UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended ~~July 29, 2018~~April 28, 2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________________ to ________________________________________

Commission File Number: 1-2402

HORMEL FOODS CORPORATION

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		41-0319970 (I.R.S. Employer Identification No.)



1 Hormel Place Austin, Minnesota (Address of principal executive offices)		55912-3680 (Zip Code)

(507) 437-5611

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock $0.01465 par value	HRL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). X 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.



Class	Outstanding at ~~September~~June 2, ~~2018~~2019
Common Stock	$.01465 par value	~~533,117,904~~533,844,537
Common Stock Non-Voting	$.01 par value ~~-0-~~	–0–

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - ~~July 29, 2018~~April 28, 2019 and October ~~29, 2017~~28, 2018
CONSOLIDATED STATEMENTS OF OPERATIONS - Three and ~~Nine~~Six Months Ended ~~July~~April 28, 2019 and April 29, 2018 ~~and July 30, 2017~~
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - Three and ~~Nine~~Six Months Ended ~~July~~April 28, 2019 and April 29, 2018 ~~and July 30, 2017~~
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT - ~~Twelve~~Three and Six Months Ended ~~October~~April 29, ~~2017~~2018 and ~~Nine~~Three and Six Months Ended ~~July 29, 2018~~April 28, 2019
CONSOLIDATED STATEMENTS OF CASH FLOWS - ~~Nine~~Six Months Ended ~~July~~April 28, 2019 and April 29, 2018 ~~and July 30, 2017~~
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
RESULTS OF OPERATIONS
Overview
Consolidated Results
Segment Results
Related Party Transactions
LIQUIDITY AND CAPITAL RESOURCES
FORWARD-LOOKING STATEMENTS

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings

Item 1A.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.	Exhibits

SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)

July 29,
2018 October 29,
2017
(Unaudited)
ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 268,982
$ 444,122
Accounts receivable 559,181
618,351
Inventories 1,001,044
921,022
Income taxes receivable 4,641
22,346
Prepaid expenses 14,542
16,144
Other current assets 5,920
4,538
TOTAL CURRENT ASSETS 1,854,310
2,026,523

GOODWILL 2,734,575
2,119,813

OTHER INTANGIBLES 1,236,897
1,027,014

PENSION ASSETS 190,050
171,990

INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES 276,462
242,369

OTHER ASSETS 192,769
184,948

PROPERTY, PLANT AND EQUIPMENT
Land 51,145
51,249
Buildings 904,750
866,855
Equipment 1,806,543
1,710,537
Construction in progress 311,177
148,064
Less: Allowance for depreciation (1,663,305 ) (1,573,454 )
Net property, plant and equipment 1,410,310
1,203,251

TOTAL ASSETS $ 7,895,373
$ 6,975,908




	April 28, 2019			October 28, 2018
	(Unaudited)
Assets
Current Assets
Cash and Cash Equivalents	$	639,327		$	459,136
Short-term Marketable Securities	6,675			—
Accounts Receivable	537,447			600,438
Inventories	1,030,574			963,527
Income Taxes Receivable	293			3,995
Prepaid Expenses	24,219			16,342
Other Current Assets	12,132			6,662
Total Current Assets	2,250,667			2,050,100

Goodwill	2,486,635			2,714,116

Other Intangibles	1,040,392			1,207,219

Pension Assets	205,229			195,153

Investments in and Receivables from Affiliates	276,478			273,153

Other Assets	181,777			189,951

Property, Plant and Equipment
Land	49,642			50,332
Buildings	1,011,242			956,260
Equipment	1,851,640			1,863,020
Construction in Progress	259,683			332,205
Less: Allowance for Depreciation	(1,677,640		)	(1,689,217		)
Net Property, Plant and Equipment	1,494,567			1,512,600

Total Assets	$	7,935,745		$	8,142,292

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)

July 29,
2018 October 29,
2017
(Unaudited)
LIABILITIES AND SHAREHOLDERS’ INVESTMENT

CURRENT LIABILITIES

Accounts payable $ 488,978
$ 552,714
Short-term debt 95,000
—
Accrued expenses 58,416
76,966
Accrued workers compensation 27,289
26,585
Accrued marketing expenses 119,663
101,573
Employee related expenses 201,353
209,562
Taxes payable 2,372
525
Interest and dividends payable 103,760
90,287
TOTAL CURRENT LIABILITIES 1,096,831
1,058,212

LONG-TERM DEBT–less current maturities 624,801
250,000

PENSION AND POST-RETIREMENT BENEFITS 534,698
530,249

OTHER LONG-TERM LIABILITIES 104,083
99,340

DEFERRED INCOME TAXES 139,192
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– 7,781
7,741
authorized 1,600,000,000 shares;
issued 531,103,604 shares July 29, 2018
issued 528,423,605 shares October 29, 2017
Additional paid-in capital 27,975
13,670
Accumulated other comprehensive loss (259,208 ) (248,075 )
Retained earnings 5,615,053
5,162,571
HORMEL FOODS CORPORATION SHAREHOLDERS’ INVESTMENT 5,391,601
4,935,907
NONCONTROLLING INTEREST 4,167
3,790
TOTAL SHAREHOLDERS’ INVESTMENT 5,395,768
4,939,697

TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT $ 7,895,373
$ 6,975,908




	April 28, 2019			October 28, 2018
	(Unaudited)
Liabilities and Shareholders' Investment
Current Liabilities
Accounts Payable	$	523,673		$	618,830
Accrued Expenses	59,144			48,298
Accrued Workers Compensation	24,935			24,594
Accrued Marketing Expenses	126,252			118,887
Employee Related Expenses	182,720			224,736
Taxes Payable	22,154			2,490
Interest and Dividends Payable	112,798			101,079
Total Current Liabilities	1,051,676			1,138,914

Long-term Debt–Less Current Maturities	250,000			624,840

Pension and Post-retirement Benefits	488,479			477,557

Other Long-term Liabilities	101,378			99,070

Deferred Income Taxes	142,428			197,093

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–	7,854			7,825
Authorized 1,600,000,000 Shares;
Issued 536,092,537 Shares April 28, 2019
Issued 534,135,484 Shares October 28, 2018
Additional Paid-in Capital	163,980			106,528
Accumulated Other Comprehensive Loss	(278,135		)	(243,498		)
Retained Earnings	6,003,637			5,729,956
Hormel Foods Corporation Shareholders' Investment	5,897,336			5,600,811
Noncontrolling Interest	4,448			4,007
Total Shareholders' Investment	5,901,784			5,604,818

Total Liabilities and Shareholders' Investment	$	7,935,745		$	8,142,292

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended
July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
Net sales $ 2,359,142
$ 2,207,375
$ 7,021,003
$ 6,674,911
Cost of products sold 1,899,970
1,754,966
5,562,966
5,183,302
GROSS PROFIT 459,172
452,409
1,458,037
1,491,609

Selling, general and administrative 210,747
176,660
633,668
567,886
Equity in earnings of affiliates 13,141
3,956
50,158
27,376

OPERATING INCOME 261,566
279,705
874,527
951,099

Other income and expense:
Interest and investment income 4,601
1,376
5,418
6,643
Interest expense (8,435 ) (3,057 ) (20,165 ) (9,106 )

EARNINGS BEFORE INCOME TAXES 257,732
278,024
859,780
948,636

Provision for income taxes 47,379
95,473
108,694
319,896

NET EARNINGS 210,353
182,551
751,086
628,740
Less: Net earnings attributable to noncontrolling interest 110
43
352
159
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION $ 210,243
$ 182,508
$ 750,734
$ 628,581

NET EARNINGS PER SHARE:
BASIC $ 0.40
$ 0.35
$ 1.42
$ 1.19
DILUTED $ 0.39
$ 0.34
$ 1.38
$ 1.17

WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC 530,606
528,165
529,953
528,487
DILUTED 543,762
538,814
543,352
539,504

DIVIDENDS DECLARED PER SHARE: $ 0.1875
$ 0.1700
$ 0.5625
$ 0.5100



	Three Months Ended						Six Months Ended
	April 28, 2019			April 29, 2018 *			April 28, 2019			April 29, 2018
Net Sales	$	2,344,744		$	2,330,568		$	4,705,099		$	4,661,861
Cost of Products Sold	1,875,595			1,837,765			3,747,616			3,670,762
Gross Profit	469,149			492,803			957,483			991,099

Selling, General and Administrative	170,076			204,549			363,620			424,421
Equity in Earnings of Affiliates	13,291			13,486			24,749			37,017

Operating Income	312,364			301,740			618,612			603,695

Other Income and Expense:
Interest and Investment Income	11,297			2,144			18,171			10,083
Interest Expense	(5,615		)	(7,001		)	(11,762		)	(11,730		)

Earnings Before Income Taxes	318,046			296,883			625,021			602,048

Provision for Income Taxes	35,410			59,361			100,866			61,315

Net Earnings	282,636			237,522			524,155			540,733
Less: Net Earnings Attributable to Noncontrolling Interest	207			138			301			242
Net Earnings Attributable to Hormel Foods Corporation	$	282,429		$	237,384		$	523,854		$	540,491

Net Earnings Per Share
Basic	$	0.53		$	0.45		$	0.98		$	1.02
Diluted	$	0.52		$	0.44		$	0.96		$	1.00

Weighted-average Shares Outstanding
Basic	535,480			529,799			534,988			529,626
Diluted	546,330			542,811			546,724			543,146

*Adjusted due to the adoption of Accounting Standards Update (ASU) 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). See Note A - General.

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

Three Months Ended Nine Months Ended
July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
NET EARNINGS $ 210,353
$ 182,551
$ 751,086
$ 628,740
Other comprehensive (loss) income, net of tax:
Foreign currency translation (17,209 ) 4,143
(8,201 ) (3,037 )
Pension and other benefits 2,393
3,314
7,366
9,961
Deferred hedging (9,010 ) (170 ) (10,273 ) (2,677 )
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME (23,826 ) 7,287
(11,108 ) 4,247
COMPREHENSIVE INCOME 186,527
189,838
739,978
632,987
Less: Comprehensive (loss) income attributable to noncontrolling interest (262 ) 143
377
67
COMPREHENSIVE INCOME ATTRIBUTABLE TO HORMEL FOODS CORPORATION $ 186,789
$ 189,695
$ 739,601
$ 632,920




	Three Months Ended					Six Months Ended
	April 28, 2019		April 29, 2018			April 28, 2019		April 29, 2018
Net Earnings	$	282,636	$	237,522		$	524,155	$	540,733
Other Comprehensive Income, Net of Tax:
Foreign Currency Translation	5,901		4,796			7,747		9,008
Pension and Other Benefits	1,770		2,487			5,209		4,973
Deferred Hedging	6,707		(613		)	6,346		(1,263		)
Total Other Comprehensive Income	14,378		6,670			19,302		12,718
Comprehensive Income	297,014		244,192			543,457		553,451
Less: Comprehensive Income Attributable to Noncontrolling Interest	378		385			441		638
Comprehensive Income Attributable to Hormel Foods Corporation	$	296,636	$	243,807		$	543,016	$	552,813

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

(in thousands, except per share amounts)

(Unaudited)

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 (loss) 48,228
22
48,250
Purchases of common stock (94,487 ) (94,487 )
Stock-based compensation expense 1
15,590
15,591
Exercise of stock options/restricted shares 38
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 750,734
352
751,086
Other comprehensive (loss) income (11,133 ) 25
(11,108 )
Purchases of common stock (44,741 ) (44,741 )
Stock-based compensation expense 1
17,655
17,656
Exercise of stock options/restricted shares 58
41,372
41,430
Shares retired (19 ) 44,741
(44,722 )

—
Declared cash dividends – $0.5625 per share (298,252 ) (298,252 )
Balance at July 29, 2018 $ 7,781
$ —
$ 27,975
$ 5,615,053
$ (259,208 ) $ 4,167
$ 5,395,768



	Three Months Ended April 29, 2018

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest		Total Shareholders’ Investment
	Shares		Amount			Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest		Total Shareholders’ Investment
Balance at January 28, 2018	529,988		$	7,764		—		$	—		$	19,242		$	5,366,501		$	(242,176	)	$	4,043	$	5,155,374
Net Earnings														237,384						138		237,522
Other Comprehensive Income																	6,423			247		6,670
Purchases of Common Stock						(593	)	(19,542		)												(19,542		)
Stock-based Compensation Expense			1								4,051											4,052
Exercise of Stock Options/Restricted Shares	738		9								7,212											7,221
Shares Retired	(593	)	(8		)	593		19,542			(19,534		)									—
Declared Cash Dividends – $0.1875 Per Share														(99,664		)						(99,664		)
Balance at April 29, 2018	530,133		$	7,766		—		$	—		$	10,971		$	5,504,221		$	(235,753	)	$	4,428	$	5,291,633

	Three Months Ended April 28, 2019

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest		Total Shareholders’ Investment
	Shares		Amount			Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest		Total Shareholders’ Investment
Balance at January 27, 2019	534,170		$	7,826		—		$	—		$	130,196		$	5,856,029		$	(292,342	)	$	4,070	$	5,705,779
Net Earnings														282,429						207		282,636
Other Comprehensive Income																	14,207			171		14,378
Purchases of Common Stock						(562	)	(22,813		)												(22,813		)
Stock-based Compensation Expense			1								5,567											5,568
Exercise of Stock Options/Restricted Shares	2,485		35								28,390											28,425
Shares Retired	(562	)	(8		)	562		22,813			(173		)	(22,632		)						—
Declared Cash Dividends – $0.21 per share														(112,189		)						(112,189		)
Balance at April 28, 2019	536,093		$	7,854		—		$	—		$	163,980		$	6,003,637		$	(278,135	)	$	4,448	$	5,901,784

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

(in thousands, except per share amounts)

(Unaudited)



	Six Months Ended April 29, 2018

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest		Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 29, 2017	528,424		$	7,741		—		$	—		$	13,670		$	5,162,571		$	(248,075	)	$	3,790	$	4,939,697
Net Earnings														540,491						242		540,733
Other Comprehensive Income																	12,322			396		12,718
Purchases of Common Stock						(1,331	)	(44,741		)												(44,741		)
Stock-based Compensation Expense			1								11,390											11,391
Exercise of Stock Options/Restricted Shares	3,040		43								30,633											30,676
Shares Retired	(1,331	)	(19		)	1,331		44,741			(44,722		)									—
Declared Cash Dividends – $0.375 Per Share														(198,841		)						(198,841		)
Balance at April 29, 2018	530,133		$	7,766		—		$	—		$	10,971		$	5,504,221		$	(235,753	)	$	4,428	$	5,291,633

	Six Months Ended April 28, 2019

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest		Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 28, 2018	534,135		$	7,825		—		$	—		$	106,528		$	5,729,956		$	(243,498	)	$	4,007	$	5,604,818
Net Earnings														523,854						301		524,155
Other Comprehensive Income																	19,162			140		19,302
Purchases of Common Stock						(1,627	)	(67,622		)												(67,622		)
Stock-based Compensation Expense			1								13,513											13,514
Exercise of Stock Options/Restricted Shares	3,585		52								44,371											44,423
Shares Retired	(1,627	)	(24		)	1,627		67,622			(432		)	(67,166		)						—
Cumulative Effect Adjustment from Adoption of:
ASU 2016-16														(10,475		)						(10,475		)
ASU 2017-12														21			(21		)			—
ASU 2018-02														52,342			(53,778		)			(1,436		)
Declared Cash Dividends – $0.42 Per Share														(224,895		)						(224,895		)
Balance at April 28, 2019	536,093		$	7,854		—		$	—		$	163,980		$	6,003,637		$	(278,135	)	$	4,448	$	5,901,784

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Nine Months Ended
July 29,
2018 July 30,
2017
OPERATING ACTIVITIES

Net earnings $ 751,086
$ 628,740
Adjustments to reconcile to net cash provided by operating activities:
Depreciation 111,586
89,930
Amortization of intangibles 9,522
6,191
Equity in earnings of affiliates (50,158 ) (27,376 )
Distribution from equity method investees 20,023
19,521
(Benefit) provision for deferred income taxes (56,110 ) 11,359
(Gain) loss on property/equipment sales and plant facilities (1,330 ) 1,283
Gain on insurance proceeds —
(3,029 )
Non-cash investment activities (9,696 ) (3,790 )
Stock-based compensation expense 17,656
13,867
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable 78,730
16,722
Increase in inventories (48,927 ) (72,882 )
Increase in prepaid expenses and other current assets (12,863 ) (22,333 )
Increase (decrease) in pension and post-retirement benefits 163
(6,370 )
Decrease in accounts payable and accrued expenses (84,182 ) (166,509 )
Increase in net income taxes payable 17,705
46,069
NET CASH PROVIDED BY OPERATING ACTIVITIES 743,205
531,393

