewConsolidated Results
20
ConsolidatedSegment Results
22
Segment Results
Related Party Transactions
24
LIQUIDITY AND CAPITAL RESOURCESNon-GAAP Financial Measures
24
FORWARD-LOOKING STATEMENTSLiquidity and Capital Resources
26
Critical Accounting Estimates
27
Item 3.Forward-looking Statements
28
Item 3.
28
Item 4.
29
PART II - OTHER INFORMATION
29
Item 1.
29
Item 1A.
30
Item 2.
30
Item 3.
30
Item 4.
30
Item 5.
30
Item 6.
30
Exhibits31
SIGNATURES




2
Table of Contents
PART I – FINANCIAL INFORMATION


Item 1. Financial StatementsFINANCIAL STATEMENTS


HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands, except share and per share amounts)
    
 January 28,
2018		 October 29,
2017
 (Unaudited)  
ASSETS 
  
CURRENT ASSETS 
  
Cash and cash equivalents$385,775
 $444,122
Accounts receivable569,099
 618,351
Inventories973,221
 921,022
Income taxes receivable176
 22,346
Prepaid expenses15,581
 16,144
Other current assets4,417
 4,538
TOTAL CURRENT ASSETS1,948,269
 2,026,523
    
GOODWILL2,957,463
 2,119,813
    
OTHER INTANGIBLES1,023,322
 1,027,014
    
PENSION ASSETS178,010
 171,990
    
INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES262,147
 242,369
    
OTHER ASSETS196,571
 184,948
    
PROPERTY, PLANT AND EQUIPMENT   
Land51,481
 51,249
Buildings890,026
 866,855
Equipment1,776,526
 1,710,537
Construction in progress174,733
 148,064
Less: Allowance for depreciation(1,599,700) (1,573,454)
Net property, plant and equipment1,293,066
 1,203,251
    
TOTAL ASSETS$7,858,848
 $6,975,908
See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands, except share and per share amounts)
    
 January 28,
2018		 October 29,
2017
 (Unaudited)  
LIABILITIES AND SHAREHOLDERS’ INVESTMENT 
  
CURRENT LIABILITIES 
  
Accounts payable$532,847
 $552,714
Short-term debt255,000
 —
Accrued expenses72,098
 76,966
Accrued workers compensation29,754
 26,585
Accrued marketing expenses127,684
 101,573
Employee related expenses157,667
 209,562
Taxes payable46,235
 525
Interest and dividends payable102,229
 90,287
TOTAL CURRENT LIABILITIES1,323,514
 1,058,212
    
LONG-TERM DEBT–less current maturities624,726
 250,000
    
PENSION AND POST-RETIREMENT BENEFITS532,652
 530,249
    
OTHER LONG-TERM LIABILITIES107,894
 99,340
    
DEFERRED INCOME TAXES114,688
 98,410
    
SHAREHOLDERS’ INVESTMENT   
Preferred stock, par value $.01 a share–   
authorized 160,000,000 shares; issued–none

 

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

 

Common stock, par value $.01465 a share–7,764
 7,741
authorized 1,600,000,000 shares;   
issued 529,988,220 shares January 28, 2018   
issued 528,423,605 shares October 29, 2017   
Additional paid-in capital19,242
 13,670
Accumulated other comprehensive loss(242,176) (248,075)
Retained earnings5,366,501
 5,162,571
HORMEL FOODS CORPORATION SHAREHOLDERS’ INVESTMENT5,151,331
 4,935,907
NONCONTROLLING INTEREST4,043
 3,790
TOTAL SHAREHOLDERS’ INVESTMENT5,155,374
 4,939,697
    
TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT$7,858,848
 $6,975,908
See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)Unaudited
(Unaudited)
 Three Months Ended
 January 28,
2018		 January 29,
2017
Net sales$2,331,293
 $2,280,227
Cost of products sold1,829,114
 1,727,947
GROSS PROFIT502,179
 552,280
    
Selling, general and administrative219,122
 210,217
Equity in earnings of affiliates23,531
 13,299
    
OPERATING INCOME306,588
 355,362
    
Other income and expense:   
Interest and investment income3,306
 2,449
Interest expense(4,729) (3,026)
    
EARNINGS BEFORE INCOME TAXES305,165
 354,785
    
Provision for income taxes1,954
 119,482
    
NET EARNINGS303,211
 235,303
Less: Net earnings attributable to noncontrolling interest104
 156
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION$303,107
 $235,147
    
NET EARNINGS PER SHARE:   
BASIC$0.57
 $0.44
DILUTED$0.56
 $0.44
    
WEIGHTED-AVERAGE SHARES OUTSTANDING:   
BASIC529,453
 528,585
DILUTED543,482
 540,064
    
DIVIDENDS DECLARED PER SHARE:$0.1875
 $0.1700
 Quarter Ended
 In thousands, except per share amountsJanuary 28, 2024January 29, 2023
Net Sales$2,996,911 $2,970,992 
Cost of Products Sold2,488,178 2,475,043 
Gross Profit508,733 495,949 
Selling, General, and Administrative240,386 222,056 
Equity in Earnings of Affiliates16,091 15,559 
Operating Income284,438 289,452 
Interest and Investment Income19,434 10,096 
Interest Expense18,326 18,347 
Earnings Before Income Taxes285,547 281,201 
Provision for Income Taxes66,818 63,551 
Net Earnings218,729 217,651 
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest(134)(69)
Net Earnings Attributable to Hormel Foods Corporation$218,863 $217,719 
Net Earnings Per Share
Basic$0.40 $0.40 
Diluted$0.40 $0.40 
Weighted-average Shares Outstanding
Basic547,020546,384
Diluted547,920550,031
 
See Notes to the Consolidated Financial Statements




3
Table of Contents
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)Unaudited
(Unaudited)
    
 Three Months Ended
 January 28,
2018		 January 29,
2017
NET EARNINGS$303,211
 $235,303
Other comprehensive income (loss), net of tax:   
Foreign currency translation4,212
 (8,087)
Pension and other benefits2,486
 3,333
Deferred hedging(650) (1,323)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)6,048
 (6,077)
COMPREHENSIVE INCOME309,259
 229,226
Less: Comprehensive income attributable to noncontrolling interest253
 (84)
COMPREHENSIVE INCOME ATTRIBUTABLE TO HORMEL FOODS CORPORATION$309,006
 $229,310
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Net Earnings$218,729 $217,651 
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation11,459 15,046 
Pension and Other Benefits2,129 2,990 
Derivatives and Hedging5,206 (14,514)
Equity Method Investments2,884 — 
Total Other Comprehensive Income (Loss)21,678 3,522 
Comprehensive Income240,407 221,173 
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest75 154 
Comprehensive Income Attributable to Hormel Foods Corporation$240,332 $221,019 
 
See Notes to the Consolidated Financial Statements




4
Table of Contents
HORMEL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
Unaudited
In thousands, except share and per share amountsJanuary 28, 2024October 29, 2023
Assets  
Cash and Cash Equivalents$963,212 $736,532 
Short-term Marketable Securities18,712 16,664 
Accounts Receivable (Net of Allowance for Doubtful Accounts of
   $3,651 at January 28, 2024, and $3,557 at October 29, 2023)
751,048 817,391 
Inventories1,578,191 1,680,406 
Prepaid Expenses and Other Current Assets56,001 46,256 
Total Current Assets3,367,164 3,297,249 
Goodwill4,931,257 4,928,464 
Other Intangibles1,753,156 1,757,171 
Pension Assets200,113 204,697 
Investments in Affiliates728,146 725,121 
Other Assets377,623 370,252 
Property, Plant, and Equipment
Land75,000 74,626 
Buildings1,464,811 1,458,354 
Equipment2,781,258 2,781,730 
Construction in Progress215,086 195,665 
Less: Allowance for Depreciation(2,380,631)(2,344,557)
Net Property, Plant, and Equipment2,155,524 2,165,818 
Total Assets$13,512,983 $13,448,772 
Liabilities and Shareholders’ Investment  
Accounts Payable and Accrued Expenses$744,116 $823,076 
Accrued Marketing Expenses101,928 87,452 
Employee-related Expenses212,719 263,330 
Interest and Dividends Payable162,452 172,178 
Taxes Payable85,533 15,212 
Current Maturities of Long-term Debt954,031 950,529 
Total Current Liabilities2,260,779 2,311,776 
Long-term Debt Less Current Maturities2,357,176 2,358,719 
Pension and Post-retirement Benefits352,709 349,268 
Deferred Income Taxes500,581 498,106 
Other Long-term Liabilities193,172 191,917 
Shareholders’ Investment
Preferred Stock, Par Value $0.01 a Share —
Authorized 160,000,000 Shares; Issued — None
— — 
Common Stock, Nonvoting, Par Value $0.01 a Share —
Authorized 400,000,000 Shares; Issued — None
— — 
Common Stock, Par Value $0.01465 a Share — Authorized 1,600,000,000 Shares;
Shares Issued as of January 28, 2024: 547,595,988
Shares Issued as of October 29, 2023: 546,599,420
8,021 8,007 
Additional Paid-in Capital529,715 506,179 
Accumulated Other Comprehensive Loss(250,783)(272,252)
Retained Earnings7,557,157 7,492,952 
Hormel Foods Corporation Shareholders’ Investment7,844,111 7,734,885 
Noncontrolling Interest4,455 4,100 
Total Shareholders’ Investment7,848,566 7,738,985 
Total Liabilities and Shareholders’ Investment$13,512,983 $13,448,772 
See Notes to the Consolidated Financial Statements

5
Table of Contents
HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT
(in thousands, except per share amounts)Unaudited
(Unaudited)
Quarter Ended January 29, 2023
 Hormel Foods Corporation Shareholders  
Common
Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interest
Total
Shareholders’
Investment
In thousands, except per share amountsSharesAmountSharesAmount
Balance at October 30, 2022546,237$8,002 —$— $469,468 $7,313,374 $(255,561)$4,936 $7,540,219 
Net Earnings (Loss)217,719 (69)217,651 
Other Comprehensive Income (Loss)3,300 222 3,522 
Stock-based Compensation Expense5,202 5,202 
Exercise of Stock Options/Restricted Shares2283 2,632 2,635 
Declared Dividends – $0.2750 per Share169 (150,405)(150,236)
Balance at January 29, 2023546,466$8,006 —$— $477,470 $7,380,689 $(252,261)$5,089 $7,618,993 
Quarter Ended January 28, 2024
 Hormel Foods Corporation Shareholders  
Common
Stock		Treasury
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Non-
controlling
Interest		Total
Shareholders’
Investment
In thousands, except per share amountsSharesAmountSharesAmount
Balance at October 29, 2023546,599$8,007 —$— $506,179 $7,492,952 $(272,252)$4,100 $7,738,985 
Net Earnings (Loss)218,863 (134)218,729 
Other Comprehensive Income (Loss)21,469 209 21,678 
Contribution from Noncontrolling Interest280 280 
Stock-based Compensation Expense4,444 4,444 
Exercise of Stock Options/Restricted Shares99714 18,883 18,898 
Declared Dividends – $0.2825 per Share209 (154,658)(154,449)
Balance at January 28, 2024547,596$8,021 —$— $529,715 $7,557,157 $(250,783)$4,455 $7,848,566 
              
 Hormel Foods Corporation Shareholders    
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interest
 
Total
Shareholders’
Investment
Balance at October 30, 2016$7,742
 $—
 $—
 $4,736,567
 $(296,303) $3,400
 $4,451,406
              
Net earnings      846,735
   368
 847,103
Other comprehensive income        48,228
 22
 48,250
Purchases of common stock  (94,487)         (94,487)
Stock-based compensation expense1
   15,590
       15,591
Exercise of stock options/nonvested shares38
   30,827
       30,865
Shares retired(40) 94,487
 (32,747) (61,700)     —
Declared cash dividends – $0.68 per share      (359,031)     (359,031)
Balance at October 29, 2017$7,741
 $—
 $13,670
 $5,162,571
 $(248,075) $3,790
 $4,939,697
Net earnings      303,107
   104
 303,211
Other comprehensive income        5,899
 149
 6,048
Purchases of common stock  (25,199)         (25,199)
Stock-based compensation expense

   7,339
       7,339
Exercise of stock options/nonvested shares34
   23,421
       23,455
Shares retired(11) 25,199
 (25,188) 

     —
Declared cash dividends – $0.1875 per share      (99,177)     (99,177)
Balance at January 28, 2018$7,764
 $—
 $19,242
 $5,366,501
 $(242,176) $4,043
 $5,155,374

See Notes to the Consolidated Financial Statements





6
Table of Contents
HORMEL FOODS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)Unaudited
(Unaudited)
Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Operating Activities  
Net Earnings$218,729 $217,651 
Adjustments to Reconcile to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization64,067 61,503 
Equity in Earnings of Affiliates(16,091)(15,559)
Distributions Received from Equity Method Investees15,731 3,652 
Provision for Deferred Income Taxes(179)(311)
Non-cash Investment Activities(12,612)(7,839)
Stock-based Compensation Expense4,444 5,202 
Operating Lease Cost8,675 5,187 
Other Non-cash, Net5,814 1,707 
Changes in Operating Assets and Liabilities:
Decrease (Increase) in Accounts Receivable68,094 79,561 
Decrease (Increase) in Inventories103,894 (11,766)
Decrease (Increase) in Prepaid Expenses and Other Assets1,533 (34,538)
Increase (Decrease) in Pension and Post-retirement Benefits10,756 10,710 
Increase (Decrease) in Accounts Payable and Accrued Expenses(132,229)(171,368)
Increase (Decrease) in Net Income Taxes Payable63,353 59,837 
Net Cash Provided by (Used in) Operating Activities403,980 203,629 
Investing Activities
Net Sale (Purchase) of Securities(964)(833)
Purchases of Property, Plant, and Equipment(47,210)(37,052)
Proceeds from Sales of Property, Plant, and Equipment8 5,016 
Proceeds from (Purchases of) Affiliates and Other Investments— (418,616)
Proceeds from Company-owned Life Insurance11 16 
Net Cash Provided by (Used in) Investing Activities(48,154)(451,469)
Financing Activities
Repayments of Long-term Debt and Finance Leases(2,249)(2,189)
Dividends Paid on Common Stock(150,294)(142,017)
Proceeds from Exercise of Stock Options18,898 2,635 
Proceeds from Noncontrolling Interest280 — 
Net Cash Provided by (Used in) Financing Activities(133,365)(141,570)
Effect of Exchange Rate Changes on Cash4,218 7,093 
Increase (Decrease) in Cash and Cash Equivalents226,680 (382,318)
Cash and Cash Equivalents at Beginning of Year736,532 982,107 
Cash and Cash Equivalents at End of Period$963,212 $599,789 
 Three Months Ended
 January 28,
2018		 January 29,
2017
OPERATING ACTIVITIES 
  
Net earnings$303,211
 $235,303
Adjustments to reconcile to net cash provided by operating activities:   
Depreciation35,867
 29,247
Amortization of intangibles3,256
 2,072
Equity in earnings of affiliates(23,531) (13,299)
Distribution from equity method investees23
 2,523
Provision for deferred income taxes(68,856) 11,215
Gain on property/equipment sales and plant facilities(1,131) (801)
Non-cash investment activities(10,880) (1,208)
Stock-based compensation expense7,339
 7,240
Changes in operating assets and liabilities, net of acquisitions:   
Decrease in accounts receivable69,629
 36,507
Increase in inventories(21,255) (17,513)
Decrease (increase) in prepaid expenses and other current assets569
 (19,425)
Increase in pension and post-retirement benefits2,132
 3,238
Decrease in accounts payable and accrued expenses(58,077) (178,157)
Increase in net income taxes payable65,881
 98,307
NET CASH PROVIDED BY OPERATING ACTIVITIES304,177
 195,249
    
INVESTING ACTIVITIES   
Proceeds from sale of business—
 135,944
Acquisitions of businesses/intangibles(858,102) —
Purchases of property/equipment(53,694) (37,895)
Proceeds from sales of property/equipment751
 3,926
Decrease in investments, equity in affiliates, and other assets2,718
 3,596
   Proceeds from company-owned life insurance3,028
 —
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES(905,299) 105,571
    
FINANCING ACTIVITIES   
Proceeds from short-term debt630,000
 —
Principal payments on short-term debt(375,000) —
Proceeds from long-term debt375,000
 —
Principal payments on long-term debt(274) —
Dividends paid on common stock(89,814) (76,629)
Share repurchase(25,199) (30,588)
Proceeds from exercise of stock options23,455
 7,398
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES538,168
 (99,819)
    
EFFECT OF EXCHANGE RATE CHANGES ON CASH4,607
 (6,323)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(58,347) 194,678
Cash and cash equivalents at beginning of year444,122
 415,143
CASH AND CASH EQUIVALENTS AT END OF QUARTER$385,775
 $609,821


See Notes to the Consolidated Financial Statements


7
Table of Contents
HORMEL FOODS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)Unaudited
 
NOTE AGENERAL - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
Presentation:The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with accounting principles generally accepted accounting principlesin the United States (U.S.) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of thecertain information and footnotes required by U.S. generally accepted accounting principles (GAAP) for completecomprehensive financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results and cash flows for the interim period are not necessarily indicative of the results that may be expected for the full year.  The balance sheet at October 29, 2017, has been derived from the audited financial

These statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer toshould be reviewed in conjunction with the consolidated financial statements and footnotesassociated notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2017.
Investments
2023. The Company maintains a rabbi trustsignificant accounting policies used in preparing these interim consolidated financial statements are consistent with those described in Note A - Summary of Significant Accounting Policies to fund certain supplemental executive retirement plans and deferred income plans.  Under the plans,consolidated financial statements in the participants can defer certain types of compensation and elect to receive a return on the deferred amounts based on the changes in fair value of various investment options, primarily a variety of mutual funds.Form 10-K. The Company has corporate-owned life insurance policies on certain participants in the deferred compensation plans.  The cash surrender value of the policies is included in other assets on the Consolidated Statements of Financial Position.  The securities held by the trust are classified as trading securities.  Therefore, unrealized gains and losses associated with these investments are includeddetermined there have been no material changes in the Company’s earnings.  Securities held by the trust generated gains of $3.4 millionsignificant accounting policies, including estimates and assumptions, as disclosed in its Annual Report on Form 10-K for the quarterfiscal year ended January 28, 2018, compared to gains of $1.5 million for the quarter ended JanuaryOctober 29, 2017.2023.