INVESTING ACTIVITIES
Proceeds from sale of business —
135,944
Acquisitions of businesses/intangibles (857,668 ) —
Purchases of property/equipment (243,975 ) (118,511 )
Proceeds from sales of property/equipment 7,242
2,276
Increase in investments, equity in affiliates, and other assets (6,863 ) (4,851 )
Proceeds from company-owned life insurance 5,294
5,323
Proceeds from insurance recoveries —
3,569
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,095,970 ) 23,750

FINANCING ACTIVITIES
Net proceeds from short-term debt 95,000
—
Proceeds from long-term debt 375,000
—
Principal payments on long-term debt (199 ) —
Dividends paid on common stock (288,515 ) (256,341 )
Share repurchase (44,741 ) (94,487 )
Proceeds from exercise of stock options 40,732
14,337
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 177,277
(336,491 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH 348
(454 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (175,140 ) 218,198
Cash and cash equivalents at beginning of year 444,122
415,143
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 268,982
$ 633,341



	Six Months Ended
	April 28, 2019			April 29, 2018
Operating Activities
Net Earnings	$	524,155		$	540,733
Adjustments to Reconcile to Net Cash Provided by Operating Activities:
Depreciation	74,458			74,081
Amortization of Intangibles	6,285			6,235
Equity in Earnings of Affiliates	(24,749		)	(37,017		)
Distribution from Equity Method Investees	10,000			10,024
(Benefit) Provision for Deferred Income Taxes	(37,940		)	(74,486		)
Loss (Gain) on Property/Equipment Sales and Plant Facilities	458			(1,384		)
Gain on Sale of Business	(16,469		)	—
Non-cash Investment Activities	(17,632		)	(8,451		)
Stock-based Compensation Expense	13,514			11,391
Changes in Operating Assets and Liabilities, Net of Acquisitions:
Decrease (Increase) in Accounts Receivable	32,634			87,141
(Increase) Decrease in Inventories	(111,601		)	(59,094		)
(Increase) Decrease in Prepaid Expenses and Other Current Assets	(7,198		)	(3,926		)
Increase (Decrease) in Pension and Post-retirement Benefits	6,380			1,525
(Decrease) Increase in Accounts Payable and Accrued Expenses	(108,347		)	(122,847		)
Increase (Decrease) in Net Income Taxes Payable	21,645			19,416
Net Cash Provided by Operating Activities	365,593			443,341

Investing Activities
Net (Purchase) Sale of Securities	(6,664		)	—
Proceeds from Sale of Business	473,885			—
Acquisitions of Businesses/Intangibles	—			(857,673		)
Purchases of Property/Equipment	(87,621		)	(141,160		)
Proceeds from Sales of Property/Equipment	31,167			6,439
(Increase) Decrease in Investments, Equity in Affiliates, and Other Assets	(110		)	2,906
Proceeds from Company-owned Life Insurance	14,170			3,028
Net Cash Provided by (Used in) Investing Activities	424,827			(986,460		)

Financing Activities
Net Proceeds from Short-term Debt	—			185,000
Proceeds from Long-term Debt	—			375,000
Repayments of Long-term Debt	(374,840		)	(237		)
Dividends Paid on Common Stock	(212,287		)	(189,139		)
Share Repurchase	(67,622		)	(44,741		)
Proceeds from Exercise of Stock Options	44,277			29,978
Net Cash (Used in) Provided by Financing Activities	(610,472		)	355,861

Effect of Exchange Rate Changes on Cash	243			4,707
Increase (Decrease) in Cash and Cash Equivalents	180,191			(182,551		)
Cash and Cash Equivalents at Beginning of Year	459,136			444,122
Cash and Cash Equivalents at End of Quarter	$	639,327		$	261,571

See Notes to Consolidated Financial Statements

HORMEL FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A - GENERAL

Basis of ~~Presentation~~

Presentation: The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. The ~~balance sheet~~Consolidated Statement of Financial Position at October ~~29, 2017,~~28, 2018, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October ~~29, 2017.~~28, 2018.

~~Investments~~

Investments: The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. Under the plans, 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. 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~~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 included in the Company’s earnings. Securities held by the trust generated gains of ~~$1.4~~$4.8 million and ~~$2.6~~$6.2 million for the ~~third~~second quarter and ~~nine~~six months ended ~~July 29, 2018,~~April 28, 2019, compared to losses of $2.2 million and gains of ~~$1.5 million and $4.8~~$1.2 million for the ~~third~~second quarter and ~~nine~~six months ended ~~July 30, 2017.~~April 29, 2018.

Supplemental Cash Flow ~~Information~~

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~~Other Assets on the Consolidated Statements of Financial Position. Changes in the value of these investments are included in the Company’s ~~net earnings~~Net Earnings and are presented in the Consolidated Statements of Operations as ~~either interest~~Interest and ~~investment income (loss) or interest expense, as appropriate.~~Investment Income.

~~Guarantees~~

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 ~~$2.3~~$2.4 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. The reclassifications had no impact on ~~net earnings~~Net Earnings or ~~operating cash flows as previously reported,~~Operating Income, other than those related to the adoption of ASU ~~2016-15~~2017-07 as described within the new accounting pronouncements adopted in the current fiscal year.

Accounting Changes and Recent Accounting ~~Pronouncements~~Pronouncements:

New Accounting Pronouncements ~~adopted~~Adopted in ~~current fiscal year~~Current Fiscal Year

~~In July 2015, the FASB issued ASU 2015-11,~~ ~~Inventory (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 Compensation~~: ~~Improvements to Employee Share-Based Payment Accounting (Topic 718)~~. 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 resulted in the excess tax benefits (“windfalls”) and tax deficiencies (“shortfalls”) realized 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 have been applied prospectively. Excess tax benefits of $5.4 million and $20.8 million were recorded as a reduction of income tax expense for the third quarter and nine months ended July 29, 2018, respectively. The effective tax rate was reduced by 2.1 percent and 2.4 percent for the third quarter and nine months ended July 29, 2018, respectively, as a result of the exercise activity. The Company applied the amendments related 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. Under the nature of the distribution approach, distributions are classified based on the nature of the activity that generated them. The guidance requires cash received from the settlement of insurance claims to be classified on the basis of the related insurance coverage. Accordingly, the Company classified cash settlements received from insurance claims to the specific type of loss to determine the cash flow classification of the proceeds. The guidance also 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 July 30, 2017:~~

Reported July 30, 2017 ASU 2016-09 ASU 2016-15 Adjusted July 30, 2017
Operating Activities
Equity in earnings of affiliates $ (7,855 ) $ —
$ (19,521 ) $ (27,376 )
Distributions received from equity method investees —
—
19,521
19,521
Gain on insurance proceeds —
—
(3,029 ) (3,029 )
Excess tax benefit from stock-based compensation (24,859 ) 24,859
—
—
Decrease in accounts receivable 18,348
—
(1,626 ) 16,722
Increase in inventories (72,598 ) —
(284 ) (72,882 )
Net Cash Provided by Operating Activities 511,473
24,859
(4,939 ) 531,393

Investing Activities
Proceeds from sales of property/equipment 2,532
—
(256 ) 2,276
Increase in investments, equity in affiliates, and other assets (1,154 ) —
(3,697 ) (4,851 )
Proceeds from company-owned life insurance —
—
5,323
5,323
Proceeds from insurance recoveries —
—
3,569
3,569
Net Cash Provided by Investing Activities 18,811
—
4,939
23,750

Financing Activities
Excess tax benefit from stock-based compensation 24,859
(24,859 ) —
—
Net Cash Used in Financing Activities (311,632 ) (24,859 ) —
(336,491 )
Effect of Exchange Rate Changes on Cash (454 ) —
—
(454 )
(Decrease) Increase in Cash and Cash Equivalents $ 218,198
$ —
$ —
$ 218,198
Cash and cash equivalents at beginning of the year 415,143
—
—
415,143
Cash and Cash Equivalents at the End of Quarter $ 633,341
$ —
$ —
$ 633,341

~~In March 2018, the FASB issued ASU No. 2018-05,~~ ~~Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118~~. The update provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the “Tax Act”). SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The Company’s accounting for certain income tax effects are incomplete; however, reasonable estimates have been determined for those tax effects. The estimates were recorded as provisional amounts in the consolidated financial statements as of January 28, 2018, and remain provisional as of July 29, 2018. The Company recognized a measurement-period adjustment during the three months ended July 29, 2018, and expects to have all provisional amounts related to the effects of the Tax Act finalized within the one year measurement period. Refer to Note I for further details regarding the Tax Act.

~~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 in enhanced disclosures about revenue, provide guidance for transactions which were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. ~~In August 2015, the FASB issued ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,~~ which defers the effective date of ASU 2014-09 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.~~2017. The updated guidance is to be applied either retrospectively or by using a cumulative effect adjustment. The Company ~~expects to adopt~~adopted the provisions of the new standard using the full retrospective method at the beginning of fiscal 2019. The Company ~~has completed~~made the following policy elections upon adoption: to account for shipping and handling costs as contract fulfillment costs and to exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price. The Company will account for variable consideration using the expected value method. The Company also applied the practical expedient to not capitalize contract costs to obtain contracts with a ~~significant portion~~duration of ~~its detailed assessments relating to revenue streams~~one year or less, which are expensed and ~~customer arrangements, and is focused on controls to support recognition and disclosure requirements under~~included in the ~~new guidance. Based on the assessment to date, the~~Consolidated

Statements of Operations. The Company ~~does~~did not ~~expect the adoption~~have a cumulative effect adjustment as a result of adoption. Adoption of the new standard todid not have a material impact on ~~its~~the Company’s results of operations. Additional qualitative disclosures have been provided in Note B - Revenue Recognition and further disaggregation of revenues provided in Note N - Segment Reporting.

~~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 January 2018, the FASB issued ASU 2018-01, which relieves businesses and organizations from having to present prior comparative years' results and to clarify, improve, and correct errors in the new leasing guidance codified in ASC 842. In July 2018, ASU 2018-10 was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Subsequent to the end of the third quarter, in July 2018, the FASB issued ASU 2018-11, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption which allows entities to apply the provisions of the updated guidance at the effective date. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. 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, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. The Company is currently assessing the timing and impact of adopting the updated provisions.

In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). The updated guidance requires the recognition 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, the 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 only within the first interim period of a fiscal year. 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~~adopted the updated provisions ~~of the new accounting standard~~ at the beginning of fiscal 2019, ~~which will result~~resulting in a reclassification from prepaid tax assets to deferred tax assets. In addition, due to the impact of the lower tax rate on deferred tax balances resulting from the Tax Cuts and Jobs Act (Tax Act), the Company ~~expects to recognize~~recognized a cumulative effect adjustment to ~~retained earnings~~Retained Earnings of ~~approximately $10.0~~$10.5 million.

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~~Other components of net periodic pension cost and net periodic post-retirement benefit cost tomust 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.~~capitalization. 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~~adopted the updated provisions ~~of this new accounting standard~~ at the beginning of fiscal ~~2019~~2019. The Company elected to utilize a practical expedient which allows the Company to use historical amounts disclosed in the Pension and ~~is currently assessing~~Other Post-retirement Benefits footnote as an estimation basis for retrospectively applying the ~~impact~~requirements to separately report the other components in the income statement. Due to the retrospective adoption, the Company reclassified $4.6 million and $9.2 million of ~~adoption~~non-service cost components of net periodic benefit costs out of Operating Income to Interest and Investment Income on ~~its consolidated financial statements.~~the Consolidated Statements of Operations for the three months and six months ended April 29, 2018.

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~~requirements apply prospectively. 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 or annual period. The Company ~~is currently assessing the timing and impact of adopting~~early adopted the updated ~~provisions.~~guidance at the beginning of fiscal 2019, therefore eliminating the requirement to separately measure and report hedge ineffectiveness. The Company applied the amendment to cash flow hedge relationships existing on the date of adoption using a modified retrospective approach.

Presentation and disclosure requirements were applied on a prospective basis. The adoption resulted in an immaterial adjustment from Retained Earnings to Accumulated Other Comprehensive Loss.

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 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 early adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification of $53.8 million to Accumulated Other Comprehensive Loss.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350). The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years and is to be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company early adopted the updated provisions on a prospective basis at the beginning of fiscal 2019. The impact related to adoption was immaterial in the first six months of fiscal 2019, but the Company will continue to evaluate in future quarters.

New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement, and presentation of expenses will depend on the classification as a finance or operating lease. The update also requires certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. In July 2018, the FASB issued ASU 2018-11, which provides an optional transition method in addition to the existing modified retrospective transition method allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The requirements of the new standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2020 and is in the process of ~~assessing~~evaluating the impact of adoption ~~this standard will have~~ 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, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2021 and is in the process of evaluating the impact of adopting the updated provisions.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (ASC). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is currently assessing the impact of adoption on its consolidated financial statements, results of operations, and cash flows.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidanceimproves the disclosure requirements on fair value measurements. The updated guidance ifis effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715). The updated guidance improves disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they either are not relevant to the Company, or they are not expected to have a material effect on its business practices, financial condition, results of operations, or disclosures.

NOTE B - REVENUE RECOGNITION

Revenue from Contracts with Customers: Effective October 29, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers using the full retrospective adoption method. The impact of adopting this guidance was immaterial to the Company’s financial statements and related disclosures. Under ASC 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance, where payment terms are identified, and collectability is probable. The Company’s customer contracts predominantly contain a single performance obligation to fulfill customer orders for the purchase of specified products. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Revenue from product sales is primarily identified by purchase orders (“contracts”) which in some cases are governed by a master sales agreement. The purchase orders in combination with the invoice typically specify quantity and product(s) ordered, shipping terms, and certain aspects of the transaction price including discounts. Contracts are at standalone pricing or governed by pricing lists or brackets. Revenue is recognized as control of the promised good transfers to the customer in an amount reflective of the consideration the Company expects to receive in exchange for those goods. The Company’s revenue is recognized at a point in time when obligations under the terms of the agreement are satisfied once the shipped product is received or picked up by the customer. Revenues are recognized at the net consideration the Company expects to receive in exchange for the goods. The amount of net consideration recognized includes estimates of variable consideration, including costs for trade promotion programs, consumer incentives, and allowances and discounts associated with distressed or potentially unsaleable products.

A majority of the Company’s revenue is short-term in nature with shipments within one year from order date. The Company's payment terms generally range between 7 to 45 days and vary by sales channel and other factors.

The Company promotes products through advertising, consumer incentives, and trade promotions. These programs include discounts, slotting fees, coupons, rebates, and in-store display incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the sale price based on amounts estimated as variable consideration. The Company estimates variable consideration at the expected value method to determine the total consideration which the Company expects to be entitled. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.

The Company elected to account for shipping and handling costs as contract fulfillment costs, and exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price.

Disaggregation of Revenue: The Company discloses revenue by reportable segment. A reconciliation of these disaggregated revenues is provided in Note N - Segment Reporting.

Contract Balances: The Company does not have significant deferred revenue or unbilled receivable balances as a result of transactions with customers.

Contract Costs: The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with duration of one year or less, which are expensed and included in the Consolidated Statements of Operations.

NOTE BC - ACQUISITIONS AND DIVESTITURES

Divestiture: On April 15, 2019, the Company completed the sale of CytoSport, Inc. (CytoSport), which includes the Muscle Milk^® and Evolve^® brands, to PepsiCo, Inc., and received proceeds of $473.9 million, subject to working capital adjustments. The divestiture resulted in a pre-tax gain of approximately $16.5 million recognized in Selling, General and Administrative expense and a tax benefit of $17.0 million recognized within the Provision for Income Taxes on the Consolidated Statements of Operations.

CytoSport's results of operations through the date of divestiture are included within Earnings Before Income Taxes in the Consolidated Statements of Operations and are reported within the Grocery Products and International & Other segments (See Note N - Segment Reporting).

Acquisition: 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~~final purchase price of $857.4 million. ~~The purchase price is preliminary pending final purchase accounting adjustments.~~ The transaction was funded with cash on hand and by borrowing $375.0 million under a term loan facility and $375.0 million under a revolving credit facility.

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

The acquisition was accounted for as a business combination using the acquisition method. The Company ~~has estimated~~obtained an independent appraisal and completed purchase accounting for the acquisition ~~date fair values~~in the fourth quarter of ~~the assets acquired and liabilities assumed using independent appraisals, and determined~~fiscal 2018. A final ~~working capital adjustments. A preliminary~~ allocation of the purchase price to the acquired assets, liabilities, and goodwill is presented in the table below.



(in thousands)
Accounts receivable	$	21,199
Inventory	32,817
Prepaid and other assets	881
Other assets	936
Property, plant and equipment	83,662
Intangible assets	223,704
Goodwill	610,602
Current liabilities	(21,366		)
Deferred taxes	(95,077		)
Purchase price	$	857,358

(in thousands)
Accounts receivable $ 21,257
Inventory 29,699
Prepaid and other assets 881
Other assets 935
Property, plant and equipment 83,663
Intangible assets 231,964
Goodwill 610,836
Current liabilities (21,366 )
Deferred taxes (100,511 )
Purchase price $ 857,358

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets recognized. The $610.6 million of goodwill recorded as part of the acquisition primarily reflects the value of the potential to expand presence in the deli channel and ~~serve~~serves as the catalyst for uniting all of the Company's deli businesses into one customer-facing organization. The goodwill balance is not expected to be deductible for income tax purposes. The goodwill and intangible assets have been allocated to the Refrigerated Foods segment.

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 $103.3 million. 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 with a premium brand in the fast-growing Brazilian market.~~

~~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. 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 $223.7 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 its 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 CD - INVENTORIES

Principal components of inventories are:



(in thousands)	April 28, 2019		October 28, 2018
Finished products	$	586,427	$	525,628
Raw materials and work-in-process	261,663		247,495
Operating supplies	117,956		126,644
Maintenance materials and parts	64,528		63,760
Total	$	1,030,574	$	963,527

(in thousands) July 29,
2018 October 29,
2017
Finished products $ 573,199
$ 511,789
Raw materials and work-in-process 240,122
237,903
Operating supplies 127,702
114,098
Maintenance materials and parts 60,021
57,232
Total $ 1,001,044
$ 921,022

NOTE DE - GOODWILL AND INTANGIBLE ASSETS

Goodwill: The changes in the carrying amounts of goodwill for the ~~third quarter~~three and ~~nine~~six months ended ~~July 29, 2018,~~April 28, 2019, are presented in the table below. The ~~increase~~reduction in goodwill for the quarter is ~~related to purchase accounting adjustments for the Ceratti acquisition based on an updated valuation of the business. For the first nine months, the large increase in goodwill is related~~due to the ~~acquisition~~divestiture of ~~Columbus, acquired~~CytoSport on ~~November 27, 2017. Other minor changes in goodwill during~~April 15, 2019. Beginning balances have been reclassified to conform to the ~~first nine months relate to preliminary purchase accounting adjustments~~current year presentation between segments. See Note N - Segment Reporting and Note C - Acquisitions and Divestitures for ~~the Fontanini and Ceratti acquisitions, acquired on August 16, 2017, and August 22, 2017, respectively.~~additional information.

(in thousands)
Grocery
Products

Refrigerated
Foods
JOTS
International
& Other
Total
Balance as of April 29, 2018 $ 882,582
$ 1,407,131
$ 203,214
$ 239,029
$ 2,731,956
Purchase adjustments —
—
—
2,619
2,619
Balance as of July 29, 2018 $ 882,582
$ 1,407,131
$ 203,214
$ 241,648
$ 2,734,575



(in thousands)	Grocery Products			Refrigerated Foods		JOTS		International & Other			Total
Balance at January 27, 2019	$	857,373		$	1,458,692	$	176,628	$	224,057		$	2,716,750
Goodwill sold	(225,072		)	—		—		(4,945		)	(230,017		)
Foreign currency translation	—			—		—		(98		)	(98		)
Balance at April 28, 2019	$	632,301		$	1,458,692	$	176,628	$	219,014		$	2,486,635



(in thousands)	Grocery Products			Refrigerated Foods		JOTS			International & Other			Total
Reported balance at October 28, 2018	$	882,582		$	1,406,897	$	203,214		$	221,423		$	2,714,116
Segment reclassification	(25,209		)	51,795		(26,586		)	—			—
Adjusted balance at October 28, 2018	857,373			1,458,692		176,628			221,423			2,714,116
Goodwill sold	(225,072		)	—		—			(4,945		)	(230,017		)
Foreign currency translation	—			—		—			2,536			2,536
Balance at April 28, 2019	$	632,301		$	1,458,692	$	176,628		$	219,014		$	2,486,635

(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 —
610,836
—
—
610,836
Purchase adjustments —
596
—
3,330
3,926
Balance as of July 29, 2018 $ 882,582
$ 1,407,131
$ 203,214
$ 241,648
$ 2,734,575

Intangible Assets: The reduction in indefinite and definite-lived intangible assets for fiscal year 2019 is due to the divestiture of CytoSport.

The carrying amounts for indefinite-lived intangible assets are presented in the table below.



(in thousands)	April 28, 2019			October 28, 2018
Brands/tradenames/trademarks	$	959,400		$	1,108,122
Other intangibles	184			184
Foreign currency translation	(3,083		)	(3,484		)
Total	$	956,501		$	1,104,822

The gross carrying amount and accumulated amortization for definite-lived intangible assets are presented in the table below. Additions in the first nine months of fiscal 2018 are due to the allocation of $29.4 million related to the preliminary valuation of customer relationships acquired as part of the Columbus acquisition. These additions were partially offset by preliminary purchase accounting adjustments to the customer relationships valued as part of the Ceratti acquisition. Once fully amortized, the definite-lived intangible assets are removed from the table.



	April 28, 2019					October 28, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer lists/relationships	$	113,739	$	(32,088	)	$	137,039	$	(36,367	)
Other intangibles	6,957		(2,172		)	6,155		(1,547		)
Foreign currency translation	—		(2,545		)	—		(2,883		)
Total	$	120,696	$	(36,805	)	$	143,194	$	(40,797	)

July 29, 2018 October 29, 2017
(in thousands)
Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization
Customer lists/relationships $ 137,039
$ (35,941 ) $ 115,940
$ (25,973 )
Formulas and recipes —
—
1,950
(1,950 )
Other intangibles 7,056
(2,174 ) 3,100
(2,044 )
Total $ 144,095
$ (38,115 ) $ 120,990
$ (29,967 )

Amortization expense was ~~$3.3~~$3.1 million and ~~$9.5~~$6.3 million for the ~~third~~second quarter and ~~nine~~six months ended ~~July 29, 2018,~~April 28, 2019, respectively, compared to ~~$2.1~~$3.0 million and $6.2 million for the ~~third~~second quarter and ~~nine~~six months ended ~~July 30, 2017.~~April 29, 2018.

Estimated annual amortization expense for the five fiscal years after October ~~29, 2017,~~28, 2018, is as follows:



(in millions)
2019	$11.7
2020	10.7
2021	10.7
2022	10.4
2023	9.5

(in millions)
2018 $12.7
2019 12.8
2020 12.7
2021 12.9
2022 12.5

The carrying amounts for indefinite-lived intangible assets are presented in the table below. Additions in the first nine months of fiscal 2018 are due to the allocation of $201.3 million related to the tradenames acquired as part of the Columbus acquisition.

(in thousands) July 29,
2018 October 29,
2017
Brands/tradenames/trademarks $ 1,130,733
$ 935,807
Other intangibles 184
184
Total $ 1,130,917
$ 935,991

NOTE EF - PENSION AND OTHER POST-RETIREMENT BENEFITS

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


	Pension Benefits												Pension Benefits
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018			July 30, 2017			July 29, 2018			July 30, 2017			April 28, 2019			April 29, 2018			April 28, 2019			April 29, 2018
Service cost	$	7,903		$	7,564		$	23,709		$	22,692		$	6,511		$	7,903		$	13,021		$	15,806
Interest cost	14,045			13,565			42,144			40,697			15,095			14,049			30,192			28,098
Expected return on plan assets	(24,776		)	(22,734		)	(74,317		)	(68,202		)	(23,121		)	(24,771		)	(46,246		)	(49,541		)
Amortization of prior service cost	(617		)	(750		)	(1,851		)	(2,250		)	(699		)	(617		)	(1,397		)	(1,234		)
Recognized actuarial loss	4,548			6,542			13,626			19,625			3,701			4,540			7,402			9,079
Curtailment loss (gain)													—			—			2,825			—
Net periodic cost	$	1,103		$	4,187		$	3,311		$	12,562		$	1,487		$	1,104		$	5,797		$	2,208


	Post-retirement Benefits												Post-retirement Benefits
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018			July 30, 2017			July 29, 2018			July 30, 2017			April 28, 2019			April 29, 2018			April 28, 2019			April 29, 2018
Service cost	$	98		$	275		$	739		$	824		$	173		$	321		$	347		$	641
Interest cost	2,692			2,871			8,356			8,613			3,009			2,832			6,174			5,664
Amortization of prior service cost	(812		)	(1,069		)	(2,233		)	(3,206		)	(669		)	(711		)	(1,338		)	(1,421		)
Recognized actuarial loss	44			598			133			1,825			—			45			—			89
Curtailment loss (gain)													—			—			(620		)	—
Net periodic cost	$	2,022		$	2,675		$	6,995		$	8,056		$	2,513		$	2,487		$	4,563		$	4,973

~~During~~Non-service cost components of net pension and postretirement benefit cost are presented within interest and investment income on the ~~third~~Consolidated Statements of Operations.

Curtailments were recognized in the first quarter of fiscal ~~2017,~~2019 due to the ~~Company made discretionary contributions~~sale of ~~$16.1 million to fund its pension plans. No discretionary contributions are expected to be made in fiscal 2018.~~the Fremont facility.

NOTE FG - DERIVATIVES AND HEDGING

The Company uses hedging programs to manage price risk associated with commodity purchases. These programs utilize futures and options contracts to manage the Company’s exposure to price fluctuations in the commodities markets. The Company has

determined its designated hedging programs to be highly effective in offsetting the changes in fair value or cash flows generated by the items hedged. Effectiveness testing is performed on a quarterly basis to ascertain a high level of effectiveness for cash flow and fair value hedging programs.

Cash Flow Hedges: The Company ~~utilizes~~designates corn and lean hog futures and options used to offset price fluctuations in the Company’s future direct grain and hog ~~purchases. The financial instruments are designated and accounted for~~purchases as cash flow ~~hedges, and the Company measures the effectiveness of the hedges at least quarterly.~~hedges. Effective gains or losses related to these cash flow hedges are reported in accumulated other comprehensive loss (AOCL) and reclassified into earnings, through cost of products sold, in the period or periods in which the hedged transactions affect earnings. ~~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 exposure beyond the next two upcoming fiscal years and its hog exposure beyond the next fiscal year. ~~As of July 29, 2018, and October 29, 2017, the Company had the following outstanding commodity futures contracts that were entered into to hedge forecasted purchases:~~



	~~Volume~~
~~Commodity~~	~~July 29, 2018~~	~~October 29, 2017~~
~~Corn~~	~~17.9 million bushels~~	~~11.5 million bushels~~
~~Lean hogs~~	~~0.8 million cwt~~	~~0.3 million cwt~~

As of July 29, 2018, the Company has included in AOCL hedging losses of $11.9 million (before tax) relating to its positions, compared to gains of $1.8 million (before tax) as of October 29, 2017. The Company expects to recognize the majority of these losses over the next 12 months.

Fair Value Hedges: The Company ~~utilizes~~designates the futures it uses to minimize the price risk assumed when fixed forward priced contracts are offered to the Company’s commodity ~~suppliers.~~suppliers as fair value hedges. The intent of the program is to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery. ~~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 with the gain or loss on the hedged purchase commitment, are marked-to-market through earnings and ~~are~~ recorded on the Consolidated Statements of Financial Position as a current asset and liability, respectively. Effective gains or losses related to these fair value hedges are recognized through cost of products sold in the period or periods in which the hedged transactions affect earnings. Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold. As of July 29, 2018, and October 29, 2017, the Company had the following outstanding commodity futures contracts designated as fair value hedges:



	~~Volume~~
~~Commodity~~	~~July 29, 2018~~	~~October 29, 2017~~
~~Corn~~	~~3.4 million bushels~~	~~4.1 million bushels~~
~~Lean hogs~~	~~0.1 million cwt~~	~~0.4 million cwt~~

Other Derivatives: The Company holds certain futures and options contract positions as part of a merchandising program and to manage the Company’s exposure to fluctuations in commodity markets. The Company has not applied hedge accounting to these positions. Activity related to derivatives not designated as hedges is immaterial to the consolidated financial statements.

Volume:As of ~~July 29,~~April 28, 2019, and October 28, 2018, the Company had ~~an immaterial amount of~~the following outstanding ~~corn~~commodity futures and options contracts related to ~~these programs and none at October 29, 2017.~~its hedging programs:



	Volume
Commodity Contracts	April 28, 2019	October 28, 2018
Corn	21.3 million bushels	23.0 million bushels
Lean hogs	299.6 million pounds	56.9 million pounds

Fair ~~Values:~~Value of Derivatives: The fair values of the Company’s derivative instruments (in thousands) as of ~~July 29, 2018,~~ April 28, 2019,

and October ~~29, 2017,~~28, 2018, were as follows:


		Fair Value (1)						Fair Value (1)
	Location on Consolidated Statements of Financial Position	July 29, 2018			October 29, 2017
Asset Derivatives:
Derivatives Designated as Hedges:							Location on Consolidated Statements of Financial Position	April 28, 2019		October 28, 2018
Commodity contracts	Other current assets	$	(9,414	)	$	326	Other Current Assets	$	3,221	$	(30	)

Derivatives Not Designated as Hedges:
Commodity contracts	Other current assets	—			—

Total Asset Derivatives		$	(9,414	)	$	326

(1) Amounts represent the gross fair value of derivative assets and liabilities. 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 amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statements of Financial Position. See Note ~~K “Fair~~L - Fair Value ~~Measurements”~~Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

~~Derivative Gains~~Fair Value Hedge - Assets(Liabilities): The carrying amount of the Company's fair value hedge assets (liabilities) (in thousands) as of April 28, 2019, and ~~Losses:~~ ~~Gains~~October 28, 2018, were as follows:

AOCL Impact: In fiscal 2019, the Company adopted the amended guidance of ASC 815, Derivatives and Hedging. As a result, hedge ineffectiveness related to effective relationships is now deferred in AOCL until the hedged item impacts earnings. Prior to fiscal 2019, gains or losses on the derivative instrument in excess of the cumulative change in the cash flows of the hedged item, if any (i.e, the ineffective portion) were recognized in the Consolidated Statements of Operations during the current period. As of April 28, 2019, the Company has included in AOCL, hedging gains of $0.1 million (before tax) relating to its positions. The Company expects to recognize the majority of these gains over the next 12 months.