Supplemental Cash Flow Information
Non-cash investment activities presented on the Consolidated Statements of Cash Flows primarily consist of unrealized gains or losses on the Company’s rabbi trust.  The noted investments are included in other assets on the Consolidated Statements of Financial Position.  Changes in the value of these investments are included in the Company’s net earnings and are presentedRounding: Certain amounts in the Consolidated Financial Statements of Operations as either interest and investment income (loss) or interest expense, as appropriate.associated notes may not foot due to rounding. All percentages have been calculated using unrounded amounts.


Guarantees
The Company enters into various agreements guaranteeing specified obligations of affiliated parties.  The Company’s guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement.  The Company currently provides revocable standby letters of credit totaling $4.0 million to guarantee obligations that may arise under workers compensation claims of an affiliated party.  This potential obligation is not reflected in the Company’s Consolidated Statements of Financial Position.

Reclassifications
Reclassifications:Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. TheAmortization related to operating leases and debt issuance costs were reclassified from Amortization to separate line items within the operating activities section of the Consolidated Condensed Statements of Cash Flows. These reclassifications had no impact on net earningsthe Consolidated Statements of Operations, Consolidated Condensed Statements of Financial Position, or operating cash flows as previously reported.the Increase (Decrease) in Cash and Cash Equivalents in the Consolidated Condensed Statements of Cash Flows.


Accounting Changes and Recent Accounting PronouncementsPronouncements:


New Accounting Pronouncements adopted in current fiscal yearNot Yet Adopted

In July 2015,November 2023, the FASB issued ASU 2015-11, Inventory2023-07 Segment Reporting (Topic 330). The updated guidance requires that inventory be measured at the lower of cost and net realizable value. The guidance is limited to inventory measured using the first-in, first-out (“FIFO”) or average cost methods and excludes inventory measured using last-in, first-out (“LIFO”) or retail inventory methods. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The updated guidance is effective for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. The Company adopted the updated provisions on a prospective basis at the beginning of fiscal 2018. The adoption did not have a material impact on its consolidated financial statements, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation280): Improvements to Employee Share-Based Payment Accounting (Topic 718). Reportable Segment Disclosures. The update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted in any interim or annual period, with adjustments reflected as of the beginning of the fiscal year. Accordingly, the Company adopted the provisions of this new accounting standard at the beginning of fiscal 2018. This will result in realized excess tax benefits (“windfalls”) and tax deficiencies (“shortfalls”) upon exercise or vesting of stock-based awards being recorded in its Consolidated Statements of Operations instead of additional paid-in capital within its Consolidated Statements of Financial Position. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement will be applied prospectively. Excess tax benefits of $11.8 million were recorded as a reduction of income tax expense for the first quarter ended January 28, 2018, thus reducing the effective tax rate by 3.9% for the quarter. The Company will apply the amendments relatedintended to the presentation of excess tax benefits on the consolidated statement of cash flows using a retrospective transition method, and as a result, realized windfalls were reclassified from financing activities to operating activities in its Consolidated Statements of Cash Flows. In accordance with ASU 2016-09, the Company has made the accounting policy election to estimate forfeitures and adjust as actual forfeitures occur.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230). The update makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted provided all amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company early adopted the provisions of the new accounting standard at the beginning of fiscal 2018 and elected to account for distributions received from equity method investees as cash flows from operating activities using the nature of distribution approach accounting policy election. Under the nature of the distribution approach, distributions are classified based on the nature of the activity that generated them. The guidance requires cash proceeds from the settlement of corporate-owned life insurance policies to be classified as investing activities. Accordingly, the Company classified the cash proceeds received from corporate-owned life insurance policies as cash flows from investing activities. The adoption did not have a material impact on its consolidated financial statements.

The following table reconciles the Consolidated Statements of Cash Flows line items impacted by the adoption of these standards at January 29, 2017:
 Reported January 29, 2017 ASU 2016-09 ASU 2016-15 Adjusted January 29, 2017
Operating Activities       
Equity in earnings of affiliates$(10,776) $—
 $(2,523) $(13,299)
Distributions received from equity method investees—
 —
 2,523
 2,523
Excess tax benefit from stock-based compensation(17,630) 17,630
 —
 —
Net Cash Provided by Operating Activities$177,619
 $17,630
 $—
 $195,249
        
Financing Activities       
Excess tax benefit from stock-based compensation$17,630
 $(17,630) $—
 $—
Net Cash Used in Financing Activities$(82,189) $(17,630) $—
 $(99,819)

New Accounting Pronouncements not yet adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This topic converges the guidance within U.S. GAAP and international financial reporting standards and supersedes ASC 605, Revenue Recognition. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new

standard will also result inimprove reportable segment disclosure requirements, primarily through enhanced disclosures about revenue, provide guidance for transactions which were not previously addressed comprehensively,significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and improve guidance for multiple-element arrangements. In August 2015,any additional measures of a segment's profit or loss used by the FASB issuedCODM when deciding how to allocate resources. The ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which defers the effective date of ASU 2014-09also requires all annual disclosures currently required by one year allowing early adoption as of the original effective date of December 15, 2016. In 2016 and 2017, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-13, and ASU 2017-14 to clarify, among other things, the implementation guidance related to principal versus agent considerations, identifying performance obligations and accounting for licenses of intellectual property. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period, and early adoption is permitted for annual reporting periods beginning after December 15, 2016. The updated guidance isTopic 280 to be applied either retrospectively or by using a cumulative effect adjustment.included in interim periods. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2019. The Company has completed a significant portion of its detailed assessments relating to revenue streams and customer arrangements, and is focused on controls to support recognition and disclosure requirements under the new guidance. Based on the assessment to date, the Company does not expect the adoption of the new standard to have a material impact on its results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update requires lessees to put most leases on their balance sheets while recognizing expenses on their income statements in a manner similar to current U.S. GAAP. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. In 2018, the FASB issued ASU 2018-01 which permits an entity to elect an optional transition practical expedient to not evaluate land easements existing or expiring before the entity’s adoption of ASC 842 and not previously accounted for as leases under ASC 840. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The updated guidance is to be applied using modified retrospective method and early adoption is permitted. The Company expects to adopt the provisions of this new accounting standard at the beginning of fiscal 2020, and is in the process of evaluating the impact of adoption on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 958). The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment methodology with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The updated guidance is to be applied on a modified retrospective approach and is effective for fiscal years,2023, and interim periods within those fiscal years beginning after December 15, 2019.2024. Early adoption is permitted forand requires retrospective application to all entities for fiscal years beginning after December 15, 2018, and interimprior periods therein.presented in the financial statements. The Company is currently assessing the timing and impact of adopting the updated provisions.

In October 2016,December 2023, the FASB issued ASU 2016-16, 2023-09Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). : Improvements to Income Tax Disclosures. The updated guidance requires the recognitionupdate is intended to enhance transparency and decision usefulness of the income tax consequences of an intra-entity asset transfer, other than transfers of inventory, when the transfer occurs. For intra-entity transfers of inventory, thedisclosures. This ASU updates income tax effects will continue to be deferred until the inventory has been sold to a third party. The updated guidance is effective for reporting periods beginning after December 15, 2017, with early adoption permitted onlydisclosure requirements by requiring specific categories and greater disaggregation within the first interim periodrate reconciliation and disaggregation of a fiscal year.income taxes paid by jurisdiction. The guidance is required to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company will adopt the provisions of the new accounting standard at the beginning of fiscal 2019 and is in the process of evaluating the impact of adoption on its consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). The updated guidance requires an employer to report the service cost component of net periodic pension cost and net periodic post-retirement benefit cost in the same line item or items as other compensation costs. The updated guidance also requires the other components of net periodic pension cost and net periodic post-retirement benefit cost to be presented in the income statement separately from the service cost component and outside income from operations. Additionally, only the service cost component is eligible for capitalization, when applicable. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The updated guidance should be applied retrospectively for the presentation of the service cost component and other components of net benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net benefit cost. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2019 and is currently assessing the impact on its consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities (Topic 815). The updated guidance expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirement apply prospectively. The updated guidanceupdate is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early2024 with early adoption is permitted in any interim or annual period.permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.


In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220). The updated guidance allows entities to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The Company is in the process of assessing the impact this standard will have on our consolidated financial statements and related disclosures.
Any other recentlyRecently issued accounting standards or pronouncements not disclosed above have been excluded as they either are currently not relevant to the Company, or they are not expected to have a material effect on its business practices, financial condition, resultsCompany.



8
Table of operations, or disclosures.Contents


NOTE BACQUISITIONS
On November 27, 2017, the Company acquired Columbus Manufacturing, Inc. (Columbus), an authentic premium deli meat and salami company, from Chicago-based Arbor Investments for a preliminary purchase price of $857.6 million, subject to customary working capital adjustments. The transaction was funded with cash on hand along with borrowing $375.0 million under a term loan facility and $375.0 million under a revolving credit facility. The acquisition was accounted for as a business combination using the acquisition method. The Company is in process of completing its preliminary allocation of the fair value of Columbus' assets. Allocations between goodwill and identifiable intangible assets acquired are pending completion of a third-party valuation appraisal. Refer to Note D for preliminary amounts assigned to goodwill.

Columbus specializes in authentic premium deli meat and salami and allows the Company to enhance its scale in the deli by broadening its portfolio of products, customers, and consumers.

Operating results for this acquisition have been included in the Company’s Consolidated Statements of Operations from the date of acquisition and are reflected in the Refrigerated Foods segment.

On August 22, 2017, the Company acquired Cidade do Sol (Ceratti) for a preliminary purchase price of approximately $103.5 million, subject to customary working capital adjustments. The transaction was funded by the Company with cash on hand. The Company has completed a preliminary allocation of the fair value of Ceratti. Allocations are based on the acquisition method of accounting and in-process third party valuation appraisals.

Ceratti is a growing, branded, value-added meats company in Brazil offering more than 70 products in 15 categories, including authentic meats such as mortadella, sausage, and salami for Brazilian retail and foodservice markets under the popular Ceratti® brand.  The acquisition of Ceratti allows the Company to establish a full in-country presence in the fast-growing Brazilian market with a premium brand.

Operating results for this acquisition have been included in the Company’s Consolidated Statements of Operations from the date of acquisition and are reflected in the International & Other segment.

On August 16, 2017, the Company acquired Fontanini Italian Meats and Sausages (Fontanini), a branded foodservice business, from Capitol Wholesale Meats, Inc. for a preliminary purchase price of $428.4 million, subject to customary working capital

adjustments. The transaction provides a cash flow benefit resulting from the amortization of the tax basis of assets, the net present value of which is approximately $90.0 million. The transaction was funded by the Company with cash on hand and by utilizing short-term financing. The Company has completed a preliminary allocation of the fair value of Fontanini. Allocations are based on the acquisition method of accounting and in-process third party valuation appraisals. Primary assets acquired include goodwill of $223.6 million and intangibles of $110.3 million.

Fontanini specializes in authentic Italian meats and sausages, as well as a variety of other premium meat products, including pizza toppings and meatballs, and allows the Company to expand the foodservice business.

Operating results for this acquisition have been included in the Company’s Consolidated Statements of Operations from the date of acquisition and are reflected in the Refrigerated Foods segment.


NOTE CINVENTORIES
Principal components of inventories are:
(in thousands)January 28,
2018		 October 29,
2017
Finished products$539,058
 $511,789
Raw materials and work-in-process251,475
 237,903
Operating supplies125,551
 114,098
Maintenance materials and parts57,137
 57,232
Total$973,221
 $921,022


NOTE D - GOODWILL AND INTANGIBLE ASSETS

Goodwill:The change in the carrying amountsamount of goodwill for the first quarter ended January 28, 2018, are presented in the table below.2024, is:
In thousandsRetailFoodserviceInternationalTotal
Balance at October 29, 2023$2,916,796 $1,750,594 $261,074 $4,928,464 
Foreign Currency Translation— — 2,793 2,793 
Balance at January 28, 2024$2,916,796 $1,750,594 $263,867 $4,931,257 

Intangible Assets: The increase to goodwillcarrying amounts for the quarter is primarily related to the acquisition of Columbus. A preliminary allocation has been made to tangible assets, however, the allocation from goodwill to identifiableindefinite-lived intangible assets is pending receipt of the third-party valuation appraisal report.are:
In thousandsJanuary 28, 2024October 29, 2023
Brands/Trade Names/Trademarks$1,636,807 $1,636,807 
Other Intangibles184 184 
Foreign Currency Translation(5,523)(5,893)
Total$1,631,468 $1,631,098 
(in thousands)
Grocery
Products
 
Refrigerated
Foods
 JOTS 
International
& Other
 Total
Balance as of October 29, 2017$882,582
 $795,699
 $203,214
 $238,318
 $2,119,813
Goodwill acquired—
 836,979
 —
 —
 836,979
Purchase adjustments—
 510
 —
 161
 671
Balance as of January 28, 2018$882,582
 $1,633,188
 $203,214
 $238,479
 $2,957,463

The gross carrying amount and accumulated amortization for definite-lived intangible assets are presented in the table below.are:
 January 28, 2024October 29, 2023
In thousandsGross Carrying
Amount		Accumulated
Amortization		Gross Carrying
Amount		Accumulated
Amortization
Customer Lists/Relationships$168,239 $(85,749)$168,239 $(82,658)
Other Intangibles59,241 (16,919)59,241 (15,857)
Trade Names/Trademarks6,210 (5,068)6,540 (5,089)
Foreign Currency Translation— (4,265)— (4,344)
Total$233,690 $(112,002)$234,020 $(107,947)
 January 28, 2018 October 29, 2017
(in thousands)
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Customer lists/relationships$115,940
 $(29,782) $115,940
 $(25,973)
Formulas and recipes—
 —
 1,950
 (1,950)
Other intangibles6,964
 (1,556) 3,100
 (2,044)
Total$122,904
 $(31,338) $120,990
 $(29,967)

Amortization expense was $3.3 million and $2.1 million for the quarters ended January 28, 2018 and January 29, 2017, respectively.on intangible assets is as follows:
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Amortization Expense$4,463 $4,607 


Estimated annual amortization expense on intangible assets for the five fiscal years after October 29, 2017,2023, is as follows:
In thousands
Amortization
Expense
2024$16,381 
202514,681 
202614,210 
202713,940 
202813,009 



9
(in millions) 
2018$10.6
201910.5
202010.5
202110.5
202210.2
Table of Contents
NOTE C - INVESTMENTS IN AFFILIATES

Equity in Earnings of Affiliates consists of:
 Quarter Ended
In thousands% OwnedJanuary 28, 2024January 29, 2023
MegaMex Foods, LLC(1)
50%$8,091 $13,681 
Other Equity Method Investments(2)
Various (20-50%)8,000 1,878 
Total Equity in Earnings of Affiliates$16,091 $15,559 
(1)    MegaMex, Foods, LLC, is reflected in the Retail Segment.
(2)    Other Equity Method Investments are primarily reflected in the International Segment but also include corporate venturing investments.

Distributions received from equity method investees include:
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Dividends$15,731 $3,652 

On December 15, 2022, the Company purchased from various minority shareholders a 29% common stock interest in PT Garudafood Putra Putri Jaya Tbk (Garudafood), a food and beverage company in Indonesia. On April 12, 2023, the Company purchased additional shares increasing the ownership interest to 30%. This investment expands the Company’s presence in Southeast Asia and supports the global execution of the entertaining and snacking strategy. The Company has the ability to exercise significant influence, but not control, over Garudafood; therefore, the investment is accounted for under the equity method.

The Company obtained its Garudafood interest for a purchase price of $425.8 million, including associated transaction costs. The transaction was funded using the Company’s cash on hand. Based on a third-party valuation, the Company’s basis difference between the fair value of the investment and proportionate share of the carrying amounts for indefinite-livedvalue of Garudafood’s net assets is $324.8 million. The basis difference related to inventory, property, plant and equipment, and certain intangible assets are presentedis being amortized through Equity in Earnings of Affiliates over the table below.
(in thousands)January 28,
2018		 October 29,
2017
Brands/tradenames/trademarks$931,573
 $935,807
Other intangibles184
 184
Total$931,757
 $935,991

NOTE EPENSION AND OTHER POST-RETIREMENT BENEFITS
Net periodic benefit cost for pension and other post-retirement benefit plans consistsassociated useful lives. As of January 28, 2024, the remaining basis difference was $324.9 million, which includes the impact of foreign currency translation. Based on quoted market prices, the fair value of the following:common stock held in Garudafood was $279.4 million as of January 26, 2024.

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, of which $9.1 million is remaining as of January 28, 2024. This difference is being amortized through Equity in Earnings of Affiliates.


NOTE D - INVENTORIES
 Pension Benefits Post-retirement Benefits
 Three Months Ended Three Months Ended
(in thousands)January 28,
2018		 January 29,
2017		 January 28,
2018		 January 29,
2017
Service cost$7,903
 $7,564
 $320
 $275
Interest cost14,049
 13,566
 2,832
 2,871
Expected return on plan assets(24,770) (22,734) —
 —
Amortization of prior service cost(617) (750) (710) (1,068)
Recognized actuarial loss4,539
 6,541
 44
 628
Net periodic cost$1,104
 $4,187
 $2,486
 $2,706


Principal components of inventories are:
In thousandsJanuary 28, 2024October 29, 2023
Finished Products$887,941 $954,432 
Raw Materials and Work-in-Process416,896 448,535 
Operating Supplies161,174 168,289 
Maintenance Materials and Parts112,181 109,151 
Total Inventories$1,578,191 $1,680,406 


NOTE FE - DERIVATIVES AND HEDGING

The Company uses hedging programs to manage price risk associated with commodity purchases.purchases and interest rates. These programs utilize futures, swaps, and options contracts to manage the Company’s exposure to price fluctuations in the commodities markets.market fluctuations. The Company has determined its designated hedging programs to be highly effective in offsetting the changes in fair value or cash flows generated by the items hedged. Effectiveness testing is performed on a quarterly basis to ascertain a high level of effectiveness for cash flow and fair value hedging programs. If the requirements of hedge accounting are no longer met, hedge accounting is discontinued immediately and any future changes to fair value are recorded directly through earnings.




10
Table of Contents
Cash Flow Commodity Hedges: The Company utilizes cornuses futures, swaps, and lean hog futuresoptions contracts to offset price fluctuations in the Company’sCompany's future directpurchases of grain, lean hogs, natural gas, and hog purchases.  The financial instrumentsdiesel fuel. These contracts are designated and accounted for as cash flow hedges, and the Company measures the effectiveness of the hedges at least quarterly.  Effectivehedges; therefore, effective gains or losses related to these cash flow hedges are reported in accumulated other comprehensive lossAccumulated Other Comprehensive Loss (AOCL) and reclassified into earnings, through costCost of products sold,Products Sold, in the period or periods in which the hedged transactions affect earnings. Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold.  The Company typically does not hedge its grain, natural gas, or diesel fuel exposure beyond the next two upcoming fiscal years and its lean hog exposure beyond the next fiscal year.  As of January 28, 2018, and October 29, 2017, the Company had the following outstanding commodity futures contracts that were entered into to hedge forecasted purchases:

Volume
CommodityJanuary 28, 2018October 29, 2017
Corn11.3 million bushels11.5 million bushels
Lean hogs0.2 million cwt0.3 million cwt
As of January 28, 2018, the Company has included in AOCL, hedging gains of $0.8 million (before tax) relating to its positions, compared to gains of $1.8 million (before tax) as of October 29, 2017.Fair Value Commodity Hedges: The Company expects to recognizedesignates the majority of these gains over the next 12 months.
Fair Value Hedges: The Company utilizes futures it uses to minimize the price risk assumed when fixed forward priced contracts are offered to the Company’s commodity suppliers.lean hog and grain suppliers as fair value hedges. The intent of the program isprograms are intended to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery. The futures contracts are designated and accounted for as fair value hedges, and the Company measures the effectiveness of the hedges at least quarterly.  Changes in the fair value of the futures contracts along withand the gain or loss on the hedged purchase commitment are marked-to-market through earnings and are recorded on the Consolidated Condensed Statements of Financial Position as a current assetCurrent Asset and liability,Current Liability, respectively. Effective gainsGains or losses related to these fair value hedges are recognized through costCost of products soldProducts Sold in the period or periods in which the hedged transactions affect earnings.  Any

Cash Flow Interest Rate Hedges: In the second quarter of fiscal 2021, the Company designated two separate interest rate locks as cash flow hedges to manage interest rate risk associated with the anticipated debt transactions required to fund the acquisition of the Planters® snack nuts business. The total notional amount of the Company’s locks was $1.25 billion. In the third quarter of fiscal 2021, the associated unsecured senior notes were issued with a tenor of seven and thirty years and both locks were lifted (See Note J - Long-Term Debt and Other Borrowing Arrangements). Mark-to-market gains orand losses on these instruments were deferred as a component of AOCL. The resulting gain in AOCL is reclassified to Interest Expense in the period in which the hedged transactions affect earnings.

Fair Value Interest Rate Hedge: In the first quarter of fiscal 2022, the Company entered into an interest rate swap to protect against changes in the fair value of a portion of previously issued senior unsecured notes attributable to the change in the benchmark interest rate. The hedge specifically designated the last $450 million of the notes due June 2024 (the 2024 Notes). The Company terminated the swap in the fourth quarter of fiscal 2022. The loss related to hedge ineffectiveness are recognized in the current period cost of products sold.  As of January 28, 2018, and October 29, 2017, the Company had the following outstanding commodity futures contracts designatedswap was recorded as a fair value hedges:hedging adjustment to the hedged debt and will be amortized through earnings over the remaining life of the debt.

Volume
CommodityJanuary 28, 2018October 29, 2017
Corn2.6 million bushels4.1 million bushels
Lean hogs0.3 million cwt0.4 million cwt
Other Derivatives:The Company holds certain futures and options contract positions as part of a merchandising program andswap contracts to manage the Company’s exposure to fluctuations in grain and pork commodity markets. The Company has not applied hedge accounting to these positions. Activity related to derivatives not designated as hedges is immaterial to the consolidated financial statements.

As of January 28, 2018, and October 29, 2017, the Company had the followingVolume: The Company's outstanding futures and options contracts related to these programs:
its commodity hedging programs include:
In millionsJanuary 28, 2024October 29, 2023
Corn24.8 bushels30.7 bushels
Lean Hogs158.2 poundsVolume144.2 pounds
CommodityNatural Gas3.5 MMBtuJanuary 28, 2018October 29, 20173.0 MMBtu
CornDiesel Fuel0.3 gallons0.2 million bushels— gallons



Fair Values:Value of Derivatives: The gross fair values of the Company’s derivative instruments (in thousands)designated as of January 28, 2018, and October 29, 2017, were as follows:hedges are:
   
Fair Value (1)
 
Location on Consolidated
Statements of Financial
Position
 January 28,
2018		 October 29,
2017
Asset Derivatives:     
Derivatives Designated as Hedges:   
  
Commodity contractsOther current assets $(390) $326
      
Derivatives Not Designated as Hedges:     
Commodity contractsOther current assets 12
 —
      
Total Asset Derivatives  $(378) $326
In thousandsLocation on Consolidated Condensed Statements of Financial PositionJanuary 28, 2024October 29, 2023
Commodity Contracts(1)
Other Current Assets$(8,909)$(13,233)
(1)    Amounts represent the gross fair value of commodity derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its commodity hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The amount or timing of cash collateral balances may impact the classification of the commodity derivative inon the Consolidated Condensed Statements of Financial Position. The gross liability position as of January 28, 2024, is offset by the right to reclaim net cash collateral of $24.5 million contained within the master netting arrangement. The gross liability position as of October 29, 2023, is offset by the right to reclaim net cash collateral of $32.2 million. See Note K “FairH - Fair Value Measurements”Measurements for a discussion of these net amounts as reported inon the Consolidated Condensed Statements of Financial Position.

DerivativeFair Value Hedge - Assets (Liabilities): The carrying amount of the Company’s fair value hedged assets (liabilities) are:
In thousandsLocation on Consolidated Condensed Statements of Financial PositionJanuary 28, 2024October 29, 2023
Commodity Contracts
Accounts Payable(1)
$(2,241)$(4,914)
Interest Rate Contracts
Current Maturities of Long-term Debt(2)
(445,673)(442,549)
(1)Represents the carrying amount of fair value hedged assets and liabilities, which are offset by other assets included in master netting arrangements described above.
(2)    Represents the carrying amount of the hedged portion of the 2024 Notes. As of January 28, 2024, the carrying amount of the 2024 Notes included a cumulative fair value hedging adjustment of $4.3 million from discontinued hedges.

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Accumulated Other Comprehensive Loss Impact: As of January 28, 2024, the Company included in AOCL hedging losses (before tax) of $17.3 million on commodity contracts and gains (before tax) of $12.2 million related to interest rate settled positions. The Company expects to recognize the majority of the losses on commodity contracts over the next twelve months. Gains and Losses:  Gainson interest rate contracts offset the hedged interest payments over the tenor of the associated debt instruments.

The effect on AOCL for gains or losses (before tax, in thousands)tax) related to the Company’sCompany's derivative instruments for the first quarter ended January 28, 2018, and January 29, 2017, were as follows:are:
 
Gain/(Loss)
Recognized
 in AOCL(1)
Gain/(Loss)
Reclassified from
AOCL into Earnings(1)
Location on
Consolidated
Statements
of Operations
 Quarter EndedQuarter Ended
In thousandsJanuary 28, 2024January 29, 2023January 28, 2024January 29, 2023
Cash Flow Hedges
Commodity Contracts$(5,613)$(8,390)$(11,601)$10,859 Cost of Products Sold
Excluded Component(2)
1,156 345 — — 
Interest Rate Contracts— — 247 247 Interest Expense
  
Gain/(Loss)
Recognized in AOCL
(Effective Portion) (1)
 
Location on
Consolidated
Statements
of Operations
 
Gain/(Loss)
Reclassified from
AOCL into Earnings
(Effective Portion) (1)
 
Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (2) (4)
  Three Months Ended  Three Months Ended Three Months Ended
Cash Flow Hedges: January 28, 2018 January 29, 2017  January 28, 2018 January 29, 2017 January 28, 2018 January 29, 2017
Commodity contracts $(387) $(646) Cost of products sold $608
 $1,469
 $(90) $—
    
Location on
Consolidated
Statements
of Operations
 
Gain/(Loss)
Recognized in
Earnings (Effective
Portion) (3)
 
Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (2) (5)
     Three Months Ended Three Months Ended
Fair Value Hedges:      January 28, 2018 January 29, 2017 January 28, 2018 January 29, 2017
Commodity contracts     Cost of products sold $557
 $(54) $(249) $—
    
Location on
Consolidated
Statements
of Operations
 
Gain/(Loss)
Recognized
in Earnings
  
     Three Months Ended  
Derivatives Not
Designated as Hedges:
      January 28, 2018 January 29, 2017    
Commodity contracts     Cost of products sold $12
 $(228)    
(1)Amounts represent gains or losses in AOCL before tax.    See Note H “AccumulatedG - Accumulated Other Comprehensive Loss”Loss for the after-tax impact of these gains or losses on net earnings.Net Earnings.
(2)There were no gains or losses    Represents the time value of commodity options excluded from the assessment of hedge effectiveness duringfor which the quarter.difference between changes in fair value and periodic amortization is recorded in AOCL.
(3)Amounts represent
Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for gains or losses (before tax) related to the Company’s derivative instruments are:
Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Net Earnings Attributable to Hormel Foods Corporation$218,863 $217,719 
Cash Flow Hedges - Commodity Contracts
Gain (Loss) Reclassified from AOCL(11,601)10,859 
Amortization of Excluded Component from Options(1,156)(1,412)
Fair Value Hedges - Commodity Contracts
   Gain (Loss) on Commodity Futures(1)
3,595 (3,022)
Total Gain (Loss) on Commodity Contracts(2)
(9,163)6,425 
Cash Flow Hedges - Interest Rate Contracts
Gain (Loss) Reclassified from AOCL247 247 
Fair Value Hedge - Interest Rate Contracts
Amortization of Loss Due to Discontinuance of Fair Value Hedge(3)
(3,125)(3,125)
Total Gain (Loss) on Interest Rate Contracts(4)
(2,878)(2,878)
Total Gain (Loss) Recognized in Earnings$(12,040)$3,547 

(1)Represents gains or losses on commodity contracts designated as fair value hedges that were closed during the quarter ended January 28, 2024, and January 29, 2023, which were offset by a corresponding gain or loss on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to-market through earnings with no impact on a net basis.
(4)There were no gains or losses resulting from(2)    Total Gain (Loss) on Commodity Contracts is recognized in earnings through Cost of Products Sold.
(3)    Represents the discontinuance of cash flow hedges during the quarter.
(5)There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge duringthe quarter.hedging adjustment amortized through earnings.

(4)    Total Gain (Loss) on Interest Rate Contracts is recognized in earnings through Interest Expense.



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NOTE GINVESTMENTS INF - PENSION AND RECEIVABLES FROM AFFILIATESOTHER POST-RETIREMENT BENEFITS

The Company accountsNet periodic cost for its majority-owned operations under the consolidation method.  Investments in which the Company owns a minority interest,pension and for which thereother post-retirement benefit plans consists of:
 Pension Benefits
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Service Cost$9,053 $8,902 
Interest Cost18,336 17,157 
Expected Return on Plan Assets(19,377)(19,571)
Amortization of Prior Service Cost(221)(460)
Recognized Actuarial (Gain) Loss3,316 3,325 
Net Periodic Cost$11,107 $9,353 

 Post-retirement Benefits
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Service Cost$41 $62 
Interest Cost2,896 3,014 
Amortization of Prior Service Cost2 2 
Recognized Actuarial (Gain) Loss(317)(7)
Net Periodic Cost$2,622 $3,070 

Non-service cost components of net pension and post-retirement benefit cost are no other indicators of control, are accounted for under the equity or cost method.  These investments, along with any related receivables from affiliates, are includedpresented within Interest and Investment Income in the Consolidated Statements of Financial Position as investments in and receivables from affiliates.Operations.