The effect of AOCL for gains or losses (before tax, in thousands) related to the ~~Company’s~~Company's derivative instruments for the ~~third quarter~~three months ended ~~July~~April 28, 2019, and April 29, 2018, ~~and July 30, 2017,~~ were as follows:


	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)							Gain/(Loss) Recognized in AOCL (1)						Location on Consolidated Statements of Operations		Gain/(Loss) Reclassified from AOCL into Earnings (1)								Gain/(Loss) Recognized in Earnings (Ineffective Portion)
	Three Months Ended						Three Months Ended							Three Months Ended							Three Months Ended								Three Months Ended								Three Months Ended
Cash Flow Hedges:	July 29, 2018			July 30, 2017			July 29, 2018				July 30, 2017			July 29, 2018				July 30, 2017			April 28, 2019			April 29, 2018					April 28, 2019				April 29, 2018				April 28, 2019			April 29, 2018
Commodity contracts	$	(12,620	)	$	1,490		Cost of products sold		$	(763	)	$	1,758			$	(241	)	$	(22	)
Commodity Contracts																						$	505		$	(862	)	Cost of Products Sold		$	(532	)		$	(40	)		$	—		$	(271	)
Excluded Component (2)																						$	5,930

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: July 29, 2018 July 30, 2017 July 29, 2018 July 30, 2017
Commodity contracts Cost of products sold $ 1,363
$ (730 ) $ 29
$ 51

Location on
Consolidated
Statements
of Operations

Gain/(Loss)
Recognized
in Earnings

Three Months Ended
Derivatives Not
Designated as Hedges:
July 29, 2018 July 30, 2017
Commodity contracts Cost of products sold $ (41 ) $ 9

~~Derivative Gains and Losses:~~ ~~Gains~~The effect of AOCL for gains or losses (before tax, in thousands) related to the ~~Company’s~~Company's derivative instruments for the ~~nine~~six months ended ~~July~~April 28, 2019, and April 29, 2018, ~~and July 30, 2017,~~ were as follows:

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)
Nine Months Ended Nine Months Ended Nine Months Ended
Cash Flow Hedges: July 29, 2018 July 30, 2017 July 29, 2018 July 30, 2017 July 29, 2018 July 30, 2017
Commodity contracts $ (13,869 ) $ 703
Cost of products sold $ (195 ) $ 4,980
$ (602 ) $ 17

Location on
Consolidated
Statements
of Operations

Gain/(Loss)
Recognized in
Earnings (Effective
Portion) (3)

Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (2) (5)
Nine Months Ended Nine Months Ended
Fair Value Hedges: July 29, 2018 July 30, 2017 July 29, 2018 July 30, 2017
Commodity contracts Cost of products sold $ 3,144
$ (1,321 ) $ (243 ) $ 52

Location on
Consolidated
Statements
of Operations

Gain/(Loss)
Recognized
in Earnings

Nine Months Ended
Derivatives Not
Designated as Hedges:
July 29, 2018 July 30, 2017
Commodity contracts Cost of products sold $ 25
$ (228 )



	Gain/(Loss) Recognized in AOCL (1)						Location on Consolidated Statements of Operations	Gain/(Loss) Reclassified from AOCL into Earnings (1)					Gain/(Loss) Recognized in Earnings (Ineffective Portion)
	Six Months Ended							Six Months Ended					Six Months Ended
Cash Flow Hedges:	April 28, 2019			April 29, 2018				April 28, 2019			April 29, 2018		April 28, 2019		April 29, 2018
Commodity Contracts	$	(337	)	$	(1,249	)	Cost of Products Sold	$	(1,775	)	$	568	$	—	$	(361	)
Excluded Component (2)	$	5,243

(1)~~Amounts represent gains or losses in AOCL before tax.~~ See Note ~~H “Accumulated~~I - 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 amount of lean hog options excluded from the assessment of ~~hedge~~ effectiveness ~~during~~for which the ~~third quarter~~difference between changes in fair value and periodic amortization is recorded in AOCL.

Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for gains or ~~first nine months.~~losses (before tax, in thousands) related to the Company's derivative instruments for the three months and six months ended April 28, 2019, and April 29, 2018, were as follows:

~~(3)~~



	Cost of Products Sold
	Three Months Ended						Six Months Ended
	April 28, 2019			April 29, 2018			April 28, 2019			April 29, 2018
Consolidated Statements of Operations	$	1,875,595		$	1,837,765		$	3,747,616		$	3,670,762


Cash Flow Hedges - Commodity Contracts
Gain (loss) reclassified from AOCL	(532		)	(40		)	(1,775		)	568
Amortization of excluded component from options	(1,110		)	—			(2,468		)	—
Gain (loss) due to ineffectiveness	—			(271		)	—			(361		)

Fair Value Hedges - Commodity Contracts
Gain (loss) on commodity futures (1)	705			1,224			1,637			1,781
Gain (loss) due to ineffectiveness	—			(23		)	—			(272		)

Total gain (loss) recognized in earnings	$	(937	)	$	890		$	(2,606	)	$	1,716

(1)Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the ~~third~~ quarter, ~~or the first nine months,~~ which were offset by a corresponding gain 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 the discontinuance of cash flow hedges during the third quarter or first nine months.~~

~~(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 third quarter or first nine months.~~

NOTE GH - INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

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

Investments in and receivables from affiliates ~~consists~~consist of the following:



(in thousands)	Segment	% Owned	April 28, 2019		October 28, 2018
MegaMex Foods, LLC	Grocery Products	50%	$	206,480	$	205,148
Foreign Joint Ventures	International & Other	Various (26-40%)	69,998		68,005
Total			$	276,478	$	273,153

(in thousands)
Segment % Owned July 29,
2018 October 29,
2017
MegaMex Foods, LLC Grocery Products 50% $ 207,956
$ 177,657
Foreign Joint Ventures International & Other Various (26-40%) 68,506
64,712
Total $ 276,462
$ 242,369

Equity in earnings of affiliates consists of the following:



		Three Months Ended					Six Months Ended
(in thousands)	Segment	April 28, 2019			April 29, 2018		April 28, 2019		April 29, 2018
MegaMex Foods, LLC	Grocery Products	$	13,479		$	12,934	$	23,981	$	32,522
Foreign Joint Ventures	International & Other	(188		)	552		768		4,495
Total		$	13,291		$	13,486	$	24,749	$	37,017

Three Months Ended Nine Months Ended
(in thousands)

Segment
July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
MegaMex Foods, LLC Grocery Products $ 11,859
$ 2,528
$ 44,381
$ 20,715
Foreign Joint Ventures International & Other 1,282
1,428
5,777
6,661
Total $ 13,141
$ 3,956
$ 50,158
$ 27,376

~~Dividends~~For the second quarter and six months ended April 28, 2019, $10.0 million of dividends were received from affiliates, ~~for the third quarter and nine months ended July 29, 2018, were $10.0 million and $20.0 million, respectively,~~ compared to ~~$7.0 million and $19.5~~$10.0 million of dividends received for both the ~~third~~second quarter and ~~nine~~six months ended ~~July 30, 2017.~~April 29, 2018.

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, of which ~~$13.8~~$13.2 million is remaining as of ~~July 29, 2018.~~April 28, 2019. This difference is being amortized through ~~equity~~Equity in ~~earnings~~Earnings of ~~affiliates.~~Affiliates.

NOTE HI - ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss are as follows:

(in thousands)
Foreign
Currency
Translation

Pension &
Other
Benefits

Deferred
Gain (Loss) -
Hedging

Accumulated
Other
Comprehensive
Loss
Balance at April 29, 2018 $ 1,766
$ (237,502 ) $ (17 ) $ (235,753 )
Unrecognized gains (losses)
Gross (16,838 ) —
(12,620 ) (29,458 )
Tax effect —
—
3,031
3,031
Reclassification into net earnings
Gross —
3,163
(1) 763
(2) 3,926
Tax effect —
(770 ) (184 ) (954 )
Net of tax amount (16,838 ) 2,393
(9,010 ) (23,455 )
Balance at July 29, 2018 $ (15,072 ) $ (235,109 ) $ (9,027 ) $ (259,208 )


(in thousands)	Foreign Currency Translation			Pension & Other Benefits				Deferred Gain (Loss) - Hedging				Accumulated Other Comprehensive Loss			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	)
Balance at January 27, 2019															$	(42,977	)	$	(247,952	)		$	(1,413	)		$	(292,342	)
Unrecognized gains (losses)
Gross	(8,226		)	—				(13,869		)		(22,095		)	5,730			1				6,435				12,166
Tax effect	—			—				3,341				3,341			—			—				(133		)		(133		)
Reclassification into net earnings
Reclassification into Net Earnings
Gross	—			9,675			(1)	195			(2)	9,870			—			2,333			(1)	532			(2)	2,865
Tax effect	—			(2,309		)		60				(2,249		)	—			(564		)		(127		)		(691		)
Net of tax amount	(8,226		)	7,366				(10,273		)		(11,133		)	5,730			1,770				6,707				14,207
Balance at July 29, 2018	$	(15,072	)	$	(235,109	)		$	(9,027	)		$	(259,208	)
Balance at April 28, 2019															$	(37,247	)	$	(246,182	)		$	5,294			$	(278,135	)



(in thousands)	Foreign Currency Translation			Pension & Other Benefits				Deferred Gain (Loss) - Hedging				Accumulated Other Comprehensive Loss
Reported balance at October 28, 2018	$	(44,854	)	$	(197,613	)		$	(1,031	)		$	(243,498	)
Impact of adoption of ASU
ASU 2017-12	—			—				(21		)	(3)	(21		)
ASU 2018-02	—			(53,778		)	(3)	—				(53,778		)
Adjusted balance at October 28, 2018	(44,854		)	(251,391		)		(1,052		)		(297,297		)
Unrecognized gains (losses)
Gross	7,607			2,204				4,926				14,737
Tax effect	—			(533		)		71				(462		)
Reclassification into Net Earnings
Gross	—			4,667			(1)	1,775			(2)	6,442
Tax effect	—			(1,129		)		(426		)		(1,555		)
Net of tax amount	7,607			5,209				6,346				19,162
Balance at April 28, 2019	$	(37,247	)	$	(246,182	)		$	5,294			$	(278,135	)

(1) Included in the computation of net periodic ~~cost (see~~cost. See Note ~~E “Pension~~F - Pension and Other Post-Retirement ~~Benefits”~~Benefits for additional ~~details).~~details.

(2)Included in ~~cost~~Cost of ~~products sold~~Products Sold in the Consolidated Statements of Operations.

(3)Cumulative effect from the adoption of Accounting Standards Update. See Note A - General for additional details.

NOTE IJ - INCOME TAXES

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

On December 22, 2017, the United States (U.S.) 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, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income, and introducing new limitations on certain business deductions, ~~will not~~ apply ~~for~~to the Company ~~until~~in fiscal 2019. ~~For~~In addition, for fiscal ~~2018,~~2019 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 inwas reduced from a blended rate of 23.4 percent for fiscal 2018, ~~as compared to the previous 35.0 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 21.0 percent in ~~subsequent~~ fiscal ~~years.~~2019 and beyond.

The ~~lower~~Company's effective tax rate for ~~both~~ the ~~third~~second quarter and first ~~nine~~six months of fiscal 2018 is largely due to the passage of the Tax Act. In the third quarter, the Company recorded an adjustment to the provisional non-cash tax benefit of $11.0 million, bringing the deferred tax liability revaluation to $84.8 million for the first nine months of fiscal 2018. A provisional charge of $5.2 million for deemed repatriation of the Company's previously undistributed foreign earnings2019 was recorded in the first quarter with no additional charges in the second or third quarter of fiscal 2018. 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 effective tax rates for the third quarter and first nine months of fiscal 2018 of 18.411.1 percent and ~~12.6~~16.1 percent, respectively, compared to ~~34.3~~20.0 percent and ~~33.7~~10.2 percent for the respective periods last year. The lower effective tax rate in the current quarter resulted from the net tax benefits generated from the CytoSport divestiture and equity based compensation. The Company expects a full-year effective tax rate between ~~15.0~~17.5 percent and ~~16.0~~19.5 percent for fiscal ~~2018.~~2019.

In March 2018, the FASB issued ASU 2018-05,Income Taxes: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (Topic 740), which provides guidance for companies related to the Tax Act. This ASU ~~2018-05~~ allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. Based on current interpretation of the Tax Act, the Company made reasonable estimates to record provisional adjustments during ~~the third quarter and first nine months of~~ fiscal 2018, as described above. ~~As the Company accumulates and processes data to finalize the underlying calculations, and as regulators issue further guidance, estimates may change during fiscal 2018.~~ The Company ~~will continue~~continued to ~~refine~~evaluate such amounts within ~~the measurement period allowed, which will be completed no later than~~ the first quarter of fiscal ~~2019.~~2019 and determined no adjustments were required within the remaining portion of the measurement period. As of January 27, 2019, the Company has completed the accounting for the tax effects of the Tax Act.

During fiscal 2018, the Company provisionally recorded the transition tax on its foreign earnings. Those foreign earnings have been deemed repatriated for U.S. federal tax purposes. The Company maintains all earnings are permanently reinvested. Accordingly, no additional income taxes have been provided for withholding tax, state tax, or other taxes.

The amount of unrecognized tax benefits, including interest and penalties, is recorded in other long-term liabilities. If recognized as of ~~July~~April 28, 2019, and April 29, 2018, ~~and July 30, 2017, $26.0~~$27.7 million and ~~$20.3~~$24.6 million, respectively, would impact the Company’s effective tax rate. The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense. Interest and penalties included in income tax expense was immaterial for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2018 was~~2019, compared to $0.2 million and ~~$0.6 million respectively, compared to $0.1 million and $0.2~~$0.4 million for the ~~comparable quarter and first nine months of~~respective periods in fiscal ~~2017.~~2018. The amount of accrued interest and penalties at ~~July~~April 28, 2019, and April 29, 2018, ~~and July 30, 2017,~~ associated with unrecognized tax benefits was ~~$6.3~~$6.7 million and ~~$2.8~~$6.8 million, respectively.

The Company is regularly audited by federal and state taxing authorities. The United States Internal Revenue Service (I.R.S.) concluded its examination of fiscal ~~2016~~2017 in the ~~first~~second quarter of fiscal ~~2018.~~2019. The Company has elected to participate in the Compliance Assurance Process (CAP) for fiscal years ~~2017 and 2018.~~2018 through 2020. The objective of CAP is to contemporaneously work with the I.R.S. to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company may elect to continue participating in CAP for future tax ~~years; the~~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. While it is reasonably possible that one or more of these audits may be completed within the next 12 months and the related unrecognized tax benefits may change, based on the status of the examinations it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.

NOTE JK - STOCK-BASED COMPENSATION

The Company issues stock options and restricted shares as part of its stock incentive plans for employees and non-employee directors. During the second quarter and six months ended April 28, 2019, stock-based compensation expense was $5.6 million and $13.5 million, respectively, compared to $4.1 million and $11.4 million for the second quarter and six months ended April 29, 2018, respectively.

At April 28, 2019, there was $35.3 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 3.0 years. During the second quarter and six months ended April 28, 2019, cash received from stock option exercises was $28.3 million and $44.3 million, respectively, compared to $6.5 million and $30.0 million, for the second quarter and six months ended April 29, 2018, respectively.

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

Stock Options: 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.

During the third quarter of fiscal 2018, the Company made a one-time grant of 200 stock options to each active, full-time employee and 100 stock options to each active, part-time employee of the Company on April 30, 2018. The options vest in five years and expire ten years after the grant date.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of ~~July 29, 2018,~~April 28, 2019, and changes during the ~~nine~~six months then ended, is as follows:



	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at October 28, 2018	29,536	$	23.55
Granted	1,809	44.37
Exercised	3,521	12.58
Forfeited	527	36.27
Outstanding at April 28, 2019	27,297	26.10		5.6	$	386,180
Exercisable at April 28, 2019	19,036	$	21.00	4.2	$	360,893

Shares
Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic Value
Outstanding at October 29, 2017 30,685
$ 18.08

Granted 6,272
36.39

Exercised 3,905
10.44

Forfeited 259
36.21

Expired 3
37.76

Outstanding at July 29, 2018 32,790
$ 22.35
5.3 $ 473,449
Exercisable at July 29, 2018 23,206
$ 17.00
3.8 $ 457,840

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during the ~~third~~second quarter and first ~~nine~~six months of fiscal years ~~2018~~2019 and ~~2017,~~2018, are as ~~follows.~~follows:



	Three Months Ended				Six Months Ended
	April 28, 2019		April 29, 2018		April 28, 2019		April 29, 2018
Weighted-average grant date fair value	$	8.21	$	6.49	$	9.24	$	6.86
Intrinsic value of exercised options	$	75,545	$	15,512	$	107,786	$	71,814

Three Months Ended Nine Months Ended
July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
Weighted-average grant date fair value $ 7.33
$ —
$ 7.16
$ 6.41
Intrinsic value of exercised options $ 25,136
$ 12,385
$ 96,950
$ 73,473

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				Six Months Ended
	April 28, 2019		April 29, 2018		April 28, 2019		April 29, 2018
Risk-free interest rate	2.6	%	2.7	%	2.8	%	2.3	%
Dividend yield	2.0	%	2.2	%	1.9	%	2.1	%
Stock price volatility	19.0	%	19.0	%	19.0	%	19.0	%
Expected option life	8 years		8 years		8 years		8 years

Three Months Ended Nine Months Ended
July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
Risk-free interest rate 2.9 % — % 2.7 % 2.4 %
Dividend yield 2.1 % — % 2.1 % 2.0 %
Stock price volatility 19.0 % — % 19.0 % 19.0 %
Expected option life 8 years
—
8 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.

Restricted Shares: Restricted shares awarded annually on February 1 are subject to a restricted period which expires the date of the Company’s next annual

stockholders meeting. Newly elected directors receive a prorated award of restricted shares of the Company's common stock, which expires on the date of the Company's second succeeding annual stockholders meeting. A reconciliation of the restricted shares (in thousands) as of ~~July 29, 2018,~~April 28, 2019, and changes during the ~~nine~~six months then ended, is as follows:



	Shares	Weighted- Average Grant Date Fair Value
Restricted at October 28, 2018	52	$	34.08
Granted	51	42.23
Vested	52	34.08
Restricted at April 28, 2019	51	$	42.23

Shares
Weighted-
Average Grant
Date Fair Value
Restricted at October 29, 2017 58
$ 35.62
Granted 52
34.08
Vested 57
35.62
Forfeited 1
35.62
Restricted at July 29, 2018 52
$ 34.08

The weighted-average grant date fair value of restricted shares granted, the total fair value (in thousands) of restricted shares granted, and the fair value (in thousands) of shares that have vested during the first ~~nine~~six months of fiscal years ~~2018~~2019 and ~~2017,~~2018, are as follows:



	Six Months Ended
	April 28, 2019		April 29, 2018
Weighted-average grant date fair value	$	42.23	$	34.08
Fair value of restricted shares granted	2,134		1,760
Fair value of shares vested	1,760		2,053

Nine Months Ended
July 29,
2018 July 30,
2017
Weighted-average grant date fair value $ 34.08
$ 35.62
Fair value of restricted shares granted 1,760
2,080
Fair value of shares vested 2,053
1,920

During the third quarter and nine months ended July 29, 2018, stock-based compensation expense was $6.3 million and $17.7 million, respectively, compared to $2.0 million and $13.9 million for the third quarter and nine months ended July 30, 2017, respectively.

At July 29, 2018, there was $38.4 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 3.4 years. During the third quarter and nine months ended July 29, 2018, cash received from stock option exercises was $10.7 million and $40.7 million, respectively, compared to $5.4 million and $14.3 million for the third quarter and nine months ended July 30, 2017, respectively.

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

NOTE KL - FAIR VALUE MEASUREMENTS

Pursuant to the provisions of ASC 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. ~~Assets~~The Company classifies 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 ~~measured~~carried at fair value on a recurring basis as of ~~July 29, 2018,~~April 28, 2019, and October ~~29, 2017,~~28, 2018, and their level within the fair value hierarchy, are presented in the tables below.


	Fair Value Measurements at July 29, 2018								Fair Value Measurements at April 28, 2019
(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)		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)	$	268,982	$	268,982	$	—	$	—	$	639,327	$	630,947	$	8,380	$	—
Other trading securities (2)	138,922		—		138,922		—
Commodity derivatives (3)	4,119		4,119		—		—
Short-term marketable securities (2)									6,675		2,332		4,343		—
Other trading securities (3)									155,068		—		155,068		—
Commodity derivatives (4)									10,123		4,860		5,263		—
Total Assets at Fair Value	$	412,023	$	273,101	$	138,922	$	—	$	811,193	$	638,139	$	173,054	$	—
Liabilities at Fair Value
Deferred compensation (2)	$	61,652	$	—	$	61,652	$	—
Deferred compensation (3)									$	61,265	$	—	$	61,265	$	—
Total Liabilities at Fair Value	$	61,652	$	—	$	61,652	$	—	$	61,265	$	—	$	61,265	$	—


	Fair Value Measurements at October 29, 2017								Fair Value Measurements at October 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)		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	$	—	$	—	$	459,136	$	459,136	$	—	$	—
Other trading securities ~~(2)~~(3)	128,530		—		128,530		—		137,311		—		137,311		—
Commodity derivatives ~~(3)~~(4)	2,821		2,821		—		—		4,611		4,611		—		—
Total Assets at Fair Value	$	575,473	$	446,943	$	128,530	$	—	$	601,058	$	463,747	$	137,311	$	—
Liabilities at Fair Value
Deferred compensation ~~(2)~~(3)	$	62,341	$	—	$	62,341	$	—	$	60,181	$	—	$	60,181	$	—
Total Liabilities at Fair Value	$	62,341	$	—	$	62,341	$	—	$	60,181	$	—	$	60,181	$	—

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. As these investments~~accounts, and have a maturity date of three months or ~~less, the carrying value approximates fair value.~~less. Cash equivalents considered Level 2 are funds holding agency bonds or securities booked 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 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)

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~~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.~~applicable federal rates. These balances are classified as Level 2.

~~(3)~~(4)

The Company’s commodity derivatives represent futures contracts and options used in its hedging or other programs to offset price fluctuations associated with purchases of corn, soybean meal, 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

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. Over-the-counter (OTC) derivative instruments are valued using discounted cashflow models, observable market inputs, and other mathematical pricing models. The Company’s lean hog option contracts are OTC instruments whose value is calculated using the Black-Scholes pricing model, lean hog future prices quoted from the Chicago Mercantile Exchange, and other adjustments to inputs that are observable in active markets. As the value of these instruments is driven by observable prices in active markets they are classified as Level 2. 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 ~~July 29, 2018,~~April 28, 2019, the Company has recognized the right to reclaim net cash collateral of ~~$13.5~~$6.9 million from various counterparties (including ~~$8.9 million of cash plus $4.6~~$7.9 million of realized gains on closed ~~positions)~~positions offset by cash owed of $1.0 million). As of October ~~29, 2017,~~28, 2018, the Company had recognized the right to reclaim net cash collateral of ~~$2.5~~$4.6 million from various counterparties (including ~~$11.0~~cash of $4.7 million less $0.1 million of realized ~~gains offset by cash owed of $8.5 million on closed positions)~~losses).

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 ~~$634.5~~$257.1 million as of ~~July 29, 2018,~~April 28, 2019, and ~~$266.5~~$631.3 million as of October ~~29, 2017.~~28, 2018.

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 nine~~six months ended ~~July~~April 28, 2019, and April 29, 2018, ~~and July 30, 2017,~~ there were no material remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

NOTE LM - EARNINGS PER SHARE DATA

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



	Three Months Ended		Six Months Ended
(in thousands)	April 28, 2019	April 29, 2018	April 28, 2019	April 29, 2018
Basic weighted-average shares outstanding	535,480	529,799	534,988	529,626
Dilutive potential common shares	10,850	13,012	11,736	13,520
Diluted weighted-average shares outstanding	546,330	542,811	546,724	543,146

Three Months Ended Nine Months Ended
(in thousands) July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
Basic weighted-average shares outstanding 530,606
528,165
529,953
528,487
Dilutive potential common shares 13,156
10,649
13,399
11,017
Diluted weighted-average shares outstanding 543,762
538,814
543,352
539,504

For the ~~third~~second quarter and ~~nine~~six months ended ~~July 29, 2018,~~April 28, 2019, a total of ~~10.6~~2.1 million and ~~7.6~~1.6 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, compared to ~~2.4~~6.8 million and ~~3.4~~6.1 million, respectively, for the ~~third~~second quarter and ~~nine~~six months ended ~~July 30, 2017.~~April 29, 2018.

NOTE MN - 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 four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. ~~As a result of a business realignment at~~At the beginning of fiscal ~~2018,~~2019, the ~~former Specialty~~Hormel Deli Solutions division combined all deli businesses, including the Jennie-O Turkey Store deli division, into one division within the Refrigerated Foods ~~segment results are now reported as part of~~segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. ~~Periods presented herein~~Fiscal 2018 segment results have been ~~recast~~adjusted to reflect ~~this change.~~these changes.

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

The Refrigerated Foods segment consists primarily of the processing, marketing, and sale of branded and unbranded pork, beef, and poultry products for retail, foodservice, deli, and ~~fresh product~~commercial 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, markets, and sells Company products internationally. This segment also includes the results from the Company’s international joint ~~ventures.~~ventures and royalty arrangements.

Intersegment sales are recorded at prices that approximate cost and are eliminated in the Consolidated Statements of Operations. The Company does not allocate investment income, interest expense, and 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 earnings of affiliates is included in segment ~~operating~~ profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included below as ~~net interest~~Net Unallocated Expense and ~~investment expense (income), general corporate expense, and noncontrolling interest~~Noncontrolling Interest when reconciling to ~~earnings before income taxes.~~Earnings Before Income Taxes.

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


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018			July 30, 2017			July 29, 2018			July 30, 2017			April 28, 2019			April 29, 2018			April 28, 2019			April 29, 2018
Sales to Unaffiliated Customers
Grocery Products	$	617,727		$	618,859		$	1,863,147		$	1,869,652		$	635,319		$	621,492		$	1,242,144		$	1,225,069
Refrigerated Foods	1,195,763			1,086,546			3,539,186			3,237,071			1,257,884			1,245,066			2,536,631			2,499,703
Jennie-O Turkey Store	398,058			369,078			1,160,622			1,178,304			305,256			303,875			626,490			626,635
International & Other	147,594			132,892			458,048			389,884			146,285			160,135			299,834			310,454
Total	$	2,359,142		$	2,207,375		$	7,021,003		$	6,674,911		$	2,344,744		$	2,330,568		$	4,705,099		$	4,661,861

Intersegment Sales
Grocery Products	$	14		$	7		$	28		$	22		$	—		$	10		$	22		$	14
Refrigerated Foods	1,660			1,223			5,210			5,039			3,273			1,386			5,451			3,550
Jennie-O Turkey Store	28,069			29,264			78,297			85,080			30,050			25,539			58,861			50,228
International & Other	—			—			—			—			—			—			—			—
Total	29,743			30,494			83,535			90,141			33,323			26,935			64,334			53,792
Intersegment elimination	(29,743		)	(30,494		)	(83,535		)	(90,141		)	(33,323		)	(26,935		)	(64,334		)	(53,792		)
Total	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Net Sales
Grocery Products	$	617,741		$	618,866		$	1,863,175		$	1,869,674		$	635,319		$	621,502		$	1,242,166		$	1,225,083
Refrigerated Foods	1,197,423			1,087,769			3,544,396			3,242,110			1,261,157			1,246,452			2,542,082			2,503,253
Jennie-O Turkey Store	426,127			398,342			1,238,919			1,263,384			335,306			329,414			685,351			676,863
International & Other	147,594			132,892			458,048			389,884			146,285			160,135			299,834			310,454
Intersegment elimination	(29,743		)	(30,494		)	(83,535		)	(90,141		)	(33,323		)	(26,935		)	(64,334		)	(53,792		)
Total	$	2,359,142		$	2,207,375		$	7,021,003		$	6,674,911		$	2,344,744		$	2,330,568		$	4,705,099		$	4,661,861

Segment Operating Profit
Segment Profit
Grocery Products	$	85,540		$	82,116		$	281,168		$	282,789		$	104,499		$	93,206		$	199,796		$	190,751
Refrigerated Foods	138,497			138,314			435,638			442,316			158,088			166,920			320,681			324,451
Jennie-O Turkey Store	34,625			44,986			126,855			176,952			17,749			32,073			55,653			69,797
International & Other	18,646			17,111			64,151			62,191			14,325			20,850			39,303			45,505
Total segment operating profit	277,308			282,527			907,812			964,248
Net interest and investment expense (income)	3,834			1,681			14,747			2,463
General corporate expense	15,852			2,865			33,637			13,308
Total segment profit													294,661			313,049			615,433			630,504
Net unallocated expense													(23,178		)	16,304			(9,287		)	28,698
Noncontrolling interest	110			43			352			159			207			138			301			242
Earnings Before Income Taxes	$	257,732		$	278,024		$	859,780		$	948,636		$	318,046		$	296,883		$	625,021		$	602,048

Revenue has been disaggregated into the categories below to show how sales channels affect the nature, amount, timing, and uncertainty of revenue and cash flows for the second quarter and first six months of fiscal 2019 and 2018.



	Three Months Ended				Six Months Ended
(in thousands)	April 28, 2019		April 29, 2018		April 28, 2019		April 29, 2018
U.S. Retail	$	1,255,507	$	1,257,474	$	2,508,822	$	2,557,146
U.S. Foodservice	716,407		674,244		1,406,312		1,331,347
U.S. Deli	212,715		220,478		463,991		431,475
International	160,115		178,372		325,974		341,893
Total	$	2,344,744	$	2,330,568	$	4,705,099	$	4,661,861

The Company’s products primarily consist of meat and other food products. Perishable includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding JOTS products). Shelf-stable includes canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, hash, stews, meat spreads, flour and corn tortillas,

salsas, tortilla chips, and other items that do not require refrigeration. The Poultry category is composed primarily of JOTS products. The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products. The amount of total revenues contributed by classes of similar products for the second quarter and first six months of fiscal 2019 and 2018 are as follows:



	Three Months Ended				Six Months Ended
(in thousands)	April 28, 2019		April 29, 2018		April 28, 2019		April 29, 2018
Perishable	$	1,317,455	$	1,304,008	$	2,658,607	$	2,622,881
Shelf-stable	444,831		444,748		881,728		869,341
Poultry	427,663		427,669		869,055		871,111
Miscellaneous	154,795		154,143		295,709		298,528
Total	$	2,344,744	$	2,330,568	$	4,705,099	$	4,661,861

Item 2. Management’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.~~28, 2018.

RESULTS OF OPERATIONS

Overview

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

The Company reported net earnings per diluted share of ~~$0.39~~$0.52 for the ~~third~~second quarter of fiscal ~~2018,~~2019, compared to ~~$0.34~~$0.44 per diluted share in the ~~third~~second quarter of fiscal ~~2017.~~2018. Significant factors impacting the quarter were:

The Company delivered ~~record net~~ earnings ~~resulting~~growth. Net earnings benefited from one-time gains associated with the divestiture of CytoSport, Inc. (CytoSport), lower SG&A, and a strong ~~performance in~~quarter from Grocery ~~Products~~Products.

Three of the Company's four segments delivered volume and International & Other, the inclusion of three acquisitions, and the benefit from tax reform. These factors more than offset increases in freight costs, volatility due to tariffs, increased advertising investment, and continued oversupply in the turkey industry.net sales growth.

Refrigerated Foods segment profit ~~finished~~declined as growth in ~~line with last year. The inclusion of the Fontanini and Columbus acquisitions and strong~~ value-added ~~sales by the retail and foodservice businesses~~profits did not fully offset ~~an 88%~~a steep decline in commodity ~~profits, a double-digit increase in per-unit freight costs, and higher advertising investments.~~profits. Higher operational expenses related to capacity expansion projects also impacted profitability.

Grocery Products ~~segment~~ profit increased ~~as core Grocery Products earnings more than offset a decline in contract manufacturing~~primarily due to higher volume and ~~increased advertising investments.~~margin across many product categories.

JOTS segment profit ~~decreased as a result of lower profits from whole bird sales, double-digit increases in per-unit freight~~was negatively impacted by higher-than-expected plant startup costs, higher feed costs, and ~~increased advertising investments.~~lower retail sales.

International & Other ~~segment~~ profit ~~increased as improved profitability in China more than offset lower~~decreased primarily due to the continued impact of tariffs on fresh pork ~~export profits due to tariffs and increased advertising investments.~~exports along with higher freight costs.

~~Subsequent to the end of the quarter, the~~The Company ~~announced~~completed the sale of ~~the Fremont pork processing facility~~CytoSport to ~~WholeStone Farms, LLC, for $30 million.~~PepsiCo, Inc., on April 15, 2019. The ~~transaction is~~Company received $473.9 million in cash, subject to ~~customary closing conditions~~working capital adjustments, and ~~is expected~~used the proceeds to ~~be completed in December 2018. The transaction includes a multi-year agreement to supply~~pay off the ~~Company with pork raw materials.~~remaining debt from the Columbus Manufacturing, Inc. (Columbus) acquisition.