Investments in and receivables from affiliates consists of the following:
 
(in thousands)
Segment % Owned January 28,
2018		 October 29,
2017
MegaMex Foods, LLCGrocery Products 50% $192,570
 $177,657
Foreign Joint VenturesInternational & Other Various (26-40%) 69,577
 64,712
Total    $262,147
 $242,369

Equity in earnings of affiliates consists of the following:
   Three Months Ended
(in thousands)
 
Segment
 January 28,
2018		 January 29,
2017
MegaMex Foods, LLCGrocery Products $19,588
 $9,071
Foreign Joint VenturesInternational & Other 3,943
 4,228
Total  $23,531
 $13,299
Dividends received from affiliates for the first quarter ended January 28, 2018, were $0.023 million compared to $2.5 million of dividends received for the first quarter ended January 29, 2017.
The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, of which $14.2 million is remaining as of January 28, 2018.  This difference is being amortized through equity in earnings of affiliates.


NOTE HG - ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive lossAccumulated Other Comprehensive Loss are as follows:
In thousandsForeign
Currency
Translation		Pension &
Other
Benefits
Derivatives &
Hedging
Equity
Method
Investments		Accumulated
Other
Comprehensive
Loss
Balance at October 29, 2023$(86,022)$(183,993)$(9,084)$6,847 $(272,252)
Unrecognized Gains (Losses)
Gross11,250 32 (4,457)4,522 11,347 
Tax Effect— — 1,074 — 1,074 
Reclassification into Net Earnings
Gross— 2,780 (1)11,354 (2)(1,639)(3)12,496 
Tax Effect— (683)(2,765)— (3,448)
Change Net of Tax11,250 2,129 5,206 2,884 21,469 
Balance at January 28, 2024$(74,772)$(181,863)$(3,877)$9,730 $(250,783)
(in thousands)
Foreign
Currency
Translation
 
Pension &
Other
Benefits
 
Deferred
Gain (Loss) -
Hedging
 
Accumulated
Other
Comprehensive
Loss
Balance at October 29, 2017$(6,846) $(242,475)  $1,246
  $(248,075)
Unrecognized gains (losses)         
Gross4,063
 —
  (387)  3,676
Tax effect—
 —
  92
  92
Reclassification into net earnings         
Gross—
 3,256
(1) (608)(2) 2,648
Tax effect—
 (770)  253
  (517)
Net of tax amount4,063
 2,486
  (650)  5,899
Balance at January 28, 2018$(2,783) $(239,989)  $596
  $(242,176)

(1)    IncludedIncluded in the computation of net periodic cost (seecost. See Note E “PensionF - Pension and Other Post-Retirement Benefits”Benefits for additional details).information.
(2)Included in costCost of products soldProducts Sold and Interest Expense in the Consolidated Statements of Operations. See Note E - Derivatives and Hedging for additional information.

(3)    Included in Equity in Earnings of Affiliates in the Consolidated Statements of Operations.





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NOTE IINCOME TAXESH - FAIR VALUE MEASUREMENTS

Accounting guidance establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of the three levels below based on the inputs used in the valuation.

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

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

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

The Company’s financial assets and liabilities carried at fair value on a recurring basis and their level within the fair value hierarchy are presented in the tables below.
 Fair Value Measurements at January 28, 2024
In thousandsTotal Fair
Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets at Fair Value    
Cash and Cash Equivalents(1)
$963,212 $957,910 $5,302 $— 
Short-term Marketable Securities(2)
18,712 3,459 15,253 — 
Other Trading Securities(3)
199,690 — 199,690 — 
Commodity Derivatives(4)
5,365 7,767 (2,402)— 
Total Assets at Fair Value$1,186,979 $969,136 $217,844 $— 
Liabilities at Fair Value
Deferred Compensation(3)
$60,658 $— $60,658 $— 
Total Liabilities at Fair Value$60,658 $— $60,658 $— 

 Fair Value Measurements at October 29, 2023
In thousandsTotal Fair
Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets at Fair Value    
Cash and Cash Equivalents(1)
$736,532 $735,387 $1,145 $— 
Short-term Marketable Securities(2)
16,664 2,499 14,164 — 
Other Trading Securities(3)
188,162 — 188,162 — 
Commodity Derivatives(4)
9,330 9,603 (273)— 
Total Assets at Fair Value$950,688 $747,489 $203,199 $— 
Liabilities at Fair Value
Deferred Compensation(3)
$55,222 $— $55,222 $— 
Total Liabilities at Fair Value$55,222 $— $55,222 $— 

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

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

(2)    The Company holds securities as part of a portfolio maintained to generate investment income and to provide cash for operations of the Company, if necessary. The portfolio is managed by a third party who is responsible for daily trading activities, and all assets within the portfolio are highly liquid. The cash, U.S. government securities, and money market funds rated AAA held by the portfolio are classified as

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Level 1. The current investment portfolio also includes corporate bonds and other asset backed securities for which there is an active, quoted market. Market prices are obtained from a variety of industry providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and therefore, these securities are classified as Level 2.

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

Under the Company’s deferred compensation plans, participants can defer certain types of compensation and elect to receive a return based on the changes in fair value of various investment options, which include equity securities, money market accounts, bond funds, or other portfolios for which there is an active quoted market. The Company also offers a fixed rate investment option to participants. The rate earned on these investments is adjusted annually based on a specified percent of the U.S. Internal Revenue Service (IRS) applicable federal rates. These liabilities are classified as Level 2. The Company maintains funding in the rabbi trust generally mirroring the selections within the deferred compensation plans. These funds are managed by a third-party insurance policy, the values of which represent their cash surrender value based on the fair value of the underlying investments in the account. These policies are classified as Level 2.

The rabbi trust is included in Other Assets and deferred compensation liabilities in Other Long-term Liabilities on the Consolidated Condensed Statements of Financial Position. Securities held by the rabbi trust are classified as trading securities. Unrealized gains and losses associated with these investments are included in the Company's earnings. During the quarter ended January 28, 2024, securities held by the rabbi trust generated gains of $11.5 million, compared to gains of $7.0 million for the quarter ended January 29, 2023.

(4)    The Company’s commodity derivatives represent futures, swaps, and options contracts used in its hedging or other programs to offset price fluctuations associated with purchases of corn, natural gas, diesel fuel, hogs, and pork, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers. The Company’s futures and options contracts for corn are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange. These are active markets with quoted prices available, and these contracts are classified as Level 1. The Company holds natural gas, diesel fuel, and pork swap contracts that are over-the-counter instruments classified as Level 2. The value of the natural gas and diesel fuel swap contracts is calculated using quoted prices from the New York Mercantile Exchange, and the value of the pork swap contracts are calculated using a futures implied USDA estimated pork cut-out value. All derivatives are reviewed for potential credit risk and risk of nonperformance. The net balance for commodity derivatives is included in Other Current Assets or Accounts Payable, as appropriate, on the Consolidated Condensed Statements of Financial Position. As of January 28, 2024, the Company has recognized the right to reclaim net cash collateral of $24.5 million from various counterparties (including cash of $22.3 million plus $2.2 million of realized gain). As of October 29, 2023, the Company had recognized the right to reclaim net cash collateral of $32.2 million from various counterparties (including cash of $42.6 million less $10.4 million of realized loss).

The Company’s financial assets and liabilities include accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value. The Company does not carry its long-term debt at fair value on the Consolidated Condensed Statements of Financial Position. The fair value of long-term debt, utilizing discounted cash flows (Level 2), was $2.8 billion as of January 28, 2024, and $2.7 billion as of October 29, 2023. See Note J - Long-Term Debt and Other Borrowing Arrangements for additional information.

The Company measures certain nonfinancial assets and liabilities at fair value, which are recognized or disclosed on a nonrecurring basis (e.g., goodwill, intangible assets, and property, plant, and equipment). There were no material remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the quarter ended January 28, 2024, and January 29, 2023.


NOTE I - COMMITMENTS AND CONTINGENCIES

Except as described below, there were no material changes outside the ordinary course of business during the quarter ended January 28, 2024, to the contractual obligations and other commitments last disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2023.

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


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Pork Antitrust Litigation
Beginning in June 2018, a series of putative class action complaints were filed against the Company, as well as several other pork-processing companies and a benchmarking service called Agri Stats in the United States District Court for the District of Minnesota styled In re Pork Antitrust Litigation (the Pork Antitrust Civil Litigation). The plaintiffs allege, among other things, that beginning in January 2009, the defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork and pork products—including through the use of Agri Stats—in violation of federal antitrust laws. The complaints on behalf of the putative classes of indirect purchasers also include causes of action under various state unfair competition laws, consumer protection laws, and unjust enrichment common laws. The plaintiffs seek treble damages, injunctive relief, pre-and post-judgment interest, costs, and attorneys’ fees. Since the original filing, certain direct-action plaintiffs have opted out of class treatment and are proceeding with individual direct actions making similar claims, and others may do so in the future. The Company has not recorded any liability for these matters as it does not believe a loss is probable, and it cannot reasonably estimate any reasonably possible loss as the Company believes that it has valid and meritorious defenses against the allegations.

The Offices of the Attorney General in New Mexico and Alaska have filed complaints against the Company and certain of its pork subsidiaries, as well as several other pork processing companies and Agri Stats. The complaints are based on allegations similar to those asserted in the Pork Antitrust Civil Litigation and allege violations of state antitrust, unfair trade practice, and unjust enrichment laws based on allegations of conspiracies to exchange information and manipulate the supply of pork. The Company has not recorded any liability for these matters as it does not believe a loss is probable, and it cannot reasonably estimate any reasonably possible loss as the Company believes that it has valid and meritorious defenses against the allegations.

Turkey Antitrust Litigation
Beginning in December 2019, a series of putative class action complaints were filed against the Company, as well as several other turkey-processing companies and a benchmarking service called Agri Stats, in the U.S. District Court for the Northern District of Illinois styled In re Turkey Antitrust Litigation. The plaintiffs allege, among other things, that from at least 2010 to 2017, the defendants conspired and combined to fix, raise, maintain, and stabilize the price of turkey products—including through the use of Agri Stats—in violation of federal antitrust laws. The complaints on behalf of the putative classes of indirect purchasers also include causes of action under various state unfair competition laws, consumer protection laws, and unjust enrichment common laws. The plaintiffs seek treble damages, injunctive relief, pre-and post-judgment interest, costs, and attorneys’ fees. Since the original filing, certain direct-action plaintiffs have opted out of class treatment and are proceeding with individual direct actions making similar claims, and others may do so in the future. The Company has not recorded any liability for these matters as it does not believe a loss is probable, and it cannot reasonably estimate any reasonably possible loss as the Company believes that it has valid and meritorious defenses against the allegations.

Poultry Wages Antitrust Litigation
In December 2019, a putative class of non-supervisory production and maintenance employees at poultry-processing plants in the continental United States filed an amended consolidated class action complaint against the Company and various other poultry processing companies in the United States District Court for the District of Maryland styled Jien, et al. v. Perdue Farms, Inc., et al. The plaintiffs allege that since 2009, the defendants directly and through a wage survey and benchmarking service exchanged information regarding compensation in an effort to depress and fix wages and benefits for employees at poultry-processing plants, feed mills, and hatcheries in violation of federal antitrust laws. The plaintiffs seek, among other things, treble monetary damages, punitive damages, restitution, and pre-and post-judgment interest, as well as declaratory and injunctive relief. In July 2022, the Court partially granted the Company’s motion to dismiss, and dismissed plaintiffs’ per se wage-fixingclaim as to the Company. The Company has not recorded any liability for this matter as it does not believe a loss is probable, and it cannot reasonably estimate any reasonably possible loss as the Company believes that it has valid and meritorious defenses against the allegations.

Red Meat Wages Antitrust Litigation
In November 2022, a putative class of non-supervisory production and maintenance employees at “red meat” processing plants in the continental United States filed a class action complaint against the Company and various other beef- and pork-processing companies in the United States District Court for the District of Colorado styled Brown, et al. v. JBS USA Food Co., et al. The plaintiffs allege that since 2014, the defendants directly and through a wage survey and benchmarking service exchanged information regarding compensation in an effort to depress and fix wages and benefits for employees at beef- and pork-processing plants in violation of federal antitrust laws. The plaintiffs seek, among other things, treble monetary damages, punitive damages, restitution, and pre-and post-judgment interest, as well as declaratory and injunctive relief. The Company has not recorded any liability for this matter as it does not believe a loss is probable, and it cannot reasonably estimate any reasonably possible loss as the Company believes that it has valid and meritorious defenses against the allegations.



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NOTE J - LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
Long-term Debt consists of:
In thousandsJanuary 28, 2024October 29, 2023
Senior Unsecured Notes, with Interest at 3.050%
     Interest Due Semi-annually through June 2051 Maturity Date
$600,000 $600,000 
Senior Unsecured Notes, with Interest at 1.800%
     Interest Due Semi-annually through June 2030 Maturity Date
1,000,000 1,000,000 
Senior Unsecured Notes, with Interest at 1.700%
     Interest Due Semi-annually through June 2028 Maturity Date
750,000 750,000 
Senior Unsecured Notes, with Interest at 0.650%
     Interest Due Semi-annually through June 2024 Maturity Date
950,000 950,000 
Unamortized Discount on Senior Notes(6,832)(7,016)
Unamortized Debt Issuance Costs(15,383)(16,278)
Interest Rate Swap Liabilities(1)
(4,327)(7,451)
Finance Lease Liabilities33,938 36,085 
Other Financing Arrangements3,811 3,908 
Total3,311,208 3,309,247 
Less: Current Maturities of Long-term Debt954,031 950,529 
Long-term Debt Less Current Maturities$2,357,176 $2,358,719 
(1)    See Note E - Derivatives and Hedging for additional information.

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

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

Subsequent to the end of the first quarter of fiscal 2024, the Company's Board of Directors approved up to $500 million of new long-term financing which is intended, along with cash on hand, to pay the 2024 Notes upon maturity.

Unsecured Revolving Credit Facility: On May 6, 2021, the Company entered into an unsecured revolving credit agreement with Wells Fargo Bank, National Association as administrative agent, swingline lender and issuing lender, U.S. Bank National Association, JPMorgan Chase Bank, N.A. and BofA Securities, Inc. as syndication agents and the lenders party thereto. The revolving credit agreement provides for an unsecured revolving credit facility with an aggregate principal commitment amount at any time outstanding of up to $750.0 million with an uncommitted increase option of an additional $375.0 million upon the satisfaction of certain conditions.

On April 17, 2023, the Company entered into a first amendment (Amendment) to the Company’s $750.0 million revolving credit agreement. The Amendment provides for, among other things (i) the replacement of London Interbank Offered Rate (LIBOR) with Term Secured Overnight Financing Rate (SOFR) and Daily Simple Singapore Overnight Rate Average (SORA) for the Eurocurrency Rate for U.S. Dollars and Singapore Dollars, including applicable credit spread adjustments and relevant SOFR benchmark provisions, (ii) permitting two one-year extension options to be exercised at any anniversary, (iii) removing the change in debt ratings notice requirement, (iv) shortening the notice period requirements for Base Rate Loans to allow for same day notice, and (v) increasing the number of permitted interest periods from 8 to 15.

The unsecured revolving line of credit bears interest, at the Company’s election, at either a Base Rate plus margin of 0.0% to 0.150% or the Adjusted Term SOFR, Adjusted Daily Simple Risk-Free Rate (RFR) or Eurocurrency Rate plus margin of 0.575%

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to 1.150% and a variable fee of 0.050% to 0.100% is paid for the availability of this credit line. Extensions of credit under the facility may be made in the form of revolving loans, swingline loans, and letters of credit. The lending commitments under the agreement are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of January 28, 2024, and October 29, 2023, the Company had no outstanding draws from this facility.

Debt Covenants: The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of January 28, 2024, the Company was in compliance with all covenants.


NOTE K - INCOME TAXES

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

On December 22, 2017, the United States enacted comprehensive tax legislation into law, H.R. 1, commonly referred to as the Tax Act. Except for certain provisions, the Tax Act is effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer, the majority of the provisions will not apply for the Company until fiscal 2019, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income, and introducing new limitations on certain business deductions. For fiscal 2018, and effective in the first quarter, the most significant impacts include lowering of the U.S. federal corporate income tax rate, remeasuring certain net deferred tax liabilities, and requiring the transition tax on the deemed repatriation of certain foreign earnings. The phase-in of the lower federal corporate income tax rate resulted in a blended rate of 23.4 percent for fiscal 2018, as compared to the previous 35 percent, and is based on the applicable tax rates before and after passage of the Tax Act and the number of days in the fiscal year. The tax rate will be reduced to 21 percent in subsequent fiscal years.