Consolidated Results

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


	Three Months Ended					Nine Months Ended					Three Months Ended						Six Months Ended
(in thousands, except per share amounts)	July 29, 2018		July 30, 2017		% Change	July 29, 2018		April 30, 2017		% Change	April 28, 2019			April 29, 2018		% Change	April 28, 2019			April 29, 2018		% Change
Volume (lbs.)											1,180,007			1,171,401		0.7	2,376,900			2,361,993		0.6
Net sales											$	2,344,744		$	2,330,568	0.6	$	4,705,099		$	4,661,861	0.9
Net earnings	$	210,243	$	182,508	15.2	$	750,734	$	628,581	19.4	282,429			237,384		19.0	$	523,854		$	540,491	(3.1	)
Diluted earnings per share	0.39		0.34		14.7	1.38		1.17		17.9	0.52			0.44		18.2	0.96			1.00		(4.0	)
Adjusted net earnings											248,988		⁽¹⁾	237,384		4.9	490,413		⁽¹⁾	540,491		(9.3	)
Adjusted diluted earnings per share											0.46		⁽¹⁾	0.44		4.5	0.90		⁽¹⁾	1.00		(10.0	)

~~Net Sales~~

Three Months Ended Nine Months Ended
(in thousands) July 29, 2018 July 30, 2017
%
Change
July 29, 2018 July 30, 2017
%
Change
Volume (lbs.) 1,170,893
1,112,064
5.3
3,532,886
3,495,215
1.1
Organic volume⁽¹⁾
1,121,020
1,112,064
0.8
3,389,442
3,414,761
(0.7 )
Net sales $ 2,359,142
$ 2,207,375
6.9
$ 7,021,003
$ 6,674,911
5.2
Organic net sales⁽¹⁾
2,202,365
2,207,375
(0.2 ) 6,577,436
6,574,680
—

⁽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~~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~~These 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~~Adjusted net ~~sales~~earnings and ~~organic volume are defined as net sales and volume excluding the impact of acquisitions and divestitures. Organic net sales and organic volume~~diluted earnings per share exclude the ~~impacts of the acquisition of Columbus Craft Meats (November 2017), the acquisition of Fontanini Italian Meats and Sausages (August 2017), and~~one-time gain associated with the divestiture of ~~Farmer John (January 2017)~~the CytoSport business, which was recognized in ~~Refrigerated Foods~~Net Unallocated Expense and Provision for Income Taxes. The tax benefit was driven by the ~~acquisition~~sale of ~~Ceratti (August 2017) in International.~~shares of the CytoSport legal entity. The ~~tables~~table below ~~show~~shows the calculations to reconcile from the non-GAAP adjusted measures to the GAAP ~~measures~~measure in both the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2018 and fiscal 2017.~~2019.

Third Quarter
Volume (lbs.) FY 2018 FY 2017
(in thousands)
Reported
(GAAP)
Acquisitions
Organic
(Non-GAAP)

Reported
(GAAP)

Organic
% Change
Grocery Products 327,890
—
327,890
330,505
(0.8 )
Refrigerated Foods 530,337
(37,482 ) 492,855
503,296
(2.1 )
Jennie-O Turkey Store 227,903
—
227,903
200,143
13.9
International & Other 84,763
(12,391 ) 72,372
78,120
(7.4 )
Total Volume 1,170,893
(49,873 ) 1,121,020
1,112,064
0.8

Net Sales FY 2018 FY 2017
(in thousands)
Reported
(GAAP)
Acquisitions
Organic
(Non-GAAP)

Reported
(GAAP)

Organic
% Change
Grocery Products $ 617,727
$ —
$ 617,727
$ 618,859
(0.2 )
Refrigerated Foods 1,195,763
(137,803 ) 1,057,960
1,086,546
(2.6 )
Jennie-O Turkey Store 398,058
—
398,058
369,078
7.9
International & Other 147,594
(18,974 ) 128,620
132,892
(3.2 )
Total Net Sales $ 2,359,142
$ (156,777 ) $ 2,202,365
$ 2,207,375
(0.2 )



	Second Quarter
	2019 Non-GAAP Adjusted Earnings			Gain on CytoSport Sale			2019 GAAP Earnings
Grocery Products	$	104,499		$	—		$	104,499
Refrigerated Foods	158,088			—			158,088
Jennie-O Turkey Store	17,749			—			17,749
International & Other	14,325			—			14,325
Total segment profit	$	294,661		$	—		$	294,661
Net Unallocated Expense	(6,709		)	(16,469		)	(23,178		)
Noncontrolling interest	207			—			207
Earnings Before Income Taxes	$	301,577		$	16,469		$	318,046
Provision for income taxes	52,382			(16,972		)	35,410
Net Earnings	$	249,195		$	33,441		$	282,636
Less: Net earnings attributable to noncontrolling interest	207			—			207
Net Earnings attributable to Hormel Foods Corporation	$	248,988		$	33,441		$	282,429

Diluted Earnings Per Share	$	0.46		$	0.06		$	0.52


First Nine Months
Volume (lbs.)	FY 2018							FY 2017
(in thousands)	Reported (GAAP)		Acquisitions			Organic (Non-GAAP)		Reported (GAAP)		Divestitures			Organic (Non-GAAP)		Organic % Change
																	First Six Months
																	2019 Non-GAAP Adjusted Earnings		Gain on CytoSport Sale			2019 GAAP Earnings
Grocery Products	995,505		—			995,505		1,008,180		—			1,008,180		(1.3	)	$	199,796	$	—		$	199,796
Refrigerated Foods	1,641,151		(107,544		)	1,533,607		1,633,211		(80,454		)	1,552,757		(1.2	)	320,681		—			320,681
Jennie-O Turkey Store	634,140		—			634,140		620,343		—			620,343		2.2		55,653		—			55,653
International & Other	262,090		(35,900		)	226,190		233,481		—			233,481		(3.1	)	39,303		—			39,303
Total Volume	3,532,886		(143,444		)	3,389,442		3,495,215		(80,454		)	3,414,761		(0.7	)
Total segment profit																	$	615,433	$	—		$	615,433
Net Unallocated Expense																	7,182		(16,469		)	(9,287		)
Noncontrolling interest																	301		—			301
Earnings Before Income Taxes																	$	608,552	$	16,469		$	625,021
Provision for income taxes																	117,838		(16,972		)	100,866
Net Earnings																	$	490,714	$	33,441		$	524,155
Less: Net earnings attributable to noncontrolling interest																	301		—			301
Net Earnings attributable to Hormel Foods Corporation																	$	490,413	$	33,441		$	523,854


Net Sales	FY 2018							FY 2017
(in thousands)	Reported (GAAP)		Acquisitions			Organic (Non-GAAP)		Reported (GAAP)		Divestitures			Organic (Non-GAAP)		Organic % Change
Grocery Products	$	1,863,147	$	—		$	1,863,147	$	1,869,652	$	—		$	1,869,652	(0.3	)
Refrigerated Foods	3,539,186		(383,698		)	3,155,488		3,237,071		(100,231		)	3,136,840		0.6
Jennie-O Turkey Store	1,160,622		—			1,160,622		1,178,304		—			1,178,304		(1.5	)
International & Other	458,048		(59,869		)	398,179		389,884		—			389,884		2.1
Total Net Sales	$	7,021,003	$	(443,567	)	$	6,577,436	$	6,674,911	$	(100,231	)	$	6,574,680	—
Diluted Earnings Per Share																	$	0.90	$	0.06		$	0.96

The increase in net sales for the ~~third~~second quarter of fiscal ~~2018~~2019 was ~~driven by the inclusion of the Columbus, Fontanini, and Ceratti acquisitions along with growth from many of the Company's brands across the organization. Organic~~primarily related to increased whole bird sales ~~growth was flat for the quarter. Higher sales of whole birds~~ at JOTS, Herdez^® salsas and sauces, Hormel^® Natural Choice^® products, Hormel^®Bacon 1^TMcooked bacon, and Wholly^®guacamoledips. Partially offsetting these gains were declines in fresh pork retail and ~~foodservice~~export sales of ~~Hormel~~^® ~~Natural Choice~~^® ~~products, retail~~and lean ground turkey sales of ~~Wholly Guacamole~~^® ~~dips and~~ ~~Herdez~~^®~~sauces and salsas, and foodservice sales of~~ ~~Austin Blues~~^®~~smoked barbecue products were offset by declines due to lower hog harvest volumes, the CytoSport portfolio, and the Company's contract manufacturing business in Grocery Products.~~at JOTS.

For the first ~~nine~~six months of ~~2018,~~2019, the increase in net sales was primarily related to ~~the inclusion of the~~ growth from value-added products such as Columbus ~~Fontanini,~~^® branded items, Herdez^® salsas and ~~Ceratti acquisitions,~~sauces, Hormel^® pepperoni, Hormel^® Natural Choice^® products, and Wholly^® guacamole dips more than offsetting declines in fresh pork retail and export sales and lean ground turkey sales at ~~JOTS, CytoSport, and the Company's contract manufacturing business in Grocery Products.~~JOTS.

Cost of Products Sold


	Three Months Ended					Nine Months Ended					Three Months Ended					Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change	July 29, 2018		July 30, 2017		% Change	April 28, 2019		April 29, 2018		% Change	April 28, 2019		April 29, 2018		% Change
Cost of products sold	$	1,899,970	$	1,754,966	8.3	$	5,562,966	$	5,183,302	7.3	$	1,875,595	$	1,837,765	2.1	$	3,747,616	$	3,670,762	2.1

~~The cost~~Cost of products sold for the ~~third~~second quarter and first ~~nine~~six months of ~~2018~~fiscal 2019 were higher as a result of ~~the inclusion of the Columbus, Fontanini,~~increased input costs, operational expenses, and ~~Ceratti acquisitions and higher~~per-unit freight ~~costs, especially in the Refrigerated Foods and JOTS segments.~~expenses.

Gross Profit


	Three Months Ended							Nine Months Ended								Three Months Ended								Six Months Ended
(in thousands)	July 29, 2018			July 30, 2017			% Change	July 29, 2018			July 30, 2017			% Change		April 28, 2019			April 29, 2018			% Change		April 28, 2019			April 29, 2018			% Change
Gross profit	$	459,172		$	452,409		1.5	$	1,458,037		$	1,491,609		(2.3	)	$	469,149		$	492,803		(4.8	)	$	957,483		$	991,099		(3.4	)
Percentage of net sales	19.5		%	20.5		%		20.8		%	22.3		%			20.0		%	21.1		%			20.3		%	21.3		%

Gross profit as a percentage of net sales declined for the second quarter. Margins in Grocery Products increased in the second quarter of fiscal 2019 due to higher margins across many categories, while Refrigerated Foods, JOTS, and International & Other ~~increased in the third quarter of fiscal 2018, while Refrigerated Foods, Grocery Products and JOTS~~ declined compared to the prior year. ~~Lower raw material costs in China positively impacted International & Other margins during the quarter.~~ Margins in Refrigerated Foods were negatively impacted by lower commodity profits and ~~unfavorable~~higher operational expenses. JOTS declined on higher-than-expected plant ~~variances. Grocery Products margins in the third quarter were~~startup expenses, higher feed costs, and lower retail sales. International & Other was negatively impacted by ~~a weaker sales mix due to declines at CytoSport. Depressed turkey commodity markets pressured JOTS in the third quarter. Additionally,~~lower fresh pork exports and higher freight ~~costs negatively impacted all segments.~~ costs.

For the first ~~nine~~six months of ~~2018,~~2019, gross profit as a percentage of net sales ~~was flat for International & Other while down in~~declined due to lower pork commodity profits, higher freight expenses, higher operational expenses, and lower fresh pork exports.

Looking to the second half of fiscal 2019, the Company expects the Refrigerated Foods, Grocery Products, and ~~JOTS. Reduced commodity profitability, input cost volatility, and higher freight costs were the main drivers of the declines.~~

~~Looking ahead to the fourth quarter, the Company expects Refrigerated Foods and the~~ International & Other segments to ~~grow their value-added businesses~~experience periods of margin compression due to rising and ~~offset~~volatile pork markets as a ~~portion~~result of the impact of ~~higher freight costs. Pork~~

African swine fever in China. Additionally, pork export margins ~~in the International & Other segment will likely be~~could remain challenged due to tariffs ~~on exports to China. Grocery Products anticipates continued challenges at CytoSport~~ and ~~within contract manufacturing as well as increased freight costs. The depressed~~global trade uncertainty. Lost lean ground turkey ~~commodity markets are anticipated to continue~~distribution is expected to negatively impact ~~JOTS for the remainder of the year.~~JOTS.

Selling, General and Administrative (SG&A)


	Three Months Ended							Nine Months Ended							Three Months Ended								Six Months Ended
(in thousands)	July 29, 2018			July 30, 2017			% Change	July 29, 2018			July 30, 2017			% Change	April 28, 2019			April 29, 2018			% Change		April 28, 2019			April 29, 2018			% Change
SG&A	$	210,747		$	176,660		19.3	$	633,668		$	567,886		11.6	$	170,076		$	204,549		(16.9	)	$	363,620		$	424,421		(14.3	)
Percentage of net sales	8.9		%	8.0		%		9.0		%	8.5		%		7.3		%	8.8		%			7.7		%	9.1		%

For the ~~third~~second quarter of fiscal 2019, SG&A expenses decreased primarily due to a one-time gain resulting from the CytoSport divestiture and lower selling expenses. For the first six months of fiscal 2019, SG&A expenses declined due to the gain from the CytoSport divestiture, a legal settlement, and lapping Columbus acquisition costs from the prior year. Selling expenses have also been favorable.

Advertising investments declined moderately from the prior year in the second quarter and first ~~nine~~six months of fiscal ~~2018, SG&A expenses increased~~2019 and are expected to be modestly lower compared to the prior year due to the ~~inclusion of the Columbus, Fontanini, and Ceratti acquisitions and higher advertising investments. Advertising investments are expected to increase approximately 20 percent for the year.~~CytoSport divestiture.

Equity in Earnings of Affiliates


	Three Months Ended					Nine Months Ended					Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change	July 29, 2018		July 30, 2017		% Change	April 28, 2019		April 29, 2018		% Change		April 28, 2019		April 29, 2018		% Change
Equity in earnings of affiliates	$	13,141	$	3,956	232.2	$	50,158	$	27,376	83.2	$	13,291	$	13,486	(1.4	)	$	24,749	$	37,017	(33.1	)

Results for the ~~third~~second quarter ~~and~~of fiscal 2019 were in-line with last year. For the first ~~nine~~six months of fiscal ~~2018 were positively~~2019, equity in earnings of affiliates was negatively impacted by ~~strong~~the effect of a non-operating tax benefit in the Company's MegaMex ~~results~~joint venture in fiscal 2018 and ~~tax reform.~~lower international joint venture earnings.

Effective Tax Rate

Three Months Ended Nine Months Ended
July 29, 2018 July 30, 2017 July 29,
2018 July 30,
2017
Effective tax rate 18.4 % 34.3 % 12.6 % 33.7 %



	Three Months Ended				Six Months Ended
	April 28, 2019		April 29, 2018		April 28, 2019		April 29, 2018
Effective tax rate	11.1	%	20.0	%	16.1	%	10.2	%

The lower effective tax rate for both the third quarter and first nine months of fiscal 2018 reflects the impact of the Tax Cuts and Jobs Act signed into law on December 22, 2017. In the third quarter, the Company recorded an adjustment to the provisional non-cash tax benefit of $11.0 million, bringing the deferred tax liability revaluation to $84.8 million for the first nine months of fiscal 2018. A provisional charge of $5.2 million for deemed repatriation of the Company's previously undistributed foreign earnings was recorded in the first quarter with no additional charges in the second or third quarter. The one-time tax events and reduction in the federal statutory tax rate were the main drivers of the Company's effective tax rates for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2018~~2019 of ~~18.4~~11.1 percent and ~~12.6~~16.1 percent, respectively, ~~compared to 34.3~~versus 20.0 percent and ~~33.7~~10.2 percent for the respective periods last year. The lower effective tax rate in the current quarter resulted from the net tax benefits generated by the CytoSport divestiture and equity based compensation. The Company expects a full-year effective tax rate between ~~15.0~~17.5 and ~~16.0~~19.5 percent for fiscal ~~2018.~~2019. For further ~~description~~information refer to Note ~~I "Income Taxes".~~J - Income Taxes.

Segment Results

Net sales and operating profits for each of the Company’s reportable segments are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent these segments, if operated independently, would report the operating profit and other financial information shown below. At the beginning of fiscal 2019, the Hormel Deli Solutions division combined all deli businesses, including the Jennie-O Turkey Store deli division, into one division within the Refrigerated Foods segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. Fiscal 2018 segment results have been adjusted to reflect these changes. Additional segment financial information can be found in Note MN - Segment Reporting of the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.