The lowerCompany’s effective tax rate for the quarter ended January 28, 2024, was 23.4% compared to 22.6% for the corresponding period a year ago. The Company benefited from the impact of certain discrete items and higher federal deductions in the first quarter of fiscal 2018 is largely due to the passage of the Tax Act, lowering the Company's long-term effective tax rate.  In the first quarter, the Company recorded a one-time provisional non-cash tax benefit of $68.0 million for deferred tax liability revaluation and a provisional $5.2 million charge for deemed repatriation of the Company's previously undistributed foreign earnings. At this point, no additional income taxes have been provided for any undistributed foreign earnings not subject to the transition tax and additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practical at this time. The one-time tax events and reduction in the federal statutory tax rate were the main drivers of the Company's first quarter effective tax rate of 0.6 percent, versus 33.7 percent lastprior year. The Company expects a full-year effective tax rate between 17.5 percent and 20.5 percent for fiscal 2018.


The staff of the U.S. Securities and Exchange Commission has recognized the complexity of reflecting the impacts of the Tax Act and issued guidance in Staff Accounting Bulletin No. 118, which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides a measurement period for up to one year in which to complete the required analysis and accounting. Based on current interpretation of the Tax Act, the Company made reasonable estimates to record provisional adjustments during the first quarter of fiscal 2018, as described below. As the Company accumulates and processes data to finalize the underlying calculations, and expects regulators to issue further guidance, estimates may change during fiscal 2018. The Company will continue to refine such amounts within the measurement period allowed, which will be completed no later than the first quarter of fiscal 2019.

The amount of unrecognizedUnrecognized tax benefits, including interest and penalties, isare recorded in other long-term liabilities.Other Long-term Liabilities. If recognized as of January 28, 2018, and January 29, 2017, $34.2 million and $20.6 million, respectively,2024, these benefits would impact the Company’s effective tax rate.rate by $17.7 million compared to $18.2 million as of January 29, 2023. The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense,Provision for Income Taxes, with $0.2 millionimmaterial losses included during the quarter ended January 28, 2024, and $0.1 million of interest and penalties included in expense in the first quarter of fiscal 2018 and 2017, respectively.January 29, 2023. The amount of accrued interest and penalties at January 28, 2018, and January 29, 2017, associated with unrecognized tax benefits was $7.3 million and $2.7 million respectively.at January 28, 2024, and $2.6 million at January 29, 2023.


The Company is regularly audited by federal and state taxing authorities. The United States Internal Revenue Service (I.R.S.)IRS concluded its examination of fiscal 20162021 in the firstsecond quarter of fiscal 2018.2023. The IRS placed the Company has elected to participate in the Bridge phase of the Compliance Assurance Process (CAP) for fiscal years 20172020 and 2018.2023. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances. The Company has elected to participate in CAP for fiscal years through 2025. The objective of CAP is to contemporaneously work with the I.R.S.IRS to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time.


The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 2011.2015. While it is reasonably possible that one or more of these audits may be completed within the next 12 months and that the related unrecognized tax benefits may change based on the status of the examinations, it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.



NOTE JSTOCK-BASED COMPENSATION
The Company issues stock options and nonvested shares as part of its stock incentive plans for employees and non-employee directors.  The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant.  Options typically vest over four years and expire ten years after the date of the grant.  The Company recognizes stock-based compensation expense ratably over the shorter of the requisite service period or vesting period.  The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.
A reconciliation of the number of options outstanding and exercisable (in thousands) as of January 28, 2018, and changes during the quarter then ended, is as follows:
 Shares 
Weighted-
Average
Exercise Price
 
Weighted-
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic Value
Outstanding at October 29, 201730,685
 $18.08
    
Granted1,968
 37.10
    
Exercised2,301
 10.20
    
Forfeited3
 33.31
    
Expired1
 37.76
    
Outstanding at January 28, 201830,348
 $19.91
 5.0 $460,530
Exercisable at January 28, 201824,284
 $16.34
 4.1 $448,268
The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during the first quarter of fiscal years 2018 and 2017, are as follows. 
 Three Months Ended 
 January 28,
2018		 January 29,
2017		 
Weighted-average grant date fair value$6.93
 $6.33
 
Intrinsic value of exercised options$56,302
 $51,942
 
The fair value of each option award is calculated on the date of grant using the Black-Scholes valuation model utilizing the following weighted-average assumptions:
 Three Months Ended 
 January 28,
2018		 January 29,
2017		 
Risk-free interest rate2.3% 2.4% 
Dividend yield2.0% 2.0% 
Stock price volatility19.0% 19.0% 
Expected option life8 years
 8 years
 
As part of the annual valuation process, the Company reassesses the appropriateness of the inputs used in the valuation models.  The Company establishes the risk-free interest rate using stripped U.S. Treasury yields as of the grant date where the remaining term is approximately the expected life of the option.  The dividend yield is set based on the dividend rate approved by the Company’s Board of Directors and the stock price on the grant date.  The expected volatility assumption is set based primarily on historical volatility.  As a reasonableness test, implied volatility from exchange traded options is also examined to validate the volatility range obtained from the historical analysis.  The expected life assumption is set based on an analysis of past exercise behavior by option holders.  In performing the valuations for option grants, the Company has not stratified option holders as exercise behavior has historically been consistent across all executive employee and non-employee director groups.

Nonvested shares vest on the earlier of the day before the Company’s next annual meeting date or one year from grant date.  Subsequent to the end of the quarter, restricted shares were awarded with a restricted period expiring the date of the Company’s next annual stockholders meeting.
A reconciliation of the nonvested shares (in thousands) as of January 28, 2018, and changes during the quarter then ended, is as follows:
 Shares 
Weighted-
Average Grant-
Date Fair Value
Nonvested at October 29, 201758
 $35.62
Granted—
 —
Vested3
 35.62
Forfeited1
 35.62
Nonvested at January 28, 201854
 $35.62
The weighted-average grant date fair value of nonvested shares granted, the total fair value (in thousands) of nonvested shares granted, and the fair value (in thousands) of shares that have vested during the first quarter of fiscal years 2018 and 2017, are as follows:
 Three Months Ended
 January 28,
2018		 January 29,
2017
Weighted-average grant date fair value$35.62
 $41.01
Fair value of nonvested shares granted—
 1,920
Fair value of shares vested133
 1,920
During the first quarter ended January 28, 2018, stock-based compensation expense was $7.3 million compared to $7.2 million for the first quarter ended January 29, 2017.
At January 28, 2018, there was $17.7 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans.  This compensation is expected to be recognized over a weighted-average period of approximately 2.6 years.  During the first quarter ended January 28, 2018, cash received from stock option exercises was $23.5 million compared to $7.4 million for the first quarter ended January 29, 2017. 

Shares issued for option exercises and nonvested shares may be either authorized but unissued shares, or shares of treasury stock acquired in the open market or otherwise.

NOTE KFAIR VALUE MEASUREMENTS
Pursuant to the provisions of ASC 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements.  Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).  ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation.  Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement.  The three levels are defined as follows:
Level 1:  Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.
Level 3:  Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

The Company’s financial assets and liabilities are measured at fair value on a recurring basis as of January 28, 2018, and October 29, 2017, and their level within the fair value hierarchy, are presented in the tables below.
 Fair Value Measurements at January 28, 2018
(in thousands)Total Fair Value 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets at Fair Value 
  
  
  
Cash and cash equivalents (1)
$385,775
 $385,775
 $—
 $—
Other trading securities (2)
139,752
 —
 139,752
 —
Commodity derivatives (3)
2,303
 2,303
 —
 —
Total Assets at Fair Value$527,830
 $388,078
 $139,752
 $—
Liabilities at Fair Value       
Deferred compensation (2)
$64,665
 $—
 $64,665
 $—
Total Liabilities at Fair Value$64,665
 $—
 $64,665
 $—
 Fair Value Measurements at October 29, 2017
(in thousands)
Total Fair Value

 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets at Fair Value 
  
  
  
Cash and cash equivalents (1)
$444,122
 $444,122
 $—
 $—
Other trading securities (2)
128,530
 —
 128,530
 —
Commodity derivatives (3)
2,821
 2,821
 —
 —
Total Assets at Fair Value$575,473
 $446,943
 $128,530
 $—
Liabilities at Fair Value       
Deferred compensation (2)
$62,341
 $—
 $62,341
 $—
Total Liabilities at Fair Value$62,341
 $—
 $62,341
 $—
The following methods and assumptions were used to estimate the fair value of the financial assets and liabilities above:
(1)The Company’s cash equivalents consist primarily of bank deposits, money market funds rated AAA, or other highly liquid investment accounts.  As these investments have a maturity date of three months or less, the carrying value approximates fair value.
(2)A majority of the funds held in the rabbi trust relate to the supplemental executive retirement plans and have been invested in fixed income funds managed by a third party.  The declared rate on these funds is set based on a formula using the yield of the general account investment portfolio supporting the fund, adjusted for expenses and other charges.  The rate is guaranteed for one year at issue, and may be reset annually on the policy anniversary, subject to a guaranteed minimum rate.  As the value is based on adjusted market rates, and the fixed rate is only reset on an annual basis, these funds are classified as Level 2.  The funds held in the rabbi trust are included in other assets on the Consolidated Statements of Financial Position.  The remaining funds held are also managed by a third-party insurance policy, the values of which represent their cash surrender value based on the fair value of the underlying investments in the account and include equity securities, money market accounts, bond funds, or other portfolios for which there is an active quoted market.  Therefore these policies are also classified as Level 2.  The related deferred compensation liabilities are included in other long-term liabilities on the Consolidated Statements of Financial Position with investment options generally mirroring those funds held by the rabbi trust.  Therefore these investment balances are classified as Level 2.  The Company also offers a fixed rate investment option to participants.  The rate earned on these investments is adjusted annually based on a specified percentage of the I.R.S. Applicable Federal Rates.  These balances are classified as Level 2.
(3)The Company’s commodity derivatives represent futures contracts used in its hedging or other programs to offset price fluctuations associated with purchases of corn and hogs, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers.  The Company’s futures contracts for corn and soybean meal are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange.  These are active markets with quoted prices available, and these contracts are classified as Level 1.  All derivatives are reviewed for potential credit risk and risk of nonperformance.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The net balance for each program is included in other current assets or accounts payable, as appropriate, in the Consolidated Statements of Financial Position.  As of January 28, 2018, the Company has recognized the right to reclaim net cash collateral of $2.7 million from various counterparties (including $15.3 million of realized gains offset by cash owed of $12.6 million on closed positions).  As

of October 29, 2017, the Company had recognized the right to reclaim net cash collateral of $2.5 million from various counterparties (including $11.0 million of realized gains offset by cash owed of $8.5 million on closed positions).
The Company’s financial assets and liabilities include accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value.  The Company does not carry its long-term debt at fair value in its Consolidated Statements of Financial Position.  Based on borrowing rates available to the Company for long-term financing with similar terms and average maturities, the fair value of long-term debt, utilizing discounted cash flows (Level 2), was $638.5 million as of January 28, 2018, and $266.5 million as of October 29, 2017.
In accordance with the provisions of ASC 820, the Company measures certain nonfinancial assets and liabilities at fair value, which are recognized or disclosed on a nonrecurring basis (e.g. goodwill, intangible assets, and property, plant and equipment).   During the first quarters ended January 28, 2018, and January 29, 2017, there were no material remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

NOTE L - EARNINGS PER SHARE DATA
 
The reported net earnings attributable to the Company were used when computing basic and diluted earnings per share. Diluted earnings per share was calculated using the treasury stock method. The following table sets forth the shares used as the denominator for those computations:computations are as follows:
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Basic Weighted-average Shares Outstanding547,020 546,384 
Dilutive Potential Common Shares900 3,647 
Diluted Weighted-average Shares Outstanding547,920 550,031 
Antidilutive Potential Common Shares17,892 3,239 



18
 Three Months Ended 
(in thousands)January 28,
2018		 January 29,
2017		 
Basic weighted-average shares outstanding529,453
 528,585
 
Dilutive potential common shares14,029
 11,479
 
Diluted weighted-average shares outstanding543,482
 540,064
 
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For the first quarters ended January 28, 2018, and January 29, 2017, a total of 5.4 million and 3.4 million weighted-average stock options, respectively, were not included in the computation of dilutive potential common shares since their inclusion would have had an antidilutive effect on earnings per share.

NOTE M - SEGMENT REPORTING

The Company develops, processes, and distributes a wide array of food products in a variety of markets. The Company reports its results in the following fourthree segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store,Retail, Foodservice, and International, & Other. As a result of a business realignment atwhich is consistent with how the beginning of fiscal 2018, the former Specialty Foods segment results are now reported as part of the Grocery Products segment. Periods presented herein have been recast to reflect this change.Company's chief operating decision maker (CODM) assesses performance and allocates resources.

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

The Refrigerated FoodsFoodservice segment consists primarily of the processing, marketing, and sale of brandedfood and unbranded pork, beef, chicken, and turkey productsnutritional products for retail, foodservice, convenience store, and fresh productcommercial customers.
The Jennie-O Turkey Store segment consists primarily of the processing, marketing, and sale of branded and unbranded turkey products for retail, foodservice, and fresh product customers.

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

Intersegment sales are recorded at approximate costeliminated in consolidation and are eliminated in the Consolidated Statements of Operations.not reviewed when evaluating segment performance. The Company does not allocate deferred compensation, expenses associated with the transformation and modernization initiative, investment income, interest expense, andor interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at corporate.the corporate level. Equity in earningsEarnings of affiliatesAffiliates is included in segment operating profit; however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded. These items are included below as net interestNet Unallocated Expense and investment expense (income), general corporate expense, and noncontrolling interestNoncontrolling Interest when reconciling to earnings before income taxes.Earnings Before Income Taxes.

Sales and operating profitsFinancial measures for each of the Company’s reportable segments and reconciliation to earnings before income taxesconsolidated Earnings Before Income Taxes are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Net Sales  
Retail$1,911,272 $1,957,797 
Foodservice913,087 834,750 
International172,552 178,445 
Total Net Sales$2,996,911 $2,970,992 
Segment Profit
Retail$149,505 $154,677 
Foodservice150,164 136,442 
International20,031 19,905 
Total Segment Profit319,700 311,025 
Net Unallocated Expense34,020 29,755 
Noncontrolling Interest(134)(69)
Earnings Before Income Taxes$285,547 $281,201 


The Company’s products primarily consist of meat and other food products. Total revenue contributed by classes of similar products are: 
Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Perishable$2,106,571 $2,080,461 
Shelf-stable890,340 890,531 
Total Net Sales$2,996,911 $2,970,992 


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 Three Months Ended 
(in thousands)January 28,
2018		 January 29,
2017		 
Sales to Unaffiliated Customers 
  
 
Grocery Products$613,870
 $610,374
 
Refrigerated Foods1,176,456
 1,123,039
 
Jennie-O Turkey Store390,648
 420,989
 
International & Other150,319
 125,825
 
Total$2,331,293
 $2,280,227
 
     
Intersegment Sales    
Grocery Products$4
 $5
 
Refrigerated Foods2,164
 2,139
 
Jennie-O Turkey Store24,689
 28,256
 
International & Other—
 —
 
Total26,857
 30,400
 
Intersegment elimination(26,857) (30,400) 
Total$—
 $—
 
     
Net Sales    
Grocery Products$613,874
 $610,379
 
Refrigerated Foods1,178,620
 1,125,178
 
Jennie-O Turkey Store415,337
 449,245
 
International & Other150,319
 125,825
 
Intersegment elimination(26,857) (30,400) 
Total$2,331,293
 $2,280,227
 
     
Segment Operating Profit    
Grocery Products$99,977
 $92,376
 
Refrigerated Foods142,949
 173,808
 
Jennie-O Turkey Store49,874
 68,180
 
International & Other24,655
 25,463
 
Total segment operating profit317,455
 359,827
 
Net interest and investment expense (income)1,423
 577
 
General corporate expense10,971
 4,621
 
Less: Noncontrolling interest104
 156
 
Earnings Before Income Taxes$305,165
 $354,785
 
Perishable includes fresh meats, frozen items, refrigerated meal solutions, bacon, sausages, hams, guacamole, and other items that require refrigeration. Shelf-stable includes canned luncheon meats, nut butters, snack nuts, chili, shelf-stable microwaveable meals, hash, stews, tortillas, salsas, tortilla chips, nutritional food supplements, and other items that do not require refrigeration.