	Three Months Ended						Nine Months Ended						Three Months Ended							Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change		July 29, 2018		July 30, 2017		% Change		April 28, 2019			April 29, 2018		% Change		April 28, 2019			April 29, 2018		% Change
Net Sales
Grocery Products	$	617,727	$	618,859	(0.2	)	$	1,863,147	$	1,869,652	(0.3	)	$	635,319		$	621,492	2.2		$	1,242,144		$	1,225,069	1.4
Refrigerated Foods	1,195,763		1,086,546		10.1		3,539,186		3,237,071		9.3		1,257,884			1,245,066		1.0		2,536,631			2,499,703		1.5
Jennie-O Turkey Store	398,058		369,078		7.9		1,160,622		1,178,304		(1.5	)	305,256			303,875		0.5		626,490			626,635		—
International & Other	147,594		132,892		11.1		458,048		389,884		17.5		146,285			160,135		(8.6	)	299,834			310,454		(3.4	)
Total	$	2,359,142	$	2,207,375	6.9		$	7,021,003	$	6,674,911	5.2		$	2,344,744		$	2,330,568	0.6		$	4,705,099		$	4,661,861	0.9

Segment Operating Profit
Segment Profit
Grocery Products	$	85,540	$	82,116	4.2		$	281,168	$	282,789	(0.6	)	$	104,499		$	93,206	12.1		$	199,796		$	190,751	4.7
Refrigerated Foods	138,497		138,314		0.1		435,638		442,316		(1.5	)	158,088			166,920		(5.3	)	320,681			324,451		(1.2	)
Jennie-O Turkey Store	34,625		44,986		(23.0	)	126,855		176,952		(28.3	)	17,749			32,073		(44.7	)	55,653			69,797		(20.3	)
International & Other	18,646		17,111		9.0		64,151		62,191		3.2		14,325			20,850		(31.3	)	39,303			45,505		(13.6	)
Total segment operating profit	277,308		282,527		(1.8	)	907,812		964,248		(5.9	)
Net interest and investment expense	3,834		1,681		128.1		14,747		2,463		498.7
General corporate expense	15,852		2,865		453.3		33,637		13,308		152.8
Total segment profit													294,661			313,049		(5.9	)	615,433			630,504		(2.4	)
Net unallocated expense													(23,178		)	16,304		(242.2	)	(9,287		)	28,698		(132.4	)
Noncontrolling interest	110		43		155.8		352		159		121.4		207			138		50.0		301			242		24.4

Earnings before income taxes	$	257,732	$	278,024	(7.3	)	$	859,780	$	948,636	(9.4	)	$	318,046		$	296,883	7.1		$	625,021		$	602,048	3.8
* FY18 segment results have been adjusted to reflect the changes in the Grocery Products, Refrigerated Foods and Jennie-O Turkey Store segments.													* FY18 segment results have been adjusted to reflect the changes in the Grocery Products, Refrigerated Foods and Jennie-O Turkey Store segments.

Grocery Products

Results for the Grocery Products segment compared to the prior year are as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended					Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change		July 29, 2018		July 30, 2017		% Change		April 28, 2019		April 29, 2018		% Change	April 28, 2019		April 29, 2018		% Change
Volume (lbs.)	327,890		330,505		(0.8	)	995,505		1,008,180		(1.3	)	340,602		329,424		3.4	679,345		658,731		3.1
Net sales	$	617,727	$	618,859	(0.2	)	$	1,863,147	$	1,869,652	(0.3	)	$	635,319	$	621,492	2.2	$	1,242,144	$	1,225,069	1.4
Segment profit	85,540		82,116		4.2		281,168		282,789		(0.6	)	104,499		93,206		12.1	199,796		190,751		4.7

Net sales for the ~~third~~second quarter of fiscal 2019 increased on growth from Herdez^® salsas and sauces, Wholly^®guacamole dips, and Skippy^® peanut butter, partially offset by lower sales of CytoSport products. For the first ~~nine~~six months of fiscal ~~2018 decreased as mid-single-digit~~2019, net sales growth infrom the Company's ~~core Grocery Products portfolio, led by~~ ~~Wholly Guacamole~~^® ~~dips~~MegaMex joint venture and ~~Herdez~~^® ~~salsas and sauces was~~other key brands more than offset by declines ~~across the CytoSport portfolio and the Company's contract manufacturing business.~~at CytoSport.

For the ~~third~~second quarter, segment profit increased primarily due to higher volume and margin across many categories and lower expenses for CytoSport. Segment profit increased for the first six months of fiscal 2019 as ~~core Grocery Products earnings~~higher volumes and margins and a legal settlement more than offset ~~declines~~the effect of a non-operating tax benefit in ~~contract manufacturing. Segment profit for the first nine months of fiscal 2018 declined due to lower earnings from~~ the Company's ~~contract manufacturing business and lower volumes at CytoSport. Declines were partially offset by strong results from the core Grocery Products business, notably the~~ MegaMex joint ~~venture.~~venture in fiscal 2018.

The Company anticipates volume, sales, and ~~earnings~~profit declines in the ~~fourth quarter, impacted~~second half due to the divestiture of CytoSport, the potential for higher input costs due to African swine fever, and a price decline on Skippy^® peanut butter products driven by ~~lower sales from the Company's contract manufacturing business, increased freight costs, and higher advertising investments.~~competitive pressures.

Refrigerated Foods

Results for the Refrigerated Foods segment compared to the prior year are as follows:


	Three Months Ended					Nine Months Ended						Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change	July 29, 2018		July 30, 2017		% Change		April 28, 2019		April 29, 2018		% Change		April 28, 2019		April 29, 2018		% Change
Volume (lbs.)	530,337		503,296		5.4	1,641,151		1,633,211		0.5		578,795		577,394		0.2		1,168,151		1,170,170		(0.2	)
Net sales	$	1,195,763	$	1,086,546	10.1	$	3,539,186	$	3,237,071	9.3		$	1,257,884	$	1,245,066	1.0		$	2,536,631	$	2,499,703	1.5
Segment profit	138,497		138,314		0.1	435,638		442,316		(1.5	)	158,088		166,920		(5.3	)	320,681		324,451		(1.2	)

~~Third~~Second quarter net sales ~~increased~~increases were led by foodservice products such as ~~a result of the Columbus and Fontanini acquisitions in addition to strong foodservice sales of~~ ~~Austin Blues~~Hormel^® ~~smoked barbeque~~Bacon 1^TM cooked bacon, Hormel^®Fire Braised^TM products, and ~~retail~~Austin Blues^® authentic barbeque products. Retail products such as Hormel^® Black Label^® bacon, Hormel^® Natural Choice^® products, Hormel^® pepperoni, and Hormel^® prepared foods products for the deli also showed excellent growth. Branded value-added sales of ~~Hormel~~^® ~~Natural Choice~~^® ~~and~~ ~~Applegate~~^®growth was offset by a double-digit decline in commodity sales as the Company converts commodity pork to value-added products. For the first ~~nine~~six months of ~~2018, incremental sales~~2019, growth from ~~acquisitions and growth~~many value-added products more than offset declines in ~~the value-added portfolios offset the impact of the Farmer John divestiture and lower hog harvest volumes.~~commodity sales.

Refrigerated Foods profit for the quarter declined as growth in value-added profits did not fully offset ~~an 88%~~a steep decline in commodity profits ~~a double-digit increase in per-unit freight costs,~~ and higher ~~advertising investments~~operational expenses related to ~~deliver segment profit results in line with last year.~~capacity expansion projects. Segment profit for the first ~~nine~~six months declined due to reduced commodity profits, increased freight ~~costs, one-time transaction costs for the Columbus acquisition,~~expenses, and ~~the divestiture of the Farmer John business.~~higher operational expenses.

Looking ahead to the second half, Refrigerated Foods is expected to ~~continue~~grow sales and earnings due to ~~benefit from the inclusion of acquisitions along with strong momentum~~strength in the value-added ~~businesses while managing through commodity volatility and increased freight costs.~~portfolio. Higher input costs due to the impact of African swine fever present a risk. This could lead to short-term margin compression as branded value-added pricing actions lag input cost increases.

Jennie-O Turkey Store

Results for the JOTS segment compared to the prior year are as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change		July 29, 2018		July 30, 2017		% Change		April 28, 2019		April 29, 2018		% Change		April 28, 2019		April 29, 2018		% Change
Volume (lbs.)	227,903		200,143		13.9		634,140		620,343		2.2		175,611		172,705		1.7		357,770		355,765		0.6
Net sales	$	398,058	$	369,078	7.9		$	1,160,622	$	1,178,304	(1.5	)	$	305,256	$	303,875	0.5		$	626,490	$	626,635	—
Segment profit	34,625		44,986		(23.0	)	126,855		176,952		(28.3	)	17,749		32,073		(44.7	)	55,653		69,797		(20.3	)

For the ~~third~~second quarter, ~~volume and~~ sales ~~gains~~ were ~~driven by increases~~flat as improved results in whole bird and ~~commodity~~foodservice sales were offset by declines in ~~addition~~retail sales due to ~~strong value-added~~the lingering impact of two voluntary product recalls. Net sales ~~growth led by~~ ~~Jennie-O~~^® ~~premium deli products and~~ ~~Jennie-O~~^® ~~lean ground turkey. For~~for the first ~~nine~~six months of fiscal ~~2018, sales declines~~2019 were ~~due primarily to lower~~flat, as improved foodservice, commodity, and whole bird sales asoffset a ~~result of continued oversupply of turkeys~~decline in ~~the industry. This decline was partially offset by increased~~ retail ~~sales, led by~~ ~~Jennie-O~~^® ~~lean ground turkey and~~ ~~Jennie-O~~^® ~~Oven Ready~~^® ~~products.~~sales.

Segment profit for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2018 decreased as a result of~~2019 was lower, ~~profits from whole bird and commodity sales, increased freight~~impacted by higher-than-expected plant startup expenses, higher feed costs, and ~~increased advertising investments.~~lower retail sales.

JOTS anticipates ~~a continued~~an earnings decline in the ~~fourth quarter~~second half compared to last year ~~due to the challenging commodity environment and higher freight costs.~~driven by lower retail sales of lean ground turkey.

International & Other

Results for the International & Other segment compared to the prior year are as follows:


	Three Months Ended					Nine Months Ended					Three Months Ended						Six Months Ended
(in thousands)	July 29, 2018		July 30, 2017		% Change	July 29, 2018		July 30, 2017		% Change	April 28, 2019		April 29, 2018		% Change		April 28, 2019		April 29, 2018		% Change
Volume (lbs.)	84,763		78,120		8.5	262,090		233,481		12.3	84,999		91,878		(7.5	)	171,634		177,327		(3.2	)
Net sales	$	147,594	$	132,892	11.1	$	458,048	$	389,884	17.5	$	146,285	$	160,135	(8.6	)	$	299,834	$	310,454	(3.4	)
Segment profit	18,646		17,111		9.0	64,151		62,191		3.2	14,325		20,850		(31.3	)	39,303		45,505		(13.6	)

Volume, ~~and~~ net sales, ~~for~~and segment profit decreases in the ~~third~~second quarter and first six months of fiscal ~~2018 increased~~2019 were primarily due to the ~~inclusion~~continued impact of tariffs on fresh pork exports and higher freight expenses. This weakness more than offset strong results from the ~~Ceratti~~China business, ~~higher export~~which increased sales ~~for~~ of branded value-added products such as SPAM^® luncheon meat and Skippy^® peanut butter, and stronger sales for the China multinational business. Fresh pork volume and net sales declined sharply in the third quarter due to the impact of increased tariffs in key markets. For the first nine months of fiscal 2018, the inclusion of the Ceratti business and strong results in China drove the volume and net sales gains.butter.

For the third quarter and first nine months of fiscal 2018, segment profit increased as improved profitability in China more than offset lower fresh pork export profits and increased advertising investments. Fresh pork export profits were negatively impacted by the increased tariffs noted above.

The Company anticipates ~~continued~~ volume and sales ~~and~~growth while earnings ~~growth in the fourth quarter driven by positive momentum for branded exports and improving business results in China.~~are expected to decline due to lower margins on fresh pork exports. Pork exports remain a risk due to ~~tariffs.~~global trade uncertainty.

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.~~the corporate level. 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 Nine Months Ended
(in thousands) July 29,
2018 July 30,
2017 July 29,
2018 July 30,
2017
Interest and investment income $ 4,601
$ 1,376
$ 5,418
$ 6,643
Interest expense (8,435 ) (3,057 ) (20,165 ) (9,106 )
General corporate expense (15,852 ) (2,865 ) (33,637 ) (13,308 )
Noncontrolling interest earnings 110
43
352
159



	Three Months Ended			Six Months Ended
(in thousands)	April 28, 2019		April 29, 2018	April 28, 2019		April 29, 2018
Net unallocated expense	(23,178	)	16,304	(9,287	)	28,698
Noncontrolling interest earnings	207		138	301		242

~~Interest and investment income for the third quarter increased on favorable currency exchange gains.~~ For the ~~first nine months~~second quarter of ~~2018,~~fiscal 2019, net unallocated expense decreased primarily due to a one-time gain resulting from the CytoSport divestiture, lower selling expenses, higher interest and investment ~~income~~income.

Net unallocated expense for the first six months of fiscal 2019 decreased due to ~~market-based losses in~~a one-time gain resulting from the ~~rabbi trust related to~~CytoSport divestiture, the ~~supplemental executive retirement plans. Interest expense increased for both the third quarter~~benefit from a legal settlement and first nine months of fiscal 2018 due to the higher level of debt associated with the acquisition of Columbus. General corporate expense increased for the third quarter and first nine months due to higher employee-related expenses, including the third quarter impact of the universal stock option grant, 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.~~selling expenses.

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.~~28, 2018.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were ~~$269~~$639.3 million at the end of the ~~third~~second quarter of fiscal ~~2018~~2019 compared to ~~$633.3~~$261.6 million at the end of the comparable fiscal ~~2017~~2018 period.

Cash provided by operating activities was ~~$743.2~~$365.6 million in the first ~~nine~~six months of fiscal ~~2018~~2019 compared to ~~$531.4~~$443.3 million in the same period of fiscal ~~2017. Higher net earnings and improved cash flows from~~2018. The decrease is due to higher levels of working capital ~~accounts~~primarily from inventory in the first ~~nine~~six months of ~~the year led~~fiscal 2019 compared to the ~~increase.~~prior year.

Cash provided by investing activities was $424.8 million in the first six months of fiscal 2019 compared to cash used in investing activities ~~was $1,096.0 million in the first nine months~~ of ~~fiscal 2018 compared to cash provided by investing activities of $23.8~~$986.5 million in the same period of fiscal ~~2017.~~2018. In the ~~first~~second quarter of fiscal 2019, the Company received proceeds of $473.9 million for the sale of CytoSport. In fiscal 2018, the Company spent $857.6 million on the acquisition of Columbus. Capital expenditures in the first ~~nine~~six months of fiscal ~~2018 increased~~2019 decreased to ~~$244.0~~$87.6 million from ~~$118.5~~$141.2 million in the comparable period of fiscal ~~2017.~~2018. The Company currently estimates its fiscal ~~2018~~2019 capital expenditures ~~will~~to be approximately ~~$400.0~~$310.0 million. Key projects for the full year include ~~bacon~~ capacity increases in the ~~Wichita, Kansas,~~

~~facility; a new whole bird~~Company's Nevada, Iowa, pizza toppings facility, an expansion at the Fontanini facility in ~~Melrose, Minnesota; improvements to the Austin, Minnesota, plant;~~McCook, Ill, and multiple other projects designed to increase value-added capacity.

Cash used in financing activities was $610.5 million in the first six months of fiscal 2019 compared to cash provided by financing activities ~~was $177.3 million in the first nine months~~ of ~~fiscal 2018 compared to cash used in financing activities of $336.5~~$355.9 million in the same period of fiscal ~~2017.~~2018. In ~~connection with~~the first six months of fiscal 2019, the Company repaid $374.8 million of debt related to the purchase of Columbus in the prior year. The higher cash provided in fiscal 2018 is related to the purchase of Columbus as the Company borrowed $375.0 million under a term loan facility and $375.0 million under a revolving credit facility to fund the purchase, with ~~$280.0~~$190.0 million paid down during the first ~~nine~~six months. The Company repurchased ~~$44.7~~$67.6 million of its common stock in the first ~~nine~~six months of fiscal ~~2018~~2019 compared to ~~$94.5~~$44.7 million repurchased

during the same period of the prior year. For additional information pertaining to the Company’s share repurchase plans or programs, see Part II, Item 2 ~~“Unregistered~~- 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 ~~nine~~six months of fiscal ~~2018~~2019 were ~~$288.5~~$212.3 million compared to ~~$256.3~~$189.1 million in the comparable period of fiscal ~~2017.~~2018. For fiscal ~~2018,~~2019, the annual dividend rate was increased to ~~$0.75~~$0.84 per share, representing the ~~52nd~~53rd consecutive annual dividend increase. The Company has paid dividends for ~~90 years~~363 consecutive quarters 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 of the ~~third~~second quarter of fiscal ~~2018,~~2019, the Company was in compliance with all of these debt covenants.

Cash flows from operating activities continue to provide the Company with its principal source of liquidity. The Company does not anticipate a significant risk to cash flows from this source in the foreseeable future because the Company operates in a relatively stable industry and has strong brands across many product lines.

The Company is dedicated to returning excess cash flow to shareholders through dividend payments. Growing the business through innovation and evaluating opportunities for strategic acquisitions remains a focus for the Company. Reinvestments in 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. Along with these commitments, the Company will continue payments to reduce short-term debt borrowed in connection with the acquisition of Columbus.~~2019.

Contractual Obligations and Commercial Commitments

The Company records income taxes in accordance with the provisions of ASC 740, Income Taxes. The Company is unable to determine its contractual obligations by year related to this pronouncement, as the ultimate amount or timing of settlement of its reserves for income taxes cannot be reasonably estimated. The total liability for unrecognized tax benefits, including interest and penalties, at ~~July 29, 2018,~~April 28, 2019, was ~~$26.0~~$27.7 million.

There have been no other material changes to the information regarding the Company’s future contractual financial obligations previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October ~~29, 2017.~~28, 2018.

Off-Balance Sheet Arrangements

As of ~~July 29, 2018,~~April 28, 2019, and October ~~29, 2017,~~28, 2018, the Company had ~~$44.4~~$45.6 million and ~~$48.0~~$45.5 million, respectively, of standby letters of credit issued on its behalf. The standby letters of credit are primarily related to the Company’s self-insured workers compensation programs. However, that amount includes ~~$2.3~~$2.4 million as of April ~~29, 2018,~~28, 2019, and ~~$4.0~~$2.4 million as of October ~~29, 2017,~~28, 2018, of revocable standby letters of credit for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

Trademarks

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

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 discussion of risk factors in Part II, Item 1A of this Quarterly Report on Form 10-Q contains certain cautionary statements regarding the Company’s business, which should be considered by investors and others. Such risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Hog Markets: The Company’s earnings are affected by fluctuations in the live hog market. To minimize the impact on earnings, and to ensure a steady supply of quality hogs, the Company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to 10 years. ~~Purchased hogs~~Hogs purchased under contract accounted for 96 ~~percent and 95~~ percent of the total hogs purchased by the Company during the first ~~nine~~six months of fiscal years ~~2018~~2019 and ~~2017, respectively.~~2018. 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.

InTo reduce the ~~second quarter of fiscal 2017,~~Company's exposure to changes in lean hog markets, the Company ~~initiated~~utilizes a hedge program to offset the fluctuations in the ~~Company"s~~Company's future direct hog purchases. ~~This~~The program ~~currently~~ utilizes lean hog futures ~~and these contracts~~which are accounted for under cash flow hedge accounting. The fair value of the Company's open futures contracts in this ~~hedging~~ program as of ~~July 29, 2018,~~April 28, 2019 was ~~($10.0)~~$2.8 million, before tax, compared to ~~$1.7~~$0.7 million, before tax as of October ~~29, 2017.~~28, 2018. The Company measures its market risk exposure on its lean hog futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for lean hogs. A 10 percent decrease in the market price for lean hogs would have negatively impacted the fair value of the Company's ~~July 29, 2018,~~April 28, 2019, open lean hog contracts by ~~$4.0~~$1.7 million, which in turn would lower the Company's future cost on purchased hogs by a similar amount.

Turkey Production Costs: The Company raises or contracts for live turkeys to meet the majority of its raw material supply requirements. Production costs in raising turkeys are subject primarily to fluctuations in feed prices, and to a lesser extent, fuel

costs. Under normal, long-term market conditions, changes in the cost to produce turkeys are offset by proportional changes in the turkey market.

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 contracts as of ~~July 29, 2018,~~April 28, 2019, was ~~$(1.5)~~$(2.8) million, before tax, compared to ~~$(2.2)~~$(1.3) million, before tax, as of October ~~29, 2017.~~28, 2018. 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. A 10 percent decrease in the market price for grain would have negatively impacted the fair value of the Company’s ~~July 29, 2018,~~April 28, 2019, open grain contracts by ~~$7.0~~$5.9 million, which in turn would lower the Company’s future cost on purchased grain by a similar amount.

Other Input Costs: The costs of raw materials, packaging materials, freight, fuel, and energy may cause the Company's results to fluctuate significantly. To manage input cost volatility, the Company pursues cost saving measures, forward pricing, derivatives, and pricing actions when necessary.

Long-Term Debt: A principal market risk affecting the Company is the exposure 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~~$1.3 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.

Investments: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of ~~July 29, 2018,~~April 28, 2019, the balance of these securities totaled ~~$138.9~~$155.1 million compared to ~~$128.5~~$137.3 million as of October ~~29, 2017.~~28, 2018. A majority of these securities represent 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 to the Company’s pretax earnings of approximately ~~$4.5~~$6.8 million, while a 10 percent increase in value would have a positive impact of the same amount.

~~International:~~ ~~While~~International Assets: The fair values of certain Company assets are subject to fluctuations in foreign currencies. The Company's net asset position in foreign currencies as of April 28, 2019 was $529.3 million, compared to $687.7 million as of October 28, 2018, with most of the exposure existing in Chinese yuan and Brazilian real. Changes in currency exchange rates impact the fair values of the Company ~~does have international operations~~assets either currently through the Consolidated Statements of Operations as currency gains/losses or through the Consolidated Statements of Financial Position within other comprehensive loss.

The Company measures its foreign currency exchange risk by using a 10 percent sensitivity analysis on the Company's primary foreign net asset position, the Chinese yuan and ~~operates~~Brazilian real, as of April 28, 2019. A 10 percent strengthening in ~~international markets, it considers its market risk~~the value of the yuan relative to the U.S. dollar would result in ~~such activities~~other comprehensive income of approximately $33.4 million pretax. A 10 percent weakening in the value of the yuan relative to ~~be immaterial.~~the U.S. dollar would result in other comprehensive loss of approximately $27.3 million pretax. A 10 percent strengthening in the value of the real relative to the U.S. dollar would result in other comprehensive income of approximately $13.4 million pretax. A 10 percent weakening in the value of the real relative to the U.S. dollar would result in other comprehensive loss of approximately $11.0 million pretax.

Item 4. Controls and Procedures


(a)	Disclosure Controls and Procedures.

As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information the Company is required to disclose in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in 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 ~~third~~second quarter of fiscal ~~2018,~~2019, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is a party to various legal proceedings related to the ~~on-going~~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, contract disputes, intellectual property, competition laws, employment practices, or other actions brought by employees, 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 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 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, ~~foreign trade,~~ 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, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

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

The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including African swine fever (ASF), Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of 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.

Most recently, the outbreak of ASF in China has started to impact total global supply. If an outbreak of ASF were to occur in the United States, the Company's supply of hogs and pork could be materially impacted.

The Company has developed business continuity plans for various disease scenarios and will continue to update these plans as necessary. There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

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

The Company’s results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, beef, feed grains, avocados, peanuts, and 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 resulted 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, in the short-term, in higher live hog costs ~~for live hogs that are higher than~~compared to the cash spot market, depending on the relationship of the cash spot market to contract prices. Market-based pricing on certain product lines, and lead time required to implement pricing adjustments, may prevent all or part of these cost increases from being recovered, and these higher costs could adversely affect our short-term financial results.

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~~enters into long-term agreements 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~~thereby potentially lowering 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, such as 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 demand for the Company’s products may fluctuate.

The Company faces competition from producers of alternative ~~meats and~~ protein sources, including pork, beef, turkey, chicken, fish, nut butters, whey, and ~~whey.~~plant-based proteins. 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.~~acquisitions and divestitures.

The Company has made several acquisitions and divestitures in recent years that align with the Company’s strategic initiative of delivering long-term value to shareholders, most recently the ~~acquisitions~~acquisition of Columbus ~~Fontanini,~~ and ~~Ceratti, and~~the divestiture of CytoSport. The Company regularly reviews strategic opportunities ~~for strategic growth~~to grow through ~~acquisitions.~~acquisitions and to divest non-strategic assets. Potential risks associated with ~~acquisitions~~these transactions include the the inability to ~~integrate new operations successfully,~~consummate a transaction on favorable terms, the diversion of management's attention from other business concerns, the potential loss of key employees and customers of ~~the~~current or acquired companies, the inability to integrate or divest operations successfully, the possible assumption of unknown liabilities, potential disputes with ~~the~~buyers or 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~~.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~~.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's operations~~Company may be adversely impacted if the Company is unable to protect information technology systems against, or effectively respond to, ~~failures,~~ cyber-attacks, or security breaches,. interruptions or other failures.

Information technology systems are an important part of the Company’s business operations. These information technology systems, some of which are managed by third parties, may be susceptible to damage, disruptions, or shutdowns due to any number of reasons such as system failures, viruses, or cyber-attacks. Cyber-attacksAttempted cyber-attack and other cyber incidents are occurring more frequently and are being made by groups and individuals with a wide range of motives and expertise.

In addition, the Company is in the initial planning stage for a process transformation project to achieve better analytics, customer service, and process efficiencies through the use of Oracle Cloud Solutions. This project is expected to improve the efficiency and effectiveness of certain financial and business transaction processes and the underlying systems environment. Implementation is expected to occur in phases over the next several years. Such an implementation is a major undertaking from a financial, management, and personnel perspective. The implementation of the enterprise resource planning system may prove to be more ~~frequency~~difficult, costly, or time consuming than expected, and ~~greater sophistication.~~ there can be no assurance that this system will be beneficial to the extent anticipated.

In an attempt to mitigate ~~this risk,~~these risks, 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 ~~July 29, 2018,~~April 28, 2019, the Company had approximately ~~20,400~~18,500 employees worldwide, of which approximately ~~4,450~~3,210 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. Union contracts at the Company's facilities in Algona, Iowa; Atlanta, Georgia; Austin, Minnesota; and Beloit, Wisconsin will expire during fiscal 2019, covering approximately 2,300 employees. Negotiations have not yet been initiated.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities in the ~~Third~~Second Quarter of Fiscal ~~2018~~2019

~~Period~~

~~Total~~

~~Number of~~

~~Shares~~

~~Purchased~~¹

~~Average~~

~~Price Paid~~

~~Per Share~~

~~Total Number of~~

~~Shares Purchased as~~

~~Part of Publicly~~

~~Announced Plans~~

~~or Programs~~¹

~~Maximum Number~~

~~of Shares that May~~

~~Yet Be Purchased~~

~~Under the Plans or~~

~~Programs~~¹

~~April 30, 2018 – June 3, 2018~~

—

~~9,121,823~~

~~June 4, 2018 – July 1, 2018~~

—

~~9,121,823~~

~~July 2, 2018 – July 29, 2018~~

—

~~9,121,823~~

~~Total~~

—



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
January 28, 2019 – March 3, 2019	113,408	$	41.75	113,408	7,889,121
March 4, 2019 – March 31, 2019	—	—		—	7,889,121
April 1, 2019 – April 28, 2019	449,400	40.23		449,400	7,439,721
Total	562,808	$	40.53	562,808

¹On January 31, 2013, the Company announced its 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 on January 29, 2013. On November 23, 2015, the Board of Directors authorized a two-for-one split of the Company’s common stock. As part of the resolution to approve the stock split, the number of shares remaining to be repurchased was adjusted proportionately. The stock split was subsequently approved by ~~shareholders~~stockholders at the Company’s Annual Meeting on January 26, 2016, and effected January 27, 2016. All numbers in the table above reflect the impact of this stock split.

Item 6. Exhibits



31.1	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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: ~~September 7, 2018~~June 4, 2019	By	/s/ JAMES N. SHEEHAN
		JAMES N. SHEEHAN
		~~Senior~~Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: ~~September 7, 2018~~June 4, 2019	By	/s/ JANA L. HAYNES
		JANA L. HAYNES
		Vice President and Controller
		(Principal Accounting Officer)

4243



	Reported July 30, 2017			ASU 2016-09			ASU 2016-15			Adjusted July 30, 2017
Operating Activities
Equity in earnings of affiliates	$	(7,855	)	$	—		$	(19,521	)	$	(27,376	)
Distributions received from equity method investees	—			—			19,521			19,521
Gain on insurance proceeds	—			—			(3,029		)	(3,029		)
Excess tax benefit from stock-based compensation	(24,859		)	24,859			—			—
Decrease in accounts receivable	18,348			—			(1,626		)	16,722
Increase in inventories	(72,598		)	—			(284		)	(72,882		)
Net Cash Provided by Operating Activities	511,473			24,859			(4,939		)	531,393

Investing Activities
Proceeds from sales of property/equipment	2,532			—			(256		)	2,276
Increase in investments, equity in affiliates, and other assets	(1,154		)	—			(3,697		)	(4,851		)
Proceeds from company-owned life insurance	—			—			5,323			5,323
Proceeds from insurance recoveries	—			—			3,569			3,569
Net Cash Provided by Investing Activities	18,811			—			4,939			23,750

Financing Activities
Excess tax benefit from stock-based compensation	24,859			(24,859		)	—			—
Net Cash Used in Financing Activities	(311,632		)	(24,859		)	—			(336,491		)
Effect of Exchange Rate Changes on Cash	(454		)	—			—			(454		)
(Decrease) Increase in Cash and Cash Equivalents	$	218,198		$	—		$	—		$	218,198
Cash and cash equivalents at beginning of the year	415,143			—			—			415,143
Cash and Cash Equivalents at the End of Quarter	$	633,341		$	—		$	—		$	633,341



(in thousands)
Accounts receivable	$	21,257
Inventory	29,699
Prepaid and other assets	881
Other assets	935
Property, plant and equipment	83,663
Intangible assets	231,964
Goodwill	610,836
Current liabilities	(21,366		)
Deferred taxes	(100,511		)
Purchase price	$	857,358



	July 29, 2018					October 29, 2017
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer lists/relationships	$	137,039	$	(35,941	)	$	115,940	$	(25,973	)
Formulas and recipes	—		—			1,950		(1,950		)
Other intangibles	7,056		(2,174		)	3,100		(2,044		)
Total	$	144,095	$	(38,115	)	$	120,990	$	(29,967	)



	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:		July 29, 2018		July 30, 2017			July 29, 2018		July 30, 2017
Commodity contracts	Cost of products sold	$	1,363	$	(730	)	$	29	$	51



	Shares	Weighted- Average Grant Date Fair Value
Restricted at October 29, 2017	58	$	35.62
Granted	52	34.08
Vested	57	35.62
Forfeited	1	35.62
Restricted at July 29, 2018	52	$	34.08



Third Quarter
Volume (lbs.)	FY 2018							FY 2017
(in thousands)	Reported (GAAP)		Acquisitions			Organic (Non-GAAP)		Reported (GAAP)		Organic % Change
Grocery Products	327,890		—			327,890		330,505		(0.8	)
Refrigerated Foods	530,337		(37,482		)	492,855		503,296		(2.1	)
Jennie-O Turkey Store	227,903		—			227,903		200,143		13.9
International & Other	84,763		(12,391		)	72,372		78,120		(7.4	)
Total Volume	1,170,893		(49,873		)	1,121,020		1,112,064		0.8


Net Sales	FY 2018							FY 2017
(in thousands)	Reported (GAAP)		Acquisitions			Organic (Non-GAAP)		Reported (GAAP)		Organic % Change
Grocery Products	$	617,727	$	—		$	617,727	$	618,859	(0.2	)
Refrigerated Foods	1,195,763		(137,803		)	1,057,960		1,086,546		(2.6	)
Jennie-O Turkey Store	398,058		—			398,058		369,078		7.9
International & Other	147,594		(18,974		)	128,620		132,892		(3.2	)
Total Net Sales	$	2,359,142	$	(156,777	)	$	2,202,365	$	2,207,375	(0.2	)

Location on Consolidated Statements
of Financial Position

Carrying Amount of the Hedged
Assets/(Liabilities)

April 28,
2019

October 28, 2018

Accounts Payable