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

CRITICAL ACCOUNTING POLICIES
There have been no material changes in the Company’s Critical Accounting Policies, as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 29, 2017.

RESULTS OF OPERATIONS

Overview

The Company is a multinationalglobal manufacturer and marketer of consumer-brandedbranded food and meat products. It operates in fourThe Company’s three reportable segments asare described in Note M - Segment Reporting in the Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company reported diluted net earnings per diluted share of $0.56$0.40 for the first quarter of fiscal 2018,2024, flat compared to $0.44last year. Adjusted diluted net earnings per diluted share(1) was $0.41. Significant factors impacting the quarter were:

•Net sales for the first quarter increased 1 percent. The benefit from higher volumes in each segment and strong results in Foodservice more than offset lower sales in the Retail and International segments.
•Segment profit for the first quarter increased 3 percent, driven primarily by improved results in the Foodservice segment.
•Earnings before income taxes for the first quarter increased 2 percent, as the benefit from higher net sales, lower logistics expenses, and higher interest and investment income more than offset higher selling, general, and administrative expenses. Adjusted earnings before income taxes(1), excluding the impact of expenses related to the Company's transformation and modernization initiative, increased 5 percent compared to last year.
•Foodservice segment profit increased primarily due to higher sales and favorable logistics expenses.
•International segment profit increased due to the inclusion of our investment in Indonesia and significantly higher results from our partnership in the Philippines, which more than offset the impact from lower branded export demand and lower sales in China.
•Retail segment profit declined, as the benefit from higher sales in the snacking and entertaining vertical and lower logistics expenses was more than offset by the impact from lower commodity turkey pricing and lower equity in earnings from MegaMex Foods, LLC (MegaMex Foods).
•Year-to-date cash flow from operations was $404 million, up 98 percent compared to the prior year.


Consolidated Results

Volume, Net Sales, Earnings, and Diluted Earnings Per Share
 Quarter Ended
In thousands, except per share amountsJanuary 28, 2024January 29, 2023%
Change
Volume (lbs.)1,101,554 1,062,211 3.7 
Net Sales$2,996,911 $2,970,992 0.9 
Earnings Before Income Taxes285,547 281,201 1.5 
Net Earnings Attributable to Hormel Foods Corporation218,863 217,719 0.5 
Diluted Earnings Per Share0.40 0.40 — 
Adjusted Diluted Earnings Per Share (1)
0.41 0.40 2.5 
(1)    See the “Non-GAAP Financial Measures” section below for a description of the Company's use of measures not defined by United States Generally Accepted Accounting Principles (GAAP).

Net Sales
Net sales for the first quarter increased, led by the benefit from higher volumes in each segment and strong growth in Foodservice, more than offsetting lower sales in the Retail and International segments.

In Retail, net sales increased in the global flavors and snacking and entertaining verticals, and declined in the value-added meats, convenient meals and proteins, and bacon verticals. Demand was strong for many products, including Skippy® peanut

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butter, Planters® snack nuts, Wholly® dips, Herdez® salsas and sauces, La Victoria® salsas, Jennie-O® ground turkey, Hormel® Square Table™ entrees and Hormel® pepperoni, which each delivered volume and net sales improvement during the quarter. Foodservice net sales growth was broad-based, led by the Heritage Premium meats business and growth from Hormel® Bacon 1™ precooked bacon, premium prepared proteins, Jennie-O ®branded turkey items, and pepperoni. International net sales declined due to lower branded export sales and lower sales in China.


Cost of Products Sold
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Cost of Products Sold$2,488,178 $2,475,043 0.5 

Total cost of products sold for the first quarter of fiscal 2017. Significant factors impacting2024 increased due primarily to higher sales. On a per pound basis, cost of products sold decreased 3 percent, consistent with the quarter were:Company's assumption for cost moderation in fiscal 2024.

Costs are expected to continue 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 delivered record net earnings as the impact of tax reformexpects its transformation and strong Grocery Products earnings growth more than offset higher hog costs, continued challenges at Jennie-O Turkey Store (JOTS),modernization initiative to deliver cost savings throughout fiscal 2024, targeting packaging, logistics, and higher-than-expected freightproduction costs.
Refrigerated Foods segment
Gross Profit
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Gross Profit$508,733 $495,949 2.6 
Percent of Net Sales17.0 %16.7 % 

Gross profit declined due to higher hog costs, one-time transaction costs for the Columbus acquisition, the divestiture of the Farmer John business, and increased freight expenses.
JOTS segment profit decreased as a resultpercent of lower profits from whole bird and commodity sales and increased freight expenses. Lower selling, general, and administrative expenses offset a portion of the earnings decline.
•
Grocery Products segment profit increased due to strong earnings growth from the Company's MegaMex Foods, LLC (MegaMex) joint venture; lower selling, general and administrative expenses; and improved earnings from the Skippy® and Justin's® nut butter brands.
International & Other segment profit decreased as higher costs of goods for exports were partially offset by the inclusion of the Ceratti business and improving profitability in China due to lower raw material costs.
Consolidated Results
Net Earnings and Diluted Earnings per Share
 Three Months 
(in thousands, except per share amounts)January 28, 2018 January 29, 2017 
%
Change
 
Net earnings$303,107
 $235,147
 28.9 
Diluted earnings per share0.56
 0.44
 27.3 
Net Sales
 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Volume (lbs.)1,190,592
 1,244,909
 (4.4)
Organic volume(1) 
1,146,099
 1,164,455
 (1.6)
Net sales$2,331,293
 $2,280,227
 2.2
Organic net sales(1) 
2,198,421
 2,179,996
 0.8
(1) The non-GAAP adjusted financial measurements of organic net sales and organic volume are presented to provide investors additional information to facilitate the comparison of past and present operations. The company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

Organic net sales and organic volume are defined as net sales and volume excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the acquisition of Columbus Craft Meats (November 2017), the acquisition of Fontanini Italian Meats and Sausages (August 2017), and the divestiture of Farmer John (January 2017) in Refrigerated Foods and the acquisition of Ceratti (August 2017) in International. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in the first quarter of fiscal 2018 and fiscal 2017.

1st Quarter              
Volume (lbs.) FY 2018 FY 2017  
(in thousands) 
Reported
(GAAP)
 Acquisitions 
Organic
(Non-GAAP)
 
Reported
(GAAP)
 Divestitures 
Organic
(Non-GAAP)
 
Organic
% Change
Grocery Products 334,217
 

 334,217
 338,792
 

 338,792
 (1.4)
Refrigerated Foods 562,495
 (31,660) 530,835
 614,425
 (80,454) 533,971
 (0.6)
Jennie-O Turkey Store 208,431
 

 208,431
 216,643
 

 216,643
 (3.8)
International & Other 85,449
 (12,833) 72,616
 75,049
 

 75,049
 (3.2)
Total Volume 1,190,592
 (44,493) 1,146,099
 1,244,909
 (80,454) 1,164,455
 (1.6)
               
               
Net Sales FY 2018 FY 2017  
(in thousands) 
Reported
(GAAP)
 Acquisitions 
Organic
(Non-GAAP)
 
Reported
(GAAP)
 Divestitures 
Organic
(Non-GAAP)
 
Organic
% Change
Grocery Products $613,870
 

 $613,870
 $610,374
 

 $610,374
 0.6
Refrigerated Foods 1,176,456
 $(111,017) 1,065,439
 1,123,039
 $(100,231) 1,022,808
 4.2
Jennie-O Turkey Store 390,648
 

 390,648
 420,989
 

 420,989
 (7.2)
International & Other 150,319
 (21,855) 128,464
 125,825
 

 125,825
 2.1
Total Net Sales $2,331,293
 $(132,872) $2,198,421
 $2,280,227
 $(100,231) $2,179,996
 0.8

The increase in net sales for the first quarter of fiscal 2018 was primarily related2024 increased due to improvement in the Foodservice and Retail segments, more than offsetting a decline in International. Both the Foodservice and Retail segments benefited from lower logistics expenses on a volume basis. Lower logistics expenses are due to lower industrywide freight rates and savings realized as part of our transformation and modernization initiative.

Looking ahead to the inclusion of the Columbus, Fontanini, and Ceratti acquisitions. Organic sales growth was led by retail sales of Hormel®Black Label® bacon, Wholly Guacamole® dips and Muscle Milk® protein beverages. Foodservice sales of Hormel®Bacon 1TM fully cooked bacon, Hormel® pizza toppings, and Hormel®Fire BraisedTM meats also delivered gains. Partially offsetting these gains were sales declines from the divestiture of Farmer John, whole bird sales at JOTS, and the contract manufacturing business in Grocery Products.

Cost of Products Sold
 Three Months Ended 
(in thousands)January 28, 2018 January 29, 2017 
%
Change
 
Cost of products sold$1,829,114
 $1,727,947
 5.9 
Cost of products sold was up for the firstsecond quarter of fiscal 2018 compared to the prior year as2024, the Company faced higher input costs for hogs, pork bellies, and beef and pork trim. Freight expenses negatively impacted the first quarter, especially in the Refrigerated Foods and JOTS segments. The Company is working to find sustainable, mutually beneficial solutions with its customers to mitigate the impact for the remainder of the year.
Gross Profit
 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Gross profit$502,179
 $552,280
 (9.1)
Percentage of net sales21.5% 24.2%  
Grossexpects gross profit as a percentagepercent of net sales for all four of the Company's segments declined in the first quarter of fiscal 2018 compared to the prior year. Input costs were higher in Grocery Products, Refrigerated Foods, and International & Other and freight costs were up across all segments. Turkey markets were lower for JOTS. Pricing actions taken in prior quarters offset a

portion of the profitability declines. Looking ahead, higher hog costs, depressed turkey commodity markets, and higher freight expense will continue to be near-term challengescomparable to profitability. Incrementallast year. The Company expects gross profit as a percent of net sales to increase for the International segment but decline for the Retail and profits from the Columbus, Fontanini, and Ceratti acquisitions will offset part of the declines.Foodservice segments.


Selling, General, and Administrative (SG&A)
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
SG&A$240,386 $222,056 8.3 
Percent of Net Sales8.0 %7.5 % 
Adjusted SG&A(1)
$231,671 $222,056 4.3 
Adjusted Percent of Net Sales(1)
7.7 %7.5 %
 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
SG&A$219,122
 $210,217
 4.2
Percentage of net sales9.4% 9.2%  
(1)    See the “Non-GAAP Financial Measures” section below for a description of the Company's use of measures not defined by GAAP.

For the first quarter of fiscal 2018,2024, SG&A expenses increasedand SG&A as a percent of net sales increased. This was due to one-time costs associated withhigher employee and external expenses, driven in part by the acquisitionCompany's transformation and modernization initiative. Adjusted SG&A as a percent of Columbus and employee-related expenses. Marketing and advertising expenses were downnet sales(1) increasedmarginally compared to last year.

Advertising investments in the first quarter but are expectedwere $44 million, a decrease of 5 percent compared to be up over 20 percent forlast year. The Company expects full-year advertising expense to increase compared to the prior year.



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Equity in Earnings of Affiliates
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Equity in Earnings of Affiliates$16,091 $15,559 3.4 
 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Equity in earnings of affiliates$23,531
 $13,299
 76.9

ResultsEquity in earnings of affiliates for the first quarter of fiscal 2018 were positively impacted by strong2024 increased due to the inclusion of our investment in Indonesia and significantly higher results from our partnership in the Philippines, offsetting lower results for MegaMex resultsFoods.

Interest and tax reform.Investment Income and Interest Expense

 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Interest and Investment Income$19,434 $10,096 92.5 
Interest Expense18,326 18,347 (0.1)
Effective Tax Rate
 Three Months Ended
 January 28, 2018 January 29, 2017
Effective tax rate0.6% 33.7%

The effective tax rateInterest and investment income for the first quarter of fiscal 2018 reflects impacts of2024 increased primarily due to improved performance from the rabbi trust and higher interest income.

Effective Tax Cuts and Jobs Act signed into law on December 22, 2017. These impacts include a non-cash tax benefit for deferred tax liability revaluation of $68 million and a $5 million charge for deemed repatriation of the Company’s previously undistributed foreign earnings. These one-time tax events and the reduction in the federal statutory tax rate were the key drivers to the Company’s lowerRate
 Quarter Ended
 January 28, 2024January 29, 2023
Effective Tax Rate23.4 %22.6 %

The higher effective tax rate in the first quarter of fiscal 2018.2024 is primarily due to the impact of certain discrete items and higher federal deductions last year. The Company expects a full-year effective tax rate between 17.5 and 20.5 percent for fiscal 2018.2024 is expected to be between 21.0% and 23.0%. For further descriptioninformation, refer to Note IK - Income Taxes.Taxes of the Notes to the Consolidated Financial Statements.



Segment Results

Net sales and operating profitssegment profit for each of the Company’s reportable segments are set forth below. The Company does not allocate deferred compensation, expenses associated with the transformation and modernization 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.


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The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.  Additional
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023% Change
Net Sales   
Retail$1,911,272 $1,957,797 (2.4)
Foodservice913,087 834,750 9.4 
International172,552 178,445 (3.3)
Total$2,996,911 $2,970,992 0.9 
Segment Profit   
Retail$149,505 $154,677 (3.3)
Foodservice150,164 136,442 10.1 
International20,031 19,905 0.6 
Total Segment Profit319,700 311,025 2.8 
Net Unallocated Expense34,020 29,755 14.3 
Noncontrolling Interest(134)(69)(95.4)
Earnings Before Income Taxes$285,547 $281,201 1.5 

Retail
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Volume (lbs.)765,412 752,887 1.7 
Net Sales$1,911,272 $1,957,797 (2.4)
Segment Profit149,505 154,677 (3.3)

For the first quarter of fiscal 2024, volume growth was driven by the value-added meats, global flavors, emerging brands and bacon verticals. Net sales declined primarily due to lower contract manufacturing volume and lower commodity turkey pricing. Demand was strong for many products, including Skippy®peanut butter, Planters® snack nuts, Wholly® dips, Herdez® salsas and sauces, La Victoria® salsas, Jennie-O® ground turkey, Hormel®Square Table™ entrees and Hormel® pepperoni, which each delivered volume and net sales improvement during the quarter.

Segment profit declined, as the benefit from higher sales in the snacking and entertaining vertical and lower logistics expenses was more than offset by the impact from lower commodity turkey pricing and lower equity in earnings from MegaMex Foods.

Looking to the second quarter of fiscal 2024, the Retail segment financial information can be found in Note M of the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Net Sales 
  
  
Grocery Products$613,870
 $610,374
 0.6
Refrigerated Foods1,176,456
 1,123,039
 4.8
Jennie-O Turkey Store390,648
 420,989
 (7.2)
International & Other150,319
 125,825
 19.5
Total$2,331,293
 $2,280,227
 2.2
      
Segment Operating Profit 
  
  
Grocery Products$99,977
 $92,376
 8.2
Refrigerated Foods142,949
 173,808
 (17.8)
Jennie-O Turkey Store49,874
 68,180
 (26.8)
International & Other24,655
 25,463
 (3.2)
Total segment operating profit317,455
 359,827
 (11.8)
Net interest and investment expense1,423
 577
 146.6
General corporate expense10,971
 4,621
 137.4
Less: Noncontrolling interest104
 156
 (33.3)
      
Earnings before income taxes$305,165
 $354,785
 (14.0)
Grocery Products
Results for the Grocery Productsexpects lower segment profit compared to last year. Segment profit is expected to be pressured by lower pricing in whole bird turkey markets and higher SG&A. Risks to this outlook include a further slowing in consumer demand, a higher-than-expected impact from elasticities as a result of pricing actions, and greater-than-expected pricing headwinds in the prior year are as follows:whole bird turkey business.


Foodservice
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Volume (lbs.)256,007 237,087 8.0 
Net Sales$913,087 $834,750 9.4 
Segment Profit150,164 136,442 10.1 


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 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Volume (lbs.)334,217
 338,792
 (1.4)
Net sales$613,870
 $610,374
 0.6
Segment profit99,977
 92,376
 8.2

NetVolume and net sales growth for the first quarter of fiscal 20182024 was broad-based and across numerous categories, led by Jennie-O® turkey and double-digit gains for products such as Hormel®Bacon 1™ cooked bacon, pepperoni, Austin Blues® smoked meats and Café H® globally inspired proteins. Additionally, the Company's Heritage Premium Meats group drove strong volume and double-digit net sales improvement for the quarter.

Segment profit increased on strongprimarily due to higher sales and favorable logistics expenses.

For the second quarter, the Foodservice segment expects higher segment profit compared to the prior year. Continued volume growth is expected to be offset by lower margins and higher SG&A compared to last year. Risks to this outlook include a softening of Wholly Guacamole® dips, Muscle Milk® protein products, Hormel®Compleats® microwave meals, Herdez® salsas,foodservice industry demand and higher-than-expected operating costs.


International
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023%
Change
Volume (lbs.)80,135 72,237 10.9 
Net Sales$172,552 $178,445 (3.3)
Segment Profit20,031 19,905 0.6 

During the SPAM® familyfirst quarter of products. These increasesfiscal 2024, higher commodity exports led to volume gains compared to last year. Net sales declined due to lower branded export sales and lower sales in China. Also in China, foodservice results improved as we lapped COVID-related disruption last year. This benefit was more than offset declinesby continued weakness in the retail channel.

Segment profit increased for the quarter due to the inclusion of our investment in Indonesia and significantly higher results from our partnership in the Philippines, which offset the impact from lower branded export demand and lower sales in China.

In the second quarter of fiscal 2024, the International segment anticipates segment profit to increase significantly compared to last year. This recovery is expected to be driven by improvement across the business, including from its branded exports, partnership in the Philippines, and multinational business in Brazil. The Company also expects a benefit from the contract manufacturinginclusion of its investment in Indonesia. Risks to this outlook include continued softness in China and commodity headwinds impacting the export business.



Unallocated Income and Expense
 Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Net Unallocated Expense$34,020 $29,755 
Noncontrolling Interest(134)(69)

For the first quarter of fiscal 2018, segment profit2024, net unallocated expense increased due to strong earnings growth from the Wholly Guacamole®driven by transformation and Herdez® brands and a one-time tax gain in MegaMex due to the impact of tax reform. Lower SG&A expenses and improved sales of Skippy®and Justin's® nut butter products aided profits.
The Company anticipates sales growth in the second quarter, with margins negatively impacted by promotional activity, increased freight,modernization initiative costs and higher raw material costs.
Refrigerated Foods
Results for the Refrigerated Foods segment compared to the prior year are as follows:
 Three Months Ended

(in thousands)
January 28, 2018 January 29, 2017 
%
Change
Volume (lbs.)562,495
 614,425
 (8.5)
Net sales$1,176,456
 $1,123,039
 4.8
Segment profit142,949
 173,808
 (17.8)

The divestiture of Farmer John during the first quarter of fiscal year 2017 was the primary contributor to lower sales volume in fiscal 2018. The increase in net sales was driven by the inclusion of Columbus and Fontanini sales, which more than offset the sales decline from the Farmer John divestiture. Additional sales increases are attributable to foodservice sales of Hormel®Bacon 1TM fully cooked bacon, Hormel® pizza toppings, and Hormel®Fire BraisedTM meats and retail sales of Hormel®Black Label® bacon and Applegate® natural and organic products.
Refrigerated Foods segment profit for the first quarter declined due to higher hog costs, one-time transaction costs for the Columbus acquisition, the divestiture of the Farmer John business, and increased freight expenses.
Looking forward, the Company expects sales growth in the second quarter from the value-added businesses and the incremental impact of Columbus and Fontanini. Higher hog costs and increased freightemployee-related expenses, are expected to continue near-term, though the segment still expects to show segment profit growth due to improved results in the value-added businesses.

Jennie-O Turkey Store
Results for the JOTS segment compared to the prior year are as follows:
 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Volume (lbs.)208,431
 216,643
 (3.8)
Net sales$390,648
 $420,989
 (7.2)
Segment profit49,874
 68,180
 (26.8)
For the first quarter of fiscal 2018, volume and sales declines were due primarily to lower harvest volumes and turkey commodity prices as a result of continued oversupply of turkeys in the industry and excess meat in cold storage. Sales declines of whole birds were partially offset by increased retail sales, led by Jennie-O® lean ground turkey and Jennie-O®Oven Ready® products.

Segment profit for the first quarter of fiscal 2018 decreased as a result of lower profits from whole bird and commodity sales, and increased freight expenses. Lower selling, general, and administrative expenses offset a portion of the earnings decline.
Looking forward, the challenging environment for commodity turkey pricesfavorable rabbi trust performance and higher freight costs are expected to continue impacting year-over-year business performance.interest income.

International & Other
Results for the International & Other segment compared to the prior year are as follows:
 Three Months Ended
(in thousands)January 28, 2018 January 29, 2017 
%
Change
Volume (lbs.)85,449
 75,049
 13.9
Net sales$150,319
 $125,825
 19.5
Segment profit24,655
 25,463
 (3.2)
Volume and net sales for the first quarter of fiscal 2018 increased due to the addition of the Ceratti business in Brazil, increased export sales, and strong results in China.
Segment profit declines for the first quarter of fiscal 2018 were driven primarily by higher costs of goods for exports, partially offset by the inclusion of the Ceratti business. Profitability in China improved due to lower raw material costs.
The Company anticipates continued volume, sales, and earnings growth in the second quarter driven by improving results in China and the addition of the Ceratti business.



Unallocated Income and Expenses
The Company does not allocate investment income, interest expense, or interest income to its segments when measuring performance.  The Company also retains various other income and unallocated expenses at corporate.  Equity in earnings of affiliates is included in segment operating profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.
 Three Months Ended
(in thousands)January 28, 2018 January 29,
2017
Net interest and investment expense$1,423
 $577
Interest expense4,729
 3,026
General corporate expense10,971
 4,621
Noncontrolling interest earnings104
 156
General corporate expense increased for the first quarter due to higher employee-related expenses and favorable adjustments in fiscal 2017 related to both a lower of cost or market inventory reserve and finalizing the sale of Diamond Crystal Brands.


Related Party Transactions

There has been no material change in the information regarding Related Party Transactions as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2017.2023.



(1)Non-GAAP Financial 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 comparison with peer companies as well as provide additional information about trends in the Company’s operations. Non-GAAP measures are not intended to be a substitute for GAAP measures in analyzing financial performance. These non-GAAP

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

In the fourth quarter of fiscal 2023, the Company announced a multi-year transformation and modernization initiative. The strategic investments in this 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 does not believe such costs to be reflective of the ongoing operating cost structure; therefore, the Company is excluding certain discrete costs related to the transformation and modernization initiative from the non-GAAP financial measures. Expenses for this initiative are comprised primarily of non-recurring charges for consulting fees, which are reflected in SG&A, and charges related to portfolio optimization, which are reflected in Cost of Products Sold. This presentation is consistent with the information the Company’s management is using to evaluate performance and allocate resources and facilitates comparison of operating performance across multiple periods.

Adjusted cost of products sold, adjusted SG&A, adjusted operating income, adjusted earnings before income taxes, adjusted net earnings attributable to Hormel Foods Corporation, adjusted diluted net earnings per share, adjusted SG&A as a percent of net sales, and adjusted operating margin exclude certain 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 table below shows the calculations to reconcile from the GAAP measures to the non-GAAP financial measures.

Quarter Ended
In thousands, except per share amountsJanuary 28, 2024January 29, 2023
Cost of Products Sold (GAAP)$2,488,178 $2,475,043 
Transformation and Modernization Initiative(1,598)— 
Adjusted Cost of Products Sold (Non-GAAP)$2,486,580 $2,475,043 
SG&A (GAAP)$240,386 $222,056 
Transformation and Modernization Initiative(8,715)— 
Adjusted SG&A (Non-GAAP)$231,671 $222,056 
Operating Income (GAAP)$284,438 $289,452 
Transformation and Modernization Initiative10,313 — 
Adjusted Operating Income (Non-GAAP)$294,751 $289,452 
Earnings Before Income Taxes (GAAP)$285,547 $281,201 
Transformation and Modernization Initiative10,313 — 
Adjusted Earnings Before Income Taxes (Non-GAAP)$295,859 $281,201 
Net Earnings Attributable to Hormel Foods Corporation (GAAP)$218,863 $217,719 
Transformation and Modernization Initiative7,900 — 
Adjusted Net Earnings Attributable to Hormel Foods Corporation (Non-GAAP)$226,763 $217,719 
Diluted Net Earnings Per Share (GAAP)$0.40 $0.40 
Transformation and Modernization Initiative0.01 — 
Adjusted Diluted Net Earnings Per Share (Non-GAAP)$0.41 $0.40 
SG&A as a Percent of Net Sales (GAAP)8.0 %7.5 %
Transformation and Modernization Initiative(0.3)— 
Adjusted SG&A as a Percent of Net Sales (Non-GAAP)7.7 %7.5 %
Operating Margin (GAAP)9.5 %9.7 %
Transformation and Modernization Initiative0.3 — 
Adjusted Operating Margin (Non-GAAP)9.8 %9.7 %



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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.

Cash Flow Highlights
Quarter Ended
In thousandsJanuary 28, 2024January 29, 2023
Cash and Cash Equivalents$963,212 $599,789 
Cash Provided by (Used in) Operating Activities403,980 203,629 
Cash Provided by (Used in) Investing Activities(48,154)(451,469)
Cash Provided by (Used in) Financing Activities(133,365)(141,570)
Increase (Decrease) in Cash and Cash Equivalents226,680 (382,318)

Cash and cash equivalents were $385.8increased $227 million at the end offor the first quarter of fiscal 2018 compared to $609.8 million at the end of the comparable fiscal 2017 period.
Cash provided by2024, as cash from operating activities was $304.2sufficient to cover dividend payments and capital expenditures. The purchase of a minority interest in PT Garudafood Putra Putri Jaya Tbk (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.

Cash Provided by (Used in) Operating Activities
•Cash flows from operating activities were largely impacted by changes in operating assets and liabilities.
–Inventory decreased $104 million for the first quarter of fiscal 2024 compared to an increase of $12 million in the prior year. 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. The increase in inventory during fiscal 2023 was due to production outpacing sales.
–Accounts receivable decreased $68 million and $80 million during the first quarter of fiscal 2024 and fiscal 2023, respectively primarily due to lower sales.
–Accounts payable and accrued expenses decreased $132 million and $171 million in the first quarter of fiscal 2018 compared2024 and fiscal 2023, respectively, due to $195.2 million in the same periodannual incentive payments, feed and livestock deferral payments, and general timing of fiscal 2017.  Higher net earnings and lower working capital in the first quarter of the year led to the increase.payments.

Cash used in investing activities was $905.3Provided by (Used in) Investing Activities
•Capital expenditures were $47 million and $37 million in the first quarter of fiscal 2018 compared to cash provided by investing activities of $105.6 million in the comparable quarter of2024, and fiscal 2017.  In the first quarter of fiscal 2018, the Company spent $857.6 million on the acquisition of Columbus.  Capital expenditures2023, respectively. The largest spend in the first quarter of fiscal 2018 increased2024 was for the transition from harvest to $53.7 million from $37.9 millionvalue-added capacity at our facility in Barron, Wisconsin and wastewater infrastructure to support our operations in Austin, Minnesota. The largest spend in the comparablefirst quarter of fiscal 2017.  The2023 was related to capacity expansion for pepperoni and the SPAM® family of products.
•During the first quarter of fiscal 2023, the Company currently estimates itspurchased a minority interest in Garudafood for $411 million.

Cash Provided by (Used in) Financing Activities
•Cash dividends paid to the Company’s shareholders are an ongoing financing activity for the Company with payments totaling $150 million during the first quarter of fiscal 2018 capital expenditures will be approximately $425.0 million.  Key projects include bacon capacity increases in the Wichita, Kansas, facility; a new whole bird facility in Melrose, Minnesota; modernization of the Austin, Minnesota, plant; and projects designed2024, compared to increase value-added capacity.
Cash provided by financing activities was $538.2$142 million in the first quarter of fiscal 2018 compared to cash used in financing activities2023.
•Proceeds from the exercise of $99.8stock options were $19 million in the same period of fiscal 2017.  In connection with the purchase of Columbus, the Company borrowed $375.0 million under a term loan facility and $375.0 million under a revolving credit facility, with $120.0 million paid down during the quarter. The Company repurchased $25.2 million of its common stock in the first quarter of fiscal 20182024, compared to $30.6$3 million purchased in the first quarter of the prior year.  For additional information pertaining to the Company’s share repurchase plans or programs, see Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds.”
Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company.  Dividends paid in the first quarter of fiscal 2018 were $89.8 million2023. The increase in proceeds was due to more options exercised during fiscal 2024 compared to $76.6 millionfiscal 2023.

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 comparable periodCompany looks to strategic items in support of fiscal 2017.  For fiscal 2018,growth initiatives, such as 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 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.


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Dividend Payments
The Company remains committed to providing returns to investors through cash dividends. The Company has paid 382 consecutive quarterly dividends since becoming a public company in 1928. The annual dividend rate wasfor fiscal 2024 increased to $0.75$1.13 per share, representing the 52nd58th consecutive annual dividend increase.  The Company has paid dividends

Capital Expenditures
Capital expenditures are first allocated to required maintenance and then growth opportunities based on the needs of the business. Capital expenditures supporting growth opportunities in fiscal 2024 are expected to focus on projects related to value-added capacity, infrastructure, and new technology. Capital expenditures for 358 consecutive quartersfiscal 2024 are estimated to be $280 million.

Debt
As of January 28, 2024, the Company’s outstanding debt included $3.3 billion of fixed rate unsecured senior notes due in fiscal 2024, 2028, 2030, and expects to continue doing so.

The Company is required, by certain covenants in its debt agreements, to maintain specified levels of financial ratios and financial position.  At the end of2051 with interest payable semi-annually. During the first quarter of fiscal 2018,2024, the Company made $28 million of interest payments and expects to make an additional $28 million of interest payments during fiscal 2024 on these notes. On January 30, 2024, the Company's Board of Directors approved up to $500 million of new long-term financing which is intended, along with cash on hand, to pay the $950 million notes due June 2024 upon maturity. See Note J - Long-Term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information.

Borrowing Capacity
As a source of short-term financing, the Company maintains a $750 million unsecured revolving credit facility. The maximum commitment under this credit facility may be further increased by $375 million, generally by mutual agreement of the lenders and 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 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 28, 2024, the Company had no outstanding draws 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 January 28, 2024, the Company was in compliance with all of these debt covenants.covenants and expects to maintain compliance in the future.


Cash flows from operating activities continue to provideHeld by International Subsidiaries
As of January 28, 2024, the Company with its principal sourcehad $190 million of liquidity.cash and cash equivalents held by international subsidiaries. The Company does not anticipate a significant risk tomaintains all undistributed earnings as permanently reinvested. The Company evaluates the balance and uses of cash flows from this source inheld internationally based on the foreseeable future becauseneeds of the Company operates in a relatively stable industry and has strong brands across many product lines.business.

Share Repurchases
The Company is dedicatedauthorized to returning excess cash flow to shareholders through dividend payments.  Growingrepurchase 3,677,494 shares of common stock as part of an existing plan approved by the business through innovation and evaluating opportunities for strategic acquisitions remains a focus forCompany’s Board of Directors. During the Company.  Reinvestments infirst quarter of fiscal 2024, the business to ensure employee and food safety are a top priority for the Company.  Capital spending to enhance and expand current operations will also be a significant cash outflow for fiscal 2018.
Contractual Obligations and Commercial Commitments

Company did not repurchase any shares of stock. The Company records income taxes in accordance with the provisions of ASC 740, Income Taxes. The Company is unablecontinues to determine its contractual obligations by year related to this pronouncement,evaluate share repurchases as the ultimate amount or timing of settlementpart of its reserves for income taxes cannot be reasonably estimated. The total liability for unrecognized tax benefits, including interest and penalties, at January 28, 2018, was $34.2 million.capital allocation strategy.

Commitments
There have been no other material changes to the information regarding the Company’s future contractual financial obligations that waspreviously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2017.2023.

Off-Balance Sheet Arrangements
As of January 28, 2018, and October 29, 2017, the Company had $48.0 million of standby letters of credit issued on its behalf for both periods.  The standby letters of credit are primarily related to the Company’s self-insured workers compensation programs.  However, that amount also includes $4.0 million of revocable standby letters of credit for obligations of an affiliated party that may arise under workers compensation claims.  Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.TRADEMARKS
Trademarks

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


CRITICAL ACCOUNTING 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 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. The significant accounting policies used in preparing these Consolidated Financial Statements are consistent with those described in Note A - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in the Form 10-K.


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Critical accounting estimates are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. There have been no material changes in the Company’s Critical Accounting Estimates as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 29, 2023.


FORWARD-LOOKING STATEMENTS

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

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


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


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

The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to any changes in the national and worldwide economic environment, which could include, among other things, risks related to the deterioration of economic conditions, political developments, currency exchange rates, interestconditions; risks associated with acquisitions, joint ventures, equity investments, and inflation rates, accounting standards, taxes,divestitures; potential disruption of operations, including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; failure to realize anticipated cost savings or operating efficiencies associated with strategic initiatives; risk of loss of a material contract; the Company’s inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and lawspoultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company’s products; damage to the Company’s reputation or brand image; climate change, or legal, regulatory, or market measures to address climate change; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulations affectingand potential environmental litigation; and risks arising from the Company and its markets.Company’s foreign operations.



Item 3. QuantitativeQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to various forms of market risk as a part of its ongoing business practices. The Company utilizes derivative instruments to mitigate earnings fluctuations due to market volatility.

Commodity Price Risk: The Company is subject to commodity price risk primarily through grain, lean hog, natural gas, and Qualitative Disclosures About Market Risk
Hog Markets:  The Company’s earnings are affecteddiesel fuel markets. To reduce these exposures and offset the fluctuations caused by fluctuationschanges in the live hog market.  To minimize the impact on earnings, and to ensure a steady supply of quality hogs,market conditions, the Company has entered intoemploys hedging programs. These programs utilize futures, swaps, and options contracts with producers for the purchase of hogs at formula-based prices over periods of up to 10 years.  Purchased hogs under contract accounted for 95 percent and 94 percent of the total hogs purchased by the Company during the first quarter of fiscal years 2018 and 2017, respectively.  The majority of these contracts use market-based formulas based on hog futures, hog primal values, or industry reported hog markets.  Other contracts use a formula based on the cost of production, which can fluctuate independently from hog markets.  The Company’s value-added branded portfolio helps mitigate changes in hog and pork market prices.  Therefore, a hypothetical 10 percent change in the cash hog market would have had an immaterial effect on the Company’s results of operations.
In the second quarter of 2017, the Company initiated a hedge program to offset the fluctuation in the Company’s future direct hog purchases.  This program currently utilizes lean hog futures, and these contracts are accounted for underas cash flow hedge accounting.hedges. The fair value of the Company’s open futurescash flow commodity contracts in this hedging program as of January 28, 2018,2024 was $1.0$(10.5) million, compared to $1.7$(17.1) million as of October 29, 2017.2023. The Company measures its market risk exposure on its lean hog futurescash flow commodity contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for lean hogs.prices. A 10 percent decrease in the market price for lean hogs would have negatively impacted the fair value of the Company’sCompany's cash flow commodity

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contracts as of January 28, 2018, open lean hog contracts2024 by $1.4$25.4 million, which in turn would lower the Company’sCompany's future cost on purchased hogscommodities by a similar amount.

Certain procurement contracts allow for future hog deliveries (firm commitments) to be forward priced.Interest Rate Risk: The Company generally hedges these firm commitments by using hog futures contracts.  These futures contracts are designated and accounted for as fair value hedges.  The change in the market value of such futures contracts is highly effective at offsettingsubject to interest rate risk primarily from changes in price movements of the hedged item, and the Company evaluates the effectiveness of the contracts at least quarterly.  Changes in the fair value of long-term fixed rate debt. As of January 28, 2024, the futures contracts, along with the gain or loss on the firm commitment, are marked-to-market through earnings and are recorded on the Consolidated Statements of Financial Position asCompany’s long-term debt had a current asset and liability, respectively.  The fair value of the Company’s open futures contracts as of January 28, 2018, was $(0.7) million$2.8 billion compared to $(0.9) million$2.7 billion as of October 29, 2017.2023. The Company measures its market risk exposure on its hog futures contractsof long-term fixed rate debt using a sensitivity analysis, which considers a hypothetical 10 percent change in market prices.interest rates. A 10 percent increasedecrease in market pricesinterest rates would have negativelypositively impacted the fair value of the Company’s January 28, 2018, open contracts by $2.2 million, which in turn would lower the Company’s future cost of purchased hogs by a similar amount.

Turkey Production Costs:  The Company raises or contracts for live turkeys to meet some of its raw material supply requirements.  Production costs in raising turkeys are subject primarily to fluctuations in feed prices, and to a lesser extent, fuel costs.  Under normal, long-term market conditions, changes in the cost to produce turkeys are offset by proportional changes in the turkey market.
To reduce the Company’s exposure to changes in grain prices, the Company utilizes a hedge program to offset the fluctuation in the Company’s future direct grain purchases.  This program currently utilizes corn futures for JOTS, and these contracts are accounted for under cash flow hedge accounting.  The fair value of the Company’s open futures contractsdebt as of January 28, 2018, was $(1.7) million compared to $(2.2) million, before tax, as of October 29, 2017.  The Company measures its market risk exposure on its grain futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for grain.2024 by $76.9 million. A 10 percent decrease in the market price for grainincrease would have negatively impacted the long-term debt by $71.6 million.

Foreign Currency Exchange Rate Risk: The fair valuevalues of certain assets are subject to fluctuations in foreign currency exchange rates. The Company's net asset position in foreign currencies as of January 28, 2024 and October 29, 2023 was $1.1 billion, with most of the Company’s January 28, 2017, open grain contracts by $4.4 million, whichexposure existing in turn would lower the Company’s future cost on purchased grain by a similar amount.

Long-Term Debt: A principalIndonesian rupiah, Chinese yuan, and Brazilian real. The Company currently does not use market risk affecting the Company is the exposuresensitive instruments to changes in interest rates on the Company’s fixed-rate, long-term debt.  Market risk for fixed-rate, long-term debt is estimated as the potential increase in fair value, resulting from a hypothetical 10 percent decrease in interest rates, and amounts to approximately $2.1 million.  The fair value of the Company’s long-term debt was estimated using discounted future cash flows based on the Company’s incremental borrowing rate for similar types of borrowing arrangements.manage this risk.

Investments: Investment Risk: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of January 28, 2018,2024, the balance of these securities totaled $139.8$199.7 million compared to $128.5$188.2 million as of October 29, 2017.  A majority of these securities represent2023. The rabbi trust is invested primarily in fixed income funds. The Company is subject to market risk due to fluctuations in the value of the remaining investments as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis. A 10 percent decline in the value of the investments not held in fixed income funds would have a direct negative impact tonegatively impacted the Company’s pretax earnings ofby approximately $4.7$8.9 million, while a 10 percent increase in value would have a positive impact of the same amount.

International:  While the Company does have international operations and operates in international markets, it considers its market risk in such activities to be immaterial.

Item 4. CONTROLS AND PROCEDURES

(a)    Disclosure Controls and ProceduresProcedures.
(a)Disclosure Controls and Procedures.
As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information the Company is required to disclose in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.


(b)Internal Controls.
During the first quarter of fiscal 2018, there has been(b)    Internal Controls.
There were no changechanges in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) through the first quarter of fiscal 2024 that hashave materially affected, or isare reasonably likely to materially affect, the Company’s internal control over financial reporting.



PART II - OTHER INFORMATION
 

Item 1. Legal ProceedingsLEGAL PROCEEDINGS

The Company is a party to variousInformation regarding legal proceedings relatedis available in Note I - Commitments and Contingencies of the Notes to the on-going operationConsolidated Financial Statements.



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Table of its business, including claims both by and against the Company.  At any time, such proceedings typically involve claims related to product liability, contract disputes, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors, or suppliers.  TheContents

Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable.  However, future developments or settlements are uncertain and may require the Company to change such accruals as proceedings progress.  Resolution of any currently known matters, either individually or in the aggregate, is not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.
Item 1A. Risk FactorsRISK FACTORS
Risk Factors


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

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

▪food spoilage;
▪
food contamination caused by disease-producing organisms or pathogens, such as Listeria monocytogenes, Salmonella, and pathogenic E coli.;
▪food allergens;
▪nutritional and health-related concerns;
▪federal, state, and local food processing controls;
▪consumer product liability claims;

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

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

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

The Company's business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital, energy availability and costs (including fuel surcharges), and the effects of governmental initiatives to manage economic conditions. Decreases in consumer spending rates and shifts in consumer product preferences could also negatively impact the Company.

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

▪The financial stability of our customers and suppliers may be compromised, which could result in additional bad debts for the Company or non-performance by suppliers; and
▪The value of our investments in debt and equity securities may decline, including most significantly the Company’s trading securities held as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans, and the Company’s assets held in pension plans.

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

Additionally, if a highly pathogenic disease outbreak developed in the United States, it may negatively impact the national economy, demand for Company products, and/or the Company’s workforce availability, and the Company’s financial results could suffer. The Company has developed contingency plans to address infectious disease scenarios and the potential impact on its operations, and will continue to update these plans as necessary. There can be no assurance given, however, these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

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

The Company’s results of operations, and financial condition are largely dependent uponsubject to various risks and uncertainties. There have been no material changes to the cost and supply of pork, poultry, beef, feed grains, avocados, peanuts, and whey as well as energy costs and the selling prices for many of our products, which are determined by constantly changing market forces of supply and demand.

The live hog industry has evolved to large, vertically-integrated operations using long-term supply agreements. This has resultedrisk factors previously disclosed in fewer hogs being available on the cash spot market. Consequently, the Company uses long-term supply contracts based on market-based formulas or the cost of production to ensure a stable supply of raw materials while minimizing extreme fluctuations in costs over the long-term. This may result,Part I, Item 1A. Risk Factors in the short-term, in costs for live hogs that are higher than the cash spot market dependingCompany’s Annual Report on the relationship of the cash spot market to contract prices. Market-based pricing on certain product lines, and lead time required to implement pricing adjustments, may prevent all or part of these cost increases from being recovered, and these higher costs could adversely affect our short-term financial results.

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

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

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

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

The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of disease could adversely affect the Company’s supply of raw materials, increase the cost of production, reduce utilization of the Company’s harvest facilities, and reduce operating margins. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally. The Company has developed business continuity plans for various disease scenarios and will continue to update these plans as necessary. There can be no assurance given, however, these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

Market demandForm 10-K for the Company’s products may fluctuate.fiscal year ended October 29, 2023.


The Company faces competition from producers of alternative meats and protein sources, including pork, beef, turkey, chicken, fish, nut butters, and whey. The bases on which the Company competes include:

▪price;
▪product quality and attributes;
▪brand identification;
▪breadth of product line; and
▪customer service.

Demand for the Company’s products is also affected by competitors’ promotional spending, the effectiveness of the Company’s advertising and marketing programs, and consumer perceptions. Failure to identify and react to changes in food trends such as sustainability of product sources and animal welfare could lead to, among other things, reduced demand for the Company’s brands and products. The Company may be unable to compete successfully on any or all of these bases in the future.

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

The Company has made several acquisitions in recent years, most recently the acquisitions of Columbus, Fontanini, and Ceratti, and regularly reviews opportunities for strategic growth through acquisitions. Potential risks associated with acquisitions include the inability to integrate new operations successfully, the diversion of management's attention from other business concerns, the potential loss of key employees and customers of the acquired companies, the possible assumption of unknown liabilities, potential disputes with the sellers, potential impairment charges if purchase assumptions are not achieved or market conditions decline, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience. Any or all of these risks could impact the Company’s financial results and business reputation. In addition, acquisitions outside the United States may present unique challenges and increase the Company's exposure to the risks associated with foreign operations.

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

The Company is involved on an ongoing basis in litigation arising in the ordinary course of business. Trends in litigation may include class actions involving employees, consumers, competitors, suppliers, shareholders, or injured persons, and claims relating to product liability, contract disputes, intellectual property, advertising, labeling, wage and hour laws, employment

practices, or environmental matters. Litigation trends and the outcome of litigation cannot be predicted with certainty and adverse litigation trends and outcomes could adversely affect the Company’s financial results.

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

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

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

The Company’s operations are subject to extensive regulation by the U.S. Department of Homeland Security, the U.S. Department of Agriculture, the U.S. Food and Drug Administration, federal and state taxing authorities, and other federal, state, and local authorities who oversee workforce immigration laws, tax regulations, animal welfare, food safety standards, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company’s manufacturing facilities and products are subject to continuous inspection by federal, state, and local authorities. Claims or enforcement proceedings could be brought against the Company in the future. The availability of government inspectors due to a government furlough could also cause disruption to the Company’s manufacturing facilities. Additionally, the Company is subject to new or modified laws, regulations, and accounting standards. The Company’s failure or inability to comply with such requirements could subject the Company to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions.

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

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

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

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

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

Information technology systems are an important part of the Company’s business operations. Attempted cyber-attacks and other cyber incidents are occurring more frequently and are being made by groups and individuals with a wide range of motives and expertise. In an attempt to mitigate this risk, the Company has implemented and continues to evaluate security initiatives and business continuity plans.

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

As of January 28, 2018, the Company had approximately 20,500 employees worldwide, of which approximately 4,500 were represented by labor unions, principally the United Food and Commercial Workers Union. A significant increase in labor costs

or a deterioration of labor relations at any of the Company’s facilities or contracted hog processing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results. A union contract at the Company’s facility in Rochelle, Illinois expired on February 25, 2018, covering approximately 625 employees. Negotiations are ongoing under an indefinite extension agreement.


Item 2. Unregistered SalesUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no issuer purchases of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securitiesequity securities in the First Quarter of Fiscal 2018
Period 
Total
Number of
Shares
Purchased1
 
Average
Price Paid
Per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs1
 
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs1
October 30, 2017 –
 December 3, 2017
 737,500
 $34.17
 737,500
 9,714,837
December 4, 2017 –
December 31, 2017
 —
 —
 —
 9,714,837
January 1, 2018 –
January 28, 2018
 —
 —
 —
 9,714,837
Total 737,500
 $34.17
 737,500
  
1quarter ended January 28, 2024. On January 31,29, 2013, the Company announced  itsCompany’s Board of Directors had authorized the repurchase of 10,000,000 shares of its common stock with no expiration date. The repurchase program was authorized at a meeting of the Company’s Board of Directors onOn January 29, 2013.  On November 23, 2015,26, 2016, the Board of Directors authorizedapproved a two-for-one split of the Company’s common stock.stock to be effective January 27, 2016. As part of the resolution to approve the stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately. The stock split was subsequently approved by shareholders atmaximum number of shares that may yet be purchased under the Company’s Annual Meeting onrepurchase plans or programs as of January 26, 2016, and effected28, 2024, is 3,677,494.


Item 3. DEFAULTS UPON SENIOR SECURITIES

None.


Item 4. MINE SAFETY DISCLOSURES

None.


Item 5. OTHER INFORMATION

During the fiscal quarter ended January 27, 2016.  All numbers28, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as the terms are defined in the table above reflect the impactItem 408(a) of this stock split.Regulation S-K.



Item 6. Exhibits
EXHIBITS
3.1
10.1
10.2
10.3
31.1
31.2
32.1
101The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended January 28, 2024, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Condensed Statements of Financial Position, (iv) Consolidated Statements of Changes in Shareholders’ Investment, (v) Consolidated Condensed Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.
101.INSXBRL Instance Document
104
101.SCHThe cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2024, formatted in Inline XBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document(included as Exhibit 101).



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Table of Contents
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
HORMEL FOODS CORPORATION
(Registrant)
Date: February 29, 2024By:/s/ JACINTH C. SMILEY
JACINTH C. SMILEY
Date: March 9, 2018By/s/ JAMES N. SHEEHAN
JAMES N. SHEEHAN
SeniorExecutive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: February 29, 2024By:/s/ PAUL R. KUEHNEMAN
Date: March 9, 2018By/s/ JANA L. HAYNESPAUL R. KUEHNEMAN
JANA L. HAYNES
Vice President and Controller
(Principal Accounting Officer)



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